================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 --------------
                                   FORM 10-KSB
                                 --------------
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      FOR THE YEAR ENDED DECEMBER 31, 2004
                        (Commission File No.) 333-62690
                                             -----------

                                 CYBERADS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
                                                  --------------

            Florida                                      65-1000634
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)



            21073 Powerline Road, Suit 57, Boca Raton, Florida 33433
            --------------------------------------------------------
               (Address of principal executive office) (Zip Code)

                                 (561) 672 2193
                                ----------------
                           (Issuer's telephone number)

           Securities Registered Under Section 12 (B) of the Act: None
           Securities Registered Under Section 12 (G) of the Act: None

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

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

         Revenues for the year ended December 31, 2004: $

         The aggregate market value of voting stock held by nonaffiliates of
CyberAds, Inc. ("CYAD") common stock, as of April 8, 2005 was approximately
$5,569,672 (based on the last sale price of such stock as reported by OTCBB).
The number of shares outstanding of the registrant's common stock, as of April
8, 2005 was 32,762,777

         Documents incorporated by reference. See Item 13

         Transitional Small Business Disclosure Format (check one):
                                                                Yes |_| No |X|
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<PAGE>
                                TABLE OF CONTENTS


                                                                           PAGE



PART I                                                                        3

Item 1.  Description of Business                                              3

Item 2.  Description of Property                                              4

Item 3.  Legal Proceedings                                                    4

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


PART II                                                                       4

Item 5.  Market for Common Equity and Related Stockholder Matters             5

Item 6.  Management's Discussion and Analysis or Plan of Operation            5

Item 7.  Financial Statements                                                 8

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


PART III                                                                      8

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
                Compliance With Section 16(a) of the Exchange Act             8

Item 10. Executive Compensation                                               9

Item 11. Security Ownership of Certain Beneficial Owners and Management      11

Item 12. Certain Relationships and Related Transactions                      12

Item 13. Exhibits,Lists and Reports on Form 8-K                              13

Item 14. Principal Accountant Fees and Services                              14


Signatures                                                                   15

Certifications                                                               16
<PAGE>
                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS

OVERVIEW

         CyberAds, Inc., a Florida corporation ("CYAD" or the "Company"), was
organized on April 12, 2000, under the laws of the State of Florida. We
initially compiled member lists through an Internet based opt in email list and
marketed cellular phone services through an affiliate program. Our affiliate
program works by paying participating third party web sites commissions for
referring cellular phone customers to our "freecellular.com" website. A third
party website will receive a commission if a customer it refers to us purchases
a cellular phone or cellular service.

         All of our revenues during 2004 were derived from our cellular phone
marketing services.

In December 2004, we determined that our previously announced acquisition of a
22% interest in The Vineyards Country Club ("The Vineyards") would not be
completed due to due diligence items discovered during our review that
management determined were too risky and not in the best interest of our over
business development strategy.

         During 2004, we focused on reviewing potential business models in both
the Internet and real estate sectors for the possible acquisition of a business
opportunity. After considerable review, we determined our Internet business
model on cellular phones was not profitable and we discontinued active marketing
via third party affiliate web sites. We have remained in the cellular phone
business through a telemarketing agreement with a third party affiliate that is
compensated only on sales of cellular services after confirmation by our third
party fulfillment center. The telemarketing agreement model has reduced our
liability on cancellations and returns as we now are paid on net sales after the
termination period has passed.

         During 2004, we became involved with the extreme sports industry
through an affiliation with Aqua Xtremes Inc. and their product XBoard to assist
with development of Aqua Xtremes web site for consumers and Distributors. Aqua
Xtremes designs, manufactures and markets personal water sports equipment. Its
most notable product is the Xboard, a jet-powered personal watercraft. During
the course of our investigation and research for the web site, we developed a
sales and marketing plan that has subsequently been adopted by Aqua Xtremes. We
have entered into a letter agreement with Aqua Xtremes to provide sales and
marketing support both online and for the development of the distribution
network in North America. We plan to develop a network of distributors and
dealers for Aqua Xtremes and implement a strategic marketing plan that we expect
will provide revenues as Aqua Xtremes begins delivery of the XBoard. To maximize
this opportunity, we will expect to enter into contracts with consultants for
the representation and recruitment of distributors and dealers. We anticipate
that we will involved in the development of additional product lines and
services for extreme sports market.

GOVERNMENT REGULATION

         At present, there are no specific regulations or approvals required by
or from the Federal Government or state agencies for marketing the cellular
services we offer. We are aware of no proposed regulations that may have an
effect upon our business as a seller of cellular phone services.

                                       3
<PAGE>
         Laws and regulations that apply to Internet communications, commerce
and advertising are becoming more prevalent. These regulations could affect the
cost of communicating on the Internet and negatively affect the demand for our
direct marketing solutions or otherwise harm business. Laws and regulations may
be adopted covering issues such as user privacy, pricing, libel, acceptable
content, taxation, and quality of products and services. This legislation could
hinder growth in the use of the Internet generally and decrease the acceptance
of the Internet as a communications, commercial, and direct marketing medium.

         The laws governing the Internet remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws apply to the Internet and Internet advertising. In
addition, the growth and development of the market for Internet commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. This may impose additional burdens on companies conducting
business over the Internet.


PERSONNEL

         As of the date of this report, CYAD has one full time employee as well
as a number of part time relationships with contractors for certain services.
None of CYAD's personnel are covered by collective bargaining agreements.

ITEM 2. PROPERTIES

         During 2004, we relocated our offices to a 2,000 square foot facility
located at 370 Amapola, Suite 202, Torrance, California We do not own any real
property.

ITEM 3. LEGAL PROCEEDINGS

         The Company is currently a defendant in the following lawsuits.
1. 6001, LLC - Former Landlord at 21073 Powerline Road, suite 57, Boca Raton,
Florida
2. Web Bank - a factoring company

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         No matters were submitted to the vote of our security holders during
the fourth quarter of the fiscal year covered by this report.PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

         The principal United States market for our common stock is the OTC
Bulletin Board. The following are the high and low closing sale prices for our
common stock for each quarter during the previous two years

                                                          HIGH           LOW
                                                        --------       --------
      FISCAL 2004
      Fourth Quarter (through December 31, 2004)        $   2.10       $   0.85
      Third Quarter (through September 30, 2004)        $   1.50       $   0.27
      Second Quarter (through June 30, 2004)            $   0.51       $   0.02
      First Quarter (through March 31, 2004)            $   0.13       $   0.04

      FISCAL 2002
      Fourth Quarter (through December 31, 2003)        $   0.19       $   0.02
      Third Quarter (through September 30, 2003)        $   0.50       $   0.06
      Second Quarter (through June 30, 2003)            $   2.60       $   0.25
      First Quarter (through March 31, 2003)            $   3.60       $   1.00

         The above prices presented are bid prices that represent prices between
broker-dealers and do not include retail mark-ups and markdowns for any
commissions paid to the dealer. These prices may not reflect actual
transactions.

                                       4
<PAGE>
         The Company has not paid any dividends

         There are 73 shareholders of record as April 8, 2005 holding 32,762,777
shares of common stock.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

         CyberAds received its revenue of $303,120 specifically from the
Cellular business. We discontinued the third party affiliate sales of Cellular
phones and services in the first quarter of 2004 due to the financial losses
inherent with the commission structure paid to third party affiliates. The
affiliates commission was earned on "leads" provided, rather than on sales made,
therefore the cancellations and returns on cellular phones were not recouped
from the third party affiliate and the losses became CyberAds expense.

CYBERADS CELLULAR OPERATIONS

DIRECT SUPPLIERS

         On March 10th, 2003, CyberAds, Inc entered into an agreement with
Inphonic, Inc that allows CyberAds to utilize all of Inphonic's cellular
agreements. They include AT&T, Cingular, T-Mobile, Verizon and Alltel. This in
effect increased the coverage area and provides our customers greater choices
when selecting cellular service.

         As a result of this agreement CyberAds, Inc. will no longer continue a
direct relationship with the carriers. Instead we will work as a sales agent of
Inphonic. Inphonic will be responsible for all order fulfillment including
shipping, customer care, sales and verification. They will also provide
Marketing and Creative support if required.

CELLULAR PHONE INVENTORY

         As a result of the agreement with Inphonic we are no longer required to
purchase Phones or maintain inventory. Inphonic assumes that responsibility.

RELATED PARTIES AND RELIANCE ON CERTAIN CELLULAR PROVIDERS

         We rely on Inphonic as our provider for equipment for all of the
carriers they have an affiliation with.

RECENT EVENTS

         As noted above we entered into a partnership with Inphonic, Inc. on
March 10, 2003 to handle all order fulfillment, sales, customer service,
verification and marketing. As a result of this agreement, CyberAds was able to
reduce staffing levels , and reduce payroll.

         In December 2003 we agreed to acquire a 22% interest in The Vineyards
Country Club ("The Vineyards"), a real estate development project located
adjacent to Palm Springs, California. Our investment in The Vineyards was being
acquired by our wholly owned subsidiary, The Vineyards, LLC. The Vineyards is a
luxury motor coach facility including a recently completed clubhouse, swimming
pool, tennis court, and nine-hole regulation size golf course.

         In December 2004 we determined our previously announced acquisition of
a 22% interest in The Vineyards Country Club ("The Vineyards") would not be
completed due to due diligence items discovered during our review that
management determined were too risky and not in the best interest of our
companies development. Subsequently we filed an 8 K information statement
announcing our cancellation of this announced acquisition.

                                       5
<PAGE>
         During 2004 we engaged in multiple negotiations with Internet and Real
Estate companies on merger and acquisition discussions, as of December 31, 2004
we were not party to any binding letter of intents.

PATENTS AND PROPRIETARY RIGHTS

         We do not hold any trademark, copyright or patent protection.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2004 AND 2003

         We reported revenues of $303,120.and $4,197,128 for the years ending
December 31, 2004 and 2003, respectively, losses of $509,704 and $767,528 during
the years ended December 31, 2004 and 2003, respectively. The reduction in
revenue from 2004 to 2003 is attributed to the change in revenue associated to
the Inphonic agreement whereby CyberAds receives a net commission instead of the
revenue for each phone and our discontinuance of cellular phone sales through
affiliates. The decrease in losses for 2004 was the direct result of reduction
in expenses and Salaries attributed to the agreement with Inphonic that allowed
CyberAds to rely on the fulfillment processes at Inphonic reducing the
requirement of employee related expenses at CyberAds.

         LIQUIDITY AND CAPITAL RESOURCES

         CYAD has not been profitable and has experienced negative cash flow
from operations due to its development stage, substantial ongoing investment in
research and development efforts. Consequently, CYAD has been dependent on the
sales of equity to fund cash requirements.

ITEM 7. FINANCIAL STATEMENTS

         The financial statements of CYAD are included (with an index listing
all such statements) in a separate financial section at the end of the Annual
Report on Form 10-KSB.

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

         There have been no disagreements between us and and our certifying
auditors on any matter of accounting principals or practices, financial
statement disclosure, or auditing scope or procedure..

ITEM 8A. CONTROLS AND PROCEDURES

         As required by Rule 13a-15 under the Securities Exchange of 1934,
within 90 days prior to the filing of this report, we carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and
procedures. This evaluation was carried out under the supervision and with the
participation of our management, principally our President and Chief Executive
Officer. Based on that evaluation, we concluded that our disclosure controls and
procedures are effective. There have been no significant changes in our internal
controls subsequent to the date we carried out our evaluation.Z

         Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rule and form. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports is accumulated and communicated to
management.


                                       6
<PAGE>
                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Our directors hold office until the next succeeding annual meeting of
shareholders, or until there successors have been elected and qualified.

          Our directors, executive officers and significant employees are as
follows:

NAME                   AGE              POSITION
----                   ---              --------
Walter Tatum           47               President / Secretary

         Director and Executive Officers

         Walter Tatum has served as our President, Secretary and sole director
since December 2003. Prior to joining Cyberads, Mr. Tatum was Vice President of
Sales for DMX Music, a subsidiary of Liberty Media, for 9 years.


         The Company's Bylaws currently authorize up to seven directors. Each
director is elected for one year at the annual meeting of stockholders and
serves until the next annual meeting or until a successor is duly elected and
qualified. Executive officers serve at the discretion of our board of directors.
There are no family relationships among any of the directors and executive
officers.

CODE OF ETHICS.

         Effective February 24, 2004, the Board of Directors adopted a Code of
Ethics for Senior Financial Officers. The Code of Ethics was adopted pursuant to
the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations
of the Securities and Exchange Commission thereunder. A copy of the Code of
Ethics will be made available upon request at no charge. Requests should be
directed in writing to the Company at 370 Amapola, Suite 202, Torrance, CA.


ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth information relating to salary we paid
during the past fiscal year to our chief executive officer; and to each of our
executive officers that earned more than $100,000 during the fiscal year ended
December 31, 2004. Other than salary and stock options, we paid no other form of
compensation to our executive officers and directors. No stock options were
exercised during the fiscal year ended December 31, 2004.

Name and Principal
Position             Year   Annual Compensation   Long Term Compensation
--------             ----   -------------------   ----------------------

Walter Tatum,        2004        $250,000                  None
President

                                       7
<PAGE>
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN

         On November 1, 2001, we adopted a 2001 Incentive and Non-Qualified
Stock Option Plan. We have reserved 500,000 shares of our common stock for
issuance under the Plan. The Plan authorizes the granting of awards of up to
500,000 shares of common stock to our key employees, officers, directors and
consultants. Awards consist of stock options (both nonqualified options and
options intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986), restricted stock awards, deferred stock awards,
stock appreciation rights and other stock-based awards, as described in the
Plan.No stock options are outstanding under the Plan at this time

         The plan is administered by our board of directors which determines the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms of each grant, including their vesting schedule, subject to
the provisions of the plan.

         In connection with incentive stock options, the exercise price of each
option may not be less than 100% of the fair market value of the common stock on
the date of grant (or 110% of the fair market value in the case of a grantee
holding more than 10% of our outstanding stock). The aggregate fair market value
of shares for which incentive stock options are exercisable for the first time
by an employee during any calendar year may not exceed $100,000. Nonqualified
stock options granted under the plan may be granted at a price determined by the
board of directors, not to be less than the fair market value of the common
stock on the date of grant.

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

         The following table sets forth information known to us, as of the date
of this report, relating to the beneficial ownership of shares of common stock
by: each person who is known by us to be the beneficial owner of more than five
percent of the outstanding shares of common stock; each director; each executive
officer; and all executive officers and directors as a groupWe believe that all
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as being owned by them.

                 Name and Address of         Amount of               Percent
Title of Class   Beneficial Owner            Beneficial Ownership    of Class

Common Stock     Walter  Tatum               250,000                     *
                 1681 Loma Roja Drive
                 Santa Ana, CA 92705

All officers and directors
(one person)                                 250,000                     *

        * Less than one percent

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         As of December 31, 2004, the amount due on various loans from
previously related parties is approximately $800,000.This amount is secured by
the company's assignment of its agreement with its fulfillment provider.




                                       8
<PAGE>
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K

(a)      Exhibits

Exhibit No.       Description of Document
-----------------------------------------------

3.1(a)     *      Articles of Incorporation
3.1(b)     *      Articles of Amendment
3.1(c)     *      Designation of Series A Convertible Preferred Stock
3.2        *      Bylaws (1)
4.0        *      Form of Stock Certificate


*  Incorporated by reference

(b) Reports on Form 8-K:

The following reports on Form 8-K were filed during the period covered by this
report.

January 6, 2004    Item 1.  Changes in Control of Registrant;
                   Item 7.  Financial Statements and Exhibits

January 23, 2004   Item 2.  Acquisition or Disposition of Assets;
                   Item 7.  Financial Statements and Exhibits

January 26, 2004   Item 2.  Acquisition or Disposition of Assets;
                   Item 7.  Financial Statements and Exhibits


ITEM 14.  PRINCIPAL ACCOUNTANT FEES FOR SERVICES

                          2004    2003
                        ------  ------
        Audit fees      29,600  27,900

























                                       9
<PAGE>
SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in Torrance, CA on April 13, 2005.


CYBERADS, INC.

By:/s/WALTER TATUM
Walter Tatum
Chairman, Chief Executive Officer

         In accordance with the requirements of the Securities Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.

SIGNATURE                           TITLE                     DATE

/s/WALTER TATUM                     President                 4/08/05
Walter Tatum







































                                       10
<PAGE>
                                 CYBERADS, INC.

                Years ended December 31, 2004 and 2003 (restated)

                                    CONTENTS
                                                                        Page

Report of Independent Auditor's..................................           F-2

Consolidated Financial Statements:
   Balance sheets................................................           F-3
   Statements of operations......................................           F-4
   Statements of net capital deficiency..........................     F-5 - F-6
   Statements of cash flows......................................     F-7 - F-8
   Notes to consolidated financial statements....................    F-9 - F-20











































                                       F-1
<PAGE>
                         REPORT OF INDEPENDENT AUDITOR'S


To the Board of Directors
CyberAds, Inc.


We have audited the accompanying consolidated balance sheets of CyberAds, Inc.
as of December 31, 2004 and the related consolidated statements of operations,
net capital deficiency and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the financial position of CyberAds, Inc. as of
December 31, 2004, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company had a loss from continuing
operations of $1,201,111 and a working capital deficiency of $2,720,748. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regards to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

As described in Note 15 to the consolidated financial statements, the Company
incorrectly reported in 2003 the acquisition of an investment in real estate
aggregating $10,700,000 that had not yet been completed.



                                                 /s/TIMOTHY L. STEERS, CPA, LLC
April 7, 2005
Portland, OR










                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                                 CYBERADS, INC.

                           Consolidated Balance Sheets



                                                                                       December 31
                                                                         -------------------------------------
                                                                                2004               2003
                                                                         -----------------   -----------------
                                                                                                (restated)
<S>                                                                       <C>                 <C>
                                       ASSETS
Current asset -
   Accounts receivable                                                    $             -     $        20,380

Property and equipment, net                                                        14,171              14,171

Deposits                                                                            8,585               8,585
                                                                           --------------      --------------

                                                                          $        22,756     $        43,136
                                                                           ==============      ==============

                       LIABILITIES AND NET CAPITAL DEFICIENCY

Current liabilities:
   Outstanding checks in excess of cash in bank                           $             -     $         1,207
   Note payable                                                                   294,192             120,000
   Accounts payable                                                               829,222             697,748
   Accrued liabilities                                                            653,136             944,658
   Unearned revenue                                                                     -             130,960
   Advances from related parties                                                  786,555             786,555
   Loans payable - convertible debentures                                          60,000              60,000
                                                                           --------------      --------------
       Total current liabilities                                                2,623,105           2,741,128

Advances from stockholder                                                               -             157,634

Commitments

Net capital deficiency:
   Preferred stock, $.001 par value, authorized 5,000,000 shares, of which
     1,000,000 shares has been designated as Series A Convertible, issued
     and outstanding 835,660 shares in 2004 (no shares in 2003)                       836                 836
   Common stock, $.001 par value, authorized 50,000,000 shares, issued and
     outstanding 23,225,777 shares in 2004 (18,325,777 shares in 2003)             23,226              18,326
   Common stock to be issued                                                      440,050             440,000
   Additional paid-in capital                                                  16,170,085          15,399,238
   Accumulated deficit                                                        (19,234,546)        (18,714,026)
                                                                           --------------      --------------
       Total stockholders' equity (deficit)                                    (2,600,349)         (2,855,626)
                                                                           --------------      --------------

                                                                          $        22,756     $        43,136
                                                                           ==============      ==============
                             See accompanying notes.
                                       F-3
<PAGE>
                                 CYBERADS, INC.

                      Consolidated Statement of Operations

                                                                                  Years ended December 31
                                                                                 2004              2003
                                                                           ---------------   -----------------
Net revenues                                                               $      303,120     $     4,197,128

Cost of revenues                                                                        -           1,177,111
                                                                            -------------      --------------

Gross profit                                                                      303,120           3,020,017

Selling expenses                                                                        -           1,845,967

General and administrative expenses                                               812,824           1,941,578
                                                                            -------------      --------------

Loss from operations                                                             (509,704)           (767,528)

Other income (expenses):
   Impairment of property and equipment                                                 -            (265,961)
   Other income, net                                                                4,847              16,176
   Interest expense and financing costs, net                                      (15,663)           (183,798)
                                                                            -------------      --------------
     Total other expenses                                                         (10,816)           (433,583)
                                                                            -------------      --------------

Net loss                                                                   $     (520,520)    $    (1,201,111)
                                                                            =============      ==============




Net loss per common share                                                  $        (.026)    $         (.084)
                                                                            =============      ==============
</TABLE>


















                             See accompanying notes.
                                       F-4
<PAGE>
<TABLE>
<CAPTION>
                                 CYBERADS, INC.

                Consolidated Statement of Net Capital Deficiency
                Years ended December 31, 2004 and 2003 (restated)

                          Convertible
                        preferred stock          Common stock       Common     Additional                   Deferred        Net
                       -------------------  --------------------   stock to      paid-In    Accumulated     financing     capital
                       Shares     Amount      Shares     Amount    be issued     capital      deficit         costs     deficiency
                       --------  ---------  ----------  --------  ----------  ------------- --------------  ----------  -----------
<S>                    <C>       <C>        <C>         <C>       <C>         <C>           <C>             <C>         <C>
Balance at
   December 31,
   2002                       -  $      -   14,774,777  $ 14,775  $        -  $  13,818,415 $  (17,512,915)  $  (7,015) $  (324,459)
Shares issued or to
   be issued for debt   835,660       836    1,250,000     1,250     440,000        921,074              -           -    1,363,160
Amortization of
   deferred financing
   costs                      -         -            -         -           -              -              -       7,015        7,015
Shares issued in
   exchange for
   services                   -         -    2,275,000     2,275           -        606,475              -           -      608,750
Shares issued for
   interest on convertible
   debentures                 -         -       26,000        26           -         53,274              -           -       53,300
Net loss                      -         -            -         -           -              -     (1,201,111)          -   (1,201,111)
                       --------   -------   ----------   -------  ----------   ------------  -------------    --------  -----------

Balance at
   December 31,
   2003 (restated)      835,660  $    836   18,325,777  $ 18,326  $  440,000  $  15,399,238 $  (18,714,026)  $       -  $(2,855,626)
                       ========   =======   ==========   =======  ==========   ============  =============    ========  ===========
</TABLE>























                             Continued on next page.
                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                                 CYBERADS, INC.

          Consolidated Statement of Net Capital Deficiency (continued)
                Years ended December 31, 2004 and 2003 (restated)

                          Convertible
                        preferred stock          Common stock       Common     Additional                   Deferred        Net
                       -------------------  --------------------   stock to      paid-In    Accumulated     financing     capital
                       Shares     Amount      Shares     Amount    be issued     capital      deficit         costs     deficiency
                       --------  ---------  ----------  --------  ----------  ------------- --------------  ----------  ------------
<S>                    <C>       <C>        <C>         <C>       <C>         <C>           <C>             <C>         <C>
Balance
   at December 31, 2003
   (restated)           835,660   $    836  18,325,777  $ 18,326  $  440,000   $ 15,399,238 $  (18,714,026)  $      -   $ 2,855,626)
Shares issued for
   debt
Options exercised             -          -     500,000       500           -         64,500              -          -        65,000
Shares issued in
   exchange for payable
   to stockholder             -          -   2,000,000     2,000           -        212,297              -          -       214,297
Shares issued in exchange
   for Settlement             -          -      50,000        50          50        109,900              -          -       110,000
Shares issued in exchange
   for ompensation &
   services                   -          -   2,350,000     2,350           -        384,150              -          -       386,500
Net loss                      -          -           -         -           -              -       (520,520)         -      (520,520)
                       --------  ---------  ----------  --------  ----------  ------------- --------------  ----------  ------------

Balance at
   December 31, 2004    835,660  $     836  23,225,777  $ 23,226  $  440,050   $ 16,170,085 $  (19,234,546)   $       - $(2,600,349)
                       ========  =========  ==========  ========  ==========  ============= ==============  ==========  ============
</TABLE>


























                             See accompanying notes.
                                       F-6
<PAGE>
<TABLE>
<CAPTION>
                                 CYBERADS, INC.

                      Consolidated Statement of Cash Flows
                                                                                  Years ended December 31
                                                                                 2004              2003
                                                                           ---------------   -----------------
                                                                                                (restated)
<S>                                                                        <C>               <C>
Cash flows from operating activities:
   Net loss                                                                $     (520,520)    $    (1,201,111)
    Adjustments to reconcile net loss to net cash provided by used in
     operating activities:
       Provision for doubtful accounts                                                  -             382,217
       Impairment of long-lived assets                                                  -             265,961
       Impairment of inventories                                                        -             120,879
       Depreciation                                                                     -              19,494
       Amortization of deferred financing costs                                         -               7,015
       Common stock issued for compensation and services                          496,500             608,750
       Common stock issued for interest                                             9,663              53,300
       Changes in assets and liabilities:
         Accounts receivable                                                       20,380             671,163
         Inventories                                                                    -              35,355
         Deposits                                                                       -              68,666
         Other assets                                                                   -              24,785
         Outstanding checks in excess of cash in bank                              (1,207)              1,207
         Accounts payable                                                        (175,757)         (1,390,089)
         Accrued liabilities                                                       69,941             289,046
         Unearned revenue                                                               -             130,960
                                                                            -------------      --------------
                                                                                 (101,000)             87,598
Cash flows from investing activities -
   Capital expenditures                                                                 -             (13,967)
                                                                            -------------      ---------------
                                                                                        -             (13,967)
Cash flows from financing activities:
   Cash overdraft                                                                       -            (112,649)
   Net proceeds from factored accounts receivable                                       -             342,237
   Principal repayments of note payable                                           (11,000)                  -
   Advances from related parties                                                   47,000                   -
   Repayments to related parties                                                        -            (314,603)
   Repayments to officers                                                               -            (146,250)
   Net advances from stockholder                                                                      157,634
   Proceeds from sale of common stock                                              65,000                   -
                                                                            -------------      --------------
                                                                                  101,000             (73,631)
                                                                            -------------      ---------------

Cash at end of year                                                        $            -     $             -
                                                                            =============      ==============
</TABLE>





                             Continued on next page.
                                       F-7
<PAGE>
<TABLE>
<CAPTION>
                                 CYBERADS, INC.

                Consolidated Statement of Cash Flows (continued)
                                                                                  Years ended December 31
                                                                                     2004             2003
                                                                                --------------     ----------
                                                                                                   (restated)
<S>                                                                             <C>                <C>
Supplemental disclosure of cash flow information -
   cash paid during the year for interest and financing costs                   $            -    $   206,697
                                                                                 =============     ==========

Supplemental disclosure of non-cash investing and financing activities:
   Factor payable renegotiated into notes payable                               $            -    $    120,000
                                                                                 =============     ===========

   Preferred stock issued in exchange for factor payable                        $            -    $    835,660
                                                                                 =============     ===========

   Common stock issued or to be issued in exchange for debt                     $      204,634    $    527,500
                                                                                 =============     ===========

   Accounts payable to supplier converted to note payable                       $      185,192    $          -
                                                                                 =============     ===========
</TABLE>































                             See accompanying notes.
                                       F-8
<PAGE>
                                 CYBERADS, INC.

                   Notes to Consolidated Financial Statements
                                December 31, 2004

1. Business and summary of significant accounting policies
         Business: CyberAds, Inc. ("CyberAds") was incorporated in the state of
         Florida on April 12, 2000. The Company earns commissions from selling
         approved contracts to subscribers for cellular telephone service.
         Commissions are received either from master dealers or cellular phone
         service providers, not the subscriber. Applications for cellular
         telephone services are obtained from advertising banners placed at
         various websites. The Company does business with cellular phone service
         providers as well as master dealers that have contracted with various
         other carriers and with several website hosts, who receive a commission
         for each completed contract for cellular phone service. The Company has
         been idle during 2004 and management has devoted their attention toward
         restructuring debt and seeking profitable products.

         Principles of consolidation: The accompanying consolidated financial
         statements for 2004 include the accounts of CyberAds and its wholly
         owned subsidiary IDS Cellular, Inc. ("IDS"). All significant
         intercompany transactions and balances have been eliminated in
         consolidation. The operations of IDS are currently idle.

         Cash and cash equivalents: For purposes of the cash flow statement, the
         Company considers all highly liquid investments with original
         maturities of three months or less at the time of purchase to be cash
         equivalents.

         Property and equipment: Property and equipment are stated at cost less
         accumulated depreciation. Depreciation is provided for over the
         estimated useful life of the assets of five to seven years. Leasehold
         improvements are amortized over the lesser of the original term of the
         related lease or their estimated useful life.

         Fair value of financial instruments: The Company discloses certain
         information about the fair value of financial instruments as required
         by SFAS 107, "Disclosure About Fair Value of Financial Instruments".
         Accounts receivable, accounts payable, accrued expenses, factor payable
         and loans and advances payable to related and non-related parties are
         reflected in the financial statements at fair value because of the
         short-term maturity of the instruments.

         Impairment of long-lived assets: The Company assesses the
         recoverability of long-lived assets under SFAS 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets" by determining whether the
         depreciation and amortization of the asset's balance over its remaining
         life can be recovered through projected undiscounted future cash flows.
         The amount of impairment, if any, is measured based on fair value and
         charged to operations in the period in which the impairment is
         determined by management. Long-lived assets to be disposed of are
         reported at the lower of carrying amount or fair value less cost to
         sell.

         The Company recorded an impairment loss of approximately $266,000
         during 2003 for assets that became idle as a result of staff
         reductions.

                                       F-9
<PAGE>
1. Business and summary of significant accounting policies (continued)
         Revenue recognition: The Company recorded revenue on a "net" basis when
         contracts are submitted to master dealers. The phones are shipped from
         the dealers to the subscriber and the Company does not bear the risk of
         loss on the cellular phone. Revenue is recognized when the master
         dealer ships the phones to the subscriber.

         In 2003 the also Company recorded revenue on a "gross" basis when
         contracts are submitted directly to cellular phone service providers.
         The phones are shipped from the Company to the subscriber and the
         Company bears the risk of loss on the cellular phone. Under the gross
         method commission and related cost of goods sold for the cellular phone
         is recognized when the Company ships the phones.

         Advertising costs: The Company expenses the cost of advertising as
         incurred as selling expenses. Advertising expenses were approximately
         $9,500 for 2003.

         Stock options and warrants: The Company uses a fair value based method
         of accounting for stock based compensation to employees. The Company
         also accounts for stock options and warrants issued to non-employees
         for services under the fair value method of accounting.

         Website development costs: The Company accounts for website development
         costs under Emerging Issues Task Force ("EITF") Issue No. 00-2,
         "Accounting for Web Site Development Costs". Under EITF 00-2, costs
         that involve design of the web page that do not change the content are
         capitalized and amortized over there estimated useful life. Costs
         incurred in operating a web site that has no future benefits are
         expensed in the current period. The Company accounts for costs incurred
         in operating their website under the American Institute of Certified
         Public Accountants Statement of Position ("SOP") No. 98-1. Under SOP
         98-1, costs that have a future benefit are capitalized and amortized
         over the estimated future periods that are expected to benefit from
         website changes.

         Income taxes: The Company files a consolidated tax return that includes
         CyberAds and IDS. The consolidated tax liability, determined without
         taking credits into account, is allocated based on each company's
         contribution to consolidated taxable income. Tax credits are allocated
         on a pro rata basis equal to each company's contribution to the
         consolidated tax credits determined to be available each year.

         Income taxes are determined using the liability method whereby deferred
         tax assets and liabilities are recognized for the expected tax
         consequences of temporary differences between the tax bases and
         reported amounts of assets and liabilities. Deferred tax assets and
         liabilities are computed using enacted tax rates expected to apply to
         taxable income in the years in which temporary differences are expected
         to be recovered or settled. The effect on deferred tax assets and
         liabilities from a

                                      F-10
<PAGE>
1. Business and summary of significant accounting policies (continued)
         change in tax rates is recognized in income in the period that includes
         the enactment date. The Company provides a valuation allowance for
         certain deferred tax assets, if it is more likely than not that the
         Company will not realize tax assets through future operations.

         Reporting consolidated comprehensive income (loss): The Company reports
         and displays consolidated comprehensive income (loss) and its
         components as separate amounts in the consolidated financial statements
         with the same prominence as other financial statements. Consolidated
         comprehensive income (loss) includes all changes in equity during the
         year that results from recognized transactions and other economic
         events other than transactions with owners. There were no components of
         consolidated comprehensive income to report for the years ended
         December 31, 2004 and 2003.

         Segment Reporting: The Company and its subsidiary reports information
         about operating segments and related disclosures about products and
         services, geographic areas and major customers under SFAS 131,
         "Disclosures about Segments of an Enterprise and Related Information".
         Operating segments are defined as components of an enterprise for which
         separate financial information is available that is evaluated regularly
         by management in deciding how to allocate resources and in assessing
         performance. The Company views its operations and manages its business
         in principally one segment, obtaining cellular phone applications.

         Net loss per common share: Net loss per common share is computed by
         dividing net loss by the weighted average number of common shares
         outstanding during the period as defined by SFAS 128, "Earnings Per
         Share". The weighted average number of common stock shares outstanding
         was $20,128,515 for 2004 (16,074,986 for 2003). Convertible debentures,
         convertible preferred stock, common stock options, and common stock to
         be issued are considered common stock equivalents. Common stock
         equivalents have not been included in the computation of diluted loss
         per share as the effect on net loss per common share would be
         anti-dilutive.

         Use of Estimates: The process of preparing financial statements in
         conformity with accounting principles generally accepted in the United
         States of America requires the use of estimates and assumptions
         regarding certain types of assets, liabilities, revenues and expenses.
         Accordingly, upon settlement, actual results may differ from estimated
         amounts.

2.       Operations
         Management of the Company plans to continue to restructure debt, seek
         profitable products, reduce operating expenses, and seek additional
         capital and debt financing until operations achieve profitability.
         Management of the Company believes the

                                      F-11
<PAGE>
2. Operations (continued)
         above actions, along with other plans, will allow them to continue
         operations and ultimately achieve profitability. Until then, the
         Company is dependent upon its ability to obtain additional capital and
         debt financing. The consolidated financial statements do not reflect
         adjustments relating to the recorded asset amounts, or the amounts of
         liabilities that would be necessary should the Company not be able to
         continue in existence.

3.       Property and equipment
         Property and equipment consisted of the following at December 31:
                                                  2004          2003
                                              -----------  -------------
           Furniture and fixtures             $    2,598    $     2,598
           Leasehold improvements                 20,085         20,085
            Computer equipment                    19,551         19,551
                                               ---------     ----------
                                                  42,234         42,234
            Less accumulated depreciation        (28,063)       (28,063)
                                               ---------     ----------

                                              $   14,171    $    14,171
                                               =========     ==========

4.       Notes payable
<TABLE>
<CAPTION>
         Notes payable consisted of the following at December 31:
                                                                                    2004                2003
                                                                                -----------         -----------
<S>                                                                             <C>                 <C>
            Note payable; was due in installments of $5,000 on January 15, 2004
            and February 15, 2004 with final payment due March 15, 2004, plus
            interest at 10% per annum; secured by all of the Company's accounts
            receivable, inventories, and computer hardware and software and is
            personally guaranteed by two former
            officers of the Company.                                            $   109,000         $   120,000

            Note payable to cellular phone service provider; due in installments
            of $92,596 payable on January 2, 2005 and August 2,
            2005, plus interest at 1 1/2% per month.                                185,192                   -
                                                                                -----------         -----------

           Total notes payable                                                  $   294,192         $   120,000
                                                                                ===========         ===========

           The Company is currently in default with the repayment terms of the
installment note.

                                      F-12
<PAGE>
5.       Accrued expenses
         Accrued expenses consisted of the following at December 31:
                                                                                    2004                2003
                                                                                -----------         -----------
           Payroll and payroll related liabilities                              $   614,143         $   548,195
           Commission charge-backs                                                        -             361,463
           Accrued interest                                                           3,993                   -
            Professional fees                                                        35,000              35,000
                                                                                -----------         -----------

                                                                                $   653,136         $   944,658
                                                                                ===========         ===========

         The Company is non-compliant with respect to certain federal and state
         payroll related taxes. Included in accrued payroll and payroll related
         liabilities is approximately $540,800 of unpaid payroll taxes.

6. Advances from related parties
         Advances from related parties consisted of the following at December
31:
                                                                                    2004                2003
                                                                                -----------         -----------
            Advance due to a corporation  owned by a former  officer of the
              Company, bearing interest at 10% per annum, due on demand
              and unsecured.                                                    $    54,000         $    54,000
            Advance due to a former officer of the Company, bearing
              interest at 10% per annum, due on demand and unsecured                732,555             732,555
                                                                                -----------         -----------
                                                                                $   786,555         $   786,555
                                                                                ===========         ===========
</TABLE>

7. Loans payable - convertible debentures
         Loans payable - convertible debentures consists of unsecured loans from
         two individuals whereby the principal of the note is convertible into
         the Company's common stock at the option of the holder. Interest on
         borrowings is payable quarterly at a rate of 20% per annum.

         The notes were originally convertible on or after May 13, 2003 at a
         conversion rate of 75% of the closing bid price of the Company's common
         stock one trading day prior to conversion. The beneficial conversion
         feature of the convertible debentures was valued at $20,000 on the date
         of issuance and was amortized over the original one-year life of the
         debentures.

         The due date of the convertible debentures was extended to February 13,
         2004. In consideration for the extension, the repayment of one of the
         notes was increased by $5,000 representing additional interest and the
         Company issued the holders an aggregate of 26,000 shares of its common
         stock for unpaid interest.

                                      F-13
<PAGE>
7. Loans payable - convertible debentures (continued)
         The notes were due in installments of $15,000 on November 13, 2003,
         $13,750 on December 13, 2003 and January 13, 2004, with final payment
         due February 13, 2004. The Company is currently in default with respect
         to the agreement.

         Interest expense was approximately $4,000 for the year ended December
31, 2004 ($3,300 for 2003).

8.       Advances from stockholder
         Notes payable to stockholder consisted of advances from Novanet Media,
         Inc. for working capital purposes. The advances were unsecured,
         non-interest bearing and due on demand.

         On September 2, 2004, the Company issued 2,000,000 share of its common
         stock to a major shareholder in exchange for $204,634 of working
         capital advances. The shares were valued at $.107 per share which
         represented a 68% discount from the closing bid price of the common
         stock on the date of issuance. Management of the Company estimated the
         value the shares issued based on the closing bid price of the Company's
         common stock at the date of issuance, the historical trend of the
         trading prices for its common stock and the volume of shares traded.
         The Company also recorded imputed interest of $9,663 as a result of the
         exchange.

9.       Commitments and contingencies
         The Company is non-compliant with respect to certain federal and state
         payroll related taxes. Included in accrued payroll and payroll related
         liabilities at September 30, 2004 and December 31, 2003 is
         approximately $540,800 of unpaid payroll taxes.

         In April 2004, the Company agreed to indemnify a former officer of the
         Company for any loss he sustained in a settlement reached with a
         cellular phone service provider against IDS and him personally. Under
         the indemnification, the Company was obligated to pay an aggregate of
         $72,261 in installments of $5,000 each on or before August 1, 2004 and
         September 1, 2004 with the balance due October 1, 2004. The
         indemnification had no effect on the accompanying financial statements
         as the amount owed to the cellular phone service provider was
         previously recorded as accounts payable in the records of IDS.

         The Company is currently in negotiations with an individual who has
         threatened a lawsuit against the Company, a former officer and a
         cellular phone service provider. The Company has offered to issue the
         individual 250,000 shares of common stock to settle any claims he may
         have against the Company. This individual has verbally accepted the
         settlement offer. The Company has reserved 250,000 shares of common
         stock to be issued under this settlement offer.

                                      F-14
<PAGE>
9. Commitments and contingencies (continued)
         A claim against the Company of approximately $500,000 has been
         threatened by the Creditors Committee of World Com. The Company does
         not believe that they owe the amount and intends to vigorously defend
         the claim. The claim has not been recorded in the accompanying
         consolidated financial statements due to the uncertainty of the matter.

10.      Capital stock transactions
         On May 19, 2004, the Company issued 50,000 shares of its common stock
         to a former officer of the Company in lieu of compensation. The shares
         were valued at $1.59, the closing bid price of the Company's common
         stock on the date of issuance. The Company record compensation expense
         of $79,500 as a result of the issuance.

         On August 31, 2004, the Company issued 2,000,000 shares of its common
         stock to a major shareholder of Novanet Media, Inc. in exchange for
         consulting services. The shares were valued at $.128 per share which
         represented a 63% discount from the closing bid price of the common
         stock on the date of issuance. Management of the Company estimated the
         value the shares issued based on the closing bid price of the Company's
         common stock at the date of issuance, the historical trend of the
         trading prices for its common stock and the volume of shares traded.
         The Company recorded professional fees of $250,000 as a result of the
         issuance.

         On November 1, 2004, the Company issued 300,000 shares of its common
         stock to in exchange for consulting services. The shares were valued at
         $.19 per share which represented a 44% discount from the closing bid
         price of the common stock on the date of issuance. Management of the
         Company estimated the value the shares issued based on the closing bid
         price of the Company's common stock at the date of issuance, the
         historical trend of the trading prices for its common stock and the
         volume of shares traded. The Company recorded professional fees of
         $57,000 as a result of the issuance.

         In October 2003 and in connection with the Debt Paydown Agreement, the
         Company designated 1,000,000 shares of its preferred stock as Series A
         Convertible Preferred Stock. The Series A Convertible Preferred Stock
         is non-voting and dividends accrue at a rate of 10% per annum payable
         quarterly. Unpaid accrued dividends are cumulative. The Series A
         Convertible Preferred Stock is convertible all or in part into the
         number of shares of the Company's common stock equal to 115% of the
         value of the preferred stock plus any cumulative dividends.

         On March 7, 2003, the Company issued 1,250,000 shares of its common
         stock in exchange for debt of $87,500 owed to the provider of its
         cellular phone service.

         On April 4, 2003, the Company issued 25,000 shares of its common stock
         upon signing an investment banking agreement for services. The weighted
         average

                                      F-15
<PAGE>
10. Capital stock transactions (continued)
         issuance price of the shares was $.05 per share. Management of the
         Company estimated the value the shares issued based on the closing bid
         price of the Company's common stock at the date of issuance, the
         historical trend of the trading prices for its common stock and the
         volume of shares traded. The Company recorded professional fees
         aggregating $1,250 during 2003 as a result of the issuance.

         On September 30, 2003, the Company issued 1,000,000 shares of its
         common stock to a major shareholder of Novanet Media, Inc. in exchange
         for management services. The weighted average issuance price of the
         shares was $.30 per share. Management of the Company estimated the
         value the shares issued based on the closing bid price of the Company's
         common stock at the date of issuance, the historical trend of the
         trading prices for its common stock and the volume of shares traded.
         The Company recorded professional fees aggregating $300,000 during 2003
         as a result of the issuance.

         On December 31, 2003, the Company issued 250,000 shares of its common
         stock to an investment-banking firm for services. The weighted average
         issuance price of the shares was $1.15 per share. Management of the
         Company estimated the value the shares issued based on the closing bid
         price of the Company's common stock at the date of issuance, the
         historical trend of the trading prices for its common stock and the
         volume of shares traded. The Company recorded professional fees
         aggregating $287,500 for 2003 as a result of the issuance.

         In December 2003, the Company agreed to issue 440,000 shares of its
         common stock in exchange for debt of $440,000.

11.      Stock based compensation
         During 2003, the Company issued 1,000,000 shares of its common stock to
         a former officer as compensation for services through September 14,
         2003. The weighted average issuance price of the shares was $.02 per
         share. Compensation expense of $20,000 was recorded for 2003 for the
         intrinsic value of the services rendered.

         Had compensation cost been determined based on the fair market value at
         the grant date, consistent with SFAS 148, the Company's net loss would
         have changed to the following pro-forma amount for the years ended
         December 31:
                                                                        2004
                                                                    ----------
              Net loss as reported                                 $(1,201,111)
              Pro-forma effect                                        (280,000)
                                                                    ----------

              Pro-forma net loss                                   $(1,481,111)
                                                                    ==========

                                      F-16
<PAGE>
11. Stock based compensation (continued)
              Basic and diluted net loss per share as reported     $     (.084)
              Pro-forma effect                                           (.006)
                                                                    ----------

              Pro-forma basic and diluted net loss per share       $     (.090)
                                                                    ==========

12.      Stock options
         The Company's stock option activity for options granted to employees
         and non-employees is summarized as follows for the years ended December
         31:

                                                Fixed Plan

                                              Weighted                Weighted
                                               average                 average
                                              exercise    Shares      exercise
                                 Shares         price   exercisable     price
                                -----------   --------  ------------  --------
           Outstanding at
              January 1, 2003    8,150,000     $  .82     8,150,000    $ .82
                                                        ============     ====
           Expired                (225,000)       .70
           Cancelled            (5,000,000)         -
                                ----------
           Outstanding at
              December 31, 2003  2,925,000        .48     2,925,000    $ .48
                                                           =========     ====
           Exercised              (500,000)       .13
           Expired                (300,000)      1.04
            Cancelled             (225,000)       .25
                                ----------
           Outstanding at
              December 31, 2004  1,900,000     $  .51     1,900,000    $ .51
                                ==========      =====   ============     ====

         The Company's stock option outstanding and exercisable at December 31,
2004 is summarized as follows:

                                                Fixed Plan
                          Options outstanding               Options exercisable
                                        Weighted average               Weighted
                                    ---------------------              average
               Range                 remaining   exercise              exercise
             of prices    Shares       life        price    Shares     price
           ------------  ---------  -----------  --------  ---------  ---------
            $.04 - $.99  1,200,000  1 yr. 5 mo.   $  .27   1,200,000   $  .27
           ============             ===========    =====                 =====
           $.99 - $1.25    700,000  1 yr. 2 mo.    $1.03     700,000   $ 1.03
           ============  ---------  ===========     ====   ---------     =====
           $.04 - $1.25  1,900,000    2 years     $  .51   1,900,000   $  .51
           ============  =========  ===========    =====   =========     =====


                                      F-17
<PAGE>
13.      Income taxes
<TABLE>
<CAPTION>
         Deferred income taxes consisted of the following at December 31:
                                                                        2004              2003
                                                                  ----------------  ---------------
<S>                                                               <C>               <C>
           Deferred tax asset - net operating loss carryovers     $     6,539,600   $    6,362,600
           Valuation allowance for deferred tax asset                  (6,539,600)      (6,362,600)
                                                                   --------------    -------------

                Net deferred income taxes                         $             -   $            -
                                                                   ==============    =============
</TABLE>

         As a result of the Company's continued losses and uncertainties
         surrounding the utilization of the net operating loss carryovers,
         management has determined that the realization of deferred tax assets
         is uncertain. Accordingly, a valuation allowance equal to the net
         deferred tax asset amount has been recorded as of December 31, 2004 and
         2003.

         Reconciliation of income taxes computed at the Federal statutory rate
         of 34% to the provision for income taxes is as follows for the years
         ended December 31:
<TABLE>
<CAPTION>
                                                                     2004              2003
                                                                  -------------  ---------------
<S>                                                               <C>            <C>
           Tax at statutory rates                                 $   (176,977)  $     (408,378)
           Differences resulting from:
              Non-deductible and other items                               (23)             178
              Change in deferred tax valuation allowance               177,000          408,200
                                                                   -----------    -------------

                Provision for income taxes                        $          -   $            -
                                                                   ===========    =============
</TABLE>

         At December 31, 2004, the Company had net operating loss carryovers of
         approximately $19,234,000 available to offset future Federal taxable
         income, if any, expiring through 2024. The utilization of the net
         operating loss carryovers could be limited due to restrictions imposed
         under Federal tax laws upon a change in ownership. The amount of the
         limitation, if any, has not been determined at this time.

14.      Settlements
         The Company entered into a consulting agreement in September 2002 for
         advisory, investor relations and public relations services. The
         consulting firm and the Company have taken the position that the other
         is in default of the agreement. The Company and the consulting firm
         reached a settlement in April 2004 whereby the Company agreed to issue
         100,000 shares of its common stock granted to the consulting firm under
         the original consulting agreement; however, the consulting firm was
         restricted from reselling the shares. Under the terms of the settlement
         agreement the consulting firm could resell no more than 3,000 share of
         the Company's common stock per week and no more than an aggregate of
         50,000 shares over a period of 120 days from the date of the
         settlement. They were further

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14. Settlements (continued)
         restricted from reselling the Company's common stock until September
         13, 2004 at which time they could resell no more than 3,000 shares of
         the Company's common stock per week and no more than an aggregate of
         50,000 shares over a period of 120 days. The Company recorded
         settlement expenses aggregating $110,000 as a result of the agreement
         in April 2004.

         Management of the Company valued the shares issued at $1.10 per share,
         the closing bid price of the Company's common stock on the date of the
         agreement. Management of the Company estimated the value of the
         Company's shares granted after considering the historical trend of the
         trading prices for its common stock and the limited volume of shares
         being traded.

         On April 27, 2004 the Company issued 50,000 shares of its common stock
         in accordance with the terms of the settlement. The Company has
         reserved an additional 50,000 shares of its common stock for issuance
         under the settlement.

         In April 2004, the Company agreed to indemnify a former officer of the
         Company for any loss he sustained in a settlement reached with a
         cellular phone service provider against IDS and him personally. Under
         the indemnification, the Company is obligated to pay an aggregate of
         $72,261 in installments of $5,000 each on or before August 1, 2004 and
         September 1, 2004 with the balance due October 1, 2004. The
         indemnification had no effect on the accompanying financial statements
         as the amount owed to the cellular phone service provider was
         previously recorded as accounts payable in the records of IDS.

15.      Prior period adjustment
         In 2003 the Company incorrectly reported the acquisition of an
         investment in real estate aggregating $10,700,000 that had not yet been
         completed. In 2004, management determined that it was not in the best
         interest of the Company to acquire that real estate by issuing its
         common stock. The adjustment resulted in an decrease in previously
         reported total assets and net capital deficiency by $10,700,000. The
         adjustment did not have any effect on previously reported net loss, net
         loss per share, or the statement of cash flows.

16.      Recently issued pronouncements
         In December 2004, the FASB issued a revision to SFAS 123, "Share-Based
         Payment, an amendment of FASB Statements Nos. 123 and 95," that
         addresses the accounting for share-based payment transactions in which
         a Company receives employee services in exchange for either equity
         instruments of the Company or liabilities that are based on the fair
         value of the Company's equity instruments or that may be settled by the
         issuance of such equity instruments. This statement would eliminate the
         ability to account for share-based compensation transactions using the

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16. Recently issued pronouncements (continued)
         intrinsic method and generally would require that such transactions be
         accounted for using a fair-value-based method and recognized as expense
         in the consolidated statement of operations. The effective date of this
         standard is for periods beginning after June 15, 2005. The Company
         previously adopted the fair-value-based method of valuing share-based
         payments and management does not expect any further impact of this new
         standard to have a material effect on its financial position, results
         of operations and cash flows.

         In July 2004, the Emerging Issues Task Force issued a draft abstract
         for EITF Issue No. 04-08, "The Effect of Contingently Convertible Debt
         on Diluted Earnings per Share" ("EITF 04-08"). EITF 04-08 reflects the
         Task Force's tentative conclusion that contingently convertible debt
         should be included in diluted earnings per share computations
         regardless of whether the market price trigger has been met. If
         adopted, the consensus reached by the Task Force in this Issue will be
         effective for reporting periods ending after December 15, 2004. Prior
         period earnings per share amounts presented for comparative purposes
         would be required to be restated to conform to this consensus and the
         Company would be required to include the shares issuable upon the
         conversion of its convertible notes payable in the diluted earnings per
         share computation for all periods during which the convertible notes
         payable are outstanding. Management does not expect the implementation
         of this new standard to have a material impact on its computation of
         diluted earnings per share.

         In December 2004, the Financial Accounting Standards Board Statement
         issued SFAS No. 153, "Exchanges of Non-monetary Assets, an amendment of
         APB Opinion No. 29", by eliminating the exception for non-monetary
         exchanges of similar productive assets and replaces it with a general
         exception for exchanges of non-monetary assets that do not have
         commercial substance. A non-monetary exchange has commercial substance
         if the future cash flows of the entity are expected to change
         significantly as a result of the exchange. SFAS No.151 is effective for
         a fiscal year beginning after June 15, 2005, and implementation is
         prospectively. Management does not expect the implementation of this
         new standard to have a material impact on its financial position,
         results of operations and cash flows.



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