**U. S. SECURITIES AND EXCHANGE COMMISSION****Washington, D. C. 20549**

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**FORM 10-KSB**

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

**For the fiscal year ended December 31, 2005**

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

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Commission File Number:**000-25261**

**BANCORP INTERNATIONAL GROUP, INC.(formerly March Indy International, Inc.)**(Name of small business issuer in its Charter)

** **
| **NEVADA**(State or other jurisdiction of  incorporation or organization) | **88-0339817**(I.R.S. Employer Identification No.) |
|---------------------------------------------------------------------------|----------------------------------------------------|

 

**3126South Boulevard, Suite 264****Edmond, Oklahoma 73013**(Address of principal executive offices)**(405) 235-8318**(Issuer’s telephone number)

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Securities registered under Section 12(b) of the ExchangeAct:

Securitiesregistered under Section 12(g) of the Exchange Act:**Common Stock, $0.0001 Par Value**

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Checkwhether the issuer (1) filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hassubject to such filing requirements for the past 90 days.    Yes o   No x

Checkif there is no disclosure of delinquent filers in response to Item 405 ofRegulation S-B is not contained in this form, and no disclosure will becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-KSBor any amendment to this Form 10-KSB. [X]

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).    Yes x   No o

Theissuer did not generate any revenue for the year ended December 31, 2005.

Theaggregate market value of the issuer’s common stock, $.0001 par value, held bynon-affiliates of the issuer as of June 15, 2006, was $24,763 based on thelast reported sale price on February 22, 2006 of $0.0001 as reported bythe Electronic Quotation and Trading System for over-the-counter securities. Asof June 15, 2006,  500,010,229shares of the issuer’s common stock, $.0001 par value, were outstanding.

 

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**BANCORP INTERNATIONAL GROUP, INC.**

**(formerly March Indy International, Inc.)**

**FORM 10-KSB**

**For the Fiscal Year Ended December 31, 2005**

**TABLE OF CONTENTS**

 
| Part I.   |                                                                                                                        |
|----------------|-----------------------------------------------------------------------------------------------------------------------------|
| Item 1.        | Description  of Business                                                                                                    |
| Item 2.        | Description  of Property                                                                                                    |
| Item 3.        | Legal  Proceedings                                                                                                          |
| Item 4.        | Submission  of Matters to a Vote of Security Holders                                                                        |
|           |                                                                                                                        |
| Part II.  |                                                                                                                        |
| Item 5.        | Market  for Common Equity and Related Stockholder Matters                                                                   |
| Item 6.        | Management’s  Discussion and Analysis or Plan of Operation                                                             |
| Item 7.        | Financial  Statements                                                                                                       |
| Item 8.        | Changes  In and Disagreements With Accountants on Accounting and Financial Disclosure                                       |
| Item 8A.       | Controls  and Procedures                                                                                                    |
| Item 8B.       | Other  Information                                                                                                          |
|           |                                                                                                                        |
| Part III. |                                                                                                                        |
| Item 9.        | Directors,  Executive Officers, Promoters and Control Persons; Compliance With  Section 16(a) of the Exchange Act |
| Item 10.       | Executive  Compensation                                                                                                     |
| Item 11.       | Security  Ownership of Certain Beneficial Owners and Management and Related Shareholder  Matters                            |
| Item 12.       | Certain  Relationships and Related Transactions                                                                             |
| Item 13.       | Exhibits                                                                                                                    |
| Item 14.       | Principal  Accountant Fees and Services                                                                                     |
|           |                                                                                                                        |
| SIGNATURES     |

 

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION**

         Certain statements in this reportconstitute “forward-looking statements” within the meaning of Section 27Aof the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended. Certain, but not necessarily all,of such forward-looking statements can be identified by the use offorward-looking terminology such as “anticipates,” “believes,” “expects,” “may,”“will,” or “should” or other variations thereon, or by discussions ofstrategies that involve risks and uncertainties. The actual results or industryresults may be materially different from any future results expressed orimplied by such forward-looking statements.

Throughoutthis report the first personal plural pronoun in the nominative case form “we”and its objective case form “us”, its possessive and the intensive case forms “our”and “ourselves” and its reflexive form “ourselves” refer collectively toBancorp International Group, Inc., its subsidiaries and executive officersand directors.

2

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**PART I**

**Item 1. Descriptionof Business**

**Overview**

                N.E.C.Properties, Inc. (“NEC”) was incorporated on September 16, 1995,under the laws in the State of Nevada. NEC was organized with no operations orplan of business and was a blank check company. On September 30, 1995 NEChad 25,000 shares at no par value authorized and 18,600 shares issued andoutstanding for $1,860 in cash. On November 19, 1998 the amended andrestated Articles of Incorporation were filed with the Secretary of State ofNevada that increased NEC’s authorized common shares from 25,000 to 25,000,000,and established a par value of $.001 per share. In November 1998 the NECstockholders approved two forward stock splits. The first was a 100 for 1 splitincreasing the number of the outstanding common shares to 1,860,000 and thesecond was a 1.77 for 1 stock split resulting in 3,292,200 common sharesoutstanding.

                OnNovember 10, 1999, NEC acquired all of the outstanding stock of March IndyInternational, Inc. (“March”), in exchange for 7,706,575 shares of NEC(the “Share Exchange”). March was incorporated in Delaware on November 24,1998 (“inception”). For accounting purposes, the transaction was accounted foras a reverse acquisition under the purchase method for business combinations,and accordingly the transaction was treated as a recapitalization of March,with March having acquired NEC.

                OnJune 17, 2000, we declared a one-for-three reverse stock split, effective September 26,2000. This reverse stock split reduced the number of our outstanding commonstock shares from 12,090,234 to 4,030,078.

                Weare a development stage enterprise. From inception through September 30,2000, we were in the preliminary stages of engaging in the business ofdesigning, building and racing cars for Formula One, Cart and Indy competitionboth in the United States and abroad. We also planned to develop an internetwebsite to offer and sell merchandise products related to our  racing efforts. In October 2000, becauseof our inability to successfully organize an Indy car race team and our failureto compete in the Indianapolis 500, we discontinued our racing and relatedpromotional activities.

                Duringthe calendar quarter ended September 30, 2001, we  changed our name to Bancorp InternationalGroup, Inc..

                OnAugust 19, 2005, our Board of Directors approved and adopted theCertificate of Designation Preferences and Right of Preferred Stock (“Certificateof Designation”). The Certificate of Designation sets forth the preferences andrights of the Company’s 15,000,000 authorized shares of preferred stock, $.0001par value, to be designated as the Series A Convertible Preferred Stock (“Series APreferred Stock”).

                OnAugust 19, 2005, our stockholders voted to amend our Articles ofIncorporation to increase the number of authorized shares of common stock from25,000,000 at a par value of $.001 to 500,000,000 at a par value of $0.0001. Ina second amendment on August 19, 2005, effective January 6 2006, ourstockholders approved another amended to our Articles of Incorporation thatincreased the number of our authorized shares of common stock from 500,000,000at $.0001 par value to 2,000,000,000 at $.0001 par value.

Wehave failed to timely file our reports with the U.S. Securities and ExchangeCommission in accordance with our obligations under Section 12(g) ofthe Securities Exchange Act of 1934, as amended (the “Exchange Act”). We are inthe process of preparing reports with the intent of becoming current in ourreporting obligations under the Exchange Act.

**Employees**

Asof the date of this report, we have one full-time employee, Thomas Megas, ourchief executive officer, who does not receive any form of compensation orremuneration.

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**ADDITIONALFACTORS THAT MAY AFFECT OUR FUTURE RESULTS**

Thefollowing factors and the matters discussed below and elsewhere in this reportshould be considered when evaluating our business operations and strategies.Additionally, there may be other risks and uncertainties that we are not awareof or that we currently deem immaterial, which may become material factorsaffecting our operations and business success. Many of the factors are notwithin our control. We provide no assurance that one or more of these factorswill not adversely affect us or:

·                                      the marketprice of our common stock;

·                                      any businessactivities undertaken in the future;

·                                      outsidemarket factors that affect our financial condition;

·                                      futuremerger partner; and

·                                      salesof  additional stock or other equitysecurities on terms that are highly dilutive to our shareholders.

**We are a “blank check company” and are not conducting anybusiness activities and do not have any plan of operation to undertake abusiness activity and have substantial accumulated losses.**

Duringthe quarter ended September 30, 2000, we discontinued our auto racingactivities. As of December 31, 2005 we have not formulated a plan toundertake another business activity. However, we are examining businessopportunities within the energy sector, although no definitive agreements havebeen executed.

Wehave not realized any revenue from our operations and have incurred substantiallosses resulting in an accumulated deficit at December 31, 2005, of$4,577,949. In addition, we will continue to incur losses attributable to theadministrative costs associated with a “blank check, publicly-held shellcompany.” See “Item 6. Management’s Discussion and Analysis or Plan ofOperation.”

                **There is no assurance that we will obtain capitalresources to fund any business activities undertaken.**

Todate, we have not pursued additional sources of capital resources; however, ourability to fund future business enterprise is directly related to our abilityto obtain capital resources through the sale or syndication of some or all ofour interests through a public offering or mergers with other viable businessentities. If we are unsuccessful and capital resources do not become availableon terms acceptable to us, we may not be able to undertake the businessenterprise or, if undertaken, continue the business enterprise. This lack ofcapital resource may ultimately result in the loss of investment in our commonstock.

**We may undertake startup business activities pursuant tosharing arrangements that do not result in the anticipated benefits****.**

                Inconnection with a business enterprise we undertake, we may enter into variouscost and revenue sharing arrangements, including joint ventures andpartnerships, intended to complement or expand the business activities. We maynot realize the anticipated benefits offered by these arrangements. The costsof obtaining these sharing arrangements may increase our invested cost in thebusiness activities without providing a correlating increase in the revenues;thus, adversely affecting the financial potential of the business activities.

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**Any business activities or enterprise undertaken outside ofthe United States will involve inherently greater risks.**

     We may engage in a business enterprise oractivity outside the United States. As with any business operation andactivities outside of the United States, there are a number of inherent risks,many of which are beyond our control, including:

·              changes inlocal regulatory requirements;

·              changes inthe laws and policies affecting trade, investment and taxes (including laws and policies relating to the repatriation of funds and withholding taxes);

·              differingdegrees of protection of property rights;

·              instabilityof foreign currencies, economies and governments;

·              culturalbarriers; and

·              wars andacts of terrorism.

Anyof these factors could have a material adverse effect on our ability tocommence and continue the business enterprise undertaken, which may adverselyaffect the financial potential and success of the undertaken businessenterprise.

**When a market develops for our common stock, themarket price of our common stock may be highly volatile in the market place.**

       Although a market for our common stockshares previously existed, the   tradingvolume has always been very low. Furthermore, we have been delinquent in ourreporting obligations under Exchange Act. If a market redevelops, the marketprice of our common stock may be subject to certain fluctuations in response to

          ·   variations in quarterly operating results of the enterprise,

          ·   changes in earnings estimates by analysts,

          ·   development of competition within the industry, and

          ·   general stock market conditions.

**Our common stock trades in the Over-the-Counter market andthat market is highly volatile and affected by competitive forces outside ofour control.**

Uponbringing the Company filings current, the common stock should be initiallytraded on the over-the-counter exchange. The over-the-counter market’svolatility is characterized as follows:

          ·   the  over-the-counter  securities are subject to substantial  and sudden price increases and decreases,

          ·   at times the price (bid and ask) information  for the securitiesmay not be available,

          ·  if there is an insufficent number of market makers, there is a risk thatthe  dealers or group of dealers  may control the market in our common stockand set prices that are not based on competitive forces, and

          ·   the available offered price may be substantially below the quoted bidprice.

5

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**Our common stock is subject to the penny stocktrading rules which may adversely affect the ability to resell the stock.**

Ourcommon stock is subject to the “penny stock” rules. A “penny stock” isgenerally a stock that

·              is only  listed in “pink  sheets”  or on the NASD OTC  Bulletin Board,

·              the high bid price for thecommon  stock is less than $5.00,  and less than two market makers are currentlydisplaying bid and ask quotations at specified prices, or

·                                     is issued by a company with net  tangible assets of less than $5 million (or after having been in  existence  for more than three years, less than $2million) or

·              has average revenues during theprevious three years of less than $6 million.

Thepenny stock trading rules impose additional duties and responsibilitiesupon broker-dealers and salespersons recommending the purchase a penny stock orthe sale of a penny stock. Required compliance with these rules willmaterially limit or restrict

·              the ability to resell our commonstock, and

·              the liquidity  typically associated  with otherpublicly  traded stocks may not exist.

**We have a large number of authorized and unissuedshares of our common stock; the issuance and terms of issuance are within ourdiscretion and not subject to stockholder approval.**

Wemay issue additional common stock and preferred stock at prices and on termsdetermined by our board of directors, without stockholder  consent or approval,that upon  issuance  may result in  substantial  dilution of our  stockholders’interests  as well as the  market price  and  value of our  common  stock.

      We have 2,000,000,000 shares of commonstock and 15,000,000 shares of Series A Preferred Stock (each convertibleinto 100 shares of our common stock) authorized for issuance. We have the rightto offer these shares at offering prices to be determined at the solediscretion of our board of directors. The sale of these shares may result insubstantial dilution to our shareholders. These stock issuances may adverselyaffect the market price or value of our common stock.

**Our chief executive officer has voting control and mayexercise this control in the election of our directors and their continuedservice on our Board.**

Onmatters that our stockholders are entitled to vote, our chief executive officerand one of the members of our board of directors, Thomas Megas, holds votingcontrol through his ownership of common stock and preferred stock. Although Mr. Megasin his capacity as a director and our chief executive officer has a fiduciaryduty to our stockholders, Mr. Megas may exercise his voting control in amanner personally beneficial to him and to the detriment or disadvantage of ourother stockholders.

**Item 2. Descriptionof Property**

**Facilities**

         Our corporate office is located at3126 South Blvd. Suite 264, Edmond, Oklahoma 73013. If, and when, weundertake a business development enterprise, we will relocate our office tofacilities that will then serve our needs, both in location and facility size.

6

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**Item 3. LegalProceedings**

         We are currently involved in pursuingadditional legal action filed in the state of Oklahoma against Pamela ThompsonCPA, The Grace Trust and Charles Weller, esq. This case is related to thefiling described below and represents the unsettled portion of case.

         In August 2005, our managementbecame aware of the unauthorized fraudulent issuance of approximately243,842,000 shares of our common stock (the “Wrongfully Issued Shares”) tovarious entities and individuals for services and gifts, whereupon theseentities and individuals attempted to sell the Wrongfully Issued Shares in theopen market. Our officers and directors had no relationship with the entitiesand individuals that issued the Wrongfully Issued Shares.

InSeptember 2005, we a civil action in the District Court of OklahomaCounty, Oklahoma, styled *BancorpInternational Group, Inc. v.Mario A. Pino, an individual, Sam Deeb, anindividual, Jean Carlos Medina, an individual, Charles Weller, an individual,Barkev Kibarian, an individual, Felica Morales, an individual, Clearstock, Inc.,a Texas corporation, DealFlo, L.L.C., a New York Limited Liability Company, TheGrace Trust, a foreign trust, Global Consulting Group, a Maryland corporation,Intelligent Message Distributors, a Nevada corporation, and Wall Street Group,L.L.C., a Arizona limited liability company* (the “Defendants”), CaseNo. CJ-2005-7459 (the “Civil Litigation”), seeking the returnof the Wrongfully Issued Shares and the Defendants’ receipt of proceeds fromthe sale of those shares.

      In the Civil Litigation we that Mr. Pinoindividually and through various affiliated entities and co-conspirators,including the Wall Street Group, L.L.C., prepared or possessed 20 or morecommon stock certificates purportedly representing 235,000,000 shares of ourcommon stock, the previously referred to Wrongfully Issued Shares, that weredistributed to various individuals and entities, including the otherDefendants. The number of shares in question was what we could identify butcould not determine if, in addition to the 235,000,000 shares, any additionalshares issued to the market. Capital Growth Financial, L.L.C. and JH Darbie &Co. intervened in the Civil Litigation (the “Intervenors”) and alleged that theCompany negligently hired the Defendants and negligently supervised theiractions and activities, and asserted Oklahoma and federal securities fraud andfailure-to-register claims against the Defendants and us.

      Inconjunction with the Civil Litigation, we reached an agreement with JH Darbie &Co., under which we  delivered 25,025,000common stock shares to JH Darbie & Co. to be held pending settlementor conclusion of the Civil Litigation. These shares were delivered to JH Darbie &Co. to satisfy the requirements of Depository Trust Company (“DTC”) untilcommon stock shares eligible to be resold without restriction could bedelivered by JH Darbie & Co. to cover its short position in our commonstock. Furthermore, JH Darbie & Co. placed in trust $72,500 to be usedto pay the costs incurred regarding the litigation.

OnJanuary 11, 2006, the Court entered an Order Approving SettlementAgreement (the “Order”). As a result of issuance of the Order, a settlementagreement (the “Settlement Agreement”) became binding upon the Company and theDefendants Mario Pino, Barkev Kibarian, Juan Carlos Medina, Wall Street Group,L.L.C., Clearstock, Inc., Sam Deeb, Global Consulting Group., DealFlo,L.L.C., and Intelligent Message Distributors (the “Settling Defendants”) andthe Intervenors with an effective date of December 8, 2005.

                Inaccordance with the Settlement Agreement, our claims against the SettlingDefendants and the claims of the Settling Defendants against us were resolvedby the exchange of releases of claims, a release of the Wrongfully IssuedShares and payments to us in the aggregate sum of $171,546 from funds held atCapital Growth Financial, L.L.C. and the further agreement to pay an additional$277,093 by Capital Growth. Furthermore, the claims of the Intervenors againstus were released for the issuance of 25,025,000 shares of our common stock toJH Darbie & Co. and 219,723,000 shares of our common stock to CapitalGrowth Financial, L.L.C. for an aggregate sum of 244,748,000 common stockshares (the “Newly Issued Shares”). These shares were required to be depositedwith DTC by JH Darbie & Co. and Capital Growth Financial, L.L.C. insatisfaction of their short positions with companies through which securitiespurchase and sale transactions are cleared on behalf of JH Darbie &Co. and Capital Growth Financial, L.L.C. The Newly Issued Shares were issued inaccordance with the registration exemption afforded under Section 3(a)(10) ofthe Securities Act.

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Inaddition, Defendants Pino, Medina, Kibarian, Global Consulting Group,Intelligent Message Distributors and Wall Street Group, L.L.C. agreed toindemnify and hold harmless the Company against all actions, suits,proceedings, demands, and assessments brought by any past, present or futureholder of the shares of common stock of the Company in connection with theSettlement Agreement and the various claims of the Company settled in theSettlement Agreement and any associated judgments, attorney’s fees, costs andexpenses.

TheDefendants, Grace Trust, Charles Weller, and Felica Morales (“Non-SettlingDefendants”), did not execute the settlement agreement and accordingly did notsettle the claims asserted against them in the Civil Litigation. We receivedjudgments against the Non-Settling Defendants, other than The Grace Trust, andare currently pursuing collection of these judgments.

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

Other than those matterssubmitted at the shareholders meeting held on August 19, 2005, no matterswere submitted to vote of our security holders during 2000, 2001, 2002, 2003,2004 and 2005.

Because of theunauthorized issuance of our common stock shares as discussed in Part I -Item 3. Legal Proceedings, at a special shareholders meeting held on August 19,2005, the holders of our common stock approved the following:

 
| ** **                                                                                                                                               | ** ** | **Number of Votes Cast** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                                                                                               | ** ** | **For**                                 | ** ** | **Against** | ** ** | **Abstained** | ** ** | **Broker  Non-Votes** | ** ** |
| Amendment of our  Articles of Incorporation to increase the number of authorized common stock shares  from 25,000,000, to 500,000,000, $0.0001 par value |       | 3,659,311                               |       | — |   | — |   | — |   |
|                                                                                                                                                     |       |                                    |       |   |   |   |   |   |   |
| Amendment of our  Articles of Incorporation to authorize 15,000,000 shares of preferred stock ,  $0.001 par value                                        |       | 3,659,311                               |       | — |   | — |   | — |   |
|                                                                                                                                                     |       |                                    |       |   |   |   |   |   |   |
| Amendment of our Articles of Incorporation to increase the number of  authorized common stock shares to 2,000,000,000, $0.0001 par value                 |       | 3,659,311                               |       | — |   | — |   | — |   |

 

**PART II**

**Item 5. Market for Common Equity and RelatedStockholder Matters and Small Business Issuers Purchases of Equity Securities**

**Lack of Market**

      Prior to our common stock qualifying forquotation on the Over-the-Counter Bulletin Board (the “OTCBB”) under the symbol“INDQ” in November 1999, the common stock only minimally traded. In 2000our common stock was removed from the OTCBB and all trading activity was quotedin the “pink sheets” and currently is reported under the symbol “BCIT.”

Thefollowing table presents the range of high and low bid prices per common stockshare for the quarterly periods presented. The bid prices reflect inter-dealerprices, without mark-ups, mark-downs or commissions and may not present theactual price paid for the shares.
| ** **              | ** ** | **Common Stock Bid Prices** | ** ** |
|-------------------------|------------|--------------------------------------------|------------|
| **Quarter Ended:** | ** ** | **Low**                                    | ** ** | **High** | ** ** |
| March 31,  2006    |       | $                                          | 0.0001     |   | $ | 0.0030 |   |
|                    |       |                                       |       |   |   |
| December 31,  2005 |       | $                                          | 0.0010     |   | $ | 0.0200 |   |

 

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| September 30,  2005 |   | $      | 0.0010 |   | $      | 0.0390 |   |
|--------------------------|--------|--------|--------|--------|--------|--------|--------|
| June 30,  2005      |   | $      | 0.0025 |   | $      | 0.0813 |   |
| March 31,  2005     |   | $      | 0.0400 |   | $      | 0.0800 |   |
|                     |   |   |   |   |   |
| December 31,  2004  |   | $      | 0.0200 |   | $      | 0.0500 |   |
| September 30,  2004 |   | $      | 0.0300 |   | $      | 0.0300 |   |
| June 30,  2004      |   | $      | 0.0300 |   | $      | 0.0300 |   |
| March 31,  2004     |   | $      | 0.0300 |   | $      | 0.0300 |   |
|                     |   |   |   |   |   |
| December 31,  2003  |   | $      | 0.0300 |   | $      | 0.0500 |   |
| September 30,  2003 |   | $      | 0.0500 |   | $      | 0.0600 |   |
| June 30,  2003      |   | $      | 0.0600 |   | $      | 0.0600 |   |
| March 31,  2003     |   | $      | 0.0600 |   | $      | 0.0600 |   |
|                     |   |   |   |   |   |
| December 31,  2002  |   | $      | 0.0600 |   | $      | 0.0600 |   |
| September 30,  2002 |   | $      | 0.0510 |   | $      | 0.0600 |   |
| June 30,  2002      |   | $      | 0.0500 |   | $      | 0.1000 |   |
| March 31,  2002     |   | $      | 0.1000 |   | $      | 0.3000 |   |
|                     |   |   |   |   |   |
| December 31,  2001  |   | $      | 0.2600 |   | $      | 1.0100 |   |
| September 30,  2001 |   | $      | 0.1000 |   | $      | 2.0000 |   |
| June 30,  2001      |   | $      | 0.0100 |   | $      | 0.1500 |   |
| March 31, 2001      |   | $      | 0.0200 |   | $      | 0.1500 |   |

 

**DividendPolicy**

Ourpolicy is to retain future earnings to support future business undertakings. Ifpolicy was to change, any future cash dividends will depend on factors deemedrelevant by our board of directors. These factors will generally include futureearnings, capital requirements and our financial condition. Furthermore, in theevent preferred stock shares were issued, no dividends will be paid onoutstanding common stock shares until all dividends then due on outstandingpreferred stock have been paid.

**Holders of Equity Securities**

As of June 15, 2006, there were 406 ownersof our common stock.

**Repurchase of Equity Securities**

We did not repurchase any of our commonstock shares during 2005.

**SecuritiesAuthorized for Issuance under Equity Compensation Plans**

The followingtable sets forth as of December 31, 2005, 2004, 2003, and 2002 informationrelated to each category of equity compensation plan, including individualcompensation arrangements with our non-employee directors. We do not have anyequity compensation plans approved by our shareholders. All stock options andrights to acquire our equity securities are exercisable for or represent theright to purchase our common stock.

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| **Plan category**                                          | ** ** | **Number of   Securities to be   issued upon   exercise of   outstanding   options, warrants   and rights** | ** ** | **Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number of   securities   remaining available  for future issuance   under equity   compensation plans** | ** ** |
|-----------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| *Equity compensation plans  approved by security holders: None* |       |                                                                                                                                                                         |       |                                                                                                        |       |                                                                                                                                                        |       |
|                                                            |       |                                                                                                                                                                         |       |                                                                                                        |       |                                                                                                                                                        |       |
| *Equity compensation plans not  approved by security holders:*  |       |                                                                                                                                                                         |       |                                                                                                        |       |                                                                                                                                                        |       |
| Employment  Agreement with Thomas Megas(1)                      |       | 400,000                                                                                                                                                                      |       | $                                                                                                           | 1.00       |                                                                                                                                                        | —     |   |
|                                                            |       |                                                                                                                                                                         |       |                                                                                                        |       |                                                                                                                                                        |       |
| Total                                                           |       | 400,000                                                                                                                                                                      |       |                                                                                                        |       | —                                                                                                                                                      |       |
|                                                                 |            |                                                                                                                                                                              |            |                                                                                                             |            |                                                                                                                                                             |            |  |

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(1)                                  OnFebruary 23, 2006, Mr. Megas released all of his contractual rightsunder his Employment agreement with us, including the stock options exercisablefor the purchase of 400,000 shares of our common stock for $1.00.

**SecuritiesSold Pursuant to Private Placement Offering**

Wedid not sell any securities during 2005.

**Item 6. Management’sDiscussion and Analysis or Plan of Operation.**

**Discontinued Operations**

Sinceinception, we have not realized any revenue from operations. We discontinuedour motor racing business activities in the third quarter of 2000 and have notundertaken any business activities since. Accordingly, all of these activitiesare reflected as discontinued operations in 2000 and a loss of $4,488,503. Becausewe do not have any assets and do not conduct any business activities, we areclassified as a “shell company.” As of the date of this report, we have notdeveloped a plan of operation.

**Operations**

Our operations for theyears ended December 31, 2004 and 2005 were primarily of a corporatenature including legal, accounting and general corporate administrative matters.We did not conduct any business enterprise activities during 2004 and 2005.

**Going Concern**

Asindicated in the notes to the financial statements included elsewhere in thisreport, the financial statements have been prepared assuming that we willcontinue as a going concern. In the year ended December 31, 2005, weincurred a net loss of approximately $100,601. In addition, at December 31,2005 and 2004, we had no assets and working capital deficiencies ofapproximately $259,000 and $243,000, respectively. These conditions raisesubstantial doubt about our ability to continue as a going concern. Our planswith respect to these matters include restructuring our existing obligations,raising additional capital through issuances of stock or debentures, and tocomplete a business acquisition for future operations. The accompanyingfinancial statements do not include any adjustments that might be necessary inthe event we are unable to continue as a going concern.

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**12-Month Overhead Budget**

         Our budgeted overhead expenses for the12 months ending June 30, 2007 are as follows:

 

| Expenditures:                      | ** ** | **Per  Month** | ** ** | **12  Months** | ** ** |
|------------------------------------|------------|----------------|------------|----------------|------------|
| Travel expenses                    |       | $              | 8,750      |           | $          | 105,000 |   |
| Hotel accommodations               |       | 2,500          |       | 30,000         |       |
| Rent and office  expenses          |       | 1,000          |       | 12,000         |       |
| Employee  compensation             |       | 2,667          |       | 32,000         |       |
| Accounting  expenses               |       | 7,500          |       | 90,000         |       |
| Utilities and  telephone           |       | 3,000          |       | 36,000         |       |
| Transfer agent                     |       | 625            |       | 7,500          |       |
| Office supplies  and equipment     |       | 1,042          |       | 12,500         |       |
| Miscellaneous  expenses            |       | 833            |       | 10,000         |       |
| Total Administrative  Expenditures |       | $              | 27,917     |           | $          | 335,000 |   |

 

                ***Additional Financial Commitments*.** Other than our commitments discussed above, wedo not have any capital  commitments. Weneither have any plans to raise additional funds during the next 12 months.

**CautionaryStatement Relating to Forward Looking Information**

     We have included some forward-looking  statements in this section and otherplaces  in  this report  regarding  our expectations.  These  forward-looking statements  involve known and unknown  risks,  uncertainties and other factors which  may  cause our  actual  results, levels  of  activity, performance  or achievements,  or industry results,  to be materially  different from any future results, levels ofactivity, performance or achievements expressed or implied by theseforward-looking  statements. Some ofthese forward-looking statements can be identified by the use offorward-looking terminology including  “believes,” “expects,”  “may,” “will,”  “should” or “anticipates” or the negativethereof or other  variations  thereon or  comparable  terminology, or by  discussions  of strategies that involve risks anduncertainties. You should read statements that contain these words carefullybecause they:

·    discuss our future expectations;

·    contain projections  of our  future operating  results  or of our future financial condition; or

·    state other “forward-looking” information.

         We believe it is important to discussour expectations; however, it must be recognized that events may occur in thefuture over which we have no control and which we are not accurately able topredict. Readers are cautioned to consider the specific business risk factorsdescribed in the report and not to place undue reliance on the forward-lookingstatements contained herein, which speak only as of the date hereof. Weundertake no obligation to publicly revise forward-looking statements toreflect events or circumstances that may arise after the date of this report.

**Item 7. FinancialStatements**

         Our financial statements which areprepared in accordance with Regulation S-B are set forth in this reportbeginning on pageF-1.

**Item 8. Changes inand Disagreements with Accountants and Financial Disclosure**

         There have been no disagreementsconcerning matters of accounting principle or financial statement disclosurebetween us and our independent accountants.

11

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**Item 8A. Controlsand Procedures.**

                ThomasMegas, our Chief Executive Officer and Acting Chief Financial Officer, isresponsible primarily for establishing and maintaining disclosure controls andprocedures designed to ensure that information required to be disclosed in ourreports filed or submitted under the Securities Exchange Act of 1934, asamended (the “Exchange Act”) is recorded, processed, summarized and reportedwithin the time periods specified in the rules and forms of the U.S.Securities and Exchange Commission. These controls and procedures are designedto ensure that information required to be disclosed in our reports filed orsubmitted under the Exchange Act is accumulated and communicated to ourmanagement, including our principal executive and principal financial officers,or persons performing similar functions, as appropriate to allow timelydecisions regarding required disclosure.

         Furthermore, Mr. Megas, our ChiefExecutive Officer and Acting Chief Financial Officer, is responsible for thedesign and supervision of our internal controls over financial reporting thatare then effected by and through our board of directors, management and otherpersonnel, to provide reasonable assurance regarding the reliability of ourfinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. Thesepolicies and procedures

·                                          pertain tothe maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of our assets;

·                                          providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles,  and that ourreceipts and expenditures are being made only in accordance with authorizationsof our management and directors; and

·                                          providereasonable  assurance  regarding prevention or timely detection of unauthorized acquisition,  use or disposition of our assets that couldhave a material effect on our financial statements.

         Our Chief Executive Officer and ActingChief Financial Officer, based upon his evaluation of the effectiveness of ourdisclosure controls and procedures and the internal controls over financialreporting as of the last day of the period covered by this report, concludedthat our disclosure controls and procedures and internal controls overfinancial reporting were fully ineffective as of the last day of the periodcovered by this report and reported to our auditors and board of directors thatthere are no controls and procedures and internal control over financialreporting during the period covered by this report and that all of whichmaterially affect or is reasonably likely to materially affect our disclosurecontrols and procedures or internal control over financial reporting. Inconducting their evaluation of our disclosure controls and procedures andinternal controls over financial reporting, these executive officers did notdiscover any fraud that involved management or other employees who have asignificant role in our disclosure controls and procedures and internalcontrols over financial reporting. Furthermore, although the disclosurecontrols and procedures and internal controls over financial reporting weredeficient and absent, there were no changes made in our disclosure controls andprocedures, internal controls over financial reporting, or other factors thatwould eliminate the deficiencies in our disclosure controls and procedures orinternal controls over financial reporting subsequent to the date of theirevaluation. Although significant deficiencies or material weaknesses existed,no corrective actions were taken to correct significant deficiencies andmaterial weaknesses in our internal controls and disclosure controls andprocedures because of the lack of required financial resources to correct suchdeficiencies and weaknesses.

**Item 8B. OtherInformation**

                Allreports on Form 8-K required to be filed during the three monthsended December 31, 2003, 2004 and 2005 has been previously reported on Form 8-K.

 

12

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**PART III**

**Item 9. Directors, Executive Officers, Promoters andControlled Persons; Compliance with Section 16(a) of the Exchange Act**

         Set forth below is certain informationwith respect to our executive officer and directors. Directors are generallyelected at the annual shareholders’ meeting and hold office until the nextannual shareholders’ meeting and until their successors are elected andqualify. Executive officers are elected by the Board of Directors and serve atits discretion. Our Bylaws provide that the Board of Directors shall consist ofsuch number of members as the Board of Directors may from time to timedetermine by resolution or re-election, but not less than two. Our Board ofDirectors currently consists of two individuals.

** **
| **Name**     | ** ** | **Age**    | ** ** | **Position**                                                                                                  | ** ** |
|--------------|------------|------------|------------|---------------------------------------------------------------------------------------------------------------|------------|
| ** **   | ** ** | ** ** | ** ** | ** **                                                                                                    | ** ** |
| Thomas Megas |       | 61         |       | Chairman  of the Board of Directors,  Chief Executive Officer, President, and  Acting Chief Financial Officer |       |
|         |       |       |       |                                                                                                          |       |
| Martin Duffy |       | 60         |       | Director                                                                                                      |       |

 

              The following is a briefdescription of the business background of our executive officers and directors:

         Thomas Megas is one of our foundersand has served as President, Chief Executive Officer and a member of the Boardof Directors since inception, and also serves as Chairman of the Board ofDirectors (since June 5, 2001) and our Acting Chief Financial Officer.From 1992 to 1998, Mr. Megas served as Director of March Europe andas consultant to companies in the design and development of acing cars inFormula One and other Formula One competitors. Mr. Megas has previouslybeen involved in hotel ownership and commercial real estate development inEurope from 1991 to 1999. Mr. Megas earned his B.A. from London Universityin 1962 in Banking and Finance and his M.B.A. from the Wharton School of theUniversity of Pennsylvania in 1969.

         Martin Duffy has served as one of ourDirections since November 1999. He has been involved in auto racingchassis design and construction since 1992 when he became a Director of March,Europe. Mr. Duffy is a banker by profession and from 1990 to 1995 was aDirector of RA Coleman International, an investment-banking group in the U.K.From 1961 to 1981, Mr. Duffy served as Bank Manager and FinancialConsultant for National Westminster Bank PLC. Mr. Duffy completed hiseducation in Banking with National Westminster Bank in 1960.

**Director Compensation**

         We do not compensate Directors forserving on our Board of Directors or attending meetings of the Board or anycommittee of the Board. Directors who are also our employees receive noadditional compensation for serving as directors. We reimburse our directorsfor travel and out-of-pocket expenses in connection with their attendance atmeetings of our board.

**Compliancewith Section 16(a) of the Securities Exchange Act of 1934**

                Section 16(a) ofthe Securities Exchange Act of 1934, as amended, requires our directors,officers, and persons who own more than 10% of our common stock or otherregistered class of our equity securities to file reports of ownership and changesin ownership with the Securities and Exchange Commission. Officers, directorsand greater than 10% shareholders are required to furnish us with copies of allSection 16(a) forms they file.

                Webelieve that each person who, at any time during 2004 through 2005, was adirector, executive officer, or beneficial owner of more than 10% of our commonstock failed to comply with the filing requirements of Section 16(a).

13

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**Item 10. ExecutiveCompensation**

The following table sets forth the total cash compensation,paid or accrued, to our chief executive officer during the years ended December 31,2005, 2004, 2003, and 2002 who received compensation in excess of $100,000during each of those years.

**SummaryCompensation Table**
|                                                               | ** ** | ** ** | ** ** | **Annual Compensation(1)** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|---------------------------------|------------|
| **Name and Principal Position**                | ** ** | **Year**   | ** ** | **Salary(2)**                   | ** ** | **Bonus(3)** | ** ** |
| Thomas Megas(4)                                               |       | 2005       |       | $                               | 831,875    |   | $ | — |   |
| Chairman of the Board of  Directors, Chief Executive Officer, |       | 2004       |       | $                               | 756,250    |   | $ | — |   |
| President and Acting Chief  Financial Officer                 |       | 2003       |       | $                               | 687,500    |   | $ | — |   |
|                                                               |       | 2002       |       | $                               | 625,000    |   | $ | — |   |
|                                                               |       | 2001       |       | $                               | 468,750    |   | $ | — |   |
|                                                               |       | 2000       |       | $                               | 145,833    |   | $ | — |   |

----

(1)                                  Messrs. Megasand Herd did not receive any additional non-cash compensation, perquisites andother personal benefits that during each of 2005, 2004, 2003, 2002, 2001, and2000.

(2)                                  Dollarvalue of base salary (both cash and non-cash) earned during the year.

(3)                                  Dollarvalue of bonus (both cash and non-cash) earned during the year.

(4)                                  OnFebruary 23, 2006, Mr. Megas released us from our obligations under Mr. Megas’Employment Agreement without payment of the accrued salary set forth in thistable.

**EmploymentArrangements**

In1999, we entered into long-term employment agreement with Thomas Megas, asummary of the material terms is set forth below.

Theagreement with Mr. Megas had an initial term of three years that wasextendable by agreement for an additional two-year term and then additionalone-year terms thereafter. The agreement provided for compensation to begin June 1,2000 at a rate of $250,000 to be increased by $125,000 after the first year, byan additional $225,000 after the second year and after the third year by tenpercent (10%) per year increases thereafter. Pursuant to the agreement, Mr. Megaswas granted stock options exercisable for the purchase of 400,000 shares of ourcommon stock for $1.00 per share. These options were exercisable for thepurchase of 100,000 shares on June 1, 2000, 50,000 shares on November 30,2000, 50,000 shares on May 31, 2000, 50,000 shares on November 30,2001 and 150,000 shares on May 31, 2002.  On February 23, 2006, Mr. Megasreleased us from all obligations under his employment agreement, including thestock options described above and his accrued unpaid salary.

**Loss of Key Personnel**

Our success depends to a significant degree upon theefforts, contributions and abilities of our management. The loss of theservices of Thomas Megas could have a material adverse effect on our ability toengage in future business activities. We do not maintain any insurance coveringthe disability or life of our executive officers and directors.

**Equity Compensation Plans**

Other than the grant of stock options pursuant tothe employment agreement with Thomas Megas, we have not established or enteredinto any equity compensation plans. For information related to ourcommon stock authorized for issuance under equity compensation plans, see Item5. Market for Common Equity and Related Stockholder Matters.

14

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**DirectorLiability and Indemnification**

                Aspermitted by the provisions of the Nevada Revised Statues, our Articles ofIncorporation (the “Articles”) eliminates in certain circumstances the monetaryliability of our directors for a breach of their fiduciary duty as directors.These provisions do not eliminate the liability of a director (i) for abreach of the director’s duty of loyalty to us or our shareholders; (ii) foracts or omissions by a director not in good faith or which involve intentionalmisconduct or a knowing violation of law; (iii) for liability arisingunder the Section 78.300 of the Nevada Revised Statues (relating to thedeclaration of dividends and purchase or redemption of shares in violation ofthe Nevada private corporation laws); or (iv) for any transaction fromwhich the director derived an improper personal benefit. In addition, theseprovisions do not eliminate liability of a director for violations of federalsecurities laws, nor do they limit our rights or the rights of ourshareholders, in appropriate circumstances, to seek equitable remedies such asinjunctive or other forms of on-monetary relief. Such remedies may not beeffective in all cases.

                OurArticles of Incorporation and Bylaws provide that we will indemnify ourdirectors and officers. Under such provisions, any director or officer, who inhis or her capacity as an officer or director, is made or threatened to bemade, a party to any suit or proceeding, may be indemnified if the director orofficer acted in good faith and in a manner he or she reasonably believed to bein or not opposed to our best interest. The Bylaws further provide that thisindemnification is not exclusive of any other rights that an officer ordirector may be entitled. Insofar as indemnification for liabilities arisingunder the Bylaws or otherwise may be permitted to our directors and officers,we have been advised that in the opinion of the Securities and ExchangeCommission indemnification is against public policy and is, therefore,unenforceable.

**Item 11. SecurityOwnership of Certain Beneficial Owners and Management and Related StockholderMatters**

**Securities Authorized for Issuance under Equity CompensationPlans**

                For information related to ourcommon stock authorized for issuance under equity compensation plans, see Item5. Market for Common Equity and Related Stockholder Matters, above.

**Security Ownership of Certain Beneficial Owners andManagement**

The following table presents certain informationregarding the beneficial ownership of our common stock as March 15, 2006,and as adjusted to give effect to this offering and exercise of the warrants,stock options and conversion rights under our Preferred Stock, of (i) theonly persons known by us to own beneficially more than 5% of our common stock, (ii) eachof our directors and executive officers (including those executive officersnamed in the Summary Compensation Table, see “Item 10. Executive Compensation —Director and Executive Officer Compensation”) and (iii) all of our currentexecutive officers and directors as a group, together with their percentageholdings of the beneficially owned shares. All persons listed have sole votingand investment power with respect to their shares unless otherwise indicated,and there is no family relationship among our executive officers and directors.For purposes of the following table, the number of shares and percent ofownership of outstanding common stock that the named person beneficially ownsincludes common stock shares that the named person has the right to acquirewithin 60 days of the date of this report (pursuant to exercise of stockoptions and warrants) and are deemed to be outstanding, but are not deemed tobe outstanding for the purposes of computing the number of shares beneficiallyowned and percent of outstanding common stock of any other named person.

 
| **Name and Address of Beneficial Owner**                  | ** ** | **Shares  Beneficially  Owned(1)** | ** ** | **Ownership  Percent(2)** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------|------------|---------------------------|------------|
|                                                                               |       |                               |       |                      |       |
| Thomas Megas(3)  15 Onslow Gardens, Flat Seven   London, England SW7 3AW           |       | 1,001,964,571                      |       | 80.16                     |       |
|                                                                               |       |                               |       |                      |       |
| Stewart  Sytner(4)   1800 Rockway Avenue, Suite 100   Hewlett, New York 11557 |       | 750,415,027                        |       | 60.00                     |       |
|                                                                               |       |                               |       |                      |       |
| Martin Duffy(5)                                                                    |       | 33,334                             |       | .01                       |       |

 

15

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| Executive Officers and  Directors as a group  (two individuals)(6) |   | 1,001,997,905 |   | 80.16 |   |
|--------------------------------------------------------------------|--------|---------------|--------|-------|--------|

----

(1)                                  Sharesnot outstanding but deemed beneficially owned by virtue of the right of aperson or members of a group to acquire them within 60 days are treated asoutstanding for determining the amount and percentage of common stock owned bysuch person. To the our knowledge, each named person has sole voting and soleinvestment power with respect to the shares shown except as noted, subject tocommunity property laws, where applicable.

(2)                                  Roundedto the nearest one-hundredth of one percent, based upon 500,010,229 shares ofcommon stock outstanding.

(3)                                  Mr. Megasis our Chief Executive Officer, President, Acting Chief Financial Officer andone of our Directors. The number of shares and the percentage include750,000,000 common stock shares into which the 7,500,000 shares of preferredstock owned by Mr. Megas are convertible.

(4)                                  Thenumber of shares and the percentage include 750,000,000 common stock sharesinto which the 7,500,000 shares of preferred stock owned by Mr. Sytner areconvertible.

(5)                                Mr. Duffyis one of our Directors.

(6)                                The number of shares andthe percentage include 750,000,000 common stock shares into which the 7,500,000shares of preferred stock owned by Mr. Megas are convertible.

**Item 12. CertainRelationships and Related Transactions**

Set forth is a description oftransactions we entered into with our officers, directors and shareholders thatbeneficially own more than 5% of our common stock during the four years ending December 31,2005. These transactions will continue in effect and may result in conflicts ofinterest between these individuals and us. Although our officers and directorshave fiduciary duties to our shareholders and us, there can be no assurancethat conflicts of interest will always be resolved in our favor or in favor ofour stockholders.

On January 6, 2006 we issued251,231,084 common stock shares to Abraham International Holdings, SA, acompany controlled by Thomas Megas, in reimbursement of $36,925 of costsincurred by Mr. Megas on our behalf in his capacity as our Chairman andChief Executive Officer. The shares represented payment in full and had amarket value of $25,123, the difference between market value and the totaladvances was recorded as paid in capital.

On January 6, 2006 we issued7,500,000 shares of our Series  A Preferred  Stock  to  Mr. Megas  as settlement of our $223,247 indebtednessowed to Mr. Megas that was incurred during 2000 through 2005. The sharesof the Series A Preferred Stock issued to Mr. Megas were recorded ata value of 1,500,000 based upon the market value of the 750,000,000 shares ofcommon stock into which the Series A Preferred Stock shares areconvertible.

On January 6, 2006, we issued7,500,000 shares of our Series A Preferred Stock to Stewart Sytner inreimbursement of $232,272 of costs and expenses incurred by Mr. Sytner onour behalf during the 2000 through 2005. The shares of the Series APreferred Stock issued to Mr. Sytner were recorded at a value of 1,500,000based upon the market value of the 750,000,000 shares of common stock intowhich the Series A Preferred Stock shares are convertible.

                Webelieve that the transactions described above were on terms no less favorableto us than could have been obtained with unrelated third parties.

**Item 13. Exhibits**

| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                               |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1              |       | Registrant’s Articles of Incorporation, incorporated  by reference to Exhibit 3.1 of Registrant’s Annual Report on  Form 10-KSB for the year ended 2001 filed with the Commission on  April 5, 2006. |

 

16

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| 3.2  |   | Registrant’s Bylaws,  incorporated by reference to Exhibit 3.2 of Registrant’s Registration  Statement on Form 10-SB filed with the Commission on  January 14, 1999.                                                                                                                                                |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1  |   | Form of  Certificate of Common Stock of Registrant, incorporated by reference to  Exhibit 4.1 of Registrant’s Annual Report on Form 10-KSB for  the year ended 2001 filed with the Commission on April 5, 2006                                                                                                      |
| 10.1 |   | Settlement Agreement  among Registrant, Mario A. Pino, Jean Carlos Medina, Barkev Kibarian,  Clearstock, Inc., Global Consulting Group, and Wall Street Group,  L.L.C., with effective date of January 6, 2006, incorporated by  reference to Exhibit 10.1 of Form 8-K filed with the  Commission on March 3, 2006. |
| 31.1 |   | Certification of Thomas  Megas, Chief Executive Officer and Acting Chief financial Officer of  Registrant.                                                                                                                                                                                                                                   |
| 32.1 |   | Certification Pursuant  to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of  Sarbanes-Oxley Act of 2002 of Thomas Megas, Chief Executive Officer and  Acting Chief Financial Officer of Registrant.                                                                                                                   |

** **

**Item 14. PrincipalAccountant Fees and Services**

**Fees for Independent Auditors**

In December 2005, Sherb & Co., LLPwas engaged as our independent auditors to provide professional services theaudit of our annual financial statements for the years ended December 31,2000 and 2001 and review of the unaudited financial statements included in ourQuarterly Reports on Form 10-QSB commencing with the three monthsended September 30, 2000. On June 8, 2006, we dismissed Sherb &Co., LLP and engaged Lieberman and Associates PA as our independent auditorsfor the years ended December 31, 2002 through 2005. Sherb & Co.,LLP issued its reports on our consolidated financial statements for the yearsended December 31, 2002 and 2001 and reviewed our unaudited consolidatedfinancial statements for the three months ended September 30, 2000, March 31,2001, June 30, 2001, and September 30, 2001.

No audit fees, tax fees and all other fees werebilled during 2004 and 2003 by Sherb & Co. LLP and Lieberman andAssociates PA. The audit fees, tax fees and all other service fees related toaudited of our 2001 through 2005 financial statements, tax services and otheraccounting service are or will be billed by Sherb & Co., LLP andLieberman and Associates PA in 2006.

         ***Audit Fees.***Total audit fees for our 2002financial statements have not been determined, but are estimated to total$5,000.

         ***Tax Fees.***The fees billed for tax servicesfor the year ended December 31, 2002 was approxitmatly $1,000.

         ***All Other Fees.***We do not anticipate engagingLieberman and Associates PA for any other services other than those related tothe audit of our financial statements and providing of pre-approved taxservices.

         Audit Committee Pre-ApprovalProcedures. - Rules and regulations of the Securities and ExchangeCommission implemented in accordance with the requirements of Sarbanes-OxleyAct of 2002 require audit committees of companies reporting under and pursuantto the Securities Exchange Act of 1934 to pre-approve audit and non-auditservices. Our Board of Directors has not established an Audit Committee; theentire Board of Directors performs the functions of an Audit Committee. Actingin the capacity of an audit committee our Board of Directors follows procedurespursuant to which audit, audit-related and tax services, and all permissiblenon-audit services, are pre-approved by category of service. Circumstances mayarise that require engagement of the independent public accountants foradditional services not contemplated in the original pre-approval. In thoseinstances, we will obtain the specific pre-approval of our Board of Directorsacting in the capacity as an audit committee before engaging our independentpublic accountants. The procedures require our Board of Directors be informedof each service, and the 

17

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proceduresdo not include any delegation of our Board of Directors responsibilities tomanagement. Our Board of Directors acting in the capacity of an audit committeemay delegate pre-approval authority to one or more of its members. The memberto whom this authority is delegated will report any pre-approval decisions toour Board of Directors at its next scheduled meeting.

All of the audit-related fees, tax fees and all otherfees of Sherb & Co. LLP and Lieberman and Associates PA werepre-approved by our board of directors.

18

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**SIGNATURES**

Inaccordance with Section 13 or 15(d) of the Exchange Act, theRegistrant caused this amended report to be signed on its behalf by the undersigned,thereunto duly authorized.
|   | BANCORP INTERNATIONAL, INC.     |
|--------|---------------------------------|
|   | (Registrant)

             |
|   | By:                             | /S/THOMAS MEGAS |
|   | Thomas Megas                    |
|   | Chief Executive  Officer        |
|   | President                       |
|   | Acting Chief  Financial Officer |

 

Date: June 20,2006

Inaccordance with the Exchange Act, this report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities and on thedates indicated.
| Signature       | ** ** | **Title**                       | ** ** | **Date**           |
|-----------------|------------|---------------------------------|------------|--------------------|
| /S/THOMAS MEGAS |       | Chief Executive Officer         |       | June 20, 2006 |
| Thomas Megas    |       | President                       |       |               |
|            |       | Acting Chief  Financial Officer |       |               |
|            |       | Chairman of  Board of Directors |       |               |
|            |       |                            |       |               |
| S/MARTIN DUFFY  |       | Director                        |       | June 20, 2006 |
| Martin Duffy    |       |                            |       |               |

 

19

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Index to Consolidated FinancialStatements

| Report of Independent  Registered Public Accounting Firm - for the Years Ended December 31,  2005 and 2004 |
|-----------------------------------------------------------------------------------------------------------------|
| Balance  Sheets                                                                                                 |
| Statements  of Operations                                                                                       |
| Statements of Shareholders’  Equity (Deficit)                                                              |
| Statements of Cash Flows                                                                                        |
| Notes  to Financial Statements                                                                                  |

 

F-i

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REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directorsand Stockholders Bancorp International Group, Inc.

Wehave audited the accompanying balance sheets of Bancorp International Group, Inc.as of December 31, 2005 and December 31, 2004, and the relatedstatements of operations, shareholders’ equity (deficit) and cash flows for theyears then ended. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audit.

Weconducted our audit in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basisfor our opinion.

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Bancorp International Group, Inc.at December 31, 2005 and December 31, 2004 and the results of its operationsand its cash flows for the year then ended in conformity with accountingprinciples generally accepted in the United States.

Theaccompanying financial statements have been prepared assuming that the Companywill continue as a going concern. As discussed in Note 2 to the financialstatements, the Company has suffered recurring losses from operations and has anet capital deficiency that raises substantial doubt about its ability tocontinue as a going concern. Management’s plans in regard to these matters arealso described in Note 2. The financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.
|   | /s/ Lieberman & Associates PA |
|--------|----------------------------------------|
|   | Lieberman & Associates PA     |
|   | Certified Public Accountants           |

 

June 16, 2006 Ft. Lauderdale, Florida

F-1

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** **

**Bancorp International Group, Inc.**

**Statement of Financial Position**

**As of December 31,**

 
| ** **                                                                                                                                                       | ** ** | **2005**     | ** ** | **2004**     | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------|------------|--------------|------------|
| **Assets**                                                                                                                                                       | ** ** | ** **   | ** ** | ** **   | ** ** |
| **Total Assets**                                                                                                                                                 | ** ** | **$**        | **—** |         | $          | — |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                   | ** ** | ** **   | ** ** | ** **   | ** ** |
| Accounts Payable and Accrued Expenses                                                                                                                            |       | 258,713      |       | 243,697      |       |
| Current portion  of Long Term Debt                                                                                                                               |       | 526,519      |       | 440,934      |       |
| **Total  Liabilities**                                                                                                                                           | ** ** | **785,232**  | ** ** | **684,631**  | ** ** |
| **Stockholders’  Equity**                                                                                                                                   | ** ** | ** **   | ** ** | ** **   | ** ** |
| Common Stock,  $.0001 par value, 2,000,000,000 shares authorized, 4,030,078 shares issued  and outstanding at December 31, 2002 and December 31, 2001. |       | 403          |       | 403          |       |
| Additional Paid  in Capital                                                                                                                                      |       | 3,792,314    |       | 3,792,314    |       |
| Accumulated  Deficit                                                                                                                                             |       | (4,577,949   | )          | (4,477,348   | )          |
| **Total Stockholders’ Equity**                                                                                                                              | ** ** | **(785,232** | **)**      | **(684,631** | **)**      |
| **Total  Liabilities and Stockholders’ Equity**                                                                                                             | ** ** | **$**        | **—** | ** **   | **$**      | **—** | ** ** |

 

The accompanying notes are an integralpart of these financial statements

F-2

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**Bancorp International Group, Inc.Statement of OperationsFor the Year Ended December 31,**
| ** **               | ** ** | **2005**    | ** **   | **2004**    | ** ** |
|--------------------------|------------|-------------|--------------|-------------|------------|
| **REVENUES**             | ** ** | **$**       | **—**   |        | —     |   |
| **COST OF  GOOD SOLD**   |       | —      |         | —      |       |
| **GROSS  PROFIT**        | ** ** | **—**  |         | —      |       |
| **EXPENSES:**            | ** ** | ** **  | ** **   | ** **  | ** ** |
| Accounting Fees          |       | —      |         | 1,495       |       |
| Interest Expense         |       | 15,016      |         | 13,450      |       |
| Lodging and Travel       |       | 85,585      |         | 47,492      |       |
| Office Expense           |       | —      |         | 38,230      |       |
| **Total Expenses**       | ** ** | **100,601** | ** **   | **100,667** | ** ** |
| **NET  INCOME/(LOSS)**   | ** ** | **$**       | **(100,601** | **)**       | **$**      | **(100,667** | **)** |
| **Earnings  per Share:** |       |        |         |        |       |
| **Basic**                | ** ** | **$**       | **(0.02**    | **)**       | **$**      | **(0.02** | **)** |
| ***Fully Diluted**       | ** ** | **$**       | **—**   | ** **  | **$**      | **—** | ** ** |

** **

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*** The Fully Diluted Earnings Per Share forthe years ended December 31, 2003 and December 31, 2002 isantidlutive and therefore not reflected in the financial statements.**

The accompanying notes are an integralpart of these financial statements

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**BancorpInternational Group, Inc.**

**Statement of Changes in Cash Flow**

**For theYear Ended December 31,**

 
| ** **                                                                   | ** ** | **2005**    | ** ** | **2004**    | ** ** |
|------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
| **Cash flow from operating  activities:**                                    |       |        |       |        |       |
| Net Income /  (Loss)                                                         |       | $           | (100,601   | )           | $          | (100,667 | ) |
| Non Cash  Adjustments:                                                       |       |        |       |        |       |
| Prior Year  adjustment for interest                                          |       | —      |       | —      |       |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |        |       |        |       |
| Increase in  Accounts Payable                                                |       | 15,016      |       | 13,450      |       |
| **Net cash flow provided from  operating activities:**                       | ** ** | **(85,586** | **)**      | **(87,217** | **)**      |
| **Cash  flow from investing activities:**                                    |       |        |       |        |       |
| Stockholder  Loans                                                           |       | 85,585      | ** ** | **87,217**  | ** ** |
| **Net cash flow used in investing  activities:**                             | ** ** | **85,585**  | ** ** | **87,217**  | ** ** |
| **Cash  flow from financing activities:**                                    |       |        |       |        |       |
| Proceeds from  conversion of Stockholder debt to common stock                |       | —      |       | —      |       |
| **Net cash flow from financing  activities:**                                | ** ** | **—**  |       | —      |       |
| Net increase in  cash flow                                                   |       | —      |       | —      |       |
| Beginning Cash                                                               |       | —      |       | —      |       |
| **Ending  Cash**                                                             | ** ** | **$**       | **—** |        | $          | — |   |
| Supplemental disclosures by financing activiites                             |       | $           | —     |        | $          | — |   |

 

The accompanying notes are an integralpart of these financial statements

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**Bancorp International Group, Inc.**

**Statement of Stockholders’ Equity**

 

 
| ** **                          | ** ** | **Shares**    | ** ** | **Par**    | ** ** | **PIC**       | ** **    | **Accumulated  Deficit** | ** **     | **Total**      | ** **   |
|-------------------------------------|------------|---------------|------------|------------|------------|---------------|---------------|--------------------------|----------------|----------------|--------------|
| **Balance  December 31, 2002** | ** ** | **4,030,078** | ** ** | **403**    | ** ** | **3,792,314** | ** **    | **(4,281,364**           | **)**          | **(488,647**   | **)**        |
| December 31,  2003 Net Loss    |       |          |       |       |       |          |          | (95,317                  | )              | (95,317        | )            |
| **Balance  December 31, 2003** | ** ** | **4,030,078** | ** ** | **403**    | ** ** | **3,792,314** | ** **    | **(4,376,681**           | **)**          | **(583,964**   | **)**        |
| December 31,  2004 Net Loss    |       |          | ** ** | ** ** | ** ** | ** **    | ** **    | (100,667                 | )              | **(100,667**   | **)**        |
| **Balance  December 31, 2004** | ** ** | **4,030,078** | ** ** | **$**      | **403**    | ** **    | **3,792,314** | ** **               | **(4,477,348** | **)**          | **(684,631** | **)** |
| December 31,  2005 Net Loss    |       |          |       |       |       |          |          | (100,601                 | )              | (100,601       | )            |
| **Balance December 31, 2005**  | ** ** | **4,030,078** | ** ** | **403**    | ** ** | **$**         | **3,792,314** | ** **               | **$**          | **(4,577,949** | **)**        | **$** | **(785,232** | **)** |
|                                     |            |               |            |            |            |               |               |                          |                |                |              |  |  |  |  |

 

The accompanying notes are an integralpart of these financial statements

 

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BANCORP INTERNATIONAL GROUP, INC.

NOTES TO FINANCIALSTATEMENTS

Years Ended December 31, 2005 and December 31, 2004

1.                        THECOMPANY

N.E.C. Properties, Inc. (“NEC”) was incorporated on September 16,1995, under the laws in the State of Nevada. NEC was organized with no  operations or plan of business. On September 30,1995 the Company issued 18,600 shares of its then no par value and 25,000authorized common stock, for $1,860 in cash. On November 19, 1998 theState of Nevada approved NEC’s restated Articles of Incorporation, whichincreased their authorized common shares from 25,000 to 25,000,000, andestablished a par value of $.001 per share of common stock. In  addition, in November 1998 NEC approved aforward stock split of 100:1, thus increasing the number of then outstandingcommon shares to 1,860,000. In addition, at that time the Company alsoauthorized a 1.77 for 1 forward stock split in anticipation of mergertransaction with March Indy International, Inc. (“March” or “March Indy”).The previously issued 1,860,000 common shares were now 3,613,249 common shares.

On November 10, 1999, NEC acquired all the outstanding stock of March for 7,706,575 shares of NEC. March was incorporated in Delaware on November 24,1998 (“inception”). For accounting purposes, the  transaction has been accounted for as areverse acquisition under the  purchasemethod for business combinations, and accordingly the transaction has beentreated as a recapitalization of March, with March as the acquirer. Theshares issued in the Transaction were treated as being issued for cash and havebeen shown as outstanding  for allperiods presented in the same manner as for a stock split.

On June 17, 2000 the Company declared a one for three (1:3)reverse  stock split, effective June 26,2000. The financial statements herein  giveretroactive effect to this, and all the above, related equity  transactions transaction.

March had intended to engage in the business of designing,building  and racing motor cars forFormula One, Cart and Indy competition both  in the United States and abroad. March hasalso planned to develop an  Internetwebsite in order to merchandise products related to its racing efforts. Fromthe time of its inception March had been a  development stage enterprise through September 30,2000. Subsequent to September 30, 2000, the management of March determinedthat due to the  inability tosuccessfully organize an Indy car race team and to compete in the Indianapolis500 in the second quarter of the year  endedDecember 31, 2000, that the Company’s operations, as intended, would ceaseto operate. Due to the cessation of operations, management has determined thatthey are no longer a development stage enterprise commencing from the thirdquarter ended September 30, 2000.

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During the quarter ended September 30, 2001, March changedits name to Bancorp International Group, Inc. (“Bancorp”) in an attempt toeffect a merger with a financial service oriented business. Bancorp  has not merged with any financial service  business. Henceforth NEC, March orBancorp are to be referred to as the  “Company”,  unless reference is made to the respectivecompany for  reference to  events surrounding their acquisition by theCompany.

The Company is subject to the reporting obligations under Section 12(g)ofthe Securities Exchange Act of 1934. The Company has not complied with thereporting obligations since December 31, 2001. The Company is in theprocess of preparing all required quarterly and annual reports on Form 10-QSBand Form 10-KSB for filing to become  current.

2.                        GOING CONCERN

The accompanying financial statements have been prepared assuming that theCompany will continue as a going concern. The Company has incurred net lossesof approximately $101,000 and $101,000 for the years ended December 31,2005 and December 31, 2004. Additionally, the Company has no assets andhas working capital deficiencies of approximately $785,000 and $685,000 at December 30,2005 and 2004 respectively. These conditions raise substantial doubt about the Company’sability to continue as a going concern. Management’s plans with respect tothese matters include restructuring its  existingobligations, raising additional capital through future issuances of stock andor debentures, and to complete a business acquisition for future operations.The accompanying financial  statements donot include any adjustments that might be necessary should the Company beunable to continue as a going concern.

3.                        SIGNIFICANTACCOUNTING POLICIES

(a)           Use of Estimates - The preparation offinancial statements in  conformity withaccounting principles generally accepted in the  United States of America requires managementto make estimates  and assumptions thataffect the reported amounts of assets and  liabilities and disclosure of contingentassets and liabilities  at the date ofthe financial statements and the reported amounts  of revenue and expenses during the reportingperiod. Critical  estimates includemanagement’s judgments associated with: other  asset valuations and accrued expenses. Actualresults could  differ from thoseestimates.

(b)          Loss Per Share - Basic earnings (loss) pershare (“EPS”) is  determined by dividingnet loss for the period by the weighted  averagenumber of common shares outstanding during the same  period. Diluted EPS reflects the potentialdilution that could  occur if securitiesor other contracts to issue common stock were  exercised or converted into common stock orresulted in the  issuance of commonstock, which would then share in the earnings  of the Company. For the year ended December 31,2002

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the Company had no potentially dilutive instruments outstanding thatcould potentially be exercised or converted into common stock.

(c)           Impairment of Long-Lived Assets - The Companyreviews long-lived  assets for impairmentwhenever circumstances and situations  changesuch that there is an indication that the carrying amounts  may not be recovered. The recoverability ofassets held and used  in operations ismeasured by a comparison of the carrying amount  of the assets to the future net cash flowsexpected to be  generated by the assets.If such assets are considered to be  impaired,the impairment to be recognized is measured by the  amount by which the carrying amount of theassets exceeds the  fair value of theassets.

As of December 31, 2000 all Long-Lived assets have beendeemed  impaired and written down to -0-.This expense was included in discontinued operations for the year ended December 31,2000.

(d)          Fair Value of Financial Instruments - The Company’sfinancial  instruments consists ofaccounts payable and accrued expenses.  Thecarrying amount of the financial instruments reported in the  consolidated balance sheet approximates fairvalue based on the  short-term maturityof these instruments.

(e)           Income Taxes - The Company accounts forincome taxes in  accordance withFinancial Accounting Standards Board (“FASB”)  Statement of Financial Accounting Standards (“SFAS”)No. 109,  “Accounting for IncomeTaxes.” The Company recognizes deferred  taxassets and liabilities based on the difference between the  financial statement carrying amounts and thetax bases of the  assets and liabilities,using the effective tax rates in the  yearsin which the differences are expected to reverse. A  valuation allowance related to the deferredtax asset is also  recorded when it isprobable that some or all of the deferred tax  asset will not be realized. Income tax expenseconsists of the  tax payable for theperiod and the change during the period in  deferred tax assets and liabilities.

The following is a reconciliation of income tax expense computed  using the statutory Federal rate for the yearsended December 31:

 

|                                                | ** ** | **2003**   | ** ** | **2003**   | ** ** |
|------------------------------------------------|------------|------------|------------|------------|------------|
| Income tax  benefit computed at statutory rate |       | $          | 4,577,949  |       | $          | 4,477,348 |   |
| Changes in  valuation allowance                |       | (4,577,949 | )          | (4,477,348 | )          |
| Provision for income  tax                      |       | —     |       | —     |       |
|                                                |            |            |            |            |            |  |  |

 

The Company has not recorded a deferred tax asset as of December  31,2005or December 31, 2004 due to not having filed their required corporate taxreturns. Had such returns been filed a resultant deferred tax asset would havebeen recorded, with the establishment of a corresponding valuation allowancedue to the probability that some, or all, of the deferred tax asset will not

F-8

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be realized. In addition,due to this non-compliance, the Company is unaware if it has Net OperatingLosses that it may use to off- set future income if they should complete anacquisition in the future and achieve profitability.

(h)          Recent Accounting Pronouncements:

(i)             In December 2004, the FASB issued SFASNo. 153, “Exchanges  of NonmonetaryAssets - an amendment for APB Opinion No.  29”. This statement amends APBOpinion No. 29 to eliminate  theexception for Nonmonetary exchanges of similar  productive assets and replaces it with ageneral exception  for exchanges ofNonmonetary assets that do not have  commercialsubstance. A Nonmonetary exchange has commercial  substance if future cash flows of the entityare expected to  change significantly asa result of the exchange. The  provisionsof SFAS No. 153 are effective for the Company’s  year ended December 31, 2006. Managementis currently  evaluating the impact ofthe adoption of SFAS No. 153 on the  Company’s consolidated financial position,liquidity, or  results of operations.

(ii)          In June 2005, the FASB issued SFAS No. 154“Accounting  Changes and ErrorCorrections,” (“SFAS 154”), a replacement  of APB Opinion No. 20, “AccountingChanges”, and SFAS No. 3  “ReportingAccounting Changes in Interim Financial  Statements.”SFAS 154 applies to voluntary changes in  accounting principle and changes therequirements for  accounting for andreporting of a change in accounting  principle.SFAS 154 requires retrospective application to  prior periods’ financial statement of avoluntary change in  accounting principleunless it is impracticable. SFAS 154 is  effectivefor accounting changes and corrections of errors  made in fiscal years beginning after December 15,2005.  Earlier application is permittedfor accounting changes and  correctionsof errors made occurring in fiscal years  beginning after June 1, 2005. The companywill adopt SFAS  154 effective December 15,2005. SFAS 154 is not expected to  have asignificant impact on the companies consolidated  financial statements.

(iii)       In March 2006, the FASB issued FASBStatement No. 156,  this amends FASBStatement No. 140. This Statement  establishes,among other things, the accounting for all  separately recognized servicing assets andservicing  liabilities. This Statementamends Statement 140 to require  that allseparately recognized servicing assets and  servicing liabilities be initially measured atfair value,  if practicable. ThisStatement permits, but does not  require,the subsequent measurement of separately recognized  servicing assets and servicing liabilities atfair value. An  entity that usesderivative instruments to mitigate the  risksinherent in servicing assets and servicing liabilities  is required to account for those derivativeinstruments at  fair value. Under thisStatement, an entity can elect

F-9

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subsequent fair value measurement  to account  for its separately recognized servicingassets and servicing  liabilities. Byelecting that option, an entity may simplify it’s accounting because thisStatement permits income  statementrecognition of the potential offsetting changes in fair value of thoseservicing assets and servicing liabilities and derivative instruments  in the same accounting period. This Statementis effective for financial statements for fiscal years beginning after September 15,2006. Earlier adoption of this Statement is permitted as of the beginning  of an entity’s  fiscal year, provided  the  entityhas not yet issued any financial statements for that fiscal year. Managementbelieves this Statement will have no impact on the  financial statements  of the  Company once  adopted.

4.                        STOCKHOLDERSEQUITY

In August 2005, the SEC temporarily suspended trading ofthe Company because it appeared at that time all of the securities trading inthe name of Bancorp International Group, Inc. and  purportedly signed by the Thomas Megas asPresident and M. Puig as Secretary were counterfeit. Subsequent to this eventthe share resumed trading.

5.                        SUBSEQUENTEVENTS

(a)           In August 2005, the Company became awareof the unauthorized  issuance ofapproximately 243,842,000 shares of the Company’s  common stock (the “Wrongfully Issued Shares”)to various entities  and individuals forservices and gifts, whereupon these entities  and individuals attempted to sell theWrongfully Issued Shares on  the openmarket. As per members of management of the Company,  they are not aware of, nor do they have anyrelated activities  with these entitiesand individuals.

In September 2005, the Company filed a claim in the District  Court of Oklahoma County, Oklahoma, (the “CivilLitigation”)  against twelve defendants(the “Defendants”) seeking the return  ofall the Wrongfully Issued Shares and the Defendants’ receipt  of proceeds from the sale of those shares.

In the Civil Litigation the Company alleged that one of the  Defendants individually and through variousaffiliated entities  and co-conspirators,including another Defendant, prepared or  possessed 20 or more common stock certificatespurportedly  representing 235,000,000common stock shares of the Company, the  previouslyreferred to Wrongfully Issued Shares, which were  distributed to various individuals andentities, including other  Defendants.Two financial service firms intervened in the Civil  Litigation (the “Interveners”) and allegedthat the Company  negligently hired theDefendants and negligently supervised their  actions and activities, and asserted Oklahomaand federal  securities fraud andfailure-to-register claims against the  Defendantsand the Company.

In conjunction with the Civil Litigation, the Company reached an  agreement with one of the Interveners, wherebythe Company  delivered 25,075,000 commonstock shares to one of the  Intervenersto be held pending settlement or conclusion of the  Civil Litigation. These shares were deliveredto the Intervener  to satisfy therequirements of Depository Trust Company (“DTC”)  until common stock shares eligible to beresold without  restriction could bedelivered by the Intervener to cover its

F-10

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short position in the Company’s common stock. Furthermore, the  Intervener placed in trust $72,500 to be usedto pay the costs of  registering the25,075,000 common stock shares under the  Securities Act of 1933, as amended (the “SecuritiesAct”), and  the applicable statesecurities laws in the event that  registrationwas required.

On January 11, 2006, the presiding Judge in the Civil Litigation  entered an Order Approving SettlementAgreement (the “Order”). As  a result ofissuance of the Order, a settlement agreement (the “Settlement Agreement”)became binding upon the Company and some of Defendants (the “SettlingDefendants”) and the Interveners with an effective date of December 8,2005.

In accordance with the Settlement Agreement, the Company’s claims againstthe Settling Defendants and the claims of the Settling Defendants against theCompany were resolved by the exchange of release of claims, a release of theWrongfully Issued Shares and payments to the Company in the aggregate sum of$171,546 from funds held by one of the Interveners and the further agreement topay an additional $277,093. Furthermore, the claims of the Interveners againstthe Company were exchanged for the issuance of 25,025,000 shares of the Company’scommon stock to one of the Interveners and 219,723,000 shares of the Company’scommon stock to the Intervener for an aggregate sum of 244,748,000 common stockshares (the “Newly Issued Shares”). The Newly Issued Shares are required to bedeposited with DTC by the Interveners in satisfaction of their short positionswith vendors through which securities purchase and sale transactions arecleared on behalf of the Interveners. The Newly Issued Shares were issued in accordancewith the registration exemption afforded under Section 3(a)(10) of theSecurities Act of 1933.

In addition, some of the Settling Defendants agreed to indemnify  and hold harmless the Company against allactions, suits,  proceedings, demands,and assessments brought by any past,  presentor future holder of the shares of common stock of the  Company in connection with the SettlementAgreement and the  various claims of theCompany settled in the Settlement Agreement  and any associated judgments, attorney’s fees,costs and  expenses.

Two of the Defendants, did not execute or participate in the  Settlement Agreement and accordingly did notsettle the claims  asserted against themin the Civil Litigation (“Non-Settling  Defendants”).The Company was granted judgments against the

Non-Settling Defendants and the Company is negotiating  settlements of the judgments with theNon-Settling Defendants,  the outcome ofwhich is uncertain as of the date of this report.

(b)          In regard to the above situation, of theunauthorized issuance of  common shares,the Company authorized the following:

F-11

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OnAugust 19, 2005, the Company’s Board of Directors  approved and adopted Certificate ofDesignation Preferences  and Right ofPreferred Stock (the “Certificate of  Designation”).The Certificate of Designation sets forth the  preferences and rights of the Company’s15,000,000  authorized shares ofpreferred stock, $.0001 par value, to  bedesignated as the Series A Convertible Preferred Stock  (the “Series A Preferred Stock”).

Theholders of shares of the Series A Preferred Stock have  the right, at their option, to convert the Series APreferred Stock into shares of the Company’s common stock at  a ratio of 1 share of Series A Preferredfor 100 shares of  common stock. The Series APreferred are entitled to receive  dividendsof every kind declared and paid to holders of the  Company’s common stock, at a rate equal to theset  conversion rate of 1:100. Inaddition, the Preferred A have  a rightto have their shares adjusted in the event of future  issuances of common shares that would have adilutive effect  on the Preferred A. ThePreferred A have voting rights equal  tothe number of shares of common stock that the Preferred A  are convertible into, whether or notconverted. In the event  of the Company’sliquidation or dissolution or winding up,  voluntary or involuntary, the holders of theoutstanding  Series A PreferredStock will be entitled to receive  liquidationbenefits identical to those received by holders  of common stock, provided that each share ofthe Series A  Preferred Stock willbe treated as if equal to 100 shares of  commonstock.

-                      On August 21, 2005, the Company amended their Articlesof  Incorporation. This amendmentincreased the number of our  authorizedshares of common stock from 25,000,000 to  500,000,000 and reduced the par value to$0.0001, and  authorized 15,000,000shares of preferred stock, par value  of$0.0001. The holders of 90.8% of the outstanding common  stock shares approved this amendment at ashareholders  meeting held on August 19,2005.

-                      On January 6, 2006, the Company amended their Articlesof  Incorporation. This amendmentincreased the number of  authorizedshares of common stock, par value of $.0001, from  500,000,000 to 2,000,000,000. The holders of90.8% of the  outstanding common stockshares approved this amendment at a  shareholdersmeeting held on August 19, 2005.

(c)           On January 4, 2006, the Company’s Boardof Directors authorized the following:

·         251,231,084 common stock shares toThomas Megas in reimbursement of $36,925 of costs incurred by Mr. Megas on our behalf in his capacity as ourChairman and Chief  Executive Officer.These costs consisted of $33,000 paid  toconsultants for professional services including accounting and legal servicesand $3,925 for travel

F-12

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expenses. The sharesrepresented payment in full for the above expenses and had a market value of$25,123, the difference between market value and the total advance was  recorded as paid in capital to the Company.

·         7,500,000  shares of Series A  Preferred  Stock to  Mr. Megas as settlement of outstandingdebt incurred by the Company to Mr. Megas, between the periods of January 1,2000 and December 31, 2005. The converted debt had an outstanding value of$223,247.

·         7,500,000  shares of Series A  Preferred  Stock to  a major investor  as settlement of outstanding debt incurred bythe Company to the investor, between the periods of January 1, 2000 and December 31,2005. The converted debt had an outstanding value of $225,000.

(d)            The Company has been informed by the US  Securities and exchange Commission (the “Commission”) that the Commissions intendsto  institute proceedings against theCompany pursuant to Section  12(j) of the Securities Act of 1934 (the“Exchange Act”). The  Commission isalleging violations of Section 13(a) of the  Exchange Act and Rules 13a-1 and13a-13 there under, to determine  whetherthe Exchange Act registration of the Company’s common  stock should be suspended or revoked.

The Company is currently in the process of curing the above  violations. The Company has not determinedwhat effect to the  Company, or itsshareholders, will result if the Company is  unable to cure these violations.

(e)           During the year ended December 2005, themanagement of the  Company has pursuedbusiness opportunities in the energy sector.  As of December 31, 2005 no definitiveagreements have been  reached with regardto potential acquisitions.

In September 2005 the Company entered into a joint agreement withESC Oil  Export. Ltd to sell the oil andgas reserves of Papua New Guinea. The agreement  is contingent upon the government of Papua NewGuinea’s acceptance of the  proposed gasand supply contracts.

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