UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
QANNUAL 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.

(formerly known as Cyokonos Corporation)

(Name of Small Business Issuer in its charter)

Nevada91-1953719(State of Incorporation)(IRS Employer ID. No.)




#105  470 Neave Road, Kelowna, British Columbia, Canada  V1V 2M2

(Address of Principal Executive Offices) (Zip Code)

(250) 807-2211

Issuer'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 Q         No □



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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. Q



The issuer's operating revenues for its most recent fiscal year were $1,156,799. Non-operating revenues were $10,149. 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 March 31, 2007, was $2,316,186



As of March 31, 2007 there were 72,812,391 of common stock outstanding and no other outstanding classes of a common equity security.



Transitional Small Business Disclosure Format (check one): Yes □    No Q

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TABLE OF CONTENTS



|PART I   |                                                                                                | Page
|-------- | ---------------------------------------------------------------------------------------------- | ----
|ITEM 1.  | Description of Business                                                                        | 4   
|ITEM 2.  | Description of Properties                                                                      | 11  
|ITEM 3.  | Legal Proceedings                                                                              | 11  
|ITEM 4.  | Submission of Matters to a Vote of Security Holders                                            | 12  
|PART II  |                                                                                                |     
|ITEM 5.  | Market for Common Equity and Related Stockholder Matters                                       | 13  
|ITEM 6.  | Management's Discussion and Analysis or Plan of Operation                                      | 16  
|ITEM 7.  | Financial Statements                                                                           | 23  
|ITEM 8.  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure           | 42  
|ITEM 8A. | Controls and Procedures                                                                        | 42  
|PART III |                                                                                                |     
|ITEM 9.  | Directors and Executive Officers                                                               | 43  
|ITEM 10. | Executive Compensation                                                                         | 45  
|ITEM 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 46  
|ITEM 12. | Certain Relationships and Related Transactions                                                 | 46  
|ITEM 13. | Exhibits                                                                                       | 47  
|ITEM 14. | Principal Accountant Fees and Services                                                         | 48  

FORWARD-LOOKING STATEMENTS

This Report contains certain forward looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to EPOD International, Inc. (formerly, Cyokonos Corporation) that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management. When used in this Report, the words "estimate," "project," "believe," "anticipate," "hope," "intend," "expect," and similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these identifying words. Such statements reflect our current views with respect to future events and are subject to unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated in such forward looking statements. Such factors include the risks described in Item 1. Description of Business; Risk Factors and elsewhere in this Report and, among others, the following: general economic and business conditions, both nationally, internationally, and in the regions in which we operate; catastrophic events, including acts of terrorism; the success of our technology; relationships with and events affecting third parties; demographic changes; existing government regulations, and changes in, or the failure to comply with, government regulations; competition; changes in business strategy or development plans; the cost of pursuing new business initiatives; technological developments and difficulties; the availability and terms of capital to fund the expansion of our businesses; and other factors referenced in this Report. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. We do not undertake any obligation to publicly release any revisions to these forward looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



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PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

The Company was incorporated on July 11, 2003 in the Commonwealth of the Bahamas. The Company is in the process of developing and producing innovative energy management and electronic technology with the intent to license and sell such products and technology. It currently owns the worldwide rights to certain patent-pending technology that improves the efficiency of electrical power usage. In November 2003, the Board of Directors of the Company approved the acquisition through reverse merger of Cyokonos Corporation, a public entity organized under the laws of the state of Nevada on February 16, 1999. This reverse merger (Merger) was executed on January 13, 2004 pursuant to an Exchange Agreement with the issuance of 9,230,000 shares of common stock, at par value of $.001 per share, to the shareholders of Cyokonos. From its inception until January 13, 2004, Cyokonos was headed up by its sole officer and director, Mr. Ronald McIntire and had not commenced any commercial operations or material operating activities. On January 15, 2004, the Company retained Mr. L. Mark Roseborough as President of the Company and entered into contractual relationship for his services on July 1, 2004.



A Special Shareholder's Meeting, for Cyokonos, was called on January 21, 2004, at which time Mr. Ronald McIntire, of Cyokonos Corporation, voluntarily resigned from the Board of Directors and Mr. Michael Matvieshen, Mr. L. Mark Roseborough, Mr. Peter Hipp, Mr. Hans Schroth and Mr. Peter Lacey were elected to the Board of Directors. The Shareholders also voted to change the name of Cyokonos Corporation to EPOD International Inc. at the soonest practicable date. The name change became effective on or about July 9, 2004, at which time the trading symbol on the OTC Bulletin Board changed from CYOK to EPOI.



In 2005, the Company's common stock was approved for listing and trading on the Frankfurt Stock Exchange under the symbol EDU, Effective August 18th, 2005.



In the second quarter of 2006, the Company received unanimous board approval to change its name to IQ Renewable Energy Corp, which more accurately reflects its current business concentration in the manufacturing, sale, ownership and operation of advanced, turnkey solar powered systems and related components.  The Company filed the required Form 14C with the SEC. The name change has not yet taken effect.



Effective August 18th, 2005, Mr. Ljubisan Stamenic was elected to our Board. In October of 2005, Mr. Peter Hipp resigned from our Board. Mr. Hipp did not resign due to any disagreement with the Company on any matter related to its operations, policies or practices.



Effective July 28th, 2006 Mr. Lawerance J. Faulk was elected to our Board and Mr. Peter Lacey resigned from the board. Mr. Lacey did not resign due to any disagreement with the Company on any matter related to its operations, policies or practices.



Effective October 16, 2006 Mr. Rene Dureault and Mr. Robert Stabinsky were elected to our Board.



The Company's principal place of business is currently located at #105  470 Neave Court, Kelowna, British Columbia, Canada V1V 2M2. The web address is www.epodinc.com.



The Company's common stock currently trades under the symbol EPOI on the OTC Bulletin Board.  Its symbol and CUSIP will change pending the company name change.



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BUSINESS OF THE COMPANY



The Company is an integrated Energy Services company aspiring to be a leader in electrical power storage systems for the distributed generation, co-generation, wind and solar power markets through the production, licensing and sales of innovative, energy management and electronic technology. The Company is in development of certain patent-pending electrical technology that it is calling the Energy Pod, or EPOD, which may exist in one form as an integrated circuit chip transportable across many different markets and applications. The Energy Pod products manage and manipulate electrical energy. EPOD provides demand and supply-side management solutions through a comprehensive suite of patent-pending storage, conversion and energy management products allowing users to significantly increase power sales revenue, reduce their power costs and increase their power quality.



The Company, over the next year, anticipates increased revenues and will need to accomplish an equity financing in order to fund working capital and focused projects.  As the company moves forward in its Research and Development, Commercial Solar Power Installations and Solar Panel Manufacturing it is also strategically aligning itself with and acquiring interests in companies who have the required production capability for its own and related products as it prepares for initial sales.



MARKET



The two main EPOD markets are for power storage and power conversion/management. Products that are being introduced to the market are for these market segments set forth below.



Power Storage



EPOD provides commercial and industrial power users with power storage systems. EPOD can assist with increased power quality and reliability, reduced power costs and new power sales revenue. For grid-power users, EPOD's EMT (Energy Management Technology) power storage system allows a company to buy and store inexpensive, off-peak power for next-day peak-power demand or back-up power requirements. The EMT's peak-shaving and virtual load-shifting benefits dramatically reduce or eliminate demand and standby charges while increasing power quality and reliability. For partial onsite power users, the EMT power storage system allows a company to further reduce grid-based power costs by increasing the output of the on-site power generation assets. The installation of an EMT storage unit allows a company to operate DG or CoGen hardware during off-peak hours, storing this power for next-day use and increasing the useful output of your capital assets.



Power Management and Conversion



EPOD offers three management and conversion products, (i) The EPOD rectifier is an AC-continuous waveform current converted to DC-power with less than 4% power loss. Traditional rectifiers average 70-71% efficiency, whereas the EPOD rectifier is 96% efficient. EPOD's advanced rectifier design represents a new benchmark for rectifier efficiency, (ii) The EPOD inverter has been designed to allow for DC power to be converted to AC power on the order of 95% efficiency, and (iii) The EPOD power controller significantly increases a battery's useful output. When a DC-power supply is used in a circuit utilizing the patent-pending EPOD power controller, the controller will manage and maintain the voltage at a higher potential by creating an energy reservoir from the energy that is normally consumed by the circuit whenever the circuit is turned on. This reservoir of energy holds the circuit voltage higher than if a battery, for example, was used without the EPOD power controller in the circuit. The ability of the power controller to maintain higher circuit voltage throughout the battery discharge curve equals more power available to do more work. In independent engineering tests, the batteries using the EPOD power controller increased the overall useful work completed by the battery by up to 30%. The Company is also developing other innovative products with synergetic technologies.



The Company continues to focus on the global solar power markets due to the continued growth in world-wide demand for solar panels, inverters and renewable energy as a whole.  Using the Company's patent-pending power controller and advanced power management, the EPOD Inverter increases the functional output of a majority of PV panels, and provides the Company a competitive advantage in the manufacture and sale of photovoltaic (PV) panels. To execute this strategy, management is in the process of acquiring and constructing PV panel manufacturing capacity to focus on the building-integrated photovoltaic (BIPV) market, the process whereby solar panels are integrated into the exterior skin of commercial buildings, often replacing glass windows with a transparent, power-generating solar panel. By combining BIPV with EPOD's power storage and energy management system, commercial buildings can become energy self-sufficient and, in some cases, generate revenue from the sale of surplus solar energy to the local power grid.

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Currently, the company has patents pending in over 40 countries for its power controller/management technology.  This technology is integral to the business plan, as a majority of the revenues of the company are expected to be realized from the application of this product in the solar and other alternative energy industries.  Revenues will be realized through the actual sale of the product and through ongoing revenue streams from the sale of energy made possible through the product's use. To date, the company has spent  $40,221 on these patent applications.



Research and Development



In addition to its development of its solar applications, the Company continues to put significant research and development into and pursue collaborative partnerships for alternative energy uses of its products including wind applications and hybrid batteries for large-scale commercial/industrial applications. In September 2005, the Company announced that it will continue to aggressively pursue the development of alternative power storage solution to conventional lead-acid batteries for large-scale commercial/ industrial applications. Building on its original technology development agreement with the University of British Columbia's Department of Electrical and Computer Engineering, successful results from EPOD's phase I feasibility study have resulted in the decision to pursue phase II of the project to fully develop version one of the company's supercapacitor-based battery. Laboratory test units, as well as larger scale prototypes, will be built and tested in various renewable energy and emergency back-up power applications during Q4, 2006 and due to some technical delays, will continue on into 2007. The prototype units are to be built by EPOD's joint-venture partner, the Molecular Mechatronics Group at the University of British Columbia's Department of Electrical and Computer Engineering.



The EPOD hybrid battery, which already demonstrates many performance characteristics equivalent to lead-acid batteries, is anticipated to feature substantially lower cost, higher power and energy density, longer lifespan, and will be virtually environmentally benign. This hybrid battery will also be able to be charged and discharged at a much higher rate than lead-acid batteries, and offer customers the potential to trade energy at various times of the day to take advantage of price differentials in non-regulated energy markets.



The Company has also researched, developed and successfully produced a low power, single cell, vanadium redox batter, and, in a joint research and technology development effort between EPOD and Barrett Engineering Inc. of San Diego, California, completed the successful conversion and testing of a hydrogen-fueled motor, successfully converting a Honda GX160 gasoline-fueled motor to operate using hydrogen. Testing is continuing on both of these technologies.



In October 2005, the Company announced a pilot project with Canada's second largest wind power developer to test EPOD's proprietary power storage system, the EMT. The company is currently waiting for development funds to complete the prototype. Developed specifically to store commercial volumes of electric power for later use or resale, the pilot will utilize the EMT to capture and store up to 100% of wind power generated during off-peak periods for resale to the power grid during peak demand. Through the use of the Company's patent-pending power management and power conversion technology, the efficient and cost-effective storage of wind power in the EMT allows wind power developers to offer guaranteed volumes of power at fixed times, and hence remove the single largest obstacle to the commercial adoption of large-scale wind power.  Successful results of the pilot test will enable the Company to rapidly expand its marketing and business development initiatives through North America and Europe.  As a result, the Company is poised to offer energy management solutions to the two largest segments of the renewable energy sector: wind and solar.



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In the second quarter of 2006, the company signed a licensing agreement with the University of New Brunswick, allowing EPOD to further its product development by utilizing an inverter technology developed by the University.  Payment to the University includes a royalty on products developed and a yearly flat fee. As part of its product development, the Company has a completed inverter. The Company's new, modular-based, grid-tie inverter, to be branded the EPOD Grid-Tie Inverter or "GTI," offers commercial solar and wind power applications an unprecedented combination of field performance, expansion flexibility, and cost-effectiveness. With a 10-kilowatt capacity and modular design, users are able to install multiple EPOD Inverters in parallel to accommodate the specific capacity requirement of each installation. The modular design affords solar and wind power users near limitless scalability and flexibility in grid-tie inverters, allowing for more accurate and cost effective commercial power inverter sizing, all at an industry-leading price point.



INITIATIVES



The Company is taking significant advantage of the Green movement to increase energy efficiency, specifically in regions where there is an emphasis on reducing reliance on fossil-fuel based, nonrenewable power.  Its solar power applications are experiencing initial sales and the company's operations have been focused on the solar energy industry.  This has involved a two pronged approach - strategically positioning itself to acquire and develop the required production capacity for its own and related products and to realize ongoing revenue streams in the solar power market through power system construction and sales of power.



In 2005, the Company entered into a joint venture with CompMess GmbH & Co. KG, a German automated equipment and electronics manufacturer to construct its first commercial solar power system in Germany, utilizing the EPOD Solar Inverter, EPOD EMT Power Storage System and photovoltaic panels. In April of 2006, EPOD's first commercial-scale solar power installation began generating renewable energy for sale to the local electric utility under a 20-year power purchase agreement with the German government. The system, installed by EPOD has an estimated lifespan of 40-plus years. The power purchase agreement is part of a federal government energy program in Germany whereby residential, commercial, and industrial power users are encouraged to utilize renewable energy to reduce, and ultimately eliminate, Germany's dependence on fossil fuel-based and non-renewable power. As both electric power demand and prices continue to increase, it is Management's opinion that demand for EPOD's solar power systems will grow correspondingly. The Company intends to construct, own, and operate many such commercial solar power systems under similar power purchase agreements with local and regional utilities in Germany, and elsewhere in the European Union.



Previously, it was reported that as of July 10th, 2006 EPOD had acquired 51% of the shares of CompMess, a German manufacturing company.  Since that time, it has come to the attention of EPOD that certain conditions required to complete the share transfer and consequent change of ownership in Germany have not been completed and the finalization of the acquisition has not yet occurred, pending these matters.  To date, EPOD has paid to CompMess shareholders €40,000 (50,956 USD) as part of the purchase.  During the year ended December 31, 2006, EPOD has a loan outstanding to CompMess in the amount of $406,766 USD with no stated terms.  This amount is considered by the Company to be a deposit toward the purchase.  Additionally, the Company purchased inventory from CompMess in the amount of $30,086 USD. Because this acquisition was not completed, the Company is not including CompMess financial statements in its consolidated financial reporting.



Recognizing the need for additional manufacturing capacity and processes, the Company developed a new, proprietary, solar panel assembly-manufacturing process to reduce costs by up to 40%.  The process, one which would help the Company become one of the lowest cost solar panel producers in the world, will be able to be applied to almost any existing amorphous silicon solar panel plant, and hence create an additional opportunity to acquire old solar panel factories that are currently only marginally profitable.



Further to the Company's plans to increase its solar panel manufacturing capacity, the Company intends to construct a solar panel manufacturing facility in Kelowna, B.C. An estimated five megawatts of production capacity is anticipated to be available within six months after financial closing. EPOD intends to sell to investors up to 49% equity in the to-be-built facility. Currently pending are agreements to date to sell 17% of the equity in the Kelowna facility for cash proceeds of USD$525,000 (CAD$586,000), and secured debt guarantees in the amount of USD$1.5 million.  The Company has agreed in principle to the purchase of 10,000 feet of factory space from a related party vendor. Financing for this project is expected to close in Q3, 2007.



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The addition of solar panel manufacturing capacity will allow EPOD to further vertically integrate its solar power operations, and substantially increase the Company's solar panel output. This manufacturing capacity and increased solar panel output will also enable EPOD to maximize its solar power system sales and integration in the Province of Ontario, where market prices have touched CDA$8 per watt, installed.  The Ontario Power Authority and the Ontario Energy Board recently announced the creation of the Standard Offer Program a renewable energy feed-in tariff initiative. The Standard Offer Program will pay EPOD and other solar power generators CAD$0.42 per kilowatt-hour (approximately USD$0.37), under what is anticipated to be a 20-year power purchase agreement. Given the Ontario government's increased support of solar energy through the Standard Offer Program, EPOD intends to aggressively pursue solar system sales in the Ontario market effective immediately



In April of 2006, EPOD announced its intention to create a renewable energy income fund for the purpose of investing in utility-integrated, renewable energy infrastructure projects. The EPOD Renewable Energy Income Fund ("REIF") will be utilized to invest in renewable power generating assets with a focus on commercial solar power installations. The installations will be utility-integrated, selling 100% of power generated to the Fund's utility customers under industry standard 20-year power purchase agreements. The Company intends to sell commercial solar power installations to the REIF, as well as operate the installations for the Fund under an operating and maintenance contract. Additionally, EPOD in the projects earning a share of the long term, power sales revenue.  EPOD has engaged ALCM to serve as fund manager and advisor to the EPOD Renewable Energy Income Fund. ALCM, a British Columbia-based registered portfolio manager and its affiliated company, Energy Logics Inc., have focused on the exploration, financing, and management of sustainable wind energy investments globally. Energy Logics currently has in excess of 1,000MW of wind-power under development in Canada, the United States and the Philippines. Preliminary plans are for the assets will be sold to the income trust at their fair market value, the trust will provide 80% of the funds in cash, the other 20% in units in the fund.  This will allow EPOD to continue to fund revenue producing projects, and allow EPOD to participate in the ongoing revenue stream generated by the assets through the trust.  The remaining 80% of the units in the Trust will be sold through ALCM.



In anticipation of significant expansion in capacity and revenues, in 2006 and beyond, the Company also hired a new CFO, Frank Wisehart, to oversee this next stage of growth for the Company.   Mr. Wisehart took over from Mr. George Drazenovic in April of 2006.



In the second quarter of 2006, the Company purchased all of the assets of ISE Solar LLC, a US based company for $500,000.  The subsidiary's assets consisted of $500,000 in inventory for resale.  Upon purchase, EPOD has sold  the entire inventory at a price of $1,135,200.



In July of 2006 the Company sold a 3-kilowatt solar power system, including an EPOD power storage unit, to an electrical contractor in Kelowna, British Columbia. The EPOD solar power and storage system will serve as the principal source of electric power for the residential customer, and will be grid-tied with the local utility being used to supplement the clients' power needs.



In August of 2006 the Company entered into an agreement to sell a five (5) megawatt solar panel manufacturing plant to Ditec Automation Group Ditec of Mexico City, Mexico valued at $17 million is subject to Ditec financing and the agreement has been approved by the majority of the Board.



FINANCING



Financing Activities.



From inception to December 31, 2006, the Company received advances from shareholders as a source of funding. In the quarter ended September 30, 2006 an agreement was made with a director and shareholder to convert $1,000,000 USD to 25,000,000 restricted common shares. As a result of this transaction, $1,400,000 has been recorded as a beneficial conversion on the transactions based on the share price as of the date of the conversion.  The balance of the shareholder advances as of December 31, 2006 is $336,240. These advances are unsecured, non-interest bearing and have no stated maturity. In addition, during the period from inception to December 31, 2006, the Company entered into a promissory note and loan agreement with a shareholder for $95,000.  The loan agreement is non-interest bearing and has no stated maturity date. In 2005, the company entered into two promissory notes totaling $195,000 with a shareholder, maturing in 2015, with interest accrued at 5% on the unpaid principal.  The company entered into three additional promissory notes with directors and their related parties totaling $197,057 of which $27,540 was repaid in December, 2006.  The loans bear interest at 10%, calculated semi-annually.  Principal and interest are due upon demand.  The lender has the option of converting the loans to EPOD common stock at a price of $1.00 within 5 years.  The balance of the loans as at December 31, 2006 is $548,967 and unpaid accrued interest in the amount of $36,024.



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EMPLOYEES



The Company had no full-time employees as of December 31, 2006, but has contracted with several independent consultants for services and executive positions



RISK FACTORS



The Company faces a number of risks and uncertainties that could cause actual results or events to differ materially from those contained in any forward-looking statement. Additional risks and uncertainties not presently known to the Company or that are currently deemed to be immaterial may also impair the Company's business operations. Factors that could cause or contribute to such differences include, but are not limited to, the following:



We May Be Unable To Meet Our Future Capital Requirements.



We may require additional capital to finance expansion or growth at levels greater than our current business plan. Because of the uncertainties in raising additional capital, there can be no assurance that we will be able to obtain the necessary capital to finance our growth initiatives. Insufficient capital will require us to delay or scale back our proposed development activities.



We Have A Limited Operating History.



We commenced operations in November 1999 and adopted our current business plan in January 2004. Accordingly, we have a limited operating history and our business strategy may not be successful. Our failure to implement our business strategy or an unsuccessful business strategy could materially adversely affect our business, financial condition and operating losses.



We Depend On Key Personnel To Maintain Our Success.



Our success depends substantially on the continued services of our directors, executive officers and key consultants, in particular Michael Matvieshen, L. Mark Roseborough and certain other executive officers. The loss of the services of any of our key executive officers could harm our business. None of our key executive officers or key consultants currently has a contract that guarantees their continued employment by us. There can be no assurance that any of these persons will be retained by us or that these persons will not participate in businesses that compete with us in the future.



Corporate Governance-Related Issues.



Prior to April of 2005 the Company's President and Chief Executive Officer, L. Mark Roseborough, was also acting as the Company's Chief Financial Officer. In April of 2005  Mr. George Drazenovic was retained as CFO and was elected as Treasurer at a meeting of the Board of Directors.  This step allowed for the division of the two positions and independent oversight in the CFO role. Mr. Drazenovic is ended his term as CFO as of March 31st, 2006 and Mr. Frank Wisehart, CPA, CVA, CFE has been appointed by the Company as the new CFO effective March 31st, 2006.  The Company is in the process of developing and implementing policies and practices relating to corporate governance, including reviewing and monitoring the implementation of the corporate governance guidelines.  The company has recently approved a Code of Ethics. It is expecting to implement a functioning Corporate Governance Committee, Compensation Committee and an Audit Committee Expert.



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Our Products May Not Have Marketable Value



Our products marketability is in its initial stages and we are not assured of future marketability of the products. The new and advanced products that we are developing are not fully tested and therefore, there is no guarantee of a marketable product.



The Price Of The Company's Securities May Be Volatile And Subject To Wide Fluctuations.



The market price of the Company's securities may be volatile and subject to wide fluctuations. If the Company's revenues do not grow or grow more slowly than it anticipates, or, if operating or capital expenditures exceed its expectations and cannot be adjusted accordingly, or if some other event adversely affects the Company, the market price of the Company's securities could decline. If securities analysts alter their financial estimates of the Company's financial condition it could affect the price of the Company's securities. Some other factors that could affect the market price of the Company's securities include announcements of new product or service offerings, technological innovations and competitive developments. In addition, if the market for stocks in the Company's industry or the stock market in general experiences a loss in investor confidence or otherwise fails, the market price of the Company's securities could fall for reasons unrelated to its business, results of operations and financial condition. The market price of the Company's stock also might decline in reaction to conditions, trends or events that affect other companies in the market for electronic generation and storage products and services even if these conditions, trends or events do not directly affect the Company. In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities class action litigation. If the Company were to become the subject of securities class action litigation, it could result in substantial costs and a diversion of management's attention and resources.



The Public Trading Market For The Company's Common Stock Is Limited And May Not Be Developed Or Sustained.



There is a limited trading market for the Company's Common Stock. The Common Stock has been traded under the symbol EPOI on the Over The Counter Bulletin Board, a NASDAQ-sponsored and operated inter-dealer automated quotation system for equity securities. There can be no assurance that an active and liquid trading market will develop or, if developed that it will be sustained.



Proprietary Technology.

Our business plan is based on proprietary and patent-pending technology. There is no guarantee that patents will be granted and we face risk of claims that we have infringed third parties intellectual property rights.  These may result in costly litigation or the invalidation of property rights on which we depend.



Technological Change.



The market for products and services in the electrical technology industry is characterized by rapid change, evolving industry standards and frequent introductions of new technological developments. These new standards and developments could make our existing or future products or services obsolete. Our keeping pace with the introduction of new standards and technological developments could result in additional costs or prove difficult or impossible. The failure to keep pace with these changes and to continue to enhance and improve the responsiveness, functionality and features of our services could harm our ability to attract and retain customers and markets.



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United States Participation in a War or Military or Other Actions; Terrorism.



Involvement in a war or other military action or acts of terrorism may cause significant disruption to commerce throughout the world. To the extent that such disruptions result in 1) delays or cancellations of customer orders, 2) a general decrease in consumer spending on certain technology, 3) our inability to effectively market and distribute our products, or 4) our inability to access capital markets, our business and results of operations could be materially and adversely affected. We are unable to predict whether the involvement in a war or other military action will result in any long term commercial disruptions or if such involvement or responses will have any long term material adverse effect on our business, results of operations, or financial condition.



We May Issue Shares Of Common Stock In The Future.



Our certificate of incorporation authorizes the issuance of 75,000,000 shares of common stock. The future issuance of all or part of the remaining authorized common stock may result in substantial dilution in the percentage of our common stock held by our existing stockholders. Also, any stock we sell in the future may be valued on an arbitrary basis by us and the issuance of shares of common stock for future services, acquisitions or other corporate actions may have the effect of diluting the value of the shares held by existing shareholders.



ITEM 2. DESCRIPTION OF PROPERTY



The Company's current principal place of business is located at #105  470 Neave Road, Kelowna, British Columbia, Canada  V1V 2M2.  It has developed 2,500 square feet of leased office space in Kelowna, British Columbia to house its corporate headquarters and for laboratory research and development. The dedicated executive office and laboratory space allows the Company to consolidate its product development and administrative efforts under one roof while providing much needed space for additional staff and future growth. Additionally, the new facility will increase research and development security, laboratory efficiency, and, in the short term, reduce administrative overheads.



In the year ending December 31, 2006 the Company's Canadian subsidiary sold the owned strata property at 470 Neave Court in Kelowna, British Columbia, Canada for a net gain of $4,192.



ITEM 3. LEGAL PROCEEDINGS



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 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 $25,872 CDN ($22,168 USD) as legally owing.  On April 20, a garnishee notice was delivered to the Canadian Western Bank for collection of $18,000 CDN. As of December 31, 2006 this amount continues to be outstanding.



On August 31, 2006 the company was named as a co-defendant in a lawsuit seeking damages of $100,000 USD. The lawsuit pertains to the private sale of shares between the Company's chairman and a non-related individual.



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 $116,610 CDN.  This amount is being disputed by EPOD, which has recorded in its accounts $93,182 CDN ($83,574 USD), which is the maximum amount it expects to be required to pay. In the quarter ending September 30, 2006, $12,435 USD was paid and $71,139 USD is outstanding.



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ITEM 4. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



In September 2006, the Company agreed to convert $1,000,000 USD of advances received from Michael Matvieshen, the Company's Chairman, into 25,000,000 shares of restricted Common Stock.  We relied upon the exemption from registration as set forth in Regulation D of Securities Act for the issuance of these shares.  The shareholder took the shares for investment purposes without a view to distribution and had access to information concerning EPOD and the Company's business prospects, and was permitted access to the Company's management for the purpose of acquiring investment information, as required by the Securities Act.  Further, there was no general solicitation or advertising for the issuance of the shares.



ITEM 4A. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



In July 2006, shareholders holding 31,900,177 shares (approximately 67%) of our Common Stock outstanding at such time consented in writing, without a meeting, to change our Company's name from EPOD International Inc. to IQ Renewable Energy Corp. We filed a preliminary information statement on Schedule 14C with the SEC regarding this matter on July 14, 2006, but have not yet filed a definitive information statement or mailed such information statement to our shareholders as required by law.  Accordingly, we have not taken the actions necessary to effect the name change described above and at the present time we are uncertain when, if at all, we will effect the name change.



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PART II



ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



A.    Market for Common Stock



The Company's common stock is not traded on a national securities exchange or the NASDAQ Stock Market. The common stock has been quoted on the OTC Bulletin Board under the symbol "CYOK" from November 2001 through July 2004 and then under the symbol EPOI thereafter. The range of high and low bid prices on the OTC Bulletin Board during each fiscal quarter, as reported by Bloomberg L.P., is as follows:



|Quarter Ended                                 |  | High |      | Low
|--------------------------------------------- |  | ---- | ---- | ---
|December 31, 2001                             |  | $    | 0.50 |    
|March 31, 2002                                |  | $    | 0.85 |    
|June 30, 2002                                 |  | $    | 1.25 |    
|September 30, 2002                            |  | $    | 1.20 |    
|December 31, 2002                             |  | $    | 1.05 |    
|March 31, 2003                                |  | $    | 0.55 |    
|June 30, 2003                                 |  | $    | 1.05 |    
|September 30, 2003                            |  | $    | 1.01 |    
|December 31, 2003                             |  | $    | 0.99 |    
|March 31, 2004                                |  | $    | 1.00 |    
|June 30, 2004                                 |  | $    | 1.25 |    
|September 30, 2004  (2:1 stock split 9/22/04) |  | $    | 2.50 |    
|December 31, 2004                             |  | $    | 2.00 |    
|March 31, 2005                                |  | $    | 1.60 |    
|June 30, 2005                                 |  | $    | 1.40 |    
|September 30, 2005                            |  | $    | 1.55 |    
|December 31, 2005                             |  | $    | 1.31 |    
|March 31, 2006                                |  | $    | 0.95 |    
|June 30, 2006                                 |  | $    | 0.63 |    
|September 30, 2006                            |  | $    | 0.30 |    
|December 31, 2006                             |  | $    | 0.25 |    



"Penny Stock" Rules



The Company's common stock is a "penny stock" which is subject to Rule 15g-9 under the Securities Exchange Act of 1934. It is considered penny stock because it is not listed on a national exchange or NASDAQ, its bid price is below $5.00 per share, has net tangible assets of less than $5,000,000, and average annual revenue has not exceeded $6,000,000 in the past three years.



As a result, broker-dealers must comply with additional sales practices requirements. Broker-dealers must determine that the investment is suitable for the buyer and receive the buyer's written agreement to the transaction before they can sell the Company's common stock to buyers who are not the broker-dealer's established customers or institutional accredited investors. In addition, broker-dealers must deliver to the buyer before the transaction a disclosure schedule which explains the penny stock market and its risks, discloses the commissions to be paid to the broker-dealer, discloses the stock's bid and offer quotations, and discloses if the broker-dealer is the sole market maker in the stock.



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B.     Holders of Record



As of  March  31, 2007, the Company had 60 holders of record of its shares of common stock, excluding shares held by broker-dealers.  Shareholders held 72,812, 391 shares of common stock.  An additional 333,510 shares are yet to be administratively issued for shares issued in 2006.



C.    Dividends



The Company has not paid any cash dividends and does not anticipate that it will pay cash dividends on in the foreseeable future.  Payment of cash dividends is within the discretion of the Board of Directors and will depend, among other factors, upon earnings, financial condition and capital requirements.  There are no restrictions on the payment of dividends.



D.    Securities Authorized for Issuance under Equity Compensation Plans





EQUITY COMPENSATION PLAN INFORMATION

(December 31, 2006)



|Plan category                                              | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     | 450,000 (1)                                                                                 | $0.00                                                                       | 249,482                                                                                     
|Equity compensation plans not approved by security holders | 200,000 (2)                                                                                 | $0.75                                                                       | 200,000                                                                                     



(1)    The Company registered a consultant stock compensation plan in 2005, registering 450,000 shares of common stock to be used to compensate persons providing consulting services, with distribution to be determined by the Plan Committee. 153,979 of the shares have been granted in 2005, and 46,572 of the shares have been granted in 2006. As of March 31, 2007 all but 33 of the shares were administratively issued.

(2)    The Company has set aside 200,000 shares of common stock to be used for non-executive employee options with vesting and distribution to be determined by the Board of Directors. No options have yet been granted.



E.    Unregistered Securities Sales



Common Stock

During the period ended 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 March 31, 2007, 54,000 of these shares have not been administratively issued.



The Company has an ongoing agreement to provide $5,000 CDN monthly in shares to an unaffiliated individual for services provided.  At December 31, 2006, 257,603 shares have been issued, (with 82,522 in the quarter just ended) and 235,477 shares have still to be administratively issued.



During the quarter ended September 30, 2006, the Company entered into an agreement with a related party to convert shareholder advances to the Company's common stock.  As a result, the related party received 25 million restricted shares. All of these shares have been administratively issued.



During the quarter ended September 30, 2006, a resolution was approved by the Board of Directors for the Company to buyback up to 10,000,000 shares of common stock from its public held float at market prices.  The buyback can be initiated at management's discretion.



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Warrants



As part of a private placement of shares used to raise equity financing, warrants and piggyback warrants were issued.  In total, 510,867 shares were issued, each with one warrant at $1.75 expiring in May of 2006 and one piggyback warrant at $2.00 expiring in May of 2007 as part of the unit sold.



Options



On April 1, 2006, the Company granted 200,000 options to purchase stock at $1 per share to a consultant, for services provided.  At the end of 2006 all options are vested, none have been exercised.



On July 31, 2006 the Company issued 480,110 options to purchase stock at $1 per share to the President of the Company as part of his compensation contract.  At the end of 2006 all options are vested, none have been exercised.



On July 1, 2006 the Company issued 479,878 options to purchase stock at $1 per share to the Chief Financial Officer of the Company as part of his compensation contract.  At the end of 2006 all options are vested, none have been exercised.



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.



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 contract, there is an option to purchase 100,000 shares of common stock at an exercise price of $0.75 (USD) per share for the first year and $1.00 (USD) per share for the second year.  The stock options vest monthly over the course of each year.  At the end of 2006 all options are vested, none have been exercised.



In March of 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.  At the end of 2006 all options are expired.



On April 1, 2005, the Company granted 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.  At the end of 2006 all options are vested, none have been exercised.



F.    Purchase of Equity Securities



None.



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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and related notes, which are included herein. This report contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those indicated in the forward-looking statements.



OVERVIEW



The Company was incorporated on July 11, 2003 in the Commonwealth of the Bahamas. The Company is in the process of developing and producing innovative energy management and electronic technology with the intent to license and sell such products and technology. It currently owns the worldwide rights to certain patent-pending technology that improves the efficiency of electrical power usage. In November 2003, the Board of Directors of the Company approved the acquisition through reverse merger of Cyokonos Corporation, a public entity organized under the laws of the state of Nevada on February 16, 1999. This reverse merger (Merger) was executed on January 13, 2004 pursuant to an Exchange Agreement with the issuance of 9,230,000 shares of common stock, at par value of $.001 per share, to the shareholders of Cyokonos. From its inception until January 13, 2004, Cyokonos was headed up by its sole officer and director, Mr. Ronald McIntire and had not commenced any commercial operations or material operating activities. On January 15, 2004, the Company retained Mr. L. Mark Roseborough as President of the Company and entered into contractual relationship for his services on July 1, 2004.



A Special Shareholder's Meeting, for Cyokonos, was called on January 21, 2004, at which time Mr. Ronald McIntire, of Cyokonos Corporation, voluntarily resigned from the Board of Directors and Mr. Michael Matvieshen, Mr. L. Mark Roseborough, Mr. Peter Hipp, Mr. Hans Schroth and Mr. Peter Lacey were elected to the Board of Directors. The Shareholders also voted to change the name of Cyokonos Corporation to EPOD International Inc. at the soonest practicable date. The name change became effective on or about July 9, 2004, at which time the trading symbol on the OTC Bulletin Board changed from CYOK to EPOI. Effective August 18th, 2005., Mr. Ljubisan Stamenic because a board member. In October of 2005, Mr. Peter Hipp resigned.  On July 18th, 2006 Mr. Peter Lacey resigned from the Board, and Mr. Lawrence J. Faulk was appointed to the Board.  Neither Mr. Hipp nor Mr. Lacey resigned due to any disagreement with the Company on any matter related to its operations, policies or practices. Recently, in October of 2006, Mr. Robert Stabinsky and Mr. Rene Dureault were appointed to the Board of Directors



In the second quarter of 2006, the Company received unanimous board approval to change its name to IQ Renewable Energy Corp, which more accurately reflects its current business concentration in the manufacturing, sale, ownership and operation of advanced, turnkey solar powered systems and related components.  The Company filed the required Form 14C with the SEC. The name change has not yet taken effect.



In 2005, the Company's common stock was approved for listing and trading on the Frankfurt Stock Exchange under the symbol EDU. The Company inter-listed its stock on the Frankfurt Exchange in order to broaden the Company's shareholder base and increase the Company's profile with both individual and institutional investors in Germany and across Europe.



The Company is an integrated Energy Services company aspiring to be a leader in electrical power storage systems for the distributed generation, co-generation, wind and solar power markets through the production, licensing and sales of innovative, energy management and electronic technology. The Company is in development of certain patent-pending electrical technology that it is calling the Energy Pod, or EPOD, which may exist in one form as an integrated circuit chip transportable across many different markets and applications. The Energy Pod products manage and manipulate electrical energy. EPOD provides demand and supply-side management solutions through a comprehensive suite of patent-pending storage, conversion and energy management products allowing users to significantly increase power sales revenue, reduce their power costs and increase their power quality.



EPOD provides commercial and industrial power users with power storage systems. EPOD can assist with increased power quality and reliability, reduced power costs and new power sales revenue. For grid-power users, EPOD's EMT (Energy Management Technology) power storage system allows a company to buy and store inexpensive, off-peak power for next-day peak-power demand or back-up power requirements. The EMT's peak-shaving and virtual load-shifting benefits dramatically reduce or eliminate demand and standby charges while increasing power quality and reliability. For partial onsite power users, the EMT power storage system allows a company to further reduce grid-based power costs by increasing the output of the on-site power generation assets. The installation of an EMT storage unit allows a company to operate DG or CoGen hardware during off-peak hours, storing this power for next-day use and increasing the useful output of your capital assets.



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EPOD offers three management and conversion products, (i) The EPOD rectifier is an AC-continuous waveform current converted to DC-power with less than 4% power loss. Traditional rectifiers average 70-71% efficiency, whereas the EPOD rectifier is 96% efficient. EPOD's advanced rectifier design represents a new benchmark for rectifier efficiency, (ii) The EPOD inverter has been designed to allow for DC power to be converted to AC power on the order of 95% efficiency, and (iii) The EPOD power controller significantly increases a battery's useful output. When a DC-power supply is used in a circuit utilizing the patent-pending EPOD power controller, the controller will manage and maintain the voltage at a higher potential by creating an energy reservoir from the energy that is normally consumed by the circuit whenever the circuit is turned on. This reservoir of energy holds the circuit voltage higher than if a battery, for example, was used without the EPOD power controller in the circuit. The ability of the power controller to maintain higher circuit voltage throughout the battery discharge curve equals more power available to do more work. In independent engineering tests, the batteries using the EPOD power controller increased the overall useful work completed by the battery by up to 30%. The Company is also developing other innovative products with synergetic technologies.



The Company continues to focus on the global solar power markets due to the continued growth in world-wide demand for solar panels, inverters and renewable energy as a whole.  Using the Company's patent-pending power controller and advanced power management, the EPOD Inverter increases the functional output of a majority of PV panels, and provides the Company a competitive advantage in the manufacture and sale of photovoltaic (PV) panels. To execute this strategy, management is in the process of acquiring and constructing PV panel manufacturing capacity to focus on the building-integrated photovoltaic (BIPV) market, the process whereby solar panels are integrated into the exterior skin of commercial buildings, often replacing glass windows with a transparent, power-generating solar panel. By combining BIPV with EPOD's power storage and energy management system, commercial buildings can become energy self-sufficient and, in some cases, generate revenue from the sale of surplus solar energy to the local power grid.



The Company is taking significant advantage of the Green movement to increase energy efficiency, specifically in regions where there is an emphasis on reducing reliance on fossil-fuel based, nonrenewable power.  Its solar power applications are experiencing initial sales and the company's operations have been focused on the solar energy industry.  This has involved a two pronged approach - strategically positioning itself to acquire and develop the required production capacity for its own and related products and to realize ongoing revenue streams in the solar power market through power system construction and sales of power.



In 2005, the Company entered into a joint venture with CompMess GmbH & Co. KG, a German automated equipment and electronics manufacturer to construct its first commercial solar power system in Germany, utilizing the EPOD Solar Inverter, EPOD EMT Power Storage System and photovoltaic panels. In April of 2006, EPOD's first commercial-scale solar power installation began generating renewable energy for sale to the local electric utility under a 20-year power purchase agreement with the German government. The system, installed by EPOD has an estimated lifespan of 40-plus years. The power purchase agreement is part of a federal government energy program in Germany whereby residential, commercial, and industrial power users are encouraged to utilize renewable energy to reduce, and ultimately eliminate, Germany's dependence on fossil fuel-based and non-renewable power. As both electric power demand and prices continue to increase, it is Management's opinion that demand for EPOD's solar power systems will grow correspondingly. The Company intends to construct, own, and operate many such commercial solar power systems under similar power purchase agreements with local and regional utilities in Germany, and elsewhere in the European Union.



Previously, it was reported that as of July 10th, 2006 EPOD had acquired 51% of the shares of CompMess, a German manufacturing company.  Since that time, it has come to the attention of EPOD that certain conditions required to complete the share transfer and consequent change of ownership in Germany have not been completed and the finalization of the acquisition has not yet occurred, pending these matters.  To date, EPOD has paid to CompMess shareholders €40,000 (50,956 USD) as part of the purchase.  During the year ended December 31, 2006, EPOD has made an additional deposit with CompMess in the amount of $406,766 USD with no stated terms and purchased inventory from CompMess in the amount of $30,086 USD . Because this acquisition was not completed the Company is not including CompMess financial statements in its consolidated financial reporting.



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Recognizing the need for additional manufacturing capacity and processes, the Company developed a new, proprietary, solar panel assembly-manufacturing process to reduce costs by up to 40%.  The process, one which would help the Company become one of the lowest cost solar panel producers in the world, will be able to be applied to almost any existing amorphous silicon solar panel plant, and hence create an additional opportunity to acquire old solar panel factories that are currently only marginally profitable.



Further to the Company's plans to increase its solar panel manufacturing capacity, the Company intends to construct a solar panel manufacturing facility in Kelowna, B.C. An estimated five megawatts of production capacity is anticipated to be available within six months after financial closing. EPOD intends to sell to investors up to 49% equity in the to-be-built facility. Currently pending are agreements to date to sell 17% of the equity in the Kelowna facility for cash proceeds of USD$525,000 (CAD$586,000), and secured debt guarantees in the amount of USD$1.5 million.  The Company has agreed in principle to the purchase of 10,000 feet of factory space from a related party vendor. Financing for this project is expected to close in Q3, 2007.



The addition of solar panel manufacturing capacity will allow EPOD to further vertically integrate its solar power operations, and substantially increase the Company's solar panel output. This manufacturing capacity and increased solar panel output will also enable EPOD to maximize its solar power system sales and integration in the Province of Ontario, where market prices have touched CDA$8 per watt, installed.  The Ontario Power Authority and the Ontario Energy Board recently announced the creation of the Standard Offer Program a renewable energy feed-in tariff initiative. The Standard Offer Program will pay EPOD and other solar power generators CAD$0.42 per kilowatt-hour (approximately USD$0.37), under what is anticipated to be a 20-year power purchase agreement. Given the Ontario government's increased support of solar energy through the Standard Offer Program, EPOD intends to aggressively pursue solar system sales in the Ontario market effective immediately



In April of 2006, EPOD announced its intention to create a renewable energy income fund for the purpose of investing in utility-integrated, renewable energy infrastructure projects. The EPOD Renewable Energy Income Fund ("REIF") will be utilized to invest in renewable power generating assets with a focus on commercial solar power installations. The installations will be utility-integrated, selling 100% of power generated to the Fund's utility customers under industry standard 20-year power purchase agreements. The Company intends to sell commercial solar power installations to the REIF, as well as operate the installations for the Fund under an operating and maintenance contract. Additionally, EPOD in the projects earning a share of the long term, power sales revenue.  EPOD has engaged ALCM to serve as fund manager and advisor to the EPOD Renewable Energy Income Fund. ALCM, a British Columbia-based registered portfolio manager and its affiliated company, Energy Logics Inc., have focused on the exploration, financing, and management of sustainable wind energy investments globally. Energy Logics currently has in excess of 1,000MW of wind-power under development in Canada, the United States and the Philippines. Preliminary plans are for the assets will be sold to the income trust at their fair market value, the trust will provide 80% of the funds in cash, the other 20% in units in the fund.  This will allow EPOD to continue to fund revenue producing projects, and allow EPOD to participate in the ongoing revenue stream generated by the assets through the trust.  The remaining 80% of the units in the Trust will be sold through ALCM.



In anticipation of significant expansion in capacity and revenues, in 2006 and beyond, the Company also hired a new CFO, Frank Wisehart, to oversee this next stage of growth for the Company.   Mr. Wisehart took over from Mr. George Drazenovic in April of 2006.



In the second quarter of 2006, the Company purchased all of the assets of ISE Solar LLC, a US based company for $500,000.  The subsidiary's assets consisted of $500,000 in inventory for resale.  Upon purchase, EPOD has sold  the entire inventory at a price of $1,135,200.



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In July of 2006 the Company sold a 3-kilowatt solar power system, including an EPOD power storage unit, to an electrical contractor in Kelowna, British Columbia. The EPOD solar power and storage system will serve as the principal source of electric power for the residential customer, and will be grid-tied with the local utility being used to supplement the clients' power needs.



On August of 2006 the Company entered into an agreement to sell a five (5) megawatt solar panel manufacturing plant to Ditec Automation Group Ditec of Mexico City, Mexico valued at $17 million which is subject to Ditec financing and the agreement has been approved by the majority of the Board.



On March 27, 2007, the Company signed a Right to Purchase 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 shall acquire all of the shares of Mill Creek Developments Ltd. for $12,000,000 CDN ($10,359,600 USD) and 24,000,000 shares of the company. A deposit of $600,000 CDN ($520,440 USD) was paid on March 30, 2007.



The Company's research and development initiatives remain strong.  In September 2005, the Company announced that it will continue to aggressively pursue the development of alternative power storage solution to conventional lead-acid batteries for large-scale commercial/ industrial applications. Building on its original technology development agreement with the University of British Columbia's Department of Electrical and Computer Engineering, successful results from EPOD's phase I feasibility study have resulted in the decision to pursue phase II of the project to fully develop version one of the company's supercapacitor-based battery. Laboratory test units, as well as larger scale prototypes, will be built and tested in various renewable energy and emergency back-up power applications during Q4, 2006 and due to some technical delays, will continue on into 2007. The prototype units are to be built by EPOD's joint-venture partner, the Molecular Mechatronics Group at the University of British Columbia's Department of Electrical and Computer Engineering.



The EPOD hybrid battery, which already demonstrates many performance characteristics equivalent to lead-acid batteries, is anticipated to feature substantially lower cost, higher power and energy density, longer lifespan, and will be virtually environmentally benign. This hybrid battery will also be able to be charged and discharged at a much higher rate than lead-acid batteries, and offer customers the potential to trade energy at various times of the day to take advantage of price differentials in non-regulated energy markets.



The Company has also researched, developed and successfully produced a low power, single cell, vanadium redox batter, and, in a joint research and technology development effort between EPOD and Barrett Engineering Inc. of San Diego, California, completed the successful conversion and testing of a hydrogen-fueled motor, successfully converting a Honda GX160 gasoline-fueled motor to operate using hydrogen. Testing is continuing on both of these technologies.



In October 2005, the Company announced a pilot project with Canada's second largest wind power developer to test EPOD's proprietary power storage system, the EMT. The company is currently waiting for development funds to complete the prototype. Developed specifically to store commercial volumes of electric power for later use or resale, the pilot will utilize the EMT to capture and store up to 100% of wind power generated during off-peak periods for resale to the power grid during peak demand. Through the use of the Company's patent-pending power management and power conversion technology, the efficient and cost-effective storage of wind power in the EMT allows wind power developers to offer guaranteed volumes of power at fixed times, and hence remove the single largest obstacle to the commercial adoption of large-scale wind power.  Successful results of the pilot test will enable the Company to rapidly expand its marketing and business development initiatives through North America and Europe.  As a result, the Company is poised to offer energy management solutions to the two largest segments of the renewable energy sector: wind and solar.



In the second quarter of 2006, the company signed a licensing agreement with the University of New Brunswick, allowing EPOD to further its product development by utilizing an inverter technology developed by the University.  Payment to the University includes a royalty on products developed and a yearly flat fee. As part of its product development, the Company has a completed inverter. The Company's new, modular-based, grid-tie inverter, to be branded the EPOD Grid-Tie Inverter or "GTI," offers commercial solar and wind power applications an unprecedented combination of field performance, expansion flexibility, and cost-effectiveness. With a 10-kilowatt capacity and modular design, users are able to install multiple EPOD Inverters in parallel to accommodate the specific capacity requirement of each installation. The modular design affords solar and wind power users near limitless scalability and flexibility in grid-tie inverters, allowing for more accurate and cost effective commercial power inverter sizing, all at an industry-leading price point.



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The Company's current principal place of business is located at #105  470 Neave Road, Kelowna, British Columbia, Canada  V1V 2M2.  It has developed 2,500 square feet of leased office space in Kelowna, British Columbia to house its corporate headquarters and for laboratory research and development. The dedicated executive office and laboratory space allows the Company to consolidate its product development and administrative efforts under one roof while providing much needed space for additional staff and future growth. Additionally, the new facility will increase research and development security, laboratory efficiency, and, in the short term, reduce administrative overheads.



The Company's common stock trades under the symbol EPOI on the OTC Bulletin Board.  It's website is located at www.epodinc.com.



Critical Accounting Policies and Estimates



Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results could differ from these estimates under different assumptions or conditions. During the year ended December 31, 2006, there were no material changes to accounting estimates or judgments.



Use of Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements.  Accordingly, upon settlement, actual results may differ from estimated amounts.



Translation of Financial Statements

The U.S. dollar is the functional currency of the Company. A Canadian bank account is maintained and is translated using the exchange rate in effect at the balance sheet date.   Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars at the exchange rate in effect on the balance sheet date.  Non-monetary assets and liabilities are translated at their historical rate. 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.



Fair Value of Equity Instruments

The Company's accounting is in accordance with Financial Accounting Standards Board No. 123 and ETIF 96-18A in recording warrants and stock options.  The Company uses fair value base method of accounting for employee stock options or similar instruments.  Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company utilizes the Black-Scholes valuation model to calculate the fair value of options issued for payment of services.  The parameters used in such valuations include a risk free rate of 4.0%, the assumption that no dividends are paid, exercise periods of two to five years, and a volatility factor of 127%, in accordance with SFAS No. 123.



Revenue Recognition

The Company  recognizes revenue for products and other services to customers in the period the related services are provided or when the products are shipped, when the amount of revenue is determinable and collection is reasonably assured.



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RESULTS OF OPERATIONS



FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005



Revenue.  The Company had operating revenues totaling $1,156,799 compared to no operating revenues from inception.  The Company had non-operating revenues totaling $10,149 for the year ended December 31, 2006.



General and Administrative Expenses; Legal Expenses; Research and Development.The Company incurred general and administrative costs and legal fees during the year ended December 31, 2006 of $981,435 and $142,686 respectively, compared to $1,585,150 and $295,580 at December 31, 2005.  Additionally, the Company incurred research and development costs of $162,958 during the year ended December 31, 2006 and $349,986 at December 31, 2005. The Company expects general and administrative expenses to continue to increase during fiscal year 2007 as the Company ramps of its sales and increases its employee base.



Net Loss.  Mainly as a result of the above, the Company sustained a loss from operations of $2,100,407 for the year ended December 31, 2006, and net loss of $2,289,233 at December 31, 2005.



LIQUIDITY AND CAPITAL RESOURCES



FOR THE YEAR ENDED DECEMBER 31, 2006



Our financial statements have been prepared on the going concern basis of accounting, which contemplates realization of assets and liquidation of liabilities in the ordinary course of business.  The Company has experienced a loss from operations during its development stage as a result of its investment necessary to achieve its operating plan, which is long-range in nature.



Cash Position.As of December 31, 2006, the Company had cash and cash equivalents of $ 0.00 and current liabilities of $2,015,602.



Operating Activities.
 During the year ended December 31, 2006, the Company had negative cash flows
from operating activities of $331,891 and recorded an operating loss of $2,100,407.  At December 31, 2006, the Company had an accumulated operating deficit of $5,666,693.



Financing Activities.  From inception to December 31, 2006, the Company received advances from shareholders as a source of funding. In the quarter ended September 30, 2006 an agreement was made with a director and shareholder to convert $1,000,000 USD of shareholder advances to 25,000,000 restricted common shares. As a result of this transaction, $1,400,000 has been recorded as a beneficial conversion on the transactions based on the share price as of the date of the conversion.  The balance of shareholder advances as of December 31, 2006 is $336,240. These advances are unsecured, non-interest bearing and have no stated maturity. In addition, during the period from inception to December 31, 2006, the Company entered into a promissory note and loan agreement with a shareholder for $95,000.  The loan agreement is non-interest bearing and has no stated maturity date. In 2005, the company entered into two promissory notes totaling $195,000 with a shareholder, maturing in 2015, with interest accrued at 5% on the unpaid principle.  The company entered into three additional promissory notes with directors and their related parties totaling $197,057 of which $27,540 was repaid in December, 2006.  The loans bear interest at 10%, calculated semi-annually.  Principal and interest are due upon demand.  The lender has the option of converting the loans to EPOD common stock at a price of $1.00 within 5 years.



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Future Capital requirements.  The Company has no positive working capital, and 2006 was the first year since inception that operational revenues have been generated. The Company's ability to continue as a going concern is contingent upon its ability to attain profitable operations by securing financing and implementing its business plan. The Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.



OUTLOOK



The Company has experienced a loss from operations during its development stage as a result of its investment necessary to achieve its operating plan, which is long-range in nature. For the period from inception to December 31, 2006, the Company has incurred accumulated deficit of $5,666,693. In addition, the Company has no significant physical assets, no working capital, no revenue generating operations and stockholders deficit.  The Company's ability to continue as a going concern is contingent upon its ability to attain profitable operations by securing financing and implementing its business plan. In addition, the Company's ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrance into established markets and the competitive environment in which the Company operates.



The Company's current cash balance as of December 31, 2006 was $0.00. In order to advance its business plan to the next phase, the Company will need to raise additional capital. For the twelve-month period subsequent to December 31, 2006, the Company anticipates that its minimum cash requirements to continue as a going concern will be approximately $100,000 per month. The anticipated source of these funds will be from operational revenues and private placement of its equity securities.  The Company continues to pursue financing through several different sources. These financing efforts if they are successful should allow the Company to pursue its business and marketing plan more aggressively, however, the Company makes no representations regarding the success of these negotiations.



If no funding is received, the Company will be forced to rely on funds loaned by the officers and directors. The officers and directors have no formal commitments or arrangements to advance or loan funds to the Company. In such a restricted cash flow scenario, the Company would be primarily unable to move its business plan forward, and would, instead, delay all cash intensive activities. Should the Company be unable to raise additional financing, it cannot assure that it would be able to maintain operations.



22

---





ITEM 7. FINANCIAL STATEMENTS



The audited financial statements of the Company and related notes that have been included in this 10-KSB have been audited by Williams & Webster, P.S.. They have been so included in reliance upon the opinion of such accountants given upon their authority as experts in auditing and accounting.



23

---





Board of Directors

EPOD International Inc.

Kelowna, British Columbia



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



We have audited the accompanying consolidated balance sheets of EPOD International Inc. and subsidiaries as of December 31, 2006 and 2005 and the related consolidated statements of operations, stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.



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 provides a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EPOD International Inc., and subsidiaries as of December 31, 2006 and 2005 and the results of its operations, stockholders' deficit and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company's significant and ongoing operating losses raise substantial doubt about its ability to continue as a going concern. Management's plans regarding the resolution of this issue are also discussed in Note 2. The 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 30, 2007



24

---



|EPOD INTERNATIONAL INC.    
|---------------------------
|CONSOLIDATED BALANCE SHEETS

|                                                                   |   |              |   |             
|------------------------------------------------------------------ | - | ------------ | - | ------------
|                                                                   |   | December 31, |   | December 31,
|                                                                   |   | 2006         |   | 2005        
|ASSETS                                                             |   |              |   |             
|CURRENT ASSETS                                                     |   |              |   |             
|Cash                                                               | $ | -            | $ | 193         
|Accounts receivable, net                                           |   | 140,474      |   | -           
|Accounts receivable - related party                                |   | 466,000      |   | -           
|GST tax refund, net                                                |   | 3,195        |   | 22,071      
|Note receivable                                                    |   | 32,540       |   | -           
|Inventory                                                          |   | 98,228       |   | 64,629      
|Prepaid expenses                                                   |   | 53,032       |   | 42,297      
|Total Current Assets                                               |   | 793,469      |   | 129,190     
|                                                                   |   |              |   |             
|PROPERTY, PLANT AND EQUIPMENT, NET                                 |   | 193,668      |   | 357,296     
|                                                                   |   |              |   |             
|OTHER ASSETS                                                       |   |              |   |             
|Intellectual property, net                                         |   | 37,643       |   | 33,274      
|Deposits                                                           |   | 485,037      |   | 347,714     
|Total Other Assets                                                 |   | 522,680      |   | 380,988     
|                                                                   |   |              |   |             
|TOTAL ASSETS                                                       | $ | 1,509,817    | $ | 867,474     
|                                                                   |   |              |   |             
|LIABILITIES AND STOCKHOLDERS' DEFICIT                              |   |              |   |             
|                                                                   |   |              |   |             
|LIABILITIES                                                        |   |              |   |             
|CURRENT LIABILITIES                                                |   |              |   |             
|Bank indebtedness                                                  | $ | 1,635        | $ | -           
|Accounts payable and accrued liabilities                           |   | 699,076      |   | 266,261     
|Compensation payable                                               |   | 393,660      |   | 250,448     
|Shareholder advances                                               |   | 336,240      |   | 1,048,178   
|Notes payable - related parties                                    |   | 548,967      |   | 487,000     
|Accrued interest payable                                           |   | 36,024       |   | 7,161       
|Total Current Liabilities                                          |   | 2,015,602    |   | 2,059,048   
|                                                                   |   |              |   |             
|COMMITMENTS AND CONTINGENCIES                                      |   | -            |   | -           
|                                                                   |   |              |   |             
|STOCKHOLDERS' DEFICIT                                              |   |              |   |             
|Common stock, $0.0005 par value; 75,000,000
    shares authorized, |   |              |   |             
|72,811,424 and 47,518,852 issued and outstanding,
    respectively |   | 36,405       |   | 23,759      
|Common stock issuable                                              |   | 131,196      |   | 58,308      
|Discount on common stock                                           |   | (21,270)     |   | (21,270)    
|Stock options and warrants                                         |   | 1,675,806    |   | 1,649,406   
|Additional paid-in capital                                         |   | 3,348,081    |   | 689,300     
|Accumulated deficit                                                |   | (5,666,693)  |   | (3,566,286) 
|Accumulated other comprehensive income (loss)                      |   | (9,310)      |   | (24,848)    
|Total Stockholders' Deficit                                        |   | (505,785)    |   | (1,191,631) 
|                                                                   |   |              |   |             
|TOTAL LIABILITIES AND STOCKHOLDERS'
    DEFICIT                    | $ | 1,509,817    | $ | 867,417     

The accompanying notes are an integral part of these financial
statements.

25

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|EPOD INTERNATIONAL INC.                  
|-----------------------------------------
|CONSOLIDATED STATEMENTS OF
    OPERATIONS



|                                         |   | Year Ended   |   | Year Ended  
|---------------------------------------- | - | ------------ | - | ------------
|                                         |   | December 31, |   | December 31,
|                                         |   | 2006         |   | 2005        
|                                         |   |              |   |             
|REVENUE                                  | $ | 690,799      | $ | -           
|REVENUE - RELATED PARTY                  |   | 466,000      |   | -           
|TOTAL REVENUE                            |   | 1,156,799    |   | -           
|                                         |   |              |   |             
|COST OF REVENUE                          |   | 513,333      |   | -           
|                                         |   |              |   |             
|GROSS PROFIT                             |   | 643,466      |   | -           
|                                         |   |              |   |             
|OPERATING EXPENSES                       |   |              |   |             
|General and administrative               |   | 981,435      |   | 1,585,150   
|Legal and professional                   |   | 142,686      |   | 295,580     
|Research and development                 |   | 162,958      |   | 349,986     
|Depreciation and amortization expense    |   | 24,843       |   | 12,598      
|Total Operating Expenses                 |   | 1,311,922    |   | 2,243,314   
|                                         |   |              |   |             
|LOSS FROM OPERATIONS                     |   | (668,456)    |   | (2,243,314) 
|                                         |   |              |   |             
|OTHER INCOME (EXPENSE)                   |   |              |   |             
|Interest expense                         |   | (28,901)     |   | (19,841)    
|Financing costs                          |   | (1,400,000)  |   | -           
|Other income                             |   | 5,957        |   | 6,186       
|Gain (loss) on sale of assets            |   | 4,192        |   | -           
|Foreign currency transaction gain (loss) |   | (13,199)     |   | (32,264)    
|Total Other Income (Expense)             |   | (1,431,951)  |   | (45,919)    
|                                         |   |              |   |             
|NET LOSS BEFORE TAXES                    |   | (2,100,407)  |   | (2,289,233) 
|                                         |   |              |   |             
|PROVISION FOR INCOME TAXES               |   | -            |   | -           
|                                         |   |              |   |             
|NET LOSS                                 |   | (2,100,407)  |   | (2,289,233) 
|                                         |   |              |   |             
|OTHER COMPREHENSIVE INCOME (LOSS)        |   |              |   |             
|Foreign currency translation gain (loss) |   | 15,538       |   | (12,603)    
|                                         |   |              |   |             
|NET COMPREHENSIVE LOSS                   | $ | (2,084,869)  | $ | (2,301,836) 
|                                         |   |              |   |             
|BASIC AND DILUTED                        |   |              |   |             
|NET LOSS PER COMMON SHARE                | $ | (0.03)       | $ | (0.05)      
|                                         |   |              |   |             
|WEIGHTED AVERAGE NUMBER OF COMMON        |   |              |   |             
|SHARES OUTSTANDING BASIC AND DILUTED     |   | 58,324,631   |   | 47,540,332  

The accompanying notes are an integral part of these financial
statements.

26

---

EPOD INTERNATIONAL INC.THE STATEMENT OF
  STOCKHOLDERS' DEFICIT

|                                                                    |                      |   |            |   |                     |   |                  |   |                                     |   |                     |   |                         |   |                                     
|------------------------------------------------------------------- | -------------------- | - | ---------- | - | ------------------- | - | ---------------- | - | ----------------------------------- | - | ------------------- | - | ----------------------- | - | ------------------------------------
|                                                                    | Common Stock         |   | Additional |   | Issuable            |   |                  |   | Discount                            |   |                     |   | Other                   |   | Total                               
|                                                                    | Number
    of Shares |   | Amount     |   | Paid-in
    Capital |   | Common
    Stock |   | Stock Options
    and 
    Warrants |   | on Common
    Stock |   | Accumulated
    Deficit |   | Comprehensive
    Income 
    (Loss)
|                                                                    |                      |   |            |   |                     |   |                  |   |                                     |   |                     |   |                         |   |                                     
|Balance, December 31, 2004 (Restated)                               | 46,740,630           | $ | 23,370     | $ | 119,915             | $ | -                | $ | 497,839                             | $ | (21,270)            | $ | (1,277,053)             | $ | (12,245)                            
|Options issued for services                                         | -                    |   | -          |   | -                   |   | -                |   | 1,049,381                           |   | -                   |   | -                       |   | -                                   
|Common stock issued for services at
    $0.73 - $1.34 per share     | 223,355              |   | 112        |   | 243,013             |   | -                |   | -                                   |   | -                   |   | -                       |   | -                                   
|Common stock issuable for services at
    $0.73 - $1.34 per share   | -                    |   | -          |   | -                   |   | 58,308           |   | -                                   |   | -                   |   | -                       |   | -                                   
|Common stock/warrants issued for cash
    at $0.75                  | 510,867              |   | 255        |   | 293,395             |   | -                |   | 89,500                              |   | -                   |   | -                       |   | -                                   
|Common stock issued for cash at $0.75                               | 44,000               |   | 22         |   | 32,977              |   | -                |   | -                                   |   | -                   |   | -                       |   | -                                   
|Beneficial conversion on loans                                      | -                    |   | -          |   | -                   |   | -                |   | 12,686                              |   | -                   |   | -                       |   | -                                   
|Foreign currency translation gain
    (loss)                        | -                    |   | -          |   | -                   |   | -                |   | -                                   |   | -                   |   | -                       |   | (12,603)                            
|Net loss for year ended December 31,
    2005                       | -                    |   | -          |   | -                   |   | -                |   | -                                   |   | -                   |   | (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)                            
|Options issued for services                                         | -                    |   | -          |   | -                   |   | -                |   | 181,807                             |   | -                   |   | -                       |   | -                                   
|Common stock issued for services at
    $0.15 - $0.82 per share     | 292,572              |   | 146        |   | 115,874             |   | -                |   | -                                   |   | -                   |   | -                       |   | -                                   
|Common stock issuable for services at
    $0.15 - $0.82 per share   | -                    |   | -          |   | -                   |   | 72,888           |   | -                                   |   | -                   |   | -                       |   | -                                   
|Warrants expired                                                    | -                    |   | -          |   | 18,100              |   | -                |   | (18,100)                            |   | -                   |   | -                       |   | -                                   
|Options expired                                                     | -                    |   | -          |   | 137,307             |   | -                |   | (137,307)                           |   | -                   |   | -                       |   | -                                   
|Common stock issued for shareholder
    advances at $0.04 per share | 25,000,000           |   | 12,500     |   | 987,500             |   | -                |   | -                                   |   | -                   |   | -                       |   | -                                   
|Beneficial conversion of shareholder
    advances                   | -                    |   | -          |   | 1,400,000           |   | -                |   | -                                   |   | -                   |   | -                       |   | -                                   
|Foreign currency translation gain
    (loss)                        | -                    |   | -          |   | -                   |   | -                |   | -                                   |   | -                   |   | -                       |   | 15,538                              
|Net loss for year ended December 31,
    2006                       | -                    |   | -          |   | -                   |   | -                |   | -                                   |   | -                   |   | (2,100,407)             |   | -                                   
|Balance, December 31, 2006                                          | 72,811,424           | $ | 36,405     | $ | 3,348,081           | $ | 131,196          | $ | 1,675,806                           | $ | (21,270)            | $ | (5,666,693)             | $ | (9,310)                             

The accompanying notes are an integral part of these financial
statements.

27

---

EPOD INTERNATIONAL INC.CONSOLIDATED STATEMENTS OF CASH
    FLOWSYear
    Ended
    
    Year
    EndedDecember
    31,
    
    December
    31,2006
    
    2005CASH
    FLOWS FROM OPERATING ACTIVITIES:Net loss
    $
    (2,100,407)
    $
    (2,289,233)Adjustments to reconcile net loss to net cash
    used by operating activities:Depreciation and amortization
    
    24,843
    
    12,598Common stock issued for services and expenses
    
    188,908
    
    301,433Beneficial conversion of shareholder advance
    
    1,400,000
    
    -Options issued for expenses
    
    181,807
    
    1,049,381Changes in assets and liabilities:Accounts receivable
    
    (140,474)
    
    -Accounts receivable - related party
    
    (466,000)
    
    -GST tax refund
    
    18,876
    
    (22,071)Inventory
    
    (33,599)
    
    (64,629)Prepaid expenses
    
    (10,735)
    
    (39,605)Accounts payable
    
    432,815
    
    166,630Accrued interest payable
    
    28,863
    
    7,161Compensation payable
    
    143,212
    
    150,752Net cash used by operating activities
    
    (331,891)
    
    (727,583)CASH
    FLOWS FROM INVESTING ACTIVITIES:Deposits
    
    (137,323)
    
    (268,750)Notes receivable
    
    (32,540)
    
    -Acquisition of equipment
    
    (18,595)
    
    (117,232)Acquisition of patents
    
    (6,450)
    
    (33,770)Sale of buildings & land
    
    244,578
    
    -Acquisition of buildings & land
    
    (85,118)
    
    (250,557)Net cash provided (used) by investing activities
    
    (35,448)
    
    (670,309)CASH FLOWS FROM
    FINANCING ACTIVITIES:Bank indebtedness
    
    1,635
    
    -Common stock/warrants issued for cash
    
    -
    
    416,149Proceeds from short-term borrowings
    
    -
    
    197,057Repayment of short-term borrowings
    
    (27,540)
    
    -Repayment of borrowing, related party
    
    (466,096)
    
    (153,199)Proceeds from short-term borrowings, related
    parties
    
    843,609
    
    937,856Net cash provided by financing activities
    
    351,608
    
    1,397,863NET
    INCREASE (DECREASE) IN CASH
    
    (15,731)
    
    (29)Other comprehensive loss - foreign currency
    translation gain (loss)
    
    15,538
    
    (12,603)CASH, BEGINNING OF PERIOD
    
    193
    
    222CASH, END OF PERIOD
    $
    -
    $
    193SUPPLEMENTAL CASH FLOW INFORMATION:Interest paid
    $
    -
    $
    -Income taxes paid
    $
    -
    $
    -NON-CASH FINANCING AND INVESTING ACTIVITIES:Common stock issued for repayment of advances
    $
    1,000,000
    $
    -The accompanying notes are an integral part of these financial
statements.
28

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS

The Company was incorporated on July 11, 2003 in the
Commonwealth of the Bahamas and 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. The Company has chosen December 31 as its
year-end.

During January 2004, EPOD International Inc. (the "Company")
completed a reorganization with Cyokonos Corporation ("Cyokonos") a Nevada
corporation, whose net liabilities consisted of cash of $85 and accounts payable
and due to affiliate of $3,075. In conjunction therewith, the Company issued
18,460,000 shares of its restricted common stock for all of the issued and
outstanding common shares of Cyokonos. This reorganization was accounted for as
though it were a recapitalization of the Company and sale 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. See Note 5. On May 9, 2005, a wholly owned
subsidiary was incorporated in the country of Canada, EPOD Industries Inc. One
common share valued at $0.01 CDN was issued to EPOD International Inc. The
company commenced operations in June of 2005. On November 5, 2005 a second
wholly owned subsidiary, EPOD Renewable Utilities Inc., was incorporated in
Canada. Three hundred common shares, with no par value, were issued to EPOD
International Inc. As of December 31, 2006, it had no activity. On January 11,
2006, 100% of the shares of EPOD Erneuerbare Energien GmbH, an inactive German
Company was purchased for  27,500 ($33,374 USD). As of December 31,
2006 the Company purchased property in Falkenau, Germany for 
65,000 ($85,118 USD) with the intent to install a commercial scale solar power
energy grid. The solar power will be sold to the local electric utility company.
On May 1, 2006, the Company purchased all physical assets ISE Solar, LLC, a U.S.
based company with no previous operating activity. It was purchased for
$500,000.

The Company was formed in July 2003 and was in the development stage from
July 11, 2003 through December 31, 2005. The year 2006 is the first year during
which it is considered and operating company.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented
to assist in understanding the Company's financial statements. The 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, and have been consistently applied in the preparation of the financial
statements.

Accounting for Shareholder Advances with Beneficial Conversion Features

Following guidance by EITF 00-27, 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 income statement as a financing cost and on the balance sheet as
an increase in stockholders' equity.

In accordance with EITF 98-5 and 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 Note 5 & 8.

Accounting Method

The Company's financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.

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 were the same, as
inclusion of common stock equivalents would be antidilutive. At December 31,
2006, the Company has a total of 3,273,711 shares that would be issued if all
options and warrants were exercised. At December 31, 2006, the Company has
insufficient authorized shares available to execute all of its obligations
related to common stock transactions. See Note 12.

29

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.

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.

Comprehensive Income (Loss)

The Company has adopted SFAS 130, "Reporting Comprehensive
Income" (hereinafter "SFAS No. 130"), 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.

Compensated Absences

Currently, the Company has no employees entitled to
compensated absences. The Company's policy will be to recognize the costs of
compensated absences when there are employees who earn such benefits. Currently
there are only independent contractors working for the Company.

Cost of Sales

Cost of sales consist of the purchase price of products sold, commissions,
inbound shipping charges, net of freight recovered from customers, and packaging
supplies.

Derivative Instruments

The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities  Deferral of the Effective Date
of FASB No. 133", SFAS No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities", SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." These statements establish
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
They require that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. The Company has not entered into derivatives contracts to hedge existing
risks or for speculative purposes.

As of December 31, 2006, the Company has not engaged in any transactions that
would be considered derivative instruments or hedging activities.

Estimates

The process of preparing financial statements in conformity
with accounting principles generally accepted in the United States of America
requires the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated amounts.

30

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



Fair Value of Financial Instruments

The Company's financial instruments as defined by Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," may include cash, receivables, advances, accounts
payable and accrued expenses. 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 and 2005.

Going Concern

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.

As of December 31, 2006, the Company has incurred losses
exceeding $5,000,000. At December 31, 2006, the Company has limited cash
resources, a working capital deficiency, and an accumulated deficit. These
factors, among others, raise substantial doubt about the Company's ability to
continue as a going concern for a reasonable period of time. The 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 twelve-month period 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.

Inventories

Inventories are stated at the lower of cost or market on a first-in,
first-out basis.

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 company; and EPOD Erneuerbare Engergien
GmbH, a German company. All significant transactions and balances among the
companies included in the consolidated financial statements have been
eliminated.

Provision for Taxes

Income taxes are provided based upon the liability method of
accounting pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," (hereinafter "SFAS 109"). 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.

Recent Accounting Pronouncements

In September 2006, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements," ("SAB 108"),which provides interpretive guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. The Company
adopted SAB 108 in the fourth quarter of 2006 with no impact on its financial
statements.

In September 2006, the FASB issued SFAS No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans

31

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|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



In September 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 157, "Fair Value
Measurements" which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles (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 Financial Accounting Standards Board 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 March 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 156, "Accounting for
Servicing of Financial Assetsan amendment of FASB Statement No. 140." This
statement requires an entity to recognize a servicing asset or servicing
liability each time it undertakes an obligation to service a financial asset by
entering into a servicing contract in any of the following situations: a
transfer of the servicer's financial assets that meets the requirements for sale
accounting; a transfer of the servicer's financial assets to a qualifying
special-purpose entity in a guaranteed mortgage securitization in which the
transferor retains all of the resulting securities and classifies them as either
available-for-sale securities or trading securities; or an acquisition or
assumption of an obligation to service a financial asset that does not relate to
financial assets of the servicer or its consolidated affiliates. The statement
also requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable, and permits
an entity to choose either the amortization or fair value method for subsequent
measurement of each class of servicing assets and liabilities. The statement
further permits, at its initial adoption, a one-time reclassification of
available for sale securities to trading securities by entities with recognized
servicing rights, without calling into question the treatment of other available
for sale securities under Statement 115, provided that the available for sale
securities are identified in some manner as offsetting the entity's exposure to
changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value and requires separate
presentation of servicing assets and servicing liabilities subsequently measured
at fair value in the statement of financial position and additional disclosures
for all separately recognized servicing assets and servicing liabilities. This
statement is effective for fiscal years beginning after September 15, 2006, with
early adoption permitted as of the beginning of an entity's fiscal year.
Management believes the adoption of this statement will have no impact on the
Company's financial condition or results of operations.

32

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|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



In February 2006, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 155, "Accounting for
Certain Hybrid Financial Instruments, an Amendment of FASB Standards No. 133 and
140" (hereinafter "SFAS No. 155"). This statement established the accounting for
certain derivatives embedded in other instruments. It simplifies accounting for
certain hybrid financial instruments by permitting fair value remeasurement for
any hybrid instrument that contains an embedded derivative that otherwise would
require bifurcation under SFAS No. 133 as well as eliminating a restriction on
the passive derivative instruments that a qualifying special-purpose entity ("SPE")
may hold under SFAS No. 140. This statement allows a public entity to
irrevocably elect to initially and subsequently measure a hybrid instrument that
would be required to be separated into a host contract and derivative in its
entirety at fair value (with changes in fair value recognized in earnings) so
long as that instrument is not designated as a hedging instrument pursuant to
the statement. SFAS No. 140 previously prohibited a qualifying special-purpose
entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument. This
statement is effective for fiscal years beginning after September 15, 2006, with
early adoption permitted as of the beginning of an entity's fiscal year.
Management believes the adoption of this statement will have no impact on the
Company's financial condition or results of operations.

In May 2005, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 154, "Accounting Changes and
Error Corrections," (hereinafter "SFAS No. 154") which replaces Accounting
Principles Board Opinion No. 20, "Accounting Changes", and SFAS No. 3,
"Reporting Accounting Changes in Interim Financial Statements  An Amendment of
APB Opinion No. 28". SFAS No. 154 provides guidance on accounting for and
reporting changes in accounting principle and error corrections. SFAS No. 154
requires that changes in accounting principle be applied retrospectively to
prior period financial statements and is effective for fiscal years beginning
after December 15, 2005. The Company adopted SFAS No. 154.

In March 2005, the FASB issued FASB Interpretation No. 47
("FIN 47"), "Accounting for Conditional Asset Retirement Obligations, an
interpretation of FASB Statement No. 143." FIN 47 clarifies the scope and timing
of liability recognition for conditional asset retirement obligations under SFAS
No. 143 and is effective no later than the end of our 2005 fiscal year. The
Company does not expect FIN 47 to have a material impact on its consolidated
financial position, results of operations or cash flows.

Reclassification

Certain amounts from prior periods have been reclassified to conform to the
current period presentation. These reclassifications have not resulted in any
changes to the Company's accumulated deficit or net losses presented.

Revenue Recognition

The Company recognizes revenue from sales 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 collectibility is reasonably assured

Shipping and Handling Fees and Costs

The Emerging Issues Task Force ("EITF") issued EITF No. 00-10, "Accounting
for Shipping and Handling Fees and Costs", which was adopted by the Company.

Stock Options and Warrants

The Company's accounting is in accordance with Financial
Accounting Standards Board No. 123 and ETIF 96-18A in recording warrants and
stock options. The Company uses fair value base method of accounting for
employee stock options or similar instruments. Under the fair value based
method, compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period.

Translation of Financial Statements

The U.S. dollar is the functional currency of the Company.
Canadian bank accounts are maintained and are translated using the exchange rate
in effect at the balance sheet date. Monetary assets and liabilities denominated
in foreign currencies are translated to United States dollars at the exchange
rate in effect on the balance sheet date. Non-monetary assets and liabilities
are translated at their historical rate. 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. The Canadian dollar is the function currency of the Canadian
subsidiaries and the Euro is the functional currency of the German subsidiary.
Unrealized gains and losses on the Company's foreign currency translation are
included in comprehensive income.



33

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|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 





NOTE 3  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 and depreciating percentages of the property and
equipment are as follows:

|Storage Equipment  | 10
    years
|------------------ | ------------
|Power Generator    | 25 years    
|Equipment          | 10
    years
|Computer Equipment | 3 years     
|Office Equipment   | 5
    years 
|Leaseholds         | 5 years     
|Building           | 25
    years

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

|                                  |   | December
    31, |   | December
    31,
|--------------------------------- | - | ---------------- | - | ----------------
|                                  |   | 2006             |   | 2005            
|Storage Equipment                 | $ | 4,720            | $ | 4,720           
|Power Generator                   |   | 38,800           |   | 38,800          
|Equipment                         |   | 11,539           |   | 7,155           
|Computer Equipment                |   | 11,133           |   | 3,027           
|Office Equipment                  |   | 3,713            |   | 1,357           
|Leaseholds                        |   | 67,813           |   | 64,232          
|Building                          |   | 6,548            |   | 201,265         
|Land                              |   | 78,570           |   | 49,292          
|Less
    Accumulated Depreciation |   | (29,168)         |   | (12,552)        
|                                  |   |                  |   |                 
|Total Net Property and Equipment  | $ | 193,668          | $ | 357,296         

Depreciation expense for the years ended December 31, 2006
and 2005 is $22,762 and $12,101. The Company valuates the recoverability of
property and equipment when events and circumstances indicate that such assets
might be impaired. Maintenance and repairs are expensed as incurred.
Replacements and betterments are capitalized. The cost and related reserves of
assets sold or retired are removed from the accounts, and any resulting gain or
loss is reflected in results of operations.

During the quarter ended June 30, 2006, the land and building with a book
value of $244,578 USD were sold to an unrelated party and a gain on sale of
$4,192 recorded.

NOTE 4  INTELLECTUAL PROPERTY

In 2006, $6,450 was capitalized representing legal costs for
patent applications. It is being amortized over 17 years on a straightline
basis. In 2006, accumulated amortization totalled $2,578 and amortization
expense was $2,081. The following table presents expected future amortization of
patent costs for each of the next five years:

34

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 





|2007               | $ | 2,366 
|------------------ | - | ------
|2008               |   | 2,366 
|2009               |   | 2,366 
|2010               |   | 2,366 
|2011               |   | 2,366 
|Thereafter         |   | 25,813
|                   |   |       
|Total amortization | $ | 37,643

NOTE 5 - COMMON STOCK TRANSACTIONS

The Company is authorized to issue 75,000,000 shares of
$0.0005 par value common stock. 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 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 USD 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 were expired. The piggyback warrants are
exercisable at $2.00 and expire in May 2007.

During 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. All of
these shares have been administratively issued.

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. All of these shares have
been administratively issued.

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). None have been
administratively issued at March 31, 2007.

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. All of these shares have been administratively issued.

35

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|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



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. To date, 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. At December 31, 2006, all shares
  have been administratively issued.
3. During year ended December 31, 2005, 25,878 shares valued
  at $30,287 were issued to an unaffiliated consultant for services provided.
  All of these shares have been administratively issued. An additional 19,629
  shares were administratively issued through the stock consultant plan for
  shares issued and work completed in 2004.

During the period ended 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 Company has an ongoing agreement to provide $5,000 CDN
monthly in shares to an unaffiliated individual for services provided. At
December 31, 2006 and 2005, 257,603 shares and 44,881 shares respectively, have
been issued, and 235,477 shares have still to be administratively issued.

During the quarter ended September 30, 2006, the Company
entered into an agreement with a related party (see Note 8) to convert
shareholder advances in to the Company's common stock. As a result, the related
party received 25 million restricted shares. All of these shares have been
administratively issued.

During the quarter ended September 30, 2006, a resolution was
approved by the Board of Directors for the Company to buyback up to 10,000,000
shares of common stock from its public held float at market prices. The buyback
can be initiated at management's discretion.

For the year ended December 31, 2006, the Company authorized the issuance of
25,559,295 shares of the Company's common stock valued at $1,188,908.

NOTE 6  COMMON STOCK OPTIONS

The Company utilizes the Black-Scholes Option Price
Calculation to compute the fair value of options issued for payment of services.
The assumptions used in such valuations include: risk free rate of 4.0%; no
dividends are paid; exercise periods of two to five years; and a volatility
factor of 44% to 171%.

36

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



Options granted during the year ended December 31, 2006 were in accordance
with various contracts for services that the company has signed.

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. In the year
ended December 31, 2006, 480,110 options were granted valued $60,741.

On July 1, 2006, the Company gave its chief financial officer
an option to purchase shares as of July 1, 2006, in an amount equal to 1% of the
number of shares outstanding on that date. The shares vest immediately upon
grant. In 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 (USD) per share for the
first year and $1.00 (USD) 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 (USD), $13,935 of which was 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 (USD), of which
$14,677 has been recorded 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 $401,613, all
of which have been recorded as of December 31, 2005. The contract also indicates
that 200,000 options for each consultant will be granted and vest as of April 1,
2006 and April 1, 2007.

On April 1, 2006, the Company granted to a consultant, 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 $63,513.

In the year ended December 31, 2005, 971,723 new options were
granted at an exercise price of $0.90 per share. Options valued at $1,049,381
vested and were recorded. Following is a summary of the status of the options
during the years ended December 31, 2006 and 2005:

37

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 





|                                                       |  | Number of Shares Under Options |               | Weighted Average Exercise Price
|------------------------------------------------------ |  | ------------------------------ | ------------- | -------------------------------
|Balance at January 1, 2005                             |  | 982,800                        |               | $       0.75                   
|Granted                                                |  | 971,723                        |               | 0.90                           
|Exercised                                              |  | -                              |               | -                              
|Forfeited                                              |  | -                              |               | -                              
|Outstanding at December 31, 2005                       |  | 1,954,523                      |               |                                
|Granted                                                |  | 1,159,988                      |               | 1.00                           
|Exercised                                              |  | -                              |               |                                
|Forfeited                                              |  | (150,000)                      |               | 0.75                           
|Options outstanding at December 31, 2006               |  | 2,964,511                      |               | $        0.90                  
|Options exercisable at December 31, 2006               |  | 2,964,511                      |               | $        0.90                  
|Weighted average fair value of options granted in 2004 |  |                                | $        0.69
|Weighted average fair value of options granted in 2005 |  |                                | $        0.33
|Weighted average fair value of options granted in 2006 |  |                                | $        0.06



None of the stock options outstanding and exercisable at December 31, 2006 were approved by shareholders.  Summarized information about stock options outstanding and exercisable at December 31, 2006 is as follows:



|                     |  | Outstanding Options           
|-------------------- |  | ------------------------------
|Exercise Price Range |  | Number of Shares Under Options
|$0.75 to $1.00       |  | 2,964,511                     



|                     |  | Exercisable Options           
|-------------------- |  | ------------------------------
|Exercise Price Range |  | Number of Shares Under Options
|$0.75 to $1.00       |  | 2,964,511                     

NOTE 7 - INCOME TAXES

At December 31, 2006 and 2005, the Company had deferred tax
assets calculated at an expected blended rate of 34% principally arising from
net operating loss carryforwards for income tax purposes. As management of the
Company cannot determine that it is more likely than not that the Company will
realize the benefit of the deferred tax asset, a valuation allowance equal to
the deferred tax asset has been established at December 31, 2006 and 2005.

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

|                                       |   | 2006        |   | 2005       
|-------------------------------------- | - | ----------- | - | -----------
|Net operating loss carryforwards       | $ | 880,902     | $ | 656,052    
|Stock based expenses                   |   | 1,045,774   |   | 556,485    
|Deferred tax asset                     |   | 1,926,676   |   | 1,212,537  
|Deferred tax asset valuation allowance |   | (1,926,676) |   | (1,212,537)
|Net deferred tax asset                 | $ | -           | $ | -          

At December 31, 2006, the Company has net operating loss
carryforwards of approximately $2,591,000, which expire in the years 2012
through 2026. The net change in the allowance account was an increase of
$714,139 for the year ended December 31, 2006.

NOTE 8 - RELATED PARTY TRANSACTIONS

From inception to June 30, 2006, the Company received
advances from shareholders as a source of funding. In the quarter ended
September 30, 2006 an agreement was made with a director and shareholder to
convert $1,000,000 USD to 25,000,000 restricted common shares. As a result of
this transaction, $1,400,000 has been recorded as a financing cost on the income
statement and an increase to stockholder's equity based on excess value of the
stock issued in exchange for shareholders advances. The balance of the
shareholder advances as of December 31, 2006, is $336,240. These advances are
unsecured, non-interest bearing and have no stated maturity.

38

---



|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



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 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 $120,000 CDN per annum
and a $60,000 signing bonus. As of December 31, 2006, $308,988 USD has been
accrued since the inception of the contract.

On August 22, 2005, the Company purchased property from Parmount Holdings,
Ltd, a related entity. The purchase price, as per the purchase contract, was
$292,820 CDN ($250,557 USD), with ownership taken in July 2005.

On September 8, 2005, the Company entered into a loan
agreement with a director for $42,285 USD 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 USD 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. As of
December 31, 2006, the entire balance of the loan is still outstanding.

On September 8, 2005, the Company entered into a loan
agreement with the wife of a director for $42,285 USD due on demand. The
principal amount of the loan shall bear interest at 10 percent until repaid and
calculated semiannually, not in advance. The lender has the option to convert
the cash loan to common stock at a price of $1.00 USD 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. As of December 31, 2006 $14,745
USD remains outstanding.

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
$42,000 CDN ($38,597 USD). During 2006 the consultant was paid $36,000 CDN
($31,680). No amounts are owing as of December 31, 2006.

On December 6, 2005, the Company entered into a loan
agreement with the company of a director for $108,113 USD 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 USD for a period of five years. As of December
31, 2006, the entire balance of the loan is outstanding.

In 2005, the Company entered into two debt agreements with a
shareholder/director. The related promissory notes, for a total of $195,000, are
uncollateralized, mature in 2015, and accrue interest at 5%. As of December 31,
2006, the entire balance of the loan is outstanding.

On November 23, 2006, the Company sold $466,000 USD of equipment to EPOD
Solar Canada Inc., a related entity.

On December 15, 2006, the Company entered into a loan
agreement with the company of a director for $86,247 with no set repayment
terms, including no interest. As of December 31, 2006, the entire balance of the
loan is outstanding.

39

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|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|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 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 $25,872 CDN ($22,168 USD) as legally owing. On April 20, a garnishee
notice was delivered to the Canadian Western Bank for collection of $18,000 CDN.
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
$116,610 CDN. This amount is being disputed by EPOD, which has recorded in its
accounts $93,182 CDN ($83,574 USD), which is the maximum amount it expects to be
required to pay. In the quarter ending September 30, 2006, $12,435 USD was paid
and $71,139 USD is outstanding.

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. EPOD must
pay royalties, which are the greater of 5% of the revenue from product sales or
$250 CDN for each product sold. Upon execution of the agreement, EPOD must pay
$5,000 CDN to the University, and a yearly fee of $5,000 beginning on September
1, 2006 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.

During the quarter ended September 30, 2006, the Company
entered into an agreement with a related party (see Note 8) to convert
shareholder advances into the Company's common stock. As a result, the related
party received 25 million restricted shares. All of these shares have been
administratively issued.

During the quarter ended September 30, 2006, a resolution was
approved by the Board of Directors for the Company to buyback up to 10,000,000
shares of common stock from its public held float at market prices. The buyback
can be initiated at management's discretion.

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 $17,019 CDN, plus all applicable taxes.
Future minimum lease payments as of December 31, 2006 are:

|Year  | Amount (USD)
|----- | ------------
|2007  | $           
|2008  |             
|2009  |             
|2010  |             
|2011  |             
|Total | $           

Other Matters

Previously it was reported that as of July 10, 2006, EPOD had acquired 51% of
the shares of CompMess, a German manufacturing company. Since that time, it has
come to the attention of EPOD that certain conditions required to complete the
share transfer and consequent change of ownership in Germany have not been
completed and the finalization of the acquisition has not yet occurred, pending
these matters. To date, EPOD has paid to CompMess shareholders 40,000 ($50,956
USD) as part of the purchase. During the quarter ending September 30, 2006, EPOD
loaned CompMess the amount of $406,766 USD with no stated terms. This amount is
considered by the Company to be a deposit towards the purchase price.
Additionally, the Company purchased inventory from CompMess in the amount of
$30,086 USD. Because this acquisition was not completed the Company is not
including CompMess financial statements in its consolidated financial reporting.

40

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|EPOD INTERNATIONAL INC.           
|----------------------------------
|NOTES TO THE FINANCIALS STATEMENTS
|DECEMBER 31, 2006                 



The Company was named as a co-defendant in a lawsuit seeking
damages of $100,000 USD. Because the lawsuit principally involces 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 May 2006, EPOD acquired all the inventory assets of ISE
Solar LLC, valued at $500,000. In exchange for the inventory, EPOD agreed to pay
the shareholders of ISE Solar LLC the sum of $500,000, with fifty percent down
and the remaining balance due on November 6, 2006. The Company failed to pay the
remaining balance upon the due date and the financial statements reflect the
balance still owed the shareholders of ISE Solar LLC as of year end. The Company
is in the process of working out a payment plan with the shareholders at this
time to resolve these payments being in default.

NOTE 11 - SUBSEQUENT EVENTS

On March 27, 2007, the Company signed a right to purchase
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 shall acquire all of the shares of Mill Creek
Developments Ltd. for $12,000,000 CDN ($10,359,600 USD) and 24,000,000 shares of
the Company's common stock. A deposit of $600,000 CDN ($520,440 USD) was paid on
March 30, 2007.

On April 5, 2007, the board of directors approved a resolution to increase
the number of common stock shares authorized from 75,000,000 to 200,000,000.



41

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



None.



ITEM 8A.  CONTROLS AND PROCEDURES



(a) Evaluation of Disclosure Controls and Procedures



The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer, concluded that the Company's disclosure controls and procedures, as of the end of such period, are effective in timely making known to them information relating to the Company and the Company's consolidated subsidiaries required to be disclosed in the Company's reports filed or submitted under the Exchange Act.



Since we are not an accelerated filer, we are not currently required to comply with Section 404 (Management Assessment of Internal Controls) of the Sarbanes-Oxley Act of 2002. We are in the process of implementing what we believe will be sufficient internal control structures and procedures for our financial reporting such that our management can provide the required certifications as to these structures and procedures in our Annual Report on Form 10-KSB for our fiscal year ending December 31, 2007.



(b) Changes in Internal Controls



There has been no change in the Company's internal control over financial reporting or in other factors during the year or quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting subsequent to the date of the evaluation referred to above.



42

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PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS



The following are the directors and executive officers of the Company:



Michael Matvieshen, 45, Chairman of the Board. Mr. Matvieshen became a director of the Company on January 13, 2004 upon the Company's acquisition of EPOD International Inc. and then Chairman of the Board on January 21, 2004.  Mr. Matvieshen is the founder of EPOD and was its President since inception. Prior to founding EPOD, he was President of Wolverine Resources Inc., a large oil upgrading refinery owned by a large venture capital firm. Mr. Matvieshen has also served as Vice President of Gen5 Tech Corporation, which managed the construction, capital budgeting and startup of an oil upgrading plant in Alberta.  Mr. Matvieshen has extensive experience in the industrial wastewater and industrial waste-oil treatment industries and has been in the technology business for the past fifteen years primarily as an entrepreneur and inventor.



L. Mark Roseborough,54, Director. Mr. Roseborough became a Director of the Company on January 21, 2004 and also serves in the capacity of President. From 1992 to 2003, Mr. Roseborough worked at Belkorp Industries Inc. where he was most recently Vice President of Manufacturing having direct responsibility for the operations of three pulp and paper mills and one small oil refinery. These operations had approximately 350 employees and $300 million in revenues. From November 1999 to 2003, he also held the position as President and Chief Executive Officer of Bluewater Fiber in Port Huron, Michigan (on behalf of owner Merrill Lynch) which was a large recycle pulp mill with revenues at full production of $35 million. In 1997, Mr. Roseborough also started, and co-owned, Belkin Paper Stock, a successful paper trading business. Prior to his work at Belkorp, he served from 1989-1992 as General Manager of Slave Lake Pulp overseeing the design, construction, hiring and training of employees for a $175 million state-of-the-art mechanical pulp mill owned by Alberta Energy Company. Mr. Roseborough is also a commercial pilot with a multiengine instrument rating.



Ljubisan Stamenic, 48, Director.  Dr. Stamenic became a Director of the Company on August 18th, 2005.  He is currently the Research and Development Head and Project Leader at the British Columbia Institute of Technology in Vancouver, Canada, where he formed and managed the Photovoltaic Energy Applied Research Lab. He received his Ph.D. in Engineering Physics at Simon Fraser University.  He has published over forty scientific papers at conferences and in technical journals and a number of books related to photovoltaic energy. He is president of the Canadian Solar Industries Association and Chair of  its Photovoltaic Division, has numerous professional memberships and serves on the Board of Directors of Carmanah Technologies and Matrix Solar Technolgies.  Dr. Staminic holds the patent to the Smart MPPT Controller and has developed two other products.  He has received numerous awards and grants for his research and is adjunct professor at the University of Belgrade.



Hans Schroth, 48, Director.  Mr. Schroth became a Director of the Company on January 21, 2004. Mr. Schroth comes to EPOD with an extensive business and management background in the food/beverage and franchise industry. Mr. Schroth has worked for start up organizations in the farming and import and export business. He currently serves on the Board of Directors of Globus Corporation and part owner of Celltech Labs.



Lawerance J. Faulk, 62,Director, Mr. Faulk became a Director of the Company on July 18, 2006. Mr Faulk a former Washington State Senator and International Marketing Manager for the Boeing Company, brings EPOD extensive state and federal governmental, and international business experience, and will be integral to the international expansion of EPOD's solar panel manufacturing and renewable energy business.



Rene Dureault,65, Director, Mr. Dureault became a Director of the Company on October 16, 2006. Mr. Dureault, president of Mill Creek Developments Inc., a British Columbia based commercial real-estate development firm, brings to EPOD over forty years of financial and business experience.



Robert Stabinsky, 54, Director, Mr. Stabinsky became a Director of the Company on October 16, 2006. Mr Stabinsy, P. Eng., is president of Innovation Systems Engineering Inc., a Pennsylvania  based developer and manufacturer of equipment, control systems, and full factory solutions to the solar, semiconductor, and various other industries. Mr. Stabinsky brings to EPOD extension solar panel manufacturing expertise and industry specific experience that will be instrumental to the effective construction and roll out of the Company's solar panel factories.



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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE



Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors, executive officers and persons who own beneficially more than 10% of the Company's common stock to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company or advice that no filings were required, during fiscal year 2005 all officers, directors and greater than 10% beneficial owners complied with the Section 16(a) filing requirements.



Audit Committee



The Company's Board of Directors has established a separately designated, standing Audit Committee (as defined in and established in accordance with Section 3(a)(58)(A) of the Exchange Act) to oversee the accounting and financial reporting processes of the Company and the audits of our financial statements.  The members of the Audit Committee are Peter Lacey (Chair), and Hans Schroth.



Under the new rules of the SEC brought about by the Sarbanes-Oxley Act, companies are required to disclose whether their Audit Committees have an "audit committee financial expert" as defined in Item 401(h) of Regulation S-B under the Exchange Act and whether that expert is "independent" as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act. The Board of Directors has determined that although the two members of the current audit committee are "independent" and have ability to understand financial reporting, they may not fully meet the description of "financial experts" as defined in the Regulation. The Board of Directors is evaluating qualified candidates to expand the Board at this time.



The company has recently approved a Code of Ethics (Exhibit 14).



44

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ITEM 10.  EXECUTIVE COMPENSATION



The following table sets forth certain information regarding compensation paid during each of the Company's last three fiscal years to its chief executive officer and other executive officers whose total annual salary and bonuses exceeded $100,000 (the named executive officers).



SUMMARY COMPENSATION TABLE



|                            |  |             |  |                      |            | Long Term 
Compensation 
Awards                           |            |           |   |                         | 
|--------------------------- |  | ----------- |  | -------------------- | ---------- | --------------------------------------------------------- | ---------- | --------- | - | ----------------------- | 
|Name and Principal Position |  | Fiscal Year |  | Annual 
Compensation |            | Securities 
Underlying 
Options 
(in shares, 
cumulative) |            | Bonus ($) |   | All Other 
Compensation | 
|Salary ($)                 
|                            |  |             |  |                      |            |                                                           |            |           |   |                         | 
|L. Mark Roseborough         |  | 2006        |  | $                    | 99,121(2)  |                                                           | 480,110(3) |           |   |                         | 
|Frank A. Wisehart (7)       |  | 2006        |  | $                    | 30,000     |                                                           | 479,878(8) |           |   |                         | 
|L. Mark Roseborough(1)      |  | 2005        |  | $                    | 102,924(2) |                                                           | 471,723(3) |           |   | 0                       | 
|George Drazenovic (4)       |  | 2005        |  |                      | 48,032     |                                                           | 200,000(5) |           |   | 0                       | 
|L. Mark Roseborough(1)      |  | 2004        |  | $                    | 49,848(2)  |                                                           | 333,800(3) |           |   | 51,462                  | 
|Ronald McIntire(6)          |  | 2004        |  | $                    | 0          |                                                           | 0          |           | $ | 0                       | 
|President and CEO           |  | 2003        |  | $                    | 0          |                                                           | 0          |           | $ | 0                       | 
|                            |  | 2002        |  | $                    | 0          |                                                           | 0          |           | $ | 0                       | 



(1)   Mr. L. Mark Roseborough became President on January 15, 2004, and a contact was entered into with his company, Rosborough Holdings for his services as President.

(2)   Mr. Roseborough has not yet been paid these amounts, as it is being set up as a Company accrual until sufficient funds can be obtained.

(3)   On July 31, 2004, July 31, 2005, and July 31,2006 as part of his compensation package, Mr. Roseborough received 233,800, 471,723, and 488,110 options respectively to purchase  restricted shares of common stock, which represented one (1%) of the outstanding common shares of the Company on those dates, and 100,000 options in 2004 to purchase restricted shares as compensation for being a Director

(4)    On April 1, 2005, EPOD entered into a contract with Mr. George Drazenovic for his services as Chief Financial officer and resigned on March 31, 2006.

(5)    On April 1, 2005, as part of his compensation package, Mr. Drazenovic received 200,000 options to purchase shares of common stock.

(6)    Mr. McIntire became the President and Chief Executive Officer of the Company in November 1999 and resigned on January 21, 2004.

(7)    On July 1, 2006, EPOD entered into a contract with Mr. Frank A. Wisehart for his services as Chief Financial officer.

(8)    On July 1, 2006, as part of his compensation package, Mr. Wisehart received 479,878 options to purchase restricted shares of common stock, which represented one (1%) of the outstanding common shares of the Company on July 1,2006.



COMPENSATION OF DIRECTORS FOR FISCAL 2006



None of the seven directors receives any cash compensation.



DIRECTOR AND EXECUTIVE OPTIONS GRANTED IN FISCAL 2005



On July 31, 2006, the Company granted 480,110 options to purchase shares of restricted common stock to President L. Mark Roseborough pursuant to an option agreement that is part of his compensation agreement.



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On July 1, 2006, the Company granted 479,878 options to purchase shares of common stock to CFO Frank A. Wisehart pursuant to an option agreement that is part of his compensation agreement.



ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT



The following table sets forth information with respect to beneficial ownership of our outstanding stock as of December 31, 2006 by (i) each person known to the Company to be the beneficial owner of more than 5% of the Company's common stock; (ii) each of the Company's directors; (iii) each executive officer named in the Summary Compensation Table; and (iv) all of the Company's executive officers and directors as a group.



|                                                                   |  | Shares Beneficially 
Owned
|------------------------------------------------------------------ |  | --------------------------
|Name of Beneficial Owner                                           |  | Number                    
|Michael Matvieshen, Chairman                                       |  | 37,515,744(1)             
|L. Mark Roseborough, President                                     |  | 1,285,633(2)              
|Hans Schroth, Director                                             |  | 270,000(3)                
|Peter Lacey  (Company Director until resignation on July 28, 2006) |  | 18,318,000(4)             
|Frank A. Wisehart, Chief Financial Officer                         |  | 479,878(5)                
|All executive officers and directors as a group (5 persons)        |  | 57,869,255                



*  Based on 72,812,391 shares outstanding as of  March  31, 2007 **  Less than one percent



(1)   Includes 37,116,248 shares of common stock owned directly, 299,496 shares of common stock owned indirectly through his spouse and 100,000 options.

(2)   Includes 1,285,633 options.

(3)   Includes 170,000 shares of common stock owned by his spouse and 100,000 options.

(4)   Includes 18,164,000 shares of common stock owned directly, 54,000 shares owned by a related company, 44,000 of which have not been administratively issued and 100,000 options.

(5)   Includes 479,878 options



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



As permitted by Nevada law, the Company's Articles of Incorporation provide that the Company will indemnify its directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil or criminal action brought against them on account of their being or having been Company directors or officers unless, in any such action, they are adjudged to have acted with gross negligence or willful misconduct. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable.



From January 13, 2004 to December 31, 2006, the Company received advances from shareholders totaling $1,048,178. These advances are unsecured, non-interest bearing and have no stated maturity.



In 2003, the Company entered into a promissory note and loan agreement with a shareholder, Mike Matvieshen 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 still outstanding.



On July 1, 2004, the Company entered into an agreement with Roseborough Holdings, Inc.  Under the terms of the agreement, the Company pays a monthly amount, which is fixed from time to time by the board of directors, of $120,000 (Cdn.) per annum with a $60,000 (Cdn.) signing bonus, for the services of Mark Rosborough.  Approximately $205,848 (USD) has been accrued under this agreement as of December 31, 2006.



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On December 3, 2004, the Company entered into an agreement with Parmount Holdings, Ltd for the purchase and construction of its corporate headquarters which was completed in 2005. Under the terms of the agreement, the purchase price, as per the purchase contract, was $292,820 excluding GST. Paramount Holdings is an entity one third owned by the spouse of Mike Matvieshen.  The following directors, Mark Roseborough, Hans Schroth, and Denor equipment, a company owned by Peter Lacey, have provided financing to Parmount Holdings Ltd.



During the quarter ended December 31, 2005, the Company authorized the issuance of 50,537 shares to a consultant, who is the brother of Mark Roseborough, a director, for payment of services provided. At year-end, 33 shares have yet to be administratively issued.  Also during the year the consultant was paid $42,000 CDN ($38, 597 USD), and an additional $3,000 has been accrued for work in December.



On September 8, 2005, the Company entered into a loan agreement with Peter Lacey, a director, for $42,885 USD 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 USD for a period of five years.



On September 8, 2005, the Company entered into a loan agreement with the spouse of Hans Schroth, a director, for $42,885 USD 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 USD for a period of five years.



On December 6, 2005, the Company entered into a loan agreement with Denor Equipment company of Peter Lacey, a director of EPOD for $108,113 USD 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 USD for a period of five years.



In 2005, the Company entered into two promissory notes for $195,000 with a shareholder/director, Mike Matvieshen, maturing in 2015, with interest accrued at 5% on the unpaid principal.



On November 23, 2006, the Company sold $466,000 USD of equipment to EPOD Solar Canada Inc., a related entity.



On December 15, 2006, the Company entered into a loan agreement with the company of a director for $86,246.84 with no set repayment terms, including no interest.  As of December 31, 2006, the entire balance of the loan is outstanding.





ITEM 13.  EXHIBITS



Exhibits



Exhibit 14 -   Code of Ethics



Exhibit 23   Consent to Incorporation from Public Accountants, filed herewith.



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.



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ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES



Williams & Webster P.S.has served as the Company's Principal Accountant since July 13, 2004. Their fees billed to the Company for the past two fiscal year are set forth below:



|                            |  | Fiscal year ending 
December 31, 2006 |  | Fiscal year ending 
December 31, 2005
|--------------------------- |  | ------------------------------------- |  | -------------------------------------
|Audit Fees                  |  | $19,118                               |  | $15,000                              
|Audit Related Fees (Review) |  | $20,875                               |  | $17,026                              
|Tax Fees                    |  | $1,357                                |  | $4380                                
|All Other Fees              |  | $0.00                                 |  | $1,398                               



As of December 31, 2006, the Company's Board of Directors did not have a pre-approval policy for the fees of the principal accountant.  It is in the process of adopting such a policy.



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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/ Frank A.
      WisehartChief Financial
      OfficerApril 00, 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 | President and Chief
    Executive Officer |     
|L. Mark Roseborough         |                                           |     
|/s/ MICHAEL MATVIESEN       | Director                                  |     
|Michael Matviesen           |                                           |     
|/s/ LJUBISAN STAMENIC       | Director                                  |     
|Ljubisan Stamenic           |                                           |     
|/s/ RENE DUREAULT           | Director                                  |     
|Rene Dureault               |                                           |     
|/s/ HANS SCHROTH            | Director                                  |     
|Hans Schroth                |                                           |     
|/s/ ROBERT STABINSKY        | Director                                  |     
|Robert Stabinsky            |                                           |     
|/s/ LAWERNCE FAULK          | Director                                  |     
|Lawernce Faulk              |                                           |     
|                            |                                           |     

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