UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form
      10-KSB





(Mark
      One)





[x]
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      fiscal year ended December 31, 2004





[
                ]
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      transition period from ________to________





Commission
      file number: 000-30011





Total
      Identity Corp.


(Name
      of
      small business issuer in its charter)





Florida
            
            65-0309540(State
                or other jurisdiction
            
            (I.R.S.
                Employerof
                incorporation or organization No.)
            
            Identification
                )1007
                N. Federal Highway, Suite D-6Fort
                Lauderdale, Florida
            
            33304(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer's
      telephone number 561-208-8101


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


Title
                  of each class
              Name
                  of each exchange on which registeredNone
              not
                  applicable(Title
                  of each class)




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





common
      stock, par value $0.01 per share


(Title
      of
      class)





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





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes [ ] No [X]





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of the registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. [ ]


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





State
      issuer's revenues for its most recent fiscal year. $ 0 for the fiscal year
      ended
      December 31, 2004.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked prices of such common equity, as of a
      specified date within the past 60 days. The aggregate market value of the common
      equity held by non-affiliates computed at the closing price of the registrant’s
      common stock on September 7, 2006 is approximately $129,529.





On
      August
      31, 2006 27,392,510 shares of common stock are issued and
      outstanding **.**





TOTAL
      IDENTITY CORP.


ANNUAL
      REPORT ON FORM 10-KSB


FOR
      THE
      YEAR ENDED DECEMBER 31, 2004





TABLE
      OF CONTENTS





Documents
                Incorporated by Reference
            3Forward
                Looking Statements
            3PART
                IItem
                1.
            Description
                of Business
            4Item
                2.
            Description
                of Property
            12Item
                3.
            Legal
                Proceedings
            12Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            13PART
                IIItem
                5.
            Market
                Price for Common Equity, Related Stockholder Mattersand
                Small Business Issuer Purchases of Equity Securities
            14Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            16Item
                7.
            Financial
                Statements
            21Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting
              and
                Financial Disclosures
            21Item
                8A
            Controls
                and Procedures
            22Item
                8B.
            Other
                Information
            22PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons, Compliance with
                Section
                16(a) of the Exchange Act
            22Item
                10.
            Executive
                Compensation
            24Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            28Item
                12.
            Certain
                Relationships and Related Matters
            29Item
                13.
            Exhibits
            31Item
                14.
            Principal
                Accountant Fees and Services
            33SIGNATURES
            
            34


2





**DOCUMENTS
      INCORPORATED BY REFERENCE**





If
      the
      following documents are incorporated by reference, briefly describe them and
      identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which
      the document is incorporated: (1) any annual report to security holders; (2)
      any
      proxy or information statement; and (3) any prospectus filed pursuant to Rule
      424(b) of the Securities Act of 1933 ("Securities Act"). Not
      Applicable.





Transitional
      Small Business Disclosure Form (check one): Yes  No
      X





CERTAIN
      CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION





Certain
      statements in this annual report on Form 10-KSB contain or may contain
      forward-looking statements that are subject to known and unknown risks,
      uncertainties and other factors which may cause actual results, performance
      or
      achievements to be materially different from any future results, performance
      or
      achievements expressed or implied by such forward-looking statements. These
      forward-looking statements were based on various factors and were derived
      utilizing numerous assumptions and other factors that could cause our actual
      results to differ materially from those in the forward-looking statements.
      These
      factors include, but are not limited to, economic, political and market
      conditions and fluctuations, government and industry regulation, interest rate
      risk, U.S. and global competition, and other factors. Most of these factors
      are
      difficult to predict accurately and are generally beyond our control. You should
      consider the areas of risk described in connection with any forward-looking
      statements that may be made herein. Readers are cautioned not to place undue
      reliance on these forward-looking statements, which speak only as of the date
      of
      this report. Readers should carefully review this annual report in its entirety,
      including but not limited to our financial statements and the notes thereto.
      Except for our ongoing obligations to disclose material information under the
      Federal securities laws, we undertake no obligation to release publicly any
      revisions to any forward-looking statements, to report events or to report
      the
      occurrence of unanticipated events.





Unless
      otherwise indicated, the terms "Total Identity," the "Company," " we," "our,"
      and "us" refers to Total Identity Corp. a Florida corporation, and our
      subsidiaries Total Identity Systems, Inc., a New York corporation ("TISC"),
      Total Digital Communications, Inc., a Florida corporation formerly known as
      Total Digital Displays, Inc. (“Total Digital”), Yard Sale Drop Off, Inc., a
      Florida corporation formerly known as Total Identity Group, Inc. (“Yard Sale
      Drop Off”) and Sovereign Research, LLC, a Florida limited liability company.





All
      share
      and per share information presented in this annual report have been
      retroactively adjusted to give effect to a 1:10 reverse stock split of our
      common stock effective January 27, 2003.


3


**PART
      I**





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





We
      have
      in the past and intend to continue to acquire assets and/or businesses that
      we
      believe are undervalued, and generally to operate those assets and businesses
      through our subsidiaries. During the fiscal years ended December 31, 2003,
      2004
      and 2005, and from December 31, 2005 through the date of this report, our
      operations have consisted of the following:





**Sovereign
      Research** .
      In May,
      2006 we formed Sovereign Research LLC as a Florida limited liability company
      to
      provide research reports and annual reports, primarily to small cap public
      companies. We have not yet commenced formal operations through our Sovereign
      Research subsidiary, nor have we entered into any binding agreements to provide
      research reports for any third party.





**Yard
      Sale Drop Off** **.** From
      January 2005 through March 2006, we operated an “eBay” service business that
      assisted eBay sellers in listing and selling their merchandise on the eBay
      auction website. We sold our interest in Yard Sale Drop Off in May,
      2006.





**Total
      Identity Systems** **.** From
      October 13, 2003 through November 30, 2004, we operated a Rochester, New
      York-based manufacturer of custom sign manufacturer servicing local, regional
      and national accounts. See below and “Item 2. Legal Proceedings” We discontinued
      our operation of Total Identity Systems effective November 30,
      2004.





**Kina’ole
      Development** .
      From
      January 31, 2003 until September 30, 2003, we operated a Hawaii-based
      manufacturer of prefabrication homes. Effective September 30, 2003, we divested
      ourselves of our interest in Kina’ole Development.





**Hi*Tech
      Electronic Displays** **.** From
      October 2003 until December 2003 we operated an LED (light emitting diode)
      sign
      business in connection with our acquisition of assets from Hi*Tech. As described
      later in this section, in February 2004, we rescinded our purchase of the assets
      relating to these operations.





Each
      of
      these business operations, as well as other matters that have materially
      affected us during the period covered by this Report, are described below.





**Sovereign
      Research**





In
      May,
      2006 we formed Sovereign Research LLC as a Florida limited liability company
      to
      provide research reports and annual reports, primarily to small cap public
      companies. It is anticipated that the reports will be prepared for us by third
      parties with whom we contract, and that the reports will provide the investment
      community with information about the companies’ operations, the industry in
      which the company operates, competitive factors in the industry, marketing
      statistics, marketing trends and source references. Information contained in
      the
      reports will be provided by the companies, as well as publicly available
      information gathered by the third party with whom we contract. Reports will
      be
      commissioned by the public companies desiring our reports and the companies
      for
      whom we prepare the reports will be required to release us from liability
      including for any information in our report obtained in the public domain.
      We do
      not intend to provide recommendations relating to the purchase or sale of any
      securities or as to the value of any security. We have not yet commenced formal
      operations through our Sovereign Research subsidiary, nor have we entered into
      any binding agreements to provide research reports for any third
      party.





**Yard
      Sale Drop Off**





In
      January 2005, we commenced operations of our Yard Sale Drop Off, Inc. (“YSDO”)
      subsidiary. YSDO is a trading assistant and “power seller” that assists others
      to list and sell items through on-line auctions on the eBay website. In a
      typical consignment sale arrangement, an eBay seller brings his or her
      merchandise to the YSDO location where YSDO personnel take pictures of the
      item,
      work with the seller to get a detailed and accurate description of the item
      to
      be sold, compose the auction description, determine the best category under
      which to list the item for sale and answer questions that the seller may have.
      YSDO then assists the seller to list the item and if the item


4


is
      purchased in the auction, YSDO packs and ships the item and receives a
      percentage of the sales price for its services.





In
      March
      2006, we entered into an agreement to sell all of the assets of our YSDO
      subsidiary to Mr. Mike Phillips, an unrelated third party, and discontinue
      the
      operations of this subsidiary. The purchase price for the assets was $8,000
      in
      cash and payment was received in four installments of $2,000 each, with the
      last
      payment made in May 2006 at which time we released all of the assets to the
      purchaser.





**Total
      Identity Systems**





In
      October 2003, we entered into a series of agreements with Total Identity Systems
      Corporation, a New York corporation (“TISC”) and Robert David, its sole officer,
      director and principal shareholder, to acquire TISC for a purchase price of
      approximately $1.8 million and certain other concessions to the seller in the
      form of an employment agreement and the assumption of leasehold obligations
      to
      an entity owned by Mr. David.





On
      February 23, 2004, we entered into a series of agreements with Robert David
      that
      (a) amended the stock purchase agreements and related documents dated October
      13, 2003 and (b) settled certain disputes that had arisen in connection with
      the
      October 13, 2003 agreements, including an arbitration initiated by the Company
      to resolve those disputes. Among the modifications to the initial agreement
      were
      a reduction in the purchase price from $1.8 million to $1.2 million, and a
      change in Robert David’s status with TISC, from an employee to a consultant. At
      the time the agreements were entered into, the arbitration we commenced to
      resolve the differences that arose between the parties was also
      discontinued.





On
      July
      22, 2004, we terminated our consulting agreement with Robert David on the
      grounds that Mr. David had breached the, as well as his fiduciary duties to
      the
      Company, by improperly attempting to dispose of Company assets. On or about
      July
      26, 2004, Robert David commenced two arbitrations against the Company and TISC
      with the American Arbitration Association, alleging that (a) the Company had
      improperly terminated his consulting agreement and (b) the Company was in
      default of certain payment obligations under the agreements to acquire
      TISC.





A
      central
      focus of the arbitration was our contention that information provided to us
      by
      Mr. David concerning TISC’s banking relationship with Mercantile and Trader’s
      Trust Company, a bank that had made loans to TISC, was materially inaccurate.
      The bank had previously noticed a default against TISC under the promissory
      note
      and other loan agreements between TISC and Mercantile and Trader's Trust
      Company.





On
      or
      about November 24, 2004, Mercantile and Trader's Trust Company exercised certain
      rights granted under the loan documents and had “swept” TISC’s accounts
      aggregating approximately $200,000 maintained at the bank, and applied the
      proceeds to the outstanding indebtedness of TISC to the bank. In addition,
      Mercantile and Trader's Trust Company notified the United States Post Office
      that it was exercising its rights under the loan documents to take control
      over
      all mail directed to us and the bank changed the locks at TISC’s Rochester, New
      York facility, and was seeking to take control over TISC’s assets in order to
      satisfy TISC’s indebtedness to Mercantile and Trader's Trust
      Company.





In
      exercising these rights, the Mercantile and Trader's Trust Company assumed
      control over TISC and prevented TISC from conducting and funding its day-to-day
      operations. In light of the actions taken by the bank, including our loss of
      control over TISC’s records and operations and the prospect that our registered
      public accounting firm would thereafter be unable to audit TISC’s books and
      records, we treated the operations of TISC as discontinued operations as of
      November 30, 2004, and, accordingly, our financial statements for the quarter
      ended September 30, 2004 reflect the impact of discontinuing the operations
      of
      TISC. As noted under FASB 5 paragraph 11 we presented the discontinued
      operations of TISC to keep the financial statements from being
      misleading.





As
      a
      result of all of the above and the failure of the parties to pay fees to the
      American Arbitration Association, in April 2006, the arbitration that was
      pending before the American Arbitration Association was dismissed.





TISC
      operated as a vertically integrated custom manufacturer of signs and awnings
      headquartered in Rochester, NY, with in-house marketing, sales, design,
      engineering, manufacturing, and installation capabilities.


5


The
      core manufacturing business consisted of custom on-premise identity products
      such as neon, channel letters, cabinet signs, and commercial awnings. TISC
      also
      designed and manufactured highly custom “theme” signage for customers such as
      Hard Rock Cafe, Gibson Guitars, and Walt Disney World.





**Total
      Digital Communications**





On
      December 15, 2004, Total Digital Communications, Inc., formerly known as Total
      Digital Displays, Inc. (which was, at the time, our wholly owned subsidiary)
      acquired certain assets from Leonard Lightman, including the seller’s rights
      under a purported license agreement with Major League Baseball. The purchase
      price for the assets was paid by the issuance of 10,000,000 shares of Total
      Digital’s common stock to the seller. The 10,000,000 shares represented
      approximately 93% of Total Digital’s outstanding common stock at the time of
      issuance.





On
      December 29, 2004, we distributed to our shareholders of record on December
      15,
      2004 as a dividend, an aggregate of 804,929 shares, constituting all of the
      common stock of Total Digital then owned by us. One share of Total Digital
      was
      distributed for each 20 shares of our common stock held on the record date.
      The
      dividend was paid without registration under the Securities Act of 1933, as
      amended ("Securities Act"), in reliance upon an opinion of counsel that the
      transaction did not require registration under the Securities Act.





On
      January 11, 2005, we determined that the seller of the assets had misrepresented
      its ownership of the assets and, on January 11, 2005, we asserted claims against
      the seller, and demanded rescission of the asset purchase agreement, including
      its return of the 10,000,000 shares of Total Digital paid as consideration
      for
      the assets. The seller failed to comply with our demands, and we filed suit
      against the seller in Broward Circuit Court. In August 2005 the court awarded
      us
      a default against the seller for failure to file an answer to our complaint
      within the prescribed timeframe; however, in September 2005 the default was
      set
      aside.





We
      have
      been advised that the opinion of counsel upon which the distribution to our
      shareholders was based has been withdrawn. Therefore, we are treating the shares
      of Total Digital that were distributed to our shareholders as restricted
      securities. However, in light of the uncertainty of the effect that our claims
      against the seller have upon ownership of the 10,000,000 shares that were issued
      to the seller, we cannot predict whether we have any control over the future
      activities of Total Digital. At this time, we do not believe that Total Digital
      has any assets and are not aware of any market for the shares of Total Digital.
      In addition, we have been advised that Total Digital was administratively
      dissolved on September 16, 2005 by the State of Florida resulting from its
      failure to file its annual report.





**Settlement
      of Dispute with Former Director**





On
      May
      13, 2004, we and Scott Siegel, one of our director, entered into an agreement
      resolving certain disputes that had arisen relating to the ownership of
      1,050,000 shares of our common stock and 250,000 shares of our Series A
      preferred stock that were the subject of a stock purchase agreement dated
      February 21, 2003. The primary terms of the agreement are that (a) Mr. Siegel
      retained 250,000 shares of common stock (the “Retained Shares”), (b) 800,000
      shares of common stock issued to Mr. Siegel under the February 21, 2003 stock
      purchase agreement were surrendered to us and have been canceled, (c) we agreed
      to pay Mr. Siegel the sum of $35,265, plus $7,000 less an amount equal to our
      legal fees in settlement of this matter, (d) the Series A preferred stock has
      been surrendered to us and canceled; and (e) Mr. Siegel resigned as a director
      effective May 13, 2004.





**Kina’ole
      Development**





On
      January 31, 2003, we acquired 100% of the assets and outstanding stock of
      Kina’ole Development Corporation, a Hawaii corporation. Kina’ole engages in the
      manufacture and sale of prefabricated homes. Effective September 30, 2003,
      we
      agreed with the former owners of Kina’ole to exchange all of our shares of
      Kina’ole for (a) the 500,000 shares of our Series B Preferred Stock, (b) the
      issuance of 120,000 shares of our common stock to the former shareholders of
      Kina’ole in connection with the January 2003 acquisition, and (c) $13,500 paid
      to such shareholders. As a result of this exchange, we divested ourselves of
      the
      prefabricated home manufacturing operations conducted by
      Kina’ole.


6


**Hi*Tech
      Electronic Displays**





On
      October 13, 2002 we entered into an agreement with Hi*Tech Electronic Displays,
      Inc., a Florida corporation, and purchased the assets of Hi*Tech’s Factory
      Automation Division. As consideration for the asset purchase, we issued Hi*Tech
      Electronic Displays, Inc. 250,000 shares of our common stock valued at $152,500.
      Following the closing of the transaction until December 2003, we operated an
      LED
      sign business offering signs which were fabricated for us by Hi*Tech. However,
      as a result of the failure of the seller to cooperate in the completion of
      an
      audit related to the assets and the unwillingness to turn over the assets
      purchased, on February 27, 2004, we entered into a rescission agreement with
      Hi*Tech Electronic Displays, Inc. to rescind our purchase of the Hi*Tech assets.
      Under the rescission agreement, we delivered the assets we acquired from
      Hi*Tech; however, Hi*Tech has failed and continues to refuse to deliver the
      250,000 shares of our common stock that we paid to Hi*Tech as consideration
      for
      its assets. As a result of our limited financial resources we are unable at
      this
      time to retain counsel to pursue a return of those shares.





**Status
      as a “Shell Company”**





Under
      rules and regulations adopted by the Securities and Exchange Commission, a
      “shell company” is a company, other than an asset-based issuer, with no or
      nominal operations and either no or nominal assets, assets consisting solely
      of
      cash and cash equivalents or assets consisting of any amount of cash and cash
      equivalents and nominal other assets. At the present time, we believe that
      we
      are a “shell company” within the meaning of these rules and
      regulations.





We
      intend
      to seek to acquire assets or shares of an entity actively engaged in business
      which generates revenues, in exchange for our securities. Our purpose is to
      seek, investigate and, if such investigation warrants, acquire an interest
      in
      business opportunities presented to us by persons or firms who or which desire
      to seek the perceived advantages our company may offer. We will not restrict
      our
      search to any specific business, industry, or geographical location and we
      may
      participate in a business venture of virtually any kind or nature. This
      discussion of the proposed business is purposefully general and is not meant
      to
      be restrictive of our virtually unlimited discretion to search for and enter
      into potential business opportunities. Management anticipates that it may be
      able to participate in only one potential business venture because we have
      nominal assets and limited financial resources. This lack of diversification
      should be considered a substantial risk to our shareholders because it will
      not
      permit us to offset potential losses from one venture against gains from
      another.





We
      may
      seek a business opportunity with entities which have recently commenced
      operations, or which wish to utilize the public marketplace in order to raise
      additional capital in order to expand into new products or markets, to develop
      a
      new product or service, or for other corporate purposes. We may acquire assets
      and establish wholly-owned subsidiaries in various businesses or acquire
      existing businesses as subsidiaries. We anticipate that the selection of a
      business opportunity in which to participate will be complex and extremely
      risky. Due to general economic conditions, rapid technological advances being
      made in some industries and shortages of available capital, management believes
      that there are numerous firms seeking the perceived benefits of a publicly
      registered corporation. These perceived benefits may include facilitating or
      improving the terms on which additional equity financing may be sought,
      providing liquidity for incentive stock options or similar benefits to key
      employees, providing liquidity (subject to restrictions of applicable statutes),
      for all shareholders and other factors. Potentially, available business
      opportunities may occur in many different industries and at various stages
      of
      development, all of which will make the task of comparative investigation and
      analysis of such business opportunities extremely difficult and
      complex.





The
      analysis of new business opportunities will be undertaken by, or under the
      supervision of, Mr. Matthew Dwyer, our CEO, who may not be considered a
      professional business analyst. Mr. Dwyer will be the key person in the search,
      review and negotiation with potential acquisition or merger candidates. We
      intend to concentrate on identifying preliminary prospective business
      opportunities that may be brought to our attention through present associations
      of our officers and directors, or by our shareholders. In analyzing prospective
      business opportunities, we will consider such matters as the available
      technical, financial and managerial resources; working capital and other
      financial requirements; history of operations, if any; prospects for the future;
      nature of present and expected competition; the quality and experience of
      management services which may be available and the depth of that management;
      the
      potential for further research, development, or exploration; specific risk
      factors not now foreseeable but which then may be anticipated to impact our
      proposed


7


activities;
      the potential for growth or expansion; the potential for profit; the perceived
      public recognition of acceptance of products, services, or trades; name
      identification; and other relevant factors. We will not acquire or merge with
      any company for which audited financial statements cannot be obtained within
      the
      time period prescribed by applicable rules of the Securities and Exchange
      Commission which is presently four business days from the closing date of the
      transaction. This requirement for readily available audited financial statement
      may require us to preclude a transaction with a potential candidate which might
      otherwise be beneficial to our shareholders.





We
      will
      not restrict our search for any specific kind of company, but may acquire a
      venture that is in its preliminary or development stage, which is already in
      operation, or in essentially any stage of its corporate life. It is impossible
      to predict at this time the status of any business in which we may become
      engaged, in that such business may need to seek additional capital, may desire
      to have its shares publicly traded, or may seek other perceived advantages
      which
      we may offer. However, we do not intend to obtain funds in one or more private
      placements to finance the operation of any acquired business opportunity until
      such time as we have successfully consummated such a merger or
      acquisition.





We
      anticipate that we will incur nominal expenses in the implementation of our
      business plan described herein. Because we have no capital with which to pay
      these anticipated expenses, these expenses will be paid by Mr. Dwyer with his
      personal funds as interest-free loans. However, the only opportunity to have
      these loans repaid will be from a prospective merger or acquisition candidate.
      Repayment of any loans made on our behalf will not impede, or be made
      conditional in any manner, to consummation of a proposed
      transaction.





In
      implementing a structure for a particular business acquisition, we may become
      a
      party to a merger, consolidation, reorganization, joint venture, or licensing
      agreement with another corporation or entity. We may also acquire stock or
      assets of an existing business. On the consummation of a transaction, it is
      probable that our present management and shareholders will no longer be in
      control of our company. In addition, our directors may, as part of the terms
      of
      the acquisition transaction, resign and be replaced by new directors without
      a
      vote of our shareholders or may sell their stock. Any terms of sale of the
      shares presently held by officers and/or directors will be also afforded to
      all
      other shareholders on similar terms and conditions. Any and all such sales
      will
      only be made in compliance with federal and applicable state securities
      laws.





We
      anticipate that any securities issued in any such reorganization would be issued
      in reliance upon exemption from registration under applicable federal and state
      securities laws. In some circumstances, however, as a negotiated element of
      a
      transaction, we may agree to register all or a part of such securities
      immediately after the transaction is consummated or at specified times
      thereafter. If such registration occurs, of which there can be no assurance,
      it
      will be undertaken by the surviving entity after we have successfully
      consummated a merger or acquisition and we are no longer considered a "shell"
      company. Until such time as this occurs, we will not attempt to register any
      additional securities. The issuance of substantial additional securities and
      their potential sale into any trading market which may develop in our securities
      may have a depressive effect on the value of our securities in the future,
      if
      such a market develops, of which there is no assurance.





**Employees**





As
      of
      August 31, 2006, we had one full-time employee, Mr. Matthew Dwyer, our Chief
      Executive Officer. Our employee is not covered by collective bargaining
      agreements, and we believe our relationship with our employee to be
      good.





**RISK
      FACTORS**





Before
      you invest in our securities, you should be aware that there are various risks.
      You should consider carefully these risk factors, together with all of the
      other
      information included in this annual report before you decide to purchase our
      securities. If any of the following risks and uncertainties develop into actual
      events, our business, financial condition or results of operations could be
      materially adversely affected.





***Our
      auditors have raised substantial doubts as to our ability to continue as a
      going
      concern.***





Our
      consolidated financial statements have been prepared assuming we will continue
      as a going concern. Since inception we have experienced recurring losses from
      operations, which losses have caused an


8


accumulated
      deficit of $10,256,314 as of December 31, 2004. In addition, for the year ended
      December 31, 2004 we reported a net loss of $523,937. We had a working capital
      deficit of $434,866 at December 31, 2004 and cash on hand of $2,824. These
      factors, among others, raise substantial doubt about our ability to continue
      as
      a going concern. Our financial statements do not include any adjustments that
      might result from the outcome of this uncertainty. We anticipate that we will
      continue to incur losses in future periods and we will need to raise substantial
      amounts of capital to pay our current obligations and implement our business
      model. No assurances can be given that adequate financing can be obtained to
      meet our capital needs. If we are unable to generate profits and unable to
      continue to obtain financing to meet our working capital requirements, we may
      have to curtail our business sharply or cease operations altogether. Our
      continuation as a going concern is dependent upon our ability to generate
      sufficient cash flow to meet our obligations on a timely basis, to obtain
      additional financing, and, ultimately, to attain profitability. Should any
      of
      these events not occur, the accompanying financial statements will be adversely
      effected and we may have to cease operations.





***We
      have no current business operations and are dependent upon identifying an
      operating business to acquire in order to generate revenues and pay our
      operating expenses.***





As
      a
      result of actions taken by an institutional lender, the operations of TISC
      have
      ceased. In addition, in May 2006 we discontinued the operations of Yard Sale
      Drop Off and, while we have recently formed a new subsidiary to engage in the
      preparation and marketing of research reports, we currently engage in no
      revenue-producing activities. At this time, our operating expenses are being
      paid through loans from our affiliates. There is no assurance that our
      affiliates will be able to continue to fund our operating expenses. Accordingly,
      we are dependent on identifying and acquiring an operating business in order
      to
      generate revenues to fund operating expenses. If we are unable to acquire an
      operating business or otherwise fund our operating expenses, we may be required
      to cease operations.





***Our
      continued issuance of shares of common stock in payment of management
      compensation and consulting fees is dilutive to our existing
      shareholders.***





Due
      to
      our lack of revenues and income, we have historically paid compensation to
      our
      Chief Executive Officers and certain other officers and consultants through
      the
      issuance of options shares of our common stock, including shares issued and
      issuable upon the exercise of options. In some cases, the shares have been
      issued, including upon the exercise of options, at less than fair market value.
      The issuance of these shares is dilutive to the equity ownership of our shares
      by other shareholders and the issuance of shares at less than fair market value
      is dilutive to the book value of our common stock. Our lack of revenues may
      require that we continue to dilute shareholders through the issuance of our
      shares to management and consultants.





***There
      is uncertainty concerning the status of shares of our subsidiary that were
      distributed to our shareholders.***





We
      previously distributed shares of our former subsidiary, Total Digital Displays,
      to our shareholders. Subsequent to the distribution, we determined that the
      assets that were acquired by our subsidiary prior to the distribution did not
      exist and that we and Total Digital Displays have asserted that we had been
      fraudulently induced to purchase the assets. As a result, we notified the seller
      of claims we have against it, and demanded rescission of the asset purchase
      agreement, including its return of the 10,000,000 shares of Total Digital
      Displays issued to the seller under the asset purchase agreement. To date,
      the
      seller has not complied with our demands and has denied wrongdoing, and we
      have
      filed suit against the seller in Broward Circuit Court. The court awarded
      summary judgment in our favor and we are evaluating whether to seek a default
      judgment against the seller. In light of the foregoing, the opinion of counsel
      that caused the shares of Total Digital Display to be issued without legend
      has
      been withdrawn, and we are treating the shares of Total Digital Display that
      were distributed to our shareholders as restricted securities. At this time,
      it
      is our understanding that Total Digital Display has no assets and there is
      no
      market for the shares of Total Digital Display. At this time, we cannot
      determine whether we will reacquire Total Digital Display as a subsidiary,
      the
      legal status of the shares of Total Digital Display that were distributed to
      our
      shareholders, or otherwise predict the impact that the foregoing facts will
      have
      on our operations.





***Start-up
      expenses and future losses will adversely affect our
      operations.***





Because
      of significant up-front expenses required to enter into new businesses, we


9


anticipate
      that we  may
      incur
      losses until revenues are sufficient to cover our operating costs. Future losses
      are likely before our operations become profitable. As a result of our lack
      of
      operating history, you will have no basis upon which to accurately forecast
      our:





·
            Total
                assets, liabilities, and equity;


·
            Total
                revenues;


·
            Gross
                and operating margins; and


·
            Labor
                costs.





Accordingly,
      any subsequent business plans may not either materialize or prove successful,
      and we may never be profitable.





***Our
      management may be unable to effectively integrate future acquisitions and to
      manage our growth, and we may be unable to fully realize any anticipated
      benefits of any acquisition.***





Our
      business strategy includes growth through acquisition and internal development.
      We are subject to various risks associated with our growth strategy, including
      the risk that we will be unable to identify and recruit suitable acquisition
      candidates in the future or to integrate and manage the acquired companies.
      Acquired companies’ histories, geographical locations, business models and
      business cultures can be different from ours in many respects. If we should
      consummate one or more acquisitions, our directors and senior management will
      face a significant challenge in their efforts to integrate our business and
      the
      business of the acquired companies or assets, and to effectively manage our
      continued growth. There can be no assurance that our efforts to integrate the
      operations of any acquired assets or companies acquired in the future will
      be
      successful, that we can manage our growth or that the anticipated benefits
      of
      these proposed acquisitions will be fully realized. The dedication of management
      resources to these efforts may detract attention from our day-to-day business.
      There can be no assurance that there will not be substantial costs associated
      with these activities or of the success of our integration efforts, either
      of
      which could have a material adverse effect on our operating
      results.





***Our
      strategy of seeking joint ventures or strategic alliances may be
      unsuccessful.***





We
      may
      also choose to expand our operations by entering into joint ventures or other
      strategic alliances with other parties. Any such transaction would be
      accompanied by the risks commonly encountered in such transactions. These
      include, among others, the difficulty of assimilating the operations and
      personnel and other various factors. There can be no assurance should we enter
      into any strategic alliance with a third party that we will be successful in
      overcoming these risks or any other problems encountered in connection with
      joint ventures or other strategic alliances.





***We
      depend on the continued services of our executive officers and on our ability
      to
      attract and maintain other qualified employees.***





Our
      future success depends on the continued services of our executive officers.
      The
      loss of their services would be detrimental to us and could have a material
      adverse effect on our business, financial condition and results of operations.
      We do not currently maintain key-man insurance on his life. Our future success
      is also dependent on our ability to identify, hire, train and retain other
      qualified managerial and other employees. Competition for these individuals
      is
      intense and increasing. We may not be able to attract, assimilate, or retain
      qualified technical and managerial personnel and our failure to do so could
      have
      a material adverse effect on our business, financial condition and results
      of
      operations.





***Our
      common stock is thinly traded and an active and visible trading market for
      our
      common stock may not develop.***





Our
      common stock is currently quoted on a limited basis on the Pink Sheets under
      the
      symbol “TIDC.” The quotation of our common stock on the Pink Sheets does not
      assure that a meaningful, consistent and liquid trading market currently exists.
      We cannot predict whether a more active market for our common stock will develop
      in the future. In the absence of an active trading market:





§
            investors
                may have difficulty buying and selling or obtaining market
                quotations;


10


§
            market
                visibility for our common stock may be limited;
                and


§
            a
                lack of visibility for our common stock may have a depressive effect
                on
                the market price for our common
                stock.





***The
      sale of shares eligible for future sale could have a depressive effect on the
      market price for our common stock; Rule 144 is not currently available for
      resales of our common stock.***





As
      of
      August 31, 2006, there are 27,392,510 shares of common stock issued and
      outstanding. Of the currently issued and outstanding shares, approximately
      3,779,734 restricted shares of common stock have been held for in excess of
      one
      year and are currently available for public resale pursuant to Rule 144
      promulgated under the Securities Act ("Rule 144"). Unless registered on a form
      other than Form S-8, the resale of our shares of Common Stock owned by officers,
      directors and affiliates is subject to the volume limitations of Rule 144.
      In
      general, Rule 144 permits our shareholders who have beneficially owned
      restricted shares of common stock for at least one year to sell without
      registration, within a three-month period, a number of shares not exceeding
      one
      percent of the then outstanding shares of common stock. Furthermore, if such
      shares are held for at least two years by a person not affiliated with us (in
      general, a person who is not one of our executive officers, directors or
      principal shareholders during the three-month period prior to resale), such
      restricted shares can be sold without any volume limitation. Sales of our common
      stock under Rule 144 or pursuant to such registration statement may have a
      depressive effect on the market price for our common stock.




Rule
      144
      is not currently available to permit resales of our common stock because, at
      this time, we are not current in our reporting obligations under the Securities
      Exchange Act of 1934 (the “Exchange Act”). At such time, if any, as we have
      filed all reports that we are required to file under the Exchange Act, holders
      of our common stock who meet the requirements for resales under Rule 144 will
      be
      able to do so if they so desire.





***We
      currently do not have an operating business, but also do not intend to pursue
      a
      course of complete liquidation and dissolution, and accordingly, the value
      of
      your shares may decrease.***





We
      currently do not have any operating business. We continue to incur operating
      expenses while we consider alternative operating plans. These plans may include
      business combinations with or investments in other operating companies, or
      entering into a completely new line of business. We have not yet identified
      any
      such opportunities, and thus, you will not be able to evaluate the impact of
      such a business strategy on the value of your stock. In addition, we cannot
      assure you that we will be able to identify any appropriate business
      opportunities. Even if we are able to identify business opportunities that
      our
      Board deems appropriate, we cannot assure you that such a strategy will provide
      you with a positive return on your investment, and it may in fact result in
      a
      substantial decrease in the value of your stock. These factors will
      substantially increase the uncertainty, and thus the risk, of investing in
      our
      shares.





***We
      may not be able to identify or fully capitalize on any appropriate business
      opportunities.***





We
      have
      not yet identified any appropriate business opportunities, and, due to a variety
      of factors outside of our control, we may not be able to identify or fully
      capitalize on any such opportunities. These factors include:





§
            competition
                from other potential acquirers and partners of and investors in potential
                acquisitions, many of whom may have greater financial resources than
                we
                do;


§
            in
                specific cases, failure to agree on the terms of a potential acquisition,
                such as the amount or price of our acquired interest, or incompatibility
                between us and management of the company we wish to acquire; and


§
            the
                possibility that we may lack sufficient capital and/or expertise
                to
                develop promising opportunities.





Even
      if
      we are able to identify business opportunities that our Board deems appropriate,
      we cannot assure you that such a strategy will provide you with a positive
      return on your investment, and may in fact result in a substantial decrease
      in
      the value of your stock. In addition, if we enter into a combination with a
      business that has operating income, we cannot assure you that we will be able
      to
      utilize all or even a portion of our existing net operating loss carryover
      for
      federal or state tax purposes following such a business combination. If we
      are
      unable to make use of our existing net operating loss carryover, the tax
      advantages of such a combination may be limited, which could negatively impact
      the price of our stock and the value of your


11


investment.
      These factors will substantially increase the uncertainty, and thus the risk,
      of
      investing in our shares.





***Because
      our stock currently trades below $5.00 per share, and is quoted on the Pink
      Sheets, our stock is considered a "penny stock" which can adversely affect
      its
      liquidity.***





For
      so
      long as the trading price of our common stock is less than $5.00 per share,
      our
      common stock is considered a "penny stock," and trading in our common stock
      is
      subject to the requirements of Rule 15g-9 under the Securities Exchange Act
      of
      1934. Under this rule, broker/dealers who recommend low-priced securities to
      persons other than established customers and accredited investors must satisfy
      special sales practice requirements. The broker/dealer must make an
      individualized written suitability determination for the purchaser and receive
      the purchaser's written consent prior to the transaction.





SEC
      regulations also require additional disclosure in connection with any trades
      involving a "penny stock," including the delivery, prior to any penny stock
      transaction, of a disclosure schedule explaining the penny stock market and
      its
      associated risks. These requirements severely limit the liquidity of securities
      in the secondary market because few broker or dealers are likely to undertake
      these compliance activities. In addition to the applicability of the penny
      stock
      rules, other risks associated with trading in penny stocks could also be price
      fluctuations and the lack of a liquid market. Finally, as a penny stock we
      may
      not be entitled to the protections provided by the Private Securities Litigation
      Reform Act of 1995.





***Provisions
      of our articles of incorporation and bylaws may delay or prevent a take-over
      which may not be in the best interests of our
      shareholders.***





Provisions
      of our articles of incorporation and bylaws may be deemed to have anti-takeover
      effects, which include when and by whom special meetings of our shareholders
      may
      be called, and may delay, defer or prevent a takeover attempt. In addition,
      certain provisions of the Florida Business Corporations Act also may be deemed
      to have certain anti-takeover effects which include that control of shares
      acquired in excess of certain specified thresholds will not possess any voting
      rights unless these voting rights are approved by a majority of a corporation's
      disinterested shareholders.





In
      addition, our articles of incorporation authorize the issuance of up to
      1,250,000 shares of preferred stock with such rights and preferences as may
      be
      determined from time to time by our board of directors, of which no shares
      are
      presently issued and outstanding. Our board of directors may, without
      stockholder approval, issue preferred stock with dividends, liquidation,
      conversion, voting or other rights that could adversely affect the voting power
      or other rights of the holders of our common stock.





***It
      is not possible to foresee all risks that may affect us. Moreover, we cannot
      predict whether we will successfully effectuate our current business plan.
      Each
      prospective purchaser is encouraged to carefully analyze the risks and merits
      of
      an investment in the shares and should take into consideration when making
      such
      analysis, among others, the Risk Factors discussed
      above.***





**ITEM
      2.**   **DESCRIPTION
      OF PROPERTY**





We
      maintain a mailing address at 1007 N. Federal Highway, Suite D-6, Fort
      Lauderdale, Florida 33304. Mr. Matthew Dwyer, our sole officer and director,
      provides our company with office space at his primary residence at no cost
      to
      us.





**ITEM
      3.**   **LEGAL
      PROCEEDINGS**





*Stephen
      E. Webster v. Richard Dwyer, Matthew P. Dwyer, Phillip Mistretta, Total Digital
      Displays, Inc., Leslie W. Kernan, Jr., Lacy Katzen LLP, et al, case number
      2005-211 in the Supreme Court of the State of New York* .
      We were
      a defendant in this proceeding in which the plaintiff, Stephen E. Webster,
      sought repayment of a $125,000 debenture we issued to the plaintiff by alleging
      that he was fraudulently induced to purchase the debenture. We filed various
      motions in our defense; however, in September 2005 a judgment was grant against
      our company and other parties for $125,000 plus 9% interest per annum. In March
      2006 our attorneys filed a motion to withdraw as counsel which was granted,
      and
      as August 31, 2006 the default judgment against us in the amount of $125,000
      remains outstanding.. As a result of our limited financial means, we are unable
      to appeal the judgment. Even if we had sufficient funds to hire counsel to
      commence an appeal, we do not know


12


at
      this time if sufficient grounds exist for an appeal of the default
      judgment.





*Total
      Identity Corp. v. Argilus, LLC, American Arbitration Association Case No.
      154590070504* .
      ArgiIus
      LLC was hired to raise the capital and/or secure financing to purchase TISC.
      In
      August 2004 we filed a claim against ArgiIus LLC for breach of its fiduciary
      duty as a result of ArgiIus' failure to perform its agreement. A demand for
      arbitration was filed with American Arbitration Association in August 2004,
      and
      to date there have been no hearings or proceedings in the matter other than
      the
      filing of the initial demand and Argilus’ response in October 2004 together with
      counterclaims demanding $150,000 and 1,000,000 shares of our common stock.
      By
      letter dated August 22, 2006 from the American Arbitration Association we were
      advised that as it had not received communication from either party to the
      matter in response to an earlier letter, that it was their intent to close
      its
      file absent advice from either party on or before August 29, 2006. By letter
      dated August 25, 2006 from counsel to Argilus to the American Arbitration
      Association, Argilus agreed to withdraw its counterclaim. In a subsequent dated
      August 31, 2006 from the American Arbitration Association, we were advised
      that
      unless it was advised to the contrary by September 7, 2006, the arbitration
      would be considered withdrawn. Our ability to pursue the matter is limited
      as a
      result of our limited financial resources. While we believe we have meritorious
      claims, even if we had sufficient funds to hire counsel and pursue this claim,
      we are unable at this time to predict the outcome of the matter.





*Robert
      David v. Total Identity Corp. and Total Identity Systems, Inc., American
      Arbitration Association Case No. 1516859104* .
      This
      legal proceeding relates to a series of agreements we entered into in October
      2003 with TISC and Mr. Robert David, its sole officer, director and principal
      shareholder, as described in Item 1. Description of Business - Total Identity
      Systems Corp. appearing earlier in this report.





*Total
      Identity Corp. vs Leonard Lightman, case number 05008931 in the Circuit Court
      of
      the 17th Judicial Circuit in and for Broward County,
      Florida* .
      In June
      2005 we brought a lawsuit against Mr. Leonard Lightman alleging that he had
      made
      numerous fraudulent misrepresentations with regards to various licenses and
      rights that he had to market certain Major League Baseball and NASCAR
      franchises. As a result, we incurred various expenses and costs to purchase
      ownership in the non-existent asset. The court awarded us a default in August
      2005 as a result of the defendant's failure to answer our complaint within
      the
      prescribed timeframe; however, in September 2005 the court set aside the default
      and as of August 31, 2006 the case remains pending. However, in view of our
      understanding that the defendant has no assets and the cost and expense that
      we
      will incur in pursuing this claim, we have made the business decision to not
      proceed in the collection of the judgment.





*The
      Lebrecht Group, APC vs. Total Identity Corp.* ,
      case
      number 03CC12717 in the Superior Court for Orange County, California. We were
      a
      defendant in a lawsuit seeking to collect legal fees and costs totaling $46,286
      together with accrued interest, attorney's fees and court costs. On May 4,
      2004
      a judgment in the amount of $50,714 was awarded to the plaintiff with interest
      at the rate of 10% per annum. A total of $53,362 is included in our accounts
      payable at December 31, 2004 in the consolidated financial statements appearing
      elsewhere in this report. The judgment remains outstanding as of the date of
      this report.





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





None.


13


**PART
      II**





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





Our
      common stock is quoted on the Pink Sheets under the symbol "TIDC." The following
      table sets forth the high and low closing sale prices for our common stock
      as
      reported on the Pink Sheets and for the last two fiscal years and the subsequent
      interim period. These prices do not include retail mark-ups, markdowns or
      commissions, and may not necessarily represent actual transactions.





High
            
            
            Low*Fiscal
                2004*First
                quarter ended March 31, 2004
            
            
            $0.56
            
            
            $0.15Second
                quarter ended June 30, 2004
            
            
            $0.31
            
            
            $0.10Third
                quarter ended September 30, 2004
            
            
            $0.19
            
            
            $0.08Fourth
                quarter ended July 31, 2004
            
            
            $0.19
            
            
            $0.05*Fiscal
                2005*First
                quarter ended March 31, 2005
            
            
            $0.19
            
            
            $0.03Second
                quarter ended June 30, 2005
            
            
            $0.19
            
            
            $0.02Third
                quarter ended September 30, 2005
            
            
            $0.10
            
            
            $0.02Fourth
                quarter ended December 31, 2005
            
            
            $0.06
            
            
            $0.01*Fiscal
                2006*First
                quarter ended March 31, 2006
            
            
            $0.03
            
            
            $0.01Second
                quarter ended June 30, 2006
            
            
            $0.15
            
            
            $0.009





On
      September 7, 2006, the last reported sale price of the common stock on Pink
      Sheets was $0.0095 per share. As of August 31, 2006 there were approximately
      189
      shareholders of record of the common stock.





**Dividend
      Policy**





We
      have
      never paid cash dividends on our common stock. We intend to keep future
      earnings, if any, to finance the expansion of our business. Payment of dividends
      and distributions is subject to certain restrictions under the Florida Business
      Corporations Act, including the requirement that after making any distribution
      we must be able to meet our debts as they become due in the usual course of
      our
      business. We do not anticipate that any cash dividends will be paid in the
      foreseeable future.





**Recent
      Sales of Unregistered Securities**





In
      February 2005, we issued 500,000 shares of our common stock to Wall
      Street-Review Financial Services, Inc., an affiliate of our CEO Mr. Dwyer,
      for
      an aggregate purchase price of $25,000. The shares were valued at $0.05 per
      share which was the fair market value of our common stock on the date of
      issuance. We had reasonable grounds to believe that the recipient was an
      accredited investor. The certificate evidencing shares issued in the transaction
      included a legend to the effect that the securities were not registered under
      the Securities Act and could not be resold absent registration or the
      availability of an applicable exemption therefrom. No general solicitation
      or
      advertising was used in connection with the transaction. The transaction was
      exempt from the registration requirements of the Securities Act by reason of
      Section 4(2) thereunder as a transaction by an issuer not involving any public
      offering.





In
      February 2005 we issued 395,335 shares of our common stock to Wall Street Review
      Financial Services, Inc., an affiliate of our CEO Mr. Dwyer, in satisfaction
      of
      debt of $15,813. The shares were valued at $0.04 per share which was the fair
      market value of our common stock on the date of issuance. We had reasonable
      grounds to believe that the recipient was an accredited investor. The
      certificate evidencing shares issued in the transaction included a legend to
      the
      effect that the securities were not registered under the Securities Act and
      could not be resold absent registration or the availability of an applicable
      exemption therefrom. No general solicitation or advertising was used in
      connection with the transaction. The transaction was exempt from the
      registration requirements of the Securities Act by reason of Section 4(2)
      thereunder as a transaction by an issuer not involving any public
      offering.


14


In
      June
      2005 issued 250,000 shares of our common stock valued at $20,000 to an
      individual as compensation for consulting services to be rendered to us related
      to the business of our Yard Sale Drop Off subsidiary under the terms of a one
      year consulting agreement. We had reasonable grounds to believe that the
      recipient was an accredited. The certificate evidencing shares issued in the
      transaction included a legend to the effect that the securities were not
      registered under the Securities Act and could not be resold absent registration
      or the availability of an applicable exemption therefrom. No general
      solicitation or advertising was used in connection with the transaction. The
      transaction was exempt from the registration requirements of the Securities
      Act
      by reason of Section 4(2) thereunder as a transaction by an issuer not involving
      any public offering.





At
      December 31, 2004 we owed Mrs. Cindy Dolgin $40,000 under the terms of a
      promissory note issued in January 2004. In March 2006 the note was converted
      into 4,000,000 shares of our common stock at a conversion rate of $0.01 per
      share and we issued Mrs. Dolgin an additional 1,500,000 shares of our common
      stock valued at $15,000 as a penalty for failure to pay the note when due
      pursuant to its terms. We had reasonable grounds to believe that the recipient
      was an accredited investor. The certificates evidencing shares issued in the
      transaction included a legend to the effect that the securities were not
      registered under the Securities Act and could not be resold absent registration
      or the availability of an applicable exemption therefrom. No general
      solicitation or advertising was used in connection with the transaction. The
      transaction was exempt from the registration requirements of the Securities
      Act
      by reason of Section 4(2) thereunder as a transaction by an issuer not involving
      any public offering.





On
      June
      23, 2006, $30,000 of related party accounts payable due by us to Mr. Matthew
      Dwyer, our CEO, was converted into 3,000,000 shares of common stock at a market
      price of $0.01 per share. We had reasonable grounds to believe that the
      recipient was an accredited investor. The certificates evidencing shares issued
      in the transaction included a legend to the effect that the securities were
      not
      registered under the Securities Act and could not be resold absent registration
      or the availability of an applicable exemption therefrom. No general
      solicitation or advertising was used in connection with the transaction. The
      transaction was exempt from the registration requirements of the Securities
      Act
      by reason of Section 4(2) thereunder as a transaction by an issuer not involving
      any public offering.





On
      April
      7, 2006 we borrowed $40,000 from Mr. Manny Losada, a principal shareholder
      of
      our company, under the terms of a note which is due on September 30, 2006.
      As
      additional consideration for the loan, in June 2006 we issued Mr. Losada 800,000
      shares of our common stock valued at $8,000. We granted Mr. Losada piggy back
      registration rights covering these securities. We had reasonable grounds to
      believe that the recipient was an accredited investor. The certificates
      evidencing shares issued in the transaction included a legend to the effect
      that
      the securities were not registered under the Securities Act and could not be
      resold absent registration or the availability of an applicable exemption
      therefrom. No general solicitation or advertising was used in connection with
      the transaction. The transaction was exempt from the registration requirements
      of the Securities Act by reason of Section 4(2) thereunder as a transaction
      by
      an issuer not involving any public offering.





**Securities
      Authorized for Issuance Under Equity Compensation Plans**





The
      following table sets forth securities authorized for issuance under equity
      compensation plans, including individual compensation arrangements, by us under
      our 2003 Omnibus Securities Plan and our 2003 Non-Qualified Stock Option and
      Grant Plan and any compensation plans not previously approved by our
      shareholders as of December 31, 2004 which includes our 2004 Equity Compensation
      Plan.


15


Number
                of securities to
            Weighted
                average
            Number
                of securitiesbe
                issued upon exercise
            exercise
                price of
            remaining
                available forof
                outstanding options,
            outstanding
            future
                issuance underwarrants
                and rights
            options,
                warrants
            equity
                compensationand
                rights
            plans
                (excludingsecurities
                reflected incolumn
                (a)Plan
                category(a)
            (b)
            (c)Plans
                approved by our shareholders:2003
                Omnibus Securities Plan
            0
            n/a
            175,0002003
                Non-Qualified Stock Option andGrant
                Plan
            0
            n/a
            100,000Plans
                not approved by our shareholders:2004
                Equity Compensation Plan
            0
            n/a
            2,500,000





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





The
      following analysis of our results of operations and financial condition should
      be read in conjunction with the accompanying consolidated financial statements
      for the year ended December 31, 2004 and notes thereto appearing elsewhere
      in
      this annual report.





***Overview***





During
      fiscal 2003 our operations were those of our TISC and Kina'ole Development
      Corporation subsidiaries. TISC operated as a vertically integrated custom
      manufacturer of signs and awnings headquartered in Rochester, NY, with in-house
      marketing, sales, design, engineering, manufacturing, and installation
      capabilities. Kina'ole Development Corporation planned to sell manufactured
      homes to retail customers. We acquired 100% of the capital stock of Kina'ole
      Development Corporation in January 2003 and we acquired 100% of TISC in October
      2003. Effective September 30, 2003, we agreed with the former owners of Kina’ole
      Development Corporation to exchange all of our shares of Kina’ole for the
      500,000 shares of our Series B Preferred Stock, the issuance of 120,000 shares
      of our common stock to the former shareholders of Kina’ole in connection with
      the January 2003 acquisition, and $13,500 paid to such shareholders. As a result
      of this exchange, we divested ourselves of the prefabricated home manufacturing
      operations conducted by Kina’ole. The operating results of Kina'ole Development
      Corporation are included in discontinued operations as of December 31, 2003
      in
      the financial statements appearing elsewhere in this annual report.





During
      fiscal 2004 our operations were those of our TISC subsidiary. As described
      elsewhere herein during November 2004, we learned that Mercantile and Trader's
      Trust Company had exercised certain rights granted under the loan documents
      and
      had “swept” TISC’s accounts aggregating approximately $200,000 maintained at the
      bank, and applied the proceeds to the outstanding indebtedness of TISC to the
      bank. In addition, Mercantile and Trader's Trust Company notified the United
      States Post Office that it was exercising its rights under the loan documents
      to
      take control over all mail directed to us and the bank had changed the locks
      at
      TISC’s Rochester, New York facility, and was seeking to take control over TISC’s
      assets in order to satisfy TISC’s indebtedness to Mercantile and Trader's Trust
      Company. In exercising these rights, the Mercantile and Trader's Trust Company
      assumed control over TISC and prevented TISC from conducting and funding its
      day-to-day operations. In light of the actions taken by the bank, including
      our
      loss of control over TISC’s records and operations and the prospect that our
      registered public accounting firm would thereafter be unable to audit TISC’s
      books and records, we treated the operations of TISC as discontinued operations
      as of November 30, 2004, and, accordingly, our financial statements for the
      fiscal years ended December 31, 2004 and 2003 contained elsewhere herein reflect
      the impact of discontinuing the operations of TISC.





While
      we
      incurred expenses related to the operations of Kina'ole Development Corporation
      in fiscal 2003, it did


16


not
      generate any revenues. Revenues for TISC for fiscal 2003 and fiscal 2004, as
      well as costs of sale and expenses related to TISC's operations have been
      included in discontinued operations for the respective periods in the financial
      statements appearing elsewhere in this annual report.





As
      described earlier in this annual report we intend to seek to acquire assets
      or
      shares of an entity actively engaged in business which generates revenues,
      in
      exchange for our securities. Our ability to continue as a going concern is
      dependent on our ability to identify and close a business combination with
      an
      operating entity. We have not yet identified any such opportunities, and we
      cannot assure you that we will be able to identify any appropriate business
      opportunities, or, if identified, that we will be able to close a transaction
      which is inevitably beneficial to our shareholders. In addition, as it is likely
      that if we enter into a business combination the structure of the transaction
      will be such that the approval of our shareholders is not necessary before
      the
      transaction is closed. As such, our shareholders are relying entirely upon
      the
      judgment of our management in structuring a transaction which provides some
      benefit to our shareholders.





***Results
      of Operations***





***Fiscal
      year ended December 31, 2004 ("Fiscal 2004") as compared to the fiscal year
      ended December 31, 2003 ("Fiscal 2003")***




Increase/
              
              Increase/Fiscal
                  2004
              
              Fiscal
                  2003
              
              (Decrease)
              
              (Decrease)$
                    2004 vs 2003
              
              
              %
                  2004 vs 2003Revenue
              
              $
              0
              
              $
              0
              
              
              0
              
              
              n/aCost
                  of sales
              
              
              0
              
              
              0
              
              
              0
              
              
              n/aGross
                  margin
              
              
              0
              
              
              0
              
              
              0
              
              
              n/aExpensesConsulting
                  fees
              
              
              659,136
              
              
              2,704,037
              
              
              (2,044,901
              )
              
              (75.6
              )%Salaries
                  and wages
              
              
              264,375
              
              
              2,000
              
              
              262,375
              
              
              13,119
              %Selling,
                  general and administrative
              
              
              111,380
              
              
              309,484
              
              
              (198,104
              )
              
              (64.0
              )%Total
                  expenses
              
              
              1,034,891
              
              
              3,015,521
              
              
              (1,980,630
              )
              
              (65.7
              )%Loss
                  from operations
              
              
              (1,034,891
              )
              
              (3,015,521
              )
              
              (1,980,630
              )
              
              (65.7
              )%Other
                  income (expense)Interest
                  expense
              
              
              (74,518
              )
              
              (24,130
              )
              
              50,338
              
              
              209
              %Loss
                  on settlement
              
              
              0
              
              
              (185,000
              )
              
              NM
              
              
              NMGain
                  (loss) on extinguishment of debt
              
              
              70,000
              
              
              (1,950,500
              )
              
              NM
              
              
              NMTotal
                  other income (expense)
              
              
              (4,518
              )
              
              (2,159,630
              )
              
              NM
              
              
              NMLoss
                  before discontinued operations
              
              
              (1,039,409
              )
              
              (5,175,151
              )
              
              (4,135,742
              )
              
              (80
              )%Discontinued
                  operations
              
              
              515,472
              
              
              (611,063
              )
              
              NM
              
              
              NMNet
                  loss
              
              $
              (523,937
              )
              $
              (5,786,214
              )
              $
              (5,262,227
              )
              
              (91
              )%




NM
      =  not
      material





**Total
      expenses**





Our
      total
      expenses for fiscal 2004 were $1,034,891, a decline of $1,980,630, or
      approximately 66%, from our total expenses of $3,015,521 for fiscal 2003.
      Included in this decrease were the following:





▪  For
      fiscal 2004 consulting fees declined $2,044,901, or approximately 76%, to
      $659,136 from $2,704,037 for fiscal 2003. Consulting fees included approximately
      $222,136 of cash paid under the terms of various consulting agreements and
      approximately $437,000 representing the value of shares of our common stock
      which we issued as compensation for business consulting services rendered to
      us.





▪  For
      fiscal 2004 salaries and wages increased $262,375, to $264,375 from $2,000
      for
      fiscal 2003. This increase is primarily attributable to expenses related to
      the
      employment agreements for our CEO and our CFO, and


17


▪  Selling,
      general and administrative expense decreased $198,104, or approximately 64%,
      to
      $111,380 for fiscal 2004 from $309,484 for fiscal 2003.





**Other
      income (expense)**





Overall,
      total other expense declined substantially for fiscal 2004 from fiscal 2003
      as a
      result of the following:





▪  Interest
      expense increased $50,338 for fiscal 2004 from fiscal 2003, an approximate
      209%
      increase. This increased interest expense is primarily related to $45,000 of
      interest expense which represents the value of securities issued as an
      inducement to lend us money for which there was no comparable expense in fiscal
      2003,





▪  For
      fiscal 2003 we recognized a loss on settlement of $185,000 which represented
      the
      settlement of litigation to which we were a party. We did not have comparable
      transactions in fiscal 2004, and





▪  For
      fiscal 2003 we recognized a loss of $1,950,500 on extinguishments of debt as
      compared to a gain on extinguishment of debt of $70,000 for fiscal
      2004.





**Discontinued
      operations**





As
      described earlier in this section, in fiscal 2003 we discontinued the operations
      of Kina'ole Development Corporation and in fiscal 2004 we discontinued the
      operations of TISC. We reported discontinued operations for fiscal 2003 of
      a
      loss of $611,063, which includes a loss of $428,849 attributable to TISC and
      a
      loss of $182,214 attributable to Kina'ole Development Corporation. For fiscal
      2004 we reported income on discontinued operations of $515,472 which is related
      to TISC.





***Liquidity
      and Capital Resources***





Liquidity
      is the ability of a company to generate funds to support its current and future
      operations, satisfy its obligations and otherwise operate on an ongoing basis.
      At December 31, 2004 we had cash on hand of $2,824 and a working capital deficit
      of $434,866.





At
      December 31, 2004 we had total assets of $6,904 which consisted of $2,824 of
      cash and $4,080 of prepaid expenses. Our total liabilities at December 31,
      2004
      were $441,770, which included $189,818 of accounts payable and accounts payable
      - related party, $1,500 of accrued expenses and an aggregate of $250,542 in
      convertible debentures and notes payable, including $100,452 of notes payable
      related parties. We do not have sufficient working capital to satisfy these
      obligations.





Net
      cash
      provided by operating activities for fiscal 2004 was $220,701 as compared to
      net
      cash used in operating activities of $1,246,855. The principal changes in cash
      provided by (used in) operating activities from period to period which are
      unrelated to our discontinued operations include:





▪  a
      decrease of $5,262,277 in our net loss for fiscal 2004 from fiscal
      2003,





▪  a
      one
      time gain of $70,000 on extinguishments of debt,





▪  the
      expense related to stock issued for services, salary and interest decreased
      $2,187,138 from fiscal 2003 to fiscal 2004,





▪  an
      increase of $256,375 in expenses related to stock issued for salary and warrants
      issued for services which is primarily attributable to stock issued as partial
      compensation for services rendered by our Chief Executive Officer during fiscal
      2004,





▪  a
      decrease of $58,290 in accounts payable and accounts payable - related party,
      and





▪  a
      decrease of $12,413 in accrued expenses.


18


Net
      cash
      used by investing activities for fiscal 2004 was $2,678 as compared to net
      cash
      provided by investing activities of $849,932 for fiscal 2003. The change is
      primarily related to our acquisition of TISC in fiscal 2003.





Net
      cash
      used by financing activities for fiscal 2004 was $215,199 as compared to net
      cash provided by financing activities of $392,304 for fiscal 2003. The principal
      changes in cash provided (used) by financing activities from fiscal 2003 to
      fiscal 2004 which are unrelated to our discontinued operations
      include:





▪  a
      decrease of $83,000 in proceeds to us from the issuance of stock,
      and





▪  a
      decrease of proceeds from notes payable and related party notes of $263,731
      that
      was partially offset by an increase of $62,302 in payment of notes payable
      and
      related party notes.





At
      December 31, 2004 we had an accumulated deficit of $10,256,314. The report
      from
      our independent registered public accounting firm on our audited financial
      statements at December 31, 2004 contains an explanatory paragraph regarding
      doubt as to our ability to continue as a going concern as a result of our losses
      and working capital deficit. As discussed earlier in this report, we have
      discontinued our operations and are now seeking to acquire assets or shares
      of
      an entity actively engaged in business which generates revenues, in exchange
      for
      our securities. We cannot predict when, if ever, we will be successful in this
      venture and, accordingly, we may be required to cease operations at any time.
      We
      do not have sufficient working capital to pay our operating costs for the next
      12 months and we will require additional funds to pay our legal, accounting
      and
      other fees associated with our company and its filing obligations under federal
      securities laws, as well as to pay our other accounts payable generated in
      the
      ordinary course of our business. We have no commitments from any party to
      provide such funds to us. If we are unable to obtain additional capital as
      necessary until such time as we are able to conclude a business combination,
      we
      will be unable to satisfy our obligations and otherwise continue to meet our
      reporting obligations under federal securities laws. In that event, our ability
      to consummate a business combination with upon terms and conditions which would
      be beneficial to our existing shareholders would be adversely
      affected.





***Critical
      Accounting Policies***





Our
      financial statements and accompanying notes are prepared in accordance with
      generally accepted accounting principles in the United States. Preparing
      financial statements requires management to make estimates and assumptions
      that
      affect the reported amounts of assets, liabilities, revenue and expenses. These
      estimates and assumptions are affected by management's applications of
      accounting policies. Critical accounting policies for our company include the
      following:





*Fixed
      assets* .
      Fixed
      assets are recorded at cost. Major additions and improvements are capitalized.
      Minor replacements, maintenance and repairs that do not increase the useful
      life
      of the assets are expensed as incurred. Depreciation of property and equipment
      is determined on a straight-line basis over the expected useful lives. The
      cost
      and related accumulated depreciation of equipment retired or sold are removed
      from the accounts and any differences between the undepreciated amount and
      the
      proceeds from the sale are recorded as gain or loss on sale of equipment. All
      of
      our fixed assets were repossessed to pay secured debt during November 2004
      (see
      Note 3 of the Notes to Consolidated Financial Statements appearing elsewhere
      in
      this report.)





*Long-Lived
      Assets* We
      adopted Statement of Financial Accounting Standards No. 144 (SFAS 144),
      "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144
      develops one accounting model (based on the model in SFAS 121) for long-lived
      assets that are to be disposed of by sale and addresses the principal
      implementation issues. SFAS 144 requires that long-lived assets that are to
      be
      disposed of by sale be measured at the lower of book value or fair value less
      cost to sell. This requirement eliminates the previous (APB30) requirement
      that
      discontinued operations be measured at net realizable value or that entities
      include under discontinued operations in the financial statements amounts for
      operating losses that have not yet occurred. Additionally, SFAS 144 expands
      the
      scope of discontinued operations to include all components of an entity with
      operations that (1) can be distinguished from the rest of the entity and (2)
      will be eliminated from the ongoing operations of the entity in a disposal
      transaction.


19


***New
      Accounting Standards***





On
      December 16, 2004 the Financial Accounting Standards Board (FASB) issued SFAS
      No. 123(R), “Share-Based Payment” (SFAS 123(R)), which is an amendment to SFAS
      No. 123, “Accounting for Stock- Based Compensation”. SFAS 123(R) eliminates the
      ability to account for share-based compensation transactions using Accounting
      Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to
      Employees”, and generally requires such transactions to be accounted for using a
      fair-value based method with the resulting cost recognized in the financial
      statements. SFAS 123(R) is effective for awards that are granted, modified
      or
      settled in cash during the first annual period beginning after June 15, 2005,
      or
      the year ending December 31, 2006 for our company. In addition, this new
      standard will apply to unvested options granted prior to the effective date.
      The
      effect of adoption of SFAS 123(R) is not anticipated to have a material impact
      on our company.





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs - an amendment of
      ARB No. 43, Chapter 4” (SFAS 151). This Statement amends the guidance in ARB No.
      43, Chapter 4, "Inventory Pricing" to clarify the accounting for abnormal
      amounts of idle facility expense, freight, handling costs, and wasted material
      (spoilage). This Statement requires that certain items be recognized as
      current-period charges and requires that allocation of fixed production
      overheads to the costs of conversion be based on the normal capacity of the
      production facilities. SFAS 151 is effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005, or the year ending December 31,
      2006
      for our company. The effect of adoption of SFAS 151 is not anticipated to have
      a
      material impact on our company.





In
      December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate
      Time-sharing Transactions” (SFAS 152), which amends FASB statement No. 66,
“Accounting for Sales of Real Estate”, to reference the financial accounting and
      reporting guidance for real estate time-sharing transactions that is provided
      in
      AICPA Statement of Position 04-2, “Accounting for Real Estate Time-Sharing
      Transactions” (SOP 04-2). SFAS 152 also amends FASB Statement No. 67,
“Accounting for Costs and Initial Rental Operations of Real Estate Projects”, to
      state that the guidance for (a) incidental operations and (b) costs incurred
      to
      sell real estate projects does not apply to real estate time-sharing
      transactions. The accounting for those operations and costs is subject to the
      guidance in SOP 04-2. SFAS 152 is effective for financial statements for fiscal
      years beginning after June 15, 2005, or the year ending December 31, 2006 for
      our company. The effect of adoption of SFAS 152 is not anticipated to have
      a
      material impact on our company.





In
      December 2004, the FASB issued SFAS No.153, “Exchange of Nonmonetary Assets”
(SFAS 153). This Statement addresses the measurement of exchanges of nonmonetary
      assets. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary
      Transactions” (APB 29), is based on the principle that exchanges of nonmonetary
      assets should be measured based on the fair value of the assets exchanged.
      The
      guidance in APB 29 included certain exceptions to that principle and SFAS 153
      amends APB 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetary exchange
      has commercial substance if the future cash flows of the entity are expected
      to
      change significantly as a result of the exchange. SFAS 153 is effective for
      financial statements for fiscal years beginning after June 15, 2005, or the
      year
      ending December 31, 2006 for our company. The effect of adoption of SFAS 151
      is
      not anticipated to have a material impact on our company.





In
      March
      2005, the Securities and Exchange Commission (SEC) released Staff Accounting
      Bulletin No. 107, "Share-Based Payment" (SAB 107), which provides interpretive
      guidance related to the interaction between SFAS 123(R) and certain SEC rules
      and regulations. It also provides the SEC staff's views regarding valuation
      of
      share-based payment arrangements. In April 2005, the SEC amended the compliance
      dates for SFAS 123(R), to allow companies to implement the standard at the
      beginning of their next fiscal year, instead of the next reporting period
      beginning after June 15, 2005. The effect of adoption of SAB 107 is not
      anticipated to have a material impact on our company.





In
      March
      2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional
      Asset Retirement Obligations" (FIN 47). FIN 47 provides guidance relating to
      the
      identification of and financial reporting for legal obligations to perform
      an
      asset retirement activity. The Interpretation requires recognition of a
      liability for the fair value of a conditional asset retirement obligation when
      incurred if the liability's fair value can be reasonably estimated. FIN 47
      also
      defines when an entity would have sufficient information to reasonably


20


estimate
      the fair value of an asset retirement obligation. FIN 47 is effective no later
      than the end of fiscal years ending after December 15, 2005. Our adoption of
      FIN
      47 had no impact on our company.





In
      May
      2005, the FASB issued FASB Statement No. 154, "Accounting Changes and Error
      Corrections” (SFAS 154). SFAS 154 replaces APB Opinion No. 20, "Accounting
      Changes” and FASB Statement No. 3, “Reporting Accounting Changes in Interim
      Financial Statements" and represents another step in the FASB's goal to converge
      its standards with those issued by the IASB. Among other changes, SFAS 154
      requires that a voluntary change in accounting principle be applied
      retrospectively with all prior period financial statements presented on the
      new
      accounting principle, unless it is impracticable to do so. SFAS 154 also
      provides that (1) a change in method of depreciating or amortizing a long-lived
      non- financial asset be accounted for as a change in estimate (prospectively)
      that was effected by a change in accounting principle, and (2) correction of
      errors in previously issued financial statements should be termed a
      "restatement." The new standard is effective for accounting changes and
      correction of errors made in fiscal years beginning after December 15, 2005.
      The
      effect of adoption of SFAS 154 is not anticipated to have a material impact
      on
      our company.





In
      February of 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments" (SFAS 155), which is intended to simplify the accounting
      and improve the financial reporting of certain hybrid financial instruments
      (i.e., derivatives embedded in other financial instruments). The statement
      amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging
      Activities", and SFAS No. 140, "Accounting for Transfers and Servicing of
      Financial Assets and Extinguishments of Liabilities a replacement of FASB
      Statement No. 125." SFAS 155 is effective for all financial instruments issued
      or acquired after the beginning of an entity's first fiscal year that begins
      after September 15, 2006. The effect of adoption of SFAS 155 is not anticipated
      to have a material impact on our company.





In
      March
      of 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial
      Assets, an amendment of FASB Statement No. 140” (SFAS 156). SFAS 156 amends SFAS
      140, "Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities a replacement of FASB Statement No. 125," with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. SFAS 156 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 any of the following
      situations: (a) a transfer of the servicer’s financial assets that meets the
      requirements for sale accounting, (b) a transfer of the servicer’s financial
      assets to a qualifying special-purpose entity in a guaranteed mortgage
      securitization in which the transferor retains all of the resulting securities
      and classifies them as either available-for-sale securities or trading
      securities, and (c) an acquisition or assumption of an obligation to service
      a
      financial asset that does not relate to financial assets of the servicer or
      its
      consolidated affiliates. SFAS 156 is effective for all servicing assets and
      liabilities as of the beginning of an entity's first fiscal year that begins
      after September 15, 2006. The effect of adoption of SFAS 156 is not anticipated
      to have a material impact on our company.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes (FIN 48) - an interpretation of FASB Statement No. 109, Accounting
      for Income Taxes (SFAS No. 109)” (FIN 48) *.* FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in
      accordance with SFAS No. 109 and prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a return. Guidance is also
      provided on de-recognition, classification, interest and penalties, accounting
      in interim periods, disclosure and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006. The effect of adoption of FIN 48 is
      not
      anticipated to have a material impact on our company.





**ITEM
      7.**   **FINANCIAL
      STATEMENTS**





Our
      financial statements are contained in pages F-1 through F-25, which appear
      at
      the end of this annual report.





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





None.


21


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





As
      required by Rule 13a-15 under the Securities Exchange Act of 1934, as of
      December 31, 2004, the end of the period covered by this annual report, our
      management concluded its evaluation of the effectiveness of the design and
      operation of our disclosure controls and procedures. Disclosure controls and
      procedures are controls and procedures designed to reasonably assure that
      information required to be disclosed in our reports filed under the Securities
      Exchange Act of 1934, such as this annual report, is recorded, processed,
      summarized and reported within the time periods prescribed by SEC rules and
      regulations, and to reasonably assure that such information is accumulated
      and
      communicated to our management, including our President, to allow timely
      decisions regarding required disclosure.





As
      of the
      evaluation date, our CEO who is our sole management and sole employee, concluded
      that we maintain disclosure controls and procedures that are effective in
      providing reasonable assurance that information required to be disclosed in
      our
      reports under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported within the time periods prescribed by SEC rules and
      regulations, and that such information is accumulated and communicated to our
      management to allow timely decisions regarding required disclosure.





There
      have been no changes in our internal control over financial reporting that
      has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.





**ITEM
      8B.**  **OTHER
      INFORMATION**





None.





**PART
      III**





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





**Executive
      Officers and Directors**





Name
            
            Age
            
            
            PositionMatthew
                P. Dwyer
            
            41
            
            
            Chief
                Executive Officer, ChiefFinancial
                Officer and sole director





Matthew
      P. Dwyer has been a member of our board of directors since January 12, 2004.
      He
      has served as Chief Executive Officer and Chief Financial Officer since April
      22, 2004 and. He served as a Vice President and Secretary from January 12,
      2004
      to April 22, 2004. From October 2002 until January 2004, he served as a
      full-time consultant for Kina’ole Development Corporation, a Hawaii corporation.
      Mr. Dwyer provided advice to Kina’ole in connection with our acquisition of
      Kina’ole in January 2003, and, thereafter, continued to provide consulting
      services to Kina’ole in connection with potential acquisitions and financings.
      From May 2002 until October 2004, Mr. Dwyer was self-employed as a business
      consultant. In April 1999, Mr. Dwyer founded Wallstreet-Review, Inc.
      (“WALS.pk”), a financial consulting firm. He served as Chairman and Chief
      Executive Officer of Wallstreet-Review until November 2001, and, from November
      2001 until May 2002, provided consulting services to it.





Our
      officers are elected annually at the first board of directors meeting following
      the annual meeting of shareholders, and hold office until their respective
      successors are duly elected and qualified, unless sooner displaced.





**Directors'
      Compensation**





We
      do not
      have an established compensation policy for our directors.


22


**Director
      independence, Audit Committee of the Board of Directors and Audit Committee
      financial expert**





As
      our
      Board of Directors is comprised of only one individual who also serves as our
      sole officer, we do not have any directors who are “independent” within the
      meaning of definitions established by the Securities and Exchange Commission.
      We
      anticipate that if we are successful in closing a business combination with
      an
      operating entity, our future Board of Directors may include members who are
      independent. We do not currently have any committees of our Board of Directors.
      We are not currently subject to any law, rule or regulation requiring that
      all
      or any portion of our Board of Directors include “independent” directors, nor
      are we required to establish or maintain an Audit Committee of our Board of
      Directors.





Our
      sole
      director is not an “audit committee financial expert” within the meaning of Item
      401(e) of Regulation S-B. In general, an “audit committee financial expert” is
      an individual member of the audit committee or Board of Directors
      who:


▪  understands
        generally accepted accounting principles and financial statements,
 ▪  is
        able
        to assess the general application of such principles in connection with
        accounting for estimates, accruals and reserves,
 ▪  has
        experience preparing, auditing, analyzing or evaluating financial statements
        comparable to the breadth and complexity to our
 financial statements,
 ▪  understands
        internal controls over financial reporting, and
 ▪  understands
        audit committee functions. .





**Code
      of Ethics**





We
      have
      not yet adopted a Code of Ethics applicable to our Chief Executive Officer,
      principal financial and accounting officers and persons performing similar
      functions. A Code of Ethics is a written standard designed to deter wrongdoing
      and to promote:


▪  honest
        and ethical conduct,
 ▪  full,
        fair, accurate, timely and understandable disclosure in regulatory filings
        and
        public statements,
 ▪  compliance
        with applicable laws, rules and regulations,
 ▪  the
        prompt reporting violation of the Code, and
 ▪  accountability
        for adherence to the Code.





We
      are
      not currently subject to any law, rule or regulation requiring that we adopt
      a
      Code of Ethics. If and to the extent that we adopt a Code of Ethics, we will
      file a copy of the Code of Ethics with the Securities and Exchange Commission,
      and will provide a copy, without charge, to any person desiring a copy of the
      Code of Ethics, by written request to the our company at its principal offices.
      Inasmuch as our operations are managed by our sole officer and director, and
      there are, therefore, no effective checks and balances relative to the decisions
      made and actions taken by our sole officer and director, we do not believe
      that
      a Code of Ethics would provide a meaningful element of security to our security
      holders. We may adopt a Code of Ethics in the future as we expand our management
      structure to add additional employees.





**Compliance
      With Section 16(a) of the Exchange Act**





Based
      solely upon a review of Forms 3 and 4 and amendments thereto furnished to us
      under Rule 16a-3(d) of the Securities Exchange Act of 1934, as amended, during
      the fiscal year ended December 31, 2004 and Forms 5 and amendments thereto
      furnished to us with respect to the fiscal year ended December 31, 2004, as
      well
      as any written representation from a reporting person that no Form 5 is
      required, we are aware that the above Board members failed to file on a timely
      basis, as disclosed in the aforementioned Forms, reports required by Section
      16(a) of the Securities Exchange Act of 1934 during the fiscal year ended
      December 31, 2004 other than Mr. Matthew Dwyer who failed to report various
      grants of securities to him that were exempt under Rule 16b-3, as well as the
      disposition of securities by him during fiscal 2004. Mr. Dwyer failed to timely
      file 20 Form 4s covering 40 transactions.


23


**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





The
      following table summarizes all compensation recorded by us in each of the last
      three fiscal years for our Chief Executive Officer and each other executive
      officers serving as such (the “Named Executive Officers”) whose annual
      compensation exceeded $100,000.





**Summary
      Compensation Table**




Annual
                  Compensation
              
              Long-term
                  compensationName
                  and principal
              
              
              
              Other
              
              Securities
              
              All
                  otherposition
              
              
              
              Annual
              Restricted
              underlying
              LTIP
              Compen-Fiscal
              Salary
              Bonus
              Compen-
              stock
              options/
              payouts
              sationYear
              ($)
              ($)
              sation
                  $)
              awards($)
              SARs
                  (#)
              ($)
              ($)Matthew
                  P. Dwyer1
              2004
              $165,000
              $6,000
              $0
              $0
              662,500
              $0
              $0Philip
                  C. Mistretta2
              2004
              $75,000
              $0
              $0
              $0
              0
              $0
              $02003
              $0
              $0
              $0
              $0
              0
              $0
              $0Richard
                  R. Dwyer3
              2003
              $33,000
              $0
              $0
              $0
              0
              $0
              $0Scott
                  Siegel4
              2003
              $0
              $0
              $0
              $0
              0
              $0
              $0Martin
                  Peskin5
              2003
              $0
              $0
              $0
              $0
              0
              $0
              $0




1  Mr.
      Matthew P. Dwyer has served as our Chief Executive Officer, Chief Financial
      Officer and a director since April 22, 2004. Mr. Dwyer's 2004 salary was paid
      to
      him through a combination of cash payments totaling $96,000 and the issuance
      of
      375,000 shares of our common stock valued at $69,000. Other annual compensation
      paid to Mr. Dwyer in fiscal 2004 represents an expense allowance of $500 per
      month. During fiscal 2004 we granted Mr. Dwyer options to purchase a total
      of
      662,500 shares of our common stock, of which 262,500 options were exercisable
      at
      $0.03 per share, 200,000 options were exercisable at $0.19 per share and the
      remaining 200,000 options were exercisable at $0.08 per share.





2  Mr.
      Mistretta served as our Chief Executive Officer from November 2003 until April
      2004.





3  Mr.
      Richard R. Dwyer served as our Chief Executive Officer from August 2003 until
      November 2003.





4  Mr.
      Siegel serves as our Chief Executive Officer from March 2003 until August
      2003.





5  Dr.
      Peskin served as our Chief Executive Officer from July 2003 until August
      2003.





**Employment
      Agreements**





On
      February 23, 2004, we entered into an Employment Agreement with Matthew P.
      Dwyer
      covering Mr. Dwyer’s services to us as our Vice President. The agreement, which
      is for an initial term expiring on January 1, 2007, provides for the payment
      of
      compensation to Mr. Dwyer of $120,000 for the first year, $136,000 for the
      second year and $149,600 for the third year. Salary payments to Mr. Dwyer,
      at
      his election, may be made through the issuance of shares of our common stock
      that have been registered for resale on Form S-8. Mr. Dwyer has advised us
      that
      he intends to exercise this election and receive his salary in common stock.
      The
      agreement also grants Mr. Dwyer five-year options to purchase 500,000 shares
      of
      our common stock at $.03 per share, 62,500 of which have vested, with the
      balance vesting on quarterly basis. Mr. Dwyer is also entitled to (a) an annual
      bonus in an amount equal to 1% of our post-tax profits, but not more than 50%
      of
      his then current salary, (b) a car allowance not to exceed $500 per month and
      (c) other benefits made available to all of our employees as a group. In the
      event of Mr. Dwyer’s death, we are required to pay his base salary to his estate
      for the remaining term of the employment agreement. In the event we undergo
      a
      change in control, Mr. Dwyer is entitled to terminate the agreement and, in
      such
      event, we are required to pay Mr. Dwyer an amount equal to approximately three
      times his average annual salary during the preceding three years. The agreement
      contains provisions protecting the confidentiality of our proprietary
      information and provides that Mr. Dwyer may not compete with us during the
      term
      of the agreement and for two years thereafter.





During
      May 2004, our CEO resigned and we amended the employment agreement of the Vice
      President to promote him to CEO and Chief Financial Officer. In recognition
      of
      the increased responsibilities undertaken his salary was increased from $120,000
      per year to $180,000 per year and his stock options were increased from 62,500
      shares per quarter to 200,000 shares per quarter. The options are fully vested,
      issued


24


at
      the beginning of the quarter, exercisable for five year at the market price
      on
      the first day of the quarter.





During
      fiscal 2004 we issued a total of 375,000 shares of common stock in lieu of
      cash
      salary under the employment agreement valued at $69,000. In addition, we issued
      662,500 shares of common stock for the exercise of all stock options related
      to
      the above employment agreement in conversion of related party payables totaling
      $60,875.





**Consulting
      Agreement**





On
      February 2, 2004, we entered into a consulting agreement with Richard R. Dwyer,
      our former Chief Executive Officer. The agreement was for an initial term of
      one
      year, subject to a six-month renewal term. Mr. Dwyer provided consulting
      services to us in the areas of corporate development, acquisitions and strategic
      planning. For his services, Mr. Dwyer received fully vested and exercisable
      two-year warrants to purchase 1,100,000 shares of our common stock at an
      exercise price of $.03 per share, plus warrants to purchase an additional
      750,000 shares in the event the renewal term of the agreement becomes
      effective). The agreement contains provisions protecting the confidentiality
      of
      our proprietary information. The warrants to purchase 1,100,000 shares of our
      common stock granted as compensation under the initial term of the agreement
      were exercised by Mr. Dwyer through the conversion of accrued compensation
      totaling $33,000 due him for his services as President and CEO from August
      2003
      until November 2003. We recognized $157,000 in consulting expense in fiscal
      2004
      related to the grant of these warrants. In February 2005 we extended the term
      of
      the consulting agreement with Mr. Dwyer and as consideration granted him
      warrants to purchase an additional 750,000 shares of our common stock at an
      exercise price of $0.03 per share. Mr. Dwyer exercised the warrants in February
      2005. The agreement expired in August 2005 pursuant to its terms.





**Stock
      Option Information**





The
      following table sets forth certain information with respect to stock options
      granted in fiscal 2004 to the Named Executive Officers.





**Option
      Grants in Year Ended December 31, 2004**


**(individual
      grants)**





Name
            No.
                of Securities
            %
                of Total
            Exercise
                Price
            Expiration
                DateUnderlying
            Options/SARs
                GrantedOptions/SARs
                Granted
            to
                Employees in FiscalYearMatthew
                P. Dwyer
            662,500
            100%
            (1)
            (1)Phillip
                C. Mistretta
            0
            n/a
            n/a
            n/a





(1)  Includes
      options to purchase 262,500 shares of our common stock with an exercise price
      of
      $0.03 per share, options to purchase 200,000 shares of our common stock with
      an
      exercise price of $0.19 per share and options to purchase 200,000 shares of
      our
      common stock with an exercise price of $0.08 per share.





The
      following table sets forth certain information regarding stock options held
      as
      of December 31, 2004 by the Named Executive Officers.





**Aggregate
      Option Exercises in Year Ended December 31, 2004**


**and
      Year-End Option Values**





Name
            Shares
            Value
            No.
                of Securities Underlying
            Value
                of Unexercised In-The-Acquired
            Received
            Unexercised
                Options at
            Money
                Options at December 31,On
                Exercise
            $
            December
                31, 2004
            2004(1)Exercisable
            Unexercisable
            Exercisable
            UnexercisableMatthew
                Dwyer
            662,500
            $21,125
            0
            0
            n/a
            n/aPhillip
                Mistretta
            0
            n/a
            0
            0
            n/a
            n/a


25


(1)  The
      value
      of unexercised in the money options at December 31, 2004 is calculated by
      determining the difference between the fair market value of the securities
      underlying the options and the exercise price of the options at fiscal year-end,
      respectively. At December 31, 2004 the closing price of our common stock as
      reported on the OTC Bulletin Board was $0.06 per share.





**Stock
      Option Plans**





**2004
      Equity Compensation Plan** . On June
      15, 2004, our Board of Directors authorized our 2004 Equity Compensation Plan
      (the "2004 Plan"). We have currently reserved 2,500,000 of our authorized but
      unissued shares of common stock for issuance under the 2004 Plan, and a maximum
      of 2,500,000 shares may be issued, unless the 2004 Plan is subsequently amended
      (subject to adjustment in the event of certain changes in our capitalization),
      without further action by our Board of Directors and shareholders, as required.
      Subject to the limitation on the aggregate number of shares issuable under
      the
      2004 Plan, there is no maximum or minimum number of shares as to which a stock
      grant or plan option may be granted to any person. Shares used for stock grants
      and plan options may be authorized and unissued shares or shares reacquired
      by
      us, including shares purchased in the open market. Shares covered by plan
      options which terminate unexercised will again become available for grant as
      additional options, without decreasing the maximum number of shares issuable
      under the 2004 Plan, although such shares may also be used by us for other
      purposes.





Under
      the
      2004 Equity Compensation Plan the following types of stock-based awards may
      be
      made:





•  non-qualified
      stock options;


•  stock
      grants; and


•  stock
      appreciation rights.





In
      addition, the 2004 Plan allows for the inclusion of a reload option provision,
      which permits an eligible person to pay the exercise price of the option with
      shares of common stock owned by the eligible person and receive a new option
      to
      purchase shares of common stock equal in number to the tendered shares. The
      term
      of each plan option and the manner in which it may be exercised is determined
      by
      the Board of Directors or the committee, provided that no option may be
      exercisable more than 10 years after the date of its grant.





The
      2004
      Plan provides that, if our outstanding shares are increased, decreased,
      exchanged or otherwise adjusted due to a share dividend, forward or reverse
      share split, recapitalization, reorganization, merger, consolidation,
      combination or exchange of shares, an appropriate and proportionate adjustment
      shall be made in the number or kind of shares subject to the plan or subject
      to
      unexercised options and in the purchase price per share under such options.
      Any
      adjustment, however, does not change the total purchase price payable for the
      shares subject to outstanding options.





All
      2004
      Plan options are nonassignable and nontransferable, except by will or by the
      laws of descent and distribution, and during the lifetime of the optionee,
      may
      be exercised only by such optionee, except as provided by the board of the
      Committee. Options are also subject to termination by the Committee or the
      Board
      under certain conditions.





At
      December 31, 2004, no options had been granted under the 2004 Plan. At August
      31, 2006, options covering 1,500,000 shares have been granted under the 2004
      Plan.





**Total
      Identity Corp. 2003 Omnibus Securities Plan** .
      On May
      2, 2003, our Board of Directors approved the Total Identity Corp. 2003 Omnibus
      Securities Plan (the "2003 Omnibus Securities Plan"). On May 2, 2003, the 2003
      Omnibus Securities Plan was approved by written consent of holders of a majority
      of our voting stock, and ratified on June 17, 2003. On January 12, 2004, our
      Board of Directors increased the number of shares available for issuance under
      the 2003 Omnibus Securities Plan from 140,000 to 800,000.





Under
      the
      2003 Omnibus Securities Plan the following types of stock-based awards may
      be
      made:





·  stock
      options (including incentive stock options and non-qualified stock
      options),


·  restricted
      stock awards;


·  unrestricted
      stock awards; and


·  performance
      stock awards.


26


Our
      employees and those of any subsidiary are eligible to be granted awards under
      the 2003 Omnibus Securities Plan at the discretion of the Board of Directors.
      The 2003 Omnibus Securities Plan is currently administered by the Board of
      Directors. In the future, the Board of Directors may form a Compensation
      Committee to administer the 2003 Omnibus Securities Plan. The plan administrator
      has discretion to:





·  select
      the persons to whom awards will be granted;


·  grant
      Awards under the 2003 Omnibus Securities Plan;


·  determine
      the number of shares to be covered by each Award;


·  determine
      the nature, amount, pricing, timing and other terms of the Award;


·
            interpret, construe and implement the provisions of the 2003 Omnibus
                Securities Plan (including the authority to adopt rules and
              regulations
                for carrying out the purposes of the plan);
                and


·  terminate,
      modify or amend the 2003 Omnibus Securities Plan.




In
      general, the awards under the 2003 Omnibus Securities Plan, will be
      proportionately adjusted for any increase or decrease in the number of issued
      shares of common stock resulting from an increase, decrease or exchange in
      the
      outstanding shares of common stock or additional shares or new or different
      shares are distributed through merger, consolidation, sale or exchange of all
      or
      substantially all of our assets, reorganization, recapitalization,
      reclassification, stock dividend, stock split, reverse stock split, spin-off
      or
      other distribution with respect to such shares.





Under
      the
      2003 Omnibus Securities Plan, the Board of Directors may grant either incentive
      stock options or nonqualified stock options. The exercise price for each stock
      option is to be determined by the Board of Directors. Stock options must have
      an
      exercise price of at least 85% (100% in the case of incentive stock options,
      or
      at least 110% in the case of incentive stock options granted to certain
      employees owning more than 10% of the outstanding voting stock) of the fair
      market value of the common stock on the date the stock option is granted. Under
      the 2003 Omnibus Securities Plan, fair market value of the common stock for
      a
      particular date is generally the average of the closing bid and asked prices
      per
      share for the stock as quoted on the OTC Bulletin Board on such
      date.





No
      stock
      option may be exercised after the expiration of ten years from the date of
      grant
      (or five years in the case of incentive stock options granted to certain
      employees owning more than 10% of the outstanding voting stock). Restricted
      and
      unrestricted stock may also be awarded under the 2003 Omnibus Securities Plan,
      subject to such terms, conditions and restrictions as the administering body
      deems appropriate.





At
      each
      of December 31, 2004 and August 31, 2006, awards covering 625,000 shares had
      been made under the 2003 Omnibus Securities Plan.





**Total
      Identity Corp. 2003 Non-Qualified Stock Option and Grant
      Plan** .
      On May
      2, 2003, our Board of Directors approved, declared it advisable and in our
      best
      interests and directed that there be submitted to the holders of a majority
      of
      our voting stock the Total Identity Corp. 2003 Non-Qualified Stock Grant and
      Option Plan (the "2003 Non-Qualified Securities Plan"). On May 2, 2003, the
      Board of Directors approval of the 2003 Non-Qualified Securities Plan was
      ratified by written consent of a majority of our voting stock On November 14,
      2003, the Board of Directors increased the number of shares available for
      issuance under the 2003 Non-Qualified Securities Plan to 3,000,000 shares,
      and
      on January 12, 2004 increased the number of shares available for issuance to
      5,200,000 shares.




Under
      the
      2003 Non-Qualified Securities Plan, the following types of stock-based
      awards:





·  stock
      options (non-qualified stock options); and


·  stock
      awards (restricted, unrestricted or performance-based).





Our
      key
      employees (including employees who are also directors or officers), directors
      and consultants are eligible to be granted awards under the 2003 Non-Qualified
      Securities Plan at the discretion of the Board of Directors. Selected
      consultants may participate in the 2003 Non-Qualified Securities Plan
      if:


27


·  the
      consultant renders bona fide services to us or one of our
      subsidiaries;


·  the
      services rendered by the consultant are not in connection with the offer or
      sale
      of securities in a capital-raising transaction and do not directly or indirectly
      promote or maintain a market for our securities; and


·  the
      consultant is a natural person who has contracted directly with us or a
      subsidiary to render such services.





The
      2003
      Non-Qualified Securities Plan currently is administered by our Board of
      Directors, but at the Board’s election, a committee may be appointed by the
      Board of Directors. The Board of Directors or any committee appointed by the
      Board of Directors has full authority, in its discretion, to:





·  select
      the persons to whom awards will be granted;


·  grant
      awards under the 2003 Non-Qualified Securities Plan;


·  determine
      the number of shares to be covered by each award;


·  determine
      the nature, amount, pricing, timing and other terms of the award;


·
            interpret, construe and implement the provisions of the 2003 Non-Qualified
                Securities Plan (including the authority to adopt
              rules and regulations for carrying out the purposes of the plan);
                and


·  terminate,
      modify or amend the 2003 Non-Qualified Securities Plan.





In
      general, awards under the 2003 Non-Qualified Securities Plan, will all be
      proportionately adjusted for any increase or decrease in the number of issued
      shares of common stock resulting from an increase, decrease or exchange in
      the
      outstanding shares of common stock or additional shares or new or different
      shares are distributed through merger, consolidation, sale or exchange of all
      or
      substantially all of our assets, or our reorganization, recapitalization,
      reclassification, stock dividend, stock split, reverse stock split, spin-off
      or
      other distribution with respect to our shares.





Under
      the
      2003 Non-Qualified Securities Plan the Board of Directors may grant
      non-qualified stock options. Non-qualified stock options may be granted for
      such
      number of shares of common stock as the Board of Directors determines, so long
      as such number of shares does not exceed the amount permitted under the plan.
      The exercise price for each stock option is determined by the Board of
      Directors. No stock option may be exercised after the expiration of ten years
      from the date of grant. Subject to the foregoing and the other provisions of
      the
      2003 Non-Qualified Securities Plan, stock options may be exercised at such
      times
      and in such amounts and be subject to such restrictions and other terms and
      conditions, if any, as determined by the Board of Directors. Restricted stock
      may also be awarded by the Board of Directors subject to such terms, conditions
      and restrictions, if any, as it deems appropriate.





At
      each
      of December 31, 2004 and August 31, 2006, awards covering 5,100,000 shares
      had
      been made under the 2003 Non-Qualified Securities Plan.





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





At
      August
      31, 2006, there were 27,392,510 shares of our common stock issued and
      outstanding. The following table sets forth, as of that date information known
      to us relating to the beneficial ownership of these shares by:




- 
      each
      person who is the beneficial owner of more than 5% of the outstanding shares
      of
      the class of stock;


-  each
      director;


-  each
      executive officer; and


-  all
      executive officers and directors as a group.





Unless
      otherwise indicated, the business address of each person listed is in care
      of
      1007 North Federal Highway, Suite D-6, Fort Lauderdale, Florida 33304. We
      believe that all persons named in the table have sole voting and investment
      power with respect to all shares beneficially owned by them. Under securities
      laws, a person is considered to be the beneficial owner of securities he owns
      and that can be acquired by him within 60


28


days
      from
      August 31, 2006 upon the exercise of options, warrants, convertible securities
      or other understandings. We determine a beneficial owner's percentage ownership
      by assuming that options, warrants or convertible securities that are held
      by
      him, but not those held by any other person and which are exercisable within
      60
      days of that date have been exercised or converted.





Name
                of
            
            Amount
                and Nature of
            
            PercentageBeneficial
                Owner
            
            Beneficial
                Ownership
            
            of
                ClassMatthew
                P. Dwyer13
            
            6,407,835
            
            22.3%All
                officers and directors asa
                group (one person)1
                3
            
            6,407,835
            
            22.3%Cindy
                Dolgin2
            
            5,750,000
            
            21.0%Manny
                Losada
            
            1,650,000
            
            6.0%Dr.
                Martin Peskin3
            
            3,000,000
            
            11.0%





*   represents
      less than 1%





1  Includes
      options to purchase an aggregate of 1,400,000 shares of our common stock with
      exercise prices ranging from $0.01 to $0.10 per share granted to him pursuant
      to
      the terms of his employment agreement, 1,862,500 shares owned by AFAB, Inc.
      and
      145,335 shares owned by Wall Street Review. Mr. Dwyer has voting and dispositive
      control over securities held by these entities.





2  Excludes
      500,000 shares owned by Mr. Neil Dolgin, the spouse of Mrs. Cindy Dolgin. Mr.
      Dolgin was an executive officer and director of our company from April 2003
      until November 2004. 3  Mr.
      Dwyer
      has entered into an agreement with Dr. Peskin to sell him 3,000,000 shares
      of
      common stock held by Mr. Dwyer.





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





On
      October 28, 2002, our then-principal stockholder, Marc Douglas, entered into
      a
      stock purchase agreement pursuant to which Mr. Douglas agreed to sell, through
      a
      series of transactions, all 250,000 shares of our Series A Preferred Stock
      owned
      by him and to cancel 156,717 shares of common stock owned by him in exchange
      for
      a promissory note to Mr. Douglas in the principal amount of $150,000 due 120
      days from the closing. The Series A Preferred Stock sold by Mr. Douglas
      represented 100% of the outstanding Series A Preferred Stock and, after
      cancellation of the 156,717 shares of common stock owned by Mr. Douglas and
      his
      affiliates as discussed below, represented 56% of the voting control of our
      company. The closing for the sale took place upon the satisfaction of all
      closing conditions on December 18, 2002.





In
      conjunction with the sale of Mr. Douglas' Series A Preferred Stock, our
      then-current directors resigned from the Board and William Michael Sessions
      and
      John W. Meyers were appointed to the Board. In addition, Mr. Sessions was
      appointed to serve as our CEO and Secretary and Mr. Meyers was appointed to
      serve as our COO and Treasurer.




In
      connection with the sale of his Series A Preferred Stock, Mr. Douglas also
      cancelled 156,717 shares of our common stock and 60,500 options and warrants
      to
      acquire the common stock owned by him and his affiliates. Our new Board of
      Directors assigned to Mr. Douglas and his affiliates $675,000 of the outstanding
      principal balance of the $1,175,000 purchase note payable to us by an entity
      controlled by Mr. Douglas. In connection with this transaction, we entered
      into
      a five-year consulting agreement with Mr. Douglas whereby he agreed to provide
      us advice regarding strategies for development and expansion of our business,
      including with respect to mergers and acquisitions, in exchange for the
      consulting agreement. We have written off the remaining $500,000 of the note
      receivable from the former stockholder as of December 29, 2002. This balance
      was
      written off based on management's decision not to engage Mr. Douglas for any
      consulting services on our behalf subsequent to December 29, 2002. As a result
      of this transaction there was both a change of voting control of our company
      and
      a change in its management, including its Board of Directors.





On
      October 24, 2002, we issued 41,667 shares of our common stock, with restrictive
      legend, to Marc Douglas. Our Board of Directors approved this issuance during
      the second quarter of fiscal year ended December 29, 2002. This issuance was
      made pursuant to an agreement entered into in May 2002, between our company
      and
      Thrift Ventures, Inc., a company controlled by Mr. Douglas, a then officer
      and
      director of our company, whereby Thrift Ventures, Inc. agreed to prepay an
      initial interest payment of $98,926 on a purchase


29


note
      between our company and Thrift Ventures, Inc. This issuance was exempt from
      registration pursuant to Section 4(2) of the Securities Act.





On
      January 31, 2003, we acquired 100% of the outstanding stock of Kina'ole
      Development Corporation, a Hawaiian corporation, from William Michael Sessions
      and John W. Meyers, both of whom were officers and directors of our company
      at
      the time of the transaction. In exchange for Kina'ole's shares, we issued Mr.
      Sessions and Mr. Meyers each 250,000 shares of our Series B Convertible
      Preferred Stock. On September 30, 2003 we entered into an agreement with Messrs.
      Sessions and Meyers to exchange the 500,000 shares of Series B Convertible
      Preferred Stock for 100% of the securities of Kina'ole Development Corporation.
      In addition, upon settlement of a then pending lawsuit we agreed to issue an
      additional 120,000 shares of our common stock to Messrs. Sessions and Meyers
      and
      to pay certain obligations to these individuals in the amount of $13,500. All
      operations of Kina'ole Development Corporation are included in discontinued
      operations as of December 31, 2003.





On
      February 21, 2003, we entered into a Stock Purchase Agreement with Messrs.
      Sessions and Meyers, and Mr. Scott Siegel, whereby we agreed to issue 1,050,000
      shares of our common stock to Mr. Siegel, and Mr. Sessions and Mr. Meyers
      transferred 250,000 shares of Series A Preferred Stock to Mr. Siegel, all in
      exchange for Mr. Siegel agreeing to pay approximately $72,500 of our outstanding
      liabilities and $150,000 for outstanding amounts owed by Mr. Sessions and Mr.
      Meyers to Marc Douglas. On March 5, 2003, Mr. Sessions and Mr. Meyers resigned
      as directors of our company and Mr. Siegel, who was not a related party to
      our
      company at the time of the transaction, became an officer and
      director.





On
      May
      13, 2004, we entered into an agreement with Mr. Siegel resolving certain
      disputes that had





arisen
      relating to the ownership of 1,050,000 shares of our common stock and 250,000
      shares of our Series A Preferred Stock. Under the terms of the agreement:





·  Mr.
      Siegel retained 250,000 shares of common stock originally acquired by him on
      February 21, 2003, at an agreed upon purchase price of $.03 per share and
      800,000 shares of common stock issued to Mr. Siegel under the February 21,
      2003
      stock purchase agreement were surrendered to us and canceled. The Series A
      Preferred Stock was surrendered to us and canceled;





·  We
      agreed
      to pay Mr. Siegel $35,265, plus $7,000 less an amount equal to our legal fees
      in
      settlement of this matter. As our legal fees in this matter exceeded $7,000,
      the
      amount payable to Mr. Siegel at December 31, 2004 was $35,265. The amount
      payable to Mr. Siegel was to be paid (a) one-third for each million dollars
      in
      financing raised by us after June 27, 2004 or (b) pro-rata to the extent that
      our other officers or directors receive repayment of indebtedness from
      third-party financing obtained by us subsequent June 27, 2004; and





·
            Mr. Siegel resigned as a director effective May 13, 2004.





In
      October 2003 we issued a $150,000 principal amount 12% secured debenture to
      Argilus Capital, LLC which was due on January 10, 2004. The funds to satisfy
      the
      debenture were to be provided to us from the net proceeds of a $1,000,000
      private placement. The terms of this debenture provided that as additional
      consideration we were to issue or cause to be issued to Argilus Capital, LLC
      400,000 freely tradeable shares of our common stock. If the debenture was not
      paid when due because of a failure to complete the private offering, the 400,000
      shares of our common stock would be used by the holder to satisfy our
      obligations under the debenture and thereafter release us from any obligation
      related thereto. Mr. Matthew Dwyer, who was then a shareholder of our company,
      transferred 400,000 shares of our common stock that he owned to Argilus Capital,
      LLC pursuant to this requirement. The private offering was never completed
      and
      as a result Argilus Capital, LLC was entitled to the 400,000 shares. In March
      2004 we issued Mr. Dwyer, who was then an officer and director of our company,
      400,000 shares valued at $76,000, in replacement of the shares he had
      transferred to Argilus Capital, LLC on our behalf.





On
      January 16, 2004 we borrowed $50,000 from Mrs. Cindy Dolgin, the wife of Mr.
      Neil Dolgin who was then an officer and director of our company. The funds
      were
      used by us for working capital. As an inducement to loan us the money we issued
      Mrs. Dolgin 250,000 shares of our common stock valued at $45,000. The note
      carried a 45 day term with interest at 8% per annum and contained a penalty
      cause requiring us to issue 5,000 shares of our common stock per day from the
      due date of February 28, 2004 of the note until such time as the


30


note
      is paid in full. In addition, the note provided that should Mrs. Dolgin elect
      to
      convert the note into equity and invest an additional $200,000 into our company
      prior to the due date of the note, the note would be convertible at $0.25 per
      share. No such election was ever made. On October 26, 2004 we made a $10,000
      payment to Mrs. Dolgin. At December 31, 2004 we owed Mrs. Cindy Dolgin,
      presently a principal shareholder of our company, $40,000 under the note. In
      March 2006 the note was converted into 4,000,000 shares of our common stock
      at a
      conversion rate of $0.01 per share. We issued Mrs. Dolgin an additional
      1,500,000 shares of our common stock valued at $15,000 as a penalty for failure
      to pay the note when due.





During
      fiscal 2004 we issued Mr. Matthew Dwyer, our President and CEO, options to
      purchase 262,500 shares of our common stock with an exercise price of $0.03
      per
      share, options to purchase 200,000 shares of our common stock with an exercise
      price of $0.19 per share and options to purchase 200,000 shares of our common
      stock with an exercise price of $0.08 per share as additional compensation
      under
      this employment agreement. Mr. Dwyer exercised these options through the
      conversion of working capital advances he had made us totaling $60,875 as
      described below.





During
      each of fiscal 2003 and fiscal 2004 from time to time Mr. Matthew Dwyer has
      lent
      our company funds for working capital. Generally the loans do not bear interest
      and there is no fixed term for repayment. During fiscal 2003 he lent us a total
      of $180,937, all of which was outstanding at December 31, 2003. During fiscal
      2004 he lent us an additional $15,906. During fiscal 2004 we repaid Mr. Dwyer
      approximately $92,402 and he utilized an additional $60,875 due him for working
      capital advances as payment for the exercise price of options granted under
      his
      employment agreement as described above. At December 31, 2004 we owned him
      approximately $43,566.





In
      February 2005, we issued 500,000 shares of our common stock to Wall
      Street-Review Financial Services, Inc., an affiliate of our CEO Mr. Dwyer,
      for
      an aggregate purchase price of $25,000. The shares were valued at $0.05 per
      share which was the fair market value of our common stock on the date of
      issuance. In February 2005 we also issued 395,335 shares of our common stock
      to
      Wall Street Review Financial Services, Inc. in satisfaction of debt of $15,813.





On
      June
      23 2006, $30,000 of related party accounts payable due by us to Mr. Matthew
      Dwyer, our CEO, was converted into 3,000,000 shares of common stock at a market
      price of $0.01 per share.





On
      April
      7, 2006 we borrowed $40,000 from Mr. Manny Losada, a principal shareholder
      of
      our company, under the terms of a note bearing interest at 2% per month which
      is
      due on September 30, 2006. As additional consideration for the loan, in June
      2006 we issued Mr. Losada 800,000 shares of our common stock valued at $8,000.
      We granted Mr. Losada piggy back registration rights covering these securities.





In
      June
      2006 we borrowed an additional $25,000 from Mr. Losada which bears interest
      at
      12% per annum and was due on July 31, 2006. As additional consideration for
      the
      loan we issued Mr. Losada 100,000 shares of our common stock valued at $1,000.
      The amount of the loan remains outstanding as of August 31, 2006.





**PART
      IV**





**ITEM
      13.**  **EXHIBITS**





The
      following documents are filed as a part of this report or are incorporated
      by
      reference to previous filings, if so indicated:





EXHIBIT
      NO.  DESCRIPTION


3.1.1
              Amended
                  and Restated Articles of Incorporation (1)3.1.2
              Statement
                  of Designation of Series A Preferred Stock (2)3.2
              Amended
                  and Restated By-Laws (3)3.3
              Articles
                  of Amendment filed June 30, 2004. (23)3.4
              Articles
                  of Amendment filed July 1, 2004 (24)3.5
              Articles
                  of Amendment dated June 25, 2004 (28)3.6
              Articles
                  of Amendment dated June 25, 2004 (29)10.1
              2003
                  Omnibus Securities Plan, as amended (4)
                  **





10.2
              2003
                  Non-Qualified Stock Grant and Option Plan, as amended (5)
                  **10.3
              Stock
                  Purchase Agreement dated October 13, 2003 by and between Total
                  Identity
                  Corp. and Total Identity Systems Corp. (6)10.4
              Stock
                  Purchase Agreement dated October 13, 2003 by and between Total
                  Identity
                  Corp. and Robert David (7)10.5
              Employment
                  Agreement dated October 13, 2003 by and between Charles Finzer
                  and Total
                  Identity Corp. (8)**10.6
              Employment
                  Agreement dated October 13, 2003 by and between Robert David and
                  Total
                  Identity Corp. (9)**10.7
              Promissory
                  Note dated October 13, 2003 from Total Identity Systems Corp. to
                  Robert
                  David (10)10.8
              Pledge
                  Agreement dated October 13, 2003 by and between Total Identity
                  Corp. and
                  Robert David (11)10.9
              Lease
                  Agreement dated October 13, 2003 by and between Total Identity
                  Systems
                  Corp. and 2340 Townline Road Corporation (12)10.10
              Amendment
                  No. 1 to the Common Stock Purchase Agreement dated February 23,
                  2004 by
                  and between Total Identity Corp., Total Identity Systems Corp.
                  and Robert
                  David (13)10.11
              Amendment
                  No. 1 to Common Stock Purchase Agreement dated February 23, 2004
                  by and
                  between Total Identity Corp. and Robert David (14)10.12
              Amended
                  and Restated Promissory Note dated February 23, 2004
                  (15)10.13
              Amended
                  and Restated Pledge Agreement dated February 23, 2004
                  (16)10.14
              Lease
                  Agreement dated February 23, 2004 (17)10.15
              Consulting
                  Agreement dated February 23, 2004 by and between Total Identity
                  Corp. and
                  Robert David (18)**10.16
              Amended
                  and Restated Pledge Agreement dated February 23, 2004 by and between
                  Total
                  Identity Corp., Robert David and Shapiro, Rosenbaum, Liebschultz
                  and
                  Nelson, LLP (19)10.17
              Employment
                  Agreement dated February 23, 2004 with Matthew P. Dwyer
                  (20)**10.18
              Consulting
                  Agreement dated February 2, 2004 with Richard R. Dwyer (21)
                  **10.19
              Settlement
                  Agreement dated May 13, 2004 between Scott Siegel and Total Identity
                  Corp.
                  (22)10.20
              Employment
                  Agreement with Jeffrey Hoffman (25)**10.21
              2004
                  Equity Compensation Plan (26)**10.22
              Agreement
                  dated June 17, 2005 between Total Identity Corp. and WallStreet-Review
                  Financial Services, Inc. (27) **10.23
              8%
                  Note in the principal amount of $50,000 dated January 16, 2004
                  issued to
                  Ms. Cindy Dolgin *10.24
              Note
                  in the principal amount of $40,000 dated April 7, 2006 issued to
                  Mr.
                  Manuel B. Losada *10.25
              Note
                  in the principal amount of $72,031 dated May 11, 2006 issue to
                  Tripp
                  Scott, P.A. *21.1
              Subsidiaries
                  of the registrant *31.1
              Section
                  302 Certificate of Chief Executive Officer *31.2
              Section
                  302 Certificate of Chief Financial Officer *32.1
              Section
                  906 Certificate of Chief Executive Officer **
              filed
                  herewith**
              compensatory
                  agreement(1)
              Incorporated
                  by reference to Exhibit 3.1 to the registration statement on Form
                  SB-2
                  filed on April 14, 2000.(2)
              Incorporated
                  by reference to Exhibit 4.1 to the registration statement on Form
                  SB-2
                  filed on April 14, 2000.(3)
              Incorporated
                  by reference to Exhibit 3.2 to the registration statement on Form
                  SB-2
                  filed on April 14, 2000.(4)
              Incorporated
                  by reference to Exhibit 10.1 to the annual report on Form 10-KSB
                  for the
                  fiscal year ended December 31, 2003.(5)
              Incorporated
                  by reference to Exhibit 10.2 to the annual report on Form 10-KSB
                  for the
                  fiscal year ended December 31, 2003.(6)
              Incorporated
                  by reference to Exhibit 10.1 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(7)
              Incorporated
                  by reference to Exhibit 10.2 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(8)
              Incorporated
                  by reference to Exhibit 10.3 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(9)
              Incorporated
                  by reference to Exhibit 10.4 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(10)
              Incorporated
                  by reference to Exhibit 10.5 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(11)
              Incorporated
                  by reference to Exhibit 10.6 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(12)
              Incorporated
                  by reference to Exhibit 10.7 to the Current Report on Form 8-K
                  filed on
                  October 28, 2003.(13)
              Incorporated
                  by reference to Exhibit 10.1 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(14)
              Incorporated
                  by reference to Exhibit 10.2 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(15)
              Incorporated
                  by reference to Exhibit 10.3 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(16)
              Incorporated
                  by reference to Exhibit 10.4 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(17)
              Incorporated
                  by reference to Exhibit 10.5 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(18)
              Incorporated
                  by reference to Exhibit 10.6 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(19)
              Incorporated
                  by reference to Exhibit 10.7 to the Current Report on Form 8-K
                  filed on
                  February 24, 2004.(20)
              Incorporated
                  by reference to Exhibit 10.17 to the annual report on Form 10-KSB
                  for the
                  fiscal year ended December 31, 2003.(21)
              Incorporated
                  by reference to Exhibit 10.18 to the annual report on Form 10-KSB
                  for the
                  fiscal year ended December 31, 2003.(22)
              Incorporated
                  by reference to Exhibit 10.1 to the Current Report on Form 8-K
                  filed on
                  May 20, 2004.(23)
              Incorporated
                  by reference to Exhibit 3.1 to the Current Report on Form 8-K filed
                  on
                  September 24, 2004.
 32


(24)
              Incorporated
                  by reference to Exhibit 3.2 to the Current Report on Form 8-K filed
                  on
                  September 24, 2004.(25)
              Incorporated
                  by reference to Exhibit 10.1 to the Current Report on Form 8-K
                  filed on
                  September 24, 2004.(26)
              Incorporated
                  by reference to Exhibit 10.1 to the registration statement on Form
                  S-8
                  filed on February 11, 2005.(27)
              Incorporated
                  by reference to Exhibit 10.1 to the Current Report on Form 8-K
                  filed on
                  July 7, 2005.(28)
              Incorporated
                  by reference to Exhibit 3.1 to the quarterly report on Form 10-QSB/A
                  for
                  the period ended June 30, 2004.(29)
              Incorporated
                  by reference to Exhibit 3.2 to the quarterly report on Form 10-QSB/A
                  for
                  the period ended June 30, 2004.


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





HJ
&
      Associates, LLC. served as our independent registered public accounting firm
      for
      fiscal 2004 and fiscal 2003. The following table shows the fees that were billed
      for the audit and other services provided by this firm for the 2004 and 2003
      fiscal years.





Fiscal
                2004
            Fiscal
                2003Audit
                Fees
            $12,500
            $55,382Audit-Related
                Fees
            2,500
            3,705Tax
                Fees
            0
            0All
                Other Fees
            4,000
            2,127TOTAL
            $19,000
            $61,214





*Audit
      Fees* —
This
      category includes the audit of our annual financial statements, review of
      financial statements included in our Form 10-QSB Quarterly Reports and services
      that are normally provided by the independent auditors in connection with
      engagements for those fiscal years. This category also includes advice on audit
      and accounting matters that arose during, or as a result of, the audit or the
      review of interim financial statements.





*Audit-Related
      Fees* —
This
      category consists of assurance and related services by the independent auditors
      that are reasonably related to the performance of the audit or review of our
      financial statements and are not reported above under “Audit Fees.” The services
      for the fees disclosed under this category include consultation regarding our
      correspondence with the SEC and other accounting consulting.





*Tax
      Fees* —
This
      category consists of professional services rendered by our independent auditors
      for tax compliance and tax advice. The services for the fees disclosed under
      this category include tax return preparation and technical tax advice.





*All
      Other Fees* —
This
      category consists of fees for other miscellaneous items.





Our
      Board
      of Directors has adopted a procedure for pre-approval of all fees charged by
      the
      our independent auditors. Under the procedure, the Board approves the engagement
      letter with respect to audit, tax and review services. Other fees are subject
      to
      pre-approval by the Board, or, in the period between meetings, by a designated
      member of Board. Any such approval by the designated member is disclosed to
      the
      entire Board at the next meeting. The audit and tax fees paid to the auditors
      with respect to fiscal year 2004 were pre-approved by the Board of Directors.





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





Total
                Identity Corp.September
                13, 2006
            
            
            By:
                /s/ Matthew P. DwyerMatthew
                P. Dwyer, CEO, CFO and President, principal executive officer and
                principal financial and accounting
                officer








In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Signature
            
            Title
            
            Date/s/
                Matthew P. Dwyer
            
            CEO,
                Chief Financial Officer,
            
            September
                13, 2006Matthew
                P. Dwyer
            
            President
                and director









**TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 
 **December
        31, 2004 and 2003**
 
           
  
   
 
 
 
 
 
 
 C
        O N T E
        N T S
 
 
 Report
                  of Independent Registered Public Accounting Firm
              3Consolidated
                  Balance Sheet
              F4Consolidated
                  Statements of Operations
              F6Consolidated
                  Statements of Stockholders’ Equity (Deficit)
              F7Consolidated
                  Statements of Cash Flows
              F9Notes
                  to the Consolidated Financial Statements
              F11
 
 
  
   REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  The
        Board
        of Directors
 Total
        Identity Corporation and Subsidiaries
 Fort
        Lauderdale, Florida
  We
        have
        audited the accompanying consolidated balance sheet of Total Identity
        Corporation and Subsidiaries as of December 31, 2004 , and the related
        consolidated statements of operations, stockholders' equity (deficit) and
        cash
        flows for the years ended December 31, 2004 and 2003.  These consolidated
        financial statements are the responsibility of the Company's management. 
Our responsibility is to express an opinion on these consolidated financial
        statement based on our audits.
  We
        conducted our audits in accordance with the standards of the Public Company
        accounting Oversight Board (United States).  Those standards require that
        we plan and perform the audit to obtain reasonable assurance about whether
        the
        consolidated financial statements are free of material misstatements.  An
        audit includes examining, on a test basis, evidence supporting the amounts
        and
        disclosures in the consolidated financial statements.  An audit also
        includes assessing the accounting principles used and significant estimates
        made
        by management, as well as evaluating the overall consolidated 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 consolidated financial position of Total Identity
        Corporation and Subsidiaries as of December 31, 2004 and the results of their
        operations and their cash flows for the years ended December 31, 2004 and
        2003,
        in conformity with U.S. generally accepted accounting principles.
  The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern.  As discussed in Note 7 to
        the consolidated financial statements, the Company's deficit in working capital
        and losses raises substantial doubt about its ability to continue as a going
        concern.  Management’s plans concerning these matters are also described in
        Note 7.  The consolidated financial statements do not include any
        adjustments that might result from the outcome of this uncertainty.
  /s/
        HJ
& Associates, LLC
 HJ
&
        Associates, LLC
 Salt
        Lake
        City, Utah
 
  
  
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Balance Sheet
 
 
 
 
 
 **ASSETS**
 
 December
                  31,2004CURRENT
                  ASSETSCash
              
              $
              2,824Prepaid
                  expenses
              
              
              4,080Total
                  Current Assets
              
              
              6,904TOTAL
                  ASSETS
              
              $
              6,904
 
           The
              accompanying notes are an integral part of these consolidated financial
              statements.
 F4
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Balance Sheet (Continued)
  LIABILITIES
        AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
 December
                  31,2004CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              142,644Accounts
                  payable- related party (Note 5)
              
              
              47,174Accrued
                  expenses
              
              
              1,500Convertible
                  debenture (Note 4)
              
              
              125,000Notes
                  payable (Note 4)
              
              
              25,000Notes
                  payable- related party (Notes 4 and 5)
              
              
              100,452Total
                  Current Liabilities
              
              
              441,770TOTAL
                  LIABILITIES
              
              
              441,770STOCKHOLDERS’
                  EQUITY (DEFICIT)Preferred
                  stock, Series “A” $0.01 par value,1,500,000
                  shares authorized; -0- sharesissued
                  and outstanding
              
              
              -Preferred
                  stock, Series “B” $0.01 par value,500,000
                  shares authorized; -0- issued and outstanding
              
              
              -Common
                  stock, $0.01 par value, 30,000,000 sharesauthorized;
                  15,347,171 shares issued and outstanding
              
              
              153,471Additional
                  paid-in capital
              
              
              9,667,977Accumulated
                  deficit
              
              
              (10,256,314
              )Total
                  Stockholders’ Equity (Deficit)
              
              
              (434,866
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS’EQUITY
                  (DEFICIT)
              
              $
              6,904
 The
              accompanying notes are an integral part of these consolidated financial
              statements.
 F5
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Statements of Operations
 
 For
                  the Years EndedDecember
                  31,2004
              
              2003REVENUE
              
              $
              -
              
              $
              -COST
                  OF SALES
              
              
              -
              
              
              -GROSS
                  MARGIN
              
              
              -
              
              
              -EXPENSESConsulting
                  fees
              
              
              659,136
              
              
              2,704,037Salaries
                  and wages
              
              
              264,375
              
              
              2,000Selling,
                  general and administrative
              
              
              111,380
              
              
              309,484Total
                  Expenses
              
              
              1,034,891
              
              
              3,015,521LOSS
                  FROM OPERATIONS
              
              
              (1,034,891
              )
              
              (3,015,521
              )OTHER
                  INCOME (EXPENSE)Interest
                  expense
              
              
              (74,518
              )
              
              (24,130
              )Loss
                  on settlement
              
              
              -
              
              
              (185,000
              )Gain
                  (Loss) on extinguishments of debt
              
              
              70,000
              
              
              (1,950,500
              )Total
                  Other Income (Expense)
              
              
              (4,518
              )
              
              (2,159,630
              )LOSS
                  BEFORE DISCONTINUED OPERATIONS
              
              
              (1,039,409
              )
              
              (5,175,151
              )DISCONTINUED
                  OPERATIONS (NOTE 3)
              
              
              515,472
              
              
              (611,063
              )NET
                  LOSS
              
              $
              (523,937
              )
              $
              (5,786,214
              )BASIC
                  INCOME (LOSS) PER SHARELoss
                  per share before discontinued operations
              
              $
              (0.06
              )
              $
              (0.85
              )Income
                  (loss) per share on discontinued operations
              
              
              0.03
              
              
              (0.10
              )NET
                  LOSS PER SHARE
              
              $
              (0.03
              )
              $
              (0.95
              )WEIGHTED
                  AVERAGE NUMBER OF SHARES OUTSTANDING
              
              
              15,229,431
              
              
              6,088,123
 The
              accompanying notes are an integral part of these consolidated financial
              statements.
 F6
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Statements of Stockholders’ Equity (Deficit)
 
 AdditionalPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-inAccumulatedShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              DeficitBalance,
                  fiscal 2002
              
              250,000
              
              $2,500
              
              189,671
              
              $1,896
              
              $3,850,664
              
              $(3,946,163)Series
                  B preferred stockissued
                  in acquisition of Kina‘Ole
                  Development Corporation
              
              500,000
              
              5,000
              
              -
              
              -
              
              (189,777)
              
              -Common
                  stock issued forconsulting
                  services
              
              -
              
              -
              
              2,995,000
              
              29,950
              
              1,482,800
              
              -Common
                  stock issued asincentive
                  for loan toCompany
              
              -
              
              -
              
              50,000
              
              500
              
              17,500
              
              -Common
                  stock issued asincentive
                  for loan toCompany
              
              -
              
              -
              
              25,000
              
              250
              
              8,750
              
              -Common
                  stock issued forDebt
              
              -
              
              -
              
              6,050,000
              
              60,500
              
              2,001,000
              
              -Warrants
                  issued to consultantsfor
                  services rendered
              
              -
              
              -
              
              -
              
              -
              
              1,227,875
              
              -Common
                  stock issued forconversion
                  of warrants
              
              -
              
              -
              
              2,900,000
              
              29,000
              
              54,000
              
              -Spin-off
                  of Kina ‘OleDevelopment
                  Corporation
              
              (500,000)
              
              (5,000)
              
              -
              
              -
              
              317,290
              
              -Stock
                  issued for acquisition
              
              -
              
              -
              
              250,000
              
              2,500
              
              -
              
              -Consolidated
                  net loss forthe
                  year ended December31,
                  2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,786,214
              )Balance,
                  December 31, 2003
              
              
              250,000
              
              
              2,500
              
              
              12,459,671
              
              
              124,596
              
              
              8,770,102
              
              
              (9,732,377
              )Series
                  A preferred stockRetired
                  in settlement
              
              
              (250,000
              )
              
              (2,500
              )
              
              -
              
              
              -
              
              
              2,500Common
                  stock issued forconsulting
                  services
              
              
              -
              
              
              -
              
              
              1,700,000
              
              
              17,000
              
              
              263,000
              
              
              -Common
                  stock issued forsalaries
              
              
              -
              
              
              -
              
              
              375,000
              
              
              3,750
              
              
              65,250
              
              
              -Common
                  stock issued asincentive
                  for loan toCompany
              
              
              -
              
              
              -
              
              
              250,000
              
              
              2,500
              
              
              42,500
              
              
              -Common
                  stock issued forpurchase
                  of subsidiary
              
              
              -
              
              
              -
              
              
              200,000
              
              
              2,000
              
              
              28,000
              
              
              -Common
                  stock issued forconversion
                  of debt
              
              
              -
              
              
              -
              
              
              400,000
              
              
              4,000
              
              
              72,000
              
              
              -Balance
                  forward
              
              
              -
              
              $
              -
              
              
              15,384,671
              
              $
              153,846
              
              $
              9,243,352
              
              $
              (9,732,377
              )
 The
              accompanying notes are an integral part of these consolidated financial
              statements.
 F7
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Statements of Stockholders’ Equity (Deficit) (Continued)
 
 AdditionalPreferred
                  Stock
              
              Common
                  Stock
              
              Paid-inAccumulatedShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              DeficitBalance
                  forward
              
              
              -
              
              $
              -
              
              
              15,384,671
              
              $
              153,846
              
              $
              9,243,352
              
              $
              (9,732,377
              )Common
                  stock issued forwarrant
                  exercise
              
              
              -
              
              
              -
              
              
              1,100,000
              
              
              11,000
              
              
              22,000
              
              
              -Common
                  stock issued foroption
                  exercise
              
              
              -
              
              
              -
              
              
              662,500
              
              
              6,625
              
              
              54,250
              
              
              -Common
                  stock cancelled
              
              
              -
              
              
              -
              
              
              (1,800,000
              )
              
              (18,000
              )
              
              18,000
              
              
              -Stock
                  warrants issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              157,000
              
              
              -Stock
                  options issued for salary
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              99,375
              
              
              -Contribution
                  of capital
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              74,000
              
              
              -Consolidated
                  net loss forthe
                  year ended December31,
                  2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (523,937
              )Balance,
                  December 31, 2004
              
              
              -
              
              $
              -
              
              
              15,347,171
              
              $
              153,471
              
              $
              9,667,977
              
              $
              (10,256,314
              )
 The
              accompanying notes are an integral part of these consolidated financial
              statements.
 F8
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Statements of Cash Flows
 For
                  the Years EndedDecember
                  31,2004
              
              2003CASH
                  FLOWS FROM OPERATINGACTIVITIESNet
                  loss
              
              $
              (523,937
              )
              $
              (5,786,214
              )Adjustments
                  to reconcile net loss to netcash
                  used by operating activities:Depreciation
                  and amortization - discontinued operations
              
              
              229,475
              
              
              43,638(Gain)
                  on extinguishments of debt
              
              
              (70,000
              )
              
              -Loss
                  on extinguishments of debt - discontinued
              
              
              45,453
              
              
              1,949,500Stock
                  issued for services, salary and interest
              
              
              394,000
              
              
              2,581,138Stock
                  options issued for salary
              
              
              99,375
              
              
              -Stock
                  warrants issued for services
              
              
              157,000
              
              
              -(Gain)
                  on discontinued operations
              
              
              (663,852
              )
              
              -Changes
                  in assets and liabilities:(Increase)
                  decrease in receivables - discontinued
              
              
              (231,005
              )
              
              24,508(Increase)
                  decrease in inventory - discontinued
              
              
              142,847
              
              
              (45,619
              )(Increase)
                  in prepaid assets
              
              
              (4,080
              )
              
              -(Increase)
                  decrease in other assets - discontinued
              
              
              88,801
              
              
              (30,359
              )(Decrease)
                  in accounts payable andaccounts
                  payable - related party
              
              
              (58,290
              )
              
              -Increase
                  in accounts payable - discontinued
              
              
              236,618
              
              
              849,494(Decrease)
                  in warranty payable - discontinued
              
              
              -
              
              
              (450,976
              )Increase
                  (Decrease) in customer deposit payable - discontinued
              
              
              190,509
              
              
              (242,488
              )(Decrease)
                  in accrued expenses
              
              
              (12,413
              )
              
              -Increase
                  (decrease) in accrued expenses - discontinued
              
              
              200,200
              
              
              (139,477
              )Net
                  Cash Provided (Used) by Operating Activities
              
              
              220,701
              
              
              (1,246,855
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESAcquisition
                  of subsidiary
              
              
              -
              
              
              851,382Purchase
                  of property and equipment - discontinued
              
              
              (2,678
              )
              
              (1,450
              )Net
                  Cash Provided (Used) by Financing Activities
              
              
              (2,678
              )
              
              849,932CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from issuance of stock
              
              
              -
              
              
              83,000Payment
                  on bank overdraft - discontinued
              
              
              25,480
              
              
              (95,985
              )Payment
                  on notes payable - discontinued
              
              
              (320,235
              )
              
              -Proceeds
                  from notes payable and related party notes
              
              
              210,000
              
              
              473,431Payment
                  of notes payable and related party notes
              
              
              (130,444
              )
              
              (68,142
              )Net
                  Cash Provided (Used) by Financing Activities
              
              
              (215,199
              )
              
              392,304INCREASE
                  (DECREASE) IN CASH
              
              
              2,824
              
              
              (4,619
              )CASH
                  AT BEGINNING OF PERIOD
              
              
              -
              
              
              4,619CASH
                  AT END OF PERIOD
              
              $
              2,824
              
              $
              -
 F9
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Consolidated
        Statements of Cash Flows
 
 For
                  the Years EndedDecember
                  31,2004
              
              2003SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOWINFORMATION:CASH
                  PAID FOR:Interest
              
              $
              160,490
              
              $
              -Income
                  taxes
              
              $
              -
              
              $
              -SCHEDULE
                  OF NON-CASH FINANCING ACTIVITIES:Stock
                  issued for services, salary and interest
              
              $
              394,000
              
              $
              2,581,138Stock
                  options issued for salary
              
              $
              99,375
              
              $
              -Stock
                  warrants issued for services
              
              $
              157,000
              
              $
              -Stock
                  issued for debt
              
              $
              199,875
              
              $
              428,500
          F10
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        1  ORGANIZATION
        AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a.
            Organization 
 Total
        Identity Corporation (the “Company” or “TIC”), was organized in the State of
        Florida on July 22, 1991 for the purpose of managing the operations of retail
        thrift stores which offered for sale new and used articles of clothing,
        furniture, miscellaneous household items and antiques. Through its wholly
        owned
        subsidiaries, the Company operated six retail thrift stores that offered
        new and
        used articles of clothing, furniture, miscellaneous household items and
        antiques, and an Internet subsidiary which operated a business-to-consumer
        site
        that offered collectibles, art and antiques on a limited basis, until August
        27,
        2001, when the sale of these business units to the Company’s President and
        principal stockholder was complete. This transaction had been approved by
        the
        Company’s stockholders (with all shares held by the President and his affiliates
        voting with the majority of all other outstanding shares) at the annual meeting
        held on August 13, 2001.
 
 On
        October 13, 2003, the Company purchased all of the outstanding stock of Total
        Identity Systems Corporation (“TIS”) (Note 3). TIS was incorporated on February
        16, 1982 in the State of New York, under the name of Total Energy Services
        Corporation. On August 23, 1996, the Company changed its name to Total Identity
        Systems Corporation. On October 20, 1999, the Company began also operating
        under
        the name of Empire/Forster Sign & Awning. The Company designed,
        manufactured, and installed custom awnings and signs until November 24, 2004,
        when Mercantile and Traders Trust Company (M&T Bank) exercised rights given
        to it in a promissory note and other loan agreements, sweeping TIS’s accounts
        and applying them to the outstanding indebtedness of TIS to M&T Bank.
        M&T Bank also took control of all mail to TIS and all assets at TIS’s
        Rochester, New York facility to satisfy TIS’s indebtedness to M&T Bank. As a
        result of actions by M&T Bank, TIS’s operations have ceased and its results
        of operations are treated as discontinued operations as of November 30,
        2004.
 
 Effective
        January 27, 2003, the Company’s common stock underwent a 1 for 10 reverse stock
        split. The effect of the reverse stock split has been retroactively reflected
        in
        the consolidated financial statements for all fiscal periods
        presented.
 
 b.
            Basis
                of Presentation 
 The
        Company uses the accrual method of accounting for financial purposes and
        has
        elected December 31 as its year-end.
 
 c.
            Principles
                of Consolidation 
 The
        consolidated financial statements as of December 31, 2004 and 2003 include
        those
        of Total Identity Corporation and its wholly-owned subsidiaries Total Identity
        Systems Corporation, Total Digital Communications, Inc. (f.k.a. Total Digital
        Displays, Inc.) and Total Identity Group, Inc. All significant intercompany
        accounts and transactions have been eliminated.
 
 d.
            Use
                of Estimates 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect certain reported amounts and disclosers.
        Accordingly, actual results could differ from those estimates.
 
 e.
            Fixed
                Assets 
 Fixed
        assets are recorded at cost. Major additions and improvements are capitalized.
        Minor replacements, maintenance and repairs that do not increase the useful
        life
        of the assets are expensed as incurred. Depreciation of property and equipment
        is determined on a straight-line basis over the expected useful
        lives.
 
 The
        cost
        and related accumulated depreciation of equipment retired or sold are removed
        from the accounts and any differences between the undepreciated amount and
        the
        proceeds from the sale are recorded as gain or loss on sale of
        equipment.
 F11
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        1
        -  ORGANIZATION
        AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 All
        fixed
        assets of the Company were repossessed to pay secured debt during November
        2004
        (see Note 3)
 
 f.
            Long-Lived
                Assets 
 The
        Company adopted Statement of Financial Accounting Standards No. 144 (SFAS
        144),
        "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144
        develops one accounting model (based on the model in SFAS 121) for long-lived
        assets that are to be disposed of by sale and addresses the principal
        implementation issues. SFAS 144 requires that long-lived assets that are
        to be
        disposed of by sale be measured at the lower of book value or fair value
        less
        cost to sell. This requirement eliminates the previous (APB30) requirement
        that
        discontinued operations be measured at net realizable value or that entities
        include under discontinued operations in the financial statements amounts
        for
        operating losses that have not yet occurred. Additionally, SFAS 144 expands
        the
        scope of discontinued operations to include all components of an entity with
        operations that (1) can be distinguished from the rest of the entity and
        (2)
        will be eliminated from the ongoing operations of the entity in a disposal
        transaction.
 
 g.
            Fair
                Value of Financial Instruments 
 The
        carrying amounts of the Company’s financial instruments, including cash,
        accounts payable, and accrued liabilities, approximate fair value due to
        their
        short maturities.
 
 h.
            Revenue 
 The
        Company records revenue on the accrual basis when all goods and services
        have
        been performed and delivered, the amounts are readily determinable and
        collection is reasonably assured.
 
 i.
            Advertising 
 The
        Company follows the policy of charging the costs of advertising to expense
        as
        incurred. Advertising expense for the years ended December 31, 2004 and 2003
        was
        $-0- and $87,860, respectively.
 
 j.
            Recent
                Accounting Pronouncements  On
        December 16, 2004 the FASB issued SFAS No. 123(R), “Share-Based Payment” (SFAS
        123(R)), which is an amendment to SFAS No. 123, “Accounting for Stock- Based
        Compensation”. SFAS 123(R) eliminates the ability to account for share-based
        compensation transactions using Accounting Principles Board Opinion (APB)
        No.
        25, “Accounting for Stock Issued to Employees”, and generally requires such
        transactions to be accounted for using a fair-value based method with the
        resulting cost recognized in the financial statements. SFAS 123(R) is effective
        for awards that are granted, modified or settled in cash during the first
        annual
        period beginning after June 15, 2005, or the year ending December 31, 2006
        for
        the Company. In addition, this new standard will apply to unvested options
        granted prior to the effective date. The effect of adoption of SFAS 123(R)
        is
        not anticipated to have a material impact on the Company.
  In
        November 2004, the FASB issued SFAS No. 151, “Inventory Costs - an amendment of
        ARB No. 43, Chapter 4” (SFAS 151). This Statement amends the guidance in ARB No.
        43, Chapter 4, "Inventory Pricing" to clarify the accounting for abnormal
        amounts of idle facility expense, freight, handling costs, and wasted material
        (spoilage). This Statement requires that certain items be recognized as
        current-period charges and requires that allocation of fixed production
        overheads to the costs of conversion be based on the normal capacity of the
        production facilities. SFAS 151 is effective for inventory costs incurred
        during
        fiscal years beginning after June 15, 2005, or the year ending December 31,
        2006
        for the Company. The effect of adoption of SFAS 151 is not anticipated to
        have a
        material impact on the Company.
  In
        December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate
        Time-sharing Transactions” (SFAS 152), which amends FASB statement No. 66,
“Accounting for Sales of Real Estate”, to reference the financial accounting and
        reporting guidance for real estate time-sharing transactions that is provided
        in
        AICPA Statement of Position 04-2, “Accounting for Real Estate Time-Sharing
        Transactions” (SOP 04-2). SFAS 152 also
 F12
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        1
        -  ORGANIZATION
        AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  amends
        FASB Statement No. 67, “Accounting for Costs and Initial Rental Operations of
        Real Estate Projects”, to state that the guidance for (a) incidental operations
        and (b) costs incurred to sell real estate projects does not apply to real
        estate time-sharing transactions. The accounting for those operations and
        costs
        is subject to the guidance in SOP 04-2. SFAS 152 is effective for financial
        statements for fiscal years beginning after June 15, 2005, or the year ending
        December 31, 2006 for the Company. The effect of adoption of SFAS 152 is
        not
        anticipated to have a material impact on the Company.
  In
        December 2004, the FASB issued SFAS No.153, “Exchange of Nonmonetary Assets”
(SFAS 153). This Statement addresses the measurement of exchanges of nonmonetary
        assets. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary
        Transactions” (APB 29), is based on the principle that exchanges of nonmonetary
        assets should be measured based on the fair value of the assets exchanged.
        The
        guidance in APB 29 included certain exceptions to that principle and SFAS
        153
        amends APB 29 to eliminate the exception for nonmonetary exchanges of similar
        productive assets and replaces it with a general exception for exchanges
        of
        nonmonetary assets that do not have commercial substance. A nonmonetary exchange
        has commercial substance if the future cash flows of the entity are expected
        to
        change significantly as a result of the exchange. SFAS 153 is effective for
        financial statements for fiscal years beginning after June 15, 2005, or the
        year
        ending December 31, 2006 for the Company. The effect of adoption of SFAS
        151 is
        not anticipated to have a material impact on the Company.
 
 l.
            Recent
                Accounting Pronouncements (Continued)  In
        March
        2005, the Securities and Exchange Commission (SEC) released Staff Accounting
        Bulletin No. 107, "Share-Based Payment" (SAB 107), which provides interpretive
        guidance related to the interaction between SFAS 123(R) and certain SEC rules
        and regulations. It also provides the SEC staff's views regarding valuation
        of
        share-based payment arrangements. In April 2005, the SEC amended the compliance
        dates for SFAS 123(R), to allow companies to implement the standard at the
        beginning of their next fiscal year, instead of the next reporting period
        beginning after June 15, 2005. The effect of adoption of SAB 107 is not
        anticipated to have a material impact on the Company.
  In
        March
        2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional
        Asset Retirement Obligations" (FIN 47). FIN 47 provides guidance relating
        to the
        identification of and financial reporting for legal obligations to perform
        an
        asset retirement activity. The Interpretation requires recognition of a
        liability for the fair value of a conditional asset retirement obligation
        when
        incurred if the liability's fair value can be reasonably estimated. FIN 47
        also
        defines when an entity would have sufficient information to reasonably estimate
        the fair value of an asset retirement obligation. FIN 47 is effective no
        later
        than the end of fiscal years ending after December 15, 2005. The effect of
        adoption of FIN 47 is not anticipated to have a material impact on the
        Company.
  In
        May
        2005, the FASB issued FASB Statement No. 154, "Accounting Changes and Error
        Corrections” (SFAS 154). SFAS 154 replaces APB Opinion No. 20, "Accounting
        Changes” and FASB Statement No. 3, “Reporting Accounting Changes in Interim
        Financial Statements" and represents another step in the FASB's goal to converge
        its standards with those issued by the IASB. Among other changes, SFAS 154
        requires that a voluntary change in accounting principle be applied
        retrospectively with all prior period financial statements presented on the
        new
        accounting principle, unless it is impracticable to do so. SFAS 154 also
        provides that (1) a change in method of depreciating or amortizing a long-lived
        non- financial asset be accounted for as a change in estimate (prospectively)
        that was effected by a change in accounting principle, and (2) correction
        of
        errors in previously issued financial statements should be termed a
        "restatement." The new standard is effective for accounting changes and
        correction of errors made in fiscal years beginning after December 15, 2005.
        The
        effect of adoption of SFAS 154 is not anticipated to have a material impact
        on
        the Company.
  In
        February of 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid
        Financial Instruments"
  (SFAS
        155), which is intended to simplify the accounting and improve the financial
        reporting of certain hybrid financial instruments (i.e., derivatives embedded
        in
        other financial instruments). The statement amends SFAS No. 133, "Accounting
        for
        Derivative Instruments and Hedging Activities", and SFAS No. 140, "Accounting
        for
 F13
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        1
        -  ORGANIZATION
        AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Transfers
        and Servicing of Financial Assets and Extinguishments of Liabilities a
        replacement of FASB Statement No. 125." SFAS 155 is effective for all financial
        instruments issued or acquired after the beginning of an entity's first fiscal
        year that begins after September 15, 2006. The effect of adoption of SFAS
        155 is
        not anticipated to have a material impact on the Company.
  In
        March
        of 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial
        Assets, an amendment of FASB Statement No. 140” (SFAS 156). SFAS 156 amends SFAS
        140, "Accounting for Transfers and Servicing of Financial Assets and
        Extinguishments of Liabilities a replacement of FASB Statement No. 125,"
        with
        respect to the accounting for separately recognized servicing assets and
 
 l.  Recent
        Accounting Pronouncements (Continued)
  servicing
        liabilities. SFAS 156 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 any of the following situations:
        (a) a transfer of the servicer’s financial assets that meets the requirements
        for sale accounting, (b) a transfer of the servicer’s financial assets to a
        qualifying special-purpose entity in a guaranteed mortgage securitization
        in
        which the transferor retains all of the resulting securities and classifies
        them
        as either available-for-sale securities or trading securities, and (c) an
        acquisition or assumption of an obligation to service a financial asset that
        does not relate to financial assets of the servicer or its consolidated
        affiliates. SFAS 156 is effective for all servicing assets and liabilities
        as of
        the beginning of an entity's first fiscal year that begins after September
        15,
        2006. The effect of adoption of SFAS 156 is not anticipated to have a material
        impact on the Company.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes (FIN 48) an interpretation of FASB Statement No. 109, Accounting
        for Income Taxes (SFAS No. 109)” (FIN 48) *.* FIN 48
        clarifies the accounting for uncertainty in income taxes recognized in
        accordance with SFAS No. 109 and prescribes a recognition threshold and
        measurement attribute for the financial statement recognition and measurement
        of
        a tax position taken or expected to be taken in a return. Guidance is also
        provided on de-recognition, classification, interest and penalties, accounting
        in interim periods, disclosure and transition. FIN 48 is effective for fiscal
        years beginning after December 15, 2006. The effect of adoption of FIN 48
        is not
        anticipated to have a material impact on the Company.
 
 m.
            Basic
                Loss Per Share 
 The
        computation of basic loss per share of common stock is based on the weighted
        average number of shares outstanding during the period of the consolidated
        financial statements as follows:
 
 For
                  the Years EndedDecember
                  31,2004
              
              2003Loss
                  before discontinued operations
              
              $(1,039,409)
              
              $(5,175,151)Discontinued
                  operations
              
              515,472
              
              (611,063)Net
                  loss
              
              $
              (523,937
              )
              $
              (5,786,214
              )Weighted
                  average number of shares outstanding
              
              
              15,229,431
              
              
              6,088,123Loss
                  per share before discontinued operations
              
              $
              (0.06
              )
              $
              (0.85
              )Income
                  (Loss) per share on discontinued operations
              
              
              0.03
              
              
              (0.10
              )Total
                  loss per share
              
              $
              (0.03
              )
              $
              (0.95
              )
 F14
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        1  ORGANIZATION
        AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 Net
        loss
        per share is computed in accordance with SFAS No. 128, “Earning Per Share”, by
        dividing the net loss allocable to common stockholders by the weighted average
        number of shares of common stock outstanding. During each year presented
        the
        Company has outstanding equity instruments
 
 m.
            Basic
                Loss Per Share (Continued) 
 which
        have not been used in the calculation of diluted net loss per share allocable
        to
        common stockholders because to do so would be anti-dilutive.
 
 n.
            Provision
                for Taxes 
 Deferred
        taxes are provided on a liability method whereby deferred tax assets are
        recognized for deductible temporary differences and operating loss and tax
        credit carryforwards and deferred tax liabilities are recognized for taxable
        temporary differences. Temporary differences are the differences between
        the
        reported amounts of assets and liabilities and their tax bases. Deferred
        tax
        assets are reduced by a valuation allowance when, in the opinion of management,
        it is more likely than not that some portion or all of the deferred tax assets
        will not be realized. Deferred tax assets and liabilities are adjusted for
        the
        effects of changes in tax laws and rates on the date of enactment.
 
 Net
        deferred tax assets and liabilities consist of the following components as
        of
        December 31, 2004:
 
 2004Deferred
                  tax assets:NOL
                  Carryover
              
              $
              1,557,600Deferred
                  tax liabilities:
              
              
              -Valuation
                  allowance
              
              
              (1,557,7600
              )Net
                  deferred tax assets and liabilities
              
              $
              -
 
 The
        income tax provision differs from the amount of income tax determined by
        applying the U.S. federal and state income tax rates of 39% to pretax income
        from continuing operations for the year ended December 31, 2004 due to the
        following:
 
 2004Book
                  income (loss)
              
              $(204,335)Stock
                  for services/options expense
              
              253,645Loss
                  on extinguishment
              
              17,725(Gain)
                  on extinguishment
              
              (21,709)Meals
                  and entertainment
              
              1,630Utilized
                  net operating loss
              
              (46,956)$-
 
 At
        December 31, 2004, the Company had net operating loss carryforwards of
        approximately $3,900,000 that may be offset against future taxable income
        from
        the year 2004 through 2024. No tax benefit has been reported in the December
        31,
        2004 consolidated financial statements since the potential tax benefit is
        offset
        by a valuation allowance of the same amount.
 F15
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        1  ORGANIZATION
        AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 
 n.
            Provision
                for Taxes 
 Due
        to
        the change in ownership provisions of the Tax Reform Act of 1986, net operating
        loss carryforwards for Federal income tax reporting purposes are subject
        to
        annual limitations. Should a change in ownership occur, net operating loss
        carryforwards may be limited as to use in future years.
 
 o.
            Change
                in Authorized Shares and Par Value 
 On
        May 2,
        2003, the Company amended its Articles of Incorporation and increased its
        authorized shares from 1,500,000 to 30,000,000 and changed its par value
        to
        $0.01 from $0.10. The consolidated financial statements have been retroactively
        adjusted for the change in par value.
 
 p.
            Reclassification
                of Prior Year Balances 
 The
        classification of certain balances within the consolidated financial statements
        for the year ended December 31, 2003 have been changed to be consistent with
        the
        classification of the consolidated financial statements for the year ending
        December 31, 2004.
 
 NOTE
        2
        -  COMMITMENTS
        AND CONTINGENCIES
 
 Litigation
 
 During
        2002, TIS was a defendant in two lawsuits. The first lawsuit was settled
        for
        $12,650 and paid to the plaintiff in November 2003. The second lawsuit was
        settled for $8,500 and paid in July 2003.
 
 On
        May 4,
        2004 a judgment was granted against the Company in a lawsuit filed in the
        Superior Court for Orange County, California. The suit sought collection
        of
        legal fees and costs totaling $50,714 including accrued interest at the rate
        of
        10% per annum, attorney’s fees and court costs. A total of $53,632 is included
        in accounts payable at December 31, 2004.
 
 Consulting
        Agreements
 
 During
        January 2004, the Company entered into a two year consulting agreement with
        an
        individual. The agreement called for the issuance of 1,250,000 fully vested
        shares of common stock as compensation for business consulting services.
 
 During
        October 2004, the Company entered into a one year consulting agreement with
        a
        company. The agreement called for the payment of $4,000 per month and a one-time
        issuance of 450,000 shares of fully vested common stock for business consulting
        services. The agreement was subsequently terminated prior to December 31,
        2004.
 
 During
        October 2004, the Company entered into a three month consulting agreement
        with a
        company. The agreement called for the payment of $20,000 per month for business
        consulting services. The agreement was subsequently terminated prior to December
        31, 2004.
 
 NOTE
        3
        -  SALES
        AND
        ACQUISITIONS AGREEMENTS
 
 Acquisition
        and sale of Kina’ole Development Corporation
 
 On
        January 31, 2003, the Company acquired 100% of the outstanding common stock
        of
        Kina'ole Development Corporation, a Hawaii corporation (“Kina'ole”), in exchange
        for 500,000 shares of the Company's Series B Convertible Preferred Stock.
        Kina'ole is located in Lihue, Hawaii, and through arrangements with dealerships
        on each Hawaiian island, Kina'ole planned to sell manufactured homes to retail
        customers. The Company acquired the Kina'ole shares from Michael Sessions
        and
        John Meyers, who,
 F16
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        3  SALES
        AND
        ACQUISITIONS AGREEMENTS (CONTINUED)
 
 at
        the
        time of the acquisition, were officers and directors of the Company. The
        500,000
        shares of Series B Preferred Stock where considered to have no value based
        on
        the fair value of the net assets of Kina’ole at the acquisition date. The
        combination was accounted for as a purchase, with the results of operations
        of
        Kina’ole included in the Company’s consolidated statement of operations from the
        date of acquisition.
 
 On
        September 30, 2003 the Company entered into an agreement with two shareholders
        to exchange the 500,000 outstanding shares of Series B Preferred Stock, held
        by
        the two shareholders, for all of the shares held by the Company of the
        wholly-owned subsidiary Kina’ole Development Corporation. In addition, upon
        settlement of a pending lawsuit the Company agreed to issue 120,000 additional
        shares of common stock to the two shareholders. Also, the Company agreed
        to pay
        certain obligations to the two shareholders in the amount of $13,500. All
        operating results of Kina’ole have been included in discontinued operations as
        of December 31, 2003. No tax benefit has been attributed to the discontinued
        operations.
 
 The
        following is a summary of the loss from discontinued operations resulting
        from
        the sale of Kina’ole:
 
 For
                  the Year EndedDecember
                  31,2003SALES,
                  NET
              
              $-EXPENSESSalaries
                  and wages
              
              
              135,000General
                  and administrative expense
              
              
              47,214Total
                  Expenses
              
              
              182,214LOSS
                  FROM OPERATIONS
              
              
              (182,214
              )OTHER
                  INCOME (EXPENSE)
              
              
              -NET
                  LOSS FROM DISCONTINUEDOPERATIONS
              
              $
              (182,214
              )
 
 Acquisition
        of Total Identity Systems Corporation
 
 In
        October 2003 the Company acquired all of the outstanding shares of stock
        of TIS.
        The acquisition was to take place in two parts. In the first part the Company
        purchased newly issued shares of TIS totaling 60% interest for $150,000 cash
        and
        a note for $475,000 payable in five equal monthly installments of $95,000
        starting in March 2004. In the second part, the Company was to acquire the
        remaining 40% by purchasing remaining shares for $500,000 payable in eight
        quarterly payments of $50,000 each starting in January 2005 and the balance
        of
        $100,000 by issuing 200,000 shares of the Company’s common stock. The
        acquisition was accounted for using the purchase method of accounting and
        the
        results of operations of TIS for November and December 2003 were included
        in the
        results of operations of the Company’s operations for the year ending December
        31, 2003.
 
 In
        connection with February 2004 amendments to the purchase agreements, the
        Company
        entered into a consulting agreement with the former owner and President of
        TIS,
        Robert David. Mr. David was formerly employed by the Company and served as
        a
        Vice President from October 2003, when the original acquisition of TIS took
        place, until February 2004, when the acquisition agreements were amended.
        On
        July 22, 2004, TIS terminated the consulting agreement with Mr. David on
        the
        grounds that he had breached the consulting agreement as well as his fiduciary
        duties to TIS by improperly attempting to dispose of Company assets.
 
 On
        or
        about July 26, 2004, Mr. David commenced two arbitrations against the Company
        and TIS with the American Arbitration Association, alleging that (a) the
        Company
        had improperly terminated his consulting agreement and (b) the Company was
        in
        default of certain payment obligations under the acquisition
        agreements.
 F17
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        3  SALES
        AND
        ACQUISITIONS AGREEMENTS (CONTINUED)
 
 Acquisition
        Total Identity Systems Corporation (Continued)
 
 In
        his
        notice of default, Mr. David demanded that the Company’s promissory note in the
        amount of $400,000 be immediately due and payable. In his demands for
        arbitration, Mr. David sought $95,000 that is allegedly due and owning
        under the consulting agreement and damages in excess of $150,000 arising
        out of
        the Company’s alleged defaults under the acquisition agreements. On
        December 13, 2004, we notified the escrow agent holding the shares of TISC
        we
        acquired from Mr. David and TISC that, without waiving any rights we have
        against Mr. David, the escrow agent may release the shares to Mr. David.
        We have
        received notice that Mr. David has disclaimed ownership of the shares and
        rejected delivery of the shares from the escrow agent.
 
 On
        or
        about August 4, 2004, the Company responded to Mr. David’s demands for
        arbitration and denied that it had improperly terminated Mr. David’s consulting
        agreement. The Company also denied that it had defaulted under the acquisition
        agreements and asserted affirmative defenses and counterclaims for fraudulent
        inducement, fraud, failure to disclose material information, improper use
        of
        Company assets and breach of contract, including breach of Mr. David’s covenant
        not to interfere with the Company’s ability to repay indebtedness to various
        institutional lenders including Manufacturers and Traders Trust Company (M&T
        Bank). The Company alleges that Mr. David, through improprieties as a consultant
        and a former officer of the Company and as a participant in a conspiracy
        with
        others, improperly interfered with the Company’s ability to secure funding and
        otherwise meet its obligations to M&T Bank. Among the improper activities
        alleged against Mr. David were his unauthorized discussions with M&T Bank
        relating to TIS’s indebtedness and Mr. David’s guarantees of those debts. In its
        counterclaims, the Company seeks damages from Mr. David of in excess of
        $400,000, a determination that the termination of the consulting agreement
        was
        proper and that the Company is entitled to retain ownership of TIS stock.
 
 Subsequently,
        during April 2006, all claims against the Company and counterclaims against
        Mr.
        David were dismissed.
 
 As
        a
        result of the above disputes, M&T Bank exercised certain rights granted to
        it under a General Security Agreement and various related loan documents
        between
        TIS and M&T Bank. In connection therewith, (a) on November 24, 2004, the
        Bank “swept” TIS’s accounts aggregating approximately $200,000 and applied the
        proceeds to the outstanding indebtedness of TIS, (b) on November 27, 2004,
        the Company learned that M&T Bank had notified the United States Post Office
        that it was exercising its rights under the loan documents to take control
        over
        all mail directed to TIS, and (c) on December 6, 2004, the Company learned
        that
        the Bank had changed the locks at TIS's Rochester, New York facility and
        took
        control over TIS's assets in order to satisfy TIS's indebtedness.
 
 In
        exercising these rights, M&T prevented TIS from conducting and funding its
        day-to-day operations, and accordingly, operations have ceased. All operating
        results of TIS have been included in discontinued operations as of December
        31,
        2004 and 2003. No tax benefit has been attributed to the discontinued
        operations.
     F18
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        3  SALES
        AND
        ACQUISITIONS AGREEMENTS (CONTINUED)
 
 The
        following is a summary of the loss from discontinued operations resulting
        from
        the disposal of TIS:
 
 For
                  theYears
                  EndedDecember
                  31,2004
              
              2003(Unaudited)REVENUE
              
              $8,042,602
              
              $1,318,249COST
                  OF SALES
              
              
              4,991,771
              
              
              1,425,979GROSS
                  MARGIN
              
              
              3,050,831
              
              
              (107,730
              )EXPENSESAmortization
                  and depreciation
              
              
              229,475
              
              
              43,636Selling,
                  general and administrative expense
              
              
              2,947,966
              
              
              258,780Total
                  Expenses
              
              
              (3,177,441
              )
              
              (302,416
              )LOSS
                  FROM OPERATIONS
              
              
              (126,610
              )
              
              (410,146
              )OTHER
                  INCOME (EXPENSE)Interest
                  expense
              
              
              (93,084
              )
              
              (41,565
              )Other
                  income
              
              
              71,314
              
              
              14,288Other
                  (expense)
              
              
              -
              
              
              (5,729
              )Gain
                  (loss) on forgiveness of debt
              
              
              4,853,867
              
              
              66,203Gain
                  (loss) on disposal of assets
              
              
              (4,190,015
              )
              
              (51,900
              )Total
                  Other Income (Expense)
              
              
              642,082
              
              
              (18,703
              )NET
                  INCOME (LOSS) FROM DISCONTINUEDOPERATIONS
              
              $
              515,472
              
              $
              (428,849
              )Total
                  Other Income (Expense)
              
              
              642,082
              
              
              (18,703
              )
 
 Sale
        of Total Digital Displays
 
 On
        December 15, 2004, our wholly-owned subsidiary Total Digital acquired certain
        assets from an individual, including the seller’s rights under a purported
        license agreement with Major League Baseball. The purchase price for the
        assets
        was paid by the issuance of 10,000,000 shares of Total Digital’s common stock to
        the seller. The 10,000,000 shares represented approximately 93% of Total
        Digital’s outstanding common stock at the time of issuance.
 
 On
        December 29, 2004, the Company intended to distribute to its shareholders
        of
        record on December 15, 2004, as a dividend, an aggregate of 804,929 shares,
        constituting all of the common stock of Total Digital owned by the Company.
        One
        share of Total Digital was to be distributed for each 20 shares of our common
        stock held on the record date.
 
 On
        January 11, 2005, the Company determined that the seller of the assets had
        fraudulently misrepresented that the seller owned a license from Major League
        Baseball when, in fact, the seller did not own any such license. As a result,
        on
        January 11, 2005, the Company notified the seller of claims it had against
        it
        and demanded rescission of the asset purchase agreement, including its return
        of
        the 10,000,000 shares of Total Digital. T he
        seller
        failed to comply with the Company’s demands, and the Company filed suit against
        the seller in Broward Circuit Court. In August 2005 the court awarded the
 F19
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        3  SALES
        AND
        ACQUISITIONS AGREEMENTS (CONTINUED)
 
 Company
        a
        default against the seller for failure to file an answer to the complaint
        within
        the prescribed timeframe; however, in September 2005 the default was set
        aside. At this
        time, Total Digital has no assets and there is no market for the shares of
        Total
        Digital. In light of the foregoing, the opinion of counsel that caused the
        shares of Total Digital to be issued without legend has been withdrawn, and
        the
        Company is treating the shares of Total Digital that were distributed to
        its
        shareholders as restricted securities.
 
 NOTE
        4  NOTES
        PAYABLE
 
 Notes
        payable consist of the following amounts at December 31, 2004:
 
 2004Notes
                  payable to a related party individual, unsecured,due
                  on demand
              
              
              40,000Notes
                  payable to a former officer, unsecured,due
                  on demand (Related party)
              
              
              35,265Note
                  payable to a former director, unsecured,past
                  due, (Related party)
              
              
              25,187Note
                  payable to a corporation, unsecured,due
                  on demand
              
              
              25,000Convertible
                  debenture payable to a corporation, unsecured,due
                  on demand, interest at 12%, convertible at $0.25 per share
              
              
              125,000Total
                  current notes payable
              
              $
              250,452
 
 NOTE
        5 -  RELATED
        PARTY TRANSACTIONS
 
 Accounts
        and Notes Payable
 
 On
        January 16, 2004, the Company borrowed $50,000 from the wife of a former
        director of the Company. The loan is unsecured and due on demand. As an
        inducement for the loan, the Company issued 250,000 shares of common stock
        on
        March 1, 2004 valued at $45,000, or $0.18 per share, which was charged to
        interest expense. On March 31, 2006, the note was converted to common stock
        at
        $0.01 per share, or 4,000,000 shares. In addition, the Company issued an
        additional 1,500,000 shares per a penalty clause that entitled the holder
        to
        5,000 shares per day for everyday the note wasn’t paid.
 
 In
        October of 2003, an officer and shareholder of the Company transferred 400,000
        shares of the Company’s common stock he owned to Argilus Capital, LLC as
        collateral on a convertible debenture due to a failed private offering. During
        March 2004, the Company issued the officer 400,000 restricted shares of the
        Company’s common stock valued at $76,000, or $0.19 per share, recognizing a debt
        reduction of $150,000 and a contribution of capital of $74,000.
 
 As
        of
        December 31, 2004 the Company owed two related parties a total of $47,174
        for
        amounts loaned to the Company for operating expenses and two notes payable
        to
        former officers totaling $60,452.
 
 Employment
        Agreement
 
 During
        February 2004, the Company entered into two employment agreements with
        individuals to provide services as the Chief Executive Officer (CEO) and
        Vice-President of the Company. In addition to cash or stock salaries, the
        individuals are
 F20
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        5  RELATED
        PARTY TRANSACTIONS (CONTINUED)
 
 Employment
        Agreement (Continued)
 
 entitled
        to receive options to acquire shares of the Company’s common stock at $0.03 per
        share and 1% of the Company’s post tax profit in excess of $1,000,000 for each
        of the next three years.
 
 During
        May 2004, the Company’s CEO resigned and the Company amended the employment
        agreement of the Vice President to promote him to CEO and Chief Financial
        Officer. In recognition of the increased responsibilities undertaken his
        salary
        was increased from $120,000 per year to $180,000 per year and his stock options
        were increased from 62,500 shares per quarter to 200,000 shares per quarter.
        The
        options are fully vested, issued at the beginning of the quarter, exercisable
        for five year at the market price on the first day of the quarter.
 
 During
        the year the Company issued a total of 375,000 shares of common stock in
        lieu of
        cash salary under the employment agreement valued at $69,000. In addition,
        the
        Company issued 662,500 shares of common stock for the exercise of all stock
        options related to the above employment agreement in conversion of related
        party
        payables totaling $60,875.
 
 Consulting
        Agreements
 
 On
        February 2, 2004, the Company entered into a consulting agreement with Richard
        R. Dwyer, its former Chief Executive Officer. The agreement was for an initial
        term of one year, subject to a six-month renewal term. Mr. Dwyer provides
        consulting services in the areas of corporate development, acquisitions and
        strategic planning. For his services, Mr. Dwyer received fully vested and
        exercisable warrants to purchase 1,100,000 shares of common stock at an exercise
        price of $.03 per share. As of December 31, 2004, all 1,100,000 warrants
        were
        exercised through the conversion of related party payables totaling $33,000.
        The
        Company recognized $157,000 in consulting expense related to the grant of
        the
        warrants.
 
 Settlement
        Agreement
  On
        May
        13, 2004, the Company and Scott Siegel, a former officer and director, entered
        into an agreement resolving certain disputes that had arisen relating to
        the
        ownership of 1,050,000 shares of the Company’s common stock and 250,000 shares
        of its Series A preferred stock that were the subject of a stock purchase
        agreement dated February 21, 2003. Under the terms of the Agreement:
  ·
            Mr.
                Siege retained 250,000 shares of common stock originally acquired
                by him
                under the stock purchase agreement dated February 21, 2003, at an
                agreed
                upon purchase price of $.03 per share;  ·
            800,000
                shares of common stock issued to Mr. Siegel under the February 21,
                2003
                stock purchase agreement were surrendered to the Company and
                canceled;  ·
            The
                Company agreed to pay Mr. Siegel the sum of $35,265, plus $7,000
                less an
                amount equal to the Company’s legal fees in settlement of this matter (as
                the Company’s legal fees in this matter exceeded $7,000, the amount
                payable to Mr. Siegel at December 31, 2004 is $35,265);   ·
            The
                amount payable to Mr. Siegel will be paid (a) one-third for each
                million
                dollars in financing raised by the Company after June 27, 2004 or
                (b)
                pro-rata to the extent that other officers or directors of the Company
                receive repayment of indebtedness from third-party financing obtained
                by
                the Company subsequent to June 27, 2004;   ·
            The
                Preferred Shares were surrendered to the Company and canceled; and   ·
            Mr.
                Siegel resigned as a director of the Company, effective May 13, 2004.  NOTE
        6  COMMON
        STOCK AND EQUITY INSTRUMENTS
 
 During
        October 2003, the Company issued 1,000,000 shares of common stock to a capital
        funding company as inducement to raise a target amount of funds for the Company.
        During June 2004, the 1,000,000 shares of common stock were returned
 F21
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        6  COMMON
        STOCK AND EQUITY INSTRUMENTS (CONTINURED)
 
 and
        cancelled due to non-performance.
 
 During
        October 2003, the Company issued 1,000,000 shares of common stock to a capital
        funding company as inducement to raise a target amount of funds for the Company.
        During June 2004, the 1,000,000 shares of common stock were returned and
        cancelled due to non-performance.
 
 2003
        Omnibus Securities Plan
 
 On
        May 2,
        2003, the Company approved the 2003 Omnibus Securities Plan (the Securities
        Plan) by written consent of the holders of a majority of its voting stock,
        and
        ratified on June 17, 2003. During 2004, the Company approved the increase
        of the
        number of shares available for issuance under the Securities Plan from 140,000
        to 800,000. Under the Securities Plan, stock-based awards in the form of
        incentive and non-qualified stock options, restricted and restricted stock
        awards, and performance stock awards may be made. The Board of Directors
        of the
        Company or Securities Plan administrator has the discretion to select the
        persons to whom awards will be granted; grant awards under the Securities
        Plan;
        determine the number of shares to be covered by each award; determine the
        nature, amount, pricing, timing and other terms of the award; interpret,
        construe and implement the provisions of the Securities Plan; and terminate,
        modify or amend the Securities Plan. As of December 31, 2004, 625,000 shares
        have been issued under the Securities Plan.
 
 On
        May 2,
        2003, the Company approved and ratified the 2003 Non-Qualified Stock Option
        and
        Grant Plan (the Option Plan) by written consent of a majority of its voting
        stock. During 2003, the Company approved the increase of the number of shares
        available for issuance under the Option Plan to 3,000,000 and during 2004,
        increased the number of shares available for issuance to 5,200,000. Under
        the
        Option Plan, stock-based awards in the form of non-qualified stock options
        and
        restricted, unrestricted and performance-based stock awards may be made.
        The
        Board of Directors of the Company or Option Plan administrator has the
        discretion to select the persons to whom awards will be granted; grant awards
        under the Option Plan; determine the number of shares to be covered by each
        award; determine the nature, amount, pricing, timing and other terms of the
        award; interpret, construe and implement the provisions of the Option Plan;
        and
        terminate, modify or amend the Option Plan. As of December 31, 2004, awards
        covering 5,100,000 shares have been made under the Option Plan. The Company
        applies FASB Statement 123, “Accounting for Stock-Based Compensation” (“SFAS
        123”) in accounting for all share based payments. Under SFAS 123, compensation
        cost is recognized in accordance with the fair value based method prescribed
        in
        SFAS 123 for all stock based awards granted. The Company estimated the fair
        value of each stock option or warrant issued during the year  at
        the
        grant date by using the Black-Scholes option pricing model based on the
        following assumptions:
 
 2004
        Equity Compensation Plan
 
 On
        June
        15, 2004, the Board of Directors initially authorized and approved the Total
        Identity Corp. 2004 Equity Compensation Plan (the Plan). The Company reserved
        a
        total of 2,500,000 shares of common stock for issuance upon the exercise
        of
        options and the grant of other awards under the Plan. Awards under the Plan must
        be issued only for bona fide services and may not be issued under the Plan
        for
        services in connection with the offer and sale of securities in a capital
        raising or capital promoting transaction. As of December 31, 2004, no shares
        were issued under the plan.
 
 Stock
        Options and Warrants
 
 The
        Company applies SFAS 123 in accounting for the issuance of all equity
        instruments. Under SFAS 123, compensation cost is recognized in accordance
        with
        the fair value based method prescribed in SFAS 123 for stock based awards
        granted. The Company estimated the fair value of each stock. As a result
        of
        applying SFAS 123, the Company incurred an additional expense of $157,000
        and
        $1,227,875 for services rendered by non-employees and $99,375 and $-0- for
        services rendered by employees for the years ended December 31, 2004 and
        2003,
        respectively.
 
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        6  COMMON
        STOCK AND EQUITY INSTRUMENTS (CONTINURED)
 
 We
        estimated the fair value of the stock options at the grant date by using
        the
        Black-Scholes option pricing model based on the following
        assumptions:
 
 For
                  the YearEndedDecember
                  31, 2004Risk
                  free interest rates
              
              
              0.98%
                  - 1.71%Expected
                  lives
              
              
              one
                  year or lessExpected
                  volatilities
              
              
              204%
                  - 287%Dividend
                  yields
              
              
              0.00%
 
 A
        summary
        of the status of the Company’s outstanding stock options and warrants as of
        December 31, 2004 and 2003 and changes during the years then ended is presented
        below:
 
 2004
              
              
              
              2003Weighted
              
              
              
              WeightedAverage
              
              
              
              AverageExercise
              
              
              
              ExerciseShares
              
              Price
              
              Shares
              
              PriceOutstanding,
                  beginningof
                  year
              
              
              -
              
              $
              -
              
              
              71,033
              
              $
              16.50Granted
              
              
              1,762,500
              
              
              0.05
              
              
              3,250,000
              
              
              0.03Expired/Cancelled
              
              
              -
              
              
              -
              
              
              (421,033
              )
              
              2.80Exercised
              
              
              (1,762,500
              )
              
              (0.05
              )
              
              (2,900,000
              )
              
              (0.03
              )Outstanding
                  end of year
              
              
              -
              
              $
              .-
              
              
              -
              
              $
              -
 
 NOTE
        7  GOING
        CONCERN
 
 The
        Company's consolidated financial statements are prepared using Generally
        Accepted Accounting Principals applicable to a going concern that contemplates
        the realization of assets and liquidation of liabilities in the normal course
        of
        business. However, the Company does not have significant cash or other material
        assets, nor does it have an established source of revenues sufficient to
        cover
        its operating costs. Additionally, the Company has accumulated significant
        losses, has negative working capital, and a deficit in stockholders' equity.
        All
        of these items raise substantial doubt about its ability to continue as a
        going
        concern. Management's plans with respect to alleviating the adverse financial
        conditions that caused shareholders to express substantial doubt about the
        Company's ability to continue as a going concern are as follows:
 
 Management
        believes that, based upon the current operating plan of divesting itself
        of
        discontinued operations of YSDO and pursuing the acquisition of another business
        entity with substantial assets, which produces positive cash flows from
        operations, should help alleviate the adverse financial condition of the
        Company. Investors should be aware the Company's existing working capital
        will
        not be sufficient to fund its ongoing expenses of a reporting company through
        December 31, 2006. If the Company is not successful in identifying and acquiring
        another business entity with substantial assets which produce positive cash
        flows from operations, the Company may be forced to raise additional equity
        or
        debt financing to fund its ongoing obligations, seek protection under existing
        bankruptcy laws or cease doing business. If additional funds are raised through
        the issuance of equity securities, the percentage ownership of the Company's
        then-current stockholders would be diluted.
 
 If
        additional funds are raised through the issuance of debt securities, the
        Company
        will incur interest charges until the related debt is paid off.
 F23
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        7  GOING
        CONCERN (CONTINUED)
 
 There
        can
        be no assurance that the Company will be able to identify and acquire another
        business entity with substantial assets which produce positive cash flows
        from
        operations or raise any required capital necessary to achieve its current
        operating plan. The ability of the Company to continue as a going concern
        is
        dependent upon its ability to successfully accomplish the plan described
        in the
        preceding paragraph and eventually attain profitable operations. The
        accompanying consolidated financial statements do not include any adjustments
        that might be necessary if the Company is unable to continue as a going
        concern.
 
 NOTE
        8  SUBSEQUENT
        EVENTS
 
 During
        February 2005, the Company sold 500,000 shares of its common stock to Wall
        Street-Review Financial Services, Inc., a related party company, for an
        aggregate purchase price of $25,000 or $.05 per share. The sole officer and
        director of Wall Street-Review Financial Services, Inc. is also the sole
        officer
        and director of the Company. The $.05 per share purchase price was the closing
        bid price for the Company’s common stock on the date of purchase.
 
 During
        February 2005, the Company issued 395,335 shares of its common stock to Wall
        Street-Review Financial Services, Inc. in exchange for debt of $15,813, or
        $.04
        per share, which was the closing bid price for the Company’s common stock on the
        date of issuance.
 
 During
        February 2005, the Company extended its consulting agreement with Richard
        R.
        Dwyer, its former Chief Executive Officer. As consideration for the extension,
        the Company issued warrants to purchase 750,000 shares of common stock at
        $0.03
        per share. The warrants were then exercised and 750,000 shares of common
        stock
        were issued.
 
 During
        February 2005, the Company entered into a lease for 2,920 square feet of
        store
        front space in Pompano Beach, Florida for its wholly-owned subsidiary, Yard
        Sale
        Drop Off, Inc. The term of the lease is 60 months and calls for total payments
        of $147,275 plus sales and property tax and assessments and utilities. The
        lease
        was subsequently terminated in October 2005 at no penalty. During February
        2005,
        a lawsuit was commenced in the Supreme Court of the State of New York, County
        of
        Monroe, under the caption Stephen E. Webster v. Richard Dwyer, Matthew P.
        Dwyer,
        Phillip Mistretta, Total Digital Displays, Inc., Leslie W. Kernan, Jr., Lacy
        Katzen LLP, et al. While the Company and its officers understand that the
        plaintiff also intends to assert claims against Total Identity Corporation
        and
        others, neither the Company, Richard Dwyer, Matthew P. Dwyer nor Total Digital
        Displays, Inc. has been served in connection with this purported lawsuit.
        The
        plaintiff, Stephen E. Webster, previously purchased a $125,000 debenture
        from
        Total Identity Corporation and is seeking payment of the convertible debenture
        by alleging that he was fraudulently induced to purchase the debenture. The
        Company and its officers believe that (a) the plaintiff may have a relationship
        with Argilus, Inc., the respondent in a pending arbitration proceeding commenced
        by the Company, and (b) the plaintiff, due to its relationship with Argilus,
        may
        have been induced by Argilus to commence the suit as a strategic tactic in
        connection with the pending arbitration between the Company and Argilus.
        The
        Company has been severed and has filed various motions in its defense. In
        September of 2005 a judgment was grant against the Company and other parties
        for
        $125,000 plus 9% interest per annum, In February of 2006 the judgment was
        vacated. In March of 2006 Tripp Scott the Companies attorneys filed a motion
        to
        withdraw as counsel which was granted. As of this time the Company has not
        retained new counsel and is not sure if it will be able to adequately defend
        itself due to its lack of resources.
 
 During
        March 2005, the Company entered into two one-year consulting agreements with
        individuals for consulting related to the business of the Company’s wholly-owned
        subsidiary, YSDO. The agreements call for up front one-time payments of 250,000
        and 750,000 fully earned shares, or a total of 1,000,000 shares valued at
        a
        market price of $0.08 on the date of issue totaling $80,000.
 
 On
        January 1, 2006, the Company granted its CEO and Chief Financial Officer
        200,000
        options to purchase common stock at $0.03 per share in accordance with an
        employment agreement. The Company recognized $6,000 in compensation expense
        as a
        result of the issuance of these options.
 
 On
        March
        31, 2006, a related party note payable in the amount of $40,000 was converted
        to
        common stock at $0.01 per share, or 4,000,000 shares. In addition, the Company
        issued 1,500,000 shares of common stock valued at a market price of $0.01
        per
        share, or $15,000, for payment of past due penalties.
 F24
 **TOTAL
        IDENTITY CORPORATION AND SUBSIDIARIES**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2004 and 2003
 
 NOTE
        8  SUBSEQUENT
        EVENTS (CONTINUED)
 
 During
        March 2006, the Company entered into an agreement to sell the discontinued
        assets of its wholly-owned subsidiary Yard Sale Drop Off, Inc. to an individual
        for $8,000. The sale was completed upon receipt of the last payment on May
        10,
        2006.
 
 On
        April
        1, 2006, the Company granted its CEO and Chief Financial Officer 200,000
        options
        to purchase common stock at $0.01 per share in accordance with an employment
        agreement. The Company recognized $2,000 in compensation expense as a result
        of
        the issuance of these options.
 
 On
        April
        19, 2006, the Company borrowed $40,000 from an individual. The note payable
        is
        due in six months, carries interest at 2% per month and is payable after
        three
        months without penalty. As inducement to issue the note, the Company issued
        800,000 shares of common stock.
 
 On
        May
        11, 2006, the Company entered into a note payable for past due legal fees
        and
        accrued interest totaling $72,031. The note is secured by a second general
        security interest in the Company’s assets and must be paid at the time of sale
        of the Company or a change in control.
 
 During
        May 2006, the Company formed a wholly-owned subsidiary, Sovereign Research,
        LLC.
        Sovereign Research, LLC has had no operations to-date.
 
 On
        June
        23 2006, $30,000 of related party accounts payable was converted into 3,000,000
        shares of common stock at a market price of $0.01 per share.
 
 On
        June
        28, 2006, the Company borrowed $25,000 from an individual. The note payable
        is
        due July 31, 2006 and carries interest at 12% per annum. As inducement to
        issue
        the note, the Company issued 100,000 shares of common stock valued at a market
        price of $0.01 per share, or $1,000.
 
 During
        June 2006 the Company received a letter from an attorney representing a Dr.
        Martin Peskin, a former Officer and Director of the Company, disputing the
        amount of money owed to Dr. Peskin. No lawsuit has been filed or threatened
        at
        this time and the Company stands by the amount it claims it owes Dr. Peskin
        based on past filings made when Dr. Peskin was a Director of the Company.
 
 On
        July
        1, 2006, the Company granted its CEO and Chief Financial Officer 200,000
        options
        to purchase common stock at $0.01 per share in accordance with an employment
        agreement. The Company recognized $2,000 in compensation expense as a result
        of
        the issuance of these options.
     F25