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, 2004

[ ]  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 files 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, 2004 was $74,844.

The aggregate market value of voting common equity held by non-affiliates as of
March 31, 2004 was approximately $12,695,285.12, using the closing price of
AdZone's common stock of $0.32 per share on March 31 2004.

As of March 31, 2004, there were 70,832,255 shares of common stock issued and
outstanding. As of June 30, 2004, there were 76,604,148 shares of common stock
issued and outstanding.

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


<PAGE>

                              ADZONE RESEARCH, INC.

                                   FORM 10-KSB
                    FOR THE FISCAL YEAR ENDED MARCH 31, 2004

                                      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                                              12
Item 8.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                               12
Item 8A.  Controls and Procedures                                           12

                                    PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
              Compliance with Section 16(A) of the Exchange Act.            13
Item 10.  Executive Compensation                                            15
Item 11.  Security Ownership of Certain Beneficial Owners and Management    20
Item 12.  Certain Relationships and Related Transactions                    21
Item 13.  Exhibits and Reports on Form 8-K                                  22

                                     PART IV

Item 14.  Principal Accountant Fees and Services                            23

                                   SIGNATURES

<PAGE>

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.

                                     PART I

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 is in it's a development stage, and has focused
principally on the development of its proprietary software, and has just begun
to initiate efforts towards developing a significant revenue base.


                                       1
<PAGE>

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.

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

AdZone was also negotiating with officials of the Global Public Health
Intelligence Network, a world-wide public health organization based in Canada,
and the World Health Organization based Geneva, for possible contracts or grants
to provide internet monitoring for possible bioterrorist activities. These
negotiations were terminated during the year ended March 31, 2003

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 June 25,
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.


                                       2
<PAGE>

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 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.

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 9 full time and two part time employees. 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 govt agencies that Sarnoff already has contacts with.
In April of 2003 AdZone signed a deal with Autometric agreeing to provide it's
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.

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.


                                       3
<PAGE>

DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS

In the normal course of business, AdZone periodically extends unsecured credit
to it's customers which during fiscal 2004 were 100% derived from a sole source.
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.

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 govt 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 it's 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.

RESEARCH AND DEVELOPMENT. AdZone has expended approximately $566,000 and $88,000
during fiscal 2004 and 2003, 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://wwwsec.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 51% 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. AdZone may be subject to a claim relating to
certain previously leased facilities. In May 2000 AdZone executed a 5-year lease
for a marketing premises in the Empire State Building in New York City. This
office was closed prior to March 2001, and AdZone surrendered the premises to
the landlord. The scheduled annual rental amount was approximately $65,145 for
the period from May 1, 2000 through December 31, 2001; approximately $68,175 for
the period from January 1, 2002 through August 31, 2003; and approximately
$71,205 for the period from September 1, 2003 through April 30, 2005.
Additionally, AdZone was responsible for its pro-rata share of increases in ad
valorem taxes, utilities, insurance and common area operating costs over the
base year expenses. The lease also provided that in the event of AdZone's early
termination of the lease, AdZone would be responsible for supplemental amounts
during the occupancy period using the effective annual rental yield of
approximately $68,175 and the amounts actually paid by AdZone. AdZone has
surrendered all security deposits to the landlord. To date, AdZone has not
received any notice from the landlord demanding amounts additional to such
security deposits. Management cannot provide you any assurances, however, that
such demand may not be made in the future.

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, 2004, there were 70,832,255 shares of $0.001 par value common
stock of AdZone outstanding and owned by approximately 159 shareholders of
record, exclusive of shareholders holding their shares in street name. As of
June 29, 2004, there were 76,604,148 shares of $0.001 par value common stock of
AdZone outstanding and owned by approximately 169 shareholders of record,
exclusive of shareholders holding their shares in street name.

Our Certificate of Incorporation authorizes 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. No shares of preferred stock have been issued. 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 therefor. 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.

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, 2004

                First Quarter             $0.18                  $0.01
                Second Quarter            $0.24                  $0.06
                Third Quarter             $0.37                  $0.15
                Fourth Quarter            $1.35                  $0.31


FISCAL YEAR ENDED MARCH 31, 2003

                                           High                   Low
                                           ----                   ---
                First Quarter             $0.08                  $0.03
                Second Quarter            $0.10                  $0.02
                Third Quarter             $0.08                  $0.02
                Fourth Quarter            $0.04                  $0.02



                                       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 former President 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             8,000,000                .98                 -0-
Approved by security holders

      Total                               8,000,000                .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.

RECENT SALES OF SECURITIES

On January 5, 2004, we issued 15,000 shares of common stock to Ronald C. Mayhew
for a purchase price of $0.34 per share.

On January 7, 2004, we issued 54,444 shares of common stock to Ronald C. Mayhew
in consideration of $4,900 in accounting services.

On January 20, 2004, we issued, 20,000 shares of common stock to William F.
Bogardus in consideration of $7,000 in services.

On January 20, 2004, we issued 60,000 shares of common stock and 100,000 common
stock purchase warrants exercisable at $0.15 per share to Thomas F. Gavin in
consideration of consulting services relating to new releases and shareholder
service.

On January 20, 2004, we issued 160,000 shares of common stock to Tom Kober in
consideration of accounting consulting services.

On January 23, 2004, we issued 3,227 shares of common stock to Art Metz in
consideration of accounting consulting services.

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


                                       7
<PAGE>

On January 30, 2004, we issued 36,000 shares of common stock to Peter Cardona in
consideration of web design services.

On February 20, 2004, we issued an aggregate of 224,000 shares of common stock
to employees in lieu of cash bonuses.

On February 23, 2004, we issued 700 shares of common stock to Equities Magazine
in consideration of services rendered.

On March 5, 2004, we issued 51,617 shares of common stock to Ronald C. Mayhew in
consideration of accounting services rendered.

On March 12, 2004, we issued 5,000 shares of common stock to Duane B. Lewin in
consideration of consulting services rendered.

On March 20, 2004, AdZone Research, Inc. 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 of the Company. As of date, the Company issued and sold
to the Purchaser (i) 6,746,691 shares of common stock; and (ii) warrants to
purchase 3,373,345 shares of common stock for a purchase price of $1,000,000.

The issuance of the shares and the warrants was exempt from registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) of such
Securities Act and Regulation D promulgated thereunder based upon the
representations of each of the Investors that it was an "accredited investor"
(as defined under Rule 501 of Regulation D) and that it was purchasing such
securities without a present view toward a distribution of the securities. In
addition, there was no general advertisement conducted in connection with the
sale of the securities.


                                       8
<PAGE>


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.

Adzone's business plan has not been fully implemented and, accordingly, Adzone
has not fully commenced operations. Adzone has had no substantial operations or
assets since inception and is considered to be in the development stage.

FISCAL YEAR ENDED MARCH 31, 2004 COMPARED TO MARCH 31, 2003

The year end March 31, 2004 has seen tremendous change at AdZone Research. The
economic downturn in the United States economy has hampered our expected inroads
into the commercial adverting end of our business and we have had to slow our
development in that area. The portion of our business dealing with defense
issues and internet terrorism has shown great potential for growth. We have
aligned ourselves with The Raytheon Corp, Sarnoff Corp and Autometric (a
subsidiary of the Boeing Corp.). During the year we turned our focus to
partnering with established defense contractors. 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. Adzone has completed a new
stand alone product named the "G-Stir" which reports on data from our database.
This product has been received very favorably by the government and defense
marketplace. We expect sales with this and related products.

Adzone is still considered to be in the development stage because we have no
substantial revenues to date.

For the fiscal year ended March 31, 2004, Adzone incurred system production and
maintenance expenses of approximately $566,143, including depreciation of
approximately $3,292, as compared to approximately $74,004 and $14,305 for the
same period of the prior fiscal year.

For the fiscal year ended March 31, 2004, Adzone incurred operating expenses of
approximately $956,300 which was exclusive of officer's compensation, as
compared to approximately $598,486 the same period of the prior fiscal year.
Adzone experienced shifts in categorical expenses including a increase in
selling and marketing expenses by approximately $127,150, a decrease in
consulting and professional fees of approximately $1,701, and an increase in
other general and administrative costs of approximately $42,436.

For the fiscal year ended March 31, 2004, Adzone incurred a net loss of
approximately $(1,735,105) as compared to a net loss of approximately $(927,536)
for the fiscal year ended March 31, 2003.Based on the weighted-average number of
shares of common stock issued and outstanding at March 31, 2004 and 2003,
respectively, Adzone incurred a net loss per share of approximately $(.03) and
$(.03).

For the fiscal year ended March 31, 2004, the net reduction in the accrual
account was approximately $409,434 for compensation expenses relating to
employment contracts we had entered into with our chief executive officer,
Charles Cardona, and our former president, John Cardona.

FISCAL YEAR ENDED MARCH 31, 2003 COMPARED TO MARCH 31, 2002

AdZone incurred system production and maintenance expenses of approximately
$88,309, including depreciation of approximately $14,305, as compared to
approximately $71,463 for the same period of the prior fiscal year.

AdZone incurred operating expenses of approximately $598,486 exclusive of
officer's compensation, for fiscal 2003, as compared to approximately $200,882
the same period of the prior fiscal year. AdZone experienced shifts in
categorical expenses including a decrease in selling and marketing expenses by
approximately $43,831, a decrease in consulting and professional fees of
approximately $237,429, and an increase in other general and administrative
costs of approximately $245,517.


                                       9
<PAGE>


For the fiscal year ended March 31, 2003, AdZone incurred a net loss of
approximately $(927,536) as compared to a net loss of approximately $(611,630)
for the fiscal year ended March 31, 2002. Based on the weighted-average number
of shares of common stock issued and outstanding at March 31, 2003 and 2002,
respectively, AdZone incurred a net loss per share of approximately $(.03) and
$(.02).

For the fiscal year ended March 31, 2003 AdZone paid or accrued approximately
$229,278 in compensation expense relating to employment contracts it had entered
into with its Chief Executive Officer, Charles Cardona, and its former
President, John Cardona.

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 $622,797 on hand at March 31, 2004 as compared to
$8,084 of March 31, 2003.

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. As of date, we issued and sold to The Nutmeg Group (i) 6,746,691 shares
of common stock; and (ii) warrants to purchase 3,373,345 shares of common stock
for a purchase price of $1,000,000.

      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 2004 and 2003 was provided principally through the
unregistered sales of equity securities, loans and the exercise of options under
the companies 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 approximately $ 1,381,600 during fiscal
2004 and $239,500 during Fiscal 2003.


                                       10
<PAGE>


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 it's technology and the usefulness of it's data.

Adzone plans to continue marketing it's G-Stir product which reports on current
and historical data in it's clandestine message interception database. This
product has been well received by the various interested parties within the
Government and Defense Industry. Adzone intends to have sales with this and
similar products in the near future. Adzone has numerous potential clients with
which it is currently working.

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, 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 includes multiple
acquisitions and research and defense company management. This should help
Adzone in it's goal of completing a strategically valuable acquisition.

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. Adzone anticipated contracts to result from these efforts in the
fiscal year beginning April 1, 2003, while delays have occurred, Adzone is
confident it will achieve revenues from this agreement.

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). Adzone anticipated revenue to result within fiscal year 2003. Adzone in
fact did generate revenues from this agreement. Additional business is being
negotiated and is anticipated in the coming year from Autometric. Adzone
believes that its alliance with Autometric will benefit both entities and
provide considerable sales opportunities.

Adzone continues to market it's surveillance systems and data directly to
various govt agencies. Adzone has temporarily suspended its efforts in marketing
it's products at the state level and is instead currently focusing on more
lucrative federal agency contracts and contracts through it's partners
Autometric (A division Of Boeing), Raytheon and Sarnoff.

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


                                       11
<PAGE>


or arrangements to advance or loan funds for Adzone and do not have any legal
requirement to do so.


ITEM 7 - INDEX TO FINANCIAL STATEMENTS

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


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

None


ITEM 8-A - CONTROLS AND PROCEDURES

As of March 31, 2004, an evaluation was performed under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective as of March 31, 2004. There have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect internal controls subsequent to March 31, 2004.


                                       12
<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

Daniel Wasserman      Executive Vice President              January 2002

John Cardona*         Director                               August 2001

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 terminates on August 31, 2004, and Daniel Wasserman
has entered into an employment agreement that terminates on March 3, 2004. 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 39, has served as AdZone's President 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 35, is consultant to AdZone serving as its Homeland Security
Defense Advisor with responsibility for long-term corporate planning and global
and operational strategies. Mr. Cardona is also serving as a consultant to
Competitrack, a market research company. From August 2001 until his resignation
in June 2002, Mr. Cardona served as President of AdZone. 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.


                                       13
<PAGE>


DANIEL WASSERMAN

Daniel Wasserman, age 52, 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 49, 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 36, is a Director of AdZone and was President of
Executive Help from January 2001 until the merger 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 68, 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


                                       14
<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, 2004, 2003, and
2002:

                           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>                   <C>
Charles Cardona     Chief Executive Officer     2004   $188,551(2)       0        5,471,151 (1)            50,000
                    Acting Chief Financial      2003   $190,385          0              0                   0
                    Officer                     2002   $153,525          0              0               1,000,000
                    Director

John Cardona        Director                    2004   $ 83,418(3)       0        5,706,899 (1)           100,000
                                                2003   $190,385          0              0                   0
                                                2002   $153,525          0              0               1,000,000
</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:

------------------ -------------------- ----------------- ----------------------
NAME               TITLE                NUMBER OF SHARES  DATE OF ISSUANCE
------------------ -------------------- ----------------- ----------------------
John Conley        Advisory Director    50,000            February 28, 2003
------------------ -------------------- ----------------- ----------------------
                                        10,000            May 1, 2003
------------------ -------------------- ----------------- ----------------------
Jonathan White     Advisory Director    40,000            November 18, 2002
------------------ -------------------- ----------------- ----------------------
                                        50,000            February 28, 2003
------------------ -------------------- ----------------- ----------------------
Russell Ivy        Director             10,000            February 28, 2003
------------------ -------------------- ----------------- ----------------------
                                        50,000            September 3, 2003
------------------ -------------------- ----------------- ----------------------
                                        15,000            February 20, 2004
------------------ -------------------- ----------------- ----------------------
Warren Hamburger   Director             200,000           September 3, 2003
------------------ -------------------- ----------------- ----------------------
                                        15,000            February 20, 2004
------------------ -------------------- ----------------- ----------------------


                                       15
<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 of
Name                Options/SAR's Granted        In Fiscal Year        Base Price($/Sh)     Expiration Date
----                ---------------------        --------------        ----------------     ---------------
<S>                      <C>                         <C>                    <C>                  <C>
Charles Cardona          3,000,000                   20.69%                 $0.10                2/5/10
John Cardona             3,000,000                   20.69%                 $0.10                2/5/10
</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
                   Shares Acquired                       Options/SARs At FY-End             At FY-End
Name                On Exercise       Value Realized    Exercisable/Unexercisable    Exercisable/Unexercisable
----                -----------       --------------    -------------------------    -------------------------
<S>                     <C>                 <C>               <C>                             <C>
Charles Cardona         -0-                 $0                7,000,000                       $0
John Cardona            -0-                 $0                7,000,000                       $0
</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
2007 - $208,000 annual


                                       16
<PAGE>


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 companies 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 it's 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:

Options for 750,000 shares at $.85
Options for 750,000 shares at $1.00
Options for 750,000 shares at $1.50
Options for 750,000 shares at $1.75

Additionally the employee shall receive the following 3,000,000 options upon the
Company achieving $500,000 in total revenues prior to March 31, 2005.

Options for 750,000 shares at $.85

Options for 750,000 shares at $1.00

Options for 750,000 shares at $1.50

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


                                       17
<PAGE>


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, misc. expenses, .[sic] 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

2007 - $208,000 annual

The initial base salary shall be reduced to $1500 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 companies 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:


                                       18
<PAGE>


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 it's 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:

Options for 750,000 shares at $.85

Options for 750,000 shares at $1.00

Options for 750,000 shares at $1.50

Options for 750,000 shares at $1.75

Additionally the employee shall receive the following 3,000,000 options upon the
company achieving $500,000 in total revenues prior to March 31, 2005.

Options for 750,000 shares at $.85

Options for 750,000 shares at $1.00

Options for 750,000 shares at $1.50

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 fee's, and miscellanous 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.


                                       19
<PAGE>


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of the date of this Report 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                        22,352,422 (1)                 26.74%
17 Sunny Line Dr.
Calverton, NY 11933

John Cardona                           18,381,849 (2)                 19.35%
118 Overlook Dr.
Aquebogue, NY 11931

Daniel Wasserman                        3,081,000 (3)                  4.01%
20953 Cohasset Ter
Ashburn, VA

Warren Hamburger                        1,070,000                      2%
42 Fire Island Ave.
Babylon, NY 11702

Russell Ivy                                65,000                     .08%
211 West Sealy Street
Alvin, TX 77511

Richard A. McCann                        1,709,218                    .08%
116 Holcomb Cove Rd.
Candler, NC 28715

All Executive Officers and
Directors of AdZone as
a Group (6 persons)                    46,659,489                     51.41%

----------

(1) Includes 7,000,000 shares that may be acquired upon exercise of stock
options granted to Mr. Cardona at exercise prices ranging from $0.10 to $1.75
per share. Excludes securities owned by John Cardona, Mr. Cardona's brother;
12,849 shares owned by Michael Cardona, Mr. Cardona's brother; and 198,183
shares owned by Valerie Cardona, Mr. Cardona's mother, with respect to all of
which Mr. Cardona disclaims beneficial ownership. Plus 4,000,000 shares owed to
Mr. Cardona under the agreement which he loaned AdZone 4,000,000 shares for the
purpose of a stock loan.

(2) Includes 7,000,000 shares that may be acquired upon exercise of stock
options granted to Mr. Cardona at exercise prices ranging from $0.10 to $1.75
per share. Excludes securities owned by Charles Cardona, Mr. Cardona's brother;
12,849 shares owned by Michael Cardona, Mr. Cardona's brother; and 198,183
shares owned by Valerie Cardona, Mr. Cardona's mother, with respect to all of
which Mr. Cardona disclaims beneficial ownership. Plus 4,000,000 shares owed to
Mr. Cardona under the agreement which he loaned AdZone 4,000,000 shares for the
purpose of a stock loan.

(3) Includes 1,500,000 shares that may be acquired upon exercise of stock
options granted to Mr. Wasserman at exercise prices ranging from $0.3182 to
$0.3612 per share.


                                       20
<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
are repayable in aggregate monthly amounts of approximately $370. Due to the
nature of the debt and irregular payment history, these advances are classified
as "current" in the accompanying financial statements.

During Fiscal 2004, all amounts advanced by Company officers were repaid in
full.



                                       21
<PAGE>


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 as of 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.
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
23.1  Consent of Auditors

----------

* 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.

REPORTS ON FORM 8-K:

           AdZone filed twe reports on form 8-K during the quarter ended March
31, 2004. Information regarding the items reported on is as follows:


                                       22
<PAGE>


DATE OF REPORT               ITEM REPORTED ON
--------------               ----------------
February 11, 2004            AdZone announced the private placement of $300,000.
March 30, 2004               AdZone disseminated a corporate update.


ITEM 14- PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company paid or accrued the following fees in each of the prior two fiscal
years to it's principal accountant, S. W. Hatfield, CPA of Dallas, Texas

                                       Year ended          Year ended
                                        March 31,           March 31,
                                          2004                2003
                                       ----------          ----------

(1)   Audit fees                         $26,613              $24,040
(2)   Audit-related fees                      --                   --
(3)   Tax fees                                --                   --
(4)   All other fees                          --                   --
                                        --------             --------

   Totals                                $26,613              $24,040
                                        ========             ========

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, 2004 and 2003 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, 2004, for filing with the Securities
and Exchange Commission.

The Company's principal accountant, S. W. Hatfield, CPA did not engage any other
persons or firms other than the principal accountant's full-time, permanent
employees.



                                       23
<PAGE>


                                   SIGNATURES

In accord 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 8, 2004               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 8, 2004               By:  /s/ Charles Cardona
                                       ----------------------------------------
                                       Charles Cardona, Chairman of the Board


Dated: July 8, 2004               By:  /s/ John Cardona
                                       ----------------------------------------
                                       John Cardona, Director


Dated: July 8, 2004               By:  /s/ Warren Hamburger
                                       ----------------------------------------
                                       Warren Hamburger, Director


Dated: July 8, 2004               By:  /s/ Russell Ivy
                                       ----------------------------------------
                                       Russell Ivy, Director

Dated: July 8, 2004               By:  /s/ Richard A. McCann
                                       ----------------------------------------
                                       Richard A. McCann, Director


                                       24
<PAGE>


                             ADZONE RESEARCH, INC.
                         (a development stage company)

                                    CONTENTS



                                                                           Page

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                          F-2

FINANCIAL STATEMENTS

   Balance Sheets
     as of March 31, 2004 and 2003                                          F-3

   Statements of Operations and Comprehensive Income
     for the years ended March 31, 2004 and 2003 and
     for the period from February 28, 2000 (date of inception)
     through March 31, 2004                                                 F-4

   Statement of Changes in Shareholders' Equity
     for the period from February 28, 2000 (date of inception)
     through March 31, 2004                                                 F-5

   Statements of Cash Flows
     for the years ended March 31, 2004 and 2003 and
     for the period from February 28, 2000 (date of inception)
     through March 31, 2004                                                 F-6

   Notes to Financial Statements                                            F-7

<PAGE>

                       LETTERHEAD OF S. W. HATFIELD, CPA
                       ---------------------------------


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------


Board of Directors and Stockholders
AdZone Research, Inc.

We have audited the  accompanying  balance  sheets of AdZone  Research,  Inc. (a
Delaware  corporation and a development  stage company) as of March 31, 2004 and
2003 and the related statements of operations and comprehensive loss, changes in
shareholders'  equity and cash flows for each of the years  ended March 31, 2004
and 2003 and for the period from February 28, 2000 (date of  inception)  through
March 31, 2004, respectively.  These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of AdZone Research,  Inc. as of
March 31,  2004 and 2003 and the  results of its  operations  and cash flows for
each of the years ended March 31, 2004 and 2003 and for the period from February
28,  2000  (date  of  inception)  through  March  31,  2004 in  conformity  with
accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note C to the
financial  statements,  the Company has not  developed a revenue  base since the
development  of it's  proprietary  software.  Accordingly,  the Company has been
principally  dependent on private placements of equity securities or the sale of
equity  securities  into the open market  through the Company's  Employee  Stock
Option Plan to provide  sufficient  working capital to maintain the integrity of
the corporate entity.  These  circumstances  create  substantial doubt about the
Company's  ability to continue as a going  concern and are  discussed in Note C.
The financial  statements do not contain any adjustments  that might result from
the outcome of these uncertainties.



                                                /s/ S. W. Hatfield, CPA
                                                -------------------------
                                                S. W. HATFIELD, CPA
Dallas, Texas
June 23, 2004 (except for Note R
  as to which the date is June 25, 2004)


                                      F-2
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
                                 BALANCE SHEETS
                            March 31, 2004 and 2003


<TABLE>
<CAPTION>
                                                                              March 31,     March 31,
                                                                                 2004          2003
                                                                             -----------   -----------
<S>                                                                          <C>           <C>
                                     ASSETS

CURRENT ASSETS
   Cash on hand and in bank                                                  $   622,797   $     8,084
   Prepaid expenses and other                                                    134,272        35,375
                                                                             -----------   -----------
     TOTAL CURRENT ASSETS                                                        757,069        43,459
                                                                             -----------   -----------

PROPERTY AND EQUIPMENT - AT COST                                                  62,098        60,860
   Accumulated depreciation                                                      (51,675)      (49,255)
                                                                             -----------   -----------
     NET PROPERTY AND EQUIPMENT                                                   10,423        11,605
                                                                             -----------   -----------

OTHER ASSETS
   Restricted cash - Preferred Stock dividend reserve                             37,266            --
   Security deposits and other                                                     1,089           390
                                                                             -----------   -----------
     TOTAL OTHER ASSETS                                                           38,355           390
                                                                             -----------   -----------

TOTAL ASSETS                                                                 $   805,847   $    55,454
                                                                             ===========   ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Current maturities of Note payable                                        $    62,787   $    65,958
   Accounts payable - trade                                                      297,389       130,341
   Accrued dividends payable                                                         583            --
   Accrued interest payable                                                           --         2,514
   Advances from officers                                                             --        34,774
   Accrued officer compensation                                                  160,926       570,360
                                                                             -----------   -----------
     TOTAL CURRENT LIABILITIES                                                   521,685       803,947
                                                                             -----------   -----------

LONG-TERM LIABILITIES
   Notes payable                                                                 166,783            --
                                                                             -----------   -----------
     TOTAL LIABILITIES                                                           688,468       803,947
                                                                             -----------   -----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
   Preferred stock - $0.001 par value.  20,000,000 shares authorized
     Series A - 50 shares authorized
       24.2194 and -0- shares issued and outstanding, respectively                    --            --
     Series B - xx shares authorized
       31.0000 and -0- shares issued and outstanding, respectively                    --            --
   Common stock - $0.001 par value.  200,000,000 shares authorized
     70,832,255 and 50,096,462 shares issued and outstanding, respectively        70,832        50,096
   Additional paid-in capital                                                  4,876,105     2,251,242
   Deficit accumulated during the development stage                           (4,796,793)   (3,035,031)
                                                                             -----------   -----------
                                                                                 150,144      (733,693)
   Stock subscription receivable                                                 (30,550)      (14,800)
   Treasury stock - at cost (25,000 shares)                                       (2,215)           --
                                                                             -----------   -----------
     TOTAL SHAREHOLDERS' EQUITY                                                  117,379      (748,493)
                                                                             -----------   -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   $   805,847   $    55,454
                                                                             ===========   ===========
</TABLE>


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


                                      F-3
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
                 STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                    Years ended March 31, 2004 and 2003 and
    Period from February 28, 2000 (date of inception) through March 31, 2004


<TABLE>
<CAPTION>
                                                                                      Period from
                                                                                   February 28, 2000
                                                                                  (date of inception)
                                                  Year ended       Year ended           through
                                                March 31, 2004   March 31, 2003      March 31, 2004
                                                --------------   --------------   -------------------
<S>                                             <C>              <C>              <C>
REVENUES                                        $       74,844   $           --   $           158,850
                                                --------------   --------------   -------------------

PRODUCTION EXPENSES
   Salaries, wages and related costs                   393,288           33,881               962,195
   Direct occupancy and operating expenses             169,855           40,123               428,481
   Depreciation                                          3,292           14,305                44,609
                                                --------------   --------------   -------------------
     Total production expenses                         566,435           88,309             1,435,285
                                                --------------   --------------   -------------------

GROSS PROFIT                                          (491,591)         (88,309)           (1,276,435)
                                                --------------   --------------   -------------------

OPERATING EXPENSES
   Selling and marketing costs
     Salaries, wages and related costs                 127,150               --               453,608
     Direct occupancy and operating expenses            54,141               --               391,598
   General and administrative costs
     Officers compensation                             271,969          229,278               890,179
     Consulting and professional fees                  354,737          356,438               978,420
     Other general and administrative costs            180,466          138,030               354,673
   Compensation expense related to common
     stock issuances at less than "fair value"         237,629          101,400               339,779
   Depreciation                                          2,177            2,618                14,141
                                                --------------   --------------   -------------------
       Total operating expenses                      1,228,269          827,764             3,422,398
                                                --------------   --------------   -------------------

LOSS FROM OPERATIONS                                (1,719,860)        (916,073)           (4,698,833)

OTHER INCOME (EXPENSE)
   Interest and other income                               298               --                 4,636
   Interest expense                                    (11,580)         (11,463)              (36,160)
   Lawsuit settlement                                   (3,000)              --               (23,000)
   Loss on disposition of equipment                       (963)              --               (16,779)
                                                --------------   --------------   -------------------

NET LOSS                                            (1,735,105)        (927,536)           (4,770,136)

OTHER COMPREHENSIVE INCOME                                  --               --                    --
                                                --------------   --------------   -------------------

COMPREHENSIVE LOSS                              $   (1,735,105)  $     (927,536)  $        (4,770,136)
                                                ==============   ==============   ===================
</TABLE>


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


                                      F-4
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
           STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS - CONTINUED
                    Years ended March 31, 2004 and 2003 and
    Period from February 28, 2000 (date of inception) through March 31, 2004


<TABLE>
<CAPTION>
                                                                           Period from
                                                                        February 28, 2000
                                                                       (date of inception)
                                       Year ended       Year ended           through
                                     March 31, 2004   March 31, 2003      March 31, 2004
                                     --------------   --------------   -------------------
<S>                                  <C>              <C>              <C>
NET LOSS                             $   (1,735,105)  $     (927,536)  $        (4,770,136)

OTHER COMPREHENSIVE INCOME                       --               --                    --
                                     --------------   --------------   -------------------

COMPREHENSIVE INCOME                 $   (1,735,105)  $     (927,536)  $        (4,770,136)
                                     ==============   ==============   ===================

Net loss per weighted-average share
   of common stock outstanding,
   computed on Net Loss
   - basic and fully diluted         $        (0.03)  $        (0.03)  $             (0.13)
                                     ==============   ==============   ===================

Weighted-average number of shares
   of common stock outstanding -
   basic and fully diluted               62,374,341       36,670,763            35,891,430
                                     ==============   ==============   ===================
</TABLE>


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


                                      F-5
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
    Period from February 28, 2000 (date of inception) through March 31, 2004

<TABLE>
<CAPTION>

                                 Preferred Stock          Common Stock        Additional
                                 ----------------         ------------         paid-in
                                 Shares    Amount    Shares        Amount      capital
                                 -------   ------  -----------   ----------   ----------
<S>                               <C>      <C>      <C>          <C>          <C>
INITIAL CAPITALIZATION
 FEBRUARY 28, 2000                    --   $   --          170   $      150   $       --
 Effect of September 10, 2000
   125,000 for 1 forward stock
   split and change to $0.001
   par value                          --       --   21,249,830       21,100      (21,100)
February 29, 2000 private
  placement of common stock           --       --           30    1,000,000           --
   Effect of September 10, 2000
   125,000 for 1 forward stock
   split and change to $0.001
   par value                          --       --    3,749,970     (996,250)     996,250
  Less costs of raising capital       --       --           --           --      (12,500)
Net loss for the period               --       --           --           --           --
                                 -------   ------  -----------   ----------   ----------

BALANCES AT MARCH 31,2000             --       --   25,000,000       25,000      962,650

Cash received on stock
  subscription receivable             --       --           --           --           --
November 30, 2000 private
  placement of common stock           --       --      666,665          667      289,333
  Less costs and expenses
    of raising capital                --       --           --           --     (188,500)
Common stock issued for:
  Costs and expenses of
    raising capital                   --       --      400,000          400      175,600
  Prepaid interest on loan            --       --      250,000          250       31,000
  Employee wages and bonuses          --       --    1,095,000        1,095       64,605
  Officer bonus                       --       --      500,000          500       29,500
  Professional services               --       --      107,000          107        6,313
Net loss for the year                 --       --           --           --           --
                                 -------   ------  -----------   ----------   ----------

BALANCES AT MARCH 31, 2001            --   $   --   28,018,665   $   28,019   $1,370,501
                                 =======   ======  ===========   ==========   ==========

<CAPTION>
                                   Deficit
                                 accumulated
                                   in the         Stock         Treasury
                                 development   subscription      Stock
                                    stage       receivable      at cost        Total
                                 -----------   ------------   -----------   -----------
<S>                              <C>           <C>            <C>           <C>
INITIAL CAPITALIZATION
 FEBRUARY 28, 2000               $        --   $         --   $        --   $       150
 Effect of September 10, 2000
   125,000 for 1 forward stock
   split and change to $0.001
   par value                              --             --            --            --
February 29, 2000 private
  placement of common stock               --       (600,000)           --       400,000
   Effect of September 10, 2000
   125,000 for 1 forward stock
   split and change to $0.001
   par value                              --             --            --            --
  Less costs of raising capital           --             --                     (12,500)
Net loss for the period              (35,822)            --            --       (35,822)
                                 -----------   ------------   -----------   -----------

BALANCES AT MARCH 31,2000            (35,822)      (600,000)           --       351,828

Cash received on stock
  subscription receivable                 --        600,000            --       600,000
November 30, 2000 private
  placement of common stock               --             --            --       290,000
  Less costs and expenses
    of raising capital                    --             --            --      (188,500)
Common stock issued for:
  Costs and expenses of
    raising capital                       --             --            --       176,000
  Prepaid interest on loan                --             --            --        31,250
  Employee wages and bonuses              --             --            --        65,700
  Officer bonus                           --             --            --        30,000
  Professional services                   --             --            --         6,420
Net loss for the year             (1,460,043)            --            --    (1,460,043)
                                 -----------   ------------   -----------   -----------

BALANCES AT MARCH 31, 2001       $(1,495,865)  $         --   $        --   $   (97,345)
                                 ===========   ============   ===========   ===========
</TABLE>


The accompanying notes are an integral part of these financial statements


                                      F-6
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
            STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - CONTINUED
    Period from February 28, 2000 (date of inception) through March 31, 2004

<TABLE>
<CAPTION>


                                 Preferred Stock          Common Stock        Additional
                                 ----------------         ------------         paid-in
                                 Shares    Amount    Shares        Amount      capital
                                 -------   ------  -----------   ----------   ----------
<S>                               <C>      <C>      <C>          <C>          <C>

BALANCES AT MARCH 31, 2001            --   $   --   28,018,665   $   28,019   $1,370,501

Conversion of AdZone
  Interactive, Inc. common
  stock to AdZone Research,
  Inc. common stock                   --       --  (10,018,643)     (10,019)      10,019
Effect of reverse merger with
  AdZone Research, Inc.               --       --    5,346,000        5,346       (5,346)
                                 -------   ------  -----------   ----------   ----------

BALANCES AT MARCH 31, 2001
  POST-REVERSE ACQUISITION            --       --   23,346,022       23,346    1,375,174

Issuance of common stock for
  Conversion of short-term debt       --       --      360,000          360       21,240
  Cash                                --       --      744,442          744       39,656
  Lawsuit settlement                  --       --      500,000          500       19,500
  Professional services               --       --    1,531,666        1,532      115,668
Net loss for the year                 --       --           --           --           --
                                 -------   ------  -----------   ----------   ----------

BALANCES AT MARCH 31, 2002            --       --   26,482,130       26,482    1,571,238

Issuance of common stock for
  Cash                                --       --    2,413,334        2,413      103,587
  Exercise of granted options         --       --    9,350,000        9,350      211,950
  Directors fees                      --       --      160,000          160        8,140
  Employee compensation               --       --    5,790,000        5,790       98,860
  Professional services               --       --    5,900,998        5,901      257,467
Net loss for the year                 --       --           --           --           --
                                 -------   ------  -----------   ----------   ----------

BALANCES AT MARCH 31, 2003            --   $   --   50,096,462   $   50,096   $2,251,242
                                 =======   ======  ===========   ==========   ==========

<CAPTION>
                                   Deficit
                                 accumulated
                                   in the         Stock         Treasury
                                 development   subscription      Stock
                                    stage       receivable      at cost        Total
                                 -----------   ------------   -----------   -----------
<S>                              <C>           <C>            <C>           <C>

BALANCES AT MARCH 31, 2001       $(1,495,865)  $         --   $        --   $   (97,345)

Conversion of AdZone
  Interactive, Inc. common
  stock to AdZone Research,
  Inc. common stock                       --             --            --            --
Effect of reverse merger with
  AdZone Research, Inc.                   --             --            --            --
                                 -----------   ------------   -----------   -----------

BALANCES AT MARCH 31, 2001
  POST-REVERSE ACQUISITION        (1,495,865)            --            --       (97,345)

Issuance of common stock for
  Conversion of short-term debt           --             --            --        21,600
  Cash                                    --             --            --        40,400
  Lawsuit settlement                      --             --            --        20,000
  Professional services                   --             --            --       117,200
Net loss for the year               (611,630)            --            --      (611,630)
                                 -----------   ------------   -----------   -----------

BALANCES AT MARCH 31, 2002        (2,107,495)            --            --      (509,775)

Issuance of common stock for
  Cash                                    --             --            --       106,000
  Exercise of granted options             --        (14,800)           --       206,500
  Directors fees                          --             --            --         8,300
  Employee compensation                   --             --            --       104,650
  Professional services                   --             --            --       263,368
Net loss for the year               (927,536)            --            --      (927,536)
                                 -----------   ------------   -----------   -----------

BALANCES AT MARCH 31, 2003       $(3,035,031)  $    (14,800)  $        --   $  (748,493)
                                 ===========   ============   ===========   ===========
</TABLE>


The accompanying notes are an integral part of these financial statements


                                      F-7
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
            STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - CONTINUED
    Period from February 28, 2000 (date of inception) through March 31, 2004

<TABLE>
<CAPTION>


                                 Preferred Stock          Common Stock        Additional
                                 ----------------         ------------         paid-in
                                 Shares    Amount    Shares        Amount      capital
                                 -------   ------  -----------   ----------   ----------
<S>                               <C>      <C>      <C>          <C>          <C>
BALANCES AT MARCH 31, 2003            --   $   --   50,096,462   $   50,096   $2,251,242

Issuance of preferred stock
  Series A                         34.85       --           --           --      348,500
  Series B                         31.00       --           --           --      310,000
Redemption of preferred stock
  Series A                        (10.63)      --           --           --     (106,304)
  Redemption premium                  --       --           --           --      (15,946)
Issuance of common stock for
  Cash                                --       --      772,333          773       69,602
  Employee stock option plan
    Employees                         --       --    1,950,000        1,950      883,100
    Officers                          --       --      150,000          150       91,350
  Compensation
    Employees                         --       --    3,119,000        3,119      266,057
    Officers                          --       --   11,180,000       11,180      576,870
  Professional services
    Restricted shares                 --       --    1,909,460        1,909      241,578
    Registered shares                 --       --    1,075,000        1,075       44,675
  Director fees                       --       --      280,000          280       30,520
  Cost of obtaining capital           --       --      300,000          300     (115,139)
  Purchase of treasury stock          --       --           --           --           --
Payment of dividends on
  Series A and Series B
  preferred stock                     --       --           --           --           --
Net loss for the year                 --       --           --           --           --
                                 -------   ------  -----------   ----------   ----------

BALANCES AT MARCH 31, 2004         55.22   $   --   70,832,255   $   70,832   $4,876,105
                                 =======   ======  ===========   ==========   ==========

<CAPTION>
                                     Deficit
                                   accumulated
                                     in the         Stock         Treasury
                                   development   subscription      Stock
                                      stage       receivable      at cost        Total
                                 -------------   ------------   -----------   -----------
<S>                                <C>           <C>            <C>           <C>
BALANCES AT MARCH 31, 2003       $  (3,035,031)  $    (14,800)  $        --   $  (748,493)

Issuance of preferred stock
  Series A                                  --             --            --       348,500
  Series B                                  --             --            --       310,000
Redemption of preferred stock
  Series A                                  --             --            --      (106,304)
  Redemption premium                        --             --            --       (15,946)
Issuance of common stock for
  Cash                                      --             --            --        70,375
  Employee stock option plan
    Employees                               --             --            --       885,050
    Officers                                --             --            --        91,500
  Compensation
    Employees                               --             --            --       269,176
    Officers                                --             --            --       588,050
  Professional services
    Restricted shares                       --             --            --       243,487
    Registered shares                       --        (15,750)           --        30,000
  Director fees                             --             --            --        30,800
  Cost of obtaining capital                 --             --            --      (114,839)
  Purchase of treasury stock                --             --        (2,215)       (2,215)
Payment of dividends on
  Series A and Series B
  preferred stock                      (26,657)            --            --       (26,657)
Net loss for the year               (1,735,105)            --            --    (1,735,105)
                                 -------------   ------------   -----------   -----------

BALANCES AT MARCH 31, 2004       $  (4,796,793)  $    (30,550)  $    (2,215)  $   117,379
                                 =============   ============   ===========   ===========
</TABLE>


The accompanying notes are an integral part of these financial statements

                                      F-8
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
                            STATEMENTS OF CASH FLOWS
                    Years ended March 31, 2004 and 2003 and
    Period from February 28, 2000 (date of inception) through March 31, 2004


<TABLE>
<CAPTION>
                                                                                            Period from
                                                                                         February 28, 2000
                                                                                         (date of inception)
                                                         Year ended       Year ended          through
                                                       March 31, 2004   March 31, 2003     March 31, 2004
                                                       --------------   --------------   -------------------
<S>                                                    <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss for the period                             $   (1,735,105)  $     (927,536)  $        (4,770,136)
   Adjustments to reconcile net loss
     to net cash provided by operating activities
       Depreciation and amortization                            5,736           16,923                59,017
       Loss on disposition of equipment                           963               --                16,779
       Compensation expense related to common
         stock issuances at less than "fair value"            237,629          101,400               339,779
       Common stock issued for
         Salaries, wages and bonuses                          664,718           37,850               798,268
         Professional fees                                    273,488          236,168               633,026
         Directors fees                                        30,800            8,300                39,100
         Interest expense                                       7,500            7,500                24,375
         Lawsuit settlement                                        --               --                20,000
       (Increase) Decrease in
         Deposits and other assets                             (2,500)           1,800                  (390)
       Increase (Decrease) in
         Accounts payable and accrued liabilities             167,048            8,943               378,346
         Accrued officers compensation                       (409,434)         276,428               160,926
         Accrued interest payable                              (2,514)           1,436                    --
                                                       --------------   --------------   -------------------
NET CASH USED IN OPERATING ACTIVITIES                        (761,671)        (230,788)           (2,300,910)
                                                       --------------   --------------   -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Cash paid to purchase property and equipment                (5,250)            (608)              (91,851)
   Cash received on disposition of equipment                       --               --                 5,900
                                                       --------------   --------------   -------------------
NET CASH USED IN INVESTING ACTIVITIES                          (5,250)            (608)              (85,951)
                                                       --------------   --------------   -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net cash activity on officer and employee advances         (35,754)          20,380                (1,010)
   Principal received from notes payable                      166,783               --               238,383
   Principal paid on notes payable                             (3,171)              --                (3,171)
   Loan acquisition fees paid                                    (966)              --                  (966)
   Sale of preferred stock                                    658,500               --               658,500
   Cash paid to redeem preferred stock                       (122,250)              --              (122,250)
   Sale of common stock                                       894,620          219,100             2,443,770
   Cash paid for raising capital                             (147,839)              --              (172,839)
   Cash paid to acquire treasury stock                         (2,215)              --                (2,215)
   Cash paid for preferred stock dividends                    (26,074)              --               (26,074)
                                                       --------------   --------------   -------------------
NET CASH PROVIDED  BY FINANCING ACTIVITIES                  1,381,634          239,480             3,012,158
                                                       --------------   --------------   -------------------

INCREASE (DECREASE) IN CASH                                   614,713            8,084               625,297

Cash at beginning of period                                     8,084               --                    --
                                                       --------------   --------------   -------------------

CASH AT END OF PERIOD                                  $      622,797   $        8,084   $           625,297
                                                       ==============   ==============   ===================
</TABLE>

The accompanying notes are an integral part of these financial statements


                                      F-9
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)
                            STATEMENTS OF CASH FLOWS
                    Years ended March 31, 2004 and 2003 and
    Period from February 28, 2000 (date of inception) through March 31, 2004


<TABLE>
<CAPTION>
                                                                                  Period from
                                                                               February 28, 2000
                                                                               (date of inception)
                                                 Year ended      Year ended         through
                                               March 31, 2004  March 31, 2003    March 31, 2004
                                               --------------  --------------  -------------------
<S>                                            <C>             <C>             <C>
SUPPLEMENTAL DISCLOSURE OF
   INTEREST AND INCOME TAXES PAID
     Interest paid for the period              $        6,029  $        2,527  $             8,556
                                               ==============  ==============  ===================
     Income taxes paid for the period          $           --  $           --  $                --
                                               ==============  ==============  ===================

SUPPLEMENTAL DISCLOSURE OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES
     Common stock issued for prepaid interest  $           --  $           --  $            31,250
                                               ==============  ==============  ===================
     Common stock issued in repayment of
       short-term debt                         $           --  $           --  $            21,600
                                               ==============  ==============  ===================
     Common stock issued for prepaid
       consulting fees                         $           --  $       28,000  $            28,000
                                               ==============  ==============  ===================
     Common stock issued in partial
       payment of accrued officers
       compensation                            $      192,797  $       65,000  $           257,797
                                               ==============  ==============  ===================
</TABLE>


The accompanying notes are an integral part of these financial statements


                                      F-10
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                         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.

The Company's business plan has not been fully implemented and, accordingly, has
not fully commenced operations. The Company has had no substantial operations or
substantial  assets since  inception and is considered to be in the  development
stage.


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 accompanying financial statements reflect the
Company's  year-end  of  March  31 as of  the  first  day of  the  first  period
presented.

For accounting  purposes,  the acquisition of AdZone, on August 10, 2001, by the
Company  effected  a change  in  control  and was  accounted  for as a"  reverse
acquisition"  whereby AdZone is the accounting  acquiror for financial statement
purposes.  Accordingly,  for all  periods  subsequent  to August 10,  2001,  the
financial  statements of the Company reflect the historical financial statements
of AdZone from its  inception  on February  28, 2000 and the  operations  of the
Company subsequent to the August 10, 2001 transaction date.

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-11
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE C - GOING CONCERN UNCERTAINTY

During August 2001, the Company entered into a business combination  transaction
with AdZone  Interactive,  Inc., a privately-owned  New York  corporation.  This
transaction  effected  a change in  control  of the  Company.  Accordingly,  the
Company  abandoned it's initial business plan of developing an internet web site
that would offer professional space planning and design, pricing information and
direct ordering of modular office  furniture  systems.  Subsequent to the August
2001 change in control,  management adopted the existing business plan of AdZone
Interactive, Inc. as that of the continuing operation. Management remains of the
opinion  that being a  publicly-owned  entity  will  enhance  acceptance  of the
Company's products and, potentially, attract additional equity capital.

The Company is engaged in the  extraction of 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.

The events  which  occurred on  September  11,  2001,  and  subsequent  thereto,
generated  additional  interest in the Company's  internet data mining  research
capabilities  for  potential  private  and  public  sector  clients.  Management
continues  to  maintain  the  belief  that the  Company  will be able to acquire
various contracts to provide research information for various private and public
sector purposes. On May 27, 2003, the Company received a $50,000 contract from a
major United States defense  contractor to provide support  services  related to
that entity's provision of services for Homeland Security issues.  This contract
generated gross revenues of  approximately  $75,000 during the Fiscal Year ended
March 31, 2004.

In May 2003,  the Company  executed a letter of intent  based on a proposal  for
services  issued to a major United  States  Governmental  agency  (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.

With cumulative revenues of approximately $159,000 from limited revenue sources,
the Company remains in the development stage.

The Company continues to be dependent on private placements of equity securities
and the proceeds from the sale of common stock to employees  and officers  under
the  Company's  Stock  Option  Plan to  provide  sufficient  working  capital to
maintain the integrity of the corporate entity.

Because of the Company's lack of operations,  the Company's future  continuance,
for the  foreseeable  future,  will be fully dependent on either future sales of
equity  securities  and/or  advances or loans from  significant  stockholders or
corporate  officers  to  provide  sufficient  working  capital to  preserve  the
integrity of the corporate entity during the development phase.

There is no assurance that the Company will be able to obtain additional funding
through the sales of additional  securities or, that such funding, if available,
will be obtained on terms favorable to or affordable by the Company.

It  is  the  intent  of  management  and  significant  stockholders  to  provide
sufficient  working  capital  necessary to support and preserve the integrity of
the  corporate  entity.  However,  there  is  no  legal  obligation  for  either
management or significant stockholders to provide additional future funding.


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,  including  accounts  in  book  overdraft  positions,
      certificates  of  deposit  and  other   highly-liquid   investments   with
      maturities of three months or less,  when  purchased,  to be cash and cash
      equivalents.


                                      F-12
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

2.    Accounts receivable and revenue recognition

      In the  normal  course  of  business,  the  Company  periodically  extends
      unsecured  credit to it's  customers  which  during  Fiscal 2004 were 100%
      derived  from  a  sole  source.  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.

3.    Property, plant 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.

4.    Organization costs

      The  Company has adopted the  provisions  of AICPA  Statement  of Position
      98-5,  "Reporting  on  the  Costs  of  Start-Up  Activities"  whereby  all
      organization and initial costs incurred with the incorporation and initial
      capitalization of the Company were charged to operations as incurred.

5.    Production, Research and development expenses

      Costs  associated with software  production,  research and development are
      charged to operations as incurred.

6.    Advertising expenses

      Advertising and marketing expenses are charged to operations as incurred.

7.    Income taxes

      The Company  utilizes the asset and  liability  method of  accounting  for
      income  taxes.  At March 31,  2004 and 2003,  the  deferred  tax asset and
      deferred tax liability accounts,  as recorded when material,  are entirely
      the result of temporary differences.

      Temporary  differences  represent differences in the recognition of assets
      and  liabilities  for  tax and  financial  reporting  purposes,  primarily
      accumulated depreciation and amortization.  As of March 31, 2004 and 2003,
      the deferred tax asset is related  solely to the  Company's  net operating
      loss carryforward and is fully reserved.


                                      F-13
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

8.    Loss per share

      Basic  earnings  (loss) per 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, 2004 and 2003, the Company's outstanding stock options and
      warrants are deemed to be anti-dilutive due to the Company's net operating
      loss position.


NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash,  accounts  receivable,  accounts  payable and notes
payable, 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.


NOTE F - CONCENTRATIONS OF CREDIT RISK

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,  2004 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.



               (Remainder of this page left blank intentionally)


                                      F-14
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE G - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at March 31, 2004 and 2003:

<TABLE>
<CAPTION>
                                                   March 31,         March 31,
                                                     2004              2003           Estimated life
                                               ----------------  ----------------     --------------

<S>                                                    <C>               <C>              <C>
         Computer equipment                            $54,168           $50,856          3 years
         Office furniture and other equipment            7,930            10,004          7 years
                                                       -------            ------
                                                        62,098            60,860
         Less accumulated depreciation                 (51,675)          (49,255)
                                                        ------            ------

         Net property and equipment                    $10,423           $11,605
                                                        ------            ======
</TABLE>

Depreciation  expense for the years ended March 31, 2004 and 2003 and the period
from  February 28, 2000 (date of  inception)  through March 31, 2004 was $5,469,
$16,923, and $58,750, respectively.


NOTE H - NOTES PAYABLE
                                                            March 31,  March 31,
                                                              2004       2003
                                                            ---------  ---------
$50,000 installment note payable to an individual.
   Interest imputed at 15.0% and 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, 2004 and the entire amount is classified
   as "current" in the accompanying financial statements.
   Unsecured.                                               $  50,000    $50,000

$15,958 promissory note payable to a law firm.
   Interest at 9.0%.  Originally payable in full
   on June 30, 2001.  Renegotiated as a result
   of litigation during February 2004.  Payable
   as follows: $5,000 on the date of execution
   of the settlement agreement; seven monthly
   installments of $2,000, starting March 13, 2004;
   final installment of $766.50 on October 13, 2004.
   Non-interest bearing subsequent to the February
   2004 settlement date.   Secured by 150,000
   shares of common stock owned by the
   Company's Chief Operating Officer.                          12,787     15,958
                                                            ---------  ---------

                                                            $  62,787  $  65,958
                                                            =========  =========


                                      F-15
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE I - ADVANCES FROM OFFICERS

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
are repayable in aggregate  monthly  amounts of  approximately  $370. Due to the
nature of the debt and irregular payment history,  these advances are classified
as "current" in the accompanying financial statements.

During  Fiscal 2004,  all amounts  advanced by Company  officers  were repaid in
full.


NOTE J - LONG-TERM NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                March 31,  March 31,
                                                                  2004       2003
                                                                ---------  ---------
<S>                                                             <C>        <C>
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, 2004),
   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, 2004) , placed in escrow
   with the lender's brokerage firm, owned by the Company's
   Chief Executive and Chief Operating Officers, respectively.  $ 166,783  $       -
                                                                =========  =========
</TABLE>

The lender was  inconsistent in the  application of the 1.0%  origination fee in
the  various  closing  documents.   The  Company  is  contingently   liable  for
approximately $709 in unbilled and unremitted origination fees.


NOTE K - OFFICER 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
                               2007 - $208,000 annual

The initial  base salary  shall be reduced to $1,500 per week until such time as
the company [sic] 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  companies  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.



                                      F-16
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE K - OFFICER COMPENSATION - CONTINUED

      CCardona  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 it's discretion  grant up to an additional
      $100,000 in bonus to CCardona on an annual basis.

      Stock Options:           The employee  shall  receive  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 )

                               Additionally   the  employee  shall  receive  the
                               following  3,000,000  options  upon  the  company
                               achieving  $500,000  in total  revenues  prior to
                               March 31, 2005.
                               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
                               he is involved with.

Other Agreements:              Medical  and Dental  insurance  is fully paid for
                               the employee by the Company during the employment
                               period.   Company  shall  reimburse  or  pay  for
                               reasonable  company  vehicle  expenses  including
                               lease  or  purchase  payments,   gas,  tolls  and
                               repairs.

Legal Representation:          AdZone Research agrees to defend employee against
                               any and  all  legal  claims  and  litigation.  In
                               addition,  AdZone Research  further agrees to pay
                               all expenses arising from any and all litigation,
                               including  but not  limited to  attorney's  fee's
                               legal  fee's,   misc.   expenses,   .[sic]  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
                               2007 - $208,000 annual

The initial  base  salary  shall be reduced to $1500 per week until such time as
the company [sic] 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  companies  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.


                                      F-17
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE K - OFFICER COMPENSATION - CONTINUED

      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 it's 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:
                               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 )

                               Additionally   the  employee  shall  receive  the
                               following  3,000,000  options  upon  the  company
                               achieving  $500,000  in total  revenues  prior to
                               March 31, 2005.
                               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:         John A.  Cardona  will receive 5% of all sales he
                               is involved with.

Other Agreements:              Medical  and Dental  insurance  is fully paid for
                               the employee by the Company during the employment
                               period.   Company  shall  reimburse  or  pay  for
                               reasonable  company  vehicle  expenses  including
                               lease  or  purchase  payments,   gas,  tolls  and
                               repairs.

Legal Representation:          AdZone Research agrees to defend employee against
                               any and  all  legal  claims  and  litigation.  In
                               addition,  AdZone Research  further agrees to pay
                               all expenses arising from any and all litigation,
                               including  but not  limited to  attorney's  fee's
                               legal  fee's,   misc.   expenses,   .[sic]  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.



               (Remainder of this page left blank intentionally)


                                      F-18
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE K - OFFICER COMPENSATION - CONTINUED

In March 2003,  the Company  entered into an  employment  agreement  with Daniel
Wasserman  (Wasserman)  to serve as its  Executive  Vice  President and Managing
Director of Global Defense Group for a 12-month  period.  Under this  agreement,
Wasserman  receives a salary of $175,000 per year,  commencing upon closing of a
paid sale or completed  financing of  $1,000,000 or more.  Until such time,  the
Company shall pay Wasserman an interim  salary  beginning at $550 per week.  The
salary  will  increase by $1000 per month upon the first paid sale of $50,000 or
more made by Wasserman. The salary will then increase by an additional $1500 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.
Should  Wasserman reach  $1,200,000 in paid sales by the end of 2003,  Wasserman
will be entitled  to full base  salary of $175,000  for the entire year of 2003,
any back  portion  of which is unpaid  at that  time  will be paid to  Wasserman
within 30 days.  This provision is in addition to any  commission,  which is due
and payable. Wasserman also received a contract signing bonus of 450,000 shares.
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.  The Company shall pay Wasserman a cash bonus
of $175,000  should sales exceed  $3,000,000 for the calendar year of 2003. This
bonus shall be paid  proportionally  as sales  revenues are received.  Wasserman
shall receive 1.5 % of the first  $1,000,000  of contract  value as paid on each
contract brought in by Wasserman and 2.5% of contract values above $1,000,000 as
paid  on  each  contract  brought  in  Wasserman.  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.  There  shall  be an
additional  sales  commission bonus of 1% on any $500,000 plus sale closed prior
to July 4, 2003. Should a multi year contract be closed,  this bonus shall apply
to first year value only.  This  commission  bonus shall be paid as the money is
received by AdZone.

As of March  31,  2004 and  2003,  total  cumulative  amounts  unpaid  under the
agreements with CCardona and JCardona are as follows:

                                                 March 31,     March 31,
                                                   2004          2003
                                                 ---------     ----------
      Officer compensation                       $ 160,926     $  570,360
                                                 =========     ==========

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

                                                Year ending
                                                 March 31,       Amount
                                                -----------    ----------
                                                   2005        $  328,667
                                                   2006           365,333
                                                   2007           387,667
                                                   2008           346,666
                                                               ----------
                                                  Totals       $1,428,333
                                                               ==========


               (Remainder of this page left blank intentionally)



                                      F-19
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE L - INCOME TAXES

The  components  of income tax  (benefit)  expense for the years ended March 31,
2004 and 2003 and for the period  from  February  28,  2000 (date of  inception)
through March 31, 2004, respectively, are as follows:

                                                                Period from
                                                             February 28, 2000
                                                             (date of inception)
                               Year ended      Year ended         through
                             March 31, 2004  March 31, 2003    March 31, 2004
                             --------------  --------------  -------------------
Federal:
  Current                    $           --  $           --  $                --
  Deferred                               --              --                   --
                             --------------  --------------  -------------------
State:
  Current                                --              --                   --
  Deferred                               --              --                   --
                             --------------  --------------  -------------------

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

As of March 31,  2004,  the Company has a net  operating  loss  carryforward  of
approximately  $4,000,000 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.

The Company's  income tax expense for each of the years ended March 31, 2004 and
2003 and for the period from February 28, 2000 (date of inception) through March
31, 2004,  respectively,  differed from the statutory federal rate of 34 percent
as follows:

<TABLE>
<CAPTION>
                                                                                        Period from
                                                                                     February 28, 2000
                                                                                     (date of inception)
                                                       Year ended      Year ended         through
                                                     March 31, 2004  March 31, 2003    March 31, 2004
                                                     --------------  --------------  -------------------
<S>                                                  <C>              <C>              <C>
Statutory rate applied to loss before income taxes   $     (590,935)  $     (315,225)  $        (1,631,000)
Increase (decrease) in income taxes resulting from:
    State income taxes                                           --               --                    --
   Non-deductible charges for compensation expense
     related to issuances of common stock at less
     than "fair value"                                       80,800           34,500               115,500
    Other, including reserve for deferred tax asset         510,135          280,725             1,515,500
                                                     --------------   --------------   -------------------

      Income tax expense                             $           --   $           --   $                --
                                                     ==============   ==============   ===================
</TABLE>



                                      F-20
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE L - INCOME TAXES - CONTINUED

Temporary  differences,  consisting primarily of statutory deferrals of expenses
for organizational costs and statutory  differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities give rise to deferred tax assets and liabilities
as of March 31, 2004 and 2003:

                                                March 31, 2004   March 31, 2003
                                                --------------   --------------
Deferred tax assets
Net operating loss carryforwards                $    1,360,000   $      790,000
Less valuation allowance                            (1,360,000)        (790,000)
                                                --------------   --------------

  Net Deferred Tax Asset                        $           --   $           --
                                                ==============   ==============

During the years  ended March 31,  2004 and 2003,  the reserve for the  deferred
current tax asset increased by approximately $570,000 and $73,400, respectively.


NOTE M - PREFERRED STOCK TRANSACTIONS

Preferred  stock  consists  of the  following  as of March  31,  2004 and  2003,
respectively:

<TABLE>
<CAPTION>
                                                        March 31, 2004               March 31, 2003
                                                        --------------               --------------
<C>                                                  <C>           <C>            <C>           <C>
                                                   # shares      par value      # shares      par value
                                                   --------      ---------      --------      ---------
9.0% Series A Cumulative Convertible Stock           24.22         $   -              -         $   -
9.0% Series B Cumulative Convertible Stock           31.00             -              -             -
                                                     -----         -----          -----         -----
     Totals                                          55.22         $   -              -         $   -
                                                     =====         =====          =====         =====
</TABLE>

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 4,220,459  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.



                                      F-21
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE M - PREFERRED STOCK TRANSACTIONS - CONTINUED

9.0% Series A Cumulative Preferred Stock - continued

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.

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, 2004,  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  at a  gross
redemption  price of approximately  $122,250,  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 it's 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 $11,000 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.



                                      F-22
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE M - PREFERRED STOCK TRANSACTIONS - CONTINUED

9.0% Series B Cumulative Preferred Stock - continued

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.

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, 2004,  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 $122,250 of the net proceeds were used to repurchase
approximately  10.63  shares of the then  issued and  outstanding  9.0% Series A
Preferred Stock.

Dividend reserve

In conjunction with the Series A and Series B Preferred Stock transactions,  the
Company  established a contractual  reserve account for the payment of 12 months
of dividends. At March 31, 2004,  approximately $37,300 was in two separate bank
accounts  maintained  by the  Company's  Escrow Agent for the payment of monthly
dividends.


NOTE N - 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 2004, 2003 and 2002, the Company issued approximately  20,735,793,
25,364,332  and  3,136,108  shares  of  common  stock,  in both  registered  and
restricted, unregistered form.

On January 28,  2002,  February  21, 2002 and March 26, 2003 (as  amended),  the
Company filed separate Registration  Statements on Form S-8 registering 538,665,
303,000 and 17,100,000 shares of common stock respectively.


               (Remainder of this page left blank intentionally)


                                      F-23
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

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 1/28/02                   538,665      459,998      78,667
Filing dated 2/21/02                   303,000      171,000     132,000
Filing dated 3/26/03 (as amended)   17,100,000   16,864,000   2,036,000

The following table presents the various  categories for stock issuances  during
Fiscal 2004, 2003 and 2002:

                                           Registered   Restricted      Total
                                          -----------  -----------   -----------
  Balances at March 31, 2001                5,346,000   18,000,022    23,346,022
    Cash                                           --      744,442       744,442
    Conversion of short-term loans                 --      360,000       360,000
    Consulting and Legal services             681,666       25,000       706,666
    Lawsuit settlement                             --      500,000       500,000
    Legal services                                 --      170,000       170,000
    Operating expenses                             --      405,000       405,000
    Personnel compensation                         --      250,000       250,000
                                          -----------  -----------   -----------

  Balances at March 31, 2002                6,027,666   20,454,464    26,482,130

    Cash                                           --    2,413,334     2,413,334
    Consulting and Legal services          12,258,332    2,982,666    15,240,998
    Directors fees                                 --      160,000       160,000
    Operating expenses                             --       10,000        10,000
    Personnel compensation                         --    5,790,000     5,790,000
    Reclassifications per Rule 144(k)      20,454,464  (20,454,464)           --
                                          -----------  -----------   -----------

  Balances at March 31, 2003               38,740,462   11,356,000    50,096,462

    Cash                                    2,100,000      772,333     2,872,333
    Capital formation and public relations         --      730,700       730,700
    Consulting and Legal services           1,075,000      200,000     1,275,000
    Directors fees                                 --      280,000       280,000
    Operating expenses                             --    1,278,760     1,278,760
    Personnel compensation                         --   14,299,000    14,299,000
    Reclassifications per Rule 144(k)      11,356,000  (11,356,000)           --
                                          -----------  -----------   -----------

  Balances at March 31, 2004               53,271,462   17,560,793    70,832,255
                                          ===========  ===========   ===========


In each instance where the agreed-upon value of the Company's common stock, when
issued,  and/or the value of the services rendered or the cash received was less
than the "fair  value" of the  Company's  common  stock,  as  determined  by the
discounted closing quoted closing price of the Company's securities as quoted on
the OTC Bulletin Board,  the Company  recognized a non-cash charge to operations
for the difference.


                                      F-24
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

The  following  tables  recap the  Company's  stock  issuances,  by  purpose  or
function,  for each of the Fiscal  Years  ended March 31,  1004,  2003 and 2002,
respectively:

                        FISCAL YEAR ENDED MARCH 31, 2002

Issuances pursuant to an exemption from registration pursuant to Section 4(2)
-----------------------------------------------------------------------------

<TABLE>
<CAPTION>
  Date of                                             Number    Proceeds or     Excess
   Issue                       Issuee               of Shares    Valuation    fair value
 ---------      ----------------------------------  ----------  -----------   ----------
<C>             <C>                                    <C>      <C>           <C>
Cash
----
8/22/2001       Seth Blumenthal                        100,000  $     7,000   $       --
8/29/2001       Suzanne Tryphonos                        1,666          100           --
10/11/2001      Thomas Clemens                          33,333        2,000           --
10/11/2001      Gerard Stankewicz                       33,333        2,000           --
10/11/2001      Barbara Welker                          10,000          600           --
10/11/2001      Marcia Strada                           10,000          600           --
10/22/2001      Colleen Strada                          10,000          600           --
10/31/2001      Kenneth Ullman                         444,444       20,000           --
12/18/2001      Gerard Stankewicz                       16,666        2,000          500
1/22/2002       Ruth Makofske                           85,000        5,000           --
                                                    ----------  -----------   ----------
                                                       744,442  $    39,900   $      500
                                                    ==========  ===========   ==========
Conversion of short-term loans (1)
----------------------------------
8/10/2001       Barbara Welker                         166,667  $    10,000   $       --
8/10/2001       Charles Blanchfield                     83,333        5,000           --
8/10/2001       Thomas Clemens                          50,000        3,000           --
8/10/2001       Marilyn Hyman                           33,333        2,000           --
8/10/2001       Joe Mortimer                            16,667        1,000           --
8/10/2001       Suzanne Tryphonos                       10,000          600           --
                                                    ----------  -----------   ----------
                                                       360,000  $    21,600   $       --
                                                    ==========  ===========   ==========
Consulting and Legal services
-----------------------------
11/29/2001      Seth Blumenthal                         25,000  $     1,000   $      250
                                                    ==========  ===========   ==========

Lawsuit settlement (2)
----------------------
9/9/2001        Competitive Media Reporting, LLC.      500,000  $    20,000   $       --
                                                    ==========  ===========   ==========

Legal services (3)
------------------
Various         Warren Hamburger                       170,000  $     9,700   $       --
                                                    ==========  ===========   ==========

Operating expenses
------------------
1/29/2002       Jeffrey Halbirt (4)                    200,000  $    14,000   $       --
1/29/2002       Terry Nield (4)                        200,000       14,000           --
3/14/2002       Sheldon Katz (5)                         5,000          250           --
                                                    ----------  -----------   ----------
                                                       405,000  $    28,250   $       --
                                                    ==========  ===========   ==========
Personnel compensation
----------------------
3/24/2002       Daniel Wasserman (6)                   250,000  $    15,000   $       --
                                                    ==========  ===========   ==========
</TABLE>


                                      F-25
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

(1) - Between April 1, 2001 and August 10, 2001,  AdZone received  approximately
$21,600 in cash proceeds for the sale of restricted,  unregistered  common stock
of  Executive  Help  Services,  Inc. to be issued  concurrent  with the business
combination date at a rate of $0.06 per share.
(2) - In  September  2001,  the Company  issued  500,000  shares of  restricted,
unregistered  common stock to an unrelated  company in settlement of a breach of
contract and  non-competition  agreement between the Company's President and the
President's former employer.
(3) - Mr. Hamburger is a member of the Company's Board of Directors
(4) - Mr. Halbirt and Mr. Nield were previously  officers  and/or  affiliates of
the Company prior to the reverse acquisition business combination between AdZone
Research, Inc. (formerly Executive Help Services,  Inc.) and AdZone Interactive,
Inc.
(5) - Issued in  payment  of late fees  incurred  on the lease of the  Company's
former executive offices in Riverhead, New York.
(6) - Issued  pursuant to an  employment  contract for services as the Company's
Vice President for Contract Procurement in lieu of cash compensation

Issuances pursuant to Registration Statement(s) filed on Form(s) S-8
     with the U. S. Securities and Exchange Commission

 Date of                                      Number    Proceeds or     Excess
  Issue                   Issuee            of Shares    Valuation    fair value
---------      ---------------------------  ----------  -----------   ----------
Consulting services
-------------------
12/13/2001     Charles Blanchfield (7)          40,000  $     4,000   $        -
12/13/2001     Robert King (7)                  40,000        4,000            -
12/13/2001     Thomas Kober (7)                 40,000        4,000            -
12/13/2001     Theresa Kober (7)               300,000       18,000            -
1/29/2002      Leonard Braumberger (8)         133,333       16,000            -
3/1/2002       Leonard Braumberger (8)          53,333        8,000            -
2/21/2002      Dave Grandy (9)                  75,000        9,000            -
                                            ----------  -----------   ----------
                                               681,666  $    63,000   $        -
                                            ==========  ===========   ==========

(7) - Issued to various professionals,  some of whom were existing shareholders,
providing legal and accounting services to the Company under one-year contracts.
(8) - Issued to Mr.  Braumberger  and/or  Communique  Media  Services,  Inc.  of
Blaine, Washington, an unrelated entity, to provide web development services and
maintain the Company's corporate internet web site for a fee of $8,000 per month
payable in shares as registered on a January 28, 2001 Form S-8 filing.
(9) - Issued to Mr. Grandy and/or International  Standard Consulting Corporation
of  Vancouver,  British  Columbia,  Canada,  an  unrelated  entity,  to  provide
strategic business and technology  development  consulting services for a fee of
$4,500 per month payable in shares as registered on a February 21, 2001 Form S-8
filing.


               (Remainder of this page left blank intentionally)



                                      F-26
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

                        FISCAL YEAR ENDED MARCH 31, 2003
                        --------------------------------

Issuances pursuant to an exemption from registration pursuant to Section 4(2)
-----------------------------------------------------------------------------
 Date of                                       Number   Proceeds or     Excess
  Issue                   Issuee             of Shares   Valuation    fair value
---------      ----------------------------  ---------  -----------   ----------
Cash
----
5/15/02        B&G Holding Co.                  75,000  $     5,000   $        -
6/6/02         Eleanor Garrett                 300,000       15,000            -
6/6/02         Warren Hamburger (10)           200,000       10,000            -
6/24/02        Kevin Messina                   375,000       15,000            -
7/19/02        Scott Bolkema                   700,000       35,000            -
10/8/02        Carl Washwick                   333,334       10,000            -
11/18/02       Joshua Blumenthal                50,000       10,000            -
3/21/02        Eleanor Garrett                 140,000        2,000            -
3/21/03        Warren Hamburger (10)           140,000        2,000            -
3/31/03        Warren Hamburger (10)           100,000        2,000            -
                                             ---------  -----------   ----------
                                             2,413,334  $   106,000   $        -
                                             =========  ===========   ==========
Consulting and Legal Services
-----------------------------
8/2/02         Jack Kratoville (11)             20,000  $     1,200   $        -
Various        Keith Peters (12)               100,000       10,000            -
9/7/02         Dag Finn Sjoen (11/18)           10,000          250            -
9/20/02        Suzanne Tryphonos (13)           16,666          333            -
Various        Warren Hamburger (10/14)        310,000        6,200            -
10/4/02        Kathleen Kenney (14)             25,000          500            -
Various        Jason Genet (15)              1,225,000       36,875            -
10/11/02       First American Ventures (16)    500,000       12,500            -
11/20/02       Bob Schmidt                     100,000        5,000            -
12/12/02       Robert Fitzpatrick (14)          60,000        1,200            -
Various        Arthur Metz (17)                326,000       10,060            -
2/28/03        Thomas Kober (17)               100,000        3,000            -
3/21/03        Charles Blanchfield (17)        100,000        3,000            -
3/21/03        Thomas Gavin (16)               100,000        5,000            -
                                             ---------  -----------   ----------
                                             2,992,666  $    95,118   $        -
                                             =========  ===========   ==========
Directors fees
--------------
5/1/02         John Conley                      10,000  $       500   $        -
11/18/02       Jonathan White                   40,000        4,500            -
2/28/03        Russell Ivy                      10,000          300            -
2/28/03        John Conley                      50,000        1,500            -
2/28/03        Jonathan White                   50,000        1,500            -
                                             ---------  -----------   ----------
                                               160,000  $     8,300   $        -
                                             =========  ===========   ==========


                                      F-27
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

 Date of                                       Number   Proceeds or     Excess
  Issue                   Issuee             of Shares   Valuation    fair value
---------      ----------------------------  ---------  -----------   ----------
Personnel compensation
----------------------
2/28/02        Charles Cardona               2,000,000  $    30,000   $        -
2/28/03        John Cardona                  2,000,000       30,000            -
8/5/02         Elizabeth Neese                   5,000          500            -
7/9/02         Daniel Wasserman                300,000       12,000            -
Various        Reidar Sjoen (18)               625,000       12,500            -
Various        Valerie Cardona (19)            425,000       10,000            -
Various        Thomas Madigan                   85,000        1,650            -
Various        Ursula Olivares                 350,000        8,000            -
                                             ---------  -----------   ----------

                                             5,790,000  $   104,650   $        -
                                             =========  ===========   ==========

(10) - Mr. Hamburger is a member of the Company's Board of Directors
(11) - Issued for various services  related to the Company's  relocation of it's
corporate offices.
(12) - Issued for general business advisory services.
(13) - Issued for general office and clerical services
(14) - Issued for legal services.
(15) - Issued for Website development, updates and maintenance.
(16) - Issued for various investor and public relations services.
(17)  -  Issued  for  accounting,  bookkeeping  and  other  financial  reporting
services.
(18) - Mr. Dag Finn Sjoen is the father of Mr. Reidar Sjoen,  an employee of the
Company.
(19) - Ms. Cardona is the mother of Charles Cardona, the Company's Chairman, and
John Cardona, the Company's former President of the Company

Issuances pursuant to Registration Statement(s) filed on Form(s) S-8
     with the U. S. Securities and Exchange Commission

 Date of                                       Number   Proceeds or     Excess
  Issue                   Issuee             of Shares   Valuation    fair value
---------      ----------------------------  ---------  -----------   ----------
                                           Common stock directly issued
                                           ----------------------------
Consulting and Legal services
-----------------------------
4/3/02         Leonard Braumberger (8)          53,333  $     8,000   $        -
4/10/02        Dave Grandy (9)                  30,000        4,500            -
5/7/02         Leonard Braumberger (8)          53,333        8,000            -
5/7/02         Dave Grandy (9)                  30,000        4,500            -
6/6/02         Leonard Braumberger (8)          53,333        8,000            -
6/6/02         Dave Grandy (9)                  18,000        4,500            -
7/1/02         Leonard Braumberger (8)          53,333        8,000            -
7/1/02         Dave Grandy (9)                  18,000        4,500            -
8/19/02        Tyler Byrd (12)                 400,000       24,000            -
8/19/02        Thomas Gavin (16)               175,000       10,500            -
9/7/02         Thomas Gavin (16)               140,000        7,000            -


                                      F-28
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

Issuances pursuant to Registration Statement(s) filed on Form(s) S-8
     with the U. S. Securities and Exchange Commission - Continued

 Date of                                       Number   Proceeds or     Excess
  Issue                   Issuee             of Shares   Valuation    fair value
---------      ----------------------------  ---------  -----------   ----------
                                      Common stock directly issued - continued
                                      ----------------------------
Consulting and Legal services - continued
-----------------------------
9/20/02         Charles Blanchfield (17)       233,333        9,333            -
9/20/02         Robert King (17)               233,333        9,333            -
9/20/02         Thomas Kober (17)              233,334        9,334            -
10/4/02         Robert Fitzpatrick (14)        100,000        3,000            -
10/7/02         Jason Genet (15)               400,000        8,000        8,000
10/9/02         Leonard Braumberger (8)         60,000        8,000            -
1/1/03          Thomas Gavin (17)              306,000       15,300            -
1/10/03         John Calcagni (14)             168,000        4,200            -
3/27/03         Hank Zemla (12)                150,000        2,250            -
                                             ---------  -----------   ----------
                                             2,908,332  $   160,250   $    8,000
                                             =========  ===========   ==========

             Common stock issued pursuant to the granting of options to purchase
             -------------------------------------------------------------------
 Date of                                       Number   Proceeds or     Excess
  Issue                   Issuee             of Shares   Valuation    fair value
---------      ----------------------------  ---------  -----------   ----------
Consulting and Legal services
-----------------------------
8/19/02         Kyle Kennedy (20) (*)          500,000  $    18,000   $   12,000
10/7/02         Kyle Kennedy (20) (*)          250,000        2,500        5,000
10/16/02        Kyle Kennedy (20) (*)        1,000,000       15,000       20,000
11/12/02        Kyle Kennedy (20) (*)          200,000        3,000        3,000
11/26/02        Kyle Kennedy (20) (*)          300,000        4,300        2,700
12/10/02        Kyle Kennedy (20) (*)        2,100,000       30,800       23,100
1/23/03         Kyle Kennedy (20) (*)        1,050,000       11,000       15,750
1/28/03         Kyle Kennedy (20) (*)        3,950,000       28,500       11,850
                                             ---------  -----------   ----------
                                             9,350,000  $   113,100   $   93,400
                                             =========  ===========   ==========

(20) - On Aug. 19, 2002 the Company  entered into a  consulting  agreement  with
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
cancellable  at 30 days notice by either  party.  Mr.  Kennedy was also formerly
affiliated  with  Spartan  Securities  Group,  Ltd. and has  represented  to the
Company that the services  provided in this agreement are separate and unique to
Spartan's efforts in capital raising.



               (Remainder of this page left blank intentionally)


                                      F-29
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

                           YEAR ENDED MARCH 31, 2004
                           -------------------------

Issuances pursuant to an exemption from registration pursuant to Section 4(2)
-----------------------------------------------------------------------------
 Date of                                       Number   Proceeds or     Excess
  Issue                  Issuee              of Shares   Valuation    fair value
---------     ----------------------------  ----------  -----------   ----------
Cash
----
4/23/03       Ruth Makofske                    500,000  $     8,000   $        -
5/5/03        Thomas Madigan                     5,000          100            -
5/13/03       Warren Hamburger (10)            150,000       30,000            -
7/28/03       Ruth Makofske                     33,333        2,000            -
7/28/03       Warren Hamburger (10)              6,000          500            -
11/20/03      Warren Hamburger (10)             33,000        6,000            -
1/27/04       Ronald Mayhew                     30,000       10,200        1,125
1/30/04       Ronald Mayhew                     15,000        5,100        7,350
                                            ----------  -----------   ----------
                                               772,333  $    61,900   $    8,475
                                            ==========  ===========   ==========
Personnel compensation
----------------------
Various       Charles Cardona                5,473,151  $   287,187   $        -
Various       John Cardona                   5,706,849      300,574            -
Various       Brian Mayhew (21)                170,000       14,200            -
Various       Chris Vita                        35,000        4,000            -
Various       Daniel Wasserman               1,275,000       77,000            -
Various       Michael Moore                      5,000          400            -
Various       Nicole Brownell                   31,000        5,035            -
Various       Paul Weaver                      210,000       31,850            -
Various       Reidar Sjoen (18)                760,000       63,600            -
Various       Thomas Madigan                   308,000       26,880            -
Various       Ursula Oliveras                  260,000       37,600            -
Various       Valerie Cardona (19)              65,000        8,900            -
                                            ----------  -----------   ----------
                                            14,299,000  $   857,226   $        -
                                            ==========  ===========   ==========
Consulting and legal services
-----------------------------
Various       Arthur Metz                       29,699        5,284   $      581
Various       Charles Blanchfield              310,000       30,500       16,000
Various       Equities Magazine, LLC            50,700        4,990            -
Various       Ronald Mayhew                    216,061       35,275       21,303
Various       Thomas Gavin                     170,000       26,300            -
Various       Thomas Kober                     315,000       32,300       16,000
5/5/03        Jason Miller                       7,000          280            -
5/5/03        Scott Rubin                        7,000          280            -
5/23/03       Victor Yurkins                    25,000        1,250            -
5/23/03       Elizabeth Neese                   10,000          700            -
5/23/03       JoAnn Palminteri                   3,000          105            -
6/6/03        Hank Zemla                       100,000        8,500            -
7/22/03       John Calcagni                    200,000        8,000            -
7/22/03       Nu-Quest Consulting, Inc.        200,000        8,000            -
9/17/03       Barrow Street Research             5,000          700            -
3/12/04       Duane Lewin                        5,000        2,000            -
5/8/03        Olga Paidoussis                  200,000        3,200            -
1/7/04        William Bogardus                  20,000        7,000            -
1/30/04       Peter Cardona (22)                36,000        8,000        6,940
                                            ----------  -----------   ----------
                                             1,909,460  $   182,664   $   60,824
                                            ==========  ===========   ==========


                                      F-30
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE N - COMMON STOCK TRANSACTIONS - CONTINUED

                      YEAR ENDED MARCH 31, 2004 -CONTINUED

Issuances pursuant to an exemption from registration pursuant to Section 4(2)

 Date of                                      Number    Proceeds or     Excess
  Issue                Issuee               of Shares    Valuation    fair value
---------   ----------------------------    ----------  -----------   ----------
Directors Fees
--------------
Various     Russell Ivy                         65,000  $     9,400   $        -
Various     Warren Hamburger                   215,000       21,400            -
                                            ----------  -----------   ----------
                                               280,000  $    30,800   $        -
                                            ==========  ===========   ==========
Investment Banking services
---------------------------
11/18/03    Spartan Securities Group, Inc.     300,000  $    33,000   $        -
                                            ==========  ===========   ==========

(21) - Brian Mayhew is the son of Thomas Mayhew.
(22) - Peter  Cardona is the brother of Charles and John  Cardona and the son of
Valerie Cardona.

Issuances pursuant to Registration Statement(s) filed on Form(s) S-8
     with the U. S. Securities and Exchange Commission

 Date of                                      Number    Proceeds or     Excess
  Issue                Issuee               of Shares    Valuation    fair value
---------   ----------------------------    ----------  -----------   ----------
                                         Common stock directly issued
                                         ----------------------------
Consulting services
-------------------
5/5/03      Hank Zemla (12)                    100,000        4,000   $        -
5/13/03     Duane Lewin                         20,000          600            -
5/13/03     Elizabeth Wooley-Lewin              15,000          450            -
5/13/03     Sunny Lewin                         15,000          450            -
                                            ----------  -----------   ----------
                                               150,000  $     5,500   $        -
                                            ==========  ===========   ==========

             Common stock issued pursuant to the granting of options to purchase
             -------------------------------------------------------------------
 Date of                                      Number    Proceeds or     Excess
  Issue                Issuee               of Shares    Valuation    fair value
---------   ----------------------------    ----------  -----------   ----------
Consulting services
-------------------
5/6/03      Kyle Kennedy (20) (*)              300,000  $     9,000   $        -
5/20/03     Kyle Kennedy (20) (*)              625,000       31,250            -
                                            ----------  -----------   ----------
                                               925,000  $    40,250   $        -
                                            ==========  ===========   ==========
Employees
---------
Various     Charles Cardona                     50,000  $    30,500   $        -
Various     John Cardona                       100,000       61,000            -
Various     Brian Mayhew                       300,000      100,964       26,436
Various     Daniel Wasserman                   500,000      166,840       47,160
Various     Nicole Brownell                     50,000       30,500            -
Various     Ronald Mayhew                      475,000      158,025       41,100
Various     Thomas Madigan                     325,000      138,271       18,129
Various     Ursula Oliveras                    300,000      122,120       35,505
                                            ----------  -----------   ----------
                                             2,100,000  $   808,220   $  168,330
                                            ==========  ===========   ==========

(*) - Mr. Kennedy owes the Company an aggregate $30,550 in cash for the exercise
of various stock options and the issuance of the underlying registered shares of
common stock as of March 31, 2004.


                                      F-31
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE O - STOCK OPTIONS

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 , 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 an aggregate  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 2004 and 2003,  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  cancellable at 30 days notice by either
party.

                                                                Weighted average
                                                                 price per share
                                                                 ---------------
     Options outstanding at April 1, 2001            2,000,000             $0.10
       Issued -                                                                -
       Exercised                                             -                 -
       Expired/Terminated                                    -                 -
                                                    ----------

     Options outstanding at March 31, 2002           2,000,000             $0.10
       Issued 13,350,000                                                    0.03
       Exercised                                    (9,350,000)             0.01
       Expired/Terminated                           (4,000,000)             0.08
                                                    ----------

     Options outstanding at March 31, 2003           2,000,000             $0.10
       Issued 6,925,000                                                     1.11
       Exercised                                      (925,000)             0.04
       Expired/Terminated                                    -                 -
                                                    ----------

     Options outstanding at March 31, 2004           8,000,000             $0.98
                                                    ==========

The weighted  average  exercise price of all issued and  outstanding  options at
March 31, 2004 is approximately $0.98.

Had  compensation  cost for options  granted been  determined  based on the fair
values at the grant dates,  as prescribed  by Statement of Financial  Accounting
Standards  No. 123, the Company's net loss and net loss per share would not have
changed  significantly  as the  exercise  price of the  options  was  relatively
equivalent to or less than the estimated fair value of the underlying  shares at
the grant date.


                                      F-32
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE O - STOCK OPTIONS - CONTINUED

The  calculations  to estimate the fair value of the options were made using the
Black-Scholes pricing model which required making significant assumptions. These
assumptions include the expected life of the options, which was determined to be
one year, the expected volatility,  which was based on management's estimates as
there was no quoted or listed  price on the  Company's  equity  securities,  the
expected  dividends,  determined to be zero based on past  performance,  and the
risk free interest rate,  which was estimated using a bond  equivalent  yield of
6.0% at March 31, 2004, 2003 and 2002.


NOTE P - 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  180,000  warrants to purchase up to an
equivalent  number of shares of the  Company's  common stock at a price of $0.25
per share and 380,000 warrants to purchase an equivalent number of shares of the
Company's  common  stock at a price of $0.10 per share.  The  aggregate  560,000
warrants have an average exercise price of approximately  $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.

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 4,220,459  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  100Units,  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 to purchase up to an aggregate 1,409,000 shares of
common stock at a price of either $0.07 per share (995,714  shares) or $0.20 per
share (413,333  shares).  Each Warrant shall expire on either August 12, 2008 or
November 17, 2008, respectively.

No  warrants  have been  exercised  during the period  ended  March 31,  2004 or
subsequent thereto.


                                      F-33
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE P - STOCK WARRANTS - CONTINUED

The following table summarizes the outstanding warrants as of March 31, 2004 and
2003, respectively:

<TABLE>
<CAPTION>
                                                          Warrants           Warrants
                                                         originally       outstanding at     Exercise price
                                                           issued         March 31, 2004        per share
                                                       --------------     --------------   -------------------

<S>                                                           <C>                <C>         <C>
Gavin warrants - Series A                                     180,000            180,000     $0.25 per share
Gavin warrants - Series B                                     380,000            380,000     $0.10 per share
                                                            ---------          ---------

     Totals at March 31, 2003                                 560,000            560,000

Gavin warrants - FY2004                                       250,000            250,000      $0.15 - $0.85
9.0% Series A Preferred Stock Warrants                      4,220,459          4,220,459   $0.07406 - $0.13858
9.0% Series B Preferred Stock Warrants                      2,091,138          2,091,138     $0.14819 - $0.15
Underwriter's Warrants                                      1,409,047          1,409,047       $0.07 - $0.20
                                                            ---------          ---------

     Totals at March 31, 2004                               8,530,644          8,530,644
                                                            =========          =========
</TABLE>

The  weighted-average  exercise price of the Company's  outstanding  warrants at
March 31, 2004 is approximately $0.11 per share.


NOTE Q - COMMITMENTS AND CONTINGENCIES

Litigation

AdZone  Interactive,  Inc.  is a party to a lawsuit  filed  against  it by R. C.
Auletta and Co., Inc.  (Auletta) which was filed during 2001. Auletta is seeking
fees in the  amount of  approximately  $32,000  which were  performed  after the
expiration of a contract for consulting  services  between  AdZone  Interactive,
Inc.  and  Auletta.  The Company is of the  opinion  that the lawsuit is without
merit and has accrued an open unpaid balance due of approximately $600 as of the
expiration  date of the  contract.  A  judgment  in the  amount  of  $34,691.87,
including  interest,  was entered  against the Company  during Fiscal 2004.  The
Company executed a settlement  agreement whereby the judgment will be retired as
follows:  $5,000 cash upon execution of the settlement  agreement and $1,000 per
month,  commencing  December  15, 2003,  until the judgment is paid in full.  In
prior periods,  the Company has accrued,  and charged to  operations,  all costs
associated with this transaction.  No further effect on the financial  condition
of the Company should occur on this matter.

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.


                                      F-34
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE Q - COMMITMENTS AND CONTINGENCIES - CONTINUED

Office facilities - continued

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

                                              Year ending
                                               March 31,                Amount
                                              -----------              --------
                                                  2005                 $ 25,608
                                                  2006                   29,778
                                                  2007                   31,020
                                                  2008                   15,750
                                                                       --------

                                                  Total                $102,156
                                                                       ========
Consulting agreements

In January 2002, the Company executed a one-year  contract with Communique Media
Services,  Inc. and/or Leonard Braumberger,  an unrelated entity, to provide web
development  services and maintain the Company's corporate internet web site for
a  fee  of  $8,000  per  month  payable  in  shares  registered  on a  Form  S-8
Registration  Statement.  Through July 1, 2002,  the Company issued an aggregate
399,998 shares under the Form S-8 Registration Statement.  Each monthly issuance
was charged to  operations  as  consulting  fees.  As of December 31, 2002,  the
Company has no further obligations under this agreement.

In February 2002, the Company  executed a one-year  contract with  International
Standard  Consulting  Corporation,  and/or Dave Grandy,  an unrelated entity, to
provide strategic business and technology  development consulting services for a
fee of  $4,500  per  month  payable  in  shares  as  registered  on a  Form  S-8
Registration  Statement.  Through July 1, 2002,  the Company issued an aggregate
171,000 shares under the Form S-8 Registration Statement.  Each monthly issuance
is charged to  operations  as  consulting  fees.  As of December 31,  2002,  the
Company has no further obligations under this agreement.

In April 2002,  the Company  entered into a one-year  consulting  agreement with
NuQuest  Consulting,  Inc.  pursuant to which NuQuest agreed to consult with and
assist the Company with respect to the Company's  business  plan,  its financial
statements  and other  materials  prepared for the purpose of  obtaining  equity
financing,  engaging in a public offering, and/or relating to the trading of the
Company's  common  stock in the  public  markets.  NuQuest  also  agreed  to use
reasonable efforts to seek and identify potential  investors for the Company, to
assist the Company in the consummation of any proposed financing, and to provide
the Company with  written  reports of the status of its efforts on behalf of the
Company.  As  compensation  for its  services,  the  Company  agreed to issue to
NuQuest  warrants to purchase 900,000 shares of common stock, on a fully diluted
basis.  The warrants  are  exercisable  at $0.15 per share,  and the Company has
agreed to file an S-8  Registration  Statement  with the Securities and Exchange
Commission  to register the shares  underlying  the warrants.  In addition,  the
Company agreed to pay NuQuest cash  compensation  of $33,000  payable in monthly
installments over the term of the contract. As of March 31, 2003, and subsequent
thereto,  the  Company  has not  completed  the  preparation  and  filing of the
required Form S-8 Registration Statement and has not made any cash payments. The
Company cancelled and settled this agreement with the issuance of 200,000 shares
of  restricted,   unregistered   common  stock  on  July  22,  2003,  valued  at
approximately $8,000.

On November 11, 2002, the Company entered into a Consulting Agreement with PAW &
Associates  and/or Paul Weaver to provide various  product sales services.  This
Agreement  is for a 12 month term  starting  November  7, 2002.  The  Company is
obligated to issue 25,000 shares of restricted,  unregistered  common stock upon
execution of the Agreement and to pay a 3.0%  commission on the first $3 million
of acquired contract value and 5.0% on all acquired contract values in excess of
$3 million.


                                      F-35
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE Q - COMMITMENTS AND CONTINGENCIES - CONTINUED

Consulting agreements - continued

On December 2, 2002,  the Company  entered into a one year business  development
agreement with Paul Weaver to provide  assistance in the  acquisition of various
contracts  utilizing  the  Company's  data mining  research  capabilities.  This
agreement  requires  compensation  as follows:  25,000  shares of the  Company's
common stock upon  execution of the  agreement;  a 3.0%  commission on the first
cumulative $3 million in total contract value; an additional 2.0% commission for
total contract value in excess of $3 million, an additional 25,000 shares of the
Company's  common  stock on the first  contract  in excess of  $500,000 in total
contract value.

On August 13, 2002,  the Company  entered  into an  agreement  with Thomas Gavin
(Gavin) to provide  informational  and educational  news releases and distribute
said  releases to the news media.  Gavin is required to spend  approximately  40
hours per month 1) developing news release concepts and a news release timeline;
2) drafting  and editing  news  releases  for Company  review and  approval;  3)
issuing these news  releases with a quality wire news service to ensure  highest
possible media distribution; 4) identifying major trade and general daily/weekly
media to expand  coverage;  5)  reconnecting  with reporters  providing  earlier
coverage  to update them and to begin the  building  of a major  media  outreach
effort for the longer term;  and 6) preparing a general  snapshot  report on the
Company and it's operating  history.  As compensation,  the Company issued Gavin
175,000 shares of the Company's  common stock,  as registered on Form S-8, as of
August 1, 2002 and 70,000 shares of the Company's common stock, as registered on
Form S-8, on the first day of each succeeding month.  Additionally,  the Company
will issue Gavin 30,000  warrants per month to purchase an equivalent  number of
shares of the  Company's  common stock at an exercise  price of $0.25 per share.
Each  warrant  will be for a three year term from the date of  issuance.  During
Fiscal 2004,  the Company  issued an additional  aggregate  250,000  warrants to
Gavin to purchase up to an equivalent  number of shares of the Company's  common
stock at a price  ranging  from  $0.15 to $0.85 per  share.  Each of the  FY2004
warrants expire on the 2nd anniversary date of issuance.

On October 16, 2002, the Company  entered into a  Multi-Media/Corporate  Imaging
Agreement  with Jason Genet (Genet).  This agreement  contains two (2) phases of
services:  Phase I - Create [a] Multimedia  Website,  Corporate  Imaging and Web
Mercial  ("New  Product")  and Phase II - assist the Company in the marketing of
New Product, make reasonable effort to organize, produce and supervise corporate
imaging and advertising as approved by the Company.  The Company is obligated to
compensate  Genet for both Phase I and Phase II in either  cash of  $370,000  or
common stock of the Company,  as  registered  on Form S-8, in a number of shares
equal to $400,000,  priced at the closing  quoted price of the Company's  common
stock on the day of issuance.  This  agreement is cancellable at any time by the
Company with no further  obligation beyond that which was already earned and due
to be paid. Through December 31, 2002, the Company has issued Genet an aggregate
1,625,000  shares of common  stock under this  agreement.  As of March 31, 2004,
this agreement has terminated and the Company has no further obligation.

Investment Banking agreements

On June 20, 2002, the Company signed a Financial  Services  Agreement with First
American  Financial Group, New York, New York,  pursuant to which First American
Financial  Group  agreed to attempt to complete a private  placement of up to $5
million of the Company's 9% convertible  preferred  stock.  Through December 31,
2002, the Company paid First American  Financial Group  approximately  $5,000 in
conjunction with this Agreement and First American Financial Group, Inc. has not
provided any financing pursuant to this agreement.


               (Remainder of this page left blank intentionally)


                                      F-36
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE Q - COMMITMENTS AND CONTINGENCIES - CONTINUED

Consulting agreements - continued

On November  27, 2002,  the Company  entered  into an  agreement  (the  "Spartan
Agreement") with Spartan Securities Group, Ltd.  ("Spartan") under which Spartan
agreed to provide,  on an exclusive  basis,  financial  advisory and  investment
banking services to the Company for a period of one (1) year, subject to earlier
termination  by either the  Company or Spartan  upon at least  thirty (30) days'
prior written  notice to the other party.  The services  that Spartan  agreed to
provide  include  rendering  advice  with  regard  to our  internal  operations,
corporate  finance  matters,  mergers  and  acquisitions,  and  capital  raising
activities.  Spartan  also  will act as our  exclusive  Placement  Agent for any
private  offering of the Company's  securities  and as underwriter in any public
offering of equity or debt securities.  The Company has also agreed to appoint a
person nominated by Spartan to our Board of Directors.

In consideration for Spartan's  services,  the Company has agreed to pay Spartan
an initial  non-refundable  retainer of 300,000 shares of our Common Stock and a
monthly  consulting  fee of  $2,500  that will  commence  upon  completion  of a
financing  of not less  than  $350,000,  increasing  to $3,000  per  month  upon
completion of a financing of not less than $500,000.

In addition, upon completion of certain extraordinary transactions,  including a
sale of the Company's assets,  securities or business,  or the purchase by us of
another company or any of such other company's  assets,  securities or business,
Spartan  will be  entitled  to  receive  5% of the first  Five  Million  Dollars
($5,000,000),  4% of the second Five  Million  Dollars  ($5,000,000),  3% of the
third  Five  Million  Dollars  ($5,000,000),  and 2% of any  amount in excess of
Fifteen  Million  Dollars  ($15,000,000)  of  consideration   involved  in  such
transaction.  If Spartan  is  involved  in  originating  a loan or other  credit
facility with any bank or other institutional  lender, the Company has agreed to
pay Spartan a fee of 2% of the maximum amount of the credit facility,  including
of any increases in such facility after the date of the original financing.

The Company  also granted  Spartan a right of first  refusal to act as Placement
Agent  for  any  private  offering  of  our  equity  securities  (or  securities
convertible  into  equity  securities)  except for  private  placements  of such
securities  originating  from our officers and  directors.  Spartan will receive
Placement  Agent  compensation  of 10% of the gross proceeds  raised in any such
private offering and a 2% non-accountable expense allowance, as well as warrants
to  purchase  up to  20% of the  number  of  securities  sold  in the  offering,
exercisable  at 100% of the market  price of the  securities  on the date of the
sale.

If Spartan acts as  underwriter in any public  offering of the Company's  equity
securities,  Spartan  will  receive  7% of  the  gross  proceeds  raised  in the
offering, a 2% non-accountable expense allowance, and warrants to purchase up to
10% of the number of securities sold in the offering, exercisable at 100% of the
closing  market  price  on the  date of the  sale of  securities  in the  public
offering.

At November 27, 2003, the Spartan  Agreement  matured and became a non-exclusive
agreement  for the  same  services.  Spartan  was the  Placement  Agent  for the
Company's  Private  Placement  Memorandums  offering  both  the  9.0%  Series  A
Preferred  Stock and the 9.0% Series B Preferred  Stock and was paid  cumulative
commissions of approximately $77,280,  including a commission on a 9.0% Series A
Preferred Stock Unit purchased by Spartan.

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
it's   "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 has
an initial  term of one year  (expiring  April 6, 2005) with an option to extend
the  expiration  date for an  additional  six (6)  months.  For these  services,
Hartsfield  will  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.


                                      F-37
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE Q - COMMITMENTS AND CONTINGENCIES - CONTINUED

Investment Banking agreements - continued

Additionally,  Hartsfield  will be granted  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.

Business Development agreement

During  Fiscal  2004 and 2003,  the  Company has  executed  multiple  Consulting
Agreements  with Kyle  Kennedy to provide  consulting  services  in the areas of
business  development,  mergers and acquisitions  and business  strategy for the
Company. At the beginning of the business  relationship  between the Company and
Mr. Kennedy, Mr. Kennedy was affiliated with Spartan Securities Group, Ltd. (see
above) and has  represented  to the Company that the  services  provided in this
agreement are separate and unique to Spartan's  efforts in capital raising.  The
dates and consideration  related to the various  agreements with Mr. Kennedy are
as follows:

August 19, 2002       1,000,0000  options to  purchase an  equivalent  number of
                      shares of the  Company's  common stock at $0.04 per share;
                      666,000 options to purchase an equivalent number of shares
                      of the  Company's  common  stock at $0.06 per  share;  and
                      334,000 options to purchase an equivalent number of shares
                      at $0.08 per share.  These options expired on February 19,
                      2003.

October 7, 2002       250,000 options to purchase an equivalent number of shares
                      of the  Company's  common stock at $0.01 per share.  These
                      options expired on November 7, 2002

October 11, 2002      1,000,000  options to  purchase  an  equivalent  number of
                      shares of the Company's  common stock at $0.015 per share.
                      These options expired on November 10, 2002.

November 12, 2002     200,000 options to purchase an equivalent number of shares
                      of the  Company's  common stock at $0.02 per share.  These
                      options expired on December 12, 2002.

November 26, 2002     300,000 options to purchase an equivalent number of shares
                      of the Company's  common stock at $0.016 per share.  These
                      options expired on December 26, 2002.

December 11, 2002     2,100,000  options to  purchase  an  equivalent  number of
                      shares of the Company's  common stock at $0.016 per share.
                      These options expired on January 10, 2003.

January 23, 2003      1,050,000  options to  purchase  an  equivalent  number of
                      shares of the  Company's  common stock at $0.01 per share.
                      These options expired on February 22, 2003.

January 28, 2003      3,950,000  options to  purchase  an  equivalent  number of
                      shares of the  Company's  common stock at $0.01 per share.
                      These options expired on February 28, 2003.


                                      F-38
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE Q - COMMITMENTS AND CONTINGENCIES - CONTINUED

Business Development agreement - continued

May 6, 2003           300,000 options to purchase an equivalent number of shares
                      of the  Company's  common stock at $0.03 per share.  These
                      options expired on June 6, 2003.

May 20, 2003          625,000 options to purchase an equivalent number of shares
                      of the  Company's  common stock at $0.05 per share.  These
                      options expired on June 20, 2003.

As of March 31,  2004 and  2003,  Mr.  Kennedy  owed the  Company  approximately
$30,550 and $14,800, respectively, for shares purchased by Mr. Kennedy under the
exercised options.

Broker-Dealer Marketing agreement

On October 10, 2002,  the Company  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 the
Company's equity securities;  contact broker-dealers via e-mail and telephone to
review  current  Company  information  and meet with  broker-dealers,  and their
registered  representatives,  to discuss and promote  awareness of the Company's
equity  securities.  As  compensation  to First  Financial,  the Company  issued
500,000  shares of restricted,  unregistered  common stock upon the execution of
this  agreement.  Further,  the Company is  obligated  to pay First  Financial a
non-accountable  expense  allowance  of $10,000 cash payable upon receipt of any
financing from any source in a minimum amount of $500,000.

Further,  First  American  is entitled  to Bonus  Compensation  equal to 100,000
shares of  restricted,  unregistered  common  stock if at any time during the 12
months  following the execution of this  agreement,  the Company's  common stock
reaches  $0.10  per  share;   an  additional   100,000   shares  of  restricted,
unregistered  common  stock if at any time  during the 12 months  following  the
execution of this agreement, the Company's common stock reaches $0.20 per share;
an additional 100,000 shares of restricted,  unregistered common stock if at any
time  during  the 12 months  following  the  execution  of this  agreement,  the
Company's common stock reaches $0.40 per share; and an additional 100,000 shares
of  restricted,  unregistered  common  stock if at any time during the 12 months
following the execution of this  agreement,  the Company's  common stock reaches
$0.60 per share. 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 the Company is in breach of various
components  of this  contractual  agreement  and  filed for  arbitration  of the
contested matters. The Company 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 June 25,  2004.  The  Company  has no  further  obligations  in
relation to this agreement.


NOTE R - SUBSEQUENT EVENTS

Contract for Services

In May 2004,  the Company  executed a letter of intent  based on a proposal  for
services  issued to a major United  States  Governmental  agency  (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.


                                      F-39
<PAGE>

                              ADZONE RESEARCH, INC.
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE R - SUBSEQUENT EVENTS - CONTINUED

Issuances of Common Stock

During the period from April 1, 2003 through June 25, 2004,  the Company  issued
shares of registered and restricted, unregistered common stock for

                                           Number
              Issuee                      of Shares              Purpose
---------------------------------------   ---------   -------------------------

Registered on Form S-8
----------------------
   Jeff Hale/Baltic Ventures                 50,000      Consulting Agreement
   Thomas F. Gavin                          330,000   Public relations services
   Pelle Ojasu                              450,000     Consulting Agreement
   Sichenzia Ross Friedman Ference, LLP      50,000         Legal services
   Gregory Sichenzia, Esq.                   75,552         Legal services

Restricted, Unregistered shares
-------------------------------
   The Nutmeg Group, LLC                  3,457,217    Subscription Agreement
   Paul B. and Becky B. Sigfusson           525,000             Cash
   First American Financial Group           200,000      Contract Settlement
   Baltic Ventures                          200,000     Consulting Agreement
   Pelle Ojasu                              197,000     Consulting Agreement
   Arthur J. Metz                           136,472      Accounting services
   Paul B. Sigfusson Profit Sharing
     Trust                                  110,000             Cash
   Paul A. Weaver                           100,000     Consulting Agreement
   John Conley                               81,000     Consulting Agreement
   Ronald Mayhew                             71,652      Accounting services
   Robert Fitzpatrick                        50,000         Legal services
   Thomas F. Gavin                           10,000    Public relations services
   John B. and Peggy A. Murphy               10,000      Consulting Agreement
   Enzo Saulee                                4,000      Consulting Agreement
   Larry Beierly                              1,000      Consulting Agreement

On May 20, 2004, the Company  executed a Subscription  Agreement with The Nutmeg
Group, L. L. C., a U. S. Virgin Islands limited liability company,  for the sale
of common stock. The aggregate purchase price is approximately  $1,750,000 to be
paid in three  traunches  as follows:  a minimum of  $400,000  by May 20,  2004;
$1,000,000  minus the funds  paid in the first  traunche  by June 4,  2004;  and
$750,000, at the option of the Company,  within five (5) days of the date that a
Registration  Statement covering the underlying  securities in this agreement is
declared effective by the U. S. Securities and Exchange  Commission.  The number
of shares to be issued will be equal the purchase price divided by the lesser of
a)$0.20 per share;  b) 57.0% of the average  closing bid price for the Company's
common  stock on the two  trading  days prior to the  closing of the  respective
traunche;  or c) 57.0% of the average closing bid price for the Company's common
stock on the two (2)  trading  days prior to the date on which the  Registration
Statement covering the underlying shares in this agreement is declared effective
by the U. S. Securities and Exchange Commission.  This formula is referred to as
the "Fixed  Price".  The Company  initially  issued Nutmeg  3,457,217  shares of
common stock to be registered for resale on the initial $600,000 funding.  Based
on the Fixed Price  formula,  the Company has a contingent  obligation  to issue
additional  shares  based on the  average  closing  bid price for the  Company's
common stock for the two (2) days prior to the  effective  date of the Company's
Registration Statement to be filed.


                                      F-40
<PAGE>

                             ADZONE RESEARCH, INC.
                         (a development stage company)

                   NOTES TO FINANCIAL STATEMENTS - CONTINUED


NOTE R - SUBSEQUENT EVENTS - CONTINUED

Issuances of Common Stock - continued

Nutmeg  will  also be  issued  Warrants  to  purchase  shares  of  common  stock
exercisable  into such number of shares of common  stock as is equal to 50.0% of
the Purchase Price paid by Nutmeg,  divided by the Fixed Price. The common stock
underlying the Warrants will also have "piggyback"  registration  rights and the
Warrants will be  transferrable.  The Warrants will expire on December 31, 2008.
The Warrant's  exercise price will be at 125.0% of 57.0% of the average  closing
bid price for Common Stock on the two (2) trading days immediately  prior to the
filing  of a  Registration  Statement  covering  the  underlying  stock  in this
agreement with the U. S. Securities and Exchange Commission.

Upon  each  closing,  the  Company  will pay to  Nutmeg a fixed  non-accountable
allowance for due diligence expenses equal to 1.0% of the gross proceeds, plus a
flat non-accountable expense allowance of $10,000, in addition to a 10.0% fee to
Hartsfield Capital Securities, Inc. and the Company's direct legal expenses.

The Company contractually obligated itself to file a Registration Statement with
the U. S.  Securities and Exchange  Commission to  accommodate  the total shares
issued on the Subscription  Agreement and the number of shares that the Warrants
will be exercisable into within 45 days of the receipt of $1,000,000 and to have
the  Registration  Statement  declared  effective within 120 days of the initial
filing and to maintain the  effectiveness  through  December  31,  2008.  In the
Registration  Statement is not declared effective within 120 days of the initial
filing,  the  Company  will owe  Nutmeg a  penalty  equal to 1.0% of the  amount
invested by Nutmeg.  Further, the Company is liable for an additional penalty of
1.0% for each  additional 30 day period that the  Registration  Statement is not
declared effective. All costs and expenses related to the Registration Statement
are the sole responsibility of the Company.

On June 4, 2004, the Company  received gross proceeds of $600,000 on the initial
funding  by  Nutmeg  and  realized  net  proceeds  of  approximately   $529,000.
Approximately  $71,000 was paid in cash for fees to Nutmeg and  Hartsfield.  The
Company's  legal fees were satisfied with the issuance of shares of common stock
registered on Form S-8.

Purchase of Warrants

On March 24, 2004,  the Company  executed a Securities  Purchase  Agreement with
Spartan  Securities  Group, Ltd. whereby the Company would purchase from Spartan
232,528 Warrants issued to Spartan as additional compensation on the sale of the
Company's  9.0% Series A Preferred  Stock  issue.  The  Company  completed  this
transaction  with the payment of an  aggregate  $76,744 to Spartan in April 2004
($50,000) and May 2004 ($26,744).

Consulting Agreement

On April 30, 2004,  the Company  executed an  Engagement  Agreement  with Baltic
Ventures, LLC, a New York limited liability company,  (Baltic) to provide advise
and  representation  for  strategic   opportunities   including  Mergers,  Joint
Ventures,  Acquisitions  and other business  matters and to advise and represent
the Company after such  assessment to close a transaction or  acquisition  after
approval by the Company as soon as reasonably possible.  This agreement is valid
through  January 31, 2005 and is  renewable at the option of either  party.  For
compensation,  the Company  issued 25,000  shares of common stock  registered on
Form S-8 each to Baltic's principals,  Jeffrey Hale and Terry Kent. Further, the
Company  issued  200,000  shares of  unregistered,  restricted  common  stock to
Baltic.  In the event that Baltic  terminates  the  contract  during the initial
term,  the 200,000  shares must be returned to the  Company.  Additionally,  the
Company must issue Warrants to purchase up to 1,000,000  shares of the Company's
common stock,  exercisable  for a two (2) year period,  at an exercise  price of
$1.00 per share. As compensation for any consummated transaction, the Company is
liable to pay Baltic a commission of 10.0% of the closing  transaction value and
Warrants to purchase up to 1,000,000 shares of the Company's common stock at the
quoted closing price of the Company's common stock on the date of closing with a
term of two (2)  years  from  the  closing  date.  Further,  the  Company  shall
reimburse Baltic for all reasonable  out-of-pocket expenses upon approval by the
Company.  Additionally,  the Company shall furnish Baltic a computer system,  if
requested, with a value of not more than $2,500.


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