United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-KSB


(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ?ACT OF 1934

For the fiscal year ended: December 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 no.: 000-29201


                            Elva International, Inc.
                  --------------------------------------------
                 (Name of small business issuer in its charter)


           Florida                                         65-0790761
---------------------------------------           ------------------------------
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                               Identification No.)


222 Lakeview Avenue, PMB 160-415
West Palm Beach, FL                                           33401
---------------------------------------           ------------------------------
(Address of principal executive offices)                    (Zip Code)


Registrant's telephone number: (925) 831-0504


                                      N/A
                  --------------------------------------------
          (Former name or former address, if changes since last report)


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

                                                    Name of each exchange on
  Title of each class                                     which registered
      None
-----------------------------                      -----------------------------

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

                         Common Stock, $0.0001 par value
                  --------------------------------------------
                                (Title of class)




<PAGE>



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [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  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form 10- KSB or any
amendment to this Form 10-KSB. [X]



The Registrant's revenue for the fiscal year ended December 31, 2004: $402,694.



The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  (computed by  reference to the price at which the common  equity
was sold,  or the  average  bid and asked  price of such  common  equity)  as of
December 31, 2004 was $1,570,776.40.



There were 25,385,7998 shares of the registrant's common stock outstanding as of
December 31, 2004.



DOCUMENTS INCORPORATED BY REFERENCE: None



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





<PAGE>


                            SUMMARY TABLE OF CONTENTS

                                     PART I

Item 1. Description of Business

Item 2. Description of Property

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

                                     PART II

Item 5. Market Price of and Dividends on the Registrant's Common Equity and
        Other Shareholder Matters

Item 6. Management's Discussion and Analysis or Plan of Operation

Item 7. Financial Statements

Item 8. Changes in and Disagreements with Accountants

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons

Item 10. Executive Compensation

Item 11. Security Ownership of Certain Beneficial Owners and Management

Item 12. Certain Relationships and Related Transactions

Item 13. Index to Exhibits

Item 14 Principal Accountant Fees and Services

SIGNATURES




<PAGE>



                                     PART I

Forward Looking Statements

Certain  statements  contained  in  this  annual  filing,   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
the Company,  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 the Company to sustain,  manage or  forecast  its growth;  the ability of the
Company 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.  The  Company
disclaims any obligation to update any such factors or to publicly  announce the
result of any  revisions to any of the  forward-  looking  statements  contained
herein to reflect future events or developments.


ITEM 1. DESCRIPTION OF BUSINESS

(a) Development

     Elva  International,  Inc.  f/k/a Elva,  Inc. (the "Company" or "ELVA") was
organized as a Florida  corporation on August 15, 1997. The original  purpose of
the Company was to develop and apply new and profitable applications of computer
technology in the general marketplace. Introduction to a French company's unique
application  of such  technology  resulted in the entry into a  Voluntary  Share
Exchange  Agreement  between  the  Company  and the  shareholders  of the French
company  ELVA,  S.A.("ELVA,   SA").  Recognizing  that  ELVA,  SA  had  valuable
technology and computer  software  designing  assets,  the Company's  management
renamed the Company ELVA, INC. The United States Company's executive offices are
presently  located at 222 Lakeview Ave., PMB  160-415,West  Palm Beach, FL 33401
and its telephone number is (925) 831-0504.  Its European subsidiary's office is
Elva S.A located at 74,av Edouard Vaillant,  92100 Boulogne,  France,  telephone
number: 33-(0)1-41-31-66-77.




                                       4
<PAGE>



     The Company  relied upon Section  4(2) of the  Securities  Act of 1933,  as
amended (the "Act") and Rule 506 of Regulation D promulgated  thereunder  ("Rule
506") for recent issuance of its unregistered securities. In each instance, such
reliance  was based  upon the fact that (i) the  issuance  of the shares did not
involve  a public  offering,  (ii)  there  were no more  than  thirty-five  (35)
investors (excluding "accredited investors"), (iii) each investor who was not an
accredited  investor  either alone or with his purchaser  representative(s)  has
such  knowledge  and  experience  in financial  and business  matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer  reasonably  believes  immediately  prior to  making  any sale  that such
purchaser comes within this description,  (iv) the offers and sales were made in
compliance  with Rules 501 and 502, (v) the securities  were subject to Rule 144
limitations on resale and (vi) each of the parties was a sophisticated purchaser
and had full  access to the  information  on the  Company  necessary  to make an
informed  investment  decision by virtue of the due  diligence  conducted by the
purchaser or  available  to the  purchaser  prior to the  transaction  (the "506
Exemption").

     In February 2003, the Company issued  5,100,000 shares resticted under Rule
144 in exchange for  $350,000,  or $0.069 per share.  See Part I, Item 1. "Legal
Proceedings."

     In May 2004, the Company issued  3,484,614  shares resticted under Rule 144
in  exchange  for  $197,580,  or $0.06 per  share.  See Part I,  Item 1.  "Legal
Proceedings."

     In June 2004, the Company issued  1,043,625 shares resticted under Rule 144
in exchange for the  retirement of $41,746 of then  existing  debt, or $0.04 per
share. See Part I, Item 1. "Legal Proceedings."

     In March 2002, Serge Parienti resigned as the Company's President and Chief
Executive Officer. He was subsequently appointed  Vice-President.  He remained a
member of the Company's Board of Directors.

     Also in March 2002, Eric Danon was appointed  President and Chief Executive
Officer by the Company's  Board of Directors and was also appointed to the Board
of Directors.

     On June 2,  2005,  Eric  Danon,  President,  Chief  Executive  Officer  and
Director resigned,  effective  immediately.  Mr. Danon had no disagreements with
either the Board of Directors nor other members of the Company's management.

     On June 2, 2005, Zenyk Horbowi,  was appointed  President,  Chief Executive
Officer and Director





                                       5
<PAGE>



See Part I, Item 1.  "Description  of Business - (b)  Business of  Registrant  -
Employees and Consultants."

(b) Business of Issuer.

General.

     We are a  leading  supplier  of high  level  security  solutions  based  on
encrypted acoustic technology  VocalID(R) We design,  produce and market a range
of products that are sold principally to customers in the computer,communication
and  industrial  markets.  Our products are designed  into a wide variety of end
applications,  requiring the usage of notebook, desktop,fix and cellular phones.
Our end customers  are  primarily  original  equipment  manufacturers  and their
suppliers.  Elva  End-Markets.  Our  products are sold to customers in computer,
communications and industrial markets.

     Until  one  year  ago  we  had  largely   been   focusing  on  serving  the
semiconductor market by developing  solutions for secured memories.  In calendar
year 2005 we used the  desktop,  laptop  segment of the  computer  market as our
first major entry into the  commercial  marketplace  to develop our  VocalAccess
product for the Winlogon  service.  Volume  production is planned for the second
half of year 2006. More recently we have seen interesting opportunities from the
communication  and  industrial  markets.  For the  fiscal  year  ended  December
31,2005,  our revenues were mainly  coming from the  royalties  generated by our
patent  licences.  We believe  that our  diversity in the  end-markets  provides
stability to our opportunity for growth.

Business Strategy.

     Our objective is to be a leading supplier of online security authentication
to the fastest growing segments of our targeted  markets.  We intend to leverage
our team of skilled  technical  personnel  to develop  new  products  or,  where
appropriate,  use  partnership,to  serve the  fastest  gowing  segmentsof  these
markets.

     In order to capitalize on our  strengths in encrypted  acoustic  processing
design, developing and marketing, we intend to pursue the following strategies:

-    Leverage our unique VocalID(R) technology.

     We  have  built a team  of  experimented  engineers  who  combine  industry
expertise   with  advanced   smart  card  design   expertise  to  meet  customer
requirements  and enable our customers to get their products to market  rapidly.
We intend to  leverage  this  strategy  to achieve  new  levels of  integration,
enabling our customers to achieve leading performance in their products.





                                       6
<PAGE>



-    Release  unique new  products,  achieve  new design  wins,  and  cross-sell
     products.

     We are focusing on developing unique,  new,  high-margin  products to serve
our target  markets.These  markets have experienced  growing consumer demand for
increased product  performance at competitive  price. We also focus on achieving
design wins for our products with current and future customers.  Design wins are
indications  by the customer that they intend to  incorporate  our products into
new designs.  Our technical  talent works closely with our customers in securing
design wins,  developing new products and in  implementing  and  integrating our
products into their systems. We also focus on selling additional products to our
existing  customers  as we believe  the  technical  expertise  of our  marketing
department permits it to identify and capitalize on cross-selling opportunities.

-    Focus on fast growing market segments

     We have  chosen to target the  security  segments  of the  fastest  growing
end-markets.  We intend to inhance this growth potential by focusing on specific
products within the high level of authentication  market,  including the desktop
and  notebook  computers,  fix and  cellular  phones,  wide  area  networks  and
broad-based  industrial  markets.  These markets are characterized by their need
for leading-edge, high performance of security and authentication technology.

-    Leverage outsourced product fabrication capacity.

     We  outsource  most of our  manufacturing  in order  to  focus  more of our
resources  on  defining,developing  and selling our  products.  We believe  that
outsourcing  provides us numerous benefits,  including capital  efficiency,  the
flexibility  to  adopt  and  leverage  emerging  process  technologies,  without
significant  investment,  risk and a more variable cost of goods, which provides
us with greater operating flexibility.

-    Set up a Sales chanel and prioritise certain geographic markets.

     We believe that certain geographic market,  such as China, North of America
and Europe represent  opportunities for added sales and end-customer  diversity.
We are currently in the final stage of distributor  contract  negociations  with
several companies.

-    Product Segments.

     Company's  initial  VocalID  product is currently used for general  purpose
online  high  security  level   authentication   process.   Recently  introduced
VocalAccess  product was developed to replace the traditional  Winlogon service.
Based on VocalID  technology which provides a one time dynamic password.  We are
currently  developing  the next  generation  of VocalID  products  which will be
available  during th 3rd quarter of year 2006.  This new family of products will
offer more  features  and will  enhance  the  security  level to comply with the
standards of the market.  It will also  significantly  contribute  to reduce the
cost of the function.




                                       7
<PAGE>



-    Competitive Advantages.

     The company believes its exclusive acoustic interface to be unique in terms
of its  ability to be  universal  read.  When  traditional  smart card  requires
specific reader, VocalID(R) requires none. Other acoustic authentication devices
exist, but none of them are ISO smart card as their manufacturing process is not
standardized while VocalID manufacturing is based on the smart card process with
standard industrial  equipment.  We believe that our VocalID(R) offer allows for
the  merging  of  e-transactions   with  the  real  world  in  terms  of  secure
authentication and global marketing while being cost effective, widely available
and usable at the same time.

     The  company  adheres to a  stringent  set of  standards.  These  standards
include  comptability  with other operating  systems.  Our engineers  design our
software  products to be  compatible  with all major  operating  systems for the
various system  architectures.  The  compatibility of our products is key to the
market and will provide a distinct  advantage,  market driven  enhancements  and
product  offerings.Our  product design and architecture  provide flexibility and
adaptability to emerging  technologies and support for industry  standards.  Our
engineers  follow strict  adherence to industry  standards as promulgated by the
International Standards Organization. We also follow different operating systems
standards and recommended  configurations when developing our products for those
operating systems.

                        LICENSE AGREEMENTS AND INTELLECTU

     We regard our technology as proprietary  and accept to license our products
(hardware and software)  generally under written license agreements  executed by
licensees.  We have registered several patents and some patent  applications are
pending.

     Patents: ELVA holds 6 French patents, 2 US patents, 3 European patents, and
has 1 patent application (duration: from the date of registration, 20 years):

     1/ France and Europe:# 2 743 172 (France on 1995,  December  29th),  #0 870
     279 (Europe on 2001, July 25th) for "dispositif portatif d'acces a au moins
     un service  dispense par un serveur",  or "portable device for access to at
     least one service provided by a server Foreign patent applications".

     2/ France,  USA and  Europe:  #96 01872  (France on 1996,  February  15th),
     #6,393,567  (USA on May 21, 2002), #0 880 759 (Europe on February 17, 1997)
     for "procede  pour faire  autoriser  par un serveur  l'acces a un service a
     partir de dispositifs portatifs a microcircuits electroniques de type carte
     a memoire par  exemple",  or "a method for  enabling a server to  authorize
     access to a service from portable devices having electronic  microcircuits,
     E.G devices of the smart card type":

Foreign patent applications pending:

     Canada: #2,246,301 (08/12/98)




                                       8
<PAGE>



     3/  France,  USA and  Europe:  # 2 766 288  (France  on  1997,  July  15th)
     #6,421,431  (USA on July 16,  2002),  #0 996 929 (Europe on 2002,  December
     4th) for  "procede  et systeme de  transmission  sous  forme  vocale  d'une
     sequence de donnees binaires a partir d'un  transducteur  piezoelectrique",
     or "method and system for voice transmission of a binary data sequence from
     a piezoelectric transducer".

Foreign patent applications pending:

     Canada: #2,297,259 (01/11/00)
     Japan: #503509/2000 (01/17/00)

     4/  France:  # 2 796 512 on 1999,  July  13th for - "carte a  memoire  pour
     emettre  des  signaux  acoustiques  ", or  "smart  card  to  emit  acoustic
     signals".

     5/France: # 2 810 766 on 2000, June 23rd for " procede pour selectionner un
     mode de  fonctionnement  d'une  carte a  puce...",  or  "method to select a
     operating mode of the smart card..."

     6/ France:  # 2 837 305 on March 15, 2002  for"Dispositif  pour transmettre
     des informations par des moyens acoustiques" or "device for transmission of
     information using acoustic means"

Foreign patent applications pending:

     USA: #US2005/0236940A1 (10/27/05),
     China: #03801484X (06/04/04),
     others: PCT/FR2003/000828 (03/14/03)

     7/ French  patent  application  pending:  #0411973 on November 10, 2004 for
     "Methode  pour faire  emettre  sous forme  vocale une  sequence  de donnees
     binaires"  or  "Method  to send out a sequence  of binary  data  within an
     acoustic pattern"

     The Company also relies on a combination of copyright,  trademark and trade
secret  laws to protect  our  products.  We  require  employee  and  third-party
non-disclosure   and   confidentiality   agreements   as  well.   Despite  these
precautions,  it may be  possible  for  unauthorized  parties  to  copy  certain
portions of our products or reverse  engineer or obtain and use information that
we regard as proprietary.

     Because  the  software  development  industry  is  characterized  by  rapid
technological change, we believe that factors, such as (i) the technological and
creative skills of our personnel, (ii) new product developments,  (iii) frequent
product   enhancements,   (iv)  name  recognition,   and  (v)  reliable  product
maintenance  are  important  to   establishing   and  maintaining  a  technology
leadership position and improve the various legal protections  available for our
technology.




                                       9
<PAGE>



COMPETITIVE ENVIRONMENT

     The market for the  Company's  products  and services is  characterized  by
rapidly  changing   technology,   evolving   industry   standards  and  frequent
introduction of new products and services.  The Company's success will partially
depend upon its ability to enhance its  existing  products  and  services and to
introduce new competitive products and services with features that meet changing
consumer requirements.  In addition,  there can be no assurance that services or
technologies  developed  by one or more of the  Company's  present or  potential
competitors  could not render  obsolete  both  present and future  products  and
services of the Company.

     There also can be no assurance that the Company's  services will receive or
maintain  substantial market acceptance.  Changes in customer  preferences could
adversely  affect  levels of market  acceptance  of the  Company's  products and
services and the Company's operating results.

     The market that the Company  operates in is  characterized  by  competition
from new entrants, as well as competition by established participants.  Although
the Company  believes  that it will be able to establish  and maintain a sizable
market niche, there can be no assurance that a competitor with greater financial
and human  resources  than the Company will not enter the Company's  market with
products and services similar or identical to those of the Company.

     The Company's ability to compete  successfully will depend in large part on
its ability to protect any  proprietary  technology it may develop.  The Company
currently has several  patents with respect to its product or service designs or
processes,  and will moreover  attempt to protect its technology by limiting the
people with  knowledge  of its  specifications  to those with a need to know and
byhaving such persons execute confidentiality  agreements. The Company will also
rely, to the extent  possible,  on trade secret law to protect its  intellectual
property.  There can be no assurance,  however,  that any intellectual  property
protection or trade secret  protection will be sufficient to protect the Company
and its  business  from  others  seeking to copy or  appropriate  the  Company's
proprietary information.

     To establish,  maintain or increase the Company's  market share position in
the smart card industry, we will continually need to enhance our current product
offerings,  introduce  new product  features  and  enhancements,  and expand our
professional service capabilities. We currently compete principally on the basis
of the specialized nature of our technology and ability to expeditiously install
and implement a VocaliD(R) smart card system. Our product features and functions
facilitate  integration with a wide range of operating  systems and platforms to
insure product  quality,  ease of use and  reliability.  The Company believes it
competes favorably in all of these areas.

     Our  competitors  vary in size and in the scope and breadth of the products
and services  offered.  We may encounter  competition  from a number of sources,
including, Gemplus, , SecureID, Activecard,  Oberthur Card Systems ,. We compete
against  numerous,  smaller,  privately-held  companies like Xiring and NCrypton
with fewer resources based on breadth of product features and functionality,  as




                                       10
<PAGE>



well as  larger,  publicly-held  companies  with  greater  resources  and having
greater product and market diversification.

     Nevertheless,  most of those  competitors  may  become  partners  just like
Ncrypton  already has and/or ELVA's  licensees  and then,  they could as well be
considered  as ELVA's  leverages.  This  would be due to the high  potential  of
VocaliD(R)  that might help  smart  card  industrialists  to enter US market for
instance  (which  they  could  not do so far),  thanks  to an  online/readerless
positioning.

     Many of our current and  potential  competitors,  both  privately-held  and
publicly-held,  have greater  financial,  technical,  marketing and distribution
resources  than ours.  As a result,  they may be able to respond more quickly to
new or emerging technologies,  including and changes in customer requirements or
to  devote  greater  resources  to the  development  and  distribution  of their
products, maybe including VocaliD(R). In addition,  because there are relatively
low  barriers  to  entry  in the  software  marketplace,  we  expect  additional
competition from other established or emerging companies as the VocaliD(R) smart
card market  continues to expand.  Increased  competition is likely to result in
pricing pressures,  reduced gross margins and loss of market share, any of which
could materially adversely affect our business,  financial condition and results
of  operations.  We also expect that  competition  will  increase as a result of
software industry consolidations. There can be no assurance that we will be able
to  compete   successfully  against  current  and  future  competitors  or  that
competitive  pressures we encounter  will not  materially  adversely  affect our
business, financial condition and results of operations.

Dependence on Key Customers and Suppliers

     The Company is currently dependent upon a limited number of customers,  the
loss of whom would have an adverse material impact on operations.

Government Regulation

     The Company's  operations are subject to various  federal,  state and local
requirements  which  affect  businesses   generally,   such  as  taxes,   postal
regulations, labor laws, and environment and zoning regulations and ordinances.

     Although  certain  aspects of our services  may be subject to  Regulation E
promulgated by the Federal  Reserve Board,  we believe that most of our services
are not subject to Regulation E. Regulation E governs certain  electronic  funds
transfers  made by  regulated  financial  institutions  and  providers of access
devices and  electronic  fund transfer  systems.  Regulation E requires  written
receipt for transactions,  monthly statements,  pre-transaction  disclosures and
error resolution procedures.  There can be no assurance that the Federal Reserve
Board will not require  all of our  services  to comply  with  Regulation  E, or
revise  Regulation E, or adopt new rules and  regulations  for electronic  funds
transfers  that could result in an increase in our operating  costs,  reduce the
convenience and functionality of our services and products,  possibly  resulting
in reduced market  acceptance  which would have a material adverse effect on our
business, financial condition or operating results.




                                       11
<PAGE>



     We believe that current state and federal regulations concerning electronic
commerce  do not apply to our current  product  line.  However,  there is a move
towards  taxation  of  Internet  use by several  states  including  the State of
Washington.  There are some  strategic  plans  under  consideration  to  conduct
commerce  on the  Internet  using  our  core  technology.  We  have  an  ongoing
regulatory  compliance program  pertaining to transactions  utilizing smart card
technology and subscribe to industry watch  publications that address regulatory
issues.

Research and Development

     The Company has restarded its investments in research and development while
refining its R&D strategy. Reports to Security Holders The Company will send out
audited annual reports to its  shareholders if required by applicable law. Until
such time,  the Company does not foresee  sending out such reports.  The Company
will make certain  filings  with the SEC as needed,  and any filings the Company
makes to the SEC are  available  and the public may read and copy any  materials
the  Company  files  with SEC at the SEC's  Public  Reference  Room at 450 Fifth
Street, N.W.  Washington,  D.C. 20549. The public may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also  maintains  an  Internet  site  that  contains  reports,  proxy and
information  statements,  and  other  information  regarding  issuers  that file
electronically with the SEC at (http://www.sec.gov).


ITEM 2. DESCRIPTION OF PROPERTY

     The  United  States  corporate  headquarters  of ELVA  are  located  at 222
Lakeview Ave., PMB 160-415,  West Palm Beach, FL 33480 and its telephone  number
is (949) 831-0504. European subsidiary's office of Elva S.A, is located at 74,av
Edouard Vaillant, 92100 Boulogne, France, telephone number: 33-(0)1-41-31-66-77.


ITEM 3. LEGAL PROCEEDINGS

     From time to time,  we may be  involved  in  litigation  relating to claims
arising out of our operations in the normal course of business.

     In October 2005 the French court  condemned  ELVA S.A for abusive laying of
Mr. Cedric  COLNOT.  ELVA S.A has appealed this  decision,  which brings about a
probation until a new judgment is achieved.  Nevertheless  the Company is to pay
an  executory  amount  in  48,000  Euros.  The  Company  thinks  this  amount is
fallacious.  Therefore  ELVA S.A has  launched  a legal  process  consisting  of
reducing this amount down to 24,696 Euros.


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

     None.






                                       12
<PAGE>



                                    PART II


ITEM 5. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
        OTHER SHAREHOLDER MATTERS.

                               Market Information

2005                                HIGH                 LOW
------                             --------            -----
March 31, 2005                      0.06                0.06

2004                                HIGH                 LOW
------                             --------            -----
December 31, 2004                   0.06                0.06
September 30, 2004                  0.06                0.06
June 30, 2004                       0.06                0.06
March 31, 2004                      0.06                0.06

2003                                HIGH                 LOW
------                             --------            -----

December 31, 2003                   0.06                0.06
September 30, 2003                  0.06                0.06
June 30, 2003                       0.06                0.06
March 31, 2003                      0.10                0.10

2002                                HIGH                 LOW
------                             --------            -----
December 31, 2002                   0.25                0.10
September 30, 2002                  0.17                0.14
June 30, 2002                       0.48                0.17
March 31, 2002                      0.75                0.27

2001                                HIGH                 LOW
-------                            -------             -----
December  31, 2001                  1.45                0.22
September 30, 2001                  4.25                1.01
June 30, 2001                       1.75                0.36
March 31, 2001                      4.64                0.88

2000                                HIGH                 LOW
-------                            -------             -----
December  31, 2000                  2.00                0.94
(* 2:1 Stock Split October 2, 2000)
September 30, 2000                  3.00                1.50
June 30, 2000                       7.50                3.00
March 31, 2000                     11.00                1.75






                                       13
<PAGE>



1999                                HIGH                 LOW
-------                            -------             -----
December  31, 1999                  4.13                3.88
September 30, 1999                   N/A                 N/A
June 30, 1999                        N/A                 N/A
March 31, 1999                       N/A                 N/A
-------------------------

     The  approximate  number of holders of record of common  equity is 86 as of
December 31, 2002.

Dividends

     The Company has never  declared  or paid any cash  dividends  on its common
stock and does not intend to declare any dividends in the foreseeable future.


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

Results of Operations -For the Twelve Months Ending December 31, 2004 & 2003

Financial Condition, Capital Resources and Liquidity

     For the  twelve  months  ending  December  31,  2004 and  2003 the  Company
recorded revenues of $402,700 and $336,000  respectively.  For the twelve months
ending  December  31,  2004 and 2003 the Company  had total  salary  expenses of
$141,400 and $382,300 respectively.

     For the twelve months ending December 31, 2004 and 2003 the Company had, on
a  consolidated  basis,  general and  administrative  expenses of $3896,6400 and
$301,300, respectively.

     For the twelve months ending December 31, 2004 and 2003, the Company had on
a consolidated basis total operating expenses of $584,200 and $883,900.

Net Income (Loss)

     For the twelve  months  ending  December  31,  2004 and 2003,  the  Company
reported  a  net  income  and  net  loss  from  operations   including  currency
translation of $118,900 and ($561,800) respectively.

     The ability of the Company to continue as a going concern is dependent upon
its ability to obtain clients who will utilize the Company's  VocaliD(R) product
and whether the Company can attract an adequate  number of clients.  The Company
believes  that in order to be able to expand its initial  operations in terms of
sales and  marketing,  it could be required to establish  new offices in USA and
abroad,  hire staff and acquire  through  purchase or lease  computer and office
equipment to maintain accurate financial  accounting and client data. This issue
will be part of the new strategy.





                                       14
<PAGE>



Employees

The manpower is is currently five people including management.

     Our future  performance  depends  in  significant  part upon the  continued
service  of our key  technical  and  management  personnel,  and our  continuing
ability to attract and retain highly  qualified  and motivated  personnel in all
areas of our operations.  Competition for such personnel is intense.  We provide
no assurance that we can retain key  managerial and technical  employees or that
we can attract,  assimilate  or retain other highly  qualified  personnel in the
future.  Our  employees  are not  represented  by a  labor  union.  We have  not
experienced any work stoppages and consider our employee relations to be good.

     The Company  will  attempt to maintain  diversity  within its  customer and
advertising base in order to decrease its exposure to downturns or volatility in
any particular market segment. As part of this selection  strategy,  the Company
intends to offer its services to those  consumers and strategic  partners  which
have  a  reputation  for  reputable  dealings  and,  eliminating  customers  and
advertisers that it believes  present a higher credit risk. Where feasible,  the
Company will evaluate  beforehand each customer,  supplier,  partner,  strategic
partner, and advertiser for their creditworthiness.

Research and Development Plans

     Our current developments aim to enhance the technology features in terms of
personalization,  security, multi application, multi platform and product costs.
For that purpose, chip design-based positioning and software development related
to resources are accurately refined.


ITEM 7. FINANCIAL STATEMENTS

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


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.

     None.



                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.

DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth certain  information with respect to each of
our executive officers and directors. Our directors are generally elected at the
annual shareholders' meeting and hold office until the next annual shareholders'
meeting or until their successors are elected and qualified.  Executive officers
are elected by our board of directors  and serve at its  discretion.  Our bylaws
authorize the board of directors to be constituted of not less than one and such





                                       15
<PAGE>



number as our board of directors may  determine by  resolution or election.  Our
board of directors currently consists of three members.

NAME                 AGE         POSITION
-------------       ------       -----------------


Zenyk Horbowy         66         President, CEO and Director
Patrick Misko         44         Vice President of Finance and Director
Serge  Parienti       42         Vice president of Marketing and Director
---------------------------

     There are no family  relationships  between or among the executive officers
and directors of the Company.

Compliance with Section 16(a) of the Securities Exchange Act of 1934:

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's executive officers and directors and persons who own more than 10%
of a  registered  class of the  Company's  equity  securities,  to file with the
Securities and Exchange Commission (hereinafter referred to as the "Commission")
initial statements of beneficial ownership,  reports of changes in ownership and
annual  reports  concerning  their  ownership,  of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5, respectively. Executive officers,
directors  and  greater  than  10%   shareholders  are  required  by  Commission
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, all executive officers,  directors and greater
than 10% beneficial  owners of its common Stock,  and have complied with Section
16(a) filing  requirements  applicable to them during the Company's  fiscal year
ended December 31,2002 up to the first quarter ended March 31, 2003.

Business Experience

     The  following is a brief  description  of the business  background  of our
executive officers, and directors:

ZENYK HORBOWY: President , CEO & Director(Elva International, Inc.), President -
General Director (Elva, S.A.). BS EE & M/S from Paris University.  He spent last
30  years in the  Semi-conductor  Industry,  coming  from  the  French  National
Research  Laboratory  C.N.R.S.where he spent 4 years. After 4 years as Technical
Director  then  G.M.of  a small  Electronics  Company  S.A.E.I,he  joined  Texas
Instruments  Europe,  working  during  6  years  as  European  Product  Mgr  for
Optoelectronics  & Modules.  He joined the Thomson CSF  Components  Group for 10
years to handle several  Managerial  positions as Sales & Marketing Director and
then General Mgr of Telecoms & ASICs Divisions.  After, during 6 years he worked
for Alcatel  Microelectronics as VP of all Business Units in Belgium, then for 2
years VP of Sales &  Marketing  for the North of  America & ASIA  located in San
Jose California. He joined Semtech Inc. in 1998 as VP of the European Operations
for EMEA (  Europe,Middle  East & Africa) with offices in UK,  Germany,  France.
Also 2 Design Centers in UK.




                                       16
<PAGE>



PATRICK MISKO:  Vice-President  of Elva  International,  Inc. and Director,  and
Delegated  General  Director of ELVA,  SA.  Graduate of  Accounting  and Economy
Universities,  he managed a voice  server  company  for 3 years.  Then he joined
Olivetti as key account  manager for computing and vocal  products.His  previous
function was Director of sales in the computer  industry and in IVR (interactive
vocal response) field. He knows the market of vocal  identification card as well
as its major  players,  such as  manufacturers,  integrators  and  VAR's.  Serge
Parienti: Vice-President of marketing for Elva International, Inc., and Managing
Director of ELVA, SA. Graduate of a bio industry high school,  he made a special
study of  industrial  marketing  and  communication.  He has  spent 8 years as a
consultant   in  several   sectors   among  which:   strategic,   marketing  and
communication   advisor   in   telecommunications,   information   technologies,
pharmaceutics  and  biotechnology  sectors.  Just before  joining  ELVA,  he was
outstandingly involved in internet related to projects.

SERGE PARIENTI: Vice-President of Elva International, Inc. and Delegated General
Director of ELVA, SA. Graduate of a bio industry high school,  he made a special
study  of  industrial   marketing  and   communications  as  well  as  strategic
management.  He has spent 8 years as a consultant in several  sectors:  He was a
strategic,    marketing   and   communication   advisor   in   the   fields   of
telecommunications,  information technologies,  pharmaceutics and biotechnology.
Just before  joining ELVA in 1999, he was involved in ISPs and  multimedia-based
businesses over Europe.


ITEM 10. EXECUTIVE COMPENSATION

     The following  summary  compensation  table sets forth the  aggregate  cash
compensation  paid or accrued by the Company to each of the Company's  executive
officers  and key  employees  for  services  rendered to the Company  during the
Company's  fiscal  year  ended  2002,  2001 and  2000 and all plan and  non-plan
compensation  awarded  to,  earned by or paid to  certain  designated  executive
officers.













                [Balance of this page intentionally left blank.]





                                       17
<PAGE>



SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                        Long Term Compensation
------------------ ------- -------------------------------------- ---------------------- ---------- -------------
                              Annual Compensation                           Awards        Payouts
------------------ ------- ------------ ---------- -------------- ----------- ---------- ---------- -------------
(a)                (b)     (c)          (d)        (e)            (f)          (g)        (h)        (i)
                                                   Other          Restricted   Securities LTIP       All Other
Name and                                           Annual         Stock        Underlying Payouts    Compensation
Principal          Year    Salary ($)   Bonus ($)  Compensation   Award(s)     Options/
Position                                           ($)            ($)          SARs
------------------ ------- ------------ ---------- -------------- ----------- ---------- ---------- -------------
<S>                <C>     <C>          <C>           <C>          <C>        <C>          <C>         <C>
Eric Danon,        2000    $0           $0            $0           $0         $0           $0          $0
President, CEO     2001    $0           $0            $0           $0         $0           $0          $0
and Director       2002    $0           $0            $0           $0         $0           $0          $0
                   2003    $0           $0            $0           $0         $0           $0          $0
                   2004    $0           $0            $0           $0         $0           $0          $0

Serge Parienti,    2000    $82,758      $0            $0           $0         $0           $0          $0
Vice-President     2001    $43,557      $0            $0           $0         $0           $0          $0
and Director       2002    $50,816      $0            $0           $0         $0           $0          $0
                   2003    $30,622      $0            $0           $0         $0           $0          $0
                   2004    $30,622      $0            $0           $0         $0           $0          $0

Patrick Misko,     2000    $56,624      $0            $0           $0         $0           $0          $0
Vice-President     2001    $30,490      $0            $0           $0         $0           $0          $0
and Director       2002    $50,816      $0            $0           $0         $0           $0          $0
                   2003    $30,622      $0            $0           $0         $0           $0          $0
                   2004    $30,622      $0            $0           $0         $0           $0          $0
----------------------------
</TABLE>

Compensation of Directors

     The Company has no standard  arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.


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

Security Ownership of Certain Beneficial Owners

     The following  table  summarizes  certain  information  with respect to the
beneficial  ownership of company  shares as of December 31, 2002,  regarding the
ownership of common stock by each shareholder known to be the owner of more than
5% of the  outstanding  shares,  each  director and all  executive  officers and
directors as a group.  Except as otherwise  indicated,  each of the shareholders





                                       18
<PAGE>



has sole voting and investment  power with respect to the shares of common stock
beneficially owned.

--------------------------------------------------------------------------------
Name and Address of              Title of   Amount and Nature of    Percent of
Beneficial Owner                  Class       Beneficial Owner        Class
--------------------------------------------------------------------------------
Patrick Misko(1)                 Common             1,634,385            %
538 avenue de l'Hautil
78955 Carrieres sous Poissy,
France
--------------------------------------------------------------------------------
Serge Parienti(1)                Common                10,000             %
60, rue de Paris
92100 Boulogne Billancourt
France
--------------------------------------------------------------------------------
Zenyk Horbowy                                      2,708,334
1 Allee du Clos Fleury
92140 CLAMART,
FRANCE
 -------------------------------------------------------------------------------
All Executive Officers, Directors
as a group
--------------------

Certain Beneficial Owners
--------------------------------------------------------------------------------
Name and Address of              Title of   Amount and Nature of    Percent of
Beneficial Owner                  Class       Beneficial Owner        Class
--------------------------------------------------------------------------------
Commonwealth Investment          Common          5,149,999            20.3%
Services, Ltd.(1)
P.O. Box 1437
Rosseau Commonwealth O WI
75008 Paris, France
--------------------------------------------------------------------------------
Olex Financial, Ltd.(1)          Common          5,869,000            23.1%
Vanderpool Plaza
Road Town
Tortola, France
-----------------------------------------------------------------------------
TOTAL                                           11,018,999            43.4%
------------------

(1)  Based upon  25,385,998  shares of the  Company's  common  stock  issued and
     outstanding as of December 31, 2004.




                                       19
<PAGE>



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

     (a) The exhibits  required to be filed  herewith by Item 601 of  Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:

Exhibit #         Description
---------         -----------------------
3(i).1   [1]      Articles of Incorporation effective August 15, 1997.

3(i).2   [1]      Amended Articles of Incorporation filed January 29, 1999.

3(i).3   [2]      Amended Articles of Incorporation filed November 2000.

3(i).4   [2]      Amended Articles of Incorporation filed March 2001.

3(i).5   [2]      Articles  of  Association  of ELVA  ASIA  PTE LTD
                  (effective October 30, 2000.)

3(ii).1  [1]      Bylaws.

5.1      [3]      Opinion of Mintmire & Associates.

10.1     [1]      Letter of Intent between the Company and ELVA, SA.
                  Dated December 19, 1998.

10.2     [2]      Lease Agreement for California.

10.3     [2]      Lease Agreement for Asian office for ELVA ASIA PTE LTD.

10.4     [3]      Elva International, Inc., Year 2001  Employee/Consultant Stock
                  Compensation Plan (formerly Exhibit 10.1 and Exhibit 10.6).

10.5     [4]      Perrot, Ltd. Services Agreement dated May 1, 2001.
                  (formerly filed as Exhibit 10.4).

10.6     [4]      Perrot, Ltd. Supplemental Agreement dated May 1, 2001
                  (formerly filed as Exhibit 10.5).

10.7     [5]      Non-Exclusive Manufacturing Agreement.
                  Dated December 6, 2001 (in French).

10.8     [6]      I-PROVED Agreement dated May 5, 2003.




                                       20
<PAGE>



10.9     [7]      Consulting  Agreement with Matthews Morris & Company,  Inc.
                  Dated January 2, 2003.

23.1     [3]      Consent of Durland & Company, CPAs, P.A.

23.2     [3]      Consent of  Mintmire & Associates  (contained  in  the opinion
                  filed as Exhibit 5.1).

31.1      *       Section 302 Certification by the Chief Executive  Officer.

31.2      *       Section 302 Certification by the Chief Financial  Officer.

32.1      *       Certification by Chief Executive Officer pursuant to 18 U.S.C.
                  1350.

32.2      *       Certification by Chief Financial Officer pursuant to 18 U.S.C.
                  1350.
-------------------------------------------------
* Filed herewith.

[1]  Previously filed as an exhibit to the Company's  Registration  Statement on
     Form 10-SB January 27, 2000.

[2]  Previously  filed as an  exhibit  to the  Company's  Annual  Report on Form
     10-KSB filed April 16, 2001.

[3]  Previously filed as an exhibit to the Company's  Registration  Statement on
     Form S-8 July 13, 2001.

[4]  Previously  filed as an exhibit to the Company's  Quarterly  Report on Form
     10-QSB filed August 14, 2001.

[5]  Previously  filed as an  exhibit  to the  Company's  Annual  Report on Form
     10-KSB filed April 15, 2002.

[6]  Previously  filed as an  exhibit  to the  Company's  Annual  Report on Form
     10-KSB filed April 15, 2003.

[7]  Previously  filed as an exhibit to the Company's  Quarterly  Report on Form
     10-QSB filed May 20, 2003.

     (b) No Reports on Form 8-K have been filed.


ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The  Company  paid or accrued the  following  fees in each of the prior two
fiscal years to its principal  accountant,  Durland & Company CPAs, P.A. of Palm
Beach, Florida.





                                       21
<PAGE>



                                         Year ended         Year ended
                                         December 31,     December 31,
                                            2005              2004
                                        ------------      ------------
(1)        Audit fees                      $29,000         $28,500
(2)        Tax fees                        $     0         $     0
(3)        All other fees                  $     0         $     0
                                           -------         -------
   Totals                                  $29,500         $28,500

     We have  considered  whether the  provision of such  non-audit  services is
compatible with Durland & Company CPAs, P.A.  maintaining its  independence  and
determined that these services do not compromise their independence.

     Financial  Information System Design and Implementation.  Durland & Company
CPAs, P.A. did not charge the Company any fees for financial  information system
design and implementation fees.

     The Company has no formal  audit  committee.  However,  the entire Board of
Directors (the "Board") 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,  the
internal  auditors 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.

     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  consolidated  financial  statements of the
Company as of and for the year ended December 31, 2004,  with management and the
independent  auditors.  Management has the responsibility for the preparation of
the  Company's  financial  statements  and the  independent  auditors  have  the
responsibility for the 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
consolidated  financial  statements and recommended that they be included in its
Annual  Report on Form 10-KSB for the year ended  December 31, 2004,  for filing
with the  Securities  and  Exchange  Commission.  The Board  also  approved  the
reappointment of Durland & Company CPAs, P.A. as independent auditors.

     The Company's principal  accountant,  Durland & Company CPAs, P.A., did not
engage  any  other  persons  or  firms  other  than the  principal  accountant's
full-time, permanent employees.



                                       22
<PAGE>



                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                            Elva International, Inc.
                                  (Registrant)

Date:    May 15, 2006       /s/Zenyk Horbowy
                           ------------------------------------------------
                           Zenyk Horbowy, President, CEO & Director

                           /s/ Serge Parienti
                           ------------------------------------------------
                           Serge Parienti, VP and Director

                           /s/ Patrick Misko
                           ------------------------------------------------
                           Patrick Misko, VP and Director

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

Signature                               Title                        Date

By: /s/Zenyk Horbowy
   --------------------------     President, CEO & Director     April 15, 2005
      Zenyk Horbowy

By: /s/ Serge Parienti
   --------------------------     VP & Director                 April 15, 2005
      Serge Parienti

By: /s/ Patrick Misko
   --------------------------     VP & Director                 April 15, 2005
      Patrick Misko







                                       23
<PAGE>



                          INDEX TO FINANCIAL STATEMENTS


Reports of Independent Registered Public Accounting Firms ...................F-2

Consolidated Balance Sheets..................................................F-4

Consolidated Statements of Operations and Comprehensive Income (Loss)........F-5

Consolidated Statements of Stockholders' Equity (Deficiency).................F-6

Consolidated Statements of Cash Flows........................................F-7

Notes to Consolidated Financial Statements...................................F-8




































                                       F-1

<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders
Elva International, Inc.
West Palm Beach, Florida

We  have  audited  the   accompanying   consolidated   balance  sheets  of  Elva
International,  Inc.,  (the  "Company")  as of December 31, 2005 and the related
consolidated   statements  of  operations  and   comprehensive   income  (loss),
stockholders'  equity  (deficiency)  and cash  flows for the year in the  period
ended  December  31,  2005.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 2005 and the results of its  operations  and its cash flows for the
year in the period ended  December 31, 2005, in conformity  with U.S.  generally
accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements,  the Company has experienced net losses since
inception.   The  Company's  financial  position  and  operating  results  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  with  regard  to  these  matters  are  also  described  in  Note  4.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.


                                        /s/Pollard-Kelly Auditing Services, Inc.
                                           Pollard-Kelly Auditing Services, Inc.

Fairlawn, Ohio
May 15, 2006










                                       F-2

<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders
Elva International, Inc.
West Palm Beach, Florida

We  have  audited  the   accompanying   consolidated   balance  sheets  of  Elva
International,  Inc.,  (the  "Company")  as of December 31, 2004 and the related
consolidated   statements  of  operations  and   comprehensive   income  (loss),
stockholders'  equity  (deficiency)  and cash  flows for the year in the  period
ended  December  31,  2004.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 2004 and the results of its  operations  and its cash flows for the
year in the period ended  December 31, 2004, in conformity  with U.S.  generally
accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 4 to the
consolidated financial statements,  the Company has experienced net losses since
inception.   The  Company's  financial  position  and  operating  results  raise
substantial doubt about its ability to continue as a going concern. Management's
plans  with  regard  to  these  matters  are  also  described  in  Note  4.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.



/s/Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.

Palm Beach, Florida
April 11, 2006















                                       F-3

<PAGE>



<TABLE>
<CAPTION>
                            Elva International, Inc.
                           Consolidated Balance Sheets
                                  December 31,

                                                                      2005                2004
                                                             ------------------ -------------------
<S>                                                          <C>                <C>
                ASSETS
CURRENT ASSETS
  Cash and equivalents                                       $           11,236 $            86,920
  Accounts receivable, net of reserve of  $0                             99,155             152,729
  VAT tax receivable                                                     13,483              16,365
   Inventory                                                             31,460              34,481
                                                             ------------------ -------------------
          Total current assets                                          155,334             290,495
                                                             ------------------ -------------------
PROPERTY AND EQUIPMENT
  Computers and equipment                                               240,008             270,768
        Less accumulated depreciation                                  (193,733)           (200,592)
                                                             ------------------ -------------------
          Net property and equipment                                     46,275              70,176
                                                             ------------------ -------------------
OTHER ASSETS
  Deposits and other assets                                               9,702              10,763
  Income tax credit receivable                                           12,048             128,731
  Patent                                                                741,114             763,120
        Less accumulated amortization                                  (231,419)           (222,007)
                                                             ------------------ -------------------
          Net other assets                                              531,445             680,607
                                                             ------------------ -------------------
Total Assets                                                 $          733,054 $         1,041,278
                                                             ================== ===================
     LIABILITIES AND STOCKHOLDERS' EQUITY ( DEFICIENCY)
CURRENT LIABILITIES
   Accounts payable                                          $          274,626           $332,707
   Accrued Expenses
       Trade                                                             42,046              43,145
       Payroll and taxes                                                 28,726             128,863
   Provision for litigation and forex gain/loss                          48,188              80,088
   Advances from shareholders                                                 0             165,896
   Short-term debt                                                            0              50,000
   Conditional government subsidy                                        31,594              36,338
                                                             ------------------ -------------------
          Total current liabilities                                     425,180             837,037
                                                             ------------------ -------------------
LONG-TERM DEBT
   Conditional government subsidy                                             0                   0
                                                             ------------------ -------------------
          Total long-term debt                                                0                   0
                                                             ------------------ -------------------
Total Liabilities                                                       425,180             837,037
                                                             ------------------ -------------------
Minority interest in consolidated subsidiary                                  0                   0
                                                             ------------------ -------------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
   Preferred stock, $0.0001 par value, authorized
     10,000,000 shares; none issued and outstanding                           0                   0
   Common stock, $0.0001 par value, authorized
     50,000,000 shares; 29,342,520 and 25,385,998
     issued and outstanding shares                                        2,935               2,539
   Additional paid-in capital                                         5,438,343           5,270,739
   Accumulated comprehensive income (loss)                               28,978             (39,130)
   Deficit                                                           (5,162,382)         (5,029,907)
                                                             ------------------ -------------------
          Total stockholders' equity (deficiency)                       307,874             204,241
                                                             ------------------ -------------------
Total Liabilities and Stockholders' Equity (Deficiency)      $          733,054 $         1,041,278
                                                             ================== ===================
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       F-4
<PAGE>

<TABLE>
<CAPTION>
                            Elva International, Inc.
      Consolidated Statements of Operations and Comprehensive Income (Loss)
                             Year Ended December 31,

                                                                                       2005                 2004
                                                                                -----------------    -----------------
<S>                                                                             <C>                  <C>
REVENUES                                                                        $         598,110    $         402,694
                                                                                -----------------    -----------------
OPERATING EXPENSES
    Salaries                                                                              137,879              141,367
    Advertising                                                                                 0                    0
    Depreciation and amortization                                                          60,585               56,401
    General and administrative                                                            598,934              386,408
    Research and development                                                                    0                    0
                                                                                -----------------    -----------------
          Total operating expenses                                                        797,398              584,176
                                                                                -----------------    -----------------
 Operating loss                                                                          (199,288)            (181,482)
                                                                                -----------------    -----------------
OTHER INCOME (EXPENSE):
    Interest income                                                                        53,568               37,679
    Interest expense                                                                       (2,535)              (3,584)
    Foreign currency transaction gain (loss)                                                1,442               (7,066)
    Gain (loss) on sale of patent                                                               0               93,149
    Gain on forgiveness of government grant                                                14,338              207,621
                                                                                -----------------    -----------------
          Total other income (expense)                                                     66,813              327,799
                                                                                -----------------    -----------------
Net income (loss) before tax credit and minority interest                                (132,475)             146,317
    Foreign income tax                                                                          0               (1,406)
    Minority interest in consolidated subsidiary income (loss)                                  0                    0
                                                                                -----------------    -----------------
Net income (loss)                                                                        (132,475)             144,911
Other comprehensive income (loss):
    Foreign currency translation gain (loss)                                               10,152              (26,043)
                                                                                -----------------    -----------------
Comprehensive loss                                                              $        (122,323)   $         118,868
                                                                                =================    =================
Net income (loss) per common share - basic                                      $           (0.01)   $            0.01
                                                                                =================    =================
Weighted average number of common shares outstanding - basic                           27,217,922           24,186,993
                                                                                =================    =================
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       F-5
<PAGE>

<TABLE>
<CAPTION>
                            Elva International, Inc.
          Consolidated Statements of Stockholders' Equity (Deficiency)

                                                                                             Accum.                    Total
                                                              Add'l.               Stock     Comp.                  Stockholders'
                                    Number of    Common      Paid-in   Deferred    Subs.     Income                   Equity
                                      Shares      Stock       Capital     Comp.     Rec.      (Loss)    Deficit      (Deficiency)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
<S>                               <C>           <C>        <C>         <C>        <C>      <C>        <C>           <C>
BEGINNING BALANCE,
December 31, 1998                  21,500,000   $  2,150   $  828,401  $       0  $     0  $ (52,349) $  (432,606)  $     345,596
   Other comprehensive
     income (loss)                          0          0            0          0        0     (1,176)           0          (1,176)
   Net loss                                 0          0            0          0        0          0     (723,712)       (723,712)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
BALANCE, December 31, 1999         21,500,000      2,150      828,401          0        0    (53,525)  (1,156,318)       (379,292)

   Conversion of debt of
     subsidiary for stock           1,720,000        172      557,305          0        0          0            0         557,477
   Shares issued for cash           3,790,000        379    1,237,500          0        0          0            0       1,237,879
   Shares issued to effect
     2 for 1 forward split         27,010,000      2,701       (2,701)         0        0          0            0               0
   Other comprehensive
     income (loss)                          0          0            0          0        0     25,724            0          25,724
   Net loss                                 0          0            0          0        0          0   (1,163,846)     (1,163,846)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
BALANCE, December 31, 2000         54,020,000      5,402    2,620,505          0        0    (27,801)  (2,320,164)        277,942

   1 for 10 reverse split         (48,618,000)    (4,862)       4,862          0        0          0            0               0
   Shares issued for cash           3,293,640        329      586,354          0        0          0            0         586,683
   144 shares issued for
     services                         646,500         65      103,375   (103,440)       0          0            0               0
   S-8 shares issued for
     services                         135,000         14      269,986          0        0          0            0         270,000
   Conversion of debt of
     subsidiary for stock             129,082         13       17,475          0        0          0            0          17,488
   Deferred compensation
     amortization                           0          0            0     10,775        0          0            0          10,775
   Other comprehensive
     income (loss)                          0          0            0          0        0     40,426            0          40,426
   Net loss                                 0          0            0          0        0          0   (1,378,332)     (1,378,332)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
BALANCE, December 31, 2001          9,606,222        961    3,602,557    (92,665)       0     12,625   (3,698,496)       (175,018)

   144 shares issued for
     services                         120,000         12       10,488          0        0          0            0          10,500
   144 shares issued for
     cash                           6,031,537        603    1,069,331          0        0          0            0       1,069,934
   Deferred compensation
     amortization                           0          0            0     92,665        0          0            0          92,665
   Other comprehensive
     income (loss)                          0          0            0          0        0    (42,354)           0         (42,354)
   Net loss                                 0          0            0          0        0          0     (897,895)       (897,895)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
BALANCE, December 31, 2002         15,757,759      1,576    4,682,376          0        0    (29,729)  (4,596,391)         57,832

   144 shares issued for cash       5,100,000        510      349,490          0        0          0            0         350,000
   Other comprehensive
     income (loss)                          0          0            0          0        0     16,642            0          16,642
   Net loss                                 0          0            0          0        0          0     (578,427)       (578,427)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
BALANCE, December 31, 2003         20,857,759      2,086    5,031,866          0        0    (13,087)  (5,174,818)       (153,953)

   144 shares issued for cash       3,484,614        349      197,231          0        0          0            0         197,580
   144 shares issued to
     retire debt                    1,043,625        104       41,642          0        0          0            0          41,746
   Other comprehensive
     income (loss)                          0          0            0          0        0    (26,043)           0         (26,043)
   Net income                               0          0            0          0        0          0      144,911         144,911
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
BALANCE, December 31, 2004         25,385,998      2,539    5,270,739          0        0    (39,130)  (5,029,907)        204,241

   144 shares issued for cash       3,956,522        396      167,604          0        0          0            0         168,000
   Other comprehensive
     income (loss)                          0          0            0          0        0     10,152            0          10,152
   Net income (loss)                        0          0            0          0        0          0     (132,475)       (132,475)
                                  -----------   --------   ----------  ---------  -------  ---------  -----------   -------------
ENDING BALANCE, December 31, 2005  29,342,520   $  2,935   $5,438,343  $       0  $     0  $ (28,978) $(5,162,382)  $     249,918
                                  ===========   ========   ==========  =========  =======  =========  ===========   =============
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       F-6
<PAGE>

<TABLE>
<CAPTION>
                            Elva International, Inc.
                      Consolidated Statements of Cash Flows
                             Year Ended December 31,

                                                                                       2005                2004
                                                                                -----------------    ----------------
<S>                                                                             <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                               $        (132,475)   $        144,911
Adjustments to reconcile net loss to net cash used by operating activities:
     Depreciation and amortization                                                         60,585              56,401
     Provision for foreign exchange loss                                                  (19,586)             15,847
     Foreign exchange transaction gain (loss)                                              (1,442)                  0
     Lawsuit provision                                                                     11,560                   0
     Gain on forgiveness of government grant                                              (14,338)           (213,670)
Changes in operating assets and liabilities:
     (Increase) decrease in accounts receivable                                            35,301              65,417
     (Increase) decrease in inventory                                                      (1,553)             16,066
     (Increase) decrease in VAT receivable                                                    782              (4,251)
     (Increase) decrease in deposits and other assets                                        (361)              2,298
     (Increase) decrease in income tax credit receivable                                  104,827                  32
     Increase (decrease) in accounts payable                                              (18,011)            (39,704)
     Increase (decrease) accrued expense - trade                                               37             (83,738)
     Increase (decrease) salaries and payroll and taxes                                   (87,443)            (42,100)
     Increase (decrease) in deferred revenue                                                    0                   0
                                                                                -----------------    ----------------
Net cash  provided (used) by operating activities                                         (62,117)            (82,491)
                                                                                -----------------    ----------------
CASH FLOW FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                                                    (4,817)             (4,347)
     Sale of patent                                                                             0             106,349
     Increase expenditure application patent                                              (81,469)            (40,986)
                                                                                -----------------    ----------------
Net cash provided (used) by investing activities                                          (86,286)             61,016
                                                                                -----------------    ----------------
CASH FLOW FROM FINANCING ACTIVITIES:
    Proceeds from loan                                                                          0              50,000
     Shareholder advance repayments                                                      (172,637)            (15,574)
     Debt payments                                                                              0              (1,924)
     Issuance of common stock for cash                                                    168,000                   0
                                                                                -----------------    ----------------
Net cash provided by financing activities                                                  (4,637)             32,502
                                                                                -----------------    ----------------

Effect of exchange rates on cash                                                          122,781              34,398
                                                                                -----------------    ----------------

Net increase (decrease) in cash and equivalents                                           (30,259)             45,425

CASH and equivalents, beginning of period                                                  41,495              41,495
                                                                                -----------------    ----------------
CASH and equivalents, end of period                                             $          11,236    $         86,920
                                                                                =================    ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash                                                           $           2,534    $          3,584
                                                                                =================    ================
Foreign taxes paid in cash                                                      $               0    $          1,407
                                                                                =================    ================
Non-Cash Financing Activities:
  Debt converted to common stock                                                $               0    $         41,745
                                                                                =================    ================
</TABLE>

     The accompanying notes are an integral part of the financial statements

                                       F-6
<PAGE>



                            Elva International, Inc.
                   Notes to Consolidated Financial Statements

(1)  Summary of Significant Accounting Principles.
     The  Company  Elva  International,  Inc.,  (the  "Company"),  is a  Florida
     chartered corporation which conducts business from its offices in West Palm
     Beach,  Florida and Paris,  France.  The Company was incorporated on August
     15, 1997 as Computer Research  Technologies,  Inc., and changed its name to
     Elva, Inc. on January 25, 1999 and to Elva International,  Inc. on February
     23, 2001. The Company is principally  involved in the smart card technology
     industry  through its French  subsidiary,  ELVA,  SA. In November 2000, the
     Company formed a wholly owned  subsidiary,  Elva Asia,  PTE, Ltd. under the
     laws of Singapore,  and closed this entity in 2002. The following summarize
     the more significant accounting and reporting policies and practices of the
     Company:

          a)  Use  of  estimates.   In  preparing  the  consolidated   financial
     statements,  management is required to make estimates and assumptions  that
     affect the reported amounts of assets and liabilities as of the date of the
     statements of financial  condition,  and revenues and expenses for the year
     then ended. Actual results may differ significantly from those estimates.

          b) Significant acquisition. In December 1998, Elva International, Inc.
     issued  14,160,000  shares of common stock to acquire  substantially al the
     issued and  outstanding  shares of the common  stock of ELVA,  SA, a French
     corporation,   in  a  reverse   merger,   which  was  accounted  for  as  a
     reorganization  of ELVA,  SA. There  remains a  four-tenths  of one percent
     minority  interest  in  ELVA,  SA,  which  is  owned  by two  of the  major
     stockholders of Elva  International,  Inc. as a result of this acquisition.
     This minority  interest is required under French corporate law. As a result
     of this reverse  merger,  the former  stockholders  of ELVA, SA now control
     Elva International,  Inc. Prior to this reverse merger, Elva International,
     Inc. had nominal  assets and  liabilities.  Elva,  Inc.  accounted  for the
     reverse merger as an issuance of stock for the net monetary  assets of Elva
     International,   Inc.  or,  in  this  case,  as  a  capitalization  of  the
     accumulated deficit of Elva International, Inc. to the date of the merger.

          c) Principles of consolidation.  The consolidated financial statements
     include  the  accounts of Elva  International,  Inc.  and its wholly  owned
     subsidiaries. Inter-company balances and transactions have been eliminated.

          d) Net loss per  common  share.  Basic net loss per  weighted  average
     common share is computed by dividing  the net loss by the weighted  average
     number of common shares outstanding during the period.

          e) Property and equipment.  All property and equipment are recorded at
     cost  and  depreciated  over  their  estimated  useful  lives,   using  the
     straight-line  method.  Upon sale or  retirement,  the  costs  and  related
     accumulated depreciation are eliminated from their respective accounts, and
     the  resulting  gain or loss is  included  in the  results  of  operations.
     Repairs and  maintenance  charges which do not increase the useful lives of
     the assets are charged to operations as incurred.  Depreciation expense was
     $15,317 and $15,389 for the nine months ended  September 30, 2005 and 2004,
     respectively.

          f) Cash and  equivalents.  The company  considers  investments with an
     initial maturity of three months or less as cash equivalents.



                                       F-7

<PAGE>



                            Elva International, Inc.
                   Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Principles (Continued)
          g) Patents. The Company acquired two French patents, Nos. 95-15735 and
     96-01872, from the founders of ELVA, SA. The Company is amortizing the cost
     of these patents over the remaining life of the patents.  Patents in France
     have a 20 year life.  Amortization  expense was $27,646 and $28,925 for the
     nine months ended September 30, 2005 and 2004, respectively.

          h) Revenue recognition.  The Company's sole source of revenue has been
     from licensing its patented  technology.  The Company  records revenue when
     earned under its licensing  agreement.  The Company  intends to license its
     technology to others as well,  rather than to manufacture the VOCALID cards
     for sale. The Company believes that it would be prohibitively expensive for
     it to  establish  its  own  manufacturing  facilities  and  to do so  would
     distract  it from its  efforts at getting  its  technology  accepted as the
     world standard.  The Company is negotiating with an independent third party
     to manufacture  the cards and the Company will either sell them directly or
     through a distributor network.

          i) Foreign currency  transaction and translation  gains (losses).  The
     principal operating entity of the Company is its subsidiary, ELVA,SA, which
     is located in France.  The  functional  currency of ELVA,  SA, is the Euro.
     ELVA,  SA has only one customer  which is located in the US. ELVA, SA bills
     this  customer in Euros and is paid US Dollars,  (USD).  ELVA, SA records a
     transaction  gain or loss at the time of receipt of payment  consisting  of
     the  difference  between the amount of Euros billed and the amount of Euros
     the USD payment is converted into. On a consolidated  basis,  the Company's
     reporting  currency  is the US Dollar.  The Company  translated  the income
     statement items using the average  exchange rate for the period and balance
     sheet items using the end of period exchange rate, except for equity items,
     which are translated at historical rates, in accordance with SFAS 52.

          j) Research &  development.  Research  and  development  expenses  are
     expensed in the period incurred.

          k) Software  development  costs. The software developed by the Company
     is used exclusively by licensors of the Company's technology.  As such, the
     Company is not selling the  software.  Costs  incurred  in  developing  the
     software have been expensed in the period in which incurred.

          l) VAT tax receivable.  In France the government charges a Value Added
     Tax,  (VAT),  that is similar to sales tax in the US. There are three major
     differences.  First is that VAT is charged at each point of sale. Second is
     that there are no  exemptions  from the  collection of VAT.  Finally,  each
     company files a VAT return with the government monthly reflecting the gross
     VAT  collected  and VAT paid.  If the VAT paid is  greater  than the amount
     collected,  the Company receives a refund from the government approximately
     five months later.

(2)  Stockholders'  Equity.  The Company  has  authorized  50,000,000  shares of
     $0.0001 par value common stock and  10,000,000  shares of $0.0001 par value
     preferred  stock.  Rights and  privileges of the preferred  stock are to be
     determined  by the Board of Directors  prior to  issuance.  The Company had
     21,500,000  shares of common stock issued and  outstanding  at December 31,
     1998 and  September  30,  1999.  In  September  1997,  the  Company  issued
     9,000,000 shares to its founder for services rendered to the Company valued
     at $9,000.  In April 1998,  the Company  completed a  Regulation D Rule 504
     Placement for 1,757,376 shares in exchange for $17,574 cash. In April 1998,
     a majority  shareholder  donated  9,000,000  shares of common  stock to the
     Company.  In June 1998,  9,000,000  shares were issued for $32,500 in cash.
     During the third quarter of 1998,  the Company issued  2,700,000  shares of
     common stock for $54,000 in cash. In December 1998,  9,557,376  shares were
     donated to the Company.  In December 1998,  the Company  issued  14,160,000
     shares for 26,326 of the 26,336 shares issued and  outstanding of ELVA, SA,
     a French corporation.  Additionally,  in conjunction with this acquisition,
     the Company  issued  3,440,000  shares to a third party in  settlement of a
     $204,550 loan the third party had made to ELVA,  SA. As the common stock of
     the  Company was not listed at the date of  acquisition,  the fair value of
     the stock issued to settle this debt was not  determinable  and the Company
     elected to use the loan amount outstanding to value this transaction.



                                       F-8
<PAGE>



                            Elva International, Inc.
                   Notes to Consolidated Financial Statements

(2)  Stockholders' Equity (Continued).
     In July  2000,  the  Company  sold  3,490,000  shares of common  stock to a
     British  Virgin  Islands  investment  company in exchange for $1,139,893 in
     cash. In July 2000,  the Company sold 300,000  shares of common stock to an
     individual  in  exchange  for  $97,985 in cash.  In July 2000,  the Company
     agreed  to  exchange  1,720,000  shares of common  stock  for  $557,477  of
     existing  long-term debt. All three of these transactions were concluded at
     $0.3266  per share.  On October 5, 2000,  the  stockholders  of the Company
     voted to  increase  the number of  authorized  shares of common  stock from
     50,000,000 to 100,000,000  with no change in par value. In conjunction with
     the increase in the authorized shares, the Company issued 27,010,000 shares
     of common  stock to effect a two for one  forward  split of the then issued
     and outstanding shares.

     In June 2001, the Company  completed a 1 for 10 reverse split of its shares
     of common stock.  5,402,000  shares were issued and  outstanding  following
     this action.  In May 2001, the Company sold 1,250,000  shares of restricted
     common stock to a company  controlled  by the new  President of the Company
     for $200,000 in cash, or $0.16 per share.  In June 2001,  the new President
     of the  Company  was  issued  646,500  restricted  common  shares  as  sole
     compensation  for the four-year  term of his  employment  agreement.  These
     shares were valued at $0.16 per share, at the same price per share as those
     he purchased for cash, or a total of $103,440.  In August 2001, the Company
     issued 135,000 shares for services valued at $270,000,  or $2.00 per share.
     In November 2001,  the Company  issued 129,082 shares of restricted  common
     stock to convert $17,488 of debt of ELVA, SA. In November and December, the
     Company issued 3,168,640 shares of restricted  common stock in exchange for
     $386,683 in cash.

     In March 2002, the Company issued 20,000 shares of restricted  common stock
     to a former  employee for services.  These shares were valued at 50% of the
     then market value, or $0.175 per share, for a total value of $3,500. In May
     2002,  the Company sold  1,831,538  shares of  restricted  common stock for
     $270,000  in cash,  or $0.147 per share.  In July 2002,  the  Company  sold
     3,333,333 shares of restricted  common stock for $500,000 in cash, or $0.15
     per  share.  In  September  2002,  the  Company  issued  100,000  shares of
     restricted  common  stock  for  services,  valued at $0.15  per  share.  In
     November 2002,  the Company sold 666,666 shares of restricted  common stock
     in exchange for $200,000 in cash, or $0.30 per share. In December 2002, the
     Company  sold  200,000  shares of  restricted  common stock in exchange for
     $100,000 in cash,  or $0.50 per share.  The cash  purchaser in November and
     December was the same entity.

     In  January  and  February  2003,  the  Company  sold  1,000,000  shares of
     restricted  common  stock  in  exchange  for  $200,000  in cash and a stock
     subscription  of $100,000,  or $0.30 per share,  to the same investor as in
     the fourth quarter.  In April 2003, the Company received the $100,000 stock
     subscription receivable in cash.

     In the  second  quarter  2004,  the  Company  issued  3,484,614  shares  of
     restricted  common  stock in exchange  for  $197,580 in cash , or $0.06 per
     share. In the second quarter 2004, the Company issued  1,043,625  shares of
     restricted  common stock in exchange for $41,745 of existing  related party
     debt, or $0.04 per share

     In  July  2005,  the  Company  issued  3,956,522  shares  of  common  stock
     restricted under Rule 144, in exchange for a stock subscription of $168,000
     in cash, or $0.0425 per share.



                                       F-9
<PAGE>



                            Elva International, Inc.
                   Notes to Consolidated Financial Statements

(3)  Income Taxes.  Deferred  income taxes  (benefits)  are provided for certain
     income and expenses which are  recognized in different  periods for tax and
     financial  reporting  purposes.  The Company had net operating  loss carry-
     forwards for income tax purposes of approximately $4,873,900,  which expire
     $68,000 on December  31, 2011,  $132,000 on December 31, 2117,  $232,000 on
     December 31, 2118,  $724,000 on December 31, 2119,  $1,164,000  on December
     31, 2020,  $1,378,300  on December 31, 2021,  $897,900 on December 31, 2022
     and $578,400 on December 31, 2023. The Company  utilized  $144,900 with its
     net income in 2004, and has recorded net income in 2005 of $156,000.

     The amount  recorded as deferred tax asset  cumulative  as of September 30,
     2005  is  approximately  $2,000,000  which  represents  the  amount  of tax
     benefits of the loss  carry-forwards.  The Company has  established  a 100%
     valuation  allowance  for this deferred tax asset of, as the Company has no
     history of profitable  operations.  The significant components net deferred
     tax asset as of June 30, 2004 are:

Net operating losses            $          2,000,000
Valuation allowance                       (2,000,000)
                                --------------------
Net deferred tax asset          $                  0
                                ====================

     The Company's  subsidiary,  ELVA, SA, applied for research and  development
     income tax credits with the French  government for the years ended December
     31, 2001, 2000, 1999 and 1998. The credits are applied for on the Company's
     annual income tax return in mid-1999,  2000 and 2001.  The amounts  applied
     for were approximately $88,600, $104,500,  $94,800, $15,300 and $94,400 for
     2001, 2000, 1999, 1998 and 1997, respectively.  In the 4th quarter of 1999,
     2000 and 2001,  ELVA,  SA was  notified  by the  French  government  of the
     approval of the application for 1997, 1998 and 1999, respectively, and that
     payment by the  government  would occur in late 2002 and 2003.  The Company
     sold the 1997  receivable to its bank on a  non-recourse  basis in exchange
     for cash in the amount of $94,400.  The Company received the 2000 credit in
     2003 in the amount of approximately $100,000. The Company received $119,000
     in  September  2005 for the 2001  credit.  In 1996,  ELVA,  SA entered  its
     technology  in  an  annual  technology  competition.  This  competition  is
     administered by ANVAR, a French  quasi-governmental  agency  established to
     reward technology advances by French commercial enterprises.  Elva received
     one of the awards  from ANVAR for its  technology.  The  Company  believes,
     based on the foregoing,  that is more likely than not that the Company will
     receive these ongoing tax credits from the French government. These credits
     reduce the income tax benefit of its net operating loss  carry-forwards for
     the French subsidiary on a one-for-one basis.

(4)  Going  Concern.  As  shown  in  the  accompanying   consolidated  financial
     statements,  the Company  incurred net loss totaling  $132,500 for the year
     ended  December  31,  2005,  and  reflects  a   stockholders'   deficit  of
     approximately  $5,162,400 as of December 31, 2005.  These  conditions raise
     substantial  doubt as to the  ability of the Company to continue as a going
     concern.  The  ability of the  Company to  continue  as a going  concern is
     dependent upon obtaining  additional  capital and financing.  The financial
     statements  do not include any  adjustments  that might be necessary if the
     Company is unable to continue as a going concern.

(5) Related Party Transactions.
          (a) Patents.  The Company acquired two French patents,  Nos.  95-15735
     and  96-01872,  from the founders of ELVA,  SA for 21,069  shares of common
     stock of ELVA, SA valued at $320,700,  based on their  historical cost, and
     approximately  $3,333  per month  for the life of the  patents  as  royalty
     payments,  beginning in March 1997.  These ELVA, SA shares were part of the
     original  issue  shares of ELVA,  SA and,  accordingly,  had no fair market
     value at that time. After  approximately 8 months, the principals  realized
     that  the  Company  did not  have the  cash  flow to  continue  to make the
     payments  to them  and  continue  to  develop  the  marketing  efforts  and
     suspended  the  payments.  In February  1999,  the Company and the founders
     entered into a new agreement which called for total  additional  payment of
     approximately  $116,700,  with an initial payment of approximately $25,000,
     and quarterly payments of approximately  $11,500,  beginning on February 1,
     2000.  This  new  agreement  also  encompassed  the  international   patent
     application  filed with the World  Organization of  Intellectual  Property,
     principally for the US, Canada,  Europe and Japan. It also  encompasses the
     trademark "VOCALID", No. 96-605347, registered at INPI January 11, 1996.


                                      F-10
<PAGE>


                            Elva International, Inc.
                   Notes to Consolidated Financial Statements

(5) Related Party Transactions (Continued).
          (b) Long-term debt. In 1998, ELVA, SA received  approximately $204,500
     from a third  party as a loan.  In  December  1998,  as part of the reverse
     merger, Elva, Inc. issued 3,440,000 shares of common stock in settlement of
     this debt. In March,  May and September 1999 and March and July 2000,  ELVA
     received  additional  traunches of this loan from the now related  party in
     the total  amount of  approximately  $650,000.  In July 2000,  the  Company
     entered into an agreement  with the holder of its related  party  long-term
     debt to  exchange  1,720,000  shares of common  stock for  $557,477  of the
     existing   long-term   debt,   and  paid  off  the  remaining   balance  of
     approximately  $90,000  in  cash.  The  Company  also  received  a  $16,000
     conditional  loan from an unrelated  company  under which the Company would
     not be liable  for  repayment  if the  Company  hired at least  one  former
     technical  employee of the other  company.  The Company has not done so and
     has repaid this loan.

(6)  Commitments.  The Company is  committed  under an  operating  lease for its
     office  space.  The  Company is  obligated  under this lease for its office
     space for  payments  of $33,000 in 2006.  The  Company  can, at its option,
     elect to extend this lease for up to one additional three-year period.

(7)  Concentration  of Customers.  The Company's  sole source of revenue to date
     has been one customer,  a US based  company.  Accordingly,  its revenue and
     related  accounts  receivable  at all periods  presented are all related to
     this single source. The Company is endeavoring to expand its customer base.

(8)  Patent License.  In 1997, the Company entered into a non-exclusive  license
     with a US company,  Atmel  Corp.,  to license  the  Company's  patent.  The
     Company  received an initial  license fee of $100,000,  and will receive an
     additional $50,000 fee once the 10 millionth unit is delivered by Atmel

     In 2005, Atmel negotiated to end the licensing arrangement.  Atmel paid the
     Company a termination fee of $150,000 in the second quarter of 2005.

(9)  Conditional   Government   Subsidies  The  Company  has  received   several
     government grants which are conditional as to repayment.  The grants are to
     be applied as  reductions  of  salaries  and  employment  taxes paid to new
     employees.  They are  intended by the  government  to induce  increases  in
     employment,  as France has experienced high  unemployment over the last few
     years. The Company had been increasing  employment and applying accumulated
     grants as offsets to salary  expense and, at present,  is not yet obligated
     to repay any of these  grants.  Even though the Company  decreased  overall
     employment  in 2003,  the  employee  category  for which  these  grants are
     intended  has not been  decreased.  The  Company  does not expect to have a
     repay any of the grant amounts.  These grants, if required to be repaid, do
     not  require  the  payment of  interest.  The term for adding the  required
     employees  under  these  grants  is  three  years.  In 2005 and  2004,  the
     government forgave repayment of $14,338 and $207,621 of these grants.


                                      F-11