UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                 FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the Fiscal Year ended:  December 31, 2007
     OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
     EXCHANGE ACT OF 1934
                 For the transition period from: _____ to ____

                        Commission File No. 333-120688

                             AMERICAN TONERSERV CORP.
                ----------------------------------------------
                (Name of Small Business Issuer in its Charter)

            Delaware                                       33-0686105
-------------------------------                    -----------------------
(State or Other Jurisdiction of                    (I.R.S. Employer Identi-
Incorporation or Organization)                         fication No.)

             420 Aviation Blvd. Suite 103, Santa Rosa, Ca 95403
          ------------------------------------------------------------
          (Address of Principal Executive Offices, Including Zip Code)

                  Issuer's Telephone Number:  (800) 736-3515

Securities Registered Pursuant to Section 12(b) of the Act:  None.

Securities Registered Pursuant to Section 12(g) of the Act:  None.

Check whether the issuer is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. [ ]

Note - Checking the box above will not relieve any registrant required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.

Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).  Yes [ ]   No [X]

State issuer's revenues for its most recent fiscal year:  $3,630,531.

As of March 11, 2008, 61,590,956 shares of common stock were outstanding, and
the aggregate market value of the common stock of the Registrant held by non-
affiliates on that date was approximately $8,547,763.

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

Documents incorporated by reference: None.


                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

Available Information

     We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC").
You may read and copy any document we file with the SEC at the SEC's public
reference room at 100 F Street, NW, Washington, DC 20549. Please call the SEC
at 1-800-SEC-0330 for information on the public reference room. The SEC
maintains an internet site that contains annual, quarterly and current
reports, proxy and information statements and other information that issuers
file electronically with the SEC. The SEC's internet site is www.sec.gov.

     Our internet address is www.americantonerserv.com. You can access our
Investor Relations webpage through our internet site,
www.americantonerserv.com, by clicking on the "Investor Relations" link at
the top of the page. We make available free of charge, through our Investor
Relations webpage, our proxy statements, Annual Reports on Form 10-KSB or 10-
K, Quarterly Reports on Form 10-QSB or 10-Q, Current Reports on Form 8-K and
any amendments to those reports filed or furnished pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably
practicable after such material is electronically filed with, or furnished
to, the SEC. The reference to our website address does not constitute
incorporation by reference of the information contained in the website and
should not be considered part of this document. You can request a printed
copy of these documents, excluding exhibits, at no cost, by contacting
Investor Relations at 800-736-3515, 410 Aviation Blvd., Suite 103, Santa
Rosa, CA  95403, Attention: Ryan Vice, Chief Financial Officer.

OVERVIEW

     American TonerServ Corp. (the "Company," "ATS," "we," or "us") is
building a nationwide brand serving the printing needs of small- and medium-
sized businesses by consolidating leading independent companies in the $6
billion compatible cartridge and printer services industry, providing
customers with economical, top-quality, environmentally-friendly recycled
laser printer cartridges, print management, printer and other office
equipment service, printers and other office equipment and supplies through
local service teams.

     We intend to leverage nationwide buying power of recycled "compatible"
toner cartridges from re-manufacturers through volume discounts.  We also
remanufacture compatible cartridges in our own facilities.  ATS companies
collect spent toner cartridges and recycle them by delivering them to re-
manufacturers or our own facilities.  Additionally, upon request, we provide
our customers Original Equipment Manufactured ("OEM") cartridge products.

     We plan to grow primarily through acquisitions of businesses and
customer lists of compatible toner cartridge distributors and by hiring
independent sales representatives in the largest 30 metropolitan areas of the
United States.  Additionally, we expect to achieve organic growth of at least
10% by being a sales driven organization.  Our in-house Mergers and
Acquisitions Team seeks to acquire businesses that meet our acquisition
criteria.  Our in-house Integration Team supports the management and
personnel of acquired companies to become integrated into American TonerServ,
including adapting their processes, systems and culture to match our own. We

                                    2

provide acquired companies with corporate buying power, improved logistics,
and management and systems support intended to improve operational
profitability.

     We have a scalable web-based platform for order taking, fulfillment,
billing, collections, payments and customer service to bring efficiencies to
the marketplace. We have established a nationwide independent service network
to provide service on printers outside of our local service areas. This
independent service network is known as our Preferred Provider Network, and
we have been servicing printers and other office equipment through this
Network for over ten years.  We have established a network of office
equipment service and supply dealers through which we provide customers with
time and material programs or full service maintenance on their printers.
Additionally, we have a relationship with several third party vendors to
provide our customers with a print management program. The print management
program allows the customer to pay for their printers on a cost per page
basis, which we believe is a competitive advantage for ATS and for our
customers.

Additional Information

     ATS was founded as a Delaware corporation in 1995 and is headquartered
in Santa Rosa, California. We were originally incorporated under the name
"Manage Maintenance Systems, Inc." and on November 13, 1995 we amended our
Certificate of Incorporation to change our name to "Q MATRIX, Inc."  On
January 3, 2005, we amended our certificate of incorporation to change our
name to "American TonerServ Corp."

     After our incorporation in 1995, we merged with Critical Systems
Management, Inc. (CSMI) in December 1995.  CSMI was in the business of
repairing and maintaining office equipment.  After the merger, we commenced
operating in the office equipment and repair business in Phoenix, Arizona.
We began by offering agreements to small- and mid-sized businesses to provide
service for their office equipment for specific periods of time.

     On August 12, 2005, we became a reporting company under the federal
securities laws. On February 14, 2006 our common stock was accepted for
quotation on the OTC Bulletin Board. Our trading symbol is currently "ASVP."

     On March 16, 2006, we effected a one for one hundred (1 for 100) reverse
split of the outstanding shares of our common stock. Effective August 21,
2006, we effected a ten for one (ten shares for one existing share) forward
stock split of the outstanding shares of our common stock.  All numbers of
shares and per share amounts in this report have been adjusted to give effect
to the reverse and forward splits, unless otherwise stated.

     On July 5, 2006, the Company acquired the customer list of Computech
Printer Solutions, Inc ("Computech"). Computech has been engaged in the
distribution of remanufactured laser toner cartridges, primarily to business
customers.  The Company is using the customer list to solicit sales of
remanufactured toner cartridges to increase the company's sales of such
products. The Company paid $30,000 in cash at closing and an additional
payment of $20,000 on August 31, 2006.  The Company also gave Computech a two
year, non-interest bearing, convertible, contingent note in the amount of
$242,000. On June 11, 2007, the Company entered into an amendment to the
customer list acquisition agreement with Computech. Pursuant to the
amendment, the Company paid $7,500 over a three month period. Computech also
received five percent of certain gross sales through December 31, 2007. As a

                                    3

result of the amendment, the purchase price of the customer list was reduced
by $128,000. Accordingly, the note payable was also reduced by $128,000.  The
conversion valuation in the amount of $16,667 was also reversed since a
portion of the note is no longer convertible into the Company's common stock.
At December 31, 2007 an additional adjustment of $18,300 was made to reduce
the contingent note payable to zero per the terms of the amended agreement.
This note had been paid in full as of December 31, 2007.

     On August 26, 2006, the Company entered into a Customer List Purchase
Agreement with Laser Cartridge Recharge Systems, Inc. in which the Company
acquired Laser Cartridge Recharge Systems' list of customers and related
information for $104,000.  The terms of the agreement included a $5,000 down
payment and monthly payments of 25% of gross sales for year one and 20% of
gross sales for year two.  These payments assume annual gross sales of
$220,000. In August 2007, management determined that the value of the Laser
Cartridge Recharging Services customer list should be reduced by $89,115
based on a reduction of the estimated future amount of revenues generated by
this list. Accordingly, the note payable was also reduced by $89,115 to
reflect the estimated future payments remaining on the note.  The note
balance was $2,161 at December 31, 2007.

     On December 20, 2006, the Company entered into a Customer List Purchase
Agreement ("Agreement") with Brody Enterprises, which had been doing business
as "Sun Products," pursuant to which the Company acquired Brody Enterprises'
list of customers and related information. Brody Enterprises has been engaged
in the distribution of remanufactured laser toner cartridges, primarily to
business customers. The Company is using the customer list to solicit sales
of remanufactured toner cartridges to increase the Company's sales of such
products.  The Company gave Brody Enterprises a three year non-interest
bearing note in the amount of $800,000 with four annual payments of $200,000
beginning on January 2, 2007.  On January 2, 2007 the Company made its first
payment of $200,000. On January 14, 2008 the Company paid Brody Enterprises
$50,000 as a partial payment on $200,000 due on January 2, 2008 and a $5,000
extension fee.  On February 8, 2008, the Company paid Brody Enterprises
$150,000 to satisfy the remaining balance that was due on January 2, 2008.

     On April 1, 2007 the Company purchased certain assets of Optima
Technologies, Inc. ("Optima"). Optima Technologies has been engaged in the
business of print management, printing supplies and repair service since
1987. Optima's business model is consistent with the Company's stated
acquisition targets. As consideration for the purchase of Optima, ATS paid
approximately $2,550,000 in cash and promissory notes, a portion of which
will be convertible into stock of ATS.

     On December 28, 2007 the Company purchased certain assets of Tonertype
of Florida, LLC ("Tonertype"}.  Tonertype has been engaged in the business of
print management, printing supplies and repair service since 1995.
Tonertype's business model is consistent with the Company's stated
acquisition targets.  As consideration for the purchase of Tonertype, ATS
paid approximately $4,000,000. The consideration paid included $1.5 million
in cash and approximately $2.5 million in promissory notes, a portion which
will be convertible into stock of ATS.

     On March 3, 2007, the Company established NC TonerServ, LLC, a wholly-
owned subsidiary of ATS, in Morrisville, North Carolina.  The Company hired 7
personnel and granted options to four key employees for 75,000, 45,000, 5,000
and 5,000 shares of common stock, respectively.  These options have an
exercise price of $0.25 per share and vest over a four year period.

                                    4

BUSINESS

     American TonerServ purchases re-manufactured toner cartridges from a
number of selected re-manufacturers and re-manufactures some cartridges in
our own facilities.  The products cover a wide base of laser printers,
including all major makes and models and monochrome and color.  Historically,
re-manufacturers have provided us with base pricing that is at or below
current distributor pricing.  Upon placing an order with the re-manufacturer,
the product is either dropped shipped to the end user or sent to an ATS
warehouse.  This enables American TonerServ to minimize the need for
inventory warehousing.  Products are private labeled and packaged per our
instructions.  We do not rely on any one or a selected number of re-
manufacturers nor do we have long-term contractual arrangements with these
re-manufacturers.  Management believes that there is a significant number of
companies that can provide high quality laser toner compatible products at
competitive prices and that our operations would not be impacted by the loss
of any one supplier or suppliers.

     As we market re-manufactured toner products, we believe that we will
have the opportunity to develop an expanded relationship with our customers.
Based on customers' needs, we can provide additional service and maintenance
for all makes and models of office equipment. We have the expertise in the
service areas of copiers, faxes, computers, plotters, printers and some
brands of phone equipment.  In addition, we can provide service for Regional
and National accounts via our Preferred Service Provider network.

SERVICE AND MAINTENANCE PROGRAMS - Our maintenance programs offer the
advantages of maximizing productivity through less equipment downtime,
reduced administrative costs, controlled repair costs and simplified
management, all through a competitively priced service program.

PRINT MANAGEMENT - Our print management program allows us to track the actual
usage on our customer's network printers by using specialized software. This
program allows us to provide customers with a cost per printed page program
covering supplies and repairs for their printers. We can remotely manage
network printers from our regional office to provide a quicker and more
efficient response.

PREFERRED PROVIDER NETWORK - Our nationwide Preferred Provider Network
includes partnerships with companies that provide guaranteed response times,
quality service and depth of expertise.  We believe that the ability to
service and support customers on a nationwide basis for all makes and models
of printers on a cost effective basis sets us apart from our competitors.  We
generally employ our own service technicians in our hub cities and outsource
elsewhere.  There are no formal written agreements between American TonerServ
and the Preferred Service Providers (PSPs). There is a mutual understanding
as to service levels, response times and costs to be billed to us by our
network.

AXON TECHNOLOGIES, INC. - In connection with the acquisition of Optima
Technologies, the Company entered into a Management Agreement with Axon
Technologies, Inc. ("Axon"), a non-profit organization that employs persons
with disabilities.  Axon distributes its products to state agencies in
Florida.  Under this Management Agreement, Optima will provide management
services for Axon and will receive a management fee equal to 90% of the
amounts received by Axon for its products.


                                    5


CORPORATE STRATEGY

     Key components of our business strategy are: (1) Maintenance of high
product quality through establishment and use of defined standards for the
re-manufacturer suppliers; (2) Maintenance of competitive product pricing;
(3) Differentiating our toner product from the competitors by offering the
innovative solution of combining service and toner; (4) Maintaining our
distinctive competitive edge by offering both office equipment supplies and
service nationally by utilizing and expanding our existing network of service
providers; and (5) implementing a strategic marketing plan to access and
increase revenue through existing distribution channels.

     Management is working to position American TonerServ to become a
significant nationwide re-manufactured toner cartridge distribution company
based on the following characteristics of our business:

  *  QUALITY OF CARTRIDGES - Our products are lab-tested and guaranteed to be
100% compatible with the machine for which they were engineered. ATS has
selectively partnered with the top compatible cartridge manufacturers in the
world.  Our compatible toner cartridges are made in factories certified under
the International Organization for Standardization ("ISO") 9001-2000, ISO
14001, and ISTA2 Quality Systems.

  *  VOLUME DISCOUNTS ON CARTRIDGES - We have established strategic
relationships with several large toner re-manufacturing companies that allow
us to acquire toner cartridges at very competitive pricing.  Due to volume
discounts, our cost to acquire re-manufactured cartridges is often less than
the cost for the small independent companies to produce them. ATS volume
discounts help to improve the gross margin on the businesses that we acquire.
Additionally, ATS has acquired businesses that manufacture their own
compatible cartridges. However, the majority of the compatible cartridges are
acquired from our strategic vendors American TonerServ packages service
offerings with competitively priced toner cartridges with the intention of
maximizing revenue.

  *  CENTRALIZED PROCESSING - We have developed a web-based, centralized
process that enables us to cost effectively process toner and service orders
on a scalable basis.  We handle order taking, fulfillment, billing,
collections, payments and customer service calls from our National Service
Center. We track all product and service orders to assure timely fulfillment.

  *  PREFERRED PROVIDER NETWORK - Many of the small local and regional toner
cartridge companies serving business customers today are limited in their
ability to service their customers outside of their geographic marketplace.
American TonerServ currently offers national service capabilities through a
proprietary database of service providers on all makes and models of office
equipment.  The Company is not currently using a vast majority of these
service providers, but management believes working relationships can be
reactivated as demand increases.  This capability should allow significant
incremental sales opportunities to existing customers with multiple locations
requiring service.  Management believes that American TonerServ's ability to
provide access to our nationwide service to its customers will be an
attractive strategic benefit to small local and regional toner cartridge
companies that we target for acquisition. Our service offerings will afford
the opportunity to generate additional revenues per existing client and
offset marketing costs.  Additional benefits include the ability to open up
new markets for toner cartridge sales to larger, multi-site customers who
require service as a condition for buying toner cartridges.

                                    6


  *  OTHER SERVICE OFFERINGS - We also provide service on a time and
materials basis and service agreements on all makes and models of printers.

ACQUISITION STRATEGY

     Management believes that the compatible toner cartridge market is mature
and prime for consolidation and integration.  As the market continues to
mature, a number of re-manufacturers and distributors will be pressured to
expand their revenue and enhance profitability, leading some to consider
partnering with or selling to a larger national brand.  American TonerServ
will offer its service capabilities, national network and service and
maintenance expertise to attract partners seeking to transition their
businesses.

     We are primarily targeting businesses that have $2.0 to $20.0 million in
annual sales where the owner of the business would like to remain with the
business and grow it after our acquisition.  These businesses must be
currently marketing compatible toner and ink cartridges primarily to
businesses.  If we locate businesses fitting our targeted profiles in the top
30 major metropolitan markets in United States, we will pursue them.  Our
plans call for 6 to 10 acquisitions within the next 18 months. We anticipate
using a combination of cash, notes, earn-outs and stock to make the
acquisitions.  The acquisitions may include only the acquisition of the
customer lists of such companies.

CHALLENGES FOR INDEPENDENT TONER COMPANIES - As the market continues to
develop and mature, management believes that it is becoming increasingly
difficult for smaller re-manufacturers to maintain profitable operations.
These companies are challenged to provide all of the makes and models
necessary to supply the current broad printer base.  Smaller re-manufacturers
have also faced significant problems with increasing cartridge design
complexity. As a result, management believes that many smaller re-
manufacturers are unable or unwilling to continue to invest the capital and
research necessary to maintain production levels and stay current with
technology changes.

PROVIDING AN EXIT STRATEGY - Our strategic market evaluation indicated that a
number of the distributors have reached "burn out" as small independent
distributors and would entertain a strategic business partnership or sale to
a strategic buyer. Management believes that it can provide tangible benefits
to these business owners and an eventual exit strategy that will be
financially attractive to them.  Being able to provide a gradual exit
strategy through an acquisition and utilizing the Company's national service
network and back office capabilities would provide tangible strategic benefit
to the selling shareholders of these companies

PROFILE OF A TYPICAL DISTRIBUTOR/RE-MANUFACTURER CANDIDATE - Since 2006, the
Company has focused on target acquisition candidates with revenue in the
range of $250,000 to $1.5 million of annually.  In 2007, the Company focused
on target acquisition candidates with revenue in the range of $3.0 to $5.0
million.  Going forward, the Company plans to target candidates in the $2.0
to $20.0 million annual revenue range.  Our research indicates that these
companies generally produce operating income on the range of 15% to 20% of
revenue.  They typically have been in business for up to 10 years and have
fewer than 50 employees.  They generally provide service on a local or
regional basis.  They generally have a national account base but are unable
to provide service to their customers nationally. We believe that many of

                                    7


them are looking for an exit or merger. Additionally, ATS will focus on
purchasing customer lists in the markets where we have an established base of
business with existing annual revenues in the range of $500,000 to $1.5
million.  This business will be rolled into the local ATS hub business with
large expected synergies.

EXPECTED PROFILE OF A TYPICAL DISTRIBUTOR/RE-MANUFACTURER AFTER ACQUISITION -
After we acquire a distributor or re-manufacturer, we believe that the
acquired entity would phase out of the re-manufacturing process as a result
of our buying power.  When possible, the products are drop shipped directly
from our manufacturer to the end-user to permit for low inventory expenses
and elimination of delivery issues.  Service is available to their national
and regional accounts to provide incremental revenue growth.  The product
quality is usually improved by acquiring products from re-manufacturers with
whom ATS has established relationships and standards.  We believe that
acquired companies will see significant economies of scale by turning over
the administration and accounting functions to our corporate operation.  The
end result is expected to be an opportunity for the prior owner/team to
concentrate primarily on selling and customer relations.  It is through these
benefits of consolidation that there is an increase in the profitability of
the acquired entity.

THE MARKET FOR TONER AND INKJET CARTRIDGES

     Based on a review of available market research, management estimates
that the North American market size for toner and inkjet cartridges is more
than $21.0 billion and that more than 12 million desktop laser printers were
shipped in 2005. Industry estimates indicate that re-manufactured compatible
cartridges account for approximately $6.0 billion of total cartridge sales.
Additionally, the industry expects growth in the sale of color laser toner
supplies at an accelerated rate over the next five years.

     Historically, printer manufacturers such as Hewlett-Packard ("HP"),
Lexmark, Canon and Epson, have coupled low priced laser printers with high-
priced disposable cartridges.  These manufacturer's branded replacement toner
cartridges are priced at roughly one and one-half times compatible re-
manufactured cartridge product prices.  Printers are sold at minimal
operating margins and manufacturers have profited significantly by selling
disposable cartridges.  It is estimated that HP owns 65% of the U.S. market
share of toner and ink cartridges. It appears that HP's strategy is to
introduce numerous new printers models into the market annually. This allows
HP the ability to sell their OEM cartridges whereby they make good margins.
It takes the remanufacturers anywhere from 6 to 18 months to be able to offer
to the market place a high-quality competitive compatible cartridge. The
remanufacturers need to reverse engineer the cartridges and collect an
adequate supply of the original cores to produce the compatible cartridges.

     Management believes there are more than 2,000 cartridge re-manufacture
companies in the United States.

  *  GROWING MARKET SHARE FOR RE-MANUFACTURED CARTRIDGES - Management
believes that while re-manufacturers have been steadily increasing market
share during the past 10 years, a large majority of buyers for small- and
medium-sized businesses are still purchasing new cartridges from the printer
manufacturers. As a result, management believes that there is substantial
opportunity to further penetrate this market.  According to the magazine

                                    8


Imaging Spectrum, compatible cartridges account from approximately 25% of the
market and expect to grow to 35% by the year 2010.

  *  PRICING ADVANTAGE - The competition in the laser cartridge market has
increased as independent companies started refilling and rebuilding toner and
ink cartridges and selling them for approximately half the price of new
cartridges.  This has allowed re-     manufacturers to gain market share at
the expense of the OEM cartridge providers.  There has been significant
consolidation of the cartridge remanufacturers over the past five years. The
major players are Clover Technologies, MSE, NuKote, Print Rite and West Point
Products.

  *  THE GREEN FACTOR / ECO-FRIENDLY - The growing pro-environment or "green"
focus by consumers and government agencies could help accelerate growth in
market share for re-manufacturers because cartridge components are diverted
from being treated as waste by re-manufacturing processes.  Laser printer
cartridges, inkjet printer cartridges, copier cartridges and fax cartridges -
along with used cell phones (collectively called "e-waste") have been
somewhat overlooked as recyclable since they are relatively new products. E-
waste, however, is having an increased impact on our environment.

     ATS products help to reduce landfills, save energy, reduce long-term
waste matter as a result of the following factors:

  *  100% of our compatible toner/ink cartridges are by definition recycled
cartridges vs. OEM cartridges.

  *  Every compatible cartridge we sell keeps approximately one half pound of
waste out of landfills.

  *  Our compatible cartridges use approximately 97% recycled parts.

  *  QUALITY FACTORS - The recent creation of re-manufactured product quality
standards, as well as maturation of the industry segment, is expected to
diminish customer concerns that re-manufactured toner cartridges are inferior
to OEM products.

  *  REDUCED PRINTER MANUFACTURER RESISTANCE - The biggest challenge to re-
manufacturers is competing against the original equipment manufacturers.  The
gain of market share for the re-manufacturers has been subject to OEM
resistance, including use of unfair tactics such as microchips which disable
equipment or voidable warranties if non-OEM replacement cartridges are used.
Both the United States and the European Union have taken legislative action
against these non-competitive tactics, which creates an even playing field
for re-manufacturers and distributors like ATS.  Additionally, printer
manufacturers focus attention on introducing new printer models on a 12- to
18-month cycle.  Consequently, customers with older printers look to realize
maximum value out of their capital expenditure (printers) and continue to
purchase compatible supplies and request repair service.

CUSTOMERS

     During the years ended December 31, 2007 the Company, through Axon,
selling products to state agencies in Florida, accounted for approximately
$431,549 of our revenues, representing approximately  12% of our revenue.
During 2006, one customer, Xerox Corporation, accounted for approximately
$76,540 of our revenues, representing 17% of our revenues.

                                    9


     We had no other customers accounting for more than 10% of our revenue.
Other customers include small- and medium-sized businesses with one or more
work sites operating printers, and include medical facilities, service
businesses, retail establishments, government offices, and small
manufacturing companies, among others.

COMPETITION

     The competition for re-manufacturers includes re-manufacturers who sell
under a national brand or by a superstore retailer. These include Staples,
Office Depot, Office Max and Corporate Express, among others. We believe that
sales from this channel represent about one-third of the market.  The rest of
the market is represented by local and regional suppliers.  We estimate that
there are approximately 2,000 companies in the local and regional supplier
marketplace.  As a result, the market is highly fragmented with no company
having a dominant market position.  The competition for our service and
maintenance business includes equipment manufacturers and local independent
dealers for numerous makes and models of office equipment. Given the large
number of companies that service the office equipment industry, American
TonerServ competes primarily on the basis of price and service.  Currently,
we are not a significant competitor in this market.

     Management believes that there are two segments of the toner re-
manufactured marketplace.  The first segment consists of companies selling
over 2,000 cartridges per month, representing about 22% of the market. The
second segment consists of companies that sell less than 2,000 cartridges a
month, which represents about 78% of the market.

     American TonerServ has one of the most extensive network of owned and
partnered distributors and service providers in the re-manufactured cartridge
and service sector in North America, to management's knowledge.  Management
believes there are no other companies attempting to implement a roll-up
strategy in the toner cartridge market in the United States.

     The competition in the service and maintenance area is as follows:

  *  EQUIPMENT MANUFACTURERS   Equipment manufacturers such as HP, Xerox,
Canon, and others provide a high quality of service but do so at prices well
in excess of American TonerServ.  Additionally, manufacturers are typically
focused only on their own product lines and cannot promote single source
solutions without changing their focus or aligning with a company similar to
American TonerServ.

  *  REGIONAL SERVICE PROVIDERS   These companies service a larger range of
products than equipment manufacturers. However, we believe that regional
providers lack customer management capabilities and cannot provide service to
customers outside of a limited geographic region.

  *  RESELLERS AND DISTRIBUTORS   These types of providers sell many types of
equipment and brands. They typically do not have a large service and support
capability.  If they do provide extended support, it is often out-sourced to
other service providers.

     INTELLECTUAL PROPERTY

     We do not have any patents, trademarks or any other intellectual
property rights

                                    10


     RESEARCH AND DEVELOPMENT

     We have not had any expenditures for research and development activities
during the last two fiscal years.

EMPLOYEES

     We currently have 75 full time employees and 3 part time employees.

RISK FACTORS

     An investment in our securities involves a high degree of risk.
Investors should consider carefully all of the material risks described below
and all other information contained in this report before deciding to invest
in our securities. All forward-looking statements are inherently uncertain as
they are based on current expectations and assumptions concerning future
events or future performance of, or related to, our Company.

WE HAVE OPERATED AT A LOSS FOR MOST OF OUR HISTORY AND HAVE A SUBSTANTIAL
ACCUMULATED DEFICIT AND IF WE CONTINUE TO INCUR LOSSES WE MAY HAVE TO FILE
FOR BANKRUPTCY.

     During our thirteen-year operating history, we have experienced
significant operating losses.  Additionally, we are currently operating at a
loss and are dependent on additional financing in order to continue to
operate.  During the years ended December 31, 2007 and 2006, we had net
losses of $4,832,325 and $1,933,869, respectively.  As of December 31, 2007,
we had an accumulated deficit of $17,578,840. We do not believe that we can
achieve profitability until we obtain additional financing and continue to
implement our strategic business plan of acquiring other companies or
customer lists.

WE MAY BE UNABLE TO MAKE ACQUISITIONS IN THE TONER RE-MANUFACTURER MARKET
WHICH COULD FORCE THE COMPANY TO DECLARE BANKRUPTCY.

     Our business plan assumes that additional compatible toner re-
manufacturing providers will be interested in partnering with us.  In order
for this strategy to be effective, we must be able to acquire additional
companies at a reasonable valuation.  Additionally, our business plan is
based on the assumption that we will be able to improve gross margins and
reduce the back office and other overhead and related expenses of an acquired
company by at least 10% by utilizing our existing back office, systems and
service capabilities. Further, we expect that future acquisitions will be for
a combination of cash, promissory notes and stock consideration over a time
period of as much as three years and we will depend on retaining the
customers and revenues of the acquired company.  There is no assurance that
we will be able to make additional acquisitions under these terms. If we are
unable to fully implement our business plan, we will have to consider filing
for bankruptcy which could result in our shareholders losing all of their
investment in our stock.

WE MAY BE UNABLE TO RAISE NECESSARY FUNDING TO CONTINUE TO OPERATE THE
BUSINESS WHICH MAY LEAD TO BANKRUPTCY.

     We have encountered difficulty in obtaining funding for our operations
and implementing our strategic business plan. If we are unable to raise
additional funding during the next six months, we may have to consider
bankruptcy.  In addition, if unexpected adverse conditions such as losses of

                                    11


customers or judgments against us increase our cash requirements, we may not
be able to continue to operate.  We are currently spending approximating
$100,000 more cash per month than we bring in.   Delays in obtaining
additional financing could force us to cease operations and declare
bankruptcy which could result in our shareholders losing all of their
investments in our stock. If we are unable to implement our business plan,
management expects that we will require approximately $3,000,000 of outside
financing over the next 12 months to conduct our business as it is currently
operated, which includes $1,872,000 for current notes payable.

CHANGES IN MARKET CONDITIONS COULD FORCE US TO REDUCE PRICES OR REQUIRE
RETOOLING WHICH WOULD REDUCE OR ELIMINATE THE OPPORTUNITIES FOR US TO MAKE A
PROFIT.

     The toner cartridge market is currently dominated by a few, very large
manufacturers such as Hewlett Packard and Canon.  Significant adjustments in
their strategies, such as significant price reductions for new toner
cartridges, implementation of new toner technologies that render re-
manufacturing obsolete or require costly retooling or if they were to decide
to offer private label toner products, would have a negative impact on our
business strategy and cause our expected gross margins to decline.
Ultimately, this could force us to declare bankruptcy which could result in
our shareholders losing all of their investments in our stock.

TONER CARTRIDGE RE-MANUFACTURERS MAY BE UNABLE TO ADAPT TO NEW TECHNOLOGIES
WHICH WOULD LEAD TO LOST REVENUES.

     Our strategic business plans rely on the ability of other companies'
ability to continue to develop, package and supply re-manufactured toner
cartridges.  As printer technologies continue to evolve and change, it may be
possible that a much smaller percentage of the current re-manufacturers will
be able to keep pace with the printer manufacturer and make the necessary
capital investments to produce quality toner replacements in a cost effective
manner.  Consolidation in the re-manufacturer supplier business sector and
higher costs to manufacture replacement toner cartridges could cause an
increase in planned costs and a decline in revenue.

WE MAY BE UNABLE TO REACTIVATE OUR PREFERRED PROVIDER NETWORK WHICH WOULD
IMPAIR OUR ABILITY TO PROVIDE REPAIR SERVICE TO CUSTOMERS WHICH WOULD LEAD TO
LOST REVENUES.

     Our strategic business plan includes our ability to provide printer
repair and maintenance service on a nationwide basis.  American TonerServ
offers national service capabilities through our network of independent
service providers. We are not currently using a vast majority of those
service providers. If we fail to reactivate our service network as demand
increases, we will not be able to provide service and lose revenues.

WE MAY BE UNABLE TO ATTRACT ENOUGH ACQUISITION CANDIDATES WHICH WOULD HAVE A
NEGATIVE IMPACT ON OUR BUSINESS PLAN.

     Our strategic business plan is based upon our ability to forge strategic
business relationships with compatible toner distributors.  This will require
us to identify structure and close business partnerships and acquisitions
with companies with which we have no affiliation today.  Our strategic
business plan requires that we strictly adhere to financial and customer

                                    12


retention requirements in order to make the transactions attractive to our
potential partners or acquisition candidates. Although we have completed
three small acquisitions of customer lists and two asset purchase agreements
with companies engaged in the business of print management, printing supplies
and repair service, we will need to make additional acquisitions to fully
implement our business plan.  We have not entered into any new letters of
intent with any potential acquisition candidates, and have not specifically
identified terms and conditions that would be acceptable to possible
acquisition candidates.  If we fail to attract and acquire additional
suitable businesses, we will not achieve profitability and will be unable to
continue in business.

WE MAY BE UNABLE TO SUCCESSFULLY OPERATE COMPANIES THAT WE MAY ACQUIRE WHICH
COULD CAUSE US TO HAVE ADDITIONAL LOSSES.

     Our future revenues are expected to be derived from businesses and
customer lists that we acquire.  In general, the acquisition of any business,
and the subsequent integration of operations and customers, is a difficult
task with inherent risks. Failure to successfully integrate acquisition
companies could result in unanticipated costs and a loss of expected
revenues, leading to incurring additional losses. The primary asset that will
be acquired through our planned acquisitions is the underlying customer base
of the business.  We anticipate that in most cases the acquisitions will be
privately held companies wherein the customer relationships are very closely
tied to the existing ownership and management of that particular business. If
we fail to successfully transition and integrate these relationships into our
Company post acquisition, customers may elect not to continue with our
Company and we may fail to meet our planned revenue and profit objectives
relative to the purchase price paid for the acquisitions.

THERE IS CURRENTLY ONLY A VERY LIMITED MARKET FOR OUR STOCK AND THE MARKET
PRICE FOR OUR COMMON STOCK MAY BE VOLATILE.

     There is currently only a very limited trading market for our common
stock.  We cannot assure you that a trading market for our common stock will
be available in the future.

     Quotations for our common stock have only recently become available on
the OTC Bulletin Board, and trading has been sporadic. The OTC Bulletin Board
is generally considered to be a less efficient market than national exchanges
or the Nasdaq Stock Market, and trading volumes for stocks quoted on the OTC
Bulletin Board are often small. Consequently, the liquidity of our securities
could be impaired, not only in the volume of securities which could be bought
and sold, but also through delays in the timing of transactions, difficulties
in obtaining price quotations, reduction in security analysts' and media
coverage of our business, if any, and lower prices for our common stock than
might otherwise be attained. This could have an adverse effect on the ability
of an investor to sell shares of our common stock as well as on the selling
price for such shares. In addition, the market price of our common stock
could fluctuate widely due to various factors including, but not limited to,
the following:

     *  quarter-to-quarter variations in results of operations;

     *  loss of a major customer;

     *  changes in, or our failure to meet, the expectations of securities
        analysts;

                                    13


     *  announcements of strategic relationships or strategic partnerships;
        or

     *  other events or factors that may be beyond our control.

     In addition, the securities markets in general have experienced extreme
price and trading volume volatility in the past. The trading prices of
securities of many companies at our stage of growth have fluctuated broadly,
often for reasons unrelated to the operating performance of the specific
companies. These general market and industry factors may adversely affect the
trading price of our common stock, regardless of our actual operating
performance. If our stock price is volatile, we could face securities class
action litigation, which could result in substantial costs and a diversion of
management's attention and resources and could cause our stock price to fall.

WE PLAN TO SELL ADDITIONAL COMMON TO RAISE CAPITAL WHICH WOULD HAVE A
DILUTIVE AFFECT TO EXISTING SHAREHOLDERS.

     We plan to raise additional funds through the issuance of common stock
to help finance our strategic business plan.  If we are successful selling
our common stock the ownership interests of our existing shareholders would
be diluted, and shareholders could be adversely affected because the amount
available for dividends, if any, on each share would decrease; the relative
voting power of each previously outstanding share would be decreased; and the
market price of shares may decline.

OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS HAVE SUBSTANTIAL DOUBT
ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

     The report of our independent registered public accounting firm, with
respect to our consolidated financial statements and the related notes for
the years ended December 31, 2007 and 2006, states that the Company has
suffered recurring losses from operations resulting in an accumulated deficit
of $17,578,840.  Current liabilities exceed its total current assets at
December 31, 2007 by $2,121,624, which raises substantial doubt about our
ability to continue as a going concern. Our consolidated financial statements
do not include any adjustments that might result from this uncertainty.

WE MAY NOT BE ABLE TO IMPLEMENT SECTION 404 OF THE SARBANES-OXLEY ACT ON A
TIMELY BASIS.

     The SEC, as directed by Section 404 of the Sarbanes-Oxley Act, adopted
rules generally requiring each public company to include a report of
management on the company's internal controls over financial reporting in its
annual report on Form 10-KSB that contains an assessment by management of the
effectiveness of the company's internal controls over financial reporting. In
addition, the company's independent registered accounting firm must attest to
and report on management's assessment of the effectiveness of the company's
internal controls over financial reporting. This requirement will first apply
to our annual report on Form 10-K for the fiscal year ending December 31,
2008. We have begun developing our Section 404 implementation plan.  How
companies should be implementing these new requirements including internal
control reforms to comply with Section 404's requirements and how independent
auditors will apply these requirements and test companies' internal controls,
is still reasonably uncertain.  During Management's evaluation of the
effectiveness of internal controls, certain significant deficiencies and
other deficiencies that are considered to be material weaknesses were
identified.  We expect that we may need to hire and/or engage additional

                                     14


personnel and incur incremental costs in order to complete the work required
by Section 404. We can not assure you that we will be able to complete a
Section 404 plan on a timely basis. Additionally, upon completion of a
Section 404 plan, we may not be able to conclude that our internal controls
are effective, or in the event that we conclude that our internal controls
are effective, our independent accountants may disagree with our assessment
and may issue a report that is qualified. Any failure to implement required
new or improved controls, or difficulties encountered in their
implementation, could negatively affect our operating results or cause us to
fail to meet our reporting obligations.

CHANGES IN STOCK OPTION ACCOUNTING RULES MAY ADVERSELY AFFECT OUR REPORTED
OPERATING RESULTS, OUR STOCK PRICE AND OUR ABILITY TO ATTRACT AND RETAIN
EMPLOYEES.

     In December 2004, the Financial Accounting Standards Board published new
rules that require companies to record all stock-based employee compensation
as an expense. The Company adopted these new rules effective January 1, 2006.
The new rules apply to stock option grants, as well as a wide range of other
share-based compensation arrangements including restricted share plans,
performance-based awards, share appreciation rights, and employee share
purchase plans.

     As a small company with limited financial resources, we have depended
upon compensating our officers, directors, employees and consultants with
such share-based compensation awards in the past in order to limit our cash
expenditures and to attract and retain officers, directors, employees and
consultants. Accordingly, if we continue to grant stock options or other
stock based compensation awards to our officers, directors, employees, and
consultants, our future earnings, if any, will be reduced (or our future
losses will be increased) by the expenses recorded for those grants. These
compensation expenses may be larger than the compensation expense that we
would be required to record were we able to compensate these persons with
cash. The expenses we will have to record as a result of future options
grants may be significant and may materially negatively affect our reported
financial results. The adverse effects that the new accounting rules may have
on our future financial statements should we continue to rely heavily on
stock-based compensation may reduce our stock price and make it more
difficult for us to attract new investors. However, reducing our use of stock
plans to reward and incent our officers, directors, employees and
consultants, could result in a competitive disadvantage to us in the employee
marketplace.

WE HAVE NOT PAID CASH DIVIDENDS AND IT IS UNLIKELY THAT WE WILL PAY CASH
DIVIDENDS IN THE FORESEEABLE FUTURE.

     We plan to use all of our earnings, if any, to fund our operations. We
do not plan to pay any cash dividends in the foreseeable future. We cannot
guarantee that we will, at any time, generate sufficient surplus cash that
would be available for distribution as a dividend to the holders of our
preferred or common stock. You should not expect to receive cash dividends on
our preferred or common stock.

DELAWARE LAW AND OUR CORPORATE CHARTER AND BYLAWS CONTAIN ANTI-TAKEOVER
PROVISIONS THAT COULD DELAY OR DISCOURAGE TAKEOVER ATTEMPTS THAT STOCKHOLDERS
MAY CONSIDER FAVORABLE.

     Our certificate of incorporation, our bylaws and Delaware law contain
provisions that may inhibit changes in control that are not approved by our

                                    15

board of directors. These provisions may have the effect of delaying,
deferring or preventing a change in control despite possible benefits to our
stockholders, may discourage bids at a premium over the market price of our
common stock and may adversely affect the market price of our common stock
and the voting and other rights of our stockholders.

THE APPLICABILITY OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF OUR COMMON
STOCK COULD HAVE A NEGATIVE EFFECT ON THE LIQUIDITY AND MARKET PRICE OF OUR
COMMON STOCK.

     Trading in our shares is subject to the "penny stock rules" adopted
pursuant to Rule 15g-9 of the Securities and Exchange Act of 1934, as
amended, which apply to non-Nasdaq companies whose common stock trades at
less than $5.00 per share or which have a tangible net worth of less than
$5,000,000 - or $2,000,000 if a company has been operating for three or more
years. The penny stock rules impose additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and institutional accredited investors. For transactions covered by
this rule, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. Consequently, the penny stock rules will affect
the ability of broker-dealers to sell shares of our common stock and may
affect the ability of shareholders to sell their shares in the secondary
market, as compliance with such rules may delay and/or preclude certain
trading transactions. The penny stock rules could have an adverse effect on
the liquidity and/or market price of our common stock.

ITEM 2.  DESCRIPTION OF PROPERTY.

     The Company currently has four facilities. Our headquarters are located
at 420 Aviation Blvd. Suite 103, Santa Rosa, CA 95403.  The office space is
approximately 3,700 square feet. The current annual lease amount is $76,000
and the lease expires November 30, 2012.

     Our Optima Technologies, LLC subsidiary has a facility located at 6041
Siesta Lane, in New Port Richey, FL.  The office and warehouse space is
approximately 5000 square feet.  The current lease amount is $5,435 and is a
month to month lease.

     Our Tonertype LLC subsidiary has a facility located at 5313 Johns Road,
Ste. 210 Tampa, FL. The office and warehouse space is approximately 13,100
square feet. The current annual lease amount is $80,000 and expires in June
of 2012.

     Our NCTonerServ, LLC subsidiary has a facility located at 1109 Copeland
Oaks Drive in Morrisville, NC. The office space is approximately 2,500 square
feet.  The current annual lease amount is $24,750 and expires in February of
2010.

     The Company believes that it has adequate insurance covering the leased
premises and its properties.

ITEM 3. LEGAL PROCEEDINGS.

     On July 5, 2007, the Company was served with a notice of charge of
discrimination by a former independent sales representative (ISP) for alleged

                                    16


acts by another ISP.  The claimant is seeking total monetary damages in the
amount of $150,000. The Company is awaiting a response from the United States
Equal Opportunity Commission.  The Company believes it has minimal or no
liability as the Company is protected by indemnification provisions within
the ISP agreements.

     In the past, we have been subject to claims arising in the ordinary
course of business, primarily vendor disputes. We settled certain overdue
claims from certain service providers during the year ended December 31,
2007. There are currently no such claims outstanding.

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

     On October 11, 2007, the holders of a majority of the outstanding shares
of the Series C Convertible Preferred Stock ("Series C Stock") the Company
approved the conversion of all of the Series C Stock into shares of the
Company's Common Stock. The terms of the Series C Stock included a provision
that the Series C Stock would automatically be converted into Common Stock
upon the approval of the holders of a majority of the Series C Stock
outstanding.  As a result of the conversion of the Series C Stock, a total of
19,528,560 shares of Common Stock were issued to the holders of the Series C
Stock as a result of the conversion.

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Prior to this offering, there has been only a very limited market for
our common stock.  We cannot assure you that a trading market for our shares
will continue.  Our common stock is quoted on the OTC Bulletin Board under
the trading symbol "ASVP."  Quotations were first entered on the OTC Bulletin
Board on or about October 13, 2006.  The following table sets forth the high
and low sale prices for the Company's Common Stock as reported on the OTC
Bulletin Board for the periods indicated:

     QUARTER ENDED                           HIGH       LOW
     -------------                           -----     ------

     December 31, 2006                      $ 0.51     $ 0.20

     March 30, 2007                           0.53       0.35
     June 30, 2007                            0.84       0.37
     September 30, 2007                       0.35       0.20
     December 31, 2007                        0.30       0.16


Approximate Number of Holder of Common Stock

     On March 11, 2008 there were approximately 300 holders of record of our
common stock.

Dividends

     We have not paid any cash dividends since our inception and do not
contemplate paying dividends in the foreseeable future. It is anticipated
that earnings, if any, will be retained for the operation of our business.

                                    17



Recent Sales of Unregistered Securities

     There were no sales of unregistered securities that have not been
reported in the Company's reports on Form 8-K and 10-QSB during the year
ended December 31, 2007.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

     This Report contains statements that may contain forward-looking
statements, concerning the Company's future operations and planned future
acquisitions and other matters and the Company intends that such forward-
looking statements be subject to the safe harbors for such statements.  Any
statements that involve discussions with respect to predictions,
expectations, belief, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using phrases such as
"expects", or "does not expect", "is expected", "anticipates" or "does not
anticipate", "plans", "estimates" or "intends", or stating that certain
actions, events or results "may", could", "might", or "will" be taken to
occur or be achieved) are not statements of historical fact and may be
"forward looking statements". These forward-looking statements, include
statements relating to, among other things, the ability of the Company to
continue as a going concern.

     The Company cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Such
forward-looking statements are based on the beliefs and estimates of the
Company's management as well as on assumptions made by and information
currently available to the Company at the time such statements were made.
Forward looking statements are subject to a variety of risks and
uncertainties which could cause actual events or results to differ from those
reflected in the forward looking statements, including, without limitation,
the failure to obtain adequate financing on a timely basis.  Actual results
could differ materially from those projected in the forward-looking
statements, either as a result of the matters set forth or incorporated in
this Report generally and certain economic and business factors, some of
which may be beyond the control of the Company. Additional risks and
uncertainties that may affect forward-looking statements about the Company's
business and prospects include adverse economic conditions, inadequate
capital, unexpected costs, and other factors set forth under "Risk Factors"
in Item 1 - Description of Business of this report which could have an
immediate and material adverse effect. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

Critical Accounting Policies

     Our discussion and analysis of our financial condition and results of
operations upon our financial statements, which 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 amount of assets,
liabilities, revenue and expenses and related disclosure of contingent assets
and liabilities.

                                    18



     We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis on which we make judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Because this can vary in each situation, actual results may differ
from the estimates under different assumptions and conditions.

     We believe the following critical accounting policies require more
significant judgments and estimates in the preparation of our financial
statements:

     Revenue Recognition - Revenue is generated from sales of supplies and
maintenance agreements.  Revenue from supplies sales is recognized upon
shipment of product. Revenue from maintenance is recognized as services are
completed or over the term of the maintenance agreements.  The following is a
detailed description of each revenue activity and its revenue recognition
policy:

     Time and Materials Maintenance Contracts - Revenue for equipment service
calls initiated by the customer.  All work is billed based on actual time and
materials.  The revenue is recognized (and billed) after the service work is
performed for the customer.

     Full Service Maintenance Contracts - Revenue for fixed fee equipment
service contracts (annual contracts for the first year of service; contracts
are billed quarterly thereafter with a ninety day cancellation provision).
Revenues are recognized straight-line over the life of the contract with the
unearned portion shown as deferred revenue in the accompanying balance sheet.

     Remanufactured Toner Sales - Revenue for the resale of laser toner
cartridges.  The revenue is recognized upon shipment of the toner cartridges
to the customer.  In the case where the toner cartridge is sold as a bundled
product with equipment service included as part of the total purchase price,
the combined revenue is segregated between the value of the cartridge and the
service components in accordance with EITF 00-21, "Revenue Arrangements with
Multiple Deliverables".  The cartridge portion is recognized after shipment
at the same price as a "cartridge only" sale.  The service component is
deferred and recognized on the earlier of actual cartridge use or ninety days
(the maximum term of the service offering with each cartridge).

     Goodwill and Intangible Assets Acquired.  Goodwill and other intangible
assets related to the Company's customer list and asset purchases are
accounted for in accordance with Statement of Financial Accounting Standards
("FAS") No. 142, Goodwill and Other Intangible Assets ("FAS 142").  The
Company has entered into three purchase agreements to acquire customer lists
in the past. The Company accounts for the purchase of customer lists at cost,
net of discounts, if any, less accumulated amortization.  These customer
lists are amortized using the straight line method over an estimated useful
life of seven years.  The Company did not enter into any customer list
purchase agreements during the year ended December 31, 2007.  The Company has
entered into two asset purchase agreements to acquire certain assets of two
printer service companies.  These acquisitions closed on April 1, 2007 and
December 28, 2007, respectively.  Goodwill is not amortized but tested for
impairment annually.  The significant estimates and assumptions used by
management in assessing the recoverability of goodwill and other intangible
assets are estimated future cash flows, present value discount rate, and
other factors.  Any changes in these estimates or assumptions could result in

                                    19


an impairment charge.  The estimates of future cash flows, based on
reasonable and supportable assumptions and projections, require management's
subjective judgment.  Depending on the assumptions and estimates used, the
estimated future cash flows projected in the evaluations of long-lived assets
can vary within a range of outcomes.

     Valuation Allowance.  We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make
required payments. If the financial conditions of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances might be required. Our allowance for doubtful accounts
as of December 31, 2007 was $35,224.

     Stock-Based Compensation.  In assessing the fair value of option and
warrant grants to employees and consultants, we have valued these instruments
based on the Black-Scholes-Merton model which requires estimates of the
volatility of our stock and the market price of our shares.  On January 1,
2006, the Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 123R (revised 2004), "Share-Based Payment" ("FAS 123R"), that addresses
the accounting for share-based payment transactions in which an enterprise
receives employee services in exchange for equity instruments of the
enterprise. The statement eliminates the ability to account for share-based
compensation transactions, as the Company formerly did, using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25,  "Accounting for Stock Issued to Employees," and generally requires that
such transactions be accounted for using a fair-value-based method and
recognized as expenses in its statements of operations.   The Company adopted
FAS 123R using the modified prospective method which requires the application
of the accounting standard as of January 1, 2006. The Company's financial
statements as of and for the year ended December 31, 2007 reflect the impact
of adopting FAS 123R. There was no impact from the adoption of FAS 123R as
the Company had accelerated vesting for unvested options effective December
31, 2005.

     The estimated fair value of equity-based awards, less expected
forfeitures, is amortized over the awards' vesting period on a straight-line
basis.  The Company calculates the expected volatility for stock-based awards
using the historical volatility for its peer group public companies because
sufficient historical data does not yet exist for the Company's stock. The
risk free interest rates were determined by the rates of the 5 and 7 year
treasury bill on the grant date of the options.  The expected term was
determined in accordance with Staff Accounting Bulletin No. 107.

     The Company accounts for restricted stock and options granted to non-
employees in accordance with EITF No. 96-18, "Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services".  The Company records the fair
value of such restricted stock and options as deferred compensation at the
date of issuance and recognizes compensation on a straight-line basis over
the service period of the restricted stock or options.  The compensation is
adjusted for the change in fair market value at the end of each period in the
statement of operations.

     Warrants and Detachable Warrants.  As the warrant contracts must be
settled by the delivery of registered shares and the delivery of the
registered shares are not controlled by the Company and the number of shares
is unknown, pursuant to EITF 00-19, "Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock",

                                    20


the estimated fair value of the warrants at the date of issuance is recorded
as a warrant liability on the balance sheet.  The Company records the warrant
liability at fair value at the end of each reporting period with changes
recorded in earnings. At the time the warrants are exercised or the number of
shares are known the liability is reclassified to equity to reflect the
increase in shares outstanding. The Black-Scholes-Merton option pricing
method is used to value the warrants and detachable warrants upon the date of
issuance and at each balance sheet date for warrant liabilities.

     Income Taxes.  The Company uses the asset and liability approach for
financial accounting and reporting for income taxes. Deferred income taxes
are provided for temporary differences in the bases of assets and liabilities
as reported for financial statement purposes and income tax purposes. We have
recorded a valuation allowance against all net deferred income tax assets.
The valuation allowance reduces deferred income tax assets to an amount that
represents management's best estimate of the amount of such deferred income
tax assets that more likely than not will be realized.  Due to the
significant increase in common stock issued and outstanding in 2007 and 2006,
Section 382 of the Internal Revenue Code may provide significant limitations
on the utilization of net operating loss carryforwards of the Company.  As a
result of these limitations, a portion of these loss and credit carryovers
may expire without being utilized.  A valuation allowance has been recorded
as a reduction against the net operating loss carry forwards due to the
uncertainty of the ultimate realization of future benefits from these net
operating losses.

     This following discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
audited financial statements for the years ended December 31, 2007 and 2006,
and the related notes, contained in the Company's Registration Statement on
Form SB-2 and in conjunction with the audited financial statements and notes
thereto appearing elsewhere in this Form 10-KSB.

Year Ended December 31, 2007 and 2006

     Revenue. Revenue for the year ended December 31, 2007 was $3,630,531 as
compared to $456,433 for the year ended December 31, 2006. The increase of
$3,174,098 or 700% in revenue in the year ended December 31, 2007 was
primarily due to asset purchase agreement with Optima Technologies, LLC on
April 1, 2007.

     Revenues from the sale of toner cartridges increased by $2,936,110 for
2007 as compared to 2006 due primarily to the asset purchase of Optima
Technologies, LLC.  Revenues from service increased by $237,988 due to the
acquisition of Optima Technologies, LLC.

     During the year ended December 31, 2007, American TonerServ employed a
Chief Executive Officer, Chief Financial Officer, Chief Operating Officer,
Senior Vice President of Corporate Development and Strategy and a Senior Vice
President of Sales and Marketing.  The Company also employed a Vice President
of Operations, Director of Sales, an Accounting Supervisor, two customer
service representatives, a billing specialist and a service network manager.
The Company also employed 56 additional employees located in its Florida
operations, Optima Technologies, LLC and Tonertype LLC.  During 2007 we
continued implementing our new business strategy. The Company anticipates
that it will generate significant new revenue as it continues to implement

                                    21


its new business strategy and plan. However, there can be no assurance that
the Company will raise sufficient capital to pursue new business
opportunities or to continue executing its business plan.

     Gross Profit (Revenue less Cost of Goods Sold). Gross profit for the
year ended December 31, 2007 was $1,025,183 as compared to $194,331 for the
year ended December 31, 2006. The gross profit margin in 2007 was 28%
compared to a gross profit margin for 2006 of 43%. The lower gross margin was
primarily attributable to the acquisition of Optima and the lower gross
margins associated with its service revenues.

     Salaries and Wages. Salaries and Wages expenses were $1,768,024 and
$580,560 for the years ended December 31, 2007 and 2006, respectively. The
$1,187,464 increase was due, primarily to the management team's salaries
beginning January 1, 2007, stock related compensation to employees of
$202,942 and the addition of 33 employees from Optima Technologies.

     Professional Fees and Services. Professional Fees and Services expenses
were $1,346,706 and $982,493 for the years ended December 31, 2007 and 2006
respectively. This $364,213 increase was primarily due to an increase in
professional fees related to the Company's Investor Relations program with
After Market Support LLC (AMS).  The fees related to AMS were $271,500 in the
form of restricted stock.  Legal and accounting fees also increased.

     Sales and Marketing. Sales and marketing expenses were $287,616 and
$87,990 for the years ended December 31, 2007 and 2006, respectively. The
$199,626 increase was primarily due to sales commissions paid to Independent
Sales Partners (ISP's.)

     Bad Debt.  Bad debt expenses were $36,356 and $0 for the years ended
December 31, 2007 and 2006, respectively.  The increase was due to
establishing a bad debt allowance of $23,000 after the purchase of Optima and
direct bad debt write-offs of $13,356.

     General and Administrative. General and Administrative expenses were
$1,334,711 and $239,145 for the years ended December 31, 2007 and 2006
respectively. The $1,095,566 increase was primarily due to the acquisition of
Optima Technologies.  The management agreement between Azaria and Optima
accounted for $354,817 of this increase along with increased business volume
relating to the Company's acquisitions of customer lists from toner
distributors.

     Amortization Expense.  Amortization expenses were $338,173 and $11,503
for the years ended December 31, 2007 and 2006, respectively.  The $326,670
increase was primarily due to the customer list acquisition of Sun Products
in December 2006 and the acquisition of certain assets of Optima on April 1,
2007.

     Net Loss.  The net loss for the year ended December 31, 2007 and 2006
was $4,832,325 and $1,933,869 respectively. The increase in the net loss of
$2,898,456 was primarily attributable to an increase in salaries and wages of
$675,000 with the hiring of the management team, additional professional fees
of $364,213 relating to the Company's business plan being implemented for a
full twelve months as compared to the last six months of 2006 and a full year
of General and Administrative costs and support staff for 2007. Additionally,
the Optima acquisition had a $1,074,456 loss for the year ended December 31,
2007, which included $203,463 in amortization expense, $131,073 in interest

                                    22


expense, $20,335 in depreciation expense, $68,500 in inventory impairment
allowance and $23,000 in bad debt allowance.

     The Company believes that it will continue to have net losses for the
foreseeable future.

     Income (Loss) per Share. Net loss per share in 2007 was $(0.16) compared
to a loss of $(0.17) in 2006.

     Liquidity and Capital Resources

     At December 31, 2007, the Company had a working capital deficit of
$2,121,624, including cash and equivalent balances of $60,196 up from a
working capital deficit balance of $572,067 at December 31, 2006 including
cash and equivalent balances of $171,220. The change in working capital, and
cash and equivalent balances, was primarily affected by the Company's
operating losses and short-term loan obligations offset by the financing from
the common stock and warrants.

     Accounts receivable increased by $1,226,408, from $100,483 at December
31, 2006 to $1,326,891 at December 31, 2007.  This increase was due to the
Optima and Tonertype acquisitions.

     Accounts payable and accrued expenses, which consist primarily of
amounts due to third party service providers and toner suppliers, increased
from $723,817 at December 31, 2006 to $1,767,997 at December 31, 2007.  This
increase was due to the Optima and Tonertype acquisitions.  Included in these
balances are $204,512 of long outstanding payables due to independent service
providers.

     The Company has entered into no derivative financial instrument
arrangements at December 31, 2007, other than warrants issued in connection
with convertible notes payable, notes payable and a common stock offering.

     The Company has entered into certain transactions relating to its
Convertible Note Offering and its acquisitions of Optima and Tonertype which
contain financial instruments that are classified as derivative instruments
in accordance with SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" and EITF Issue No. 00-19 "Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled In, A Company's Own
Stock."

     During the year ended December 31, 2007, the Company raised a total of
$6,315,414 consisting of (1) $125,000 in gross proceeds from a private
offering of Units consisting of a convertible note and warrants, (2)
$2,688,247 in gross proceeds from a private offering of Units consisting of
Preferred Series C shares and (3) $3,502,167 in gross proceeds from a private
offering consisting of common stock and warrants.  The notes bear interest at
the simple rate of ten percent (10%) per year, payable monthly. The notes are
due and payable in full two years from the date of issuance. Each unit
includes a warrant to purchase shares of our Common Stock. The number of
shares that may be purchased pursuant to each warrant will equal
approximately 30-40% of the number of shares a holder would receive if the
holder converted their notes into shares of the Company's common stock. The
notes may be converted, at the option of the holder, into shares of our
Common Stock upon the occurrence of a Private Investment in a Public Entity
offering ("PIPE offering") undertaken by the Company that raises a minimum of

                                    23

$3.0 million. The price at which the note may be converted into Common Stock
will be the average price at which the first $1.0 million of Common Stock is
sold in a PIPE offering, as defined in the note.

     In December 2007, the Company raised $327,500 in notes payable
consisting of 200% warrant coverage.  For every dollar of the note the holder
will receive 2 warrants which expire within five years of the issuance of the
notes.  These notes are short-term with $102,500 being due on January 28,
2008 and $225,000 being due on March 28, 2008.  The note payable for $102,500
was paid on January 28, 2008. Notes totaling $150,000 that were due March 28,
2008, were exchanged for Units in the Company's current private offering for
common stock and warrants.

     The Company currently has no external sources of liquidity.

     During the year ended December 31, 2007, the Company used $2,805,345 in
cash from operations. The cash flows were used primarily to finance the
Company's continued losses from operations.  The Company does not expect to
generate sufficient cash from operations to meet its capital requirements in
the short term, which makes the Company's ability to continue as a going
concern doubtful.

     During the year ended December 31, 2007, the Company used $2,554,943 in
cash from investing activities.  The cash flows were used primarily to
complete the acquisitions of certain assets of two companies in the printer
supplies and service industry.

     During the year ended December 31, 2007, the Company received $5,249,264
in cash from financing activities. These cash flows were primarily from
$2,575,000 for the issuance of preferred stock, $2,171,840 from the issuance
of common stock, $755,000 from the issuance of notes and convertible notes
and $645,000 from shareholder advances.

     During the year ended December 31, 2006, the Company used $601,456 in
cash from operations. The cash flows were used primarily due to finance the
Company's continued losses from operations and ongoing costs incurred to
position the Company as a public entity.

     During the year ended December 31, 2006, the Company used $79,036 for
investing activities.  The cash flows were used to pay down notes payables
related to customer lists and to purchase property and equipment.

     During the year ended December 31, 2006, the Company received $839,938
primarily from the issuance of $385,000 in preferred stock and $500,000 from
the issuance of convertible notes payable.

     The following table discloses aggregate information about our
contractual obligations and the periods in which payments are due as of
December 31, 2007.









                                    24





<TABLE>
<CAPTION>
                                            Less Than                              After
Contractual Obligations           Total      1 Year      1-3 Years   4-5 Years   5 Years
-----------------------        -----------  ----------  -----------  ---------   ---------
<S>                            <C>          <C>         <C>          <C>         <C>
Notes Payable                  $3,499,433   $2,218,033  $1,281,400   $    -      $   -
Convertible Notes Payable       1,143,750      218,750     925,000        -          -
Interest on convertible notes
 payable                           20,000       18,542       1,458        -          -
Facilities and Property Leases    686,794      159,659     449,260      77,874       -
Unfulfilled Purchase Orders         4,549        4,549        -           -          -
                               ----------   ---------   ----------   ---------   --------
Total Contractual Obligations  $5,354,526   $2,619,533  $2,657,118   $  77,874   $   -
                               ==========   ==========  ==========   =========   ========

</TABLE>



     Subsequent Events

     On January 22, 2008, the Company entered into consulting agreements with
Chuck Mache, Chairman and Thomas H. Hakel, Director for $5,000 per month.
These agreements are cancelable with 30 days notice.

     On January 24, 2008, the Company converted $300,000 of a $960,000 line
of credit available for Stand By Letters of Credits (SBLC's) into cash for
working capital purposes. The line of credit has an interest rate of 7.5% and
is due and payable on June 30, 2008.

     On January 25, 2008, the Company granted 75,000 options to an employee.
These options have an exercise price of $0.25 per share with a four year
vesting schedule.


     On March 3, 2008 the Company established NC TonerServ, LLC and opened a
new office in Morrisville, North Carolina with 7 employees to begin selling
printer supplies and services to businesses.  The Company granted 75,000,
45,000, 5,000 and 5,000 options to four key employees.  These options have an
exercise price of $0.25 per share with a four year vesting schedule.

     On March 5, 2008, the Company received a loan from Rob Gutierrez for
$100,000 with 10% interest and due in thirty days.

     On March 5, 2008, the Company issued Rob Gutierrez 150,000 options in
exchange for consulting work. These options have an exercise price of $0.25
per share and vest equally over 24 months.

     On March 6, 2008, the Company amended its original termination agreement
dated October 22, 2007 with Dinosaur Securities.  The Company issued 750,000
warrants to Dinosaur Securities in lieu of the 600,000 shares originally
agreed upon as settlement.






                                    25


     On March 6, 2008 the Company terminated its relationship with After
Market Support LLC (AMS) and Keating Investments. As part of the termination
AMS and certain related persons returned 3,000,000 common shares that were
sold as part of the agreement.

     On March 25, 2007, the Company entered into an agreement with Merriman
Curhan Ford & Co ("MFC"). to represent the Company to act as its exclusive
financial advisor to assist in capital raising efforts and general investment
banking services.  As compensation for MFC's services, they will receive
shares of the Company's common stock valued at $500,000.

     During the period from January 2008 to March 2008, the Company raised
$1,250,000 from 12 accredited investors related to the Company's Common Stock
and Warrants offering.

     Business Outlook, Risks and Uncertainties

     Economic Uncertainties

     The current economic slowdown, financial market conditions, and the
political environment may affect the Company's ability to raise financing.
The Company will be required to raise additional capital to establish
business operations. The uncertainty about the Company's ability to raise
financing makes it difficult to predict the Company's results for the year
ending December 31, 2008 and its ability to continue as a going concern.

     Sufficiency of Working Capital

     As of December 31, 2007, the Company had a net working capital deficit
of $2,121,624. The Company has inadequate financial resources to sustain its
business activities. The Company has no ability to generate positive cash
flows from operations.

     During 2007, the Company received $6,315,414 in proceeds from private
offerings, of which $125,000 came from Convertible Note Offerings, $2,688,247
came from the Preferred Series C Offering and $3,502,167 cam from the Common
Stock and Warrants Offering.  These proceeds are being used for working
capital and acquisitions.

     During the period from January 2008 to March 2008, the Company raised
$1,250,000 from 12 accredited investors related to the Company's Common Stock
and Warrants offering.

     The Company estimates that it will need to raise an additional
$3,100,000 during the next 12 months to meet its minimum capital
requirements, which includes approximately $1,872,000 in current notes
payable due.  There can be no assurance that the Company will be successful
in obtaining the required financing. Thus, there is substantial doubt that
the Company will be able to continue as a going concern, absent raising
additional financing.

     The financial statements have been prepared on a going concern basis,
which assumes that the Company will be able to realize its assets and
discharge its obligations in the normal course of business.  If the Company

                                    26




were not to continue as a going concern, it would likely not be able to
realize on its assets at values comparable to the carrying value or the fair
value estimates reflected in the balances set out in the preparation of the
consolidated financial statements.

     The Company does not use financial instruments for trading purposes and
is not a party to any leverage derivatives. To the extent that the Company
has or continues to issue debt obligations outside of the course of its
normal operations, the Company's business and results of operations may be
materially effected by changes in interest rates and certain other credit
risk associated with its operations.

     Convertible Notes and Notes Payable

     The Company has $4,643,183 in notes payable at December 31, 2007.  The
Company has inadequate financial resources to meet the repayment terms of its
convertible notes payable.  The Company does not use financial instruments
for trading purposes and is not a party to any leverage derivatives.  To the
extent that the Company has or continues to issue debt obligations outside of
the course of its normal operations, the Company's business and results of
operations may be materially effected by changes in interest rates and
certain other credit risk associated with its operations.

     Other Matters

     In the event the Company experiences substantial growth in the future,
the Company's business and results of operations may be materially affected
by changes in interest rates and certain other credit risk associated with
its operations.

     Off Balance Sheet Arrangements

     The Company has no off balance sheet financing arrangements that have or
are reasonably likely to have a current or future effect on the Company's
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources
that are material to investors.

ITEM 7.  FINANCIAL STATEMENTS.

     The financial statements are set forth on pages F-1 through F-39 hereto.

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

     On August 31, 2006, Stonefield Josephson, Inc. ("Stonefield Josephson")
notified American TonerServ Corp. that it had resigned as the Company's
independent registered public accounting firm, effective immediately.

     Stonefield Josephson performed audits of the Company's consolidated
financial statements for the fiscal years ended December 31, 2005 and 2004.
Stonefield Josephson's reports did not contain an adverse opinion or
disclaimer of opinion. However, Stonefield Josephson's reports did include an
explanatory paragraph relating to substantial doubt about the Company's
ability to continue as a going concern.



                                     27

     During the fiscal years ended December 31, 2005 and 2004 and through
August 31, 2006, there have been no disagreements with Stonefield Josephson
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.

     On September 7, 2006 the Company's audit committee engaged the
accounting firm of Perry-Smith LLP to serve as the Company's independent
registered public accounting firm.

ITEM 8A(T).  CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures.

     The term "disclosure controls and procedures" is defined in Rules 13a-
15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). This term refers to the controls and procedures of a company
that are designed to ensure that information required to be disclosed by a
company in the reports that it files under the Exchange Act is recorded,
processed, summarized, and reported within the required time periods. Our
Chief Executive Officer and Principal Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this annual report. They have concluded that, as of that
date, our disclosure controls and procedures were effective at ensuring that
required information will be disclosed on a timely basis in our reports filed
under the Exchange Act.

Internal Control over Financial Reporting.

     Management's Annual Report on Internal Control over Financial Reporting.

     Section 404 of the Sarbanes-Oxley Act of 2002 requires that management
document and test the Company's internal control over financial reporting and
include in this Annual Report on Form 10-KSB a report on management's
assessment of the effectiveness of our internal control over financial
reporting.

     Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule
13a-15(f) of the Exchange Act. Under the supervision and with the
participation of our management, including Daniel J. Brinker and Ryan Vice,
our Chief Executive Officer and Chief Financial Officer, respectively, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based upon the framework in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). During Management's evaluation of the effectiveness of
internal controls, Management concluded that there are material weaknesses in
our internal control over financial reporting.  A material weakness is a
deficiency, or a combination of control deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a
material misstatement of the Company's annual or interim financial statements
will not be prevented or detected on a timely basis.

     The Company's material weaknesses in internal controls related to
reconciliation on significant accounts not being performed and reviewed on a
timely basis, significant account estimates and judgments not having
sufficient supporting documentation, accounting policies not properly
documented, communicated and applied consistently across business units and
accounting periods, existing procedures and controls are not effective in
ensuring that all transactions are properly recorded and in the appropriate

                                   28


accounting period and journal entries were not independently reviewed,
validated, authorized and property recorded in the appropriate accounting
period.

     Management believes that the reason for this is the lack of accounting
staff which results in a lack of segregation of duties necessary for an
effective system of internal control.  The material weaknesses identified did
not result in the restatement of any previously reported financial statements
or any other related financial disclosure, nor does management believe that
it had any effect on the accuracy of the Company's financial statements for
the current reporting period.

     Management has already hired one qualified staff accountant and has
currently begun recruiting for a divisional controller for its Florida
operations.  Management is committed to ensuring that proper internal
controls are in place and operating effectively and believe that additional
accounting personnel will be required to make sure the Company is adequately
staffed as it grows through acquisitions.

     This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only
management's report in this annual report.

     During the course of the audit for the years ended December 31, 2007 and
2006 certain significant deficiencies and other deficiencies that are
considered to be material weaknesses were identified.  Management has already
begun to hire the necessary accounting personnel to make sure the Company is
adequately staffed as it grows through acquisitions.  No change in our
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 8B.  OTHER INFORMATION.

     None

                                  PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     The Directors and Executive Officers of American TonerServ are as
follows:

        Name             Age                Positions and Offices Held
--------------------     ---      ------------------------------------------

Chuck Mache              51       Chairman of the Board

Daniel J. Brinker        51       Director, President and Chief
                                  Executive Officer

William A. Robotham      66       Director

                                     29


Thomas Hakel             48       Director and Secretary

Steven R. Jensen         46       Director

Aaron L. Brinker         32       Chief Operating Officer

Andrew A. Beaurline      56       Senior Vice President of Corporate
                                  Development and Strategy

Michael V. Ducey         56       Senior Vice President of Sales and
                                  Marketing

Ryan Vice                36       Chief Financial Officer

     Daniel J. Brinker is the father of Aaron L. Brinker. There are no other
family relationships between any of the Directors or Executive Officers of
American TonerServ.

     Our success will depend to a significant extent on the performance and
continued service of our officers, directors and key employees. None of our
employees have employment contracts. There can be no assurance that we will
be successful in attracting or retaining personnel needed to implement our
strategic business plan and expand our operations. We may experience
increased costs in order to attract and retain skilled employees. In
addition, there can be no assurance that we will have the resources to retain
key employees. If we fail to attract additional qualified employees or to
retain the services of key personnel, we may be unable to achieve our
objectives.

     The following sets forth biographical information as to the business
experience of each Officer and Director for at least the last five years.

     CHUCK MACHE, CHAIRMAN OF THE BOARD - Chuck Mache was elected as a
Director of the Company on November 29, 2007.  On January 8, 2008 Mr. Mache
was elected as Chairman of the Board.  Mr. Mache has spent a quarter-century
selling, managing, building, and leading sales organizations, with a
specialty in highly competitive industries. He used his breakthrough sales
approach to lead the transition of Benchmark Lending Group from a mortgage
broker to a full mortgage bank, and dramatically increased both the number
and size of loans in a short period, turning the company into a mid-size
player in the California market.  As Executive Vice President of Sales for
American Home Shield, Mache grew revenues from $6M to $100M in ten years,
formed strategic partnerships with other market leaders, such as Coldwell
Banker and Prudential, and restructured sales teams during acquisitions.

     DANIEL J. BRINKER, DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER - Mr.
Brinker has been a Director of American TonerServ since 1995 and served as
Chairman of the Board from November 2005 to January 2008.  Since November
2005, he has served as President and CEO of the Company.  He currently
devotes full time to our business.  From 2002 to October 2005, he was a
business consultant and served as President of ASKM Enterprises, Inc., his
consulting firm. Mr. Brinker served as President of ATS from 1995 to 2002.
He has over twenty years of experience as a principal, operating officer and
financier of financial and other service businesses, and technology
companies.  Mr. Brinker has extensive operational, financial and/or senior
management experience with a number of financial services companies including
American Home Shield (a publicly traded company) and Benchmark Lending Group.

                                      30

Mr. Brinker served as President of American Home Shield (AHS), the nation's
largest home warranty company, from 1987 to 1995.  Mr. Brinker led a
turnaround management team that engineered a buyout of AHS by ServiceMaster
and management in 1989.  Mr. Brinker is a Certified Public Accountant and
earned a Bachelor of Science degree in Accounting from Santa Clara University
in 1979.  Mr. Brinker has also completed certain graduate courses at Stanford
University.

     WILLIAM A. ROBOTHAM, DIRECTOR - Mr. Robotham became a Director in July
2006.  William A. Robotham is a certified public accountant and the executive
partner for Pisenti & Brinker LLP. He has served as the partner-in-charge of
the Auditing and Accounting department, the Tax department and the Management
Advisory Services department. He joined the firm in 1966, became a partner in
1969 at twenty-seven years of age, managing partner in 1983 and executive
partner in 1996. Mr. Robotham currently works in tax, general practice and
management consulting for the firm. He is also a director of American River
Bankshares, a publicly-held company listed on NASDAQ.   Mr. Robotham is
Chairman of the audit committee and is a member of other committees of
American River Bankshares.  He also serves on the regional board of North
Coast Bank and is Chairman of the Board, President and CEO of Randal
Nutritional Products, Inc.  Mr. Robotham is a member of the American
Institute of Certified Public Accountants and the California Society of
Certified Public Accountants.

     THOMAS HAKEL, DIRECTOR - Mr. Hakel has been a Director of the Company
since 2001, and as Secretary since November 2005. He has extensive experience
in corporate finance and business development. Since 1998, Mr. Hakel has been
the founder and manager of International Commerce Group, LLC, a business
consultancy organization working primarily with emerging stage technology
companies. He also served as the CEO of Accerra Corporation, a web based
communications and marketing service from 2003 to April 2004.  From 1997 to
1999, Mr. Hakel was co-founder of DTI Network Services, LLC and
ICN/CommSource Network Services, LLC, which bought international undersea
network fiber optic cable capacity. Prior to that, Mr. Hakel was Executive
Vice President at World Change Communications ("WXC"), a telecommunications
company with over $400M in annual revenues from 1996 to 1997.  In both
consulting and operational roles, Mr. Hakel has assisted numerous companies
with the development of strategic plans, debt and equity financing and
mergers and acquisitions, including transactions involving companies in the
software, telecom equipment, financial services and internet industries. He
is a Certified Public Accountant and received a Bachelors of Science Degree
in computer science from California State University, Sonoma in 1985.

     STEVEN R. JENSEN, DIRECTOR - Mr. Jensen has been a Director of the
Company since August 13, 2007. He was the founder and CEO of Optima
Technologies, LLC, from which the Company purchased certain assets on April
1, 2007. Mr. Jensen still serves as the managing member of Azaria Management
Group, L.L.C. (the new name for Optima Technologies, L.L.C.) which has been
engaged in the business of print management, printing supplies and repair
service since 1987. Mr. Jensen received a Bachelors Degree in Accounting from
the University of Miami in 1985. Mr. Jensen has extensive industry experience
and knowledge as he has been in print management & supplies industry for over
20 years. Mr. Jensen earned his Bachelor of Science from Miami University in
Ohio where he majored in both Accounting and Finance. After college, Mr.
Jensen completed pilot training in the United States Air Force.


                                    31


     AARON L. BRINKER, Chief Operating Officer - Mr. Brinker became Chief
Operating Officer of the Company in July 2006. Since 2004, Mr. Brinker has
been the founder and General Partner of MAS Enterprises, GP, which
successfully opened and manages two Fantastic Sams franchise hair salons in
the East Bay area of San Francisco. Fantastic Sams is the world's largest
full service hair care franchise with salons located throughout the United
States, Canada, Singapore, Taiwan and Japan. From 1998 to 2004, Mr. Brinker
served as a Director of SVB Capital.  SVB Capital is the private equity arm
of SVB Financial Group (Nasdaq: SIVB), a $4 billion financial services firm
serving companies in the technology, life science, private equity and premium
wine markets. Mr. Brinker helped raise, invest, and manage SVB Capital's
first two venture capital funds in excess of $385 million. From 2002 to 2005,
Mr. Brinker also served as Board Member and Treasurer of Friends for Youth, a
non-profit organization dedicated to providing youth mentoring services. He
also volunteers as a wish grantor for Make-A-Wish Foundation, which grants
the wishes of children with life-threatening medical conditions. Mr. Brinker
earned a Bachelor of Science degree in Finance from Santa Clara University in
1998.

     ANDREW BEAURLINE, SENIOR VICE PRESIDENT - CORPORATE DEVELOPMENT AND
STRATEGY - Mr. Beaurline became Sr. Vice President of Corporate Development
and Strategy in September 2006. Mr. Beaurline had been advising the Company
as a consultant since February 2006. Mr. Beaurline has 31 years experience
working with middle market businesses including 21 years of investment
banking and venture capital experience. Since August 2004, Mr. Beaurline has
served as Vice President - Corporate Development for Central Garden & Pet
("Central"), a Nasdaq National Market listed company which is one of the
largest suppliers in the lawn and garden and pet supplies industries. Mr.
Beaurline will continue to consult to Central through December 2006.  Prior
to 2005, Mr. Beaurline served as Senior Vice President, Corporate Finance
with Sucsy, Fischer & Co. (SFCo), an investment-banking firm headquartered in
Chicago.  Mr. Beaurline served SFCo for 19 years and was involved with all
aspects of developing and managing a middle-market investment banking
practice.  Mr. Beaurline has extensive experience providing all types of
financial advisory services to privately held companies.  He has successfully
completed corporate merger, sale, acquisition, management buy-out, private
equity placement and debt financing transactions. At SFCo Mr. Beaurline was
also responsible for the firm's valuation services practice.  He has
significant experience providing formal valuation reports on corporations,
partnerships, and individual securities.  Mr. Beaurline has also provided
fairness opinions and has served as an expert witness regarding valuation
issues.  Mr. Beaurline also has operating experience serving as interim CFO
for clients when requested. Prior to joining SFCo, Mr. Beaurline was an
investment officer with First Chicago's Institutional Venture Capital Fund,
and a Senior Manager with Arthur Andersen & Co. (Minneapolis) in its tax and
audit divisions. Mr. Beaurline has served as a director for several companies
including Nserve Corporation, an extended warranty contract underwriter with
annual revenues of $125 million. Mr. Beaurline is a Certified Public
Accountant and earned a Masters in Business Administration from the
University of Chicago with a specialization in business economics and
concentrations in marketing and finance.  He also earned a Bachelors of
Science in Accountancy (with honors) from the University of Illinois.

     MICHAEL V. DUCEY, SENIOR VICE PRESIDENT OF SALES AND MARKETING - Mr.
Ducey became Senior V.P. of Sales and Marketing on May 14, 2007. Mr. Ducey is
an Imaging Supply Industry veteran who has spent the last ten years in a
variety of Executive Sales Management positions at Nukote International. Over

                                     32

the last two years, Mr. Ducey has served as Senior Vice President-Sales and
New Business Development, focusing his team in developing the Imaging Supply
Reseller Channel. Mr. Ducey was previously Vice President of the Imaging
Solutions Division, where he led his team in the management and development
of Nukote's OEM business. From 1974 -1997, Mr. Ducey held several management
positions at Standard Register, including Product Manager, National Account
Manager, and Regional Manager. His extensive experience at Standard Register
included training and leading sales organizations in the pursuit and closing
of end-user accounts and developing long term relationships. During this time
at Standard Register, he developed expertise selling into the Healthcare and
Financial markets. Mr. Ducey brings an extensive and knowledgeable background
in the Imaging Supply Reseller Channel and to the End-User. Mr. Ducey
graduated from Illinois State University in 1974 with a degree in Business
Administration.

     RYAN VICE, Chief Financial Officer - On July 7, 2006, the Board of
Directors elected Ryan Vice to serve as Chief Financial Officer of the
Company.  Mr. Vice has over 12 years of experience in corporate finance,
accounting and business development.  From 1999 to 2006, Mr. Vice was the
corporate controller and primary financial officer for North Bay Corporation,
a refuse and recycling company, with over 20 subsidiaries and over 150,000
customers.  Mr. Vice oversaw all aspects of the accounting and finance
functions of the company including budgeting, forecasting and preparing the
consolidated financial statements of multiple operating companies. From
October 1996 to April 1999, Mr. Vice practiced public accounting with Pisenti
& Brinker LLP.   He is also the founder and part-owner of four other small
businesses. Mr. Vice is a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants.  Mr. Vice is also a Real
Estate Broker licensed by the California Department of Real Estate and a
member of the National Association of Realtors.  Mr. Vice earned his Bachelor
of Science in Finance from California State University, Sacramento in 1995.

     Our Executive Officers hold office until the next annual meeting of the
Board of Directors. There are no known arrangements or understandings between
any Director or Executive Officer and any other person pursuant to which any
of the above-named Executive Officers or Directors was selected as an
Executive Officer or Director.

     The Company has determined that Chuck Mache, Thomas Hakel and William
Robotham are independent directors as defined under the rules used by the
NASDAQ Stock Market.  However, Thomas Hakel, who serves on the audit
committee, does not currently meet the independence requirements for audit
committee members under the rules used by the NASDAQ Stock Market.

     The Board of Directors currently has an audit committee and a
compensation committee. William Robotham and Thomas Hakel are the members of
the audit committee.  William Robotham, Thomas Hakel and Chuck Mache are
members of the compensation committee.  The audit committee is chaired by
William Robotham and the compensation committee is chaired by Thomas Hakel.
The Board of Directors has determined that William Robotham is an "audit
committee financial expert" as defined in Item 407(d)(5) of SEC Regulation S-
B.  The Company does not currently have charters for either of it committees.

ADVISORS

     The following persons have agreed to assist the Company on an advisory
basis.

                                     33

     GENE KLEIN, CHAIRMAN - Mr. Klein is the Chief Executive Officer of
BarkerBlue Digital Imaging, Inc. (BarkerBlue), a document management and
print company servicing the San Francisco Bay Area, where Mr. Klein has been
since 1979. In 2000, BarkerBlue became the first reprographics company in
Northern California to successfully host an online blue print plan room for
the Aluminum Extruders Council industry. This changed the paradigm for Mr.
Klein's peers in the reprographics industry, as it forced them to expand
their core competence from printing to digital document management. Mr. Klein
was instrumental in developing the technology into a system-wide standard
within ReproMAX, the world's leading Network of wide-format technology
experts, which allowed the organization to become the first successful
distribute-and-print network of building plans and specifications. Mr. Klein
is a past Chairman of ReproMAX and is currently on its Board of Directors.
Mr. Klein has been a member of the IRgA (International Reprographic
Association) since 1980 and a member of PIA (Printing Association of America)
since 1984. Mr. Klein is the immediate past Chairman of the Board of the San
Mateo Area Chamber of Commerce. Mr. Klein graduated from Stanford University
with a Bachelors of Arts degree in English Literature in 1979.

     HENRY MANAYAN - Currently, Mr. Manayan is the President and General
Counsel of Transpacific Capital Corporation, a finance and investment company
based in the Silicon Valley area of California. He is also a board director,
officer and legal counsel to several hi-tech companies and organizations.
Mr. Manayan has served as Executive Director of CultureCom Holdings Ltd.
since September 1999. Mr. Manayan is a lawyer and management consultant based
in Silicon Valley, California.  Mr. Manayan served three-terms as the Mayor
of the City of Milpitas, California, the first Asian-American ever elected to
the position. Mr. Manayan was educated at Syracuse University, Oxford
University (Great Britain), Yale-in-China College, Golden Gate University
Graduate College of Banking and Finance, and received his Juris Doctor from
University of Santa Clara School of Law. Mr. Manayan also completed post-
graduate work at the London Business School and Harvard University. Mr.
Manayan has been a college professor and lectures at the University of
Washington (Seattle, Washington).  Mr. Manayan's experience includes
commercial real estate development in five Western States and investment
banking. He was one of the original co-founding Directors of ViaGold Capital,
Ltd., and helped to take it public on the Australian Stock Exchange in 1997.

     BRYAN THOMAS - Mr. Thomas is the President and Chief Executive Officer
of Thomas Reprographics, Inc. which provides construction document printing
and distribution management services for the architectural and construction
industry. In the nine years in his position, Mr. Thomas has led his company
through significant expansion. He has made over twenty acquisitions during
this time while maintaining a focus on organic growth.

     As a result, Thomas Reprographics has grown over 300% and is the second
largest reprographics company in North America. Thomas Reprographics
currently employs over 900 people in Arizona, Texas, Minnesota, and Florida.
Mr. Thomas is a past Chairman of ReproMAX, Inc. ("ReproMAX") and is a current
Director of that corporation. He is also the 2007-2008 President of the
International Reprographics Association and Past President of the Central
Reprographics Association.  Mr. Thomas earned his Masters in Business
Administration from Southern Methodist University.

     RICK BOSWORTH - Mr. Bosworth has developed and successfully expanded
profitable reprographic companies over a 30+ year career. For the past four
years, Mr. Bosworth has lead and grown ReproMAX, the world's largest

                                     34

reprographic network with over 250 participating companies throughout the
United States, Canada and Western Europe. Mr. Bosworth's continuing goals are
to assist and accelerate the changing direction of the reprographic industry
through technology implementation and industry integrations.  As President of
Indox Services Corporation from 1973 to 2003, Mr. Bosworth worked closely
within the architectural and construction communities to facilitate, manage
and improve information/document processes, and successfully integrating
internal information workflows, print, copy and related services for
companies such as MasterCard, Anheuser-Busch, Sara Lee, US Bank, and others.
Mr. Bosworth served as ReproMAX Chairman from 1999 to 2001. Mr. Bosworth has
contributed to the International Reprographics Association as a Board Member
for 5 years, acting as both Program and Convention Chair. Mr. Bosworth has
also served as Board Member and President of the Central Reprographics
Association. Mr. Bosworth currently serves the community as a Board Member
for the St. Louis Area Foodbank. Mr. Bosworth earned his degree from the
University of Missouri with a Bachelors of Arts in Economics.

     DAVID FERRARI - Mr. Ferrari is the President of One Workplace L.
Ferrari, LLC ("One Workplace"), a full service office furnishings dealership
in the San Francisco Bay Area where he has worked since 1973. One Workplace
provides workplace furnishings, architectural demountable walls, audio visual
systems integration, and interactive technology white board products for the
work place. In addition to its products, One Workplace provides complete
asset management storage services, re-furbishing and light re-manufacturing
as well as installation and delivery services. One Workplace represents
Steelcase products and 200 other manufacturers.   Recent start up divisions
in the company include Health Care, Audio Visual, and On Site Facility
Management Services. One Workplace is the largest independent office
furnishings dealer east of New York City and is viewed as a leader in
innovation for their industry.  Mr. Ferrari is on the Board of Directors of
Lindsay-Ferrari, Facility Link LLC a nation wide service organization,
Proview Global an international off shore production company providing
Computer Automated Design services and benefits administration, OFRA (office
furniture rental alliance) a national office furniture rental business,  and
various not for profit boards including Los Gatos Little League. Mr. Ferrari
graduated from the University of Santa Clara in 1974 with Bachelor of Science
degrees in marketing and management.

     PAUL FRIDRICH - Mr. Fridrich is currently the President and CEO of
CyberCopy, a leading provider of document management and distribution in
Ventura County, California. Mr. Fridrich has held this position since he
founded the company in 1997. Prior to CyberCopy, Mr. Fridrich founded
Westlake Graphics, where the rapid growth he engineered resulted in the
company's inclusion on the "Inc. 500" list, signifying its place among the
fastest growing privately owned companies in the nation. He was educated in
his native Slovakia in the field of petro-chemical engineering. He also
serves on the Board of Directors of ReproMAX, the international network of
independently owned reprographic companies and is a member of PIA (Printing
Industry Association) and IRgA (International Reprographic Association).

SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE

     Not Applicable.

CODE OF ETHICS

     The Company's Code of Ethics and Business conduct was filed as Exhibit
14 to the Company's Annual Report on Form 10-KSB for the year ended December
31, 2005.  It is also available on our website at www.americantonerserv.com.

                                     35

ITEM 10.  EXECUTIVE COMPENSATION.



<TABLE>
<CAPTION>
                                           SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------
                                                                               Non-
                                                                   Non-Equity  qualified
                                                                   Incentive   Deferred
                                                                   Plan        Compen-     All Other
Name and                                     Stock      Option     Compensa-   sation      Compen-
Principal                             Bonus  Awards(1)  Awards(1)  tion        Earnings    sation       Total
Position            Year  Salary ($)  ($)   ($)         ($)        ($)                     ($)         ($)
------------------  ----  ----------  ----  ----------  ---------  ----------  ----------  ----------  --------
<S>                 <C>   <C>         <C>   <C>         <C>        <C>         <C>         <C>         <C>
Daniel J. Brinker,  2007 $176,539      -    $  -        $21,187(2)     -           -       $ 7,200(3)  $204,926
 CEO                2006 $ 30,000(4)        $90,517     $ 8,566        -           -       $   -       $129,083

Aaron L. Brinker,   2007 $137,308      -    $  -        $ 6,538        -           -       $ 9,000(3)  $152,846
 COO                2006 $ 23,333(4)        $72,414     $ 3,269        -           -       $12,000     $111,016

Ryan P. Vice, CFO   2007 $ 95,192      -    $ 7,500     $ 4,704        -           -       $ 4,200(3)  $111,596
                    2006 $ 15,000(5)        $ 1,875     $ 2,352        -           -       $12,000     $ 31,227

Andrew Beaurline,   2007 $176,539      -    $  -        $93,026        -           -       $ 7,200(3)  $276,765
 VP of Corporate    2006 $ 58,000           $  -        $31,009        -           -       $70,000(6)  $159,009
 Development

Michael V. Ducey,   2007 $ 89,423      -    $  -        $20,417        -           -       $  -        $109,840
 VP of Sales &      2006 $   -              $  -        $  -           -           -       $  -        $  -
 Marketing
----------------------------------------------------------------------------------------------------------------
</TABLE>



(1) The value for Stock Awards and Option Awards in the table above
represents the dollar amount recognized for financial reporting purposes for
2007 in accordance with Statement of Financial Accounting Standards No. 123R,
Accounting for Stock-Based Compensation, ("FAS 123R"). The fair value of the
Stock Awards on the grant date was $0.015 per share, as determined by the
Board of Directors. For Option Awards, the dollar amount for each individual
varies depending on the number of options held, the fair value of such
options, and the vesting terms of such options. See Note 2 of Notes to
Audited Financial Statements for the year ended December 31, 2007 for
information on the assumptions used to calculate the grant date fair value of
Option Awards and the expense recognized under FAS 123R.

(2) Of the Option Awards to Daniel J Brinker, $8,109 relates to his services
as a Director of the Company.

(3) All other compensation relates to monthly auto allowances.

(4) This amount had been accrued but not paid as of December 31, 2006.  In
February 2007, this person agreed to accept shares of the Company's common
stock in lieu of cash for this amount. (See Item 12.  Certain Relationships
and Related Transactions.)

(5) This amount had been accrued but not paid as of December 31, 2006.  In
February 2007, Mr. Vice agreed to accept shares of the Company's common stock
in lieu of cash for $12,000 of this amount. (See Item 12.  Certain
Relationships and Related Transactions.)

(6) Represents amounts paid to Andrew Beaurline for consulting services
performed from February 2006 to August 2006 prior to becoming the Company's
Senior Vice President of Corporate Development.

                                     36

EMPLOYMENT ARRANGEMENTS

     We do not currently have any formal employment agreements with current
or proposed Executive Officers. However, in July 2006 we entered into letter
agreements concerning compensation matters with Daniel J. Brinker, Aaron L.
Brinker and Ryan Vice.

     In July 2006, the company entered into a Stock Compensation Agreement
with Mr. Daniel Brinker for services rendered to the Company as President,
Chief Executive Officer and Chief Financial Officer.  Mr. Brinker received
5.0 million shares of common stock at $0.015 per share.  As President and CEO
Mr. Daniel Brinker's compensation package provides for base compensation of
$180,000 per year.  Mr. Daniel Brinker became a full time employee of the
Company in November 2006. Upon funding of an offering of a least $5.0
million, Mr. Daniel Brinker will receive a three-year employment contract
with a guarantee of one year.  Mr. Brinker will receive an opportunity to
achieve cash bonus equal to 25% of his salary and a $600.00 monthly auto
allowance.  The bonus will be based upon criteria set by the Board of
Director's compensation committee.  Additionally, Mr. Daniel Brinker has been
granted 900,000 stock options.

     In July 2006, the company entered into a Stock Compensation Agreement
with Mr. Aaron Brinker for services rendered to the Company as a consultant
from February 2006 to July 2006.  Mr. Brinker received 4.0 million shares of
common stock at $0.015 per share.  Mr. Aaron L. Brinker, our Chief Operating
Officer, effective July 2006, has a compensation package that provides for
base compensation of $140,000 per year.  Mr. Aaron Brinker became a full time
employee of the Company in November 2006.  Mr. Aaron Brinker's salary will be
reviewed annually thereafter by the Board of Director's compensation
committee.  Mr. Aaron Brinker has an opportunity to achieve cash bonus equal
to 25% of his base salary and a $750.00 monthly auto allowance.  The bonus
will be based upon criteria set by the Board of Director's compensation
committee.  Additionally, Mr. Aaron Brinker has been granted 450,000 stock
options.

     Andrew Beaurline, who became our Senior Vice President of Corporate
Development and Strategy on September 19, 2006, has a compensation package
that provides for base compensation of $180,000 per year.  Mr. Beaurline's
salary will be reviewed by the Board of Director's compensation committee
annually thereafter.  Mr. Beaurline will receive an opportunity to achieve
cash bonus equal to 30% of his base salary.  Additionally, Mr. Beaurline was
granted options to purchase up to 4,000,000 shares of the Company.

     Ryan Vice, our Chief Financial Officer, has a compensation package that
provides for base compensation of $120,000 per year.  Mr. Vice's salary will
be reviewed annually thereafter by the Board of Director's compensation
committee.  Mr. Vice began with the Company in June 2006 as a part time
consultant.  Mr. Vice became a full time employee of the Company in November
2006.  Mr. Vice has an opportunity to achieve cash bonus equal to 25% of his
base salary and a $350.00 monthly auto allowance.  The bonus will be based
upon criteria set by the Board of Director's compensation committee.
Additionally, Mr. Vice has been granted 300,000 stock options. In connection
with his employment, Mr. Vice received 1,000,000 shares of the Company's
common stock.  Mr. Vice has executed a repurchase agreement with ATS whereby
the Company may repurchase these shares if he is employed by the Company for
less than two years.

                                      37


             2007 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                                       Option Awards                                       Stock Awards
                   ---------------------------------------------------- --------------------------------------------
                                                                                                          Equity
                                                                                                          Incentive
                                                                                              Equity      Plan
                                                                                              Incentive   Awards:
                                           Equity                                             Plan        Market or
                                           Incentive                                          Awards:     Payout
                                           Plan                                               Number of   Value of
                                           Awards:                                 Market     Unearned    Unearned
                   Number      Number      Number                       Number     Value      Shares,     Shares,
                   of Securi-  of Securi-  of                           of Shares  of Shares  Units       Units
                   ties Under- lying Un-   Securi-                      or Units   or Units   or Other    or Other
                   lying Un-   exercised   ties Un-                     of Stock   of Stock   Rights      Rights
                   exercised   Options (#) lying Un-  Option   Option   That       That       That        That
                   Options (#) ----------- exercised  Exercise Expir-   Have Not   Have Not   Have Not    Have Not
                   -----------     Un-     Unearned   Price    ation    Vested     Vested     Vested      Vested
Name               Exercisable exercisable Options(#) ($)      Date     ($)        ($)        (#)         ($)
----               ----------- ----------- ---------- -------- -------- ---------- ---------- ----------  ----------
<S>                <C>         <C>         <C>        <C>      <C>      <C>        <C>        <C>         <C>
Daniel J. Brinker    231,429     900,000              $0.165   7/7/2016

Daniel J. Brinker    175,000     300,000              $0.165   10/2/2016

Aaron L. Brinker     115,714     450,000              $0.165   7/7/2016

Ryan P. Vice          77,143     300,000              $0.150   7/7/2016  1,000,000 $250,000
                                                                            (1)
Andrew Beaurline     952,381   4,000,000              $0.150   9/19/2016

Michael V. Ducey      23,810     500,000              $0.600   5/14/2017

--------------------------------------------------------------------------------------------------------------------

(1) The market value of shares that have not vested was determined by the last reported sale price of the common stock
of $0.25 on December 31, 2007.

</TABLE>



COMPENSATION OF DIRECTORS AND ADVISORS

     Members of the Board of Directors do not currently receive any cash
compensation for their services as Directors.  However, certain Directors
have received options to purchase shares of our Common Stock. To attract and
keep Board members the Company may grant options to Board members.  Director
Thomas Hakel was granted 7,500 options on March 22, 2001, and 7,500 options
on December 17, 2003.

     In July 2006, the Company entered into a Stock Compensation Agreement
with Mr. Thomas Hakel for consulting services rendered to the Company
relating to financial modeling and acquisition strategies. Mr. Hakel received
2.5 million shares of common stock at $0.015 per share.

     In July 2006, the Company entered into a Stock Compensation Agreement
with Mr. William Robotham for consulting services rendered to the Company
relating to strategic planning and acquisition strategies. Mr. Robotham
received 2.0 million shares of common stock at $0.015 per share.



                                     38


     On October 2, 2006 the Board granted options to purchase 300,000 shares
to each of the three board members comprised of Daniel Brinker, William
Robotham and Thomas Hakel. These options are exercisable at $0.165 per share
and vest in equal monthly increments over two years starting on the grant
date.

     Henry Manayan was granted 200,000 non-qualified stock options
exercisable at a price of $0.15 per share.  The options vested over one year
commencing October 1, 2006 at a rate of 16,667 shares per month as long as
the one year agreement remains in affect. At December 31, 2007, these options
were fully vested.

     During 2006, Chuck Mache, who was then an Advisor, was granted 240,000
non-qualified stock options exercisable at a price of $0.15 per share.  The
options shall vest over one year commencing September 4, 2006 at a rate of
20,000 shares per month as long as the one year agreement remains in affect.
At December 31, 2007, these options were fully vested.

     On February 9, 2007 the Board granted options to purchase 100,000 shares
to four individuals comprised of Bryan Thomas, Rick Bosworth, Gene Klein and
David Ferrari to serve on its Strategic Advisory Board.  These options are
exercisable at $0.40 a share and will vest equally over the twelve month
term.  These agreements are cancelable by either party without notice after
30 days.  These individuals are expected to devote approximately one hour of
their time in a bi-weekly conference call.

     On August 13, 2007, the Board of Directors granted options to Steven R.
Jensen, a director, to purchase 300,000 shares of common stock.  The exercise
price of these options was $0.36 per share with a vesting period of 30
months.

     On November 28, 2007, the Board of Directors granted options to Chuck
Mache, a director, to purchase 300,000 shares of common stock.  The exercise
price of these options was $0.20 per share with a vesting period of 24
months.



<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------
                               2007 DIRECTOR COMPENSATION TABLE

                                                                     Non-
                    Fees                              Non-Equity   qualified
                   Earned                             Incentive    Deferred     All
                     or                                 Plan        Compen-     Other
                   Paid in      Stock      Option      Compen-      sation      Compen-
                    Cash      Awards(1)   Awards(1)    sation       Earnings    sation    Total
      Name           ($)         ($)        ($)          ($)          ($)        ($)       ($)
----------------   --------   ---------   ---------   ----------   ---------   --------  -------
<S>                <C>        <C>         <C>         <C>          <C>         <C>       <C>
Chuck Mache        $  -0-      $ 10,000(6)     984(2)                                    $ 10,984

William Robotham   $  -0-         -          8,109(3)                                    $  8,109

Thomas Hakel       $  -0-         -          8,109(4)                                    $  8,109

Steven R. Jensen   $  -0-         -          7,182(5)                                    $  7,182

-------------------------------------------------------------------------------------------------



</TABLE>
                                    39

(1) The value for Option Awards in the table above represents the dollar
amount recognized for financial reporting purposes for 2007 in accordance
with FAS No. 123R.  The dollar amount for each individual varies depending on
the number of options held, the fair value of such options, and the vesting
terms of such options. See Note 2 of Notes to Audited Financial Statements
for the year ended December 31, 2007 for information on the assumptions used
to calculate the grant date fair value of Option Awards and the expense
recognized under FAS 123R.

(2)  As of December 31, 2007, $22,636 of the Option Awards held by Mr. Mache
were unvested.

(3)  As of December 31, 2007, $6,082 of the Option Awards held by Mr.
Robotham were unvested.

(4)  As of December 31, 2007, $6,082 of the Option Awards held by Mr. Hakel
were unvested.

(5)  As of December 31, 2007, $35,909 of the Option Awards held by Mr. Jensen
were unvested.

(6)  Mr. Mache's stock award was granted prior to him becoming a Director of
the Company.

2005 STOCK INCENTIVE PLAN

     On December 15, 2005, the Board of Directors adopted a new Stock
Incentive Plan (the "2005 Plan"), which was approved by our shareholders in
February 2006.  The 2005 Plan allows the Board of Directors to grant stock
options from time to time to employees, officers and directors of the Company
and service providers (consultants) to American TonerServ. The Board of
Directors has the power to determine at the time the option is granted
whether the option will be an Incentive Stock Option (an option that
qualifies under Section 422 of the Internal Revenue Code of 1986) or an
option that is not an Incentive Stock Option.  However, Incentive Stock
Options will only be granted to persons who are employees or officers of
American TonerServ.  The Board of Directors determines vesting provisions at
the time options are granted. In July 2006, the shareholders approved an
increase in the total number of shares of Common Stock subject to options
under the 2005 Plan from 2,500,000 to 7,000,000 shares (after giving effect
to the ten for one (10 for 1) stock split), subject to adjustment in the
event of certain recapitalizations, reorganizations and so forth. On
September 29, 2006, the Board of Directors and our shareholders approved an
increase in the total number of shares of Common Stock subject to options
under the 2005 Plan from 7,000,000 to 8,400,000 shares, subject to adjustment
in the event of certain recapitalizations, reorganizations and so forth. On
April 19, 2007, the Board of Directors authorized a 1,600,000 increase in the
plan to 10,000,000 shares, which was approved by a majority of the
stockholders.  The total number of shares authorized to be granted under the
2005 plan was 10,000,000 at December 31, 2007.   The option price must be
satisfied by the payment of cash and will be no less than 100% of the fair
market value of the Common Stock on the date the option is granted for
Incentive Stock Options and 85% of the market value for non-qualified
options.


                                    40


     During 2007, a total of 2,332,600 options to purchase shares of common
stock were granted under the 2005 Stock Incentive Plan, of which 750,000
options were granted to non-employees and vest equally over a twelve month
period.  The remaining 1,582,600 of options to purchase shares were granted
to directors, officers and employees of the Company.  A total of 6,300
options to purchase shares were forfeited due to termination of employment.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth the number and percentage of shares of
our $.001 par value common stock and preferred shares owned beneficially, as
of March 9, 2007, by any person who is known by us to be the beneficial owner
of 5% or more of such common stock, by all Directors and Executive Officers
individually, and by all Directors and Executive Officers as a group.
Information as to beneficial ownership is based upon statements furnished to
us by such persons.

                                      Amount of
Name and Address                      Beneficial             Percentage
of Beneficial Owner                   Ownership               of Class
-------------------                  --------------          ----------
BRAM Enterprises (1)                  6,544,274 (1)             10.7%
3550 Round Barn Blvd, Suite 100
Santa Rosa, CA 95403

Daniel J. Brinker                     6,372,951 (2)             10.5%
420 Aviation Blvd., Suite 103
Santa Rosa, CA  95403

Aaron L. Brinker                      4,237,681 (3)              7.0%
729 Cumberland Ct.
Pleasant Hill, CA 94523

Thomas Hakel                          3,350,455 (4)              5.5%
1020 Blue Oak Pl.
Santa Rosa, CA 95404

William A. Robotham                   6,797,780 (5)             11.1%
3550 Round Barn Blvd, Suite 100
Santa Rosa, CA 95403

Lynn J. Brinker                       3,988,210 (6)              6.6%
77 875 Seminole Rd.
Indian Wells, CA 92210

James Laier                           7,896,073 (7)             12.5%
1080 Airport Blvd.
Santa Rosa, CA 95403

Chuck Mache                           1,785,439 (8)              2.9%
1004 Slate Drive
Santa Rosa, CA  95405

Ryan Vice                             1,082,810 (9)              1.8%
PO Box 5545
Santa Rosa, CA 95402


                                      41


Andrew Beaurline                      1,114,970 (10)             1.8%
2149 - 48th Avenue
San Francisco, CA 94116

Michael V. Ducey                         73,810 (11)             0.1%
148 Sontag Dr
Franklin TN 37064

Steve Jensen                          5,140,000 (12)             8.3%
6041 Siesta Lane
Port Richey, Florida 34668

All Directors and Officers           22,956,657                 45.9%
as a group (7 persons)
_____________________

(1)  Includes 5,928,387 common shares held directly by BRAM Enterprises, a
general partnership in which Lynn Brinker and William A. Robotham are equal
partners, 615,887 shares that are issuable under warrants held by BRAM
Enterprises.

(2)  Includes 5,964,022 common shares held directly by Daniel J. Brinker;
406,429 shares issuable on exercise of options held by Daniel J. Brinker that
are exercisable within 60 days; and 2,500 shares that are issuable under
warrants held by Daniel J. Brinker.

(3)  Includes 4,121,977 common shares held directly by Aaron L. Brinker and
115,714 shares issuable on exercise of options held by Aaron L. Brinker that
are exercisable within 60 days.

(4)  Includes 2,675,455 common shares held directly by Thomas Hakel; 175,000
shares issuable upon exercise of options held by Thomas Hakel within 60 days;
and 500,000 shares that are issuable under warrants held by Mr. Hakel.

(5)  Includes 2,800,643 common shares held by William A. Robotham;  175,000
shares issuable on exercise of options held by Mr. Robotham within 60 days;
3,272,137 of the common shares held by BRAM Enterprises in which Mr. Robotham
is a partner; and 500,000 shares that are issuable under warrants held by Mr.
Robotham.

(6)  Includes 711,010 common shares held by Lynn Brinker;  5,063 shares that
are issuable under warrants held by Lynn Brinker; and 3,272,137 of the common
shares held by BRAM Enterprises in which Mr. Lynn Brinker is a partner;

(7)  Includes 5,034,891 common shares held by James Laier and 2,861,183
shares that are issuable under warrants held by Mr. Laier.

(8)  Includes 1,242,939 common shares held directly by Chuck Mache;  252,500
shares that are issuable under warrants held by Chuck Mache and 290,000
issuable on exercise of options held by Mr. Mache that are exercisable within
60 days.

(9) Includes 1,005,667 common shares held directly by Ryan Vice and 77,143
issuable on exercise of options held by Mr. Vice that are exercisable within
60 days.


                                    42


(10) Includes 162,589 common shares held directly by Andrew Beaurline and
952,381 issuable on exercise of options held by Mr. Beaurline that are
exercisable within 60 days.

(11) Includes common shares issuable on exercise of options held by Mr. Ducey
that are exercisable within 60 days.

(12) Includes 1,800,000 common shares held directly by Steve Jensen; 40,000
issuable on exercise of options held by Mr. Jensen that are exercisable
within 60 day; 1,500,000 common shares issuable in conjunction with a
convertible note: and 1,800,000 shares that are issuable under warrants held
by Mr. Jensen.

EQUITY COMPENSATION PLAN INFORMATION

     The following table provides information about the Common Stock that may
be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2007.





<TABLE>
<CAPTION>

______________________________________________________________________________________
                                                                   Number of
                                                                   Securities Remain-
                                                                   ing Available for
                                                                   Future Issuance
                     Number of Secure-                             Under Equity
                     ties to be Issued      Weighted-Average       Compensation Plans
                     upon Exercise of       Exercise Price of      (excluding secure-
                     Outstanding Options,   Outstanding Options,   ties reflected
                     Warrants and Rights    Warrants and Rights    in column (a))
Plan Category             (a)                     (b)                    (c)
______________________________________________________________________________________
<S>                  <C>                    <C>                    <C>
Equity Compensation
Plans approved by        9,357,733               $0.220                 667,400
Stockholders
______________________________________________________________________________________
Equity compensation
plans not approved         400,000               $0.213                    -
by Stockholders
______________________________________________________________________________________

</TABLE>



ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     On February 26, 2007 the Company issued 389,630 shares of common stock
for services previously rendered to the Company. These shares were issued at
$0.45 per share.  Dan Brinker, Chief Executive Officer received 66,667 shares
for a total of $30,000 in compensation. Aaron Brinker, Chief Operating
Officer received 45,185 shares for a total of $20,333 in compensation.  Ryan
Vice, Chief Financial Officer received 26,667 shares for a total of $12,000
in compensation.  Andrew Beaurline, Vice President of Corporate Development

                                     43


and Strategy received 228,889 shares for a total of $103,000 in compensation,
of which $45,000 related to consulting services prior to his employment with
the Company.

     During February through April of 2007, the Company made advances to
Andrew Beaurline, Senior Vice President of Corporate Development and Strategy
totaling $26,500.  This amount is still outstanding as of December 31, 2007.

     During August through December 2007, Thomas Hakel, Director, made
advances to the Company totaling $315,000 for operating capital purposes.

     During August through December 2007, William Robotham, Director,
advanced the Company totaling $370,000 for operating capital purposes, of
which $40,000 had been paid back as of December 31, 2007.

     On October 29, 2007, Chuck Mache, Director, invested $50,000 into the
Company's private offering of common stock and warrants.

     On November 30, 2007, William Robotham, Director, purchased two units at
$50,000 per unit of the Company's private offering of common stock and
warrants in exchange for cancellation of $100,000 of advances made to the
Company.

     On November 30, 2007, Thomas Hakel, Director purchased two units at
$50,000 per unit of the Company's private offering of common stock and
warrants in exchange for cancellation of $100,000 of advances made to the
Company.

     On December 11, 2007, BRAM Enterprises, a general partnership owned
fifty percent by William Robotham, Director, purchased three units at $50,000
per unit of the Company's private offering of common stock and warrants in
exchange for cancellation of $75,000 in advances and a $75,000 convertible
note.

     On December 28, 2007, Steven Jensen, Director, converted his $450,000
note from the termination of the Azaria Management Agreement into nine units
of the Company's private offering of common stock and warrants.

     On December 28, 2007, the Company sold six units of a note offering,
each unit consisting of a $25,000 promissory note and 50,000 redeemable
warrants at a purchase price of $25,000 per unit (the "Note Unit") to William
Robotham, Director, (three Note Units); Chuck Mache, Director,(one Note
Unit); Thomas Hakel, Director, (one Note Unit); and Michael Ducey, Senior
Vice President of Sales and Marketing, (one Note Unit).

     At December 31, 2007, the Company had outstanding payables to Dan
Brinker, President and Chief Executive Officer, of $61,095, Thomas Hakel,
Director, of $215,000 and William Robotham, Director of $155,000.  Dan
Brinker was repaid $50,000 in January 2008. Thomas Hakel was repaid $35,000
in February 2008. These payables related to advances for operating capital to
the Company during the Company's transition into a public company and during
the implementation of the Company's acquisition strategy and does not reflect
all amounts owed to these individuals.






                                       44

ITEM 13.  EXHIBITS

EXHIBIT
NUMBER     DESCRIPTION
--------   -----------

2.1        Asset Purchase Agreement dated as of April 1, 2007, among
           Optima Technologies, LLC, a Delaware limited liability
           company, American TonerServ Corp., a Delaware corporation,
           Optima Technologies, L.L.C., a Nevada limited liability
           company ("seller"), and Steven R. Jensen. (11)

2.2        Asset Purchase Agreement dated as of December 19, 2007,
           Among TT Acquisition, LLC, a Delaware limited liability
           company, American Tonerserv Corp., a Delaware corporation,
           Tonertype of Florida, LLC, a Florida limited liability
           company, and David T. Shaver and Clyde C. Shaver (13)

3.1        Certificate of Incorporation, as amended (1)

3.2        Bylaws (1)

3.3        Certificate of Amendment filed January 3, 2005 (1)

3.4        Certificate of Amendment filed March 16, 2006 (3)

3.5        Certificate of Amendment filed August 21, 2006 (4)

3.6        Certificate of Designations, Preferences and Rights of
           Series C Convertible Preferred Stock (5)

10.1       1995 Stock Incentive Plan, as amended (1)

10.2       Office Lease Agreement between Monroe Forsyth, Inc. and
           American TonerServ Corp. - Filed herewith electronically.

10.4       Customer List Purchase Agreement with Computech Print
           Solutions, Inc. (6)

10.5       Convertible Promissory Note issued to Computech Print
           Solutions, Inc. (6)

10.6       Stock Compensation Agreement with Daniel J. Brinker (7)

10.7       Stock Compensation Agreement with Thomas Hakel (7)

10.8       Stock Compensation Agreement with Aaron L. Brinker (7)

10.9       Stock Compensation Agreement with William A. Robotham (7)

10.10      Stock Compensation Agreement with Basilio Chen (7)

10.11      Employment Letter with Daniel J. Brinker (7)





                                     45


10.12      Employment Letter with Aaron L. Brinker (7)

10.13      Employment Letter with Ryan Vice (7)

10.14      Stock Repurchase Right Agreement with Ryan Vice (7)

10.15      Corporate Development and Consulting Agreement with Fort
           Holdings Ltd. (7)

10.16      Employment Letter with Andrew A. Beaurline (8)

10.17      Form of 10% Convertible Note for 2006 Offering (8)

10.18      Form of Warrant to Purchase Common Stock for 2006
           Offering (8)

10.19      Form of Registration Rights Agreement for 2006 Offering (8)

10.20      Customer List Purchase Agreement with Brody Enterprises (9)

10.21      Promissory Note issued to Brody Enterprises (9)

10.22      Consulting Agreement with Arnold Brody (9)

10.23      Stock Compensation Agreement dated February 26, 2007 with
           Daniel J. Brinker (10)

10.24      Stock Compensation Agreement dated February 26, 2007 with
           Ryan Vice (10)

10.25      Stock Compensation Agreement dated February 26, 2007 with
           Aaron L. Brinker (10)

10.26      Stock Compensation Agreement dated February 26, 2007 with
           Andrew A. Beaurline (10)

10.27      Secured Promissory Note to Optima Technologies, L.L.C. (11)

10.28      Contingent Promissory Note to Optima Technologies,
           L.L.C. (11)

10.29      Convertible Promissory Note to Optima Technologies,
           L.L.C.  (11)

10.30      Management Agreement with Optima Technologies, L.L.C. and
           Steven R. Jensen. (11)

10.31      Management Agreement with Axon Technologies, Inc. (11)

10.32      Employment Letter with Michael V. Ducey (12)

10.33      Termination of Amended and Restated Management Agreement
           with Azaria Management Group, LLC - Filed herewith
           electronically

10.34      Additional Convertible Note with Azaria Management Group,
           LLC - Filed herewith electronically

                                     46



10.35      Modified Convertible Note with Azaria Management Group,
           LLC - Filed herewith electronically

10.36      Short-Term Promissory Note to Tonertype of Florida, LLC (13)

10.37      Installment Promissory Note to Tonertype of Florida,
           LLC (13)

10.38      Contingent Convertible Promissory Note to Tonertype of
           Florida, LLC (13)

10.39      Consulting Agreement with After Market Support, LLC (14)

10.40      Mutual Termination Agreement with After Market Support, LLC

10.41      Consulting Agreement with Tom Hakel - Filed herewith
           electronically

10.42      Coaching and Consulting Agreement with Chuck Mache - Filed
           herewith electronically

21         Subsidiaries of the Registrant - Filed herewith electronically

23.2       Consent of Perry-Smith LLP, Independent Registered Public
           Accounting Firm - Filed herewith electronically

14         Code of Ethics (2)

31.1       Certification of Chief Executive Officer Pursuant to Section
           302 of the Sarbanes-Oxley Act of 2002 - Filed herewith
           electronically

31.2       Certification of Principal Financial Officer Pursuant to
           Section 302 of the Sarbanes-Oxley Act of 2002 - Filed
           herewith electronically

32.1       Certification of Chief Executive Officer Pursuant to Section
           18 U.S.C. Section 1350 - Filed herewith electronically

32.2       Certification Principal Financial Officer of Pursuant to
           Section 18 U.S.C. Section 1350 - Filed herewith
           electronically
_______________

(1)  Incorporated by reference to the Company's Form SB-2 registration
     statement SEC File No. 333-120688.

(2)  Incorporated by reference to the Company's Annual Report on Form
     10-KSB for the year ended December 31, 2005.

(3)  Incorporated by reference to the Company's Report on Form 8-K dated
     March 16, 2006.

(4)  Incorporated by reference to the Company's Report on Form 8-K dated
     August 21, 2006.

(5)  Incorporated by reference to the Company's Report on Form 8-K dated
     May 15, 2006.

                                     47

(6)  Incorporated by reference to he Company's Report on Form 8-K dated
     July 5, 2006.

(7)  Incorporated by reference to the Company's Report on Form 8-K dated
     July 7, 2006.

(8)  Incorporated by reference to the Company's Report on Form 8-K dated
     September 18, 2006.

(9)  Incorporated by reference to the Company's Report on Form 8-K dated
     December 20, 2006.

(10) Incorporated by reference to the Company's Annual Report on Form
     10-KSB for the year ended December 31, 2006.

(11) Incorporated by reference the Company's Report on Form 8-K dated
     March 31, 2007.

(12) Incorporated by reference the Company's Report on Form 8-K dated
     May 14, 2007.

(13) Incorporated by reference the Company's Report on Form 8-K dated
     December 19, 2007.

(14) Incorporated by reference to the Company's Quarterly Report on
     Form 10-QSB for the quarter ended September 30, 2007.

(15) Incorporated by reference the Company's Report on Form 8-K dated
     March 6, 2008.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     The following table presents aggregate fees for professional services
rendered by Perry-Smith LLP for the audit of the Company's annual financial
statements for the fiscal years ended December 31, 2007 and December 31,
2006.  Fees billed for other services rendered by them during those periods
are also included.

                                       2007            2006
                                     --------        --------
Audit Fees (1)                       $111,500        $46,000
Audit-Related Fees                       -              -
Tax Fees
All Other Fees (2)                   $ 10,000           -
                                     --------        -------
     Total                           $121,500        $46,000
                                     --------        -------

(1) These are fees for professional services performed by Perry-Smith LLP for
the audit of the Company's annual financial statements included in the
Company's Annual Report on Form 10-KSB and the review of financial statements
included in the Company's reports on Form 10-QSB and services that are
normally provided by the accountant in connection with statutory and
regulatory filings for those fiscal years.

(2) These are fees for professional services performed by Perry-Smith LLP in
connection with the filing of the Company's Form 8-K related to the
acquisition of certain assets of Optima Technologies, LLC.

                                      48




AUDIT COMMITTEE PRE-APPROVAL POLICY

     The Company's independent accountants may not be engaged to provide non-
audit services that are prohibited by law or regulation to be provided by it,
nor may the Company's principal accountant be engaged to provide any other
non-audit service unless it is determined that the engagement of the
principal accountant provides a business benefit resulting from its inherent
knowledge of the Company while not impairing its independence.  The Audit
Committee must pre-approve the engagement of the Company's principal
accountant to provide both audit and permissible non-audit services.  No non-
audit services were provided by the independent accountants during the past
two fiscal years.











































                                     49


          REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
American TonerServ Corp.
Santa Rosa, California

     We have audited the accompanying balance sheet of American TonerServ
Corp. as of December 31, 2007 and 2006, and the related statements of
operations, stockholders' equity (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 audits.

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

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American
TonerServ Corp. as of December 31, 2007 and 2006 and the results of its
operations, stockholders' equity (deficit) and its 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 3 to the
financial statements, the Company has suffered recurring losses from
operations resulting in an accumulated deficit of $17,578,840.  Current
liabilities exceed its total current assets at December 31, 2007 by
$2,121,624.  This raises substantial doubt about the Company's ability to
continue as a going concern.  Management's plan regarding these matters is
described in Note 3.  The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


/s/ Perry-Smith LLP


Sacramento, California
March 28, 2008










                                    F-1


AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Consolidated Balance Sheet

                                                                December 31,
                                                                    2007
                                                                ------------
ASSETS
Current assets:
 Cash and cash equivalents                                      $     60,196
 Accounts receivable, net of doubtful accounts of $35,224          1,326,891
 Inventory                                                           715,328
 Prepaid expenses and other current assets                            33,127
 Deferred compensation                                               471,298
                                                                ------------
     Total current assets                                          2,606,840

 Customer lists, net                                               4,002,862
 Goodwill                                                          1,801,895
 Property and equipment, net                                         394,745
 Other assets                                                         29,959
                                                                ------------
     Total Assets                                               $  8,836,301
                                                                ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable and accrued expenses                          $  1,767,997
 Shareholder advances                                                431,095
 Notes payable - current portion
  (net of unamortized discount of $(223,120)                       2,068,033
 Notes payable, related parties - current portion                    150,000
 Convertible notes payable, related parties - current portion         31,250
 Convertible notes payable - current portion                         187,500
 Deferred revenue                                                     92,589
                                                                ------------
     Total current liabilities                                     4,728,464
                                                                ------------
Long-term liabilities:
 Notes payable (net of unamortized discount of $(343,815)          1,281,400
 Convertible notes payable                                           925,000
 Warrant liabilities                                                 119,700
                                                                ------------
     Total long-term liabilities                                   2,326,100
                                                                ------------
     Total liabilities                                             7,054,564
                                                                ------------
Commitments and contingencies
Stockholders' equity:
Common stock; $.001 par value; 450,000,000 shares authorized;
  60,390,956 shares issued and outstanding                            60,391
Additional paid-in capital                                        19,300,186
Accumulated deficit                                              (17,578,840)
                                                                ------------
     Total stockholders' equity                                    1,781,737
                                                                ------------
     Total Liabilities and Stockholders' Equity                 $  8,836,301
                                                                ============

The accompanying notes form an integral part of these consolidated financial
statements.

                                    F-2



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Consolidated Statements of Operations

                                                  December 31,  December 31,
                                                      2007          2006
                                                  ------------  -------------
Revenues:
 Toner                                            $ 3,203,894     $ 267,784
 Service                                              426,637       188,649
                                                  -----------    ----------
Total revenues                                      3,630,531       456,433
                                                  -----------    ----------
Cost of sales:
 Toner                                              2,116,802       171,229
 Service                                              420,046        90,873
 Inventory write-down                                  68,500          -
                                                  -----------    ----------
Total cost of sales                                 2,605,348       262,102
                                                  -----------    ----------
Gross profit                                        1,025,183       194,331

Operating Expenses:
 Salaries and wages                                 1,768,024       580,560
 Professional fees and services                     1,346,706       982,493
 Sales and marketing                                  287,616        87,990
 General and administrative                         1,334,711       239,145
 Amortization of customer lists                       338,173        11,503
                                                  -----------    ----------
Total operating expenses                            5,075,230     1,901,691
                                                  -----------    ----------
Loss from operations                               (4,050,047)   (1,707,360)

Other income (expense):
 Fair value of convertible debt                        85,417      (154,166)
 Termination of management agreement                 (550,000)         -
 Interest expense                                    (260,267)      (75,162)
 Change in fair value of warrant liabilities          (71,873)      (35,000)
 Gain on claims settlements                            14,445        37,819
                                                  -----------   -----------
 Net loss                                         $(4,832,325)  $(1,933,869)
                                                  ===========   ===========
Net loss per share:
 Basic and diluted                                $     (0.16)  $     (0.17)
                                                  ===========   ===========

Weighted average number of shares outstanding:
 Basic and diluted                                 29,373,589    11,359,337
                                                  ===========   ===========





The accompanying notes form an integral part of these consolidated financial
statements.

                                    F-3





AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 2007 and 2006


<TABLE>
<CAPTION>
                                                       Preferred             Additional
                               Common Stock              Stock                Paid-in     Accumulated
                                  Shares      Amount     Shares     Amount    Amount        Deficit        Total
                               ------------   ------   ----------   ------   ----------   ------------   ----------
<S>                            <C>            <C>      <C>          <C>      <C>          <C>            <C>
January 1, 2006                   771,880    $   772        -          -    $ 9,397,566  $(10,812,646)  $(1,414,308)

Issuance of common stock       19,500,000     19,500        -          -        293,000          -          312,500

Issuance of common stock-
 restricted                     2,500,000      2,500        -          -           -             -            2,500

Exchange of convertible
 notes for preferred
 stock                               -          -         832,884   $  833      832,051          -          832,884

Sale of preferred stock              -          -         285,000      285      384,715          -          385,000

Reclassification of war-
 rant liability                      -          -            -         -         22,224          -           22,224

Exercise of stock options          10,000         10         -         -          1,490          -            1,500

Stock compensation from
 options                             -          -            -         -        330,926          -          330,926

Stock compensation from
 restricted stock                    -          -            -         -        597,499          -          597,499

Net loss                             -          -            -         -           -       (1,933,869)   (1,933,869)
                               ----------    -------    ---------   ------  -----------  ------------   -----------
December 31, 2006              22,781,880     22,782    1,117,884    1,118   11,859,471   (12,746,515)     (863,144)

Sale of common stock            8,910,000      8,910         -        -       2,218,590          -        2,227,500

Issuance of common stock
 with warrants valued at
 $687,392                       1,071,847      1,071         -        -         406,354          -          407,425

Issuance of common stock-
 restricted                     3,000,000      3,000         -        -            -             -            3,000

Exchange of notes and
 interest for common stock      5,098,669      5,099         -        -       1,269,569          -        1,274,668

Sale of preferred c shares           -          -         834,971      835    2,587,412          -        2,588,247

Conversion of preferred c
 shares into common stock      19,528,560     19,529   (1,952,855)  (1,953)     (17,576)         -             -

Stock compensation from
 options                             -          -            -         -        281,615          -          281,615

Stock compensation from
 restricted stock                    -          -            -         -        694,751          -          694,751

Net Loss                             -          -            -         -           -       (4,832,325)   (4,832,325)
                               ----------    -------    ---------   ------  -----------  ------------   -----------
December 31, 2007              60,390,956    $60,391         -      $  -    $19,300,186  $(17,578,840)  $ 1,781,737
</TABLE>



Common Share Purchase Warrant

In connection with the Company's private offering of common stock and
warrants in 2007, the Company issued 14,008,669 of warrants.  Each warrant
entitles its owner to purchase one share of common stock at an exercise price
of $0.30 per share and are exercisable at various dates in 2012, subject to
the terms of the warrant agreements.

The accompanying notes form an integral part of these consolidated financial
statements.
                                     F-4

AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
                                                    Years Ended December 31,
                                                       2007          2006
                                                   -----------    ---------
Cash flow from operating activities:
 Net loss                                          $(4,832,325) $(1,933,869)

Adjustment to reconcile net loss to net
 cash used in operating activities:
  Depreciation                                          32,650       11,330
  Amortization                                         338,173       26,941
  Accretion of notes discount                           97,124       11,804
  Change in fair value of warrant liability             71,873       35,000
  Fair value of convertible debt                       (85,417)     154,166
  Gain on claims settlement                            (14,445)     (37,819)
  Stock based compensation                             929,295      978,283
  Termination of mgmt agreement settled in stock       450,000         -
  Inventory write-down                                  68,500         -
  Provision for doubtful accounts                       36,356         -

Changes in operating assets and liabilities
 (excluding effects of Optima Technologies, LLC and
  Tonertype LLC acquisitions):
 (Increase) decrease in assets:
  Accounts receivable                                 (709,032)     (19,464)
  Inventory                                           (166,497)        -
  Prepaid expenses and other current assets            (37,582)       4,127
  Deposits                                               7,110       (7,110)

 Increase (decrease) in liabilities:
  Accounts payable and accrued expenses                918,265      184,760
  Deferred revenue                                      90,607       (9,605)
                                                   -----------    ---------
     Net cash used in operating activities          (2,805,345)    (601,456)
                                                   -----------    ---------
Cash flow from investing activities:
 Purchase of Optima Technologies, LLC and
  Tonertype LLC                                     (2,522,990)        -
 Purchase of customer lists                               -         (55,000)
 Purchase of property and equipment                    (31,953)     (24,036)
                                                   -----------    ---------
     Net cash used in investing activities          (2,554,943)     (79,036)
                                                   -----------    ---------
Cash flow from financing activities:
 Bank overdraft                                        (58,811)        -
 Proceeds from issuance of preferred stock           2,575,000      385,000
 Proceeds from issuance of common stock              2,171,840        6,500
 Issuance of notes payable                             355,000         -
 Proceeds from issuance of convertible notes
  payable                                              400,000      500,000
 Proceeds from shareholder advances                    645,000         -
 Payment of debt on customer list acquisitions        (821,182)     (51,562)
 Payment of convertible notes                          (50,000)        -
 Payment of notes payable                              (26,394)        -
                                                   -----------    ---------
     Net cash provided by financing activities       5,249,264      839,938
                                                   -----------    ---------
     Net increase (decrease) in cash                   (52,213)     159,446
                                                   -----------    ---------
Cash and cash equivalents, beginning of period         171,220       11,774
                                                   -----------    ---------
Cash and cash equivalents, end of period           $    60,196    $ 171,220
                                                   ===========    =========

The accompanying notes form an integral part of these consolidated financial
statements.
                                     F-5



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Increase (Decrease) in Cash and Cash Equivalents

                                                    Years Ended December 31,
                                                       2007         2006
                                                   -----------    ---------
Supplementary information:
 Interest paid                                     $   163,222     $ 58,749
                                                   ===========    =========

Income taxes paid                                  $       800    $     800
                                                   ===========    =========

Non cash investing and financing transactions:

 Common stock issued on conversion of advances,
 notes payable and interest                        $ 1,374,667    $    -
                                                   ===========    =========
 Series C Convertible Preferred stock issued
 on conversion of notes payable and interest       $      -       $ 832,884
                                                   ===========    =========

Issuance of notes payable for acquisitions         $ 3,866,559    $ 874,881
                                                   ===========    =========

Deferred compensation on restricted stock and
 option grants to non-employees                    $   397,922    $ 262,990
                                                   ===========    =========

Warrant liabilities reclassified to equity         $      -       $  22,224
                                                   ===========    =========

Issuance of common stock to settle accounts
 payable                                           $   177,000    $  25,000
                                                   ===========    =========

Issuance of preferred stock to settle accounts
 Payable                                           $    13,248    $    -
                                                   ===========    =========
Issuance of convertible notes payable to
 settle accounts payable                           $      -       $  97,100
                                                   ===========    =========

Reduction of purchase price of customer lists      $   225,705    $    -
                                                   ===========     =========









The accompanying notes form an integral part of these consolidated financial
statements.

                                    F-6


AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

1.   The Company

     Organization and Business Activity:

     Managed Maintenance Systems, Inc. was incorporated in the state of
Delaware on May 30, 1995.  During 1995 the Company changed its name to "Q
MATRIX, Inc."  In January 2005, the Company changed its name to AMERICAN
TONERSERV CORP. (the "Company").  The Company is a national distributor of
compatible printer toner cartridges.  The Company services printers and other
office equipment through its Preferred Provider Network. The Company is
located in Santa Rosa, California.

     Certificate of Incorporation Amendment:

     On March 16, 2006, American TonerServ Corp. (the "Company") filed a
Certificate of Amendment to the Certificate of Incorporation of the Company.
The Certificate of Amendment was filed to effect a one for one-hundred
reverse split of the shares of the Company's common stock outstanding.

     On July 10, 2006, the Company's shareholders approved an amendment to
the Company's Certificate of Incorporation of the Corporation to increase the
number of shares of capital stock authorized to 500,000,000 (450,000,000
shares of Common Stock and 50,000,000 shares of Preferred Stock) and to
effect a one for ten stock split.  The stock split became effective on August
21, 2006.

     All numbers of shares and per share amounts in this filing have been
adjusted to give effect to the reverse and forward splits, unless otherwise
stated.

2.   Summary of Significant Accounting Policies

     Principles of Consolidation:

     The consolidated financial statements include the accounts of American
TonerServ Corp. and its wholly-owned subsidiaries, Optima Technologies, LLC
and Tonertype LLC (collectively referred to as the "Company"). American
TonerServ Corp. is the sole member of Optima Technologies, LLC and Tonertype
LLC which are Delaware Limited Liability Companies. Intercompany transactions
and balances have been eliminated in consolidation.

Estimates:

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.


                                     F-7



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

Fair Value of Financial Instruments:

     For certain of the Company's financial instruments, including accounts
receivable, accounts payable and accrued expenses, the carrying amounts
approximate fair value due to the short-term nature of these items.  The
amounts owed on notes payable also approximate fair value, because the
interest rates and terms are offered to the Company at current market rates.
On long term debt that is interest free or with below market interest rates
an imputed interest rate is used to discount the liabilities.

     The Black-Scholes-Merton model is used to value warrants and options.
The conversion option, included as a component of convertible debt, is valued
using an estimated Private Investment in a Public Entity ("PIPE") price equal
to a 20% discount off the fair market value of the stock.  The convertible
notes associated with the acquisitions of Optima and Tonertype are carried at
face value as these were not "in-the-money" at inception.

     Inventory and Inventory Reserve:

     Inventory consists of finished goods and raw materials which is
primarily toner cartridges and service parts and is stated at the lower of
cost or market determined by the first-in, first-out (FIFO) method. An
inventory reserve has been set up to account for obsolete inventory.  At
December 31, 2007, this amount was $68,500.


                  Finished Goods          $ 681,994
                  Raw Materials             101,834
                  Inventory valuation
                    Allowance               (68,500)
                                          ---------
                  Total Inventory         $ 715,328
                                          =========




















                                     F-8



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     Cash and Cash Equivalents:

     Cash and cash equivalents consist principally of bank deposits. Cash
balances are maintained in bank accounts that are insured by the Federal
Deposit Insurance Corporation ("FDIC") up to a maximum of $100,000.  At
December 31, 2007, The Company did not have cash deposits in excess of FDIC
insurance limits.

     Accounts Receivable:

     Accounts receivable are shown net of allowance for doubtful accounts. In
determining the allowance for doubtful accounts, the Company uses specific
identification, which includes a reserve on older balances that are disputed
or in cases where the Company has knowledge of a potential customer payment
issue.  During the year ended December 31, 2007, the Company had bad debt
write-offs of $13,356.  The allowance for doubtful accounts balance at
December 31, 2007 was $35,224.

     Property and Equipment:

     Property and equipment is stated at cost less accumulated depreciation.
Property and equipment is depreciated using the straight line method over
estimated useful lives, which range from three to seven years.  Leasehold
improvements are depreciated on a straight line basis over the lesser of the
lease term or estimated useful life.

     Acquisitions:

Optima Technologies, LLC:

     On April 1, 2007, the Company entered into an Asset Purchase Agreement
("Agreement") with Azaria Management Group L.L.C. , a Nevada limited
liability company ("AMG") formerly Optima Technologies, L.L.C., a Nevada
limited liability company ("Optima"), and Steven R. Jensen, who owns all of
the membership interests in Optima relating to the purchase of certain assets
of Optima's printer business.  The purchase price for the acquisition
consisted of $741,278 in cash, $124,987 in acquisition costs and $1,800,000
in the form of three promissory notes.  The Company also assumed certain
liabilities of Optima of $76,825 and the obligations of Optima under certain
contracts.

     On August 25, 2007, the Company entered into an Agreement with AMG which
modified the Asset Purchase Agreement with Optima entered into on April 1,
2007 relating to the purchase of certain assets by the Company.






                                     F-9



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

Acquisitions (continued):

     One of the promissory notes (the "Secured Note") in the amount of
$250,000 bore interest at the rate of 7% per annum and was due within 105
days after the closing date.  The Secured Note was secured by the assets
purchased in the transaction. The note was discounted 8% for a combined
imputed interest rate of 15%.  The discount of $5,624 was amortized over the
term of the note.  This note was paid in full on August 13, 2007.

     One of the promissory notes (the "Contingent Note") is in the amount of
$1,250,000 and bears interest at the rate of 7% per annum. The Contingent
Note was subject to adjustment as described below.  The Contingent Note is
payable in thirty equal monthly installments of principal and interest,
commencing on May 1, 2007.  The note has been discounted 8% for a combined
imputed interest rate of 15%. The discount of $120,465 will be amortized over
the term of the note.  Under the terms of the amended agreement, the Company
will continue to make the scheduled monthly installment payments under the
Contingent Note dated April 1, 2007, until March 1, 2008, at which time the
entire outstanding principal balance and unpaid accrued interest shall be due
and payable.  The Contingent Note was also amended to eliminate the gross
profit requirements of the note.  In addition, the Contingent Note shall be
secured by the accounts receivable and inventory of Optima.  The security
interest is subordinated to any financing of the Company of at least $3
million. As of March 1, 2008, the Company has not made this payment and has
been granted an extension.  The Company intends to pay off this note balance
as soon as funds are available are negotiating a short term extension.

     One of the promissory notes (the "Convertible Note"), in the amount of
$300,000, has a maturity date two years after the closing date.  On the
maturity date, the Convertible Note will automatically be converted into
1,500,000 shares based on the calculated share price of $0.20 per share per
the terms of the amended agreement on November 30, 2007.

     In connection with the closing of the acquisition, the Company entered
into a Management Agreement with Azaria and Steven R. Jensen that provides
that Optima will serve as the manager of the Company's operations acquired
from Optima for a period of thirty months, with an option for the Company to
extend the agreement for an additional eighteen months.  The Management
Agreement provides for an annual management fee of $522,429 to be paid to
Steven R. Jensen in consideration for certain services, including, without
limitation, support staffing, master software license, and office and
warehouse facilities.  The management fee will be adjusted annually to
reflect a cost of living increase, and periodically to reflect changes in
personnel.







                                     F-10



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

Acquisitions (continued):

     The annual management fee has been adjusted downward to $455,028 based
on a reduction of personnel effective September 1, 2007.  Under the terms of
the amended agreement dated August 25, 2007, the Company will pay AMG
$100,000 on or before October 8, 2007, for the right to unilaterally
terminate the Management Agreement (the "Subsidiary Termination Right").
Upon exercise of the Subsidiary Termination Right, the Company will pay AMG
an amount equal to $25,000 multiplied by the number of months remaining in
the term of the Management Agreement minus the $100,000 paid as stated above.
AMG has granted the Company an extension until November 30, 2007 to pay the
$100,000 termination fee.   The Company made the $100,000 payment on November
30, 2007.

     In the amended agreement the Company has also purchased certain
inventory for $158,000 payable in six equal monthly payments plus interest
thereon at the rate of 10% per annum.  Five installment payments have been
made for this inventory.

     On December 26, 2007, the Company entered into a Termination of Amended
and Restated Management Agreement (the "Termination Agreement") with Azaria
and Steven R. Jensen pursuant to which the Company paid deferred management
fees and a termination fee of $100,000 to Azaria; delivered a $450,000
Convertible Promissory Note (the "Additional Convertible Note") to Azaria;
and entered into a Modification to a $300,000 Convertible Promissory Note
(the "Modified Convertible Note") and accelerated the vesting of an option
granted to an employee of the Company. The Termination Agreement terminated
the agreement under which Azaria had provided management services to the
Company's Optima Technologies subsidiary. The Company will now manage the
operations of this subsidiary directly.

     Also in connection with the closing of the acquisition, the Company
entered into a Management Agreement with Axon Technologies, Inc. ("Axon"), a
non-profit organization that employs persons with disabilities.  Axon
distributes its products to state agencies in Florida.  Under this Management
Agreement, Optima will provide management services for Axon and will receive
a management fee equal to 90% of the amounts received by Axon for its
products.















                                     F-11



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

Acquisitions (continued):

The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.  The Company had
a change in estimate of the customer list from $1,899,000 to $1,436,000.  The
reduction in the customer list was offset by an increase in Goodwill.


                  Vehicles and equipment      $   87,362
                  Inventory                       40,791
                  Customer list                1,436,000
                  Goodwill                     1,042,848
                  Covenant not to compete         10,000
                                              ----------
                  Total assets acquired        2,617,001
                                              ----------
                  Notes payable - vehicles       (76,825)
                                              ----------
                  Net assets acquired         $2,540,176
                                              ==========

Tonertype of Florida, LLC:

     On December 19, 2007, the Company entered into an Asset Purchase
Agreement with Tonertype of Florida, LLC, a Florida limited liability company
("Tonertype"), and David T. Shaver and Clyde C. Shaver, who own all of the
membership interests in Tonertype, relating to the purchase of certain assets
of Tonertype's printer business. The closing of the Agreement occurred on
December 28, 2007. The purchase price for the acquisition consisted of $1.5
million in cash and $2.5 million in the form of three promissory notes. The
Company also assumed a liability of Tonertype of approximately $42,000 and
the obligations of Tonertype under certain contracts.  One of the promissory
notes (the "Short-Term Note") in the amount of $500,000 bears interest at the
rate of 5% per annum and is due within 120 days after the closing date.

     One of the promissory notes (the "Installment Note"), in the amount of
$1,500,000, bears interest at the rate of 5% per annum and has a maturity
date three years after the closing date. The Installment Note is payable in
monthly installments based on a 60 month amortization schedule with a balloon
payment due at maturity.

     One of the promissory notes (the "Contingent Note") is in the amount of
$500,000 and does not bear interest. The principal amount of the Contingent
Note is subject to adjustment as described below. On December 28, 2009, the
principal balance of the Contingent Note will automatically be converted into
shares of the Company's common stock at a conversion price equal to $0.23 per
share. The Company has agreed to register the shares underlying the
Contingent Note for resale under the Securities Act of 1933, as amended.




                                     F-12



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006


Acquisitions (continued):

     The principal amount of the Contingent Note (or the Installment Note, in
the case of a downward adjustment that exceeds the principal balance of the
Convertible Note) shall be adjusted as follows: (i) in the event that the
aggregate EBITDA (as defined in the Agreement) for the Contingent Period (as
defined in the Agreement) exceeds the Bonus Threshold (as defined in the
Agreement), the principal amount of the Convertible Note shall be adjusted
upward by an amount equal to 50% of such amount in excess of the Bonus
Threshold; or (ii) in the event that the aggregate EBITDA for the Contingent
Period is less than the Trigger Amount (as defined in the Agreement), the
principal balance of the Convertible Note shall be adjusted downward by an
amount equal to such deficiency.

     The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition.


                  Vehicles and equipment      $  280,707
                  Inventory                      576,540
                  Customer list                2,227,800
                  Goodwill                       758,951
                  Covenant not to compete         10,000
                  Accounts Receivable            553,732
                                              ----------
                  Total assets acquired        4,407,729
                                              ----------
                  Accounts Payable              (416,370)
                  Notes payable - vehicles       (42,083)
                                              ----------
                  Net assets acquired         $3,949,276
                                              ==========


















                                     F-13




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

Acquisitions (continued):

The unaudited pro forma combined statements of operations for the years ended
December 31, 2007 and 2006 presented below assumes that the acquisitions of
certain assets of Optima Technologies, LLC and Tonertype LLC were completed
on January 1, 2007 and 2006, respectively:

                                    December 31,
                               2007             2006
                            -----------     -----------
Revenues:
  Toner                     $ 8,748,102     $ 7,535,843
  Service                     1,229,811       1,379,274
                            -----------     -----------
Total revenues                9,977,913       8,915,117
                            -----------     -----------
Cost of sales:
  Toner                       5,564,817       4,800,868
  Service                       978,408         808,484
  Inventory write-down           68,500            -
                            -----------     -----------
Total cost of sales           6,611,725       5,609,352
                            -----------     -----------
Gross profit                  3,366,188       3,305,765
                            -----------     -----------
Operating expenses:
  Salaries and wages          2,533,787       1,304,014
  Professional fees and
   services                   1,349,786         986,883
  Sales and marketing           341,600         180,840
  General and administrative  2,124,431       1,433,736
  Amortization of
   customer lists               724,250         589,541
                            -----------     -----------
Total operating expenses      7,073,854       4,495,014
                            -----------     -----------
Loss from operations         (3,707,666)     (1,189,249)

Other income (expense):
  Fair value of convertible
   debt                          85,417        (154,166)
  Interest expense             (441,703)       (350,543)
  Change in fair value of
   warrant liability            (71,873)        (35,000)
  Termination of
   Management agreement        (550,000)           -
  Gain on claims settlement      14,445          37,819
                            -----------     -----------
Net loss                    $(4,671,380)    $(1,691,139)
                            ===========     ===========
Net loss per share:
  Basic and diluted         $     (0.15)    $     (0.15)
                            ===========     ===========

                                   F-14


AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

Acquisitions (continued):

     The adjustments and methodology used in allocating the purchase
consideration for Optima and Tonertype and in the preparation of these
unaudited pro forma combined statements of operations are based on estimates,
available information and certain assumptions. The pro forma financial data
do not purport to represent what the Company's combined results of operations
would actually have been if such acquisition had in fact occurred at the
beginning of the periods, and are not necessarily representative of the
Company's results of operations for any future period since the companies
were not under common management or control during the periods presented.

     Customer Lists:

     On June 11, 2007, the Company entered into an amendment to the customer
list acquisition agreement with Computech Printer Solutions, Inc.
("Computech").  The Company will pay $7,500 over a three month period.  All
three payments have been made per the terms of the amendment.  Computech will
also receive five percent of the gross sales through December 31, 2007.
Because of this agreement the purchase price of the customer list was reduced
by $128,000. Accordingly, the note payable was also reduced by $128,000.  The
conversion valuation in the amount of $16,667 has also been reversed since a
portion of the note is no longer convertible into the Company's common stock.

     At December 31, 2007 an additional adjustment of $18,300 was made to
reduce the contingent note payable to zero per the terms of the amended
agreement.  Accordingly, the customer list was also reduced by $18,300.

     In August 2007, management determined that the value of the Laser
Cartridge Recharging Services customer list should be reduced by $89,115
based on a reduction of the estimated future amount of revenues generated by
this list. Accordingly, the note payable was also reduced by $89,115 to
reflect the estimated future payments remaining on the note.


















                                      F-15





AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     Long-Lived Assets:

     The Company evaluates the carrying value of its long-lived assets when
events or circumstance indicate the existence of a possible impairment, based
on projected undiscounted cash flows, and recognizes impairment when such
cash flows will be less than the carrying values. Measurement of the amounts
of impairments, if any, is based upon the difference between carrying value
and fair value of the long lived assets. At December 31, 2007, management
determined that its long-lived assets were not impaired.

     Revenue Recognition:

     Revenue is generated from sales of supplies and maintenance agreements.
Revenue from supplies sales is recognized upon shipment.  Revenue from
maintenance is recognized as services are completed or over the term of the
maintenance agreements.  The following is a detailed description of each
revenue activity and its revenue recognition policy:

     Remanufactured Toner Sales - Revenue for the resale of laser toner
cartridges is recognized upon shipment of the toner cartridges to the
customer. In the case where the toner cartridge is sold as a bundled product
with equipment service included as part of the total purchase price, the
combined revenue is segregated between the value of the cartridge and the
service components in accordance with Emerging Issues Task Force 00-21,
Revenue Arrangements with Multiple Elements.  The cartridge portion is
recognized after shipment at the same price as a "cartridge only" sale.  The
service component is deferred and recognized on the earlier of actual
cartridge use or ninety days (the maximum term of the service offering with
each cartridge).

     Time and Materials Maintenance Contracts - Revenue for equipment service
calls initiated by the customer is billed based on actual time and materials.
The revenue is recognized as the service is provided.

     Full Service Maintenance Contracts - Revenue for fixed fee equipment
service contracts are recognized on a straight-line basis over the life of
the contract.

     Deferred Revenue:

     Contract revenue for full-service contracts is recognized by the
straight line method over the life of the contract with the unearned portion
shown as deferred revenue in the accompanying balance sheet. Deferred revenue
is also recorded due to the Company's government customers prepaying for
toner orders before they are shipped.





                                   F-16



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     Deferred Income Taxes:

     The Company uses the asset and liability approach for financial
accounting and reporting for income taxes. Deferred income taxes are provided
for temporary differences in the bases of assets and liabilities as reported
for financial statement purposes and income tax purposes. We have recorded a
valuation allowance against all net deferred income tax assets.  The
valuation allowance reduces deferred income tax assets to an amount that
represents management's best estimate of the amount of such deferred income
tax assets that more likely than not will be realized.

     Stock Based Compensation:

     The Company has a stock incentive plan (the "Plan"), administered by the
Board of Directors, which provides for the granting of options and shares of
common stock to employees, officers, directors and other service providers of
the Company. Options granted under the Plan generally are granted with an
exercise price equal to the market value of a common share at the date of
grant and typically vest over four years from the date of grant.




























                                   F-17




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Basis of Presentation and Summary of Significant Accounting Policies
     (Continued)

Stock Based Compensation (Continued):

On April 19, 2007, the Board of Directors authorized a 1,600,000 increase in
the plan to 10,000,000 shares, which was approved by a majority of the
stockholders.  The total number of shares authorized to be granted under the
2005 plan was 10,000,000 at December 31, 2007.  The 1995 Stock Option Plan
has expired but all options outstanding at that time continue in accordance
with their respective terms.  No new options will be granted under the 1995
Plan and there were 35,133 options outstanding under the 1995 Plan.

     The estimated fair value of equity-based awards, less expected
forfeitures, is amortized over the awards' vesting period on a straight-line
basis.  Share-based compensation expense recognized in the consolidated
statements of operations relating to stock options for the years ended
December 31, 2007 and 2006 was $188,975 and $51,442 respectively.  We have
not recorded income tax benefits related to equity-based compensation expense
as deferred tax assets are fully offset by a valuation allowance.

     In calculating compensation related to stock option grants, the fair
value of each stock option is estimated on the date of grant using the Black-
Scholes-Merton option-pricing model and the following weighted average
assumptions:

                                    Year Ended          Year Ended
                                 December 31, 2007   December 31, 2006
                                 ------------------   ------------------

Dividend yield                          None                   None
Expected volatility                     35.0%                  35.0%
Risk-free interest rate               3.4%-5.1%              4.0%-5.1%
Expected terms (years)                 5.7-6.3                5.7-6.3

     The Company calculates the expected volatility for stock-based awards
using the historical volatility for its peer group public companies because
sufficient historical data does not yet exist for the Company's stock.  The
risk free interest rates were determined by the rates of the 5 and 7 year
treasury bills on the grant date of the options.  The expected term was
determined in accordance with Staff Accounting Bulletin No. 107.

     The Company records the fair value of restricted stock and options
granted to non-employees as deferred compensation at the date of issuance and
recognizes compensation pro rata over the service period of the restricted
stock or options.  The compensation is adjusted for the change in fair market
value at the end of each period.


                                   F-18



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     The Company accounts for restricted stock and options granted to non-
employees in accordance with EITF No. 96-18, "Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services".  The Company records the fair
value of such restricted stock and options as deferred compensation at the
date of issuance and recognizes compensation on a straight-line basis over
the service period of the restricted stock or options.  The compensation is
adjusted for the change in fair market value at the end of each period in the
statement of operations.

     Net Loss per Share:

     Net loss per share has been calculated using the weighted average number
of shares outstanding during the period.  Diluted loss per common share is
computed similar to basic loss per share except that the weighted average
number of common shares outstanding is increased to include additional common
shares from the assumed exercise of options and warrants and conversion of
convertible debt, if dilutive. Dilutive loss per share is the same as basic
loss per share in all periods, since the impact of outstanding options and
warrants is antidilutive.

     All numbers of shares and per share amounts in these financial
statements and notes have been adjusted to give effect to the reverse and
forward splits, unless otherwise stated.


























                                   F-19




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     Net Loss per Share (Continued):

     The following securities could potentially dilute basic earnings per
share in the future:

                                             December 31,   December 31,
                                                 2007           2006
                                             ------------   ------------
     Options                                   9,757,733       7,442,643
     Common Stock Warrants - 1998 & 1999
       grants                                     25,729          50,729
     Common Stock Warrants                    14,008,669 (1)        -
     Common Stock Warrants -
      Convertible debt                         1,410,000 (2)     682,399 (4)
     Convertible debt                          1,375,000 (3)   1,538,462 (5)
     Convertible Preferred Stock                    -         11,178,840 (6)
     Convertible debt - acquisitions           3,645,923 (7)        -
                                             -----------      ----------
     Potential equivalent shares excluded     30,223,054      20,893,073
                                             ===========      ==========


(1) In addition to the outstanding options and common stock warrants, during
the three months ended December 31, 2007 the Company sold approximately 70
units at $50,000 per unit at $0.25 per share.  In addition to the common
stock, the investor received one warrant for each share purchased
representing 14,008,669 warrants exercisable at a price of $0.30 per share.
These warrants are exercisable over a five year period.  The Company also
reserves the right to call these warrants with 30 days notice if the Company
becomes listed on NASDAQ, the average daily trading volume is equal to or
greater than 400,000 shares and the stock price is $0.75 per share.

(2) The Company has issued $850,000 of notes as of December 31, 2007 that the
holders of these notes hold warrants that may be exercised to purchase a
number of shares equal to 30% to 150% of the face value of the notes.  The
exercise price of the warrants will be equal to the price of shares sold in
the offering of common stock.  The Company estimated the number of warrants
based on the fair value of common stock of $0.25 per share at December 31,
2007.

(3)  Convertible debt was calculated based on $275,000 of convertible notes
outstanding using an estimated conversion price of $0.20 per share, which
represents a discount of 20%, the estimated discount of a PIPE offering, of
the fair value of common stock of $0.25 per share at December 31, 2007.





                                      F-20



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     Net Loss per Share (Continued):

(4) In addition to the outstanding options and common stock warrants, the
Company has issued $550,000 of notes as of December 31, 2006 that are
convertible into common stock at a conversion price equal to the price of
shares sold in a future offering of common stock.  The holders of these notes
also hold warrants that may be exercised to purchase a number of shares equal
to 30% to 150% of the number of shares each holder would receive if their
notes are converted into common stock. The exercise price of the warrants
will be equal to the price of shares sold in the offering of common stock.
The Company estimated the number of warrant's based on the fair value of
common stock of $0.49 per share at December 31, 2006.

(5) Convertible debt was calculated based on $600,000 of convertible notes
outstanding using an estimated conversion price of $0.39 per share, which
represents a discount of 20%, the estimated discount of a PIPE offering, of
the fair value of common stock of $0.49 per share at December 31, 2006.

(6) Convertible debt from acquisitions includes the Tonertype and Optima
convertible notes.  The Optima convertible note converts into 1,500,000
shares based on a $0.20 share price and a $300,000 convertible note. The
Tonertype note converts into which converts into 2,145,923 shares based on a
share price of $0.23 and a $500,000 convertible note.

(7)  Preferred Series C Convertible Shares are convertible into ten shares of
the Company's common stock at the option of the holders. The Series C
Convertible Shares were converted into Common Stock on October 11, 2007 by
the majority vote of the Series C holders.





















                                   F-21




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

2.   Summary of Significant Accounting Policies (Continued)

     Convertible Debt Securities:

     The Company has issued convertible debt securities with non-detachable
conversion features and detachable warrants.  The Company accounts for such
securities in accordance with SFAS No. 150 "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity."  The
Company accounts for such securities on the balance sheet as a component of
the overall fair value of the securities.  The Company estimates fair value
based on the intrinsic value of common stock by determining the difference
between the total shares converted at fair value and the total shares
converted at a 20% discount, which is the estimated discount of a PIPE
offering.

     Warrants and Detachable Warrants:

     As the warrant contracts must be settled by the delivery of registered
shares and the delivery of the registered shares are not controlled by the
Company and the number of shares is unknown, pursuant to EITF 00-19,
"Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock", the estimated fair value of the warrants
at the date of issuance was recorded as a warrant liability on the balance
sheet.  The Company records the warrant liability at fair value at the end of
each reporting period with changes recorded in earnings. At the time the
warrants are exercised or the number of shares are known the liability will
be reclassified to equity to reflect the increase in shares outstanding.

     The Black-Scholes-Merton option pricing method is used to value the
warrants and detachable warrants upon the date of issuance and at each
balance sheet date for warrant liabilities.  During 2006, the Company
reclassified $22,224 of warrants to equity upon conversion of notes payable
(Note 9).  The assumptions used to value this amount was based on $0.025 per
share, a 1% volatility and a risk free interest rate of 3%. At December 31,
2007, a $0.20 per share value was attached to the warrants, a 35% volatility
and risk free interest rates ranging from 3.05% - 3.45% based on the
estimated lives ranging from 1.25 to 5 years, based on an estimated PIPE
occurring in the third quarter of 2008.

     Segment:

     Based on the Company's integration and management strategies, the
Company operates in a single business segment.  For the years ended December
31, 2007 and December 31, 2006, all material revenues have been derived from
domestic operations.

3.   Going concern and Basis of Presentation

     The financial statements have been prepared on a going concern basis,
which assumes that the Company will be able to realize its assets and
discharge its obligations in the normal course of business.


                                   F-22




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

3.   Going concern and Basis of Presentation (Continued):

     The Company had a net loss of $4,832,325 and had negative cash flows
from operations of $2,805,345 for the year ended December 31, 2007 and had an
accumulated deficit of $17,578,840 and a working capital deficit of
$2,121,624 at December 31, 2007. The Company settled overdue claims from
certain service providers resulting in a net gain of $14,445 during the year
ended December 31, 2007.  The Company has significant cash requirements and
no ability to generate sufficient cash flows from operations. Thus, the
Company has insufficient funds to meet its financial obligations as they
become due.

     Management believes it will be successful in financing its operations
for the next twelve months. However, until such time as financing is
obtained, there can be no assurance that sufficient funds will be available
to finance its operations.  This raises substantial doubt about the Company's
ability to continue as a going concern.  It is management's objective to seek
additional capital and funding sources to finance its future operations. The
Company raised $6,315,414 through private offerings during the year ended
December 31, 2007.

     The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.  Although the Company will continue to seek
additional cash resources through equity issuances in order to position the
Company for possible future opportunities, there can be no assurance that
funds will be available on an economic basis to the Company.

4.   Recent Accounting Pronouncements

     In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS
No. 154, "Accounting Changes and Error Corrections," which replaces APB
Opinion No. 20, "Accounting Changes," and SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements," and changes the requirements for
the accounting for and reporting of a change in accounting principle. SFAS
No. 154 is effective for accounting changes and corrections of errors made in
fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154
in the year ended December 31, 2006 did not have a material effect on the
Company's results of operations, liquidity or capital resources.










                                   F-23




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

4.   Recent Accounting Pronouncements (Continued):

     Effective January 1, 2007, the Company adopted the provisions of FASB
interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes -
an interpretation of FASB Statement No. 109.  FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in a company's financial
statements in accordance with FASB Statement No. 109, Accounting for Income
Taxes.  FIN 48 also prescribes a recognition threshold and measurement
standard for the financial statement recognition and measurement of an income
tax position taken or expected to be taken in a tax return.  In addition, FIN
48 provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.  There
was no impact from applying the provisions of FIN 48 on the Company's
earnings or financial position.

     In September 2006, the Securities and Exchange Commission published
Staff Accounting Bulleting (SAB) No. 108, "Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements".  SAB 108 was issued to address diversity in practice in
quantifying financial statement misstatements and the potential under current
practice to build up improper amounts on the balance sheet.  The Company
adopted SAB 108 in the year ended December 31, 2006.  The adoption of SAB 108
did not have a material impact on the Company's financial position, results
of operations or cash flows.

     In December 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements".  This statement defines fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS No. 157 applies under other accounting pronouncements that require or
permit fair value measurements and is intended to increase consistency and
comparability.  SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007.  The adoption of SFAS No. 157
is not expected to have a material impact on our financial position, results
of operations or cash flows.
















                                     F-24




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

5.   Property and Equipment

     A summary of property and equipment as of December 31, 2007, is as
follows:

                Computer hardware                  $  11,083
                Furniture and fixtures                36,693
                Vehicles and equipment               381,490
                Computer software                     11,300
                                                   ---------
                                                     440,566
                Less accumulated depreciation        (45,821)
                                                   ---------
                                                   $ 394,745
                                                   =========

     Depreciation for the years ended December 31, 2007 and 2006, totaled
$32,650 and $11,330, respectively.

6.   Customer Lists and Asset Purchases

     A summary of customer lists as of December 31, 2007, is as follows:

                Customer lists                    $4,367,976
                Less accumulated amortization       (365,114)
                                                   ---------
                                                  $4,002,862
                                                   =========

Amortization expense for the year ended December 31, 2007 totaled $338,173.






















                                    F-25




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

6.   Customer Lists and Asset Purchases (Continued):

                  Gross Notes Payable   $ 4,406,368
                  Unamortized discount     (566,935)
                                          ---------

                  Subtotal                3,499,433
                  Less: current portion  (2,218,033)
                                          ---------
                  Total long term debt   $1,281,400
                                          =========

     Amortization expense related to the notes payable discount was $97,124
for the year ended December 31, 2007.






































                                     F-26




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

7.   Accounts Payable and Accrued Expenses

     Accounts payable and accrued expenses as of December 31, 2007 is
comprised of the following:

                                                   December 31,
                                                       2007
                                                   ------------
   Accounts payable                                $1,254,774
   Long outstanding payables                          204,512
   Accrued payroll                                    131,614
   Accrued other expenses                             177,097
                                                   ----------
   Total accounts payable and accrued expenses     $1,767,997
                                                   ==========

8.   Convertible Notes Payable

     As of December 31, 2007, convertible notes payable (the "Notes") are
comprised of unsecured notes payable as follows:

                                                Third     Related
                                                Parties   Parties
                                               --------   --------

   Convertible notes payable                   $250,000   $ 25,000

   Fair value of convertible debt                62,500      6,250
   Convertible notes payable -
     acquisitions                               500,000    300,000
                                               --------   --------
   Subtotal                                     812,500    331,250
   Less current portion                        (187,500)   (31,250)
                                               --------   --------
   Total long term portion                     $625,000   $300,000
                                               ========   ========














                                     F-27



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

8.   Convertible Notes Payable (Continued)

     In the period from July 2006 to August 2007, $800,000 of convertible
notes payable were issued.  The offering consisted of the sale of Units at a
purchase price of $50,000 per Unit.  Each Unit consists of a 10% Convertible
Note in the principal amount of $49,999 (the "Notes") and a detachable
warrant to purchase shares of the Company's Common Stock (the "Warrants").
The Notes bear interest at the rate of 10% per annum and become due and
payable in full one to two years after issuance.  The Notes may be converted,
at the option of the holder, into shares of Common Stock  upon the sale and
issuance of Common Stock by the Company in a PIPE offering resulting in gross
proceeds of not less than $3,000,000 (a "$3 Million Qualified Offering").
The conversion term will expire six months after the Company completes a $3
Million Qualified Offering.  The Notes will be automatically converted into
shares of common stock upon the sale and issuance of common stock by the
Company in a PIPE offering resulting in gross proceeds of not less than
$5,000,000 (a "$5 Million Qualified Offering").  The price at which the Notes
may be converted into Common Stock (the "Conversion Price") will be the
average price at which the first $1.0 million of Common Stock is sold in a $3
Million or $5 Million Qualified Offering, whichever may occur.  During the
fourth quarter of 2007, $525,000 of these convertible notes, along with
accrued interest of $24,667 was exchanged for common stock and warrants as
part of an equity private offering. The balance of these convertible notes at
December 31, 2007 was $275,000.

     The remaining Notes also contain detachable warrants equal to 30-40% of
the face value of the Note.  In assessing the fair value of the warrant
grants, the Company recorded the fair value of these instruments based on the
Black-Scholes-Merton model which requires estimates of the volatility of our
stock and the market price of our shares at the date of grant (see Note 9).
The intrinsic value of the warrants at their grant date was $68,750.  The
fair value of the warrant liabilities at December 31, 2007 was $119,700.

     In May 2006, $751,386 of convertible notes payable issued in May 2005
and $81,498 of related accrued interest on these notes, which were originally
to be converted into shares of common stock, were exchanged for Series C
Convertible Preferred Stock ("Series C Shares"). In addition, the warrants to
purchase 1,127,079 shares of common stock were terminated.  A total of
832,884 Series C Shares were issued in exchange for the convertible notes and
the interest accrued thereon, along with the termination of warrants issued
with the convertible notes.  This did not result in an expense for the
induced conversion because the note holders did not receive additional
consideration to convert the notes payable to Series C preferred
shareholders. During 2007, the Company paid off the remaining $50,000 of
convertible notes from this offering.  As of December 31, 2007, there was no
convertible notes outstanding that were issued in May 2005.






                                     F-28




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

9.   Warrant Liabilities

     In conjunction with raising capital through the sale of convertible
notes payable (see Note 8), the Company issued various warrants to purchase
shares of common stock.  As the contracts must be settled by the delivery of
registered shares and delivery of the registered shares are not controlled by
the Company, the fair value of the warrants at the date of issuance was
recorded as warrant liabilities on the balance sheet.  The fair value of the
warrant liabilities at December 31, 2007 was $119,700. The Company recorded
the change in fair value of warrant liabilities of $71,873 and $35,000 in the
statement of operations for the years ended December 31, 2007 and 2006,
respectively.

     In calculating the warrant liabilities, the fair value of each warrant
is estimated at the end of each period using the Black-Scholes-Merton model
and the following weighted average assumptions:

                            December 31, 2007          December 31, 2006
                            -----------------          -----------------
     Dividend yield               None                       None
     Expected volatility          35.0%                      35.0%
     Risk-free interest rate    3.05-3.45%                    4.0%
     Expected terms (years)     1.25-5.00                     1.25

10.  Pension Plan:

     The Company had no 401(k) benefit plan for its full time employees
during the year ended December 31, 2007.

11.  General and Administrative Expenses:

     During the years ended December 31, 2007 and 2006 General and
Administrative expenses were comprised as follows:

                                               December 31,    December 31,
                                                   2007            2006
                                               ------------    ------------
Office lease                                   $  148,710        $112,405
Telephone                                          60,543          16,892
Insurance                                         132,303          11,377
Depreciation                                       32,650          11,330
Management fees paid to Azaria                    354,818            -
Automobile expense                                120,543            -
Bad debt expense                                   36,356            -
Software license                                   39,759           9,991
Travel expenses                                    69,150           9,105
Other                                             339,879          68,045
                                               ----------        --------
Total General and Administrative Expenses      $1,334,711        $239,145
                                               ==========        ========


                                     F-29



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

12.  Income Taxes:

     The Company has no taxable income and a full valuation allowance on
deferred income tax assets.  Accordingly, there was no provision for federal
and state income taxes for the years ended December 31, 2007 and 2006.

     A reconciliation of the statutory federal rate and the Company's
effective tax rate for the year ended December 31, 2007 and 2006, is as
follows:

                                                     2007     2006
                                                     -----    -----

     Statutory federal income tax rate               (34)%    (34)%
     State income taxes net of federal benefit        (6)%     (6)%
     Valuation allowance on deferred income tax
       assets                                         40 %     40 %
                                                     -----    -----
       Effective tax rate                              0 %      0 %
                                                     ======  ======

     Significant components of the Company's deferred tax assets and
liabilities as of December 31, 2007, are as follows:

     Deferred tax assets and liabilities:
       Net operating loss carryforwards                $5,445,000
     Stock compensation                                   652,000
     Warrant liabilities                                   43,000
     Fair value of convertible notes payable               46,000
     Amortization                                        (118,000)
                                                       ----------
       Total deferred tax asset                         6,068,000
       Less valuation allowance                        (6,068,000)
                                                       ----------
         Net deferred tax asset                        $     -
                                                       ==========

     Net operating loss carryforwards of approximately $14,967,303 for
federal and $6,099,181 for state are available as of December 31, 2007, to be
applied against future taxable income.  The net operating loss carryforwards
expire in tax years 2015 through 2027 for federal purposes and in tax years
2012 through 2017 for state purposes.   In 2007 no state operating losses
expired for tax purposes and in 2006 $161,936 in state net operating losses
expired for tax purposes.







                                      F-30




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

12.  Income Taxes (Continued):

     Due to the significant increase in common stock issued and outstanding
in 2006 and 2007, Section 382 of the Internal Revenue Code may provide
significant limitations on the utilization of net operating loss
carryforwards of the Company.  As a result of these limitations, a portion of
these loss and credit carryovers may expire without being utilized.  A
valuation allowance has been recorded as a reduction against the net
operating loss carry forwards due to the uncertainty of the ultimate
realization of future benefits from these net operating losses.  The change
in valuation allowance for the year ended December 31, 2007 and 2006, was
$1,839,000 and $775,022, respectively.

13.  Preferred Stock

     In May 2006, the Company issued 1,067,884 Series C Shares in exchange
for convertible notes and the interest accrued thereon totaling $832,884 (see
Note 6) and cash of $235,000.

     In December 2006, the Company received subscriptions for 50,000 shares
of Series C Shares from accredited investors in a private offering for
$150,000 in cash.

     During 2007, the Company sold an additional 834,971 for a total Series C
Shares outstanding of 1,952,856.

     The Series C Shares are convertible into ten shares of the Company's
common stock at the option of the holders. The holders of the Series C Shares
will vote together with the holders of common stock on an "as if converted"
basis.  The holders of the Series C Shares will also be entitled to vote as a
separate class as required by Delaware law. Holders of Series C Convertible
Preferred Stock will receive dividends only when and if declared by the Board
of Directors of the Company and no dividends shall accumulate on the Series C
Convertible Preferred Stock.

     On October 11, 2007 a majority of the Series C Share holders voted to
convert their shares into shares of the Company's common stock.  At December
31, 2007 there were no Series C Shares outstanding.














                                      F-31



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

14.  Common Stock Warrants

     Common stock warrants were issued in 1998 and 1999, in connection with
debt agreements, which have been fully repaid; the warrants expire on
February 1, 2008. Common stock warrants have also been issued in connection
with debt agreements relating to the Company's private debt offerings from
2004 to 2006 (see Notes 8 & 9). From October to December of 2007, the Company
issued warrants in a private equity offering.  Warrants outstanding from
those issued as of December 31, 2007, are as follows:

             Balance at December 31, 2006            __________
             Warrants issued in 1998 & 1999              50,729
             Warrants issued from 2004 to 2006        1,410,000
             Warrants issued in 2007                 14,008,669
             Exercised in 2007                             -
             Expired in 2007                            (25,000)
                                                     ----------
             Balance at December 31, 2007            15,444,398
                                                     ==========

     The weighted average exercise price per share of the warrants issued in
1998 and 1999 at December 31, 2007, was $1.00.  The warrants issued from 2004
to 2006 have an average exercise price per share of $0.20.  The warrants
issued in 2007 have an exercise price of per share of $0.30.



























                                     F-32




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

15.  Stock-based Compensation

     At December 31, 2006, $174,434 in compensation was accrued for services
rendered by certain individuals. On February 22, 2007, the Company issued
389,630 shares of common stock for services previously rendered to the
Company. The number of shares issued was based on the share price of $0.45,
which is the fair market value of stock as of the date of issuance.  Dan
Brinker, Chief Executive Officer, received 66,667 shares for a total of
$30,000 in compensation. Aaron Brinker, Chief Operating Officer, received
45,185 shares for a total of $20,333 in compensation.  Ryan Vice, Chief
Financial Officer, received 26,667 shares for a total of $12,000 in
compensation.  Andrew Beaurline, Vice President of Corporate Development and
Strategy received 228,889 shares for a total of $103,000 in compensation, of
which $45,000 related to consulting services prior to his employment with the
Company.  Chuck Mache, advisor, received 22,222 shares for a total of $10,000
in compensation.

     On December 4, 2007, Chuck Mache, Director, received 16,000 shares for a
total of $4,000 in compensation.

     On December 4, 2007, Andrew Halperin, a Preferred Service Provider
(PSP), received 8,000 shares for a total of $2,000 in settlement for past due
invoices.

16.  Restricted Stock

     On July 7, 2006, the Company's Board of Directors entered into a
Corporate Development and Consulting Agreement with Fort Holdings Limited, a
British Virgin Island corporation ("Fort Holdings"), under which Fort
Holdings will provide corporate and business development, planning and
financial consulting services to the Corporation. As compensation for these
services, Fort Holdings received a $10,000 retainer and 1,500,000 shares of
the Company's Common Stock. Fort Holdings will be required to return 500,000
shares in the event that the corporate development plan is not completed and
1,000,000 shares if Fort Holdings terminates the Corporate Development and
Consulting Agreement within six months of entering into the agreement. As of
February 28, 2007, the Corporate Development and Consulting Agreement was
completed and the remaining 500,000 shares were vested immediately.  The fair
value of this stock when granted was $0.015 per share. At December 31, 2007,
this consulting agreement was no longer in effect.

     On July 7, 2006, the Board of Directors granted 1,000,000 shares of
restricted stock for services provided by Ryan Vice prior to his appointment
as Chief Financial Officer of the Company. These shares are subject to the
employee's continued service of two years to the Company. The fair value of
this stock when granted was $0.015 per share.




                                    F-33




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006


     Restricted shares have the same voting and dividend rights as the
Company's unrestricted common shares.  Prior to the implementation of SFAS
123R, the Company had not issued any restricted stock.  Compensation cost for
restricted stock is recognized in the financial statements on a pro rata
basis over the vesting period for the Chief Financial Officer.

     On September 30, 2007, the Company entered into an exclusive investor
relations consultant agreement with After Market Support, LLC (AMS), under
which AMS will provide various services as outlined in the agreement to help
the Company achieve a NASDAQ listing within a twelve month period.  As
compensation for these services, AMS received 3,000,000 shares of the
Company's Common Stock for $3,000.  The fair value of this stock when granted
was $0.22 per share.  Restricted shares totaling 2,000,000 shares will vest
over the next 12 months based on performance conditions, as defined in the
agreement.  The Company will pay $10,000 per month plus additional program
fees over the twelve months totaling $300,000.   The total compensation
recognized during the year ended December 31, 2007 was $271,500. On March 6,
2008 the Company and AMS mutually terminated its relationship.  As part of
the termination AMS will return 3,000,000 common shares that it purchased as
part of the deal.































                                      F-34




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

16.  Restricted Stock (Continued)

     The amount of expense for the year ended December 31, 2007 related to
restricted stock that would have been included in the consolidated statements
of operations under the provisions of Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees was $7,500 ($0.015 per share).
The amount of expense for the year ended December 31, 2007 related to
restricted stock for non-employees was $374,000.  We have not recorded income
tax benefits related to the expense for restricted stock issued to non-
employees as deferred tax assets are fully offset by a valuation allowance.
The implementation of SFAS 123R did not have a significant impact on cash
flows from operations during the year ended December 31, 2007.

     A summary of the changes in restricted stock outstanding during the year
ended December 31, 2007 is presented below:

---------------------------------------------------------------------------
                                                            Weighted
                                                             Average
                                                            Grant Date
                                     Shares                 Fair Value
---------------------------------------------------------------------------
Non-vested shares
 at January 1, 2007                2,500,000                    -
   Granted                         2,000,000                 $ 0.22
   Vested                         (1,750,000)                  0.04
   Forfeited/Expired                    -                       -
                                   ---------                 ------
Non-vested shares
 at December 31, 2007              2,750,000                 $ 0.15
                                   =========                 ======

     As of December 31, 2007, there was $439,500 of total unrecognized
compensation cost related to restricted stock, of which $435,750 is recorded
as deferred compensation. The weighted average vesting period remaining for
the restricted stock is approximately 8 months.
















                                     F-35




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

17.  Stock Option Plan

     A summary of the changes in stock options outstanding under our equity-
based compensation plans during the twelve months ended December 31, 2007 is
presented below:



<TABLE>
<CAPTION>

                                                            Weighted
                                                            Average
                                               Weighted     Remaining
                                               Average      Contractual    Aggregate
                                               Exercise     Term           Intrinsic
                                  Shares       Price        (Years)        Value
                                ----------     --------     -----------    ----------
<S>                            <C>             <C>          <C>            <C>
Outstanding at January 1, 2007  7,442,640        $0.17        9.67         $2,386,274
                                                                           ==========
 Granted                        2,332,600        $0.39          -              33,000
 Exercised                          -              -            -          ==========
 Forfeited/Expired               ( 17,507)       $1.74          -
                                ---------       ------        ----
Outstanding at December 31,
  2007                          9,757,733        $0.22        8.51         $  725,750
                                =========       ======        ====         ==========
Exercisable at December 31,
  2007                          2,933,833        $0.22        8.70         $  235,090
                                =========       ======        ====         ==========

</TABLE>




     The weighted average grant date fair value of options granted during the
year ended December 31, 2007 was $67,902.

     As of December 31, 2007, there was $490,462 of total unrecognized
compensation cost related to non-vested options granted under the plans,
which is expected to be recognized over a weighted average period of 2.28
years, of which $35,548 is recorded as deferred compensation.  The total fair
value of options vested was $550,612 during the year ended December 31, 2007.













                                     F-36



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

18.  Line of Credit:

     On June 6, 2007, the Company secured a credit facility in the amount of
$960,000 from a bank.  This facility will be used to provide Standby Letters
of Credit ("SBLC's") to secure standard terms from certain vendors.  This
credit facility has a maturity date of June 30, 2008 and is co-obligated by
Daniel Brinker, William Robotham and Thomas Hakel. Any draws on the letter of
credit will accrue interest at 5 percent over the prime rate.  On January 24,
2008, the Company amended the terms of the line of credit to borrow up to
$300,000 of this credit facility for working capital purposes at an interest
rate of 7.5%.

19.  Operating Lease Commitments:

     The Company leases its business premises in Santa Rosa under a non-
cancelable operating lease expiring November 2012.  The lease payments are
subject to annual increases per the lease agreement.  Future minimum rental
payments required under this lease as of December 31, 2007 is $419,182 for
the year ending December 31, 2007.

     The Company leases its business premises in Las Vegas under a non-
cancelable operating lease expiring in March 2008. Future minimum rental
payments required under this lease as of December 31, 2007 is $3,752.

     The Company leases its business premises in Tampa, FL under a non-
cancelable operating lease expiring February 2011.  The lease payments are
subject to annual increases per the lease agreement. Future minimum rental
payments required under this lease as of December 31, 2007 is $263,860 for
the year ending December 31, 2007.

     Total rent expense for the years ended December 31, 2007, and 2006,
totaled $148,710 and $112,405, respectively.

20.  Concentration of Credit Risk

     During the year ended December 31, 2007 the Company, through Axon,
selling products to state agencies in Florida, accounted for approximately
$431,549 of revenues, representing approximately  12% of our revenues.
During 2006, one customer, Xerox Corporation, represented approximately
$76,540 of revenues and 17% of total revenues.

     At December 31, 2007 the Company did not have any significant customers
relating to accounts receivable.

21.  Related Party Balances and Transactions

     During 2007, the Company advanced $26,500 to Andrew Beaurline, Senior
Vice President of Corporate Development and Strategy.



                                     F-37



AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

     At December 31, 2007, the Company had outstanding payables to Dan
Brinker, President and Chief Executive Officer, of $61,095 Thomas Hakel,
Director, of $215,000 and William Robotham, Director, of $155,000.  These
payables related to advances for operating capital to the Company during the
Company's transition into a public company and the execution of the Company's
acquisition strategy, and do not necessarily represent all amounts owed to
these individuals.

22.  Commitments and Contingencies

     On July 5, 2007, the Company was served with a notice of charge of
discrimination by a former independent sales representative (ISP) for alleged
acts by another ISP.  The claimant is seeking total monetary damages in the
amount of $150,000. The Company is awaiting a response from the United States
Equal Opportunity Commission.  The Company believes it has minimal or no
liability as the Company is protected by indemnification provisions within
the ISP agreements.

     In the past, we have been subject to claims arising in the ordinary
course of business, primarily vendor disputes. We settled certain overdue
claims from certain service providers during the year ended December 31,
2007. There are currently no such claims outstanding. During the year ended
December 31, 2007, the Company settled $15,445 in long outstanding payables.
The Company paid $1,000 in cash and $2,000 in stock and realized a gain of
$14,445.


























                                   F-38




AMERICAN TONERSERV CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006

23.  Subsequent Events (Unaudited)

     On January 8, 2008, the Board of Directors elected Chuck Mache to serve
as Chairman of the Board.

     On January 22, 2008, the Company entered into consulting agreements with
Chuck Mache, Chairman and Thomas H. Hakel, Director for $5,000 per month.
These agreements are cancelable with 30 days notice.

     On January 24, 2008, the Company converted $300,000 of a $960,000 line
of credit available for Stand By letter of Credits into cash for working
capital purposes. The line of credit has an interest rate of 7.5% and is due
and payable on June 30, 2008.

     On January 25, 2008, the Company granted 75,000 options to an employee.
These options have an exercise price of $0.25 per share with a four year
vesting schedule.

     On March 3, 2008 the Company established NC TonerServ LLC and opened a
new office in Morrisville, North Carolina with 7 employees to begin selling
printer supplies and services to businesses.  The Company granted 75,000,
45,000, 5,000 and 5,000 options to four key employees.  These options have an
exercise price of $0.25 per share with a four year vesting schedule.

     On March 5, 2008, the Company received a loan from Rob Gutierrez for
$100,000 with 10% interest and due in thirty days.

     On March 5, 2008, the Company issued Rob Gutierrez 150,000 options in
exchange for consulting services. These options have an exercise price of
$0.25 per share and vest equally over 24 months.

     On March 6, 2008, the Company amended its original termination agreement
dated October 22, 2007 with Dinosaur Securities.  The Company issued 750,000
warrants to Dinosaur Securities in lieu of the 600,000 shares originally
agreed upon as settlement.

     On March 6, 2008 the Company terminated it's relationship with After
Market Support LLC (AMS) and Keating Investments. As part of the termination
AMS will return 3,000,000 common shares that it purchased for $3,000 as part
of the deal.

     During the period from January 2008 to March 2008, the Company raised
$1,250,000 from 12 accredited investors related to the Company's Common Stock
and Warrants offering.

     On March 25, 2007, the Company entered into an agreement with Merriman
Curhan Ford & Co ("MFC"). to represent the Company to act as its exclusive
financial advisor to assist in capital raising efforts and general investment
banking services.  As compensation for MFC's services, they will receive
shares of the Company's common stock valued at $500,000.

                                    F-39



                                SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                      AMERICAN TONERSERV CORP.



Date:  March 31, 2008                 By:/s/ Daniel J. Brinker
                                         Daniel J. Brinker
                                         President and Chief Executive
                                         Officer


                                      By:/s/ Ryan Vice
                                         Ryan Vice
                                         Chief Financial Officer and
                                         Principal Accounting Officer


     In accordance with the Exchange Act, this report has been signed
following persons on behalf of the registrant and in the capacities and on
the dates indicated.



/s/ Daniel J. Brinker                                 March 31, 2008
Daniel J. Brinker, Director



/s/ Thomas Hakel                                      March 31, 2008
Thomas Hakel, Director



/s/ William A. Robotham                               March 31, 2008
William A. Robotham, Director



/s/ Chuck Mache                                       March 31, 2008
Chuck Mache, Director



/s/ Steven R. Jensen                                  March 31, 2008
Steven R. Jensen, Director