U. S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.  20549





FORM 10-K







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





For the fiscal year ended       December 31, 2010





[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ___________ to _____________





Commission File No. 000-29735


___________________________





TACTICAL AIR DEFENSE SERVICES, INC.





Nevada



88-0455809(State or other jurisdiction



(IRS Employerof Incorporation)



Identification Number)123 West Nye Lane, Suite 517Carson City, Nevada 89706(Address of principal executive offices)(775) 888-6744(Issuer’s Telephone Number)





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





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





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _X_Yes    ___No





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ___Yes_X_No





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ____





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer                                                      ___                                Accelerated filer                                                                ___


Non-accelerated filer                                                      ___                                  Smaller reporting company                                             _X_





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





The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $11,438,524 based upon the closing price of our common stock which was $.004 on May 11, 2011.  Shares of common stock held by each officer and director and by each person or group who owns 10% or more of the outstanding common stock amounting to approximately 138,303,209 shares have been excluded in that such persons or groups may be deemed to be affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.




As of May 13, 2011, there were 2,997,935,294 shares of our common stock outstanding.





Documents Incorporated by Reference:                                                                                     None

















Tactical Air Defense Services, Inc.





Annual Report on Form 10-K





Table of Contents





Part IItem 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. (Removed &  Reserved)Part IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management's Discussion and Analysis of Financial Condition and

Results of OperationsItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and

Financial DisclosureItem 9A. Controls and ProceduresItem 9B.  Other InformationPart IIIItem 10. Directors, Executive Officers, and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits, Financial Statement SchedulesSignatures





















Forward Looking Statements





This Annual Report on Form 10-K and all other reports filed by Tactical Air Defense Services, Inc., a Nevada corporation (“TADS” or the “Company”), from time to time with the Securities and Exchange Commission (the “SEC” and collectively the “Filings”) contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, the management of TADS as well as estimates and assumptions made by TADS management. The forward-looking statements and associated risks set forth in this Annual Report include or relate to, among other things, (a) our growth strategies, (b) anticipated trends in our industry, (c) our ability to obtain and retain sufficient capital for future operations, and (d) our anticipated needs for working capital. These statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Business,” as well as in this Annual Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report will in fact occur.





The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties. Such forward-looking statements are based on assumptions described herein. The assumptions are based on judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Accordingly, although we believe that the assumptions underlying the forward-looking statements are reasonable, any such assumption could prove to be inaccurate and therefore there can be no assurance that the results contemplated in forward-looking statements will be realized. In addition, as disclosed elsewhere in the “Risk Factors” section of this prospectus, there are a number of other risks inherent in our business and operations which could cause our operating results to vary markedly and adversely from prior results or the results contemplated by the forward-looking statements. Management decisions, including budgeting, are subjective in many respects and periodic revisions must be made to reflect actual conditions and business developments, the impact of which may cause us to alter marketing, capital investment and other expenditures, which may also materially adversely affect our results of operations. In light of significant uncertainties inherent in the forward-looking information included in this prospectus, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.





Some of the information in this annual report contains forward-looking statements that involve substantial risks and uncertainties. Any statement in this prospectus and in the documents incorporated by reference into this prospectus that is not a statement of an historical fact constitutes a “forward-looking statement”. Further, when we use the words “may”, “expect”, “anticipate”, “plan”, “believe”, “seek”, “estimate”, “internal”, and similar words, we intend to identify statements and expressions that may be forward- looking statements. We believe it is important to communicate certain of our expectations to our investors. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions that could cause our future results to differ materially from those expressed in any forward-looking statements. Many factors are beyond our ability to control or predict. You are accordingly cautioned not to place undue reliance on such forward-looking statements. Important factors that may cause our actual results to differ from such forward-looking statements include, but are not limited to, the risk factors discussed herein.





Although TADS believes that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, management does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with TADS’ consolidated financial statements and the related notes filed herewith.



































PART I





Item 1. Description of Business





Tactical Air Defense Services, Inc. (“TADS”) is a Nevada public corporation that offers air-combat training, aerial refueling, aircraft maintenance training, disaster relief services, and other Aerospace/Defense services to the United States and Foreign militaries and agencies. TADS is certified by the United States Government as a private-sector military contractor and has been granted the required security clearances. The Company is currently a developmental stage company with limited current business operations, no active contracts in operation and uncertain viability.





The Company’s executive offices are located at 123 West Nye Lane, Suite 517, Carson City, Nevada, 89706 and the Company’s phone number is (775) 888-6744.





TADS Corporate History





TADS was incorporated in the State of Nevada on July 9, 1998 under the name Natalma Industries, Inc. Originally, TADS operated as a junior mining company engaged in the exploration of mining properties. We were unsuccessful in locating a joint venture partner to assist us in the development of our mining claims. As a result, TADS was unable to pay for and perform the exploration and development required in its agreement with the owners of its properties and lost our rights to the mining claims. Our management at the time, therefore determined that it was in the best interest of our shareholders that we seek potential operating businesses and business opportunities with the intent to acquire or merge with another business, which led to the purchase substantially all of the assets of AeroGroup Incorporated on December 15, 2006 (the “AeroGroup Acquisition”). The complete terms of the AeroGroup Acquisition were disclosed in our Form 8-K filed with the SEC on December 18, 2006. AeroGroup Incorporated originally commenced its operations and business plan as a contractor of military flight training as AeroGroup International Corporation in January 2002, and eventually merged with and acquired AeroGroup Incorporated.





Current Business Operations





As a result of the U.S. Base Foreclosure Act, the overall downsizing of the armed forces of the U.S. and its foreign allies, and the advanced age of the U.S. military air fleet, there was insufficient equipment and personnel to meet demands for combat air training and air refueling training. The wars in Iraq and Afghanistan and various regional conflicts and terrorist’s acts, have only added to this crisis. The private-sector is now being asked to fill a role once the exclusive domain of the military, and the capabilities of civilian contractors are well recognized, and are frequently proven superior and more efficient than public-sector contractors. In addition, due to the escalating wild fires in the Western U.S., and the financial and environmental costs associated with this crisis, fire-fighting preparedness and capability have become a top priority at both the State and Federal levels of government. Again, the private sector is being asked to provide services that were previously the domain of the public-sector.





In order to meet present and future military, environmental, and financial threats, the United States and its allies has been forced to continue to commit billions of dollars to training, preparedness, and execution. These needs cannot be met without the support of the private-sector. We believe that there is currently no other private-sector contractor which has the potential capabilities to adequately fulfill these diverse and urgent demands, and we believe that TADS, through its current management and business contacts and relationships, has the potential ability to negotiate future contracts and business relationships in order to provide access to the aircraft, personnel, and operational skills necessary to claim a portion of this rapidly growing and highly-profitable market for diverse air support services. Although the Company believes it has the potential ability to negotiate such future contracts and business relationships, the Company does not currently have any such active contracts and it cannot be assured that it will be awarded any such contracts in the future.





We are currently pursuing and negotiating for the acquisition of maintenance and air training contracts with both the United States Department of Defense and various foreign militaries, but for security purposes, cannot disclose the countries with which we are engaged in discussions or bids. We believe that our most likely future revenues will come from foreign military training, both air and maintenance. The contracts that we are pursuing can be executed with or without planes or other physical assets, but the acquisition of planes and equipment would greatly enhance our ability to capture more and larger contracts.  As disclosed below, we are currently engaged in litigation to secure certain aircraft and parts that we believe have been improperly interfered with by third parties.  We have been pursuing this remedy diligently and although we believe that we will prevail and will successfully acquire the assets, the timing is uncertain as is the eventual outcome. Although we believe we will prevail in the acquisition of such assets, we are currently exploring other opportunities to acquire military aircraft and other military assets in order to further our business strategy. In order to acquire any such military assets, the Company would either need to lease such assets with the requirement of an upfront payment of a minimal security deposit, or purchase such assets. In either lease or purchase scenario, the Company would need additional funding and is currently exploring asset-based financing for the assets which it is contemplating purchasing and/or leasing, although it cannot give assurances that any such funding will be available to the Company for such use.






Page 1





Air Combat Training





Air combat training exercises are currently conducted by the training commands of the United States Air Force, United States Navy, and of most of our NATO, and foreign allies. We believe neither the U. S. Department of Defense (the “DoD”) nor its allies have sufficient personnel, support equipment, or access to foreign enemy type aircraft, to meet current demand. In many instances our European allies have neither the facilities nor the extensive airspace required for fighter combat training or fighter bomber training that we hope to provide.





TADS believes it is able to provide the armed forces of the U.S. and its allies with a vast array of training services and support functions including, but not limited to air combat instruction and tactical training, actual aggressor simulated combat, classroom instruction, and airspace scheduling, fueling, aircraft spare parts support, aircraft maintenance and aircraft maintenance training.





Air combat simulation exercises are currently conducted by the training commands of the United States Air Force, United States Navy, and of most of our NATO, and foreign allies. We believe neither the DoD nor its allies have sufficient training and support equipment and personnel to meet current demand. In many instances, our European allies have neither the facilities nor the extensive airspace required for fighter combat training or fighter bombing training that TADS believes it can provide.





Although not a requirement, it is probable that in order to be awarded any such contract, the Company would need to acquire, through either lease or purchase, certain military aircraft to be deployed in any related contract.  The purchase of any such military aircraft would require significant additional funding, typically an asset-based funding, which funding the Company does not currently have in place, nor can guarantee that it will be able to acquire.





Our flight training services focus on two major components; initial qualification flight training and advanced flight training, both of which consist of ground, and in the air flight training. In addition, we are preparing to perform other flight training support services as described herein.





Initial Qualification Flight Training





Initial qualification flight training consists of the training of military pilots that have only recently become qualified in their aircraft and of more experienced pilots returning for recurrency training. Initial qualification flight training involves aircraft specific flight theory, flight maneuvers, aerodynamics, emergency in flight procedures as they relate to combat in a specific aircraft. Pilots and other crew members are also trained in cockpit resource management, which focuses on division of duties between pilot and co-pilot and utilization of resources within the aircraft cockpit to complete the flight plan and address emergencies. Initial qualification training involves many hours of classroom instruction in aircraft systems operations, air-to-air flight maneuvers, tactics, formation flying, instrument training and air-to-ground tactics. In flight instruction is generally provided only once the pilot has shown proficiency in ground instruction and flight simulator instruction.





Although not a requirement, it is probable that in order to be awarded any such contract, the Company would need to acquire, through either lease or purchase, certain military aircraft to be deployed in any related contract.  The purchase of any such military aircraft would require significant additional funding, typically an asset-based funding, which funding the Company does not currently have in place, nor can guarantee that it will be able to acquire.





Advanced  Flight Training





Advanced flight training focuses on combat and other advanced maneuvers and is conducted after the pilot completes initial qualification training and returns to a “full service” training facility where he is provided refresher or upgrade training to sharpen his or her combat skills. We intend to focus the training venue on approved overseas customers and NATO customers who would use our facilities and ranges to qualify, in some cases, and re-qualify in other cases in specific combat skills like air-to-air, air-to-ground, electronic countermeasure training, air-refueling training, and other advanced maneuvers.





Although not a requirement, it is probable that in order to be awarded any such contract, the Company would need to acquire, through either lease or purchase, certain military aircraft to be deployed in any related contract.  The purchase of any such military aircraft would require significant additional funding, typically an asset-based funding, which funding the Company does not currently have in place, nor can guarantee that it will be able to acquire.






Page 2





U.S. Military Training





A crucial component to aerial combat training involves training against actual foreign adversary aircraft which are typically Russian, ex-Soviet bloc, or Chinese. However, because the U.S. military has little to no access to “enemy” aircraft, the status-quo has been to use aged U.S. military aircraft operating as the adversarial or “Red Air” aircraft. The status-quo leaves much to be desired because aged U.S. military aircraft do not possess the flying characteristics or capabilities of sophisticated enemy combat aircraft, nor do they emit the same electronic, radar signature, or visual signals.





Through its past and present relationships with companies licensed by the U.S. Department of Justice (BATF) to import foreignweapons of war, TADS believes it can provide unique Red Air aggressor aircraft, along with ILyushin IL-78’s available in the U.S. or the Ukraine.  These are the aircraft that are the actual fighter aircraft currently used substantially many of the former Soviet bloc countries and non-allied nations.





In connection with contracts to provide adversary combat aircraft to the U.S. military, TADS believes it can supply various support services such as adversary pilots, spare parts, service and maintenance of the adversary aircraft, tactical training, actual aggressor simulated combat, and classroom instruction.





Although not a requirement, it is probable that in order to be awarded any such contract, the Company would need to acquire, through either lease or purchase, certain military aircraft to be deployed in any related contract.  The purchase of any such military aircraft would require significant additional funding, typically an asset-based funding, which funding the Company does not currently have in place, nor can guarantee that it will be able to acquire.





Foreign Air Combat Training





Unlike the training of the U.S. military, air combat training of foreign allied militaries typically entails air combat training techniques and strategies using U.S. military aircraft such as the F-16, which such foreign militaries have already purchased. Although a commercial endeavor, it has been a strategic decision of the U.S. government to supply U.S. fighter aircraft to its allies. However, the ability and resources of the U.S. military to thereafter train the foreign purchasers of its aircraft is extremely limited and sub-par.





As a result, there is a backlog of allied countries that have purchased F-16’s and other U.S. fighter aircraft, and that have immediate and ongoing need for air combat training. TADS believes they are able to offer to foreign militaries actual combat training from highly experienced U.S. fighter pilots, classroom training, and parts, service, and maintenance protocols for their aircraft. TADS also has the capability to either train on foreign soil and foreign military bases to fulfill multi-year contracts, or to provide a turn-key solution by hosting foreign militaries on U.S. soil, and therein provide not only pilots, training protocols, and parts, service, and maintenance, but also the air-bases, bombing ranges, fueling services, housing requirements, etc.





Although not a requirement, it is probable that in order to be awarded any such contract, the Company would need to acquire, through either lease or purchase, certain military aircraft to be deployed in any related contract.  The purchase of any such military aircraft would require significant additional funding, typically an asset-based funding, which funding the Company does not currently have in place, nor can guarantee that it will be able to acquire.





Air to Air Refueling





As demonstrated by the debacle between Boeing and AES in the awarding of the next generation of air refueling aircraft, air refueling is big business, and the U.S. fleet of air refueling aircraft, which were all built in the 1950’s and 1960’s, are operating well below the required levels. With its aging fleet and the uncertainty of the delivery of new tankers, there is an immediate need for the military to outsource air re-fueling and air refueling training.





On May 18, 2010 TADS signed a Lease Option Agreement for the exclusive lease of two Russian ILyushin IL-78 and two ILyushin IL-76 supertanker aircraft from Air Support Systems, LLC. The IL-78 is used for mid-air refueling by most air forces in the world including Russia, most former Soviet republics, China, India, Pakistan, Cuba, Libya, Syria, and many others. The TADS IL-78 is the Midas version and is configured for mid-air refueling. It is capable of re-fueling at an airspeed exceeding 400 knots, and can deliver fuel to three aircraft simultaneously. In addition, the ILyushin aircraft are the only planes ever made for the purpose of aerial fire-fighting and water-bombing, and are recognized as far superior to any other aircraft in existence for this purpose. A copy of the Lease Option Agreement was attached as an exhibit to our Form 10-Q for the period ending March 31, 2010 filed with the SEC on May 24, 2010 and incorporated herein by reference.





Although the Company believes it has the resources available to it to pursue such air to air refueling contracts, the Company does not anticipate being awarded any such contracts in the near future.






Page 3





Aerial Fire-Fighting





In addition to its military operation capabilities, the IL-76/78 is the only large aircraft ever built for the purpose of aerial water-bombing, and is considered by most fire-fighting experts as the most capable. The ILyushin IL-76/78 aircraft are dedicated water-bombers that are capable of quickly and efficiently disbursing large quantities of water or fire retardant to defeat the increasing damage from the extensive forest fires in the Western U.S. and other areas.





As exemplified by the state-of emergency declared by California recently, the United States Forest Service estimates that forest fires will be a permanent threat. In addition to the substantial revenue stream that TADS anticipates could result from these services, we believe that TADS would receive valuable high-profile publicity from providing aerial fire-fighting services.





Due to the escalating forest fire crisis in the Western U.S., and the unique capabilities and exclusivity of its ILyushin aircraft, prior to cancellation of its exclusive lease, TADS had been exploring opportunities with State and Federal agencies in connection with providing aerial fire-fighting services to combat the seemingly ever-growing devastation of forest fires. Although the Company believes it has the resources available to it to pursue such aerial firefighting contracts, the Company does not anticipate being awarded any such contracts in the near future.





Specialty Aerial Services





In addition to its use as an air refueling aircraft and as an aerial fire-fighter, the unique characteristics of the IL-78 make it extremely desirable for a number of specialty aerial services.





The IL-78aircraft is a versatile workhorse that can be configured for heavy cargo and used for the transport of military vehicles, heavy equipment, and commercial air cargo services. The IL-78 has unique performance capabilities and is famous for its ability to operate in extreme conditions and from marginal landing areas.





Although the Company believes it has the resources available to it to pursue such specialty contracts, the Company does not anticipate being awarded any such contracts in the near future.





Current Asset Status





On May 18, 2010 the Company signed a lease agreement with Air Support Systems, LLC. As consideration for the lease option, TADS issued Air Supports Systems, LLC a one-time up-front fee consisting of 10,000,000 shares of the Company’s restricted common stock. The lease provides TADS an exclusive one year period in which to lease and utilize the aircraft in exchange for: (i) a fee equal to fifty (50%) percent of the operating profits of any contract, where operating profits equals the gross cash receipts derived from a contract minus the direct expenses of operating said contract; (ii) a fee equal to fifty (50%) percent of the fee paid to TADS in connection with any off-loaded fuel for which TADS is paid in connection with a contract for air-to-air refueling; and (iii) TADS and Air Support Systems, LLC shall agree upon a minimum monthly, quarterly, or annual fee amount, as the case may be, on a case-by-case basis, relevant to the type and terms of the particular aircraft under lease and the related contract. A copy of the Lease Option Agreement was attached as an exhibit to our Form 10-Q for the period ending March 31, 2010 filed with the SEC on May 24, 2010 and incorporated herein by reference.





On August 31, 2010, the Company entered into a Settlement Agreement and Release with M&M Aircraft Acquisitions, Inc. (the “M&M Agreement”) to acquire the exclusive right to purchase a number of military jets and related parts and engines.  Approximately $2,000,000 is required to complete the purchase of the assets under the M&M Agreement and the Company believes the ability to raise financing to cover such acquisition costs is good, however, as of the date of this report, because M&M has failed to perform its obligations under the M&M Agreement, we cannot move forward on any financing until such time as this issue is resolved. We have re-initiated legal action against M&M in Palm Beach County, Florida in order to take possession of the related aircraft and parts. Despite the legal hurdles, the Company is currently exploring a number of financing proposals for the funding of the acquisition of the assets. TADS believes that when fully operational and under contract, the aircraft may add between $9,000,000 and $13,500,000 in the aggregate per year to its top-line revenue. In addition, TADS anticipates that the aircraft, related parts, and jet engines may significantly increase the assets to its balance sheet, as well as provide additional cash-flows to the Company from sales of surplus spare parts and jet engines. A copy of the M&M Aircraft Settlement Agreement and Release has been attached as an exhibit hereto and incorporated herein by reference. However, although the Company believes it will prevail in certain legal disputes with M&M Aircraft Acquisitions, Inc. as described herein, the assets may not be available to the Company for an indefinite period, if ever.





The Company is currently exploring other opportunities to acquire military aircraft and other military assets in order to further its business strategy. In order to acquire any such military assets, the Company would either need to lease such assets with the requirement an upfront payment of a minimal security deposit, , or purchase such assets, In either lease or purchase scenario, the Company would need additional funding and is currently exploring asset-based financing for the assets which it is contemplating purchasing and/or leasing, although it cannot give assurances that any such funding will be available to the Company for such use.






Page 4





Customers and Competition





The capabilities of companies which provide similar services are limited. Typically, our competitors operate a small number of older-generation aircraft. They therefore generally neither have the aircraft required to fulfill the current contracts in the awards process, and nor do they have the infrastructure necessary should they be awarded a contract. TADS believes that its ability to procure, support, and maintain military aircraft and ground-threat support equipment, either though itself or by partnering with similar service providers, gives it a distinct advantage over the competition.





We are dependent on a small, limited pool of customers for our services. The Company’s aerial training and air refueling services will only be requested, if at all, by United States and allied military agencies with specific needs, and by contractors for these services who sub-contract to us.





The contract procurement process is lengthy and the government military organizations and the State and Federal agencies that are our primary target customers are often delayed and cautious when issuing contracts such as those we pursue. These customers have strict regulations and policies with respect to procuring services from private-sector companies for fulfillment of their contracts. In addition, unless no other competitors are available, the contracts we target are generally required to request bids before awarding contracts. While we believe, based on our experience, very few other entities are currently able to provide most of these services, no assurance can be made that new entities with more resources than us will enter into this business.





The Company’s business is dependent on our ability to bid for, negotiate, secure, and perform under specialized government and agency contracts. We have in the past been awarded a number of service contracts, and we are in various stages of discussions for the awarding of additional service contracts related to our services described herein, although no assurances can be given that these discussions will lead to the awarding of additional contracts.





Government Approval, Regulation and Licensing





In order to own and operate military aircraft and to enter into government contracts we are required to have certain government licenses and permits. Our proposed business is heavily regulated. All of our operations involve intense government approval and oversight. Prior to awarding contracts other than on a “bid for service” basis, military agencies are required to publish their proposed award of a contract with details of such contract. During this time period, other persons may submit objections or counter bids on these contracts.





Our potential aircraft operations will also be subject to all regulations of the Federal Aviation Administration that relate to civil “experimental” aircraft, and will be subject to special airworthiness standards and operating procedures of the Federal Aviation Administration. Additionally, our pilots, instructors and mechanics also must generally be appropriately certified to perform their duties by the Federal Aviation Administration and are required to comply with strict recurrency flight and ground training rules along with medical certification for pilots.





In addition to the foregoing, government agencies will require that we have and maintain a proper safety program, an approved spare parts program and an approved aircraft inspection maintenance program, each of which must be sufficient to support the contracts that we undertake to perform and each of which must be continually kept current.





Additionally, we could be subject to rules of foreign governments with respect to operations of our aircraft over their territories.





Intellectual Property





We maintain several patent applications to a number of procedures that related to the methods of conversion of military aircraft for use by civilian entities in training military personnel. These patents, which were acquired through the AeroGroup Acquisition, are as follows:





Aircraft

PatentF-16 Falcon


Pat. Pend. 60805870Kfir


Pat. Pend. 60805885A-4 Skyhawk


Pat Pend. 60805877MiG 29


Pat Pend. 60805888





We are required to renew such patent applications and, as of the date of this filing, such applications have lapsed without renewal; however, we believe it can be renewed in a matter of weeks when needed. No assurance can be made that we will be awarded patents or that they will not be challenged. Moreover, no assurance can be made that competitors will not utilize similar procedures to privatize military aircraft.







Page 5







Employees





As of December 31, 2010, we have two full time employees. In addition, we hire independent contractor labor for executive management, legal, accounting and other administrative functions, on an as needed basis.





WHERE YOU CAN FIND MORE INFORMATION





You are advised to read this Form 10-K in conjunction with other reports and documents that we file from time to time with the SEC.  In particular, please read our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we file from time to time.  You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.





Item 2. Description of Properties





The Company’s executive offices are located at 123 West Nye Lane, Suite 517, Carson City, Nevada, 89706 and the Company’s phone number is (775) 888-6744. We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.





Item 3. Legal Proceedings





Mr. Charlie Searock (“Searock”), a former executive officer of our company, has brought a laws suit in the District Court of the 336 th Judicial District of Grayson County, Texas against us and seven other defendants on February 6, 2007, on claims of breach of an employment agreement between Searock and International Tactical Training Center, Inc. (“ITTC”). (Charles J. Searock, Jr., vs. Tactical Air Defense Services, Inc., International Tactical training Center, Inc., Mark Daniels, Victor Miller, John Farley, Gary Fears, Jamie Goldstein, and Joel Ramsden, Cause No.07-0322-336). ITTC and the Company are the only two corporate defendants named in the Searock lawsuit. Of the six individuals named as defendants, three are former ITTC management.   Searock asserts that the Company is liable for ITTC’s breach of employment agreement because he alleges that the Company acquired ITTC’s assets, and that ITTC was a former subsidiary of AeroGroup, Inc., an entity not named as a defendant in the Searock lawsuit. In addition to his claim for breach of the ITTC employment contract, Searock also asserts theories of tort liability against the defendants.   The Company denies any liability to Searock on his claim for breach of the ITTC employment contract and denies Searock has any factual basis to impose liability on the Company under any of his theories of tort liability. Specifically, the Company denies that it acquired, owns or controls ITTC’s former assets. The Company believes that this claim is without merit and is working towards resolution of the same.  On October 25, 2010, Searock was awarded a default judgment of $1,248,962 including accrued interest, jointly and severally against TADS and the other defendants, all of whom who failed to appear for trial, and an award of exemplary damages of $2,000,000 against TADS.   Searock claims that TADS and the other defendants were given notice of the trial, however it is TADS assertion and the assertion of the other defendants that none one of the defendants, including TADS, ever received notice of the trial, were unaware of the trial, and that the judgment is without merit.  TADS is in the process of vigorously contesting the judgment based upon not having received notice, and although no assurances can be given, the Company believes that the judgment will be vacated by the Court.





In June of 2009, Victor Miller and Air 1 Flight Support, an entity controlled by Victor Miller, caused an injunction to be placed on the Company to not relocate the IL-78, which the Company leases from a third party, as a result of a lien Victor Miller and Air 1 Flight Support placed on the IL-78 for unpaid services provided to the third-party leasing the IL-78 to the Company.  The Company believes that the lien and injunction are completely without merit based upon Victor Miller and Air 1 Flight Support being party to a settlement agreement between the parties including the third-party subject to the lien.  Victor Miller and Air 1 Flight Support subsequently filed a motion for contempt of court against the Company subsequent to the IL-78 having been relocated by a third-party to which the Company leases the IL-78, without the knowledge or assistance of the Company.  Victor Miller and Air 1 Flight Support subsequently filed a legal proceeding against the Company in Michigan in connection with the lien, which has resulted in a judgment against the Company. The Litigation between the parties was resolved in November, 2010, and the judgment against TADS and the lien against the IL-78 have been removed.





On March 4, 2010, TADS sued Mark Daniels, the Company’s former President and Chief Executive Officer, and various entities affiliated with or controlled by Mr. Daniels, in The Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida, for temporary and permanent injunctive relief, damages, and other relief for breach of contract, breach of fiduciary duty and duty of loyalty, tortuous interference with advantageous and contractual relationships, and misappropriation, misuse and conversion of trade secrets and confidential business information.






Page 6





On September 7, 2010, Palm Beach County Circuit Court Judge Jack S. Cox ruled in favor of TADF and imposed additional findings and sanctions on Daniels, including but not limited to:





-
Since leaving TADF, Daniels has been actively participating in attempts to compete with TADF and has violated his non-compete agreement with TADF;


-
Daniels, acting individually or in concert with any company or entity he is directly or indirectly involved in, is immediately enjoined from and ordered to cease and desist and to refrain from engaging in any and all acts of competition with TADS;


-
Daniels’ non-compete agreement shall begin anew from September 7, 2010;


-
Daniels lied under oath at the March 25th, 2010 Court Hearing and continued to lie under oath at the September 7, 2010 hearing;


-
Daniels was found in Contempt of Court for having made false statements under oath;


-
Daniels was immediately sentenced to 5 months, 29 days in confinement at the Palm Beach County Jail, subject to being released after 2 days and being on probation for 5 months, 27 days;


-
In addition, the Court sanctioned Daniels by striking all of his pleadings because it found that Daniels set in motion a series of events and intentionally provided testimony for the purpose of hindering, delaying, and otherwise defeating the proper administration of justice.





In addition to the above, on May 7, 2010, Mr. Daniels filed an improper and frivolous Involuntary Chapter 7 Petition (the “Petition”) against the Company in the United States Bankruptcy Court for the Southern District of Florida, in an effort to circumvent the legitimate court process, by claiming non-payment of a promissory note that the Company contends in its litigation against Mr. Daniels was issued without proper consideration when Mr. Daniels was the President, Chief Executive Officer, and a Director of the Company. Upon notification to the Company on May 10, 2010 of this improper Petition, the Company requested and was granted an Emergency Hearing for May 14, 2010 in the United States Bankruptcy Court in the Southern District of Florida before Chief Justice Paul G. Hyman (the "Emergency Hearing"). On May 14, 2010, Chief Justice Paul G. Hyman dismissed the Involuntary Chapter 7 Petition by a signed Order granting an emergency Motion to Dismiss the Involuntary Chapter 7 Petition filed against the Company by Mr. Daniels.  In the Court Order, it was agreed that:





-
Mr. Daniels’ claim is the subject of a bona fide dispute;-
The Company has more than 12 unsecured creditors (note holders are the only claims not in dispute);





-
The Court should enter an Order dismissing Mr. Daniels’ involuntary petition, with prejudice to any subsequent involuntary petition by Mr. Daniels (i.e.. he is barred from refilling an involuntary petition), or any insider or affiliate of Mr. Daniels; and-
Moreover, Mr. Daniels cannot pursue any efforts or take any actions to solicit, recruit, encourage, or cause any other alleged creditor of the Company to file an involuntary bankruptcy petition against the Company.





-
The Company agreed to withdraw its claim for attorney’s fees, costs, damages and punitive damages arising from the improvident filing in exchange for Mr. Daniels’ consent to the dismissal of the petition.





Additionally, Mr. Daniels’ attorney of record who filed the Petition, as a result of learning that Mr. Daniels had materially misstated the facts and failed to disclose that Mr. Daniels was currently the Defendant in civil litigation with the Company, filed a motion to withdraw his representation of Mr. Daniels in the Petition.





Despite the dismissal of the Petition described above, on August 3, 2010 certain affiliates and business associates of Mr. Daniels filed an improper and frivolous Involuntary Chapter 7 Petition (the “New Petition”) against the Company in the United States Bankruptcy Court for the Southern District of Florida, in an effort to circumvent the legitimate court process, in direct violation of the Court Order issued by Judge Paul Hyman on May 14, 2010 described above.





The Company immediately requested an emergency Motion to Dismiss the New Petition based upon its contention that:





-
the New Petition violated the Court Order because it was solicited, recruited, encouraged, or caused by Mr. Daniels;


-
the majority of the new petitioners were affiliates and business associates of Mr. Daniels;


-
a majority of the new petitioners were currently involved in civil litigation with TADF; and


-
all of the claims of the new petitioners were either without merit, being contested, or were frivolous and improper.





On August 10, 2010, at an Emergency Hearing to Dismiss the fraudulent and improper Petition, the Federal Bankruptcy judge dismissed the Petition, as had been anticipated and previously disclosed by the Company, and, moreover, due to the egregious actions of the petitioners, reserved the right of the US Federal Bankruptcy Court to:





-
impose sanctions upon the petitioners, and


-
impose punitive sanctions upon the petitioners if it is determined that the actions of the petitioners violated the Court Order previously issued by U.S. Federal Bankruptcy Court Judge Hyman.






Page 7





Although no assurances can be given, the Company believes that sanctions will be imposed upon the petitioners, and that it will be determined that the petitioners violated the Court Order issued by Judge Hyman.





As disclosed in our past filings, Sichenzia & Ross LLP (“Sichenzia”) had been pursuing a claim against the Company for unpaid services dating back to early 2007. The Company recently learned that Sichenzia obtained a judgment against the Company in the amount of $21,471.87 in the Civil Court of the City of New York, County of New York on April 3, 2008. We believe that this claim is without merit and are working towards resolution of the same.





As of the date of this Annual Report, the Company is not a party to any pending litigation or legal proceeding that is not described herein or in the ordinary course of business. To our knowledge, no such proceedings exist or are threatened other than those described herein.





Item 4. (Removed and Reserved)
























































Page 8






PART II





Item 5: Market for Registrant's Common Equity and Related Stockholder Matters





(a) Market Information.





The common stock of the Company, $.001 par value, is currently traded over the counter and is listed on the OTC Pink Sheets under the symbol "TADF" The availability of historical trading prices of our common stock is limited, with periods of little or no trading activity. The following table sets forth the available approximate range of high and low closing prices for the common stock of the Company during the periods indicated. The quotations presented are adjusted to reflect splits in our common stock and reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not necessarily represent actual transactions in the common stock.





2010
Low
HighFirst Quarter
0.0011
0.003Second Quarter
0.0025
0.0308Third Quarter
0.0035
0.0084Fourth Quarter
0.0019
0.0052009
Low
HighFirst Quarter
$0.011
$0.08Second Quarter
0.001
0.048Third Quarter
0.0013
0.0033Fourth Quarter
0.0013
0.0025





On May 11, 2011 the closing quotation for our common stock was $0.004 per share. As reflected by the high and low prices on the foregoing table, the trading price of the common stock of the Company can be volatile with dramatic changes over short periods. The trading price may reflect imbalances in the supply and demand for shares of the Company, market reaction to perceived changes in the industry in which the Company sells products and services, general economic conditions, and other factors. Investors are cautioned that the trading price of the common stock can change dramatically based on changing market perceptions that may be unrelated to the Company and its activities.





(b) Approximate number of equity security holders





As of May 11, 2011, there were approximately 217 holders of record of our common stock.  This number excludes the shares of our common stock owned by stockholders holding stock under nominee security position listings.





(c) Dividends





We have never declared or paid a cash dividend and do not foresee paying one in the near future.  Any future decisions regarding dividends will be made by our board of directors.  We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.  Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders.  Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.





(d) Securities authorized for issuance under equity compensation plans





The Company does not currently maintain any stock option plan, whether approved by shareholders or otherwise, however, the Company does, on occasion issue equity or options as compensation to consultants and employees. Additional detailed information relating to stock and option grants during 2010 can be found below in “Item 11, Executive Compensation” and Item 5(e) “Recent sales of unregistered securities”, the provisions of which are incorporated herein.





(e) Recent sales of unregistered securities.





Convertible Debentures





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $146,142.51 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 73,071,255 shares of Common Stock at a conversion price of $0.002 per share.





Page 9








On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $18,244.62 to Alexis Korybut as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 9,122,310 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $3,000.00 to Tom Robinson as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 1,500,000 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $30,000.00 to Michael Cariello as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 15,000,000 shares of Common Stock at a conversion price of $0.002 per share.





On October 15, 2010, the Company issued a Convertible Debenture in a principle amount of $110,000 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 55,000,000 shares of Common Stock at a conversion price of $0.002 per share.





On December 31, 2010, the Company issued a Convertible Debenture in a principle amount of $176,108.00 to GFMB LLC as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 234,754,123 shares of Common Stock at a conversion price of $0.00075 per share.





Conversion of Notes and Exercise of Warrants





In October, 2010, the Company issued 54,194,041 shares of Common Stock to Juliana Hoyos Castellar in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 3,284,487 shares of Common Stock to Amy Crystal in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $2,290.63 including $2,000.00 of principle and $290.63 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 2,463,366 shares of Common Stock to Humberto De Armas in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,717.97 including $1,500.00 of principle and $217.97 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 54,194,041 shares of Common Stock to the Estella A. Korybut Irrevocable Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 2,463,366 shares of Common Stock to Marla Lopez Garcia in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,717.97 including $1,500.00 of principle and $217.97 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 33,334,172 shares of Common Stock to Fox Hollow Holdings in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $22,947.24 including $20,000.00 of principle and $2,147.24 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 32,395,947 shares of Common Stock to International Associates in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $22,301.37 including $20,951.30 of principle and $1,350.07 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture






Page 10





In October, 2010, the Company issued 11,050,838 shares of Common Stock to Peter Maffitt in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $7,706.95 including $6,729.11 of principle and $977.84 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 7,390,097 shares of Common Stock to Nathalie Zambrano in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $5,153.92 including $4,500.00 of principle and $653.92 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 3,095,843 shares of Common Stock to Evan Pruzan in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $2,145.32 including $2,000.00 of principle and $145.32 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 31,800,000 shares of Common Stock to Brad Bingham in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $38,702.05 including $37,500.00 of principle and $1,202.05 of accrued interest, at a conversion price of $0.00125 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 75,754,123 shares of Common Stock to Alexis Korybut in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $52,149.14 including $46,128.43 of principle and $6020.71 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 54,194,041 shares of Common Stock to the Revocable Living Trust Agreement of Michael M. Korybut in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In December, 2010, the Company issued 129,341,862 shares of Common Stock to CTBMB LLC in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $89,038.94 including $76,728.71 of principle and $12,310.23 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In December, 2010, the Company issued 95,208,361 shares of Common Stock to Black Ridge Holdings in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $65,541.44 including $56,400.00 of principle and $9141.44 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





Issuance of Common Stock





The Company issued 14,000,000 shares of Common Stock to Mr. Alexis Korybut in October, 2010 as additional compensation. No registration rights were issued in connection with these shares.  The shares were valued at $32,200.





The Company issued 3,750,000 shares of stock to Susan Jackson in December of 2010, at a purchase price of $0.004 per share for a total consideration of $15,000, subject to the terms of a securities purchase agreement.  No registration rights were issued in connection with these shares.





The Company issued 1,250,000 shares of stock to Sunburst Holdings Ltd in December of 2010, at a purchase price of $0.004 per share for a total consideration of $5,000, subject to the terms of a securities purchase agreement.  No registration rights were issued in connection with these shares.





The Company issued 20,000,000 shares of stock to Brad Bingham in December of 2010 as payment of accrued legal fees. No registration rights were issued in connection with these shares.  The shares were valued at $20,000.





The Company issued 20,000,000 shares of stock to Gregory Broms in December of 2010 as an incentive for a loan to the Company.  No registration rights were issued in connection with these shares.  The shares were valued at $20,000.





Pursuant to a Securities Purchase Agreement, in December, 2010, the Company sold 3,750,000 shares of Common Stock to one investor at a purchase price of $0.004 per share. The gross proceeds of the offering totaled $15,000.





Pursuant to a Securities Purchase Agreement, in December, 2010, the Company sold 1,250,000 shares of Common Stock to one investor at a purchase price of $0.004 per share. The gross proceeds of the offering totaled $5,000.






Page 11





The Company reasonably believes that all of the issuances of securities described above were deemed to be exempt from registration in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering.  Each investor had a pre-existing relationship with the Company and/or represented that it had the financial wherewithal, knowledge and sophistication to invest in the securities of the Company.  In addition, each recipient represented that they are acquiring the securities as an investment only and not with a view towards distribution of the same to the public.  We made available to each investor with disclosure of all aspects of our business, including providing the investor with press releases, access to our auditors, and other financial, business, and corporate information.  Finally, all securities issued were either restricted with an appropriate restrictive legend on certificates for shares, notes and warrants issued stating that the securities (and underlying shares) have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom, or were issued pursuant to an exemption provided under Rule 144.





Item 6. Selected Financial Data





Not Applicable.





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





The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and related notes included in this report.  This report contains “forward-looking statements” that are not historic in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology are forward-looking statements based on current expectations and assumptions.





The forward-looking events discussed in this report, the documents to which we refer you and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us.  For these statements, we claim the protection of the “bespeaks caution” doctrine.  All forward-looking statements in this document are based on information currently available to us as of the date of this report, and we assume no obligation to update any forward-looking statements.  Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.





Critical Accounting Policies





Our critical and significant accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements.  These policies have been consistently applied in all material respects and address such matters as revenue recognition and depreciation methods.  The preparation of the financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ from those estimates.  The accounting treatment of a particular transaction is specifically dictated by accounting principles, generally accepted in the United States of America, with no need for management’s judgment in their application.  There are also areas in which management’s judgment in selecting any viable alternative would not produce a materially different result.  See our audited financial statements and notes thereto which contain accounting policies and other disclosures required by accounting principles, generally accepted in the United States of America.





Results of Operations




Revenues





Year

Ended December 312010

2009Total Sales
$0

$0





We had no revenues for the year ended December 31, 2010 or for the year ended December 31, 2009.






Page 12





Net Profit (Loss).





Year

Ended December 312010

2009Net Profit (Loss)
($1,330,332)

($633,600)





For the year ended December 31, 2010, we sustained net losses of $1,330,332 as compared with a net loss of $633,600 for the year ended December 31, 2009.  The increase in net loss is attributed to increased costs associated with general and administrative expenses and an element of compensatory stock issuance.





Liquidity and Capital Resources





As at December 31, 2010, the Company had total assets of $165,168. There were liabilities of $1,689,003 comprised of $154,500 in accounts payable and $1,543,503 in long term debentures. Assets of $165,165 and liabilities of $1,698,003 resulted in a working capital deficiency of $1,532,835. The Company reported total stockholders’ deficit of $1,532,835 at December 31, 2010. We anticipate that our current cash on hand of $168 as of December 31, 2010 is not sufficient to satisfy our cash requirements without additional funding.  The Company has funded its operations and met its capital expenditures requirements primarily through cash generated from contributions from the issuance of convertible debt securities and short-term promissory notes. We do not have any financing commitments and no assurance can be made that we will be obtaining financing at the times and terms needed. Therefore, there is substantial doubt that we will be able to continue as a going concern. In addition, we will need substantial additional capital during the next 12 months on order to complete our business plan.





During the year ended December 31, 2011, the Company believes that it will expend funds on the following:





-
Expenses related to the acquisition of potential contracts;


-
Leasing and refurbishment of certain military aircraft and equipment;


-
Leasing and refurbishment of training facilities to fulfill potential contracts; and


Hiring of additional employees and independent contractors to fulfill potential contracts.





Total current judgments outstanding against the Company total approximately $3,270,422 plus accrued interest. Considering the overall current legal proceedings and those specific to the acquisition of assets under the M&M Agreement, the Company has and expects to continue to expend significant funds on legal expenses.  Legal expenses have been a burden upon the liquidity of the company since early 2010, and continue to be so, although we believe a portion of these expenses will be greatly reduced in the coming year as the litigation is anticipated to be resolved within that time frame. Considering the importance of some of the current litigation to the Company, although it is an expense that we would prefer not to incur, our management believes that it is a necessary expense and we can obtain financing to continue to fund the litigation.  In connection with the Searock judgments against the Company, it is the Company’s position that it will be overturned on appeal in light of both the evidence and the fact that the Company did not receive proper notice of impending litigation and was not able to present any defense, and as such until such time as final determinations by the courts have been made, we do not expect these judgments against the company to affect our liquidity.





Need for Additional Capital





As indicated above, management does not believe that the Company has sufficient capital to sustain its operations without raising additional capital.  We presently do not have any immediately available credit, bank financing or other external sources of liquidity.  Accordingly, we expect that we will require additional funding through additional equity and/or debt financings.  However, there can be no assurance that any additional financing will become available to us, and if available, on terms acceptable to us.





Any financing, if available, may involve restrictive covenants that may impact our ability to conduct our business or raise additional funds on acceptable terms.  If we are unable to raise additional capital when required or on acceptable terms, we may have to delay, scale back or discontinue our expansion plans.  In the event we are unable to raise additional capital we will not be able to sustain any growth or continue to operate.





As disclosed in our Form 8-K filed on April 28, 2011, on April 1, 2011, the Company entered into a Letter of Intent (the “LOI”) with Cornucopia, Ltd. (“Cornucopia”) to provide up to $1,000,000 in possible financing to the Company.  On April 25, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Cornucopia, Ltd. to provide an initial financing of $400,000, payable in two separate financing tranches of $200,000 each, with the first tranche closed and funded upon execution of the SPA. Pursuant to the terms of the SPA, the Company expects to close the second tranche of the additional $200,000 in financing under the SPA within 30-60 days, although no assurances can be given such financing will close. Copies if the LOI and SPA were attached as an exhibit to the Form 8-K and have been incorporated in its entirety by reference. We expect to use this initial $400,000 of financing in order to (i) help satisfy our immediate liquidity needs, and (ii) lease certain military aircraft that we believe will begin to generate revenue and earnings such that it will cover a material portion of our broader and future liquidity needs. Considering the $2,000,000 in estimated capital required to complete the purchase of the assets under the M&M Agreement and the legal expenses associated with the M&M Agreement and those required to defend against the approximately $3,270,422 plus accrued interest in judgments against us, the $400,000 in potential immediate financing will not completely satisfy our current liquidity needs. We are also pursuing a number of contracts that we believe will generate revenues and earnings to cover any outstanding liquidity shortfall. In addition, although we can make no guarantees, we believe that the current M&M litigation for the related aircraft and parts will be settled in our favor, and that the acquisition of said assets will greatly change the liquidity prospects of the Company due to either putting such aircraft to work on contract or by selling the assets at a significant premium to the price that the Company will have paid for such assets.






Page 13





Effects of Inflation





Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change and continually maintain effective cost control in operations.





Off Balance Sheet Arrangements





We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.





Going Concern





The accompanying financial statements have been prepared assuming we will continue as a going concern.  We have had substantial operating losses for the past years and are dependent upon outside financing to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management’s plan to raise necessary funds from shareholders to satisfy the expense requirements of the Company.





Forward-Looking Statements





The Company, from time to time, may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological development, new products, research and development activities and similar matters. The Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in any of the Company's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company's business include, but are not limited to, the following: (a) the failure to obtain additional borrowed and/or equity capital on favorable terms for acquisitions and expansion; (b) adverse changes in federal and state laws, or other matters affecting the Company's business; (c) the demand for the Company's products and services; and (d) other risks detailed in the Company's Securities and Exchange Commission filings.





This Form 10-K contains and incorporates by reference certain "forward-looking statements" with respect to results of operations and businesses of the Company. All statements, other than statements of historical facts, included in this Form 10-K, including those regarding market trends, the Company's financial position, business strategy, projected costs, and plans and objectives of management for future operations, are forward-looking statements. In general, such statements are identified by the use of forward-looking words or phrases including, but not limited to, "intended, will, should, may, expect, anticipate, estimates, projects" or the negative thereof or variations thereon or similar terminology.





Forward-looking statements are based on the Company's current expectations. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risk and uncertainty, the Company's actual results could differ materially. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed hereunder and elsewhere in this Form 10-K. These forward-looking statements represent the Company's judgment as of the date of this Form 10-K. All subsequent written and oral forward-looking statements attributable to the Company are expressly qualified in their entirety by the Cautionary Statements. The Company disclaims, however, any intent or obligation to update its forward-looking statements.





Item 7A.  Quantitative and Qualitative Disclosure about Market Risk





Not applicable.

















Page 14








Item 8. Financial Statements and Supplementary Data

















CONTENTS











Report of Independent Registered Public Accounting Firm – 2010Balance SheetStatements of OperationsStatements of Stockholders' Equity (Deficit)Statements of Cash FlowsNotes to Financial Statements


































F-1







MALCOLM L. POLLARD,INC.


4845 W. LAKE ROAD, # 119


ERIE, PA 16505


(814) 838-8258


FAX (814) 838-8452





Report of Independent Registered Public Accounting Firm








Board of Directors





Tactical Air Defense Services, Inc. and Subsidiaries








We have audited the accompany consolidated  balance sheet of Tactical Air Defense Services, Inc. and Subsidiaries  as of December 31, 2010 and the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2010.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.





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





The Company has not generated significant revenues or profits to date. This factor, among others, raises substantial doubt about its ability to continue as a going concern.  The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flow to conduct its operations and its ability to obtain additional sources of capital and financing.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.





In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2010 , the results of its operations, changes in stockholders’ equity,  and its cash flows for the year ended December 31, 2010, in conformity with U.S. generally accepted accounting standards.





/s/ Malcolm L. Pollard, Inc.





Malcolm L. Pollard, Inc.


Erie, Pennsylvania


May 12, 2011















F-2








TACTICAL AIR DEFENSE SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31,

December 31,2010

2009ASSETSCurrent Assets:Cash
$                        168

$                        -Loans Receivable
165,000

-Total Current Assets
165,168

-Property and Equipment, net
-

88,000TOTAL ASSETS
$                 165,168

$                88,000LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable
$                 154,500

$                18,378Short-Term Debentures, including accrued interest
-

1,431,813Total Current Liabilities
154,500

1,450,191Long-Term Debentures, including accrued interest
1,543,503TOTAL LIABILITIES
1,698,003

1,450,191COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' DEFICIENCY:Preferred stock-$.001 par value; 50,000,000 shares authorized; --0- shares issued and outstanding
--

--Common stock-$.001 par value;30,000,000,000 shares authorized; -2,987,935,294 and 1,428,730,286 shares issued and outstandingat December 31, 2010 and December 31, 2009 , respectively
2,984,443

1,428,730Additional paid-in-capital
35,425,158

35,733,183Accumulated deficit
(39,942,436)

(38,524,104)TOTAL STOCKHOLDERS' DEFICIENCY
(1,532,835)

(1,362,191)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY
$                 165,168

$                88,000

















F-3










TACTICAL AIR DEFENSE SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSYear EndedDecember 31,
December 31,2010
2009REVENUES
$
$Operating costsGeneral and administrative, including compensatory element of stock issuance of $684,948 for the year ended December 31, 2010
1,158,818
603,600TOTAL COSTS
1,158,818
603,600OPERATING LOSS
(1,158,818)
(603,600)OTHER (EXPENSE) INCOME:Interest expense
(171,514)
(30,000)OtherTOTAL OTHER EXPENSES
(171,514)
(30,000)NET LOSS
$                (1,330,332)
$                 (633,600)Impairment of Asset
$                     (88,000)NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
$                (1,418,332)
$                 (633,600)Loss per common share - basic and diluted
$                         (0.00)
$                       (0.00)Weighted average number of shares outstanding - basic and diluted
2,208,332,790
896,300,964






































F-4







TACTICAL AIR DEFENSE SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYDeficitAccumulated
TotalDuring
Stockholders’Common Stock
Preferred Stock
Additional Paid
Development
(Deficiency)Shares

Amount
Shares

Amount
in Capital
Stage
EquityBalance -December 31, 2007

45,248,296

$
45,248

6,400,000
-
$
6,400
$
26,650,808
$
(35,376,124)
$
(8,673,668
)Stock issued for services to consultants and employees

85,900,000


85,900

-
-

-

756,680

-

842,580Issuance of common stock upon conversion of debentures

724,055,560


724,056

-
-

-

8,996,448

-

9,720,504Net loss






-
-

-

-

(2,514,380)

(2,514,380
)Balance -December 31, 2008

855,203,856

$
855,204

6,400,000
-
$
6,400
$
36,403,936
$
(37,890,504)
$
(624,964
)Stock issued for services to consultants and employees-net of stock retired

553,526,430


553,526

-
-

-

(657,153)

-

-103,627Issuance of common stock upon retirement of preferred stock




20,000

(6,400,000)
-

(6,400)-

(13,600)

-Net loss






-


-

-

(633,600)

(633,600
)Balance -December 31, 2009

1,428,730,286

$
1,428,730

--
-
$
--
$
35,733,183
$
(38,524,104)
$
-1362191
)Stock issued for services to consultants and employees

107,152,512


107,153

-


-

-

-

107,153Issuance of common stock upon conversion of debentures

1,452,052,496


1,448,560

-


-

(308,025)

-

1,140,535Net loss






-
-

-

-

(1,418,332)

(1,418,332)
)2,987,935,294


2,984,443

-
-

-

35,425,158

-39,942,436

-1,532,835





























F-5








TACTICAL AIR DEFENSE SERVICES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYear EndedDecember 31,

December 31,2010

2009CASH FLOWS FROM OPERATING ACTIVITIESNet (loss)

$
(1,418,332)

$               (633,600)Adjustments to reconcile net loss to net cash used in operating activities:Impairment of Fixed Asset


88,000Bad Debt Reserve




250,000Stock-based compensation


365,775

296,651Changes in operating assets and liabilities:Loan Receivable


(165,000)Accounts payable


136,122

10,633Accrued liabilities


-

-Net Cash Used in Operating Activities


(993,435)

(76,316)CASH USED IN INVESTING ACTIVITIESNet Cash Used in Investing Activities




-CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from Related Parties


960,403

28,160Proceeds from sale of common stock


33,200

25,000Net Cash Provided by Financing Activities


993,603

53,160Increase (Decrease) in cash


168

(23,156)Cash - Beginning of period


-

23,156Cash - End of period

$
168

-Interest paid

$
-

$                          -Taxes paid

$
-

$                          -























F-6








TACTICAL AIR DEFENSE SERVICES, INC.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





NOTE 1 - COMPANY AND BASIS OF PRESENTATION:





General





Tactical Air Defense Services, Inc. (“TADS”) is a Nevada public corporation operating as an Aerospace/Defense Services contractor that offers tactical aviation services, aerial refueling, aircraft maintenance, disaster relief services, and other Aerospace/Defense services to the United States and Foreign militaries and agencies.





TADS was incorporated in the State of Nevada on July 9, 1998 under the name Natalma Industries, Inc. Originally, TADS operated as a junior mining company engaged in the exploration of mining properties. We were unsuccessful in locating a joint venture partner to assist us in the development of our mining claims. As a result, TADS was unable to pay for and perform the exploration and development required in its agreement with the owners of its properties and lost our rights to the mining claims. Our management at the time, therefore determined that it was in the best interest of our shareholders that we seek potential operating businesses and business opportunities with the intent to acquire or merge with another business, which led to the purchase substantially all of the assets of AeroGroup Incorporated (the “AeroGroup Acquisition”).





On December 15, 2006 (the “Closing Date”), TADS and three of its wholly-owned subsidiaries, Resource Financial Aviation Holdings Inc., OneSource Aviation Acquisition Inc. and Genesis Aviation Acquisition Inc., each a Nevada corporation (the “TADS Subsidiaries” and, collectively with TADS,”) acquired substantially all of the assets of AeroGroup Incorporated (“Aero or AeroGroup”), a Utah corporation, and its three wholly owned subsidiaries, OneSource Acquisition, Inc., Genesis Acquisition, Inc. and Resource Financial Holding Acquisition, Inc., each a Delaware corporation (the “AeroGroup Subsidiaries” and, collectively with AeroGroup Incorporated, “AeroGroup”), pursuant to an Asset Purchase Agreement dated July 14, 2006, as amended (the “Asset Purchase Agreement”) and in consideration of the acquisition issued stock and assumed certain indebtedness and other obligations under various warrants, a real property sublease, government and non-government aviation contracts and certain other contracts of AeroGroup (the “AeroGroup Acquisition”). As a result of the asset purchase, the Company intends to be a provider of outsourced military fighter jet pilot training to military personnel, including certain flight support services.





Since the AeroGroup Acquisition was settled through the issuance of a controlling interest in TADS Common Stock, AeroGroup is deemed to be the acquirer for accounting purposes. Furthermore, since TADS is deemed to be a shell company prior to the acquisition, purchase accounting was not applied. Therefore, the transaction was accounted for as a reverse acquisition and recapitalization of AeroGroup. Accordingly, the historical financial statements presented in the financial statements are those of AeroGroup as adjusted to reflect the recapitalization and elimination of certain assets and liabilities that were not assumed by TADS. The net liabilities not assumed by TADS were recorded as a contribution to capital totaling $4,505,560. These liabilities substantially consisted of indebtedness due to Aero’s controlling stockholder, Mark Daniels (“Daniels”).





The accompanying share information for Aero has been retroactively restated to reflect the recapitalization transactions, including the exchange of Common Stock and Common Stock equivalents of Aero for Common Stock and Common Stock equivalents of TADS based on the exchange ratio of 50 to 1.





In connection with the reverse acquisition, the consideration paid to Aero Group for the assets consisted of:





-
14,989,900 shares of restricted Common Stock of TADS, constituting a majority of the then outstanding Common Stock of TADS.


-
Assumption by TADS of Aero’s obligations under its convertible debentures totaling approximately $5.6 million, inclusive of accrued interest, all convertible into shares of TADS Common Stock at prices ranging $0.15 to $1.00 per share.


-
Assumption by TADS of Aero’s obligation under a convertible note issued in connection with a settlement agreement in the principal amount of $250,000, with an interest rate of 12%, payable in 36 equal monthly installments of principal, plus interest. The note has a maturity date of April 13, 2011. The note is convertible into shares of Common Stock at a rate of $.50 per share.


-
Assumption by TADS of Aero’s obligation under an assumed secured note payable to Daniels in the principal amount of $1,100,000, plus interest, at the rate of 12% per annum. The outstanding principal and interest is convertible into shares of TADS Common Stock at a conversion price of $.0.50 per share.


-
Assumption by TADS of Aero’s' obligation under a note assumed by the Company in connection with its June 2006 asset purchase (Note 5) in the principal amount of $2.2 million, plus interest at the rate of 8% per annum. The outstanding principal and interest is convertible into shares of TADS Common Stock at a conversion price of $0.50 per share.


-
Assumption by TADS of Aero’s obligations under certain outstanding warrants to purchase 23,968,315 shares of Common Stock exercisable at $0.15 per share.


-
Assumption by TADS of Aero’s obligations under government contracts and subcontracts and of leases relating to its Grayson Airport facilities, a $300,000 consulting contract and property leases.


-
Assumption by TADS of Aero’s obligations for accrued expenses totaling $136,000.







F-7






Aero is a Utah corporation, which was incorporated on July 31, 1984 under the name Diversified Resources Group, Inc. Aero was a provider of outsourced military fighter jet pilot training to military personnel, including certain flight support services. Effective January 1, 2006, Aero became a development stage company as it was devoting all of its present efforts to securing and establishing a new business.





Going Concern and Management's Plan





The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern. However, as shown in the accompanying consolidated financial statements,the Company has incurred losses from operations since inception and has a significant working capital deficiency as of December 31, 2010 of approximately $39,516,000.





On December 15, 2006, TADS acquired substantially all of the assets of Aero and assumed certain contracts in exchange for the assumption by TADS of certain liabilities of Aero. Management believes the Company can raise adequate capital for the Company’s required working capital needs for 2010. Management also believes that it still needs substantial capital in order to carry out its business plan, which is to become a civilian provider of outsourced military aviation services which includes fighter jet pilot training, maintenance training, aerial fire-fighting, disaster relief services, and other aerial services. No assurance can be given that the Company can obtain the required estimated additional working capital, or if obtained, that such funding will not cause substantial dilution to stockholders of the Company. Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing of a new product, many of which risks are beyond the control of the Company. All of the factors discussed above raise substantial doubt about the Company's ability to continue as a going concern.





These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.





NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis of Presentation





In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair statement of the results of operations and cash flows for the periods presented and the condensed consolidated balance sheet for the year ended December 31, 2010. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the SEC rules and regulations.





Financial Reporting





The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred.





Use of Estimates





The Company’s significant estimates include accrued expenses and stock based transactions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such estimates are fair when considered in conjunction with the financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.





Cash and Cash Equivalents





Cash and cash equivalents include all interest-bearing deposits or investments with maturities of three months or less.






F-8





Concentration of Credit Risk





Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insured institution insures up to $250,000 on account balances. The amounts that are not insured by FDIC limitations are held in short-term securities.





Fair value of financial instruments





The carrying amounts reported in the balance sheet for accounts payable and accrued expenses, debenture and loans payable approximate their fair market value based on the short-term maturity of these instruments.





Impairment of long – lived assets and long- lived assets to be disposed of





The Company accounts for the impairment of long-lived assets in accordance with FASB ASC 360 “Property, Plant and Equipment”.  ASC 360 requires write-downs to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.





As of December 31, 2010, the property and equipment held by the Company have been reviewed, and it was determined that their value had been impaired 100%.





Revenue Recognition





Revenue for services and goods is recognized monthly as provided pursuant to the terms of contracts or purchase orders, which have prices that are fixed and determinable. The Company assesses the client’s ability to meet the contract terms, including meeting payment obligations, before entering into the contract. Deferred revenue results from customers who are billed for monitoring in advance of the period in which the services are provided, on a monthly, quarterly or annual basis.





The Company follows Staff Accounting Bulletin 104 (SAB 104), which requires the Company to defer certain revenue and expenses. The capitalized costs and deferred revenues related to the installation are then amortized over the life of an average customer relationship, on a straight line basis. If the customer is discontinued prior to the expiration of the original expected life, the unamortized portion of the deferred installation revenue and related capitalized costs are recognized in the period the discontinuation becomes effective. In accordance with EITF 00-21, “Revenue Arrangements with Multiple Deliverables”, the service contracts that include both installation and video streaming are considered a single unit of accounting.





Property and Equipment





Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for major betterments and additions are capitalized while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are currently charged to expense. Any gain or loss on disposition of assets is recognized currently in the statement of income.





Earnings (loss) per share





Earnings (loss) per share is computed in accordance with FASB ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. The outstanding warrants for years ended December 31, 2010 and 2009 respectively are anti-dilutive and therefore are not included in earnings (loss) per share.





Accounting for stock-based compensation





In accordance with FASB ASC 718-10, “Compensation-Stock Compensation”, a public entity measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service.





In addition, a public entity is required to measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value. The fair value of that award has been re-measured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period.





For the years ended December 31, 2010 and 2009, the Company did not grant any stock options.






F-9





Non- Employee Stock Based Compensation





The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50, “Equity-Based Payments to Non-Employees”.





Common stock purchase warrants





The Company accounts for common stock purchase warrants in accordance with FASB ASC 815-40, “Derivatives and Hedging”.  Based on the provisions of ASC 815-40, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).





Income Taxes





The Company accounts for income taxes using FASB ASC 740-10, "Income Taxes," which requires recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.





FASB ASC 740-10 also provides guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under ASC 740-10, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.





NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS





Recently Adopted Accounting Pronouncements





In April 2010, the FASB issued ASU 2010-17, “Revenue Recognition—Milestone Method”,which  provides guidance on defining the milestone and determining when the use of the milestone method of revenue recognition for research and development transactions is appropriate. It provides criteria for evaluating if the milestone is substantive and clarifies that a vendor can recognize consideration that is contingent upon achievement of a milestone as revenue in the period in which the milestone is achieved, if the milestone meets all the criteria to be considered substantive. ASU 2010-17 is effective for milestones achieved in fiscal years, and interim periods within those years beginning on or after June 15, 2010 with prospective application.  Early adoption is permitted with specific provisions.  The Company adopted these amendments in the third year of 2010 and the adoption did not have a material impact on the disclosures in the Company’s consolidated financial statements.





In September 2009, the FASB issued ASU 2009-13 (Topic 605-25), “Revenue Recognition; Multiple-Element Arrangements.”  These amendments provide clarification on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated.  An entity is required to allocate revenue in an arrangement using estimated selling prices of deliverables in the absence of vendor-specific objective evidence or third-party evidence of selling price. These amendments also eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method.  The amendments significantly expand the disclosure requirements for multiple-deliverable revenue arrangements.  These provisions are to be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier application permitted.  The Company adopted these amendments in the third year of 2010 and the adoption did not have a material impact on the disclosures in the Company’s consolidated financial statements.





Recently Issued Accounting Pronouncements Not Yet Adopted





In July 2010, the FASB issued ASU 2010-20, “Receivables (Topic 310): Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses”,which will require additional disclosures about the credit quality of loans, lease receivables and other long-term receivables and the related allowance for credit losses. Certain additional disclosures in this new accounting guidance will be effective for the Company on December 31, 2010 with certain other additional disclosures that will be effective on March 31, 2011. The Company does not expect the adoption of this new accounting guidance to have a material impact on its consolidated financial statements.






F-10





In April 2010, the FASB issued ASU 2010-13, “Compensation — Stock Compensation (Topic 718) — Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades.” ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010 and are not expected to have a significant impact on the Company’s consolidated financial statements.





Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.





NOTE 4 – SALE OF STOCK





Pursuant to a Securities Purchase Agreement, in July, 2010, the Company sold 4,000,000 shares of Common Stock to one investor at a purchase price of $0.0033 per share. The gross proceeds of the offering totaled $13,200.





Pursuant to a Securities Purchase Agreement, in August, 2010, the Company sold 3,000,000 shares of Common Stock to one investor at a purchase price of $0.005 per share. The gross proceeds of the offering totaled $15,000.





Pursuant to a Securities Purchase Agreement, in September, 2010, the Company sold 1,000,000 shares of Common Stock to one investor at a purchase price of $0.005 per share. The gross proceeds of the offering totaled $5,000.





Pursuant to a Securities Purchase Agreement, in December, 2010, the Company sold 3,750,000 shares of Common Stock to one investor at a purchase price of $0.004 per share. The gross proceeds of the offering totaled $15,000.





Pursuant to a Securities Purchase Agreement, in December, 2010, the Company sold 1,250,000 shares of Common Stock to one investor at a purchase price of $0.004 per share. The gross proceeds of the offering totaled $5,000.





Convertible Debentures





Third Quarter of 2009





On July 31, 2009, the Company issued four Convertible Debentures totaling $753,457.42 in principle amount in the aggregate, as consideration for the retirement of Short-Term Loans totaling $753,457.42 of principle plus accrued interest through July 31, 2009.  The Short-Term Loans are described below in the Section titled “Additional Indebtedness”.  The Convertible Debentures have a term of three years, an interest rate of 12%, are convertible into 602,765,936 shares of Common Stock at a conversion price of $0.00125, have full-ratchet anti-dilution protection, and were issued as follows: $300,000 in principle amount to the Dakota Fears Trust, $300,000 in principle amount to the Gary Fears Trust, $76,728.71 in principle amount to the Dakota Fears Trust, and $76,728,71 in principle amount to the Gary Fears Trust.





On September 3, 2009, the Company issued two Convertible Debentures totaling $162,964.54 in principle amount in the aggregate,  as consideration for the retirement of two Promissory Notes totaling $162,964.54 of principle plus accrued interest through September 3, 2009.  The Promissory Notes are described below in the Section titled “Additional Indebtedness”.  The Convertible Debentures have a term of three years, an interest rate of 12%, are convertible into 130,371,634 shares of Common Stock at a conversion price of $0.00125, have full-ratchet anti-dilution protection, and were issued as follows: $119,729 in principle amount to Alexis Korybut, and $43,234 in principle amount to Joint Strategy Group, Inc.





On September 3, 2009, the Company issued Convertible Debentures totaling, $274,603.11 in principle amount in the aggregate, all of which have a term of three years, an interest rate of 12%, a conversion price of $0.00125, and full-ratchet anti-dilution protection.  The Convertible Debentures were issued as follows:  $50,000 in principle amount to Michael Cariello for accrued and unpaid consulting fees for the period from April 16, 2008 through April 15, 2009, which principle amount is convertible into 40,000,000 shares of Common Stock; $8,537.73 in principle amount to Michael Cariello for accrued and unpaid salary for the period from April 16, 2009 through July 31, 2009, which principle amount is convertible into 6,830,184 shares of Common Stock; $19,762.32 in principle amount to Joint Strategy Group, Inc. for consulting fees for the period from April 16, 2009 through July 31, 2009, which principle amount is convertible into 15,809,856 shares of Common Stock; $46,128.43 in principle amount to Alexis Korybut for accrued and unpaid salary for the period from October 31, 2007 through April 15, 2008, which principle amount is convertible into 36,902,744 shares of Common Stock; $119,731.11 in principle amount to Alexis Korybut for accrued and unpaid salary for the period from April 16, 2008 through April 15, 2009, which principle amount is convertible into 95,784,888 shares of Common Stock; and $30,443.52 in principle amount to Alexis Korybut for accrued and unpaid salary for the period from April 16, 2009 through July 31, 2009, which principle amount is convertible into 24,354,816 shares of Common Stock.






F-11





Fourth Quarter of 2009





On October 16, 2009, the Company issued a Convertible Debenture in a principle amount of $560.00 to Michael Cariello as consideration for accrued and unpaid salary for the period from August 1, 2009 through October 15, 2009.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 448,000 shares of Common Stock at a conversion price of $0.00125 per share,





On October 16, 2009, the Company issued a Convertible Debenture in a principle amount of $22,460.79 to Alexis Korybut as consideration for accrued and unpaid salary for the period from August 1, 2009 through October 15, 2009.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 17,968,632 shares of Common Stock at a conversion price of $0.00125 per share,





On October 31, 2009, the Company issued a Convertible Debenture in a principle amount of $57,542.46 to the Gary Fears Trust as consideration for loans to the Company accrued during the period from July 31, 2009 through October 31, 2009.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 46,033,968 shares of Common Stock at a conversion price of $0.00125 per share.





First Quarter of 2010





On January 1, 2010, the Company issued a Convertible Debenture in a principle amount of $51,008.96 to the Gary Fears Trust as consideration for loans to the Company accrued during the period from November 1, 2009 through December 31, 2009.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 40,807,168 shares of Common Stock at a conversion price of $0.00125 per share.





On January 1, 2010, the Company issued a Convertible Debenture in a principle amount of $11,500 to Michael Cariello as consideration for unpaid salary accrued during the period from October 16, 2009 through December 31, 2009.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 9,200,000 shares of Common Stock at a conversion price of $0.00125 per share.





On January 1, 2010, the Company issued a Convertible Debenture in a principle amount of $16,707.50 to Alexis Korybut as consideration for unpaid salary accrued during the period from October 16, 2009 through December 31, 2009.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 13,336,000 shares of Common Stock at a conversion price of $0.00125 per share.





Second Quarter of 2010





On April 12, 2010, the Company issued a Convertible Debenture in a principle amount of $25,000 to the Katherine O’Connor Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 36,316,095 shares of Common Stock at a conversion price of $0.0006884 per share.





On April 1, 2010, the Company issued a Convertible Debenture in a principle amount of $37,500 to the Bingham Law Group as consideration for unpaid legal fees as of 4/1/2010 to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 30,000,000 shares of Common Stock at a conversion price of $0.00125 per share.





On May 19, 2010, the Company issued a Convertible Debenture in a principle amount of $150,000 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 60,000,000 shares of Common Stock at a conversion price of $0.0025 per share.





On July 1, 2010, the Company issued a Convertible Debenture in a principle amount of $218,570.50 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 127,428,200 shares of Common Stock at a conversion price of $0.0025 per share.






F-12





On July 1, 2010, the Company issued a Convertible Debenture in a principle amount of $33,945.68 to Alexis Korybut as consideration for unpaid salary, benefits, and expenses to the Company during the 2nd year of 2010.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 13,578,272 shares of Common Stock at a conversion price of $0.0025 per share.





On June 30, 2010, the Company issued a Convertible Debenture in a principle amount of $45,000.00 to Michael Cariello as consideration for unpaid salary to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 18,000,000 shares of Common Stock at a conversion price of $0.0025 per share.





The Convertible Debentures issued on July 1, 2010 were determined to have a beneficial conversion feature totaling $297,516.  The beneficial conversion feature has been accounted for as a debt discount which is being amortized over the term of loans (three years).  As of September 30, 2010, $24,725 of the beneficial conversion feature had been amortized.





Fourth Quarter of 2010





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $146,142.51 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 73,071,255 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $18,244.62 to Alexis Korybut as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 9,122,310 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $3,000.00 to Tom Robinson as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 1,500,000 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $30,000.00 to Michael Cariello as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 15,000,000 shares of Common Stock at a conversion price of $0.002 per share.





On October 15, 2010, the Company issued a Convertible Debenture in a principle amount of $110,000 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 55,000,000 shares of Common Stock at a conversion price of $0.002 per share.





On December 31, 2010, the Company issued a Convertible Debenture in a principle amount of $176,108.00 to GFMB LLC as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 234,754,123 shares of Common Stock at a conversion price of $0.00075 per share.





Conversion of Notes and Exercise of Warrants





Conversion of Notes and Exercise of Warrants





In March, 2010, the Company issued 2,324,356 shares of Common Stock to Cassio Ismael in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,600.11, including $1,500 of principle and $100.11 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In March, 2010, the Company issued 2,324,356 shares of Common Stock to Marcela Alvarez in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,600.11, including $1,500 of principle and $100.11 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In March, 2010, the Company issued 2,324,356 shares of Common Stock to Jessica Buitrago in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,600.11, including $1,500 of principle and $100.11 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.






F-13





In April, 2010, the Company issued 33,570,797 shares of Common Stock to the Estella A. Korybut Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $23,110.14, including $20,000 of principle and $3,110.14 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In April, 2010, the Company issued 16,785,399 shares of Common Stock to the Michael Korybut in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $11,555.07, including $10,000 of principle and $1,555.07 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In April, 2010, the Company issued 15,615,324 shares of Common Stock to Jamie Goldstein in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $10,749.59 including $10,000 of principle and $749.59 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In May, 2010, the Company issued 38,335,351 shares of Common Stock to The Gary Fears Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $26,390.06 including $24,187.35 of principle and $2,202.71 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In May, 2010, the Company issued 75,556,581 shares of Common Stock to The Gary Fears Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $52,013.15 including $47,500.00 of principle and $4,513.15 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In May, 2010, the Company issued 76,397,762 shares of unrestricted Common Stock to The Gary Fears Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $52,592.22 including $48,000.00 of principle and $4,592.22 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In June, 2010, the Company issued 7,002,111 shares of Common Stock to Fox Hollow Holdings, Inc. in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $4,820.25 including $4,390.14 of principle and $430.11 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In July, 2010, the Company issued 12,500,267 shares of Common Stock to Fox Hollow Holdings, Inc. in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $8,605.18 including $7,740.00 of principle and $865.18 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In July, 2010, the Company issued 27,298,139 shares of Common Stock to The Gary Fears Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $18,792.04 including $16,897.65 of principle and $1,894.39 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In July, 2010, the Company issued 36,348,730 shares of Common Stock to Venetian Investment Partners LLC in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $25,022.47 including $22,500.00 of principle and $2,522.47 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In July, 2010, the Company issued 30,017,511 shares of Common Stock to Drae Holdings LLC in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $20,664.05 including $18,625.00 of principle and $2,039.05 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In July, 2010, the Company issued 40,291,962 shares of Common Stock to International Associates in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $27,736.99 including $25,000.00 of principle and $2,736.99 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In July, 2010, the Company issued 12,500,994 shares of Common Stock to Fox Hollow Holdings, Inc in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $8,605.68 including $7,704.00 of principle and $901.68 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In August, 2010, the Company issued 15,943,242 shares of Common Stock to Fox Hollow Holdings, Inc in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $10,975.33 including $9,793.65 of principle and $1,181.68 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.






F-14





In August, 2010, the Company issued 55,576,481 shares of Common Stock to Fox Hollow Holdings, Inc in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $38,258.85 including $34,000 of principle and $4,258.85 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 53,046,206 shares of Common Stock to The Gary Fears Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $36,517.01 including $33,100.00 of principle and $3,417.01 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 12,836,118 shares of Common Stock to The Gary Fears Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $8,836.38 including $8,000.00 of principle and $836.38 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 54,245,717 shares of Common Stock to Joint Strategy Group in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,342.75 including $33,234.43 of principle and $4,108.32 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 50,219,529 shares of Common Stock to Sean Sullivan in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $34,571.12 including $30,500.00 of principle and $4,071.12 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 63,864,767 shares of Common Stock to Venetian Investment Partners in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $43,964.51 including $38,787.21 of principle and $5,177.30 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 50,219,529 shares of Common Stock to TCI Global Trading in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $34,571.12 including $30,500.00 of principle and $4,071.12 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In September, 2010, the Company issued 17,459,453 shares of Common Stock to Venetian Investment Partners in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $12,019.09 including $10,603.71 of principle and $1,415.38 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 54,194,041 shares of Common Stock to Juliana Hoyos Castellar in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 3,284,487 shares of Common Stock to Amy Crystal in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $2,290.63 including $2,000.00 of principle and $290.63 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 2,463,366 shares of Common Stock to Humberto De Armas in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,717.97 including $1,500.00 of principle and $217.97 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 54,194,041 shares of Common Stock to the Estella A. Korybut Irrevocable Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 2,463,366 shares of Common Stock to Marla Lopez Garcia in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,717.97 including $1,500.00 of principle and $217.97 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture






F-15





In October, 2010, the Company issued 33,334,172 shares of Common Stock to Fox Hollow Holdings in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $22,947.24 including $20,000.00 of principle and $2,147.24 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 32,395,947 shares of Common Stock to International Associates in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $22,301.37 including $20,951.30 of principle and $1,350.07 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 11,050,838 shares of unrestricted Common Stock to Peter Maffitt in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $7,706.95 including $6,729.11 of principle and $977.84 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 7,390,097 shares of Common Stock to Nathalie Zambrano in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $5,153.92 including $4,500.00 of principle and $653.92 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 3,095,843 shares of Common Stock to Evan Pruzan in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $2,145.32 including $2,000.00 of principle and $145.32 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 31,800,000 shares of Common Stock to Brad Bingham in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $38,702.05 including $37,500.00 of principle and $1,202.05 of accrued interest, at a conversion price of $0.00125 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 75,754,123 shares of Common Stock to Alexis Korybut in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $52,149.14 including $46,128.43 of principle and $6020.71 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 54,194,041 shares of Common Stock to the Revocable Living Trust Agreement of Michael M. Korybut in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In December, 2010, the Company issued 129,341,862 shares of Common Stock to CTBMB LLC in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $89,038.94 including $76,728.71 of principle and $12,310.23 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In December, 2010, the Company issued 95,208,361 shares of Common Stock to Black Ridge Holdings in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $65,541.44 including $56,400.00 of principle and $9141.44 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





Issuance of Common Stock





Issuance of Common Stock to ZA Consulting





The Company issued 20,000,000 shares of Common Stock to ZA Consulting, Inc. in May, 2010, as consideration for investor relations services and related consulting services valued at $100,000.





Issuance of Common Stock to Phillip Scott





In March 2010, the Company entered into a Settlement and Release Agreement with DS Enterprises, Inc. (“DSE”) in connection with an unpaid convertible promissory note.  The Company issued 45,805,758 shares of Common Stock to Phillip Scott in March, 2010 per the terms of a settlement agreement between the Company and DS Enterprises as full and complete settlement of all claims held by DSE against the Company.






F-16





Issuance of Common Stock to Alexis Korybut





The Company issued 50,000,000 shares of Common Stock to Alexis Korybut in March, 2010 as a signing bonus per the terms of his employment agreement of January 1, 2010.  No registration rights were issued in connection with these shares.





The Company issued 14,000,000 shares of Common Stock to Mr. Alexis Korybut in September 2010 as additional compensation. No registration rights were issued in connection with these shares.  The shares were valued at $27,300.





Issuance of Common Stock to Michael Cariello





The Company issued 50,000,000 shares of Common Stock to Michael Cariello in March, 2010 as a signing bonus per the terms of his employment agreement of January 1, 2010.  No registration rights were issued in connection with these shares.  The shares were valued at $62,500.





Issuance of Common Stock to Rene Ferrer





The Company issued 50,000,000 shares of Common Stock to Rene Ferrer in July, 2010 as a signing bonus per the terms of his employment agreement of July 1, 2010.  No registration rights were issued in connection with these shares.  The shares were valued at $200,000.





Issuance of Common Stock to Tom Robinson





The Company issued 10,000,000 shares of Common Stock to Tom Robinson in July, 2010 as a signing bonus per the terms of his employment agreement of July 1, 2010.  No registration rights were issued in connection with these shares.  The shares were valued at $36,500.





Issuance of Common Stock to David Perin





The Company issued 2,500,000 shares of Common Stock to David Perin in July, 2010 per the terms of a settlement agreement between the Company and David Perin. No registration rights were issued in connection with these shares.





Issuance of Common Stock to MBC Consulting Corp.





The Company issued 15,000,000 shares of Common Stock to MBC Consulting LLC in September, 2010 pursuant to a consulting agreement between MBC and the Company. No registration rights were issued in connection with these shares.  The shares were valued at $29,250.





Issuance of Common Stock to Wall Street Resources, Inc..





The Company issued 6,000,000 shares of Common Stock to Wall Street Resources, Inc. in September, 2010 pursuant to a consulting agreement between Wall Street Resources and the Company. No registration rights were issued in connection with these shares.  The shares were valued at $11,700.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $146,142.51 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 73,071,255 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $18,244.62 to Alexis Korybut as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 9,122,310 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $3,000.00 to Tom Robinson as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 1,500,000 shares of Common Stock at a conversion price of $0.002 per share.





On October 1, 2010, the Company issued a Convertible Debenture in a principle amount of $30,000.00 to Michael Cariello as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 15,000,000 shares of Common Stock at a conversion price of $0.002 per share.






F-17





On October 15, 2010, the Company issued a Convertible Debenture in a principle amount of $110,000 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 55,000,000 shares of Common Stock at a conversion price of $0.002 per share.





In October, 2010, the Company issued 54,194,041 shares of Common Stock to Juliana Hoyos Castellar in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 3,284,487 shares of Common Stock to Amy Crystal in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $2,290.63 including $2,000.00 of principle and $290.63 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 2,463,366 shares of Common Stock to Humberto De Armas in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,717.97 including $1,500.00 of principle and $217.97 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 54,194,041 shares of Common Stock to the Estella A. Korybut Irrevocable Trust in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 2,463,366 shares of Common Stock to Marla Lopez Garcia in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $1,717.97 including $1,500.00 of principle and $217.97 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 54,194,041 shares of Common Stock to the Revocable Living Trust Agreement of Michael M. Korybut in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $37,795.40 including $33,000.00 of principle and $4,795.40 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture.





In October, 2010, the Company issued 33,334,172 shares of Common Stock to Fox Hollow Holdings in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $22,947.24 including $20,000.00 of principle and $2,147.24 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 32,395,947 shares of Common Stock to International Associates in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $22,301.37 including $20,951.30 of principle and $1,350.07 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 11,050,838 shares of Common Stock to Peter Maffitt in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $7,706.95 including $6,729.11 of principle and $977.84 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 7,390,097 shares of Common Stock to Nathalie Zambrano in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $5,153.92 including $4,500.00 of principle and $653.92 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 3,095,843 shares of Common Stock to Evan Pruzan in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $2,145.32 including $2,000.00 of principle and $145.32 of accrued interest, at a conversion price of $0.0006884 subject to the terms of the Convertible Debenture





In October, 2010, the Company issued 31,800,000 shares of Common Stock to Brad Bingham in connection with the conversion of a Convertible Debenture of the Company in the aggregate amount of $38,702.05 including $37,500.00 of principle and $1,202.05 of accrued interest, at a conversion price of $0.00125 subject to the terms of the Convertible Debenture





Issuance of Common Stock to Alexis Korybut





The Company issued 14,000,000 shares of Common Stock to Mr. Alexis Korybut in October, 2010 as additional compensation. No registration rights were issued in connection with these shares.  The shares were valued at $32,200.






F-18





Issuance of Common Stock to Susan Jackson





The Company issued 3,750,000 shares of stock to Susan Jackson in December of 2010, at a purchase price of $0.004 per share for a total consideration of $15,000, subject to the terms of a securities purchase agreement.  No registration rights were issued in connection with these shares.





Issuance of Common Stock to Sunburst Holdings, Ltd





The Company issued 1,250,000 shares of stock to Sunburst Holdings Ltd in December of 2010, at a purchase price of $0.004 per share for a total consideration of $5,000, subject to the terms of a securities purchase agreement.  No registration rights were issued in connection with these shares.





Issuance of Common Stock to Brad Bingham





The Company issued 20,000,000 shares of stock to Brad Bingham in December of 2010 as payment of accrued legal fees. No registration rights were issued in connection with these shares.  The shares were valued at $20,000.





Issuance of Common Stock to Gregory S. Broms





The Company issued  20,000,000 shares of stock to Gregory Broms in December of 2010 as an incentive for a loan to the Company.  No registration rights were issued in connection with these shares.  The shares were valued at $20,000.





Retirement of Common Stock





The Company retired 86,885,154 shares of its Common Stock in March, 2010, which had been issued to Plumtree Capital Management, LLC, pursuant to an agreement between the Company and Plumtree Capital Management LLC in November, 2009.





Series A Preferred Stock





On March 21, 2007, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Nevada, designating a series of 50,000,000 shares of Preferred Stock of the Company, $.001 par value (the “Series A Preferred Stock”).





On March 21, 2007, the Company filed a Certificate of Designation of Series A Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Nevada, designating a series of 50,000,000 shares of Preferred Stock of the Company, $.001 par value (the “Series A Preferred Stock”). Pursuant to the Series A Certificate of Designation, holders of the Company’s Series A Preferred Stock are entitled to:





-
Elect one director to the Company’s board of directors;


-
Vote on all other matters on a 25 votes per share Common Stock basis.


-
With respect to dividend rights, rights on redemption, rights on conversion and rights on liquidation, winding up and dissolution, rank senior to all Common Stock, warrants and options to purchase Common Stock established by the Board or the Stockholders (all of such equity securities of the Corporation to which the Series A Preferred Stock ranks senior are collectively referred to herein as “Junior Stock”).


-
Each share of Series A Preferred Stock is initially convertible into 2 shares of the Common Stock of the Company, subject to adjustment for stock splits, recapitalization or other reorganizations.





In addition, the Series A Preferred Stock:





-
has weighted average antidilution protection that will cause the conversion price to adjust downward in the event that the Company issues shares of Common Stock or securities convertible into Common Stock at a price of less than the conversion price of the Series A Preferred Stock then in effect may be converted into Common Stock at the option of the holder; and


-
Diluted net loss per share reflects per share amounts that result if dilutive common stock equivalents are converted to common stock. Common stock equivalents, consisting of convertible debt, options and warrants were not included in the calculation of diluted loss per share for the three months ended September 30, 2008 and 2009 because their inclusion would have had been anti-dilutive.






F-19





NOTE 6 - STOCKHOLDERS' EQUITY:





Effective as of April 24, 2009, the Company filed an amendment to its Articles of Incorporation (the “Amendment”) to increase the Company’s authorized capital stock from 1,050,000,000 shares of Common Stock, par value $.001 per share to 3,050,000,000 shares, par value $.001 per share, of which 3,000,000,000 shares are Common Stock and the remaining 50,000,000 shares are a newly created class of “blank check” preferred stock.





NOTE 7 – COMMITMENTS:





Compensation Agreements





On April 15, 2009, the Company entered into an employment agreement with Mark Daniels as Chief Executive Officer of the Company.  The term of the agreement is for one year, and provides for an annual salary of $160,000 and a signing bonus of 80,000,000 restricted shares of the Company’s Common Stock.  The agreement also provides for participation by Mr. Daniels in the management bonus pool. No registration rights were granted in connection with these shares. Mr. Daniels was terminated in November of 2009, and the Company is currently pursuing through a legal action the retirement of the 80,000,000 shares of its Common Stock.  Mr. Daniels was terminated in November of 2009, and the Company is currently pursuing through a legal action the retirement of the 80,000,000 shares of its Common Stock.





On April 15, 2009, the Company entered into an employment agreement with Alexis Korybut as Vice President of the Company.  The term of the agreement is for one year, and provides for an annual salary of $120,000 and a signing bonus of 60,000,000 shares of the Company’s Common Stock.  The agreement also provides for participation by Mr. Korybut in the management bonus pool.





On April 15, 2009, the Company entered into a consulting agreement with Joint Strategy Group, LLC to provide consulting services to the Company.  The term of the agreement is for one year, and provides for a monthly fee of $5,000 and a signing bonus of 60,000,000 shares of the Company’s Common Stock.  The agreement also provides for participation by Joint Strategy Group, LLC in the management bonus pool. No registration rights were granted in connection with these shares.





On January 1, 2010, the Company entered into a new employment agreement with Alexis Korybut as President, Chief Executive Officer, and Chief Financial Officer of the Company.  The term of the agreement is for one year, and provides for an annual salary of $120,000 and a signing bonus of 50,000,000 shares of the Company’s Common Stock.  The agreement also provides for participation by Mr. Korybut in the management bonus pool. No registration rights were granted in connection with these shares.





On January 1, 2010, the Company entered into a new employment agreement with Michael Cariello as Chief Operating Officer of the Company.  The term of the agreement is for one year, and provides for an annual salary of $120,000 and a signing bonus of 50,000,000 shares of the Company’s Common Stock.  The agreement also provides for participation by Mr. Cariello in the management bonus pool. No registration rights were granted in connection with these shares.





In May, 2010, the Company entered into a six-month Corporate Development Services Agreement with ZA Consulting, Inc. to provide, among other services, investor relations consulting services.  As consideration for the services to be provided by ZA Consulting, the Company issued 20,000,000 shares of Common Stock to ZA Consulting and agreed to pay $150,000 in cash to ZA Consulting. No registration rights were granted in connection with these shares.  The shares were valued at $100,000.





On July 9, 2010, the Company entered into an employment agreement with Rene Ferrer as Director of Business Development for Latin America.  The term of the agreement is for one year, and provides for an annual salary of $48,000 and a signing bonus of 50,000,000 shares of the Company’s Common Stock.  No registration rights were granted in connection with these shares.





On July 14, 2010, the Company entered into an employment agreement with Tom Robinson as Director of Disaster Relief Services of the Company.  The term of the agreement is for one year, and provides for an annual salary of $48,000 and a signing bonus of 10,000,000 shares of the Company’s Common Stock.  No registration rights were granted in connection with these shares.  The shares were valued at $36,500.





On August 17, 2010, the Company entered into a consulting agreement with Wall Street Resources, Inc. to provide investor communications services to the Company. The term of the agreement is for one year. The agreement provides for a total fee of $31,500 in cash and 6,000,000 shares of the Company’s Common Stock.  No registration rights were granted in connection with these shares. No registration rights were granted in connection with these shares.





On August 25, 2010, the Company entered into a consulting agreement with MBC Consulting Corp. to provide financial support services. The term of the agreement is for one year. The agreement provides for a total fee of 15,000,000 shares of the Company’s Common Stock.  No registration rights were granted in connection with these shares.






F-20





Lease Agreement





On May 18, 2010, the Company signed a lease agreement with Air Support Systems, LLC. The Lease Option Agreement with Air Support Systems, LLC gives TADS the right to enter into exclusive one-year renewable leases for any or all of the four IL-76 and IL-76 supertanker aircraft, under a fee arrangement that allocates 50% of the operating profits each to TADS and Air Support Systems, respectively.





Legal Proceedings





Mr. Charlie Searock, a former executive officer of our company, has brought a lawsuit in the District Court of the 336th Judicial District of Grayson County, Texas against us and seven other defendants on February 6, 2007, on claims of breach of an employment agreement between Searock and International Tactical Training Center, Inc. (“ITTC”). (Charles J. Searock, Jr., vs. Tactical Air Defense Services, Inc., International Tactical training Center, Inc., Mark Daniels, Victor Miller, John Farley, Gary Fears, Jamie Goldstein, and Joel Ramsden, Cause No.07-0322-336). ITTC and the Company are the only two corporate defendants named in the Searock lawsuit. Of the six individuals named as defendants, three are former ITTC management.   Searock asserts that the Company is liable for ITTC’s breach of employment agreement because he alleges that the Company acquired ITTC’s assets, and that ITTC was a former subsidiary of AeroGroup, Inc., an entity not named as a defendant in the Searock lawsuit. In addition to his claim for breach of the ITTC employment contract, Searock also asserts theories of tort liability against the defendants.   The Company denies any liability to Searock on his claim for breach of the ITTC employment contract and denies Searock has any factual basis to impose liability on the Company under any of his theories of tort liability. Specifically, the Company denies that it acquired, owns or controls ITTC’s former assets. The Company believes that this claim is without merit and is working towards resolution of the same.





In June of 2009, Victor Miller and Air 1 Flight support, an entity controlled by Victor Miller, caused an injunction to be placed on the Company to not relocate the IL-78, which the Company leases from a third party, as a result of a lien Victor Miller and Air 1 Flight Support placed on the IL-78 for unpaid services provided to the third-party leasing the IL-78 to the Company.  The Company believes that the lien and injunction are completely without merit based upon Victor Miller and Air 1 Flight Support being party to a settlement agreement between the parties including the third-party subject to the lien.  Victor Miller and Air 1 Flight Support subsequently filed a motion for contempt of court against the Company subsequent to the IL-78 having been relocated by a third-party to which the Company leases the IL-78, without the knowledge or assistance of the Company.  Victor Miller and Air 1 Flight Support subsequently filed a legal proceeding against the Company in Michigan in connection with the lien, which has resulted in a judgment against the Company.  The Company intends to contest the judgment which it was not given the opportunity to defend against for what it believes to be a fraudulent lien. The Company believes that these motions and proceedings are without merit, and the Company intends to vigorously defend itself, and pursue Victor Miller and Air 1 Flight Support for tortuous interference and material damages to the Company.





On March 4, 2010, TADS sued Mark Daniels, the Company’s former President and Chief Executive Officer, and various entities affiliated with or controlled by Mr. Daniels, in The Circuit Court of The 15th Judicial Circuit in and for Palm Beach County, Florida, for temporary and permanent injunctive relief, damages, and other relief for breach of contract; breach of fiduciary duty and duty of loyalty; tortuous interference with advantageous and contractual relationships, and misappropriation, misuse and conversion of trade secrets and confidential business information. Although the Court did not grant our Emergency Motion for Preliminary Injunction, the court did find that here continues to be a valid and enforceable agreement between the parties. Most recently, the Company filed motions for the disgorgement of certain assets and opportunities that it believes Mr. Daniels has misappropriated, and for the cancellation of certain convertible promissory notes and certain share issuances that it believes the Company awarded to Mr. Daniels without proper consideration when Mr. Daniels was the President, CEO, and director of the Company, and based upon information relied upon at the time by Mr. Daniels that the Company believes was materially misrepresented by Mr. Daniels.  The Company is continuing to vigorously pursue all claims and remedies against Mr. Daniels and the other the defendant in such action. TADS is currently preparing its case against Mr. Daniels and the other defendants to seek permanent injunctive relief and damages, and we believe that we will prevail in this action, although no assurances can be given.





On May 7, 2010, Mr. Daniels filed an improper and frivolous Involuntary Chapter 7 Petition (the “Petition”) against the Company in the United States Bankruptcy Court for the Southern District of Florida, in an effort to circumvent the legitimate court process, by claiming non-payment of a promissory note that the Company contends in its litigation against Mr. Daniels was issued without proper consideration when Mr. Daniels was the President, Chief Executive Officer, and a Director of the Company. Upon notification to the Company on May 10, 2010 of this improper Petition, the Company requested and was granted an Emergency Hearing for May 14, 2010 in the United States Bankruptcy Court in the Southern District of Florida before Chief Justice Paul G. Hyman (the "Emergency Hearing"). On May 14, 2010, Chief Justice Paul G. Hyman dismissed the Involuntary Chapter 7 Petition by a signed Order granting an emergency Motion to Dismiss the Involuntary Chapter 7 Petition filed against the Company by Mr. Daniels.  In the Court Order, it was agreed that:







F-21






-
Mr. Daniels’ claim is the subject of a bona fide dispute;-
The Company has more than 12 unsecured creditors (note holders are the only claims not in dispute);





-
The Court should enter an Order dismissing Mr. Daniels’ involuntary petition, with prejudice to any subsequent involuntary petition by Mr. Daniels (i.e.. he is barred from refilling an involuntary petition), or any insider or affiliate of Mr. Daniels; and-
Moreover, Mr. Daniels cannot pursue any efforts or take any actions to solicit, recruit, encourage, or cause any other alleged creditor of the Company to file an involuntary bankruptcy petition against the Company.





-
The Company agreed to withdraw its claim for attorney’s fees, costs, damages and punitive damages arising from the improvident filing in exchange for Mr. Daniels’ consent to the dismissal of the petition.





Additionally, Mr. Daniels’ attorney of record who filed the Petition, as a result of learning that Mr. Daniels had materially misstated the facts and failed to disclose that Mr. Daniels was currently the Defendant in civil litigation with the Company, filed a motion to withdraw his representation of Mr. Daniels in the Petition.





As of April 1, 2011, TADS is not a party to any pending litigation or legal proceeding that is not in the ordinary course of business. To our knowledge, no such proceedings are threatened other than those described herein.





NOTE 8 - OTHER EVENTS:





Departures of Directors or Principal Officers; Elections of Directors; Appointments of Principal Officers





-
On February 4, 2009, Mark Daniels resigned as Chief Executive Officer of the Company, but continues to serve as Director along with Peter Maffitt and Charles Deangelo;


-
On February 4, 2009, James O’Brien was appointed interim Chief Executive Officer, Secretary, and Principle Accounting Officer of the Company;


-
On April 14, 2009, Mr. Obrien was terminated from all capacities with the Company;


-
On April 14, 2009, Mr. Mark Daniels was appointed as Chief Executive Officer, Secretary, and Principle Accounting Officer of the Company;


-
On June 8, 2009, Michael Cariello was appointed by the Board of Directors of the Company as Chief Operating Officer of the Company;


-
On July 10, 2009, Alexis Korybut was appointed by the Board of Directors of the Company as Principle Accounting Officer of the Company;


-
On July 10, 2009, Peter Maffitt and Charles Deangelo resigned from the Board of Directors of the Company, leaving Mark Daniels as the sole member of the Board of Directors of the Company;


-
On July 10, 2009, Mark Daniels, acting as the sole member of the Board of Directors of the Company, appointed Michael Cariello and Alexis Korybut to the Board of Directors of the Company, where they joined Mark Daniels as the three members of the Board of Directors of the Company;


-
On November 23, 2009, Mark Daniels resigned from all capacities as an Officer of the Company including as President, Chief Executive Officer, Treasurer, and Secretary, and also resigned from the Board of Directors of the Company, leaving Alexis Korybut and Michael Cariello as the remaining two member of the Board of Directors of the Company;


-
On November 23, 2009, Michael Cariello and Alexis Korybut, acting as the Board of Directors of the Company, appointed Alexis Korybut as President, Chief Executive Officer, and Treasurer of the Company, and appointed Michael Cariello as Secretary of the Company;


-
November 23, 2009, Michael Cariello and Alexis Korybut, acting as the Board of Directors of the Company, appointed Mark Shubin to the Board of Directors of the Company, where he joined Michael Cariello and Alexis Korybut as the three members of the Board of Directors of the Company; and


-
November 23, 2009, Mark Shubin resigned from the Board of Directors of the Company, leaving Michael Cariello and Alexis Korybut as the remaining two members of the Board of Directors of the Company.




On October 26, 2010, our former accountant, Larry O’Donnell, PC, resigned. Such decision was the sole decision of the auditor and such resignation was not recommended or approved of by the board of directors or any audit or similar committee.





On or about November 17, 2010, we retained the firm of DeJoya Griffith & Company, LLC to review all interim period financial statements going forward and audit our financial statements for the upcoming year ending December 31, 2010. Such change in accountant was approved by the Company’s board of directors. At no time prior to our retention of DeJoya Griffith & Company, LLC, did we, or anyone on our behalf, consult with DeJoya Griffith & Company, LLC regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements






F-22





On or about February 8, 2011, Tactical Air Defense Services, Inc. (the “Company”) appointed Mr. Peter C. Maffitt to its Board of Directors.





On or about March 20, 2011, we terminated DeJoya Griffith & Company, LLC as our auditors and we retained the firm of Malcolm Pollard CPA, LLC to review all interim period financial statements going forward and audit our financial statements for the upcoming year ending December 31, 2010. Such change in accountant was approved by the Company’s board of directors. At no time prior to our retention of Malcolm Pollard CPA, LLC, did we, or anyone on our behalf, consult with Malcolm Pollard COA, LLC regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements





Increase in Authorized Shares





Pursuant to a vote of the shareholders of the Company, on April 24, 2009, the authorized number of shares of Common Stock of the Company was increased from 1,000,000,000 to 3,000,000,000.  The authorized number of shares of the Company’s Series A Preferred shares remained at 50,000,000.





Legal Proceedings





Mr. Charlie Searock, a former executive officer of our company, has brought a laws suit in the District Court of the 336th Judicial District of Grayson County, Texas against us and seven other defendants on February 6, 2007, on claims of breach of an employment agreement between Searock and International Tactical Training Center, Inc. (“ITTC”). (Charles J. Searock, Jr., vs. Tactical Air Defense Services, Inc., International Tactical training Center, Inc., Mark Daniels, Victor Miller, John Farley, Gary Fears, Jamie Goldstein, and Joel Ramsden, Cause No.07-0322-336). ITTC and the Company are the only two corporate defendants named in the Searock lawsuit. Of the six individuals named as defendants, three are former ITTC management.   Searock asserts that the Company is liable for ITTC’s breach of employment agreement because he alleges that the Company acquired ITTC’s assets, and that ITTC was a former subsidiary of AeroGroup, Inc., an entity not named as a defendant in the Searock lawsuit. In addition to his claim for breach of the ITTC employment contract, Searock also asserts theories of tort liability against the defendants.   The Company denies any liability to Searock on his claim for breach of the ITTC employment contract and denies Searock has any factual basis to impose liability on the Company under any of his theories of tort liability. Specifically, the Company denies that it acquired, owns or controls ITTC’s former assets. The Company believes that this claim is without merit and is working towards resolution of the same.  In November, 2010, the District Court of the 336th Judicial District of Grayson County, Texas ruled in favor of Searock against the Company and four other defendants, and awarded to Searock a judgment of $524,000 jointly and severally with all defendants, $524,000 jointly and severally with all defendants for damages, and $2,000,000 against the Company for punitive damages.  The Company has filed an appeal in the Ft. Worth Court of Appeals and firmly believes that the judgment will be dismissed in its entirety not only based upon the merits of the case, but also because the Company and the other four defendants were all denied “due-process” in that none of the defendants including the Company was served with notice of the court date, and as such, none of the defendants were present to offer any defense.  Searock claims that all defendants were properly served, curiously, however no proof of such was requested by the presiding judge who then proceeded to issue the judgment against the defendants.





In June of 2009, Victor Miller and Air 1 Flight support, an entity controlled by Victor Miller, caused an injunction to be placed on the Company to not relocate the IL-78, which the Company leases from a third party, as a result of a lien Victor Miller and Air 1 Flight Support placed on the IL-78 for unpaid services provided to the third-party leasing the IL-78 to the Company.  The Company believes that the lien and injunction are completely without merit based upon Victor Miller and Air 1 Flight Support being party to a settlement agreement between the parties including the third-party subject to the lien.  Victor Miller and Air 1 Flight Support subsequently filed a motion for contempt of court against the Company subsequent to the IL-78 having been relocated by a third-party to which the Company leases the IL-78, without the knowledge or assistance of the Company.  Victor Miller and Air 1 Flight Support subsequently filed a legal proceeding against the Company in Michigan in connection with the lien, which has resulted in a judgment against the Company.  The Company intends to contest the judgment which it was not given the opportunity to defend against for what it believes to be a fraudulent lien. The Company believes that these motions and proceedings are without merit, and the Company intends to vigorously defend itself, and pursue Victor Miller and Air 1 Flight Support for tortuous interference and material damages to the Company.  In November of 2010, the Miller and Air1 Flight Support Case was settled in favor of the Company, which did not pay any compensation to Miller or Air 1 Flight Support.  The Company is reserving its rights to pursue damages against Miller and Air 1 Flight Support.





On March 4, 2010, TADS sued Mark Daniels, the Company’s former President and Chief Executive Officer, and various entities affiliated with or controlled by Mr. Daniels, in The Circuit Court of The 15th Judicial Circuit in and for Palm Beach County, Florida, for temporary and permanent injunctive relief, damages, and other relief for breach of contract; breach of fiduciary duty and duty of loyalty; tortuous interference with advantageous and contractual relationships, and misappropriation, misuse and conversion of trade secrets and confidential business information. Although the Court did not grant our Emergency Motion for Preliminary Injunction, the court did find that here continues to be a valid and enforceable agreement between the parties. Most recently, the Company filed motions for the disgorgement of certain assets and opportunities that it believes Mr. Daniels has misappropriated, and for the cancellation of certain convertible promissory notes and certain share issuances that it believes the Company awarded to Mr. Daniels without proper consideration when Mr. Daniels was the President, CEO, and director of the Company, and based upon information relied upon at the time by Mr. Daniels that the Company believes was materially misrepresented by Mr. Daniels.






F-23





TADS is currently preparing its case against Mr. Daniels and the other defendants to seek permanent injunctive relief and damages, and we believe that we will prevail in this action, although no assurances can be given.





On May 7, 2010, Mr. Daniels filed an improper and frivolous Involuntary Chapter 7 Petition (the “Petition”) against the Company in the United States Bankruptcy Court for the Southern District of Florida, in an effort to circumvent the legitimate court process, by claiming non-payment of a promissory note that the Company contends in its litigation against Mr. Daniels was issued without proper consideration when Mr. Daniels was the President, Chief Executive Officer, and a Director of the Company. Upon notification to the Company on May 10, 2010 of this improper Petition, the Company requested and was granted an Emergency Hearing for May 14, 2010 in the United States Bankruptcy Court in the Southern District of Florida before Chief Justice Paul G. Hyman (the "Emergency Hearing"). On May 14, 2010, Chief Justice Paul G. Hyman dismissed the Involuntary Chapter 7 Petition by a signed Order granting an emergency Motion to Dismiss the Involuntary Chapter 7 Petition filed against the Company by Mr. Daniels.  In the Court Order, it was agreed that:





-
Mr. Daniels’ claim is the subject of a bona fide dispute;-
The Company has more than 12 unsecured creditors (note holders are the only claims not in dispute);





-
The Court should enter an Order dismissing Mr. Daniels’ involuntary petition, with prejudice to any subsequent involuntary petition by Mr. Daniels (i.e.. he is barred from refilling an involuntary petition), or any insider or affiliate of Mr. Daniels; and-
Moreover, Mr. Daniels cannot pursue any efforts or take any actions to solicit, recruit, encourage, or cause any other alleged creditor of the Company to file an involuntary bankruptcy petition against the Company.





-
The Company agreed to withdraw its claim for attorney’s fees, costs, damages and punitive damages arising from the improvident filing in exchange for Mr. Daniels’ consent to the dismissal of the petition.





Additionally, Mr. Daniels’ attorney of record who filed the Petition, as a result of learning that Mr. Daniels had materially misstated the facts and failed to disclose that Mr. Daniels was currently the Defendant in civil litigation with the Company, filed a motion to withdraw his representation of Mr. Daniels in the Petition.





As of December 31, 2010, TADS is not a party to any other pending litigation or legal proceeding that is not in the ordinary course of business. To our knowledge, no such proceedings are threatened.













































F-24








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





Not applicable.





Item 9A.   Controls and Procedures





(A) Evaluation of disclosure controls and procedures.





We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.





As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective to satisfy the objectives for which they are intended.


(B) Management’s report on internal controls over financial reporting.


The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act). Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, management believes that, as of December 31, 2010, the Company’s internal control over financial reporting was ineffective based on the COSO criteria, due to the following material weakness listed below.





Insufficient segregation of duties in our finance and accounting functions due to limited personnel.  During the year ended December 31, 2010, the company internally performed all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements.  Due to the fact these duties were performed oftentimes by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.  These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.





Insufficient corporate governance policies.  Our corporate governance activities and processes are not always formally documented.  Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management.


We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies and we intend to consider the results of our remediation efforts and related testing as part of our next year-end assessment of the effectiveness of our internal control over financial reporting.





This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.





(C) Changes in internal controls over financial reporting.





There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Item 9B. Other Information.





Convertible Debenture Issuances





In January 2011, the Company issued a Convertible Debenture in a principle amount of $40,833.16 to Alexis Korybut as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 54,444,213 shares of Common Stock at a conversion price of $0.00075 per share.






Page 15





In January, 2011, the Company issued a Convertible Debenture in a principle amount of $30,000.00 to Michael Cariello as consideration for unpaid salary.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 40,000,000 shares of Common Stock at a conversion price of $0.00075 per share.





In January, 2011, the Company issued a Convertible Debenture in a principle amount of $13,384.59 to the Gary Fears Trust as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 17,846,113 shares of Common Stock at a conversion price of $0.00075 per share.





In January, 2011, the Company issued a Convertible Debenture in a principle amount of $50,000.00 to the Bingham Law Group as consideration for unpaid legal fees as of 1/1/2011 to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 66,666,667 shares of Common Stock at a conversion price of $0.00075 per share.





In January, 2011, the Company issued a Convertible Debenture in a principle amount of $25,000.00 to Dwight Barnell as consideration for a loan to the Company.  The Convertible Debenture has a term of three years, an interest rate of 12%, and has full-ratchet anti-dilution protection.  The principle amount is convertible into 33,333,333 shares of Common Stock at a conversion price of $0.00075 per share.





As previously disclosed in our filings with the SEC, on May 18, 2010 the Company signed a lease agreement with Air Support Systems, LLC. As consideration for the lease option, TADS was required to issue Air Supports Systems, LLC a one-time up-front fee consisting of 10,000,000 shares of the Company’s restricted common stock. The 10,000,000 shares due and payable under the agreement were not immediately issued due to a Company clerical oversight. In May of 2011, the Company issued the 10,000,000 shares to Air Support Systems, LLC.





Cornucopia Financing





As disclosed in our Form 8-K filed on April 28, 2011, on April 1, 2011, the Company entered into a Letter of Intent (the “LOI”) with Cornucopia, Ltd. (“Cornucopia”) to provide up to $1,000,000 in possible financing to the Company.  On April 25, 2011, the Company entered into a Securities Purchase Agreement (the “SPA”) with Cornucopia, Ltd. to provide an initial financing of $400,000, payable in two separate financing tranches of $200,000 each, with the first tranche closed and funded upon execution of the SPA. Pursuant to the terms of the SPA, the Company expects to close the second tranche of the additional $200,000 in financing under the SPA within 30-60 days, although no assurances can be given such financing will close. Copies if the LOI and SPA were attached as an exhibit to the Form 8-K and have been incorporated in its entirety by reference. We expect to use this initial $400,000 of financing in order to (i) help satisfy our immediate liquidity needs, and (ii) lease certain military aircraft that we believe will begin to generate revenue and earnings such that it will cover a material portion of our broader and future liquidity needs. Considering the $2,000,000 in estimated capital required to complete the purchase of the assets under the M&M Agreement and the legal expenses associated with the M&M Agreement and those required to defend against the approximately $3,270,422 plus accrued interest in judgments against us, the $400,000 in potential immediate financing will not completely satisfy our current liquidity needs. We are also pursuing a number of contracts that we believe will generate revenues and earnings to cover any outstanding liquidity shortfall. In addition, although we can make no guarantees, we believe that the current M&M litigation for the related aircraft and parts will be settled in our favor, and that the acquisition of said assets will greatly change the liquidity prospects of the Company due to either putting such aircraft to work on contract or by selling the assets at a significant premium to the price that the Company will have paid for such assets.





Tac-Air Services Agreement





As disclosed in our Form 8-K filed on May 10, 2011, on or about May 2, 2011, the Company entered into a joint venture Services Agreement (the “Tac Agreement”) with Tactical Air Support, Inc., a Nevada corporation (“Tac-Air”) relating to the capital lease and operation of an Embraer EMB 314 Super Tucano aircraft (the “Aircraft”). The Embraer EMB 314 Super Tucano is world renowned for its capabilities in counter insurgency and air to ground ordnance deliveries.Pursuant to the terms of the Tac Agreement, the Aircraft was leased in the name of Tac-Air under a capital lease, with Tac-Air maintaining full control of the Aircraft and responsibility for all associated operational, administrative, maintenance and insurance costs related to the operation of the Aircraft. Tactical Air Defense Services, Inc. has deliver $80,280.00 as a security deposit (the “Deposit”) under the lease of the Aircraft, with Tac-Air required to compensate the Company with an interest payment equal to one percent (1%) of the Deposit payable monthly. In addition, the Company is entitled to thirty percent (30%) of the operating profit received by Tac-Air relating to work performed with the Aircraft.





We have no other information to disclose that was required to be disclosed in a report on Form 8-K during fourth quarter of fiscal year 2010, but was not reported.






Page 16





PART III





Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act





Board of  Directors and Officers





As of the date of this report, our executive officers and directors, the positions held by them, and their ages are as follows:





Name
Age
PositionAlexis Korybut
45
Chairman of the Board of Directors, President, Chief Executive Officer and Chief Financial OfficerMichael Cariello
50
Director, Chief Operating Officer and SecretaryPeter C. Maffitt
67
Director





Alexis C. Korybut, Chairman of the Board of Directors, President, Chief Executive Officer and Chief Financial Officer





Mr. Korybut brings to the Company a wealth of corporate,administrative, and financial management experience in both the domestic and international arenas, having achieved success at some of the most respected firms in the financial services industry such as Salomon Brothers and Smith Barney where he worked with both private and public companies to raise capital through the international debt and equity markets





Mr. Korybut has also been the Managing Partner of Plumtree Capital Management LLC, a public-venture fund management firm since 2005, and the Managing Partner of Plumtree Consulting Group LLC, a firm offering consulting services to high-growth public companies, since 2008.  From 1999 through 2004, Mr. Korybut was President of Sterling Financial Group of Companies, Inc, a Florida-based financial services firm with offices throughout the United States, Europe, and Latin America. His management expertise and strategic guidance enabled Sterling Financial to be recognized in 2002 and 2003 by Inc. Magazine as the 8th and 26th fastest growing privately-held company in the United States, respectively, and as the number one fastest growing privately-held company in the State of Florida over the same period.





Mr. Korybut received a BA from Georgetown University in 1988 and an MBA in finance from the University of Michigan Business School in 1994. In addition to his native English, Mr. Korybut speaks French, Spanish, and Portuguese.





Mike “Ratso” Cariello, Chief Operating Officer and Secretary





Mr. Cariello is one of the most renowned pilots to have served in the U.S. military in recent decades.  He has flown civilian and military aircraft for over 30 years, and has accumulated over 9,000 flight-hours, mostly in high performance jet fighters such as, F/A-18, F-16, A-4 Skyhawk.  Mr. Cariello has a distinguished career having served in the U.S. Marine Corp for over 14 years. He retired from the Marine Corps in 1998 following his 3 year appointment as Adversary Officer at the Top Gun Fighter Weapons School for the Navy and Marine Corps.  Mr. Cariello has also served as the 767 Program Manager and Pilot for Blackwater, Inc., one of the largest U.S. Defense contractors in Iraq from July 2005 through December 2007.  He has also been a qualified 767 Captain for American Airlines since 2000, flying internationally to Europe and South America from Miami, Florida.


Mr. Cariello’s reputation and his experience in all facets of air combat training and adversary programs has brought a level of professionalism and credibility to the Company that has been recognized and lauded by our past, current, and potential customers.





Peter C. Maffit, Director





Mr. Maffitt is a member of our Board of Director and an executive with over 30 years of experience in the corporate, government, and military sectors, with an emphasis on new business development and fund-raising in the international sector including the Middle East, Latin America, and Asia. Mr. Maffitt is a published author including publications in the U.S. Foreign Service Journal. Mr. Maffitt is 62 years old, a graduate of Yale University, speaks Spanish, French, Russian, and Mandarin, and for the past seven years has been providing consulting services to domestic companies engaged in international business.






Page 17





Involvement in Certain Legal Proceedings





Except as set forth herein, no Officer or Director of the Company has, during the last five years: (i) been convicted in or is currently subject to a pending a criminal proceeding; (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to any federal or state securities or banking laws including, without limitation, in any way limiting involvement in any business activity, or finding any violation with respect to such law, nor (iii) has any bankruptcy petition been filed by or against the business of which such person was an executive officer or a general partner, whether at the time of the bankruptcy of for the two years prior thereto.





Family Relationships





There is no family relationship among any of our officers or directors.





Director Compensation





The Directors of the Company may receive stock compensation for their services as members of the Board of Directors, and are entitled to reimbursement for expenses incurred in connection with their attendance at Board of Directors’ meetings. Our by-laws also provide that they may be paid a fee for their services as Directors, although we do not currently pay such fees. Officers are appointed by the Board of Directors and serve at the discretion of the Board.





Section 16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and stockholders holding more than 10% of our outstanding common stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in beneficial ownership of our common stock.  Executive officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.  To our knowledge, based solely on review of the copies of such reports furnished to us for the year ended December 31, 2010, not all Section 16(a) reports required to be filed by our executive officers, directors and greater-than-10% stockholders were filed on a timely basis.





Item 11. Executive Compensation





Set forth below is information concerning the compensation paid for services in all capacities to our President and Executive Officers for the years ended December 31, 2010 and 2009.





Name and Position
Year
Salary ($)
Bonus ($)
Stock Awards ($)
Option Awards($)
Non-Equity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation Earnings (4)
All Other Compensation ($)
Total    ($)Alexis Korybut
2010
120,000
-0-
75,000
-0-
-0-
-0-
-0-
195,000Chief Executive OfficerChief Financial Officer
2009
120,000
-0-
75,000
-0-
-0-
-0-
-0-
195,000Chairman and formerVice PresidentMichael Cariello
2010
120,000
-0-
75,000
-0-
-0-
-0-
-0-
195,000Chief Operating OfficerSecretary
2009
30,000
-0-
-0-
-0-
-0-
-0-
-0-
30,000Mark Daniels
2009
90,000
-0-
100,000
-0-
-0-
-0-
-0-
190,000Former Chief ExecutiveOfficer and Former Chief Financial Officer
2008
250,000
-0-
131,250
-0-
-0-
-0-
-0-
381,250James O’Brien
2009
20,000
-0-
7,500
-0-
-0-
-0-
-0-
27,500Former Chief ExecutiveOfficer and Former Chief Financial Officer
2008
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-






Page 18





Option/SAR Grants in Fiscal Year 2009





None.





Employment Agreements





On January 1, 2010, the Company entered into an employment agreement with Alexis Korybut as President, Chief Executive Officer, and Chief Financial Officer of the Company.  The term of the agreement is for one year, and provides for an annual salary of $120,000 and a signing bonus of 50,000,000 restricted shares of the Company’s Common Stock.  The agreement also provides for participation by Mr. Korybut in the management bonus pool.





On January 1, 2010, the Company entered into an employment agreement with Michael Cariello as Chief Operating Officer of the Company.  The term of the agreement is for one year, and provides for an annual salary of $120,000 and a signing bonus of an additional 30,000,000 restricted shares of the Company’s Common Stock.  The agreement also provides for participation by Mr. Cariello in the management bonus pool.





On April 24, 2011, the Company entered into an employment agreement with its Chief Executive Officer, Alexis C. Korybut. Pursuant to the terms of the agreement, Mr. Korybut will be employed in the positions of Chief Executive Officer, President and Chief Financial Officer of the Company and will receive an annual salary of $120,000, a one-time issuance of 1,000,000 shares of the Company’s Series A Preferred Stock and additional benefits as outlined in the agreement. A copy of the agreement has been attached as an exhibit to our Form 8-K filed with the SEC on April 28, 2011and has been incorporated in its entirety herein by reference.





Item 12. Security Ownership of Certain Beneficial Owners and Management.





The following table presents information about the beneficial ownership of our shares of common stock as of December 31, 2010 by: (i) each person or entity who is known by us to own beneficially more than 5% of the outstanding shares of our share of common stock; and (ii) each of our directors and each of our named executive officers and all directors and executive officers as a group.





Name And Address
Number Of Shares

Beneficially Owned
Percentage OwnedMichael Cariello(1)
50,000,000
1.67%Alexis Korybut(2)
88,303,209
2.95%All directors, officers and 5% shareholders as a group
138,303,209
4.62%





(1)
The address is 10907 Carrolwood Drive, Tampa, Florida 33618.


(2)
The address is 3667 Park Lane, Miami, Florida 33313.





Beneficial ownership is determined in accordance with the rules and regulations of the SEC.  The number of shares and the percentage beneficially owned by each individual listed above include shares that are subject to options held by that individual that are immediately exercisable or exercisable within 60 days from the date of this report and the number of shares and the percentage beneficially owned by all officers and directors as a group includes shares subject to options held by all officers and directors as a group that are immediately exercisable or exercisable within 60 days from the date of this report.




Item 13. Certain Relationships and Related Transactions.





The Company issued 4,000,000 restricted shares of Common Stock to Plumtree Capital Management, LLC in July, 2008 as compensation for accrued and unpaid consulting fees and expenses through July 2008. Based upon a closing market price of the Company’s Common Stock on July 1, 2008, such shares maintained an approximate market value of $160,000; however, the true valuation of such shares is affected by the fact the shares were issued as restricted shares and therefore unable to be sold immediately in the open market. The Company issued 82,885,154 restricted shares of Common Stock to Plumtree Capital Management, LLC in April, 2009 as consideration for unpaid salary and expenses accrued from July 1, 2008 through April 15, 2009, and as consideration for a new employment agreement with the Company. Based upon a closing market price of the Company’s Common Stock on April 1, 2009, such shares maintained an approximate market value of $911,736; however, the true valuation of such shares is affected by the fact the shares were issued as restricted shares and therefore unable to be sold immediately in the open market. No registration rights were issued in connection with these shares.  These shares of Common Stock have subsequently been retired as per agreement between the Company and Plumtree Capital Management, LLC. Alexis C. Korybut, our current Chief Executive Officer, was, at the time of issuance, the Managing Member of Plumtree Capital Management, LLC and, again, at the time of issuance, our Vice President of Finance.






Page 19





On May 18, 2010 the Company signed a lease agreement with Air Support Systems, LLC. As consideration for the lease option, TADS issued Air Supports Systems, LLC a one-time up-front fee consisting of 10,000,000 shares of the Company’s restricted common stock. The lease provides TADS an exclusive one year period in which to lease and utilize the aircraft in exchange for: (i) a fee equal to fifty (50%) percent of the operating profits of any contract, where operating profits equals the gross cash receipts derived from a contract minus the direct expenses of operating said contract; (ii) a fee equal to fifty (50%) percent of the fee paid to TADS in connection with any off-loaded fuel for which TADS is paid in connection with a contract for air-to-air refueling; and (iii) TADS and Air Support Systems, LLC shall agree upon a minimum monthly, quarterly, or annual fee amount, as the case may be, on a case-by-case basis, relevant to the type and terms of the particular aircraft under lease and the related contract. A copy of the Lease Option Agreement was attached as an exhibit to our Form 10-Q for the period ending March 31, 2010 filed with the SEC on May 24, 2010 and incorporated herein by reference. Gary Fears is the Managing Member of Air Support Systems, LLC and, as disclosed herein, maintains convertible promissory notes issued by the Company.





Item 14. Principal Accountant Fees and Services





Audit Fees





For the year ended December 31, 2010, Malcolm L. Pollard, Inc., the Company’s current principal accountants, billed the Company $25,000 for fees for the audit of the Company’s annual financial statements.  We paid Larry Scharfman & Co. C.P.A., P.A., our former auditor, auditor fees of $5,000 for review fees for each of the first two quarters of the 2009 10Q’s. We paid Larry O’Donnell, C.P.A., P.A., our former auditor, auditor fees $5,000 for the 2009 third quarter 10Q review and $25,000 for the 2009 10-K audit.





Audit-Related Fees





For the years ended December 31, 2010 and December 31, 2009, none of the Company’s past or present auditors provided the Company with any assurances or related services reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported above under "Audit Fees."





Tax Fees





For the years ended December 31, 2010 and December 31, 2009, Hamilton PC, none of the Company’s past or present auditors provided professional services for tax compliance, tax advice, and tax planning.





All Other Fees





For the years ended December 31, 2010 and December 31, 2009, none of the Company’s past or present auditors provided services related to the preparation and filing of the Company’s filings, the creation of pro forma financial statements and other related matters.





Audit Committee Pre-Approval Policies





The Company currently does not have an audit committee.  The Company’ Board of Directors currently approves in advance all audit and non-audit related services performed by the Company’s principal accountants.


























Page 20








Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.





a.  Exhibits





Exhibit #
Title3.1
Articles of Incorporation and amendments thereto. (Attached as an exhibit to our First Amended Form 10-Q for the period ending September 30, 2010 filed with the SEC on May 10, 2011 and incorporated herein by reference).3.2
Certificate of Amendment to Articles of Incorporation dated July 7, 2003 (Attached as an exhibit to our Form 10-SB filed with the SEC on December 17, 2007 and incorporated herein by reference).3.2
Bylaws (Attached as an exhibit to our Form 10-SB filed with the SEC on December 17, 2007 and incorporated herein by reference).10.1
Convertible Promissory Note issued to Alexis Korybut dated January 1, 2011.10.2
Convertible Promissory Note issued to Michael Cariello dated January 1, 2011.10.3
Convertible Promissory Note issued to Gary Fears Trust dated January 1, 2011.10.4
Convertible Promissory Note issued to The Bingham Law Group, APC dated January 1, 2011.10.5
Convertible Promissory Note issued to Dwight Barnell dated January 1, 2011.14.1
Code of Ethics. (Attached as an exhibit to our Form 10-KSB filed with the SEC on October 15, 2008 and incorporated herein by reference).31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
































Page 21







SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





TACTICAL AIR DEFENSE SERVICES, INC.








Date: May 13, 2011                                                                                   /s/ Alexis C. Korybut


By: Alexis C. Korybut


Its: Chief Executive Officer








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








Signature
Title
Date/s/ Alexis C. Korybut

CEO, President and Chief Financial Officer
May 13, 2011Alexis C. Korybut
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)/s/ Michael Cariello

Director, Secretary and Chief Operating Officer
May 13, 2011Michael Cariello/s/ Peter C. Maffit

Director
May 13, 2011Peter C. Maffit









































Page 22