SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549








FORM
      10-KSB




x
            Annual
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the fiscal year ended December 31,
                2004.




o
            Transition
                report pursuant to Section 13 or 15(d) of the Securities ExchangeAct
                of 1934 for the transition period from ____________ to
                ___________.





Commission
      File No. 0-24812





ORBIT
      BRANDS CORPORATION


(Name
      of
      small business issuer as specified in its charter)


Delaware
              56-1781650(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)




13701
        Riverside Drive, Suite 701, Sherman Oaks, CA 91423
 (Address
        of principal executive offices)




**818-501-2238**


(Issuer's
      telephone number)





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




NONE





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





Common
      Stock, $.001 par value




(Title
      of class)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the preceding 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 o No x





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B in this form and no disclosure will be contained, to the best
      of
      issuer's knowledge, in definitive proxy or information statements incorporated
      by reference in Part III of this Form 10-KSB or any amendment to this Form
      10-KSB. o





The
      issuer's revenues for the most recent fiscal year were $3,398. As of June 6,
      2006, the aggregate market value of the common stock held by non-affiliates
      of
      the issuer was approximately $266,983 based upon the average bid and asked
      price
      of such common stock as of such date **.** As of
      June 13, 2006, there were 3,094,350,600 shares of common stock outstanding
      and
      5,000,000 shares of preferred stock outstanding.





Documents
      Incorporated by Reference





None.





Transitional
      small business disclosure format Yes o No x










ORBIT
      BRANDS COROPORATION


FORM
      10-KSB


YEAR
      ENDED DECEMBER 31, 200 4





TABLE
      OF
      CONTENTS





PART
                  IITEM
                  1. Description of Business
              
              3ITEM
                  2. Description of Property
              
              14ITEM
                  3. Legal Proceedings
              
              15ITEM
                  4. Submission of Matters to a Vote of Security holders
              
              26PART
                  IIITEM
                  5. Market for the Common Equity and Related Stockholder
              
              28ITEM
                  6. Management's Discussion and Analysis or Plan of Operation
              
              39ITEM
                  7. Financial Statements
              
              F-1ITEM
                  8. Changes in and Disagreements with Accountants on Accounting
                  and
                  Financial Disclosure
              
              54ITEM
                  8 A Controls and Procedures
              
              54PART
                  IIIITEM
                  9. Directors and Executive Officers of the Registrant
              
              56ITEM
                  10. Executive Compensation
              
              57ITEM
                  11. Security Ownership of Certain Beneficial Owners and
                  Management
              
              60ITEM
                  12. Certain Relationships and Related Transactions
              
              60ITEM
                  13. Exhibits and Reports on Form 8-K
              
              60ITEM 14
                  Principal Accountant Fees and services
              
              67SIGNATURES
              
              68





2




CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS





Some
      of
      the information contained in this Annual Report on Form 10-KSB may contain
      forward-looking statements. Such statements include, in particular, statements
      about our plans, strategies and prospects under the headings "Description of
      Business" and "Management's Discussion and Analysis of Financial Condition
      and
      Results of Operations." You can identify forward- looking statements by our
      use
      of forward-looking terminology such as "may," "will," "expect," "anticipate,"
      "estimate," "continue" or other similar words. Although we believe that our
      plans, intentions and expectations reflected in or suggested by such
      forward-looking statements are reasonable, we cannot assure you that
      our


plans,
      intentions or expectations will be achieved. When considering such
      forward-looking statements, you should keep in mind the following important
      factors that could cause our actual results to differ materially from those
      contained in any forward-looking statement:





The
      Company may not be able to meet our short-term or long-term liquidity needs
      on
      terms favorable to us, if at all and consequently may not be able to operate
      in
      the future;





Given
      these uncertainties, we caution you not to place undue reliance on
      forward-looking statements. We undertake no obligation to publicly release
      the
      results of any revisions to these forward-looking statements that may be made
      to
      reflect any future events or circumstances or to reflect the occurrence of
      unanticipated events.





ITEM
      1.
      DESCRIPTION OF BUSINESS.





(a)
      Overview.





The
      Company was incorporated in Delaware on November 12, 1991 under the name
      Longview Golf Corporation. The Company changed its name to Brassie Golf
      Holdings, Ltd. on September 18, 1992, and then again, on March 29, 1993, to
      Brassie Golf Corporation. On June 2, 1998, the Company changed its name to
      Divot
      Golf Corporation. Subsequently, in March 2000, the Company changed its name
      to
      ORBITTRAVEL.COM CORPORATION. In 2003, the Company’s stockholders approved a new
      name change to ORBIT BRANDS CORPORATION, and the Company officially changed
      its
      name to “ORBIT BRANDS CORPORATION” on March 18, 2004.





The
      Company was assessed by the State of Delaware in the amount of approximately
      $344,000 for corporate franchise taxes and related charges for the years 2000,
      2001 and 2002, which assessments were not paid at the time they were issued.
      During this same period, the Company’s business operations were dormant. As a
      result of the Company’s failure to file its annual reports for the years 2000,
      2001 and 2002 and its non-payment of franchise taxes, the Company temporarily
      was not in good standing in the State of Delaware. However, based upon the
      Company’s filing of its State of Delaware franchise tax returns on March 16,
      2004, the franchise tax assessments were recalculated and adjusted downward
      to
      the aggregate sum of approximately $944 based on the Company’s report of annual
      revenues for the years 2000, 2001 and 2002. Accordingly, on March 16, 2004,
      the
      Company also remitted the reduced tax assessments to the State of Delaware,
      which resulted in the immediate issuance of a Certificate of Renewal and Revival
      of the Company’s Certificate of Incorporation from the Delaware Secretary of
      State, effective as of February 28, 2002, and the restoration of the Company’s
      good standing in Delaware as of said date.
      The
      last Delaware franchise tax return filed by the Company was for the 2003 tax
      year.




3





During
      the past two years, because the Company did not file its annual reports with
      the
      SEC when due, the Company also did not file its 2004 and 2005 tax returns .
      The
      Company did file all required Forms 8-K in a timely manner.





In
      May
      2004, the Company’s shareholders authorized the Company to file for protection
      pursuant to the provisions of Chapter 11 of the Bankruptcy Code, Title 11 United
      States Code Sections 101, *et.
      seq* .,
      at the
      discretion of the Company’s Board of Directors.





However,
      on June 25, 2004, before the Company affirmatively sought relief under the
      Bankruptcy Code, several of the Company’s creditors filed an Involuntary Chapter
      11 Petition against the Company in the United States Bankruptcy Court for the
      Central District of California, in Los Angeles, California (the “Bankruptcy
      Case”). The Company published notice of the commencement of the involuntary
      bankruptcy case to all of its shareholders, pursuant to the filing of an SEC
      Form 8-K regarding the filing of the Involuntary Chapter 11 Petition with the
      Securities and Exchange Commission.





In
      filing
      the Involuntary Petition, the Company's creditors expressed their concern that
      management had been required to devote considerable time and resources to the
      pending litigation (including, without limitation, the Miller Action and the
      Company Action) and, as a result, that it had not been able to devote its
      efforts to the Company’s business activities, as well as noting the financial
      burden of continuing to defend against claims brought by the same plaintiffs,
      or
      assisted by the same individuals, in several states where the Company had
      conducted business, and that the interests of creditors and shareholders had
      been compromised as a result. They believed the involuntary proceeding would
      bring a halt to the pending and threatened litigation and protect their
      interests as creditors, as well as the interests of shareholders.





The
      Company ultimately consented to the entry of an order for relief, converting
      the
      case to a Voluntary Chapter 11 case on or about December 14, 2004. The Company
      timely filed its Chapter 11 Schedules and Statement of Financial Affairs on
      December 29, 2004.







The
      First
      meeting of Creditors in the Bankruptcy Case was conducted on February 8, 2005,
      and the Court convened the initial Chapter 11 Status Conference on March 17,
      2005. At the hearing, the Court continued the Status Conference to June 16,
      2005. By motion, the Company obtained an order setting April 22, 2005 as the
      claims bar date. At the Status Conference held on June 16, 2005, the Court
      received the Company’s report on its reorganization efforts and continued the
      Status Conference to October 13, 2005.




On
      July
      13, 2005, the Company filed a motion for an order authorizing
      debtor-in-possession financing under Section 364 of the Bankruptcy Code in
      order
      to fund various administrative expenses in connection with the Chapter 11 case.
      The motion was unopposed, and on August 3, 2005, the Bankruptcy Court issued
      its
      order granting the motion and approving the financing as requested by the
      Company.




4





On
      July
      25, 2005, the Official Committee of Unsecured Creditors (the “Creditors
      Committee”) gave notice of its application to employ a financial and
      reorganization consultant and for authorization of a post-petition retainer
      to
      the consultant. The Creditors Committee’s application was filed on August 2,
      2005, together with the Company’s stipulation to the granting of the
      application. The application was not opposed, and on August 15, 2005, the
      Bankruptcy Court issued its order granting the application and approving the
      employment of the Creditors Committee’s consultant and authorizing the requested
      post-petition retainer.





On
      June
      20, 2006, the Company filed an application to employ a public accounting firm,
      Malone & Bailey, P.C., as its independent auditor, in conjunction with the
      preparation and filing of its updated Securities and Exchange Commission
      quarterly and annual reporting requirements, and sought Bankruptcy Court
      authorization to pay a post-petition retainer to Malone & Bailey, P.C. The
      Creditors Committee supported this application, and on July 17, 2006, the Court
      entered its Order granting the Company’s application to employ Malone &
Bailey, P.C. as the Company’s independent auditor.





On
      September 22, 2006, the Company filed its motion to approve a compromise
      pursuant to Bankruptcy Rule 9019 with respect to the litigation described in
      detail in Section “F,” infra .
      As
      described therein, the compromise involves the proposed settlement and
      dismissal, with prejudice, not only of the Molus Action (see Section “F,” infra ),
      but
      also the dismissal, with prejudice, of the Teakwood Action (see Section “A,” supra ,),
      the
      Miller Action (see Section “C,” supra ),
      and
      the Dollinger Action (see Section “G,” infra ),
      as
      well as the mutual and general release of all claims, known and unknown,
      asserted and unasserted, between all of the parties to the Molus Action, the
      Miller Action and the Dollinger Action, and the Company’s claims as set forth in
      the Company Action (see Section “B,” supra ).





Pursuant
      to an order of the Bankruptcy Court, the compromise approval motion was
      initially scheduled for hearing on November 14, 2006. However, in evaluating
      the
      motion, the Bankruptcy Court decided that notice needed to be provided not
      only
      to creditors and other parties in interest but also to the Company’s
      shareholders, and recommended that the Company re-notice the motion more broadly
      or incorporate the motion and proposed compromise into its proposed amended
      disclosure statement and amended plan of reorganization. The Company intends
      to
      follow the Court’s recommendation and to incorporate the motion and proposed
      compromise into its reorganization proposal.





As
      a
      result of the compromise, once approved, all of the foregoing actions are
      expected to be dismissed, with prejudice, in the first quarter of 2007, upon
      approval of the Company’s motion, or upon the subsequent approval of the
      Company’s Plan of Reorganization by the United States Bankruptcy
      Court.





The
      Company is currently restructuring its financial program for its successful
      emergence from Chapter 11. In this regard, the Company filed its original
      proposed disclosure statement and original proposed Chapter 11 plan of
      reorganization (collectively, its “plan proposal”) on September 16, 2005. The
      Company filed its amended plan proposal on September 14, 2006. However, based
      upon pending business developments and the need to incorporate the settlement
      and compromise of its litigation with certain of its creditors, as described
      herein, into its amended plan proposal, the Company intends to file its second
      amended plan proposal by January 31, 2007, in accordance with an order of the
      Bankruptcy Court. The Court has scheduled a hearing for February 15, 2007 on
      the
      status of the Chapter 11 case and is expected to schedule further hearings
      to
      approve the plan proposal at that time.




5




Once
      the
      Chapter 11 plan of reorganization is confirmed, the Company will emerge from
      Chapter 11 and continue to implement its immediate and long-range business
      plan.




The
      Company’s executive offices are located at 13701 Riverside Drive, Suite 701,
      Sherman Oaks, California, 91423. Its telephone number is (818) 501-2238.





(b)
      Corporate Structure, Background and Business Activities of the Company.





Corporate
      Structure





The
      Company has four (4) wholly-owned subsidiaries which are Delaware **c** orporations:
      SMARTVoice Telecommunications, Inc., (“Smart Voice”), Itrex International
      Corporation (“Itrex”), Malibu Beach Beverage Group (“Malibu”) and Malibu
      Entertainment Group, Inc.(“MEG”). The Company has one (1) wholly-owned
      subsidiary which is a Nevada **c** orporation:
      Malibu Mixers Company/BBKO (“BBKO”).





Itrex’s
      intended business plan is to facilitate development and funding of early stage
      ,
      high growth companies in the technology, health and fitness, and consumer goods
      industries. SmartVoice’s intended business plan is to develop and market certain
      proprietary telecommunications technology. Malibu’s intended business plan is
      the production, marketing and distribution of healthy fruit and green tea blends
      as an alternative to carbonated soft drinks. MEG’s intended business plan is the
      development and production of various television, film and media projects.
      The
      BBKO subsidiary will be renamed Floating Bed International (“FB”). FB is a
      specialty bed manufacturer who designs and manufactures beds , which are
      uniquely advantageous for the human mind and body by focusing on improving
      blood
      circulation.





The
      Company intends currently to focus its efforts and business strategy on seeking
      financing for its core business, internet-based technologies, as well as product
      development and the distribution of related consumer products throughout North
      America. The Company intends to raise additional capital in the form of equity
      and/or debt to fund the acquisition and growth of its subsidiaries and recent
      acquisitions, as described above, which could significantly change the capital
      structure and cause a change of control in the Company.




6





Since
      January 2001, through the date of this filing, the Company has been essentially
      non-operative. Its only significant business activity during this period has
      been raising capital through Itrex to fund the operations of its subsidiaries
      and to pay certain of the Company’s professionals, employees and other
      individuals and entities in connection with attempting to restructure the
      Company.





Background





**ITREX
      INTERNATIONAL CORPORATION, A DELAWARE CORPORATION**





Since
      the
      formation of Itrex International Corporation (“Itrex”) in 2002, the Company has
      utilized convertible promissory notes to finance all of the development stage
      activities of the other Orbit subsidiaries, and from time to time Itrex has
      up-streamed funds to the Company in order to facilitate the Company’s own
      business operations. The primary asset of Itrex is its intellectual property,
      including the “Media Exchange,” which is described below.




The
      Media
      Exchange plans to enter the multi-billion dollar global music, media and
      entertainment industry with a revolutionary technology (the “MX”) that could
      redefine the financing tools of the industry. The MX is an integrated
      multi-function exchange platform for the offering and trading of a novel
      formulation of securities, backed by the current and future revenue streams
      of
      the issuers (including artists, record labels, and entertainers). The MX can
      serve the interests of all segments of the music entertainment industry,
      including artists, labels, studios, producers, fans, and investors, by
      diversifying the risks and rewards of financing industry growth, and insuring
      a
      transparent public market.




The
      MX
      provides a financing vehicle which will raise growth capital for artists and
      other segments of the music, media and entertainment industry through the
      issuance of asset-based securities. These securities will be backed by rights
      to
      a percentage of the underlying intellectual property (e.g., music) and
      associated revenues generated through(a) publishing and licensing of music,
      (b)
      royalties, (c) merchandising, (d) album sales, and (e) bookings and promotional
      appearances.





The
      MX is
      a seamless financial product. Its methodology can be readily expanded into
      other
      facets of the entertainment industry, such as television, film, publishing,
      and
      other media, and as it gains broad acceptance in the public markets, we
      anticipate extending its scope to other segments of related industries, and
      beyond.




For
      the
      major entertainment industry participants, particularly the larger record
      labels, the MX offers the ability to hedge risk and diversify exposure, while
      retaining revenues from the sale of record albums (cd’s, ipod and other current
      media). At the same time, the record labels can securitize their existing
      royalty streams in order to raise new capital, by shifting a portion of their
      royalty streams into the public market. This will allow the record labels to
      reduce their risk without a corresponding reduction in profits, and will provide
      new operating capital while generating broad exposure for their stable of new
      and existing artists.




7




In
          many
          if not all aspects of the entertainment industry, artists at all stages
          of their
          careers can be viewed as growth businesses. Achieving commercial success
          requires being properly capitalized to produce albums, conduct marketing
          campaigns, and underwrite touring expenses, among other requirements. Artists
          have intellectual property with intrinsic value, multiple revenue streams,
          and a
          potentially high growth curve when they are properly funded and even moderately
          successful. Using the MX platform, the issuers can market themselves to
          intrinsic and other potential investors. Between the ubiquitous “garage band”
and the major recording star, there is a wide range of artists who have
          loyal
          followings, generate revenues, and are “on track” to becoming even more
          successful.


The
          MX
          will offer intrinsic investors the unique opportunity of investing in their
          favorite artists, satisfying the desire not only to share in, but to benefit
          from, their artistic and commercial success.





**SMARTVoice
      Telecommunications, Inc.**





SMARTVoice
      will seek to develop and market telecommunication technology for IP telephony
      and applications. IP Telephony is the technology of using the Internet to
      transport voice conversations.





SMARTVoice
      intends to be an IP Telephony service provider with two product lines: (1)
      internet protocol telephone devices and communication services, and (2) hosted
      services which implement the functionality of a private branch exchange, or
      PBX,
      over data networks. Its first product line will include analog telephone
      adaptors and communication software and services that work over broadband
      networks. SMARTVoice expects to sell internet protocol telephony software and
      services that will enable its customers to provision and use voice communication
      services with IP telephones and other end-point devices. SMARTVoice has
      established its website at “ www.smartvoice-ip.com ”. Effective
      January 1, 2004, the Company through a subsidiary SMARTVoice Telecommunications,
      Inc, a Delaware corporation (“SMARTVoice”) agreed to acquire the intellectual
      property of SMARTVoice Telecommunications, Inc, a Georgia corporation
      (“Georgia”) formed on May 6, 2003. The net liabilities of Georgia were initially
      acquired by the Company for no consideration. In addition, the Company entered
      into an employment contract with an individual to serve as the Chief Executive
      Officer of SMARTVoice (see below). On October 19, 2004, the agreement was
      amended to adjust the purchase price to include an additional amount of $570,000
      in the form notes payable and amend certain terms of the employment
      agreement.





The
      acquisition was accounted for as a purchase and the results of operations have
      been included in the consolidated financial statements since the date of
      acquisition. SMARTVoice will seek to develop and market telecommunication
      technology for IP telephony and applications. IP telephony is the technology
      of
      using the internet to transport voice conversations.




8





The
      summarized balance sheet at the acquisition date as adjusted for the notes
      is as
      follows:


Current
                  assets
              
              $
              4,754Due
                  to affiliates
              
              
              11,284
              )Notes
                  payable
              
              
              (570,000
              )Other
                  current liabilities
              
              
              (216,215
              )$
              (792,745
              )





The
      net
      cost of the acquisition of $792,745 was recorded as goodwill and subsequently
      impaired.





Prior
      to
      this, Georgia was an affiliate of the Company, and between December 16, 2003
      and
      May 31, 2004, the Company caused certain of its convertible debenture holders
      to
      invest approximately $405,905 of the amounts discussed below into Georgia for
      use as working capital for both Georgia ($250,905) and the Company ($155,000).
      On January 1, 2004 SMARTVoice executed employment agreements with Charles P.
      Shuster, as Chairman and CEO of SMARTVoice and Frederick Alger as Chief
      Financial Officer of SMARTVoice. The terms of the employment contracts for
      Fredrick Alger are for 90 day renewal periods at compensation rates yet to
      be
      determined. The employment contract between Fredrick Alger was not renewed
      after
      the initial 90 day period. The term of the employment contract with Charles
      Shuster is for a period of seven years at a base salary of $275,000 per annum
      and a signing bonus of $150,000. In addition he is entitled to options to
      purchase 5,000,000 shares of common stock of the Company at fair market value
      exercisable for 5 years. The contract also contains certain anti-dilution
      provisions, incentive compensation and severance pay in the amount of $900,000
      in the event of default or termination for certain reasons. The contract was
      amended on October 19, 2004, to remove the anti-dilution provisions effective
      at
      the inception of the contract and remove the right to the 5,000,000 options.
      The
      compensation has been deferred for all executive employment agreements of
      SMARTVoice. The Company has formed a compensation committee to review the terms
      of the Executive Employment Agreements.





**Malibu
      Beach Beverage Group, LLC**





On
      November 26, 2003, Malibu Beach Beverage Group, LLC (“Malibu” and/or “MBBG”)
      purchased certain intellectual property rights from Amy L. Goldman, the duly
      appointed, qualified and acting Chapter 7 Trustee of the bankruptcy estate
      of
      MBB, Inc. in that certain Chapter 7 bankruptcy case pending in the United States
      Bankruptcy Court for the Central District of California, San Fernando Valley
      Division, In re: Malibu Beach Beverage Co., Inc., Debtor, Case No.: SV 01-
      17743-AG, including the right to use the trade name of “Malibu Beach Beverage
      Company,” among other assets (the “Rights”), for a purchase price of $20,000.
      MBB Group is a Delaware limited liability company in which Joseph R.


Cellura,
      the Company’s Chairman, Chief Executive Officer and majority shareholder, owns a
      25% interest.





Effective
      June 30, 2004, Malibu Beach Beverage Group, LLC, a Delaware LLC (“Malibu”) was
      acquired by the Company. MBBG sold all of its rights, title and interests in
      all
      intellectual property of the low carb beverages including but not limited to
      any
      and all formulas, copyrights and applications, patents and applications,
      trademarks and applications, licensing, contracts, proprietary information,
      any
      other claimed proprietary information, and any other tangible and intangible
      intellectual property of the low carb beverage business of the MBBG. The net
      liabilities of MBBG were acquired by the Company for no consideration. The
      Company’s Chairman and CEO, Joseph Cellura, holds a 25% membership interest in
      MBBG.




9





The
      acquisition was accounted for as a purchase and the results of operations have
      been included in the consolidated financial statements since the date of
      acquisition.





The
      summarized balance sheet at the acquisition date is as follows:


Current
                  assets
              
              $
              242,542Property
                  and equipment
              
              
              6,300Due
                  to related parties
              
              
              (1,239,056
              )Current
                  liabilities
              
              
              (142,891
              )$
              (1,133,105
              )
  The
      net
      cost of the acquisition of $1,133,105 was recorded as goodwill and subsequently
      impaired.





The
      following summarized unaudited pro forma information assumes the acquisition
      had
      occurred on January 1:


2004
              
              2003Net
                  sales
              
              $
              12,222
              
              $
              -Net
                  (loss)
              
              $
              (8,645,286
              )
              $
              (1,256,839
              )Net
                  (loss) per shareBasic
                  and diluted
              
              $
              (0.00
              )
              
              (0.00
              )





**Malibu
      Entertainment Group, Inc., a Delaware corporation**





In
      May
      2004, Malibu Entertainment Group (“MEG”) was formed as a media and entertainment
      company for the purpose of developing and financing television, film and media
      projects for distribution and exploitation worldwide. MEG seeks to finance
      or
      co-finance various media projects, at such time as it secures the appropriate
      financing and/or distribution advances.






Over
          the
          past two years, MEG has entered into non-exclusive consulting agreements
          with
          several experienced film and television executives in order to create media
          opportunities for the company. These executives include Jim Townsend, Dean
          Hamilton, Bert Bedrosian and Frederico LaPenda.


**Floating
      Bed International, Inc., f/k/a BBKO Corporation, f/k/a Malibu Mixers Company,
      a
      Nevada corporation**




10





Floating
      Bed International, Inc. (“FB Int’l.”) develops, markets and sells high quality
      rest and relaxation devices in the form of beds and hammocks. Its patent-pending
      technology utilizes gentle motion to provide many health benefits to end users.
      The benefits of this type of motion have been established in independent
      scientific studies over a number of years. The company currently has one core
      product which can be customized and accessorized at the end of its manufacturing
      process. This feature allows purchasers to use the product in many ways in
      different settings, in order to serve a number of diverse purposes. The
      company’s products are sold to individuals and also to commercial users, such as
      hotels and health spas.





The
      Hammock Industry Overview





The
      hammock is an established piece of furniture with which most people are
      familiar. However, no significant improvements have been made to the hammock
      in
      recorded history. Thus, the company’s product represents a giant step forward
      for this unique item.





A
      major
      trend has emerged as people are turning to outdoor areas (yards, decks, rooftops
      -- basically, whatever is available) to expand their practical living space.
      Outdoor furniture sales are booming. Traditional indoor products are being
      adapted and new products are being developed for outdoor use. Thirty years
      ago,
      the general public could not have been sold on the idea of a bathtub in the
      yard. However, in today’s vernacular, anyone with the space and the money has to
      have a hot tub. Attitudes change, and people are thinking of their yards and
      open spaces in new ways. Given the increasing cost of housing construction
      and
      the scarcity of indoor space, this trend will likely continue into the
      foreseeable future.





The
      Company intends currently to focus its efforts and business strategy on seeking
      financing for its core business, internet-based technologies, as well as product
      development and the distribution of related consumer products throughout North
      America. The Company intends to raise additional capital in the form of equity
      and/or debt to fund the acquisition and growth of its subsidiaries and recent
      acquisitions, as described above, which could significantly change the capital
      structure and cause a change of control in the Company.




During
      the current year, the Company’s affiliate, Itrex International Corporation,
      raised an aggregate of approximately $1.2 million in the form of convertible
      notes. The terms of the notes are that they pay 12 percent interest per annum
      for the period outstanding and are convertible into the Companies common stock
      at a rate between $.0005 and $.015 per share. A portion of these funds were
      utilized for the payment of certain professionals required to assist in the
      preparation of the Company’s corporate legal work and securities filings. (See
      discussion, supra.) In addition, Itrex restructured Company debt and paid for
      business expenses attributable to 2002 and 2003 operations and for the business
      acquisition activities associated with Malibu Beach Beverage Company, Inc.,
      and
      SMARTVoice Telecommunications, Inc.




11




The
      Company intends currently to focus its efforts and business strategy on seeking
      financing for its core business, internet-based technologies, as well as product
      development and the distribution of related consumer products throughout North
      America in 2005 and 2006. The Company intends to raise additional capital in
      the
      form of equity and/or debt to fund the acquisition and growth of its various
      subsidiaries, which could significantly change the capital structure and cause
      a
      change of control in the Company.




Since
      January 2001, through the date of this Form 10-KSB, the Company has been
      essentially non-operative. Its only significant business activity during this
      period has been raising capital through Itrex to fund the operations of its
      subsidiaries, and to pay certain of the Company’s professionals, employees and
      other individuals and entities in connection with attempting to restructure
      the
      Company, which includes, but is not limited to, the preparation of this Form
      10-KSB.





(c)
      Prior
      History of the Company.





Golf
      Course Ownership, Design and Development, Management Sales of Consumer Products,
      Hospitality, Food and Beverage, Internet, Internet Travel, Telephony and
      Communications. As of 1997, the Company owned four golf courses and managed
      more
      than 20 other golf courses. Through April 1998, the Company was engaged in
      acquiring, designing, developing, constructing, owning, operating and managing
      private, semi-private and public golf courses throughout the United States.





At
      that
      time, the Company focused its core business activities on certain opportunities
      in the World Golf Village resort, a destination golf resort located near
      Jacksonville, Florida. The Company became actively involved in the development
      of various amenities, including Sam Snead's Tavern and World Golf Spa &
Bungalows, managed by Canyon Ranch Management, LLC. The Company also acquired
      parcels of land in the World Golf Village in December 1996 and January 1998.
      In
      addition, the Company paid $250,000 to the World Golf Village Foundation (which
      included the United States Golf Association, the PGA TOUR, and other leading
      golf organizations) for various consumer product license agreements at the
      World
      Golf Village, in order to establish a unique platform for sales of consumer
      products called “Interactive Information Technology and Entertainment”
(“IIT&E”), by means of a virtual golf pro shop, “divot.com,” a product and
      service-based portal with direct access to the Intranet at World Golf Village
      and the worldwide Internet. The license agreements covered various Miller Golf
      products and related travel products for a term of 20 years.





Due
      to
      ongoing labor issues, the capital requirements associated with continued
      ownership and management of its golf courses, and unsatisfactory operating
      results, the Company decided to refocus its business strategy on consumer
      products. The Company chose to continue its efforts at the World Golf Village,
      but instead of concentrating its efforts on golf course ownership, design and
      management, the Company shifted its focus to developing, licensing and marketing
      golf-related products and services. In July 1997, the Company sold its division
      responsible for managing third party-owned golf courses, and in August 1997,
      the
      Company sold its golf course design subsidiary to KSL Fairways. (See related
      exhibits, infra, for terms and conditions of sale, etc.) During the period
      from
      November 1997 through April 1998, the Company sold the golf courses it owned.




12





In
      order
      to implement its new strategic focus, the Company became one of the initial
      founding sponsors of the “FIRST TEE Program”. In addition, the Company acquired
      or assumed certain golf-related products, companies, license agreements, and
      joint content revenue share distribution agreements in April 1998, including
      Divot Corporation, Divot Development Corporation, and Divot Golf Corporation,
      a
      designer and supplier of golf accessories. The Company’s acquisition of Divot
      Golf Corporation provided it with patents on several unique products. In
      addition, the Company acquired the assets of Divot Spa WGV, Inc., two parcels
      of
      land located at the World Golf Village, under a management agreement with Canyon
      Ranch Management, LLC.





(See
      related exhibits, infra, for description of consideration.)





On
      April
      8, 1998, the Company also acquired Miller Golf, Inc., a 49-year old supplier
      of
      golf accessory products, for $4 million in cash and $300,000 in common stock
      of
      the Company. Miller Golf’s product line included a wide range of logo golf
      products, tournament prizes, and awards to private and public golf courses
      and
      golf course management companies. At the time of its acquisition in April 1998,
      Miller Golf had produced in 1997 revenues of $9.5 million, with $900,000 in
      earnings before interest, taxes, depreciation and amortization (“EBITDA”).





However,
      with the loss of the Company’s World Golf Village acquisitions, including the
      real estate it had acquired, the Company scaled back its efforts in the areas
      of
      golf-related products and services, and concentrated its efforts and new
      strategic focus on its internet properties.





In
      approximately January 1998, the Company concluded that the Internet technology
      strategies developed under its IIT&E platform could increase its growth,
      while utilizing the licenses at the World Golf Village for which the Company
      had
      paid $250,000. IIT&E featured golf and spa destination travel packages and
      consumer products ranging from logo premiums to travel packages for golf, spa,
      fishing and residence club shares, offered via the worldwide Internet, the
      Intranet at the World Golf Village, and the Company’s web-based portal, www.divot.com ,
      its
      virtual golf pro shop.




In
      February 1999, facing a challenge ostensibly led by a recalcitrant shareholder
      who sought to oust the Company’s existing management team, in response to
      representations that the Company’s proposed new management team, headed by
      Jeremiah F. Daly, had obtained certain financing commitments necessary for
      the
      Company to maintain its asset base and to cure a technical default of its
      wholly-owned subsidiary, Miller Golf (which Mr. Daly served as President),
      to
      its senior secured lender, Citizens Bank of Massachusetts, and in order to
      avoid
      using the Company’s resources in litigation, Mr. Cellura elected to resign as
      the Chairman and CEO of the Company. However, between February 1999 and June
      1999, new management was unable to deliver the reported new funding commitments,
      and the Company proceeded to lose all of its assets and properties at the World
      Golf Village, including the real estate it had acquired. In addition, Miller
      Golf was sold to certain insiders of the Company, including its previous owner,
      in a private transaction for $1.2 million, although the Company had paid $4.3
      million ($4 million in cash and $300,000 in stock) to acquire Miller Golf in
      April 1998, little more than a year prior to the forced sale of Miller Golf
      by
      the Company.




13





In
      June
      1999, Mr. Cellura was re-appointed as Chairman and CEO of the Company. Upon
      the
      resumption of his prior positions, $10 million in new funding commitments were
      quickly established in order to take the Company forward, which permitted the
      implementation of the Company’s new IIT&E Internet marketing strategies.





In
      late
      1999, after the demise of the Company’s golf-related products and services
      operations, the Company repositioned itself as a value-added service provider,
      specializing in business-to-business e-commerce applications, distribution
      services, and on-line marketing solutions to the travel industry worldwide.
      Through its wholly-owned subsidiary, OrbitTravel.com, Inc., the Company
      refocused its efforts on the creation of an independent travel, entertainment,
      and financial distribution and e-commerce business that specialized in assisting
      travel suppliers and tourism destinations in promoting, distributing and selling
      their products electronically to travel purchasers worldwide, by means of the
      Internet, airline global distribution systems, America Online, British Airways,
      and One World, an affiliation of the largest airlines, private “intranets” and
      other electronic distribution networks.




(d)
      Employees.





As
      of
      December 31 st ,
      2004,
      the Company has one full-time employee, Joseph R. Cellura, who serves in the
      capacities of Chairman of the Board of Directors and Chief Executive Officer.
      In
      addition, Douglas R. Dollinger has served the Company as Chief Legal Officer
      at
      various times since February 1999 through October, 2003. The Company currently
      utilizes several professionals engaged to address legal, accounting, audit
      and
      tax matters.





ITEM
      2.
      DESCRIPTION OF PROPERTY.





The
      Company’s principal business office is located at 13701 Riverside Drive, Suite
      701, Sherman Oaks, California, 91423. The Company’s telephone number is (818)
      501-2238.





During
      August 2004, Itrex International, Inc. (“Itrex”), a subsidiary of the Company,
      entered into a lease for a residential property to be used as an office. The
      term of the lease was for six months. The Company agreed to issue an aggregate
      of 7,500,000 shares of common stock in consideration for the lease term. The
      fair market value of the shares issued was amortized over the term of the lease.




14




During
      May 2005, Itrex entered into a lease for another residential property to be
      utilized as an office. The lease commenced June 1, 2005 for an initial term
      of
      one year at an annual rental of $96,000. The lease provides for two renewal
      options, for four years and five years, respectively. The first option has
      been
      exercised.




Future
      minimum lease payments are as follows:


2005:
              
              $
              56,0002006:
              
              $
              96,0002007:
              
              $
              96,0002008:
              
              $
              96,0002009:
              
              $
              96,0002010:
              
              $
              40,000





Rent
      expense for the years ended December 31, 2004 and 2003 including the above
      lease
      was $48,000 and $48,000.





ITEM
      3.
      LEGAL PROCEEDINGS.





I.
            Previously
                non-disclosed, Pending or Threatened Litigation. In regard to pending
                or
                threatened litigation, the Company submits the following:


A.
            *Orbittravel.com
                Corporation, etc., et al, Plaintiffs, v. Teakwood Ventures, L.L.C.,
                etc.,
                et al, Defendants*,
                United States District Court for the Southern District of New York,
                Case
                No. 01-CV-10077-SWK (the “Teakwood Action”).





In
      November 2001, the Company, along with two other plaintiffs, filed suit against
      an investor group headed by Teakwood Ventures, LLC, in the United States
      District Court for the Southern District of New York (the “Teakwood Action”). In
      the Teakwood Action, the Company sought to recover in excess of $10 million
      in
      damages and other relief against Defendant Teakwood Ventures, LLC and related
      individuals and entities. The Company asserted claims of fraud,
      misrepresentation, breach of contract and violation of RICO statutes, among
      other claims. Prior to the commencement of the Teakwood Action, on or about
      October 18, 2001, the Company had reached an overall settlement with the
      Defendants (the “Teakwood Settlement”), pursuant to the terms of which
      approximately 184,277,000 shares of common stock which had been issued by the
      Company to the defendants were returned to the Company for its benefit. The
      Teakwood Action presently remains open on the District Court docket, pending
      the
      consummation of the settlement.





Based
      upon the settlement of the Molus Action (defined and described in Section “F,” infra ),
      it is
      anticipated that the Teakwood Action will be dismissed, with prejudice, in
      the
      late first quarter or early second quarter of 2007, upon approval of the
      Company’s motion to approve the settlement, or upon approval of the Company’s
      Plan of Reorganization by the United States Bankruptcy Court.





B.
            *ORBIT
                BRANDS CORPORATION, a Delaware corporation, vs. Douglas R. Dollinger,**Joanne
                Bertolini, and Dean E. Miller, etc., et al*.
                (the “Company Action”).




15





In
      February 2004, the Company commenced suit against the above-named individuals
      in
      the Superior Court of the State of California for the County of Los Angeles
      (the
“Superior Court”), seeking damages for breach of fiduciary duty, professional
      negligence, breach of contract, intentional interference with business
      relations, negligent interference with business relations, intentional
      infliction of emotional distress, negligent infliction of emotional distress,
      and common counts, and an accounting (the “Company Action”). The Company
      anticipated amending the suit to add additional parties and additional claims.





By
      motion
      filed in January 2005, the defendants sought the dismissal of the Superior
      Court
      action on jurisdictional grounds. Since the Company had voluntarily converted
      its creditors’ involuntary Chapter 11 bankruptcy case, filed in June 2004, to a
      voluntary Chapter 11 case in December 2004 (see below), the Company elected
      to
      dismiss the Superior Court action, without prejudice, preserving its rights
      to
      proceed against the defendants in the bankruptcy case and related
      proceedings.




The
      total
      amount of damages claimed by the Company in the Superior Court Company Action
      exceeded $1 million. Based upon the settlement of the Molus Action (defined
      and
      described in Section “F,” infra ),
      the
      Company’s claims (and the claims asserted by the defendants in the above
      litigation against the Company and its officers and agents) will be mutually
      and
      generally released, effective in the late first quarter or early second quarter
      of 2007, upon approval of the Company’s motion to approve the settlement, or
      upon approval of the Company’s Plan of Reorganization by the United States
      Bankruptcy Court.








C.
            *Dean
                E. Miller, Plaintiff, vs. Orbittravel.Com Corporation and Joseph
                R.
                Cellura, Defendants; ORBIT BRANDS CORPORATION and Joseph R. Cellura,
                Counterclaimants, vs. Dean E. Miller,
                Counter-Defendant*,
                Delaware Court of Chancery Case No. CA 253-N (the “Miller
                Action”).





In
      February 2004, the Company and Mr. Cellura were named as defendants in this
      suit, filed in Delaware Chancery Court by a former employee of the Company,
      Dean
      Miller, who had been terminated in or about 2001. Mr. Miller is acting as his
      own counsel. Mr. Miller also is a minority shareholder in the Company. The
      suit
      is based upon an alleged failure to hold annual stockholders meetings and
      alleges claims for breach of fiduciary duties, misappropriation and embezzlement
      of funds and securities.





The
      Company and Mr. Cellura answered the lawsuit in April 2004, categorically
      denying Mr. Miller’s contentions, and filed a counterclaim for declaratory
      relief.




In
      late
      April 2004, Mr. Miller filed motions to amend his Complaint and for summary
      judgment, along with his answer to the counterclaim. At a status conference
      in
      May 2004, the Chancery Court determined that Mr. Miller had not actually filed
      his proposed amended complaint, and determined to treat his motion solely as
      a
      motion to amend and that any motion for summary judgment was premature. The
      Court scheduled a hearing on the motion to amend for June 2004.




16





In
      late
      May 2004, the Company was informed that Mr. Miller purportedly had called for
      a
      special meeting of the Company or of its “Shareholders Oversight Committee” to
      be held on May 27, 2004, at which time Mr. Miller intended to take various
      corporation actions. In response, the Company and Mr. Cellura immediately
      notified Mr. Miller, in writing, that the proposed meeting was in contravention
      of the Company’s Certificate of Incorporation and By-Laws and Delaware
      Corporation Law, and that the proposed meeting and any purported corporate
      action to be taken at the meeting were, and would be deemed to be, null, void
      and without effect.





Thereafter,
      at the June 2004 hearing on Mr. Miller’s motion to amend his Complaint, Mr.
      Miller did not appear, and the Chancery Court denied the motion.





Following
      the filing of a creditors’ Involuntary Chapter 11 Petition against the Company
      in the United States Bankruptcy Court for the Central District of California
      on
      June 25, 2004 (see Section “E,” infra ),
      Defendants filed notice of the filing of the Involuntary Petition, which
      automatically stayed the litigation under Title 11 U.S.C. § 362(a), and as a
      result, there has been no subsequent activity in the Miller Action since that
      date.





In
      or
      about December 2004, Mr. Miller filed the first of three separate proofs of
      claim against the Company with the Bankruptcy Court, thereby preserving his
      right to assert his claims as against the Company and submitting to the
      jurisdiction of the Bankruptcy Court with respect to his claims. The Company
      maintained the right to object to Mr. Miller’s claims and to have its objections
      determined by the Bankruptcy Court through the claims objection procedure under
      the Bankruptcy Code and the Bankruptcy Rules.





Based
      upon the settlement of the Molus Action (defined and described in Section “F,” infra ,
      the
      Miller Action will be dismissed, with prejudice, in the late first quarter
      or
      early second quarter of 2007. In addition, the claims asserted by Miller against
      the Company (and the claims asserted by the Company against Miller in its
      counterclaim) will be mutually and generally released, effective in the late
      first quarter or early second quarter of 2007, upon approval of the Company’s
      motion to approve the settlement, or upon approval of the Company’s Plan of
      Reorganization by the United States Bankruptcy Court.





D.
            *Mark
                Savoretti, Plaintiff, vs. Spartan Capital Management, Inc., a Delaware
                corporation, a/k/a Spartan Capital, LLC, a Delaware limited liability
                company; Divot Golf Corporation, a Delaware corporation, n/k/a
                Orbittravel.com, Inc., a Delaware corporation; and Joseph R. Cellura,
                Defendants*,
                Circuit Court of the Sixth Judicial District in and for Pinellas
                County,
                Florida, Circuit Civil Uniform Case No. 522004 CA 000646 XX CICI,
                Ref.
                Case No. 04-646-CI-11


-
      and
      -


*In
      re. ORBIT BRANDS CORPORATION, Alleged Debtor; Mark SavorettiPlaintiff, vs.
      Spartan Capital Management, Inc., a Delaware corporation, a/k/a*  *Spartan
      Capital, LLC, a Delaware limited liability company; Divot Golf*    *Corporation,
      a Delaware corporation, n/k/a Orbittravel.com, Inc., a Delaware*   *corporation;
      and Joseph R. Cellura, Defendants* ,
      United
      States Bankruptcy Court for the Middle District of Florida, Chapter 11
      (Involuntary) Case No. MP 04-00006-MGW (together, the “Savoretti
      Action”).




17




In
      January 2004, the Company, an affiliate of the Company, and Mr. Cellura, as
      well
      as a third party, were named as defendants in this action filed in Florida
      Circuit Court for damages in excess of $100,000 based on claims for fraudulent
      inducement, constructive trust, breach of contract, fraudulent transfer and
      alter ego, arising from a failed business transaction which occurred in late
      1999 and early 2000 (the “Savoretti Action”).





In
      September 2004, Mr. Cellura removed the lawsuit to the United States Bankruptcy
      Court for the Middle District of Florida, based on the pendency of the Company’s
      Involuntary Chapter 11 proceedings in the Central District of California, and
      thereafter Mr. Cellura filed and served his answer to the Complaint in September
      2004.





In
      January 2005, Mr. Cellura filed a motion to transfer the Savoretti Action to
      the
      Central District of California. Plaintiff consented to the motion to transfer
      by
      stipulation, and the lawsuit was thereafter transferred to the Central District
      of California in or about March 2005, where it was placed on the docket of
      the
      United States Bankruptcy Court as an adversary proceeding in the Company’s
      Chapter 11 case.





In
      November 2005, the Bankruptcy Court dismissed the adversary proceeding for
      lack
      of prosecution by Plaintiff. However, inasmuch as Plaintiff also had filed
      a
      proof of claim with the Bankruptcy Court in or about March 2005, Plaintiff
      preserved his right to assert his claims as against the Company and submitted
      to
      the jurisdiction of the Bankruptcy Court with respect to his claims.





In
      October 2006, Plaintiff informed the Company that he estimated his claim for
      damages at in excess of $20 million. Both the Company and Mr. Cellura vigorously
      deny any liability to Plaintiff and further deny that Plaintiff has suffered
      damages in any sum or at all.




Nonetheless,
      in November 2006, Plaintiff filed a motion for reconsideration of the
      Bankruptcy’s Court’s order dismissing the adversary proceeding, which was heard
      by the Bankruptcy Court on January 11, 2007. Both the Company and Cellura
      opposed the motion. At the hearing, the Bankruptcy Court denied the motion,
      but
      stated that its decision was without prejudice to Plaintiff’s claim as an
      unsecured creditor in the Company’s Chapter 11 proceeding.





The
      Company previously had noted that it disputed Plaintiff’s claim and that it
      intended to object to Plaintiff’s proof of claim which was filed with the
      Bankruptcy Court. The Company expects to have its objections determined by
      the
      Bankruptcy Court through the claims objection procedure provided under the
      Bankruptcy Code and the Bankruptcy Rules.





The
      Company intends to resist Plaintiff’s claims vigorously in the Chapter 11 case,
      as the Company continues to deny any and all liability to Plaintiff. However,
      it
      is not possible to predict the outcome of Plaintiff’s claims for damages or the
      amounts, if any, for which the Company could be determined to be
      liable.




18




E.
            *In
                re. ORBIT BRANDS CORPORATION, Debtor*,
                United States Bankruptcy Court for the Central District of California,
                Los
                Angeles Division, Chapter 11 Case No. LA 04-24171-ES (RN) (the “Bankruptcy
                Case”).





In
      May
      2004, the Company’s shareholders authorized the Company to file for protection
      pursuant to the provisions of Chapter 11 of the Bankruptcy Code, Title 11 United
      States Code Sections 101, *et.
      seq* .,
      at the
      discretion of the Company’s Board of Directors.





However,
      on June 25, 2004, before the Company affirmatively sought relief under the
      Bankruptcy Code, several of the Company’s creditors filed an Involuntary Chapter
      11 Petition against the Company in the United States Bankruptcy Court for the
      Central District of California, in Los Angeles, California (the “Bankruptcy
      Case”). The Company published notice of the commencement of the involuntary
      bankruptcy case to all of its shareholders, pursuant to the filing of an SEC
      Form 8-K regarding the filing of the Involuntary Chapter 11 Petition with the
      Securities and Exchange Commission.





In
      filing
      the Involuntary Petition, the Company's creditors expressed their concern that
      management had been required to devote considerable time and resources to the
      pending litigation (including, without limitation, the Miller Action and the
      Company Action) and, as a result, that it had not been able to devote its
      efforts to the Company’s business activities, as well as noting the financial
      burden of continuing to defend against claims brought by the same plaintiffs,
      or
      assisted by the same individuals, in several states where the Company had
      conducted business, and that the interests of creditors and shareholders had
      been compromised as a result. They believed the involuntary proceeding would
      bring a halt to the pending and threatened litigation and protect their
      interests as creditors, as well as the interests of shareholders.





The
      Company ultimately consented to the entry of an order for relief, converting
      the
      case to a Voluntary Chapter 11 case on or about December 14, 2004. The Company
      timely filed its Chapter 11 Schedules and Statement of Financial Affairs on
      December 29, 2004.





The
      First
      Meeting of Creditors in the Bankruptcy Case was conducted on February 8, 2005,
      and the Court convened the initial Chapter 11 Status Conference on March 17,
      2005. At the hearing, the Court continued the Status Conference to June 16,
      2005. By motion, the Company obtained an order setting April 22, 2005 as the
      claims bar date. At the Status Conference held on June 16, 2005, the Court
      received the Company’s report on its reorganization efforts and continued the
      Status Conference to October 13, 2005.




On
      July
      13, 2005, the Company filed a motion for an order authorizing
      debtor-in-possession financing under Section 364 of the Bankruptcy Code in
      order
      to fund various administrative expenses in connection with the Chapter 11 case.
      The motion was unopposed, and on August 3, 2005, the Bankruptcy Court issued
      its
      order granting the motion and approving the financing as requested by the
      Company.




19





On
      July
      25, 2005, the Official Committee of Unsecured Creditors (the “Creditors
      Committee”) gave notice of its application to employ a financial and
      reorganization consultant and for authorization of a post-petition retainer
      to
      the consultant. The Creditors Committee’s application was filed on August 2,
      2005, together with the Company’s stipulation to the granting of the
      application. The application was not opposed, and on August 15, 2005, the
      Bankruptcy Court issued its order granting the application and approving the
      employment of the Creditors Committee’s consultant and authorizing the requested
      post-petition retainer.





On
      June
      20, 2006, the Company filed an application to employ a public accounting firm,
      Malone & Bailey, P.C., as its independent auditor, in conjunction with the
      preparation and filing of its updated Securities and Exchange Commission
      quarterly and annual reporting requirements, and sought Bankruptcy Court
      authorization to pay a post-petition retainer to Malone & Bailey, P.C. The
      Creditors Committee supported this application, and on July 17, 2006, the Court
      entered its Order granting the Company’s application to employ Malone &
Bailey, P.C. as the Company’s independent auditor.





On
      September 22, 2006, the Company filed its motion to approve a compromise
      pursuant to Bankruptcy Rule 9019 with respect to the litigation described in
      detail in Section “F,” infra .
      As
      described therein, the compromise involves the proposed settlement and
      dismissal, with prejudice, not only of the Molus Action (see Section “F,” infra ),
      but
      also the dismissal, with prejudice, of the Teakwood Action (see Section “A,” supra ,),
      the
      Miller Action (see Section “C,” supra ),
      and
      the Dollinger Action (see Section “G,” infra ),
      as
      well as the mutual and general release of all claims, known and unknown,
      asserted and unasserted, between all of the parties to the Molus Action, the
      Miller Action and the Dollinger Action, and the Company’s claims as set forth in
      the Company Action (see Section “B,” supra ).





Pursuant
      to an order of the Bankruptcy Court, the compromise approval motion was
      initially scheduled for hearing on November 14, 2006. However, in evaluating
      the
      motion, the Bankruptcy Court decided that notice needed to be provided not
      only
      to creditors and other parties in interest but also to the Company’s
      shareholders, and recommended that the Company re-notice the motion more broadly
      or incorporate the motion and proposed compromise into its proposed amended
      disclosure statement and amended plan of reorganization. The Company intends
      to
      follow the Court’s recommendation and to incorporate the motion and proposed
      compromise into its reorganization proposal.





As
      a
      result of the compromise, once approved, all of the foregoing actions are
      expected to be dismissed, with prejudice, late in the first quarter or early
      in
      the second quarter of 2007, upon approval of the Company’s motion, or upon the
      subsequent approval of the Company’s Plan of Reorganization by the United States
      Bankruptcy Court.





The
      Company is currently restructuring its financial program for its successful
      emergence from Chapter 11. In this regard, the Company filed its original
      proposed disclosure statement and original proposed Chapter 11 plan of
      reorganization (collectively, its “plan proposal”) on September 16, 2005. The
      Company filed its amended plan proposal on September 14, 2006. However, based
      upon pending business developments and the need to incorporate the settlement
      and compromise of its litigation with certain of its creditors, as described
      herein, into its amended plan proposal, the Company intends to file its second
      amended plan proposal in February or March 2007. The Court has scheduled a
      hearing for February 15, 2007 on the status of the Chapter 11 case and is
      expected to schedule further hearings in regard to the Company’s plan proposal
      at that time.




20




F.
            *Carol
                Molus and Michael Molus, Plaintiffs, vs. Joseph Cellura, etc., et
                al.,
                Defendants**,*Orange
                County Superior Court Case No. 04 CC 08612, removed to United States
                District Court for the Central District of California on January
                6, 2005,
                assigned Case No. SA CV-05-23-JVS (the “Molus
                Action”).





In
      December 2004, the Molus Action was filed and served on the named defendants.
      Although the Plaintiffs did not name the Company in this action, they did name
      Joseph Cellura, the Company’s Chairman and Chief Executive Officer, and the
      Company’s attorneys, Ben-Zvi & Beck, LLP. The complaint purports to state a
      variety of causes of action, including but not limited to allegations of breach
      of contract, fraud, elder abuse, violations of the federal securities laws,
      and
      professional negligence against the Company’s attorneys.





The
      defendants removed the Molus Action to Federal District Court on or about
      January 6, 2005 and in late January 2005, they filed their respective answers
      to
      the complaint, wholly denying plaintiffs’ allegations of wrongdoing and
      asserting a variety of affirmative defenses to plaintiffs’ claims. In addition,
      the defendants filed and served separate third-party complaints against Douglas
      R. Dollinger, the Company’s former Chief Legal Officer and outside counsel, for
      partial and full indemnity.





In
      April
      2005, Dollinger filed and served his answer to the third-party complaints and
      concurrently filed and served his own counterclaim for indemnity against both
      the defendants and additional, unrelated third parties. The defendants timely
      filed their respective answers to Dollinger’s counterclaim.





In
      August
      2005, Dollinger sought permission to file a “Fourth Party” “impleader” with
“cross and counterclaims” against further additional parties, to which the
      defendants stipulated. However, the Dollinger “Fourth Party” action has never
      been filed or served.





On
      August
      16, 2005, Plaintiffs dismissed the lawsuit, with prejudice, as to one of the
      Company’s attorneys.





The
      defendants are defending the lawsuit vigorously, and they intend to continue
      to
      defend the lawsuit in such manner. They deny any liability to Plaintiffs.




The
      District Court established a discovery cutoff of December 31, 2005 and
      initially **** scheduled
      the trial to commence on April 11, 2006. A settlement conference was originally
      set for November 30, 2005. Beginning in November 2005, the parties began
      conducting depositions. Plaintiffs’ depositions were taken but not completed at
      that time, and were scheduled to resume in January 2006, by agreement of the
      parties. When the depositions resumed, Plaintiff Michael Molus’ deposition was
      completed, but prior to the completion of the deposition of Plaintiff Carol
      Molus and prior to the depositions of the principal defendants and Dollinger,
      the parties initiated settlement discussions which, by agreement, took
      precedence over the scheduled depositions.




21




The
      settlement discussions led to a tentative settlement, subject to definitive
      settlement documentation to be drawn by the parties. Over the course of the
      next
      two months, the parties exchanged drafts of various settlement agreements,
      but
      the settlement was not presented to the District Court, as the parties had
      agreed that important details still had to be resolved and that they needed
      to
      memorialize the settlement in a comprehensive and formal written settlement
      agreement containing mutual general releases. As of March 2006, the parties’
settlement efforts had broken down, as they reached several impasses in their
      ongoing negotiations to resolve the open issues and details of the proposed
      settlement documentation.





The
      defendants reported on the status of the settlement negotiations to the District
      Court,, which vacated the scheduled April 11, 2006 trial date and directed
      the
      parties to attend a mandatory settlement conference on April 12, 2006. The
      District Court thereafter conducted the mandatory settlement conference on
      April
      12, 2006, at which time the plaintiffs and defendants appeared, but the third
      party defendant and counterclaimant, Dollinger, acting pro se, did not appear.





At
      the
      settlement conference, the plaintiffs’ main action against the defendants was
      settled, and the settlement was placed on the record in open court. Due to
      the
      absence of Dollinger, the defendants’ third party counterclaim for
      indemnification against Dollinger, and Dollinger’s third party counterclaim and
      purported fourth party counterclaim against the defendants remained unsettled
      and pending.





In
      the
      days that followed, Dollinger notified the defendants that he intended to
      challenge the settlement reached with the plaintiffs, and the plaintiffs
      themselves sent a letter to the District Court seeking to rescind their
      settlement. The District Court then scheduled a further status conference
      regarding the settlement and related issues on May 4, 2006.





At
      the
      May 4, 2006 status conference, conducted via telephonic conference call and
      which Dollinger attended (by telephone), the District Court reiterated its
      view
      that the Plaintiffs’ main action had in fact been settled, and the District
      Court directed the plaintiffs and their counsel to cooperate in executing a
      written settlement agreement by May 12, 2006. In the event that the plaintiffs
      did not sign the settlement agreement by May 12, the District Court directed
      the
      defendants to file a motion to enforce the settlement. The plaintiffs did not
      execute the settlement agreement, and therefore the defendants prepared a motion
      to enforce the settlement, as directed by the District Court, which was filed
      on
      June 14, 2006 and set for hearing on July 10, 2006.




22





On
      or
      about June 12, 2006, acting *pro
      se* ,
      the
      plaintiffs filed a motion seeking to compel enforcement of the aborted January
      2006 settlement and an award of sanctions against the defendants, which was
      also
      set for hearing on July 10, 2006.





With
      regard to Dollinger’s third party counterclaim for indemnification and his
      purported fourth party counterclaim against the defendants, the District Court
      scheduled a further mandatory settlement conference on June 15, 2006, which
      Dollinger and the defendants were ordered to attend in person, together with
      their respective counsel.





At
      the
      June 15, 2006 mandatory settlement conference, Dollinger did not appear in
      person, attempting to appear instead via telephone, with local counsel appearing
      specially on his behalf. As a result of Dollinger’s failure to appear in person,
      in violation of the Local Rules of the District Court and the Court’s Standing
      Order, the District Court continued the mandatory settlement conference to
      July
      11, 2006 but awarded sanctions totaling $3,420 in favor of defendants and their
      respective counsel and against Dollinger. The District Court further advised
      that in the event Dollinger did not pay the sanctions award by June 23, 2006,
      it
      would consider issuing terminating sanctions with respect to all of the claims
      asserted by Dollinger in the Molus Action; however, Dollinger caused the
      sanctions award to be paid by the Court’s deadline.





The
      parties’ respective motions set for hearing on July 10, 2006 were continued in
      view of the pending (continued) mandatory settlement conference set for the
      following day. On July 11, 2006, after extensive negotiations in which the
      Court, through United States Magistrate Judge Marc Goldman, participated
      personally, the parties agreed to and entered into a settlement in open court
      in
      the Santa Ana Division of the U.S. District Court for the Central District
      of
      California. The settlement resolved not only the Molus Action pending in that
      court, but also the Dollinger Action pending in the Southern District of New
      York (see Section “G,” infra )
      and the
      Miller Action pending in Delaware Chancery Court (see Section “C,” supra ),
      as
      well as other actions then pending and related to the parties (see Section
“A,” supra )
      and
      various claims which had been asserted between and among the parties (see
      Section “B,” supra ),
      all of
      which were agreed to be mutually and generally released, and to be memorialized
      in a written settlement agreement to be prepared and circulated for execution
      by
      the parties. The parties further agreed to obtain approval of the settlement
      from the United States Bankruptcy Court in the Bankruptcy Case (as described
      in
      Section “E,” supra ),
      since, inter  alia ,
      the
      settlement called for the issuance of common stock of the Company to various
      parties as specified therein.





Pursuant
      to the parties’ agreement and as referenced in the settlement placed on the
      record in the District Court, a formal written “Settlement Agreement and
      Release” was subsequently prepared by counsel for the parties in order to
      memorialize the agreement. The Settlement Agreement and Release (“SAR”) was
      circulated for approval and fully executed as of August 31, 2006. By its terms,
      the SAR shall become effective on the 11 th day
      following the entry of the order of the Bankruptcy Court approving the SAR.
      As
      noted in Section “E,” supra ,
      a
      motion to approve the compromise constituting the parties’ settlement was filed
      with the Bankruptcy Court on September 22, 2006 and was initially scheduled
      for
      hearing on November 14, 2006. However, based upon the Bankruptcy Court’s
      determination that broader notice of the motion to approve the compromise (to
      now include the Company’s shareholders) was appropriate, the Company intends to
      incorporate the proposed compromise into its amended plan proposal to be filed
      in February or March 2007.




23





In
      support of the compromise motion, the Company has noted that the settlement
      is
      in the best interests of the Company’s creditors, in that it minimizes the
      impact on the bankruptcy estate by issuing shares of the Company’s common stock
      to the plaintiffs in the litigation (representing in the aggregate a minority
      holding of less than 10% of the Company’s authorized common shares) without requiring the payment of any funds whatsoever, and without incurring the
      substantial expense and delay, as well as the risk, attendant to a trial on
      the
      merits. Thus, the settlement serves the paramount interests of both the
      Company’s creditors and its equity holders, because it is to be achieved with
      the least possible expenditure of the Company’s resources.





Accordingly,
      the Molus Action has been settled, subject only to the approval of the United
      States Bankruptcy Court pursuant to either a renewed motion to approve the
      settlement or approval by the Bankruptcy Court of the Company’s Chapter 11 Plan
      of Reorganization, which is anticipated to occur late in the first quarter
      or
      early in the second quarter of 2007.





G.
            *Douglas
                R. Dollinger, Individually and as Escrow Agent on Behalf of Certain
                Intended Beneficiaries, Plaintiffs, v. Joseph R. Cellura, etc., et
                al,
                Defendants*,
                United States District Court for the Southern District of New York,
                Case
                No. 05 CIV. 3097 (assigned to Judge Stephen C. Robinson) (the “Dollinger
                Action”).





In
      late
      March 2005, the complaint in the Dollinger Action was filed and thereafter
      served on the defendants named in this lawsuit. Although the Plaintiffs did
      not
      name the Company in this action, the named defendants include Joseph Cellura,
      the Company’s Chairman and Chief Executive Officer, the Company’s attorneys,
      Ben-Zvi & Beck, LLP, and a brokerage house previously utilized by the
      Company in Florida, Park Financial Group. The complaint purports to state a
      variety of claims for relief, including but not limited to allegations of breach
      of contract, fraud, misrepresentation, tortious interference with contract,
      violations of common law duties, violations of the federal securities laws,
      and
      negligence, and seeks injunctive relief and the imposition of a constructive
      trust.





On
      or
      about May 13, 2005, the Plaintiffs filed an amended complaint in the Dollinger
      Action, in which at least three additional defendants were named, including
      several of the Company’s shareholders and another of the Company’s attorneys. On
      the same date, on behalf of certain defendants (the Company’s attorneys, Ben-Zvi
& Beck, LLP), a motion to dismiss, stay and/or transfer the Dollinger Action
      was filed and served on the Plaintiffs. Mr. Cellura joined in this motion.
      The
      Plaintiffs subsequently filed and served their opposition to defendants’ motion,
      in June 2005, and the defendants thereafter filed and served their reply in
      July
      2005. The motion stands submitted, and the Court has taken the matter under
      submission pending its ruling, which has not been issued to date.




24





Accordingly,
      none of the defendants originally named in the Dollinger Action has filed or
      served an answer to the complaint or to the amended complaint. The defendants
      intend to deny the allegations of wrongdoing asserted by the plaintiffs and
      to
      defend the suit vigorously, if the amended complaint survives the pending
      motion.





The
      Court
      has not yet scheduled a status conference, nor has any trial date been
      set.





Based
      upon the settlement of the Molus Action (defined and described in Section “F,” infra ,
      the
      Dollinger Action will be dismissed, with prejudice, late in the first quarter
      or
      early in the second quarter of 2007, upon approval of the Company’s motion to
      approve the settlement, or upon approval of the Company’s Plan of Reorganization
      by the United States Bankruptcy Court.





H.
            *Mary
                Jean Ribas, Plaintiff, vs. Joseph R. Cellura, and Doe 1 through and
                including Doe 100, Defendants*,
                Superior Court of the State of California for the County of Los Angeles,
                Central District, Case No. BC 351042 (the “Ribas
                Action”).





In
      April
      2006, the Ribas Action was filed in Los Angeles County Superior Court. Although
      the Plaintiff did not name the Company in this action, she did name Mr. Cellura,
      the Company’s Chairman and Chief Executive Officer, as the sole named defendant.
      The action seeks damages of approximately $14,500, plus interest, statutory
      penalties, and attorneys’ fees and costs, based upon claims for breach of
      contract and wages allegedly due to the Plaintiff brought under the California
      Labor Code and the Fair Labor Standards Act, arising from an independent
      contractor relationship which ended in December 2005.





The
      Ribas
      Action was commenced by the filing of the Summons and Complaint on April 20,
      2006. The Company believes that Plaintiff elected not to sue it due to the
      pendency of the Company’s Chapter 11 bankruptcy case.





Mr.
      Cellura responded to the Complaint by filing his Answer on July 25, 2006. On
      September 8, 2006, Plaintiff filed her First Amended Complaint, and on October
      6, 2006,




Mr.
      Cellura filed his Answer to the First Amended Complaint, in which he denied
      Plaintiff’s allegations of wrongdoing and asserted a variety of affirmative
      defenses to Plaintiff’s claims.





On
      August
      23, 2006, the Court conducted a Case Management Conference and ordered the
      parties to mediation to attempt to resolve the case. The mediation was held
      on
      January 8, 2007 but was unsuccessful. The Court also held a Post-Mediation
      Status Conference on January 25, 2007. The Court has scheduled the Final
      Pretrial Conference on April 27, 2007 and the trial on May 8, 2007.





Mr.
      Cellura intends to defend the lawsuit vigorously, as he denies any liability
      to
      Plaintiff. The Company also maintains the right to object to Plaintiff’s claims
      in the Chapter 11 bankruptcy case and to have its objections determined by
      the
      Bankruptcy Court through the claims objection procedure provided under the
      Bankruptcy Code and the Bankruptcy Rules.




25





Based
      upon the foregoing developments, it is not possible to predict whether the
      Ribas
      Action will be settled, or the outcome in the event the Ribas Action goes to
      trial. Thus, it is not possible to predict the outcome of the Ribas Action
      or
      the amount of damages, if any, for which Mr. Cellura, who would be entitled
      to
      indemnification from the Company, could be determined to be liable, nor is
      it
      possible to predict the amount of damages, if any, for which Plaintiff could
      be
      determined. to be liable to Mr. Cellura or to third parties, on their possible
      claims against Plaintiff.





II.
      Unasserted Claims and Assessments. The Company currently is unaware of any
      unasserted claims or assessments contemplated against the Company which are
      not
      discussed elsewhere in this Report.





III.
      Other Matters. With regard to other matters, please be
      advised that the Company is aware of no other threatened lawsuits
      or claims.





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





In
      July
      2003, under Delaware General Law 228, the Company received approval from greater
      than 51% of the Company's issued and outstanding common shares held by less
      than
      9 shareholders approving the following actions:




· To
      authorize the proposed change
      of the Company's name to ORBIT BRANDS CORPORATION in order to more accurately
      reflect the business of the Company [this occurred formally as of March 18,
      2004];





·
      To authorize the reverse split of the
      Company’s stock 500 to 1. (This was authorized in May, 2004,however the split
      has not yet been effected);





·
      To change the Company's auditors; and





·
      To authorize the change in the Company's
      stock transfer
      agent [this also was deferred until April 2004].





In
      April
      2004, under Delaware General Law 228, the Company received approval from greater
      than 51% of the Company's issued and outstanding common shares held by less
      than
      9 shareholders approving the following actions:





·
      To authorize and approve the election of a
      third Director to fill a vacancy in the Company’s Board of
      Directors;





·
      To adopt and approve an amendment to the
      Company’s Amended Certificate of Incorporation to ratify the change of the
      Company’s name to ORBIT BRANDS CORPORATION and to increase the total number of
      shares the Company is authorized to issue to two billion (2,000,000,000) shares
      of common stock, at $.001 par value per share, and ten million (10,000,000)
      shares of preferred series A stock, at $.001 par value per share;




26





·
      To ratify the prior appointment of the
      Company’s auditors, based upon the discretion of the Company’s Board of
      Directors;





·
      To appoint various professionals as the
      Company’s General Counsel, SEC Counsel, and Delaware Counsel;





·
      To authorize the Company’s participation in
      certain legal proceedings, as described above;





·
      To ratify the prior appointment of an
      escrow agent for certain of the Company’s common stock beneficially owned by the
“Teakwood Group” of the Company’s shareholders;





·
      To approve a proposed financing transaction
      between the Company, certain of its shareholders and a qualified third party
      lender, and to authorize the negotiation of additional financing opportunities
      deemed


advisable
      by the Board of Directors;





·
      To authorize the Company to enter into
      transactions to acquire SMARTVoice Telecommunications, Inc. and Malibu Beach
      Beverage Company, Inc., as described, infra;





·
      To ratify the prior formation, transactions
      and activities of Itrex, and of Itrex with the Company;





·
      To approve and authorize the Company to
      enter into a proposed settlement of certain legal proceedings known and
      identified as the “Guerin Action”;





·
      To approve and authorize the filing of
      registration statements with the Securities and Exchange Commission (“SEC”) for
      public offerings of the securities of SMARTVoice and MBB, in the discretion
      of
      the Board of


Directors;





·
      To authorize the Board of Directors, in its
      discretion, to cause the Company to file for relief under the applicable
      provisions of the United States Bankruptcy Code, if necessary; and




·
            To
                ratify, confirm and approve prior actions taken by any officer or
                director
                of the Company in furtherance of the foregoing resolutions.





On
      December **** 6, **** 2004
      the
      Company amended its Articles of Incorporation to increase its authorized capital
      to 5,000,000,000 shares of $.001 par value common stock.




27





PART
      II





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





On
      June
      13th, 2006 **,** the
      Company had approximately 400 stockholders of record of its common stock. The
      Company has not declared or paid any dividend on its common stock since its
      inception. The Company does not anticipate declaring or paying any dividends
      on
      its common stock for the foreseeable future.





The
      Company’s common stock was de-listed on March 22, 1999 from the NASDAQ’s
      National Market System (“NMS”), and traded on the “Bulletin Board” until on or
      about June 1, 2003, when it was delisted. Thereafter, the Company’s stock has
      since been traded on the “Pink Sheets.” The Company intends to list its common
      stock on the Bulletin Board, but it cannot assure it will be able to do so.
      (SEE
“Risk Factors”.)





The
      quotations set forth herein may reflect inter-dealer prices, without retail
      market, mark-down or commission, and may not represent actual
      transactions.





Its
      common stock has been traded over-the-counter under the symbols “OBTV” and
      currently “OBBCQ.PK”. The following table sets forth the quarterly high and low
      sales prices per share of the Company’s common stock as reported on the
      over-the-counter market:





Source
      of
      Quotations: NASDAQ Electronic Market Quotation System.




Closing
      Price


Per
                  SharePeriod
                  or Quarter
              
              
              High
              
              
              LowFirst
                  Quarter 2003
              
              
              .002
              
              
              .002Second
                  Quarter 2003
              
              
              .004
              
              
              .003Third
                  Quarter 2003
              
              
              .002
              
              
              .002Fourth
                  Quarter 2003
              
              
              .004
              
              
              .004First
                  Quarter 2004
              
              
              .000
              
              
              .000Second
                  Quarter 2004
              
              
              .000
              
              
              .000Third
                  Quarter 2004
              
              
              .000
              
              
              .000Fourth
                  Quarter 2004
              
              
              .000
              
              
              .000




On
      June
      6, 2006, the last reported sales price of the Company’s common stock on the
      over-the-counter market was $.0003 per share.





Recent
      Sales of Unregistered Securities





During
      the current year, the Company issued, by itself, and through its affiliate
      (and
      subsequently wholly-owned subsidiary) Itrex an aggregate of approximately
      $4,500,000 of unregistered convertible debentures to numerous investors and
      service providers, convertible into the Company’s common stock (the
“Debentures”). Approximately $240,000 of the proceeds from the sale of the
      Debentures was used to fund the working capital of SMARTVoice, which
      subsequently became the Company’s wholly-owned subsidiary. (See “Business of the
      Company”, MD&A, and “Financial Information”). Approximately $890,000 of the
      proceeds from the sale of the Debentures was used to fund the working capital
      of
      the Company. (See Business of the Company”, MD&A, and “Financial
      Information”) Approximately $200,000 of the proceeds from the sale of the
      Debentures was used to fund the working capital of Malibu Beach Beverage Group,
      LLC, an entity 25% beneficially owned by the Company’s Chairman and Chief
      Executive Officer Joseph R.Cellura, and from whom Itrex subsequently obtained
      certain rights to receive revenue in the form of royalties (See Business of
      the
      Company”, MD&A, and “Financial Information”). The Company believes, but
      cannot assure that these transactions were exempt from registration under
      Section 4(2) of the Securities Act of 1933, as amended (the “Act”), in that the
      Company believes that each transaction met the criteria for the private
      placement exemption provided by Section 4(2). No underwriters were used in
      these
      transactions, nor were any commissions paid to anyone by the Company.




28




As
      described above, the responsibility for all of the Company’s corporate
      governance, the Company’s filing and payment of its local, state and federal tax
      returns and taxes, the Company’s preparation and filing of its quarterly and
      annual federal securities reports and related periodic filings, the Company’s
      issuance of legal opinions regarding a variety of subjects, and the Company’s
      maintenance and preservation of its books and records, all had reposed in the
      Company’s Chief Legal Officer, Mr. Douglas R. Dollinger, up to and including
      October 2003.





The
      relationship between Mr. Dollinger and the Company became strained in 2003,
      and
      by October 2003, it had become sufficiently problematic that the Company
      determined that changes were mandated, particularly after the Company received
      certain communications from Mr. Dollinger on or about October 14, 2003. At
      that
      point, the Company sought to retrieve its books and records and other documents
      in Mr. Dollinger’s possession or control. After a number of unsuccessful
      attempts to obtain the Company’s books and records from Mr. Dollinger, the
      Company embarked on a course of reconstructing its books and records
      independently of Mr. Dollinger and his “administrative assistant,” Ms. Joanne
      Bertolini.





During
      the course of the following months, through March 2004, the Company began to
      take the necessary actions to file its hitherto unfiled corporate tax returns,
      pay its corporate franchise taxes, revive its corporate charter and reinstate
      its good standing in the State of Delaware, and defend litigation in the
      Delaware Court of Chancery brought by a terminated former employee and minority
      shareholder, Dean E. Miller. In addition, the Company resuscitated its
      relationships with its stock transfer agent, its outside accountants and its
      outside auditors, all of whom had suspended or terminated their engagements
      with
      the Company based on lack of communication and/or failure to pay their
      respective professional fees and expenses. The Company thereupon undertook
      to
      bring itself back into compliance with applicable securities laws and
      regulations, beginning with its Form 10-KSB filing for the 2003 calendar year.




29




Prior
      to
      these events, on or about August 22 nd ,
      2003, a
      majority of the shareholders of the Company, acting pursuant to written consent
      in lieu of notice under Delaware General Corporate Law Section 228, approved
      the
      change in the Company’s auditors to the firm of Stark Winter Schenkein &
Co., LLP, as well as the change in the Company’s name from OrbitTRAVEL.com
      Corporation to ORBIT BRANDS CORPORATION. Both of these changes were disclosed
      in
      the filing of an SEC Form 8-K on or about August 22 nd ,
      2003.
      Mr. Dollinger personally prepared and/or was aware of each of these documents
      at
      the time they were executed or filed. The Form 8-K was provided to the Company’s
      outside accountants, Kingery, Crouse & Hohl, P.A. for preparation for
      filing, and subsequent filing, with the SEC.





With
      respect to the Company’s preferred stock, on October 16, 2003, Mr. Cellura
      notified the Board of Directors that he intended to convert a portion of the
      Company’s $3.4 million indebtedness to him to preferred stock. Unbeknownst to
      Mr. Cellura or the Company at that time, among many other duties and
      responsibilities which the Company ultimately learned Mr. Dollinger had not
      performed in 2002 and 2003, the Company’s certificate of incorporation had never
      been amended to authorize the issuance of preferred stock in accordance with
      the
      June 24, 1999 Settlement Agreement between the Company and Mr. Cellura. As
      a
      result, no action could be taken at that time to cause the issuance of preferred
      stock to Mr. Cellura.





Thereafter,
      following the Company’s renewal of its good standing in the State of Delaware
      and the resolution of its relationship with its stock transfer agent, *inter
      alia* ,
      on
      April 29, 2004, a majority of the shareholders of the Company, acting pursuant
      to written consent in lieu of notice under Delaware General Corporate Law
      Section 228, approved an amendment to the Company’s Certificate of Incorporation
      which authorized 10,000,000 shares of Series A Preferred Stock.





During
      April 2004 the Company amended its Articles of Incorporation to increase its
      authorized capital to 2,000,000,000 shares of $.001 par value common stock
      and
      10,000,000 shares of $.001 par value preferred stock. The Company also
      authorized the designation of Series A convertible preferred stock as
      follows:





(a)
      Designation. The series of Preferred Stock created hereby shall be designated
      the “Series A Preferred Stock”.





(b)
      Authorized Shares. The number of shares of Series A Preferred Stock shall be
      Ten
      Million (10,000,000) Shares.





(c)
      Liquidation Rights. In the event of any liquidation, dissolution or winding
      up
      of the Corporation, either voluntary or involuntary, after setting apart or
      paying in full the preferential amounts due to holders of senior capital stock,
      if any, the holders of Series A Preferred Stock and parity capital stock, if
      any, shall be entitled to receive, prior and in preference to any distribution
      of any of the assets or surplus funds of the Corporation to the holders of
      junior capital stock, including Common Stock, an amount equal to the market
      value of the Series A Preferred Stock as of such date divided by the number
      of
      common shares into which this series of preferred stock converts per share,
      plus
      accrued and unpaid dividends (the “Liquidation Preference”). If upon such
      liquidation, dissolution or winding up of the Corporation, the assets of the
      Corporation available for distribution to the holders of the Series A Preferred
      Stock and parity capital stock, if any, shall be insufficient to permit in
      full
      the payment of the Liquidation Preference, then all such assets of the
      Corporation shall be distributed ratably among the holders of the Series A
      Preferred Stock and parity capital stock, if any. Neither the consolidation
      or
      merger of the Corporation, nor the sale, lease or transfer by the Corporation
      of
      all or a part of its assets, shall be deemed a liquidation, dissolution or
      winding up of the Corporation, for purposes of this Section (c ).




30





(d)
      Dividends. The Series A Preferred Stock shall not be entitled to receive any
      dividends.





(e)
      Conversion Rights. Each share of Series A Preferred Stock shall be convertible,
      at the option of the holder, into 1000:1 fully paid and nonassessable shares
      of
      the Corporation's Common Stock, provided, however, that such conversion would
      not violate any applicable federal, state or local law, rule, or regulation,
      or
      any judgment, writ, decree or order binding upon the Corporation or the holder,
      or any provision of the Corporation’s or the holder’s Amended Articles of
      Incorporation or Bylaws, nor conflict with or contravene the provisions of
      any
      agreement to which the Corporation or the holder are parties, or by which they
      are bound. Said conversion rate shall be subject to equitable adjustment at
      the
      reasonable discretion of the Board of Directors of the Corporation in the event
      of the occurrence of capital events which make such adjustment appropriate,
      such
      as a dividend payable in shares of common stock, combinations of the common
      stock, a merger or consolidation, or the like.





(i)
                Conversion Procedure.





The
                holder shall effect conversions by surrendering the certificate(s)
                representing the Series A Preferred Stock to be converted to the
                Corporation, together with a form of conversion notice satisfactory
                to the
                Corporation, which shall be irrevocable. If the holder is converting
                less
                than all of the shares of Series A Preferred Stock represented by
                the
                certificate tendered, the Corporation shall promptly deliver to the
                holder
                a new certificate representing the Series A Preferred Stock not converted.
                Not later than five (5) trading days after the conversion date, the
                Corporation shall deliver to the holder a certificate or certificates,
                which shall be subject to restrictive legends and trading restrictions
                required by law, representing the number of shares of Common Stock
                being
                acquired upon the conversion; provided, however, that the Corporation
                shall not be obligated to issue such certificates until the Series
                A
                Preferred Stock is delivered to the Corporation. If the Corporation
                does
                not deliver such certificate(s) by the date required under this paragraph
                (e)(I), the holder shall be entitled, by written notice to the Corporation
                at any time on or before receipt of such certificate(s), to rescind
                such
                conversion.





31


(ii)
      Value Maintenance and Reset Provision





The
                number of common shares that this series of convertible preferred
                shares
                convert into is initially set as of the date of this certificate.
                The
                number of shares is calculated by taking the conversion ratio and
                multiplying the amount of common shares available per preferred share
                by
                the number of preferred shares designated by the preferred share
                certificate attached to this certificate. However, this number shall
                be
                adjusted at the end of each month, or on any date upon which a demand
                for
                conversion occurs. The purpose of this provision is to maintain the
                original underlying value of the preferred shares on the date of
                the
                original issuance of the preferred shares. This will be accomplished
                using
                the following formula:





One
                divided by the quotient of the common stock price on the day of conversion
                divided by the common stock price as of the original date of issuance
                of
                the preferred shares. This result shall be multiplied by the number
                of
                original common shares that the preferred shares could have been
                converted
                to, i.e., assume the original common stock price was $10, and the
                current
                stock price is $5. To convert the convertible shares today, the number
                of
                common shares per conversion would increase by the following formula:
                1 /
                ($5 per share / $10 per share) = 2. Then multiply the original number
                of
                common shares that the preferred stock could have converted into
                by 2.
                However, in no case shall the preferred shares be convertible into
                a
                number of common shares that is less then the original number of
                common
                shares that the preferred shareholders had the right to convert into
                as of
                the date of issuance.





(iii)
      Conversion Penalty.





In
                the event the Corporation breaches its obligation to timely deliver
                the
                Common Stock on conversion, without limiting the shareholder's other
                rights and remedies, the Corporation shall pay to the shareholder
                $5.00
                per day for each such breach for each 1000:1 shares of Common Stock
                subject to the conversion, with pro rata payments for amounts less
                than
                1000:1 shares.





(iv)
      Adjustments on Stock Splits, Dividends and Distributions.





If
                the Corporation, at any time while any Series A Preferred Stock is
                outstanding, (a) shall pay a stock dividend or otherwise make a
                distribution or distributions on shares of its Common Stock payable
                in
                shares of its capital stock (whether payable in shares of its Common
                Stock
                or of capital stock of any class), (b) subdivide outstanding shares
                of
                Common Stock into a larger number of shares, (c) combine outstanding
                shares of Common Stock into a smaller number of shares, or (d) issue
                reclassification of shares of Common Stock into any shares of capital
                stock of the Corporation,
                the Conversion Ratio shall be adjusted by multiplying the number
                of shares
                of Common Stock issuable by a fraction, of which the numerator shall
                be
                the number of shares of Common Stock of the Corporation outstanding
                after
                such event and the denominator shall be the number of shares of Common
                Stock outstanding before such event. Any adjustment made pursuant
                to this
                paragraph (e)(iv) shall become effective immediately after the record
                date
                for the determination of stockholders entitled to receive such dividend
                or
                distribution, or immediately after the effective date in the event
                of a
                subdivision, combination or reclassification. Whenever the Conversion
                Ratio is adjusted pursuant to this paragraph, the Corporation shall
                promptly mail to the shareholder a notice setting forth the Conversion
                Ratio after such adjustment and a brief statement of the facts requiring
                such adjustment.






32





(v)
      Adjustments on Reclassifications, Consolidations and Mergers.





In
                the event of a reclassification of the Common Stock or a consolidation
                or
                merger of the Corporation with or into another person, the sale or
                transfer of all or substantially all of the assets of the Corporation,
                or
                any compulsory share exchange pursuant to which the Common Stock
                is
                converted into other securities, cash or property, then each holder
                of
                Series A Preferred Stock then outstanding shall have the right thereafter
                to convert such Series A Preferred Stock only into the shares of
                stock or
                other securities or property receivable upon, or deemed to be held
                by
                holders of Common Stock following, such reclassification, consolidation,
                merger, sale, transfer or share exchange, and the holder shall be
                entitled
                upon such event to receive such amount of securities or property
                as the
                shares of the Common Stock into which such Series A Preferred Stock
                could
                have been converted immediately prior to such reclassification,
                consolidation, merger, sale, transfer or share exchange would have
                been
                entitled. The terms of any such consolidation, merger, sale, transfer
                or
                share exchange shall include such terms as are necessary or required
                in
                order to continue to give to the holder the right to receive the
                securities or property set forth in this paragraph (e)(v) upon any
                conversion following such consolidation, merger, sale, transfer or
                share
                exchange. This provision shall similarly apply to successive
                reclassifications, consolidations, mergers, sales, transfers or share
                exchanges.





(vi)
                Fractional Shares; Issuance Expenses.





Upon
                a conversion of Series A Preferred Stock, the Corporation shall not
                be
                required to issue stock certificates representing fractions of shares
                of
                Common Stock, but shall issue that number of shares of Common Stock
                which
                is rounded to the nearest whole number. The issuance of certificates
                for
                shares of Common Stock on conversion of Series A Preferred Stock
                shall be
                made without charge to the holder for any documentary stamp or similar
                taxes that may be payable in respect of the issuance or delivery
                of such
                certificate, provided that the Corporation shall not be required
                to pay
                any tax that may be payable in respect of any such transfer involved
                in
                the issuance and/or delivery of any such certificate upon conversion
                in a
                name other than that of the holder, and the Corporation shall not
                be
                required to issue or deliver such certificates unless or until the
                person
                or persons requesting the issuance thereof shall have paid to the
                Corporation the amount of such tax, or shall have established to
                the
                satisfaction of the Corporation that such tax has been
                paid.




33


(f)
      Voting Rights. Except as otherwise expressly provided herein or as required
      by
      law, the holders of shares of Series A Preferred Stock shall be entitled to
      vote
      on any matters considered and voted upon by the Corporation's Common Stock.
      The
      holders of Series A Preferred Stock shall be entitled to 1000:1 votes per share
      of Series A Preferred Stock. Except as otherwise expressly provided herein
      or as
      required by law, the holders of Series A Preferred Stock and the holders of
      Common Stock shall vote as separate classes.





(g)
      Reservation of Shares of Common Stock. The Corporation covenants that it will
      at
      all times reserve and maintain available out of its authorized and unissued
      Common Stock, solely for the purpose of issuance upon conversion of Series
      A
      Preferred Stock as herein provided, free from preemptive rights or any other
      actual contingent purchase rights of persons other than the holders of Series
      A
      Preferred Stock, such number of shares of Common Stock as shall be issuable
      upon
      conversion of the outstanding Series A Preferred Stock. If at any time the
      number of authorized but unissued shares of Common Stock shall not be sufficient
      to effect the conversion of all outstanding Series A Preferred Stock, the
      Corporation shall take such corporate action as may be necessary to increase
      the
      number of authorized shares of Common Stock which are required to satisfy such
      purpose. The Corporation covenants that all shares of Common Stock that shall
      be
      so issuable shall, upon issuance, be duly and validly authorized, issued, fully
      paid and nonassessable.





(h)
      No
      Reissuance of Series A Preferred Stock. No shares of Series A Preferred Stock
      acquired by the Corporation by reason of redemption, purchase, conversion or
      otherwise, shall be reissued, and all such shares shall be cancelled, retired
      and/or eliminated from the shares of capital stock which the Corporation shall
      be authorized to issue.





(i)
      Mandatory Redemption. There shall be no mandatory redemption.





(j)
      Assignment. There shall be no restrictions prohibiting a preferred stock holder
      from assigning, pledging or hypothecating his, her or its preferred
      shares.





Subsequently,
      on June 3, 2004, the Company’s Board of Directors met and determined that
      because the Company had been unable to pay in excess of approximately $3,500,000
      of accrued debt owed to Mr. Cellura as of December 31, 2003, based on previous
      and unpaid settlements, accrued and unpaid compensation and expenses, and
      accrued and unpaid benefits, and because Mr. Cellura had indicated that he
      was
      willing to forego payment of $750,000 of said indebtedness in exchange for
      shares of convertible preferred stock of the Company, the Company would be
      authorized to issue 5,000,000 shares of the Series A convertible preferred
      stock
      to Mr. Cellura, in accordance with the Company’s Certificate of Designation of
      Series A Preferred Stock.The preferred stock had a fair market value on the
      date
      of issuance of $20,000,000. The Company determined that this transaction as
      originally reported in the June 2004 10QSB was incorrect and will file an
      amended June 2004 10QSB reflecting the correction of this error. The Company
      originally ascribed a value of $750,000 to the issuance of the preferred stock
      pursuant to the amount of debt forgiven. Subsequently, the Company determined
      it
      was more appropriate to record the issuance at fair market value based on the
      underlying common stock value at the date of issuance.The Company recorded
      a
      loss of $19,250,000 with respect to this issuance.




34




On
      or
      about February 21 st ,2004
      the
      Company entered into a Security Agreement and Promissory Note with Sherman
&
Peabody, LLC (“S&P”) (the “S&P Note”). Pursuant to the S&P
      Agreement, S&P was to loan Itrex the sum of $250,000 for a period of up to
      365 days at an interest rate of 12% per annum, secured by shares of the
      Company’s common stock. S&P, however, only funded $155,000 of the $250,000,
      and on or about June 5 th ,
      2004,
      the Company and S&P reached a new agreement whereby the S&P Agreement
      was rescinded, S&P received an unsecured promissory note in the amount of
      the $155,000 it had paid the Company (the “S&P Replacement Note”). The
      S&P Replacement Note is convertible at S&P’s option into either: (a) an
      amount of cash equal to the 5-day average trailing price of the Company’s common
      shares multiplied by 5,500,000; or (b) an amount of cash equal to 150% of the
      outstanding balance owed by the Company to S&P. Additionally, S&P is
      entitled to receive a 35% Loan Management Fee. This note was included as an
      Exhibit in the Company’s 2003 10 KSB.





During
      June 2004 the Company, through Malibu Beach Beverage Group, LLC borrowed
      $100,000 pursuant to a promissory note. The note bears interest at 0% per annum
      and was due on September 30, 2004. There are certain loan administration fees
      attached to this note. The note is currently in default. The lender has the
      option to convert the note and fee into shares of the Company’s common stock at
      the rate of $.015 per share.





During
      August 2004 the majority shareholder of the Company entered into a loan
      agreement (“Argyle agreement”) whereby he arranged to personally borrow an
      amount up to the value of 33% of the bid price of 119,714,050 shares of the
      Company’s common stock . Any advances under the agreement bear interest at the
      prime rate and are due on August 19, 2007. On August 25, 2004 the shareholder
      borrowed $295,000 pursuant to the agreement and loaned these proceeds to the
      Company. The Argyle loan agreement was fully disclosed in the Company’s 2003 10
      KSB.





During
      December 2004, Sutra Group, LLC (“Sutra”) entered into an agreement with the
      Company’s subsidiary, Malibu Entertainment Group (“MEG”), to loan MEG the sum of
      $185,000 in order to capitalize a licensing agreement between Summit Crest
      Productions, Inc. (“Summit Crest”), one of MEG’s shareholders, acting on behalf
      of MEG, and The Havana Company (“Havana”). In consideration for the loan, the
      Company issued a promissory note in favor of Sutra, convertible into common
      stock of the Company, at an interest rate and for a number of shares to be
      negotiated and agreed to by the parties. The Company is currently in
      negotiations with Sutra to fix the remaining terms of the note. The proceeds
      of
      the Sutra loan were received and deposited into MEG’s bank account.




35





The
      Company believes that it took reasonable steps to ensure that each of the
      offerees in these transactions was an accredited investor under Rule 501 of
      the
      Securities Act. The Company believes, but cannot assure, that the above-
      referenced recent sales of unregistered securities were effected in compliance
      with applicable federal securities laws and state “blue sky” securities laws. In
      the event that any of these transactions are, in the future, deemed not in
      compliance with such laws, the Company may have to give rescission offers to
      these securities holders. The acceptance of some or all of such rescission
      offers (if any) may have a materially adverse effect on the Company’s
      finances.





**Subsequent
      Events**





In
      May
      2005, the Company secured a loan commitment from Avalon International Group
      (“Avalon”), a disinterested third party, to borrow $150,000 in order to provide
      working capital to its BBKO subsidiary. The Company offered an unsecured
      convertible promissory note to Avalon which would bear interest at a rate to
      be
      negotiated, with the interest to accrue and be payable in kind or in cash.
      The
      Avalon note (including all principal and interest due under the note) was to
      be
      convertible into the common stock of the Company at a conversion ratio per
      share
      to be negotiated. The Company is currently in negotiations with Avalon to fix
      the remaining terms of the note. The proceeds of the Avalon loan were received
      and deposited into BBKO’s bank account.




On
      May
      11, 2005, BBKO,LLC entered into a license agreement with the Company’s
      subsidiary, BBKO, Inc. f/k/a Malibu Mixers Company (“BBKO”). The license
      provided for the granting of certain rights associated with a property known
      as
“Beats, Bouts, and Knockouts”, whereby BBKO,Inc. would distribute the property
      and remit royalties to BBBKO, LLC as Licensor. In January, 2006 the parties
      involved in the licensing agreement entered into a settlement agreement due
      to
      several disputes that had arisen among the parties. Pursuant to the terms of
      the
      settlement, BBKO LLC paid BBKO, Inc. $141,000. In exchange, BBKO, LLC retains
      all rights related to the property as the license agreement is rescinded. BBKO,
      Inc. must set aside 85 million shares of Orbit Brands Corporation stock to
      settle any such claims that might present themselves in the future as a result
      of this transaction.





On
      June
      15, 2005, the Company secured a loan commitment from M2B, a disinterested third
      party, to borrow $100,000 in order to fund administrative expenses associated
      with the Company’s Chapter 11 proceedings. The M2B loan was subject to approval
      from the Bankruptcy Court, which approval was forthcoming, following the
      Company’s application for authority to borrow the funds. The Company executed an
      unsecured convertible promissory note in favor of M2B bearing interest at the
      rate of 10% per annum, with the interest accruing and payable in kind or in
      cash. The M2B note matures on the second anniversary date following confirmation
      of the Company’s Chapter 11 Plan. The M2B note (including all principal and
      interest due under the note) may be converted into the common stock of the
      Company at the conversion ratio of $.001 per share. The proceeds of the M2B
      loan
      were deposited into the Company’s “debtor-in-possession” bank
      account.




36





On
      October 3, 2005, through its BBKO subsidiary, the Company entered into a loan
      agreement with Harbor View Fund, Inc. (“Harbor View”), a disinterested third
      party, pursuant to which Harbor View agreed to loan BBKO the sum of $300,000
      for
      operating capital for an initial term of six months, which term can be extended
      by agreement of the parties. In consideration for the loan, the Company executed
      an unsecured convertible promissory note in favor of Harbor View which accrued
      simple interest at the rate of 4% per annum. The Harbor View note (including
      all
      principal and interest due under the note) may be converted into the common
      stock of the Company.  The
      proceeds of the Harbor View loan were deposited into BBKO’s bank
      account.





On
      March
      27, 2006, the Company entered into a Binding Memorandum of Understanding with
      the founder of Floating Bed, Inc. whereby the Company will rename its BBKO
      subsidiary as Floating Bed International(“FB”). Pursuant to this agreement, the
      founder will grant FB a non-exclusive license to manufacture, market, distribute
      and sell floating beds for an initial period which commenced on April 1, 2006.





At
      such
      time as FB has secured working capital of at least $500,000, the non-exclusive
      license shall be converted to an exclusive license. Should the Company fail
      to
      secure the $500,000 pursuant to contractual benchmarks, the license shall be
      nullified.





The
      founder and/or Floating Bed, Inc. shall be issued a convertible promissory
      note
      or warrants for 4.9% of the presently outstanding and issued common stock of
      the
      Company, not to exceed 125,000,000 shares of the Company’s common stock. The
      founder shall enter into an employment agreement with FB whereby he will act
      as
      President of the FB. The founder shall have the right to sell FB, and shall
      retain control over the terms of such sale. If and when FB is sold, the Company
      shall receive 1% of the sales price for every $20,000 invested by the Company,
      not to exceed 25% of the total sales price.





On
      April
      19, 2006, through its Itrex subsidiary, the Company entered into a loan
      agreement with M2B, Inc. (“M2B”), a disinterested third party, pursuant to which
      M2B agreed to loan Itrex and the Company the sum of $46,000 for various
      operating costs, including transfer agent expenses and other ordinary business
      expenses. The Company executed an unsecured convertible promissory note in
      favor
      of M2B bearing interest at the rate of 12% per annum, with the interest accruing
      and payable in kind or in cash. The M2B note matures on April 19, 2007. The
      M2B
      note (including all principal and interest due under the note) may be converted
      into the common stock of the Company at the conversion ratio of $.0003 per
      share. The proceeds of the M2B loan were deposited into Itrex’ bank
      account.





On
      September 27, 2006, and October 4, 2006, through its Itrex subsidiary, the
      Company entered into two loan agreements with Todd Silverstein (“TS”), a
      disinterested third party, pursuant to which TS agreed to loan Itrex and the
      Company the sum of $40,000($30,000 and $10,000 respectively)for various
      operating costs, including bankruptcy proceeding expenses and other ordinary
      business expenses. The Company executed unsecured convertible promissory notes
      in favor of TS bearing interest at the rate of 5% per annum, with the interest
      accruing and payable in kind or in cash. The TS notes mature one year from
      the
      date of issuance.The TS notes (including all principal and interest due under
      the note) may be converted into the common stock of the Company at the
      conversion ratio of $.0002 per share. The proceeds of the TS loan were deposited
      into Itrex’ bank account.




37




On
      December 7, 2006, The Company and two of its wholly-owned subsidiaries, Malibu
      Entertainment Group(“MEG”), and “BBKO” , entered into non-binding term sheets
      with Cleveland BioLabs, Inc. (“CBLI”) which provided that the Company would
      accept CBLI’s investment of a total of $300,000 in the Company in exchange for a
      20% minority common stock position in the Company, 10% minority common stock
      positions in three of the Company’s wholly-owned subsidiaries, Itrex
      International(“Itrex”), Malibu Beach Beverage Group(“Malibu”), and Smartvoice
      Telecommunication, Inc.(“SVT”). CBLI receives 95% majority common stock
      positions in MEG and BBKO.





Pursuant
      to the term sheet, MEG and BBKO each issued a promissory note convertible into
      common stock for the sum of $25,000 each on or about December 7, 2006, and
      an
      additional promissory note convertible into stock for the sum of $25,000 each
      on
      or about January 2, 2007. The term sheets contemplate that two further
      promissory notes convertible into common stock for the sum of $75,000 each
      shall
      be issued on or about February 2, 2007, and that two final promissory notes
      for
      the sum of $25,000 each shall be issued on or about March 2, 2007. CBLI
      anticipates utilizing its majority position in MEG and BBKO to raise capital
      to
      support its innovative research and development into cancer treatment
      agents.





On
      January 18, 2007, through its Itrex subsidiary, the Company entered into a
      loan
      agreement with Michael Silverstein (“MS”), a disinterested third party, pursuant
      to which MS agreed to loan Itrex and the Company the sum of $25,000 for various
      operating costs, including bankruptcy proceeding expenses and other ordinary
      business expenses. The Company executed a unsecured convertible promissory
      note
      in favor of MS bearing interest at the rate of 6% per annum, with the interest
      accruing and payable in kind or in cash. The MS note matures one year from
      the
      date of issuance. The MS note (including all principal and interest due under
      the note) may be converted into the common stock of the Company at the
      conversion ratio of $.0002 per share. The proceeds of the MS loan were deposited
      into Itrex’ bank account.





During
      the periods covered by these financial statements the Company issued shares
      of
      common stock and convertible debentures without registration under the
      Securities Act of 1933. Although the Company believes that the sales did not
      involve a public offering of its securities and that the Company did comply
      with
      the “safe harbor” exemptions from registration, it could be liable for
      rescission of the sales if such exemptions were found not to apply and this
      could have a material negative impact on the Company’s financial position and
      results of operations.




38





**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS OF THE COMPANY, INCLUDING ITS WHOLLY-OWNED
      SUBSIDIARIES.**




You
      should read the following discussion and analysis in conjunction with the
      consolidated financial statements of ORBIT BRANDS CORPORATION (“Orbit” or “the
      Company) for calendar years 2003 and 2004, included in this Annual Report on
      Form 10-KSB.




**Chapter
      11 Bankruptcy Proceeding**




In
      May
      2004, the Company’s shareholders authorized the Company to file for protection
      pursuant to the provisions of Chapter 11 of the Bankruptcy Code, Title 11 United
      States Code Sections 101, *et.
      seq* .,
      at the
      discretion of the Company’s Board of Directors.





However,
      on June 25, 2004, before the Company affirmatively sought relief under the
      Bankruptcy Code, several of the Company’s creditors filed an Involuntary Chapter
      11 Petition against the Company in the United States Bankruptcy Court for the
      Central District of California, in Los Angeles, California (the “Bankruptcy
      Case”). The Company published notice of the commencement of the involuntary
      bankruptcy case to all of its shareholders, pursuant to the filing of an SEC
      Form 8-K regarding the filing of the Involuntary Chapter 11 Petition with the
      Securities and Exchange Commission.





In
      filing
      the Involuntary Petition, the Company's creditors expressed their concern that
      management had been required to devote considerable time and resources to the
      pending litigation (including, without limitation, the Miller Action and the
      Company Action) and, as a result, that it had not been able to devote its
      efforts to the Company’s business activities, as well as noting the financial
      burden of continuing to defend against claims brought by the same plaintiffs,
      or
      assisted by the same individuals, in several states where the Company had
      conducted business, and that the interests of creditors and shareholders had
      been compromised as a result. They believed the involuntary proceeding would
      bring a halt to the pending and threatened litigation and protect their
      interests as creditors, as well as the interests of shareholders.





The
      Company ultimately consented to the entry of an order for relief, converting
      the
      case to a Voluntary Chapter 11 case on or about December 14, 2004. The Company
      timely filed its Chapter 11 Schedules and Statement of Financial Affairs on
      December 29, 2004.




The
      First
      Meeting of Creditors in the Bankruptcy Case was conducted on February 8, 2005,
      and the Court convened the initial Chapter 11 Status Conference on March 17,
      2005. At the hearing, the Court continued the Status Conference to June 16,
      2005. By motion, the Company obtained an order setting April 22, 2005 as the
      claims bar date. At the Status Conference held on June 16, 2005, the Court
      received the Company’s report on its reorganization efforts and continued the
      Status Conference to October 13, 2005.




39




On
      July
      13, 2005, the Company filed a motion for an order authorizing
      debtor-in-possession financing under Section 364 of the Bankruptcy Code in
      order
      to fund various administrative expenses in connection with the Chapter 11 case.
      The motion was unopposed, and on August 3, 2005, the Bankruptcy Court issued
      its
      order granting the motion and approving the financing as requested by the
      Company.





On
      July
      25, 2005, the Official Committee of Unsecured Creditors (the “Creditors
      Committee”) gave notice of its application to employ a financial and
      reorganization consultant and for authorization of a post-petition retainer
      to
      the consultant. The Creditors Committee’s application was filed on August 2,
      2005, together with the Company’s stipulation to the granting of the
      application. The application was not opposed, and on August 15, 2005, the
      Bankruptcy Court issued its order granting the application and approving the
      employment of the Creditors Committee’s consultant and authorizing the requested
      post-petition retainer.





On
      June
      20, 2006, the Company filed an application to employ a public accounting firm,
      Malone & Bailey, P.C., as its independent auditor, in conjunction with the
      preparation and filing of its updated Securities and Exchange Commission
      quarterly and annual reporting requirements, and sought Bankruptcy Court
      authorization to pay a post-petition retainer to Malone & Bailey, P.C. The
      Creditors Committee supported this application, and on July 17, 2006, the Court
      entered its Order granting the Company’s application to employ Malone &
Bailey, P.C. as the Company’s independent auditor.





On
      September 22, 2006, the Company filed its motion to approve a compromise
      pursuant to Bankruptcy Rule 9019 with respect to the litigation described in
      detail in Section “F,” infra .
      As
      described therein, the compromise involves the proposed settlement and
      dismissal, with prejudice, not only of the Molus Action (see Section “F,” infra ),
      but
      also the dismissal, with prejudice, of the Teakwood Action (see Section “A,” supra ,),
      the
      Miller Action (see Section “C,” supra ),
      and
      the Dollinger Action (see Section “G,” infra ),
      as
      well as the mutual and general release of all claims, known and unknown,
      asserted and unasserted, between all of the parties to the Molus Action, the
      Miller Action and the Dollinger Action, and the Company’s claims as set forth in
      the Company Action (see Section “B,” supra ).





Pursuant
      to an order of the Bankruptcy Court, the compromise approval motion was
      initially scheduled for hearing on November 14, 2006. However, in evaluating
      the
      motion, the Bankruptcy Court decided that notice needed to be provided not
      only
      to creditors and other parties in interest but also to the Company’s
      shareholders, and recommended that the Company re-notice the motion more broadly
      or incorporate the motion and proposed compromise into its proposed amended
      disclosure statement and amended plan of reorganization. The Company intends
      to
      follow the Court’s recommendation and to incorporate the motion and proposed
      compromise into its reorganization proposal.





As
      a
      result of the compromise, once approved, all of the foregoing actions are
      expected to be dismissed, with prejudice, in the first quarter of 2007, upon
      approval of the Company’s motion, or upon the subsequent approval of the
      Company’s Plan of Reorganization by the United States Bankruptcy
      Court.




40





The
      Company is currently restructuring its financial program for its successful
      emergence from Chapter 11. In this regard, the Company filed its original
      proposed disclosure statement and original proposed Chapter 11 plan of
      reorganization (collectively, its “plan proposal”) on September 16, 2005. The
      Company filed its amended plan proposal on September 14, 2006. However, based
      upon pending business developments and the need to incorporate the settlement
      and compromise of its litigation with certain of its creditors, as described
      herein, into its amended plan proposal, the Company intends to file its second
      amended plan proposal by January 31, 2007, in accordance with an order of the
      Bankruptcy Court. The Court has scheduled a hearing for February 15, 2007 on
      the
      status of the Chapter 11 case and is expected to schedule further hearings
      to
      approve the plan proposal at that time.





**Overview
      and Background.**





**ITREX
      INTERNATIONAL CORPORATION, A DELAWARE CORPORATION**





Since
      the
      formation of Itrex International Corporation (“Itrex”) in 2002, the Company has
      utilized convertible promissory notes to finance all of the development stage
      activities of the other Orbit subsidiaries, and from time to time Itrex has
      up-streamed funds to the Company in order to facilitate the Company’s own
      business operations. The primary asset of Itrex is its intellectual property,
      including the “Media Exchange,” which is described below.




The
      Media
      Exchange plans to enter the multi-billion dollar global music, media and
      entertainment industry with a revolutionary technology (the “MX”) that could
      redefine the financing tools of the industry. The MX is an integrated
      multi-function exchange platform for the offering and trading of a novel
      formulation of securities, backed by the current and future revenue streams
      of
      the issuers (including artists, record labels, and entertainers). The MX can
      serve the interests of all segments of the music entertainment industry,
      including artists, labels, studios, producers, fans, and investors, by
      diversifying the risks and rewards of financing industry growth, and insuring
      a
      transparent public market.




The
      MX
      provides a financing vehicle which will raise growth capital for artists and
      other segments of the music, media and entertainment industry through the
      issuance of asset-based securities. These securities will be backed by rights
      to
      a percentage of the underlying intellectual property (e.g., music) and
      associated revenues generated through(a) publishing and licensing of music,
      (b)
      royalties, (c) merchandising, (d) album sales, and (e) bookings and promotional
      appearances.




41





The
      MX is
      a seamless financial product. Its methodology can be readily expanded into
      other
      facets of the entertainment industry, such as television, film, publishing,
      and
      other media, and as it gains broad acceptance in the public markets, we
      anticipate extending its scope to other segments of related industries, and
      beyond.




For
      the
      major entertainment industry participants, particularly the larger record
      labels, the MX offers the ability to hedge risk and diversify exposure, while
      retaining revenues from the sale of record albums (cd’s, ipod and other current
      media). At the same time, the record labels can securitize their existing
      royalty streams in order to raise new capital, by shifting a portion of their
      royalty streams into the public market. This will allow the record labels to
      reduce their risk without a corresponding reduction in profits, and will provide
      new operating capital while generating broad exposure for their stable of new
      and existing artists.


In
          many
          if not all aspects of the entertainment industry, artists at all stages
          of their
          careers can be viewed as growth businesses. Achieving commercial success
          requires being properly capitalized to produce albums, conduct marketing
          campaigns, and underwrite touring expenses, among other requirements. Artists
          have intellectual property with intrinsic value, multiple revenue streams,
          and a
          potentially high growth curve when they are properly funded and even moderately
          successful. Using the MX platform, the issuers can market themselves to
          intrinsic and other potential investors. Between the ubiquitous “garage band”
and the major recording star, there is a wide range of artists who have
          loyal
          followings, generate revenues, and are “on track” to becoming even more
          successful.


The
          MX
          will offer intrinsic investors the unique opportunity of investing in their
          favorite artists, satisfying the desire not only to share in, but to benefit
          from, their artistic and commercial success.





**MALIBU
      BEACH BEVERAGE GROUP, a DELAWARE CORPORATION**





On
      March
      28, 2003, through its affiliate (and subsequently, its wholly-owned subsidiary,
      Itrex International Corporation), the Company executed a definitive acquisition
      agreement to acquire Malibu Beach Beverage
      Group (“MBBG”). MBBG had been in business since 1998 as a specialty beverage
      manufacturer of natural juice blends and teas.





On
      November 26, 2003, Malibu Beach Beverage Group, LLC (“MBB Group”) purchased
      certain intellectual property rights from Amy L. Goldman, the duly appointed,
      qualified and acting Chapter 7 Trustee of the bankruptcy estate of MBB, Inc.
      in
      that certain Chapter 7 bankruptcy case pending in the United States Bankruptcy
      Court for the Central District of California, San Fernando Valley Division,
      In
      re: Malibu Beach Beverage Co., Inc., Debtor, Case No.: SV 01- 17743-AG,
      including the right to use the trade name of “Malibu Beach Beverage Company,”
among other assets (the “Rights”), for a purchase price of $20,000. MBBG is a
      Delaware limited liability company in which Joseph R. Cellura,
      the Company’s Chairman, Chief Executive Officer and majority shareholder, owns a
      25% interest.




42




Effective
      June 30, 2004, Malibu Beach Beverage Group, LLC, a Delaware LLC (“MBBG”) was
      acquired by the Company. MBBG sold all of its rights, title and interests in
      all
      intellectual property of the low carb beverages including but not limited to
      any
      and all formulas, copyrights and applications, patents and applications,
      trademarks and applications, licensing, contracts, proprietary information,
      any
      other claimed proprietary information, and any other tangible and intangible
      intellectual property of the low carb beverage business of the MBBG. The net
      liabilities of MBBG were acquired by the Company for no consideration. The
      Company’s Chairman and CEO, Joseph Cellura, holds a 25% membership interest in
      MBBG.





The
      acquisition was accounted for as a purchase and the results of operations have
      been included in the consolidated financial statements since the date of
      acquisition.





The
      summarized balance sheet at the acquisition date is as follows:




Current
                  assets
              
              $
              242,542Property
                  and equipment
              
              
              6,300Due
                  to related parties
              
              
              (1,239,056
              )Current
                  liabilities
              
              
              (142,891
              )$
              (1,133,105
              )





The
      net
      cost of the acquisition of $1,133,105 was recorded as goodwill and subsequently
      impaired.





Low
      carbohydrate diets such as “Atkins,” “South Beach” and the “Zone” are no longer
      passing fads. They represent a major consumer trend and a significant lifestyle
      change. According to market researcher A.C. Nielsen, over 32 million people
      in
      the United States were predicted to move to a low carb diet in 2004 alone.
      The
      U.S. market alone for low carb products was projected to grow to over $16
      billion in 2004. The NPD (National Product Development) Group has estimated
      that
      25 million Americans currently are trying some type of low-carb diet. A web
      site
      called “lowcarbdietworld.com” claims that more than 68 million people are on, or
      have been on, some type of low-carb diet.




With
      the
      production and distribution of high quality, all natural, low-carb, low-cal,
      new
      age beverages in a growing market; MBB seeks to capitalize on increasing market
      share and the demand for low calorie, vitamin-enhanced, low carbohydrate
      beverages. Guided by the creative vision and business acumen of its senior
      management team and operations support, MBB is positioned to achieve great
      success in this highly lucrative market segment. MBB has presented the Malibu
      beverage line at the 2004 FMI Food and Beverage Show and earned the #2 award
      for
      best new age beverage product in the beverage category.





The
      company’s primary focus at present is to obtain the financing necessary to
      develop large national accounts and continue to fund the production and support-
      related expenses required to implement its business plan strategy.




43





**SMARTVoice
      Telecommunications,Inc., a Delaware corporation**




Effective
      January 1, 2004, the Company through a subsidiary SMARTVoice Telecommunications,
      Inc, a Delaware corporation (“SMARTVoice”) agreed to acquire the intellectual
      property of SMARTVoice Telecommunications, Inc, a Georgia corporation
      (“Georgia”) formed on May 6, 2003. The net liabilities of Georgia were initially
      acquired by the Company for no consideration. In addition, the Company entered
      into an employment contract with an individual to serve as the Chief Executive
      Officer of SMARTVoice (see below). On October 19, 2004, the agreement was
      amended to adjust the purchase price to include an additional amount of $570,000
      in the form notes payable and amend certain terms of the employment
      agreement.





The
      acquisition was accounted for as a purchase and the results of operations have
      been included in the consolidated financial statements since the date of
      acquisition. SMARTVoice will seek to develop and market telecommunication
      technology for IP telephony and applications. IP telephony is the technology
      of
      using the internet to transport voice conversations.





The
      summarized balance sheet at the acquisition date as adjusted for the notes
      is as
      follows:


Current
                  assets
              
              $
              4,754Due
                  to affiliates
              
              
              (11,284
              )Notes
                  payable
              
              
              (570,000
              )Other
                  current liabilities
              
              
              (216,215
              )$
              (792,745
              )





The
      net
      cost of the acquisition of $792,745 was recorded as goodwill and subsequently
      impaired.





Prior
      to
      this, Georgia was an affiliate of the Company, and between December 16, 2003
      and
      May 31, 2004, the Company caused certain of its convertible debenture holders
      to
      invest approximately $405,905 of the amounts discussed below into Georgia for
      use as working capital for both Georgia ($250,905) and the Company ($155,000).
      On January 1, 2004 SMARTVoice executed employment agreements with Charles P.
      Shuster, as Chairman and CEO of SMARTVoice and Frederick Alger as Chief
      Financial Officer of SMARTVoice. The terms of the employment contracts for
      Fredrick Alger are for 90 day renewal periods at compensation rates yet to
      be
      determined. The employment contract between Fredrick Alger was not renewed
      after
      the initial 90 day period. The term of the employment contract with Charles
      Shuster is for a period of seven years at a base salary of $275,000 per annum
      and a signing bonus of $150,000. In addition he is entitled to options to
      purchase 5,000,000 shares of common stock of the Company at fair market value
      exercisable for 5 years. The contract also contains certain anti-dilution
      provisions, incentive compensation and severance pay in the amount of $900,000
      in the event of default or termination for certain reasons. The contract was
      amended on October 19, 2004, to remove the anti-dilution provisions effective
      at
      the inception of the contract and remove the right to the 5,000,000
      options.




44





Since
      the
      creation of SMARTVoice Telecommunications Inc., a Delaware corporation (“SVT”)
      in 2004, the company has been involved in the development and marketing of
      telecommunications technology for IP telephony and related applications. SVT
      is
      an IP telephony service provider featuring two product lines: (i) internet
      protocol telephone devices and internet communication services, and (ii) hosted
      services that implement the functionality of a private branch exchange, or
      PBX,
      over data networks. Charles P. (“Pat”) Shuster, the Chief Executive Officer of
      SVT, believes that the key to future success will be identifying niche markets
      in which the company can differentiate itself from numerous emerging carriers.
      The company remains focused on developing relationships in international
      markets, where it believes it can sustain a competitive advantage.




IP
      telephony is an alternative technology that can replace services provided by
      the
      traditional telephone network. IP telephony technology translates voice
      transmissions into data packets, transmits the packets over data networks,
      and
      reconverts them into voice transmissions at the selected destination. Unlike
      traditional telephone networks, IP telephony does not utilize dedicated circuits
      for each telephone call. Instead, the same IP telephony network can be shared
      by
      multiple users for voice, data and video simultaneously. This type of data
      network is more efficient than a dedicated circuit network, because the data
      network is not restricted by the one-call, one-line limitation of a traditional
      telephone network. This improved efficiency creates cost savings that can be
      passed on to the consumer in the form of lower rates or retained by the IP
      telephony provider.





**Malibu
      Entertainment Group, Inc., a Delaware corporation**





In
      May
      2004, Malibu Entertainment Group (“MEG”) was formed as a media and entertainment
      company for the purpose of developing and financing television, film and media
      projects for distribution and exploitation worldwide. MEG seeks to finance
      or
      co-finance various media projects, at such time as it secures the appropriate
      financing and/or distribution advances.


Over
          the
          past two years, MEG has entered into non-exclusive consulting agreements
          with
          several experienced film and television executives in order to create media
          opportunities for the company. These executives include Jim Townsend, Dean
          Hamilton, Bert Bedrosian and Frederico LaPenda.





**** **Floating
      Bed International, Inc., f/k/a BBKO Corporation, f/k/a Malibu Mixers Company,
      a
      Nevada corporation**





Floating
      Bed International, Inc. (“FB Int’l.”) develops, markets and sells high quality
      rest and relaxation devices in the form of beds and hammocks. Its patent-pending
      technology utilizes gentle motion to provide many health benefits to end users.
      The benefits of this type of motion have been established in independent
      scientific studies over a number of years. The company currently has one core
      product which can be customized and accessorized at the end of its manufacturing
      process. This feature allows purchasers to use the product in many ways in
      different settings, in order to serve a number of diverse purposes. The
      company’s products are sold to individuals and also to commercial users, such as
      hotels and health spas.




45





The
      Hammock Industry Overview





The
      hammock is an established piece of furniture with which most people are
      familiar. However, no significant improvements have been made to the hammock
      in
      recorded history. Thus, the company’s product represents a giant step forward
      for this unique item.





A
      major
      trend has emerged as people are turning to outdoor areas (yards, decks, rooftops
      -- basically, whatever is available) to expand their practical living space.
      Outdoor furniture sales are booming. Traditional indoor products are being
      adapted and new products are being developed for outdoor use. Thirty years
      ago,
      the general public could not have been sold on the idea of a bathtub in the
      yard. However, in today’s vernacular, anyone with the space and the money has to
      have a hot tub. Attitudes change, and people are thinking of their yards and
      open spaces in new ways. Given the increasing cost of housing construction
      and
      the scarcity of indoor space, this trend will likely continue into the
      foreseeable future.





The
      Company intends currently to focus its efforts and business strategy on seeking
      financing for its core business, internet-based technologies, as well as product
      development and the distribution of related consumer products throughout North
      America. The Company intends to raise additional capital in the form of equity
      and/or debt to fund the acquisition and growth of its subsidiaries and recent
      acquisitions, as described above, which could significantly change the capital
      structure and cause a change of control in the Company.




Since
      January 2001, through the date of this filing, the Company has been essentially
      non-operative. Its only significant business activity during this period has
      been raising capital through Itrex to fund the operations of Itrex and the
      other
      subsidiaries, and to pay certain of the Company’s professionals, employees and
      other individuals and entities in connection with attempting to restructure
      the
      Company.




M,
      D
& A





FORWARD-LOOKING
      STATEMENTS





This
      Discussion and Analysis of Financial Condition and Results of Operations
      contains forward-looking statements within the meaning of Section 27A of the
      Securities Act and Section 21E of the Exchange Act, including our statements
      regarding factors that could impact our gross margins; our cost estimates under
      contracts accounted for using the percentage of completion method; efforts
      to
      raise additional financing; commitment of resources, and reduction in operating
      costs including the possible sale or cessation of certain business segments
      and
      the possible further reduction of personnel and suspension of salary increases
      and capital expenditures. You should not place undue reliance on these
      forward-looking statements. Actual results could differ materially from those
      anticipated in these forward-looking statements as a result of a number of
      factors, including our good faith assumptions being incorrect, our business
      expenses being greater than anticipated due to competitive factors or
      unanticipated development or sales costs; revenues not resulting in the manner
      anticipated due to a continued slow down in technology spending, particularly
      in
      the telecommunications market; our failure to generate investor interest or
      to
      sell certain of our assets or business segments. The forward-looking statements
      may also be impacted by the additional risks faced by us as described in this
      Report, including those set forth under the section entitled Factors that May
      Affect Future Results. All forward-looking statements included in this Report
      are based on information available to us on the date hereof, and we assume
      no
      obligation to update any such forward-looking statements.




46




**Risk
      Factors.**





Investing
      in the Company’s securities involves a high degree of risk. An investor should
      carefully consider the following factors and other information in this Annual
      Report on Form 10-KSB, including the Company’s consolidated financial statements
      and related notes, before making a decision to invest in the Company’s
      securities. Additional risks and uncertainties, including those generally
      affecting the market in which the Company operates or that the Company currently
      deems immaterial, may also impair the Company’s current or future business. The
      Company has a history of losses and therefore cannot assure investors that
      it
      will be profitable.





Since
      June 2004, Orbit has operated under Chapter 11 of the United States Bankruptcy
      Code, in a case pending in the United States Bankruptcy Court for the Central
      District of California, as the parent company of the various wholly-owned
      subsidiaries which are described below.




The
      Company is currently restructuring its financial program for its successful
      emergence from Chapter 11. In this regard, the Company filed its original
      proposed disclosure statement and original proposed Chapter 11 plan of
      reorganization (collectively, its “plan proposal”) on September 16, 2005. The
      Company filed its amended plan proposal on September 14, 2006. However, based
      upon pending business developments and the need to incorporate the settlement
      and compromise of its litigation with certain of its creditors, as described
      herein, into its amended plan proposal, the Company intends to file its second
      amended plan proposal by January 31, 2007, in accordance with an order of the
      Bankruptcy Court. The Court has scheduled a hearing for February 15, 2007 on
      the
      status of the Chapter 11 case and is expected to schedule further hearings
      to
      approve the plan proposal at that time.




47




The
      Company has been delinquent in filing various reports required under the
      Securities Act of 1933 and the Securities Exchange Act of 1934, including,
      but
      not limited to, Forms 10QSB and 10KSB for the period from **** September
      2004 to the current period. Although the Company intends to file such late
      reports in the near future, it cannot assure when such reports will be filed.





The
      Company has recently experienced operating and net losses. Currently the Company
      has a net operating loss carry forward. The Company lost approximately $31.42
      million in 2004 and approximately $3.024 million in 2003. In the future, the
      Company may not be able to generate sufficient revenue from operations to pay
      all of its operating or other expenses. If the Company fails to generate
      sufficient cash from its operations to pay these expenses, its management will
      need to identify other sources of funds. The Company may not be able to borrow
      money or issue more shares of common stock to meet its cash needs. Even if
      the
      Company can complete such financing transactions, it may not be on terms
      favorable to the Company. If the Company cannot raise sufficient capital to
      fund
      operations, the Company may not be able to continue its business, and the value
      of its securities could decline or experience significant dilution, require
      a
      change in the capital structure of the Company, or even become worthless.





The
      Company’s securities could experience wide fluctuations in trading price and
      volume, or its securities may not have a market that trades. Although the
      Company intends to list its securities for trading on NASDAQ’s “Bulletin Board”
exchange, there can be no assurance that it will meet the requirements of the
      Bulletin Board, or otherwise be able to trade on this exchange, which could
      adversely impact the liquidity of the Company’s securities and its ability to
      raise capital.





The
      Company’s charter documents contain anti-takeover provisions that could prevent
      or delay a change in control of the Company, or adversely affect the market
      price of its common stock.





The
      Company’s by-laws and amended certificate of incorporation give the Company’s
      Board of Directors the authority to issue up preferred stock and to determine
      the rights and preferences of the preferred stock without obtaining shareholder
      approval. The existence of this preferred stock could make it more difficult
      or
      discourage an attempt to obtain control of the Company by means of a tender
      offer, merger, proxy contest or otherwise. Furthermore, the preferred stock
      could be issued with other rights, including economic rights, senior to the
      Company’s common stock, and, therefore, the issuance or conversion of the
      preferred stock could have an adverse effect upon the market price of the
      Company’s common stock, change the capital structure of the Company, or even
      result in a change in control.





Some
      provisions of Delaware law could make it more difficult for a third party to
      acquire the Company or hinder a change in management, even if doing so would
      be
      beneficial to the Company’s shareholders. In addition, the Company may in the
      future adopt other measures that may have the effect of delaying, deferring
      or
      preventing an unsolicited takeover, even if such a change in control was at
      a
      premium price or favored by a majority of unaffiliated shareholders. These
      measures may be adopted without any further vote or action by the Company’s
      shareholders.




48





Future
      issuances and sales into the market of the Company’s common stock will dilute
      its current stockholders and may depress the market price of the Company’s
      common stock.





As
      of
      June 13, 2006, the Company had approximately 3,094,350,600 shares of its common
      stock outstanding and 5 million of preferred.





All
      of
      the shares issued in exchange for the outstanding convertible notes are
      restricted but may be eligible for resale if the note holders comply with Rule
      144 of the Securities Act. The Company believes that all or substantially all
      of
      the note holders of its convertible preferred stock and convertible debt
      securities have held such securities for in excess of one year. Therefore,
      upon
      issuance of the common stock, such note holders may be deemed to have complied
      with Rule 144(d) of the Securities Act, as their holding period for the common
      stock may tack with their holding period for the convertible securities, as
      permitted by Rule 144(d)(ii) of the Securities Act. Persons who have held such
      securities for more than two years will be eligible to resell their shares
      under
      Rule 144(k) of the Securities Act.





Because
      the Company’s common stock is currently traded on the Over-the-Counter Pink
      Sheets, sales of its common stock may:





·
      cause the market price of the common stock
      to decrease in value;





·
      decrease the level of public interest in
      its common stock;





·
      inhibit buying activity that might
      otherwise help support the market price of its common stock;





·
      prevent possible upward price movements in
      its common stock; or





·
      not trade in a public market.





The
      Company’s employment contract with its executive officer could have the effect
      of precluding or otherwise delaying a change in control of the Company that
      could be beneficial to the Company’s stockholders.





The
      employment contract with the Company’s executive officer provides for the
      payment of significant severance payments in the event the executive officer
      is
      terminated.





For
      example, Mr. Cellura's employment agreement, which expires on June 24, 2010,
      would require the Company to pay him, upon termination, an aggregate severance
      amount of up to $2.15 million plus the remaining base salary amounts, and $3.5
      million in convertible preferred promissory notes due to him under the
      employment agreement, if the Company terminates him without cause. Even if
      the
      Company were to be successful in terminating Mr. Cellura's employment with
      cause, the Company still would be required to pay him $900,000 in addition
      to
      the $3.5 million in convertible preferred promissory notes. This could have
      the
      effect of precluding or otherwise delaying a change of control of the Company
      that would otherwise be in the best interest of its stockholders. See Executive
      Compensation--Employment Contracts, infra.




49





Financing
      Activity.





During
      the current year, the Company issued, by itself, and through its affiliate
      (and
      subsequently wholly-owned subsidiary) Itrex an aggregate of approximately
      $4,500,000 of unregistered convertible debentures to numerous investors and
      service providers, convertible into the Company’s common stock (the
“Debentures”). Approximately $240,000 of the proceeds from the sale of the
      Debentures was used to fund the working capital of SMARTVoice, which
      subsequently became the Company’s wholly-owned subsidiary. (See “Business of the
      Company”, MD&A, and “Financial Information”). Approximately $890,000 of the
      proceeds from the sale of the Debentures was used to fund the working capital
      of
      the Company. (See Business of the Company”, MD&A, and “Financial
      Information”) Approximately $200,000 of the proceeds from the sale of the
      Debentures was used to fund the working capital of Malibu Beach Beverage Group,
      LLC, an entity 25% beneficially owned by the Company’s Chairman and Chief
      Executive Officer Joseph R.Cellura, and from whom Itrex subsequently obtained
      certain rights to receive revenue in the form of royalties (See Business of
      the
      Company”, MD&A, and “Financial Information”). The Company believes, but
      cannot assure that these transactions were exempt from registration under
      Section 4(2) of the Securities Act of 1933, as amended (the “Act”), in that the
      Company believes that each transaction met the criteria for the private
      placement exemption provided by Section 4(2). No underwriters were used in
      these
      transactions, nor were any commissions paid to anyone by the Company.





The
      Company intends to raise additional capital in the form of equity and debt
      to
      fund the acquisition and growth of its recent acquisitions, as described above,
      which could significantly change the capital structure and cause a change of
      control in the Company.





Results
      of Operations.





As
      described herein, the Company was inactive from an operational standpoint and
      therefore generated no revenue during the reporting period.





**Comparison
      of 2003 to 2004.**





Revenues.





The
      Company generated no revenue in 2003 and $3,398 in 2004.





Operating
      Expenses. Operating expenses in 2003 and 2004 were $1.236 million and $27.789
      million respectively. These expenses were incurred through issuances of debt
      for
      services provided to the Company during the reporting period and general
      administrative expenses primarily related to litigation, management, and the
      operations of the SmartVoice and Malibu subsidiaries. In addition, in 2004,
      the
      Company incurred $2,267,000 in impairment losses attributable to the Smartvoice
      and Malibu Beach Beverage Group acquisitions(see Item 1). The Company recognized
      compensation expense of $19,250,000 related to the issuance of preferred stock
      issued in exchange for the forgiveness of certain debt.(See Note 7 in Notes
      to
      the Financial Statements)




50





Other
      Expenses. Other expenses in 2003 and 2004 consisted of $1.788 and $3.634 million
      respectively. Approximately $1.788 and $1.930 was related to interest payable
      on
      unsecured debt owed by the company for 2004 and 2003 respectively.




The
      Company recognized a $1,024,000 net loss in converting debt to common stock
      during the period. The Company recognized a loss of $644,000 attributable to
      certain derivative liabilities as discussed in Notes 7and 8of the Financial
      Statement Notes. The Company recognized $35,000 of expense associated with
      reorganization activity during the year.





Net
      Loss.
      The company and it’s subsidiaries incurred a loss of $3.024 million in 2003 and
      $ 31.420 million in 2004.





Liquidity
      and Capital Resources.





Capitalization.
      The Company’s charter authorizes the issuance of 5 billion shares of common
      stock and 10.0 million shares of preferred stock. As of June 13th, 2006, the
      Company had approximately 3.1 billion shares of common stock outstanding and
      approximately 5 million in preferred stock.





Current
      and Future Liquidity Needs. The Company has not generated net cash from
      operations for any period since 1996. The Company has primarily financed its
      operations since 1996 through private sales of equity and debt securities.
      As of
      this filing date, the Company has no principal source of cash or liquidity.





Plan
      of
      Operation





The
      company has developed wholly owned subsidiaries and plans to focus on business
      opportunities in separate and distinct markets. Following is a brief description
      of the intended activities for each of the subsidiaries:





**SMARTVOICE**





IP
      Telephony is an alternative technology that can replace services provided by
      the
      traditional telephone network. IP Telephony technology translates voice into
      data packets, transmits the packets over data networks and reconverts them
      into
      voice at the destination. Unlike traditional telephone networks, IP Telephony
      does not use dedicated circuits for each telephone call; instead, the same
      IP
      Telephony network can be shared by multiple users for voice, data and video
      simultaneously. This type of data network is more efficient than a dedicated
      circuit network because the data network is not restricted by the one-call,
      one-line limitation of a traditional telephone network. This improved efficiency
      creates cost savings that can be passed on to the consumer in the form of lower
      rates or retained by the IP Telephony provider.




51




We
      intend
      to focus SMARTVoice on High Margin Opportunities in Emerging Markets. SMARTVoice
      will targets international markets undergoing telecommunications deregulation,
      which we believe will provide high margin opportunities. We intend to continue
      to enhance our global distribution chain by securing new resellers with strong
      local sales and marketing channels. Our plan is to develop and integrate new
      services into our existing managed platform.





In
      many
      of the foreign jurisdictions in which we conduct or plan to conduct business,
      the primary provider of significant in-country transmission facilities is the
      national telephone company, which may be the only provider in that country.
      Accordingly, we may have to lease transmission capacity at artificially high
      rates from such a monopolistic provider, and consequently, we may not be able
      to
      generate a profit on those calls.





**MALIBU
      BEACH BEVERAGE GROUP**





Malibu
      Beach Beverage Group (“MBBG”) is a specialty beverage manufacturer which
      produces three low carbohydrate, low calorie, all natural fruit juice blends,
      and three flavored micro-brewed green tea blends. MBBG was established to
      distribute and sell these product lines. In July 2004, Orbit entered into a
      letter agreement with MBBG to acquire MBBG for a combination of cash and stock.





Low
      carbohydrate diets such as “Atkins,” “South Beach” and the “Zone” are no longer
      passing fads. They represent a major consumer trend and a significant lifestyle
      change. According to market researcher A.C. Nielsen, over 32 million people
      in
      the United States were predicted to move to a low carb diet in 2004 alone.
      The
      U.S. market alone for low carb products was projected to grow to over $16
      billion in 2004. The NPD (National Product Development) Group has estimated
      that
      25 million Americans currently are trying some type of low-carb diet. A web
      site
      called “lowcarbdietworld.com” claims that more than 68 million people are on, or
      have been on, some type of low-carb diet.




With
      the
      production and distribution of high quality, all natural, low-carb, low-cal,
      new
      age beverages in a growing market; MBBG seeks to capitalize on increasing market
      share and the demand for low calorie, vitamin-enhanced, low carbohydrate
      beverages. Guided by the creative vision and business acumen of its senior
      management team and operations support, MBBG is positioned to achieve great
      success in this highly lucrative market segment. MBBG has presented the Malibu
      beverage line at the 2004 FMI Food and Beverage Show and earned the #2 award
      for
      best new age beverage product in the beverage category.





**Malibu
      Entertainment Group, Inc., a Delaware corporation**





In
      May
      2004, Malibu Entertainment Group (“MEG”) was formed as a media and entertainment
      company for the purpose of developing and financing television, film and media
      projects for distribution and exploitation worldwide. MEG seeks to finance
      or
      co-finance various media projects, at such time as it secures the appropriate
      financing and/or distribution advances.




52




Over
          the
          past two years, MEG has entered into non-exclusive consulting agreements
          with
          several experienced film and television executives in order to create media
          opportunities for the company. These executives include Jim Townsend, Dean
          Hamilton, Bert Bedrosian and Frederico LaPenda.




**Floating
      Bed International, Inc., f/k/a BBKO Corporation, f/k/a Malibu Mixers Company,
      a
      Nevada corporation**





Floating
      Bed International, Inc. (“FB Int’l.”) develops, markets and sells high quality
      rest and relaxation devices in the form of beds and hammocks. Its patent-pending
      technology utilizes gentle motion to provide many health benefits to end users.
      The benefits of this type of motion have been established in independent
      scientific studies over a number of years. The company currently has one core
      product which can be customized and accessorized at the end of its manufacturing
      process. This feature allows purchasers to use the product in many ways in
      different settings, in order to serve a number of diverse purposes. The
      company’s products are sold to individuals and also to commercial users, such as
      hotels and health spas.





The
      Hammock Industry Overview





The
      hammock is an established piece of furniture with which most people are
      familiar. However, no significant improvements have been made to the hammock
      in
      recorded history. Thus, the company’s product represents a giant step forward
      for this unique item.





A
      major
      trend has emerged as people are turning to outdoor areas (yards, decks, rooftops
      -- basically, whatever is available) to expand their practical living space.
      Outdoor furniture sales are booming. Traditional indoor products are being
      adapted and new products are being developed for outdoor use. Thirty years
      ago,
      the general public could not have been sold on the idea of a bathtub in the
      yard. However, in today’s vernacular, anyone with the space and the money has to
      have a hot tub. Attitudes change, and people are thinking of their yards and
      open spaces in new ways. Given the increasing cost of housing construction
      and
      the scarcity of indoor space, this trend will likely continue into the
      foreseeable future.




53




ITEM
      7.
      FINANCIAL STATEMENTS.




ORBIT
        BRANDS  CORPORATION
 CONSOLIDATED
        FINANCIAL STATEMENTS
 DECEMBER
        31,2004
 
 CONTENTS
 Reports
                    of Independent Registered Public Accounting Firms
                F-2Financial
                    Statements:Balance
                    Sheet
                F-4Statements
                    of Operation
                F-5Statement
                    of Stockholders' (Deficit)
                F-6Statements
                    of Cash Flows
                F-7Notes
                    to Financial Statements
                F-8
  F-1
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To
        the
        Board of Directors of Orbit Brands Corporation
 Sherman
        Oaks, California
 
 We
        have
        audited the accompanying consolidated balance sheet of Orbit Brands Corporation
        as of December 31, 2004 and the related consolidated statement of operations,
        stockholders’ deficit, and cash flow for the year 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 an audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit also includes examining,
        on a test basis, evidence supporting the amounts and disclosures in the
        financial statements, 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 provides a reasonable basis
        for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Orbit Brands Corporation as
        of
        December 31, 2004 and the results of operations and cash flows for the year
        ended December 31, 2004, in conformity with accounting principles generally
        accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that Orbit
        Brands
        Corporation will continue as a going concern. As discussed in Note 2 to the
        financial statements, Orbit Brands, Inc. suffered recurring losses from
        operations and has a working capital deficiency, which raises substantial
        doubt
        about its ability to continue as a going concern. Management’s plans regarding
        those matters also are described in Note 2. The financial statements do not
        include any adjustments that might result from the outcome of this
        uncertainty.
 
 MALONE
        & BAILEY, PC
 
 www.malone-bailey.com
 Houston,
        Texas
 
 February
        9, 2007
  F-2
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Stockholders
        and Board of Directors
 Orbit
        Brands Corporation
 
 We
        have
        audited the consolidated balance sheet of Orbit Brands Corporation as of
        December 31, 2003, and the related consolidated statements of operations,
        stockholders' (deficit) and cash flows for the year ended December 31, 2003.
        These financial statements are the responsibility of the Company's management.
        Our responsibility is to express an opinion on these financial statements
        based
        on our 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 financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates by management, as well as evaluating the overall financial
        statement presentation. We believe that our audit provides a reasonable basis
        for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Orbit Brands Corporation as
        of
        December 31, 2003, and results of its operations and its cash flows for the
        year
        ended December 31, 2003, in conformity with accounting principles generally
        accepted in the United States of America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 2 to the
        financial statements, the Company has suffered a loss from operations and
        has
        working capital and stockholders' deficits. These factors raise substantial
        doubt about the Company's ability to continue as a going concern. Management's
        plans in regard to this matter are also discussed in Note 2. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 Stark
        Winter Schenkein & Co., LLP
  Denver,
        Colorado
 June
        3,
        2004
  F-3
  Orbit
            Brands Corporation
 (DEBTOR-IN-POSSESSION)
 Consolidated
            Balance Sheet
 December
            31, 2004
  AssetsCurrent
                    AssetsCash
                
                $
                789Total
                    current assets
                
                
                789Property
                    & equipment
                
                
                5,238$
                6,027Liabilities
                    and Stockholders' (Deficit)Current
                    liabilities subject to compromise:Accounts
                    payable
                
                $
                2,251,044Accrued
                    interest
                
                
                5,716,053Accounts
                    payable and accrued expenses - related parties
                
                
                5,839,518Derivative
                    liability
                
                
                2,672,776Convertible
                    notes payable - related parties
                
                
                947,229Convertible
                    notes payable
                
                
                17,756,288Total
                    current liabilites subject to compromise
                
                
                35,182,908Stockholders'
                    (deficit):Preferred
                    stock, $.001 par value, Series A convertible10,000,000
                    shares authorized,5,000,000
                    shares issued and outstanding
                
                
                20,000,000Common
                    stock, $.001 par value,5,000,000,000
                    shares authorized,1,126,107,071
                    shares issued and outstanding
                
                
                1,126,106Paid
                    in capital
                
                
                59,686,430Accumulated
                    (deficit)
                
                
                (115,989,417
                )(35,176,881
                )$
                6,027
  ***See
          the accompanying notes to the consolidated financial
          statements.***
  F-4
 Orbit
            Brands Corporation
 (DEBTOR-IN-POSSESSION)
 Consolidated
            Statements of Operations
 Years
            Ended December 31, 2004 and 2003
  2004
                  
                  2003Revenue
                  
                  $
                  3,398
                  
                  $
                  -Operating
                      Expenses:Selling,
                      general and administrative expenses
                  
                  
                  4,968,599
                  
                  
                  986,144Compensation
                  
                  
                  20,553,490
                  
                  
                  250,000Impairments
                  
                  
                  2,267,329
                  
                  
                  -27,789,418
                  
                  
                  1,236,144Loss
                      from operations
                  
                  
                  (27,786,020
                  )
                  
                  (1,236,144
                  )Other
                      (income) expense:Interest
                  
                  
                  1,930,436
                  
                  
                  1,787,800Reorganization
                      expenses
                  
                  
                  35,000
                  
                  
                  -Loss
                      on derivative liability
                  
                  
                  644,262
                  
                  
                  -Loss
                      on conversion of debt to common stock
                  
                  
                  1,024,000
                  
                  
                  -3,633,698
                  
                  
                  1,787,800Net
                      (loss)
                  
                  $
                  (31,419,718
                  )
                  $
                  (3,023,944
                  )Per
                      share information - basis and fully diluted:Weighted
                      average shares outstanding
                  
                  
                  844,772,026
                  
                  
                  610,680,704Net
                      loss per share
                  
                  $
                  (0.04
                  )
                  $
                  -
  ***See
            the accompanying notes to the consolidated financial
            statements.***
  F-5
  Orbit
            Brands Corporation
 (DEBTOR-IN-POSSESSION)
 Consolidated
            Statements of Stockholders' (Deficit)
 Years
            Ended December 31, 2004 and 2003
 Common
                        Stock
                    
                    Preferred
                        Stock
                    
                    Treasury
                        StockShares
                    
                    Amount
                    
                    Shares
                    
                    Amount
                    
                    Shares
                    
                    Amount
                    
                    Paid
                        in Capital
                    
                    Accumulated
                      (Deficit)
                    
                    TotalBalance
                        December 31, 2002
                    
                    
                    610,680,704
                    
                    $
                    610,680
                    
                    
                    281,250
                    
                    $
                    281
                    
                    
                    281,250
                    
                    $
                    (210,937
                    )
                    $
                    59,252,605
                    
                    $
                    (81,545,755
                    )
                    $
                    (21,893,126
                    )Retirement
                        of preferred stock
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (281,250
                    )
                    
                    (281
                    )
                    
                    (281,250
                    )
                    
                    210,937
                    
                    
                    (210,656
                    )
                    
                    
                    
                    
                    -Net
                        (loss)
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    
                    
                    
                    (3,023,944
                    )
                    
                    (3,023,944
                    )Balance
                        December 31, 2003
                    
                    
                    610,680,704
                    
                    
                    610,680
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    59,041,949
                    
                    
                    (84,569,699
                    )
                    
                    (24,917,070
                    )Conversion
                        of debt
                    
                    
                    521,745,956
                    
                    
                    521,746
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    2,803,684
                    
                    
                    
                    
                    
                    3,325,430Issuance
                        of preferred stock for related party debt
                    
                    
                    
                    
                    
                    
                    
                    
                    5,000,000
                    
                    
                    20,000,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    20,000,000Derivative
                        liability
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (2,159,203
                    )
                    
                    
                    
                    
                    (2,159,203
                    )Error
                        correction
                    
                    
                    (6,319,589
                    )
                    
                    (6,320
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (6,320
                    )Net
                        (loss)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (31,419,718
                    )
                    
                    (31,419,718
                    )Balance
                        December 31, 2004
                    
                    
                    1,126,107,071
                    
                    $
                    1,126,106
                    
                    
                    5,000,000
                    
                    $
                    20,000,000
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    59,686,430
                    
                    $
                    (115,989,417
                    )
                    $
                    (35,176,881
                    )
  F-6
  Orbit
            Brands Corporation (DEBTOR-IN-POSSESSION)
 Consolidated
            Statements of Cash Flows Years
              Ended December 31, 2004 and 2003
  2004
                  
                  2003Cash
                      flows from operating activities:Net
                      (loss)
                  
                  $
                  (31,419,718
                  )
                  $
                  (3,023,944
                  )Adjustments
                      to reconcile net (loss) to net cash (used in)operating
                      activities:Depreciation
                  
                  
                  1,062Impairments
                  
                  
                  2,267,329Compensation
                      - exchange of related party debt for preferred stock
                  
                  
                  19,250,000Notes
                      payable issued for services
                  
                  
                  2,915,199
                  
                  
                  809,430Issuance
                      of common stock and warrants for services
                  
                  
                  182,334
                  
                  
                  -Loss
                      on derivative liability
                  
                  
                  644,262Loss
                      on conversion of debt to common stock
                  
                  
                  1,024,000Changes
                      in:Other
                      current assets
                  
                  
                  (23,995
                  )
                  
                  (2,800
                  )Accounts
                      payable
                  
                  
                  598,797
                  
                  
                  15,882Accrued
                      interest
                  
                  
                  1,376,438
                  
                  
                  1,713,800Accounts
                      payable and accrued expenses - related parties
                  
                  
                  1,930,297
                  
                  
                  323,268Net
                      cash (used in) operating activities:
                  
                  
                  (1,253,995
                  )
                  
                  (164,364
                  )Cash
                      flows from financing activities:Proceeds
                      from notes payable
                  
                  
                  1,208,191
                  
                  
                  209,300Net
                      increase in cash
                  
                  
                  (45,804
                  )
                  
                  44,936Beginning
                      - cash balance
                  
                  
                  46,593
                  
                  
                  1,657Ending
                      - cash balance
                  
                  $
                  789
                  
                  $
                  46,593Supplemental
                      cash flow information:Cash
                      paid for income taxes
                  
                  $
                  -
                  
                  $
                  -Cash
                      paid for interest
                  
                  $
                  -
                  
                  $
                  -
  ***See
            the accompanying notes to the consolidated financial
            statements.***
  F-7
  NOTE
        1.
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization
 
 The
        Company has four (4) wholly-owned subsidiaries which are Delaware Corporations:
        SMARTVoice Telecommunications, Inc., (“Smart Voice”), Itrex International
        Corporation (“Itrex”), Malibu Beach Beverage Group (“Malibu”), and Malibu
        Entertainment Group, Inc.(“MEG”). The Company has one (1) wholly-owned
        subsidiary which is a Nevada Corporation: Malibu Mixers Company/BBKO (“BBKO”).
 
 Since
        January 2001, through the date of this filing, the Company has been essentially
        non-operative. Its only significant business activity during this period
        has
        been raising capital through Itrex to fund the operations of its subsidiaries
        and to pay certain of the Company’s professionals, employees and other
        individuals and entities in connection with attempting to restructure the
        Company.
 
 Operations
        have ceased and there have been no operations since June 2004.
 
 Consolidation
 
 The
        financial statements include the accounts of the Company and its wholly owned
        subsidiaries. All significant inter-company accounts and transactions have
        been
        eliminated in consolidation.
 
 Reclassifications
 
 Certain
        items presented in the previous year’s financial statements have been
        reclassified to conform to current year presentation.
 
 Revenue
        Recognition
 
 The
        Company recognizes revenue from services at the time the services are completed
        and revenue from the sale of products at the time that title passes to the
        buyer.
 
 Cash
        and
        Cash Equivalents
 
 The
        Company considers all highly liquid investments with an original maturity
        of
        three months or less to be cash equivalents.
 
 Property
        and Equipment
 
 Property
        and equipment is recorded at cost. Depreciation of assets is computed using
        the
        straight-line method over the estimated useful lives of the assets.
 
 Financial
        Instruments
 
 Fair
        value estimates discussed herein are based upon certain market assumptions
        and
        pertinent information available to management as of December 31, 2004. The
        respective carrying value of certain on-balance-sheet financial instruments
        approximated their fair values. These financial instruments include cash,
        accounts payable and notes payable. Fair values were assumed to approximate
        carrying values for these financial instruments because they are short term
        in
        nature and their carrying amounts approximate fair values. The carrying value
        of
        the Company’s long-term debt approximated its fair value based on the current
        market conditions for similar debt instruments.
  F-8
 
 Derivative
        Financial Instruments
 
 The
        Company does not use derivative instruments to hedge exposures to cash flow,
        market, or foreign currency risks.
 
 We
        review
        the terms of convertible debt and equity instruments issued to determine
        whether
        there are embedded derivative instruments, including embedded conversion
        options
        that are required to be bifurcated and accounted for separately as a derivative
        financial instrument. In circumstances where the convertible instrument contains
        more than one embedded derivative instrument, including the conversion option
        that is required to be bifurcated, the bifurcated derivative instruments
        are
        accounted for as a single, compound derivative instrument The Company may
        also
        issue options or warrants to non-employees in connection with consulting
        or
        other services they provide.
 
 Derivative
        financial instruments are initially measured at their fair value. For derivative
        financial instruments that are accounted for as liabilities, the derivative
        instrument is initially recorded at its fair value using binomial lattice
        model
        utilizing the probability of weighted average cash flow scenarios and is
        then
        re-valued and is re-measured at each reporting date, with changes in the
        fair
        value reported as charges or credits to income. For option-based derivative
        financial instruments like warrants, the Company also uses the Black-Scholes
        option pricing model to value the derivative instruments. To the extent that
        the
        initial fair values of the freestanding and/or bifurcated derivative instrument
        liabilities exceed the total proceeds received, an immediate charge to income
        is
        recognized, in order to initially record the derivative instrument liabilities
        at their fair value.
 
 If
        the
        derivative exists at the inception of the instrument, the discount from the
        face
        value of the convertible debt or equity instruments resulting from allocating
        some or all of the proceeds to the derivative instruments, together with
        the
        stated interest on the instrument, is amortized over the life of the instrument
        through periodic charges to income, using the effective interest method.
        If the
        instrument is determined not to contain embedded derivatives at inception,
        but
        later becomes one because of a tainting event caused by a instrument entered
        into subsequent to the inception of the convertible debt, the resulting
        liability is reduced from Additional Paid in Capital.
 
 The
        classification of derivative instruments, including whether such instruments
        should be recorded as liabilities or as equity, is re-assessed periodically,
        including at the end of each reporting period. If re-classification is required,
        the fair value of the derivative instrument, as of the determination date,
        is
        re-classified. Any previous charges or credits to income for changes in the
        fair
        value of the derivative instrument are not reversed. Derivative instrument
        liabilities are classified in the balance sheet as current or non-current
        based
        on whether or not net-cash settlement of the derivative instrument could
        be
        required within twelve months of the balance sheet date.
 
 Long
        Lived Assets
 
 The
        carrying value of long-lived assets is reviewed on a regular basis for the
        existence of facts and circumstances that suggest impairment. The Company
        will
        measures the amount of any impairment based on the amount that the carrying
        value of the impaired assets exceed the undiscounted cash flows expected
        to
        result from the use and eventual disposal of the impaired assets.
 
 Net
        Income (Loss) Per Common Share
 
 The
        Company calculates net income (loss) per share as required by Statement of
        Financial Accounting Standards (“SFAS”) 128, "Earnings per Share." Basic
        earnings (loss) per share is calculated by dividing net income (loss) by
        the
        weighted average number of common shares outstanding for the period. Diluted
        earnings (loss) per share is calculated by dividing net income (loss) by
        the
        weighted average number of common shares and dilutive common stock equivalents
        outstanding. During periods in which the Company incurs losses common stock
        equivalents, if any, are not considered, as their effect would be
        anti-dilutive.
  F-9
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the amounts reported in the financial
        statements and accompanying notes. Actual results could differ from those
        estimates.
 
 Income
        Taxes
 
 The
        Company follows SFAS 109 "Accounting for Income Taxes" for recording the
        provision for income taxes. Deferred tax assets and liabilities are computed
        based upon the difference between the financial statement and income tax
        basis
        of assets and liabilities using the enacted marginal tax rate applicable
        when
        the related asset or liability is expected to be realized or settled. Deferred
        income tax expenses or benefits are based on the changes in the asset or
        liability each period. If available evidence suggests that it is more likely
        than not that some portion or all of the deferred tax assets will not be
        realized, a valuation allowance is required to reduce the deferred tax assets
        to
        the amount that is more likely than not to be realized. Future changes in
        such
        valuation allowance are included in the provision for deferred income taxes
        in
        the period of change.
 
 Stock-Based
        Compensation
 
 The
        Company accounts for equity instruments issued to employees for services
        based
        on the fair value of the equity instruments issued and accounts for equity
        instruments issued to other than employees based on the fair value of the
        consideration received or the fair value of the equity instruments, whichever
        is
        more reliably measurable.
 
 The
        Company accounts for stock based compensation in accordance with SFAS 123,
        "Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow
        companies to either expense the estimated fair value of stock options or
        to
        continue to follow the intrinsic value method set forth in APB Opinion 25,
        "Accounting for Stock Issued to Employees" (“APB 25”) but disclose the pro forma
        effects on net income (loss) had the fair value of the options been expensed.
        The Company has elected to continue to apply APB 25 in accounting for its
        stock
        option incentive plans.
 
 SFAS
        123
        requires the Company to provide pro-forma information regarding net income
        and
        earnings per share as if compensation cost for the Company's stock option
        plans
        had been determined in accordance with the fair value based method prescribed
        in
        SFAS 123. The fair value of the option grants is estimated on the date of
        grant
        utilizing the Black-Scholes option pricing model with the following weighted
        average assumptions for grants during the years ended December 31 2003: expected
        life of options of 5 years, expected volatility of 361%, risk-free interest
        rate
        of 3% and no dividend yield. The weighted average fair value at the date
        of
        grant for warrants granted during the year ended December 31, 2003, approximated
        $0.00 per warrant. Compensation costs charged to operations aggregated $0
        for
        the years ended December 31, 2004 and 2003. These results may not be
        representative of those to be expected in future years .
 
 Recent
        Pronouncements
  In
        December 2004, the FASB issued SFAS No. 123 (revised 2004), *Share-Based
        Payment* ,
        which
        is a revision of SFAS No. 123, *Accounting
        for Stock-Based Compensation* .
        SFAS
        No. 123(R) supersedes APB Opinion No. 25, *Accounting
        for Stock Issued to Employees* ,
        and
        amends SFAS No. 95, *Statement
        of Cash Flows* .
        Generally, the approach in SFAS No. 123R is similar to the approach described
        in
        SFAS No. 123. However, SFAS No. 123R requires all share-based payments to
        employees, including grants of employee stock options, to be recognized in
        the
        income statement based on their fair values. Pro forma disclosure is no longer
        an alternative. SFAS No. 123R became effective for Orbit as of January 1,
        2006.
  F-10
 
 SFAS
        No.
        123R requires public companies, as well as nonpublic companies that used
        the
        fair value method of accounting prescribed by SFAS No. 123 for either
        recognition or pro forma disclosure purposes, to adopt its requirements using
        one of two methods: (i) a “modified prospective” method in which compensation
        cost is recognized beginning with the effective date (a) based on the
        requirements of SFAS No. 123R for all share-based payments granted after
        the
        effective date and (b) based on the requirements of SFAS No. 123 for all
        awards
        granted to employees prior to the effective date of SFAS No. 123R that remain
        unvested on the effective date, or (ii) a “modified retrospective” method which
        includes the requirements of the modified prospective method described above,
        but also permits entities to restate, based on the amounts previously recognized
        under SFAS No. 123 for purposes of pro forma disclosures, either (a) all
        prior
        periods presented or (b) prior interim periods of the year of adoption.
 
 Orbit
        accounts for derivative financial instruments in accordance with SFAS
        No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
        No. 133 requires that an entity recognize all derivatives, as defined, as
        either assets or liabilities measured at fair value. In addition, all
        derivatives used in hedging relationships must be designated, reassessed
        and
        documented pursuant to the provisions of SFAS No. 133.
  Certain
        of Orbit’s debt instruments contained imbedded derivatives, as defined. Orbit
        has not designated these imbedded derivatives as hedges under SFAS No. 133
        and, as such, changes in their fair value are being recognized in earnings
        as
        derivative gains or losses.
  NOTE
        2.
        BASIS OF REPORTING
 
 The
        Company’s financial statements are presented on a going concern basis, which
        contemplates the realization of assets and satisfaction of liabilities in
        the
        normal course of business. Since January 2001, through the date of this filing,
        the Company has been essentially non-operative. Its only significant business
        activity during this period has been raising capital through Itrex to fund
        the
        operations of its subsidiaries and to pay certain of the Company’s
        professionals, employees and other individuals and entities in connection
        with
        attempting to restructure the Company.
 
 The
        Company has experienced a significant loss from operations as a result of
        its
        investment necessary to achieve its operating plan, which is long-range in
        nature. For the years ended December 31, 2004 and 2003, the Company incurred
        net
        losses of $31,419,718 and $3,023,944 and has working capital and stockholder
        deficits of $35,182,119 and $35,176,881 at December 31, 2004.
 
 Since
        June 2004, Orbit has operated under Chapter 11 of the United States Bankruptcy
        Code, in a case pending in the United States Bankruptcy Court for the Central
        District of California, as the parent company of the various wholly-owned
        subsidiaries which are described below.
  The
        Company is currently completing the reorganization process in Chapter 11.
        It is
        scheduled to provide a definitive disclosure statement in February 2007,
        after
        which a hearing will be set on confirmation of the Company’s proposed Chapter 11
        plan of reorganization. Once the Chapter 11 plan of reorganization is confirmed
        , the Company will emerge from Chapter 11 and continue to implement its
        immediate and long-range business plan.
  The
        Company’s ability to continue as a going concern is contingent upon its ability
        to attain profitable operations and secure financing. In addition, the Company’s
        ability to continue as a going concern must be considered in light of the
        problems, expenses and complications frequently encountered by entrance into
        established markets and the competitive environment in which the Company
        operates.
  F-11
 
 The
        Company intends currently to focus its efforts and business strategy on seeking
        financing for its core business, internet-based technologies, as well as
        product
        development and the distribution of related consumer products throughout
        North
        America. The Company intends to raise additional capital in the form of equity
        and/or debt to fund the acquisition and growth of its subsidiaries and recent
        acquisitions, as described above, which could significantly change the capital
        structure and cause a change of control in the Company.
 
 The
        financial statements do not include any adjustments to reflect the possible
        future effects on the recoverability and classification of assets or the
        amounts
        and classification of liabilities that may result from the possible inability
        of
        the Company to continue as a going concern.
 
 NOTE
        3.
        ACQUISITIONS
 
 Effective
        January 1, 2004, the Company through a subsidiary SMARTVoice Telecommunications,
        Inc, a Delaware corporation (“SMARTVoice”) agreed to acquire the intellectual
        property of SMARTVoice Telecommunications, Inc, a Georgia corporation
        (“Georgia”) formed on May 6, 2003. The net liabilities of Georgia were initially
        acquired by the Company for no consideration. In addition, the Company entered
        into an employment contract with an individual to serve as the Chief Executive
        Officer of SMARTVoice (see below). On October 19, 2004, the agreement was
        amended to adjust the purchase price to include an additional amount of $570,000
        in the form notes payable and amend certain terms of the employment
        agreement.
 
 The
        acquisition was accounted for as a purchase and the results of operations
        have
        been included in the consolidated financial statements since the date of
        acquisition. SMARTVoice will seek to develop and market telecommunication
        technology for IP telephony and applications. IP telephony is the technology
        of
        using the internet to transport voice conversations.
 
 The
        summarized balance sheet at the acquisition date as adjusted for the notes
        is as
        follows:
 Current
                    assets
                
                $
                4,754Due
                    to affiliates
                
                
                (11,284
                )Notes
                    payable
                
                
                (570,000
                )Other
                    current liabilities
                
                
                (216,215
                )$
                (792,745
                )
 
 The
        net
        cost of the acquisition of $792,745 was recorded as goodwill and subsequently
        impaired.
 
 Effective
        June 30, 2004, Malibu Beach Beverage Group, LLC, a Delaware LLC (“MBBG”) was
        acquired by the Company. MBBG sold all of its rights, title and interests
        in all
        intellectual property of the low carb beverages including but not limited
        to any
        and all formulas, copyrights and applications, patents and applications,
        trademarks and applications, licensing, contracts, proprietary information,
        any
        other claimed proprietary information, and any other tangible and intangible
        intellectual property of the low carb beverage business of the MBBG. The
        net
        liabilities of MBBG were acquired by the Company for no consideration. The
        Company’s Chairman and CEO, Joseph Cellura, holds a 25% membership interest in
        MBBG.
 
 The
        acquisition was accounted for as a purchase and the results of operations
        have
        been included in the consolidated financial statements since the date of
        acquisition.
  F-12
 
 The
        summarized balance sheet at the acquisition date is as follows:
 Current
                    assets
                
                $
                242,542Property
                    and equipment
                
                
                6,300Due
                    to related parties
                
                
                (1,239,056
                )Current
                          liabilities
                
                
                (142,891
                )$
                (1,133,105
                )
 The
        net
        cost of the acquisition of $1,133,105 was recorded as goodwill and subsequently
        impaired. The Company also booked impairment losses of $274,092 relating
        to
        Malibu Beach Beverage inventories and $67,387 related to obsolete Smartvoice
        equipment.
 
 NOTE
        4.
        ACCOUNTS PAYABLE AND ACCRUED EXPENSES-RELATED PARTY
 
 Accounts
        payable and accrued expenses consists of the following at December 31,
        2004:
 Accrued
                    salaries
                
                $
                2,464,515Settlement
                    accrual (see note 10)
                
                
                2,500,000Accrued
                    consulting expenses
                
                
                338,205Other
                    miscellaneous accruals
                
                
                536,798$
                5,839,518
 NOTE
        5.
        CONVERTIBLE NOTES PAYABLE
 
 Notes
        payable consists of the following at December 31, 2004:
 Unsecured
                    convertible 12 % notes payable due January 1999, Principal and
                    interest
                    payable at maturity
                
                $
                1,527,500Unsecured
                    convertible 12% debentures due at various dates in 2000, principal
                    and
                    interest payableat
                    maturity, unless converted into common stock
                
                
                2,935,907Unsecured
                    convertible 5 % and 12 % debentures due at various dates in 2001,
                    principal and interest payable at maturity, unless converted
                    into common
                    stock
                
                
                4,910,000Unsecured
                    convertible 12 % debentures due at various dates in 2002, principal
                    and
                    interest payable at maturity, unless converted into common
                    stock
                
                
                3,573,145Unsecured
                    convertible 12% debentures due at various dates in 2003, principal
                    and
                    interest payable at maturity, unless converted into common
                    stock
                
                
                850,130Unsecured
                    convertible 12% debentures due at various dates in 2004, principal
                    and
                    interest payable at maturity, unless converted into common
                    stock
                
                
                3,198,431Other
                    notes payable
                
                
                761,704$
                17,756,289
  Convertible
        notes payable to related parties at December 31, 2004 amounted to
        $947,229.
 
 F-13
  Substantially
        all of the notes are currently in default. Certain debenture agreements contain
        covenants, which require the Company to perform a reverse split of not less
        than
        fifteen shares of the Company's common stock for one share of common stock.
 
 The
        convertible notes have contractual conversion rates of between $0.0002 and
        $0.015 (see Note 12).
 
 As
        discussed in Note 7, when the company issued the preferred stock , the company
        re-evaluated the determination under SFAS 133 and EITF 00-19, of whether
        or not
        the embedded conversion feature was in need of bifurcation and separate fair
        value reporting as a derivative liability. The Company determined that the
        embedded conversion feature did now in fact meet the definition for liability
        accounting and required bifurcation and fair value recording because the
        issuance of preferred shares caused an “indeterminate” amount of shares to be
        issued. At inception of the preferred stock issuance, the entire population
        of
        convertible notes was considered to be “tainted” and now contained embedded
        derivative liabilities. The value of the derivative liability associated
        with
        the embedded conversion feature at June 3, 2004 was $1,761,889. Since this
        determination was made subsequent to the inception of the original notes,
        this
        resulted in a decrease in Additional paid-in capital.
 
 The
        fair
        value of these embedded conversion features was estimated using a binomial
        lattice model utilizing the probability of weighted average cash flows under
        different scenarios.
 
 The
        primary factors driving the economic value of the embedded derivatives are
        stock
        price, stock volatility, an event of default and successful restructuring.
        Management then made projections of these variables over the term of the
        valuations. The assumptions at the date (6/3/2004) the Notes were initially
        tainted were:
 ·
              The
                  stock price would increase at the cost of equity with a volatility
                  of
                  200%  ·
              The
                  company is in a state of default and will remain in default for
                  a period
                  of 12 months, after which, an event of default would occur 5% of
                  the time,
                  increasing 0.1% per month  ·
              The
                  Company would automatically convert “in-the-money” notes if the
                  registration was effective and the company was not in
                  default  ·
              Successful
                  restructuring would be initially 0% for 12 months then increase
                  to 30%
                  with a .005 stock price and increment monthly by 2% to a maximum
                  of
                  95%.  At
        December 31, 2004 the company re-measured the fair value of the embedded
        conversion feature and the market value was $2,604,716. As a result a loss
        was
        recorded in the amount of $973,516 for the year ended December 31,
        2004.
 
 NOTE
        6.
        INCOME TAXES
 
 Deferred
        income taxes reflect the net effects of temporary differences between the
        carrying amounts of assets and liabilities for financial reporting purposes
        and
        the amounts used for income tax purposes. Significant components of the
        Company's deferred tax assets at December 31, 2004 are approximated as
        follows:
 Deferred
                    tax assets:Net
                    operating loss carryforwards
                
                $
                14,166,667Valuation
                    allowance for deferred tax assets
                
                
                (14,166,667
                )Net
                    deferred tax assets
                
                $
                -
  F-14
  At
        December 31, 2004, the Company has a net operating loss carry forward of
        approximately $42.5 million, which will begin to expire in the year 2012
        and
        continue to expire through the year 2024. Given the changes in the business
        and
        ownership, management believes it is highly unlikely that the net operating
        loss
        will be available to offset future income. The tax benefits of these items
        are
        reflected in the above table of deferred tax assets and liabilities. U.S.
        tax
        rules impose limitations on the use of net operating losses following certain
        changes in ownership. If a change were to occur, the limitation could reduce
        the
        amount of these benefits that would be available to offset future taxable
        income
        each year, starting with the year of ownership change.
 
 The
        reconciliation of income tax attributable to continuing operations computed
        at
        the U.S. federal statutory tax rates to income tax expense is approximated
        as
        follows:
 YEARS
                    ENDEDDECEMBER
                    31,2004
                
                2003Income
                    tax benefit at U.S. statutory rate
                
                $
                (1,150,000
                )
                $
                (1,030,000
                )State
                    tax benefit, net
                
                
                (170,000
                )
                
                (150,000
                )Change
                    in valuation allowance
                
                
                1,320,000
                
                
                1,180,000Tax
                    expense
                
                $
                -
                
                $
                -
  NOTE
        7.
        STOCKHOLDERS’ DEFICIT
 
 As
        of
        December 31, 2004, warrants to purchase 100,000,000 shares of the Company's
        common stock were outstanding. These warrants expire March 28, 2008 and had
        an
        exercise price of $.001 per share.
 
 Stock
        Option Plan
 
 In
        November 2000, the Board of Directors and the stockholders of the Company
        adopted a stock option plan. The number of options, which may be granted
        under
        the plan aggregates 175,000,000. The purchase price for any Stock Awards
        and the
        exercise price for any Options may not be less than the fair market value
        for
        the common stock on the date of grant. There are currently no options
        outstanding under the plan.
 
 Preferred
        Stock
 
 On
        June
        3, 2004, the Company issued 5,000,000 Shares of Series A convertible preferred
        stock to a related party in exchange for forgiveness of $750,000 of debt.
        The
        preferred stock had a fair market value on the date of issuance of $20,000,000.
        The Company determined that this transaction as originally reported in the
        June
        2004 10QSB was incorrect and will file an amended June 2004 10QSB reflecting
        the
        correction of this error. The Company originally ascribed a value of $750,000
        to
        the issuance of the preferred stock pursuant to the amount of debt forgiven.
        Subsequently, the Company determined it was more appropriate to record the
        issuance at fair market value based on the underlying common stock value
        at the
        date of issuance. The Company recorded compensation expense of $19,250,000
        with
        respect to this issuance.
 
 The
        Company examined the terms of the preferred stock in accordance with SFAS
        133
        and determined that the conversion feature was clearly and closely related
        to
        the host contract and therefore did not need to be bifurcated and valued
        as a
        liability. However under the terms of the “reset provision” which states the
        number of common shares that this series of convertible preferred shares
        convert
        into is initially set as of the date of this certificate. The number of shares
        is calculated by taking the conversion ratio and multiplying the amount of
        common shares available per preferred share by the number of preferred shares
        designated by the preferred share certificate attached to this certificate.
        However, this number shall be adjusted at the end of each month, or on any
        date
        upon which a demand for conversion occurs. The purpose of this provision
        is to
        maintain the original underlying value of the preferred shares on the date
        of
        the original issuance of the preferred shares. This will be accomplished
        using
        the following formula:
 
 F-15
  One
        divided by the quotient of the common stock price on the day of conversion
        divided by the common stock price as of the original date of issuance of
        the
        preferred shares. This result shall be multiplied by the number of original
        common shares that the preferred shares could have been converted to, i.e.,
        assume the original common stock price was $10, and the current stock price
        is
        $5. To convert the convertible shares today, the number of common shares
        per
        conversion would increase by the following formula: 1 / ($5 per share / $10
        per
        share) = 2. Then multiply the original number of common shares that the
        preferred stock could have converted into by 2. However, in no case shall
        the
        preferred shares be convertible into a number of common shares that is less
        then
        the original number of common shares that the preferred shareholders had
        the
        right to convert into as of the date of issuance.
 
 This
        in
        fact caused a “tainting” of the conversion features within all the outstanding
        convertible notes and warrants, creating the need for re-evaluation of the
        outstanding convertible debt and warrants. See Notes 5 and 8.
 
 Common
        Stock
 
 During
        August 2004, the Company converted $1,451,189 of debt into 96,745,956 shares
        of
        the company’s common stock as part of the restructuring of the company’s
        capitalization. The shares issued were valued at their fair market value
        of
        $96,746. The difference between the fair market value of the shares issued
        for
        the above conversion has been recorded as a(loss) on the settlement of debt
        during the period of $1,354,443. In addition to this conversion the Company
        also
        converted $1,321,000 of debt during the year into 425,000,000 shares of common
        stock. The loss on settlement attributable to this conversion was $1,318,552.
        The Company also recorded an increase to APIC of approximately $131,000 related
        to derivative liabilities associated with debt conversions.
 
 NOTE
        8.
        WARRANTS
 
 During
        2003, the company issued 100,000,000 warrants to outsiders for services.
        As a
        result of the issuance of the preferred stock, the company re-evaluated these
        warrants under SFAS 133 and determined that they were considered to be “tainted”
and should be valued as derivative liabilities.
 
 At
        June
        3, 2004, the derivative liability associated with the warrants was determined
        to
        be $397,314.
 
 At
        December 31, 2004 the company re-measured the fair value of the derivative
        liability associated with the warrants and estimated it to be $68,060 using
        Black Scholes pricing model. The assumptions used in this model included
        (1)
        250%volatility, (2) expected term of 5 years, (3) risk free rate of return
        associated with the remaining term of the warrant (4) expected dividends
        of
        zero. This resulted in a gain in the amount of $329,254 for the year ended
        December 31, 2004.
  NOTE
        9.
        COMMITMENTS AND CONTINGENCIES
 
 Operating
        Leases
 
 F-16
  During
        August 2004, Itrex International, Inc. (“Itrex”), a subsidiary of the Company,
        entered into a lease for a residential property to be used as an office.
        The
        term of the lease was for six months. The Company agreed to issue an aggregate
        of 7,500,000 shares of common stock in consideration for the lease term.
        The
        fair market value of the shares issued was amortized over the term of the
        lease.
  During
        May 2005, Itrex entered into a lease for another residential property to
        be
        utilized as an office. The lease commenced June 1, 2005 for an initial term
        of
        one year at an annual rental of $96,000. The lease provides for two renewal
        options, for four years and five years, respectively. The first option has
        been
        exercised.
  Future
        minimum lease payments are as follows:
 2005
                
                $
                56,0002006
                
                
                96,0002007
                
                
                96,0002008
                
                
                96,0002009
                
                
                96,0002010
                
                
                40,000
 Rent
        expense for the years ended December 31, 2004 and 2003 including the above
        lease
        was $48,000 and $48,000.
 
 Employment
        Contract
 
 The
        Company extended the employment with an executive officer, which now expires
        during June 2010. The agreement provides for minimum salary levels and minimum
        expense reimbursements as well as for incentive bonuses, which are payable
        if
        specified management goals are attained. Minimum commitments for future salaries
        and expense reimbursement, excluding bonuses aggregate $358,000 per
        year.
 
 Litigation
 
 A.
              *Orbittravel.com
                  Corporation, etc., et al, Plaintiffs, v. Teakwood Ventures, L.L.C.
                  et
                  al.*
 
 In
        November 2001, Orbit sued an investor group headed by Teakwood Ventures,
        LLC. On
        October 18, 2001, Orbit had reached an overall settlement requiring the return
        of 184,277,000 shares of common stock which had been issued to the defendants.
        This lawsuit is still unresolved and is expected to be dismissed in the
        bankruptcy proceedings.
  B.
              *ORBIT
                  BRANDS CORPORATION, a Delaware corporation, vs. Douglas R.
                  Dollinger,*et
                  al.
 
 In
        February 2004, Orbit sued its former in-house counsel and others for
        professional negligence and other claims. This lawsuit is still unresolved
        and
        is expected to be dismissed in the bankruptcy proceedings.
 
 C.
              *Dean
                  E. Miller, Plaintiff, vs; ORBIT BRANDS CORPORATION*
 
 In
        February 2004, Orbit was sued by a former employee of the Company, Dean Miller,
        who had been terminated in 2001 This lawsuit is still unresolved and is expected
        to be dismissed in the bankruptcy proceedings.
 
 F-17
 
 D.
              *Mark
                  Savoretti, Plaintiff, vs. Orbittravel.com, Inc., et
                  al*,
  In
        January 2004, Orbit was sued for fraudulent inducement, constructive trust,
        breach of contract, fraudulent transfer and alter ego, arising from a failed
        business transaction which occurred in late 1999 and early 2000. The bankruptcy
        court dismissed the proceeding but allowed the claim to be considered as
        an
        unsecured claim in the bankruptcy. Unsecured creditors are expected to get
        no
        payments when the bankruptcy is resolved.
 
 E.
              *In
                  re. ORBIT BRANDS CORPORATION,
                  Debtor*
 
 In
        May
        2004, Orbit filed for protection pursuant to the provisions of Chapter 11
        of the
        Bankruptcy Code, Title 11.
 
 Orbit
        is
        currently restructuring its financial program for its successful emergence
        from
        Chapter 11. Its first plan of reorganization was filed on September 16, 2005.
        Orbit intends to file its second amended plan proposal in February or March
        2007. The Court has scheduled a hearing for February 15, 2007 on the status
        of
        the Chapter 11 case.
 
 F.
              *Carol
                  Molus and Michael Molus, Plaintiffs, vs. Joseph Cellura, etc.,
                  et
                  al*.
 
 In
        December 2004, Orbit and others were sued by certain investors for breach
        of
        contract, fraud, elder abuse, violations of the federal securities laws,
        and
        professional negligence against the Company’s attorneys. A pending settlement
        authorizes issuance of common shares representing up to 10% of total outstanding
        shares, pending a re-hearing and approval of the Court.
 
 G.
              *Douglas
                  R. Dollinger, Individually and as Escrow Agent on Behalf of Certain
                  Intended Beneficiaries, Plaintiffs, v. Joseph R. Cellura, etc.,
                  et al,
                  Defendants*,
                  United States District Court for the Southern District of New York,
                  Case
                  No. 05 CIV. 3097 (assigned to Judge Stephen C. Robinson) (the “Dollinger
                  Action”).
 
 In
        late
        March 2005, Orbit and others were sued by its former in-house counsel Orbit
        expects this lawsuit to be dismissed in the bankruptcy proceedings.
 
 H.
              *Mary
                  Jean Ribas, Plaintiff, vs. Joseph R. Cellura, et
                  al.*
 
 In
        April
        2006, a former employee sued Orbit’s CEO for lost wages and damages. Orbit
        disputes this case, which is expected to be dismissed or resolved in the
        bankruptcy proceedings.
 
 During
        2003 and 2004, Orbit sold common stock and convertible debentures without
        registration under the Securities Act of 1933. Although Orbit believes that
        the
        sales did not involve a public offering of its securities and that Orbit
        did
        comply with the “safe harbor” exemptions from registration, it could be liable
        for rescission of the sales if such exemptions were found not to apply and
        this
        could have a material negative impact on Orbit’s financial position and results
        of operations.
  NOTE
        10.
        RELATED PARTY TRANSACTIONS
 
 At
        December 31, 2003 the Company was indebted to an officer in the aggregate
        amount
        of approximately $3,500,000 which was included in accounts payable and accrued
        expenses - related parties. This amount relates principally to a settlement
        agreement for $2,500,000 and unpaid salary and expenses.
 
 On
        June
        3, 2004, because the Company had been unable to pay approximately $3,500,000
        of
        accrued debt owed to an officer and director of the Company, and because
        of the
        importance of said officer and director to the Company, the Company’s Board of
        Directors met and voted in favor of the issuance of a Series A Super Majority
        Voting Preferred class of stock to said officer and director, as ratified
        by a
        majority vote of the Company’s shareholders. As of December 31, 2003, based on
        previous and unpaid settlements, accrued and unpaid compensation and expenses,
        and accrued and unpaid benefits, and because said officer and director had
        indicated that he was willing to forego the payment of $750,000 of said
        indebtedness in exchange for shares of convertible preferred stock of the
        Company, the Company was duly authorized to issue 5,000,000 shares of the
        aforementioned Series A convertible preferred stock to said officer and
        director, in accordance with the Company’s Certificate of Designation of Series
        A Preferred Stock. The preferred stock had a fair market value on the date
        of
        issuance of $20,000,000. The Company determined that this transaction as
        originally reported in the June 2004 10QSB was incorrect and will file an
        amended June 2004 10QSB reflecting the correction of this error. The Company
        recorded compensation expense of $19,250,000 with respect to this issuance.
 
 F-18
 
 NOTE
        11.
        CORPORATE RESTRUCTURING
 
 In
        July
        2003, Orbit changed its name to Orbit Brands Corporation.
 
 In
        May
        2004, Orbit authorized a 500-to-1 reverse stock split, but this hasn’t occurred
        yet.
 
 During
        April 2004, Orbit increased its authorized capital to 2,000,000,000 shares
        of
        $.001 par value common stock and 10,000,000 shares of $.001 par value preferred
        stock. Orbit also authorized the designation of Series A convertible preferred
        stock with liquidation rights and no dividends. Each share of preferred is
        convertible into 1000 shares of common stock.
 
 On
        December **** 6, **** 2004,
        Orbit increased its authorized capital to 5,000,000,000 shares of $.001 par
        value common stock.
  NOTE
        12.
        SUBSEQUENT EVENTS
 
 In
        May
        2005, Orbit borrowed $150,000 from Avalon International Group under an unsecured
        convertible promissory note. Orbit is currently in negotiations with Avalon
        to
        fix the remaining terms of the note.
  On
        May
        11, 2005, BBKO, LLC entered into a license agreement with Orbit’s subsidiary,
        BBKO, Inc. f/k/a Malibu Mixers Company (“BBKO”), that was later rescinded. BBKO,
        LLC paid BBKO $141,000 and BBKO, LLC got its license back. Also, Orbit owes
        85
        million common shares to BBKO, LLC.
 
 On
        June
        15, 2005, Orbit borrowed $100,000 from M2B under an unsecured convertible
        promissory note with interest at 10% APR. The note is due 2 years following
        confirmation of Orbit’s Chapter 11 Plan, and may be converted into common stock
        at $.001 per share.
 
 On
        October 3, 2005, through its BBKO subsidiary, borrowed $300,000 from Harbor
        View
        Fund, Inc. under an unsecured convertible promissory note with interest at
        4%
        APR. Orbit is currently in negotiations with Harbor View to fix the remaining
        terms of the note, including the conversion terms.
 
 On
        April
        19, 2006, through its Itrex subsidiary, Orbit borrowed $46,000 from M2B,
        Inc.
        under an unsecured convertible promissory note with interest at 12% APR,
        and
        maturing on April 19, 2007. The note may be converted into common stock at
        $.0003 per share.
 
 On
        September 27, 2006, and October 4, 2006, through its Itrex subsidiary, Orbit
        borrowed a total of $40,000 from Todd Silverstein under unsecured convertible
        promissory notes with interest at 5% APR and maturing one year from each
        date of
        issuance. The notes may be converted into common stock at $.0002 per
        share.
 
 F-19
  Upon
        confirmation of emergence from Chapter 11, Orbit will transfer a 95% interest
        in
        two of its wholly-owned subsidiaries, Malibu Entertainment Group (“MEG” and
“BBKO”). In connection with this transfer, MEG and BBKO borrowed $250,000 and
        agreed to borrow another $50,000 from Cleveland BioLabs, Inc. (“CBLI”) in
        exchange for a convertible promissory note, a 20% minority common stock position
        in Orbit, 10% minority common stock positions in three of Orbit’s wholly-owned
        subsidiaries, Itrex,,Malibu Beach Beverage Group (“Malibu”), and Smartvoice
        Telecommunication, Inc. (“SVT”), and also 95% majority common stock positions in
        MEG and BBKO.
 
 On
        January 18, 2007, through its Itrex subsidiary, Orbit borrowed $25,000 from
        Michael Silverstein under an unsecured convertible promissory note with interest
        at 6% APR and maturing on January 18, 2008. The note may be converted into
        common stock at $.0002 per share.
  F-20





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





On
      January 4, 2006, with the approval of the Audit Committee and the concurrence
      of
      the Board of Directors, ORBIT BRANDS CORPORATION(the "Registrant")initially
      engaged Malone & Bailey, PC (“MB”), as its independent auditors, **** in
      place
      of its former independent auditors, Stark Winter Schenkein & Co
      (“SWS”),effective as of that date. On May 18, 2006, MB was retained to audit the
      Company for the Fiscal years ended 2004 and 2005 and perform review procedures
      on the Company’s quarterly SEC filings.





On
      July
      29, 2003, with the approval of the Audit Committee and the concurrence of the
      Board of Directors, **** the
      Company **** engaged
      Stark Winter Schenkein & Co., LLP ("SWS") as its independent
      auditors. **,** having **** dismissed
      its former independent auditors, Holtz Rubenstein & Co., LLP ("HR"),
      effective as of that date. Prior to the engagement of SWS, HR had served as
      the
      independent auditors of the Registrant since December 2001. Prior to the
      engagement, there were no consultations between SWS and the Registrant regarding
      the treatment of accounting, auditing or financial reporting
      issues.





SWS’s
      and
      HR's audits of the Registrant's financial statements for the years ended
      December 31, 2000 thru 2003, contained no adverse opinion or disclaimer of
      opinion and were not qualified or modified as to uncertainty, audit scope or
      accounting principles except for a paragraph regarding uncertainty concerning
      the Company's ability to continue as a going concern; such statements did not
      contain any adjustments for uncertainty stated therein.





There
      have been no disagreements between the Registrant and SWS or HR in connection
      with the audit of the Registrant's financial statements for the fiscal years
      ended December 31, 2000 thru 2003, and in the subsequent interim period through
      June 30, 2004, on any matter of accounting principles or practices, financial
      statement disclosure or auditing scope or procedure, which disagreements, if
      not
      resolved to the satisfaction of SWS or HR, would have caused SWS or HR to make
      reference to the subject matter of the disagreements in their respective reports
      on the Registrant's financial statements for any such periods. None of the
      reportable events listed in Item 304(a)(1)(v) of Regulation S-K under the
      Securities Exchange Act of 1934, as amended, occurred with respect to the
      Registrant's two most recent fiscal years or the subsequent interim period
      through June 30, 2004 preceding the dismissal of SWS.





Item
      8-A.
      CONTROLS AND PROCEDURES.





Prior
      to
      the filing date of this report, the Company conducted an evaluation of the
      effectiveness of the design and operation of the Company’s disclosure controls
      and procedures. This evaluation was conducted and supervised by the Company’s
      Chief Executive Officer, Joseph R. Cellura. Based on this evaluation, the
      Company concluded that the controls and other procedures it employs for
      recording, processing, summarizing and reporting information the Company is
      required to disclose in the reports it files under the Securities and Exchange
      Act of 1934, as Amended (the “Exchange Act”)(15 U.S.C. §§ 78a, et seq.), were
      not effective as of the end of the period covered by this report.




54





The
      Company concluded that most of the ineffectiveness of its controls and
      procedures could be attributed to its relationship with Chief Legal Officer,
      Douglas R. Dollinger, Esq. (See Footnote 1, supra.) Since on or about February
      17, 1999 through the end of the period covered by this report, Mr. Dollinger’s
      corporate responsibilities included, without limitation, the maintenance of
      certain corporate books and records, and the preparation and filing of all
      reports under the Exchange Act. (See Footnote 1, supra.) A significant number
      of
      the Company’s books and records, including, but not limited to, by-laws,
      articles of incorporation and amendments thereto, material agreements and other
      documents are in the possession, custody and/or control of Mr. Dollinger.
      However, the company has in its possessions copies of the documents required
      to
      prepare this filing.





Since
      on
      or about October 14, 2003, the Company has continually requested of Mr.
      Dollinger, both orally and in writing, that he deliver all Company books and
      records in his possession, custody and/or control back to the Company. To date,
      Mr. Dollinger has refused to deliver or return such books and records to the
      Company.




Our
      independent accountants have also reported to our Board of Directors certain
      matters involving internal controls that the accountants consider to be
      weaknesses under standards established by the Public Company Accounting
      Oversight Board. The identified weaknesses relate to a lack of segregation
      of
      duties within our accounting and financial management functions and inadequate
      dedication of resources to the financial review and analysis functions. Due
      to
      the size of the Company, the lack of operations and significant financial
      constraints, the Company has been unable to employ the necessary resources
      for
      proper internal financial review and analysis. The Company recorded adjustments
      identified by the auditors for the valuation of preferred stock issued to retire
      related party debt, the value of derivatives, derivative liabilities, stock
      for
      services, and losses on extinguishment of debt. The company will endeavor to
      correct this going forward.





The
      Company has begun to implement procedures and controls designed to increase
      the
      effectiveness of its disclosure under the Exchange Act. Since on or about
      October 14, 2003,the Company has worked with and continues to work with new
      general and securities counsel, its auditors and accountants to prepare and
      file
      any and all such delinquent reports as soon as practicable. The
      Company **** commenced
      suit against Mr. Dollinger, among others, for damages for, inter alia, breach
      of
      fiduciary duty, professional negligence, breach of contract, intentional
      interference with business relations, negligent interference with business
      relations, intentional infliction of emotional distress, negligent infliction
      of
      emotional distress, and common counts, and for an accounting. The Company
      anticipates that **** these
      and
      other claims against the defendants may be adjudicated in the Company’s Chapter
      11 Bankruptcy case, if the Company determines that it is advisable to
      do **** so.
      (See
      Item 3, “Legal Proceedings,” supra.)




55




PART
      III





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





The
      following table sets forth information regarding our executive officers and
      directors:




Name
              
              Age
              
              PositionJoseph
                  R. Cellura
              
              51
              
              Chairman
                  of the Board of Directors and Chief Executive OfficerDenise
                  Bertolini
              
              41
              
              Director
                  and Secretary


Joseph
      R.
      Cellura has served as the Company’s Chairman of the Board of Directors and Chief
      Executive Officer since June 1999. Mr. Cellura previously served as Chairman
      of
      the Board of Directors and Chief Executive Officer from September 3, 1997 until
      February 17, 1999. During the interim period between serving as Chairman of
      the
      Board of Directors and Chief Executive Officer, Mr. Cellura independently sought
      further business opportunities for the Company. Mr. Cellura originally joined
      the Company as a result of the Company’s acquisition of Divot Corporation and
      Divot Development Corporation.





Mr.
      Cellura had served as an executive officer and owned a majority interest in
      the
      common stock of Divot Corporation since 1989 and Divot Development Corporation
      since 1994. Prior to joining the Company, Mr. Cellura had been involved in
      various and progressively more responsible positions throughout his career,
      with
      extensive travel experience throughout the USA, Europe and Asia. The Company
      believes Mr. Cellura has the experience and business acumen necessary to
      successfully assist the Company in its planned restructuring.





During
      the period from 1976 to 1992, Mr. Cellura was an investment banker with Shearson
      & Kidder Peabody & Co. Mr. Cellura attended the State University of New
      York at Amherst, New York.





Denise
      Bertolini has served on the Company’s Board of Directors since April 2004. Ms.
      Bertolini joined Globaltronix, an internet banking firm, in 2000. While at
      Globaltronix, she helped implement and manage an online banking application,
      oversaw the implementation of certain investment banking applications to raise
      capital utilizing a “dutch auction” methodology in the public and private
      sectors, and interfaced with the SEC to obtain an approved model. Prior to
      joining Globaltronix, Ms. Bertolini was a trader’s assistant and compliance
      administrator at Brookehill Equities, Inc. from 1995 to 2000. Prior to
      Brookehill Equities, Inc., Ms. Bertolini worked for EGS Partners as a trader’s
      assistant, and for Goldman, Sachs & Co. as an administrative assistant, from
      1981-1989.




56




The
      Company’s directors and executive officers are required to file with the SEC, by
      a specified date, reports regarding their transactions involving the Company’s
      common stock. To the Company’s knowledge, based solely upon information
      furnished to the Company, none of the Company’s directors or executive officers
      filed any such reports during 2004. The Company is not aware of any transactions
      involving its common stock by any of its directors or executive officers.





ITEM
      10.
      EXECUTIVE COMPENSATION.





The
      Company’s directors have served without compensation for their services as
      directors but have been reimbursed for expenses incurred in connection with
      their duties. It is anticipated that the Company’s directors will continue to
      serve without compensation (other than reimbursement of expenses). Other than
      the employment contracts described below, the Company had no standard
      arrangements or policies for compensation of its executives. The Board of
      Directors will, from time to time, determine the compensation of senior
      management in accordance with its prevailing financial condition, as the Board
      shall determine, and provide other incentives to promote successful management
      of its business. There were no bonus, stock option or other incentive plans
      in
      effect for any level of management as of the end of 2002, except for the
      Company’s 1998 Incentive Stock Option Plan and 1994 Stock Option Plan, and the
      performance bonuses included in the employment agreement of Mr. Cellura, as
      more
      fully described below.





The
      following table sets forth information with respect to compensation paid to
      the
      Company’s Chief Executive Officer in 2004. No other executive officer received
      compensation in excess of $100,000 in 2004.





Summary
      Compensation


AnnualSecurities
                Compensation
                    UnderlyingName
                  and Principal Position
              
              Year
              
              Salary
              
              Options
                  Bonus
              
              All
                  Other CompensationJoseph
                  R. Cellura
              
              
              2004
              
              $
              250,000
              
              
              
              
              $
              19,358,000Chief
                  Executive Officer
              
              
              2003
              
              $
              250,000
              
              
              
              
              
              108,0002002
              
              $
              250,000
              
              
              
              
              
              108,000




Mr.
      Cellura served on the Company’s Board of Directors as its Chairman and Chief
      Executive Officer from





September
      3, 1997 until he resigned on February 17, 1999. On February 17, 1999, the
      remaining members of the Board elected Jeremiah M. Daly, another Board member
      and the Company’s then President, to serve as Chairman and Chief Executive
      Officer. Mr. Daly resigned from all of those positions, including as a member
      of
      the Board of Directors, effective April 28, 1999, at which time the Board of
      Directors appointed Kenneth Craig to serve as President and Chief Executive
      Officer. Mr. Craig was appointed Chairman on May 6, 1999. He was succeeded
      as
      Chairman and Chief Executive Officer by Mr. Cellura on June 24, 1999.




57





All
      stock
      options that the Company has granted since its inception have been forfeited.
      As
      of the end of 2004, there were no unexercised options or stock appreciation
      rights held by executives of the Company which were then outstanding.





Employment
      Contracts.





The
      Company extended the employment with an executive officer, which now expires
      during June 2010. The agreement provides for minimum salary levels and minimum
      expense reimbursements as well as for incentive bonuses, which are payable
      if
      specified management goals are attained. Minimum commitments for future salaries
      and expense reimbursement, excluding bonuses aggregate $358,000 per
      year.





In
      addition to these amounts, the Company has agreed to pay an annual
      performance/incentive bonus on the following terms:


Company
                  Fiscal Year Revenue
              
              Bonus$0
                  to $2.0 million
              
              
              5%
                  of base salary$2.0
                  million to $5.0 million
              
              
              15%
                  of base salary$5.0
                  million to $10.0 million
              
              
              30%
                  of base salary$10.0
                  million or greater
              
              
              50%
                  of base salary


The
      employment agreement also provides for the issuance of 5 million options to
      purchase shares of the Company’s common stock upon the Company’s adoption of a
      new stock option plan, all of which will be immediately exercisable. The
      employment agreement provides anti-dilution protection such that in the event
      the Company ever issues any additional shares at a price less than the exercise
      price then in effect for the options granted to him, the exercise price of
      his
      options will be proportionately reduced. In addition, the Company may be
      required to record compensation expense on each occasion the exercise price
      of
      the options is reduced.





The
      employment contract allows the employee at all times to maintain his
      proportionate equity interest in the Company by means of the issuance of
      additional shares of common stock to him in sufficient amounts to preserve
      his
      percentage ownership in the Company. This may be accomplished by purchase at
      the
      price or on terms included in the employment contract or his election to convert
      debt owed to him by the Company.





If
      the
      Company terminates the employment agreement without cause at any time during
      the
      term the Company is required to fulfill the following severance obligations:





(1)
      The
      Company must continue to reimburse the employee after the termination of his
      employment approximately $9,000 per month to enable him to maintain an office
      and residence in New York City , California,
      Florida, or any other geographic location in the best interest of the
      employee **,** for the
      balance of the term of the agreement;




58





(2)
      In
      the event the employee continues after the termination of his employment to
      hold
      options, warrants or other securities convertible into the Company’s common
      stock, the exercise prices of such securities shall be proportionately reduced
      if the Company issues common stock at a price lower than the exercise price
      then
      in effect for the employees options;





(3)
      The
      Company must pay the employee a lump sum equal to the sum of the present value
      of 100% of his base salary for the balance of the term of the employment
      agreement;





(4)
      The
      Company must pay the employee an additional lump sum equal to $1.25 million;
      and





(5)
      The
      Company must execute a UCC-1 financing statement in favor of the employee
      enabling him to record a lien against the Company’s assets in order to secure
      payment of the $1.25 million severance payment.





In
      addition, regardless of whether the Company has previously terminated the
      employee’s employment, if upon the expiration of the employment term, the
      Company elects not to offer an additional five-year employment contract, the
      Company must pay him an additional lump sum payment in the amount of $900,000.





The
      Company may only avoid these severance obligations if it terminates employment
      for cause. In order for the Company to terminate employment for cause, it must
      follow the procedures set forth in his employment agreement. The Company would
      be required to give a 90 days' prior written notice of his termination for
      cause. The employee would then have 90 additional days to elect whether to
      object to his termination. If so objected, the Board of Directors would be
      required to convene a special meeting within 30 days, at which the employee
      would have the right to appear, to review his objection and determine whether
      sufficient evidence existed to terminate employment for cause. The employee
      may
      again object to the Board of Directors' determination by filing a request for
      arbitration within 30 days of the Board's determination. The arbitration would
      be required to take place within 60 days of notice of such request. If the
      employee objected to termination of his employment for cause, he would remain
      in
      his position as Chief Executive Officer and continue to receive the amounts
      due
      to him under his employment agreement, until the contested matters were finally
      determined. This process could take a substantial amount of time. Even if the
      Company were to be successful in terminating employment for cause, if upon
      expiration of the employment term, the Company elects not to offer an additional
      five year employment contract, the Company would be obligated to pay him an
      additional lump sum payment of $900,000, as well as paying existing payable
      of
      approximately $3,500,000.





The
      Company also entered into a consulting agreement with an officer of the Company
      relating to services to be performed for Malibu Beach Beverage Group. This
      agreement provides for an annual consulting fee of $250,000 per annum. This
      agreement was nullified effective January 1, 2005.




59




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





Information
      regarding the beneficial ownership of the Company’s common stock as of this
      filing by each director, each executive officer, all executive officers and
      directors as a group, and each person known to the Company to beneficially
      own
      more than 5% percent of the Company’s common
      stock, is set forth below.


Name
                  of Beneficial Owner Owned Shares (1)
              
              Number
                  of Shares Beneficially
              
              Percent
                  of AllJoseph
                  R. Cellura
              
              
              236,163,238
              
              
              21.0
              %





(1)
      Based
      on 1,126,107,071 shares outstanding.





Since
      approximately 21% of the Company’s voting common stock is currently concentrated
      in the Company’s chief executive officer and, based upon the provisions of his
      executive employment agreement, which includes anti-dilution protection, the
      chief executive officer is entitled to convert his Series A Super Majority
      Voting Preferred Stock into voting common stock in amounts that would result,
      in
      the event of such an election by the chief executive officer, in the
      concentration of approximately 85% or more of the Company’s voting common stock
      in the Company’s chief executive officer, he may be able to directly control the
      Company’s future.





ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





None




ITEM
      13.
      EXHIBITS





(a)
      Exhibits --


2.1(1)
              
              Stock
                  Purchase Agreement effective as of April 20, 1998 by and among
                  the
                  Company, Talisman Tools Incorporated and Daniel S. Shedd and Dixon
                  Newbold;2.2(2)
              
              Stock
                  Purchase Agreement effective as of April 15, 1998 by and among
                  the
                  Company, Divot Golf Corporation, a Florida corporation, and Joseph
                  R.
                  Cellura;2.3(3)
              
              Stock
                  Purchase Agreement effective as of January 28, 1998 by and among
                  the
                  Company, Miller Golf, Inc., Robert Marchetti, Louis Katon and John
                  Carroll;
  60
  2.4(10)
              
              Sale
                  and Assignment Agreement dated as of January 27, 2000 by and among
                  Mark
                  Savoretti and Spartan Capital Management, LLC;2.5(10)
              
              Assignment
                  Agreement dated as of January 27, 2000 by and among the Company
                  and
                  Spartan Capital Management, LLC;2.6(10)
              
              Right
                  to Use Agreement dated as of November 1, 1999 by and among the
                  Company and
                  Orbit Network, Inc.;2.7(10)
              
              Letter
                  of Intent dated as of February 9, 2000 by and among the Company
                  and
                  AnimInet, Inc.;2.8(10)
              
              Stock
                  Acquisition Agreement dated as of January 31, 2000 by and among
                  the
                  Company and Wilhelmina Artist Management, LLC;3.1(4)
              
              The
                  Company’s Certificate of Incorporation;3.2(4)
              
              The
                  Company’s Bylaws;3.3(5)
              
              Amendment
                  to the Company’s Certificate of Incorporation, filed July 18, 1994;3.4
              
              Amendment
                  to articles of incorporation Orbit filed dated March 18th,
                  20043.5
              
              Certificate
                  of Good Standing State of Delaware dated March 16th,
                  20043.6
              
              Certificate
                  of Designation State of Delaware dated June 1st,
                  20043.7
              
              Certificate
                  of Designation State of Delaware Correction dated June 1st,
                  20043.8
              
              Board
                  of Directors Minutes dated April 4th,
                  20043.9
              
              Board
                  of Directors Minutes dated June 3rd,
                  20043.10
              
              228
                  Written Consent dated May 3rd,
                  20043.11
              
              228
                  Written Consent dated May 25th,
                  20043.12
              
              Board
                  of Directors Minutes dated September 25,20043.13
              
              Board
                  of Directors Minutes dated September 22, 20053.14
              
              Board
                  of Directors Minutes dated September 29, 20063.15
              
              Amended
                  articles of incorporation dated December 6, 20044.1(6)
              
              Certificate
                  of Designations, Preferences and Rights of the Company’s 1997 Convertible
                  Preferred Stock dated December 29, 1997;4.2(6)
              
              Certificate
                  of Designations, Preferences and Rights of 10,500 shares of the
                  Company’s
                  1997 Convertible Preferred Stock dated January 13,
                  1998;
  61
  4.3(10)
              
              Form
                  of Exchange Letter between the Company and the holders of the Company’s
                  1997 Convertible Preferred Stock;4.4(10)
              
              Funding
                  Commitment Letter and Subscription Agreement as of February 15,
                  2000 by
                  and between the Company and Teakwood Ventures, LLC;10.1
                  (7)
              
              Form
                  of Warrant issued to the Summit Stockholders dated June 30,
                  1995;10.2(7)
              
              Form
                  of Warrant and Registration Rights Agreement issued to Financial
                  Advisor
                  dated June 30, 1995;10.3(8)
              
              Agreement
                  in Principle dated February 21, 1996 between the Company, Gordon
                  Ewart,
                  the Company’s four golf course subsidiaries, and the Company’s three
                  pension fund partners;10.4(6)
              
              Form
                  of Convertible Debenture Agreement dated November 18, 1997 between
                  the
                  Company and signatories, with form of warrant to purchase shares
                  of the
                  Company’s common stock;10.5(6)
              
              Form
                  of Private Placement Purchase Agreement dated December 3, 1997
                  between the
                  Company and signatories, with form of warrant to purchase shares
                  of the
                  Company’s common stock;10.6(3)
              
              Form
                  of Private Placement Memorandum dated April 3, 1998 between the
                  Company
                  and signatories, with form of warrant to purchase shares of the
                  Company’s
                  common stock;10.7(10)
              
              Employment
                  Agreement dated June 24, 1999 between the Company and Joseph R.
                  Cellura;10.8(10)
              
              Employment
                  Agreement dated November 1, 1999 between the Company and Dean E.
                  Miller;10.9(10)
              
              Employment
                  Agreement dated November 1, 1999 between the Company and David
                  A.
                  Noosinow;10.10(10)
              
              Employment
                  Agreement dated December 1, 1999 between the Company and Douglas
                  R.
                  Dollinger;10.11(10)
              
              Intentionally
                  Omitted;10.12(10)
              
              Intentionally
                  Omitted;10.13(10)
              
              Form
                  of Exchange Letter between the Company and holders of the Company’s
                  convertible debt;10.14(10)
              
              Settlement
                  Agreement dated as of June 24, 1999 between the Company and Joseph
                  R.
                  Cellura;10.15(10)
              
              Separation
                  Agreement dated as of September 1, 1999 between the Company and
                  Kenneth
                  Craig;
  62
  10.16(10)
              
              Settlement
                  Agreement dated as of January 31, 2000 between the Company and
                  Clifford F.
                  Bagnall;10.17(10)
              
              Settlement
                  Agreement dated as of January 31, 2000 between the Company and
                  Kirk
                  Scoggins;10.18(10)
              
              Memorandum
                  of Settlement dated as of June 29, 1999 between the Company and
                  the
                  Plaintiff Group;10.19(9)
              
              The
                  Company’s 1998 Incentive Stock Option Plan;10.20(10)
              
              Form
                  of OrbitTravel.com, Inc. Convertible Note;10.21(10)
              
              Management
                  Agreement dated November 17, 1999 between OrbitTravel.com, Inc.
                  and
                  Bonveno.com Limited;10.22(10)
              
              European
                  Specific Software Development Agreement dated November 17, 1999
                  between
                  OrbitTravel.com, Inc. and Bonveno.com Limited;10.23(10)
              
              Operational
                  Agreement dated November 17, 1999 between OrbitTravel.com, Inc.
                  and
                  Bonveno.com Limited;10.24(10)
              
              Interactive
                  Services Agreement between America Online, Inc. and Orbit Network,
                  Inc.
                  dated as of May 1, 1999;10.25(10)
              
              Agreement
                  dated as of July 1, 1996 between Applied Information Services,
                  Inc. and
                  Amadeus Marketing, S.A.;10.26(10)
              
              Associate
                  Distribution and Services Agreement dated as of April 2, 1998 between
                  Orbit Network, Inc. and The Sabre Group, Inc.;10.27(10)
              
              Services
                  Display and Reservations Agreement dated as of November 24, 1998
                  between
                  Orbit Network, Inc. and Galileo International, L.L.C.;10.28(10)
              
              Associate
                  Participation Global Reference System Agreement dated as of August
                  2, 1999
                  between Orbit Network, Inc. and WorldSpan, L.P.;10.29(10)
              
              Certificate
                  of Incorporation of OrbitTravel.com, Inc.;10.30(10)
              
              Bylaws
                  of OrbitTravel.com, Inc.;10.31(10)
              
              Joint
                  Venture Agreement dated November 17, 1999 among WebTravel Systems
                  Limited,
                  OrbitTravel.com, Inc., and Bonveno.com Limited;10.32(10)
              
              Form
                  of Indemnification Agreement;10.33(10)
              
              Joint
                  Content Distribution Agreement dated January 9, 2000 between
                  OrbitTravel.com, Inc. and AsiaGateway.com, Ltd.;10.34(10)
              
              Consulting
                  Services Agreement and Joint Consent Agreement dated February 7,
                  2000 by
                  and among OrbitTravel.com, Inc. and Laspata/Decaro Studio
                  Corp.;
  63
  10.35(11)
              
              Settlement
                  Agreement between Divot Golf Corporation and Joseph Salvani dated
                  March 1,
                  2000; *10.36(11)
              
              Settlement
                  Agreement between Divot Golf Corporation and Joseph Cellura Trust,
                  dated
                  March 1, 2000; *10.37(11)
              
              Addendum
                  to Funding Commitment Letter and Subscription Agreement between
                  Teakwood
                  Ventures, LLC and OrbitTRAVEL.com, Inc.; *10.38(12)
              
              Restated
                  and Amended Funding Agreement and Secured Revolving Credit Agreement
                  between Teakwood Ventures, LLC and OrbitTRAVEL.com,
                  Inc.;10.38
              
              Promissory
                  Notes Template ITREX International Corporation10.39
              
              Promissory
                  Notes Affidavit Template ITREX International
                  Corporation10.40
              
              Teakwood
                  Settlement dated October 18th,
                  200110.41
              
              Promissory
                  Note Sherman and Peabody dated June 4th,
                  200410.42
              
              Acquisition
                  Agreement of Smartvoice Telecommunications Incorporated (Georgia)
                  by
                  Smartvoice Telecommunication Incorporated (Delaware) dated January
                  1st,
                  200410.43
              
              Acquisition
                  Agreement of Malibu Beach Beverage Group dated June 30,
                  200410.44
              
              Employment
                  Agreement between ORBIT BRANDS CORPORATION and Pat Shuster dated
                  January
                  1st,
                  200410.45
              
              Intentionally
                  omitted10.46
              
              Intentionally
                  omitted10.47
              
              Intentionally
                  omitted10.48
              
              License
                  agreement with BBKO, LLC dated May 11, 2005.10.49
              
              Settlement
                  agreement with BBKO, LLC dated January, 2006.10.50
              
              Loan
                  documentation for $25,000 M2B loan dated February 25,
                  200510.51
              
              Loan
                  documentation for $25,000 M2B loan dated March 29, 200510.52
              
              Loan
                  documentation for $10,000 M2B loan dated April 8, 200510.53
              
              Loan
                  documentation for $100,000 M2B loan dated June 15,
                  2005.10.54
              
              Loan
                  documentation for $100,600 M2B loan dated September 9,
                  200510.55
              
              Loan
                  documentation for $10,000 M2B loan dated September 13,
                  2005
  64
  10.56
              
              Loan
                  documentation for $12,000 M2B loan dated September 13,
                  200510.57
              
              Loan
                  documentation for $300,000 Harbor View convertible note dated October
                  3,
                  2005.10.58
              
              Memorandum
                  of Understanding regarding potential acquisition of Floating Beds
                  Inc.
                  dated March 27, 2006.10.59
              
              Loan
                  documentation for $46,000 M2B loan dated April 19,
                  2006.10.60
              
              Loan
                  documentation for $30,000 Todd Silverstein note dated September
                  27,
                  200610.61
              
              Loan
                  documentation for $10,000 Todd Silverstein note dated October 4,
                  200610.62
              
              Loan
                  documentation for $25,000 Cleveland Biolabs, Inc.(“CBLI”) note with Malibu
                  Entertainment Group(“MEG’),dated December 7, 200610.63
              
              Loan
                  documentation for $25,000 CBLI note with BBKO dated December 7,
                  200610.64
              
              Loan
                  documentation for $25,000 CBLI note with MEG dated January 4,
                  200710.65
              
              Loan
                  documentation for $25,000 CBLI note with BBKO dated January 4,
                  200710.66
              
              Loan
                  documentation for $75,000 CBLI note with MEG dated February 2,
                  200710.67
              
              Loan
                  documentation for $75,000 CBLI note with BBKO dated February 2,
                  200710.68
              
              Loan
                  documentation for $25,000 Mike Silverstein note dated January 18,
                  200721(10)
              
              The
                  Company’s subsidiaries;31.1
              
              Certification
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002;32.1
              
              Certification
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.




(1)
      Incorporated by reference from the Company’s Current Report on Form 8-K dated
      April 20, 1998.





(2)
      Incorporated by reference from the Company’s Current Report on Form 8-K dated
      April 15, 1998.





(3)
      Incorporated by reference from the Company’s Current Report on Form 8-K dated
      April 8,1998.




65





(4)
      Incorporated by reference from the Company’s Form 10 filed on December 13,
      1993.





(5)
      Incorporated by reference from the Company’s Form 10 filed on September 15,
      1994.





(6)
      Incorporated by reference from the Company’s Annual Report on Form 10-KSB for
      1997.





(7)
      Incorporated by reference from the Company’s Annual Report on Form 10-K for
      1995.





(8)
      Incorporated by reference from the Company’s Current Report on Form 8-K dated
      August 30, 1996.





(9)
      Incorporated by reference from the Company’s Registration Statement on Form S-8
      filed September 1, 1998.





(10)
      Incorporated by reference from the Company’s Annual Report on Form 10-KSB for
      1999.





(11)
      Incorporated by reference from the Company’s Quarterly Report
      on
      Form 10-QSB for March 31, 2000.





(12)
      Incorporated by reference from the Company’s Quarterly Report on Form 10-QSB for
      September 30, 2000.





(b)
      Reports on Form 8-K





(1)  A report
      on Form 8-K dated June 30, 2004 disclosing Company’s creditors filing an
      Involuntary Chapter 11 Petition against the Company with the objective of
      reorganizing the Company in the United States Bankruptcy Court





(2)
      A
      report of Form 8-K dated December 30, 2005, disclosing a change in the Company’s
      Independent Certified Public Accountants.




66




Item
      14.
      Principal Accountant Fees and Services.





The
      following table sets forth fees billed to us by our auditors during the fiscal
      years ended December 31, 2004 and December 31, 2003 for: (i) services rendered
      for the audit of our annual financial statements and the review of our quarterly
      financial statements and services by our auditor that are reasonably related
      to
      the performance of the audit or review of our financial statements and that
      are
      not reported as Audit Fees, (ii) services rendered in connection with tax
      compliance, tax advice and tax planning, and (ii) all other fees for services
      rendered.





December
                31, 2004
            
            December
                31, 2003(i)
                Audit and audit-related fees
            
            $
            103,000
            
            $
            17,500(ii)
                Tax Fees
            
            $
            0
            
            $
            0(iii)
                All Other
            
            $
            0
            
            $
            0




67





SIGNATURES





In
      accordance with Sections 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 on or as of March 1, 2004.





ORBIT
                BRANDS CORPORATION fka OrbitTRAVEL.com CorporationBy:
                /s/ Joseph R.CelluraJoseph
                R. CelluraChairmanChief
                Executive Officer




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


Signature
              
              Title
              
              Date/s/
                  Joseph R. Cellura
              
              Chairman
                  of the Board of Directors and Chief Executive And Accounting
                  Officer
              
              February
                  12, 2007


68