**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-KSB**





(Mark
      one)





x
              **Annual
                  Report Under Section 13 or 15(d) of The Securities Exchange Act
                  of
                  1934**





For
      the
      fiscal year ended March 31, 2007




o
            **Transition
                Report Under Section 13 or 15(d) of The Securities Exchange Act of
                1934**




For
      the
      transition period from _________ to _________





Commission
      File Number: 0-28717




**ADZONE
      RESEARCH, INC.**


(Name
      of
      small business issuer in its charter)





Delaware
            88-0420405(State
                of incorporation)
            (IRS
                Employer ID Number)





4062-80
      Grumman Blvd., Calverton, NY 11933


(Address
      of principal executive offices)





(631)
      369-1100


(Issuer's
      telephone number)





Securities
      registered under Section 12(b) of the Exchange Act: None





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


Common
      Stock $0.001 par value





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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of Company'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. o





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





The
      issuer's revenues for the fiscal year ended March 31, 2007 were
      $103,757.





The
      aggregate market value of voting common equity held by non-affiliates as of
      June
      30, 2007 was approximately $2,208,168 using the closing price of AdZone's common
      stock of $0.01 per share on June 30, 2007. ****





As
      of
      July 12, 2007, there were 220,816,804 shares of common stock issued and
      outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





None.





Transitional
      Small Business Disclosure Format: Yes o No x





ADZONE
      RESEARCH, INC.


FORM
      10-KSB




FOR
      THE
      FISCAL YEAR ENDED MARCH 31, 2007




INDEX





PART
      I





PageItem
                1.
            Description
                of Business
            
            1Item
                2.
            Description
                of Property
            
            4Item
                3.
            Legal
                Proceedings
            
            4Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            4PART
                IIItem
                5.
            Market
                for Common Equity and Related Stockholder Matters
            
            5Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            
            7Item
                7.
            Financial
                Statements
            
            17Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            17Item
                8A.
            Controls
                and Procedures
            
            18Item
                8A(T).
            Controls
                and Procedures
            
            19Item
                8B.
            Other
                Information
            
            19PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(A) of the Exchange Act.
            
            19Item
                10.
            Executive
                Compensation
            
            21Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            25Item
                12.
            Certain
                Relationships and Related Transactions, andDirector
                Independence
            
            26Item
                13.
            Exhibits
            
            27PART
                IVItem
                14.
            Principal
                Accountant Fees and Services
            
            29SIGNATURES







CAUTION
      REGARDING FORWARD-LOOKING INFORMATION





Certain
      statements contained in this Annual Report on Form 10-KSB (the “Annual Report”),
      including, without limitation, statements containing the words "believes",
      "anticipates", "expects" and words of similar import, constitute forward-looking
      statements. Such forward-looking statements involve known and unknown risks,
      uncertainties and other factors that may cause the actual results, performance
      or achievements of AdZone, or industry results, to be materially different
      from
      any future results, performance or achievements expressed or implied by such
      forward-looking statements.





Such
      factors include, among others, the following: international, national and local
      general economic and market conditions; demographic changes; the ability of
      AdZone to sustain, manage or forecast its growth; the ability of AdZone to
      successfully make and integrate acquisitions; raw material costs and
      availability; new product development and introduction; existing government
      regulations and changes in, or the failure to comply with, government
      regulations; adverse publicity; competition; the loss of significant customers
      or suppliers; fluctuations and difficulty in forecasting operating results;
      changes in business strategy or development plans; business disruptions; the
      ability to attract and retain qualified personnel; the ability to protect
      technology; and other factors referenced in this and previous
      filings.





Given
      these uncertainties, readers of this Form 10-KSB and investors are cautioned
      not
      to place undue reliance on such forward-looking statements. AdZone disclaims
      any
      obligation to update any such factors or to publicly announce the result of
      any
      revisions to any of the forward-looking statements contained herein to reflect
      future events or developments.





**ITEM
      1 - DESCRIPTION OF BUSINESS**





GENERAL





AdZone
      Research, Inc. (“Adzone”, the “Company”, “we”, “us” or “our”) were incorporated
      in Delaware on May 31, 1994 under the name Executive Help Services, Inc. for
      the
      purpose of developing an Internet web site that would offer planning of
      professional office space and design of modular office furniture with direct
      ordering capabilities. From our inception until June 1999, we had no significant
      operations. In June 1999, we began to offer our products and services through
      an
      e-commerce website, "www.modularoffice.com", which offered office furnishings
      to
      businesses ranging in size from small businesses operating in home offices
      to
      large corporate customers.





Upon
      a
      change in management that occurred in January 2001, we abandoned our previously
      adopted business plan. From January 2001 until August 2001, we did not engage
      in
      any significant activity other than negotiating a merger with AdZone
      Interactive, Inc., also known as AII, a privately held corporation. AII was
      founded in March 2000 to engage in Internet advertising research by extracting
      various data elements through the monitoring of Internet websites maintained
      by
      independent third parties.





On
      August
      10, 2001, we closed an Agreement and Plan of Share Exchange with AII whereby
      we
      exchanged 18,000,000 shares of our restricted common stock for 100% of the
      issued and outstanding common stock of AII. Immediately thereafter, we effected
      a merger of the two entities with AII as the surviving entity. At the time
      of
      the merger, we changed our corporate name to AdZone Research, Inc. and our
      trading symbol was changed to "ADZR."





Since
      our
      merger with AII, we have continued the business of AII as an Internet
      advertising research firm engaged in the extraction of data through the
      monitoring of Internet websites. The extracted data are then used to provide
      various market research statistics and other focused information as requested
      by
      AdZone's clients. There is considerable competition in the internet advertising
      business worldwide, and we have not been able to successfully establish a
      profitable business.





**Business
      Description**





**OPPS
      Product Description**





In
      November 2005, AdZone introduced a new product called OPPS, (Online Predator
      Profiling System). This online application is designed to identify and track
      online sexual predators as well as assist in finding missing children. The
      OPPS
      database is a continually updated database of Internet chat rooms activity
      (The
      chat rooms were selected with input from law enforcement personnel). The user
      interface allows searches by screen name, key word and chat room, then allows
      users to track conversations.




1





The
      OPPS
      family of products includes four products from the OPPS main database. OPPS,
      the
      main system is used in house by detectives and is desktop based. OPPS FAST
      report is designed for quick identification of predator activity or missing
      children activity for field officers. OPPS ALERT is designed to alert officers
      when a known predator is chatting, which we anticipate will be released in
      the
      second half of 2006, and OPPS Missing Child Alert, which notifies investigators
      when a missing child is detected on line.





AdZone’s
      business model is to market and provide these products to law enforcement
      personnel on an annual subscription basis.





AdZone’s
      objective is to build a growing, profitable business based on licensing the
      OPPS
      family of products to help stop sexual predators, to assist in finding missing
      children, and to make a contribution to society. The marketing plan includes
      providing the opportunity for local and national businesses to sponsor licenses
      for law enforcement organizations, and also to sell directly to law enforcement
      organizations





**Product
      development**





The
      initial structured programming efforts for OPPS began in April of 2005. This
      programming and testing was to develop a data collection system whereby AdZone
      could capture and extract information from “chat rooms” leveraging AdZone’s
      existing internet monitoring technology. By the fall of 2005, a multi-protocol
      IM/chat room client manager (GAIM) was utilized as a means to increase the
      number of simultaneous chat rooms, which could be monitored. The user interface
      was developed specifically for law enforcement by allowing single field and
      multiple word searches of the database. The first “user” version of OPPS was
      ready for release in July 2005.





COMPETITION





AdZone
      has several competitors in the Internet advertising monitoring area, many of
      which have financial and other resources that are far greater than its own.
      AdZone's limited resources may hinder its ability to compete effectively.
      AdZone's principal competitor is Competitive Media Research (CMR), a division
      of
      Taylor Nelson Sofres, which offers advertising expenditure information on close
      to 300 web sites as well as an online application for accessing certain of
      its
      data.





AdZone
      has many competitors in the movie and music piracy business, many of which
      have
      financial and other resources that are far greater than its own. AdZone’s
      limited resources may hinder its ability to compete effectively.





AdZone
      has no known competitors to our Online Predator Profiling System.





SALES
      AND
      MARKETING





AdZone
      markets its products and services principally through e-mail distributions
      to
      selected target markets, through direct sales contacts, and through its
      websites, www.AdZoneinteractive.com, www.AdZoneresearch.com .
      and
      www.oppssafe.com.





DISTRIBUTION
      METHODS OF PRODUCTS OR SERVICES





AdZone
      distributes its products and services electronically through e-mailing its
      reports to the client, posting such reports to a private website that is
      accessible to the client, distribution of the report on a CD-ROM, or faxing
      its
      reports to the client location.




2





OPPS
      is
      an Online Application. All licensed users gain access to the product, its
      application and database through the internet.





STATUS
      OF
      ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE





AdZone’s
      inter-cept product for monitoring the internet for movie piracy is active and
      has one customer agreement valued at $100,000.





AdZone’s
      OPPS product is active and has 200 plus active licensed customers.





ALLOWANCE
      FOR DOUBTFUL ACCOUNTS





In
      the
      normal course of business, AdZone periodically extends unsecured credit to
      its
      customers. Because of the credit risk involved, management will provide an
      allowance for doubtful accounts, which will reflect its opinion of amounts
      which
      will eventually become uncollectible. In the event of complete non-performance,
      the maximum exposure to us is the recorded amount of trade accounts receivable
      shown on the balance sheet at the date of non-performance.





DEPENDENCE
      ON ONE OR A FEW MAJOR CUSTOMERS





The
      Company derived substantially all of its revenues from one major customer.





PATENTS,
      TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR LABOR
      CONTRACTS, INCLUDING DURATION





AdZone
      owns its internet domain names, www.AdZoneinteractive.com ,
      www.AdZoneresearch.com, www.AdZonereports.com ,
      and
      www.oppsafe.com and holds a common law copyright on all of its proprietary
      software.





In
      addition, AdZone has no plans to enter into franchise, concession or labor
      contracts.





NEED
      FOR
      GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES





AdZone
      is
      not required to apply for or obtain any government approval for its products
      or
      services.





EFFECT
      OF
      EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS ON THE BUSINESS





AdZone
      is
      not currently subject to direct federal, state or local regulation in the United
      States other than regulations applicable to businesses generally or directly
      applicable to electronic commerce. However, it is possible that a number of
      laws
      and regulations may be adopted in the United States with respect to the
      Internet. These laws may cover issues such as user privacy, freedom of
      expression, pricing, content and quality of products and services, taxation,
      advertising, intellectual property rights and information security. In addition,
      due to the sensitive nature of the data extracted in its anti-terrorism programs
      the US government could prohibit or restrict the markets that AdZone could
      sell
      to. The effect of this restriction if any is unknown. Furthermore, the growth
      of
      electronic commerce may prompt calls for more stringent consumer protection
      laws. Several states have proposed and/or enacted legislation to limit the
      use
      of personal user information gathered online or require online services to
      establish privacy policies. The adoption of such laws could create uncertainty
      in Internet usage and reduce the demand for all products and serves. AdZone
      is
      not certain how its business may be affected by the application of existing
      laws
      governing issues such as property ownership, copyrights, encryption and other
      intellectual property issues, taxation, libel, obscenity and export or import
      matters. The vast majority of those laws were adopted prior to the advent of
      the
      Internet. As a result, they do not contemplate or address the unique issues
      of
      the Internet and related technologies. Changes in laws intended to address
      such
      issues could create uncertainty in the Internet marketplace. That uncertainty
      could reduce demand for AdZone's products or services or increase the cost
      of
      doing business as a result of litigation costs or increased service delivery
      costs.




3





PRODUCTION
      COSTS





AdZone
      has expended approximately $395,000 and $491,000 during fiscal 2007 and 2006,
      respectively, for the maintenance and upgrading of its proprietary
      software.





COSTS
      AND
      EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS





AdZone
      has not expended any funds for compliance with environmental laws and does
      not
      anticipate its business plan will require any such compliance.





EMPLOYEES





As
      of
      March 31, 2007, AdZone had _6 employees.  AdZone
      also contracts for the services of independent consultants involved in its
      core
      business areas such as advertising monitoring area and movie and music piracy
      business, regulatory accounting, financial and other disciplines as needed.
      None
      of the Company’s employees are represented by labor unions or covered by any
      collective bargaining agreement. The Company believes that its relations with
      its employees are satisfactory.





RISK
      FACTORS





You
      should carefully consider the risks described elsewhere below as well as other
      information provided to you in this Annual Report, including information in
      the
      section of this document entitled “Information Regarding Forward Looking
      Statements.”





**ITEM
      2 - DESCRIPTION OF PROPERTY**





AdZone
      conducts its administrative, development and marketing operations in facilities
      leased from an unrelated party at 4062-80 Grumman Blvd. Calverton, NY 11933.
      The
      facility consists of 3,639 square feet of combined office and warehouse space.
      The lease term is 60 months. The base rent for this facility is $4,222 per
      month. Management believes that the facilities used by it in the operation
      of
      its business are adequately covered by insurance and are suitable and adequate
      for their purposes.





**ITEM
      3 - LEGAL PROCEEDINGS**





AdZone
      is
      not a party to any pending legal proceedings, and no such proceedings are known
      to be contemplated.





In
      July
      2006, the Company and its directors, executive officers and employees have
      been
      subpoenaed by the Securities and Exchange Commission (SEC) to produce
      documentation as part of a formal investigation. The Company is cooperating
      with
      the investigation.





From
      time
      to time we also may be a defendant and plaintiff in various legal proceedings
      arising in the normal course of our business. With the exception of the matters
      set forth above, we are currently not a party to any material pending legal
      proceedings or government actions, including any bankruptcy, receivership,
      or
      similar proceedings. Should any liabilities be incurred in the future, they
      will
      be accrued based on management’s best estimate of the potential loss. As such,
      there is no adverse effect on our consolidated financial position, results
      of
      operations or cash flow at this time. Furthermore, with the exception of the
      matters set forth above, our management does not believe that there are any
      proceedings to which any of our directors, officers, or affiliates, any owner
      of
      record of the beneficially or more than five percent of our common stock, or
      any
      associate of any such director, officer, affiliate of our company, or security
      holder is a party adverse to us or has a material interest adverse to our
      company.





**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





On
      March
      8, 2007, the Company held a special meeting of shareholders to amend the
      Company’s Certificate of Incorporation to increase the authorized number of
      Common Stock, par value $0.001 per share, from 200,000,000 shares to 400,000,000
      shares and to classify the Company’s 20,000,000 authorized shares of Preferred
      Stock as “Blank Check” Preferred Stock. The total amount of shares of issued and
      common stock present either in person or by proxy at the meeting was
      137,678,962. As of the record date for the meeting we had 189,940,198 shares
      of
      our common stock issued and outstanding.




4





The
      following was the number of votes cast for, against or withheld, as well as
      the
      number of abstentions and broker non-votes as to the aforementioned action
      taken
      by the company:





#
                of Votes Cast:For
            
            
            110,470,342Against
            
            
            24,289,566Abstain
            
            
            2,917,054Broker
                Non-Votes
            
            
            52,261,236





On
      March
      19, 2007, pursuant to actions taken at the meeting, the Company’s Articles of
      Incorporation were amended to allow for the issuance of up to 400,000,000 shares
      of $0.001 par value common stock. The effect of this change is reflected in
      the
      accompanying financial statements as of the first day of the first period
      presented.





**PART
      II**





**ITEM
      5 - MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER
      MATTERS**





Market
      Information





In
      January 2000, AdZone became a publicly reporting Company under the Securities
      Exchange Act of 1934, after filing a Form 10-SB with the United States
      Securities and Exchange Commission. We also filed a request with the NASD for
      clearance of quotations on the OTC Bulletin Board under Rule 15c2-11 of the
      Securities Exchange Act of 1934. We were issued the trading symbol, "EHSV."
      Concurrently with our merger with AII on August 10, 2001, we changed our
      corporate name to AdZone Research, Inc. and changed our trading symbol to
      "ADZR." We currently trade on the Pinksheets centralized quotations
      service.





The
      following are the high and low closing prices of AdZone's Common Stock for
      each
      quarter during the last two fiscal years. These high and low bid prices
      represent prices quoted on the Pinksheets centralized quotations service. These
      prices represent inter-dealer quotations without retail markup, markdown, or
      commission and may not necessarily represent actual transactions.




FISCAL
      YEAR ENDED MARCH 31, 2007





High
            
            LowFirst
                Quarter
            
            $
            0.13
            
            $
            0.06Second
                Quarter
            
            $
            0.07
            
            $
            0.01Third
                Quarter
            
            $
            0.02
            
            $
            0.01Fourth
                Quarter
            
            $
            0.01
            
            $
            0.01




FISCAL
      YEAR ENDED MARCH 31, 2006





High
            
            LowFirst
                Quarter
            
            $
            0.17
            
            $
            0.12Second
                Quarter
            
            $
            0.16
            
            $
            0.12Third
                Quarter
            
            $
            0.09
            
            $
            0.04Fourth
                Quarter
            
            $
            0.20
            
            $
            0.04




Holders





As
      of
      March 31, 2007, there were 198,239,468 shares of our common stock, $0.001 par
      value per share, issued and outstanding and owned by approximately 213
      shareholders of record, exclusive of shareholders holding their shares in street
      name. As of July 12, 2007, there were 220,816,804 shares of our common stock
      issued and outstanding and owned by approximately 213 shareholders of record,
      exclusive of shareholders holding their shares in street name.




5





Our
      original Certificate of Incorporation authorized the issuance of 100,000,000
      shares of common stock, $0.001 par value per share, and 20,000,000 shares of
      $0.001 par value preferred stock. Currently, there are 50 shares of Class A
      preferred stock authorized of which 2.78 shares are issued and outstanding,
      and
      100 shares of Class B preferred stock authorized of which .34 shares are issued
      and outstanding.





Holders
      of shares of common stock are entitled to one vote for each share on all matters
      to be voted on by the stockholders. Holders of common stock have cumulative
      voting rights. Holders of shares of common stock are entitled to share ratably
      in dividends, if any, as may be declared, from time to time by the Board of
      Directors in its discretion, from funds legally available therefore. In the
      event of a liquidation, dissolution, or winding up of AdZone, the holders of
      shares of common stock are entitled to share pro rata all assets remaining
      after
      payment in full of all liabilities. Holders of common stock have no preemptive
      or other subscription rights, and there are no conversion rights or redemption
      or sinking fund provisions with respect to such shares.





On
      May
      27, 2004, pursuant to actions filed on a Schedule 14C, the Company’s Articles of
      Incorporation were amended to allow for the issuance of up to 200,000,000 shares
      of $0.001 par value common stock from 100,000,000 shares of $0.001 par value
      previously authorized. The effect of this change is reflected in the
      accompanying financial statements as of the first day of the first period
      presented.





On
      March
      19, 2007, pursuant to actions filed on a Schedule 14C, the Company’s Articles of
      Incorporation were amended to allow for the issuance of up to 400,000,000 shares
      of $0.001 par value common stock from 200,000,000 shares of $0,001 par value
      previously authorized. The effect of this change is reflected in the
      accompanying financial statements as of the first day of the first period
      presented.





DIVIDEND
      POLICY





AdZone
      has never paid or declared a cash dividend on its common stock. The Board of
      Directors does not intend to declare or pay cash dividends in the foreseeable
      future. It is the current policy of the Board to retain all earnings, if any,
      to
      support future growth and expansion.





EQUITY
      COMPENSATION PLAN INFORMATION





The
      following table sets forth the aggregate number of shares of AdZone's Common
      Stock that may be issued upon exercise of outstanding options granted to Mr.
      Charles Cardona, our Chief Executive Officer, and Mr. John Cardona, our Chief
      Operating Officer of AdZone, and the weighted average exercise price of such
      options.





Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted-
                average exercise price of outstanding options, warrants and
                rights
            
            Number
                of securities remaining available for future compensation (excluding
                securities referred to in column 1Equity
                compensation plans approved by security holders
            
            
            -0-
            
            
            -0-
            
            
            -0-Equity
                compensation plans not approved by security holders
            
            
            4,000,000
            
            
            .98
            
            
            -0-Total
            
            
            4,000,000
            
            
            .98
            
            
            -0-




6





Recent
      Sales of Unregistered Securities





*Subsequent
      to March 31, 2007*





None.





*Fiscal
      year ended March 31, 2007 and 2006*





Other
      then set forth below, the information regarding our sales of our unregistered
      securities for the fiscal years ended March 31, 2006, 2005 and 2004, has been
      previously furnished in our Annual Reports on Form 10-KSB, Quarterly Reports
      on
      Form 10-QSB and/or our Current Reports on Form 8-K.





All
      of
      the above issuances were deemed to be exempt from the registration requirements
      of the Act for the private placement of these securities pursuant to Regulations
      S, Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”), and/or Regulation D promulgated thereunder since, among other things, the
      transaction did not involve a public offering, the investors were accredited
      investors and/or qualified institutional buyers, the investors had access to
      information about the company and their investment, the investors took the
      securities for investment and not resale, and the Company took appropriate
      measures to restrict the transfer of the securities. None of the purchasers
      who
      received shares under Regulation S are U.S. Person as defined in Rule 902(k)
      of
      Regulation S, and no sales efforts were conducted in the U.S., in accordance
      with Rule 903(c). Such purchasers acknowledged that the securities purchased
      must come to rest outside the U.S., and the certificates contain a legend
      restricting the sale of such securities until the Regulation S holding period
      is
      satisfied.





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





**Special
      Note on Forward-Looking Statements.**




Certain
      statements in “Management’s Discussion and Analysis or Plan of Operation” below,
      and elsewhere in this Annual Report, are not related to historical results,
      and
      are forward-looking statements. Forward-looking statements present our
      expectations or forecasts of future events. You can identify these statements
      by
      the fact that they do not relate strictly to historical or current facts. These
      statements involve known and unknown risks, uncertainties and other factors
      that
      may cause our actual results, levels of activity, performance or achievements
      to
      be materially different from any future results, levels of activity, performance
      or achievements expressed or implied by such forward-looking statements.
      Forward-looking statements frequently are accompanied by such words such as
      “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative
      of such terms or other words and terms of similar meaning. Although we believe
      that the expectations reflected in the forward-looking statements are
      reasonable, we cannot guarantee future results, levels of activity, performance,
      achievements, or timeliness of such results. Moreover, neither we nor any other
      person assumes responsibility for the accuracy and completeness of such
      forward-looking statements. We are under no duty to update any of the
      forward-looking statements after the date of this annual report. Subsequent
      written and oral forward looking statements attributable to us or to persons
      acting in our behalf are expressly qualified in their entirety by the cautionary
      statements and risk factors set forth below and elsewhere in this annual report,
      and in other reports filed by us with the SEC.




You
      should read the following description of our financial condition and results
      of
      operations in conjunction with the financial statements and accompanying notes
      included in this report beginning on page F-1.





AdZone
      follows the accrual basis of accounting in accordance with United States
      generally accepted accounting principles.




7





OVERVIEW





We
      were
      incorporated in Delaware on May 31, 1994 under the name Executive Help Services,
      Inc. for the purpose of developing an Internet web site that would offer
      planning of professional office space and design of modular office furniture
      with direct ordering capabilities. From our inception until June 1999, we had
      no
      significant operations. In June 1999, we began to offer our products and
      services through an e-commerce website, "www.modularoffice.com", which offered
      office furnishings to businesses ranging in size from small businesses operating
      in home offices to large corporate customers.





On
      August
      10, 2001, we closed an Agreement and Plan of Share Exchange with AII whereby
      we
      exchanged 18,000,000 shares of our restricted common stock for 100% of the
      issued and outstanding common stock of AII. Immediately thereafter, we effected
      a merger of the two entities with AII as the surviving entity. At the time
      of
      the merger, we changed our corporate name to AdZone Research, Inc. and our
      trading symbol was changed to "ADZR."





Our
      principal executive offices are located at 4062-80 Grumman Boulevard, Calverton,
      New York 11933 and our telephone number is (631) 369-1100.





RESULTS
      OF OPERATIONS





Years
      Ended March 31, 2007 and March 31, 2006.





REVENUES:





Revenues
      for the year ended March 31, 2007 amounted to $103,757 compared to $154,781
      for
      the same period of the prior fiscal year. This decrease in revenue in the amount
      of $52,023 is primarily attributable to the termination of a prior licensing
      agreement which we entered into with the Justice Fund and the consummation
      of a
      new licensing agreement dated as of October 3, 2005 which we entered into with
      All-In Movie LLC for the licensing of the Company’s technologies.





Current
      period revenues of $100,000 are derived from licensing arrangements for
      commercial applications of the Company’s technologies. Revenues for the prior
      fiscal year were derived from sales of licensing arrangements for commercial
      application of the Company’s technologies and its cyber security division.





PRODUCTION
      EXPENSES:





Salaries,
      wages and related costs:





For
      the
      fiscal year ended March 31, 2007, AdZone incurred wage related costs of $241,663
      compared to $276,921 for the same period of the prior fiscal year. This decrease
      was caused by a reduction in personnel in fiscal 2007 compared to fiscal 2006.
      See salaries, wages and related costs under the caption OPERATING EXPENSES,
      below, for information about stock-based compensation.





Direct
      occupancy and operating expenses:





For
      the
      fiscal year ended March 31, 2007, AdZone incurred operating-related expenses
      of
      $153,230 compared to $214,422 for the same period of the prior fiscal year.
      This
      decrease was due to a reduction in costs involved in the efforts to develop
      revenue-producing contracts.





OPERATING
      EXPENSES:





Salaries
      and wages and related costs:





For
      the
      fiscal year ended March 31, 2007, AdZone incurred wage related costs of
      $1,910,167 compared to $4,223,461 for the prior fiscal year. The decrease
      relates to the reduction of stock grants and options to employees in fiscal
      2007.





Salaries
      and wages included $827,285 and $3,574,922 of stock-based compensation during
      the fiscal years ended March 31, 2007 and 2006, respectively. Stock-based awards
      were made to Company officers and employees to preserve existing cash reserves.
      The Company has measured compensation associated with stock awards to employees
      using the closing market price for the Company’s trading common stock on the
      dates of awards and the Black Scholes method for valuing stock
      options.




8





Consulting
      and professional fees:





For
      the
      fiscal year ended March 31, 2007, AdZone incurred consulting and professional
      fees of $891,336 compared to $2,547,466 for the prior fiscal year. The decrease
      in the amount of $1,656,130 was primarily attributable to a temporary
      curtailment in the engagement of firms to raise capital, assist in contract
      negotiation and assist in seeking strategic merger/acquisition candidates.
      Consultants have been used by the Company to identify revenue opportunities
      and
      develop business strategies.





The
      Company compensated certain consultants and professionals with stock-based
      compensation. During the fiscal years ended March 31, 2007 and 2006, this
      expense category included $617,103 and $2,248,028 of stock-based compensation.
      The Company measures the compensation associated with stock awards to
      consultants and professional service providers using the closing market price
      for the Company’s trading common stock on the date of the award, or in the case
      of warrants, using the Black Scholes valuation Model. There can be no assurances
      that equity will be acceptable to the Company’s consultants on an extended
      basis.





General
      and administrative expense:





For
      the
      fiscal year ended March 31, 2007, AdZone incurred general and administrative
      expense of $538,106 compared to $1,110,301 for the prior fiscal year. General
      and administrative expenses primarily decreased as a result of a reduction
      in
      stock grants and stock options to directors.





Depreciation
      and amortization:





Depreciation
      and amortization expense amounted to $24,520 for the fiscal year ended March
      31,
      2007 compared to $14,153 for the prior fiscal year. Depreciation increased
      as a
      result of certain computer equipment being acquired. **** The
      Company currently has no commitments to acquire property or equipment at this
      time. However, new revenue producing contracts, when and if awarded, will
      require the Company to acquire additional computer equipment to support the
      contracts.





OTHER
      INCOME (EXPENSE):





Interest
      expense:





For
      the
      fiscal year ended March 31, 2007, AdZone incurred interest expense of $1,302,940
      compared to $904,559 for the same period of the prior fiscal year. Interest
      has
      increased due to the addition of debt in fiscal 2007. ****





NET
      LOSS:





Based
      upon the aforementioned discussion items, AdZone incurred a net loss of
      $3,708,363 for the fiscal year ended March 31, 2007, as compared to a net loss
      of $12,005,573 for the fiscal year ended March 31, 2006. This decrease in net
      loss is primarily attributable to; the loss recognized as a result of the
      extinguishment of the Company’s obligation to the Nutmeg Group and others, and
      decreased compensation costs as a result of decreased use of stock grants and
      options.





PREFERRED
      STOCK DIVIDENDS AND ACCRETIONS:





Preferred
      stock dividends relate to the Company's 9% Series A and 9% Series B Preferred
      Stock. The Company carries its preferred stock based upon amounts allocated
      to
      these securities in connection with certain unit offerings during the year.
      The
      Company accretes the carrying value to its respective redemption values through
      periodic charges to retained earnings. Preferred stock dividends paid which
      amounted to $3,069 and $3,348 for the fiscal years ended March 31, 2007 and
      2006, respectively, are reflected as increases in net loss to arrive at loss
      attributable to common stockholders for purposes of our loss per common share
      computations. Preferred stock dividends will be recorded so long as the
      preferred stock is outstanding.




9





Preferred
      stock is carried as an equity security in accordance with generally accepted
      accounting principles. There are no instances, irrespective of how remote,
      that
      the holders of preferred stock can require the Company to redeem shares for
      cash.





LIQUIDITY
      AND CAPITAL RESOURCES





Conditions
      raising substantial doubt about the Company’s ability to continue as a going
      concern and management’s plans:





The
      Company’s financial statements have been prepared in accordance with generally
      accepted accounting principles and contemplate that the Company will continue
      as
      a going concern for a reasonable period. As noted in the financial statements,
      the Company incurred a net loss of $3,708,363 and used cash of $1,457,266 in
      conducting its operations during the year ended March 31, 2007. These recurring
      negative trends raise substantial doubt about the Company’s ability to continue
      as a going concern.


Management
      considered the following specific elements of its internal projections in making
      its conclusions about its ability to continue for approximately twelve months
      following March 31, 2007.


a. Management
          does not believe that the significant level of cash used in operations
          during
          the year ended March 31, 2007 $1,457,266 is indicative of cash flow usage
          during
          the next four fiscal quarters as certain vendors continue to accept the
          Company’s equity securities for compensation for their services, which has
          helped and will continue to help preserve cash. While such non-cash expense
          is
          not currently expected to be as high in the near term future quarters as
          during
          the current quarter, based upon ongoing discussions with the vendors, management
          believes that they will continue to accept such securities in the foreseeable
          future. While payments on accounts payable and accrued expenses will continue
          in
          the normal course of business, such payments are not expected to be at
          the level
          reflected in the Company’s year to date operations.





Certain
      vendors continue to accept the Company’s equity securities for compensation For
      their
      services, which has helped and will continue to help preserve cash. While such
      non-cash expense is not currently expected to be as high in the near term future
      quarters as during the year ended March 31, 2007, based upon ongoing discussions
      with the vendors, management believes that they will continue to accept such
      securities in the foreseeable future.





b.
      Management does not currently project expending significant levels of cash
      to
      acquire equipment to support revenue growth during the next four fiscal
      quarters. Equipment necessary for the Company’s contracts principally relates to
      computer equipment, which is projected to be sufficient for the foreseeable
      future. However, the nature of contracts awarded in the future and new OPPS
      licenses, may result in additional computer hardware and infrastructure
      expenses.





c.
      The
      Company is presently pursuing additional financing.





In
      addition, the Company does not anticipate making any significant loan payments
      in the near future.




10





d.
      Finally, management believes that, in the event necessary, certain operating
      expenses can be curtailed. These expenses are principally related to employment
      and facility costs.





Management
      plans to continue to promote contracts for the commercial uses of its
      technologies. There can be no assurances that the Company can execute
      revenue-producing contracts under acceptable terms and conditions.





The
      Company has introduced a new product called Online Predator Profiling System
      (OPPS), developed with the help of a number of law enforcement departments
      for
      identifying and tracking online predators as well as finding missing children,
      and has started taking orders for same.





The
      Company’s ability to continue as a going concern is dependent upon the
      preservation of existing cash reserves and ultimately, the achievement of
      profitable operations. The financial statements do not include any adjustments
      that might arise as a result of this uncertainty.





The
      capitalization of AdZone through the sale of equity securities, loans and the
      exercise of options has allowed AdZone to maintain a positive cash position.
      AdZone has approximately $57,468 on hand at March 31, 2007 as compared to
      $1,068,871 at March 31, 2006.





Liquidity
      during fiscal 2007 and 2006 was provided principally through the sales of equity
      securities, loans and the exercise of options under the Company’s stock option
      plan. There is no guarantee that we will be successful in raising cash from
      the
      sale of unregistered securities or through loans. Total proceeds from sales
      of
      equity securities were $222,813 during Fiscal 2007 and $2,002,718 during Fiscal
      2006. Total proceeds from loans during fiscal 2007 and 2006 were $716,000 and
      $815,000, respectively.




PLAN
      OF
      OPERATION





The
      Company has initially identified three key potential markets for AdZone's
      products: businesses engaged in advertising research; security industries and
      law enforcement. The Company's operations will continue to focus on mining
      of
      data and other information through the monitoring of Internet websites developed
      and maintained by independent third parties worldwide. Additionally, if the
      Company is able to obtain one or more contracts with governmental agencies
      or
      other organizations to provide internet monitoring for possible terrorist,
      cybercrime and/or bioterrorist activities, management intends to use its
      proprietary software in accordance with the requirements of such respective
      contracts.





The
      Company has introduced a new product called Online Predator Profiling System
      (OPPS), developed with the help of a number of law enforcement departments
      for
      identifying and tracking online predators as well as finding missing children,
      and has started taking orders for same.





AdZone
      will face considerable risks in each of its future business plan steps, such
      as
      difficulty of hiring competent personnel within its budget, longer than
      anticipated website decoding, difficulty in completing key business
      acquisitions, and a shortfall of funding due to AdZone's inability to raise
      capital in the equity securities market. AdZone is currently dependent upon
      the
      sale of equity securities, loans and the exercise of options. AdZone's officers
      and directors have no formal commitments or arrangements to advance or loan
      funds to AdZone and do not have any legal requirement to do so.





CONTRACTUAL
      OBLIGATIONS





The
      table
      below reflects the Company’s contractual obligations for the next five
      years.




Less
                than One Year
            
            One
                to Three Years
            
            Three
                to Five Years
            
            After
                Five Years
            
            TotalShort-term
                debt
            
            $
            886,919
            
            $
            700,000
            
            $
            -
            
            $
            -
            
            $
            1,586,919Employment
                agreements
            
            
            662,500
            
            
            1,275,000
            
            
            -
            
            
            -
            
            
            1,937,500Operating
                lease obligations
            
            
            24,858
            
            
            -
            
            
            -
            
            
            -
            
            
            24,858$
            1,574,277
            
            $
            1,975,000
            
            
            -
            
            
            -
            
            $
            3,549,277




11





OFF-BALANCE
      SHEET ARRANGEMENTS





We
      do not
      currently have any additional off-balance sheet arrangements that have or are
      reasonably likely to have a current or future effect on our financial condition,
      changes in financial condition, revenues or expenses, results of operations,
      liquidity, capital expenditures or capital resources that are material to our
      stockholders.





SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





For
      the
      summary of our significant accounting policies, please see Note D appearing
      on
      page F-12 of our financial statements filed as part of this Annual
      Report.





**RISK
      FACTORS**





You
      should carefully consider the risks described below as well as other information
      provided to you in this Annual Report, including information in the section
      of
      this document entitled “Information Regarding Forward Looking Statements.” The
      risks and uncertainties described below are not the only ones facing the
      Company. Additional risks and uncertainties not presently known to the Company
      or that the Company currently believes are immaterial may also impair the
      Company’s business operations. If any of the following risks actually occur, the
      Company’s business, financial condition or results of operations could be
      materially adversely affected, the value of the Company’s Common Stock could
      decline, and you may lose all or part of your investment.





**RISKS
      RELATED TO OUR FINANCIAL CONDITION AND BUSINESS**





WE
      REQUIRE ADDITIONAL FINANCING IN ORDER TO CONTINUE IN BUSINESS AS A GOING
      CONCERN, THE AVAILABILITY OF WHICH IS UNCERTAIN. WE MAY BE FORCED BY BUSINESS
      AND ECONOMIC CONDITIONS TO ACCEPT FINANCING TERMS WHICH WILL REQUIRE US TO
      ISSUE OUR
      SECURITIES AT A DISCOUNT, WHICH COULD RESULT IN FURTHER DILUTION TO OUR EXISTING
      STOCKHOLDERS.




We
      require additional financing to fund our operations. There can be no assurance
      that additional financing will be available to us when needed or, if available,
      that it can be obtained on commercially reasonable terms. In addition, any
      additional equity financing may involve substantial dilution to our
      stockholders. If we fail to raise sufficient financing to meet our immediate
      cash needs, we will be forced to scale down or perhaps even cease the operation
      of our business, which may result in the loss of some or all of your investment
      in our common stock.





In
      addition, in seeking debt or equity private placement financing, we may be
      forced by business and economic conditions to accept terms which will require
      us
      to issue our securities at a discount from the prevailing market price or face
      amount, which could result in further dilution to our existing stockholders.





WE
      HAVE A
      HISTORY OF OPERATING LOSSES AND FLUCTUATING OPERATING RESULTS, WHICH RAISE
      SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.





Since
      inception through March 31, 2007, we have incurred cumulative losses of
      $27,913,812. Our net loss for the fiscal years ended March 31, 2007 and March
      31, 2006 were $3,708,363 and $12,005,573, respectively. There is no assurance
      that we will operate profitably or will generate positive cash flow in the
      future. In addition, our operating results in the future may be subject to
      significant fluctuations due to many factors not within our control, such as
      the
      unpredictability of when customers will order products, the size of customers'
      orders, the demand for our products, and the level of competition and general
      economic conditions.





Although
      we are confident that revenues will increase, we also expect an increase in
      development costs and operating costs. Consequently, we expect to incur
      operating losses and negative operating cash flow until our products gain market
      acceptance sufficient to generate a commercially viable and sustainable level
      of
      sales, and/or additional products are developed and commercially released and
      sales of such products made so that we are operating in a profitable manner.




12





OUR
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAVE EXPRESSED DOUBT ABOUT OUR
      ABILITY TO CONTINUE AS A GOING CONCERN, WHICH MAY HINDER OUR ABILITY TO OBTAIN
      FUTURE FINANCING.




In
      their
      report dated July 12, 2007, our independent registered public accounting firm
      have expressed substantial doubt about our ability to continue as a going
      concern. Our ability to continue as a going concern is an issue raised as a
      result of recurring losses from operations, a stockholders' deficit, and
      requirement for a significant amount of capital financing to proceed with our
      business plan. Our ability to continue as a going concern is subject to our
      ability to generate a profit and/or obtain necessary funding from outside
      sources, including obtaining additional funding from the sale of our securities,
      increasing sales or obtaining loans and grants from various financial
      institutions where possible. The going concern qualification in the auditor's
      report increases the difficulty in meeting such goals and there can be no
      assurances that such methods will prove successful.





WE
      MAY
      HAVE TO CURTAIL OUR BUSINESS IF WE CANNOT FIND ADEQUATE FUNDING.





We
      currently have no legally binding commitments with any third parties to obtain
      any material amount of additional equity or debt financing. We need immediate
      funds and may not be able to obtain any additional financing in the amounts
      or
      at the times that we may require the financing or, if we do obtain any
      financing, that it would be on acceptable terms because of the following:





-
      We have
      no assets to pledge as security for the loan





-
      We are
      in poor financial condition





-
      We may
      be viewed as a high market risk





As
      a
      result, we may not have adequate capital to implement future expansions,
      maintain our current levels of operation or to pursue strategic acquisitions.
      Our failure to obtain sufficient additional financing could result in the delay
      or abandonment of some or all of our development, expansion and expenditures,
      which could harm our business and the value of our common stock.





OUR
      OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY.




As
      a
      result of the nature of the markets in which we compete, our quarterly and
      annual revenues and operating results are likely to fluctuate from period to
      period. These fluctuations may be caused by a number of factors, many of which
      are beyond our control. These factors include the following, as well as others
      discussed elsewhere in this section:





·
            how
                and when we introduce new products and services and enhance our existing
                products and services;




·
            our
                ability to attract and retain new customers and satisfy our customers'
                demands;




·
            the
                timing and success of our brand-building and marketing
                campaigns;




·
            our
                ability to establish and maintain strategic
                relationships;




·
            our
                ability to attract, train and retain key
                personnel;




·
            the
                emergence and success of new and existing
                competition;





·
            varying
                operating costs and capital expenditures related to the expansion
                of our
                business operations and infrastructure, including the hiring of new
                employees; and




·
            costs
                of litigation and intellectual property
                protection.


13





In
      addition, because the market for our products and services is relatively new
      and
      maybe subject to rapid change, it is difficult to predict future financial
      results.




Our
      future operating results could fall below the expectations of public market
      analysts or investors and significantly reduce the market price of our common
      stock. Fluctuations in our operating results will likely increase the volatility
      of our stock price.





IF
      WE
      FAIL TO DEVELOP OUR PRODUCTS, WE WILL NOT ACHIEVE SIGNIFICANT REVENUES AND
      WE
      WOULD BE UNLIKELY TO BE ABLE TO CONTINUE OUR CURRENT LEVEL OF OPERATIONS AND
      WOULD BE UNABLE TO MEET OUR LONG-TERM GROWTH PLANS.




Our
      future business and financial success will depend on our ability to introduce
      new products and upgrade existing products into the marketplace. Developing
      new
      products and upgrades to existing and future products imposes burdens on our
      management. This process is costly, and we cannot assure any investor that
      we
      will be able to successfully develop any products or enhance any future
      products. If our product development efforts are unsuccessful, we will have
      incurred significant costs without recognizing the expected benefits and our
      business prospects will suffer.





WE
      MAY
      NOT BE ABLE TO EXPAND MARKET ACCEPTANCE OF THE USE OF OUR PRODUCTS, WHICH WOULD
      SEVERELY HARM OUR ABILITY TO ACHIEVE SIGNIFICANT REVENUES.




We
      cannot
      assure any investor that our proposed products will achieve market acceptance.
      Failure of our proposed products to gain market acceptance would severely harm
      our business, financial condition and results of operations.





WE
      HAVE A
      FEW PROPRIETARY RIGHTS, THE LACK OF WHICH MAY MAKE IT EASIER FOR OUR COMPETITORS
      TO COMPETE AGAINST US.





We
      rely
      in part on patents, trade secrets and other proprietary technologies to protect
      our products. We may not be able to obtain or maintain adequate U.S. patent
      protection for new products or ideas, or prevent the unauthorized disclosure
      of
      our technical knowledge or other trade secrets by our employees. Additionally,
      the laws of foreign countries may not protect our intellectual property rights
      to the same extent as the laws of the U.S. Even if our intellectual property
      rights are adequately protected, litigation may be necessary to enforce them,
      which could result in substantial costs to us and substantial diversion of
      the
      attention of our management and key technical employees. If we are unable to
      adequately protect our intellectual property, our competitors could use our
      intellectual property to develop new products or enhance their existing
      products. This could harm our competitive position, decrease our market share
      or
      otherwise harm our business.





OUR
      SUCCESS WILL DEPEND ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL AND
      IMPORTANT MEMBERS OF OUR EMPLOYEE STAFF. IF WE FAIL TO ATTRACT AND RETAIN KEY
      PERSONNEL AND KEY MEMBERS OF OUR EMPLOYEE STAFF, WE MAY BE UNABLE TO SUCCEED
      IN
      OUR MARKET.





We
      believe our future success will depend on our ability to manage our growth
      successfully, including attracting and retaining qualified employees and other
      highly skilled personnel. Our key employees may terminate their employment
      with
      us at any time. Hiring qualified management and technical personnel is difficult
      due to the limited number of qualified professionals. If we fail to attract
      and
      retain personnel, particularly management and technical personnel, we may not
      be
      able to succeed.





WE
      ARE
      DEPENDENT ON OUR MANAGEMENT AND THE LOSS OF ANY OFFICER COULD HINDER THE
      IMPLEMENTATION OF OUR BUSINESS PLAN.





We
      are
      heavily dependent upon the member of our management team, the loss of any of
      whom could have a material adverse affect on our ability to implement our
      business plan. While we have entered into employment agreements with certain
      executive officers, including Charles Cardona, our Chief Executive Officer,
      and
      John Cardona, our Chief Operating Officer, employment agreements could be
      terminated for a variety of reasons. If, for some reason, the services of our
      management, or of any member of management, were no longer available to us,
      our
      operations and proposed businesses and endeavors may be materially adversely
      affected. As we continue with our intended operations, other officers may be
      instrumental in setting up our financial and operational controls and
      procedures, and we may need to hire additional personnel to perform such
      functions. Any failure of management to implement and manage our business
      strategy and growth may have a material adverse affect on us. There can be
      no
      assurance that our operating control systems will be adequate to support its
      future operations and anticipated growth. Failure to manage our growth properly
      could have a material adverse affect on our business, financial condition or
      result of operations.




14





WE
      WILL
      NEED TO INCREASE THE SIZE OF OUR ORGANIZATION, AND MAY EXPERIENCE DIFFICULTIES
      IN MANAGING GROWTH.





We
      are a
      small company with minimal employees as of March 31, 2007. We hope to experience
      a period of significant expansion in headcount, facilities, infrastructure
      and
      overhead and anticipate that further expansion will be required to address
      potential growth and market opportunities. Future growth will impose significant
      added responsibilities on members of management, including the need to identify,
      recruit, maintain and integrate additional independent contractors and managers.
      Our future financial performance and our ability to compete effectively will
      depend, in part, on its ability to manage any future growth
      effectively.




WE
      ARE
      SUBJECT TO COMPLIANCE WITH SECURITIES LAW, WHICH EXPOSES US TO POTENTIAL
      LIABILITIES, INCLUDING POTENTIAL RESCISSION RIGHTS.




We
      have
      periodically offered and sold our common stock to investors pursuant to certain
      exemptions from the registration requirements of the Securities Act of 1933,
      as
      amended (the “Securities Act”) as well as those of various state securities
      laws. The basis for relying on such exemptions is factual; that is, the
      applicability of such exemptions depends upon our conduct and that of those
      persons contacting prospective investors and making the offering. We have not
      received a legal opinion to the effect that any of our prior offerings were
      exempt from registration under any federal or state law. Instead, we have relied
      upon the operative facts as the basis for such exemptions, including information
      provided by investors themselves.





If
      any
      prior offering did not qualify for such exemption, an investor would have the
      right to rescind its purchase of the securities if it so desired. It is possible
      that if an investor should seek rescission, such investor would succeed. A
      similar situation prevails under state law in those states where the securities
      may be offered without registration in reliance on the partial preemption from
      the registration or qualification provisions of such state statutes under the
      National Securities Markets Improvement Act of 1996. If investors were
      successful in seeking rescission, we would face severe financial demands that
      could adversely affect our business and operations. Additionally, if we did
      not
      in fact qualify for the exemptions upon which it has relied, we may become
      subject to significant fines and penalties imposed by the SEC and state
      securities agencies.




**RISKS
      RELATING TO OUR COMMON STOCK**





THERE
      IS
      NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET IN OUR COMMON STOCK, WHICH
      WOULD ADVERSELY AFFECT THE ABILITY OF INVESTORS IN OUR COMPANY TO SELL THEIR
      SECURITIES IN THE PUBLIC MARKETS.




Although
      our common stock trades on the Pinksheets centralized quotations service (the
      “Pinksheets”), a regular trading market for the securities may not be sustained
      in the future. The Pinksheets is a centralized quotation service that collects
      and publishes market maker quotes for OTC securities in real-time, that provides
      significantly less liquidity than the NASD’s automated quotation system (the
“NASDAQ Stock Market”). Quotes for stocks included on the Pinksheets are not
      listed in the financial sections of newspapers as are those for The Nasdaq
      Stock
      Market. Therefore, prices for securities traded solely on the Pinksheets may
      be
      difficult to obtain and holders of common stock may be unable to resell their
      securities at or near their original offering price or at any price. Market
      prices for our common stock will be influenced by a number of factors,
      including:




·
            the
                issuance of new equity
                securities;


15





·
            competitive
                developments, including announcements by competitors of new products
                or
                services or significant contracts, acquisitions, strategic partnerships,
                joint ventures or capital commitments;


·
            variations
                in quarterly operating results;


·
            change
                in financial estimates by securities
                analysts;


·
            the
                depth and liquidity of the market for our common
                stock;


·
            investor
                perceptions of our company and the technologies industries generally;
                and


·
            general
                economic and other national
                conditions.





THE
      LIMITED PRIOR PUBLIC MARKET AND TRADING MARKET MAY CAUSE VOLATILITY IN THE
      MARKET PRICE OF OUR COMMON STOCK.




Our
      common stock is currently traded on a limited basis on the Pinksheets under
      the
      symbol “ADZR.PK” The quotation of our common stock on the Pinksheets does not
      assure that a meaningful, consistent and liquid trading market currently exists,
      and in recent years such market has experienced extreme price and volume
      fluctuations that have particularly affected the market prices of many smaller
      companies like us. Our common stock is thus subject to volatility. In the
      absence of an active trading market:




·  investors
      may have difficulty buying and selling or obtaining market
      quotations;




·  market
      visibility for our common stock may be limited; and




·  a
      lack of
      visibility for our common stock may have a depressive effect on the market
      for
      our common stock.





THE
      MARKET PRICE OF OUR COMMON STOCK MAY DECLINE BECAUSE THERE ARE A LARGE NUMBER
      OF
      SHARES UNDERLYING OUR WARRANTS THAT MAY BE AVAILABLE FOR FUTURE SALE AND THE
      SALE OF THESE SHARES MAY DEPRESS THE MARKET PRICE.




The
      market price of our common stock may decline because there are a large number
      of
      shares which we are required to issue pursuant to our May 2004 financing, and
      shares underlying our warrants that may be available for future sale, and the
      sale of these shares may depress the market price. As of July 12, 2007, there
      were 220,816,804 shares of common stock issued and outstanding and outstanding
      options and warrants to purchase up to approximately 54,076,262 shares of common
      stock. All of the shares included in this prospectus may be sold without
      restriction. The sale of these shares may adversely affect the market price
      of
      our common stock.





OUR
      COMMON STOCK IS SUBJECT TO "PENNY STOCK" RULES.





The
      Securities and Exchange Commission has adopted Rule 15g-9 which establishes
      the
      definition of a "penny stock," for the purposes relevant to us, as any equity
      security that has a market price of less than $5.00 per share or with an
      exercise price of less than $5.00 per share, subject to certain exceptions.
      For
      any transaction involving a penny stock, unless exempt, the rules require:





·
            that
                a broker or dealer approve a person's account for transactions in
                penny
                stocks; and




·
            the
                broker or dealer receive from the investor a written agreement to
                the
                transaction, setting forth the identity and quantity of the penny
                stock to
                be purchased.





In
      order
      to approve a person's account for transactions in penny stocks, the broker
      or
      dealer must:




·
            obtain
                financial information and investment experience objectives of the
                person;
                and


16





·
            make
                a reasonable determination that the transactions in penny stocks
                are
                suitable for that person and the person has sufficient knowledge
                and
                experience in financial matters to be capable of evaluating the risks
                of
                transactions in penny stocks.





The
      broker or dealer must also deliver, prior to any transaction in a penny stock,
      a
      disclosure schedule prepared by the Commission relating to the penny stock
      market, which, in highlight form:





·
            sets
                forth the basis on which the broker or dealer made the suitability
                determination; and




·
            that
                the broker or dealer received a signed, written agreement from the
                investor prior to the transaction.





WE
      HAVE
      NOT PAID CASH DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY CASH DIVIDENDS
      IN
      THE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR
      STOCK.




We
      have
      never paid cash dividends on our stock and do not anticipate paying cash
      dividends on our stock in the foreseeable future. The payment of cash dividends
      on our stock will depend on our earnings, financial condition and other business
      and economic factors affecting us at such time as the board of directors may
      consider relevant. If we do not pay cash dividends, our stock may be less
      valuable because a return on your investment will only occur if our stock price
      appreciates.





**ITEM
      7 - INDEX TO FINANCIAL STATEMENTS**





The
      required accompanying financial statements begin on page F-1 of this Annual
      Report.





**ITEM
      8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND** **FINANCIAL
      DISCLOSURES**





On
      November 23, 2005, Aidman, Piser & Company, P.A. (the "Former Accountant")
      resigned as the Company’s auditors. On December 9, 2005, the Company engaged
      Holtz Rubenstein Reminick LLP. (the "New Accountant"), as its independent
      certified public accountant. The Company's decision to engage the New Accountant
      was approved by its Board of Directors on December 9, 2005.





The
      reports of the Former Accountant on the financial statements of the Company
      for
      each of the two most recent fiscal years, did not contain an adverse opinion
      or
      disclaimer of opinion and was not qualified or modified as to uncertainty,
      audit
      scope or accounting principles for the two most recent fiscal years and all
      subsequent interim periods, except that the Former Accountant's opinion in
      its
      report on the Company's financial statements expressed substantial doubt with
      respect to the Company's ability to continue as a going concern for the last
      two
      fiscal years.





During
      the Company's two most recent fiscal years and the subsequent interim period
      through the date of resignation, there were no reportable events as the term
      described in Item 304(a)(1)(iv) of Regulation S-B, except for the
      following:





The
      Former Accountant advised management that they noted deficiencies in internal
      controls relating to:





· the
      valuation of equity securities issued to employees and non-employees; and o
      the
      accounting and reporting for preferred stock that had also included the issuance
      of warrants and beneficial conversion features.





In
      addition, the Former Accountant advised management that internal controls
      necessary to develop reliable financial statements did not exist for the two
      most recent fiscal years ended March 31, 2005 and 2004,
      respectively.





The
      Former Accountant advised management that each of these internal control
      deficiencies constitute a material weakness as defined in Statement of Auditing
      Standards No. 60. Certain of these internal control weaknesses may also
      constitute material weaknesses in the Company's disclosure
      controls.




17





During
      the Company's two most recent fiscal years and the subsequent interim period
      through the date of resignation, there were no disagreements with the Former
      Accountant on any matters of accounting principles or practices, financial
      statement disclosure or auditing scope or procedure, which, if not resolved
      to
      the satisfaction of the Former Accountant, would have caused it to make
      reference to the subject matter of the disagreements in connection with its
      reports on these financial statements for those periods.





The
      Company did not consult with the New Accountant regarding the application of
      accounting principles to a specific transaction, either completed or proposed,
      or the type of audit opinion that might be rendered on the Company's financial
      statements, and no written or oral advice was provided by the New Accountant
      that was a factor considered by the Company in reaching a decision as to the
      accounting, auditing or financial reporting issues.





The
      Company requested that the Former Accountant furnish it with a letter addressed
      to the Securities and Exchange Commission stating whether it agrees with the
      above statements. The requested letter was attached as Exhibit 16.1 to the
      Company’s Current Report on Form 8-K filed with the SEC on December 9,
      2005.




**ITEM
      8A - CONTROLS AND PROCEDURES**





**(a)
      Evaluation of Disclosure Controls and Procedures.**




As
      of the
      end of the period covered by this report ("the Evaluation Date"), our
      management, including our chief executive officer and principal accounting
      officer, conducted an evaluation ("Evaluation") of the effectiveness of the
      design and operation of our disclosure controls and procedures, as defined
      in
      Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934.
      In
      the course of the Evaluation, we identified significant material weaknesses
      in
      our internal disclosure controls and procedures.




Our
      auditors advised
      AdZone that each of these internal control deficiencies constitute a material
      weakness as defined in Statement of Auditing Standards No. 60. Certain of these
      internal control weaknesses may also constitute material weaknesses in our
      disclosure controls. Management
      has considered the effects of the financial statement restatements on its
      evaluation of disclosure controls and procedures and has concluded that
      weaknesses are present. Our
      chief executive officer and our principal accounting officer concluded that
      as
      of the Evaluation Date our disclosure controls and procedures were not
      effective, and as of the date of the filing of this report, our chief executive
      officer and our principal accounting officer concluded that we do not maintain
      disclosure controls and procedures that are effective in providing reasonable
      assurance that information required to be disclosed in our reports under the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the SEC's rules and forms, and that such
      information is accumulated and communicated to our management, including our
      chief executive officer and our principal accounting officer, to allow timely
      decisions regarding required disclosure.




We
      are
      committed to improving our financial organization. However, the
      Company does not possess the financial resources to address other than the
      most
      rudimentary of accounting and reporting requirements, and therefore relies
      heavily on outside advisors. The Company’s inability to independently prepare
      its financial reports to the standards of Generally Accepted Accounting
      Principles and the Rules and Regulations of the Securities and Exchange
      Commission rise to the level of a material weakness in internal control.





We
      currently believe we will need to take additional steps to remediate the
      above-referenced material weaknesses, and we will continue to evaluate the
      effectiveness of our design and operation of our disclosure controls and
      procedures on an ongoing basis, and will take further action as appropriate.




18




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our reports filed under the


Exchange
      Act is accumulated and communicated to management, including our Chief Executive
      Officer, to allow timely decisions regarding required disclosure.





**(b)
      Changes in Internal Controls**





There
      have been no changes in our internal control over financial reporting identified
      in connection with the valuation required by paragraph (d) of Rules 13a-15
      15d-15 under the Exchange Act that occurred during the small business issuer’s
      last fiscal year that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.




**Item
                8A(T).**
            **Controls
                And Procedures**





Not
      applicable.





**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 serving AdZone are as follows:


Name
              
              Position
                  Held and Tenure
              
              Date
                  First Elected/AppointedCharles
                  Cardona(2)
              
              Chief
                  Executive Officer and Chairman
              
              August
                  2001John
                  Cardona(2)
              
              Chief
                  Operating Officer and Vice Chairman
              
              August,
                  2001Warren
                  Hamburger
              
              Director
              
              August
                  2001Russell
                  Ivy
              
              Director
              
              January
                  2001


(1)
        On
        March 5, 2007, Mr. John Conley resigned as a member of the Board of Directors
        of
        Adzone to begin his retirement. There was no disagreement or dispute between
        John Conley and the Company which led to his resignation.


(2)
      Charles Cardona and John Cardona are brothers.





The
      directors named above will serve until the next annual meeting of AdZone's
      stockholders or until their successors are duly elected and have qualified.
      Directors will be elected for one-year terms at the annual stockholders meeting.
      Officers hold their positions at the pleasure of the board of directors, absent
      any employment agreement. Charles Cardona has entered into an employment
      agreement with AdZone that terminates on December 31, 2009, John Cardona has
      entered into an employment agreement with AdZone that terminates on December
      31,
      2009, There is no arrangement or understanding between any of the directors
      or
      officers of AdZone and any other person pursuant to which any director or
      officer was or is to be selected as a director or officer, and there is no
      arrangement, plan or understanding as to whether non-management shareholders
      will exercise their voting rights to continue to elect the current directors
      to
      AdZone's board. There are also no arrangements, agreements or understandings
      between non-management shareholders that may directly or indirectly participate
      in or influence the management of AdZone's affairs.





19




BIOGRAPHICAL
      INFORMATION





The
      following sets the biographical information about our executive officers and
      directors as provided to us each respective individual:





CHARLES
      CARDONA





Charles
      Cardona, age 43, has served as AdZone's Chief Executive Officer and Chairman
      of
      the Board since AdZone's merger with AdZone Interactive, Inc. in August 2001.
      From February 2000 to August 2001, Mr. Cardona was President and Chief Executive
      Officer of AdZone Interactive, Inc., with which AdZone merged in August 2001.
      From 1992 to February 2000, Mr. Cardona was the President of Owl Data Systems,
      Inc., a software development Company owned by Mr. Cardona.





JOHN
      CARDONA





John
      Cardona, age 40, is serving as the Chief Operating Officer of AdZone and has
      served as its Homeland Security Defense Advisor with responsibility for
      long-term corporate planning and global and operational strategies in the past.
      From August, 2001 to June, 2002, Mr. Cardona served as President of AdZone.
      Mr.
      Cardona did serve as a consultant to Competitrack, a market research Company.
      Mr. Cardona has also served AdZone as a Director from August 2001 to the present
      time. From 1990 through August 2001, Mr. Cardona was a director of sales for
      Competitive Media Reporting, an advertising research firm. Mr. Cardona received
      a Bachelor of Arts Degree from New York Institute of Technology, Long Island,
      New York.





WARREN
      HAMBURGER





Warren
      Hamburger, age 54, has been a director of AdZone from August 2001 to the
      present. He has been a practicing attorney for 21 years during which he has
      operated his own firm as a sole practitioner. Mr. Hamburger received a Juris
      Doctor degree from New England School of Law, Boston Massachusetts, and a
      Bachelor of Science degree in business administration from Duquesne University,
      Pittsburgh, Pennsylvania.





RUSSELL
      STOVER IVY





Russell
      Stover Ivy, age 41, is a Director of AdZone and was President of Executive
      Help
      from January 2001 until the merger with AdZone in August 2001. Mr. Ivy has
      been
      a consultant to small and medium sized companies for over 20 years. He has
      been
      involved in the start-up, design and implementation of numerous business ranging
      from small financial services corporations to publicly traded telecommunications
      companies. In 1998, Mr. Ivy was a consultant to IWL Communications, which merged
      with CapRoc Communications, which was later purchased by McLeod Communications.
      In 1999 and 2000, Mr. Ivy was a consultant to First Financial Group of America,
      where he served as Director of Operations. Mr. Ivy continues to consult for
      companies regarding their operational activities and goals. Mr. Ivy received
      a
      Bachelor's degree in international economics from Texas Tech University in
      1991.





On
      April
      28, 2006, Charles Cardona resigned as our Chief Executive officer and John
      Cardona resigned as our Chief Operating Officer. Charles Cardona remained as
      Chairman of the Board of Directors. There was no disagreement or dispute between
      Charles Cardona and John Cardona and our Company which led to their
      resignations.





On
      August
      22, 2006, Charles Cardona and John Cardona were reappointed as our Chief
      Executive Officer and Chief Operating Officer respectively.





FAMILY
      RELATIONSHIPS





With
      the
      exception of Charles Cardona and John Cardona being siblings, there are no
      family relationships among any of our other directors and executive
      officers.





20




COMPLIANCE
      WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934





Based
      on
      the Company's review of copies of all disclosure reports filed by directors
      and
      executive officers of the Company pursuant to Section 16(a) of the Securities
      Exchange Act of 1934, as amended, the Company believes that there was compliance
      with all filing requirements of Section 16(a) applicable to directors and
      executive officers of the Company during 2007 fiscal year.





CODE
      OF
      ETHICS





We
      have
      adopted a Code of Business Conduct and Ethics that applies to all of our
      directors, officers and employees, including our principal executive officer
      and
      principal accounting officer. The Code of Business Conduct and Ethics will
      be
      posted on our website at http://www.AdZoneinteractive.com. A copy of the
      Company’s Code of Ethics will be filed as Exhibit 14.1 via an amendment to this
      Annual Report or as Exhibit 14.1 to a Current Report on Form 8-K.





**ITEM
      10 - EXECUTIVE COMPENSATION**





The
      following Summary Compensation Table sets forth all cash and non-cash
      compensation paid or accrued for services rendered in all capacities to the
      named Executive Officers for the fiscal years ended March 31, 2007, 2006, and
      2005:





SUMMARY
      COMPENSATION TABLE




Name
                  & Principal Position
              
              Year
              
              Salary
                  ($)
              
              Bonus
                  ($) (5)
              
              Stock
                  Awards($) (5)
              
              Option
                  Awards ($)
              
              Non-Equity
                  Incentive Plan Compensation ($)
              
              Change
                  in Pension Value and Non-Qualified Deferred Compensation Earnings
                  ($)
              
              All
                  Other Compensation ($) (1)
              
              Total
                  ($)**Charles
                  Cardona**
              
              
              2007
              
              
              287,500
              
              
              130,000
              
              
              —
              
              
              77,000
              (4)
              
              —
              
              
              —
              
              
              —
              
              
              494,500CEO,
                  acting CFO and Chairman (2)
              
              
              2006
              
              
              153,310
              
              
              75,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              228,310**John
                  Cardona**
              
              
              2007
              
              
              290,500
              
              
              130,000
              
              
              —
              
              
              77,000
              (4)
              
              —
              
              
              —
              
              
              —
              
              
              497,500COO
                  and Vice Chairman(3)
              
              
              2006
              
              
              153,310
              
              
              75,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              228,310





(1)
      With
      the exception of reimbursement of expenses incurred by our named executive
      officers during the scope of their employment, none of the named executive
      received any other compensation, perquisites or personal benefits in excess
      of
      $10,000.





(2)
      Re-appointed as the Company’s CEO and acting CFO in August of 2006.




(3)
      Re-appointed as the Company’s COO and a director in August of 2006.




(4)  Amounts
      represented as stock-based compensation expense for the fiscal year ended March
      31, 2007, for restricted stock awards and stock options granted in 2007 under
      FAS 123 R as discussed in Note D ” of the Notes to the Company’s
      Financial Statements included elsewhere in this Annual Report.


21




OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END




The
      following table sets forth information for the named executive officers and
      directors regarding the number of shares subject to both exercisable and
      unexercisable stock options, as well as the exercise prices and expiration
      dates
      thereof, as of March 31, 2007:





**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Exercisable**
            
            **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              **(#)**
              **Unexercisable**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
              **(#)**
            
            **Option**
              **Exercise**
              **Price**
              **($)**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number**
              **of**
              **Shares**
              **or Units**
              **of Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Market**
              **Value**
              **of**
              **Shares**
              **or**
              **Units**
              **of**
              **Stock**
              **That**
              **Have**
              **Not**
              **Vested**
              **($)**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That**
              **Have**
              **Not**
              **Vested**
              **(#)**
            
            **Equity Incentive**
              **Plan Awards:**
              **Market or Payout**
              **Value**
              **of**
              **Unearned**
              **Shares,**
              **Units or**
              **Other**
              **Rights**
              **That Have**
              **Not**
              **Vested**
              **($)****Charles
                Cardona**
            
            
            750,000
            
            
            —
            
            
            —
            
            
            0.85
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            1.00
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            1.50
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            1.75
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,200,000
            
            
            —
            
            
            —
            
            
            0.125
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,500,000
            
            
            —
            
            
            —
            
            
            0.20
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,300,000
            
            
            —
            
            
            —
            
            
            0.70
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,000,000
            
            
            —
            
            
            —
            
            
            3.00
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —2,200,000
            
            
            —
            
            
            —
            
            
            0.05
            
            
            12/31/14
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,100,000
            
            
            —
            
            
            —
            
            
            0.15
            
            
            12/31/14
            
            
            —
            
            
            —
            
            
            —
            
            
            —525,000
            
            
            —
            
            
            —
            
            
            0.33
            
            
            12/31/14
            
            
            —
            
            
            —
            
            
            —
            
            
            —2,400,000
            
            
            —
            
            
            —
            
            
            0.037
            
            
            12/31/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.25
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.30
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.35
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.40
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,400,000
            
            
            —
            
            
            —
            
            
            0.10
            
            
            12/31/13
            
            
            —
            
            
            —
            
            
            —
            
            
            —700,000
            
            
            —
            
            
            —
            
            
            0.11
            
            
            05/01/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —**John
                Cardona**
            
            
            750,000
            
            
            —
            
            
            —
            
            
            0.85
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            1.00
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            1.50
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            1.75
            
            
            02/05/10
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,200,000
            
            
            —
            
            
            —
            
            
            0.125
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,500,000
            
            
            —
            
            
            —
            
            
            0.20
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,300,000
            
            
            —
            
            
            —
            
            
            0.70
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,000,000
            
            
            —
            
            
            —
            
            
            3.00
            
            
            04/20/11
            
            
            —
            
            
            —
            
            
            —
            
            
            —2,200,000
            
            
            —
            
            
            —
            
            
            0.05
            
            
            12/31/14
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,100,000
            
            
            —
            
            
            —
            
            
            0.15
            
            
            12/31/14
            
            
            —
            
            
            —
            
            
            —
            
            
            —525,000
            
            
            —
            
            
            —
            
            
            0.33
            
            
            12/31/14
            
            
            —
            
            
            —
            
            
            —
            
            
            —2,400,000
            
            
            —
            
            
            —
            
            
            0.037
            
            
            12/31/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.25
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.30
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.35
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —750,000
            
            
            —
            
            
            —
            
            
            0.40
            
            
            02/06/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —1,400,000
            
            
            —
            
            
            —
            
            
            0.10
            
            
            12/31/13
            
            
            —
            
            
            —
            
            
            —
            
            
            —700,000
            
            
            —
            
            
            —
            
            
            0.11
            
            
            05/01/12
            
            
            —
            
            
            —
            
            
            —
            
            
            —





DIRECTOR
      COMPENSATION





From
      time
      to time the members of the Board of Directors receive shares of common stock
      at
      the discretion of the board for their services. No stock was issued to the
      board
      of directors as compensation during the year ended March 31, 2007.





No
      cash
      compensation was paid to any member of the Board of Directors during the year
      ended March 31, 2007.





22





Employment
      Agreements





On
      May 1,
      2006, we entered into an employment agreement with Mr. Charles Cardona, which
      superseded all prior agreements. In this agreement, Mr. Cardona will continue
      to
      serve as our Chief Executive Officer, through December 31, 2009. This agreement
      contains the following terms and conditions:





Position:
      Chief Executive Officer





Effective
      Date: May 1, 2006





BASE
      SALARY:





2006
      -
      $275,000 annual


2007
      -
      $325,000 annual


2008
      -
      $350,000 annual


2009
      -
      $375,000 annual




The
      initial base salary shall be reduced to $2,000 per week until such time as
      the
      Company reaches a cash flow positive position for at least 1 month, or the
      Company raises at least $2 Million within 12 months, or management deems that
      the Company’s cash position is sufficient to support an increase. No additional
      salary above the reduced base shall accrue as back salary during the first
      6
      months of this contract.





Bonuses:
      Quarterly Qualitative Bonus of $ 20,000





Year
      end
      Qualitative Bonus OF $ 50,000





Profitability
      Bonus: If the Company reaches annual profitability employee will receive a
      $250,000 bonus plus 250,000 shares in stock.





Mr.
      Cardona shall receive an annual bonus as follows:





0.5%
      of
      the previous years revenues plus 3.5% of the previous years profits plus 0.5%
      of
      the transaction price of any acquisition.





The
      Board
      of Directors shall at its discretion grant up to an additional $150,000 in
      bonus
      to Mr. Cardona on an annual basis.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 options
      in bonus to the employee on an annual basis at strike prices the Board may
      determine.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 shares
      in bonus to the employee on an annual basis.





All
      bonuses shall be net of payroll taxes.





Stock
      Options: The employee shall receive options to purchase 3,000,000shares as
      follows:





·
            Options
                for 750,000 shares at $.25




·
            Options
                for 750,000 shares at $.30




·
            Options
                for 750,000 shares at $.35




·
            Options
                for 750,000 shares at $.40





Additionally
      the employee shall receive the following: 3,000,000 options upon the Company
      achieving $500,000 in total revenues prior to March 31, 2007. Options shall
      be
      priced at the closing stock bid price the next trading date after $500,000
      in
      revenues have been received.





All
      the
      options granted above shall be exercisable for 6 years from the date of
      granting.





Additionally
      the Company shall maintain any existing options under previous contracts and
      option grants.





23




Additional
      Incentives: Charles A. Cardona will receive 5% of all sales he is involved
      with.





Other
      Agreements: Medical and Dental insurance is fully paid for the employee by
      the
      Company during the employment period. Company shall reimburse or pay for
      reasonable Company vehicle expenses including lease or purchase payments, gas,
      tolls and repairs. AdZone Research agrees to defend employee against any and
      all
      legal claims and litigation. In addition, AdZone Research further agrees to
      pay
      all expenses arising from any and all litigation, including but not limited
      to
      attorney's fees, legal fees and miscellaneous expenses. Legal representation
      for
      Charles A. Cardona will continue beyond the term of this contract and will
      continue for the remainder of Charles A. Cardona's life.





The
      employee shall be reimbursed for any and all reasonable business related
      expenses upon presentation of an expense report as currently in use as of
      February, 2006. Any personal expenses reimbursed may be used to reduce
      outstanding compensation due and or unpaid to the employee.





On
      May 1,
      2006, the Company entered into an Employment Agreement with Mr. John A. Cardona
      (Jcardona) which superseded all prior agreements. In this agreement, JCardona
      will serve as the Company's Chief Operating Officer, through December 31, 2009.
      This agreement contains the following terms and conditions:





Position:
      Chief Operating Officer





Effective
      Date: May 1, 2006





BASE
      SALARY:





2006
      -
      $275,000 annual


2007
      -
      $325,000 annual


2008
      -
      $350,000 annual


2009
      -
      $375,000 annual





The
      initial base salary shall be reduced to $2,000 per week until such time as
      the
      Company reaches a cash flow positive position for at least 1 month, or the
      Company raises at least $2 Million within 12 months, or management deems that
      the Company’s cash position is sufficient to support an increase. No additional
      salary above the reduced base shall accrue as back salary during the first
      6
      months of this contract.





Bonuses:
      Quarterly Qualitative Bonus of $ 20,000





Year
      end
      Qualitative Bonus of $ 50,000





Profitability
      BONUS:





If
      the
      Company reaches annual profitability employee will receive a $250,000 bonus
      plus
      250,000 shares in stock.





JCardona
      shall receive an annual bonus as follows:





0.5%
      of
      the previous years revenues plus 3.5% of the previous years profits plus 0.5%
      of
      the transaction price of any acquisition.





The
      Board
      of Directors shall at its discretion grant up to an additional $150,000 in
      bonus
      to JCardona on an annual basis.





The
      Board
      of Directors at its discretion grant up to an additional 3,000,000 options
      in
      bonus to the employee on an annual basis at strike prices the Board may
      determine.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 shares
      in bonus to the employee on an annual basis.





24




All
      bonuses shall be net of payroll taxes.





Stock
      Options: The employee shall receive options to purchase 3,000,000 (Three
      Million) shares as follows:




·
            Options
                for 750,000 shares at $.25




·
            Options
                for 750,000 shares at $.30




·
            Options
                for 750,000 shares at $.35




·
            Options
                for 750,000 shares at $.40





Additionally
      the employee shall receive the following;




3,000,000
      options upon the Company achieving $500,000 in total revenues prior to March
      31,
      2007. Options shall be priced at the closing stock bid price the next trading
      date after $500,000 in revenues have been received.





All
      the
      options granted above shall be exercisable for 6 years from the date of
      granting.





Additionally
      the Company shall maintain any existing options under previous contracts and
      option grants.





Additional
      Incentives: John A. Cardona will receive 5% of all sales he is involved
      with.





Other
      Agreements: Medical and Dental insurance is fully paid for the employee by
      the
      Company during the employment period. Company shall reimburse or pay for
      reasonable Company vehicle expenses including lease or purchase payments, gas,
      tolls and repairs. AdZone Research agrees to defend employee against any and
      all
      legal claims and litigation. In addition, AdZone Research further agrees to
      pay
      all expenses arising from any and all litigation, including but not limited
      to
      attorney's fees legal fees, and miscellaneous expenses. Legal representation
      for
      John A. Cardona will continue beyond the term of this contract and will continue
      for the remainder of John A. Cardona's life.





The
      employee shall be reimbursed for any and all reasonable business related
      expenses upon presentation of an expense report as currently in use as of
      February, 2006. Any personal expenses reimbursed may be used to reduce
      outstanding compensation due and or unpaid to the employee.





**ITEM
      11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT**





The
      following table sets forth, as of July 6, 2007, the number of shares of Common
      Stock owned of record and beneficially by executive officers, directors and
      persons who hold 5% or more of the outstanding Common Stock of AdZone. Also
      included are the shares held by all executive officers and directors as a
      group.


Name
                  and address
              
              Number
                  of Shares(i)
                  (ii)
              
              %
                  of Class Beneficially OwnedCharles
                  Cardona
                17
                  Sunny Line
                Dr.
                  Calverton, NY 11933
              
              
              37,417,422
              (1)
              
              16.95
              %John
                  Cardona
                118
                  Overlook
                Dr.
                  Aquebogue, NY 11931
              
              
              33,501,849
              (2)
              
              15.17
              %Warren
                  Hamburger
                42
                  Fire Island
                Ave.
                  Babylon, NY 11702
              
              
              2,718,000
              
              
              1.23
              %Russell
                  Ivy
                211
                  West Sealy Street
                Alvin,
                  TX 77511
              
              
              2,085,000
              
              
              .94
              %All
                  Executive Officers and
                Directors
                  of AdZone as
                a
                  Group (4 persons)
              
              
              75,722,271
              
              
              34.29
              %




The
        above-referenced percentages are given on a fully-diluted basis for such
        owner
        only.
 
 *Less
        then one percent.




25




(i)
      This
      column represents the total number of votes each named stockholder is entitled
      to vote upon matters presented to the stockholders for a vote.




(ii)
      Applicable percentage ownership is based on 220,816,804 shares of Common Stock
      outstanding as of July 6, 2007, together with securities exercisable or
      convertible into shares of Common Stock within 60 days of July 6, 2007, for
      each
      stockholder. Beneficial ownership is determined in accordance with the rules
      of
      the Securities and Exchange Commission and generally includes voting or
      investment power with respect to securities. Shares of Common Stock that are
      currently exercisable or exercisable within 60 days of July 6, 2007, are deemed
      to be beneficially owned by the person holding such securities for the purpose
      of computing the percentage of ownership of such person, but are not treated
      as
      outstanding for the purpose of computing the percentage ownership of any other
      person.





(1)
      Includes 17,055,000 shares that may be acquired upon exercise of stock options
      granted to Mr. Cardona at exercise prices ranging from $0.04 to $3.00 per share.
      Excludes securities owned by John Cardona, Mr. Cardona's brother; 113,500 shares
      owned by Peter Cardona, Mr. Cardona’s brother and 765,000 shares owned by
      Valerie Cardona, Mr. Cardona's mother, with respect to all of which Mr. Cardona
      disclaims beneficial ownership. Plus 4,000,000 shares owed to Mr. Cardona under
      the agreement which he loaned AdZone 4,000,000 shares for the purpose of a
      stock
      loan.





(2)
      Includes 17,105,000 shares that may be acquired upon exercise of stock options
      granted to Mr. Cardona at exercise prices ranging from $0.04 to $3.00 per share.
      Excludes securities owned by Charles Cardona, Mr. Cardona's brother; 113,500
      shares owned by Peter Cardona, Mr. Cardona’s brother and 765,000 shares owned by
      Valerie Cardona, Mr. Cardona's mother, with respect to all of which Mr. Cardona
      disclaims beneficial ownership. Plus 4,000,000 shares owed to Mr. Cardona under
      the agreement which he loaned AdZone 4,000,000 shares for the purpose of a
      stock
      loan.





Stock
      Option Plan





The
      Company has previously adopted a stock option plan (the “Plan”) covering
      25,000,000 shares of the Company’s Class A common stock, pursuant to which
      employees are eligible to receive qualified incentive as well as non-qualified
      stock options. On July 5, 2007, the Company’s board of directors unanimously
      approved for the Corporation to amend the Plan in order to increase the amount
      of shares that it would be authorized to issue under the 2007 Plan from
      25,000,000 to 72,000,000. Incentive stock options granted under the Plan are
      exercisable up to ten years from the date of grant at an exercise price of
      not
      less than the fair market value of the common stock on date of grant. Options
      shall vest over a period of no longer than five years.





Notwithstanding,
      the term of an incentive stock option granted under the Plan to a shareholder
      owning more than 10% of the voting rights may not exceed 5 years, and the
      exercise price of an incentive stock option granted to such shareholder may
      not
      be less than 110% of the fair market value of the common stock on the date
      of
      grant.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE.**





*Transactions
      with Related Persons*





None.





26




*PARENTS*





None.




*PROMOTERS
      AND CONTROL PERSONS*





None.





BOARD
      DETERMINATION OF INDEPENDENCE





Our
      board
      of directors has determined that its board is “independent” as that term is
      defined by the national association of securities dealers automated quotations
      (“Nasdaq”).  Under the Nasdaq definition, an independent director is a
      person who (1) is not currently (or whose immediate family members are not
      currently), and has not been over the past three years (or whose immediate
      family members have not been over the past three years), employed by the
      company; (2) has not (or whose immediate family members have not) been paid
      more
      than $60,000 during the current or past three fiscal years;  (3) has not
      (or whose immediately family has not) been a partner in or controlling
      shareholder or executive officer of an organization which the company made,
      or
      from which the company received, payments in excess of the greater of $200,000
      or 5% of that organizations consolidated gross revenues, in any of the most
      recent three fiscal years; (4) has not (or whose immediate family members have
      not), over the past three years been employed as an executive officer of a
      company in which an executive officer of the company has served on that
      company’s compensation committee; or (5) is not currently (or whose immediate
      family members are not currently), and has not been over the past three years
      (or whose immediate family members have not been over the past three years)
      a
      partner of the company’s outside auditor. A director who is, or at any time
      during the past three years, was employed by the company or by any parent or
      subsidiary of the company, shall not be considered independent .





**ITEM
      13 - EXHIBITS**





(a) *Financial
      Statements*


PageREPORT
                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
              
              
              F-2FINANCIAL
                  STATEMENTSBalance
                  Sheet as of March 31, 2007
              
              
              F-3Statements
                  of Operations and Comprehensive Loss for the years ended March
                  31, 2007
                  and 2006
              
              
              F-4,5Statements
                  of Shareholders' Deficit for the years ended March 31, 2007 and
                  2006
              
              
              F-6,7Statements
                      of Cash Flows for the years ended March 31, 2007 and 2006
              
              
              F-8,9Notes
                  to Financial Statements
              
              
              F-10


Financial
      Statements Schedules:





All
      schedules are omitted because they are inapplicable or because the required
      information is contained in the financial statements or included in the notes
      thereto.





27




(b)
      Exhibit


EXHIBIT
                NUMBER
              
              DESCRIPTION2.1
              
              Plan
                  and Agreement of Merger dated as of 2001 by and between Executive
                  Help
                  Services, Inc. and AdZone Research, Inc.&3(i).1
              
              Certificate
                  of Incorporation of Executive Help Services, Inc.**3(i).2
              
              Certificate
                  of Amendment to Certificate of Incorporation of Executive Help
                  Services,
                  Inc.**3(i).3
              
              Certificate
                  of Amendment to Certificate of Incorporation of AdZone Research,
                  Inc.
                  dated March 19, 2007.****3(ii)
              
              By-Laws
                  of Executive Help Services, Inc.**10.1
              
              Consulting
                  Agreement dated as of October 26, 2001 with Theresa A. Kober
                  ***10.2
              
              Consulting
                  Agreement dated as of November 2, 2001 with Blanchfield, King,
                  Kober &
                  Company, P.C. +10.3
              
              Consulting
                  Agreement dates as of January 1, 2002 with Communique Media Services
                  International, Inc.&&10.4
              
              Consulting
                  Agreement dated as of February 5, 2002 with International Standard
                  Consulting Corporation +++10.5
              
              Consulting
                  Agreement dated as of April 2002 with NuQuest Consulting, Inc.
                  &&&10.6
              
              Consulting
                  Agreement dated as of August 13, 2002 with Thomas F.
                  Gavin.#10.7×
              
              Employment
                  Agreement dated February 5, 2004 with Charles
                  Cardona.##10.8×
              
              Employment
                  Agreement dated as of February 5, 2004 with John
                  Cardona.##10.9
              
              Systems
                  Integration Agreement dated as of June 21 2002 with Raytheon
                  Company.&&&10.10
              
              A-K
                  Consulting agreements with Kyle Kennedy Dated Aug. 19, 2002 - May
                  22,
                  2003.#10.11
              
              Multimedia
                  Web Site design contract with Jason Genet dated Oct. 16,
                  2002.###10.12
              
              Investment
                  Banking Agreement with Spartan Securities dated Nov. 27,
                  2002.###10.13
              
              Agreement
                  to borrow shares for stock loans dated Mar. 7, 2003.###10.14
              
              Joint
                  Marketing agreement with Sarnoff Corp. dated Mar. 3,
                  2003.###10.15
              
              Warrant
                  agreement with Tom Gavin dated Mar. 12, 2003.###10.16
              
              Agreement
                  with Boeing Autometric Division dated April 2003.###10.17
              
              Amending
                  Agreement - Subscription Agreement dated July 23, 2004
                  @10.18
              
              Executed
                  Subscription Agreement dated May20, 2004.@@10.19
              
              Registration
                  Rights Agreement dated as of May 20, 2004 with The Nutmeg Group,
                  LLC.@@21.1
              
              List
                  of subsidiaries of the Company. (Filed herewith)23.1
              
              Consent
                  of Holtz Rubenstein Reminick LLP. (Filed herewith)31.1
              
              Certification
                  Pursuant
                  to Sarbanes Oxley Section 302.32.1
              
              Certification
                  by Chairman of the Board and Principal Accounting Officer pursuant
                  to
                  U>S>C> Section 1350




×
      Compensatory plan or arrangement




28




*
      Incorporated by reference to Exhibit 2 to the Registrant's Report on Form 8-K
      filed with the Securities and Exchange Commission on September 21, 2001.




**
      Incorporated by reference to the same exhibit number in the Registrant's Form
      10SB12G filed with the Securities and Exchange Commission on December 30, 1999.


38




***
      Incorporated by reference to Exhibit 101 to the Registrant's Form S-8 filed
      with
      the Securities and Exchange Commission on December 13, 2001.




***
      To be
      filed by an amendment or as an exhibit to the Company’s Current Report on Form
      8-K.




+
      Incorporated by reference to Exhibit 10.2 to the Registrant's Form S-8 filed
      with the Securities and Exchange Commission on December 13, 2001.




++
      Incorporated by reference to Exhibit 10.1 to the Registrant's Form S-8 filed
      with the Securities and Exchange Commission on January 28, 2002.




+++
      Incorporated by reference to Exhibit 10.1 to the Registrant's Form S-8 filed
      with the Securities and Exchange Commission on February 21, 2002.




&
      Incorporated by reference to the Registrant's Preliminary Information Statement
      on Schedule 14C, as amended, filed with the Securities and Exchange Commission
      on April 18, 2001.




&&
      Incorporated by reference to the Registrant's registration statement on Form
      S-8
      filed with the Securities and Exchange Commission on January 28, 2002.




&&&
      Incorporated by reference to the Registrant's annual report on Form 10-KSB
      for
      the year ended March 31, 2002 filed with the Securities and Exchange Commission
      on July 15, 2002.




#
      Incorporated by reference to the Registrant's quarterly report on Form 10-QSB
      for the quarter ended December 31, 2002 filed with the Securities and Exchange
      Commission on February 19, 2003.




##
      Incorporated by reference to the Registrant's annual report on Form 10-KSB
      for
      the year ended March 31, 2004 filed with the Securities and Exchange Commission
      on July 9, 2004.




###
      Incorporated by reference to the Registrant's annual report on Form 10-KSB/A
      for
      the year ended March 31, 2003 filed with the Securities and Exchange Commission
      on July 21, 2003.




@
      Incorporated by reference to the Registrant's registration statement on Form
      S-2
      filed with the Securities and Exchange Commission on July 23, 2004.




@@
      Incorporated by reference to the Registrant's current report on Form 8-K filed
      with the Securities and Exchange Commission on May 27, 2004.





**ITEM
      14- PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      Company paid or accrued the following fees in each of the two fiscal years
      to
      Holtz Rubinstein Reminick LLP of Melville, New York, and Aidman, Piser &
Company, P.A. of Tampa, Florida:




Year
                  ended
              
              Year
                  endedMarch
                  31,
              
              March
                  31,2007
              
              2006(1)
                  Audit fees
              
              $
              108,200
              
              $
              202,757(2)
                  Audit-related fees
              
              
              —
              
              
              —(3)
                  Tax fees
              
              
              —
              
              
              —(4)
                  All other fees
              
              
              —
              
              
              —Totals
              
              $
              108,200
              
              $
              202,757




29




The
      Company has no formal audit committee. However, as defined in Sarbanes-Oxley
      Act
      of 2002, the entire Board of Directors is the Company's de facto audit
      committee.





In
      discharging its oversight responsibility as to the audit process, the Board
      obtained from the independent auditors a formal written statement describing
      all
      relationships between the auditors and the Company that might bear on the
      auditors' independence as required by Independence Standards Board Standard
      No.
      1, "Independence Discussions with Audit Committees." The Board discussed with
      the auditors any relationships that may impact their objectivity and
      independence, including fees for non-audit services, and satisfied itself as
      to
      the auditors' independence. The Board also discussed with management and the
      independent auditors the quality and adequacy of the Company's internal
      controls. The Board reviewed with the independent auditors their management
      letter on internal controls, if one was issued by the Company's
      auditors.





The
      Board
      discussed and reviewed with the independent auditors all matters required to
      be
      discussed by auditing standards generally accepted in the United States of
      America, including those described in Statement on Auditing Standards No. 61,
      as
      amended, "Communication with Audit Committees".





The
      Board
      reviewed the audited financial statements of the Company as of and for the
      year
      ended March 31, 2007 and 2006 with management and the independent auditors.
      Management has the sole ultimate responsibility for the preparation of the
      Company's financial statements and the independent auditors have the
      responsibility for their examination of those statements.





Based
      on
      the above-mentioned review and discussions with the independent auditors and
      management, the Board of Directors approved the Company's audited financial
      statements and recommended that they be included in its Annual Report on Form
      10-KSB for the year ended March 31, 2007, for filing with the Securities and
      Exchange Commission.





30




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Act of 1933, as amended,
      AdZone caused this report to be signed on its behalf by the undersigned, thereto
      duly authorized.





ADZONE
                RESEARCH, INC.Dated:
              July 13, 2007
            By:
            /s/ *Charles
              Cardona*Charles
              Cardona, Chief Executive Officer,Acting
              Chief Financial Officerand Principal Accounting
              Officer




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





Dated:
              July 13, 2007
            By:
            /s/ *Charles
              A. Cardona*Charles A. Cardona,
              Chairman of the Board ofDirectors


Dated:
                July 13, 2007
              By:
              /s/ *John
                A. Cardona*John
                  A. Cardona,
                Vice
                  Chairman of the Board ofDirectors
 Dated:
                  July 13, 2007
                By:
                /s/ *Warren
                  Hamburger*Warren Hamburger,
                  Director
 Dated:
                    July 13, 2007
                  By:
                  /s/ *Russell
                    Ivy*Russell Ivy,
                    Director
  31




ADZONE
      RESEARCH, INC.


FINANCIAL
      STATEMENTS


YEARS
      ENDED MARCH 31, 2007 AND 2006





CONTENTS


PageREPORT
                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
              
              
              F-2FINANCIAL
                  STATEMENTSBalance
                  Sheet as of March 31, 2007
              
              
              F-3Statements
                  of Operations and Comprehensive Loss for the yearsended
                  March 31, 2007 and 2006
              
              
              F-4,5Statements
                  of Stockholders Deficit for the years endedMarch
                  31, 2007 and 2006
              
              
              F-6,7Statements
                  of Cash Flows for the years ended March 31, 2007 and 2006
              
              
              F-8,9Notes
                  to Financial Statements
              
              
              F-10




F-1




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Shareholders


AdZone
      Research, Inc.


Calverton,
      New York





We
      have
      audited the accompanying balance sheet of AdZone Research, Inc. as of March
      31,
      2007, and the related statements of operations and comprehensive loss,
      stockholders’ deficit and cash flows for the two years ended March 31, 2007 and
      2006. These financial statements are the responsibility of AdZone's management.
      Our responsibility is to express an opinion on these financial statements based
      on our audits.





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





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of AdZone Research, Inc. at March
      31,
      2007, and the results of its operations and its cash flows for the two years
      ended March 31, 2007 and 2006, in conformity with accounting principles
      generally accepted in the United States of America.





As
      more
      fully discussed in Note C, the Company has incurred substantial losses and
      has
      used significant levels of cash in developing its operations since inception.
      These conditions raise substantial doubt about the Company’s ability to continue
      as a going concern. Management’s plans with respect to this uncertainty are
      discussed in Note C to the financial statements. The financial statements do
      not
      include any adjustments that might result from the outcome of this
      uncertainty.







*/s/
      Holtz Rubenstein Reminick LLP*


Holtz
      Rubenstein Reminick LLP





Melville,
      NY


July
      12,
      2007





F-2


ADZONE
      RESEARCH, INC.


BALANCE
      SHEET


March
      31,
      2007


ASSETSCURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              57,468Prepaid
                  expenses
              
              
              254,586Marketable
                  securities
              
              
              20,273Accounts
                  receivable
              
              
              999TOTAL
                  CURRENT ASSETS
              
              
              333,326PROPERTY
                  AND EQUIPMENT, net ofaccumulated
                  depreciation of $69,832
              
              
              6,288LEASEHOLD
                  IMPROVEMENTS, net ofaccumulated
                  amortization of $22,466
              
              
              7,724Restricted
                  cash - preferred stock dividend reserve andconvertible
                  debenture interest
              
              
              127TOTAL
                  ASSETS
              
              $
              347,467LIABILITIES
                  AND SHAREHOLDERS' DEFICITCURRENT
                  LIABILITIESAccounts
                  payable - trade
              
              $
              173,730Accrued
                  expenses
              
              
              908,767Accrued
                  officers’ compensation
              
              
              589,509Loan
                  payable-convertible debentures
              
              
              1,586,919Due
                  to stockholder
              
              
              400,000TOTAL
                  CURRENT LIABILITIES
              
              
              3,658,925COMMITMENTS
                  AND CONTINGENCIES (Notes K, M and R)
              
              
              —STOCKHOLDERS'
                  DEFICITPreferred
                  stock - $0.001 par value;20,000,000
                  shares authorized:Series
                  A - 50 shares authorized;2.78
                  shares issued and outstanding
              
              
              31,969Series
                  B - 100 shares authorized;.34
                  share issued and outstanding
              
              
              11,500Common
                  stock - $0.001 par value; 400,000,000shares
                  authorized; 195,870,968 shares issuedand
                  outstanding
              
              
              195,871Common
                  stock to be issued
              
              
              20,000Additional
                  paid-in capital
              
              
              24,359,957Accumulated
                  deficit
              
              
              (27,913,812
              )Treasury
                  stock - at cost (25,000 shares)
              
              
              (2,215
              )Accumulated
                  comprehensive loss
              
              
              (14,728
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (3,311,458
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              347,467




See
      notes
      to financial statements.




F-3


ADZONE
      RESEARCH, INC.


STATEMENTS
      OF OPERATIONS AND COMPREHENSIVE LOSS


YEARS
      ENDED March 31, 2007 AND 2006


2007
              
              2006REVENUES
              
              $
              103,757
              
              $
              154,781PRODUCTION
                  EXPENSESSalaries,
                  wages and related costs
              
              
              241,663
              
              
              276,921Direct
                  occupancy and operating expenses
              
              
              153,230
              
              
              214,422Total
                  production expenses
              
              
              394,893
              
              
              491,343GROSS
                  (LOSS)
              
              
              (291,136
              )
              
              (336,562
              )OPERATING
                  EXPENSESSalaries,
                  wages and related costs
              
              
              1,910,167
              
              
              4,223,461Consulting
                  and professional fees
              
              
              891,336
              
              
              2,547,466General
                  and administrative expense
              
              
              668,106
              
              
              1,110,101Depreciation
                  and amortization
              
              
              24,520
              
              
              14,153Total
                  operating expenses
              
              
              3,494,129
              
              
              7,895,381LOSS
                  FROM OPERATIONS
              
              
              (3,785,265
              )
              
              (8,231,943
              )OTHER
                  INCOME (EXPENSE)Interest
                  and other income
              
              
              33,059
              
              
              6,068Interest
                  expense
              
              
              (1,302,940
              )
              
              (904,559
              )Extinguishment
                  gain (losses)
              
              
              1,346,783
              
              
              (2,725,139
              )Loss
                  on investment
              
              
              —
              
              
              (150,000
              )Total
                  other income (expense)
              
              
              76,902
              
              
              (3,773,630
              )NET
                  LOSS
              
              
              (
                  3,708,363
              )
              
              (12,005,573
              )OTHER
                  COMPREHENSIVE LOSS
              
              
              (683
              )
              
              (14,045
              )COMPREHENSIVE
                  LOSS
              
              $
              (3,709,046
              )
              $
              (12,019,618
              )


(Continued)




F-4





ADZONE
      RESEARCH, INC.


STATEMENTS
      OF OPERATIONS AND COMPREHENSIVE LOSS - CONTINUED


YEARS
      ENDED MARCH 31, 2007 AND 2006


2007
              
              2006RECONCILIATON
                  OF NET LOSS TO LOSSATTRIBUTABLE
                  TO COMMON SHAREHOLDERS:NET
                  LOSS
              
              $
              (3,708,363
              )
              $
              (12,005,573
              )PREFERRED
                  STOCK DIVIDENDSPreferred
                  dividends paid
              
              
              (3,069
              )
              
              (3,348
              )TOTAL
                  PREFERRED STOCK DIVIDENDS
              
              
              (3,069
              )
              
              (3,348
              )LOSS
                  ATTRIBUTABLE TO COMMONSHAREHOLDERS
              
              $
              (3,711,432
              )
              $
              (12,008,921
              )LOSS
                  PER COMMON SHARE:BASIC
                  AND DILUTED LOSS PERCOMMON
                  SHARE
              
              $
              (0.02
              )
              $
              (0.10
              )WEIGHTED
                  AVERAGE COMMON SHARESUSED
                  IN BASIC AND DILUTED LOSSPER
                  COMMON SHARE
              
              
              188,238,445
              
              
              116,323,499




See
      notes
      to financial statements.




F-5




ADZONE
      RESEARCH, INC.


STATEMENTS
      OF STOCKHOLDERS (DEFICIT)


YEARS
      ENDED MARCH 31, 2007 AND 2006


**(RESTATED**)Preferred
                  Stock
              
              Common
                  Stock
              
              Additional
                  paid-in
              
              AccumulatedShares
              
              Amount
              
              Shares
              
              Amount
              
              capital
              
              DeficitBALANCES,
                  APRIL 1, 2005
              
              
              3.12
              
              $
              43,469
              
              
              98,144,253
              
              $
              98,144
              
              $
              9,751,311
              
              $
              (12,193,459
              )Preferred
                  stock dividends paid
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              
              
              
              (3,348
              )Issuance
                  of common stock for:Cash
              
              
              
              
              
              
              
              
              4,118,286
              
              
              4,118
              
              
              221,082Exercise
                  of stock options and warrants
              
              —
              
              
              22,541,500
              
              
              22,541
              
              
              1,754,977Employee
                  compensation
              
              
              —
              
              
              —
              
              
              14,216,000
              
              
              14,216
              
              
              924,906Professional
                  services
              
              
              
              
              
              
              
              
              22,060,356
              
              
              22,061
              
              
              1,588,166Debt
                  extinguishments
              
              
              
              
              
              
              
              
              11,550,000
              
              
              11,550
              
              
              2,036,655Warrant
                  conversion
              
              
              —
              
              
              —
              
              
              3,804,570
              
              
              3,805
              
              
              (3,805
              )Issuance
                  of stock options for employee compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,635,800Issuance
                  of options to directors
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              660,000Issuance
                  of warrants for services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              76,829Debt
                  issued with warrants and beneficial conversion features
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              953,214Warrants
                  issued in connection with debt extinguishment
              
              
              
              
              
              
              
              
              
              
              
              —
              
              
              214,858Amortization
                  of deferred compensation and consulting fees
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              588,869Net
                  loss for the year
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (12,005,573
              )BALANCES,
                  MARCH 31, 2006
              
              
              3.12
              
              $
              43,469
              
              
              176,434,965
              
              $
              176,435
              
              $
              21,402,862
              
              $
              (24,202,380
              )




Stock
              
              Treasury
              
              Accumulatedsubscription
              
              Stock
              
              Comprehensivereceivable
              
              at
                  cost
              
              Loss
              
              TotalBALANCES,
                  APRIL 1, 2005
              
              $
              (30,550
              )
              $
              (2,215
              )
              $
              (7,500
              )
              $
              (2,340,800
              )Issuance
                  of warrants:Preferred
                  stock dividends paid
              
              
              —
              
              
              —
              
              
              —
              
              
              (3,348
              )Issuance
                  of common stock for:Cash
              
              
              —
              
              
              —
              
              
              —
              
              
              225,200Exercise
                  of stock options and warrants
              
              
              —
              
              
              —
              
              
              —
              
              
              1,777,518Employee
                  compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              939,122Professional
                  services
              
              
              30,550
              
              
              —
              
              
              —
              
              
              1,614,927Debt
                  extinguishments
              
              
              —
              
              
              —
              
              
              —
              
              
              2,074,055Warrant
                  conversion
              
              
              —
              
              
              —
              
              
              —
              
              
              —Issuance
                  of stock options for employee compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              2,635,800Issuance
                  of options to directors
              
              
              —
              
              
              —
              
              
              —
              
              
              660,000Issuance
                  of warrants for services
              
              
              —
              
              
              —
              
              
              —
              
              
              76,829Debt
                  issued with warrants andbeneficial
                  conversion features
              
              
              —
              
              
              —
              
              
              —
              
              
              953,214Warrants
                  issued in connection withdebt
                  extinguishments
              
              
              —
              
              
              —
              
              
              —
              
              
              214,858Amortization
                  of deferred compensation and consulting fees
              
              
              —
              
              
              —
              
              
              —
              
              
              588,869Unrealized
                      loss on marketable securities
              
              
              
              
              
              
              
              
              (6,545
              )
              
              (6,545
              )Net
                  loss for the year
              
              
              —
              
              
              —
              
              
              
              
              
              (12,005,573
              )BALANCES,
                  MARCH 31, 2006
              
              $
              (------
              )
              $
              (2,215
              )
              $
              (14,045
              )
              $
              (2,595,874
              )




See
      notes
      to financial statements




F-6








AdditionalPreferred
                Stock
            
            Common
                Stock
            
            paid-in
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            capital
            
            DeficitBALANCES,
                APRIL 1, 2006
            
            
            3.12
            
            $
            43,469
            
            
            176,434,965
            
            $
            176,435
            
            $
            21,402,862
            
            $
            (24,202,380
            )Preferred
                stock dividends paid
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,069
            )Issuance
                of common stock for:Exercise
                of stock options
            
            
            —
            
            
            —
            
            
            4,190,000
            
            
            4,190
            
            
            198,625Employee
                compensation
            
            
            —
            
            
            —
            
            
            2,950,000
            
            
            2,950
            
            
            211,550Professional
                services
            
            
            —
            
            
            
            
            
            14,822,394
            
            
            14,822
            
            
            777,904Warrant
                conversion
            
            
            —
            
            
            —
            
            
            4,898,609
            
            
            4,899
            
            
            155,850Cancellation
                of stock
            
            
            —
            
            
            —
            
            
            (7,425,000
            )
            
            (7,425
            )
            
            (102,575
            )Issuance
                of stock options for employee compensation
            
            
            
            
            
            
            
            
            
            
            
            —
            
            
            536,750Issuance
                of options to directors
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            108,500Issuance
                of warrants for services
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            6,000Debt
                issued with warrants andbeneficial
                conversion features
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,019,500Amortization
                of deferred compensation
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            44,991Net
                loss for the year
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,708,363
            )BALANCES,
                MARCH 31, 2007
            
            
            3.12
            
            $
            43,469
            
            
            195,870,968
            
            $
            195,871
            
            $
            24,359,957
            
            $
            (27,913,812
            )




Common
                  stock
              
              Treasury
              
              AccumulatedTo
                  be
              
              Stock
              
              ComprehensiveIssued
              
              at
                  cost
              
              Loss
              
              TotalBALANCES,
                  APRIL 1, 2006
              
              
              —
              
              
              (2,215
              )
              $
              (14,045
              )
              $
              (2,595,874
              )Common
                  stock to be issued
              
              
              20,000
              
              
              —
              
              
              —
              
              
              20,000Preferred
                  stock dividends paid
              
              
              —
              
              
              —
              
              
              —
              
              
              (3,069
              )Issuance
                  of common stock for:Exercise
                  of stock options
              
              
              —
              
              
              —
              
              
              —
              
              
              202,815Employee
                  compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              214,500Professional
                  services
              
              
              —
              
              
              —
              
              
              —
              
              
              792,726Warrant
                  conversion
              
              
              —
              
              
              —
              
              
              —
              
              
              160,749Cancellation
                  of stock
              
              
              —
              
              
              —
              
              
              —
              
              
              (110,000
              )Issuance
                  of stock options for employee compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              536,750Issuance
                  of options to directors
              
              
              —
              
              
              —
              
              
              —
              
              
              108,500Issuance
                  of warrants for services
              
              
              —
              
              
              —
              
              
              —
              
              
              6,000Debt
                  issued with warrants andbeneficial
                  conversion features
              
              
              —
              
              
              
              
              
              
              
              
              1,019,500Amortization
                  of deferred compensation
              
              
              —
              
              
              —
              
              
              —
              
              
              44,991Unrealized
                    loss on marketable securities
              
              
              —
              
              
              
              
              
              (683
              )
              
              (683
              )Net
                  loss for the year
              
              
              —
              
              
              —
              
              
              —
              
              
              (3,708,363
              )BALANCES,
                  MARCH 31, 2007
              
              $
              20,000
              
              $
              (2,215
              )
              $
              (14,728
              )
              $
              (3,311,458
              )




See
      notes
      to financial statements.





F-7





ADZONE
      RESEARCH, INC.


STATEMENTS
      OF CASH FLOWS


YEARS
      ENDED MARCH 31, 2007 AND 2006


2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (3,708,363
              )
              $
              (12,005,573
              )Adjustments
                  to reconcile net loss to net cash flows used in operating
                  activitiesDepreciation
                  and amortization
              
              
              24,520
              
              
              14,153Amortization
                  of debt discount
              
              
              1,019,500
              
              
              861,579Bad
                  debts
              
              
              —
              
              
              20,000Write
                  down of investments
              
              
              (683
              )
              
              150,000Stock-compensation:Salaries,
                  wages and bonuses
              
              
              547,750
              
              
              3,574,922Professional
                  services
              
              
              868,226
              
              
              2,274,078Warrants
                  issued for services
              
              
              6,000
              
              
              76,829Extinguishment
                  (gains) losses
              
              
              (1,346,783
              )
              
              2,725,139Amortization
                  of deferred compensation
              
              
              171,493
              
              
              588,869Changes
                  in operating assets and liabilities:Prepaid
                  expenses and other
              
              
              (54,188
              )
              
              13,285Accounts
                  receivable
              
              
              6,350
              
              
              (18,594
              )Accounts
                  payable and accrued liabilities
              
              
              519,403
              
              
              196,805Accrued
                  officers compensation
              
              
              589,509
              
              
              (98,244
              )Deferred
                  revenue
              
              
              (100,000
              )
              
              (32,329
              )NET
                  CASH FLOWS USED IN OPERATING ACTIVITIES
              
              
              (1,457,266
              )
              
              (1,659,083
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESCash
                  paid to purchase property and equipment
              
              
              -----
              
              
              (8,136
              )NET
                  CASH FLOWS USED IN INVESTING ACTIVITIES
              
              
              -----
              
              
              (8,136
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESSale
                  of common stock
              
              
              222,813
              
              
              2,002,718Proceeds
                  from issuance of debt
              
              
              716,000
              
              
              815,000Payment
                  for stock settlement
              
              
              (500,000
              )
              
              (500,000
              )Decrease
                  (increase) in restricted cash
              
              
              10,119
              
              
              (10,070
              )Cash
                  paid for preferred stock dividends
              
              
              (3,069
              )
              
              (3,348
              )NET
                  CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
              
              
              445,863
              
              
              2,304,300INCREASE
                  (DECREASE) IN CASH
              
              
              (1,011,403
              )
              
              637,081Cash
                  and cash equivalents, beginning of year
              
              
              1,068,871
              
              
              431,790Cash
                  and cash equivalents, end of year
              
              $
              57,468
              
              $
              1,068,871





See
      notes
      to financial statements.




F-8





ADZONE
      RESEARCH, INC.


STATEMENTS
      OF CASH FLOWS - CONTINUED


YEARS
      ENDED MARCH 31 2007 AND 2006


2007
              
              2006SUPPLEMENTAL
                  DISCLOSURE OF INTEREST AND INCOME TAXES PAIDInterest
                  paid during the period
              
              $
              20,830
              
              $
              32,825Income
                  taxes paid during the period
              
              $
              —
              
              $
              —SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIESConversion
                  of debentures
              
              $
              159,500
              
              
              —Purchase
                  of leasehold improvements
                through
                  issuance of stock
              
              $
              ----
              
              $
              19,350Consulting
                  services acquiredthrough
                  issuance of debt
              
              $
              ----
              
              $
              $
                  18,500





See
      notes
      to financial statements.




F-9





ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      A - ORGANIZATION AND DESCRIPTION OF BUSINESS**





AdZone
      Research, Inc. (Company) was incorporated on May 31, 1994 under the laws of
      the
      State of Delaware as Executive Help Services, Inc.





On
      August
      10, 2001, the Company executed an Agreement and Plan of Share Exchange with
      AdZone Interactive, Inc. (a privately-owned New York corporation) (AdZone)
      whereby the Company exchanged 18,000,022 shares of restricted, unregistered
      common stock for 100.0% of the issued and outstanding common stock of AdZone
      and
      effected a merger of the two entities with the Company being the surviving
      legal
      entity. Concurrent with this transaction, the Company changed its corporate
      name
      to AdZone Research, Inc.





AdZone
      Interactive, Inc. (AdZone) was initially incorporated as Web-AdNet.com. Inc.
      under the laws of the State of New York on February 28, 2000. The Company was
      formed to extract various data elements through the monitoring and review of
      Internet websites developed and maintained by independent third parties
      worldwide. These extracted data elements are then used to provide various market
      research statistics and other focused information as guided by the Company's
      clientele.





**NOTE
      B - PREPARATION OF FINANCIAL STATEMENTS**





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





Management
      further acknowledges that it is solely responsible for adopting sound accounting
      practices, establishing and maintaining a system of internal accounting control
      and preventing and detecting fraud. The Company's system of internal accounting
      control is designed to assure, among other items, that 1) recorded transactions
      are valid; 2) valid transactions are recorded; and 3) transactions are recorded
      in the proper period in a timely manner to produce financial statements which
      present fairly the financial condition, results of operations and cash flows
      of
      the Company for the respective periods being presented





F-10




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





In
      July
      2006 the FASB issued Financial Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN 48”),
      as an interpretation of SFAS No. 109, *Accounting
      for Income Taxes.* FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with SFAS No. 109 and
      prescribes a recognition threshold of more-likely-than-not to be sustained
      upon
      examination. Measurement of the tax uncertainty occurs if the recognition
      threshold has been met. FIN 48 also provides guidance on derecognition,
      classification, interest, penalties, accounting in interim periods, disclosure,
      and transition. FIN 48 is effective beginning February 1, 2007.
      Differences between the amounts recognized in the statements of financial
      position prior to the adoption of FIN 48 and the amounts reported after
      adoption should be accounted for as a cumulative-effect adjustment recorded
      to
      the beginning balance of retained earnings. The Company is still evaluating
      the
      impact, if any, the adoption of this interpretation will have on the Company’s
      financial position, cash flows, and results of operations.





**NOTE
      C - GOING CONCERN UNCERTAINTY**





The
      preparation of financial statements in accordance with Generally Accepted
      Accounting Principles contemplates that the Company will continue as a going
      concern. As noted in the accompanying financial statements, the Company incurred
      a net loss of $3,708,363 and used cash of $1,457,266 in conducting its
      operations during the year ended March 31, 2007. These recurring negative trends
      raise substantial doubt about the Company’s ability to continue as a going
      concern.





Management
      considered the following specific elements of its internal projections in making
      its conclusions about its ability to continue for approximately twelve months
      following March 31, 2007.


a.
            Management
                does not believe that the significant level of cash used in operations
                during the year ended March 31, 2007 $1,457,266 is indicative of
                cash flow
                usage during the next four fiscal quarters, as certain vendors continue
                to
                accept the Company’s equity securities for compensation for their
                services, which has helped and will continue to help preserve cash.
                While
                such non-cash expense is not currently expected to be as high in
                the near
                term future quarters as during the year ended March 31, 2007, based
                upon
                ongoing discussions with the vendors, management believes that they
                will
                continue to accept such securities in the foreseeable future. While
                payments on accounts payable and accrued expenses will continue in
                the
                normal course of business, such payments are expected to be at the
                level,
                or at an increased level, than that reflected in the Company’s current
                year to date operations.





b.
            Certain
                vendors continue to accept the Company’s equity securities for
                compensation for their services, which has helped and will continue
                to
                help preserve cash. While such non-cash expense is not currently
                expected
                to be as high in the near term future quarters as during the year
                ended
                March 31, 2007, based upon ongoing discussions with the vendors,
                management believes that they will continue to accept such securities
                in
                the foreseeable future.




c.
            The
                company is presently pursuing additional financing.  In
                addition, the Company does not anticipate masking any significant
                loan
                payments in the near future.




d.
            Finally,
                management believes that, in the event necessary, certain operating
                expenses can be curtailed. These expenses are principally related
                to
                employment and facility costs.





The
      Company’s ability to continue as a going concern is dependent upon the
      preservation of existing cash reserves, its ability to raise capital, and
      ultimately, the achievement of profitable operations. The financial statements
      do not include any adjustments that might arise as a result of this uncertainty.
      The Company is currently negotiating additional financing with several financial
      institutions in order to fulfill the Company’s acquisition strategy. However,
      there can be no assurance that such negotiations will be
      successful.





F-11




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





1.
      Cash
      and cash equivalents





For
      Statement of Cash Flows purposes, the Company considers all cash on hand and
      in
      banks, certificates of deposit and other highly-liquid investments with
      maturities of three months or less, when purchased, to be cash and cash
      equivalents.





2.
      Marketable securities





The
      Company’s investments consist of marketable equity securities classified as
      available for sale and recorded at fair value. Unrealized holding gains and
      losses are recorded, net of any tax effect, as a separate component of
      accumulated other comprehensive income.





3.
      Accounts receivable and revenue recognition





In
      the
      normal course of business, the Company periodically extends unsecured credit
      to
      its customers. Because of the credit risk involved, management will provide
      an
      allowance for doubtful accounts that will reflect its opinion of amounts which
      will eventually become uncollectible. In the event of complete non-performance,
      the maximum exposure to the Company is the recorded amount of trade accounts
      receivable shown on the balance sheet at the date of
      non-performance.





Revenue
      is recognized pro-rata over the term of the respective corresponding agreement
      to provide research services and information to the Company's
      customers.





4.
      Property and equipment





Property
      and equipment are recorded at historical cost. These costs are depreciated
      over
      the estimated useful lives of the individual assets, generally 3 years for
      computer equipment and 5 to 7 years for other tangible equipment and office
      furniture and fixtures, using the straight-line method.





Gains
      and
      losses from disposition of property and equipment are recognized as incurred
      and
      are included in operations.





5.
      Leasehold improvements





Leasehold
      improvements are recorded at historical cost. These costs are amortized over
      the
      life of the lease which terminates on September 30, 2007.




F-12


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





6.
      Income
      taxes





Deferred
      income tax assets and liabilities are computed annually for differences between
      the financial statement and federal income tax bases of assets and liabilities
      that will result in taxable or deductible amounts in the future, based on
      enacted tax laws and rates applicable to the periods in which the differences
      are expected to affect taxable income.  Valuation allowances are
      established when necessary to reduce deferred tax assets to the amount expected
      to be realized.





7.
      Loss
      per common share





Basic
      earnings (loss) per common share is computed by dividing the net income (loss)
      available to common shareholders by the weighted-average number of common shares
      outstanding during the respective period presented in our accompanying financial
      statements. Fully diluted earnings (loss) per share is computed similar to
      basic
      income (loss) per share except that the denominator is increased to include
      the
      number of common stock equivalents (primarily outstanding options and warrants).
      Common stock equivalents represent the dilutive effect of the assumed exercise
      of the outstanding stock options and warrants, using the treasury stock method,
      at either the beginning of the respective period presented or the date of
      issuance, whichever is later, and only if the common stock equivalents are
      considered dilutive based upon the Company's net income (loss) position at
      the
      calculation date.





As
      of
      March 31, 2007 and 2006, the Company's outstanding stock options and warrants
      (shown in the following table) are deemed to be anti-dilutive due to the
      Company's net loss position.


March
                  31,
              
              March
                  312007
              
              2006Options
                  and warrants outstanding topurchase
                  common stock
              
              
              54,076,262
              
              
              61,224,049Preferred
                  stock convertible tocommon
                  stock
              
              
              282,273
              
              
              282,273





F-13


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





8.
      Stock-based compensation





The
      Company uses stock-based compensation arrangements to compensate employees
      and
      professional service providers and consultants.





Through
      December 31, 2005, the Company used the intrinsic method outlined in Accounting
      Principles Board Opinion No. 25 Accounting
      for Stock Issued to Employees and
      related interpretation. As of January 1, 2006, the Company implemented Statement
      of Financial Accounting Standards No, 123R Accounting
      for Stock-Based Compensation  Share
      Based Payment (SFAS
      123R). As a result, the Company recognizes compensation expense based on the
      estimated fair value of employee stock options. In all instances involving
      stock
      grants, with respect to employee and non-employee compensation, the Company
      uses
      the trading market value of the common stock on the date of the award. The
      related expense is recognized on a straight line basis over the underlying
      service period.





The
      following tabular presentation reflects supplemental financial information
      related to stock-based employee compensation as if the fair value method was
      used to value employees stock options prior to the adoption of SFAS
      123R.


March
                  31,2006Net
                  loss attributable to commonstockholders,
                  as reported
              
              $
              (12,008,921
              )Stock-based
                  employee compensationincluded
                  in net loss
              
              $
              3,588,115Stock-based
                  employee compensationusing
                  the fair value model
              
              $
              (5,335,615
              )Pro
                  forma net loss attributable tocommon
                  stockholders, usingthe
                  fair value method
              
              $
              (13,756,421
              )





F-14


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





8.
      Stock-based compensation (continued)


Loss
                  per share attributable to common shareholders, as reported
              
              $
              (0.11
              )Pro
                  forma net loss per share attributable to common
                  shareholders
              
              $
              (0.12
              )





The
      Black
      Scholes Valuation Model is used to estimate fair values of employee stock
      options. Significant assumptions included an average expected term of 56
      months; a volatility factor of 164%; and, a risk free interest rate of
      5.00%.





9.
      Accumulated Other Comprehensive Loss





Accumulated
      other comprehensive loss consists of unrealized losses on marketable equity
      securities. Accumulated other comprehensive income has no applicable income
      tax.





**NOTE
      E - FAIR VALUE OF FINANCIAL INSTRUMENTS**





The
      carrying amount of cash and cash equivalents, accounts receivable, accounts
      payable and accrued expenses, stock settlement liability, notes payable and
      long-term debt, as applicable, approximates fair value due to the short term
      nature of these items and/or the current interest rates payable in relation
      to
      current market conditions.





Interest
      rate risk is the risk that the Company's earnings are subject to fluctuations
      in
      interest rates on either investments or on debt and is fully dependent upon
      the
      volatility of these rates. The Company does not use derivative instruments
      to
      moderate its exposure to interest rate risk, if any.





Financial
      risk is the risk that the Company's earnings are subject to fluctuations in
      interest rates or foreign exchange rates and are fully dependent upon the
      volatility of these rates. The Company does not use derivative instruments
      to
      moderate its exposure to financial risk, if any.




F-15




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      F - CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMER
      INFORMATION**





The
      Company maintains its cash accounts in various financial institutions subject
      to
      insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
      Under FDIC rules, the Company is entitled to aggregate coverage of $100,000
      per
      account type per separate legal entity per financial institution. During the
      year ended March 31, 2007 the Company had deposits in these financial
      institutions at various times for varying lengths of time with credit risk
      exposures in excess of statutory FDIC coverage. The Company has incurred no
      losses to date as a result of any of these unsecured situations.





During
      the year ended March 31, 2007 the Company generated its main revenue from 1
      customer representing 96% of total revenues. During the year ended March 31,
      2006, the Company generated its main revenue from one customer which represented
      84% of total revenues.








F-16


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      G - PROPERTY AND EQUIPMENT**





Property
      and equipment consists of the following at March 31, 2007:


Computer
                  equipment
              
              $
              63,622Office
                  furniture and other equipment
              
              
              12,49876,120Less
                  accumulated depreciation
              
              
              (69,832
              )Net
                  property and equipment
              
              $
              6,288




Depreciation
      expense for the years ended March 31, 2007 and 2006 was $10,696 and $8,221,
      respectively.





Leasehold
      improvements consist of the following at March 31, 2007:


Leasehold
                  improvements
              
              $
              30,190Less
                  accumulated amortization
              
              
              (22,466
              )Net
                  leasehold improvements
              
              $
              7,724


Amortization
      expense for the years ended March 31, 2007 and 2006 was $ 13,824 and $5,932, respectively.




**Note
      H - ACCRUED EXPENSES**





Accrued
      expenses consist of the following at March 31, 2007:


Accrued
                  bonuses
              
              $
              65,128Accrued
                  payroll
              
              
              398,656Accrued
                  professional services
              
              
              45,000Other
                  accrued expenses
              
              
              399,983$
              908,767


F-17


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      I - LONG-TERM DEBT**




Long-term
      debt consists of the following at March 31, 2007:


Face
                  value $222,500, 10% Series A Convertible Debentures (a)
              
              $
              168,750Face
                  Value $84,000, 10% Series A Convertible Debenture(b)
              
              
              84,000Face
                  value $400,000, 8% Convertible Promissory Notes(c)
              
              
              400,000Face
                  Value $50,000, 10% Series A Convertible Debenture (d)
              
              
              50,000Face
                  Value $212,000, 8% Convertible Promissory Notes(e)
              
              
              184,169Face
                  value $700,000, 14% Convertible Promissory Note (f)
              
              
              700,000$
              1,586,919





(a)
            The
                Company issued $225,000 face value of 10% Series A Redeemable Convertible
                Debentures, due May 2006 (the “Series A Debentures”). $125,000 was
                converted into common stock of the Company. The Company has not been
                notified by the remaining note holders as to their intentions. The
                Series
                A Debentures are convertible at the option of the holder into shares
                of
                Common Stock at a rate of $0.07 per share. The trading market price
                on the
                date of issuance of the Series A Debentures was $0.12, resulting
                in an
                embedded beneficial conversion feature. Series A Debenture holders
                were
                also issued an aggregate of 4,407,144 warrants to purchase Common
                Stock at
                $0.07 per share, over a five year term. The Series A Debentures and
                warrants were issued for cash of $165,000 and the extinguishment
                of the
                unsecured notes amounting to $125,000 in the table above. Accounting
                for
                each of these issuances was as
                follows:





Cash
      Purchase :
      The
      proceeds of $165,000 were allocated between the Series A  Debentures
      and the warrants based upon relative fair values. The fair value of the warrants
      was determined using the Black Scholes Valuation Model. As a result of this
      allocation, $104,211 of proceeds were allocated to the warrants and recorded
      as
      paid in capital. The resulting debt discount was amortized to the earliest
      date
      the debenture was  Convertible,
      which was during the nine months ended December 31, 2005. The remaining $36,842
      applies to the beneficial conversion feature which is amortized using the
      effective interest method over the remaining term of the debt. The amortization
      of the debt discount from the warrants and beneficial conversion feature charged
      to interest expense for the fiscal year ended March 31, 2007 was
      $169,000.





Debt
      Extinguishment :
      The
      excess of the aggregate fair value of the Series A Debentures and warrants
      issued (amounting to $339,858) over the carrying value of the debt extinguished
      was recorded as an extinguishment charge of $214,858. As noted above, the Series
      A Debentures contained a beneficial conversion feature. The amount of the
      beneficial conversion feature associated with the $125,000 face value of the
      Series A Debentures amounted to $89,857 and was recorded as additional paid
      in
      capital. The discount will be amortized over the debt term using the effective
      interest method. The amortization of the debt discount associated with the
      beneficial conversion feature was $ 89,285 for the fiscal year ended March
      31,
      2007.


F-18


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      I - LONG-TERM DEBT (continued)**





(b)
              During
                  July 2005, the Company issued $100,000 face value of 10% convertible
                  debentures due July 7, 2006. The Company has not been notified
                  by the note
                  holders as to their intentions. The debentures are convertible
                  into shares
                  of the Company’s common stock based on certain beneficial ownership
                  percentages as defined. In addition, the debenture holders received
                  1,428,572 warrants to purchase the Company’s stock at $0.07 per share. The
                  market price on the date of issuance was $0.12. The warrants expire
                  five
                  years from the date of
                  issuance.





On
      March
      22, 2007, the convertible debenture holders converted $16,000 of the debentures
      into 2,830,770 shares of the Company’s common stock, and the exercise price of
      the warrants into common shares shall be $0.01.





The
      proceeds of $100,000 were allocated to the debentures and warrants based upon
      the relative fair values. The warrants were valued at $63,158 and were amortized
      to the earliest date the debenture was convertible, which was during the quarter
      ended September 30, 2005. The fair value of the warrants was determined using
      the Black Scholes Valuation Model. The remaining $36,842 applies to the
      beneficial conversion feature which is amortized using the effective interest
      method over the debt term. The relative fair value of the warrants and the
      beneficial conversion feature is greater than the fair value of the debt,
      resulting in a debt discount of $100,000. Amortization for the fiscal year
      ended
      March 31, 2007 was $34,183. ****





(c)  During
      fiscal year 2006, the Company issued $400,000 of convertible promissory notes
      for cash. The notes are convertible into shares of the Company’s common stock at
      50% of the market value on the date of conversion.





The
      fair
      value of the beneficial conversion feature is greater than the fair value of
      the
      debt resulting in a debt discount of $400,000. The debt discount is amortized
      over the debt term. Amortization for the fiscal year ended March 31, 2006 was
      $400,000.





(d)  During
      March 2006, the Company issued $50,000 face value of 10% convertible debentures
      due March, 2007. The debentures are convertible into shares of the Company’s
      common stock based on certain beneficial ownership percentages as defined.
      In
      addition, the debenture holders received 714,286 warrants to purchase the
      Company’s stock at $0.07 per share. The market price on the date of issuance was
      $0.12. The warrants expire five years from the date of issuance.





The
      proceeds of $50,000 was allocated to the debentures and warrants based upon
      the
      relative fair values. The relative fair value of the warrants and the beneficial
      conversion feature is greater than the fair value of the debt, resulting in
      a
      debt discount of $50,000. Amortization for the fiscal year ended March 31,
      2006
      was $50,000.





(e)  During
      fiscal year 2007, the Company issued $212,000 of convertible promissory notes
      for cash. The notes are convertible into shares of the Company’s common stock at
      50% of the market value on the date of conversion.





(f)
      On
      September 22, 2006, the Company issued a convertible promissory note in the
      amount of $700,000. The note required prepayment of interest at 14%. As a result
      of this issuance, the Company received cash proceeds of $504,000. The note
      is
      due on September 22, 2008.The note is convertible into shares of the Company’s
      common stock at the lesser of (a) one half (1/2) of the trading value (closing
      bid price) of the common stock at the time of conversion or (b) $0.06(six
      cents).





On
      September 28, 2006, the Company issued a convertible promissory note in the
      amount of $107,500 in consideration and conversion of a $105,000 investment
      from
      2005. The note is convertible into shares of the Company’s common stock at the
      lesser of (a) one half (1/2) of the trading value (closing bid price) of the
      common stock at the time of conversion or (b) $0.02(two cents. In addition,
      the
      debenture holder received 4,300,000 warrants to purchase the Company’s stock at
      $0.025 per share. The market price on the date of issuance was $0.01. The
      warrants expire May 31, 2011.





F-19




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      J - OFFICERS’ COMPENSATION**





On
      April
      28, 2006, Charles Cardona resigned as our Chief Executive Officer and John
      Cardona resigned as our Chief Operating Officer. Charles Cardona shall remain
      Chairman of our Board of Directors. There was no disagreement or dispute between
      Charles Cardona and John Cardona and our Company which **** led
      to
      their resignations **.**





On
      August
      28, 2006, Charles Cardona and John Cardona were reappointed Chief Executive
      Officer and Chief Operating Officer respectively.





On
      May 1,
      2006, the Company entered into an Employment Agreement with Mr. Charles Cardona
      (CCardona), which superseded all prior agreements. In this agreement, CCardona
      will continue to serve as the Company's Chief Executive Officer through December
      31, 2009. This agreement contains the following terms and
      conditions:


Position:
              
              Chief
                  Executive OfficerEffective
                  Date:
              
              May
                  1, 2006Base
                  Salary:
              
              2006
                  - $275,000 annual2007
                  - $325,000 annual2008
                  - $350,000 annual2009
                  - $375,000 annual




The
      initial base salary shall be reduced to $2,000 per week until such time as
      the
      Company reaches a cash flow positive position for at least 1 month, or the
      Company raises at least $2 Million within 12 months, or management deems that
      the Company’s cash position is sufficient to support an increase. No additional
      salary above the reduced base shall accrue as back salary during the first
      6
      months of this contract.


Bonuses:
              
              Quarterly
                  Qualitative Bonus of $ 20,000Year
                  End Qualitative Bonus of $ 50,000Profitability
                  Bonus:
              
              If
                  the Company reaches annual profitability,employee
                  will receive a $250,000 bonus plus250,000
                  shares in stock.





CCardona
      shall receive an annual bonus as follows: 0.5% of the previous year’s revenues
      plus 3.5% of the previous year’s profits plus 0.5% of the transaction price of
      any acquisition.





The
      Board
      of Directors shall at its discretion grant up to an additional $150,000 in
      bonus
      to CCardona on an annual basis.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 options
      in bonus to the employee on an annual basis at strike prices the Board may
      determine.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 shares
      in bonus to the employee on an annual basis.





All
      bonuses shall be net of payroll taxes.


Stock
                  Options:
              
              The
                  employee shall receive options to purchase 3,000,000
                  (threemillion)
                  shares as follows:


Options
      for 750,000 shares at $.25


Options
      for 750,000 shares at $.30


Options
      for 750,000 shares at $.35


Options
      for 750,000 shares at $.40





Additionally,
      the employee shall receive the following;


3,000,000
      options upon the Company achieving $500,000 in total. revenues
      prior to March 31, 2007. Options shall be priced at the stock
      bid
      price the next trading date after $500,000 in revenues have
      been
      received.




All
      the
      options granted above shall be exercisable for 6 years from the date of
      granting. Additionally the Company shall maintain any existing options under
      previous contracts and option grants.





F-20




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      J - OFFICERS’ COMPENSATION**


Additional
                  Incentives:
              
              Charles
                  A. Cardona will receive 5% of all sales he is involved
                  with.Other
                  Agreements:
              
              Medical
                  and Dental insurance is fullypaid
                  for the employee by the Company during theemployment
                  period. Company shall reimburse or payfor
                  reasonable Company vehicle expenses includinglease
                  or purchase payments, gas, tolls andrepairs.Legal
                  Representation:
              
              AdZone
                  Research agrees to defend employee against any and all legal claims
                  and
                  litigation. In addition, AdZone Research further agrees to pay
                  all
                  expenses arising from any and all litigation, including but not
                  limited to
                  attorney's fees, legal fees, miscellaneous expenses. Legal representation
                  for Charles A. Cardona will continue beyond the term of this contract
                  and
                  will continue for the remainder of Charles A. Cardona's
                  life.Expense
                  Reimbursement Clause:
              
              The
                  employee shall be reimbursed for any and all reasonable business
                  related
                  expenses upon presentation of an expense report as currently in
                  use as of
                  May 2006. Any personal expenses reimbursed may be used to reduce
                  outstanding compensation due and or unpaid to the
                  employee.




On
      May 1,
      2006, the Company entered into an Employment Agreement with Mr. John A. Cardona
      (JCardona), which superseded all prior agreements. In this agreement, JCardona
      will serve as the Company's Chief Operating Officer through December 31, 2009.
      This agreement contains the following terms and conditions:


Position:
              
              Chief
                  Operating OfficerEffective
                  Date:
              
              May
                  1, 2006Base
                  Salary:
              
              2006
                  - $275,000 annual2007
                  - $325,000 annual2008
                  - $350,000 annual2009
                  - $375,000 annual




The
      initial base salary shall be reduced to $2,000 per week until such time as
      the
      Company reaches a cash flow positive position for at least 1 month, or the
      Company raises at least $2 Million within 12 months, or management deems that
      the Company’s cash position is sufficient to support an increase. No additional
      salary above the reduced base shall accrue as back salary during the first
      6
      months of this contract.


Bonuses:
              
              Quarterly
                  Qualitative Bonus of $ 20,000Year
                  End Qualitative Bonus of $
                  50,000


Profitability
                  Bonus:
              
              If
                  the Company reaches annual profitability, employee
                  will receive a $150,000 bonus plus 250,000
                  shares in
                  stock.




JCardona
      shall receive an annual bonus as follows: 0.5% of the previous year’s revenues
      plus 3.5% of the previous year’s profits plus 0.5% of the transaction price of
      any acquisition.


F-21


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      J - OFFICERS’ COMPENSATION (continued)**





The
      Board
      of Directors shall at its discretion grant up to an additional $150,000 in
      bonus
      to JCardona on an annual basis.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 options
      in bonus to the employee on an annual basis at strike prices the Board may
      determine.





The
      Board
      of Directors shall at its discretion grant up to an additional 3,000,000 shares
      in bonus to the employee on an annual basis.





All
      bonuses shall be net of payroll taxes.


Stock
                  Options:
              
              The
                  employee shall receive options to purchase3,000,000
                  (three million) shares as
                  follows:


Options
      for 750,000 shares at $.25


Options
      for 750,000 shares at $.30


Options
      for 750,000 shares at $.35


Options
      for 750,000 shares at $.40





Additionally
      the employee shall receive the following;


3,000,0000
      options upon the Company achieving $500,000 in total revenues
      prior to march 31, 2007. Options shall be priced at the closing
      stock bid price the next trading date after $500,000 in revenues
      have been received.





All
      the
      options granted above shall be exercisable for 6 years from the date of
      granting. Additionally the Company shall maintain any existing options under
      previous contracts and option grants.


Additional
                Incentives:
            
            John
                A. Cardona will receive 5% of all sales he is Involved
                with.Other
                Agreements:
            
            Medical
                and Dental insurance is fully paid for the employee by the Company
                during
                the employment period. Company shall reimburse or pay for reasonable
                Company vehicle expenses including lease or purchase payments, gas,
                tolls
                and repairs.Legal
                Representation:
            
            AdZone
                Research agrees to defend employee against any and all legal claims
                and
                litigation. In addition, AdZone Research further agrees to pay all
                expenses arising from any and all litigation, including but not limited
                to
                attorney's fees, legal fees, miscellaneous expenses. Legal representation
                for John A. Cardona will continue beyond the term of this contract
                and
                will continue for the remainder of John A. Cardona's
                life.Expense
                Reimbursement Clause:
            
            The
                employee shall be reimbursed for any and all business related expenses
                upon presentation of an expense report as currently in use as of
                May 2006.
                Any personal expenses reimbursed may be used to reduce outstanding
                compensation due and or unpaid to the
                employee.




F-22





ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      J - OFFICERS COMPENSATION (continued)**





As
      of
      March 31, 2007, there was $589,509 unpaid under the agreements with CCardona
      and
      JCardona.





As
      of
      March 31, 2006, there was $242,968 unpaid under the agreements with CCardona
      and
      JCardona. However in June, 2006, CCardona and JCardona forgave this debt from
      AdZone.





Future
      minimum amounts payable under the Cardona contracts are as follows:


Year
                  endingMarch
                  31,
              
              Amount2008
              
              $
              662,5002009
              
              
              712,5002010
              
              
              562,500Totals
              
              $
              1,937,500




**NOTE
      K - INCOME TAXES**





The
      components of income tax benefit (expense) for the years ended March 31, 2007
      and 2006, respectively, are as follows:





2007
              
              2006Federal:Current
              
              $
              —
              
              $
              —Deferred
              
              
              —
              
              
              —State:Current
              
              
              —
              
              
              —Deferred
              
              
              —
              
              
              —Totals
              
              $
              —
              
              $
              —




As
      of
      March 31, 2007, the Company has a net operating loss carry forward of
      approximately $27,900,000 to offset future taxable income. Subject to current
      regulations, this carry forward will begin to expire in 2026. The amount and
      availability of the net operating loss carry forwards may be subject to
      limitations set forth by the Internal Revenue Code. Factors such as the number
      of shares ultimately issued within a three year look-back period; whether there
      is a deemed more than 50 percent change in control; the applicable long-term
      tax
      exempt bond rate; continuity of historical business; and subsequent income
      of
      the Company all enter into the annual computation of allowable annual
      utilization of the carry forwards and the possible permanent loss of a portion
      of the carry forwards.




F-23




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      K - INCOME TAXES (CONTINUED)**





The
      Company's income tax expense for the years ended March 31, 2007 and 2006,
      respectively, differed from the statutory federal rate of 34 percent as
      follows:


2007
              
              
              2006Statutory
                  rate applied to loss before income taxes
              
              $
              1,22,840
              
              $
              4,239,000Increase
                  (decrease) in income taxes resulting from:Non-deductible
                  charges:Expenses
                  not deductible for income taxes
              
              
              (-------
              )
              
              (-------
              )Change
                  in deferred tax valuation allowance
              
              
              1,022,840
              
              
              (4,346,000
              )Other
              
              
              -------
              
              
              107,000Income
                  tax expense
              
              $
              —
              
              $
              —




March
                  31, 2007
              
              March
                  31,2006Deferred
                  tax assetsNet
                  operating loss carryforwards
              
              $
              9,180,000
              
              $
              7,637,000Deferred
                  compensation
              
              
              4,000
              
              
              19,000Deferred
                  revenue
              
              
              —
              
              
              —Less
                  valuation allowance
              
              
              (9,184,000
              )
              
              (7,656,000
              )Net
                  Deferred Tax Asset
              
              $
              —
              
              $
              —


During
      the years ended March 31, 2007 and 2006, the deferred tax asset valuation
      allowance increased by approximately $1,053,000 and $4,346,000,
      respectively.





**Note
      L-Gain on Extinguishment**





At
      March
      31, 2007, extinguishment gain represent amounts due under the new Nutmeg
      Agreement which consisted of stock and warrants valued at $1,100,000 at March
      31, 2006 and was reduced at March 31, 2007 to $-0- to reflect the market price
      at March 31, 2007, the Company wrote off two liabilities totaling $301,683,
      and
      The Company issued a convertible promissory note in consideration and conversion
      of a $105,000 investment from 2005 resulting in an extinguishments loss of
      $55,000 resulting is a net extinguishments gain of $1,346,683.


F-24




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS




**NOTE
      M - PREFERRED STOCK**





Preferred
      stock consists of the following at March 31, 2007:


March
                  31, 2007Carrying
              
              RedemptionShares
              
              Value
              
              Value9.0%
                  Series A Cumulative Convertible Stock
              
              
              2.78
              
              
              31,969
              
              $
              31,9699.0%
                  Series B Cumulative Convertible Stock
              
              
              .34
              
              
              11,500
              
              
              11,500Totals
              
              
              3.12
              
              $
              43,469
              
              $
              43,469




9.0%
      Series A Cumulative Preferred Stock





On
      August
      12, 2003, the Company opened a Private Placement Memorandum to sell up to 50
      Units, consisting of one (1) share of 9.0% Series A Cumulative Preferred Stock
      and Warrants to purchase up to 4,376,094 shares of the Company's common stock
      at
      a price of $10,000 per Unit. The number of warrants to be issued to each
      purchaser was determined by dividing the purchase price of the Unit by the
      average bid price of the Company's common stock during the 5 day trading period
      prior to such purchaser's delivery of cleared funds to the Company's Escrow
      Agent for this specific offering.





Each
      share of Series A Preferred Stock may be converted, at the sole option of the
      holder, into shares of the Company's common stock commencing on the earlier
      of
      (1) 180 days after the date any share of Series A Preferred Stock was first
      issued or (2) the effective date of a Registration Statement registering shares
      of the Company's Common Stock issuable upon conversion of the Series A Preferred
      Stock. The number of shares of common stock that may be received upon conversion
      shall be determined by dividing 115.0% of the price of a Unit ($11,500) by
      the
      average closing bid price of the Company's common stock during the 5 trading
      days immediately prior to receipt by the Company of the Preferred Shareholder's
      notice of intent to convert. However, in no case, will any share of Series
      A
      Preferred Stock be convertible into more than 500,000 shares of the Company's
      common stock.





Additionally,
      at the Company's option, the Company may elect to redeem all of the outstanding
      shares of Series A Preferred Stock at any time at a price equal to $11,500
      per
      share, plus all dividends accrued to the date of redemption. The Company also
      has the option, within 3 business days of the receipt of a notice to convert
      from a Preferred Shareholder, to pay such shareholder $11,500, plus all accrued
      dividends, in lieu of the conversion.





The
      Series A Preferred Stock accrues dividends at a rate of 9.0% per annum, from
      the
      date of issue, and the accrued dividends are payable monthly on the last
      business day of each month. In the event that the accrued dividends are unpaid
      for 12 consecutive months, the holders of the Series A Preferred Stock, voting
      as a class, shall have the right to elect one member to the Company's Board
      of
      Directors to fill such newly-created position as created by the
      default.





Each
      share of Series A Preferred Stock is entitled to vote on all matters submitted
      to the Company's shareholders at a rate of 100,000 votes per share of Series
      A
      Preferred Stock held by each respective shareholder.




F-25




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      M - PREFERRED STOCK (CONTINUED)**





The
      Company is contractually obligated to file a Registration Statement with the
      U.
      S. Securities and Exchange Commission, and use its best efforts to have said
      Registration Statement declared effective within 120 days of the closing date
      of
      this Private Placement Memorandum, registering a number of shares of its common
      stock issuable upon the conversion of the Series A Preferred Stock and the
      exercise of the Warrants. This offering was closed by the Company on October
      31,
      2003. As of March 31, 2007, and subsequent thereto, the Company has not filed
      the required Registration Statement.





The
      Company initially sold approximately 34.85 Units for gross proceeds of
      approximately $348,500 and redeemed approximately 10.63 Units during fiscal
      2004
      at a gross redemption price of approximately $122,245, inclusive of the 15.0%
      redemption premium upon the sale of 9.0% Series B Cumulative Preferred Stock.
      The Company paid a commission of approximately $41,280 to Spartan Securities
      Group, Ltd. for the selling of this offering. Additionally, Spartan Securities
      Group, Ltd. was the purchaser of one (1) Unit and received a commission related
      to the purchase of its Unit.





9.0%
      Series B Cumulative Preferred Stock





On
      November 17, 2003, the Company opened a Private Placement Memorandum to sell
      up
      to 100 Units, consisting of one (1) share of 9.0% Series B Cumulative Preferred
      Stock and Warrants to purchase up to 2,091,138 shares of the Company's common
      stock at a price of $10,000 per Unit. The number of warrants to be issued to
      each purchaser was determined by dividing the purchase price of the Unit by
      the
      average bid price of the Company's common stock during the 5 day trading period
      prior to such purchaser's delivery of cleared funds to the Company's Escrow
      Agent for this specific offering.





Each
      share of Series B Preferred Stock may be converted, at the sole option of the
      holder, into shares of the Company's common stock commencing on the earlier
      of
      (1) 180 days after the date any share of Series B Preferred Stock was first
      issued or (2) the effective date of a Registration Statement registering shares
      of the Company's Common Stock issuable upon conversion of the Series B Preferred
      Stock. The number of shares of common stock that may be received upon conversion
      shall be determined by dividing $11,000 by the average closing bid price of
      the
      Company's common stock during the 2 trading days immediately prior to receipt
      by
      the Company of the Preferred Shareholder's notice of intent to convert. However,
      in no case, will any share of Series B Preferred Stock be convertible into
      more
      than 100,000 shares of the Company's common stock.





Additionally,
      at the Company's option, the Company may elect to redeem all of the outstanding
      shares of Series B Preferred Stock at any time at a price equal to $11,500
      per
      share, plus all dividends accrued to the date of redemption.





The
      Series B Preferred Stock accrues dividends at a rate of 9.0% per annum, from
      the
      date of issue, and the accrued dividends are payable monthly on the last
      business day of each month. In the event that the accrued dividends are unpaid
      for 12 consecutive months, the holders of the Series B Preferred Stock, voting
      as a class, shall have the right to elect one member to the Company's Board
      of
      Directors to fill such newly-created position as created by the
      default.





Each
      share of Series B Preferred Stock is entitled to vote on all matters submitted
      to the Company's shareholders at a rate of 100,000 votes per share of Series
      B
      Preferred Stock held by each respective shareholder.




F-26




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS







**NOTE
      M - PREFERRED STOCK (CONTINUED)**





The
      Company is contractually obligated to file a Registration Statement with the
      U.
      S. Securities and Exchange Commission, and use its best efforts to have said
      Registration Statement declared effective within 120 days of the closing date
      of
      this Private Placement Memorandum, registering a number of shares of its common
      stock issuable upon the conversion of the Series B Preferred Stock and the
      exercise of the Warrants. This offering was closed by the Company on January
      15,
      2004. As of March 31, 2007, and subsequent thereto, the Company has not filed
      the required Registration Statement.





The
      Company initially sold approximately 31.00 Units for gross proceeds of
      approximately $310,000. The Company paid a commission of approximately $36,000
      to Spartan Securities Group, Ltd. for the selling of this offering.
      Additionally, approximately $122,245 of the net proceeds were used to repurchase
      approximately 10.63 shares of the then issued and outstanding 9.0% Series A
      Preferred Stock.





Dividend
      reserve





In
      conjunction with the Series A and Series B Preferred Stock transactions, the
      Company established a contractual reserve account for the payment of 12 months
      of dividends.





**NOTE
      N - BENEFICIAL CONVERSION DISCOUNT FEATURE ON PREFERRED
      STOCK**





In
      conjunction with the Company's August 12, 2003 Private Placement Memorandum
      to
      sell up to 50 Units, consisting of one (1) share of 9.0% Series A Cumulative
      Preferred Stock and Warrants and the Company's November 17, 2003 Private
      Placement Memorandum to sell up to 100 Units, consisting of one (1) share of
      9.0% Series B Cumulative Preferred Stock and Warrants (collectively Unit
      Offerings), the Company applied the tenets of Emerging Issues Task Force
      Consensus No. EITF 98-5, Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Features .
      The
      Company also considered the guidance of Accounting Principles Board Opinion
      Number 14, Accounting
      for Convertible Debt and Debt Issued with Stock Purchase
      Warrants and EITF
      00-27 Application of
      Issue No. 98-5 to Certain Convertible Instruments .
      It is
      Management's opinion that these standards apply to the accounting for the
      Offerings.





The
      following table reflects the allocation of proceeds from the offerings following
      the application of these accounting standards.




Initial
                Allocation
                  of ProceedsSeries
                  A Preferred
              
              
              
              TotalStock
              
              Warrants
              
              ProceedsSeries
                  A Unit Offering
              
              $
              197,525
              
              $
              150,975
              
              $
              348,500Beneficial
                  conversion feature
              
              
              (145,997
              )Initial
                  carrying value
              
              $
              51,528







F-27


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      N - BENEFICIAL CONVERSION DISCOUNT FEATURE ON PREFERRED STOCK
      (CONTINUED)**




Initial
                Allocation
                  of ProceedsSeries
                  B Preferred
              
              
              
              TotalStock
              
              Warrants
              
              ProceedsSeries
                  B Unit Offering
              
              $
              133,853
              
              $
              176,147
              
              $
              310,000Beneficial
                  conversion feature
              
              
              (133,853
              )Initial
                  carrying value
              
              $
              —


The
      initial allocation of proceeds between the Preferred Stock and Warrants was
      made
      based upon the relative fair values of the securities sold. The fair value
      of
      the Preferred Stock was calculated as equal to the fair value of common shares
      into which the preferred stock is convertible, using the trading market prices
      of the common stock on the respective dates of sale. The fair value of the
      Warrants was calculated using the Black Scholes Valuation Model. Underlying
      assumptions used included (i) the trading market values of the common stock
      into
      which the Warrants are convertible on the dates sold was used for the fair
      value; (ii) the term of the warrants was used for the term; (iii) a volatility
      factor of 360% and, (iv) a risk-free interest factor of 3%.





The
      beneficial conversion feature for each Unit Offering was calculated using that
      effective conversion rate, following the initial allocation, described above.
      The effective conversion rate is calculated by dividing the amount allocated
      to
      the preferred stock by the number of common shares into which the preferred
      stock is convertible. A beneficial conversion feature is present when the
      effective conversion rate is lower than the trading market value of the
      underlying common stock. In each of the Unit Offerings beneficial conversion
      features were present, as reflected in the tabular presentation
      above.





Following
      the allocation of proceeds, the Company will accrete the carrying values of
      the
      preferred stock to their respective redemption values through charges to
      accumulated earnings over the period up to the earliest date that the preferred
      shares can be converted or redeemed. That period is 180 days following the
      sale
      of the securities.




F-28


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      O - COMMON STOCK TRANSACTIONS**





During
      Fiscal 2007 and 2006, the Company issued 20,930,233 and 84,270,902 shares,
      respectively, of common stock, in both registered and restricted, unregistered
      form.





On
      September 8, 2006, two officers and one director of the Company cancelled
      6,825,000 shares of common stock to the Company and on November 2, 2006, a
      director of the Company cancelled 600,000 shares of common stock to the Company.





During
      fiscal 2007, several debenture holders converted $159,500 of their convertible
      debentures for 4,898,609 shares of common stock.


F-29


ADZONE
        RESEARCH, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS





**NOTE
      P - STOCK OPTIONS**





*2007
      Incentive Stock Option Plan*





The
      Company has adopted a stock option plan (the “2007 Plan”) covering 25,000,000
      shares of the Company’s Class A common stock, pursuant to which employees are
      eligible to receive qualified incentive as well as non-qualified stock options.
      Incentive stock options granted under the 2007 Plan are exercisable up to ten
      years from the date of grant at an exercise price of not less than the fair
      market value of the common stock on date of grant. Options shall vest over
      a
      period of no longer than five years.





Notwithstanding,
      the term of an incentive stock option granted under the 2007 Plan to a
      shareholder owning more than 10% of the voting rights may not exceed 5 years,
      and the exercise price of an incentive stock option granted to such shareholder
      may not be less than 110% of the fair market value of the common stock on the
      date of grant.




F-30




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS







**NOTE
      P - STOCK OPTIONS (CONTINUED)**


Weighted
                  average exerciseprice
                  per shareOptions
                  outstanding at April 1, 2005
              
              
              10,581,000
              
              $
              0.86Issued
              
              
              61,660,000
              
              
              0.30Exercised
              
              
              (22,541,500
              )
              
              0.10Expired/Terminated
              
              
              (581,000
              )
              
              0.21Options
                  outstanding at March 31, 2006
              
              
              49,118,500
              
              $
              0.54Issued
              
              
              9,425,000
              
              $
              0.10Exercised
              
              
              (4,190,000
              )
              
              0.10Expired/Terminated
              
              
              (11,328,500
              )
              
              0.21Options
                  outstanding at March 31, 2007
              
              
              43,025,000
              
              $
              0.55


The
      weighted-average remaining contractual life of the options outstanding at March
      31, 2007 was 5.11 years. The following table summarizes the outstanding options
      at March 31, 2007:


Weighted
              
              WeightedAverage
              
              AverageRange
                  of
              
              Stock
                  Options
              
              Remaining
              
              ExercisePrices
              
              Outstanding
              
              Exercisable
              
              Life
              
              Price$0.00
                  to $0.10
              
              
              6,505,000
              
              
              6,505,000
              
              
              5.93
                  yrs
              
              $
              0.04$0.11
                  to $0.20
              
              
              16,770,000
              
              
              16,770,000
              
              
              5.10
                  yrs.
              
              $
              0.13$0.21
                  to $0.40
              
              
              7,250,000
              
              
              7,250,000
              
              
              5.36
                  yrs.
              
              $
              0.33$0.41
                  to $1.00
              
              
              6,300,000
              
              
              6,300,000
              
              
              3.42
                  yrs
              
              $
              0.82$1.01
                  to $2.00
              
              
              3,600,000
              
              
              3,600,000
              
              
              2.88
                  yrs
              
              $
              1.65$2.01
                  to $3.00
              
              
              2,600,000
              
              
              2,600,000
              
              
              4.06
                  yrs
              
              $
              3.0043,025,000
              
              
              43,025,000




The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options, which do not have vesting restrictions and are
      fully transferable. In addition, option valuation models require the input
      of
      highly subjective assumptions, including the expected stock price volatility.
      Because the Company's employee stock options have characteristics significantly
      different from those of traded options, and because changes in the subjective
      input assumptions can materially affect the fair value estimate, in management's
      opinion, the existing models do not necessarily provide a reliable single
      measure of the fair value of its employee stock options.




F-31


ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      Q - STOCK WARRANTS**





During
      the year ended March 31, 2007, the Company granted warrants for professional
      services to purchase up to 75,000 shares of the Company’s common stock at
      exercise prices ranging from $0.09 to $0.14. These warrants expire in 2011.





During
      the year ended March 31, 2007, the Company granted warrants to investors for
      financing thru convertible debentures and in consideration thereof granted
      warrants to purchase up to 5,040,000 shares of the Company’s common stock at the
      exercise price of $0.025. These warrants expire in 2011.


F-32




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS







**NOTE
      Q - STOCK WARRANTS (CONTINUED)**




The
      following table summarizes the outstanding warrants as of March 31,
      2007:


Warrantsoriginally
                
                Exercise
                    priceissued
                
                per
                    shareOutstanding,
                    April 1, 2005
                
                
                15,571,708
                
                
                $0.07
                          - $5.00Warrants
                    issued
                
                
                7,460,002
                
                
                $0.05
                        - $1.00Warrants
                    exercised
                
                
                (6,640,018
                )
                
                $0.07
                    - $0.80Warrants
                    expired
                
                
                (500,000
                )
                
                $0.15
                    - $1,00Warrants
                    cancelled
                
                
                (3,786,144
                )
                
                $0.14
                    - $0.39Outstanding,
                    March 31, 2006
                
                
                12,105,548
                
                
                $0.01
                    - $5.00Warrants
                    issued
                
                
                5,400,714
                
                
                $0.025
                    - $0.14Warrants
                    exercised
                
                
                (285,714
                )
                
                $0.07
                    - $0.07Warrants
                    expired
                
                
                (4,155,000
                )
                
                $0.12
                    - $5.00Warrants
                    cancelled
                
                
                (2,014,286
                )
                
                $0.07
                    - $0.85Outstanding,
                    March 31, 2007
                
                
                11,051,262
                
                
                $0.01
                    - $.50




The
      weighted-average exercise price of the Company's outstanding warrants at March
      31, 2007 is approximately $0.06 per share.





**NOTE
      R - COMMITMENTS AND CONTINGENCIES**





*Legal
      matters*





AdZone
      is
      not a party to any pending legal proceedings, and no such proceedings are known
      to be contemplated.





In
      July
      2006, the Company and its directors, executive officers and employees have
      been
      subpoenaed by the Securities and Exchange Commission (SEC) to produce
      documentation as part of a formal investigation. The Company is cooperating
      with
      the investigation.





Due
      to
      the Company's financial position, from time to time, the Company may become
      party to either collection actions, litigation and/or judgments related to
      the
      non-payment of various operating expenses. Management is of the opinion that
      an
      appropriate provision for amounts due and other related expenses has been made
      in the accompanying financial statements.





*Office
      facilities*





On
      September 14, 2002, the Company executed a new long-term operating lease
      agreement for office space to house the Company's administrative, development
      and marketing operations located in Calverton, New York. The lease is for an
      initial term of 60 months at a rate of approximately $1,800 per month for year
      1, approximately $1,850 per month for year 2; approximately $2,418 per month
      for
      year 3; approximately $2,545 per month for year 4 and approximately $2,625
      per
      month for year 5.





On
      August
      1, 2004, the Company leased additional space at its office location in
      Calverton, N.Y. The term of this agreement will run concurrently with their
      existing lease. The new agreement requires the payment of approximately $4,016
      per month for year 3; approximately $4,143 per month for year 4; and
      approximately $4,143 per month for year 5.




Future
      minimum non-cancellable lease payments under this lease agreement are as
      follows:


Year
                  endingAmountMarch
                  31, 2008
              
              $
              24,858Total
              
              $
              24,858




Rent
      expense for the years ended March 31, 2007 and 2006 was $50,474 and $48,190,
      respectively.




F-33




ADZONE
      RESEARCH, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





**NOTE
      R - COMMITMENTS AND CONTINGENCIES**





*Consulting
      Agreement*





During
      the current fiscal year, the Company has entered into agreements with several
      individuals and companies for consulting services. The agreements call for
      payment in common stock and warrants for services rendered.





During
      the year ended March 31, 2007, the Company paid $46,973 in stock for accounting
      services.







**Note
      S - SUBSEQUENT EVENTS**





During
      the period April 1, 2007 through July 7, 2007 the following equity transactions
      occurred:





The
      Company issued 1,000,000 shares of restricted common stock with regard to the conversion
      of preferred stock in the amount of $11,500 issued in February, 2004. The
      Company also agreed to re-price the 66,666 warrants issued as part of that
      investment to $0.005(1/2cent).





·
            The
                Company issued 16,000,000 shares of its common stock in consideration
                for
                professional services performed.





The
      Company issued 5,577,336 shares of its common stock in payment of accounts
      payable obligations.


·
              The
                  Company issued stock grants of 1,100,000 shares of common stock
                  to
                  employees.
 F-34