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, 2005

[ ]   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.

        (Exact name of small business issuer as specified 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  AdZone was  required  to file such  reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B 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. [ ]

The issuer's revenues for the fiscal year ended March 31, 2005 were $332,037.

The aggregate market value of voting common equity held by  non-affiliates as of
March 31, 2005 was approximately $10,714,077 using the closing price of AdZone's
common stock of $0.16 per share on March 31, 2005.

As of March 31, 2005,  there were  98,144,253  shares of common stock issued and
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format: Yes [ ] No [X]


<PAGE>

                              ADZONE RESEARCH, INC.
                                  FORM 10-KSB

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2005


                                      INDEX

                                     PART I

                                                                            Page

Item 1.   Description of Business                                             1
Item 2.   Description of Property                                             5
Item 3.   Legal Proceedings                                                   5
Item 4.   Submission of Matters to a Vote of Security Holders                 5

                                     PART II

Item 5.   Market for the Registrant's Common Equity and                       6
          Related Stockholder Matters
Item 6.   Management's Discussion and Analysis or Plan of Operation           9
Item 7.   Financial Statements                                               15
Item 8.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                                15
Item 8A.  Controls and Procedures                                            16
Item 8B.  Other Information                                                  16

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(A) of the Exchange Act.             17
Item 10.  Executive Compensation                                             19
Item 11.  Security Ownership of Certain Beneficial Owners and Management     22
Item 12.  Certain Relationships and Related Transactions                     23
Item 13.  Exhibits and Reports on Form 8-K                                   23

                                     PART IV

Item 14.  Principal Accountant Fees and Services                             24


                                   SIGNATURES

CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain  statements  contained in this annual report on Form 10-KSB,  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.

<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS

GENERAL

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 decided to capitalize on the
advances on Internet  technology  that had occurred since our inception in order
to reach a broader  customer  base.  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.

In January 2000, we registered our common stock with the Securities and Exchange
Commission on a Form 10-SB pursuant to the  Securities  Exchange Act of 1934 and
became a public  reporting  company.  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. A clearance letter was issued to us and we were
issued the trading symbol "EHSV."

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
changed our trading symbol 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.  AdZone has focused  principally  on the  development  of its
proprietary software,  and has just begun to initiate efforts towards developing
a significant revenue base.

Among the  applications of the extracted data are the compilation of advertising
activity  and  information  regarding   advertising   expenditures  on  Internet
websites.  AdZone also has developed a subscription based online application for
accessing  data from  websites  that are hosted  within the United  States,  the
United Kingdom, Europe, and Asia and for providing such data to its clients in a
variety of customizable report formats.

The events of  September  11, 2001 and threats of terrorist  activity  that have
occurred  subsequently  thereto have generated interest in AdZone as a potential
provider  of  Internet  data.  Shortly  after  September  11,  2001,  AdZone was
contacted by the United States Office of Homeland  Security,  which expressed an
interest in using AdZone's NetGet(TM) Internet monitoring  technology to monitor
the Internet for terrorist planning and other communication. AdZone believes its
technology  is well  suited for this  purpose  and has been  working  with local
members  of  Congress  in both the House and  Senate to secure  funding  for its
proposal. The proposal has earned support from various Congressmen and senators.
Based on our initial  discussions  with officials of the federal  government and
the State of New York,  we believe that AdZone is well placed to obtain  federal
and New York State  contracts  for  Internet  monitoring  of possible  terrorist
communication, planning and various forms of cybercrime.


                                       1
<PAGE>

AdZone continues to market its surveillance systems and data directly to various
government agencies.  AdZone has temporarily  suspended its efforts in marketing
its  products  at the state  level and is  instead  currently  focusing  on more
federal agency contracts and contracts through Autometric, Raytheon and Sarnoff.

In June 2002, AdZone concluded a Systems Integrator  Agreement with the Raytheon
Company  under  which  Raytheon  agreed to use its  efforts  to  obtain  systems
integrator  agreements with smaller  technology  firms to provide software tools
developed  by AdZone  that  would  enhance  the data  analysis  capabilities  of
Raytheon's  software or that would more effectively  gather data for analysis by
Raytheon and any of its systems  integrator  partners.  Raytheon's  intent is to
demonstrate  AdZone's  technologies in conjunction  with its own technologies to
its  prospective   governmental  customers,   which  include  all  agencies  and
departments  of the United  States  government  and its  approved  international
allies.

On October 10, 2002, Adzone signed a "Broker-Dealer Marketing Program" agreement
with First  American  Financial  Group of New York, NY (First  American).  First
American  will contact  broker-dealers  as potential  market  makers in AdZone's
equity  securities;  contact  broker-dealers  via e-mail and telephone to review
current AdZone  information and meet with  broker-dealers,  and their registered
representatives, to discuss and promote awareness of AdZone's equity securities.
This agreement  originally  terminated on September 30, 2003 and was extended to
September 30, 2004 by a written  amendment dated January 7, 2004. First American
has  asserted  that  AdZone  breached  various  components  of this  contractual
agreement and filed for arbitration of the contested  matters.  AdZone and First
American   reached  a  settlement   agreement  on  June  24,  2004  whereby  the
"Broker-Dealer  Marketing  Program"  agreement  was  settled  in full  with  the
issuance of 200,000  shares of restricted  unregistered  common stock on July 6,
2004. AdZone has no further obligations in relation to this agreement.

In December  2002,  AdZone signed an investment  banking  agreement with Spartan
Securities of Florida,  whereby Spartan intends to provide assistance in banking
and capital raising for AdZone. AdZone is in the process of completing a private
placement with the assistance of Spartan Securities.

In March of 2003,  AdZone  signed an  agreement  with Sarnoff  Corp.  to jointly
market anti-terrorist services to govt. security agencies. The companies plan to
offer  technology  that  discovers  and  tracks  clandestine  communications  by
terrorist  or other  outlaw  groups  across the World Wide Web.  Their  combined
expertise can produce advanced tools for uncovering and decoding hidden messages
and other content embedded in the pixels of innocent-looking Web pages.

In April of 2003,  AdZone signed an agreement with  Autometric Inc (a subsidiary
of the Boeing Corp).  The Companies will explore ways to integrate the NetGet TM
technology with Autometrics range of products and services.

In June of 2003 AdZone filed for  preliminary  Patent  protection for its NetGet
technology.  The patent application is still in the early stages and there is no
assurance that a patent will be granted.

In May of 2004  AdZone  received  its first  purchase  order  from a US  Defense
contractor in connection with using AdZone's  technology in a viable  commercial
setting.  Due to nondisclosure  agreements  AdZone is prohibited from disclosing
any further  information in regard to this purchase  order.  AdZone  anticipated
this to be the  first  of many  revenue  generating  opportunities  for  AdZone.
Although there are no assurances that this revenue stream will continue.

In The summer and fall of 2004 AdZone  delivered  data products  relating to the
May  2004  defense   contract.   The  company  recorded  revenue  and  was  paid
approximately $150,000 for this through fiscal 2005.


                                       2
<PAGE>

In the fall of 2004 AdZone signed a one year  Distributorship  Agreement jointly
with Senticore, Inc. and The Justice Fund to market, sell, service,  distribute,
use and promote Adzone's Net Get system for commercial applications  exclusively
in Asia and South America. In exchange for these exclusive  distribution rights,
Adzone received Senticore stock valued at $150,000 and Justice Fund stock valued
at $150,000.  The resulting  revenue has been  deferred and is being  recognized
over the term of the  Distributorship  Agreement.  At March 31,  2005,  $132,329
associated with this contract is included in deferred revenue.

In  December  2004  AdZone  began  marketing  its Cyber  Security  products  and
services. The company has generated  approximately $13,000 in revenues from this
venture.

In October of 2004 the company announced that it would pay its first dividend to
shareholders in the form of approx.  1.2 million shares of stock it had received
from  Senticore  Corp.  The company has  subsequently  received  those shares as
registered shares and expects to distribute the dividend in July of 2005.

During  fiscal  2005 the  Company  raised  more than $1 million  from the Nutmeg
Group. These proceeds were used for working capital and growth.

During fiscal 2005 AdZone generated revenues of approximately  $332,000 which is
a more than 400 percent increase over least year's  approximately  $74,000.  The
company  added new  products  in the  Cyber-Security,  Defense,  Anti Piracy and
commercial  areas.  The   Cyber-Security   products  are  an  outgrowth  of  the
Cyber-Security  products and standards developed in house in our defense related
work.  The company has added and updated a variety of products in the commercial
area.  This  includes  products for the  financial,  online  gambling and health
industries.  The company is currently  working on commercial and defense product
strategies which include acquisitions,  development and joint ventures. With our
new suite of products  and  contacts in the  defense  and  commercial  areas the
company anticipates additional growth in revenue in the coming years.

COMPETITION

AdZone has  several  competitors  in the  commercial  arena,  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 expenditure information on close to 300 web sites as
well as an online  application  for  accessing  certain of its data.  Management
believes  that  AdZone's  product  although  similar in  methodology  to CMR, is
superior and that its database  contains more information on a greater number of
sites.  In  addition,  Leading Web  Advertisers  (LWA)a.k.a.  Evalient,  another
significant competitor, offers custom reports on banner creativity. Evalient was
recently acquired by CMR.

EMPLOYEES

AdZone  has  twelve  full  time and one part  time  employee.  None of  AdZone's
employees  are  represented  by a  union,  and  AdZone  considers  its  employee
relationships to be good.

SALES AND MARKETING

AdZone   markets  its   products  and  services   principally   through   e-mail
distributions to selected target markets, through direct sales contacts, through
the sales efforts of EVP Dan Wasserman,  advisor General Paul Weaver and through
its websites, www.adzoneinteractive.com, and www.adzoneresearch.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.  In June  2002,  AdZone  concluded  a Systems
Integrator   Agreement  with  Raytheon  Company,   whereby  Raytheon  agreed  to
demonstrate and promote sales of AdZone's  proprietary  software for defense and
security  applications.  Any such sales of AdZone's  software  products  through
Raytheon,   therefore,  will  be  completed  through  sales  of  Raytheon's  own
technology  with which AdZone's  products will be integrated.  In March of 2003,
AdZone signed a joint  marketing  agreement with Sarnoff Corp. to jointly market
its technology to various government  agencies that Sarnoff already has contacts
with. In April of 2003 AdZone signed a deal with Autometric  agreeing to provide
its technology to Autometric  and their clients  through  Autometric  contracts.
AdZone will provide data, custom  development and support to Autometric with the
current contract and contracts under negotiation.


                                       3
<PAGE>

STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE

In May 2004,  we executed a letter of intent  based on a proposal  for  services
issued to a major United States  Governmental  agency.  The agency  subsequently
issued and  executed a contract  with an  initial  face value of  $100,000  with
provisions for increases based on certain specified performance benchmarks. This
agreement was subsequently  extended for an additional  $50,000.  The Company is
currently engaged in negotiating additional contracts for these products.

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

For the fiscal year ended March 31, 2005, the Company derived  substantially all
of its revenues  from one major  customer and from the granting of  distribution
rights under a distribution agreement.

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

AdZone   owns   its   internet    domain    names,    www.adzoneinteractive.com,
www.adzoneresearch.com,   and  www.adzonereports.com  and  holds  a  common  law
copyright on all of its proprietary software. In June of 2003 AdZone applied for
patent protection for its methodology and / or technology.

In addition,  AdZone has no plans to enter into  franchise,  concession or labor
contracts.  In June 2002, AdZone concluded a Systems  Integrator  Agreement with
Raytheon  Company  pursuant to which it granted  Raytheon the right to integrate
certain  of  AdZone's  proprietary  software  for  integration  with  Raytheon's
software for defense and security applications.  In March of 2003, AdZone signed
a joint marketing  agreement with Sarnoff Corp. to jointly market its technology
to various government  agencies that Sarnoff already has contacts with. In April
of 2003 AdZone signed a deal with  Autometric (A division of the Boeing Company)
agreeing  to  provide  its  technology  to  their  clients  through   Autometric
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.

SOFTWARE UPGRADES AND MAINTENANCE

AdZone has expended  approximately  $498,000 and $563,000 during fiscal 2005 and
2004,  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.

                                       4
<PAGE>

REPORTS TO SECURITY HOLDERS

AdZone has not in the past  provided an annual  report to its  shareholders  and
does not intend to do so until it is able to  generate  sufficient  revenues  to
fund the expense of such reports.  AdZone is subject to the disclosure  rules of
Regulation S-B for a small business  issuer under the Securities Act of 1933 and
the  Securities  Exchange Act of 1934 and is  therefore  required to file a Form
10-KSB annually and Forms 10-QSB quarterly.  In addition,  AdZone is required to
file Forms 8-K and other proxy and  information  statements from time to time as
required.

The public may read and copy any materials  AdZone files with the Securities and
Exchange  Commission,  at the SEC's Public  Reference  Room at 450 Fifth Street,
N.W.,  Washington D.C. 20549. The public may obtain information on the operation
of the Public  Reference  Room by  calling  the SEC at  1-800-SEC-0330.  The SEC
maintains an internet site (http://www.sec.gov) That contains reports, proxy and
information  statements,  and  other  information  regarding  issuers  that file
electronically with SEC.

DEPENDENCE ON AND CONTROL BY MANAGEMENT

Charles  Cardona,  our Chief Executive  Officer and Chairman of the Board,  John
Cardona,  a member of our Board of  Directors,  and other members of the Cardona
family  beneficially own in the aggregate  approximately  33% of the outstanding
shares of AdZone's common stock.  Accordingly,  such  individuals may be able to
control the election of directors and all other matters  subject to  shareholder
vote.  This  concentration  of  ownership  may have the  effect of  delaying  or
preventing a change of control of AdZone,  even if this change of control  would
benefit shareholders.  In addition,  our future success depends to a significant
extent on the efforts and abilities of Charles Cardona. The loss of the services
of Mr.  Cardona  could  substantially  harm our business.  Should Mr.  Cardona's
services  be  terminated,  we may be unable to  attract,  motivate  and retain a
suitable replacement for him.

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.  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.


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

AdZone has not  conducted  any  meetings of  shareholders  during the  preceding
quarter or periods subsequent thereto.


                                       5
<PAGE>

                                     PART II

ITEM 5 - MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

As of March 31, 2005,  there were  98,144,253  shares of $0.001 par value common
stock of AdZone  outstanding  and owned by  approximately  188  shareholders  of
record,  exclusive of  shareholders  holding  their shares in street name. As of
July 6, 2005, there were 107,319,189  shares of $0.001 par value common stock of
AdZone  outstanding  and owned by  approximately  190  shareholders  of  record,
exclusive of shareholders holding their shares in street name.

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 2.78 shares of Preferred
Class A stock and 1 share of  Preferred  Class B stock  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.

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. A clearance letter was issued to us and 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."

The following are the high and low closing  prices of AdZone's  Common Stock for
each quarter during the last two fiscal years:

FISCAL YEAR ENDED MARCH 31, 2005

                           High                   Low
                          -----                  -----
First Quarter             $0.56                  $0.20
Second Quarter            $0.32                  $0.16
Third Quarter             $0.24                  $0.09
Fourth Quarter            $0.17                  $0.12

FISCAL YEAR ENDED MARCH 31, 2004

                           High                   Low
                          -----                  -----
First Quarter             $0.15                  $0.02
Second Quarter            $0.23                  $0.06
Third Quarter             $0.35                  $0.16
Fourth Quarter            $1.22                  $0.32


                                       6
<PAGE>

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 Chairman of the Board and Chief Executive Officer, and Mr.
John  Cardona,  our Chief  Operating  Officer and a Director of AdZone,  and the
weighted average exercise price of such options.

<TABLE>
<CAPTION>
                                        Number of          Weighted-
                                     securities to be       average             Number of
                                        issued upon        exercise       securities remaining
                                        exercise of        price of       available for future
                                        outstanding       outstanding         compensation
                                         options,          options,      (excluding securities
                                        warrants and        warrants         referred to in
                                          rights           and rights            column 1
                                     ----------------     -----------    ---------------------
<S>                                       <C>                <C>                  <C>
Equity compensation plans approved               -0-          -0-                 -0-
by security holders

Equity compensation plans not             4,000,000          .98                  -0-
approved by security holders

      Total                               4,000,000          .98                  -0-

</TABLE>
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.  However,  the Company did declare property
dividends valued at $233,186 and expect to pay dividends in July 2005.

RECENT SALES OF UNREGISTERED SECURITIES

Fiscal Year Ended March 31, 2003:

On May 15, 2002,  we issued 75,000 shares of common stock to B&G Holding Co, for
a purchase price of $0.067 per share.

On June 6, 2002, we issued 300,000 shares of common stock to Eleanor Garrett for
a purchase price of $0.05 per share.

On June 6, 2002, we issued  200,000  shares of common stock to Warren  Hamburger
for a purchase price of $0.05 per share.

On June 24, 2002 we issued 375,000 shares of common stock to Kevin Messina for a
purchase price of $0.04 per share.

On July 19, 2002, we issued  700,000 shares of common stock to Scott Bolkema for
a purchase price of $0.05 per share.

On October 8, 2002 we issued 333,334 shares of common stock to Carl Washwick for
a purchase price of $0.03 per share.

On  November  18,  2002,  we issued  50,000  shares  of  common  stock to Joshua
Blumenthal for a purchase price of $0.20 per share.


                                       7
<PAGE>

Fiscal Year Ended March 31, 2004:

On April 23, 2003, we issued 500,000 shares of common stock to Ruth Makofske for
a purchase price of $0.016 per share.

On May 5, 2003,  we issued 5,000 shares of common stock to Thomas  Madigan for a
purchase price of $0.02 per share.

On May 13, 2003, we issued  150,000  shares of common stock to Warren  Hamburger
for a purchase price of $0.20 per share.

On July 28, 2003, we issued 6,000 shares of common stock to Warren Hamburger for
a purchase price of $0.083 per share.

On July 28, 2003 we issued  33,333 shares of common stock to Ruth Makofske for a
purchase price of $0.06 per share.

On  November  20,  2003,  we issued  33,000  shares  of  common  stock to Warren
Hamburger for a purchase price of $0.18 per share.

On January 27, 2004,  we issued  30,000  shares of common stock to Ronald Mayhew
for a purchase price of $0.34 per share.

On January 30, 2004,  we issued  15,000  shares of common stock to Ronald Mayhew
for a purchase price of $0.34 per share.

Fiscal Year Ended March 31, 2005:

On May 20, 2004. we issued 3,457,217 shares of common stock to The Nutmeg Group,
LLC for a purchase price of $0.1157 per share.

On June 15, 2004, we issued 525,000 shares of common stock to Paul B. & Becky B.
Sigfusson-Joint Tenants for a purchase price of $0.22 per share.

On  June  15,  2004,  we  issued  110,000  shares  of  common  stock  to Paul B.
Sigfusson-Profit Sharing Plan for a purchase price of $0.22 per share.

On July 2, 2004 we issued  3,289,474 shares of common stock to The Nutmeg Group,
LLC for a purchase price of $0.1824 per share.

On August 3, 2004, we issued 110,000 shares of common stock to Elizabeth McCann,
for a purchase price of $0.182 per share.

On August 31, 2004 we issued  400,000 shares of common stock to Scott H. Bolkema
for a purchase price of $0.17 per share.

On  September  17,  2004,  we issued  825,593  shares  of common  stock to Arbus
Capital/Circle Group Internet LP for a purchase price of $0.1211 per share.

On October 4, 2004 we issued 50,000 shares of common stock to Paul B.  Sigfusson
for a purchase price of $0.22 per share.

On  October  4,  2004,  we issued  300,000  shares  of  common  stock to Paul B.
Sigfusson & Becky  B.Sigfusson-Joint  Tenants for a purchase  price of $0.22 per
share.

On  October  4,  2004,  we issued  100,000  shares  of common  stock to James P.
McEnaney for a purchase price of $0.10 per share.

On January 5, 2005,  we issued  100,000  shares of common stock to Oleg Koltunov
for a purchase price of $0.05 per share.


                                       8
<PAGE>

On January 18,  2005,  we issued  400,000  shares of common  stock to Scott.  H.
Bolkema for a purchase  price of $0.10 per share.

On March 31, 2005, we issued 400,000 shares of common stock to A. Richard McCann
and Elizabeth McCann for a purchase price of $0.0625 per share.

On March 31, 2005, we issued 100,000  shares of common stock to Olga  Paidoussis
for a purchase price of $0.09 per share.

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

GENERAL

Adzone follows the accrual basis of accounting in accordance with U.S. generally
accepted accounting principles.

RESULTS OF OPERATIONS

Years Ended March 31, 2005 and March 31, 2004.

REVENUES:

Revenues  for the year ended March 31, 2005  amounted to  $332,037,  compared to
$74,844 for the same period of the prior fiscal year.  Current  period  revenues
are derived from sales from our Defense  Division  representing  sub-contracting
sales to major defense supply  contractors.  While the company  expects  similar
revenue producing industry contracts in the future, no additional contracts have
been  entered  into as of this date.  Adzone  currently  has three  proposals in
process promoting our NetGet technology.

PRODUCTION EXPENSES:

Salaries, wages and related costs:

For the fiscal year ended March 31, 2005,  Adzone incurred wage related costs of
$381,267 compared to $393,288 for the same period of the prior fiscal year. This
decrease was caused by a reduction  in bonuses  paid in fiscal 2005  compared to
fiscal  2004.  The  company is  investigating  the use of interns to  supplement
salaried positions for standard  monitoring for future contracts.  See salaries,
wages and  related  costs  under the  caption  OPERATING  EXPENSES,  below,  for
information about stock-based compensation.


                                       9
<PAGE>

Direct occupancy and operating expenses:

For the fiscal  year ended March 31,  2005,  Adzone  incurred  operating-related
expenses  of  $116,416  compared  to  $169,855  for the same period of the prior
fiscal year.  This  decrease was due to certain  expenses  that were incurred in
fiscal 2004 for which there were no equivalent expenses in fiscal 2005.

OPERATING EXPENSES:

Salaries and wages and related costs:

For the fiscal year ended March 31, 2005, Adzone incurred wage related costs for
Marketing of $1,171,861  compared to $1,469,238 for the prior fiscal year.  This
decrease is due to a reduction in officers salaries.

Salaries and wages included $318,059 and $1,656,750 of stock-based  compensation
during the fiscal years ended March 31, 2005 and 2004, 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.

Consulting and professional fees:

For the  fiscal  year ended  March 31,  2005,  Adzone  incurred  consulting  and
professional  fees of  $1,705,805  compared to  $1,038,963  for the prior fiscal
year.   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,  2005 and 2004,  this
expense category included $1,748,853 and $1,012,390 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 dates of the awards. Management of
the Company  believes that the consultants  will continue to accept  stock-based
compensation  for their  services,  allowing  the Company to  preserve  its cash
reserves.

General and administrative expense:

For  the  fiscal  year  ended  March  31,  2005,  Adzone  incurred  general  and
administrative  expense of $633,935  compared to $234,607  for the prior  fiscal
year.  General and  administrative  expenses  increased  as a result of expanded
efforts to develop revenue-producing contracts.

Depreciation:

Depreciation  expense  amounted  to $13,981  for the fiscal year ended March 31,
2005  compared  to  $5,469  for  the  same  period  of the  prior  fiscal  year.
Depreciation  increased as a result of certain computer equipment being acquired
during the current year.  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, 2005,  Adzone incurred  interest  expense of
$5,796  compared  to  $11,580  for the same  period  of the prior  fiscal  year.
Interest may increase in the near term with the addition of debt in fiscal 2005.


                                       10
<PAGE>

Write down of marketable securities:

During the fiscal year ended  March 31,  2005,  Adzone took a fair market  value
writedown on certain  marketable  securities  that had been declared as property
dividends.   The  writedown  was  recorded  as  of  the  date  of  the  dividend
declaration.

Derivative loss:

During fiscal year ended March 31, 2005,  Adzone issued recognized a loss on the
stock settlement  liability  relating to the Nutmeg  Subscription (see financial
statement Note 10).

Lawsuit settlement:

During the fiscal year ended March 31,  2004,  Adzone  entered into a settlement
related to occupancy agreements in the amount of $3,000.

NET LOSS:

Based upon the  aforementioned  discussion items,  Adzone incurred a net loss of
$(4,190,952) for the fiscal year ended March 31, 2005, as compared to a net loss
of $(3,251,821) for the fiscal year ended March 31, 2004.

PREFERRED STOCK DIVIDENDS AND ACCRETIONS:

Preferred stock dividends and accretions 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.  Accretions
during  the years  ended  March  31,  2005 and 2004  amounted  to  $116,214  and
$589,533, respectively. Preferred stock dividends paid which amounted to $61,060
and  $26,657 for the fiscal  years ended March 31, 2005 and 2004,  respectively,
plus  accretions  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.  Preferred  stock  accretions will be recorded
periodically until the full redemption values are reflected.

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  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  ($4,190,952)  and used cash of
($1,593,521) in conducting its operations  during the year ended March 31, 2005.
These  recurring  negative  trends raise  substantial  doubt about the Company's
ability to continue as a going concern.

Operating  cash flows for fiscal year ended March 31, 2006 are not  projected to
be sufficient to sustain the Company's operations. However, management currently
believes that  existing cash reserves of $431,790 as of March 31, 2005,  coupled
with (i) a potential  commitment for  approximately  $750,000 in connection with
the Nutmeg Subscription  Agreement will be sufficient to fund operating deficits
for a period of approximately twelve months following March 31, 2005. 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, 2005:


                                       11
<PAGE>

      a.    Management does not believe that the significant  level of cash used
            in operations  during the year ended March 31, 2005  ($1,593,521) is
            indicative of cash flow usage during the next four fiscal  quarters.
            Cash flow from  operations  during the current  period  included two
            amounts,  as follows,  that increased cash usage.  First, a bonus of
            $320,000  was  awarded to two  officers  by the  Company's  Board of
            Directors during the second quarter.  Accordingly,  at this time, no
            further officer bonuses are contemplated.  Second,  the Company used
            cash proceeds from the Nutmeg Subscription Agreement (see discussion
            regarding  Nutmeg  in  "Liquidity"  section  below)  to pay  certain
            current  and past  due  accounts  payable  and  accrued  liabilities
            amounting  to  approximately  $263,000.  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.

      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 current quarter,  based upon ongoing discussions with the
            vendors,  management believes that they will continue to accept such
            securities in the foreseeable future.

      c.    The  Company  completed  a three  month U.S.  Department  of Defense
            contract in the second quarter of fiscal 2005 and collected $150,000
            for said contract.  Management of the Company is optimistic that the
            success of this contract will lead to additional  contracts with the
            government,  although  no such  contracts  have  yet  been  awarded.
            However,  management is actively negotiating three such proposals in
            the Defense Industry arena.

      d.    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,  if any,  may result in
            additional   modifications   and  expenditures  at  the  request  of
            customers.

      e.    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 with the U.S.  Department of
Defense and 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's  ability to continue  as a going  concern is  dependent  upon the
preservation  of existing cash  reserves,  the receipt of the final  conditional
traunch of the Nutmeg Subscription Agreement 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.

Liquidity:

Adzone  has been able to  advance  its  business  plan in a limited  fashion  by
maintaining  and  upgrading  the defense  oriented  products  and  services  and
marketing efforts for these products.

The  capitalization of Adzone through the sale of equity  securities,  loans and
options  exercised  has  allowed  Adzone to maintain a positive  cash  position.
Adzone has  approximately  $431,790  on hand at March 31,  2005 as  compared  to
$622,797 of March 31, 2004.

On March 20, 2004, AdZone entered into a Subscription Agreement, with The Nutmeg
Group,  L.L.C, for a private  placement of up to $1,750,000 for shares of common
stock.  To date,  we have sold  6,746,691  shares of common  stock to The Nutmeg
Group and issued them warrants to purchase  3,373,337 shares of common stock for
a purchase  price of  $1,000,000.  Net proceeds of $950,000 were received  after
payment of certain  broker fees.  This $950,000 is treated as a liability  until
such time as it is settled.


                                       12
<PAGE>

The shares of common stock are priced at the lesser of;

(a) $.20, or

(b) fifty-seven  percent (57%) of the average closing bid price for common stock
on the two trading days immediately prior to Closing of such traunche, or

(c) fifty-seven  percent (57%) of the average closing bid price for common stock
on the two trading days immediately  prior to the date on which the registration
statement  (as  described  in the  Registration  Rights  Agreement)  is declared
effective,

(the  lesser of (a),  (b) and (c) being  hereinafter  referred  to as the "Fixed
Price").

The Purchaser will be issued Warrants  exercisable into such number of shares of
common stock as is equal to 50% of the purchase price paid by Nutmeg, divided by
the Fixed Price.  The common stock into which the Warrants are exercisable  will
have  piggyback  registration  rights,  and the Warrants  will be  transferable.
Unexercised Warrants will expire December 31, 2008. Warrants will be exercisable
into common stock at a price equal to 125% of  fifty-seven  percent (57%) of the
average  closing bid price for Common Stock on the two trading days  immediately
prior  to  the  filing  with  the  Securities  and  Exchange  Commission  of the
registration statement (as described in the Registration Rights Agreement).

The  third  traunche  will be at the  option  of the  Company  for an  amount of
$750,000  and shall  occur  within 5 days of the date on which the  registration
statement registering the Securities is declared effective.

Liquidity during fiscal 2005 and 2004 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 were $1,456,863 during fiscal 2005 and $1,568,870 during Fiscal 2004.

PLAN OF OPERATION

The Company has initially  identified  three key potential  markets for Adzone's
products:  businesses engaged in advertising  research;  agencies of the federal
and of state governments and the defense and security industries.  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.  Adzone has been
very  successful  in  garnering  support  from many  members  of  Congress,  and
Autometric (A division Of Boeing),  Raytheon and Sarnoff Corp. Adzone feels this
is excellent validation of its technology and the usefulness of its data.

Adzone also has developed an updated strategic  business plan which incorporates
an aggressive sales strategy in the defense area of our business.  The plan also
includes  strategic  alliances  and  acquisitions,  and to that end  Adzone  has
retained  Baltic  Ventures  run by Jeff Hale,  former  President of VNU USA. His
experience  brings  considerable  talents to AdZone in the field of acquisitions
and integrations of acquired  companies.  His experience also includes  multiple
acquisitions and successful post-acquisition integration,  primarily in research
and defense  company  management  organizations.  This should help Adzone in its
goal of completing a strategically valuable acquisition.


                                       13
<PAGE>

In June 2002, Adzone concluded a Systems Integrator  Agreement with the Raytheon
Company  under  which  Raytheon  agreed to use its  efforts  to  obtain  systems
integrator  agreements with smaller  technology  firms to provide software tools
developed by the Company that would enhance the data analysis capabilities.  Our
contacts at Raytheon have indicated that they are presenting  AdZone's  products
to various  clients  including US and  international  governmental  and security
agencies.

In March of 2003,  Adzone  signed an  agreement  with Sarnoff  Corp.  to jointly
market anti-terrorist services to govt. security agencies. The companies plan to
offer  technology  that  discovers  and  tracks  clandestine  communications  by
terrorist  or other  outlaw  groups  across the World Wide Web.  Their  combined
expertise can produce advanced tools for uncovering and decoding hidden messages
and other content embedded in the pixels of innocent-looking Web pages.

In April of 2003,  Adzone  signed an agreement  with  Autometric  (a division Of
Boeing) and Adzone generated revenues  aggregating  $150,000 from this agreement
through fiscal 2005.

However,  although all three agreements  mentioned above remain in force, Adzone
continues  to market  its  surveillance  systems  and data  directly  to various
government agencies.

This  direct  effort  resulted  in Adzone  receiving  a test  contract  from the
Department  of Defense in early FY 2003 which ran through parts of the first two
quarters (June to the end of September,  2004).  The  undertaking was successful
enough to 1)  receive  official  "validation"  from a  government-owned  testing
laboratory  of  Adzone's  ability  to  find  and log the  presence  of  specific
information  contained  in English  and other  languages  communicated  over the
Internet in a fashion for which these were not meant to be used (a process  that
took over 5 months for the  government to complete),  and 2) receipt of a formal
commendation  to the  highest  levels  of  the  re-organized  U.S.  intelligence
establishment. Therefore, contracts are expected to result from these efforts in
the fiscal year beginning April 1, 2005.  While delays have occurred,  Adzone is
confident it will achieve revenues from this.

In September  2004 AdZone signed a contract  with  Senticore Inc and The Justice
Fund granting rights to distribute its NetGet (TM) Internet montoring technology
for a period of one year in exhange for $300,000.  The contract  contains  three
one-year renewal options,  at the discretion of the distributor,  with a maximum
revenue potential of $2.25 million. This contract provides Adzone with marketing
and   additional   services  for   distribution   of  the   Company's   products
internationally. It also provides access to additional legal services supporting
the Company's anti-piracy efforts.

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
either funds  advanced or loaned by Adzone's  directors and officers or the sale
of equity securities. Adzone's officers and directors have no formal commitments
or  arrangements  to  advance or loan funds for Adzone and do not have any legal
requirement to do so.


                                       14
<PAGE>

CONTRACTUAL OBLIGATIONS

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

<TABLE>
<CAPTION>
                                   Less than       One to         Three to        After
                                   One Year      Three Years     Five Years     Five Years          Total
<S>                              <C>             <C>             <C>             <C>             <C>
Long-term  debt (a)              $  175,122      $  125,000      $     --        $     --        $  300,122
Short-term  debt                     50,000            --                              --            50,000
Employment agreements               365,333         353,000            --              --           718,333
Operating lease obligations          48,951          75,520            --              --           124,471

                                 --------------------------------------------------------------------------
                                 $  639,406      $  553,520      $     --        $     --        $1,192,926
                                 ==========================================================================
</TABLE>

(a)  Interest  at prime + 1. Prime was  estimated  at 5% in  calculating  future
obligations.

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 August 4, 2004, AdZone Research,  Inc. notified S. W. Hatfield, CPA, ("SWH ")
that it has engaged Aidman,  Piser & Company,  P.A. as the Company's auditor and
as a consequence SWH was dismissed as the Company's auditors. On August 4, 2004,
the Company engaged Aidman, Piser & Company,  P.A. as independent auditor of the
Company for the fiscal year ending March 31, 2005.  The action to engage Aidman,
Piser & Company,  P.A.  was taken upon the  unanimous  approval  of the Board of
Directors of the Company, which performs the function of the Audit Committee.

During the last two fiscal  years  ended  March 31,  2004 and March 31, 2003 and
through August 4, 2004, (i) there were no disagreements  between the Company and
SWH on any matter of accounting  principles or  practices,  financial  statement
disclosure  or  auditing  scope  or  procedure  which,  if not  resolved  to the
satisfaction of SWH would have caused SWH to make reference to the matter in its
reports on the Company's  financial  statements,  and (ii) SWH's reports did not
contain an adverse  opinion or a  disclaimer  of opinion,  or was  qualified  or
modified as to uncertainty,  audit scope, or accounting  principles.  During the
last two most  recent  fiscal  years  ended  March 31, 2004 and 2003 and through
August 4, 2004,  there were no reportable  events as the term  described in Item
304(a)(1)(iv)  of Regulation  S-B. SWH 's opinion in its report on the Company's
financial  statements  for the year  ended  March 31,  2004 and 2003,  expressed
substantial  doubt with respect to the Company's  ability to continue as a going
concern.

During the two most recent fiscal years and through  August 4, 2004, the Company
has not consulted with S. W. Hatfield, CPA regarding either:

      1. the application of accounting principles to any specified  transaction,
either  completed  or  proposed,  or the type of  audit  opinion  that  might be
rendered on the Company's financial statements, and neither a written report was
provided to the Company nor oral advice was provided  that S. W.  Hatfield,  CPA
concluded  was an  important  factor  considered  by the  Company in  reaching a
decision as to the accounting, auditing or financial reporting issue; or

      2. any matter that was either subject of disagreement or event, as defined
in Item  304(a)(1)(iv)(A)  of Regulation S-B and the related instruction to Item
304 of Regulation S-B, or a reportable  event, as that term is explained in Item
304(a)(1)(iv)(A) of Regulation S-B.

SWH furnish the Company with a letter  addressed to the  Securities and Exchange
Commission  stating  that it agrees  with the above  statements.  A copy of such
letter,  dated August 4, 2004, is filed as Exhibit 16.1 to Form 8-K,  filed with
the Securities and Exchange Commission.


                                       15
<PAGE>

ITEM 8A - 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 chief financial  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.


The Company has had discussions  with the accounting  staff (the "Staff") of the
SEC with respect to (1) the valuation of equity  securities,  including options,
issued to employees and  non-employees  and (2) the accounting and reporting for
preferred  stock that had also included the issuance of warrants and  beneficial
conversion features.  After the Company's  discussions with the Staff, and after
the Company  consulted with its independent  registered  public accounting firm,
the Company  determined  the need to restate its annual and quarterly  financial
statements for fiscal 2004.  Aidman,  Piser & Company,  P.A. 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 chief
financial  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 chief  financial  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 chief financial
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.

Management of the Company intends to promptly remediate this deficiency by:

(i) acquiring the appropriate level of internal financial support

(ii) access current developments training programs for financial employees and

(iii) provide financial  employees with adequate technical resources to research
financial accounting and reporting requirements.

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.

ITEM 8B -Other Information

None.


                                       16
<PAGE>

                                    PART III

ITEM  9  -  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTORES  AND  CONTORL  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/Appointed
----                  ------------------------      ----------------------------
Charles Cardona*      Chairman of the Board,                 August 2001
                      CEO and CFO

John Cardona*         Chief Operating Officer                August 2001

Daniel Wasserman      Executive Vice President              January 2002

Warren Hamburger      Director                               August 2001

Russell Ivy           Director                              January 2001

Richard A. McCann     Director                                  May 2004

*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  terminated  on February 5, 2007,  John  Cardona has
entered into an employment  agreement with Adzone that terminates on February 5,
2007,  and Daniel  Wasserman  has  entered  into an  employment  agreement  that
terminates on June 30, 2005.  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.

BIOGRAPHICAL INFORMATION

CHARLES CARDONA

Charles  Cardona,  age 41, 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 38, 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.


                                       17
<PAGE>

DANIEL WASSERMAN

Daniel  Wasserman,  age 53, was appointed  Executive Vice President and Managing
Director of AdZone's  Global  Defense Group in January  2002.  From July 2001 to
December 2001,  Mr.  Wasserman was Vice  President-Commercial  Sales of Reliable
Integration  Services, a systems integration  company.  From November 2000 until
June 2001, he was Vice President of Sales of zGraffitti,  a desktop  advertising
firm. Mr. Wasserman served as Vice President of Sales/Advertising for Conducent,
Inc.,  a desktop  advertising  firm,  from March  1999  through  November  2000.
Beginning in 1995 through  February  1999,  Mr.  Wasserman  was a consultant  to
various  companies  specializing  in  technology  marketing,   including  Lucent
Technologies  and  Sympatico,  which  subsequently  became the largest  internet
service provider in Canada.  Mr. Wasserman received a Bachelor of Science degree
in biology in 1972 from the University of Toronto and an MBA degree in marketing
from The Schulich School of Business of York  University,  Toronto,  Canada,  in
1978.

WARREN HAMBURGER

Warren Hamburger,  age 50, 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.

RICHARD A. MCCANN

Richard McCann 69, is a director of AdZone Research, Inc. During his career, Mr.
McCann has held positions of increasing responsibility.  He initially began as a
Vice  President  and  Co-Manager  of equity  trading with Bank of America in San
Francisco,  and several years later joined Montgomery Securities in that city as
a Partner.  Thereafter he served as a Vice  President  and Senior  Institutional
Trader  in  Plymouth,  California,  and then  relocated  to the  Tampa,  Florida
headquarters of Raymond James & Co.,  serving there as a Vice President and then
became a Vice President at Ryan, Beck & CO.,  another Tampa area financial firm.
He  relocated to Atlanta,  Georgia to become  Senior Vice  President  and Equity
Trading Manager at Wachovia Securities,  and the following year became a Partner
at Florida-based Spartan Securities.

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 fiscal 2004

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,
principal  financial  officer  and  principal  accounting  officer.  The Code of
Business   Conduct   and   Ethics   will   be   posted   on   our   website   at
http://www.adzoneinteractive.com.


                                       18
<PAGE>

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, 2005,  2004, and
2003:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                       Other Annual            Long-Term
                                                       Compensation          Compensation
                                                     (# of Share of      Awards (# Securities
Name and Positions       Year   Salary ($)   Bonus    Common Stock)       Underlying Options)
=============================================================================================
<S>                      <C>    <C>              <C>      <C>                    <C>
Charles Cardona
Chief Executive Officer  2005   $312,624
Acting Chief Financial   2004   $188,551(2)      0        5,471,151 (1)           50,000
Officer                  2003   $190,385         0                0                   0
Director

John Cardona
Director                 2005   $312,624
                         2004   $ 83,418(3)      0        5,706,899 (1)          100,000
                         2003   $190,385         0                0                  0
</TABLE>

(1)   These shares were issued and charged  against  accrued  liabilities in the
      amount of $160,000.

(2)   Excludes $98,472 that was charged against accrued liabilities.

(3)   Excludes $41,800 that was charged against accrued liabilities.

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.  The following table is
a list of  directors  and  the  amount  of  shares  each  one  had  received  as
compensation during the year ended March 31, 2004:

------------------ -------------------- ----------------- ----------------------
NAME               TITLE                NUMBER OF SHARES  DATE OF ISSUANCE
------------------ -------------------- ----------------- ----------------------
John Conley        Advisory Director        -0-
------------------ -------------------- ----------------- ----------------------
Jonathan White     Advisory Director        -0-
------------------ -------------------- ----------------- ----------------------
Russell Ivy        Director              50,000           September 3, 2003
------------------ -------------------- ----------------- ----------------------
                                         15,000           February 20, 2004
------------------ -------------------- ----------------- ----------------------
Warren Hamburger   Director             200,000           September 3, 2003
------------------ -------------------- ----------------- ----------------------
                                        15,000            February 20, 2004
------------------ -------------------- ----------------- ----------------------

No compensation was paid to any member of the Board of Directors during the year
ended March 31, 2005.


                                       19
<PAGE>

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                               (Individual Grants)

<TABLE>
<CAPTION>
                                       Percent of Total
               Number of Securities     Options/SAR's
                   Underlying         Granted to Employees    Exercise
Name          Options/SAR's Granted     in Fiscal Year       Price/Share     Expiration
----               -----------            -----------        ------------    ----------
<S>                   <C>                      <C>                 <C>
Charles Cardona      -0-                      -0-                 -0-
John Cardona         -0-                      -0-                 -0-
</TABLE>

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                                        Value of Unexercised
                                            Number of Unexercised           In-The-Money
                                            Securities Underlying            Option/SARs
Name            Shares Acquired   Value     Options/SARs at FY-End            At FY-End
                 On Exercise     Realized  Exercisable/Unexercisable         Exercisable
-----            ---------       -------   ------------------------        --------------
<S>                   <C>           <C>               <C>                        <C>
Charles Cardona      -0-            $0                4,000,000                  $60,000
John Cardona         -0-            $0                4,000,000                  $60,000
</TABLE>

On February 5, 2004, 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 February 5, 2007.
This agreement contains the following terms and conditions:

Position: CEO

Effective Date: February 5, 2004

BASE SALARY:

2004 - $161,000 annual
2005 - $181,000 annual
2006 - $191,000 annual

The initial  base salary  shall be reduced to $1,500 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 $ 10,000

2ND YEAR, YEAR END QUALITATIVE BONUS OF $ 25,000

Profitability Bonus: If the company reaches annual  profitability  employee will
receive a $100,000 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
$100,000 in bonus to Mr. Cardona on an annual basis.

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

      o     Options for 750,000 shares at $.85

      o     Options for 750,000 shares at $1.00

      o     Options for 750,000 shares at $1.50

      o     Options for 750,000 shares at $1.75


                                       20
<PAGE>


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.

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 fee's legal fee's 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.

On February 5, 2004, 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
February 5, 2007. This agreement contains the following terms and conditions:

Position: COO

Effective Date: February 5, 2004

BASE SALARY:

2004 - $161,000 annual
2005 - $181,000 annual
2006 - $191,000 annual

The initial  base salary  shall be reduced to $1,500 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 $ 10,000

2ND YEAR, YEAR END QUALITATIVE BONUS OF $ 25,000

PROFITABILITY BONUS:

If the company  reaches  annual  profitability  employee will receive a $100,000
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
$100,000 in bonus to JCardona on an annual basis.

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

      o     Options for 750,000 shares at $.85

      o     Options for 750,000 shares at $1.00

      o     Options for 750,000 shares at $1.50

      o     Options for 750,000 shares at $1.75

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.

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 fee's 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.


                                       21
<PAGE>

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets  forth,  as of July 7, 2005,  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.

                                                                  % of Class
Name and address                     Number of Shares         Beneficially Owned
----------------                     ----------------         ------------------
Charles Cardona                        25,662,422 (1)                 17.49%
17 Sunny Line Dr.
Calverton, NY 11933

John Cardona                           21,691,849 (2)                 14.78%
118 Overlook Dr.
Aquebogue, NY 11931

Daniel Wasserman                        4,131,000(3)                  2.81%
20953 Cohasset Ter
Ashburn, VA

Warren Hamburger                         1,691,000                    1.15%
42 Fire Island Ave.
Babylon, NY 11702

Russell Ivy                               675,000                      .46%
211 West Sealy Street
Alvin, TX 77511

Richard A. McCann                        1,400,000                     0.95%
116 Holcomb Cove Rd.
Candler, NC 28715
                                       -----------                   -------
All Executive Officers and
Directors of AdZone as
a Group (6 persons)                     55,251,271                    37.64%


The  above-referenced  percentages are given on a  fully-diluted  basis for such
owner only. We are not assuming in the number of shares outstanding for purposes
of this table that all options and rights have been exercised.

(1)  Includes  9,000,000  shares  that may be  acquired  upon  exercise of stock
options  granted to Mr.  Cardona at exercise  prices ranging from $0.10 to $3.00
per share.  Excludes  securities owned by John Cardona,  Mr. Cardona's  brother;
12,849 shares owned by Michael Cardona,  Mr. Cardona's  brother;  113,500 shares
owned by Peter Cardona,  Mr.  Cardona's  brother 465,000 shares owned by Valerie
Cardona,  Mr. Cardona's mother,  and 100,000 shares owned by Charles A. Cardona,
III,  Mr.  Cardona's  son,  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  9,000,000  shares  that may be  acquired  upon  exercise of stock
options  granted to Mr.  Cardona at exercise  prices ranging from $0.10 to $3.00
per share.  Excludes securities owned by Charles Cardona, Mr. Cardona's brother;
12,849 shares owned by Michael Cardona,  Mr. Cardona's  brother;  113,500 shares
owned by Peter Cardona,  Mr.  Cardona's  brother 465,000 shares owned by Valerie
Cardona,  Mr. Cardona's mother,  and 100,000 shares owned by Charles A. Cardona,
III, Mr. Cardona's  nephew,  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.

(3)  Includes  2,350,000  shares  that may be  acquired  upon  exercise of stock
options granted to Mr. Wasserman at exercise prices ranging from $0.125 to $3.00
per share.


                                       22
<PAGE>

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In prior periods,  the Company's officers advanced various monies to the Company
under formal  unsecured note documents  bearing  interest at 10.0%. The advances
were repayable in at least minimum  aggregate  monthly amounts of  approximately
$370.  During  Fiscal  2004,  no advances  were made and all amounts  previously
advanced amounts to Company officers were repaid in full.

The following table reflects the advances and repayments  during each of the two
years in the period ended March 31, 2005:

        Year ended March 31,             Advances        Repayments
                                  -----------------------------------
               2004                         none          $33,754
               2005                         none            none

In the opinion of management, the above-referenced  transactions are at least as
fair to the Company as we would  expect to  negotiate  with  unaffiliated  third
parties.

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibit
-------
3.1     Certificate of Incorporation **
3.2     By-Laws **
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 dated as of Thomas F. Gavin
10.4    Consulting  Agreement  dated as of February  5, 2002 with  International
        Standard Consulting Corporation +++
10.5    Employment Agreement dated February 5, 2004 with Charles Cardona
10.6    Employment Agreement dated February 5, 2004 with John Cardona
10.7    Systems  Integration  Agreement  dated as of June 21 2002 with  Raytheon
        Company
10.8    A-K  Consulting  agreements  with Kyle Kennedy Dated Aug. 19, 2002 - May
        22, 2003
10.9    Stipulation of Settlement with Sheldon Katz , Sept. 2002
10.10   Multimedia Web Site design contract with Jason Genet dated Oct. 16, 2002
10.11   Investment Banking Agreement with Spartan Securities dated Nov. 27, 2002
10.12   Agreement to borrow shares for stock loans dated Mar. 7, 2003
10.13   Joint Marketing agreement with Sarnoff Corp. dated Mar. 3, 2003
10.14   Warrant agreement with Tom Gavin dated Mar. 12, 2003
10.15   Agreement with Boeing Autometric Division dated April 2003.
23.1    Consent of Registered Independent Accounting Firm
31.1    Certification  by Chief  Executive  Officer and Acting  Chief  Financial
        Officer pursuant to Sarbanes Oxley Section 302.
32.1    Certification  by Chief  Executive  Officer and Acting  Chief  Financial
        Officer pursuant to 18 U.S. C. Section 1350

*     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.

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

+     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.


                                       23
<PAGE>

REPORTS ON FORM 8-K:

AdZone  filed seven  reports on form 8-K during the year ended  March 31,  2005.
Information regarding the items reported on is as follows:

DATE OF REPORT             ITEM REPORTED ON
--------------             ----------------
May 3, 2004             AdZone  Research,  Inc.  today  announced  that  it  has
                        elected A. Richard McCann to its Board of Directors.

May 27, 2004            AdZone  Rearch  entered into a  Subscription  Agreement,
                        with The Nutmeg Group,  L.L.C (the  "Purchaser"),  for a
                        private  placement  of up to  $1,750,000  for  shares of
                        common stock of the Company

August 4, 2004          Change in independent public accountants

September 9, 2004       AdZone   Research   Signs   $2.5   Million,   Multi-Year
                        Commercial Division Contract

September 13, 2004      AdZone  Research  and The  Justice  Fund  Join  Ranks to
                        Intercept  and  Prosecute  Digital  Privacy   Offenders,
                        Repatriate Funds and shut Them Down

 September 15, 2004     AdZone  Research  Announces  Distribution  of Restricted
                        Common  Stock and  Warrants  to  Shareholders  of Record
                        Amounting to More than $300,000

October 13, 2004        Adzone   sets   dividend   record   date  for   upcoming
                        distribution to shareholders.

ITEM 14- PRINCIPAL ACCOUNTANT FEES AND SERVICES

                        The Company paid or accrued the  following  fees in each
                        of the two fiscal years to Aidman, Piser & Company, P.A.
                        of Tampa,  Florida  and S. W.  Hatfield,  CPA of Dallas,
                        Texas:

                                     Year ended           Year ended
                                      March 31,            March 31,
                                         2005                2004
                                      ---------            ---------
(1)   Audit fees                      $ 148,929             $  26,613
(2)   Audit-related fees                     --                   --
(3)   Tax fees                               --                   --
(4)   All other fees                         --                   --
                                      ---------            ---------

   Totals                             $ 148,929            $  26,613
                                      =========            =========

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  defacto  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,  2005 and 2004 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, 2005, for filing with the Securities
and Exchange Commission.


                                       24
<PAGE>

                                   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, 2005                   By:  /s/ Charles Cardona
                                       ----------------------------------------
                                       Charles Cardona, Chief Executive Officer
                                       and Principal Financial and 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, 2005                 By:  /s/ Charles Cardona
                                       ----------------------------------------
                                       Charles Cardona, Chairman of the Board


Dated: July 13, 2005                 By:  /s/ John Cardona
                                       ----------------------------------------
                                       John Cardona, Director


Dated: July 13, 2005                 By:  /s/ Warren Hamburger
                                       ----------------------------------------
                                       Warren Hamburger, Director


Dated: July 13, 2005                 By:  /s/ Russell Ivy
                                       ----------------------------------------
                                       Russell Ivy, Director

Dated: July 13, 2005                 By:  /s/ Richard A. McCann
                                       ----------------------------------------
                                       Richard A. McCann, Director


                                       25
<PAGE>

                              ADZONE RESEARCH, INC.
                              FINANCIAL STATEMENTS
                       YEARS ENDED MARCH 31, 2005 AND 2004

                                    CONTENTS
                                                                           Page
                                                                           ----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                     F-2

FINANCIAL STATEMENTS

   Balance Sheet as of March 31, 2005                                       F-3

   Statements of Operations and Comprehensive Loss for the years
     ended March 31, 2005 and 2004                                          F-4

   Statements of Shareholders' Equity (Deficit) for the years ended
     March 31, 2005 and 2004                                                F-6

   Statements of Cash Flows for the years ended March 31, 2005 and 2004     F-8

   Notes to Financial Statements                                            F-10


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Adzone Research, Inc.

We have audited the accompanying  balance sheet of Adzone  Research,  Inc. as of
March 31, 2005, and the related statements of operations and comprehensive loss,
shareholders' equity (deficit) and cash flows for the years ended March 31, 2005
and  2004.  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.  We were not engaged
to perform an audit of the Company's internal control over financial  reporting.
Our audits included  consideration of internal control over financial  reporting
as  a  basis  for  designing  audit  procedures  that  are  appropriate  in  the
circumstances,  but  not  for  the  purpose  of  expressing  an  opinion  on the
effectiveness  of the  Company's  internal  control  over  financial  reporting.
Accordingly,  we express no such opinion. An audit includes examining, on a test
basis,  evidence  supporting  the  amounts  and  disclosures  in  the  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,  2005,  and the results of its  operations  and its cash flows for the years
ended  March  31,  2005 and  2004,  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 for a reasonable period.  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/ AIDMAN, PISER & COMPANY, P.A.


Tampa, Florida
July 7, 2005



                                      F-2
<PAGE>

                              ADZONE RESEARCH, INC.
                                  BALANCE SHEET
                                 March 31, 2005

                                     ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                       $    431,790
   Prepaid consulting fees and other expenses                            37,000
   Marketable securities                                                 22,501
   Assets restricted for dividend payments                              202,503
   Accounts receivable                                                    8,755
                                                                   ------------

     TOTAL CURRENT ASSETS                                               702,549
                                                                   ------------

PROPERTY AND EQUIPMENT, net of
  accumulated depreciation of $62,945                                    17,070

LEASEHOLD IMPROVEMENTS, net of
  accumulated amortization of $2,710                                      8,130

Restricted cash - preferred stock dividend reserve                          176
                                                                   ------------

    TOTAL ASSETS                                                   $    727,925
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
   Note payable                                                    $     50,000
   Accounts payable - trade                                              46,049
   Accrued expenses                                                     367,305
   Accrued dividends payable                                            202,503
   Deferred revenue                                                     132,329
   Accrued officer compensation                                          98,244
   Stock settlement liability                                         1,418,000
                                                                   ------------

     TOTAL CURRENT LIABILITIES                                        2,314,430
                                                                   ------------

LONG-TERM LIABILITIES
   Long-term debt                                                       291,783
                                                                   ------------

     TOTAL LIABILITIES                                                2,606,213
                                                                   ------------

COMMITMENTS AND CONTINGENCIES (Notes K, M and R)                           --

SHAREHOLDERS' DEFICIT
   Preferred stock - $0.001 par value;
     20,000,000 shares authorized:
       Series A - 50 shares authorized;
         2.12 shares issued and outstanding                              31,969
       Series B - 100 shares authorized;
         1 share issued and outstanding                                  11,500
   Common stock - $0.001 par value; 200,000,000
       shares authorized; 98,144,253 shares issued
       and outstanding                                                   98,144
   Additional paid-in capital                                         9,751,311
   Accumulated deficit                                              (11,730,947)
   Stock subscription receivable                                        (30,550)
   Treasury stock - at cost (25,000 shares)                              (2,215)
   Accumulated comprehensive loss                                        (7,500)
                                                                   ------------
     TOTAL SHAREHOLDERS' DEFICIT                                     (1,878,288)
                                                                   ------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                        $    727,925
                                                                   ============

See notes to financial statements.


                                      F-3
<PAGE>

                              ADZONE RESEARCH, INC.
                 STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                       YEARS ENDED March 31, 2005 AND 2004

                                                     2005               2004
                                                  -----------       -----------

REVENUES                                          $   332,037       $    74,844
                                                  -----------       -----------
PRODUCTION EXPENSES
   Salaries, wages and related costs                  381,267           393,288
   Direct occupancy and operating expenses            116,416           169,855
                                                  -----------       -----------
     Total production expenses                        497,683           563,143
                                                  -----------       -----------

GROSS (LOSS)                                         (165,646)         (488,299)
                                                  -----------       -----------

OPERATING EXPENSES
   Selling, general and marketing expenses:
     Salaries, wages and related costs              1,171,861         1,469,238
     Consulting and professional fees               1,705,805         1,038,963
     General and administrative expense               633,935           234,607
     Depreciation and amortization                     13,981             5,469
                                                  -----------       -----------
     Total operating expenses                       3,525,582         2,748,277

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

LOSS FROM OPERATIONS                               (3,691,228)       (3,236,576)

OTHER INCOME (EXPENSE)
   Interest and other income                           10,885               298
   Interest expense                                    (5,796)          (11,580)
   Write down of marketable securities                (36,813)             --
   Lawsuit settlement                                    --              (3,000)
   Loss on disposition of equipment                      --                (963)
   Derivative loss                                   (468,000)             --
                                                  -----------       -----------

NET LOSS                                           (4,190,952)       (3,251,821)

OTHER COMPREHENSIVE LOSS                               (7,500)             --
                                                  -----------       -----------

COMPREHENSIVE LOSS                                $(4,198,452)      $(3,251,821)
                                                  ===========       ===========

(Continued)


                                      F-4
<PAGE>

                              ADZONE RESEARCH, INC.
           STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS - CONTINUED
                       YEARS ENDED MARCH 31, 2005 AND 2004

                                                    2005               2004
                                               ------------        ------------

RECONCILIATON OF NET LOSS TO LOSS
ATTRIBUTABLE TO COMMON SHAREHOLDERS:

NET LOSS                                       $ (4,190,952)       $ (3,251,821)
                                               ------------        ------------
PREFERRED STOCK DIVIDENDS
     AND ACCRETIONS:
     Accretions of preferred stock
       carrying values to redemption
       values                                      (116,214)           (589,533)
     Preferred dividends paid                       (61,060)            (26,657)
                                               ------------        ------------
TOTAL PREFERRED STOCK DIVIDENDS AND
ACCRETIONS                                         (177,274)           (616,190)
                                               ------------        ------------
LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS                                   $ (4,368,226)       $ (3,868,011)
                                               ============        ============

LOSS PER COMMON SHARE:
   BASIC AND DILUTED LOSS PER
   COMMON SHARE                                $      (0.05)       $      (0.06)
                                               ============        ============
   WEIGHTED AVERAGE COMMON SHARES
   USED IN BASIC AND DILUTED LOSS
   PER COMMON SHARE                              83,746,186          62,374,341
                                               ============        ============

See notes to financial statements.

                                       F-5


<PAGE>

                              ADZONE RESEARCH, INC.
                   STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
                       YEARS ENDED MARCH 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                           Preferred Stock                 Common Stock            Additional
                                    ----------------------------    ---------------------------      paid-in      Accumulated
                                       Shares          Amount          Shares         Amount         capital        Deficit
                                    ------------    ------------    ------------   ------------   ------------    ------------
<S>                                 <C>             <C>             <C>            <C>            <C>             <C>
BALANCES, APRIL 1, 2003                       --    $         --      50,096,462   $     50,096   $  2,477,735    $ (3,261,524)

Issuance of preferred stock and
warrants:
   Series A Unit Offering (a)              34.85          51,528              --             --        296,972              --
   Series B Unit Offering (b)              31.00              --              --             --        310,000              --
Accretions of discounts
   on preferred stock                         --         589,533              --             --             --        (589,533)
Preferred stock dividends paid                --              --              --             --             --         (26,657)
Redemption of preferred stock:
   Series A Preferred Stock               (10.63)       (122,245)             --             --             --              --
Issuance of common stock for:
   Cash                                       --              --         772,333            773         61,127              --
   Exercise of stock options and
     warrants                                                 --       3,025,000          3,025        861,195              --
   Employee compensation                      --              --      14,054,000         14,054      1,388,926              --
   Professional services                      --              --       2,304,460          2,304        598,164              --
   Director fees                              --              --         280,000            280         30,520              --
   Cost of obtaining capital                  --              --         300,000            300          (300)              --
Purchase of treasury stock                    --              --              --             --             --              --
Issuance of stock options for
  services                                    --             --               --             --        543,020              --
Issuance of common stock warrants
  for services                                --              --              --             --        122,672              --
Net loss for the year                         --              --              --             --             --      (3,251,821)
                                    ------------    ------------    ------------   ------------   ------------    ------------
BALANCES, MARCH 31, 2004                   55.22    $    518,816      70,832,255   $     70,832   $  6,690,031    $ (7,129,535)

<CAPTION>
                                                        Stock         Treasury
                                                    subscription       Stock
                                                     receivable        at cost          Total
                                                    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>
BALANCES, APRIL 1, 2003                             $    (14,800)   $       --      $   (748,493)

Issuance of preferred stock and
warrants:
   Series A Unit Offering (a)                               --              --           348,500
   Series B Unit Offering (b)                               --              --           310,000

Accretions of discounts
   On preferred stock                                       --              --              --
Preferred stock dividends paid                              --              --           (26,657)
Redemption of preferred stock:
  Series A Preferred Stock                                  --              --          (122,245)
Issuance of common stock for:
   Cash                                                     --              --            61,900
   Exercise of stock options and warrants              (15,750)             --           848,470
   Employee compensation                                    --              --         1,402,980
   Professional services                                    --              --           600,468
   Director fees                                            --              --            30,800
   Cost of obtaining capital                                --              --              --
Purchase of treasury stock                                  --            (2,215)         (2,215)
Issuance of stock options for services                      --              --           543,020
Issuance of common stock warrants
  for services                                              --              --           122,672
Net loss for the year                                       --              --        (3,251,821)
                                                    ------------    ------------    ------------
BALANCES, MARCH 31, 2004                            ($    30,550)   $     (2,215)   $    117,379
                                                    ============    ============    ============
</TABLE>


INFORMATION ABOUT THE ALLOCATION OF PREFERRED UNIT OFFERING PROCEEDS:

(a)   Series  A Unit  Offering  proceeds  were  allocated  $51,528  to  Series A
      Preferred  Stock,  $147,884  to  warrants  and  $149,088  to a  beneficial
      conversion feature embedded in the Series A Preferred Stock.

(b)   Series B Unit Offering  proceeds were allocated $-0- to Series B Preferred
      Stock,  $176,146  to warrants  and  $133,854  to a  beneficial  conversion
      feature embedded in the Series B Preferred Stock.

See notes to financial statements.


                                      F-6
<PAGE>

                              ADZONE RESEARCH, INC.
             STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
                       YEARS ENDED MARCH 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                           Preferred Stock           Common Stock Additional
                                    ----------------------------    ---------------------------      paid-in      Accumulated
                                       Shares          Amount          Shares         Amount         capital        Deficit
                                    ------------    ------------    ------------   ------------   ------------    ------------
<S>                                 <C>             <C>             <C>            <C>            <C>             <C>
BALANCES, MARCH 31, 2004                   55.22    $    518,816      70,832,255   $     70,832   $  6,690,031    $ (7,129,535)

Issuance of common stock for:
   Cash                                     --              --        10,167,284         10,167        170,516            --
   Employee compensation                    --              --         2,570,000          2,570        280,638            --
   Exercise of stock options
     and warrants                           --              --         1,969,000          1,969        324,211            --
   Professional services                    --              --         6,253,232          6,254      1,050,404            --
   Conversion of Preferred Stock
     Series A                             (22.10)       (246,561)      2,614,941          2,615        243,946            --
     Series B                             (30.00)       (345,000)      3,169,340          3,169        341,831            --
   Warrant conversion                       --              --           568,201            568           (568)           --
Accretions of discounts
   on preferred stock                       --           116,214            --             --             --          (116,214)
Redemption of warrants                      --              --              --             --          (76,744)           --
Preferred stock dividends paid              --              --              --             --             --           (61,060)
Common stock dividends declared             --              --              --             --             --          (233,186)
Issuance of stock options
  for services                              --              --              --             --          121,101            --
Issuance of warrants for services           --              --              --             --          605,945            --
Derivative loss                             --              --              --             --             --              --
Unrealized loss on marketable
  securities                                --              --              --             --             --              --
Net loss                                    --              --              --             --             --        (4,190,952)
                                    ------------    ------------    ------------   ------------   ------------    ------------
BALANCES, MARCH 31, 2005                    3.12    $     43,469      98,144,253   $     98,144   $  9,751,311    $(11,730,947)
                                    ============    ============    ============   ============   ============    ============

<CAPTION>
                                            Stock          Treasury     Accumulated
                                         subscription        Stock     Comprehensive
                                          receivable        at cost         Loss            Total
                                         ------------    ------------    ------------    ------------
<S>             <C> <C>                  <C>            <C>            <C>            <C>
BALANCES, MARCH 31, 2004                 $    (30,550)  $     (2,215)  $       --     $    117,379

Issuance of common stock for:
   Cash                                          --             --             --          180,683
   Employee compensation                         --             --             --          283,208
   Exercise of stock options
     and warrants                                --             --             --          326,180
   Professional services                         --             --             --        1,056,658
   Conversion of Preferred Stock
     Series A                                    --             --             --             --
     Series B                                    --             --             --             --
   Warrant conversion                            --             --             --             --
Accretions of discounts
   on preferred stock                            --             --             --             --
Redemption of warrants                           --             --             --          (76,744)
Preferred stock dividends paid                   --             --             --          (61,060)
Common stock dividends declared                  --             --             --         (233,186)
Issuance of stock options for services           --             --             --          121,101
Issuance of warrants for services                --             --             --          605,945
Unrealized loss on marketable
  securities                                     --             --           (7,500)        (7,500)
Net loss                                         --             --             --       (4,190,952)
                                         ------------   ------------   ------------   ------------
BALANCES, MARCH 31, 2005                 $    (30,550)  $     (2,215)  $     (7,500)  $ (1,878,288)
                                         ============   ============   ============   ============
</TABLE>

See notes to financial statements.


                                      F-7
<PAGE>

                              ADZONE RESEARCH, INC.
                            STATEMENTS OF CASH FLOWS
                       YEARS ENDED MARCH 31, 2005 AND 2004

                                                         2005           2004
                                                     -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                          $(4,190,952)   $(3,251,821)
   Adjustments to reconcile net loss
     to net cash flows from operating activities
       Depreciation                                       13,981          5,469
       Derivative loss                                   468,000           --
       Loss on disposition of equipment                     --              963
       Write down of marketable securities                36,813
       Securities received in exchange for services     (300,000)          --
       Stock-compensation:
         Salaries, wages and bonuses                     318,059      1,656,750
         Professional services                         1,748,853      1,012,390
         Directors fees                                     --           30,800
       Changes in operating assets and liabilities:
         Prepaid expenses and other                       97,272        (98,897)
         Accounts receivable                              (8,755)          --
         Deposits and other assets                        38,179        (37,965)
         Accounts payable and accrued liabilities        115,382        130,343
         Accrued officers compensation                   (62,682)      (409,434)
         Deferred revenue                                132,329           --
                                                     -----------    -----------
NET CASH USED IN OPERATING ACTIVITIES                 (1,593,521)      (961,402)
                                                     -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
   Cash paid to purchase property and equipment          (28,758)        (5,250)
                                                     -----------    -----------
NET CASH USED IN INVESTING ACTIVITIES                    (28,758)        (5,250)
                                                     -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES
   Sale of common stock, including $950,000
    stock settlement liability in 2005                 1,456,863        910,370
   Sale of preferred stock                                  --          658,500
   Proceeds from long-term debt                          125,000        166,783
   Cash paid to redeem preferred stock                   (76,744)      (122,245)
   Cash paid for preferred stock dividends               (61,060)       (26,657)
   Principal paid on notes payable                       (12,787)        (3,171)
   Cash paid to acquire treasury stock                      --           (2,215)
                                                     -----------    -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES              1,431,272      1,581,365
                                                     -----------    -----------
INCREASE (DECREASE) IN CASH                             (191,007)       614,713
Cash and cash equivalents, beginning of period           622,797          8,084
                                                     -----------    -----------
Cash and cash equivalents, end of period             $   431,790    $   622,797
                                                     ===========    ===========

See notes to financial statements.


                                      F-8
<PAGE>

                              ADZONE RESEARCH, INC.
                      STATEMENTS OF CASH FLOWS - CONTINUED
                       YEARS ENDED MARCH 31 2004 AND 2005



                                                         2005           2004
                                                     ------------   ------------


SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID

     Interest paid during the period                 $      5,796   $      6,029
                                                     ============   ============
     Income taxes paid during the period             $         --   $         --
                                                     ============   ============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

     Stock investment declared as
       a property dividend                           $    233,186   $         --
                                                     ============   ============
     Unrealized loss on available for
       sale marketable securities                    $      7,500   $         --
                                                     ============   ============
     Reduction in value of property
       declared as dividends                         $     30,683   $         --
                                                     ============   ============

See notes to financial statements.


                                      F-9
<PAGE>

                              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  Company  follows  the  accrual  basis  of  accounting  in  accordance  with
accounting principles generally accepted in the United States of America. AdZone
originally  elected a year-end of December  31.  Concurrent  with the August 10,
2001 business combination transaction,  the Company's Board of Directors changed
AdZone's year-end to March 31.

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
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS


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  for a  reasonable  period.  As  noted  in  the  accompanying  financial
statements,  the Company  incurred a net loss of  ($4,190,952)  and used cash of
($1,593,521) in conducting its operations  during the year ended March 31, 2005.
These  recurring  negative  trends raise  substantial  doubt about the Company's
ability to continue as a going concern.

Operating  cash flows for the fiscal year ended March 31, 2006 are not projected
to be  sufficient  to sustain  the  Company's  operations.  However,  management
currently believes that existing cash reserves of $431,790 as of March 31, 2005,
coupled with a potential  commitment  for  approximately  $750,000 in connection
with the Nutmeg  Subscription  Agreement  will be sufficient  to fund  operating
deficits for a period of  approximately  twelve months following March 31, 2005.
There can be no assurances  that Adzone will,  in fact,  receive the $750,000 in
conjunction with the subscription agreement. 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,
2005:


                                      F-11
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE C - GOING CONCERN UNCERTAINTY (CONTINUED)

      a.    Management does not believe that the significant  level of cash used
            in operations  during the year ended March 31, 2005  ($1,593,521) is
            indicative of cash flow usage during the next four fiscal  quarters.
            Cash flow from  operations  during the current  period  included two
            amounts,  as follows,  that increased cash usage.  First, a bonus of
            $320,000  was  awarded to two  officers  by the  Company's  Board of
            Directors during the second quarter.  Accordingly,  at this time, no
            further officer bonuses are contemplated.  Second,  the Company used
            cash proceeds from the Nutmeg Subscription  Agreement to pay certain
            current  and past  due  accounts  payable  and  accrued  liabilities
            amounting  to  approximately  $263,000.  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.

      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, 2005, based upon ongoing discussions
            with the vendors,  management  believes  that they will  continue to
            accept such securities in the foreseeable future.

      c.    The  Company  completed  a three  month U.S.  Department  of Defense
            contract in the second quarter of fiscal 2005 and collected $150,000
            for said contract.  Management of the Company is optimistic that the
            success of this contract  will lead to follow up contracts  with the
            government,  although  no such  contracts  have  yet  been  awarded.
            However,  management is actively negotiating three such proposals in
            the Defense Industry arena.

      d.    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,  if any,  may result in
            additional   modifications   and  expenditures  at  the  request  of
            customers.

      e.    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 with the U.S.  Department of
Defense and 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's  ability to continue  as a going  concern is  dependent  upon the
preservation  of existing cash  reserves,  the receipt of the final  conditional
traunch of the Nutmeg Subscription Agreement 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-12
<PAGE>

                              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.    Assets restricted for dividend payments

      Consists of marketable  securities valued at $67,503 at March 31, 2005 and
      1,500,000 shares of the Justice Fund valued at $135,000 at March 31, 2005.

4.    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  which 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.

5.    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.

6.    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.

7.    Advertising expenses

      Advertising and marketing  expenses are charged to operations as incurred.
      Advertising  expense  for the years  ended  March  31,  2005 and 2004 were
      $158,642 and $13,850, respectively.


                                      F-13
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

8.    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.

9.    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, 2005 and 2004, 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 31
                                                     2005         2004
                                                  ----------    ----------
      Options and warrants outstanding to
          purchase common stock                   26,152,699    19,270,695
        Preferred stock convertible to
          common stock                               282,273     1,697,941


                                      F-14
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

10.   Stock-based compensation

      The Company  uses  stock-based  compensation  arrangements  to  compensate
      employees and professional service providers and consultants.  The Company
      accounts   for  and  reports   its   stock-based   employee   compensation
      arrangements using the intrinsic method outlined in Accounting  Principles
      Board Opinion No. 25 Accounting  for Stock Issued to Employees and related
      interpretations.  In all instances,  involving  employee and  non-employee
      stock-based compensation, the Company uses the trading market value of the
      common stock on the date of the award to measure  compensation expense and
      recognizes  the  compensation  expense 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 were used:

                                                 March 31,    March 31,
                                                   2005         2004
                                              ------------   -----------
      Net loss attributable to common
        stockholders, as reported             $(4,190,226)   $(3,868,011)
                                              ============   ===========
      Stock-based employee compensation
       included in net loss                   $  (318,059)   $(1,656,750)
                                              ============   ===========
      Stock-based employee compensation
       using the fair value model             $ (1,954,917)  $(4,739,313)
                                              ============   ===========
      Pro forma net loss attributable to
        common stockholders, using
        the fair value method                 $ (5,827,084)  $(6,950,574)
                                              ============   ===========


                                      F-15
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

10.   Stock-based compensation (continued)

       Loss per share attributable to common
        shareholders, as reported                      $    (0.05)   $    (0.05)
                                                     ============   ===========
       Pro forma net loss per share attributable
        to common shareholders                         $    (0.07)   $    (0.11)
                                                     ============   ===========

      The Black  Scholes  Valuation  Model is used to  estimate  fair  values of
      employee  stock  options.  Significant  assumptions  included  an  average
      expected term of sixty months;  a volatility  factor of 360%;  and, a risk
      free interest rate of 3.0%.

11.   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.

12.   Derivative financial instruments

      The Company accounts for derivative  financial  instruments indexed to and
      potentially  settled in, its own stock in accordance  with Emerging Issues
      Task Force 00-19,  which provides that if the number of shares deliverable
      in a  transaction  be  indeterminable,  that said shares be presented as a
      liability in the balance sheet.  Further,  the liability is to be measured
      at fair value until such time as the  obligation  is  settled.  The shares
      issued in connection with the Nutmeg  Subscription  Agreement discussed in
      Item 6 "Managmement Discussion and Analysis",  under the heading Liquidity
      and  Capital  Resources  and  Note  O  to  the  financial  statements  are
      derivative   transactions   and  as  such  have  been   presented  in  the
      accompanying  balance  sheet as  liabilities.  The  difference in the fair
      value of this  liability at each  financial  reporting  date is charged to
      operations.

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-16
<PAGE>

                              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,  2005 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,  2005 the  Company  generated  revenues  from 2
customers representing 50% and 45% of total revenues,  respectively.  During the
year ended March 31, 2004 the Company  generated  revenues from 1 customer which
represented 95% of total revenues.


                                      F-17
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS



NOTE G - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at March 31, 2005:


      Computer equipment                                         $ 67,517
      Office furniture and other equipment                         12,498
                                                                 --------
                                                                   80,015
      Less accumulated depreciation                               (62,945)
                                                                 --------

      Net property and equipment                                 $ 17,070
                                                                 ========

Depreciation expense for the years ended March 31, 2005 and 2004 was $11,271 and
$5,469, respectively.

Leasehold improvements consist of the following at March 31, 2005:

      Leasehold improvements                                     $ 10,840
      Less accumulated amortization                                (2,710)
                                                                 --------
      Net leasehold improvements                                 $  8,130
                                                                 ========

Amortization  expense  for the year ended March 31, 2005 was $ 2,710 and -0- for
the year ended March 31, 2004.

Note H - ACCRUED EXPENSES

Accrued expenses consist of the following at March 31, 2005:

      Accrued bonuses                                            $ 50,000
      Accrued payroll                                             113,283
      Other accrued expenses                                      204,022
                                                                 --------
                                                                 $367,305
                                                                 ========

NOTE I - NOTE PAYABLE


Note payable consists of an unsecured installment note payable to an individual.
Interest  at 15.0%  paid in  advance  with the  issuance  of  250,000  shares of
restricted,  unregistered  common  stock  to  the  lender.  Payable  in  monthly
installments of $1,000  commencing  September 1, 2001 and each successive  month
until paid in full.  Scheduled payments are in default at March 31, 2005 and the
entire  amount  is  classified  as  "current"  in  the  accompanying   financial
statements. On April 14, 2005, the Company issued 550,000 shares of common stock
to the note holder in lieu of the $50,000 loan repayment.


                                      F-18
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE J - LONG-TERM DEBT

Long-term debt consists of the following at March 31, 2005:

Four   separate   notes   payable  to  a   non-financial
institution  investment  corporation.  Interest  at  the
prevailing  Prime Rate plus 100 basis  points  (5.00% at
March 31,  2005),  payable  quarterly in arrears plus an
origination  fee equal to 1.0% of the principal  amount.
Principal payable in full in May 2006. Collateralized by
shares  of  the  Company's  common  stock   (aggregating
approximately  7,958,121  shares  at  March  31,  2005),
placed in escrow with the lender's brokerage firm, owned
by the Company's  Chief  Executive  and Chief  Operating
Officers, respectively.                                               $  166,783

Two unsecured  notes payable with maturity  dates of May
2006 that were converted into convertible  debentures in
May 2005. See subsequent events footnote S.                              125,000
                                                                     -----------
                                                                     $   291,783
                                                                     ===========

NOTE K - OFFICERS COMPENSATION

On February 5, 2004, 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 February 5, 2007. This agreement  contains the following terms
and conditions:

Position:                      CEO
Effective Date:                February 5, 2004
Base Salary:                   2004 - $161,000 annual
                               2005 - $181,000 annual
                               2006 - $191,000 annual

The initial  base salary  shall be reduced to $1,500 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 $ 10,000
                               2nd Year, Year end Qualitative Bonus of $ 25,000
Profitability Bonus:           If the company reaches annual profitability
                               employee will receive a $100,000 bonus plus
                               250,000 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.


                                      F-19
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE K - OFFICERS COMPENSATION (CONTINUED)


The  Board of  Directors  shall  at its  discretion  grant  up to an  additional
$100,000 in bonus to CCardona on an annual basis.

Stock Options:     The employee received options to purchase 3,000,000 (three
million) shares as follows:
                               Options for 750,000 shares at $.85 (85 cents)
                               Options for 750,000 shares at $1.00 (1 dollar)
                               Options for 750,000 shares at $1.50
                                 (1 dollar and 50 cents)
                               Options for 750,000 shares at $1.75
                                 (1 dollar and 75 cents)

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.

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

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 fee's legal fees, misc. 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.


                                      F-20
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE K - OFFICERS COMPENSATION (CONTINUED)

On February 5, 2004, 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
February 5, 2007. This agreement contains the following terms and conditions:

Position:                      COO
Effective Date:                February 5, 2004
Base Salary:                   2004 - $161,000 annual
                               2005 - $181,000 annual
                               2006 - $191,000 annual

The initial  base salary  shall be reduced to $1,500 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 $ 10,000
                               2nd Year, Year end Qualitative Bonus of $ 25,000

Profitability Bonus:           If the company reaches annual profitability
                               employee will receive a $100,000 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.

The  Board of  Directors  shall  at its  discretion  grant  up to an  additional
$100,000 in bonus to JCardona on an annual basis.

Stock Options:   The employee received options to purchase
                 3,000,000 (Three Million) shares as follows:
                     Options for 750,000 shares at $.85 (85 cents)
                     Options for 750,000 shares at $1.00 (1 dollar)
                     Options for 750,000 shares at $1.50 (1 dollar and 50 cents)
                     Options for 750,000 shares at $1.75 (1 dollar and 75 cents)


                                      F-21
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE K - OFFICERS COMPENSATION (CONTINUED)

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.

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

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 fee's legal fees, misc. 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.

On February 5, 2004,  the Company  entered  into an  Employment  Agreement  with
Daniel Wasserman (Wasserman), which superceded all prior agreements, to serve as
its  Executive  Vice  President  and Managing  Director of Global  Defense Group
through  June 30, 2005.  Under this  agreement,  Wasserman  receives a salary of
$175,000 per year, commencing upon closing of a paid sale or completed financing
of  $1,500,000  or more.  Until such time,  the Company  shall pay  Wasserman an
interim  salary  beginning at $900 per week.  The salary will increase by $1,000
per month upon the first paid sale of  $100,000 or more made by  Wasserman.  The
salary will then increase by an additional  $1,500 per month upon each paid sale
of $100,000 or more made by Wasserman.  These  increases will continue until the
standard base salary of $175,000 per year is reached. This salary is independent
of any  commission,  which may be earned and paid. The Board of Directors at its
discretion and option may vote to give the employee up to an additional  $75,000
in bonus and up to 300,000  shares of stock.  The Company  shall pay Wasserman a
bonus of 100,000  shares upon the  contracting  of a sale of $1,000,000 or more.
Wasserman  shall be entitled to 4 weeks paid vacation,  plus 10 holiday days off
per year. Unused vacation will be paid at the end of the year.  Medical benefits
will be paid by the Company  once the board begins  coverage  for the  employee.
Additional  compensation for consulting  contracts brought in will be negotiated
on a case by case  basis.  This  commission  shall be  payable  when  funds  are
received  by the  company and shall be paid to the  employee  regardless  of the
salary status.

As of March 31,  2005,  there was  $98,244  unpaid  under  the  agreements  with
CCardona and JCardona.

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

Year ending
 March 31,               Amount
   2006                   365,333
   2007                   353,000
                       ----------
  Totals               $  718,333
                       ==========


                                      F-22
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS




NOTE L - INCOME TAXES

The  components  of income tax benefit  (expense)  for the years ended March 31,
2005 and 2004, respectively, are as follows:


                                            2005                   2004
                                         ---------               --------
                       Federal:
                         Current         $      --               $     --
                         Deferred               --                     --
                                         ---------               --------
                       State:
                         Current                --                     --
                         Deferred               --                     --
                                         ---------               --------

                       Totals             $     --               $     --
                                          =========              ========

As of March 31,  2005,  the Company has a net  operating  loss  carryforward  of
approximately  $7,900,000 to offset future  taxable  income.  Subject to current
regulations,  this  carryforward  will  begin to expire in 2020.  The amount and
availability  of  the  net  operating  loss  carryforwards  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 carryforwards and the possible permanent loss of a portion of
the carryforwards.


                                      F-23
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS



NOTE L - INCOME TAXES (CONTINUED)

The  Company's  income tax  expense for the years ended March 31, 2005 and 2004,
respectively, differed from the statutory federal rate of 34 percent as follows:


                                                          2005          2004
                                                      -----------   -----------
Statutory rate applied to loss before income taxes    $ 1,425,000   $ 1,120,000
Increase (decrease) in income taxes resulting from:
    Non-deductible charges:
      Expenses not deductible for income taxes           (135,000)         --
    Change in deferred tax asset valuation allowance   (1,360,000)   (1,160,000)
    Other                                                  70,000        40,000
                                                      -----------   -----------
      Income tax expense                              $      --     $      --
                                                      ===========   ===========


                                                        March 31,     March 31,
                                                          2005          2004
                                                      -----------   -----------
Deferred tax assets
   Net operating loss carryforwards                   $ 3,000,000   $ 1,950,000
   Stock based compensation                               260,000          --
   Deferred revenue                                        50,000          --
   Less valuation allowance                            (3,310,000)   (1,950,000)
                                                      -----------   -----------
     Net Deferred Tax Asset                           $      --     $      --
                                                      ===========   ===========

During the years  ended  March 31,  2005 and 2004,  the the  deferred  tax asset
valuation  allowance  increased  by  approximately  $1,360,000  and  $1,160,000,
respectively.


                                      F-24
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS



NOTE M - PREFERRED STOCK

Preferred stock consists of the following at March 31, 2005:

                                                         March 31, 2005
                                                --------------------------------
                                                Shares      Carrying  Redemption
                                                              Value      Value
                                                --------  -----------  ---------

9.0% Series A Cumulative Convertible Stock       2.78         31,969   $  31,969
9.0% Series B Cumulative Convertible Stock       1.00         11,500      11,500
                                                ------      -------   ----------
     Totals                                      3.78       $ 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
<PAGE>

                              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, 2005,  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
<PAGE>

                              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, 2005,  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.

During  the  twelve  months  ended  March  31,  2005,  21.40  shares of Series A
Preferred  Stock and 30 shares of Series B  Preferred  Stock were  converted  to
2,614,941 and 3,169,340 shares of common stock, respectively.

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.  At March  31,  2005,  approximately  $176 was in a bank  account
maintained by the Company's Escrow Agent for the payment of monthly 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 Proceeds
                              -----------------------------
                              Series A Preferred                  Total
                                    Stock          Warrants      Proceeds
                                  ---------       ---------     ---------
Series A Unit Offering            $ 197,525       $ 150,975     $ 348,500
                                                  =========     =========
Beneficial conversion feature      (145,997)
                                  ---------
Initial carrying value            $  51,528
                                  =========


                                      F-27
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

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

                                        Initial
                                 Allocation of Proceeds
                              -----------------------------
                              Series B Preferred                  Total
                                    Stock          Warrants      Proceeds
                                  ---------       ---------     ---------
Series B Unit Offering            $ 133,853       $ 176,147     $ 310,000
                                                  =========     =========
Beneficial 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
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE O - COMMON STOCK TRANSACTIONS

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.

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.

During  Fiscal  2005 and 2004,  the Company  issued  27,311,998  and  20,735,793
shares,  respectively,  of common  stock,  in both  registered  and  restricted,
unregistered form.

On July 20, 2004,  November 5, 2004 and February  23,  2005,  the Company  filed
separate Registration  Statements on Form S-8 registering 5,000,000,  12,400,000
and 3,500,000 shares of common stock, respectively.

The  following  table  recaps the status of each of the  Company's  Registration
Statements on Form S-8:
                                  Cumulative      Cumulative
                                   number of       number of         Remaining
                                    shares          shares             to be
                                  registered        issued            issued
                               -------------     -------------     -------------
     Filing dated 7/20/04          5,000,000       4,393,102            606,898
     Filing dated 11/5/04         12,400,000           ---           12,400,000
     Filing dated 2/23/05          3,500,000           ---            3,500,000

The following table presents stock issuances during Fiscal 2005 and 2004:

                                                     Total
                                                  ----------
      Balances at March 31, 2003                  50,096,462

        Cash                                       3,797,333
        Capital formation and public relations       300,000
        Consulting and legal services              2,304,460
        Directors fees                               280,000
        Personnel compensation                    14,054,000
                                                  ----------
      Balances at March 31, 2004                  70,832,255


                                      F-29
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE O - COMMON STOCK TRANSACTIONS (CONTINUED)

           Balances at March 31, 2004             70,832,255

        Cash (a)                                  12,136,284
        Consulting and legal services              6,253,232
        Personnel compensation                     2,570,000
        Conversion of preferred stock
             Series A                              2,614,941
             Series B                              3,169,340
        Conversion of warrants                       568,201
                                                  ----------

      Balances at March 31, 2005                  98,144,253
                                                  ==========

      (a) As part of common  stock sold for cash,  during May 2004,  the Company
      entered into a Subscription Agreement with an unaffiliated investor. Under
      the terms of the  Subscription  Agreement,  the Company  received  cash of
      $950,000  (net of $50,000  of  expenses)  during the year ended  March 31,
      2005. The Company is to receive  additional  cash of $750,000  within five
      days of registering  the common shares and warrants  issued as a result of
      the  Subscription  Agreement.  The number of common shares to be issued is
      equal to the amount  received  divided  by the lesser of $.20,  57% of the
      average  closing  bid  price  for  common  stock on the two  trading  days
      immediately prior to closing on the sale or 57% of the average closing bid
      price of the  Company's  common stock on the two trading days  immediately
      prior  to the  date  on  which  the  registration  statement  is  declared
      effective  ("Fixed  Price").  The proceeds from this transaction have been
      classified as Stock  Settlement  Liability at March 31, 2005. In addition,
      the Subscription Agreement provides for the issuance of warrants equal 50%
      of the purchase price of the common stock divided by the Fixed Price.  The
      warrants  expire in  December  2008 and are  exercisable  at 71.25% of the
      average  closing  bid  price  for  common  stock on the two  trading  days
      immediately  prior to filing a registration  statement with the Securities
      Exchange   Commission   (the   Company  is  required   to   register   the
      aforementioned  shares  as  well as the  shares  underlying  common  stock
      warrants).

      As a result of the above  Subscription  Agreement,  at March 31, 2005, the
      Company has issued 7,572,284 shares of common stock,  which represents the
      minimum number of shares to be issued under the Subscription  Agreement in
      exchange for cash received  through March 31, 2005. The ultimate number of
      shares to be issued is  indeterminate as the number of shares is dependent
      on the  Company's  closing  bid price  when a  registration  statement  is
      declared  effective.  As a result, the $950,000 of cash received under the
      Subscription Agreement through March 31, 2005 is included in liabilities.

      At March 31,  2005,  the  Company  measured  the value of the shares to be
      issued under the  Subscription  Agreement  through March 31, 2005 based on
      the  Company's  closing bid price at March 31, 2005 compared to the actual
      shares issued.  As a result of this  measurement,  an additional  $468,000
      liability was recorded as of March 31, 2005 with a charge to operations.


                                      F-30
<PAGE>

NOTE P - STOCK OPTIONS

2004 Stock Option Plan

The  Company  has  adopted  a stock  option  plan  (the  "2004  Plan")  covering
12,400,000  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  2004  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 the date of  grant.
Options shall vest over a period of no longer than 5 years.

Notwithstanding,  the term of an incentive  stock option  granted under the 2004
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.


2005 Incentive Stock Option Plan

The Company has adopted a stock option plan (the "2005 Plan") covering 3,500,000
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 2005 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 the date of grant. Options shall vest over a
period of no longer than 5 years.

Notwithstanding,  the term of an incentive  stock option  granted under the 2005
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.

In August 2001, pursuant to an employment  agreement which superceded an earlier
agreement  dated January 29, 2001,  with Charles  Cardona,  the Company's  Chief
Executive  Officer,  the Company  granted  options to  purchase up to  1,000,000
shares  of  common  stock at a price of $0.10  per  share.  The  options  vested
immediately  upon  execution of this  employment  agreement and expire in August
2006.

In August 2001, pursuant to an employment  agreement which superceded an earlier
agreement  dated  February  9,  2001,  with John  Cardona,  the  Company's  then
President and Chief Operating  Officer,  the Company granted options to purchase
up to  1,000,000  shares of  common  stock at a price of $0.10  per  share.  The
options  vested  immediately  upon  execution of this  employment  agreement and
expire in August 2006.

Pursuant to  replacement  employment  contracts,  executed in February 2004, the
Company has granted  options to purchase up to 3,000,000  shares of common stock
each to Charles  Cardona and John Cardona at exercise  prices ranging from $0.85
to $1.75 per share.  These options  vested  immediately  upon  execution of each
respective employment agreement and expire in February 2010.

At various times during  Fiscal 2005 and 2004,  the Company  granted  short-term
options (generally with a term of 30 days) to Kyle Kennedy to assist the Company
with business strategy,  business development and mergers and acquisitions.  Mr.
Kennedy's  compensation was in the form of options to purchase registered freely
trading  securities at various  discounts to the then current Market price.  The
agreement  was on a month to month basis  cancelable at 30 days notice by either
party.


                                      F-31
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS


NOTE P - STOCK OPTIONS (CONTINUED)

                                                       Weighted average exercise
                                                            price per share
                                                           ----------------

     Options outstanding at April 1, 2003     4,000,000         $0.10
       Issued                                12,925,000          1.02
       Exercised                             (3,025,000)         0.28
       Expired/Terminated                    (3,700,000)           --
                                             ----------         -----

     Options outstanding at March 31, 2004   10,200,000         $1.04
       Issued                                 2,350,000          0.21
       Exercised                             (1,969,000)         0.22
       Expired/Terminated                            --            --
                                             ----------         -----
     Options outstanding at March 31, 2005   10,581,000         $0.86
                                             ==========         =====


The  weighted-average  remaining  contractual life of the options outstanding at
March 31, 2005 was 3.86 years.  The following  table  summarizes the outstanding
options at March 31, 2005:

                                                     Weighted        Weighted
                                                     Average          Average
Range of              Stock Options                 Remaining        Exercise
 Prices          Outstanding  Exercisable             Life             Price
----------       -----------  -----------            --------         --------
$0.10              2,000,000   2,000,000             1.00 yrs          $0.10
$0.21                581,000     581,000             0.24 yrs          $0.21
$0.85              2,150,000   2,150,000             4.77 yrs          $0.85
$1.00              1,750,000   1,750,000             4.71 yrs          $1.00
$1.50              1,950,000   1,950,000             4.74 yrs          $1.50
$1.75              1,700,000   1,700,000             5.00 yrs          $1.75
$2.00                450,000     450,000             3.89 yrs          $2.00
                 ----------   ----------
                  10,581,000  10,581,000
                 ===========  ==========

All  2,350,000  options  granted  during  the year ended  March 31,  2005 had an
exercise price that was less than the market price.  The  weighted-average  fair
value of those  options was $0.23 and the  weighted-average  exercise  price was
$0.21.


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-32
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE Q - STOCK WARRANTS

On August 13,  2002,  pursuant  to an  agreement  with Thomas  Gavin  (Gavin) to
provide informational and educational news releases and distribute said releases
to the news media,  the  Company  issued  580,000  warrants to purchase up to an
equivalent  number of shares of the  Company's  common stock at a price of $0.15
per share.  Each of these warrants is for a three year term and expire on August
13, 2005. During Fiscal 2004, the Company issued an additional aggregate 250,000
warrants as compensation to Gavin to facilitate the purchase up to an equivalent
number of shares of the Company's  common stock at exercise  prices ranging from
$0.15 to $0.85 per share.  Each of these warrants  expire on the 2nd anniversary
date of issuance. During Fiscal 2005, the Company issued an additional aggregate
300,000  warrants as  compensation  to Gavin to facilitate the purchase up to an
equivalent  number of shares of the  Company's  common stock at exercise  prices
ranging from $0.12 to $0.43 per share.  Each of these warrants expire on the 2nd
anniversary date of issuance.

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. The warrants have an exercise price calculated
using the average  closing  bid price for the 5 trading day period  prior to the
receipt of cleared  funds from the  purchaser  times 115%.  Each  warrant  shall
expire on the 5th anniversary date of the Private Placement  Memorandum,  August
12, 2008.

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.  The warrants  have an exercise  price
calculated  using the  average  closing  bid price for the 5 trading  day period
prior to the  receipt  of cleared  funds from the  purchaser  times  115%.  Each
warrant  shall  expire  on the 5th  anniversary  date of the  Private  Placement
Memorandum, November 17, 2008.

As additional  compensation for investment banking services,  Spartan Securities
Group,  Inc.  received  warrants  in fiscal  2004 and 2003 to  purchase up to an
aggregate  1,523,463  shares of common  stock at a price of either  $0.0874  per
share  (114,416  shares),  $0.07 per share  (995,714  shares) or $0.20 per share
(413,333  shares).  On October 7, 2004,  Spartan  Securities  exercised  877,572
warrants  which were  converted to 568,201  shares of common  stock.  On May 25,
2004,  Adzone  redeemed  232,228  warrants for $76,744.  The  remaining  413,333
warrants are still outstanding and expire in November 2008.

On May 20, 2004,  the Company  entered into a  Subscription  Agreement  with The
Nutmeg  Group,  L.L.C.  for the  issuance  of the  Company's  common  shares and
warrants to purchase additional common shares. See further discussion in Item 6:
Management's Discussion and Analysis, under the heading, "Liquidity".

During the year ended March 31, 2005, the Company entered into various contracts
for  professional  services and in  consideration  thereof  granted  warrants to
purchase up to 3,525,000 shares of the Company's common stock at exercise prices
ranging from $0.14 to $5.00. These warrants expire from 2006 through 2010.


                                      F-33
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE Q - STOCK WARRANTS (CONTINUED)


The following table summarizes the outstanding warrants as of March 31, 2005:

                                            Warrants
                                           originally      Exercise price
                                             issued         per share
                                           ----------     --------------
Outstanding, April 1, 2003                  1,989,047
  Gavin warrants                              250,000      $0.15 - $0.85
  9.0% Series A Preferred Stock Warrants    4,376,094      $0.07406 - $0.13858
  9.0% Series B Preferred Stock Warrants    2,091,138      $0.14819 - $0.15
  Underwriter's Warrants                      114,416      $0.874
  NuQuest Consulting warrants                 250,000      $0.15
                                           ----------
Outstanding, March 31, 2004                 9,070,695       $0.07 - $0.85
  Warrants issued                           7,611,134       $0.12 - $5.00
  Warrants exercised                         (877,572)      $0.07 - $0.807
  Warrants expired                                 --
  Warrants redeemed                          (232,558)      $0.07
                                           ----------
Outstanding, March 31, 2005                15,571,699
                                           ==========

The  weighted-average  exercise price of the Company's  outstanding  warrants at
March 31, 2005 is approximately $0.34 per share.


                                      F-34
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS



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.

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 $4,222 per month for year 5.

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

                                  Year ending
                                   March 31,                Amount

                                     2006                  $ 48,951
                                     2007                    50,188
                                     2008                    25,332
                                                          ---------

                                     Total                $ 124,471
                                                          =========

Rent  expense  for the years  ended  March  31,  2005 and 2004 was  $36,642  and
$21,600, respectively.


                                      F-35
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE R - COMMITMENTS AND CONTINGENCIES

Consulting Agreement

On March 21, 2005, the Company entered into a twelve month Consulting  Agreement
with PAW &  Associates  and/or  Paul  Weaver to provide  various  product  sales
services. In conjunction with the terms of the agreement, the Company has issued
warrants  to purchase up to 250,000  shares of Adzone  common  stock at a strike
price of $1.00.  These  warrants  expire March 21, 2007.  Adzone agrees to pay a
2.0%  commission on the first $1 million of acquired  contract value and 5.0% on
all acquired contract values in excess of $1 million.  Adzone will also issue an
additional  200,000  warrants  with a strike  price of  $1.00  and a three  year
exercise period upon the first $1 million in contract value.

Investment Banking agreement

On April 6, 2004,  the  Company  executed  a  non-exclusive  Financial  Advisor,
Investment  Bank  and  Placement   Agent   Agreement  with  Hartsfield   Capital
Securities,  Inc. of Atlanta,  Georgia  (Hartsfield) whereby Hartsfield will use
its  "best   efforts"   to  assist   the   Company   in  one  or  more   capital
investments/fundings  which  might  result  in  a  private  placement,   merger,
acquisition, sale of assets, sale of common stock, sale of ownership interest or
any other financial transaction as defined in this agreement. This agreement had
an  initial  term of one year and  expired  April 6, 2005.  For these  services,
Hartsfield  was to receive a success  fee of 6.0% of the gross  proceeds  on all
common  debt  financing;  10.0%  of  the  gross  proceeds  on  any  hybrid  debt
(convertibles,  warrants,  etc.);  10.0% of the  gross  proceeds  on any  equity
raised;  10.0% of the gross  proceeds  on all  closings  from  Transactions  (as
defined) with an Investor Candidate or a Strategic Candidate (as defined); 10.0%
on the gross  proceeds  received from any mezzanine  loan or other  subordinated
form of indebtedness;  and 10.0% of the Aggregate  Consideration (as defined) of
any merger or acquisition introduced by Hartsfield.

Hartsfield was successful in obtaining a capital  investment of $1,750,000  with
The Nutmeg Group, of which $750,000 is still  unfunded,  through the sale of the
Company's common stock.

Additionally,  Hartsfield  is due warrants to purchase  shares of the  Company's
common  stock equal to 20.0% of the value of such  transactions  for  successful
common stock equity raised at 100.0% of the market price of the Company's common
stock at the closing of such  transaction for a period of two (2) years,  and/or
to grant Hartsfield  warrants to purchase that number of shares of the Company's
common  stock equal to 20.0% of the value of such  transactions  for  successful
preferred stock, debt, hybrid debt of any kind (convertibles, warrants, etc.) or
debt  and  equity  combination  raised  at  100.0%  of the  market  price of the
Company's  common stock at the closing of such  transaction  for a period of two
(2) years.  These stocks shall be delivered on a cashless  exercise and issuable
from the investment closing date up to no more than five (5) years from the date
and upon exercise thereof.  The stock obtainable under these warrants shall have
"piggyback"  registration  rights on the next Registration  Statement filed with
the U. S. Securities and Exchange Commission after their issue.


                                      F-36
<PAGE>

                              ADZONE RESEARCH, INC.
                          NOTES TO FINANCIAL STATEMENTS

Note S - SUBSEQUENT EVENTS

Convertible debentures

In May 2005,  two long term debt notes  aggregating  $125,000 were  converted to
Series A Redeemable Convertible Debentures ("debentures"). The debentures mature
May 6, 2006, bear interest at 9%, and are  convertible at a conversion  price of
$.07 per share.  Simultaneous  to the issuance of the debenture  agreement,  the
Company  also issued  warrants to the same note holders to purchase an aggregate
of  1,785,715  shares of the  Company's  common  stock at $.07 per share.  These
warrants expire on May 2, 2010.


Equity Transactions:

During  the  period  April 1, 2005  through  July 7, 2005 the  following  equity
transactions occurred:

      o     The Company sold  2,414,448  shares of its common  stock,  including
            from the exercise of options and warrants,  and received proceeds of
            $75,000 in connection therewith.

      o     The  Company  issued   1,080,678  shares  of  its  common  stock  in
            consideration for professional services performed.

      o     The  Company   issued   210,000   shares  of  its  common  stock  in
            consideration for employee compensation.

      o     The  Company  issued   2,120,000  shares  of  its  common  stock  in
            satisfaction of a liability for accrued officers' payroll.

      o     The Company  placed  5,000,000  shares of its common stock in escrow
            with its stock transfer agent in anticipation of future exercises of
            stock options issued under the Company's stock option plans.

      o     The Company issued 550,000 shares of common stock in connection with
            the liquidation of a note payable (see Note 5).

      o     The Company  issued  warrants to purchase up to 4,574,286  shares of
            its common stock.

      o     The Company  issued  options to purchase up to 12,950,000  shares of
            its common stock.


                                      F-37