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

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 --------------
                              AMENDMENT NUMBER 2 TO
                                   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)
                                                  --------------

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



                370 Amapola Avenue, Suite 202, Torrance, CA 90501
            --------------------------------------------------------
               (Address of principal executive office) (Zip Code)

                                 (888) 288-7466
                                ----------------
                           (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 SB 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: $303,120

         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.  None

         Transitional Small Business Disclosure Format (check one):
                                                                Yes |_| No |X|
================================================================================
<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, we have 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

        None.

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 the Company 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 the Company to rely on the fulfillment processes at Inphonic
reducing the requirement of employee related expenses at the Company.

         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.

         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
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 amended report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Torrance, CA on January 30, 2006.


CYBERADS, INC.

By:/s/ JEFF CRISWELL
Jeff Criswell
President and Chief Executive Officer

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

SIGNATURE                           TITLE                     DATE

/s/ JEFF CRISWELL                President and                01/30/06
Jeff Criswell                    Chief Executive Officer







































                                       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 REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of CyberAds, Inc.

We have audited the accompanying  consolidated balance sheets of CyberAds,  Inc.
as of  December  31, 2004 and 2003 and the related  consolidated  statements  of
operations,  net capital  deficiency and cash flows for each of the years in the
two-year period ended December 31, 2004. 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
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of CyberAds, Inc. as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for  each of the  years  in the  two-year  period  ended  December  31,  2004 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  operations of
$520,520 and a working  capital  deficiency of  $2,623,105.  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 and common stock to be issued  aggregating  $440,000 in
transactions that had not yet been completed.


                                                 /s/ TIMOTHY L. STEERS, CPA, LLC

April 7, 2005,  except  with  respect to Note 15
as to which the date is January 24, 2006
Portland, OR









                                       F-2
<PAGE>
                                 CYBERADS, INC.

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
                                                                                       December 31
                                                                         -------------------------------------
                                                                                2004               2003
                                                                         -----------------   -----------------
                                                                                                (restated)
                                                 ASSETS
                                                 ------
<S>                                                                       <C>                 <C>
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                                                               869,222             737,748
   Accrued liabilities                                                            653,136             944,658
   Unearned revenue                                                                     -             130,960
   Advances from related parties                                                1,186,555           1,186,555
   Loans payable - convertible debentures                                          60,000              60,000
                                                                         -----------------   -----------------
       Total current liabilities                                                3,063,105           3,181,128

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                                                           50                   -
   Additional paid-in capital                                                  16,170,085          15,399,238
   Accumulated deficit                                                        (19,234,546)        (18,714,026)
                                                                         -----------------   -----------------
       Total stockholders' equity (deficit)                                    (3,040,349)         (3,295,626)
                                                                         -----------------   -----------------

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

                      Consolidated Statement of Operations

<TABLE>
<CAPTION>
                                                           Years ended December 31
                                                          2004              2003
                                                   ----------------   -----------------
<S>                                                <C>                <C>
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>
                                 CYBERADS, INC.

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

<TABLE>
<CAPTION>
                          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)  $(3,686,740)

Shares issued in
   exchange for debt   835,660       836    1,250,000      1,250           -       921,074              -           -       923,160

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   $       -   $15,399,238   $(18,714,026)  $       -   $(3,295,626)
                     ========== ========= ============ ========== =========== ============= ============== =========== =============
</TABLE>

















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

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

<TABLE>
<CAPTION>
                          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   $       -   $15,399,238   $(18,714,026)  $       -   $(3,295,626)

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
   compensation &
   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   $      50   $16,170,085   $(19,234,546)  $       -   $(3,040,349)
                     ========== ========= ============ ========== =========== ============= ============== =========== =============
</TABLE>















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

                      Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
                                                                                  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                   -
   Advances from 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>
                                 CYBERADS, INC.

                Consolidated Statement of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                                 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     $        87,500
                                                                          ================   =================

   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 subsidiaries IDS Cellular,  Inc. ("IDS") and The Vineyards,  LLC.
         All  significant  intercompany  transactions  and  balances  have  been
         eliminated in consolidation.  The operations of IDS The Vineyards,  LLC
         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
         -------------

         Notes payable consisted of the following at December 31:
                                                          2004           2003
                                                       -----------   -----------

          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:

<TABLE>
<CAPTION>
                                                                         2004            2003
                                                                     ------------  --------------
<S>                                                                  <C>           <C>
         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  offer  had  no  effect  on  the  accompanying
         consolidated  financial  statements  as  consulting  services  totaling
         $27,500  owed this  individual  was  previously  recorded  as  accounts
         payable in the records of Cyberads.

                                      F-14
<PAGE>
9.       Commitments and contingencies (continued)
         -----------------------------------------

         The Company has  reserved  250,000  shares of common stock to be issued
         under this settlement offer.

         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  recorded  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  measured  at the value of the
         services  received  because  management of the Company  considered that
         value to be a more  reliable  measure than the fair value of the common
         stock issued.  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 in exchange for consulting services.  The shares were measured at
         the value of the services  received  because  management of the Company
         considered that value to be a more reliable measure than the fair value
         of the common stock issued.  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.

                                      F-15
<PAGE>
10.      Capital stock transactions (continued)
         --------------------------------------

         On April 4, 2003,  the Company issued 25,000 shares of its common stock
         to an investment-banking firm for services. The shares were measured at
         the value of the services  received  because  management of the Company
         considered that value to be a more reliable measure than the fair value
         of the common stock  issued.  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 shares were measured at the value of the
         services  received  because  management of the Company  considered that
         value to be a more  reliable  measure than the fair value of the common
         stock  issued.  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  shares  were
         measured at the value of the services  received  because  management of
         the Company  considered  that value to be a more reliable  measure than
         the  fair  value of the  common  stock  issued.  The  Company  recorded
         professional  fees  aggregating  $287,500  for 2003 as a result  of the
         issuance.

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:
                                                                       2003
                                                                  --------------

              Net loss as reported                                 $ (1,201,111)
              Pro-forma effect                                         (280,000)
                                                                  --------------

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

              Basic and diluted net loss per share as reported     $      (.084)
              Pro-forma effect                                            (.006)
                                                                  --------------

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

                                      F-16
<PAGE>
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:

<TABLE>
<CAPTION>
                                                                            Fixed Plan
                                                   -----------------------------------------------------------
                                                                      Weighted                      Weighted
                                                                       average                       average
                                                                      exercise        Shares        exercise
                                                        Shares          price       exercisable       price
                                                   ---------------   -----------  ---------------  -----------
<S>                                                <C>               <C>          <C>              <C>
           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
                                                   ===============   ===========  ===============  ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                   Fixed Plan
--------------------------------------------------------------------------------------------------------------
                            Options outstanding                                   Options exercisable
-------------------------------------------------------------------------  -----------------------------------
                                                  Weighted average
                                            -----------------------------                         Weighted
               Range                           remaining      exercise                            average
             of prices          Shares           life           price           Shares        exercise price
          ---------------  ---------------  --------------  -------------  ---------------   -----------------
<S>       <C>              <C>              <C>             <C>            <C>               <C>
            $.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
          ===============  ===============  ==============  =============  ===============   =================
</TABLE>

13.      Income taxes
         ------------

         Deferred income taxes consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                                   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>

                                      F-17
<PAGE>
13.      Income taxes (continued)
         ------------------------

         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:

                                                          2004           2003
                                                       ------------  -----------
         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                $        -    $       -
                                                       ============  ===========

         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  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.

                                      F-18
<PAGE>
14.      Settlements (continued)
         -----------------------

         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 adjustments
         ------------------------

         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.

         In 2003 the Company  incorrectly  reported common stock to be issued in
         exchange for accounts payable of $440,000 in a transaction that had not
         yet been  completed.  The debtors  agreed to accept common stock of the
         Company in exchange  for their  payable  however  have not yet demanded
         issuance of the common stock. The adjustment resulted in an increase of
         $440,000 in  previously  reported  current  liabilities,  a decrease of
         $440,000 in previously reported net capital deficiency,  and a decrease
         of $440,000  of  previously  reported  net cash  provided by  operating
         activities.  The  adjustment  did not have  any  effect  on  previously
         reported net loss or net loss per share.

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

                                      F-19
<PAGE>
16.      Recently issued pronouncements (continued)
         ------------------------------------------

         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 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.

                                      F-20