UNITED STATES SECURITIES AND EXCHANGE COMMISSION



FORM 10-KSB/A

Q
    **ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934****For
      the fiscal year ended December 31, 2006, or**£
    **TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934****For
      the transition period from ____________ to
      ____________**


Commission File No. 0-32327

EPOD INTERNATIONAL INC.

(Name of Small Business Issuer in its charter)

Nevada
    
    91-1953719(State of Incorporation)
    
    (IRS Employer ID. No.)


#5  215 Neave Road, Kelowna, British Columbia, Canada V1V 2L9

(Address of Principal Executive Offices) (Zip Code)

(250) 491-8111Issuer's telephone number, including area code

Securities registered under Section 12(b) of the Exchange Act:

none

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001 per share 
(Title of Class)

> 

---



Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will 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-KSB or any amendment to
this Form 10-KSB. [x]

The issuer's operating revenues for its most recent fiscal
year were $21,599. The aggregate market value of the common equity held by
non-affiliates (for the purposes of this calculation only, directors, executive
officers and principle controlling shareholders of the registrant are deemed to
be affiliates of the registrant) computed by reference to the price at which the
issuer's common stock was sold, based on the average of bid and asked prices on
November 13, 2007 was $54,581,000.

As of November 13, 2007, there were 79,102,257 shares of common stock
outstanding and no other outstanding classes of a common equity security.

Transitional Small Business Disclosure Format (check one): Yes No [x]

EXPLANATORY NOTE

The purpose of this Amendment No. 2 on Form 10-KSB/A to the
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 is to
add language to the Report of Independent Registered Public Accounting Firm for
the year ended December 31, 2005 and for the period of July 11, 2003 (inception)
to December 31, 2005 and to correct certain minor administerial errors in the
Financial Statements, which were filed in Amendment No. 1 on Form 10-KSB/A on
November 15, 2007. No other changes were made to this Form 10-KSB/A.

Except as set forth above, no attempt has been made in this
Amendment No. 2 on Form 10-KSB/A to modify or update other disclosures presented
in the original report on Form 10-KSB, as amended by Amendment No. 1.
Accordingly, this Amendment No. 2 and the original 10-KSB, as amended by
Amendment No. 1, should be read in conjunction with our filings made with the
Securities and Exchange Commission subsequent to the filing of the original
10-KSB, including any amendments to those filings.

The following items have been amended as a result of the matter
described above:

|Part II  |                     
|-------- | --------------------
|Item 7.  | Financial Statements
|         |                     
|Part III |                     
|Item 13. | Exhibits            



---

DESCRIPTION OF RESTATEMENT
During the year ended December 2006, Epod International Inc.
("the Company") determined that the manner in which it recognized revenue was
not in accordance with Staff Accounting Bulletin ("SAB") 104. The Company
entered into an agreement with a vendor in which it was to purchase assets from
the vendor. The Company then entered into an agreement to sell these assets. The
Company paid a deposit to the vendor in the amount of $250,000, however did not
take ownership of the assets. Previously the Company recognized the receipt of
the assets as inventory, the unpaid portion as accounts payable, the sale of the
assets as revenue and recorded the unpaid portion of the sale as accounts
receivable. This accounting treatment of the transaction was not in accordance
with the provisions of SAB No. 104 and the Company has restated the consolidated
financial statements to appropriately reflect the transactions. In the restated
consolidated financial statements, the Company recorded the deposit made to the
vendor as an other asset, recorded payment made by their customer as deferred
revenue and has reversed all revenue, cost of sales, accounts receivable,
allowance for doubtful accounts and accounts payable previously recorded. The
Company then determined the deposit made to the vendor was not realizable and
expensed the $250,000 in the consolidated statements of operations and
comprehensive loss. Accordingly, in connection with the restatement adjustments,
the Company has appropriately reversed the revenue recognized. In addition, the
Company determined that certain other transactions were improperly accounted for
as of December 31, 2006. These include payments made on behalf of the Company by
its Chariman to a potential acquisition target, the proper recording of
depreciation expense on a building sold during the year and the valuation of
inventories held at year-end.
                        
                      
                    
                  
                
              
            
          
        
      
    
  

TABLE OF CONTENTS

|PART II  |                      |   
|-------- | -------------------- | --
|ITEM 7.  | Financial Statements | 4 
|         |                      |   
|PART III |                      |   
|ITEM 13. | Exhibits             | 38



---



ITEM 7. FINANCIAL STATEMENTS





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders of 
EPOD International Inc.

We have audited the accompanying consolidated balance sheet
of EPOD International Inc. (a development stage company) (the "Company") as of
December 31, 2006, and the related consolidated statements of operations and
comprehensive loss, stockholders' deficit and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated financial statements based on our audit. We did not audit the
cumulative data from July 11, 2003 (inception) to December 31, 2005 in the
consolidated statements of operations and comprehensive loss, stockholders'
deficit and cash flows, which were audited by other auditors whose report dated
April 11, 2006, which expressed an unqualified opinion (the report was modified
related to the uncertainty of the Company's ability to continue as a going
concern) has been furnished to us. Our opinion, insofar as it relates to the
amounts included for the cumulative period from July 11, 2003 (inception) to
December 31, 2005 is based solely on the report of the other auditors.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
The Company has determined that it is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, based on our audit and the report of other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EPOD International
Inc. as of December 31, 2006, and the results of their operations and their cash
flows for the year then ended and for the period from July 11, 2003 (inception)
to December 31, 2006, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As more fully
described in Note 1, the Company has suffered recurring losses from operations
since inception and has a deficit accumulated during the development stage at
December 31, 2006. These items, among other matters, raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amount
and classification of liabilities that may result from the outcome of this
uncertainty.

As described in Note 2 to the consolidated financial
statements, effective January 1, 2006, the Company changed its method of
accounting for share-based compensation to adopt Statement of Financial
Accounting Standards No. 123(R), "Share-Based Payment."

Also, as described in Note 12, the accompanying consolidated financial
statements for the year ended December 31, 2006 have been restated.

KMJ CORBIN & COMPANY LLP 
Irvine, California 
November 13, 2007

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors 
EPOD International Inc. 
Kelowna, British Columbia

We have audited the accompanying consolidated statements of
operations, stockholders' deficit and cash flows of EPOD International Inc., (a
development stage enterprise) for the year ended December 31, 2005 and for the
period of July 11, 2003 (inception) to December 31, 2005. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. 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
audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the results of
operations, stockholders' deficit, and cash flows for year ended December 31,
2005 of EPOD International Inc. and for the period of July 11, 2003 (inception)
to December 31, 2005 in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 1, the Company has sustained substantial operating losses in
recent years, has limited cash resources and negative working capital. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans regarding those matters also are described in
Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

Williams & Webster, P.S. 
Certified Public Accountants 
Spokane, Washington 
April 11, 2006

---



EPOD INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY) 
CONSOLIDATED BALANCE SHEET

---

|                                                                                                             | December 31, 
|------------------------------------------------------------------------------------------------------------ | -------------
|                                                                                                             | 2006         
|ASSETS                                                                                                       | (Restated)   
|                                                                                                             | (See Note 12)
|CURRENT ASSETS                                                                                               |              
|Cash                                                                                                         | $            
|Accounts receivable and prepaid expenses                                                                     |              
|Note receivable                                                                                              |              
|Inventories                                                                                                  |              
|Total Current Assets                                                                                         |              
|                                                                                                             |              
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                           |              
|                                                                                                             |              
|OTHER ASSETS                                                                                                 |              
|Intellectual property, net                                                                                   |              
|Deposits                                                                                                     |              
|Total Other Assets                                                                                           |              
|                                                                                                             |              
|TOTAL ASSETS                                                                                                 | $            
|                                                                                                             |              
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                        |              
|                                                                                                             |              
|LIABILITIES                                                                                                  |              
|                                                                                                             |              
|CURRENT LIABILITIES                                                                                          |              
|Accounts payable and accrued liabilities                                                                     | $            
|Compensation payable                                                                                         |              
|Due to shareholders and related parties                                                                      |              
|Deferred revenue                                                                                             |              
|Accrued interest payable                                                                                     |              
|Total Current Liabilities                                                                                    |              
|                                                                                                             |              
|COMMITMENTS AND CONTINGENCIES                                                                                |              
|                                                                                                             |              
|STOCKHOLDERS' DEFICIT                                                                                        |              
|Common stock, $0.0005 par value; 200,000,000
    shares authorized, 72,811,424 shares issued and outstanding |              
|Common stock issuable (333,478 shares)                                                                       |              
|Discount on common stock                                                                                     |              
|Stock options and warrants                                                                                   |              
|Additional paid-in capital                                                                                   |              
|Accumulated deficit during the development stage                                                             |              
|Accumulated other comprehensive loss                                                                         |              
|Total Stockholders' Deficit                                                                                  |              
|                                                                                                             |              
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                  | $            

See report of independent registered public accounting firm
and accompanying notes to the consolidated financial statements.

---

EPOD INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

---

|                                                                       |   | Year Ended    |   | Year Ended   |   | Period from      
|---------------------------------------------------------------------- | - | ------------- | - | ------------ | - | -----------------
|                                                                       |   | December 31,  |   | December 31, |   | Inception to     
|                                                                       |   | 2006          |   | 2005         |   | December 31, 2006
|                                                                       |   | (Restated)    |   |              |   | (Restated)       
|                                                                       |   | (See Note 12) |   |              |   | (See Note 12)    
|                                                                       |   |               |   |              |   |                  
|REVENUE                                                                | $ | 21,599        | $ | -            | $ | 21,599           
|                                                                       |   |               |   |              |   |                  
|COST OF SALES                                                          |   | 62,447        |   | -            |   | 62,447           
|                                                                       |   |               |   |              |   |                  
|GROSS LOSS                                                             |   | (40,848)      |   | -            |   | (40,848)         
|                                                                       |   |               |   |              |   |                  
|OPERATING EXPENSES                                                     |   |               |   |              |   |                  
|General and administrative                                             |   | 878,463       |   | 1,585,150    |   | 3,272,560        
|Research and development                                               |   | 162,958       |   | 349,986      |   | 725,746          
|Legal and professional                                                 |   | 142,686       |   | 295,580      |   | 653,365          
|Depreciation and amortization expense                                  |   | 26,460        |   | 12,598       |   | 39,492           
|Total Operating Expenses                                               |   | 1,210,567     |   | 2,243,314    |   | 4,691,163        
|                                                                       |   |               |   |              |   |                  
|LOSS FROM OPERATIONS                                                   |   | (1,251,415)   |   | (2,243,314)  |   | (4,732,011)      
|                                                                       |   |               |   |              |   |                  
|OTHER INCOME (EXPENSE)                                                 |   |               |   |              |   |                  
|Other income                                                           |   | 5,956         |   | 6,186        |   | 12,542           
|Gain on sale of assets                                                 |   | 5,809         |   | -            |   | 5,809            
|Interest expense                                                       |   | (28,901)      |   | (19,841)     |   | (48,742)         
|Write off of deposits                                                  |   | (250,000)     |   | -            |   | (250,000)        
|Loss on extinguishment of related party debt                           |   | (1,400,000)   |   | -            |   | (1,400,000)      
|Foreign currency transaction loss                                      |   | (32,336)      |   | (32,264)     |   | (104,771)        
|Total Other Expense, Net                                               |   | (1,699,472)   |   | (45,919)     |   | (1,785,162)      
|                                                                       |   |               |   |              |   |                  
|LOSS BEFORE TAXES                                                      |   | (2,950,887)   |   | (2,289,233)  |   | (6,517,173)      
|                                                                       |   |               |   |              |   |                  
|PROVISION FOR INCOME TAXES                                             |   | -             |   | -            |   | -                
|                                                                       |   |               |   |              |   |                  
|NET LOSS                                                               |   | (2,950,887)   |   | (2,289,233)  |   | (6,517,173)      
|                                                                       |   |               |   |              |   |                  
|OTHER COMPREHENSIVE INCOME (LOSS)                                      |   |               |   |              |   |                  
|Foreign currency translation gain (loss)                               |   | 15,388        |   | (12,603)     |   | (9,460)          
|                                                                       |   |               |   |              |   | -                
|NET COMPREHENSIVE LOSS                                                 | $ | (2,935,499)   | $ | (2,301,836)  | $ | (6,526,633)      
|                                                                       |   |               |   |              |   |                  
|BASIC AND DILUTED                                                      |   |               |   |              |   |                  
|NET LOSS PER COMMON SHARE                                              | $ | (0.05)        | $ | (0.05)       |   |                  
|                                                                       |   |               |   |              |   |                  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED |   | 58,324,631    |   | 47,540,332   |   |                  

See report of independent registered public accounting firm
and accompanying notes to the consolidated financial statements.

---

EPOD INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
Common Stock
    Additional
    Paid-in
    Capital
    Issuable
    Common
 Stock
    Stock Options
    and Warrants
    Discount
    on Common
    Stock
    
    Other
    Comprehensive
    Income (Loss)
    Total
    Stockholders'
    Equity (Deficit)Number
    of Shares
    Amount
    Accumulated
    DeficitCommon stock issued for cash on
    July 11, 2003
    14,400
    $
    7
    $
    -
    $
    -
    $
    -
    $
    (5)
    $
    -
    $
    -
    $
    2Common stock issued for
    services
    35,985,600
    
    17,993
    
    -
    
    -
    
    -
    
    (12,995)
    
    -
    
    -
    
    4,998Foreign currency translation
    gain (loss)
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (12,245)
    
    (12,245)Net loss for period ended
    December 31, 2003
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (187,460)
    
    -
    
    (187,460)Balance, December 31, 2003
    36,000,000
    
    18,000
    
    -
    
    -
    
    -
    
    (13,000)
    
    (187,460)
    
    (12,245)
    
    (194,705)Reverse acquisition and
    recapitalization
    10,560,000
    
    5,280
    
    -
    
    -
    
    -
    
    (8,270)
    
    -
    
    -
    
    (2,990)Common stock issued for
    services at $0.37 - $1.29 per share
    180,630
    
    90
    
    119,915
    
    -
    
    -
    
    -
    
    -
    
    -
    
    120,005Options issued for services
    -
    
    -
    
    -
    
    -
    
    358,700
    
    -
    
    -
    
    -
    
    358,700Options issued to directors for
    services
    -
    
    -
    
    -
    
    -
    
    139,139
    
    -
    
    -
    
    -
    
    139,139Net loss for year ended
    December 31, 2004, as restated
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (1,089,593)
    
    -
    
    (1,089,593)Balance, December 31, 2004
    (Restated)
    46,740,630
    
    23,370
    
    119,915
    
    -
    
    497,839
    
    (21,270)
    
    (1,277,053)
    
    (12,245)
    
    (669,444)Options issued for services
    -
    
    -
    
    -
    
    -
    
    1,049,381
    
    -
    
    -
    
    -
    
    1,049,381Common stock issued for
    services at $0.73 - $1.34 per share
    223,355
    
    112
    
    243,013
    
    -
    
    -
    
    -
    
    -
    
    -
    
    243,125Common stock issuable for
    services at $0.73 - $1.34 per share
    -
    
    -
    
    -
    
    58,308
    
    -
    
    -
    
    -
    
    -
    
    58,308Common stock/warrants issued
    for cash at $0.75
    510,867
    
    255
    
    293,395
    
    -
    
    89,500
    
    -
    
    -
    
    -
    
    383,150Common stock issued for cash at
    $0.75
    44,000
    
    22
    
    32,977
    
    -
    
    -
    
    -
    
    -
    
    -
    
    32,999Beneficial conversion on loans
    -
    
    -
    
    -
    
    -
    
    12,686
    
    -
    
    -
    
    -
    
    12,686Foreign currency translation
    gain (loss)
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (12,603)
    
    (12,603)Net loss for year ended
    December 31, 2005
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (2,289,233)
    
    -
    
    (2,289,233)Balance, December 31, 2005
    47,518,852
    
    23,759
    
    689,300
    
    58,308
    
    1,649,406
    
    (21,270)
    
    (3,566,286)
    
    (24,848)
    
    (1,191,631)Options issued for services
    -
    
    -
    
    -
    
    -
    
    181,807
    
    -
    
    -
    
    -
    
    181,807Common stock issued for
    services at $0.15 - $0.82 per share
    292,572
    
    147
    
    115,874
    
    -
    
    -
    
    -
    
    -
    
    -
    
    116,021Common stock issuable for
    services at $0.15 - $0.82 per share
    -
    
    -
    
    -
    
    72,888
    
    -
    
    -
    
    -
    
    -
    
    72,888Warrants expired
    -
    
    -
    
    18,100
    
    -
    
    (18,100)
    
    -
    
    -
    
    -
    
    -Options expired
    -
    
    -
    
    137,307
    
    -
    
    (137,307)
    
    -
    
    -
    
    -
    
    -Common stock issued for
    shareholder advances with a fair value of $0.056 per share
    25,000,000
    
    12,500
    
    2,387,500
    
    -
    
    -
    
    -
    
    -
    
    -
    
    2,400,000Foreign currency translation
    gain
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    15,388
    
    15,388Net loss (restated - see Note
    12)
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (2,950,887)
    
    -
    
    (2,950,887)Balance, December 31, 2006
    (restated - see Note 12)
    72,811,424
    $
    36,406
    $
    3,348,081
    $
    131,196
    $
    1,675,806
    $
    (21,270)
    $
    (6,517,173)
    $
    (9,460)
    $
    (1,356,414)See report of independent registered public accounting firm
and accompanying notes to the consolidated financial statements.
EPOD INTERNATIONAL INC.
(A DEVELOPMENT STAGECOMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS

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|                                                                                |   |               |   |              |   |                  
|------------------------------------------------------------------------------- | - | ------------- | - | ------------ | - | -----------------
|                                                                                |   | Year Ended    |   | Year Ended   |   | Period from      
|                                                                                |   | December 31,  |   | December 31, |   | Inception to     
|                                                                                |   | 2006          |   | 2005         |   | December 31, 2006
|                                                                                |   | (Restated)    |   |              |   | (Restated)       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                           |   | (See Note 12) |   |              |   | (See Note 12)    
|Net loss                                                                        | $ | (2,950,887)   | $ | (2,289,233)  | $ | (6,517,173)      
|Adjustments to reconcile net loss to net cash
    used in operating activities: |   |               |   |              |   |                  
|Depreciation and amortization                                                   |   | 26,460        |   | 12,598       |   | 39,492           
|Common stock issued for services and expenses                                   |   | 170,409       |   | 301,433      |   | 596,842          
|Loss on extinguishment of related party debt                                    |   | 1,400,000     |   | -            |   | 1,400,000        
|Gain on sale of land and building                                               |   | (5,809)       |   | -            |   | (5,807)          
|Write off of deposits                                                           |   | 250,000       |   | -            |   | 250,000          
|Stock based compensation                                                        |   | 181,807       |   | 1,049,381    |   | 1,729,027        
|Changes in assets and liabilities:                                              |   |               |   |              |   |                  
|                                                                                |   |               |   |              |   |                  
|Accounts receivable and prepaid expenses                                        |   | 34,730        |   | (61,676)     |   | (24,638)         
|Inventories                                                                     |   | 15,515        |   | (64,629)     |   | (49,114)         
|Accounts payable                                                                |   | 180,556       |   | 166,630      |   | 446,817          
|Accrued interest payable                                                        |   | 28,863        |   | 7,161        |   | 36,024           
|Compensation payable                                                            |   | 143,212       |   | 150,752      |   | 393,660          
|Deferred revenue                                                                |   | 429,220       |   | -            |   | 429,220          
|Net cash used in operating activities                                           |   | (95,924)      |   | (727,583)    |   | (1,280,650)      
|                                                                                |   |               |   |              |   |                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                           |   |               |   |              |   |                  
|Deposits                                                                        |   | -             |   | (268,750)    |   | (347,714)        
|Note receivable                                                                 |   | (32,540)      |   | -            |   | (32,540)         
|Proceeds from sale of subsidiary                                                |   | -             |   | -            |   | 85               
|Deposit on acquisition of subsidiary                                            |   | (273,279)     |   | -            |   | (273,279)        
|Acquisition of equipment                                                        |   | (18,427)      |   | (117,232)    |   | (138,152)        
|Acquisition of patents                                                          |   | (6,451)       |   | (33,770)     |   | (40,221)         
|Proceeds from sale of land and buildings                                        |   | 248,602       |   | -            |   | 248,602          
|Acquisition of land and buildings                                               |   | (85,118)      |   | (250,557)    |   | (335,675)        
|Net cash used in investing activities                                           |   | (167,213)     |   | (670,309)    |   | (918,894)        
|                                                                                |   |               |   |              |   |                  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                           |   |               |   |              |   |                  
|Common stock/warrants issued for cash                                           |   | -             |   | 416,149      |   | 416,149          
|Repayment of related party borrowings                                           |   | (566,436)     |   | (153,199)    |   | (755,238)        
|Proceeds from related party borrowings                                          |   | 820,940       |   | 1,134,913    |   | 2,542,439        
|Net cash provided by financing activities                                       |   | 254,504       |   | 1,397,863    |   | 2,203,350        
|                                                                                |   |               |   |              |   |                  
|NET INCREASE (DECREASE) IN CASH                                                 |   | (8,633)       |   | (29)         |   | 3,806            
|                                                                                |   |               |   |              |   |                  
|Effect of exchange rate changes on cash                                         |   | 15,388        |   | -            |   | 3,142            
|                                                                                |   |               |   |              |   |                  
|CASH, BEGINNING OF PERIOD                                                       |   | 193           |   | 222          |   | -                
|                                                                                |   |               |   |              |   |                  
|CASH, END OF PERIOD                                                             | $ | 6,948         | $ | 193          | $ | 6,948            
|                                                                                |   |               |   |              |   |                  
|SUPPLEMENTAL CASH FLOW INFORMATION:                                             |   |               |   |              |   |                  
|Interest paid                                                                   | $ | 28,901        | $ | -            | $ | 28,901           
|Income taxes paid                                                               | $ | -             | $ | -            | $ | -                
|                                                                                |   |               |   |              |   |                  
|NON-CASH FINANCING AND INVESTING ACTIVITIES:                                    |   |               |   |              |   |                  
|Beneficial conversion of shareholder advances                                   | $ | -             | $ | 12,686       | $ | 12,686           
|Common stock issued for services and expenses                                   | $ | -             | $ | 301,433      | $ | 426,435          
|Stock based compensation                                                        | $ | -             | $ | 1,049,381    | $ | 1,547,220        
|Issuance of common stock for conversion of
    shareholder advances             | $ | 1,000,000     | $ | -            | $ | 1,000,000        
|Reversal of shareholder advances to CompMess                                    | $ | 344,460       | $ | -            | $ | 344,460          

See report of independent registered public accounting firm
and accompanying notes to the consolidated financial statements.

---

EPOD International Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 2006 and 2005NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS

EPOD International Inc. (the "Company" or "EPOD") is organized under the laws of the State of
Nevada. The Company was organized to develop, produce, license and sell
innovative energy management and electronic technology. It currently owns the
worldwide rights to certain patent-pending technology that improves the
efficiency of electrical power usage. In January 2004 the Company completed a
reverse merger transaction in which it acquired the assets that form the
foundation of its existing business operations (see Note 5).
The Company has been in the development stage through
December 31, 2006.
On July 12, 2007, the Company's Board of Directors determined
that the Company was required to restate and reissue its annual report for the
year ended December 31, 2006 due to improper accounting of certain transactions
(see Note 12). The accompanying consolidated financial statements for the year
ended December 31, 2006 have been adjusted to correct such improprieties.
Going Concern
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern.
As of December 31, 2006, the Company has incurred net losses
exceeding $6,500,000. At December 31, 2006, the Company has limited cash
resources, a working capital deficiency, and an accumulated deficit during the
development stage. These factors, among others, raise substantial doubt about
the Companys ability to continue as a going concern for a reasonable period of
time. These consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that may be necessary should the
Company be unable to continue as a going concern. The Companys continuation as
a going concern and its ability to meet its obligations as they come due is
contingent upon its ability to obtain additional financing, and to generate
revenue and cash flow to meet its obligations on a timely basis.
For the year subsequent to December 31, 2006, the Company
anticipates that its minimum cash requirements to continue as a going concern
will be $100,000 per month. The anticipated source of these funds is a private
placement of its equity securities. Management has established plans to seek new
capital from new equity securities issuances in order to provide funds needed to
increase liquidity, fund internal growth and fully implement its business plan
(see Note 11).
NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented
to assist in understanding the Companys consolidated financial statements. The
consolidated financial statements and notes are representations of the Companys
management, which is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the
United States of America ("GAAP"), and have been consistently applied in the
preparation of the consolidated financial statements.
Accounting for Shareholder Advances with Beneficial
Conversion Features
Following guidance of Emerging Issues Task Force ("EITF") No.
00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments," the
Company recorded the excess value of the stock issued in exchange for advances
payable as a beneficial conversion feature. The value of the beneficial
conversion feature is recorded on the consolidated statement of operations as an
expense.
In accordance with EITF No. 98-5, "Accounting for Convertible
Securities" and EITF No. 00-27, the amount of beneficial conversion is
determined at the issuance date of the common stock as the difference between
the price at which the stock was granted and the fair market value at the date
of conversion (See Notes 5 and 8).
Accounting for Warrants
As a result of the conversion of shareholder advances to
common stock on August 31, 2006 (see Note 5), the Company did not have a
sufficient number of authorized shares to settle outstanding and exercisable
options, warrants and convertible instruments. Therefore, under the provisions
of EITF No. 00-19, "Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock," as a result of the
conversion, the Company would have been required to classify all non-employee
options and warrants as derivative liabilities; however, the estimated fair
value of the non-employee options and warrants on August 31, 2006 and December
31, 2006 is
insignificant to the consolidated financial statements.
Basic and Diluted Net Loss per Share
Net loss per share was computed by dividing the net loss by
the weighted average number of shares outstanding during the period. The
weighted average number of shares was calculated by taking the number of shares
outstanding and weighting them by the amount of time that they were outstanding.
At December 31, 2006, basic and diluted net loss per share was the same, as
inclusion of common stock equivalents would be anti-dilutive. At December 31,
2006, the Company has a total of potentially dilutive shares of 1,709,988 shares that would be issued if all
options and warrants were exercised.
Concentration of Risk
The Company and its wholly owned subsidiaries maintain cash
in four business checking accounts in a Canadian bank, two which are denominated
in Canadian currency and two in U.S. currency. The Canadian funds are insured by
the Canada Deposit Insurance Corporation ("CDIC"). The funds held in U.S.
currency by Canadian banks are not insured. The Company also holds minimal funds
in a German bank. The Company's sales during the year were to one customer.
Comprehensive Income (Loss)
The Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which was issued
in June 1997. SFAS No. 130 establishes rules for the reporting and display of
comprehensive income and its components. SFAS No. 130 requires unrealized gains
and losses on the Companys foreign currency translation to be included in
comprehensive income (loss).
Estimates
The process of preparing financial statements in conformity
with GAAP
requires the use of estimates and assumptions regarding certain types of assets,
liabilities, disclosure of contingent assets and liabilities, and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates include, among others, valuation of inventories and deferred tax
assets, the realizability of accounts receivable and long-lived assets and the fair value of common
shares and options granted for services.
Fair Value of Financial Instruments
The Company's financial instruments as defined by SFAS No.
107, "Disclosures about Fair Value of Financial Instruments," may include cash,
receivables, advances, accounts payable and accrued liabilities, and amounts due
to related parties. All such instruments are accounted for on a historical cost
basis, which, due to the short maturity of these financial instruments,
approximates fair value at December 31, 2006.
Inventories
Inventories are stated at the lower of cost or market on a
first-in, first-out basis. At each balance sheet date, the Company evaluates its
ending inventories for excess quantities and obsolescence.  Provisions are made to reduce excess or obsolete inventories to their estimated
net realizable values. Once established, write-downs are considered permanent
adjustments to the cost basis of the excess or obsolete inventories.

---

Property, Plant and Equipment
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated useful life of the
asset, except for the land, which is not depreciated. For purposes of computing
depreciation, the useful lives of the property and equipment are as follows:

Storage Equipment
    10 yearsPower Generator
    25 yearsEquipment
    10 yearsComputer Equipment
    3 yearsOffice Equipment
    5 yearsLeasehold Improvements
    5 yearsBuilding
    25 years


The Company evaluates the recoverability of property and
equipment when events and circumstances indicate that such assets might be
impaired. Major renewals and improvements are charged to the asset accounts,
while replacements, maintenance and repairs that do not improve or extend the
lives of the respective assets are expensed. At the time that property and
equipment are retired or otherwise disposed of, the asset and its related
accumulated depreciation accounts are relieved of the applicable amounts, and
gains or losses are credited or charged to income.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets held and used by the
Company for impairment on an annual basis or whenever events or changes in
circumstances indicate that their net book value may not be recoverable. When
such factors and circumstances exist, the Company compares the projected
undiscounted future cash flows associated with the related asset or group of
assets over their estimated useful lives against their respective carrying
amount. Impairment, if any, is based on the excess of the carrying amount over
the fair value, based on market value when available, or discounted expected
cash flows, of those assets and is recorded in the period in which the
determination is made. At December 31, 2006, the Companys management believes
there is no impairment of its long-lived assets. There can be no assurance,
however, that market conditions will not change or demand for the Companys
products will continue, which could result in future impairment of long-lived
assets.

Principles of Consolidation

The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries: EPOD Corporation, a Bahamian
corporation; EPOD Industries Inc., a Canadian corporation; EPOD Renewable
Utilities Inc. an inactive Canadian corporation; and EPOD Erneuerbare Energien
GmbH, a German corporation. All significant transactions and balances among the
companies included in the consolidated financial statements have been
eliminated.

Income Taxes

Income taxes are provided based upon the liability method of
accounting pursuant to SFAS No. 109, "Accounting for Income Taxes." Under this
approach, deferred income taxes are recorded to reflect the tax consequences in
future years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year end. A valuation allowance is
recorded against the deferred tax asset if management does not believe the
Company has met the "more likely than not" standard imposed by SFAS No. 109 to
allow recognition of such an asset.

Reclassification

Certain amounts in the period ended December 31, 2005 have
been reclassified to conform with the December 31, 2006 presentation. These
reclassifications have not resulted in any changes to the Companys accumulated
deficit or net losses presented, other than those described in Note 12.

---



Revenue Recognition

The Company recognizes revenue from sales in accordance with
the Securities and Exchange Commissions Staff Accounting Bulletin ("SAB") No.
104, "Revenue Recognition." Under the provisions of SAB No. 104, the Company
recognizes revenue when there is persuasive evidence that an arrangement exists,
services have been rendered or product has been shipped, the sellers price to
the buyer is determinable, and collectability is reasonably assured. The Company
records any cash advances received from customers as deferred revenue when all
criteria for revenue recognition have not yet been met.

Stock-Based Compensation

At December 31, 2006, the Company had no employee stock-based compensation
plans.

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004),
"Share-Based Payment," ("SFAS 123(R)") which establishes standards for the
accounting of transactions in which an entity exchanges its equity instruments
for goods or services, primarily focusing on accounting for transactions where
an entity obtains employee services in share-based payment transactions. SFAS
123(R) requires a public entity to measure the cost of employee services
received in exchange for an award of equity instruments, including stock
options, based on the grant-date fair value of the award and to recognize it as
compensation expense over the period the employee is required to provide service
in exchange for the award, usually the vesting period. SFAS 123(R) supersedes
accounting under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25") for periods beginning in fiscal 2006. In
March 2005, the Securities and Exchange Commission issued SAB No. 107,
"Valuation of Share-Based Payment Arrangements for Public Companies," ("SAB No.
107") relating to SFAS 123(R). The Company has applied the provisions of SAB No.
107 in its adoption of SFAS 123(R).

The Company adopted SFAS 123(R) using
the modified prospective transition method, which requires the application of
the accounting standard as of January 1, 2006, the first day of the Company's
fiscal year 2006. The Company's consolidated financial statements as of and for
the year ended December 31, 2006 reflect the impact of SFAS 123(R). In
accordance with the modified prospective transition method, the Company's
consolidated financial statements for prior periods have not been restated to
reflect, and do not include, the impact of SFAS 123(R).

SFAS 123(R) requires companies to
estimate the fair value of share-based payment awards on the date of grant using
an option-pricing model. The value of the portion of the award that is
ultimately expected to vest is recognized as expense over the requisite service
periods in the Company's consolidated statement of operations. Prior to the
adoption of SFAS 123(R), the Company accounted for stock-based awards to
employees and directors using the fair value method in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation," ("SFAS No. 123"). Under the fair
value method, stock-based compensation expense was recognized in the Company's
consolidated statements of operations.

Stock-based compensation expense recognized during the period
is based on the value of the portion of share-based payment awards that is
ultimately expected to vest during the period. Stock-based compensation expense
recognized in the Company's consolidated statement of operations for the year
ended December 31, 2006 included compensation expense for share-based payment
awards granted prior to, but not yet vested as of December 31, 2005 based on the
grant date fair value estimated in accordance with SFAS No. 123 and compensation
expense for the share-based payment awards granted subsequent to December 31,
2005 based on the grant date fair value estimated in accordance with the
provisions of SFAS 123(R). As stock-based compensation expense recognized in the
consolidated statement of operations for the year ended December 31, 2006 is
based on awards ultimately expected to vest, it has been reduced for estimated
forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. The estimated average forfeiture rate for the year
ended December 31, 2006, of 0% was based on the Company granting immediately
exercisable options during the year ended December 31, 2006. The estimated
pricing term of option grants for 2006 was five years. In the Company's periods
prior to fiscal 2006, the Company accounted for forfeitures as they occurred.

SFAS 123(R) requires the cash flows resulting from the tax benefits resulting
from tax deductions in excess of the compensation cost recognized for those
options to be classified as financing cash flows. Due to the Company's loss
position, there were no such tax benefits during the year ended December 31,
2006. Prior to the adoption of SFAS 123(R) those benefits would have been
reported as operating cash flows had the Company received any tax benefits
related to stock option exercises.

---



Summary of Assumptions and Activity

The fair value of stock-based awards to employees and
directors is calculated using the Black-Scholes option pricing model even though
the model was developed to estimate the fair value of freely tradeable, fully
transferable options without vesting restrictions, which differ significantly
from the Company's stock options. The Black-Scholes model also requires
subjective assumptions, including future stock price volatility and expected
time to exercise, which greatly affect the calculated values. The expected term
of options granted is derived from historical data on employee exercises and
post-vesting employment termination behavior. The risk-free rate selected to
value any particular grant is based on the U.S. Treasury rate that corresponds
to the pricing term of the grant effective as of the date of the grant. The
expected volatility is based on the historical volatility of the Company's stock
price. These factors could change in the future, affecting the determination of
stock-based compensation expense in future periods.

The fair value of options granted was estimated using the following
weighted-average assumptions:

2006
      
      2005Stock options:Expected term (in years)
      5.0
      
      2.0-5.0Expected volatility
      97%
      
      44%-171%Risk-free interest rate
      3.55%
      
      4.00%Dividend yield
      -
      
      -


A summary of employee and director option activity as of December 31, 2006
and changes during the year then ended, is presented below:

|                                                             | December 31, 2006
|------------------------------------------------------------ | -----------------
|                                                             | Weighted-Average 
|                                                             |                  
|                                                             |                  
|                                                             | Shares           
|Options outstanding and exercisable at
    January 1, 2006   | 1,604,523        
|Options granted                                              | 1,159,988        
|Options forfeited                                            | -                
|Options exercised                                            | -                
|Options outstanding and exercisable at
    December 31, 2006 | 2,764,511        

The weighted-average grant date fair value of options granted
to employees and directors during 2006 was
$0.14 per option. Upon the exercise of options, the Company issues new shares
from its authorized shares.

As of December 31, 2006, there was $0 of total unrecognized compensation cost
related to employee and director stock option compensation arrangements.

As a result of adopting SFAS 123(R) on January 1, 2006, there
was no change on the Company's loss before provision for income taxes and net
loss for 2006. As the Company was previously accounting for options granted to
employees and directors under the fair value provisions of SFAS 123, basic and
diluted net loss per share for 2006 was not affected by the adoption of SFAS
123(R).

---



The following table summarizes stock-based compensation
expense related to employee and director stock options under SFAS 123(R) for the
year ended December 31, 2006, net of estimated forfeitures, which was allocated
as follows:

|                                              |   | Year        
|--------------------------------------------- | - | ------------
|                                              |   | Ended       
|                                              |   | December 31,
|                                              |   | 2006        
|Stock-based compensation expense included in: |   |             
|General and administrative                    | $ | 167,130     

All issuances of the Company's stock for non-cash
consideration have been assigned a dollar amount equaling either the market
value of the shares issued or the value of consideration received whichever is
more readily determinable. The majority of the non-cash consideration received
pertains to services rendered by consultants and others and has been valued at
the market value of the shares issued. In certain issuances, the Company may
discount the value assigned to the issued shares for illiquidity and
restrictions on resale.

Foreign Currency

The U.S. dollar is the functional currency of the Company.
The Canadian dollar is the functional currency of the Canadian subsidiaries and
the Euro is the functional currency of the German subsidiary. Canadian and
German bank
accounts are maintained and are translated using the exchange rate in effect at
the balance sheet date. Assets and liabilities denominated in foreign
currencies are translated to United States dollars at the exchange rate in
effect on the balance sheet date.  Revenues and expenses are translated at the
average rates of exchange prevailing during the year. Gains and losses on
foreign currency transactions are included in the consolidated statement of
operations. Unrealized gains and losses on the Companys foreign currency
translation are included in comprehensive income.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board
("FASB") issued SFAS No. 157, "Fair Value Measurements" which defines fair
value, establishes a framework for measuring fair value under GAAP, and expands
disclosures about fair value measurements. Where applicable, SFAS No. 157
simplifies and codifies related guidance within GAAP and does not require any
new fair value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. Earlier adoption is encouraged. The Company does not
expect the adoption of SFAS No. 157 to have a significant effect on its
financial position or results of operation.

In June 2006, the FASB issued FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109", which prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company does not expect the
adoption of FIN 48 to have a material impact on its financial reporting, and the
Company is currently evaluating the impact, if any, the adoption of FIN 48 will
have on its disclosure requirements.

In February 2007, the FASB issued SFAS No. 159, "The Fair
Value Option for Financial Assets and Financial Liabilities  Including an
Amendment of FASB Statement No. 115" ("SFAS No. 159"). SFAS No. 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS No. 159 also establishes presentation
and disclosure requirements designed to facilitate comparison between entities
that choose different measurement attributes for similar types of assets and
liabilities. The Company is scheduled to adopt SFAS No. 159 in the first quarter
of 2008, and does not expect it to have a material impact on its consolidated
financial position and consolidated results of operations or cash flows.

---

NOTE 3  PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, equipment, and accumulated
depreciation:

December 31, 2006Storage Equipment
      $
      4,720Power Generator
      
      38,800Equipment
      
      11,539Computer Equipment
      
      11,133Office Equipment
      
      3,715Leasehold Improvements
      
      67,813Building
      
      6,548Land
      
      78,570Total Cost
      
      222,838Less Accumulated Depreciation
      
      (29,168)Total Net Property and Equipment
      $
      193,670


Depreciation expense for the years ended December 31, 2006 and 2005 is
$24,378 (as restated  see Note 12) and $12,101 respectively.

On June 30, 2006, land and building with a historical net book value of
$242,793 was sold to an unrelated party for $248,602 and a gain on sale of
$5,809 was recorded.

NOTE 4  INTELLECTUAL PROPERTY

In 2006, $56,451 was capitalized representing legal costs for
patent applications. It is being amortized over 17 years on a straight-line
basis. Depreciation expense for the years ended December 31, 2006 and 2005 is
$2,082 and $497 respectively. Accumulated amortization was $2,578 and $497 at
December 31, 2006 and 2005, respectively. The following table presents expected
future amortization of patent costs for each of the next five years:

2007
      $
      2,3662008
      
      2,3662009
      
      2,3662010
      
      2,3662011
      
      2,366Thereafter
      
      25,813Total amortization
      $
      37,643


NOTE 5  COMMON STOCK TRANSACTIONS

The Company is authorized to issue 200,000,000 shares of
$0.0005 par value common stock (as amended subsequent to December 31, 2006, see
Note 11). Each share of stock is entitled to one vote at the annual
shareholders meeting. On September 20, 2004, the Company completed a
two-for-one stock split of its common stock. Prior to the date of the stock
split, 23,334,000 shares were outstanding at a par value of $0.001. Subsequent
to the stock split, 46,668,000 shares of common stock were outstanding. All
references to common stock shares in these consolidated financial statements and
notes have been restated to reflect this stock split.

During 2003, the Company exchanged all of its issued and
outstanding shares of common stock of 5,000 shares for 36,000,000 restricted
shares of common stock of Cyokonos Corporation. During January 2004, the Company
completed a reorganization with Cyokonos Corporation, whose assets consisted of
cash of $85 and whose liabilities included accounts payable and due to affiliate
of $3,075. In conjunction therewith, the reorganization was accounted for as
though it were a recapitalization of the Company and exchange by the Company of
18,460,000 shares of common stock, at par value of $0.001 per share, in exchange
for the net liabilities of Cyokonos. Also, as part of the reorganization with
Cyokonos, the Company received from an officer of the Company 7,900,000 shares
of issued and outstanding common stock. These shares were cancelled on April 7,
2004.

---



During the year ended December 31, 2005, the Company entered
into an agreement with Stepp Law Group to act as an escrow agent on its behalf,
whereby the Company offered for sale only to persons who are not "U.S. persons,"
as the term defined by the provisions of Regulation S, securities of the Company
for private placement for a total offering amount of as much as $1,500,000
(2,000,000 units) on a "best efforts" basis. Purchasers of the units received,
as a unit, one share of the Companys common stock, one non-transferable warrant
to purchase one share of common stock until May 17, 2006 at an exercise price of
$1.50 per share and one non-transferable piggyback warrant to purchase one share
of common stock until May 17, 2007 at an exercise price of $2.00 per share. The
offer and sale of units are not be registered pursuant to the Securities Act,
but rather is made privately by the Company, pursuant to that exemption from
registration provided by provisions of Regulation S. In total 510,867 units for
$383,150 have been subscribed to through the private placement, with common
shares valued at $293,650, warrants valued at $18,100 and piggyback warrants at
$71,400. All shares have been issued. As of December 31, 2006, the warrants
valued at $18,100 expired. The piggyback warrants expired in May 2007.

During the year ended December 31, 2005, an unaffiliated
individual provided legal and consulting services valued at $78,644 to the
Company in exchange for 67,500 shares of the Companys common stock.

During the year ended December 31, 2005, an unaffiliated
individual provided services valued at $49,556 to the Company in exchange for
44,880 shares of the Companys common stock.

On June 30, 2005, the Company issued 40,000 of the Companys
common stock valued at $52,000 to a law corporation in lieu of payment of
outstanding invoices for business services and advice.

During the third quarter of 2005, 44,000 shares of common
stock were provided to a related party in exchange for cash of $33,000 (See Note
8). As of December 31, 2006, none of these shares have been administratively
issued.

During the last quarter of 2005, the Company authorized the
issuance of 3,413 shares valued at $3,844 to an unaffiliated individual in
return for legal services.

During the year ended December 31, 2005, the Company adopted
a consultant stock plan, the purpose of which is to help obtain and retain
consulting services upon which the Company is dependent, by offering such
persons the opportunity to become owners of capital stock of the Company. The
plan is to be administered by a Plan Committee consisting of two or more members
of the board. The term of the plan is ten years from its effective date.
Eligible persons for awards are consultants, excluding those in connection with
the provision of any services incident to the raising of capital or promotion or
maintenance of a market for the Companys securities. The maximum number of
shares authorized by the plan is not to exceed 450,000. The granting of any
awards under the plan is to be in writing. The awards can be made as a bonus or
reward for past services, the value of which will be the fair market value of
the awarded shares on the date of grant, or for compensation of services the
value of which may not be less than 70% of the fair market value of the awarded
shares on the grant date. Awards are non-transferable. As of December 31, 2006,
200,518 shares have been effectively issued from the plan as follows:

1.     
During the quarter ended December 31, 2005, the Company authorized the issuance
of 50,537 shares to a related party consultant (see Note 8), valued at $37,902
for payment of services provided. At December 31, 2006, thirty-three shares have
yet to be administratively issued.

2.     
During the quarter ended December 31, 2005, the Company authorized the issuance
of 57,902 shares valued at $50,000 to an unaffiliated law firm for legal
services. In the first quarter of 2006, an additional 46,572 shares valued at
$25,000 were issued.

3.     
During year ended December 31, 2005, 25,878 shares valued at $30,287 were issued
to an unaffiliated consultant for services provided. An additional 19,629 shares
were issued through the stock consultant plan for shares issued and work
completed in 2004.

---

On June 30, 2006, 300,000 shares were issued to an
independent consultant with a one-year contract ending March of 2007 as an
advance payment for the providing marketing, sales and communications services
over the contract term. As of December 31, 2006, 54,000 of these shares have not
been administratively issued. The value of the shares on the date of the
agreement was $111,000, of which $92,500 was expensed in the accompanying
consolidated statement of operations and $18,500 was included in prepaid
expenses in the accompanying consolidated balance sheet.
The Company has an ongoing agreement to provide $4,273
monthly in shares to an unaffiliated individual for services provided. During
the year ended December 31, 2006, the individual earned 212,723 shares of common
stock valued at $52,909, and at December 31, 2006 a total of 235,478 shares have not been
administratively issued.
On August 31, 2006, the Company entered into an agreement
with a related party (see Note 8) to convert shareholder advances to the
Companys common stock. As a result, the related party received 25 million
restricted shares.
On September 30, 2006, a resolution was approved by the Board
of Directors for the Company to buy back up to 10,000,000 shares of common stock
from its public held float at market prices. The buy back can be initiated at
managements discretion.
NOTE 6  COMMON STOCK OPTIONS AND WARRANTS

Executive Compensation
On July 1, 2004, the Company entered into an agreement with
the president of the Company which included an option to purchase shares as of
July 31, 2004, 2005, and 2006, in an amount equal to 1% of the number of shares
outstanding on those dates. The shares vest immediately upon grant. During the
years ended December 31, 2006 and 2005, 480,110 options at a price of $1.00 per
share were granted valued at
$60,741 and 471,723 options were granted valued at $477,212, respectively.
On July 1, 2006, the Company granted its chief financial
officer an option to purchase shares at a price of $1.00 per share as of July 1,
2006, in an amount equal to 1% of the number of shares outstanding on that date.
The options vest immediately upon grant. During the year ended December 31,
2006, 479,878 options were granted valued at $44,448.
Non-Executive Compensation
On January 21, 2004, the Companys board of directors
approved the reservation of 200,000 shares of common stock for non-executive
employee options at a set price of $0.75 per share. The vesting and distribution
of such options will be determined by the board. No non-executive options were
granted as of December 31, 2006.
Consultant Compensation
On March 15, 2004, the Company entered into a two-year
contracting agreement with a law corporation for business services and advice.
For each year of the two-year contract, there is an option to purchase 100,000
shares of common stock at an exercise price of $0.75 per share for the first
year and $1.00 per share for the second year. The stock options vest monthly
over the course of each year. The total fair value of the 100,000 options
granted as of March 15, 2004 using the Black-Scholes option price calculation
was $36,234, $6,039 of which was expensed in 2005 and the remainder in 2004. The
total fair value of the 100,000 options granted as of March 15, 2005 using the
Black-Scholes Option Price Calculation was $88,060, of which $14,677 was
expensed in 2006. All options have vested.
On July 1, 2004, the Company granted to a consultant, for
services provided, an option to purchase 150,000 shares of common stock at an
exercise price of $0.75 per share. The stock options vest quarterly over the
course of one year. The total fair value of the options, estimated on the grant
date using the Black-Scholes Option Price Calculation was $137,307. All options
are now expired.
On April 1, 2005, the Company granted to each of two
consultants, for services provided, a three-year option to purchase 200,000
shares of common stock each at an exercise price of $0.75 per share. The stock
options vested April 1, 2005. The total fair value of the options, estimated on
the grant date using the Black-Scholes Option Price Calculation is $424,093, all
of which have been recorded as of December 31, 2005.
On April 1, 2006, the Company granted to a consultant who is classified as
an employee, for services provided, an option to purchase
200,000 shares of common stock each at an exercise price of $1.00 per share. The
stock options vested April 1, 2006. The total fair value of the options,
estimated on the grant date using the Black-Scholes Option Price Calculation is
$63,573.
None of the stock options outstanding and exercisable at December 31, 2006
were approved by shareholders. All options outstanding are exercisable at a
price ranging from $0.75 to $1.00 per share.
Following is a summary of the status of the all options, including employees,
directors and consultants during the years ended December 31, 2006 and 2005:

|                                                             | Number of Shares Under | Weighted Average
|------------------------------------------------------------ | ---------------------- | ----------------
|                                                             | Options                |                 
|                                                             |                        |                 
|Outstanding at January 1, 2005                               | 982,800                |                 
|Granted                                                      | 971,723                |                 
|Exercised                                                    | --                     |                 
|Forfeited                                                    | --                     |                 
|                                                             |                        |                 
|Options outstanding at December 31, 2005                     | 1,954,523              | $               
|                                                             |                        |                 
|Granted                                                      | 1,159,988              |                 
|Exercised                                                    | --                     |                 
|Forfeited                                                    | (150,000)              |                 
|                                                             |                        |                 
|Options outstanding and exercisable at
    December 31, 2005 | 2,964,511              | $               
|                                                             |                        |                 
|Weighted average fair value of options
    granted in 2005   |                        | $               
|                                                             |                        |                 
|Weighted average fair value of options
    granted in 2006   |                        | $               

NOTE 7 - INCOME TAXES

The provision for income taxes differs from the amount that would result from
applying the federal statutory rate for the years ended December 31, 2006 as
follows

|                                             |  | 2006   
|-------------------------------------------- |  | -------
|                                             |  |        
|Statutory federal
    income benefit rate    |  | (34.0)%
|Loss on extinguishment of related party debt |  | 16.0   
|Change in valuation allowance and other      |  | 18.0   
|Total                                        |  | -%     

The significant components of the Companys deferred tax assets at December
31, 2006 and 2005 are as follows:

|                                           |   | 2006        |   | 2005       
|------------------------------------------ | - | ----------- | - | -----------
|Net operating loss carry forwards          | $ | 991,000     | $ | 656,052    
|Stock based compensation                   |   | 628,000     |   | 556,485    
|Deferred tax asset                         |   | 1,619,000   |   | 1,212,537  
|Deferred tax asset
    valuation allowance |   | (1,619,000) |   | (1,212,537)
|Net deferred tax asset                     | $ | -           | $ | -          

---



At December 31, 2006, the Company has net operating loss
carry forwards of approximately $2,550,000, which expire through 2026. The net
change in the allowance account was an increase of approximately $400,000 for
the year ended December 31, 2006. The Company's use of its net operating losses
may be restricted in future years due to the limitations pursuant to IRC Section
382 on changes in ownership.

Deferred income taxes are provided for the tax effects of
temporary differences in the reporting of income and deductions for financial
statement and income tax reporting purposes and arise principally from net
operating loss carryforwards used for income tax reporting.

The Company's effective tax rate differs from the federal and
state statutory rates due to the valuation allowance recorded for the deferred
tax asset due to unused net operating loss carryforwards. An allowance has been
provided for by the Company which reduced the tax benefits accrued by the
Company for its net operating losses to zero, as it cannot be determined when,
or if, the tax benefits derived from these operating losses will materialize.
With respect to the remaining deferred tax assets for the year ended December
31, 2006, the Company intends to maintain a valuation allowance until sufficient
positive evidence exists to determine that realization of such deferred tax
assets is more likely than not to occur.

U.S. deferred income taxes were not provided for on
undistributed earnings from certain non-U.S. subsidiaries at December 31, 2006.
Those earnings are considered to be permanently reinvested in accordance with
Accounting Principles Board ("APB") Opinion 23 and will not be remitted to the
U.S.

The Company believes it has adequately provided for income
tax issues not yet resolved with federal, state and foreign tax authorities.
Although not probable, the most adverse resolution of these issues could result
in additional charges to earnings in future periods.

NOTE 8 - RELATED PARTY TRANSACTIONS

Due to Shareholders and Related Parties

In 2003, the Company entered into a promissory note and loan
agreement with a shareholder for $95,000. This note is unsecured, non-interest
bearing and has no stated maturity. As of December 31, 2006, the entire balance
of principal was still outstanding.

On September 8, 2005, the Company entered into a loan
agreement with a director for $42,285 due on demand. The principal amount of the
unsecured loan bears interest at 10 percent and calculated semi-annually. The
lender has the option to convert the cash loan to common stock at a price of
$1.00 for a period of five years. A discount on the loan of $6,343 has been
recorded calculated with a stock price of $1.15 as of the agreement date, which
was expensed during the year ended December 31, 2005. As discussed below,
certain of these advances were reversed.

On September 8, 2005, the Company entered into a loan
agreement with the wife of a director for $42,285 due on demand. The principal
amount of the loan shall bear interest at 10 percent until repaid and calculated
semi-annually, not in advance. The lender has the option to convert the cash
loan to common stock at a price of $1.00 for a period of five years. A discount
on the loan of $6,343 has been recorded calculated with a stock price of $1.15
as of the agreement date, which was expensed during the year ended December 31,
2005. As discussed below, certain of these advances were reversed.

---



On December 6, 2005, the Company entered into a loan
agreement with a company controlled by a director for $108,113 due on demand.
The principal amount of the unsecured loan bears interest at 10 percent and is
calculated semi-annually. The lender has the option to convert the cash loan to
common stock at a price of $1.00 for a period of five years. As discussed below,
certain of these advances were reversed.

In 2005, the Company entered into two debt agreements with a
shareholder/director. The related promissory notes, for a total of $195,000, are
unsecured, mature in 2015, and accrue interest at 5%. As of December 31, 2006,
the entire balance of the loan is outstanding and has been recorded as a current
liability due to the nature of the shareholder advances and the reversal of the
deposits made to CompMess (see below).

On December 15, 2006, the Company entered into a loan
agreement with a company controlled by a director for $85,628 with no set
repayment terms, including no interest. As discussed below, certain of these
advances were reversed.

In connection with the transaction with CompMess (see Note
9), the Company previously recorded amounts paid to CompMess by a
shareholder/director as deposits and due to related parties as detailed above.
During the year ended December 31, 2006, the Company determined that it did not
have a right to the deposits and did not owe any repayment of the amounts to the
shareholder/director. As a result, the Company reversed $344,460 of these
advances from related parties as detailed above.

From inception to June 30, 2006, the Company received
advances from shareholders as a source of funding. On August 31, 2006 an
agreement was made with a director and shareholder to convert $1,000,000 of such
advances to 25,000,000 restricted common shares (see Note 5). The value of the
shares on the date of the agreement was $2,400,000. As a result of this
transaction, $1,400,000 has been recorded as a loss on extinguishment of debt on
the consolidated statement of operations and an increase to consolidated
stockholders equity based on excess value of the stock issued in exchange for
shareholders advances. After the conversion, the remaining amount of advances
received from shareholders was $248,968 at December 31, 2006.

Total interest expense incurred on interest-bearing notes to related parties
was approximately $29,000 and $20,000 for the years ended December 31, 2006 and
2005, respectively.

Accounts Payable and Accrued Liabilities

On July 1, 2004, the Company entered into an agreement with a
related entity, Roseborough Holdings Inc. for management services. Under the
terms of this annual agreement, the Company is charged $102,564 per annum and a
$51,282 signing bonus. As of December 31, 2006, $308,988 has been accrued since
the inception of the contract.

On August 22, 2005, the Company purchased property from
Parmount Holdings Inc., a related entity. The purchase price as per the purchase
contract was $250,557, with ownership taken in July 2005. This property was sold
in 2006 for a gain of $5,809 (see Note 3).

Equity Transactions

During the year ended December 31, 2005, the Company issued
44,000 shares to a company controlled by a director of EPOD for cash of $33,000,
as part of a private placement, at a price of $0.75 per share. At year end, none
of the shares have been administratively issued.

During the quarter ended December 31, 2005, the Company
authorized the issuance of 50,537 shares to a consultant, who is the brother of
a director, valued at $37,902 for payment of services provided. At year end, 33
shares have yet to be administratively issued. In 2005 the consultant was paid
$35,897. During 2006 the consultant was paid $30,769. No amounts are owed as of
December 31, 2006.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

The Company has several contracts with unaffiliated
individuals for compensation in return for consulting services. The Company can
terminate these contracts without cause with the provision of 90 days notice and
payment of all compensation owed to that date.

---



On April 1, 2005, the Company entered into an agreement with
Hydraft Development Services Inc. for management services. On June 8, 2005,
notice was provided for termination of the contract. On August 24, 2005, Hydraft
filed a lawsuit against the Company in the Provincial Court of Alberta located
in Edmonton, Alberta. Pursuant to a ruling signed March 22, 2006, the Company
has accrued $22,168 as legally owing. On April 20, 2006, a garnishee notice was
delivered to the Canadian Western Bank for collection of $15,385. As of December
31, 2006 this amount continues to be outstanding.

On July 25, 2006, a garnishee order with EPOD International
Inc. as the defendant was provided to Canadian Western Bank and the Royal Bank
of Canada on behalf of the plaintiff, George Drazenovic, the former chief
financial officer of EPOD International Inc. The total amount of the order is
$99,667. This amount is being disputed by the Company, which has accrued $83,574
as the maximum amount it expects to be required to pay. During the year ended
December 31, 2006, $12,435 was paid and $71,139 remains outstanding, which is
accrued in compensation payable in the accompanying consolidated balance sheet.

On May 16, 2006, the Company signed an agreement with The
University of New Brunswick to engage in a nonexclusive license to use
technology designed by the University to develop and sell products. The Company
must pay royalties, which are the greater of 5% of the revenue from product
sales or $214 for each product sold. Upon execution of the agreement, the
Company must pay $4,273 to the University, and a yearly fee of $4,273 beginning
on September 1, 2006 and throughout the agreement until 2010.

On July 1, 2006, the Company agreed in principle to a
contract with an individual to provide the services of chief financial officer.
As part of the three-year agreement, the individual will receive 1% of the
Companys pre-tax income and 2.5% of any debt or equity financing or sales
generated through his efforts.

Leases

On August 19, 2005, the Company entered into a five-year
office lease agreement effective on the first day of September 2005. The annual
lease payment is equal to the sum of $14,597 plus all applicable taxes. Future
minimum lease payments as at December 31, 2006 are:

Year
      
      
      Amount2007
      
      $
      14,5972008
      
      
      14,5972009
      
      
      14,5972010
      
      
      9,732Total
      
      $
      53,523


Indemnities and Guarantees

During the normal course of business, the Company has made
certain indemnities and guarantees under which it may be required to make
payments in relation to certain transactions. The Company indemnifies its
directors, officers, employees and agents to the maximum extent permitted under
the laws of the State of Nevada. These indemnities include certain agreements
with the Company's officers under which the Company may be required to indemnify
such person for liabilities arising out of their employment relationship. In
connection with its facility leases, the Company has indemnified its lessors for
certain claims arising from the use of the facilities. The duration of these
indemnities and guarantees varies and, in certain cases, is indefinite. The
majority of these indemnities and guarantees do not provide for any limitation
of the maximum potential future payments the Company could be obligated to make.
Historically, the Company has not been obligated to make significant payments
for these obligations and no liabilities have been recorded for these
indemnities and guarantees in the accompanying consolidated balance sheet.



---



Other Matters

On July 10th, 2006 EPOD entered into an agreement to acquire
51% of the share capital of Compmess GmbH & Co. KG ("CompMess"), a German
manufacturing Company. The company has not yet been registered as the holder of
this interest, but has retained corporate and tax advisors in Germany to assist
in the completion of remaining outstanding issues regarding its interest in
Compmess, along with the Company's other German assets.

The Company was named as a co-defendant in a lawsuit seeking
damages of $100,000. Because the lawsuit principally involves a private security
sales transaction between two investors and because the Company was not a party
to the transaction, the Company has not recorded a liability relating to the
lawsuit.

NOTE 10 - ACQUISITION OF ISE SOLAR LLC

In the second quarter of 2006, the Company entered into an
agreement to purchase certain assets plus a 75% interest from ISE Solar LLC ("ISE"),
a US based company, for $500,000. The assets consisted of inventory for resale.
While EPOD advanced to ISE $250,000 of the purchase price but did not take
possession of the assets or any interest in ISE. The parties have since agreed
to amend the terms of their business arrangement such that all further rights
and obligations of the parties in respect of the original agreement are
terminated, but EPOD will be entitled to a licence to use ISEs proprietary
technology for solar applications for no additional consideration and ISE agrees
to perform consulting services through ISE principals at a fixed fee for service
rate. The terms and conditions of this revised business relationship are subject
to completion of definitive documentation; however, the Company is in
negotiations to include the deposit in the amended agreement. The Company has
expensed the amount in the accompanying consolidated statement of operations as
it is unsure of the outcome of the negotiations.

NOTE 11 - SUBSEQUENT EVENTS

On March 23, 2007, the Company entered into a loan agreement
with Peter Lacey, one of its directors, whereby Mr. Lacey agreed to loan the
Company a sum total of $1,600,000 CAD (the "Loan Agreement"), for the purpose of
providing the first two payments to Rene Dureault in accordance with the terms
of the Purchase Agreement between Mr. Dureault and the Company dated March 27,
2007 (see below). The total sum of the loan was disbursed as follows:

a)

Mr. Lacey disbursed the sum of $600,000 to the Company on March 23, 2007

b)

Mr. Lacey
disbursed the sum of $1,000,000 to the Company on June 5, 2007

The Loan Agreement is further evidenced by two promissory
notes from the Company to Mr. Lacey, together totalling the principal sum of
$1,600,000 (the "Promissory Notes"). The Promissory Notes provide for an annual
rate of interest of 4.00%. The first promissory note dated March 23, 2007 ( the
"First Note"), is for the principal amount of $600,000 and any accrued, but
unpaid, interest on the First Note shall be due and payable on April 1, 2008.
The second promissory note dated June 5, 2007 (the "Second Note") is for the
principal amount of $1,000,000 and any accrued, but unpaid, interest on the
Second Note shall be due and payable on June 1, 2008. The Company may, at any
time, prepay the whole or any part of the Promissory Notes without penalty.

Pursuant to the Loan Agreement, the Company issued to Mr.
Lacey 1,000,000 warrants to purchase common stock of the Company at an exercise
price of $0.30 per share (the "Warrant"). The Warrant expires on June 5, 2009.
The relative fair value of the warrants will be recorded as a debt discount and
amortized over the life of the loan.

On March 27, 2007 (see below), the Company signed a Share
Purchase/Sale Agreement for the acquisition of Mill Creek Developments Ltd. a
land development company based in Kelowna, British Columbia, Canada. Under the
terms of the share purchase agreement the Company agreed to acquire all of the
shares of Mill Creek Developments Ltd. for $12,000,000 CAD in cash and
24,000,000 shares of the Companys common stock. The Company advanced payment of
$1,600,000 CAD in cash. The Company and Rene Dureault signed an Amendment of
Purchase Contract ("Amendment"), dated August 24, 2007 revising the modalities
of payment. As per the terms of the Amendment, the Company shall pay $10,000,000
CAD in cash and 34,000,000 shares by the closing date of January 4, 2008. In
order for the Company to close the transaction, additional funding will be
required.

On October 1, 2007, the Company increased its authorized
shares of common stock from 75,000,000 to 200,000,000.

On May 9, 2007, ISE and
ICP Solar signed a Share Purchase Agreement ("Agreement"). Under the terms of
the Agreement, ISE agreed to acquire 85% all of the shares of ICP UK from ICP
Solar, in consideration of an aggregate amount of $3 million. On May 10, 2007,
ISE and ICP Solar signed an amendment to the Agreement ("Amendment"), revising
the modalities of payment. As per the terms of the Amendment, ISE shall pay ICP
Solar a total of $1.00 for the shares. In addition, ISE will also pay ICP Solar
an amount equivalent to $3,000,000, representing the principal amount on a loan
owed to ICP Solar by ICP UK, as follows:

---



(a)

$500,000 upon signing of the Agreement;

(b)

$500,000 on November 29, 2007;

(c)

The balance shall
be repaid as monthly payments for a period of 13.94 months as of January 1,
2008. Each monthly payment shall be equal to $143,500 per month and shall be
made either in cash, or in kind in the form of solar panels, at the option of
ICP Solar, as per the terms of the Agreement.

In October 2007, ISE assigned all right, title and interest
in the purchase agreement to EPOD, and EPOD will become the holder of 85% of the
issued and outstanding shares in the capital of ICP upon closing of the
transaction.

On October 3, 2007, EPOD completed a private placement of
common shares pursuant to a transaction originally announced in May 2007. The
Company sold approximately 5,000,000 shares at a price of $0.20 per share, for
proceeds of approximately $1,000,000.

On October 1, 2007, the Company closed a $3.296 million
private placement of units. The Company issued 3,296 units at a price of $1,000
per unit, with each unit comprised of 1,000 warrants and one convertible
debenture with a face value of $1,000, an interest rate of 12% and a maturity of
12 months. The convertible debentures (including interest) are convertible into
shares of the Company at a price per share of $0.50. The convertible debentures
are redeemable by the holders at any time prior to maturity provided that the
Company closes an additional round of financing for a minimum amount of $5
million and are redeemable by the Company at any time prior to maturity. The
warrants are exercisable into shares of the Company at a price per share of
$0.30 with a maturity of 24 months. The Company will record the relative fair
value of the warrants and the effective BCF as a debt discount and amortize the
discount to interest expense over the life of the debentures. The holders also have an option to exchange
all of their debentures and warrants for an interest in the Company's
installation facility located in Falkenau, Germany. The percentage of the
outstanding securities transferred to the subscriber upon exercise of this
option will to be equal to the face value of the convertible debentures plus all
accrued interest as against the overall value of the facility based on a
valuation of that facility at a price of $3.50 per installed watt hour of
production. On October 17, 2007, the Company sold an additional 113,000 units,
for gross proceeds of $113,000.

On October 3, 2007, the Company entered into an engagement
letter with Blackmont Capital to conduct a mezzanine financing consisting of a
best efforts offering of up to $20 million in convertible debenture securities.
The terms and conditions of the debentures will be determined in the context of
the market upon further negotiation between Blackmont Capital and the Company.

NOTE 12 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL
STATEMENTS

During the year ended December 2006, the Company determined
that the manner in which it recognized revenue was not in accordance with SAB 104. The Company
entered into an agreement with a vendor in which it was to purchase assets from
the vendor. The Company then entered into an agreement to sell these assets. The
Company paid a deposit to the vendor in the amount of $250,000, however did not
take ownership of the assets. Previously the Company recognized the sale of the
assets as revenue and recorded the unpaid portion of the sale as accounts
receivable. This accounting treatment of the transaction was not in accordance
with the provisions of SAB No. 104 and the Company has restated the consolidated
financial statements to appropriately reflect the transactions. In the restated
consolidated financial statements, the Company recorded the deposit made to the
vendor as an other asset, recorded payment made by its customer as deferred
revenue and has reversed all revenue, cost of sales, accounts receivable,
allowance for doubtful accounts and accounts payable previously recorded. The
Company then determined the deposit made to the vendor was not realizable and
expensed the $250,000 in the consolidated statements of operations and
comprehensive loss. Accordingly, in connection with the restatement adjustments,
the Company has appropriately reversed the revenue recognized. In addition, the
Company determined that certain other transactions were improperly accounted for
as of December 31, 2006. These include payments made on behalf of the Company by
its Chariman to a potential acquisition target, the proper recording of
depreciation expense on a building sold during the year and the valuation of
inventories held at year-end.

---



For the payments made to CompMess, the Chairman paid amounts
to CompMess as deposits on the potential future acquisition of CompMess.
Previously the Company recorded these payments as deposits in other assets on
the consolidated balance sheet and increases in shareholder advances. The
Company has determined that there is no agreement with the Chairman or with
CompMess to transfer the rights to the acquisition or the assets of CompMess to
the Company and has reversed the amounts from deposits and shareholder advances.
In addition, the net shareholder receivable due to the Chairman after the
reversal was netted against notes payable due to him. Accordingly, in connection
with the restatement adjustment, the Company has appropriately accounted for the
amounts due to the Chairman.

The following tables present a summary of the effects of the
restatement adjustments on the Company's consolidated balance sheet at December
31, 2006 and the consolidated statements of operations and cash flows for the
year ended December 31, 2006:





---



|                                                                               | As Previously |               |             |           |         
|------------------------------------------------------------------------------ | ------------- | ------------- | ----------- | --------- | --------
|                                                                               | Reported      |               | Adjustments |           | Restated
|                                                                               |               |               |             |           |         
|Cash (bank indebtedness) (4)                                                   | $             | (1,635)       | $           | 8,583     | $       
|Accounts receivable and prepaid
    expenses (1,3,4)                           |               | 193,506       |             | (145,368) |         
|Accounts receivable, related
    party (1)                                     |               | 466,000       |             | (466,000) |         
|Inventories (7)                                                                |               | 98,228        |             | (49,114)  |         
|Deposits (2,6,8)                                                               |               | 485,037       |             | (458,504) |         
|Accounts payable and accrued
    liabilities (2)                               |               | 699,076       |             | (252,259) |         
|Due to shareholders and related
    parties (6)                                |               | 885,207       |             | (439,928) |         
|Deferred revenue (1)                                                           |               | -             |             | 429,220   |         
|Accumulated deficit during the
    development stage                           |               | (5,666,693)   |             | (850,480) |         
|                                                                               |               |               |             |           |         
|Consolidated statement of
    operations for the year ended December 31, 2006: |               |               |             |          
|                                                                               |               | As Previously |             |           |         
|                                                                               | Reported      |               | Adjustments |           | Restated
|                                                                               |               |               |             |           |         
|Revenue (1)                                                                    | $             | 690,799       | $           | (669,200) | $       
|Revenue - related party (1)                                                    |               | 466,000       |             | (466,000) |         
|Cost of sales (2,7)                                                            |               | 513,333       |             | (450,886) |         
|Gross loss                                                                     |               | 643,466       |             | (684,314) |         
|General and administrative
    expense (2,3)                                   |               | 981,435       |             | (102,972) |         
|Depreciation and amortization
    expense (5)                                  |               | 24,843        |             | 1,617     |         
|Gain on sale of assets (5)                                                     |               | 4,192         |             | 1,617     |         
|Write off of deposits (8)                                                      |               | -             |             | (250,000) |         
|Foreign currency transaction
    loss (6)                                      |               | (13,199)      |             | (19,137)  |         
|Net loss                                                                       |               | (2,100,407)   |             | (850,480) |         
|Other comprehensive income
    (loss)                                          |               | 15,538        |             | (150)     |         
|Net comprehensive loss                                                         |               | (2,084,869)   |             | (850,630) |         
|                                                                               |               |               |             |           |         
|Basic and diluted net loss per
    common share                                |               | (0.03)        |             | (0.02)    |         

(1) To reverse unrealized revenue
(2) To reverse cost of sales and liability and record payments as deposits for
purchase of ISE Solar LLC 
(3) To reverse provision for doubtful accounts 
(4) To reverse unreleased check 
(5) To record depreciation expense prior to sale of building 
(6) To reverse deposits paid by shareholder for purchase of CompMess 
(7) To write down inventory to net realizable value 
(8) To write off deposits made to ISE Solar LLC

Consolidated statement of cash flows for the year ended December 31, 2006:

|                                                                            |   | As Previously |   |            
|--------------------------------------------------------------------------- | - | ------------- | - | -----------
|                                                                            |   | Reported      |   | As Restated
|                                                                            |   |               |   |            
|Cash flows from operating
    activities                                    |   |               |   |            
|                                                                            |   |               |   |            
|Net loss                                                                    | $ | (2,100,407)   | $ | (2,950,887)
|Adjustment to reconcile net
    loss to cash used in operating activities : |   |               |   |            
|Depreciation and amortization                                               |   | 24,843        |   | 26,460     
|Common stock issued for
    services and expenses                           |   | 188,908       |   | 188,907    
|Loss on extinguishment of debt
    to related party                         |   | 1,400,000     |   | 1,400,000  
|Stock based compensation                                                    |   | 181,807       |   | 170,409    
|Gain on sale of land and
    building                                       |   | -             |   | (5,809)    

|Write-off of deposits                        |  | -         |  | 250,000 
|-------------------------------------------- |  | --------- |  | --------
|Changes in assets and
    liabilities:       |  |           |  |         
|Accounts receivable and prepaid
    expenses |  | (598,333) |  | 34,730  
|Inventories                                  |  | (33,599)  |  | 15,515  
|Accounts payable                             |  | 432,815   |  | 180,556 
|Accrued interest payable                     |  | 28,863    |  | 28,863  
|Compensation payable                         |  | 143,212   |  | 143,212 
|Deferred revenue                             |  | -         |  | 429,220 
|Net cash used in operating
    activities    |  | (331,891) |  | (95,924)
|                                             |  |           |  |         

---



|                                                 |   |           |   |          
|------------------------------------------------ | - | --------- | - | ---------
|Cash flows from investing
    activities :       |   |           |   |          
|                                                 |   |           |   |          
|Deposits                                         |   | (137,323) |   | -        
|Note receivable                                  |   | (32,540)  |   | (32,540) 
|Proceeds from sale of
    subsidiary             |   | -         |   | -        
|Deposit on acquisition of
    subsidiary         |   | -         |   | (273,279)
|Acquisition of equipment                         |   | (18,595)  |   | (18,427) 
|Acquisition of patents                           |   | (6,450)   |   | (6,451)  
|Proceeds from the sale of land
    and buildings |   | 244,578   |   | 248,602  
|Acquisition of land and
    buildings            |   | (85,118)  |   | (85,118) 
|Net cash used in investing
    activities        |   | (35,448)  |   | (167,213)
|                                                 |   |           |   |          
|Cash flows from financing
    activities :       |   |           |   |          
|                                                 |   |           |   |          
|Bank indebtedness                                |   | 1,635     |   | -        
|Common stock/warrants issued
    for cash        |   | -         |   | -        
|Repayment of related party
    borrowings        |   | (493,636) |   | (566,436)
|Proceeds from related party
    borrowings       |   | 843,609   |   | 820,940  
|Net cash provided by financing
    activities    |   | 351,608   |   | 254,504  
|                                                 |   |           |   |          
|Effect of exchange rate changes                  |   | 15,538    |   | 15,388   
|                                                 |   |           |   |          
|Net increase (decrease) in cash                  |   | (193)     |   | 6,755    
|                                                 |   |           |   |          
|Cash at beginning of year                        |   | 193       |   | 193      
|                                                 |   |           |   |          
|Cash at end of year                              | $ | -         | $ | 6,948    



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PART III

ITEM 13. EXHIBITS

Exhibits

Exhibit 31.1  Certification by CEO pursuant to Section 302
of the Sarbanes Oxley Act of 2002, filed herewith.

Exhibit 31.2. Certification by CFO pursuant to Section 302
of the Sarbanes Oxley Act of 2002, filed herewith.

Exhibit 32.1  Certification by CEO pursuant to Section 302
of the Sarbanes Oxley Act of 2002, filed herewith.

Exhibit 32.2. Certification by CFO pursuant to Section 302
of the Sarbanes Oxley Act of 2002, filed herewith.



---



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.

| |                         |                          
| | ----------------------- | -------------------------
| | EPOD INTERNATIONAL INC.
| |                         |                          
| | By:                     | /s/ Michael Matvieshen   
| |                         | Michael Matvieshen       
| |                         | Chairman and
    Director
| |                         | November 19, 2007        

Pursuant to the requirement of 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/ L.
    MARK ROSEBOROUGH |  |                                                  |  |                  
|L. Mark Roseborough         |  | President
    and Chief Executive Officer        |  | November 19, 2007
|                            |  |                                                  |  |                  
|/s/ FRANK A. WISEHART       |  | Chief Financial Officer                          |  |                  
|Frank A. Wisehart           |  | (Principal Financial and
    Accounting Officer) |  | November 19, 2007
|                            |  |                                                  |  |                  
|/s/
    MICHAEL MATVIESEN   |  |                                                  |  |                  
|Michael Matvieshen          |  | Director                                         |  | November 19, 2007
|                            |  |                                                  |  |                  
|/s/
    HANS SCHROTH        |  |                                                  |  |                  
|Hans Schroth                |  | Director                                         |  | November 19, 2007
|                            |  |                                                  |  |                  
|/s/
    LAWRENCE FAULK      |  |                                                  |  |                  
|Lawrence Faulk              |  | Director                                         |  | November 19, 2007



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