**UNITED        STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM        10-K**

 

*(Mark        One)*

þ          Annual        report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the        fiscal year ended**December 31,        2007**.

o       Transition report pursuant to        Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period        from      to. 

 

Commission file number:**000-51763**

 

**COMCAM INTERNATIONAL, INC.**

(Exact        name of registrant as specified in its charter)

 

| **Delaware**

(State or other jurisdiction of

incorporation or organization) | **23-2976562** 

(I.R.S. Employer

Identification No.) |
|-------------------------------------------------------------------------------|-------------------------------------------------------------|

 

**1140 McDermott Drive, West Chester, Pennsylvania        19380**

(Address        of principal executive offices) (Zip Code)

 

**(610) 436-8089**

(Issuer’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Exchange Act:        none.

Securities registered under Section 12(g) of the Exchange Act: common stock        (title of class), $0.0001 par value.

Indicate        by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of        the Securities Act of 1933: Yeso     Noþ.

Indicate        by check mark if the registrant is not required to file reports pursuant to Section 13 or        Section 15(d) of the Exchange Act: Yeso     Noþ.

Indicate        by check mark whether the registrant: (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: Yesþ     Noo.

Indicate        by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K        is not contained herein, and will not be contained, to the best of registrant's knowledge,        in definitive proxy or information statements incorporated by reference in Part III of this        Form 10-K or any amendment to this Form 10-Ko.

Indicate        by check mark whether the registrant is a large accelerated filer, an accelerated filer, a        non-accelerated filer, or a smaller reporting company as defined by Rule 12b-2 of the        Exchange Act: smaller reporting companyþ.

Indicate        by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the        Exchange Act): Yeso     Noþ.

The        aggregate market value of the registrant's common stock, $0.0001 par value, held by        non-affiliates (1,362,799 shares) was approximately $1,227,000 based on the price of the        most recent sale of stock (December 31, 2007, $0.90).

At April        14, 2008, the number of shares outstanding of the registrant's common stock, $0.0001 par        value (the only class of voting stock), was 3,408,354.

 

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**TABLE        OF CONTENTS**

 

**PART        I**

 

| Item1. | Business | 3 |
|--------|----------|---|

| Item 1A. | Risk Factors | 13 |
|----------|--------------|----|

| Item 1B. | Unresolved Staff Comments | 19 |
|----------|---------------------------|----|

| Item 2. | Properties | 19 |
|---------|------------|----|

| Item 3. | Legal Proceedings | 19 |
|---------|-------------------|----|

| Item 4. | Submission of Matters to a Vote of                        Security-Holders | 19 |
|---------|----------------------------------------------------------------------------|----|

         

**PART II**

         

| Item 5. | Market for Registrant’s Common Equity, Related                        Stockholder Matters, and Issuer Purchases of Equity                        Securities                                                                                                                                                                                                         19 |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 6. | Selected Financial Data | 21 |
|---------|-------------------------|----|

| Item 7. | Management's Discussion and Analysis of Financial Condition                        and Results of Operations | 21 |
|---------|--------------------------------------------------------------------------------------------------------------|----|

| Item 7A. | Quantitative and Qualitative Disclosures about Market                        Risk | 28 |
|----------|-----------------------------------------------------------------------------------|----|

| Item 8. | Financial Statements and Supplementary Data | 28 |
|---------|---------------------------------------------|----|

| Item 9. | Changes in and Disagreements with Accountants on Accounting                        and Financial Disclosure | 29 |
|---------|-------------------------------------------------------------------------------------------------------------|----|

| Item 9A. | Controls and Procedures (Item 9A (T)) | 29 |
|----------|---------------------------------------|----|

| Item 9B. | Other Information | 30 |
|----------|-------------------|----|

         

**PART III**

         

| Item 10. Directors, Executive Officers, and Corporate                        Governance | 30 |
|-----------------------------------------------------------------------------------------|----|

| Item 11. | Executive Compensation | 33 |
|----------|------------------------|----|

| Item 12. | Security Ownership of Certain Beneficial Owners and                        Management and Related Stockholder                        Matters                                                                                                                                                                                                                              33 |
|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 13. | Certain Relationships and Related Transactions, and Director                        Independence | 34 |
|----------|--------------------------------------------------------------------------------------------------|----|

| Item 14. | Principal Accountant Fees and Services | 34 |
|----------|----------------------------------------|----|

| Item 15. | Exhibits and Financial Statement Schedules | 35 |
|----------|--------------------------------------------|----|

| Signatures | 36 |
|------------|----|

 

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**PART        I**

 

| **ITEM 1.** | **BUSINESS** |
|-------------|--------------|

 

***As        used herein the terms “Company,” “we,” “our,” and        “us” refer to ComCam International, Inc., and its predecessor, unless context        indicates otherwise.***

 

**Corporate History**

 

The Company        was incorporated as “Embedded Technology Group Inc.” on September 18, 1998, in        the State of Delaware. Our name was changed to “ComCam International, Inc.” on        February 19, 1999. On June 3, 2002, the Company was acquired by ComCam, Inc. We operated as        a wholly owned subsidiary of ComCam, Inc. until December 28, 2007, when 100% of our shares        were distributed as a dividend to ComCam, Inc.’s shareholders on a pro rata basis of        one share of our common stock for every twenty shares of ComCam, Inc.’s common stock        held as of the record date, December 7, 2007. The board of directors of ComCam, Inc.        decided to “spin-off” the Company in order to separately focus the attention of        the financial community on our business, with the intention of improving our access to        financing.

 

The        Company’s principal place of business is located at 1140 McDermott Drive, Suite 200,        West Chester, Pennsylvania, 19380, and our telephone number is (610) 436-8089.

 

The        Company’s registered agent is Delaware Registry Ltd., 3511 Silverside Road, Suite        105, Wilmington, Delaware, 19810.

 

**The        Company**

 

***Summary***

 

The        Company’s mission is to become a leader in the digital video camera and software        industry as a pioneering developer and provider of*Internet        Protocol*wired and wireless video products and        solutions.

 

Internet        Protocol (“IP”) is the procedure for regulating the transmission of data over a        network, be that a local area network or the internet. Our IP video products are designed        to work efficiently over a network, whether the network is connected by cable or over a        wireless connection, by breaking up data into small transmittable units which are then        reassembled on the receiving end.

 

The        Company was responsible for introducing the world’s first wireless camera networking        system using the current wireless standard, as well as developing the world’s        smallest IP network recording device.

 

Since that        time we have directed our efforts toward an integrated camera system utilizing IP        technology, which allows for video monitoring and remote control of the camera over the        internet. Basically, we have developed a high-tech camera and recorder that can be accessed        from almost anywhere. Our core technology is based on a computing platform complete with an        operating system, firmware (which is software embedded into hardware), software        applications, and development tools.

 

The        Company’s video networking system is comprised of proprietary hardware (namely our        “COMCAM Series 10” cameras and micro-servers) and software (including the        “C3” and “Pocket C3”), and other components that are programmable        and can be reconfigured to integrate a wide variety of complementary applications. Our        competitive features include:

 

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|   | **•** | high performance with low-power consumption; |
|--------|------------|----------------------------------------------|

|   | **•** | proprietary, low bandwidth compression; |
|--------|------------|-----------------------------------------|

|   | **•** | frame-by-frame encryption, motion-detection, access-control                        and other software capabilities; and |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------|

|   | **•** | multiple input/output ports. |
|--------|------------|------------------------------|

 

All of our        products use flexible viewer/recorder software that runs on PCs, handheld personal digital        assistants (“PDAs”), and cell phones. The operating platform is a hardware and        software solution which can integrate old-style analog systems with next-generation IP        surveillance/security applications.

 

The target        for our next-generation video products, solutions, and services is the growing global        market for fixed and mobile security applications over a wide range of uses. Applications        include telemedicine, transportation monitoring, process control and customized solutions        in high-margin specialty and mass-market sectors within corporate, government, and        residential markets.

 

During        2007, we sold a limited quantity of units which were primarily used for testing purposes.        Our customers have included certain United States Governmental agencies as well as private        firms. Our marketing goal is to procure government contracts, expand our commercial        business and, in the future, penetrate the retail market.

 

***The Security Surveillance Industry***

 

Since the        beginning of the new century there have been repeated calls for improvement in everyday        security measures. The immediate result of this concern has been a significant increase in        the demand for effective security systems. Both face-recognition software and        video-monitoring surveillance systems are receiving considerable attention in terms of what        technology can do to manage security environments more effectively.

 

The        security surveillance and monitoring industry is large and fragmented with no dominant        leader. Providers are comprised of thousands of manufacturing, distribution, and        installation/service companies engaged in the task of safeguarding public and/or private        facilities, personnel, and assets. The threat of terrorism, higher crime rates, and        computer vulnerability have all had an effect on creating a growing demand for security        related products. Among the services and products available are access control and        identification programs, alarm systems, biometrics, surveillance equipment, computer        security, home automation, integrated systems, intrusion alarms with monitoring, and GPS        mobile securities.

 

Over the        last 20 years, video monitoring and surveillance applications have been served by analog        technology, which requires heavy maintenance, does not offer remote accessibility, and is        notoriously difficult to integrate with other information technology systems. In addition,        searching for a sequence on videotape has traditionally taken hours of playback and        searching. Despite these drawbacks, analog technology was popular within the security        markets. Until recently, video in security applications was primarily used to provide raw        data. However, new technology enables more precise information, making it possible to        communicate, make decisions, and activate an immediate response to any perceived threat.        Advances in communication technologies now make it easier to convert video into valuable        real-time or time-lapsed information. Digital cameras today can be plugged into a standard        computer network and offer greater performance and reliability than analog cameras. Large        video archives can now be easily stored. Importantly, digital video archives can be indexed        and specific video clips located quickly and easily. New product introductions or        enhancements, declining market prices for component parts and products, and competing or        overlapping systems and technologies characterize the dynamic nature of the security        surveillance industry today. The potential for the burgeoning digital video        market is evident as the industry makes the transition from analog to digital        technology.

 

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***New Technology***

 

The rapid        growth of video monitoring surveillance has fostered a technology revolution from analog to        digital format and the use of IP networks to enable the distribution of video over the        Internet. In addition, the rapid adoption of wireless capabilities on laptop computers,        cell phones, PDA’s, and other devices has expanded the mobile computing environment.        A new technology, the IP-surveillance solution, creates digitized video streams that, when        transferred via a computer network either over a wire line or wirelessly, enable remote        monitoring from almost anywhere in the world.

 

IP-surveillance enables users to develop an open digital surveillance system        by providing solutions for converting analog images into an easily distributable digital        format. The high-resolution digital images can be viewed, stored, or transferred anywhere        on a computer network. IP-surveillance has enormous performance advantages over analog        video monitoring systems as well as substantial cost savings, which include:

 

|   | **•** | Faster installation and step by step                        implementation; |
|--------|------------|-----------------------------------------------------------------------------|

|   | **•** | Lower maintenance costs; |
|--------|------------|--------------------------|

|   | **•** | Decreasing digital technology prices; |
|--------|------------|---------------------------------------|

|   | **•** | Capacity for integration; and |
|--------|------------|-------------------------------|

|   | **•** | Remote accessibility that decreases costs. |
|--------|------------|--------------------------------------------|

         

The        networking video system utilized by the Company is a hardware and software solution that        integrates existing analog as well as next-generation IP-surveillance and security        applications. This technology has come about as a result of our multi-disciplinary research        and development effort combining video systems design with related software        products.

 

***Hardware Products: the ComCam 10 Series***

 

A        traditional commercial digital video system incorporates three components: (1) the camera        or video-capture device, (2) the player or video-display device, and (3) the server,        storage medium, or data-management device. The Company assembles all three components and        offers them as one integrated system, the ComCam 10 series.               

 

The ComCam        10 series uses technologies for video capture, compression, analysis, and transmission        capabilities. ComCam 10 technology works in all wired and wireless networks, including the        internet. ComCam 10 operates to licensed standards (e.g., cellular phones) and unlicensed        standards (e.g., the IEEE 802.11b Wireless standard and Bluetooth). The ComCam 10 series        product compatibility represents a competitive advantage since it can be deployed in over        one hundred countries around the world.

 

Compression        is the key factor for effective IP-surveillance. The ComCam 10 system operates in digital        format with a very sophisticated video compression technology that achieves a 300 to 500        percent improvement over the leading conventional compression solution JPEG and is more        dynamic than MPEG.

 

 

 

 

5

 

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Sophisticated software, embedded in the ComCam 10 camera and micro-server,        compresses and manages the broadband video signal in real-time before transmitting it        either via a wire line or wirelessly. Video entering the device’s IDNC network        processor is converted to digital data, compressed, and formatted for local storage or        direct transmission to a network server. The ComCam 10 enables easy data trans-coding to        any data format which facilitates fast transmission to a variety of devices, such as cell        phones, PDA’s, etc.

 

The        Company’s technology operates with minimal power consumption, enabling the use of        solar panels as a power source for full functionality in remote locations such as weather        stations and border crossings.

 

***Other Hardware Products***

 

In addition        to the ComCam 10 series, the Company offers the following hardware items:

 

| **•** | Asset Tracking System developed by ComCam and used by DHS                        ICE in New York, including Integrated IP, sensor array, and network barcode                        devices; |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Video MicroServers adapt legacy closed circuit television                        (CCTV) and Mil-Spec imaging products and sensors to enable IP command and                        control capability; |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | High-end IP cameras (including the CF-130, a 1.3 mega pixel                        camera that delivers crisp, uncompressed, digital video over long distances                        previously unattainable by conventional camera systems, with both night and                        day capability); and |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Original equipment manufacture (OEM) board sets. |
|------------|--------------------------------------------------|

 

***Software Products: the C3 and Pocket C3***

 

The Company        offers five recently upgraded software products that work in concert with our custom        hardware platform, the most important of which are the “Camera Control        Centers,” the C3 and the Pocket C3. The C3 brings control room video and storage to        laptops—in a choice of seven languages. Pocket C3 extends our proven network security        applications and surveillance software to the PDA and smart-phone market        sectors.    

 

Video data        can be transmitted over standard networks using any type of transmission media, such as        Ethernet, wireless LAN, or conventional dial-up phone lines. Data is then received by a        computer running the Company’s viewer program, the C3 or Pocket C3, which decodes and        decompresses the images for viewing or archiving. The C3 and Pocket C3 can also be used to        send proprietary user commands back to the ComCam 10 through the same path used to transmit        the video data. Commands are decoded by the ComCam 10 and can be used to control remote        devices such as pan/tilt/zoom camera domes and door locks. The Company’s unique        management software modules can serve as stand-alone applications or browsers that can        facilitate customization (i.e., translations) by local resellers, as well as interfacing        with third-party devices from the consumer Compaq I-PAQ to the industrialized Symbol MC-50,        both of which are PDAs that can be used as monitors and controls for our        devices.

 

***Other Software Products***

 

In addition        to the C3 and Pocket C3, the Company offers the following software items:

 

| **•** | CamNos, a camera operating system, embedded; |
|------------|----------------------------------------------|

| **•** | VideoLocker©, a video recording system; |
|------------|----------------------------------------------|

| **•** | ICE (Immigration and Customs Enforcement)                        Tracker©; |
|------------|---------------------------------------------------------------------------------|

 

6

 

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| **•** | Intelligent Video Analysis, a facial, license plate, etc.,                        recognition system; |
|------------|-------------------------------------------------------------------------------------------------------|

| **•** | Browser (thin client); |
|------------|------------------------|

| **•** | Development kits; |
|------------|-------------------|

| **•** | Remote servers; and |
|------------|---------------------|

| **•** | Custom applications. |
|------------|----------------------|

 

Our        software is compliant with Environmental Systems Research Institute (ESRI) GIS (geographic        information system) modeling and mapping software and technology.

 

***New Products***

 

The        Company’s next development target is the production of a powerful video client server        on a computer chip.

 

***Manufacturing***

 

We began        manufacturing with Pennsylvania-based Strategic Manufacturing Technologies, Inc.        (“Strategic”), located at 505 Trestle Place, Downingtown, Pennsylvania, 19353,        in October of 2005. We have no manufacturing agreement in place. Based on our purchase        orders, Strategic obtains the necessary computer and camera components from source        suppliers such as Motorola, Inc., and Analog Devices, Inc. Strategic then uses these        components to manufacture and assemble our camera systems. Following Strategic’s        manufacturing process, we perform any needed final assembly in-house. Our customers then        install their purchased units and we provide ongoing technical support.

 

The Company        has begun a limited but scheduled delivery of its products from Strategic. Historically, we        have had a time lag between purchases and delivery of our product. However, since our first        purchase from Strategic, we are now able to stock our products for immediate        distribution.

 

***Customers***

 

During        the last few years, most of our sales have been for testing purposes, as well as provided        consulting services and expert witness testimony. Our unrelated customers have        included:

 

| **•** | The U.S. Department of Homeland Security’s ICE                        (Immigration and Customs Enforcement): in the fourth quarter of 2007 they                        used our technical skills, including the development of a Detainee Tracking                        System, to upgrade key infrastructure technology for ICE’s General                        Service Administration (GSA) facility located in lower Manhattan of New                        York City (we are a contender for a multi-facility deployment after an                        extended test period); |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Technology Service Corporation: they have purchased three                        video security systems, and we have provided software expertise as part of                        a team for product integration; |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | University of South Florida, St. Petersburg, working with                        the Coast Guard and the Department of Commerce: they have purchased ten                        video security systems for work on port system security                        vehicles; |
|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Fish & Richards, PC, San Diego, CA: we consulted for                        them in the capacity of an expert witness in a high-profile infringement                        case; and |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Strela-Development AG, Switzerland: we have provided                        software development. |
|------------|---------------------------------------------------------------------------------------------------|

 

Our related        customers have included Pinnacle Electronic Systems, Inc., West Chester, PA: they have        purchased two video security systems, and we have provided software consulting services for        two projects, the Federal Detention Center (Brooklyn, NY) and the Liberty Center        (Philadelphia, PA).

 

Additionally, we have delivered video systems to the National Oceanic &        Atmospheric Administration (Department of Commerce) and the State of Washington Fish and        Wildlife Service.

 

7

 

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***Marketing and Sales Opportunities***

 

The        Company’s marketing and sales team operates from West Chester, Pennsylvania, and        targets three market segments.

 

|   | 1. | We sell directly to end-users, including government and                        commercial markets, and plan to sell directly to residential users of video                        security applications. Notably, the residential market is underserved and                        has the highest long-term growth rate potential in this sector of the                        industry. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | 2. | We intend to sell our products and/or licenses for our core                        proprietary technology to original equipment manufacturers                        (“OEMs”) as well as other key technology providers such as                        software developers and network systems operators who may in turn integrate                        our technology with their own branded products. Since 2002 we have been a                        supplier of original technology (e.g., COMCAM 10, C3) to the University of                        South Florida’s Center for Ocean Technology for the development of                        remotely operated underwater vehicles. The University of South Florida                        plans to offer these vehicles for sale to United States and European                        underwater agencies at which time we expect to enter into an agreement to                        serve as an OEM supplier. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | 3. | We supply qualified distributors and value added resellers                        (“VARs”) with a customer list; they then incorporate the                        Company’s products as part of their sales efforts. Our qualified                        distributors and VARs are established companies with at least five                        years’ experience working in the surveillance industry, have IT                        experience, can perform local translating when necessary, and provide                        marketing, installation, service, and support. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

Our        marketing and sales advantage is due to the flexibility of our technological platform which        lends itself to rapid integration with many third-party technologies including access        control, biometric, radio frequency identification (RFID), chemical detection, and seismic        detection. The Company’s suite of software products and tools can extend the        performance and functionality of many products, especially in the area of remote control        with video. We believe that the current CCTV (closed circuit television), access control,        biometrics and digital communications markets are consolidating and that our technology may        well be the glue that will integrate these markets.

 

***Business Partners***

The Company        builds partnerships with a variety of manufacturers, systems integrators, and other        companies. One of these partnerships is with Symbol Technologies, Inc., now owned by        Motorola (“Symbol”), a leader in mobile computing, RFID, and scanning        technology. The Company is a member of Symbol’s PartnerSelect program as an        authorized reseller. Further, our Pocket C3 software has been tested on all Symbol’s        mobile computers and received their Symbol PLUS validation for use on all Symbol devices.        In their validation report, our software was deemed “very straightforward and simple        to set up... [and] worked right out of the gate on all devices under test.” As such,        we are beginning to focus on bundling our hardware and software with Symbol’s mobile        computers for a simple, comprehensive, mobile security system.

 

 

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On April        15, 2005, we entered into a Teaming Agreement with Technology Service Corporation,        (“TSC”) an employee-owned, high technology company engaged in providing        engineering services and specialized products to U.S. governmental agencies and private        industry. TSC’s specialized products include sensor and subsystem prototype        development and demonstration, electronic circuit board manufacture, test devices, computer        applications for “radar siting,” geographic information services, and        sensor/system modeling and simulation. We have combined TSC’s current technology with        our own to provide a powerful web based satellite imagery application that allows the user        to zoom down to a detailed ground level view where various devices produced by us deliver        live video and sensor data. TSC is committed to including the Company as part of its        corporate presentation and, where appropriate, in its bids on federal government and other        projects. The Company’s agreement with TSC provides that each entity may incorporate        the other’s products and/or services into a proposal or bid on a case-by-case basis        as is appropriate. Most recently, our technology was incorporated in a TSC bid for a Texas        border security initiative. The Texas border security bid was formally submitted by DRS        Technologies, Inc./Night Vision Equipment Company (a defense contractor). Also, our        technology was incorporated into a TSC bid for the US Navy, under the Naval Facilities        Engineering Command (NAVFAC) Anti-terrorism Force Protection (ATFP) Ashore Program        (“Ashore”). The Ashore bid was formally submitted by EG&G (a defense        contractor and subsidiary of URS Corporation).

 

The        innovative Wireless Camera Surveillance System (“WCSS”), from Beacon Products,        Inc. (“Beacon”), features our video network technology, which received        recognition as the first fully integrated IP wireless surveillance system designed as an        outdoor lighting fixture.*Buildings        Magazine*, a national publication for owners and operators of        commercial buildings, selected Beacon’s WCSS system as one of the "Top 100 Products        of the Year 2003."*Electrical Construction & Maintenance        Magazine*named Beacon’s WCSS system "Product of the Year        2004" in its Safety and Security category. Our partnership with Beacon represents an        anticipated sales channel. Beacon’s North American sales force is comprised of 700        representatives in numerous cities and municipalities. We have no agreement with Beacon but        intend to renew a partnership and resume our engagement in joint marketing and sales        efforts. However, as our previous partnership led to no revenue, we can make no assumptions        about how beneficial a new Beacon partnership will be to our business.

 

We have        also begun a cross licensing and joint development venture with Strela Development AG of        Switzerland (“Strela”). The Company’s core technology is to be included        in Strela’s HealthSourceOne platform of remote medical diagnostic products and        services. Strela will, in turn, license our sensor technology for use in non-medical        markets. We invoice Strela for periodic consulting services and have no formal agreement in        place.

 

Further,        our recently developed Intelligent Video Analysis is the first result of a collaborative        effort between us and Alparysoft Inc. of Tomsk, Russia.

 

**Competition**

 

Competition        within the international market for fixed and mobile commercial video cameras and other        equipment communication systems is intense. While there is no dominant technological or        business leader, there are many companies with greater financial resources and more        established distribution channels than the Company has. However, we offer a highly        competitive video camera system that meets the requirements of both the commercial wired        and wireless end-users, including the offering of a fully functional,        compact wireless system for mobile and personal usage. Our products are distinguished by        next-generation innovations that are both sophisticated and cost effective. Further, we        believe that the Company has few direct competitors based on what we consider to be seven        important product and industry characteristics:

 

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|   | **•** | Flexibility: Programmable behavior; new algorithms and                        accessories at the video/control source; |
|--------|------------|------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Video Features: Distinct video compression advantage vs.                        mainstream 300%-500% smaller than JPEG, more dynamic than MPEG; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Physical Features: Adaptive power consumption - localized                        solar power capability; |
|--------|------------|----------------------------------------------------------------------------------------------------------|

|   | **•** | Network Features: Works on wireless networks and low                        bandwidth networks; |
|--------|------------|-------------------------------------------------------------------------------------------------|

|   | **•** | Storage Features: Local storage and network                        balance; |
|--------|------------|-----------------------------------------------------------------------------|

|   | **•** | Software: Strong user and developer suite of software;                        and |
|--------|------------|-----------------------------------------------------------------------------------|

|   | **•** | Barriers to Competition: Multidisciplinary R&D path,                        cross-disciplinary deployment. |
|--------|------------|----------------------------------------------------------------------------------------------------------------|

 

As a        specialized solutions integrator with a suite of hardware and software products, the        Company faces current and prospective competitors from many sectors of the expanding video        networking and security market – and we find ourselves working with apparent        competitors to complement a limitation in the competitor’s solution-solving        capabilities.

 

In general,        competitors include many companies from key sectors of the video networking and security        market, including: hardware (e.g., camera and digital video recorder), software (e.g.,        analysis, access control), networking (e.g., WiFi, cell) and specialized solutions (e.g.,        data integration, data management). However, our principal competitors are camera        manufacturers and/or suppliers that offer increasingly more sophisticated products,        including Internet Protocol capabilities. The competition falls into the following broad        categories:

 

|   | **•** | Leading security camera companies: Axis Communications,                        Pelco, Pixord, Mobotix AG and others that supply a diverse product line of                        cameras, digital video recorders and other products; |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Integrated conglomerates with products that include security                        cameras: Siemens/Bosch, Philips, Sony, GE, JVC, Sanyo and others that                        provide a full line of cameras and related accessories; and |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | “Boutique” camera and other security-industry                        equipment companies: LiveWare, ObjectVideo, DvTel, ioImage, IPIX and many                        others that offer specialized products. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Marketability**

 

The global        security market is in the midst of a transformation from first-generation analog to        second-generation digital or software-based systems. Analog CCTV video camera technology        connected to centralized control systems comprises the majority of first-generation video        security applications. New digitally based security applications integrated with video        security systems are emerging, which include access control, biometrics, RFID, chemical        detection, seismic detection, and analytic capabilities like algorithmic facial        recognition. The trend is moving toward security cameras integrated with digital        applications.

 

The        market’s transformation is potentially enormous. The*Lehman        Brothers 2007 Security Industry Report*estimated the CCTV        replacement market to second-generation systems would be in the billions. The Lehman report        also believes that current analog CCTV video security systems are being replaced or        enhanced by software based IP platforms.

 

**Patents, Trademarks, Licenses, Franchises, Concessions, Royalty        Agreements and Labor Contracts**

 

All ComCam        software is copyrighted, developed in-house, and licensed to customers in connection with        sales of our hardware. In addition, some software is additionally protected under two        company owned patents:

 

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No. US        6,975,220 B1, “Internet Based Security, Fire and Emergency Identification and        Communication System,”

 

No. US        7,302,481 B1, “Methods and Apparatus Providing Remote Monitoring of Security and        Video Systems,”

 

Additionally, our company name “COMCAM” is        trademarked.

 

We are        under no licenses, franchises, concessions, or royalty agreements associated with our        products.

 

The Company        is not subject to any labor contracts.

 

**Governmental Regulation**

 

The        following information generally summarizes governmental approval and regulations that        pertain to the Company’s operations.

 

The Company        is subject to local, state and national taxation. Our fixed and mobile digital video        cameras and communication systems must conform to local, national and international        governmental authorities that set the regulations by which communications are transmitted        within and across respective territories.

 

***The        FCC***

 

Certain        components within our products are required to meet Federal Communications Commission        (“FCC”) approval, specifically for Classes A & B Digital Devices relating        to*Part 15*, which is a common testing        standard for products similar to our own. FCC*Part 15*basically covers the regulations under which a device emits radio frequency        energy by radiation, and the technical specifications, administrative requirements, and        other conditions relating to the marketing of*FCC Part        15*devices. Approvals as required in relation to*Part 15*are obtained independently by suppliers        of these components.

 

The        FCC’s definition of a*Class A Digital Device*is one which is marketed for use in a commercial, industrial or business        environment. Our COMCAM series 10 camera and other hardware        are*Class A Digital Devices*. However,        since we sell our hardware products to system integrators, dealers and other third-party        resellers who integrate our products into their own FCC approved video solutions, we are        not required to obtain FCC approvals. Rather, each reseller secures its own FCC and/or        other approvals.

 

The        FCC’s definition of a*Class B Digital Device*is one which is marketed for use in a residential environment. Our cameras        and micro-servers are not currently sold directly into the consumer market nor to our        knowledge are they being deployed by third-party distributors and/or resellers in a        residential environment within the United States.

 

Although we        do not currently need to seek approval for our devices due to the particulars of our        current sales and customer utilization, we do plan to produce a new generation of cameras        and accompanying microservers for which we will seek appropriate FCC approval. In order to        obtain FCC approval we will provide the FCC with examples of this new        generation of products which will be subjected to a series of standardized radiation tests.        Sufficient test results will cover our products with the FCC’s        approval.

 

 

11

 

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***International Regulation***

 

Outside the        FCC’s jurisdiction we have integrated our products successfully within existing        governmental regulation and are confident that any changes in governmental regulations can        be met in relation to our core technology. Compliance with localized government regulation        is made incumbent on our distributors and resellers. Our Japanese distributor, Multi-Media        21 Co. Ltd. has sold our products in Japan since 2000 in accord with local regulatory        standards. Our distributor for the Commonwealth of Independent States, Alparysoft Inc., is        in the process of complying with adoption requirements for our products within their        territory.

 

**Environmental Laws**

 

The Company        is not currently affected by compliance with any environmental laws. However, lead danger        has historically been an issue in high-tech industries.

RoHS,short for*Restriction of Hazardous Substances,*also known        as Lead-Free, is a European Union directive from 2002 which restricts the use of six        hazardous materials found in electronic products. All electronic products sold in the EU        market must pass RoHS compliance. Further, the need to comply with RoHS type directives is        evolving globally. Japanese manufacturers have been reducing lead levels since the        beginning of the millennium and, in the United States, California has already passed        legislation to fall in line with the EU RoHS timescales.

To satisfy lead related requirements as they expand in        our customers’ states and countries, we may need to substitute different components        into our hardware. These replacement components will need to contain less of the hazardous        materials which are finding their way into the world’s landfills.

**Research and Development**

 

We are        involved on an ongoing basis in research and development activities related to improving        the capacity and performance of our products. During the years ended December 31, 2007 and        2006, the Company spent $6,052 and $31,210, respectively, on research and development        activities. We expect to increase research and development expenditures as our business        develops.

 

**Employees**

The Company        has one full time employee, three (3) full time consultants, three (3) part time        consultants and four (4) individuals who work as independent consultants. We also use        legal, accounting, and auditing firms, as required, that assist us in the operation of our        business. The Company’s employee and consultants are as follows:

***Full-time Employee:***

Don Gilbreath, Chief Executive Officer, Chief Financial Officer and        Principal Accounting Officer

 

 

***Full-time Consultants:***

David Rosen, Vice President Corporate Development

Carolyn Scheppner, Senior Software Engineer

Andy Finkel, Senior Software Engineer

         

         

12

 

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***Part-time Consultants:***

Louise Carroll, Office Manager

Mike Rivers, Documentation

Al Duncan, Operations

**Reports to Security Holders**

The        Company’s annual report contains audited financial statements. We are not required to        deliver an annual report to security holders and will not automatically deliver a copy of        the annual report to our security holders unless a request is made for such delivery. We        file all of our required reports and other information with the Commission. The public may        read and copy any materials that are filed by the Company with the Securities and Exchange        Commission (the “Commission”) at the Commission’s Public Reference Room        at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the        operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The        statements and forms filed by us with the Commission have also been filed electronically        and are available for viewing or copy on the Commission maintained Internet site that        contains reports, proxy and information statements, and other information regarding issuers        that file electronically with the Commission. The Internet address for this site can be        found at*http://www.sec.gov*.

 

| **ITEM 1A.** | **RISK FACTORS** |
|--------------|------------------|

 

The        Company’s operations and securities are subject to a number of risks. Below we have        identified and discussed the material risks that we are likely to face. Should any of the        following risks occur, they will adversely affect our operations, business, financial        condition and/or operating results as well as the future trading price and/or the value of        our securities.

 

**Risks        Related to the Company’s Business**

 

*THE        COMPANY’S ABILITY TO CONTINUE AS A GOING CONCERN IS IN QUESTION*

 

The        Company’s auditors included an explanatory statement in paragraph 4 of their report        on our financial statements for the years ended December 31, 2007 and 2006, stating that        there are certain factors which raise substantial doubt about the Company’s ability        to continue as a going concern. These factors include limited revenue generating activities        in place, and losses since inception.

 

*THE        COMPANY HAS A HISTORY OF LOSSES AND MAY INCUR LOSSES FOR THE FORESEEABLE        FUTURE*

 

The Company        had an accumulated deficit of $5,323,531 as of December 31, 2007. We do not expect to        achieve profitability in the next twelve months and can provide no assurances that we will        ever achieve profitability or in the event that we do achieve profitability that we will be        able to sustain that profitability over time.

 

13

 

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*IF THE        COMPANY DOES NOT GENERATE SUFFICIENT CASH FLOW FROM OPERATIONS AND IS UNABLE TO OBTAIN        ADDITIONAL CAPITAL TO OPERATE ITS BUSINESS, WE MAY NOT BE ABLE TO EFFECTIVELY CONTINUE        OPERATIONS*

 

As of        December 31, 2007, the Company had a working capital deficit of $968,186. We do not expect        to generate sufficient cash flow from operations to cover our expenditures until the end of        2009. Until the point at which cash flow from operations matches expenditures we will have        to obtain additional working capital from debt or equity placements to effectively continue        our operations. However, we have no commitment for the provision of additional working        capital. Should we be unable to secure additional capital to cover our short fall in cash        flow, such condition would cause us to reduce expenditures which could have a material        adverse effect on our business.

 

*THE        COMPANY MAY NOT BE ABLE TO DEVELOP NEW PRODUCTS*

 

We have        historically had difficulty producing our products because of cash flow shortages. Though        we have recently resumed the production of our products, our future success depends in a        significant part on our ability to evolve our hardware and software and to develop and        introduce new products and technologies in response to market demands. If adequate funds        are not available, the Company’s ability to develop or enhance products and services        or otherwise respond to competitive pressures would be significantly limited.

*THE        VIDEO MONITORING SURVEILLANCE INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND THE        COMPANY'S PRODUCTS COULD BECOME OBSOLETE AT ANY TIME*

Evolving        technology, updated industry standards, and frequent new product and service introductions        characterize the video surveillance market; our products could become obsolete at any time.        Competitors could develop products similar to or better than our own, finish development of        new technologies in advance of the Company’s research and development, or be more        successful at marketing new products, any of which factors may hurt our prospects for        success.

*THE        MARKET ACCEPTANCE OF THE COMPANY’S PRODUCTS IS CRITICAL TO THE COMPANY’S        GROWTH*

 

The Company        generates revenue from the design and sale of video surveillance systems; therefore, market        acceptance of our products is critical. If our customers do not accept or purchase our        products, then our revenue, cash flow and/or operating results will be negatively        impacted.

 

*THE        COMPANY COMPETES WITH LARGER AND BETTER-FINANCED CORPORATIONS*

 

Competition        within the international market for fixed and mobile commercial video cameras and other        equipment communication systems is intense. While the Company’s products are        distinguished by next-generation innovations that are more sophisticated, flexible and cost        effective than many competitive products currently in the market place, a        number of entities offer video surveillance systems, and new competitors may enter the        market in the future. Some of our existing and potential competitors have longer operating        histories, greater name recognition, larger customer bases and significantly greater        financial, technical and marketing resources than we do, including well known        multi-national corporations like Sony and JVC.

 

14

 

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*THE        COMPANY IS LARGELY DEPENDENT UPON FEW CUSTOMERS*

 

For the        year ended December 31, 2007, one customer, the U.S. Department of Homeland        Security’s Immigration and Customs Enforcement, accounted for over 95% of our net        sales. We do have a contract with this customer. The loss of this customer could have an        adverse effect on our business.

 

We have in        the past, and may in the future, lose our customers or a substantial portion of our        business with one or more major customers. If we do not sell products to our existing        customers in the quantities anticipated, or if our customers reduce or terminate their        relationships with us, market perception of our products and technology, growth prospects,        and financial condition and results of operations could be harmed. Any termination of our        relationship with our largest customer or any other customers could materially reduce our        revenue.

 

*THE        COMPANY DEPENDS UPON ONE MANUFACTURER AND LIMITED SOURCE SUPPLIERS*

 

Pennsylvania-based Strategic Manufacturing Technologies, Inc. currently        procures our components and manufactures our video surveillance systems. Our components are        purchased for us from such source suppliers as Motorola, Inc., and Analog Devices, Inc. We        anticipate that the Company will continue to depend upon one or few manufacturers as well        as a limited number of source suppliers, which reliance reduces the level of control we        have and exposes us to significant risks such as inadequate capacity, late delivery,        substandard quality and higher prices, all of which could adversely affect the        Company’s business. We currently have no agreement with Strategic Manufacturing        Technologies, Inc. for the manufacture of our video surveillance systems.

 

If our        suppliers were unable to provide parts in the volumes needed or at an acceptable price, our        manufacturer and the Company would have to identify and qualify acceptable replacements        from alternative sources of supply. If the Company was unable to obtain these components in        a timely fashion, it would likely not be able to meet demand. Any disruption of either        component procurement or manufacturing delays could adversely affect the Company’s        results of operations.

 

*OUR        CHIEF EXECUTIVE OFFICER MAY NOT BE ABLE TO OFFER HIS UNDIVIDED ATTENTION TO THE        COMPANY*

 

Don        Gilbreath serves as our chief executive officer and as the chief executive officer of        ComCam, Inc. Mr. Gilbreath’s dual responsibilities cause him to divide his time        between two corporations with disparate interests. Currently, Mr. Gilbreath devotes        significant time to the marketing of our products and services. However, ComCam, Inc. may        increase its effort to seek out unrelated business opportunities in the technology sector,        which pursuit will reduce the amount of time Mr. Gilbreath currently spends on the        development of our business.

 

 

 

15

 

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*THE        COMPANY’S SUCCESS DEPENDS ON THE COMPANY’S ABILITY TO ATTRACT AND RETAIN KEY        PERSONNEL*

 

The        Company’s future success will depend substantially on the continued services and        performance of Don Gilbreath and other key personnel. We have relatively few senior        personnel, and so the loss of the services of Don Gilbreath or any other key employees        could have a material adverse effect on the Company’s business prospects, financial        condition and results of operations. Our future success also depends on the Company’s        ability to identify, attract, hire, train, retain and motivate technical, managerial and        sales personnel. Competition for such personnel is intense, and we cannot assure that we        will succeed in attracting and retaining such personnel. Our failure to attract and retain        the necessary technical, managerial and sales personnel could have a material adverse        effect on our business prospects, financial condition and results of operations.

*MISAPPROPRIATION OF PROPRIETARY RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL        ACTIONS RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT THE COMPANY'S FINANCIAL        CONDITION*

The        Company's success depends significantly on protecting proprietary technology. Despite the        Company's efforts to protect its proprietary rights, unauthorized parties may attempt to        copy or otherwise obtain and use our technology or products. Monitoring unauthorized use of        the Company's technology is difficult, and we cannot be certain that the steps we have        taken will prevent misappropriation of our technology, particularly in foreign countries        where the laws may not protect our proprietary rights as fully as in the United        States.

In        addition, from time to time, third parties may assert patent, copyright, trademark and        other intellectual property rights claims against us with respect to existing or future        products or technology. If there is a successful claim of infringement and the Company        fails or is unable to develop non-infringing technology or license the infringed or similar        technology on a timely basis, the Company's business and results of operations could be        seriously harmed.

*THE        COMPANY’S BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATIONS*

 

International, national and local standards set by governmental regulatory        authorities set the regulations by which communications are transmitted within and across        respective territories. The Company's fixed and mobile digital video cameras and        communication systems are subject to such regulation in addition to national, state and        local taxation. Our products may be required to meet Federal Communications Commission        approval, specifically for Classes A & B of Part 15 for the telephone related        applications of our hardware products. Although the Company successfully operates within        current governmental regulations it is possible that regulatory changes could negatively        impact our operations and cause us to diminish or cease operations.

 

*THE        COMPANY’S PRODUCTS ARE SUBJECT TO ENVIRONMENTAL LAWS*

 

New        hazardous materials restrictions have been and are being sought in numerous jurisdictions        worldwide. As these restrictions take effect, the Company may need to change the components        it uses in certain key products. These components may be difficult to procure or more        expensive than the components we currently use. As such, current and future environmental        regulations could negatively impact our operations.

 

16

 

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**Risks        Related to the Company’s Stock**

 

*THE        COMPANY WILL NEED TO RAISE ADDITIONAL CAPITAL TO FUND OPERATIONS WHICH COULD ADVERSELY        AFFECT OUR SHAREHOLDERS*

 

The Company        will need to raise additional capital to fund operations until such time as our revenues        match our expenditures. We expect that revenue will match expenditures at the end of 2009.        Until the point at which cash flow from operations matches expenditures we will have to        realize up to $3,000,000 in additional capital for operations. Capital realized would be        used for research and development expenses, marketing costs and general and administrative        expenses. However, we have no commitment from any source of financing to provide us with        this necessary additional capital. Should we secure a commitment to provide us with capital        such commitment may obligate us to issue additional shares of the Company’s common        stock or warrants or other rights to acquire common stock which will result in dilution to        existing shareholders. Nonetheless, if we are unable to obtain additional capital, then we        will need to restrict or even cease operations, which action would adversely affect our        shareholders.

 

*THE        COMPANY MAY ATTEMPT TO QUOTE ITS STOCK ON THE OTCBB*

 

The Company        has no public trading market for its shares, and we cannot represent to you that a market        will ever develop. Nonetheless, we do intend to seek a quotation on the OTCBB. However,        there can be no assurance that we will obtain a quotation on the OTCBB or that obtaining a        quotation will generate a public trading market for our shares.

 

Further, if        we obtain a quotation on the OTCBB, this may not increase our ability to raise money in an        equity financing since many institutional investors do not consider OTCBB stocks for their        portfolios. Additionally, an investors’ ability to trade our stock might be        restricted as only a limited number of market makers quote OTCBB stock. Trading volumes in        OTCBB stocks are historically lower, and stock prices for OTCBB stocks tend to be more        volatile, than stocks traded on an exchange or the NASDAQ Stock Market. We may never        qualify for trading on an exchange or the NASDAQ Stock Market.

 

*THE        COMPANY’S STOCK PRICE COULD BE VOLATILE*

 

Should a        public market for our shares develop, the future market price could be subject to        significant volatility and trading volumes could be low. Factors affecting the        Company’s market price will include:

 

|   | **•** | the Company’s perceived prospects; |
|--------|------------|------------------------------------------|

|   | **•** | negative variances in our operating results, and achievement                        of key business targets; |
|--------|------------|--------------------------------------------------------------------------------------------------------------|

|   | **•** | limited trading volume in shares of the Company’s                        common stock in the public market; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------|

|   | **•** | sales or purchases of large blocks of our stock; |
|--------|------------|--------------------------------------------------|

|   | **•** | changes in, or the Company’s failure to meet, earnings                        estimates; |
|--------|------------|------------------------------------------------------------------------------------------------|

|   | **•** | changes in securities analysts’ buy/sell                        recommendations; |
|--------|------------|----------------------------------------------------------------------------------------|

|   | **•** | differences between our reported results and those expected                        by investors and securities analysts; |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------|

|   | **•** | announcements of new contracts by the Company or our                        competitors; |
|--------|------------|------------------------------------------------------------------------------------------|

|   | **•** | announcements of legal claims against us; |
|--------|------------|-------------------------------------------|

|   | **•** | market reaction to any acquisitions, joint ventures or                        strategic investments announced by us or our competitors; |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | developments in the financial markets; |
|--------|------------|----------------------------------------|

|   | **•** | general economic, political or stock market                        conditions. |
|--------|------------|--------------------------------------------------------------------------------|

 

 

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In        addition, our future stock price may fluctuate in ways unrelated or disproportionate to our        operating performance. The general economic, political and stock market conditions that may        affect the market price of the Company’s common stock are beyond our control. The        market price of the Company’s common stock at any particular time may not remain the        market price in the future. In the past, securities class action litigation has been        instituted against companies following periods of volatility in the market price of their        securities. Any such litigation, if instituted against us, could result in substantial        costs and a diversion of management’s attention and resources.

 

*THE        COMPANY’S STOCK IS A PENNY STOCK AND, THEREFORE, THE COMPANY’S SHAREHOLDERS MAY        FACE SIGNIFICANT RESTRICTIONS ON THEIR STOCK*

 

The        Company’s stock differs from many stocks in that it is a "penny stock." The        Commission defines a penny stock in Rule 3a51-1 of the Exchange Act as, generally speaking,        those securities which are not listed on either NASDAQ or a national securities exchange        and are priced under $5, excluding securities of issuers that (a) have net tangible assets        greater than $2 million if they have been in operation at least three years, (b) have net        tangible assets greater than $5 million if in operation less than three years, or (c)        average revenue of at least $6 million for the last three years. OTCBB securities are        considered penny stocks unless they qualify for one of the exclusions.

 

The        Commission has adopted a number of rules to regulate penny stocks. These rules include, but        are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-9 under        the Exchange Act. Since our securities constitute a "penny stock" within the meaning of the        rules, the rules would apply to us and our securities. The rules may further affect the        ability of owners of shares to sell their securities in any market that may develop for        them. There may be a limited market for penny stocks, due to the regulatory burdens on        broker-dealers. The market among dealers may not be active. Investors in penny stock often        are unable to sell stock back to the dealer that sold them the stock. The mark-ups or        commissions charged by the broker-dealers may be greater than any profit a seller may make.        Because of large dealer spreads, investors may be unable to sell the stock immediately back        to the dealer at the same price the dealer sold the stock to the investor. In some cases,        the stock may fall quickly in value. Investors may be unable to reap any profit from any        sale of the stock, if they can sell it at all.

Shareholders should be aware that, according to the Commission Release No.        34-29093, the market for penny stocks has suffered in recent years from patterns of fraud        and abuse. These patterns include:  

 

|   | **•** | control of the market for the security by one or a few                        broker-dealers that are often related to the promoter or issuer; |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | manipulation of prices through prearranged matching of                        purchases and sales and false and misleading press releases; |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | "boiler room" practices involving high pressure sales                        tactics and unrealistic price projections by inexperienced sales                        persons; |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | excessive and undisclosed bid-ask differentials and markups                        by selling broker-dealers; and |
|--------|------------|-------------------------------------------------------------------------------------------------------------------|

|   | **•** | the wholesale dumping of the same securities by promoters                        and broker-dealers after prices have been manipulated to a desired level,                        along with the inevitable collapse of those prices with consequent investor                        losses. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

 

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*OUR        INTERNAL CONTROLS OVER FINANCIAL REPORTING MAY NOT BE CONSIDERED EFFECTIVE IN THE FUTURE,        WHICH COULD RESULT IN A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND IN TURN        HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.*

 

Pursuant to        Section 404 of the Sarbanes-Oxley Act of 2002 we are required to furnish a report by our        management on our internal controls over financial reporting. Such report must contain,        among other matters, an assessment of the effectiveness of our internal controls over        financial reporting as of the end of the year, including a statement as to whether or not        our internal controls over financial reporting are effective. This assessment must include        disclosure of any material weaknesses in our internal controls over financial reporting        identified by management. If we are unable to continue to assert that our internal controls        are effective, our investors could lose confidence in the accuracy and completeness of our        financial reports, which in turn could cause our stock price to decline.

 

| **ITEM 1B.** | **UNRESOLVED STAFF COMMENTS** |
|--------------|-------------------------------|

 

Not        applicable.

 

| **ITEM 2.** | **PROPERTIES** |
|-------------|----------------|

 

The        Company leases 4,500square feet of office space on a month to month        basis in West Chester, Pennsylvania. Our lease costs were approximately $50,000 for each of        the years ended December 31, 2007 and 2006. We believe that the space leased is generally        suitable and adequate to accommodate current operations.

 

| **ITEM 3.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|

 

The        Company is currently not a party to any legal proceedings.

 

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

 

No matter        was submitted to a vote of the security holders, through the solicitation of proxies or        otherwise, during the fourth quarter ended December 31, 2007.

 

**PART        II**

 

| **ITEM 5.** | **MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS,                        AND ISSUER PURCHASES OF EQUITY SECURITIES** |
|-------------|-----------------------------------------------------------------------------------------------------------------------------|

 

No public        market for the Company's common stock currently exists.

 

**Capital Stock**

 

The        following is a summary of the material terms of the Company’s capital stock. This        summary is subject to and qualified by our articles of incorporation and bylaws.

 

 

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***Common Stock***

 

As of April        14, 2008, there were 68 shareholders of record holding a total of 3,408,354 shares of fully        paid and non-assessable common stock of the 100,000,000 shares of common stock, par value        $0.0001, authorized. The board of directors believes that the number of beneficial owners        is substantially greater than the number of record holders because a portion of our        outstanding common stock is held in broker “street names” for the benefit of        individual investors. The holders of the common stock are entitled to one vote for each        share held of record on all matters submitted to a vote of stockholders. Holders of the        common stock have no preemptive rights and no right to convert their common stock into any        other securities. There are no redemption or sinking fund provisions applicable to the        common stock.

 

***Preferred Stock***

 

As of April        14, 2008, there were no shareholders of record of the 2,000,000 shares of preferred stock,        par value $0.0001, authorized.

 

***Warrants***

 

As of April        14, 2008, the Company had no outstanding warrants to purchase shares of our common        stock.

 

***Stock        Options***

 

As of April        14, 2008, the Company had no outstanding stock options to purchase shares of our common        stock.

 

***Convertible Debenture***

 

During the        year ended December 31, 2007, a convertible debenture, as amended, was assumed by the        Company from ComCam, Inc. The debenture accrues interest at 7% per annum, is due on        February 14, 2009, and is convertible into a variable number of shares on a pari pasu basis        with ACC Investors LLC. At December 31, 2007 the Debenture was convertible, at the option        of the holder, into approximately 147,551 shares of either the Company’s or ComCam,        Inc.’s common stock.

 

***Dividends***

 

The Company        has not declared any cash dividends since inception and does not anticipate paying any        dividends in the near future. The payment of dividends is within the discretion of the        board of directors and will depend on our earnings, capital requirements, financial        condition, and other relevant factors. There are no restrictions that currently limit the        Company's ability to pay dividends on its common stock other than those generally imposed        by applicable state law.

 

**Transfer Agent and Registrar**

 

Our        transfer agent is Interwest Transfer, 1981 East, Murray-Holladay Road, Holladay, Utah,        84117-5164, and their telephone number is (801) 272-9294.

 

**Purchases of Equity Securities made by the Issuer and Affiliated        Purchasers**

 

None.

 

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**Recent        Sales of Unregistered Securities**

 

Effective        December 31, 2007, ACC Investors, LLC converted a convertible secured promissory note        issued by the Company in the aggregate amount of $1,476,351, including principal and        outstanding interest, into shares of common stock at a conversion rate of $0.900356 per        share for 1,408,394 restricted shares. The Company issued the shares relying on exemptions        provided by Section 4(2) and Regulation D of the Securities Act of 1933, as        amended.

 

The Company        complied with the exemptions’ requirements based on the following factors: (1) the        issuance was an isolated private transaction by the Company which did not involve a public        offering; (2) there was only one offeree who was issued the Company’s stock for the        conversion of a convertible secured promissory note; (3) the offeree committed to resell        stock according to the provisions of the Securities Act; (4) there were no subsequent or        contemporaneous public offerings of the stock; (5) the stock was not broken down into        smaller denominations; and (6) the negotiations that lead to the issuance of the stock took        place directly between the offeree and the Company.

 

| **ITEM 6.** | **SELECTED FINANCIAL DATA** |
|-------------|-----------------------------|

 

Not        required.

 

| **ITEM 7.** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL                        CONDITION AND RESULTS OF OPERATIONS** |
|-------------|------------------------------------------------------------------------------------------------------------------------|

 

This*Management’s Discussion and Analysis of Financial Condition        and**Results of Operations*and other        parts of this current report contain forward-looking statements that involve risks and        uncertainties. Forward-looking statements can also be identified by words such as        “anticipates,” “expects,” “believes,”        “plans,” “predicts,” and similar terms. Forward-looking statements        are not guarantees of future performance and our actual results may differ significantly        from the results discussed in the forward-looking statements. Factors that might cause such        differences include but are not limited to those discussed in the subsection        entitled*Forward-Looking Statements and Factors That May Affect        Future Results and Financial Condition*below. The following        discussion should be read in conjunction with our financial statements and notes thereto        included in this current report. Our fiscal year end is December 31.

 

**Discussion and Analysis**

 

Our        financial condition and results of operations depend primarily on revenue generated from        the sale of our products and by providing specialized services. In addition, our financial        condition is tied to our ability to realize additional debt or equity financing in        combination with stability in administrative expenses. There can be no assurance that an        increase in sales of our products or any other sources of revenue will provide sufficient        cash flows in the near term to sustain our operations and we have no commitments for        additionaldebt or equity financing. Since The Company does not        expect to generate sufficient cash flow in the short term, we are currently seeking        financing as a means to bridge the gap between operational losses and expenses. We can        provide no assurance that our efforts will be successful.

 

The        Company’s business development strategy is prone to significant risks and        uncertainties which can have an immediate impact on efforts to realize net cash flow and        deter future prospects of revenue growth. We have a limited history of generating revenue        which cannot be viewed as an indication of continued growth and a historical record of        incurring losses. Should we be unable to consistently generate revenue and reduce or        stabilize expenses on a consolidated basis to the point where we can realize net cash flow,        such failure will have an immediate impact on our ability to continue our business        operations.

 

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**Strategy** 

 

The Company        remains focused on numerous domestic and international sales opportunities with businesses        and organizations that have purchased our products in the past, including the        following:

 

|   | **•** | United States agencies: our products are currently being                        deployed with Immigration and Customs Enforcement (ICE) at the General                        Service Administration facility located in lower Manhattan, New York                        City. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | **•** | United States agencies: products sold to U.S. agencies have                        been used for testing purposes, including: |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | the Coast Guard and Navy which funded the University of                        South Florida for remote underwater operating vehicles and purchased 10                        camera systems between 2002 and the present, |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Naval Undersea Warfare Center who purchased 16 camera                        systems for classified purposes in 2003, |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------|

|   | (c) | the FBI through Photech, Inc., who purchased 4 camera                        systems for undisclosed surveillance monitoring in 2004, |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | National Oceanic and Atmospheric Administration (Department                        of Commerce) and the Fish and Wildlife Service (Department of the Interior)                        who each purchased 1 camera system in October 2005, and |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | Department of Interior who purchased several camera systems                        in 2001 to secure certain historic buildings in Independence Park,                        Philadelphia; and State agencies: the Washington Fish and Wildlife Service                        purchased 1 camera system in October 2005. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | **•** | United States corporations: units sold to private US                        companies for both research purposes and for implementation,                        including: |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (a) | DRS/Night Vision Systems for various purposes and purchased                        5 microserver systems between 2006 and the present, and provide engineering                        services; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | Henry Brothers for installation at JFK Airport and purchased                        3 microserver systems; |
|--------|-----|------------------------------------------------------------------------------------------------------------|

|   | (c) | IBM for loss-prevention purpose at its corporate facility in                        Raleigh, NC, purchased 3 microserver systems. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|

 

|   | **•** | Various South America and North Africa integrators: port                        security and various wireless applications including two companies in                        Cartagena, Columbia, who purchased 11 professional lens camera systems                        since 2003 for testing in a port security project. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

The Company        has significantly increased our intellectual property (IP) portfolio with the addition of        US Patent 6,975,220 to our portfolio. The technology embodied in the patent is expected to        enhance the command-and-control appliances and remote management services offered by our        products. Further, weintend to license the ‘220’ patent        directly to OEM partners, online service providers, software developers, consumer        electronics companies and other industry partners developing online services with        intelligent remote devices.The patent was acquired from HNI,        LLC (a Connecticut LLC.), a partnership that includes The Hartford, Next Generation        Ventures, LLC, and Connecticut Innovations.

 

Additionally, the Company intends to pursue numerous new domestic and        international sales opportunities to generate increased revenue, including the        following:

 

22

 

----

 

 

 

|   | **•** | DRS/Night Vision Systems has provided engineering services                        for their Perceptor camera line and it has incorporated our microservers                        and software to support trials for the military projects. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Digi-Data Corporation has signed a letter of intent to                        pursue mutually advantageous business opportunities. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | DataWorks Plus is developing a wireless inmate tracking                        system in partnership with the Company to meet the needs of the Immigration                        and Customs Enforcement (ICE). |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | EG&G has included the Company in design bids for                        wireless configurations on military contracts. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------|

|   | **•** | OLogic has included the Company in design of robotic based                        command-and-control system. |
|--------|------------|---------------------------------------------------------------------------------------------------------------|

|   | **•** | Siemens Maintenance Services, LLC, has included the Company                        in design bids for wireless configurations to commercial airports,                        municipal transportation departments and other venues. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Symbol/Motorola has made the Company a strategic sales                        partner for command-and-control and video display on mobile enterprise                        devices. |
|--------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Marketing        overtures through DRS/Night Vision, Siemans Maintenance Services, LLC, and Symbol/Motorola        have not resulted in sales to date. All of the above are examples of potential future        customers that may contribute to an increase in the Company’s revenues. Additionally,        we plan to implement an aggressive marketing and sales campaign to reach a broader market        for our products.

 

While        maintaining direct sales relations with many of its historic customers (e.g., DRS), the        Company has also focused our sales efforts on serving as an Original Equipment Manufacturer        (OEM) for strategic resellers, to serve as a research and development partner, and to        develop a network of dealers, resellers and system integrators with differing targeted        market expertise.

 

As an        Original Equipment Manufacturer (OEM), the Company has established a strategic reseller        alliance with Symbol/Motorola for the development of integrated solutions to take advantage        of its MotoMESH network architecture.

 

The Company        is offering a series of specialized “solution” bundles to be sold into the        marketplace by select distributors, including:

 

|   | **•** | AAID Security Solutions, Peachtree City, GA -- for the                        distribution of the RFID Biometric Access System. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | Remote Eyes, Laurel, MD – distribution of the CCTV                        Upgrade Kit (Limited System). |
|--------|------------|---------------------------------------------------------------------------------------------------------------|

|   | **•** | ScanSource, Greenville, SC – distributor of the CCTV                        Wireless Upgrade Kit (Full System). |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------|

|   | **•** | Susquehanna Computer Innovations, South Williamsport, PA                        – for distribution of the Integrated Command-&-Control                        Van. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

Individual dealers, resellers and system integrators have begun to offer        company-based solutions to their respective sales channels.

 

The        Company’s marketing plan provides that we will:

 

|   | **•** |  promote our products and services through our                        website; |
|--------|------------|-------------------------------------------------------------------------------------|

|   | **•** | promote our accomplishments through regular press releases                        distributed by a PR Newswire that reaches both the financial press and the                        specialized industry-sector press. We maintain an online mailing list of                        three thousand names and each release is sent to contacts on the                        list; |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | attend leading industry events, including trade conferences                        and seminars, often with a strategic partner; two recent events include                        FenceTech 2007 with AAID, to introduce its “RFID Biometric Access                        System,” and CES 2007 with OLogic, to participate at “Robotics                        TechZone” to demonstrate a video command-and-control system;                        and |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | support our strategic partners by participating in planning                        sessions and other events. |
|--------|------------|---------------------------------------------------------------------------------------------------------------|

         

         

23

 

----

 

         

Further, we        intend to:

 

|   | **•** | retain a professional investor relations / public relations                        firm to launch an aggressive re-branding awareness campaign targeted to                        both our core sales channels (e.g., security surveillance, video                        networking) as well as the investor community (e.g., market makers and                        research analysts); and |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | revise our corporate identity (e.g., logo), website and                        print materials: in line with overall corporate repositioning, we will                        revise and refresh our core branding elements to maximize their positioning                        message as a technology leader not only in video surveillance but also                        toward wireless networking; through these efforts, we will be able to                        manage sales growth as well as take advantage of new opportunities                        including customized solutions that resellers bring to us. |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Results of Operations**

 

During the        year ended December 31, 2007, we were engaged in the ongoing development and sale of        our*Internet Protocol*remote control        platform cameras, micro servers, associated software, and unique end-to-end network        solutions.

 

***Revenue***

 

Revenue for        the year ended December 31, 2007 increased to $1,209,762 from $44,402 for the year ended        December 31, 2006, an increase of 2,625%. The increase in revenue over the comparative        periods can be attributed to successful marketing efforts and a large sale to the        Department of Defense’s Immigration and Customs Enforcement during the fourth quarter        of 2007. The Company expects revenue to continue to increase over the next twelve        months.

 

Cost of        revenue for the year ended December 31, 2007 increased to $1,019,564 from $149,868 for the        year ended December 31, 2006, an increase of 580%. The increase in the cost of revenue over        the comparative periods can be primarily attributed to the hardware intensive Immigration        and Customs Enforcement sale. The Company expects the cost of revenue to grow more slowly        than sales over the next twelve months.

 

Gross        profit for the year ended December 31, 2007 was $190,198, up from a gross loss of $105,466        for the year ended December 31, 2006. This recognition of profit is due to an increase in        revenues that was greater than the corresponding increase in cost of revenues.

 

***Expenses***

 

Operating        expenses for the year ended December 31, 2007 decreased to $246,067 from $511,798 for the        year ended December 31, 2006, a decrease of 52%. The decrease in operating expenses over        the comparative periods is attributable to both a decrease in general and administrative        expenses (to $271,965

 

from        $480,988, mainly due to a decrease in personnel costs and costs attendant to financing        activities) and research and development expenses (to $6,052 from $31,210, due to limited        financial resources). The Company expects that operating expenses will increase over the        next twelve months with an increase in research and development expenses subject to the        availability of financial resources dedicated for these purposes.

 

Depreciation and amortization expenses for the years ended December 31, 2007        and 2006 were $2,074 and $4,941, respectively.

 

24

 

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***Other        Income (Expense)***

 

The losses        from other income and expenses for the year ended December 31, 2007 increased to $312,273        from $176,555 for the year ended December 31, 2006, an increase of 77%. This increase is        due to an increase in interest expense over the comparative periods (to $341,153 from        $178,524). The Company expects that losses from other income and expenses over the next        twelve months will decrease with a decrease in interest expenses.

 

***Losses***

 

Net losses        for the year ended December 31, 2007 decreased to $368,142 from $793,819 for the year ended        December 31, 2006, a decrease of 54%. The decrease in losses over the comparative periods        is primarily due to general and administrative expenses and interest expense. The Company        expects to continue to incur losses over the next twelve months.

 

***Income Tax Expense (Benefit)***

 

The Company        has an income tax benefit resulting from net operating losses to offset any future        operating profit. The net operating loss carry forwards at December 31, 2007, consisted of        approximately $5,140,000 which will begin to expire in the year 2019. The amount of net        operating loss carry forwards that can be used in any one year can be limited by        significant changes in the ownership of the Company and by the applicable tax laws which        are in effect at the time such carry forwards are utilized.

 

***Impact of Inflation***

 

The Company        believes that inflation has had a negligible effect on operations over the past three        years. We believe that we can offset inflationary increases in the cost of materials and        labor by increasing sales and improving operating efficiencies.

 

***Capital Expenditures***

 

The Company        made no significant capital expenditures on property or equipment for the years ended        December 31, 2007 or 2006.

 

***Liquidity and Capital Resources***

 

Cash flow        used in operations was $229,628 for the year ended December 31, 2007, as compared to cash        flow used in operations of $460,145 for the year ended December 31, 2006. The decrease in        cash flows usedin operating activities for the year ended December        31, 2007 can be primarily attributed to the reduction of losses incurred from operations        and an increase in accrued expenses. The Company expects to continue to use cash flow in        operating activities until such time as revenues increase.

 

Cash flows        used in investing activities was $0 for the years ended December 31, 2007 and December 31,        2006. The Company expects to use cash flow in investing activities in future        periods.

 

Cash flow        provided by financing activities was $223,931 for the year ended December 31, 2007, as        compared to $209,905 for the year ended December 31, 2006. Cash flow provided by financing        activities for the year ended December 31, 2007 is primarily attributable to the increase        on a note payable of $185,000 to Paul Higbee. The Company expects to generate additional        cash flow from financing activities in future periods.

 

 

25

 

----

 

 

The Company        had a working capital deficit of $968,186 as of December 31, 2007. We have funded our cash        needs from inception through December 31, 2007 through revenues and a series of debt and        equity transactions. Until such time as we can increase revenues, we expect that we will        require new debt or equity transactions to satisfy cash needs. If we are unable to increase        our cash flows from operating activities or obtain additional financing, we may not be able        to continue operations.

 

Since        earnings, if any, will be reinvested in operations, the Company does not expect to pay cash        dividends in the foreseeable future.

 

The Company        has no current plans for the purchase or sale of any plant or equipment.

 

The Company        has no current plans to make any changes in the number of employees.

 

***Off        Balance Sheet Arrangements***

 

As of        December 31, 2007, the Company has no significant off-balance sheet arrangements that have        or are reasonably likely to have a current or future effect on our financial condition,        changes in financial condition, revenues or expenses, results of operations, liquidity,        capital expenditures, or capital resources that is material to stockholders.

 

***Going        Concern***

 

The        Company’s auditors have expressed an opinion as to our ability to continue as a going        concern as a result of an accumulated deficit of $5,323,531 as of December 31, 2007. Our        ability to continue as a going concern is subject to the ability of the Company to obtain a        profit and/or obtaining the necessary funding from outside sources. Management’s plan        to address the Company’s ability to continue as a going concern, includes (i)        realization of increased revenues from the Company’s sales (ii) obtaining funding        from private placement sources; (iii) obtaining additional funding from the sale of the        Company’s securities; (iv) obtaining loans from shareholders as necessary, and (v)        converting outstanding debt to equity. Although management believes that it will be able to        obtain the necessary funding to allow the Company to remain a going concern through the        methods discussed above, there can be no assurances that such methods will prove        successful.

 

***Forward Looking Statements and Factors That May Affect Future Results        and Financial Condition***

 

The        statements contained in the section titled “*Results of        Operations”*and*“Description        of Business”*, with the exception of historical facts, are        forward looking statements. A safe-harbor provision may not be

 

applicable        to the forward looking statements made in this current report. Forward looking statements        reflect our current expectations and beliefs regarding our future results of operations,        performance, and achievements. These statements are subject to risks and uncertainties and        are based upon assumptions and beliefs that may or may not materialize. These statements        include, but are not limited to, statements concerning:

 

| **•** | the sufficiency of existing capital resources; |
|------------|------------------------------------------------|

| **•** | our ability to raise additional capital to fund cash                        requirements for future operations; |
|------------|-----------------------------------------------------------------------------------------------------------------|

| **•** | uncertainties involved in the rate of growth of the                        Company’s business and acceptance of products and                        services; |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | the ability of the Company to achieve and maintain an                        adequate customer base to have sufficient revenues to fund and maintain                        operations; and |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | general economic conditions. |
|------------|------------------------------|

 

26

 

----

 

 

We wish to        caution readers that our operating results are subject to various risks and uncertainties        that could cause our actual results to differ materially from those discussed or        anticipated, including the factors set forth in the section entitled        “*Risk Factors*” included        elsewhere in this report. We also wish to advise readers not to place any undue reliance on        the forward looking statements contained in this report, which reflect our beliefs and        expectations only as of the date of this report. We assume no obligation to update or        revise these forward looking statements to reflect new events or circumstances or any        changes in our beliefs or expectations, other than as required by law.

 

***Stock-Based Compensation***

 

On January        1, 2006, we adopted SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based Payment, which        addresses the accounting for stock-based payment transactions in which an enterprise        receives employee services in exchange for (a) equity instruments of the enterprise or (b)        liabilities that are based on the fair value of the enterprise’s equity instruments        or that may be settled by the issuance of such equity instruments. In January 2005, the        Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107,        which provides supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R        eliminates the ability to account for stock-based compensation transactions using the        intrinsic value method under Accounting Principles Board (APB) Opinion No. 25, Accounting        for Stock Issued to Employees, and instead generally requires that such transactions be        accounted for using a fair-value-based method. We use the Black-Scholes-Merton        (“BSM”) option-pricing model to determine the fair-value of stock-based awards        under SFAS No. 123R, consistent with that used for pro forma disclosures under SFAS No.        123, Accounting for Stock-Based Compensation. We have elected the modified prospective        transition method as permitted by SFAS No. 123R and accordingly prior periods have not been        restated to reflect the impact of SFAS No. 123R. The modified prospective transition method        requires that stock-based compensation expense be recorded for all new and unvested stock        options, restricted stock, restricted stock units, and employee stock purchase plan shares        that are ultimately expected to vest as the requisite service is rendered beginning on        January 1, 2006, the first day of our fiscal year 2006. Stock-based compensation expense        for awards granted prior to January 1, 2006 is based on the grant date fair-value as        determined under the pro forma provisions of SFAS No. 123.

 

Prior to        the adoption of SFAS No 123R, we measured compensation expense for our employee stock-based        compensation plans using the intrinsic value method prescribed by APB Opinion No. 25. We        applied the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, Accounting        for Stock-Based Compensation – Transition and Disclosure, as if the fair-value-based        method had been applied in measuring compensation expense. Under APB Opinion No. 25, when        the exercise price of our employee stock options was equal to the market price of the        underlying stock on the date of the grant, no compensation expense was        recognized.

 

We account        for equity instruments issued in exchange for the receipt of goods or services from other        than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging        Issues Task Force (“EITF”) in Issue No. 96-18. Costs are measured at the        estimated fair market value of the consideration received or the estimated fair value of        the equity instruments issued, whichever is more reliably measurable. The value of equity        instruments issued for consideration other than employee services is determined on the        earliest of a performance commitment or completion of performance by the provider of goods        or services as defined by EITF 96-18.

 

27

 

----

 

 

***Recent Accounting Pronouncements***

 

In December        2007, the FASB issued SFAS 160, “Noncontrolling interests in Consolidated Financial        Statements – an amendment of ARB No. 51”. This Statement amends ARB 51 to        establish accounting and reporting standards for the noncontrolling interest in a        subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling        interest in a subsidiary is an ownership interest in the consolidated entity that should be        reported as equity in the consolidated financial statements. This Statement is effective        for fiscal years beginning on or after December 15, 2008. Early adoption is not permitted.        Management is currently evaluating the effects of this statement, but it is not expected to        have any impact on the Company’s financial statements.

 

In January        2007, we adopted FIN 48. FIN 48 clarifies the accounting for uncertain taxes        recognized in an enterprise's financial statements in accordance with SFAS No. 109,        "*Accounting for Income Taxes."*FIN 48 prescribes a recognition threshold and measurement of a tax        position taken or expected to be taken in an enterprise's tax return. In addition,        FIN 48 provides guidance on derecognition, classification, interest and penalties,        accounting in interim periods and disclosure related to uncertain income tax        positions.

 

In February        2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and        Financial Liabilities.” SFAS 159 creates a fair value option allowing an entity to        irrevocably elect fair value as the initial and subsequent measurement attribute for        certain financial assets and financial liabilities, with changes in fair value recognized        in earnings as they occur. SFAS 159 also requires an entity to report those financial        assets and financial liabilities measured at fair value in a manner that separates those        reported fair values from the carrying amounts of assets and liabilities measured using        another measurement attribute on the face of the statement of financial position. Lastly,        SFAS 159 requires an entity to provide information that would allow users to understand the        effect on earnings of changes in the fair value on those instruments selected for the fair        value election. SFAS 159 is effective for fiscal years beginning after November 15, 2007        with early adoption permitted. The Company is continuing to evaluate SFAS 159 and to assess        the impact on our results of operations and financial condition if an election is made to        adopt the standard.

         

| **ITEM 7A.** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET                        RISK** |
|--------------|---------------------------------------------------------------------------------------|

         

Not required.

         

| **ITEM 8.** | **FINANCIAL STATEMENTS AND SUPPLEMENTARY                        DATA** |
|-------------|------------------------------------------------------------------------|

 

Our        audited financial statements for the years ended December 31, 2007 and 2006 are attached        hereto as F-1 through F-16.

 

28

 

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COMCAM        INTERNATIONAL, INC. 

(A        Development Stage Company)

INDEX        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

|   | Page |
|--------|------|

 

|   | Report of Independent Registered Public Accounting                        Firm | F-2 |
|--------|--------------------------------------------------------------------------------|-----|

 

|   | Report of Independent Registered Public Accounting                        Firm | F-3 |
|--------|--------------------------------------------------------------------------------|-----|

 

|   | Balance Sheets | F-4 |
|--------|----------------|-----|

 

|   | Statements of Operations | F-5 |
|--------|--------------------------|-----|

 

|   | Statements of Stockholders’ Equity                        (Deficit) | F-6 |
|--------|---------------------------------------------------------------------------|-----|

 

|   | Statements of Cash Flows | F-7 |
|--------|--------------------------|-----|

 

|   | Notes to Financial Statements | F-8 |
|--------|-------------------------------|-----|

 

                                                                                                                                                                   

 

 

 

 

 

 

 

 

 

 

 

 

F-1

 

----

 

REPORT OF        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of        Directors

ComCam        International, Inc.

West        Chester, PA

 

We have        audited the accompanying balance sheet of ComCam International,        Inc.[*a development stage company*] as of        December 31, 2007, and the related statements of operations, stockholders' equity (deficit)        and cash flows for the year ended December 31, 2007 and for the period from inception on        January 1, 1999 through December 31, 2007. These financial statements are the        responsibility of the Company's management. Our responsibility is to express an opinion on        these financial statements based on our audits. The financial statements of ComCam        International, Inc. for the period from January 1, 1999 through December 31, 2006 were        audited by other auditors whose report expressed an unqualified opinion on those statements        and included an explanatory paragraph expressing concern about the Company’s ability        to continue as a going concern. The financial statements as of December 31, 2006 reflect an        accumulated deficit of $4,955,389. Our opinion on the statements of operations,        stockholders' equity (deficit) and cash flows from inception of the development stage on        January 1, 1999 through December 31, 2007, insofar as it relates to amounts for prior        periods through December 31, 2006, is based solely on the report of other        auditors.

 

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 financial statements are free of material        misstatement. The Company is not required to have, nor were we engaged to perform, an audit        of its internal control over financial reporting. Our audit included consideration of        internal control over financial reporting as a basis for designing audit procedures that        are appropriate in the circumstances, but not for the purpose of expressing an opinion on        the effectiveness of the Company’s internal control over financial reporting.        Accordingly, we express no such opinion. An audit includes examining, on a test basis,        evidence supporting the amounts and disclosures in the financial statements. An audit also        includes assessing the accounting principles used and significant estimates made by        management, as well as evaluating the overall financial statement presentation. We believe        that our audits provide a reasonable basis for our opinion.

 

In our        opinion, based on our audit and the report of other auditors, the financial statements        referred to above present fairly, in all material respects, the financial position of        ComCam International, Inc. as of December 31, 2007, and the results of its operations and        its cash flows for the year ended December 31, 2007 and for the period from inception on        January 1, 1999 through December 31, 2007, in conformity with accounting principles        generally accepted in the United States of America.

 

The        accompanying financial statements have been prepared assuming that ComCam International,        Inc. will continue as a going concern. As discussed in Note 2 to the financial statements,        ComCam International, Inc. has incurred losses since its inception and has not yet        established profitable operations. These factors raise substantial doubt about the ability        of the Company to continue as a going concern. Management’s plans in regards to these        matters are also described in Note 2. The financial statements do not include any        adjustments that might result from the outcome of these uncertainties.

 

/s/        PRITCHETT, SILER & HARDY, P.C.

 

PRITCHETT,        SILER & HARDY, P.C.

April 14,        2008

Salt Lake        City, Utah

 

 

F-2

 

----

 

REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the        Stockholders’ and

Board of        Directors of

Comcam        International, Inc.

 

We have        audited the accompanying balance sheet of Comcam International, Inc. (a development stage        company), as of December 31, 2006, and the related statements of operations,        stockholders’ equity (deficit), and cash flows for the year ended December 31, 2006        and cumulative amounts through December 31, 2006. These financial statements are the        responsibility of the Company’s management. Our responsibility is to express an        opinion on these financial statements based on our audit.

 

We        conducted our audit in accordance with 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 financial statements are free of material        misstatement. The Company is not required to have, nor were we engaged to perform, an audit        of its internal control over financial reporting. Our audit included consideration of        internal control over financial reporting as a basis for designing audit procedures that        are appropriate in the circumstances, but not for the purpose of expressing an opinion on        the effectiveness of the Company’s internal control over financial reporting.        Accordingly we express no such opinion. An audit includes examining, on a test basis,        evidence supporting the amounts and disclosures in the financial statements, assessing the        accounting principles used and significant estimates made by management, as well as        evaluating the overall financial statement presentation. We believe that our audit provides        a reasonable basis for our opinion.

 

In our        opinion, the 2006 financial statements referred to above present fairly, in all material        respects, the financial position of ComCam International, Inc. (a development stage        company), as of December 31, 2006, and the results of its operations and its cash flows for        the year ended December 31, 2006, in conformity with accounting principles generally        accepted in the United States of America.

 

The        accompanying 2006 financial statements have been prepared assuming that the Company will        continue as a going concern. As discussed in Note 2 to the financial statements, the        Company’s revenue generating activities are not in place and the Company has incurred        losses since inception. These conditions raise substantial doubt about its ability to        continue as a going concern. Management’s plans regarding those matters also are        described in Note 2. The financial statements do not include any adjustments that might        result from the outcome of this uncertainty.

 

/s/ JONES        SIMKINS, P.C.

 

JONES        SIMKINS, P.C.

Logan,        Utah

April 2,        2007

 

 

 

 

 

F-3

 

----

 

| COMCAM INTERNATIONAL, INC.                                                 |
|----------------------------------------------------------------------------|
| (A Development Stage Company)                                              |
| BALANCE SHEETS                                                             |
| December 31, 2007 and 2006                                                 |
|                                                                       |   |   |   |   |
| ASSETS                                                                     |   | 2007 |   | 2006 |
|                                                                       |   |   |   |   |
| Current assets:                                                            |   |   |   |   |
| Cash and cash equivalents                                                  | $ | - |   | 5,697 |
| Accounts receivable, net                                                   |   | 192,541 |   | 6,861 |
| Inventories                                                                |   | 66,278 |   | 78,048 |
|                                                                       |   |   |   |   |
| Total current assets                                                       |   | 258,819 |   | 90,606 |
|                                                                       |   |   |   |   |
| Property and equipment, net                                                |   | 127,179 |   | 10,529 |
| Other assets                                                               |   | 2,106 |   | 4,106 |
|                                                                       |   |   |   |   |
| Total assets                                                               | $ | 388,104 |   | 105,241 |
|                                                                       |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIT                                      |   |   |   |   |
|                                                                       |   |   |   |   |
| Current liabilities:                                                       |   |   |   |   |
| Checks in excess of cash                                                   | $ | 38,931 |   | - |
| Accounts payable                                                           |   | 316,860 |   | 318,538 |
| Accrued expenses                                                           |   | 93,805 |   | 147,187 |
| Embedded derivative liability                                              |   | 69,976 |   | - |
| Advances payable to ComCam, Inc.                                           |   | - |   | 1,448,036 |
| Notes payable                                                              |   | 707,433 |   | 1,335,000 |
|                                                                       |   |   |   |   |
| Total current liabilities                                                  |   | 1,227,005 |   | 3,248,761 |
|                                                                       |   |   |   |   |
| Commitments and contingencies                                              |   |   |   |   |
|                                                                       |   |   |   |   |
| Stockholders' deficit:                                                     |   |   |   |   |
| Preferred stock, $.0001 par value; 2,000,000                               |   |   |   |   |
| shares authorized, no shares issued and                        outstanding |   | - |   | - |
| Common stock, $.0001 par value; 100,000,000                                |   |   |   |   |
| shares authorized, 3,408,354 and 2,010,795 shares                          |   |   |   |   |
| issued and outstanding, respectively                                       |   | 341 |   | 201 |
| Additional paid-in capital                                                 |   | 4,484,289 |   | 1,811,668 |
| Deficit accumulated during the development stage                           |   | (5,323,531) |   | (4,955,389) |
|                                                                       |   |   |   |   |
| Total stockholder's deficit                                                |   | (838,901) |   | (3,143,520) |
|                                                                       |   |   |   |   |
| Total liabilities and stockholders' deficit                                | $ | 388,104 |   | 105,241 |

 

 

 

 

The        accompanying notes are an integral part of these financial statements.

 

F-4

 

----

 

 

| COMCAM INTERNATIONAL, INC.                    |
|-----------------------------------------------|
| (A Development Stage Company)                 |
| STATEMENTS OF OPERATIONS                      |
| Years Ended December 31, 2007 and 2006        |
|                                          |   |   |   |   |   |   |
|                                          |   |   |   |   |   | Cumulative |
|                                          |   | 2007 |   | 2006 |   | Amounts |
|                                          |   |   |   |   |   |   |
| Revenues, net                                 | $ | 1,209,762 |   | 44,402 |   | 1,818,992 |
| Cost of revenues                              |   | 1,019,564 |   | 149,868 |   | 1,271,313 |
|                                          |   |   |   |   |   |   |
| Gross profit (loss)                           |   | 190,198 |   | (105,466) |   | 547,679 |
|                                          |   |   |   |   |   |   |
| Operating expenses:                           |   |   |   |   |   |   |
| General and administrative expenses           |   | 271,965 |   | 480,988 |   | 2,997,517 |
| Research and development expenses             |   | 6,052 |   | 31,210 |   | 2,394,872 |
| Gain on cancellation of debt                  |   | (31,950) |   | (400) |   | (131,355) |
|                                          |   |   |   |   |   |   |
|                                          |   | 246,067 |   | 511,798 |   | 5,261,034 |
|                                          |   |   |   |   |   |   |
| Loss from operations                          |   | (55,869) |   | (617,264) |   | (4,713,355) |
|                                          |   |   |   |   |   |   |
| Other income (expense):                       |   |   |   |   |   |   |
| Interest income                               |   | 883 |   | 1,969 |   | 14,187 |
| Interest expense                              |   | (341,153) |   | (178,524) |   | (652,360) |
| Gain on embedded derivative liability         |   | 27,997 |   | - |   | 27,997 |
|                                          |   |   |   |   |   |   |
|                                          |   | (312,273) |   | (176,555) |   | (610,176) |
|                                          |   |   |   |   |   |   |
| Loss before provision for income taxes        |   | (368,142) |   | (793,819) |   | (5,323,531) |
|                                          |   |   |   |   |   |   |
| Provision for income taxes                    |   | - |   | - |   | - |
|                                          |   |   |   |   |   |   |
| Net loss                                      | $ | (368,142) |   | (793,819) |   | (5,323,531) |
|                                          |   |   |   |   |   |   |
|                                          |   |   |   |   |   |   |
| Net loss per common share - basic and diluted | $ | (0.18) |   | (0.39) |   |   |
|                                          |   |   |   |   |   |   |
| Weighted average common and common            |   |   |   |   |   |   |
| equivalent shares                             |   | 2,011,000 |   | 2,011,000 |   |   |

 

 

 

 

 

The        accompanying notes are an integral part of these financial statements.

 

F-5

 

----

 

 

| COMCAM INTERNATIONAL INC.                                                                   |
|---------------------------------------------------------------------------------------------|
| (A Development Stage Company)                                                               |
| STATEMENTS OF STOCKHOLDERS' EQUITY                        (DEFICIT)                         |
| Period from January 1, 1999 (Date of Inception) to                        December 31, 2007 |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   | Deficit |   |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   | Total |
|                                                                                        |   |   |   |   |   |   |   |   |   | Additional |   | During the |   | Stockholders' |
|                                                                                        |   | Preferred Stock |   | Common Stock |   | Paid-in |   | Development |   | Equity |
|                                                                                        |   | Shares |   | Amount |   | Shares |   | Amount |   | Capital |   | Stage |   | (Deficit) |
| Balance at January 1, 1999                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (date of inception)                                                                         |   | - | $ | - |   | - | $ | - | $ | - | $ | - | $ | - |
| Issuance of common stock for cash                                                           |   | - |   | - |   | 1,568,755 |   | 157 |   | 784,839 |   | - |   | 784,996 |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (787,169) |   | (787,169) |
| Balance at December 31, 1999                                                                |   | - |   | - |   | 1,568,755 |   | 157 |   | 784,839 |   | (787,169) |   | (2,173) |
| Issuance of common stock for:                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                        |   | - |   | - |   | 373,648 |   | 37 |   | 734,050 |   | - |   | 734,087 |
| Services                                                                                    |   | - |   | - |   | 47,749 |   | 5 |   | 137,036 |   | - |   | 137,041 |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (802,538) |   | (802,538) |
| Balance at December 31, 2000                                                                |   | - |   | - |   | 1,990,152 |   | 199 |   | 1,655,925 |   | (1,589,707) |   | 66,417 |
| Issuance of common stock for cash                                                           |   | - |   | - |   | 20,643 |   | 2 |   | 25,438 |   | - |   | 25,440 |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (229,772) |   | (229,772) |
| Balance at December 31, 2001                                                                |   | - |   | - |   | 2,010,795 |   | 201 |   | 1,681,363 |   | (1,819,479) |   | (137,915) |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (506,403) |   | (506,403) |
| Balance at December 31, 2002                                                                |   | - |   | - |   | 2,010,795 |   | 201 |   | 1,681,363 |   | (2,325,882) |   | (644,318) |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (440,289) |   | (440,289) |
| Balance at December 31, 2003                                                                |   | - |   | - |   | 2,010,795 |   | 201 |   | 1,681,363 |   | (2,766,171) |   | (1,084,607) |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (571,182) |   | (571,182) |
| Balance at December 31, 2004                                                                |   | - |   | - |   | 2,010,795 |   | 201 |   | 1,681,363 |   | (3,337,353) |   | (1,655,789) |
| Issuance of common stock warrants                                                           |   | - |   | - |   | - |   | - |   | 130,305 |   | - |   | 130,305 |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (824,217) |   | (824,217) |
| Balance at December 31, 2005                                                                |   | - |   | - |   | 2,010,795 |   | 201 |   | 1,811,668 |   | (4,161,570) |   | (2,349,701) |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (793,819) |   | (793,819) |
| Balance at December 31, 2006                                                                |   | - |   | - |   | 2,010,795 |   | 201 |   | 1,811,668 |   | (4,955,389) |   | (3,143,520) |
| Reduction in shares due to spin-off                                                         |   | - |   | - |   | (10,835) |   | (1) |   | 1 |   | - |   | - |
| Transfer of assets and liabilities from                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ComCam, Inc.                                                                                |   | - |   | - |   | - |   | - |   | 1,196,410 |   | - |   | 1,196,410 |
| Issuance of common stock for note payable                                                   |   | - |   | - |   | 1,408,394 |   | 141 |   | 1,476,210 |   | - |   | 1,476,351 |
| Net loss                                                                                    |   | - |   | - |   | - |   | - |   | - |   | (368,142) |   | (368,142) |
| Balance at December 31, 2007                                                                |   | - | $ | - |   | 3,408,354 | $ | 341 | $ | 4,484,289 | $ | (5,323,531) | $ | (838,901) |

 

The        accompanying notes are an integral part of these financial statements.

 

F-6

 

----

 

 

| COMCAM INTERNATIONAL, INC.                  |
|---------------------------------------------|
| (A Development Stage Company)               |
| STATEMENTS OF CASH FLOWS                    |
| Years Ended December 31, 2007 and 2006      |
|                                        |   |   |   |   |   |   |
|                                        |   |   |   |   |   | Cumulative |
|                                        |   | 2007 |   | 2006 |   | Amounts |
| Cash Flows from operating activities:       |   |   |   |   |   |   |
| Net loss                                    | $ | (368,142) |   | (793,819) |   | (5,323,531) |
| Adjustments to reconcile net loss to net    |   |   |   |   |   |   |
| cash used in operating activities:          |   |   |   |   |   |   |
| Depreciation and amortization               |   | 2,074 |   | 4,941 |   | 51,162 |
| Accretion - debenture interest expense      |   | 56,540 |   | - |   | 56,540 |
| Stock and warrant compensation expense      |   | - |   | 78,811 |   | 267,346 |
| Gain on embedded derivative                 |   | (27,997) |   | - |   | (27,997) |
| Gain on cancellation of accounts payable    |   | (31,950) |   | (400) |   | (131,355) |
| Provision for losses on accounts receivable |   | 5,000 |   | 7,000 |   | 12,000 |
| (Increase) decrease in:                     |   |   |   |   |   |   |
| Accounts receivable                         |   | (190,680) |   | 20,290 |   | (204,541) |
| Inventories                                 |   | 11,770 |   | (22,755) |   | (66,278) |
| Other assets                                |   | 2,000 |   | - |   | (2,106) |
| Increase (decrease) in:                     |   |   |   |   |   |   |
| Accounts payable                            |   | 30,272 |   | 159,161 |   | 710,088 |
| Accrued expenses                            |   | 281,485 |   | 86,626 |   | 428,672 |
|                                        |   |   |   |   |   |   |
| Net cash used in operating activities       |   | (229,628) |   | (460,145) |   | (4,230,000) |
|                                        |   |   |   |   |   |   |
| Cash flows from investing activities:       |   |   |   |   |   |   |
| Purchase of property and equipment          |   | - |   | - |   | (59,617) |
|                                        |   |   |   |   |   |   |
| Net cash used in investing activities       |   | - |   | - |   | (59,617) |
|                                        |   |   |   |   |   |   |
| Cash flows from financing activities:       |   |   |   |   |   |   |
| Checks in excess of cash                    |   | 38,931 |   | - |   | 38,931 |
| Increase in notes payable                   |   | 185,000 |   | 210,000 |   | 1,520,000 |
| Proceeds from issuance of common stock      |   | - |   | - |   | 1,544,523 |
| Change in advances from ComCam, Inc.        |   | - |   | (95) |   | 1,186,163 |
|                                        |   |   |   |   |   |   |
| Net cash provided by financing activities   |   | 223,931 |   | 209,905 |   | 4,289,617 |
|                                        |   |   |   |   |   |   |
| Net decrease in cash                        |   | (5,697) |   | (250,240) |   | - |
|                                        |   |   |   |   |   |   |
| Cash, beginning of period                   |   | 5,697 |   | 255,937 |   | - |
|                                        |   |   |   |   |   |   |
| Cash, end of period                         | $ | - |   | 5,697 |   | - |

 

The        accompanying notes are an integral part of these financial statements.

 

F-7

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

Note 1        – Organization and Summary of Significant Accounting Policies

 

Organization

 

Comcam        International, Inc. (the Company) was organized under the laws of the state of Delaware on        September 19, 1998 and had no activity until January 1, 1999 (date of inception). The        Company was a wholly owned subsidiary of ComCam, Inc. until December 28, 2007 when the        Company was spun-off as a dividend to the shareholders of ComCam, Inc. The Company’s        operations consist primarily of the research and development of advanced compact video        systems that utilize built-in digital compression technology. Further, the Company is        considered a development stage company as defined in SFAS No. 7. Sources of financing for        the development stage activities have been primarily through equity and debt.

 

Cash and        Cash Equivalents

 

For        purposes of the statement of cash flows, the Company considers all highly liquid        investments with a maturity of three months or less to be cash equivalents.

 

Accounts        Receivable

 

Accounts        receivable are amounts due on product sales and are unsecured. Accounts receivable are        carried at their estimated collectible amounts. Credit is generally extended on a        short-term basis; thus accounts receivable do not bear interest although a finance charge        may be applied to such receivables that are more than thirty days past due. Accounts        receivable are periodically evaluated for collectiblity based on past credit history with        clients. Provisions for losses on accounts receivable are determined on the basis of loss        experience, known and inherent risk in the account balance and current economic        conditions.

 

Inventories

 

The Company        values its inventories at the lower of cost or market, determined on the first-in first-out        (FIFO) method.

 

Property        and Equipment 

 

Property        and equipment are stated at cost less accumulated depreciation. Maintenance and repairs are        charged to expense as incurred. Costs of major renewals or betterments are capitalized over        the remaining useful lives of the related assets. Depreciation is computed by using the        straight-line method. Equipment is depreciated over three to five years and furniture and        fixtures are depreciated over seven years. The cost of property disposed of and related        accumulated depreciation is removed from the accounts at the time of disposal, and gain or        loss is reflected in operations. The cost of definitive-life patents is amortized over the        remaining life of thirteen years.

 

 

 

 

 

F-8

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note 1        – Organization and Summary of Significant Accounting Policies(continued)

 

Revenue        Recognition

 

Currently        the Company has only generated revenue from two sources of revenue; 1) product sales and 2)        consulting services. Each of these are sold and delivered separately to the        customer.

 

Revenue        from product sales is recognized at the time the product is shipped and invoiced and        collectibility is reasonably assured. The Company believes that revenue should be        recognized at the time of shipment as title passes to the customer at the time of        shipment.

 

Revenues        from consulting services are recognized when a consulting agreement is executed that        establishes the amount and scope of service to be provided, the consulting services have        been performed and the Company has no additional rescission, refund or customer        satisfaction requirements, and collectibility of the amount billed is reasonably        assured.

 

As the        Company continues to grow, sales will be evaluated to determine if a product sale or        consulting agreement contains multiple deliverables. If sales were to contain multiple        deliverables they would be reviewed for compliance with the provisions of EITF 00-21, which        would require the consideration of whether or not a separate unit of accounting existed for        purposes of determining revenue recognition. The individual sales would be considered a        separate unit of accounting if all of the following criteria are met:

 

|   | a. | The delivered item(s) has value to the customer on a stand                        alone basis; |
|--------|----|------------------------------------------------------------------------------------------------|

         

|   | b. | There is objective and reliable evidence of the fair value                        of the undelivered item(s); and |
|--------|----|-------------------------------------------------------------------------------------------------------------------|

 

|   | c. | If the arrangement includes a general right of return                        relative to the delivered item, delivery or performance of the undelivered                        item(s) is considered probable and substantially in the control of the                        Company. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Income        Taxes

 

Deferred        income taxes are provided in amounts sufficient to give effect to temporary differences        between financial and tax reporting, principally related to net operating loss        carryforwards.

 

In        June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation        No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of        FASB Statement No. 109.” This statement clarifies the accounting for uncertainty        in income tax positions. The Company has filed income tax returns in the U.S. federal        jurisdiction and in certain states.

 

The Company        adopted the provisions of FIN 48 on January 1, 2007. The Company did not make any        adjustment to opening retained earnings as a result of the implementation. The Company        recognizes interest accrued related to unrecognized tax benefits along with penalties in        operating expenses. During the year ended December 31, 2007 and 2006, the Company did not        recognize any interest and penalties relating to income taxes. The Company did not have any        accrual for the payment of interest and penalties at December 31, 2007.

 

F-9

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note        1 – Organization and Summary of Significant Accounting Policies(continued)

 

Earnings        (Loss) Per Share

 

The        computation of basic earnings (loss) per common share is based on the weighted average        number of shares outstanding during the period.

 

The        computation of diluted earnings (loss) per common share is based on the weighted average        number of shares outstanding during the period plus the common stock equivalents which        would arise from the exercise of stock options and warrants outstanding using the treasury        stock method and the average market price per share during the period. Common stock        equivalents are not included in the diluted earnings per share calculation when their        effect is antidilutive.

 

Concentrations

 

The Company        maintains its cash in bank deposit accounts, which, at times, may exceed federally insured        limits. The Company has not experienced any losses in such accounts and believes it is not        exposed to any significant credit risk on cash and cash equivalents.

 

During 2007        the Company’s revenues were primarily from sales to a single customer which        approximated 95% of total sales. In addition, the products sold during 2007 were purchased        primarily from a single vendor.

 

Use        of Estimates in the Preparation of Financial Statements

 

The        preparation of financial statements in conformity with generally accepted accounting        principles requires management to make estimates and assumptions that affect the reported        amounts of assets and liabilities and disclosure of contingent assets and liabilities at        the date of the financial statements and the reported amounts of revenues and expenses        during the reporting period. Actual results could differ from those estimates.

 

Note        2 – Going Concern

 

As of        December 31, 2007, the Company has negative working capital, stockholders’ deficit,        and the Company has incurred losses since inception. These factors raise substantial doubt        about the Company’s ability to continue as a going concern. Management intends to        seek additional equity and debt financing to expand marketing efforts and product        development. There can be no assurance that such funds will be available to the Company nor        that the marketing and product development efforts will be successful.

 

Note 3        – Accounts Receivable

         

Accounts        receivable consists of the following:

|   | 2007 | 2006 |
|--------|------|------|

|   | Trade receivables | $ | 204,541 | 13,861 |
|--------|-------------------|---|---------|--------|

|   | Allowance for doubtful accounts | (12,000) | (7,000) |
|--------|---------------------------------|----------|---------|

 

|   | $ | 192,541 | 6,861 |
|--------|---|---------|-------|

 

F-10

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note 4        – Inventories

 

Inventories        consist of the following:

|   | 2007 | 2006 |
|--------|------|------|

 

|   | Raw Materials | $ | 57,555 | 63,779 |
|--------|---------------|---|--------|--------|

|   | Finished Goods | 7,455 | 9,277 |
|--------|----------------|-------|-------|

|   | Work in Process | 6,268 | 4,992 |
|--------|-----------------|-------|-------|

|   | Inventory reserve | (5,000) | - |
|--------|-------------------|---------|---|

 

|   | $ | 66,278 | 78,048 |
|--------|---|--------|--------|

 

Note 5        – Property and Equipment

 

Property        and equipment consists of the following:

|   | 2007 | 2006 |
|--------|------|------|

 

|   | Patent | $ | 100,000 | - |
|--------|--------|---|---------|---|

|   | Equipment | 67,237 | 35,507 |
|--------|-----------|--------|--------|

|   | Trademark | 15,000 | - |
|--------|-----------|--------|---|

|   | Furniture and fixtures | 2,380 | 24,110 |
|--------|------------------------|-------|--------|

 

|   | 184,617 | 59,617 |
|--------|---------|--------|

|   | Less accumulated depreciation | (57,438) | (49,088) |
|--------|-------------------------------|----------|----------|

 

|   | $ | 127,179 | 10,529 |
|--------|---|---------|--------|

 

 

 

 

 

 

 

 

 

 

 

 

F-11

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note 6        – Notes Payable

 

Notes        payable consist of the following:

|   | 2007 | 2006 |
|--------|------|------|

|   | Notes payable to Paul Higbee, bearing interest |
|--------|------------------------------------------------|

|   | at 8%, due on demand, secured by the intellectual |
|--------|---------------------------------------------------|

|   | property of the Company. | $ | 395,000 | 210,000 |
|--------|--------------------------|---|---------|---------|

 

|   | Unsecured note payable to Global Megatrend, |
|--------|---------------------------------------------|

|   | bearing interest at 7.5% and due on demand. |
|--------|---------------------------------------------|

|   | The note may be converted to common shares of |
|--------|-----------------------------------------------|

|   | the Company, at the option of the holder, based |
|--------|-------------------------------------------------|

|   | on certain terms related to outstanding shares |
|--------|------------------------------------------------|

|   | and per share prices. The Company is in default |
|--------|-------------------------------------------------|

|   | of the agreement. | 176,568 | - |
|--------|-------------------|---------|---|

 

|   | Convertible debenture to HNI, LLC of $125,000, |
|--------|------------------------------------------------|

|   | bearing interest at 7%, due on February 14, 2009, |
|--------|---------------------------------------------------|

|   | net of embedded derivative discount of $14,135 |
|--------|------------------------------------------------|

|   | (see Note 7). | 110,865 | - |
|--------|---------------|---------|---|

 

|   | Convertible unsecured note payable to Robert |
|--------|----------------------------------------------|

|   | Emmet, bearing interest at 6%, and due on |
|--------|-------------------------------------------|

|   | demand. The note may be converted into |
|--------|----------------------------------------|

|   | common shares of the Company at $.35 per |
|--------|------------------------------------------|

|   | share and contains a provision which allows |
|--------|---------------------------------------------|

|   | the Company to call for the conversion at                        anytime. | 25,000 | 25,000 |
|--------|---------------------------------------------------------------------------|--------|--------|

 

|   | Convertible unsecured note payable to ACC |
|--------|-------------------------------------------|

|   | Investors, LLC, bearing interest at 8%, due on |
|--------|------------------------------------------------|

|   | demand. During 2007 the note was converted |
|--------|--------------------------------------------|

|   | to common shares of the Company. | - | 1,100,000 |
|--------|----------------------------------|---|-----------|

 

|   | $ | 707,433 | 1,335,000 |
|--------|---|---------|-----------|

 

 

 

 

 

 

 

 

F-12

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note 7        – Convertible Debenture and Embedded Derivative to HNI, LLC

 

During the        year ended December 31, 2007, a convertible debenture (the Debenture) was transferred to        the Company from ComCam, Inc., of which the Company was a wholly-owned subsidiary. Details        related to the convertible debenture are discussed below as they were when initiated by        ComCam, Inc.

 

The        Debenture, as amended, accrues interest at 7% per annum, is due on February 14, 2009, and        is convertible into a variable number of shares on a pari pasu basis with ACC Investors        LLC. At December 31, 2007 the Debenture was convertible, at the option of the holder, into        approximately 147,551 shares of either the Company’s or ComCam, Inc.’s common        stock.

 

The Company        analyzed the Debenture based on the provisions of EITF 00-19 and determined that the        conversion option of the Debenture qualifies as an embedded derivative. Information related        to the recognition of the embedded derivative is as follows:

 

Embedded        Derivative

 

The fair        value of the embedded derivative was determined to be $113,080 and was recorded as an        embedded derivative liability. The embedded derivative is revalued at the end of each        reporting period and any resulting gain or loss is recognized as a current period charge to        the statement of operations. Upon issuance the fair value was calculated using the        Black-Scholes option pricing model with the following factors, assumptions and        methodologies:

 

|   | **•** | The fair value of the Company’s common stock was                        calculated to be $.017 per share. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------|

|   | **•** | A volatility of 149% was calculated by using the                        Company’s closing stock prices since May 2006. |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | The exercise price was $.0119. This amount was determined                        based on 30% off the most recent closing bid price immediately preceding                        the issuance date. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | The estimated life was determined to be 1 year, which is                        equal to the contractual life of the embedded derivative. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | **•** | The risk free interest rate was determined to be 5.06% based                        on the 1-year treasury rate. |
|--------|------------|------------------------------------------------------------------------------------------------------------------|

 

Since the        transfer of the convertible debenture, the Company has recorded accretion expense related        to the embedded derivative discount of $56,540.

 

At December        31, 2007, the embedded derivative liability consists of the following:

 

|   | Fair value at inception | $ | 113,080 |
|--------|-------------------------|---|---------|

|   | Less gain | (43,104) |
|--------|-----------|----------|

 

|   | $ | 69,976 |
|--------|---|--------|

 

 

 

F-13

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note 8        – Operating Leases

 

The Company        leases its office building on a month-to-month basis. Rental expense related to this        operating lease for the years ended December 31, 2007 and 2006 and cumulative amounts since        inception was approximately $50,000, $50,000 and $395,000, respectively.

 

Note 9        – Gain on cancellation of Debt

 

During the        year ended December 31, 2007, the Company recognized a gain from the cancellation of        amounts owed to three individuals for costs incurred for consulting services of        $31,950.

 

During the        year ended December 31, 2006, the Company recognized a gain from the cancellation of an        amount owed to an individual for costs incurred for research and development contracted        labor costs of $400.

 

Note        10 – Related Party Transactions

 

The Company        has provided services and product to a company owned by a director and shareholder of the        Company. Revenue related to these services for the years ended December 31, 2007 and 2006        and cumulative amounts since inception were approximately $0, $0 and $183,000,        respectively.

 

Note        11 – Income Taxes

 

The        difference between income taxes at statutory rates and the amount presented in the        financial statements is a result of the following:

|   | Years Ended |
|--------|-------------|

|   | December 31, | Cumulative |
|--------|--------------|------------|

|   | 2007 | 2006 | Amounts |
|--------|------|------|---------|

 

|   | Income tax benefit at statutory rate | $ | (106,000) | (266,000) | (1,748,000) |
|--------|--------------------------------------|---|-----------|-----------|-------------|

|   | Change in valuation allowance | 106,000 | 266,000 | 1,748,000 |
|--------|-------------------------------|---------|---------|-----------|

 

|   | $ | - | - | - |
|--------|---|---|---|---|

 

Deferred        tax assets are as follows:

|   | 2007 | 2006 |
|--------|------|------|

 

|   | Net operating loss carryforwards | $ | 1,748,000 | 1,642,000 |
|--------|----------------------------------|---|-----------|-----------|

|   | Valuation allowance | (1,748,000                        ) | (1,642,000                        ) |
|--------|---------------------|-------------------------------------|-------------------------------------|

 

|   | $ | - | - |
|--------|---|---|---|

 

The Company        has net operating loss carryforwards of approximately $5,140,000, which begin to expire in        the year 2019. The amount of net operating loss carryforwards that can be used in any one        year will be limited by significant changes in the ownership of the Company and by the        applicable tax laws which are in effect at the time such carryforwards can be        utilized.

 

F-14

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note        12 – Supplemental Cash Flow Information

 

Actual        amounts paid for interest and income taxes are as follows:

 

|   | 2007 | 2006 |
|--------|------|------|

 

|   | Interest | $ | - | 2,000 |
|--------|----------|---|---|-------|

|   | Income taxes | $ | - | - |
|--------|--------------|---|---|---|

 

During the        year ended December 31, 2007:

 

|   | **•** | The Company issued 1,408,394 shares of common stock in                        exchange for a note payable of $1,100,000 and accrued interest of                        $376,351. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | **•** | Certain assets and liabilities were transferred to the                        Company from ComCam, Inc. as follows: |
|--------|------------|---------------------------------------------------------------------------------------------------------------------|

 

|   | Property and equipment, net | $ | 118,724 |
|--------|-----------------------------|---|---------|

|   | Notes payable, net | (230,893) |
|--------|--------------------|-----------|

|   | Embedded derivative liability | (97,973) |
|--------|-------------------------------|----------|

|   | Accrued interest | (41,484) |
|--------|------------------|----------|

|   | Advances payable to ComCam, Inc. | 1,448,036 |
|--------|----------------------------------|-----------|

         

|   | 1,196,410 |
|--------|-----------|

|   | Capital contribution from ComCam, Inc. | (1,196,410                        ) |
|--------|----------------------------------------|-------------------------------------|

         

|   | $ | - |
|--------|---|---|

 

Note        13 – Preferred Stock

 

The        Company’s preferred stock may have such rights, preferences and designations and may        be issued in such series as determined by the Board of Directors. No shares were issued and        outstanding at December 31, 2007.

 

Note 14        – Reverse Common Stock Split

 

Effective        November 7, 2007, the Company approved a 1-for-2.87 reverse common stock split. All common        share amounts and per share information have been retroactively adjusted to reflect this        reverse common stock split in the accompanying financial statements.

 

Note        15 – Fair Value of Financial Instruments

 

The        Company’s financial instruments consist of cash, accounts receivable, accounts        payable and notes payable. The carrying amount of these items approximates fair value        because of their short-term nature and the notes payable bear interest at the market        interest rate.

 

 

F-15

 

----

 

COMCAM        INTERNATIONAL, INC.

(A        Development Stage Company)

NOTES        TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

 

 

Note        16 – Recent Accounting Pronouncements

 

In        September 2006, the FASB issued FASB Statement No. 157,*Fair Value Measurements*(“FAS        157”). FAS 157 establishes a single authoritative definition of fair value, sets out        a framework for measuring fair value, and expands on required disclosures about fair value        measurement. FAS 157 is effective for the Company on January 1, 2008 and will be applied        prospectively. The provisions of FAS 157 are not expected to have a material impact on the        Company’s financial statements.

 

In        September 2006, the FASB issued FASB Statement No. 158,*Employers’ Accounting for Defined Benefit Pension and Other        Postretirement Benefits*(“FAS 158”). FAS 158        addresses the accounting for defined benefit pension plans and other postretirement benefit        plans (“plans”). Specifically, FAS 158 requires companies to recognize an asset        for a plan’s overfunded status or a liability for a plan’s underfunded status        and to measure a plan’s assets and its obligations that determine its funded status        as of the end of the company’s fiscal year, the offset of which is recorded, net of        tax, as a component of other comprehensive income in shareholders’ equity. FAS158 was        effective for the Company as of January 1, 2007 and applied prospectively. The provisions        of FAS 158 did not have any impact on the Company’s financial statements.

 

In January        2007, we adopted FIN 48. FIN 48 clarifies the accounting for uncertain taxes        recognized in an enterprise's financial statements in accordance with SFAS No. 109,        "*Accounting for Income Taxes."*FIN 48 prescribes a recognition threshold and measurement of a tax        position taken or expected to be taken in an enterprise's tax return. In addition,        FIN 48 provides guidance on derecognition, classification, interest and penalties,        accounting in interim periods and disclosure related to uncertain income tax        positions.

 

In        February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value        Option for Financial Assets and Financial Liabilities". Under SFAS 159, companies may        elect to measure certain financial instruments and certain other items at fair value. The        standard requires that unrealized gains and losses on items for which the fair value option        has been elected be reported in earnings. SFAS 159 is effective for the Company as of        January 1, 2008.

 

In        December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,        “*Noncontrolling Interests in Consolidated Financial        Statements, an Amendment of ARB No. 51*” (“SFAS        160”). SFAS 160 establishes accounting and reporting standards pertaining to        ownership interests in subsidiaries held by parties other than the parent; the amount of        net income attributable to the parent and to the noncontrolling interest; changes in a        parent’s ownership interest; and the valuation of any retained noncontrolling equity        investment when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure        requirements that clearly identify and distinguish between the interests of the parent and        the interests of the noncontrolling owners. SFAS 160 is required to be adopted        prospectively for the first annual and interim reporting period beginning on or after        December 15, 2008. The Company is currently reviewing the effect that the adoption of this        statement will have on our financial statements.

 

 

 

 

F-16

 

----

 

| **ITEM 9.** | **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                        ACCOUNTING AND FINANCIAL DISCLOSURE** |
|-------------|-----------------------------------------------------------------------------------------------------------------|

 

None.

 

| **ITEM 9A.** | **CONTROLS AND PROCEDURES (ITEM 9A (T))** |
|--------------|-------------------------------------------|

 

**Management's Annual Report on Internal Control over Financial        Reporting**

 

The        Company’s management, including our chief executive officer and chief financial        officer, is responsible for establishing and maintaining adequate internal control over our        financial reporting. Internal control over financial reporting is a process designed by, or        under the supervision of, our chief executive and chief financial officers and implemented        by our board of directors, management and other personnel, to provide reasonable assurance        regarding the reliability of financial reporting and the preparation of financial        statements for external purposes in accordance with generally accepted accounting        principles and includes those policies and procedures that: (i) pertain to the        maintenance of records that, in reasonable detail, accurately and fairly reflect the        transactions and dispositions of our assets; (ii) provide reasonable assurance that        transactions are recorded as necessary to permit preparation of financial statements in        accordance with generally accepted accounting principles, and that our receipts and        expenditures are being made only in accordance with authorizations of our management and        directors; and (iii) provide reasonable assurance regarding prevention or timely        detection of unauthorized acquisition, use or disposition of our assets that could have a        material effect on the financial statements. Because of their inherent limitations,        internal control over financial reporting may not prevent or detect misstatements. Also,        projections of any evaluation of effectiveness to future periods are subject to the risk        that controls may become inadequate because of changes in conditions, or that the degree of        compliance with the policies or procedures may deteriorate.

Under the        supervision and with the participation of our management, including our principal executive        officer and principal financial officer, we conducted an evaluation of the effectiveness of        our internal control over financial reporting based on the framework in*Internal Control* *— Integrated Framework*issued by the        Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation,        our management concluded that our internal control over financial reporting was effective        as of December 31, 2007.

 

This annual        report does not include an attestation report of our registered public accounting firm        regarding internal control over financial reporting. Management's report was not subject to        attestation by our registered public accounting firm pursuant to temporary rules of the        Commission that permit us to provide only the management’s report in this Form        10-K.

 

**Changes in Internal Controls over Financial Reporting**

 

During the        period ended December 31, 2007, there has been no change in internal control over financial        reporting that has materially affected, or is reasonably likely to materially affect our        internal control over financial reporting.

 

| **9B.** | **OTHER INFORMATION** |
|---------|-----------------------|

 

None.

 

 

 

29

 

----

 

**PART        III**

 

| **ITEM 10.** | **DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE                        GOVERNANCE** |
|--------------|------------------------------------------------------------------------------------|

 

**Officers and Directors**

 

The        following table sets forth the name, age and position of each director and executive        officer of the Company:

 

| ***Name***                                                                                                        | ***Age***                                                                          | ***Year***

***Elected/Appointed***                                                      | ***Positions Held***                                                                                                   |
|-------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|
|  

Don Gilbreath

                         

Robert Betty

                         

Albert White |  

50

                         

51

                         

62 |  

1998

                         

1999

                         

2000 |  

CEO, CFO, PAO and Director

                         

Director

                         

Director |

 

***Don        Gilbreath***- Mr. Gilbreath has served as a chief executive        officer, chief financial officer, principal accounting officer, and director of the Company        since September 18, 1998. He will serve until the next annual meeting of the        Company’s shareholders or until his successor is elected.

 

Mr.        Gilbreath has 24 years of experience in product development, engineering project management        and specialized technical sales. He has provided specialized R&D expertise to General        Electric, Johnson Controls, TCI, Standard & Poor’s, and Commodore International.        He developed and launched or licensed over 30 products including musical instruments,        multimedia players, and Internet access devices. Mr. Gilbreath has broad experience in        directing international engineering teams, vendor negotiations, licensing, patents,        offshore manufacturing and launching of innovative products to world markets. From 1987 to        1992 Mr. Gilbreath was Director of Product and Market Development for Commodore        International Ltd. Among other responsibilities he was Chief Designer of CDTV, the        world’s first consumer multimedia player under $1,000. In addition, he created and        developed OEM sales channels and vertical markets for Commodore’s complete line of        microcomputers and peripherals. In 1990 Mr. Gilbreath was selected as delegate from the USA        to the USSR for technology transfer of semiconductor and computer architecture. In 1993 he        founded Gilbreath Systems Inc., an international contract engineering and product        development firm, and from 1994 to 1997 served as CTO and VP Engineering for VIScorp, a        Chicago-based company that designed and developed set-top boxes (pre-WebTV). In 1997, Mr.        Gilbreath founded the Company.

 

***Robert Betty***- Mr. Betty was appointed        as a director of the Company on February 19, 1999. He will serve until the next annual        meeting of the Company’s shareholders or until his successor is elected.

 

Mr. Betty        has over 22 years of experience in the electronics industry. From 1990 to 1994 he held        various management positions for Maris Equipment Inc., rising to vice president of        operations with responsibility for all P&L and a $63 million budget. He was the        founder, in 1994, and is the current president of Pinnacle Electronic Systems Inc., a        security systems integration firm located in West Chester, Pennsylvania. He has used his        security systems expertise as project and/or operations manager for, among others, state        prisons, a strategic oil reserve at Big Hill Texas, and five air bases located in Saudi        Arabia to support the F5 Aircraft. Betty is a member of several management associations and        holds numerous technical certificates.

 

***Albert White***– Mr. White was        appointed as a director of the Company on January 5, 2000. He will serve until the next        annual meeting of the Company’s shareholders or until his successor is        elected.

 

30

 

----

 

Mr. White        graduated from Columbia University with a Master of Business Administration and from the        University of Denver with a Bachelor of Science/Bachelor of Arts in Marketing. Mr. White        has held senior management positions with technology based companies, as the vice-president        of Network Solutions, a Virginia based developer of internet addressing systems from 1989        to 1994, and as the senior vice president of RMS Technology, a New Jersey-based        telecommunications provider, from 1994 to 1996. Since 1996 Mr. White has acted as a        business and financial consultant to chief executive officers throughout North America and        has provided entrepreneurial advice to both national and international clients. These        include acting as Senior Consultant for Safeguard Scientific, Inc., Wayne, Pennsylvania        (1997-1999); Managing Director of Promark International, LLC, Silver Spring, Maryland.        (1997-2001); Financial Advisor to the chairman and founder of Johnson Research and        Development, Atlanta, Georgia (2000-2001); and Chief Executive Officer of Excellatron Solid        State, LLC, Atlanta, Georgia (2001- 2003). Mr. White currently provides business        consultancy services in the areas of finance, marketing, acquisition/merger and real estate        development in the Atlanta, Georgia and Washington, D.C. area.

 

No other        persons are expected to make any significant contributions to the Company’s executive        decisions who are not executive officers or directors of the Company.

 

***Term        of Office***

 

Our        directors are appointed for a one (1) year term to hold office until the next annual        meeting of our shareholders or until removed from office in accordance with our bylaws. Our        executive officers are appointed by our Board of Directors and hold office until removed by        the board.

 

***Family Relationships***

 

There are        no family relationships between or among the directors or executive officers.

 

***Director Independence***

 

We are        planning to apply to have our common stock listed on the OTC Bulletin Board inter-dealer        quotation system, which does not have director independence requirements. However, for        purposes of determining director independence, we have applied the definitions set out in        NASDAQ Rule 4200(a)(15). Under NASDAQ Rule 4200(a)(15), which states that a director is not        considered to be independent if he or she is also an executive officer or employee of the        corporation. Accordingly, we consider Mr. White and Mr. Betty to be independent        directors.

 

***Involvement in Certain Legal Proceedings***

 

To the best        of our knowledge, during the past five years, none of the following occurred with respect        to a present or former director, executive officer, or employee: (1) any bankruptcy        petition filed by or against any business of which such person was a general partner or        executive officer either at the time of the bankruptcy or within two years prior to that        time; (2) any conviction in a criminal proceeding or being subject to a pending criminal        proceeding (excluding traffic violations and other minor offences); (3) being subject to        any order, judgment or decree, not subsequently reversed, suspended or vacated, of any        court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending        or otherwise limiting his or her involvement in any type of business, securities or banking        activities; and (4) being found by a court of competent jurisdiction (in a civil action),        the Commission or the Commodities Futures Trading Commission to have violated a federal or        state securities or commodities law, and the judgment has not been reversed, suspended or        vacated.

 

 

31

 

----

 

***Director Compensation***

 

Directors        are not reimbursed for out-of-pocket costs incurred in attending meetings and no director        receives any compensation for services rendered as a director. The Company may adopt a        provision for compensating directors in the future.

 

**Compliance with Section 16(A) of the Exchange Act**

 

Based        solely upon a review of Forms 3, 4 and 5 furnished to the Company, we are aware of the        following persons who, during the period ended December 31, 2007, failed to file, on a        timely basis, reports required by Section 16(a) of the Securities Exchange Act of        1934.

 

| **•** | Don Gilbreath failed to timely file a Form 3, 4 or 5 despite                        being our executive officer, a director, and the beneficial owner of more                        than 5% of our common stock. |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **•** | Robert Betty failed to timely file a Form 3, 4 or 5 despite                        being a director and shareholder. |
|------------|----------------------------------------------------------------------------------------------------------------------|

| **•** | Albert White failed to timely file a Form 3, 4 or 5 despite                        being a director. |
|------------|------------------------------------------------------------------------------------------------------|

 

***Code        of Ethics***

 

The Company        has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-B of the        Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior        officers, such as the principal executive officer, principal financial officer, controller,        and persons performing similar functions. The Company has incorporated a copy of its Code        of Ethics as Exhibit 14 to this form 10-K. Further, our Code of Ethics is available in        print, at no charge, to any security holder who requests such information by contacting        us.

 

**Board        of Directors Committees**

 

The board        of directors has not established an audit committee. An audit committee typically reviews,        acts on and reports to the board of directors with respect to various auditing and        accounting matters, including the recommendations and performance of independent auditors,        the scope of the annual audits, fees to be paid to the independent auditors, and internal        accounting and financial control policies and procedures. Certain stock exchanges currently        require companies to adopt a formal written charter that establishes an audit committee        that specifies the scope of an audit committee’s responsibilities and the means by        which it carries out those responsibilities. In order to be listed on any of these        exchanges, the Company will be required to establish an audit committee.

 

The board        of directors has not established a compensation committee.

 

 

 

 

 

 

 

32

 

----

 

| **ITEM 11.** | **EXECUTIVE COMPENSATION** |
|--------------|----------------------------|

 

**Compensation Discussion and Analysis**

 

The        objective of the Company’s compensation program is to provide compensation for        services rendered as an executive officer. Our salaries are designed to retain the services        of our executive officer. Salary is currently the only type of compensation we utilize in        our compensation program. We utilize this form of compensation because we feel that it is        adequate to retain and motivate our executive officer. The amounts we deem appropriate to        compensate our executive officer are determined in accordance with market forces; we have        no specific formula to determine compensatory amounts at this time. While we have deemed        that our current compensatory program and the decisions regarding compensation are easy to        administer and are appropriately suited for our objectives, we may expand our compensation        program to any additional future employees to include options and other compensatory        elements.

 

Our chief        executive officer, chief financial officer and principal accounting officer entered into an        employment agreement with the Company on June 22, 2005 pursuant to which he was entitled to        an initial salary of $60,000 per annum to manage the Company and our former parent company,        ComCam, Inc. Since the Company remains in the development stage, Mr. Gilbreath agreed to        waive any entitlement to said salary for the period from June 22, 2005 to December 31,        2007. Sums paid to Mr. Gilbreath in each of 2007 and 2006 were paid to him in the form of a        consulting fee rather than a salary.

 

**Tables**

 

The        following table provides summary information for the years 2007, and 2006 concerning cash        and non-cash compensation paid or accrued by the Company to or on behalf of (i) the chief        executive officer and (ii) any other employee to receive compensation in excess of        $100,000.

 

| ***Summary Compensation Table***           |
|--------------------------------------------|
| Name and Principal Position                | Year | Salary

($) | Bonus

($) | Stock Awards

($) | Option

Awards

($) | Non-Equity Incentive Plan Compensation

($) | Change in Pension Value and Nonqualified Deferred                        Compensation

($) | All Other Compensation

($)

                          | Total

($) |
| Don Gilbreath

CEO, CFO, PAO, and director | 2007

2006

                         

                          | -

-

                         

                          | -

-

                          | -

-

                         

                          | -

-

                          | -

-

                          | -

-

                          | 4,000

39,000

                          | 4,000

39,000

                         

                          |

 

We have no        “Grants of Plan-Based Awards”, “Outstanding Equity Awards at Fiscal        Year-End”, “Option Exercises and Stock Vested”, “Pension        Benefits”, or “Nonqualified Deferred Compensation”. Nor do we have any        “Post Employment Payments” to report.

         

| **ITEM 12.** | **SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND                        MANAGEMENT AND RELATED STOCKHOLDER MATTERS** |
|--------------|---------------------------------------------------------------------------------------------------------------------------|

 

The        following table sets forth certain information concerning the ownership of the        Company’s 3,408,354 shares of common stock issued and outstanding as of April 14,        2008, with respect to: (i) all directors; (ii) each person known by us to be the beneficial        owner of more than five percent of our common stock; and (iii) our directors and executive        officers as a group.

 

33

 

----

 

 

| ***Names and Addresses of Managers and Beneficial                        Owners***                                                                  | ***Title of Class*** | ***Number of Shares*** | ***Percent of***

***Class*** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|----------------------|------------------------|-------------------------------|
| Don Gilbreath, CEO, CFO, principle accounting officer and                        director

1525 Tanglewood Drive

West Chester, Pennsylvania, 19380 | Common               | 561,157                | 16.5%                         |
| Robert Betty, director

912 Carrie Lane

West Chester, Pennsylvania, 19383                                                                          | Common               | 66,004                 | 1.9%                          |
| Albert White, director

420 Northwest Drive

Silver Spring, Maryland 20901                                                                          | Common               | 10,000                 | 0.3%                          |
| ACC Investors, LLC*

1330 Avenue of the Americas

36th Floor

New York, New York 10019                                                              | Common               | 1,408,394              | 41.3%                         |
| Officer and Directors as a Group                                                                                                                    | Common               | 627,161                | 18.7%                         |

         

|   | * | Paul Higbee makes voting and investment decisions for ACC                        Investors. Paul Higbee uses ACC Investors’ address as his mailing                        address. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

| **ITEM 13.** | **CERTAIN RELATIONSHIPS AND RELATED                        TRANSACTIONS** |
|--------------|---------------------------------------------------------------------------|

 

None of our        directors or executive officers, nor any proposed nominee for election as a director, nor        any person who beneficially owns, directly or indirectly, shares carrying more than 5% of        the voting rights attached to all of our outstanding shares, nor any members of the        immediate family (including spouse, parents, children, siblings, and in-laws) of any of the        foregoing persons has any material interest, direct or indirect, in any transaction since        the beginning of our last fiscal year or in any presently proposed transaction which, in        either case, has or will materially affect us.

 

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

 

***Audit        Fees***

 

Pritchett,        Siler & Hardy ("Pritchett") is providing audit services to the Company in connection        with its annual report for the fiscal year ended December 31, 2007.

 

Jones        Simkins, P.C. (“Jones Simkins”) provided audit services to the Company in        connection with its annual report for the fiscal year ended December 31, 2006 and reviews        of the Company’s quarterly financial statements for the fiscal year ended December        31, 2007. The aggregate fees billed by Jones Simkins were $8,733 during 2007 and $35,769        during 2006.

 

***Audit        Related Fees***

 

Neither        Pritchett nor Jones Simkins billed the Company fees in 2007 or 2006 for professional        services that are reasonably related to the audit or review of the Company’s        financial statements that are not disclosed in “Audit Fees” above.

 

 

34

 

----

 

 

***Tax        Fees***

 

Jones        Simkins billed to the Company fees of approximately $734 and $2,891 during 2007 and 2006,        respectively, for professional services rendered in connection with the preparation of the        Company’s tax returns. Pritchett billed to the Company no fees for professional        services rendered in connection with the preparation of the Company’s tax        returns.

 

***All        Other Fees***

 

Neither        Pritchett nor Jones Simkins billed to the Company fees in 2007 or 2006 for other        professional services rendered or any other services not disclosed above.

 

***Audit        Committee Pre-Approval***

 

The Company        does not have a standing audit committee. Therefore, all services provided to the Company        by Pritchett and Jones Simkins, as detailed above, were pre-approved by the Company’s        board of directors. Pritchett and Jones Simkins performed all work only with their        permanent full time employees.

 

| **ITEM 15.** | **EXHIBITS AND FINANCIAL STATEMENT SCHEDULES** |
|--------------|------------------------------------------------|

 

***(a)        Financial Statements***

 

The        following documents are filed under “*Item 8. Financial        Statements and Supplementary Data,*” pages F-1 through F-16,        and are included as part of this Form 10-K:

         

|   | Financial Statements of The Company for the years ended                        December 31, 2007 and 2006: |
|--------|------------------------------------------------------------------------------------------------------------|

|   | Reports of Independent Registered Public Accounting                        Firms |
|--------|----------------------------------------------------------------------------------|

Balance Sheets

Statements of Income

Statementsof Stockholders’ Equity

Statements of Cash Flows

Notes to Financial        Statements                                                                                      

***(b)        Exhibits***

         

The        exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to        Exhibits on page 37 of this Form 10-K, and are incorporated herein by this        reference.

         

***(c)        Financial Statement Schedules***

 

We are not        filing any financial statement schedules as part of this Form 10-K because such schedules        are either not applicable or the required information is included in the financial        statements or notes thereto.

 

 

 

35

 

----

 

**SIGNATURES**

 

In        accordance with the requirements of the Securities Exchange Act of 1934, the registrant        caused this report to be signed on its behalf by the undersigned, thereunto duly authorized        this 14th day of April, 2008.

 

**COMCAM INTERNATIONAL, INC.**

 

 

/s/ Don Gilbreath

Don Gilbreath

Chief Executive Officer, Chief Financial Officer, and Principal 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/ Don Gilbreath | Director | April 14, 2008 |
|--------|-------------------|----------|----------------|

Don Gilbreath

         

|   | /s/ Robert Betty | Director | April 14, 2008 |
|--------|------------------|----------|----------------|

Robert Betty

         

|   | /s/ Albert White | Director | April 14, 2008 |
|--------|------------------|----------|----------------|

Albert White

 

 

36

 

----

 

**INDEX        TO EXHIBITS**

 

| ***Exhibit*** | ***Description*** |
|---------------|-------------------|

         

| 3 (i)* | Amended and Restated Certificate of Incorporation of the                        Company (incorporated by reference to the Form 10-SB/A filed with the                        Commission on June 26, 2006). |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3 (ii)* | Bylaws of the Company (incorporated by reference to the Form                        10-SB/A filed with the Commission on June 26, 2006). |
|---------|------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (i)* | Stock Exchange Agreement between ComCam, Inc. and the                        Company dated May 8, 2002 (incorporated by reference to the Form 10-SB/A                        filed with the Commission on June 6, 2006). |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(a)* | Securities Purchase Agreement between the Company, ComCam,                        Inc. and ACC Investors, LLC dated June 22, 2005 (incorporated by reference                        to the Form 10-SB/A filed with the Commission on June 26, 2006). |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(b)* | Convertible Secured Promissory Note between the Company,                        ComCam, Inc. and ACC Investors, LLC dated June 22, 2005 (incorporated by                        reference to the Form 10-SB/A filed with the Commission on June 26,                        2006). |
|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(c)* | Warrant to Purchase Common Stock between the Company and ACC                        Investors, LLC dated June 22, 2005 (incorporated by reference to the Form                        10-SB/A filed with the Commission on June 26, 2006). |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(d)* | Warrant to Purchase Common Stock between the Company and ACC                        Investors, LLC dated June 22, 2005 (incorporated by reference to the Form                        10-SB/A filed with the Commission on June 26, 2006). |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(e)* | Registration Rights Agreement between the Company and ACC                        Investors, LLC dated June 22, 2005 (incorporated by reference to the Form                        10-SB/A filed with the Commission on June 26, 2006). |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(f)* | Shareholders Agreement between Don Gilbreath and ACC                        Investors, LLC dated June 22, 2005 (incorporated by reference to the Form                        10-SB/A2 filed with the Commission on October 31, 2006). |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (ii)(g)* | Employment Agreement between the Company, ComCam, Inc. and                        Don Gilbreath dated June 22, 2005 (incorporated by reference to the Form                        10-SB/A filed with the Commission on June 26, 2006). |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10 (iii) | Asset Purchase Agreement between ComCam, Inc. and HNI, LLC                        dated February 14, 2007. |
|----------|------------------------------------------------------------------------------------------------------------|

| 10 (iv)* | Joinder, Amendment and Consent Agreement between ComCam,                        Inc., ComCam International, Inc. and HNI, LLC dated September 28, 2007                        (incorporated by reference to the Form 10-QSB filed with the Commission on                        November 14, 2007). |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10(v) | Amendment Agreement dated February                        14, 2008. |
|-------|---------------------------------------------------------------------|

| 14 | Code of Ethics adopted March 24,                        2008. |
|----|---------------------------------------------------------------|

| 31 | Certification of the Chief Executive                        Officer and Chief Financial Officer pursuant to Rule 13a-14 of the                        Securities and Exchange Act of 1934, as amended, as adopted pursuant to                        Section 302 of the Sarbanes-Oxley Act of 2002. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32 | Certification of the Chief Executive                        Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as                        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                        2002. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

         

|   | * | Incorporated by reference to previous filings of the                        Company. |
|--------|---|--------------------------------------------------------------------------------------|

 

37

 

----