**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
 ___________________
 
 **FORM
        10-KSB**
 ________________________________
 
 **ý**
              **ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
  For
        the
        fiscal year ended December 31, 2006
 
 ** ̈**
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
 
 
 For
        The
        Transition Period From  ___________ To ___________
 
 
 Commission
        File No.: 1-8497
 
 CALYPSO
        WIRELESS, INC.
 (Exact
        Name Of Registrant As Specified In Its Charter)
  **Delaware**
              
              **13-5671924**(State
                  of Incorporation)
              
              (I.R.S.
                  Employer Identification No.)**2500
                  N. W. 79th Ave., Suite 220, Doral, FL**
              
              **33122**(Address
                  of Principal Executive Offices)
              
              (ZIP
                  Code)
 
 Registrant's
        Telephone Number, Including Area Code: (305) 477-8722
 
 **Securities
        Registered Pursuant to Section 12(g) of The Act: Common Stock,
        $0.001**
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 x No  ̈
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes  ̈ No
        x
 
 Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K is not contained herein, and will not be contained, to the
        best
        of the registrant's knowledge, in the definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-KSB or any amendment
        to
        this Form 10-KSB.  ̈
 
 At
        December 31, 2006, the Registrant had 168,229,868 shares of common stock
        outstanding.
 
 Issuer's
        revenues for its most recent fiscal year: $0.
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer.
  Large
                  accelerated filer  ̈
              Accelerated
                  filer  ̈
              Non-accelerated
                  filer x
  
 
  **TABLE
        OF CONTENTS**
  **Item**
              
              **Description**
              
              **Page****PART
                  I**ITEM
                  1.
              
              DESCRIPTION
                  OF BUSINESS
              
              3ITEM
                  2.
              
              DESCRIPTION
                  OF PROPERTY
              
              16ITEM
                  3.
              
              LEGAL
                  PROCEEDINGS
              
              17ITEM
                  4.
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS
              
              17**PART
                  II**ITEM
                  5.
              
              MARKET
                  FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS
              
              19ITEM
                  6.
              
              MANAGEMENT'S
                  DISCUSSION AND ANALYSIS
              
              21ITEM
                  7.
              
              FINANCIAL
                  STATEMENTS
              
              25ITEM
                  8.
              
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE
              
              26ITEM
                  8.A
              
              CONTROLS
                  AND PROCEDURES
              
              26ITEM
                  8.B
              
              OTHER
                  INFORMATION
              
              26**PART
                  III**ITEM
                  9.
              
              DIRECTORS
                  AND EXECUTIVE OFFICERS OF THE REGISTRANT,
                  COMPLIANCE WITH SECTION 16(A)
              
              27ITEM
                  10.
              
              EXECUTIVE
                  COMPENSATION
              
              30ITEM
                  11.
              
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  AND RELATED STOCKHOLDER MATTERS
              
              32ITEM
                  12.
              
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                  INDEPENDENCE
              
              32ITEM
                  13.
              
              EXHIBITS
                  AND REPORTS ON FORM 8-K
              
              34ITEM
                  14.
              
              PRINCIPAL
                  ACCOUNTING FEES AND SERVICES
              
              35
  ***Table
            of Contents***
  **PART
        I**
 
 **ITEM
        1. DESCRIPTION OF BUSINESS**
 
 Some
        of
        the statements contained in this Form 10-KSB of Calypso wireless, Inc.
        (hereinafter the "Company", "We" or the "Registrant") for its year ended
        December 31, 2006 discuss future expectations, contain projections of results
        of
        operations or financial condition or state other forward-looking information.
        These statements are subject to known and unknown risks, uncertainties, and
        other factors that could cause the actual results to differ materially from
        those contemplated by the statements. The forward-looking information is
        based
        on various factors and is derived using numerous assumptions. Important factors
        that may cause actual results to differ from projections include, for
        example:
 
 **-**
              the
                  success or failure of management's efforts to implement their business
                  strategies;
 **-**
              the
                  ability of the Company to raise sufficient capital to meet operating
                  requirements;
 **-**
              the
                  ability of the Company to hire and retain quality
                  management;
 **-**
              the
                  ability of the Company to compete with other established companies
                  that
                  operate in the same markets and
                  segments;
 **-**
              the
                  effect of changing economic conditions impacting
                  operations;
 
 **Business
        Development**
 
 Calypso
        Wireless, Inc. (the "Company", "we", "Calypso" or Calypso Wireless), formerly
        Kleer-Vu Industries, Inc. (Kleer-Vu), was incorporated in the State of Delaware
        on March 22, 1983. The Company operates as a holding company with three
        subsidiaries, Industria de Telecomunicaciones Americanas ATEL, S.A. (American
        Telecom Industries ATEL, S.A.), which was incorporated in 1997 under the
        Laws of
        the Republic of Costa Rica;  Sleipner, S. A. which was incorporated in
        2003 under the laws of Switzerland and doing business in Milan, Italy; and
        Calypso Technology Holdings, Inc which was incorporated in 2006 in the State
        of
        Florida.
 
 The
        Company is a result of a business combination on October 4, 2002, between
        Kleer-Vu Industries, Inc., a public shell company, and Calypso Wireless,
        Inc., a
        privately held development stage company incorporated in the State of Florida
        in
        1998. Kleer-Vu acquired all of the outstanding capital stock of Calypso
        Wireless, Inc. by issuing 90,000,000 shares of its restricted common stock.
        For
        accounting purposes, the acquisition has been treated as the recapitalization
        of
        Calypso Wireless, Inc., with Calypso Wireless, Inc. being deemed the acquirer
        of
        Kleer-Vu in a reverse merger. At the conclusion of the merger, Calypso Wireless,
        Inc. stockholders held 99.8% of the combined company.  The Company is
        a development stage company. The company has been in the development stage
        since
        inception of its wholly owned subsidiary; Industria de Telecomunicaciones
        Americanas ATEL, S.A. (American Telecom Industries ATEL, S.A.) which was
        incorporated in 1997 under the Laws of the Republic of Costa Rica. American
        Telecom Industries ATEL, S.A. began its research and development activities
        in
        1997. In July, 2005, Calypso Wireless acquired a 16.8% interest in RV Technology
        Ltd. (RV Technology). RV Technology is a limited company under the laws of
        Hong
        Kong. The company is privately held.  In October, 2005 Calypso
        acquired Sleipner S. A. to obtain software to complement ASNAP.  In
        September, 2006 the board of Directors authorized the creation of a wholly
        owned
        subsidiary Calypso Technology Holding, Inc. which was incorporated in Florida
        to
        explore a proposed contract with VoipTel to propose on a contract in Argentina
        that would have Calypso providing a dual mode device operating on GSM and
        Wi-Fi
        in 802.11a standard (5Ghz).  Calypso Technology Holdings received
        $10,000 from Buenos Aires VoipTel, the prime bidder, to travel to Argentina
        and
        assist in the proposal to the Argentina government officials.  VoipTel
        has not received the frequencies required to proceed with any
        work.  There was no other activity in Calypso Technology
        Holdings.
 
 Calypso
        Wireless received a patent for its technology (U.S. Patent Number: 6,680,923)
        on
        January 20, 2004.  Our patent covers a communication and system method
        for establishing communication with any one of a variety or different wireless
        communication devices. The ASNAPTM technology enables seamless session
        transparency of all sessions, voice/video/data across antennae on dual mode
        cell
        phones, WiFi and macro-cellular, as well as across devices-residential,
        enterprise to macro networks (cellular phones, WiFi enabled PCs/TVs/Stereos,
        Satellite devices, and wireline devices). Additionally the ASNAPTM patent covers
        Revenue Settlements with in-building networks to macro-network
        carriers.
  3
 ***Table
            of Contents***
  **Overview
        of Business**
 
 Calypso
        Wireless’ has developed and patented technology that spans voice, video and data
        session transparency across macro-cellular networks and wireless local area
        networks.   During 2007, Calypso began the development of a test
        unit with a large US based network company. in Boca Raton,
        Florida.  Upon completion of the test unit, using the Calypso ASNAP
        technology, the companies expect to conduct a field trial with a large GSM
        wireless carrier.    Further, the Company has been in
        discussion with companies regarding licensing.  It is now shifting
        from pure research and development to beginning to work with companies regarding
        licenses.  This was previously reported as the new business model for
        Calypso.
 
 Fixed-mobile
        convergence (FMC) technology allows individuals to unite their mobile and
        business or home communications under a single phone number and voicemail
        system
        by using a combination of software, hardware and wireless services to register
        multiple handsets with a system. Proponents of FMC include mobile OEMs such
        as
        Motorola, Nokia and Sony Ericsson along with carriers such as AT&T Wireless,
        Cingular Wireless and T-Mobile all of which are supporting a mobile-centric
        model. Unlicensed Mobile Access (UMA) would allow cellular GSM (Global System
        for Mobile Communications) and GPRS (General Packet Radio Service) transmissions
        to travel over broadband networks operating in unlicensed radio bands. Dual-mode
        handsets would be able to seek out public and private wireless broadband
        internet networks (Wi-Fi and potentially WiMAX) and switch transmissions
        over to
        those networks to improve coverage or reduce airtime costs.
 
 The
        Company's Products and Services
 
 Calypso
        Wireless developed the solution that allows any mobile device to seamlessly
        roam
        between cellular networks and wireless local area networks. On January 20,
        2004
        Calypso received U.S. Patent No. U.S. 6,680,923 B1 titled: “Communication System
        and Method”. This solution is known by the trademarked acronym,
**ASNAPTM**, which stands for: Automatic Switching of Network Access
        Points.
 
 Calypso
        incorporated it’s **ASNAPTM** technology in the world's first mobile
        video phone, the C1250i that works seamlessly on both traditional
        cellular/digital frequencies and the exciting new Wi-Fi frequency. Using
        broadband, it offers a fast Internet connection that allows users to video
        conference with movie-like quality, to send and receive video clips with
        audio,
        movies-on-demand, and many other high speed services.
 
 In
        2006
        Calypso abandoned development of the its pioneering dual mode cellphone,
        for
        development of Software-based Seamless Mobility solutions, which can be licensed
        by 3rd-party partners.
 
 Calypso
        Wireless is a pre-production R&D company with key IPR assets.  The
        company has successfully demonstrated prototype applications of Seamless
        Session
        continuity of Voice, Video, and data. The company objectives include
        productization of the ASNAP technology with licensing to OEM partners. Several
        opportunities have been identified as possible OEM partnerships, carrier
        customers, as well as Enterprise customers.
  Additional
        markets can occur with licensing of Calypso Wireless's  IPR (bluetooth
        applications, patent-pending technologies) in the area of Satellite
        Communications as well as licensing the existing FMC patent for  areas
        other than voice applications, such as video, music and data session
        continuity.
  4
 ***Table
            of Contents***
  Industry
        Background
 
 Service
        Convergence focuses on end-user requirements and the service
        experience.  The primary goal of service convergence is the optimal
        delivery of all media types — voice, data, and video— to an easy-to-use user
        experience, with access, location, presence and device awareness. A goal
        of
        Calypso Wireless is to partner with Tier 2/3 carriers, MVNO/MVNE’s, OEM
        manufacturers, and Enterprise solutions providers that can license the Calypso
        Wireless technology, to enable Seamless Mobile Enterprise
        solutions.
  Market
        Size
 
 According
        to the July 2006 issue of PC Today. Cellular hardware vendors are pursuing
        FMC
        aggressively. ABI Research predicts the market for fixed mobile handsets
        will
        reach 100 million annually by 2009. And, traditional telephone companies
        customer base is dropping. Market research firm Research And Markets predicts
        wireline usage in the US will drop 8.5% by 2009. These companies need to
        offer a
        new value proposition. A principal analyst at Gartner is convinced that
        convergence is coming to stay. He says in the future, everyone will have
        a
        single mobile terminal for all their telephony needs. They will be reached
        under
        a single number anytime and anywhere. Also, a 2005 survey by Boston research
        and
        consulting firm Chadwick Martin Bailey found that 23% of IT managers have
        already allocated budget for FMC.
 
 Calypso
        Wireless with partners: offers subscribers greater flexibility, simplicity
        and
        economy:
 
 §
              Unified
                  fixed and mobile service with one phone, one number and one
                  bill
 §
              Seamless
                  roaming between cellular, Wi-Fi, WiMAX and wireline devices, for
                  Voice/Video/Data sessions - No gaps, No dropped
                  calls
 §
              More
                  reliable mobile service with wider coverage at lower
                  cost
 §
              Closer
                  integration between public and enterprise phone
                  networks
 §
              Targeted
                  Ads  - based on user
                  location
 §
              Location-aware
                  services – based on GPS, Cellular base station cellid, WiFi MAC
                  Address/SSID
 §
              Presence-aware
                  services
 §
              Newer
                  Bluetooth applications – Skype, VoIP, XM/Sirius/Worldspace Satellite
                  Music
 §
              Friendly
                  user interfaces that make it easy to make and manage
                  calls
 §
              Least
                  Cost Routing:
 §
              Better
                  in-building coverage and the prospect of being able to make FREE
                  local
                  calls while at home – or at least minimize on cellular airtime
                  charges
 §
              Users
                  minimize cellular termination fees from landline callers, by terminating
                  most calls to WiFi SIP, or landline numbers, instead of cellular
                  numbers.
 
 The
        new
        market for seamless WiFi- session continuity which are potential revenue
        sources
        for Calypso include:
  §
              OEM
                  Cellphone Vendor licensing Calypso Wireless ASNAP patent, (i.e.
                  Dual Mode
                  phone WiFi GSM phones, WiFi/3G, CDMA EVDO/WiMAX, 4G UMB/LTE
                  )
 §
              OEM
                  PBX Server Vendor licensing Calypso Wireless patent for Seamless
                  Voice
                  FMC, Skype, VoIP turning legacy PBXs into IP FMC PBXs (i.e. Cisco,
                  Avaya,
                  Mitel, MSFT Live Communications Server,
                  etc.)
 §
              OEM
                  Large Switch Vendor licensing Calypso Wireless ASNAP patent, for
                  Seamless
                  Voice FMC,  for UMA/IMS (i.e. Lucent, Nortel, Siemens, MSFT
                  Connected Services Framework, etc.)
 §
              OEM
                  Multimedia Vendor licensing Calypso
                  Wireless ASNAP patent, for Seamless Video FMC, (i.e. SONY, Microsoft
                  IPTV,
                  Siemens Myrio, Lucent IMS, etc.)
 §
              OEM
                  Chip Vendor licensing Calypso Wireless ASNAP patent,  for
                  session continuity – data, video, Skype, VoIP, Seamless Roaming with WiFi
                  (i.e. AMD, Mosaid, Intel, Freescale, TI,
                  etc.)
 §
              OEM
                  Vendor licensing Calypso Wireless patent, for other projects – Location
                  data session contuity – GPS, Cellular EOTD, RFID, WiFi MAC Address / SSID,
                  etc. (i.e. Google Earth with People Search, Location-based services
                  in CRM
                  tools, etc.)
  5
 ***Table
            of Contents***
 
 §
              Carriers
                  with WiFi partner initiatives with Seamless Roaming, Revenue Peering
                  (i.e.
                  WiFi/WiMAX cities)
 §
              Ebay-Skype
                  using Calypso Wireless ASNAP for Skype, VoIP projects, targeted
                  ads for
                  location services.
 §
              Satellite
                  Radio – WLAN patent-pending licensing (i.e. XM, Worldspace, Sirius,
                  Delphi)
 §
              Router
                  companies Co-branding / Re-selling Calypso Wireless ASNAP Servers,
                  for
                  seamless Data session continuity with 3G, WiFi,
                  etc.
  The
        potential licensees of the Calypso Wireless IPR (software, patent)
        include:
 
 §
              Chip
                  companies (e.g. Intel, AMD, as well as specialist companies like
                  Marvell,
                  Agere, Mosaid, etc.)
 §
              Software
                  OS companies (e.g. Microsoft, PalmOS,
                  etc.)
 §
              Telecom
                  Equipment companies (e.g. Alcatel-Lucent, Ericsson, Nokia-Siemens,
                  Nortel,
                  etc.)
 §
              Cellular
                  Handset companies (e.g. Sony Ericsson, RIM, Nokia,
                  etc.)
 §
              Enterprise
                  IP PBX Server companies (e.g. Avaya, Mitel,
                  etc.)
 §
              Enterprise
                  Applications companies (e.g. SAP, Microsoft,
                  etc.)
 §
              Carrier
                  Applications companies (e.g. IBM, RIM, BEA-Weblogic,
                  etc.)
 §
              Virtual
                  Operators (Disney Cellular, VoIP resellers, MVNOs,
                  etc.)
 §
              Carriers
                  (e.g. AT&T-Cingular, Verizon, Sprint-Embarq, Helio,
                  etc.)
 §
              Specialized
                  Vertical Applications (e.g. Satellite Media, Music, Video,
                  etc.)
 
 Competitors
 
 Calypso's
        products are based on patented technology (U.S. Patent Number: 6,680,923).
        Based
        on this patented technology and our knowledge of wireless products and
        technology, we are in a favorable position to begin licensing the use of
        our
        patented ASNAPTM technology to other original equipment manufacturers (OEM's)
        that manufacture cellular phones, WLAN access points, laptops computers,
        personal computers, personal digital assistants (PDA's), network servers,
        call-control media gateways, telecommunication equipment, and
        microprocessors.
 
 We
        believe that our key competition will come from existing companies that
        currently market products and services that provide communication with wireless
        communication devices. While we believe that our patented ASNAPTM technology
        provides numerous benefits to, and is a superior solution for, both end-users
        and Mobile Carriers, primarily based upon the fact that our technology enables
        users of wireless communication devices to seamlessly roam between existing
        cellular systems (i.e., WAN's- Wide Area Network's, GSM/GPRS - Global System
        for
        Mobile Communications/General Packet Radio Service, or CDMA - Code Division
        Multiple Access) and Internet broadband access through WLAN (Wireless Local
        Area
        Networks), there can be no assurance that these benefits will be realized
        or
        utilized, or that other companies will not suitably improve these parameters
        through the use of other technology.
 
 Patents
        and Proprietary Rights
 
 Calypso
        Wireless received a patent for its technology (U.S. Patent Number: 6,680,923)
        on
        January 20, 2004. Our patent covers a communication and system method for
        establishing communication with any one of a variety or different wireless
        communication devices. This technology enables users of cellular phones,
        PCMCIA
        (Personal Computer Media Interface Card Accessory) cards and other wireless
        devices to seamlessly roam between existing cellular WAN (Wide Area Network's)
        GSM/GPRS (Global System for Mobile Communications/General Packet Radio Service)
        or CDMA (Code Division Multiple Access) and WLAN (Wireless Local Area Networks)
        utilizing the 802.11 Wi-Fi standard (Wireless Fidelity).
 
 The
        Company pursues patent protection for its technology and products as soon
        as
        such technology and products are developed. To this end, we have filed United
        States patent applications and related technology international patent
        applications. The Company has filed foreign patent applications on some of
        its
        technology and products in countries where business considerations warrant
        such
        fillings. Such countries include Australia, Japan, Canada, China, Brazil,
        and
        Mexico, countries of the European Economic Community and other European
        countries.
  6
 ***Table
            of Contents***
  We
        also
        rely on proprietary technology, trade secrets, and know-how, which are not
        patented. To protect our rights in these areas, the Company requires its
        employees, directors, consultants, members of the Advisory Board, outside
        engineers and other advisors to execute confidentiality agreements upon the
        commencement of employment, consulting or other contractual relationships
        with
        the Company. These agreements provide that all confidential information
        developed or made known to the individual during the course of the relationship
        is to be kept confidential and not disclosed to third parties except in specific
        circumstances. In the case of employees, the agreements provide that all
        inventions conceived by the individual shall be the exclusive property of
        the
        Company. There can be no assurance, however, that these agreements will provide
        meaningful protection for our trade secrets, know-how or other proprietary
        information in the event of any unauthorized use, misappropriation or disclosure
        of such trade secrets, know-how or other proprietary information.
 
 We
        believe that our intellectual property gives us an advantage over potential
        competitors in that it will allow us to offer products that bring substantial
        savings to both the end users and the mobile service providers (cellular
        operators).
 
 The
        company has filed for patent protection covering an extension of its technology
        to allow users of mobile devices such as cellular phones, PDA's, satellite
        radios and portable music players, to receive satellite broadcasts on those
        devices from either satellite transmitters or wireless LAN access points,
        such
        as Wi-Fi. Calypso built upon its patented technology to create a new solution
        that allows satellite radio signals from carriers such as XM Satellite Radio
        and
        Sirius Satellite Radio to be readily received by various types of wireless
        devices.
 
 Research
        and Development
 
 We
        are in the process of adding personnel to assit in trials and any subsequent
        development that might be required for licensing.  Other development
        expenditures will relate to our new blu-blaster product.
 
 Employees
 
 In
        conjunction with its direction towards licensing its technology, the Company
        has
        reduced its operating costs by reducing the number of employees to approximately
        8 employees.
  **Reports
        to Security Holders**
 
 Calypso
        is not required to deliver an annual report to security and will not undertake
        the expense to do so at this time.  The Company files 10-QSBs
        quarterly with the SEC and 10-KSBs annually.  The public may read and
        copy any materials we file with the SEC at the SEC’s Public Reference Room at
        450 Fifth Street, N. W., Washington, D. C.  Information can be
        obtained on the operation of the Public Reference Room by calling the SEC
        at
        1-800-SEC-0330.  the SEC maintains an internet site that contains
        reports, proxy and information statements, and other information regarding
        Calypso and the address of that site is http://www.sec.gov .
 
 **ITEM
        2.****DESCRIPTION OF PROPERTY**
  Calypso
        Wireless has relocated its offices.  Effective January 1, 2007 Calypso
        entered into a lease to occupy office space at 2500 N. W. 79th Ave.,
        Doral, FL 33122, Suite 220.  The terms are $3600 per month from
        January 1, 2007 to December 31, 2008.  More space may be required as
        the development staff grows.
  7
 ***Table
            of Contents***
  **ITEM
        3. LEGAL PROCEEDINGS**
  On
        November 5, 2004, Drago Daic d/b/a Tribeca Inc, filed a lawsuit against
        the Company, Texas, alleging that the Company delivered restricted shares
        rather than registered shares in a stock purchase; that he was assigned an
        interest in a lawsuit and the Company refused to acknowledge his interest;
        that
        he was hired to assist in obtaining the grant of a patent in exchange for
        4,500,000 shares.  Although, the Company disputes the claims; has
        never issued any shares to Mr. Drago, is not pursing litigation against anyone,
        never signed a contract for assistance with the patent and has used its
        attorneys Malloy & Malloy to obtain such patent; on December 8, 2006, the
        Court rendered a judgment against Calypso in the amount of
        $117,000,000.  Our attorney’s felt that the Company had not adequately
        presented information in its defense due to certain
        limitations.  Therefore, after entry of this judgment, Calypso has
        filed a lawsuit seeking a “bill of review”, in effect a suit to set aside the
        Daic judgment, based on new information. The bill of review was granted
        :*Calypso Wireless, Inc. v. Drago Daic*, Cause No. 2007-22571 in the
        151st District Court of Harris County, Texas.  Trial date has been set
        for November 7, 2007.  The Company believes that this new trial will
        reverse the judgment; however the outcome of this case is
        uncertain.
 As
          a part
          of the filings and rulings related to the Daic case, Calypso must notify
          the
          Court prior to selling the patent or giving substantial rights to a third
          party.  We have been told that the Court will not deny any agreements
          that are related to the normal course of our business.  As such, the
          Company will continue to pursue licensing agreements as that is in the
          normal
          course of our business model and work with the Court to protect the interests
          of
          our shareholders.
 On
        April
        1, 2005, the Company terminated the services of the law firm of Sears &
Crawford.  They sought arbitration to recover legal fees that were
        challenged by Calypso.  The Company has settled this
        lawsuit.
 
 On
        October 6, 2005, Robert Leon, the Company's former Chief Technology Officer,
        commenced an action against the Company seeking additional compensation and
        reimbursement of certain expenses. On June 23, 2006, the Company agreed to
        a
        Stipulated Settlement Agreement, General Release and Proposed Order for the
        payment of $60,000 and issuance of 150,000 shares of stock.   The
        shares have been issued, however payment of the cash portion has not been
        made.  The amount is accrued in the financial statements as
        presented.
 
 On
        March
        3, 2006, Canal Place Ltd. commenced an action against the Company seeking
        unpaid
        rent for the term of certain leased property in Akron Ohio in the amount
        of
        $27,755.56. The Company had moved certain technical employees from Akron
        to
        Miami and decided to abandon the lease in Akron.  This amount is
        accrued in the financial statements as presented although no further action
        has
        been taken by Canal Place, Ltd. to further a lawsuit.
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS**
 
 During
        the year ended December 31, 2006, no matters were submitted to a vote of
        our
        security holders.
 
 **PART
        II**
 
 **ITEM
        5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS**
 
 The
        Company's common stock is traded on the Pinksheets under the symbol "CLYW",
        The
        Company's authorized capital stock consists of 200,000,000 shares of common
        stock, $.001 par value, of which 168,229,868 shares were issued and
        outstanding as of December 31, 2006.  For the periods indicated, the
        following table sets forth the high and low bid prices per share of common
        stock. The below prices represent inter-dealer quotations without retail
        markup,
        markdown, or commission and may not necessarily represent actual
        transactions.
 
 **High**
              
              
              **Low**Year
                  Ended December 31, 2006
              
              $
              0.49
              
              
              $
              0.02Quarter
                  ended December 31, 2006
              
              
              0.08
              
              
              
              0.02Quarter
                  ended September 30, 2006
              
              
              0.09
              
              
              
              0.04Quarter
                  ended June 30, 2006
              
              
              0.22
              
              
              
              0.07Quarter
                  ended March 31, 2006
              
              
              0.49
              
              
              
              0.20Year
                  Ended December 31, 2005
              
              $
              1.69
              
              
              $
              0.34Quarter
                  ended December 31, 2005
              
              
              0.90
              
              
              
              0.34Quarter
                  ended September 30, 2005
              
              
              1.02
              
              
              
              0.67Quarter
                  ended June 30, 2005
              
              
              1.69
              
              
              
              0.88Quarter
                  ended March 31, 2005
              
              
              1.68
              
              
              
              0.68
  8
 ***Table
            of Contents***
 
 (b)
        As of
        December 31, 2006, the company believes there were approximately 1,617 holders
        of record of the Company's common stock. The number of stockholders of record
        does not necessarily reflect the number of beneficial owners of the Company's
        common stock; however, because many beneficial owners may hold shares through
        nominee holders, such as brokerage firms which, in turn hold through the
        nominee
        of a securities clearing organization, such as The Depository Trust Company.
        Thus, a single stockholder of record may represent numerous beneficial
        owners.
 
 (c)
        The
        Company has never paid any cash dividends in the past and anticipates that
        for
        the foreseeable future all earnings, if any, will be retained to finance
        growth
        and to meet working capital requirements.
 
 **Securities
        Authorized for Issuance Under Equity Compensation Plans**
 
 The
        following table shows information with respect to equity compensation plans
        under which our common stock is authorized for issuance as of December 31,
        2006.
 
 **Plan
                  category**
              
              **Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights**
              
              
              **Weighted
                  average exercise   price of outstanding options, warrants and
                  rights**
              
              
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a)****(a)**
              
              
              **(b)**
              
              
              **(c)**Equity
                  compensation plans approved by security holders
              
              0
              
              
              0
              
              
              0Equity
                  compensation plans not approved by security holders
              
              2,722,646
              
              
              0.80
              
              
              N/ATotal
              
              2,722,646
              
              
              0.80
              
              
              N/A
 
 **Warrants**
 
 Calypso
        has agreed to grant approximately 390,000 warrants to D. E. Wine Investments,
        Inc. pursuant to the investment banking agreement between the Company and
        D. E.
        Wine. The warrant is a seven-year warrant to purchase common stock of the
        Company at an exercise price per share equal to the price paid per share
        for
        each Security equaling 10% of the financing total in public or private
        placements.  These warrants are included in the totals in the table
        above.
  9
 ***Table
            of Contents***
  **Recent
        Sales of Unregistered Securities**
 
 During
        the fourth quarter of 2006, the Company incurred the obligation to issue
        unregistered shares as set forth below:
  **Date
                  of Issuance**
              **Name**
              
              **No.
                  of Shares**
              
              **Consideration**
              **Exemption**Accrued
              Lissette
                  Mendoza
              
              
              115,000
              
              Employment
                  Services valued at $7,600
              Section
                  4(2)Accrued
              Julietta
                  Moran
              
              
              50,000
              
              Employment
                  Services valued at $1,500
              Section
                  4(2)Accrued
              Alfredo
                  J. Sarrazin
              
              
              112,500
              
              Employment
                  Services valued at $5,250
              Section
                  4(2)Accrued
              David
                  Davila
              
              
              170,000
              
              Employment
                  Services valued at $15,000
              Section
                  4(2)Accrued
              Cristian
                  Turrini
              
              
              120,000
              
              Employment
                  Services valued at $15,200
              Section
                  4(2)Accrued
              Alessandro
                  Valenti
              
              
              100,000
              
              Employment
                  Services valued at $7,000
              Section
                  4(2)Accrued
              Fernando
                  Salvador
              
              
              40,000
              
              Employment
                  Services valued at $3,200
              Section
                  4(2)
 Accrued
                Cacovisa-Project  Development
                    Capital
                
                
                1,273,333
                
                Private
                    Placement valued at $38,200
                Section
                    4(2)Accrued
                I.
                    Medicas Central
                
                
                3,664,400
                
                Private
                    Placement valued at $146,576
                Section
                    4(2)Accrued
                Importadora
                    Exportadora Istmo, SA
                
                
                2,833,333
                
                Private
                    Placement valued at $85,000
                Section
                    4(2)Accrued
                Inversiones-Logistic
                    Specialist Investment, Inc.
                
                
                1,700,000
                
                Private
                    Placement valued at $51,000
                Section
                    4(2)Accrued
                Link
                    System Group, Inc.
                
                
                3,833,333
                
                Private
                    Placement valued at $50.000
                Section
                    4(2)Accrued
                Interfactoring
                    Finance Corp-Manuel Antonio
                
                
                1,366,666
                
                Private
                    Placement valued at $41,000
                Section
                    4(2)Accrued
                Marker
                    Ventures, Inc.
                
                
                5,833,333
                
                Private
                    Placement valued at $175,000
                Section
                    4(2)
 The
        issuances of shares as compensation for consulting, employee, officer and
        director services as for broker commissions were also made in reliance upon
        Section 4(2) of the Act. The offering and sale of shares to accredited investors
        for cash consideration in connection with private placements were made in
        reliance upon Section 4(2) of the Act. The Company believes that the above
        issuances of restricted shares were exempt from registration pursuant to
        Section
        4(2) of the Act as privately negotiated, isolated, non-recurring transactions
        not involving any public solicitation. The recipients in each case represented
        their intention to acquire the securities for investment only and not with
        a
        view to the distribution thereof. Appropriate restrictive legends are affixed
        to
        the stock certificates issued in such transactions.
  10
 ***Table
            of Contents***
  **ITEM
        6. MANAGEMENT'S DISCUSSION AND ANALYSIS**
 
 **Introduction**
 
 The
        following discussion of our financial condition and results of our operations
        should be read in conjunction with the Financial Statements and Notes thereto.
        Our fiscal year ends December 31. This document contains certain
        forward-looking statements including, among others, anticipated trends in
        our
        financial condition and results of operations and our business strategy.
        (See
        "Factors Which May Affect Future Results"). These forward-looking statements
        are
        based largely on our current expectations and are subject to a number of
        risks
        and uncertainties. Actual results could differ materially from these
        forward-looking statements. Important factors to consider in evaluating such
        forward-looking statements include (i) changes in external factors or in
        our
        internal budgeting process which might impact trends in our results of
        operations; (ii) unanticipated working capital or other cash requirements;
        (iii)
        changes in our business strategy or an inability to execute our strategy
        due to
        unanticipated changes in the industries in which we operate; and (iv) various
        competitive market factors that may prevent us from competing successfully
        in
        the marketplace.
 
 **Plan
        of Operation**
  In
        2007,
        the Company will devote its resources into working with potential partners
        to
        license the patent, continued product development on its Bluetooth product
        and
        securing field trial agreements on the product which will allow for
        customization of the software for contracts to license the technology. This
        will
        provide the company its initial revenue and create a return for the
        shareholders.  Further, management will be pursing investors for
        interim cash flow until the contracts are finalized. Lastly efforts will
        be
        focused on risk mitigation with relationship to litigation and the ongoing
        SEC
        matters.
 
 During
        2007, Calypso began the development of a test unit with a large US based
        network
        company. in Boca Raton, Florida.  Upon completion of the test unit,
        using the Calypso ASNAP technology, the companies expect to conduct a field
        trial with a large GSM wireless carrier.  Further, the Company has
        been in discussion with companies regarding licensing.  It is now
        shifting from pure research and development to beginning to work with companies
        regarding licenses.  This was previously reported as the new business
        model for Calypso.
  **Analysis
        of Financial Condition and Results of Operation**
 
 Liquidity
        and Capital Resources
  At
        December 31, 2006, we had a working capital deficit of $1,742,611 compared
        to a
        negative working capital of $1,494,273 at December 31, 2005. The Company's
        cash
        position at December 31, 2006 was $4,609 compared to $4,771 at December 31,
        2005. Calypso did not generate any revenue in this year from operations but
        did
        sell equipment that had previously been held for the manufacture of cell
        phones.  The Company was unable to finalize any of the agreements with
        potential investors that would have raised significant capital and potentially
        resulted in a change in control.  In 2006, the Company has raised
        $983,500 in private placement offerings for working capital
        purposes.
 
 The
        Company requires approximately $1.2 million to fund its annual operating
        budget
        for 2007 not including non-cash expenses for depreciation and amortization.
        These funds will be used for payment expenses related to testing of the
        products, marketing the products, and normal business operations.  As
        of April 30, 2007 the Company has raised $160,000 in private
        placements.  Further, on March 16, 2007, the Company entered into a
“Patent Mortgage and Security Agreement” with several individuals where it
        issued Promissory Notes for $200,000, payable on March 18, 2008, to these
        individuals which granted the lenders a security interest and mortgage as
        collateral security to Debtor’s entire right, title and interest in, and under
        the following, now or hereafter existing, created, acquired or held by Debtor
        to
        its Intellectual Property.  At the option of the lender, the loans can
        be converted into shares of common stock at a conversion price of
        $0.05.
  11
 ***Table
            of Contents***
  Results
        of Operations - Year Ended December 31, 2006 compared to Year Ended December
        31,
        2005
 
 *Revenues*
 
 The
        Company did not generate any revenue related to the sale of its products
        during
        the years 2006 and 2005.  The Company is anticipating finalizing
        licensing agreements in the latter half of 2007 to continue to finance
        operations.
 
 *Operating
        Expenses*
  During
        2006, the Company incurred operating expenses of $4,411,464 compared to
        $10,715,246 during 2005. Our operating expenses decreased by approximately
        $6.3
        million.   Operating expenses, have been substantially reduced
        and consist primarily of depreciation and amortization and the write-off
        of
        equipment held for the development of cell phones - non-cash
        expenditures.  Cash operating expenses were primarily for
        significantly reduced staff and rent.
 
 *Net
        Loss and Loss Per Share*
 
 The
        Company had a net loss of $4,852,634 for the year ended December 31, 2006,
        compared to a net loss of $10,715,246 in 2005. The net loss decreased by
        $5,862,613.  The decrease was due to the reasons set forth under
        Operating Expenses above. The Company's net loss per share for 2006 and 2005
        were $0.03 and $0.09, respectively.
 
 **Off-Balance
        Sheet Arrangements**
 
 As
        of
        December 31, 2006 we did not have any off-balance sheet arrangements as defined
        in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities
        Act of
        1934.
 
 **ITEM
        7.****CONSOLIDATED FINANCIAL STATEMENTS**
 
 The
        Registrant's audited financial statements for the fiscal years ended December
        31, 2006 and 2005 are attached to this annual report.
 
 Consolidated
        Financial Statements for the Years ended December 31, 2006 and 2005
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles require the appropriate application of certain accounting
        policies, many of which require us to make estimates and assumptions about
        future events and their impact on amounts reported in the financial statements,
        and related notes. Since future events and their impact cannot be determined
        with certainty, the actual results will inevitably differ from our estimates.
        Such differences could be material to the financial statements.
 
 We
        believe application of accounting policies, and the estimates inherently
        required by the policies, are reasonable. These accounting policies and
        estimates are periodically reevaluated, and adjustments are made when the
        facts
        and circumstances dictate a change.
 
 **Critical
        Accounting Policies**
 
 Our
        significant accounting policies are described in the note 1 to our consolidated
        financial statements for the year ended December 31, 2006.
  12
 ***Table
            of Contents***
  **New
        Accounting Pronouncements**
 
 In
        May
        2005, the Financial Accounting Standards Board (*"FASB"*) issued
        Statement of Financial Accounting Standard (*"SFAS"*) No. 154,
*Accounting Changes and Error Corrections*. SFAS No. 154 replaces
        Accounting Principles Board Opinion No. 20, *Accounting Changes*, and
        SFAS No. 3, *Reporting Accounting Changes in Internal Financial
        Statements*, and changes the requirements for the accounting for and
        reporting of a change in accounting principle. SFAS No. 154 requires
        retrospective application of changes in accounting principle to prior periods’
financial statements, unless it is impracticable to determine either the
        period-specific effects or the cumulative effect of the change. SFAS No.
        154 is
        effective for accounting changes and corrections of errors made in fiscal
        years
        beginning after December 15, 2005. We adopted SFAS No. 154 on January 1,
        2006.
        Any impact on the Company’s consolidated results of operations and earnings per
        share will be dependent on the amount of any accounting changes or corrections
        of errors whenever recognized.
 
 In
        2006,
        the Financial Accounting Standards Board issued the following:
 
 -
              SFAS
                  No. 155: Accounting for Certain Hybrid Financial
                  Instruments
 -
              FAS
                  No. 156: Accounting for Servicing of Financial
                  Assets
 -
              FAS
                  No. 157: Fair Value Measurements
 -
              FAS
                  No. 158: Employers’ Accounting for Defined Benefit Pension and Other
                  Postretirement Plans
 -
              FAS
                  No. 159: The Fair Value Option for Financial Assets and Financial
                  Liabilities—Including an amendment of FASB Statement No.
                  115
 -
              FIN
                  No. 48: Accounting for Uncertainty in Income Taxes—an interpretation of
                  FASB Statement No. 109
 
 Management
        has reviewed these new standards and believes that they have no impact on
        the
        financial statements of the Company.
 
 **ITEM
        8.****CHANGES AND DISAGREEMENTS WITH
        ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**
 
 None.
 
 **ITEM
        8A. CONTROLS AND PROCEDURES**
 
 Our
        management is responsible for establishing and maintaining an adequate level
        of
        internal controls over financial reporting. Internal control over financial
        reporting is a process designed to provide reasonable assurance regarding
        the
        reliability of financial reporting and the preparation of financial statements
        for external purposes in accordance with GAAP. Internal control over financial
        reporting includes policies and procedures that:
 
 §
              Pertain
                  to the maintenance of records that, in reasonable detail, accurately
                  and
                  fairly reflect the transactions and dispositions of the assets
                  of the
                  Company;
 §
              Provide
                  reasonable assurance that transactions are recorded as necessary
                  to permit
                  preparation of financial statements in accordance with GAAP, and
                  that
                  receipts and expenditures of the Company are being made only in
                  accordance
                  with authorizations of management and directors of the Company;
                  and
 §
              Provide
                  reasonable assurance regarding prevention or timely detection of
                  unauthorized acquisition, use, or disposition of the Company’s assets that
                  could have a material effect on the consolidated financial
                  statements.
 
 Because
        of its inherent limitations, internal control over financial reporting may
        not
        prevent or detect misstatements. Also, projections of any evaluation of
        effectiveness to future periods are subject to the risk that controls may
        become
        inadequate because of changes in conditions, or that the degree of compliance
        with existing policies or procedures may deteriorate.
  13
 ***Table
            of Contents***
  ***Evaluation
        of disclosure controls and procedures***. In connection with the
        audit of the Company's financial statements for the year ended December 31,
        2006, the Company's president/chief executive officer and its chief financial
        officer conducted an evaluation regarding the effectiveness of the Company's
        disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)
        under the Exchange Act. Based upon the evaluation of these controls
        and procedures and discussions with our independent accountants, our
        president/chief executive officer and our chief financial officer concluded
        that
        our determined that our disclosure controls and procedures were ineffective
        as
        of December 31, 2006. The president/chief executive officer and chief financial
        officer determined that the Company did not maintain effective controls over
        the
        financial reporting process due to an insufficient complement of personnel
        with
        an appropriate level of accounting knowledge, experience and training in
        the
        application of generally accepted accounting principles commensurate with
        its
        financial reporting requirements and the complexity of the Company's operations
        and transactions. The Company did not maintain effective controls to ensure
        that
        there were adequate analysis, documentation, reconciliation and review of
        accounting records and supporting data and monitoring and oversight of the
        work
        performed by completeness of the consolidated financial statements in accordance
        with generally accepted accounting principles.
 
 In
        connection with the audit of the Company's financial statements for the year
        ended December 31, 2006, the Company's president/chief executive officer
        and its
        chief financial officer conducted an evaluation regarding the effectiveness
        of
        the Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
        or 15d-15(e) under the Exchange Act. Based upon the evaluation of
        these controls and procedures and discussions with our independent accountants,
        our president/chief executive officer and our chief financial officer concluded
        that our disclosure controls and procedures were not effective as of December
        31, 2006.
 
 ***Changes
        in internal controls***. During the year ended December, 2006, no
        changes occurred in our internal control over financial reporting that
        materially affected, or is reasonably likely to materially affect, our internal
        control over financial reporting.
 
 **ITEM
        8B. OTHER INFORMATION**
 As
        reported in the September 30,2006 10QSB, Calypso appointed a new CEO effective
        March 1, 2007 and Robert
        B.
        Sando who served as the Company's CFO for a short interim period resigned
        effective August 21, 2007 to pursue other opportunities.
   **PART
        III**
 
 **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
        GOVERNANCE; COMPLIANCE WITH SECTION 16(A)**
 
 At
        present, the Company has three executive officers and two directors. Our
        directors are elected to serve until the next annual meeting of shareholders
        and
        until their respective successors will have been elected and will have
        qualified. The following table sets forth the name, age and position held
        with
        respect to our present directors and executive officers:
 
 **Name**
              **Age**
              **Positions**Antonio
                  Zapata
              48
              Chairman
                  of the BoardJulietta
                  Moran
              61
              DirectorCristian
                  C. Turrini
              34
              Chief
                  Executive Officer and PresidentCheryl
                  L. Dotson
              52
              Chief
                  Financial OfficerAlessandro
                  Valenti
              52
              Vice
                  President of Research and
                  Development
  14
 ***Table
            of Contents***
  *Antonio
        Zapata - Director.*Mr. Zapata has been a director of the Company since
        January 2005. He has been a consultant in the chemical and industrial field.
        He
        received a chemical engineering degree from UNI University.  He does
        not hold any other directorships.
 
 *Julietta
        J. Moran – Director.* Ms. Moran was appointed to the board of directors in
        December 2004. From 2002-2004, Ms. Moran worked for NICACOM a telecommunication
        company as a Financial Consultant and Legal Advisor, responsible for financial
        management and projects related to the opening of multiple company locations.
        From 2001-2002, Ms. Moran worked as a financial consultant for a project
        sponsored by Interamerican Development Bank. She also served as a consultant
        for
        a governmental agency TELCOR where she was involved in financial restructuring
        related to the merger of TELCOR into ENITEL. Ms. Moran has a Bachelor of
        Science
        in Business Administration from the Universidad Centroamericana and Dade
        Community College for Business Administration, Miami. She also obtained a
        Bachelor of Law from the Universidad UNIVAL. She does not hold any other
        directorships.
 
 *Cristian
        C. Turrini -- CEO and President.*Mr. Turrini joined Calypso in September,
        2005 as Vice President and has been active in pursuing licensing
        contracts.  Mr. Turrini was assistant director of Latin America legal
        affairs, for De La Peña & Associates, P.A., Miami, Florida where he was
        involved in business development in Latin America; negotiations of potential
        corporate partnerships; acquisitions and customer contracts with clients
        in
        Latin America and Spain.  He also drafted numerous contracts for
        domestic and international transactions and negotiated contracts on behalf
        of
        clients, especially in the area of telecommunications.  He previously
        served with Grupo Sette and was involved in the privatization of State Owned
        Enterprises such as the telephone company; assisted government with
        telecommunications regulations and assisted with foreign investments, business
        developments and international corporate transactions.
  *Cheryl
          L. Dotson -- CFO.*Ms Dotson has had a successful career
          in**executive and senior management and management. She has been
          listed in Who's Who in Executive Professionals in 2004-2005. She began
          her
          career began at a "Big 4" public accounting firm. Ms. Dotson has extensive
          experience in operations and financial matters, has served as the national
          senior manager for the rollout of a major managed service solution for
          major
          consulting firm, and was involved in the negotiations with Microsoft, the
          technology partner and LexisNexis, the strategic partner, for the national
          solution. She was Chief of Staff to the Mayor of the City of Houston, the
          4th
          largest US city, responsible for oversight of 25 departments including
          the
          information technology and management audit divisions and participated
          in fiscal
          and accounting issues related to Houston's budget. She has served as a
          consultant to the District of Columbia, the Metropolitan Transit Authority,
          and
          served as the chief financial officer for the Harris County-Houston Sports
          Authority. Prior to joining Calypso Wireless, she was President and CEO
          of Smart
          Management Services, Inc., a consulting firm, and Q Healthcare Services,
          Inc., a
          health staffing company. Ms. Dotson has a Bachelor of Business Administration
          with emphasis in Accounting, magna cum laude, University of Houston,
          1972-1976.
 *Alessandro
        Valenti -- Vice President of Research and Development.*Mr.
        Valenti joined Calypso in February of 2006.  He was co-founder,
        original architect and author of Sleipner S.A. software solutions that were
        developed for the European market and is incorporated in Calypso’s
        solutions.  Mr. Valenti is working on the Nokia Siemens
        trial.
 
 (c)
        None
        of the officers have a family relationship with other directors, officers
        or
        nominees.
 
 (d)
        The
        Registrant is not aware of any of the directors, executive officers, promoters
        or control persons having any involvement in certain legal proceedings as
        outlined in Item 401 of Regulation S-B.
 
 **Section
        16(a) Beneficial Ownership Reporting Compliance**
 
 Section
        16(a) of the Securities and Exchange Act of 1934 requires the Company's
        directors and executive officers, and persons who own beneficially more than
        ten
        percent (10%) of the company's common stock, to file reports of ownership
        and
        changes of ownership with the Securities and Exchange Commission (Forms 3,
        4,
        and Form 5). Copies of all filed reports are required to be furnished to
        the
        Company pursuant to Section 16(a). Based solely on the reports received by
        the
        Company and on written representations from reporting persons, persons who
        served as officers and directors at any time of the fiscal year and have
        not
        filed reports required under Section 16(a) are:  Michael Pizzi, David
        Davilla, Christian Turrini, Akshay Sharma, Alessandro Valenti, Julietta Moran
        failed to file Form 3, 4s or 5s during the fiscal year.  Baylis Trade,
        Inc. and Halston Business, Inc. were beneficial owners of more than 10% and
        failed to file Form 4s for the fiscal year.
  15
 ***Table
            of Contents***
  **Code
        of Ethics**
 
 The
        Company has adopted its Code of Ethics and Business Conduct for Officers,
        Directors and Employees that applies to all of the officers, directors and
        employees of the Company.
 
 **Corporate
        Governance**
 
 Director
        Nomination
 
 The
        Board
        of Directors will consider director candidates as nominees from security
        holders
        that beneficially own more than 5% of Calypso stock for at least a year as
        of
        the date the recommendation is made as determined by using information in
        the
        most recent annual report.  The Board acts as the Nominating
        committee.  The Company has a small board at this time which does not
        allow for committee assignments.
 
 Audit
        Committee
 
 The
        entire Board of Directors of the Company currently serves as the Audit
        Committee.  whom satisfy all of the following criteria: (i) meet the
        independence requirements set forth in the NASD’s definition of "independent
        director," (ii) have not accepted directly or indirectly any consulting,
        advisory, or other compensatory fee from the Company or any of its subsidiaries,
        (iii) are not affiliated persons of the Company or any of its subsidiaries,
        and
        (iv) are competent to read and understand financial statements. The Board
        of
        Directors has determined that it does not have a member who qualifies as
        an
        "audit committee financial expert" within the meaning of Item 401 of Regulation
        SB of the Securities Exchange Act.
  **ITEM
            10.****EXECUTIVE
            COMPENSATION**
 
 The
        following tables contain compensation data for the Chief Executive Officer
        and
        other named executive officers and highly compensated persons of the Company
        for
        the fiscal year ended December 31, 2006:
 
 **Summary
                    Compensation Table****Salary**
                **Bonus**
                **Stock
                    Awards**
                **Option
                    Award(s)**
                **Nonequity
                    Incentive plan
                    compensation**
                **Nonqualified
                    deferred
                    Compensation earnings**
                **All
                    other compensation**
                **Total
                    Compensation****Name
                    and Principal Position**
                **Year**
                **($)
                    (1)**
                **($)**
                **($)**
                **($)
                    (2)**
                **($)**
                **($)**
                **($)**
                **($)**David
                    Davila, Former CEO and President
                2006
                150,000
                -
                15,000
                -
                -
                -
                -
                165,000Cristian
                    Turrini, Former Vice President, (current CEO)
                2006
                109,940
                -
                15,200
                -
                -
                -
                -
                125,140Cheryl
                    L. Dotson
                2006
                74,997
                -
                42,000
                -
                -
                -
                -
                116,997Alessandro
                    Valenti, Vice President Research and Development
                2006
                115,000
                -
                7,000
                -
                -
                -
                -
                122,000
 
 (1)  Salary
        includes amounts paid as salary, contract labor and amounts accrued but not
        paid.
 
 (2)  See
        "Stock-Based Compensation" in note 1 to the financial statements for valuation
        assumptions.
  16
 ***Table
            of Contents***
 
 Effective
        March 1, 2007, Mr. Cristian Turrini entered into a two year employment agreement
        with the Company to serve as President and Chief Operating Officer which
        provided for an annual salary of $150,000 with Calypso being responsible
        for
        payments of all taxes, social security and any other payments required by
        state
        and federal law. The employment agreement provides for a 10,000 shares of
        R-144
        stock each month..   The employment agreement grants Mr. Turrini
        an option to purchase 250,000 shares of common stock at an exercise price
        of
        $0.03 per year for each year of the duration of this employment
        Agreement.  The employment agreement provides that upon termination of
        the term of the contract Calypso has the option, upon mutual consent of the
        parties and agreed upon terms, to extend for an additional period negotiated
        by
        the parties.
 
 On
        February 16, 2007, Mr. Turrini also entered into four Performance Bonus
        Agreements.
  §
                The
                    first performance bonus agreement grants 750,000 R-144 shares
                    and 750,000
                    S-8 shares upon signing a Licensing Agreement that will bring
                    the company
                    a minimum of $10 million in yearly revenue.  This Agreement
                    expires on February 20, 2008
 §
                The
                    second performance bonus agreement grants 750,000 R-144 shares
                    and 750,000
                    S-8 shares upon signing a Field Trial Agreement with a large
                    US based
                    network company or a large US based carrier for testing the Calypso
                    ASNAP
                    patented technology.  This Agreement expires on February 20,
                    2008
 §
                The
                    third performance bonus agreement grants 1,000,000 R-144 shares
                    and
                    1,000,000 S-8 shares if certain goals are achieved regarding
                    risk
                    mitigation.  This Agreement expires on February 20,
                    2008.
 §
                The
                    fourth performance bonus agreement grants 250,000 R-144 shares
                    and 250,000
                    S-8 shares if certain goals are achieved regarding restructuring
                    Calypso.  This Agreement expires on February 20,
                    2008
 §
                All
                    of the transactions above will be measured at fair value in accordance
                    with FAS 123 R
  Effective
            August 21, 2007, Cheryl L. Dotson has accepted reappointment by the Board
            as
            chief financial officer. Ms. Dotson had been serving as a Consultant
            to the
            board for preparation of the 10-QSB for September 30, 2006, the 10KSB
            for
            December 31,2006, and the 10QSB for the periods March 31, 2007 and June
            30,
            2007. Ms Dotson's consulting agreement called for her to be issued 200,000
            shares for these services. These shares have been accrued in the financial
            statements for the period ended March 31, 2007. Her employment agreement is
            attached as Exhibit 9.01.
 **Outstanding
        Equity Awards at Fiscal Year-End**
 
 **Outstanding
                    Equity Awards at Fiscal Year-End****Number
                    of Securities underlying unexercised
                    options  exercisable**
                **Number
                    of Securities underlying
                    unexercised  options  unexercisable**
                **Equity
                    incentive plan awards: Number of Securities underlying unexercised
                    options  unearned options**
                **Option
                    exercise price**
                **Option
                    expiration date**
                **Number
                    of shares of units of stock that have not vested**
                **Market
                    value of shares of units of stock that have not
                    vested**
                **Equity
                    incentive plan awards: No. of unearned shares, units or other
                    rights that
                    have not vested**
                **Equity
                    incentive plan awards: Market or payout value of unearned shares,
                    units or
                    other rights that have not vested****Name
                    and Principal Position**
                **(#)**
                **(#)**
                **(#)**
                **($)**
                
                **(#)**
                **($)**
                **(#)**
                **($)**David
                    Davila, Former CEO and President
                333,328
                -
                -
                0.75
                None
                
                
                
                -Cristian
                    Turrini, Former Vice President, (current CEO)
                266,672
                -
                -
                0.75
                None
                
                
                
                -Cheryl
                    L. Dotson
                  CFO
                100,000
                -
                -
                0.80
                None
                
                
                
                -Alessandro
                    Valenti, Vice President Research and Development
                100,000
                -
                -
                0.45
                None
                
                
                
                -
  17
 ***Table
            of Contents***
 
 The
        Company has included various stock option grants in certain of its employment
        agreements. Under these agreements, employees have the option to purchase
        stock
        at various exercise prices. Options granted to employees vest ratably over
        periods as determined by the vesting schedule. Certain employees’ employment
        agreements call for full vesting at the time of a change in control. A total
        of
        2,722,646 shares were reserved for issuance pursuant to the exercise of
        outstanding stock options and warrants as of December 31, 2006 1,501,806
        options
        were in outstanding at December 31, 2005.
 
 Effective
        January 1, 2006, the Company adopted the provisions of Statement of Financial
        Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment" ) SFAS
        123(R)).  This statement requires the Company to provide pro forma
        information regarding net income (loss) applicable to common stockholders
        and
        income (loss) per share as if compensation cost for the Company's stock options
        granted had been determined in accordance with the fair value based method
        prescribed in SFAS 123. The majority of the agreements relating to the stock
        options do not have an expiration date for the exercise of the options;
        therefore, the Company used 10 years in the calculation of the options value.
        Prior to January 1, 2006, the Company accounted for its employee stock options
        under the Accounting Principles Board Opinion No. 25, “*Accounting for Stock
        Issued to Employees*,” and related interpretations.  No
        stock-based employee compensation cost is reflected in net income (loss),
        as all
        employee options granted has an exercise price equal to the market value
        of the
        underlying common stock on the date of grant.
 
 The
        Company also grants options to non-employees for goods and services and in
        conjunction with certain agreements.  .  Calypso has agreed
        to grant approximately 390,000 warrants to D. E. Wine Investments, Inc. pursuant
        to the investment banking agreement between the Company and D. E. Wine. The
        warrant is a seven-year warrant to purchase common stock of the Company at
        an
        exercise price per share equal to the price paid per share for each Security
        equaling 10% of the financing total in public or private placements. These
        grants are accounted for under SFAS No. 123(R) based on the grant date fair
        values The fair value of these warrants was estimated using a Black-Scholes
        option pricing model with the following assumptions for the warrants to be
        granted in 2006: risk-free interest rate of 7.5%; dividend yield of 0%;
        volatility factor of the expected market price of the company’s common stock of
        $.20; and a weighted-average expected life of the warrants is seven years.
        The
        fair value of these warrants was estimated to be $78,000.
  18
 ***Table
            of Contents***
  No
        stock
        options or warrants were exercised during the years ended December 31, 2006
        and
        2005.
 
 **Director
        Summary Compensation Table**
 
 The
        directors serve without cash compensation, but may be granted stock as bonus
        compensation from time to time. The table below summarizes the compensation
        paid
        by the Company to non-employee Directors for the fiscal year ended
        December 31, 2006.
 
 **Director
                  Summary Compensation Table****(a)**
              **(b)**
              **(c)**
              **(d)**
              **(e)**
              
              **(f)**
              **(g)****Name**
              **Fees Earned or**
                **Paid
                  in Cash ($)**
              **Stock**
                **Awards
                  ($)(1)**
              **Option**
                **Awards
                  ($)(1)**
              **Non-equity
                  incentive plan compensation**
              **Nonqualified
                  deferred Compensation Earnings ($)**
              **All
                  Other**
                **Compensation
                  ($)**
              **Total
                  ($)**Antonio
                  Zapata
              -
              -
              -
              
              0
              -
              -Julietta
                  Moran.
              -
              1,500
              -
              
              0
              -
              1,500
 
 (1)
        See "Stock-Based Compensation" in note 1 to the financial statements for
        valuation assumptions.
 
 **ITEM
        11.****SECURITY OWNERSHIP OF CERTAINBENEFICIAL
        OWNERS AND MANAGEMENT******
 
 The
        following table sets forth as of May 25, 2007, information with respect to
        (a)
        each person (including "group" as that term is used in section 13(d)(3) of
        the
        Securities Exchange Act of 1934 who is known to the Company to be the beneficial
        owner of more than five percent (5%) of the outstanding Common Stock of the
        Company and (b) the number and percentage of the Company's Common Stock owned
        by
        (i) each of the directors and the executive officers named on the Summary
        Compensation Table above and (ii) all directors and executive officers of
        the
        Company as a group. The Company believes that, unless otherwise indicated,
        each
        of the shareholders has sole voting and investment power with respect to
        the
        shares beneficially owned.
 
 Title
                  of Class
              Name
                  and Address of Beneficial Owner
              Amount
                  and Nature of Beneficial Owner(1)
              Percent
                  of ClassCommon
                  Stock
              Halston
                  Business, Inc.
                5979
                  N W 151st St
                Miami
                  Fl 33014
              13,864,220
              8.2%Common
                  Stock
              Baylis
                  Trade, Inc.
                41
                  South Audley, London W1K 2F5
                United
                  Kingdom
              12,200,513
              7.3%Common
                  Stock
              Interfactoring
                  Finance Corp.
                Box
                  2236, 7801 NW 37th St.
                Miami,
                  FL 33166
              10,961,921
              6.5%Restricted Stock
              Marker
                  Ventures, Inc.
                5753
                  N.W. 158 Street
                Miami,
                  FL 33014
              8,999,999
              5.3%Common
                  Stock
              Antonio Zapata,
                  Chairman
                5753
                  N.W. 158 Street
                Miami,
                  FL 33014
              0
              0.00%Restricted
                  Stock
              Julietta
                  Moran, Director
                5753
                  N.W. 158 Street
                Miami,
                  FL 33014
              50,000
              0.00%Restricted
                  Stock
              Cristian Turrini,
                  CEO and President
                9257
                  Carlyle Ave
                Surfside,
                  FL
              150,000
              0.00%Restricted
                  Stock
              David Davila,
                  Former CEO and President
                5753
                  N.W. 158 Street
                Miami,
                  FL 33014
              100,000
              0.00%Restricted
                  Stock
              Alessandro Valenti
                  , Vice President
                Via
                  Castel Morrone 2
                Milan,
                  Italy
              675,000
              0.00%Common
                  Stock
              All
                  officers and directors as a group (5 persons)
              975,000
                  shares
              0.00%
 
 (1)
        Includes accrued shares.
  19
 ***Table
            of Contents***
  **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
        DIRECTOR INDEPENDENCE**
 
 (a)
              During
                  2006, the Company was advanced $121,576 from I. Medicas
                  Central.  The advance was non-interest bearing.  A
                  subscription agreement dated December 22, 2006 was negotiated with
                  the
                  Company which converted the advance to 3,039,400 shares of the
                  Company's common stock as of the date of this agreement. During 2006,
                  the Company was advanced $85,000 from
                  Importadora Exportadora Istmo, SA.  The advance was
                  non-interest bearing.  A subscription agreement dated October
                  10, 2006 was negotiated with the Company which converted the advance
                  to 2,833,333 shares of the Company's common stock as of the date of
                  this agreement.  During 2006, the Company was advanced $51,000 from
                  Inversiones - Logistic Specialist Investments, Inc.  The advance
                  was non-interest bearing.  A subscription agreement dated
                  October 12, 2006 was negotiated with the Company which  converted the
                  advance to 1,700,000 shares of the Company's common stock as of the
                  date of this agreement.  During 2005, the Company was advanced
                  $161,000 from InterCapital - Logistic Specialist Investments,
                  Inc.  The advance was non-interest bearing.  A
                  subscription agreement dated January 22, 2007 was negotiated with
                  the
                  Company which converted the advance to 5,366,666 shares of the
                  Company's
                  common stock as of the date of this agreement.  During
                  2005, the Company was advanced $115,000 from Link Systems Group,
                  Inc.  The advance was non-interest bearing.  A
                  subscription agreement dated October 12, 2006 was negotiated with
                  the
                  Company which converted the advance to 3,833,333 shares of the
                  Company's
                  common stock as of the date of this agreement.  During
                  2005, the Company was advanced $115,000 from Marker Ventures,
                  Inc.  The advance was non-interest bearing.  A
                  subscription agreement dated October 9, 2006 was negotiated with
                  the
                  Company which converted the advance to 3,833,333 shares of the
                  Company's
                  common stock as of the date of this agreement.  During 2005, the
                  Company was advanced $60,000 from Marker Ventures, Inc.  The
                  advance was non-interest bearing.  A subscription agreement
                  dated August 31, 2006 was negotiated with the Company which converted
                  the
                  advance to 2,000,000 shares of the Company's common stock as of the
                  date of this agreement.  During 2005, the Company was advanced
                  $41,000 from Manuel Antonio - Interfactoring Finance
                  Corp.  The advance was non-interest bearing.  A
                  subscription agreement dated October 12, 2006 was negotiated with
                  the
                  Company which converted the advance to 1,366,666 shares of the
                  Company's common stock as of the date of this
                  agreement.  During 2005, the Company was advanced $38,200 from
                  Cacovisa - Project Development Capital  The advance was
                  non-interest bearing.  A subscription agreement dated October
                  12, 2006 was negotiated with the Company which converted the advance
                  to
                  1,273,333 shares of the Company's common stock as of the date of this
                  agreement.  During 2005, the Company was advanced $25,000 from
                  I. Medicas Central.  The advance was non-interest
                  bearing.  A subscription agreement dated December 22, 2006 was
                  negotiated with the Company which converted the advance to 625,000
                  shares
                  of the Company's common stock as of the date of this
                  agreement.
  20
 ***Table
            of Contents***
  (c)
              The
                  company used the following promoters during the last five fiscal
                  years:  D. E. Wine;  Shekhar Lodha and his company,
                  21st
                  Century
                  Management.
 
 **ITEM
        13.****EXHIBITS**
 
 a.
        The
        following exhibits are to be filed as part of the Annual Report:
 
 **Exhibit
                  No.**
              **Identification
                  of Exhibit**9.01
              Dotson
                Employment Agreement31.1
              Certification
                  of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to the Sarbanes-Oxley Act of 2002, filed
                  herewith.31.2
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley
                  Act
                  of 2002, filed herewith.32.1
              Certification
                  of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to the Sarbanes-Oxley Act of 2002, filed
                  herewith.32.2
              Certification
                  of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley
                  Act
                  of 2002, filed herewith.
 
 b.
        Form
        8-K Reports: The Company has not filed a Form 8-K during the fourth quarter
        ended December 31, 2006.
 
 **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
 
 Independent
        Public Accountants
 
 The
        Registrant's Board of Directors has appointed John A. Braden & Co., P.C. On
        January 1, 2007, John A. Braden & Co., PC merged with GLO CPAs, LLP, which
        firm has issued its report on our consolidated financial statements for the
        year
        ended December 31, 2006 and 2005.
 
 Principal
        Accounting Fees
 
 The
        following table set forth the following: under "Audit Fees" the aggregate
        fees
        billed for each of the past two fiscal years for professional services rendered
        by the principal accountant for the audit of the Company's financial statements
        and review of financial statements included in the Company's quarterly reports;
        under "Audit-Related Fees" the aggregate fees billed in each of the last
        two
        fiscal years for assistance and related services by the principal accountant
        that are reasonably related to the performance of the audit or review of
        the
        Company's financial statements; under "Tax Fees" the aggregate fees billed
        in
        each of the last two fiscal years for professional services rendered by the
        principal accountant for tax compliance, advice and planning; and under "All
        Other Fees" the aggregate fees billed in each of the last two fiscal years
        for
        products and services provided by the principal accountant.
 
 **December
                    31,  2006**
                
                
                **December
                    31,  2005**Audit
                    Fees
                $
                60,000
                
                
                $
                59,140Audit-Related
                    Fees
                
                
                -
                
                
                
                8,812Tax
                    fees
                
                
                -
                
                
                
                813All
                    other fees
                
                
                -
                
                
                
                8,128
  21
 ***Table
            of Contents***
  **SIGNATURES**
 
 In
        accordance with the Section 13 or 15(d) of the Exchange Act, the registrant
        caused this report to be signed on its behalf by the undersigned, thereunto
        duly
        authorized.
 
 
 CALYPSO
        WIRELESS, INC.
 
 
 By:
                  /s/ Cristian Turrini
              
              Date:
                  August 24, 2007Chief
                  Executive Officer and PresidentBy:
                  /s/ Cheryl L. Dotson
              
              Date:  August
                  24, 2007Chief
                  Financial Officer
 
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report has
        been
        signed below by the following persons on behalf of the registrant and in
        the
        capacities and on the dates indicated.
 
 By:
                  /s/ Antonio Zapata
              
              Date:
                  August 24, 2007Antonio Zapata,
                  ChairmanBy:
                  /s/ Julietta Moran
              
              Date:
                  August 24, 2007Julietta
                  Moran, Director
  22
 ***Table
            of Contents***
  **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 
 (A
        Development Stage Company)
 
 **Index**
 
 
 Report
                  of Independent Registered Public Accounting FirmConsolidated
                  Financial Statements:Balance
                  Sheets– December 31,
                  2006Statements
                  of Operations– Years ended December 31,
                  2006 and 2005 With cumulative totals from inception to December
                  31,
                  2006Statements
                  of Stockholders’ Equity– Years
                  ended December 31, 2006 and 2005 With cumulative totals from inception
                  to
                  December 31, 2006Statements
                  of Cash Flows– Years ended December 31,
                  2006 and 2005 With cumulative totals from inception to December
                  31,
                  2006Notes
                  to Consolidated Financial
                  Statements
 
 ***Table
              of Contents***
  **Report
          of Independent Certified Public Accountants**
 
 To
          the
          Board of Directors of
 Calypso
          Wireless, Inc. and Subsidiaries
  We
          have
          audited the accompanying balance sheet Calypso Wireless, Inc. and
          Subsidiaries  (a Delaware development stage company) as of December
          31, 2006, and the related consolidated statements of operations, stockholders’
equity and cash flows for the years then ended and for the period from
          inception
          to December 31, 2006.  These financial statements are the
          responsibility of the Company’s management.  Our responsibility is to
          express an opinion on these financial statements based on our
          audits.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          consolidated financial statements are free of material misstatement. The
          Company
          is not required to have, nor were we engaged to perform, an audit of its
          internal control over financial reporting.  Our audit included
          consideration of internal control over financial reporting as a basis for
          designing audit procedures that are appropriate in the circumstances, but
          not
          for the purpose of expressing and opinion on the effectiveness of the Company’s
          internal control over financial reporting.  Accordingly, we express no
          such opinion.  An audit includes examining, on a test basis, evidence
          supporting the amounts and disclosures in the consolidated financial statements.
          An audit also includes assessing the accounting principles used and significant
          estimates made by management, as well as evaluating the over-all consolidated
          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 Calypso Wireless, Inc. and
          Subsidiaries as of December 31, 2006, and the results of their operations
          and
          cash flows for the years then ended and for the period from inception to
          December 31, 2006, in conformity with accounting principles generally accepted
          in the United States of America.
 
 The
          accompanying financial statements have been prepared assuming that the
          Company
          will continue as a going concern.   As shown on the financial
          statements the Company has incurred recurring losses and has recurring
          working
          capital deficits.     The Company is dependant on
          continuing   new financing to sustain its operations and is
          exploring a number of options to obtain that
          funding.    That condition raises substantial doubt about
          its Company’s ability to continue as a going concern.   The
          financial statements do not include any adjustments that might result from
          the
          outcome of the uncertainty.
 
 As
          explained in footnote 8 the company has been involved in extensive litigation
          and on December 8, 2006 the 151st District Court of Harris County Texas
          rendered
          a judgment against the Company in the amount of $117,000,000 in the case
          of
          Drago Drac.  The court has subsequently granted a bill of review and a new
          trial has been set for November 7, 2007.   The Company believes
          that the new trail will reverse the judgment.  The financial
          statements have not been adjusted for this uncertainty.
  /s/
                GLO
                  CPAs, LLPGLO
                  CPAs, LLPHouston,
                  TexasAugust
                  24, 2007
 *Table
            of Contents*
 **CALYPSO
        WIRELESS, INC. AND
        SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Consolidated
        Balance Sheet**
 
 December
        31, 2006
 
 
 AssetsCurrent
                    assets:Cash
                
                $
                4,609Total
                    current assets
                
                
                4,609Property
                    and equipment, net of accumulateddepreciation
                
                
                25,884Patents
                
                
                455,797Investment
                    in RV Technology Limited
                
                
                1Software
                    development costs, net of accumulated amortization of $5,978,097
                    at
                    December 31, 2006
                
                
                -Other
                    assets
                
                
                6,093Total
                    assets
                
                $
                492,384Liabilities
                    and Stockholders' EquityLiabilities:Accounts
                    payable
                
                $
                207,337Accrued
                    expenses
                
                
                302,561Accrued
                    salaries and related liabilities
                
                
                339,756Advances
                    from customers
                
                
                84,790Related
                    party advances
                
                
                161,000Total
                    liabilities - current
                
                
                1,095,444Stockholders'
                    equity (deficit):Common
                    stock, $.001 par value.  Authorized 200,000,000
                    shares:168,229,868 shares issued and outstanding at December
                    31,
                    2006
                
                
                168,230Additional
                    paid-in capital
                
                
                34,827,130Deficit
                    accumulated during the development stage
                
                
                (35,598,420
                )Total
                    stockholders' equity (deficit)
                
                
                (603,060
                )Total
                    liabilities and stockholders' equity (deficit)
                
                $
                492,384
 
 See
        accompanying notes to consolidated financial statements.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND
        SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Consolidated
        Statements of Operations**
 
 Years
        ended December 31, 2006 and 2005
 
 
 Cumulative
                  totals from inception to December 31,2006
              
              
              2005
              
              
              2006Revenues
              
              $
              -
              
              
              $
              -
              
              
              $
              -Cost
                  of goods sold
              
              
              -
              
              
              
              -
              
              
              
              -Gross
                  profit
              
              
              -
              
              
              
              -
              
              
              
              -Operating
                  expenses:Research
                  and development
              
              
              332,000
              
              
              
              812,836
              
              
              
              6,587,967Impairment
                  expenses
              
              
              81,105
              
              
              
              1,949,999
              
              
              
              5,477,515Write-off
                  of inventory
              
              
              -
              
              
              
              -
              
              
              
              86,103General
                  and administrative
              
              
              1,295,669
              
              
              
              6,135,677
              
              
              
              16,783,345Interest
              
              
              -
              
              
              
              9,712
              
              
              
              218,094Depreciation
                  and amortization
              
              
              2,702,691
              
              
              
              1,807,022
              
              
              
              6,128,227Total
                  operating expenses
              
              
              4,411,465
              
              
              
              10,715,246
              
              
              
              35,281,251Operating
                  loss
              
              
              (4,411,465
              )
              
              
              (10,715,246
              )
              
              
              (35,281,251
              )Other
                  operating loss - loss on the sale of assets
              
              
              (441,169
              )
              
              
              -
              
              
              
              (317,169
              )Net
                  loss before provision for income taxes
              
              
              (4,852,634
              )
              
              
              (10,715,246
              )
              
              
              (35,598,420
              )Provision
                  for income taxes
              
              
              -
              
              
              
              -
              
              
              
              -Net
                  loss
              
              $
              (4,852,634
              )
              
              $
              (10,715,246
              )
              
              $
              (35,598,420
              )Net
                  loss per common share - basic and diluted:Net
                  loss applicable to common shareholders
              
              $
              (0.03
              )
              
              $
              (0.09
              )Weighted
                  average common shares - basic and diluted
              
              
              149,276,558
              
              
              
              123,516,778
 
 See
        accompanying notes to consolidated financial statements.
 
 ***Table
              of Contents***
  **CALYPSO
          WIRELESS, INC. AND
          SUBSIDIARY**
 (A
          Development Stage Company)
 
 **Consolidated
          Statements of Stockholders' Equity**
 
 Years
          ended December  31, 2006 and 2005
 
  DeficitaccumulatedAdditional
                
                
                during
                    the
                
                
                Stock
                
                
                TotalCommon
                    Stock
                
                
                paid-in
                
                
                development
                
                
                subscription
                
                
                stockholders'shares
                
                
                amount
                
                
                capital
                
                
                stage
                
                
                receivable
                
                
                equityBalance,
                    December 1, 1997
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Proceeds
                    from the sale of common shares
                
                
                290,000,000
                
                
                
                29,000
                
                
                
                9,145,717
                
                
                
                -
                
                
                
                -
                
                
                
                9,174,717Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (3,202,249
                )
                
                
                -
                
                
                
                (3,202,249
                )Balance,
                    December 31, 1999
                
                
                290,000,000
                
                
                
                29,000
                
                
                
                9,145,717
                
                
                
                (3,202,249
                )
                
                
                -
                
                
                
                5,972,468Proceeds
                    from the sale of common shares
                
                
                4,876,834
                
                
                
                488
                
                
                
                249,612
                
                
                
                -
                
                
                
                -
                
                
                
                250,100Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (86,068
                )
                
                
                -
                
                
                
                (86,068
                )Balance,
                    December 31, 2000
                
                
                294,876,834
                
                
                
                29,488
                
                
                
                9,395,329
                
                
                
                (3,288,317
                )
                
                
                -
                
                
                
                6,136,500Issuance
                    of common shares for services
                
                
                5,856,000
                
                
                
                585
                
                
                
                585,015
                
                
                
                -
                
                
                
                -
                
                
                
                585,600Proceeds
                    from the sale of common shares
                
                
                2,120,811
                
                
                
                212
                
                
                
                1,109,895
                
                
                
                -
                
                
                
                -
                
                
                
                1,110,107Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (469,904
                )
                
                
                -
                
                
                
                (469,904
                )Balance,
                    December 31, 2001
                
                
                302,853,645
                
                
                
                30,285
                
                
                
                11,090,239
                
                
                
                (3,758,221
                )
                
                
                -
                
                
                
                7,362,303Proceeds
                    from the sale of common shares
                
                
                5,494,036
                
                
                
                549
                
                
                
                349,104
                
                
                
                -
                
                
                
                -
                
                
                
                349,653Recapitalization
                    - Reverse Merger
                
                
                (218,215,704
                )
                
                
                59,298
                
                
                
                (59,298
                )
                
                
                -
                
                
                
                -
                
                
                
                -Issuance
                    of common shares for services
                
                
                10,000,000
                
                
                
                10,000
                
                
                
                70,000
                
                
                
                -
                
                
                
                -
                
                
                
                80,000Net
                    loss, as restated
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,512,541
                )
                
                
                -
                
                
                
                (1,512,541
                )Balance,
                    December 31, 2002, as restated
                
                
                100,131,977
                
                
                
                100,132
                
                
                
                11,450,045
                
                
                
                (5,270,762
                )
                
                
                -
                
                
                
                6,279,415Proceeds
                    from private placement of common shares
                
                
                3,730,913
                
                
                
                3,731
                
                
                
                1,669,599
                
                
                
                -
                
                
                
                (290,000
                )
                
                
                1,383,330Issuance
                    of common shares for services
                
                
                6,077,540
                
                
                
                6,078
                
                
                
                3,398,104
                
                
                
                -
                
                
                
                -
                
                
                
                3,404,182Issuance
                    of  common shares for conversion debt
                
                
                1,882,720
                
                
                
                1,882
                
                
                
                828,533
                
                
                
                -
                
                
                
                -
                
                
                
                830,415Cancellation
                    of previously issued shares
                
                
                (6,666,667
                )
                
                
                (6,667
                )
                
                
                6,667
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
                    loss, as restated
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (3,809,148
                )
                
                
                -
                
                
                
                (3,809,148
                )Balance,
                    December 31, 2003, as restated
                
                
                105,156,483
                
                
                
                105,156
                
                
                
                17,352,948
                
                
                
                (9,079,910
                )
                
                
                (290,000
                )
                
                
                8,088,194Proceeds
                    from private placement of common shares
                
                
                3,436,032
                
                
                
                3,436
                
                
                
                1,839,104
                
                
                
                -
                
                
                
                290,000
                
                
                
                2,132,540Issuance
                    of common shares for services
                
                
                1,743,700
                
                
                
                1,744
                
                
                
                1,897,046
                
                
                
                -
                
                
                
                -
                
                
                
                1,898,790Issuance
                    of common shares for product development costs
                
                
                100,000
                
                
                
                100
                
                
                
                69,900
                
                
                
                -
                
                
                
                -
                
                
                
                70,000Net
                    loss, as restated
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (10,950,630
                )
                
                
                -
                
                
                
                (10,950,630
                )Balance,
                    December 31, 2004, as restated
                
                
                110,436,215
                
                
                
                110,436
                
                
                
                21,158,998
                
                
                
                (20,030,540
                )
                
                
                -
                
                
                
                1,238,894Proceeds
                    from private placement of common shares
                
                
                19,200,000
                
                
                
                19,200
                
                
                
                3,900,800
                
                
                
                -
                
                
                
                -
                
                
                
                3,920,000Issuance
                    of common shares for services
                
                
                5,756,281
                
                
                
                5,757
                
                
                
                5,489,243
                
                
                
                -
                
                
                
                -
                
                
                
                5,495,000Issuance
                    of common shares for acquisitions
                
                
                2,500,000
                
                
                
                2,500
                
                
                
                2,117,500
                
                
                
                -
                
                
                
                -
                
                
                
                2,120,000Issuance
                    of  common shares for conversion debt
                
                
                857,142
                
                
                
                857
                
                
                
                299,143
                
                
                
                -
                
                
                
                -
                
                
                
                300,000Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (10,715,246
                )
                
                
                -
                
                
                
                (10,715,246
                )Balance,
                    December 31, 2005
                
                
                138,749,638
                
                
                
                138,750
                
                
                
                32,965,684
                
                
                
                (30,745,786
                )
                
                
                -
                
                
                
                2,358,648Proceeds
                    from private placement of common shares
                
                
                7,268,332
                
                
                
                7,268
                
                
                
                976,232
                
                
                
                -
                
                
                
                -
                
                
                
                983,500Issuance
                    of common shares for services
                
                
                1,632,500
                
                
                
                1,633
                
                
                
                239,017
                
                
                
                -
                
                
                
                -
                
                
                
                240,650Issuance
                    of  common shares for conversion debt
                
                
                20,579,398
                
                
                
                20,579
                
                
                
                646,197
                
                
                
                -
                
                
                
                -
                
                
                
                666,776Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,852,634
                )
                
                
                -
                
                
                
                (4,852,634
                )Balance,
                    December 31, 2006
                
                
                168,229,868
                
                
                $
                168,230
                
                
                $
                34,827,130
                
                
                $
                (35,598,420
                )
                
                $
                -
                
                
                $
                (603,060
                )
 
 See
          accompanying notes to consolidated financial statements.
 ***Table
              of Contents***


**CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Consolidated
        Statements of Cash Flows**
 
 Years
        ended December 31, 2006 and 2005
 
 
 2006
              
              
              2005
              
              
              Cumulative
                  totals from inception to December 31,2006Cash
                  flows from operating activities:Net
                  loss
              
              $
              (4,852,634
              )
              
              $
              (10,715,246
              )
              
              $
              (35,598,420
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  of property and equipment
              
              
              18,562
              
              
              
              65,752
              
              
              
              150,130Amortization
                  of software development costs
              
              
              2,684,129
              
              
              
              1,741,270
              
              
              
              5,978,097Common
                  stock issued for services
              
              
              240,650
              
              
              
              5,495,000
              
              
              
              11,704,222Impairment
                  expenses
              
              
              81,105
              
              
              
              1,949,999
              
              
              
              5,477,515Loss
                  on sale of assets
              
              
              441,169
              
              
              
              -
              
              
              
              441,169Write-off
                  of inventory
              
              
              -
              
              
              
              -
              
              
              
              86,103Bad
                  debt expense
              
              
              -
              
              
              
              25,396
              
              
              
              25,396(Increase)
                  decrease in operating assets:Refund
                  receivable
              
              
              -
              
              
              
              157,950
              
              
              
              (25,396
              )Prepaid
                  expenses and other current assets
              
              
              -
              
              
              
              216,056
              
              
              
              -Other
                  assets
              
              
              5,350
              
              
              
              21,903
              
              
              
              (109,101
              )Increase
                  (decrease) in operating liabilities:Accounts
                  payable
              
              
              (105,625
              )
              
              
              (94,303
              )
              
              
              294,405Accrued
                  expenses
              
              
              (99,747
              )
              
              
              (1,962,618
              )
              
              
              470,493Accrued
                  salaries and related liabilities
              
              
              234,959
              
              
              
              104,797
              
              
              
              339,756Advances
                  from customers
              
              
              -
              
              
              
              -
              
              
              
              84,790Net
                  cash used in operating activities
              
              
              (1,352,082
              )
              
              
              (2,994,044
              )
              
              
              (10,680,841
              )Cash
                  flows from investing activities:Capital
                  expenditures for property and equipment
              
              
              -
              
              
              
              (9,239
              )
              
              
              (3,622,425
              )Cash
                  proceeds from sale of assets
              
              
              134,831
              
              
              
              -
              
              
              
              134,831Patents
              
              
              -
              
              
              
              (32,546
              )
              
              
              (455,797
              )Software
                  development costs
              
              
              -
              
              
              
              -
              
              
              
              (4,368,097
              )Cash
                  paid for investment in RV Technology Limited
              
              
              -
              
              
              
              (1,000,000
              )
              
              
              (1,000,000
              )Net
                  cash provided by (used in)\ investing activities
              
              
              134,831
              
              
              
              (1,041,785
              )
              
              
              (9,311,488
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of stock
              
              
              983,500
              
              
              
              3,920,000
              
              
              
              19,303,947Repayment
                  from short-term borrowing
              
              
              -
              
              
              
              (103,905
              )
              
              
              (103,905
              )Borrowings
                  from shareholders
              
              
              546,848
              
              
              
              240,000
              
              
              
              862,048Repayment
                  of borrowings from shareholders
              
              
              (289,272
              )
              
              
              (75,800
              )
              
              
              (582,847
              )Proceeds
                  from long-term borrowings
              
              
              -
              
              
              
              -
              
              
              
              782,695Repayment
                  of long-term borrowings
              
              
              -
              
              
              
              -
              
              
              
              (265,000
              )Bank
                  overdraft
              
              
              (23,987
              )
              
              
              23,987
              
              
              
              -Net
                  cash provided by financing activities
              
              
              1,217,089
              
              
              
              4,004,282
              
              
              
              19,996,938Net
                  increase (decrease) in cash
              
              
              (162
              )
              
              
              (31,547
              )
              
              
              4,609Cash
                  at beginning of year
              
              
              4,771
              
              
              
              36,318
              
              
              
              -Cash
                  at end of year
              
              $
              4,609
              
              
              $
              4,771
              
              
              $
              4,609Supplemental
                  schedule of cash flow information:Interest
                  paid
              
              $
              -
              
              
              $
              9,712
              
              
              $
              218,094Non-cash
                  transactions:Issuance
                  of common stock for conversion of debt
              
              $
              666,776
              
              
              $
              300,000
              
              
              $
              1,797,191Issuance
                  of common stock for acquisition of software development
                  costs
              
              $
              -
              
              
              $
              1,320,000
              
              
              $
              1,390,000Issuance
                  of common stock for acquisition of investment in RV Technology
                  Limited
              
              $
              -
              
              
              $
              950,000
              
              
              $
              950,000Issuance
                  of common stock for acquisition of Sleipner, S.A.
              
              $
              -
              
              
              $
              1,170,000
              
              
              $
              1,170,000
 
 See
        accompanying notes to consolidated financial statements.


***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 **(1)**
              **Organization
                  and Summary of Significant Accounting
                  Policies**
 
 **Organization,
        Business and Ownership**
 
 Calypso
        Wireless, Inc. (the "Company or Calypso"), was incorporated in the State
        of
        Delaware on March 22, 1983.  The Company operates as a holding company
        with three wholly owned subsidiaries.  All monetary amounts noted in
        the financial statements are expressed in U.S. Dollars.  The
        functional currency of the Company is US Dollars.  Assets, Liabilities
        and transactions of Sleipner are denominated in Euros and Swiss Franks, but
        have
        been translated into US Dollars.  Translation gain or loss does not
        have a material effect on the financial statements and has been included
        within
        the various expense categories involved.
 
 Calypso
        Wireless, Inc. is a development stage company.  The Company is a
        developer and supplier of real-time video cellular phones software and
        telecommunications infrastructure software.  Calypso’s ASNAPTM unique
        switching technology provides greater bandwidth to seamlessly integrate the
        existing cellular networks and Internet IP-based telecommunications networks
        without having to replace the existing infrastructure.  The Company’s
        research and development facilities are located in Miami Lakes, Florida.
  The
        Company is a result of a business combination on October 4, 2002, between
        Kleer-Vu Industries, Inc., a public shell company, and Calypso Wireless,
        Inc., a
        privately held development stage company incorporated in the State of Florida
        in
        1998.  Kleer-Vu acquired all of the outstanding capital stock of
        Calypso Wireless, Inc. by issuing 90,000,000 shares of its restricted common
        stock.  For accounting purposes, however, the acquisition has been
        treated as the recapitalization of Calypso Wireless, Inc. with Calypso Wireless,
        Inc. deemed the acquirer of Kleer-Vu in a reverse merger.  At the
        conclusion of the merger, Calypso Wireless, Inc. stockholders held 99.8%
        of the
        combined company.  As a reverse merger, the historical operating
        results prior to the acquisition are those of Calypso Wireless, Inc. (the
        private company) and only the operations of Kleer-Vu after the
        acquisition.  In addition, Kleer-Vu formerly changed its name to
        Calypso Wireless, Inc.
 
 The
        consolidated financial statements include the accounts of the Company (located
        in Miami Lakes, Florida) and its wholly owned subsidiaries, American Telecom
        Industries ATEL, S.A. (located in Managua, Nicaragua), Sleipner, S.A. and
        Calypso Technology Holdings, Inc. All significant intercompany transactions
        and
        balances have been eliminated in consolidation.
 
 **Cash
        and Cash Equivalents**
 
 For
        purposes of the statement of cash flows, the Company considers all highly
        liquid
        investment instruments purchased with original maturities of three months
        or
        less to be cash equivalents.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
   **Property,
        Equipment and Depreciation**
 
 Property
        and equipment are recorded at cost less accumulated
        depreciation.  Upon retirement or sale, the cost of the assets
        disposed of and the related accumulated depreciation are removed from the
        accounts, with any resultant gain or loss being recognized as a component
        of
        other income or expense.  Depreciation is computed over the estimated
        useful lives of the assets (5-20 years) using the straight-line method for
        financial reporting purposes and accelerated methods for income tax
        purposes.  Maintenance and repairs are charged to operations as
        incurred.
 
 **Intangible
        Assets**
 
 SFAS
        No.
        142 eliminates the amortization of goodwill, and requires annual impairment
        testing of goodwill and introduces the concept of indefinite life intangible
        assets. The Company adopted SFAS No. 142 effective January 1,
        2002.  Patent costs include legal fees and other expenses incurred in
        connection with obtaining patent approval in the United States of
        America.  These costs are being amortized over 5 to 17
        year.  Software development costs consist of capitalized costs
        incurred in the development of the cellular phone software and
        telecommunications infrastructure.  These costs include salaries, the
        software development costs purchased from Sleipner, S.A. (see note 2) and
        other
        expenses incurred in developing the software.  See note 4 amortization
        of software development costs.
 
 **Impairment
        of Long-Lived Assets**
  Realization
        of long-lived assets is periodically assessed by the management of the
        Company.  Accordingly, in the event that facts and circumstances
        indicate that property and equipment, and intangible or other assets may
        be
        impaired, an evaluation of recoverability would be performed.  If an
        evaluation is required, the estimated future undiscounted cash flows associated
        with the asset are compared to the asset's carrying amount to determine if
        a
        write-down to market value is necessary.
  **Revenue
        Recognition**
 
 The
        Company revenue recognition policy is consistent with the criteria set forth
        in
        Staff Accounting bulletin 104-Revenue Recognition in financial Statements
        (SAB
        104) for determining when revenue is realized or realizable and
        earned.  In accordance with the requirements of SAB 104 the Company
        recognizes revenue when (1) Persuasive evidence of an arrangement exists;
        (2)
        Delivery has occurred or completion of services provided; (3) Seller’s price is
        fixed or determinable; and (4) collectibility is reasonably
        assured.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 **Stock-based
        Compensation**
 
 The
        Company grants shares of stock to employees and non-employees for goods and
        services and in conjunction with certain agreements. These grants are accounted
        for under FASB Statement No. 123R, *"Accounting for Stock-Based
        Compensation"* based on the grant date fair values.
 
 **Income
        Taxes**
 
 The
        Company is a taxable entity and recognizes deferred tax assets and liabilities
        for the future tax consequences attributable to differences between the
        financial statement carrying amounts of existing assets and liabilities and
        their respective tax basis.  Deferred tax assets and liabilities are
        measured using enacted tax rates expected to be in effect when the temporary
        differences reverse.  The effect on the deferred tax assets and
        liabilities of a change in tax rates is recognized in income in the year
        that
        includes the enactment date of the rate change.  A valuation allowance
        is used to reduce deferred tax assets because realization is not certain
        as it
        depends on the company achieving profitability in the
        future.   In addition, certain expenses incurred outside the
        United States of America may not be deductible against US income taxes, but
        may
        be utilized in the various international jurisdictions in which the company
        does
        business.
 
 **Advertising
        Costs**
 
 The
        cost
        of advertising is expensed as incurred.
 
 **Fair
        Value of Financial Instruments**
 
 The
        Company estimates the fair value of its financial instruments using available
        market information and appropriate valuation methodologies. However,
        considerable judgment is required in interpreting market data to develop
        the
        estimates of fair value.  Accordingly, the Company estimates of fair
        value are not necessarily indicative of the amounts that the Company could
        realize in a current market exchange.  The use of different market
        assumption and/or estimation methodologies may have a material effect on
        the
        estimated fair value amounts.  The interest rates payable by the
        Company on its notes payable approximate market rates.  The Company
        believes that the fair value of its financial instruments comprising accounts
        receivable, notes receivable, accounts payable, and notes payable approximate
        their carrying amounts.
 
 **Management's
        Estimates and Assumptions**
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities, disclosure of contingent
        assets and liabilities at the date of the financial statements, and the reported
        amounts of revenues and expenses.  Actual results could differ from
        these estimates.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 **New
        Standards Implemented**
 
 In
        May
        2005, the Financial Accounting Standards Board (*“FASB”*) issued
        Statement of Financial Accounting Standard (*“SFAS”*) No. 154,
*Accounting Changes and Error Corrections*.  SFAS No. 154
        replaces Accounting Principles Board Opinion No. 20, *Accounting
        Changes*, and SFAS No. 3, *Reporting Accounting Changes in Internal
        Financial Statements*, and changes the requirements for the accounting for
        and reporting of a change in accounting principle.  SFAS No. 154
        requires retrospective application of changes in accounting principle to
        prior
        periods’ financial statements, unless it is impracticable to determine either
        the period-specific effects or the cumulative effect of the
        change.  SFAS No. 154 is effective for accounting changes and
        corrections of errors made in fiscal years beginning after December 15,
        2005.  We will adopt SFAS No. 154 on January 1, 2006.  Any
        impact on the Company’s consolidated results of operations and earnings (loss)
        per share will be dependent on the amount of any accounting changes or
        corrections of errors whenever recognized.
  In
        2006,
        the Financial Accounting Standards Board issued the following:
  -
        SFAS
        No. 155: *Accounting for Certain Hybrid Financial
        Instruments*
 *-
        SFAS No. 156: Accounting for Servicing of Financial Assets*
 *-
        SFAS No. 157: Fair Value Measurements*
 *-
        SFAS No. 158: Employers’ Accounting for Defined Benefit Pension and Other
        Postretirement Plans*
 *-
        SFAS No. 159: The Fair Value Option for Financial Assets and Financial
        Liabilities—Including an amendment of FASB Statement
        No.
        115*
 *-
        FIN
        No. 48: Accounting for Uncertainty in Income Taxes—an interpretation of FASB
        Statement No. 109*
 
 Management
        has reviewed these new standards and believes that they have no impact on
        the
        financial statements of the Company at this time; however, they may apply
        in the future.
 **Reclassification**
  Certain
          2005 amounts have been reclassified to conform to the 2006
          presentation.
 **(2)**
              **Acquisitions**
 
 **Sleipner,
        S.A.**
 
 Effective
        October 10, 2005, the Company acquired 100% of the capital stock of Sleipner,
        S.A. (Sleipner) by issuing 1,500,000 shares of the Company's restricted common
        stock.  Sleipner is a company organized and existing under the laws of
        Switzerland and doing business in Italy.
 
 Sleipner
        was acquired by the Company because the cellular phone software developed
        by
        Sleipner is compatible with Calypso's ASNAPTM software.  Except for the
        compatible software, no other tangible or intangible assets were acquired
        in
        connection with this acquisition.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 As
        required by SFAS No. 141, the Company has recorded the acquisition using
        the
        purchase method of accounting with the purchase price allocated to the acquired
        assets and liabilities based on their respective estimated fair values at
        the
        acquisition date.  The purchase price of $1,170,000 was allocated at
        follows:
 
 Software
                  development costs
              
              $
              1,320,000Current
                  liabilities
              
              
              (150,000
              )Purchase
                  price
              
              $
              1,170,000
  Consistent
          with the Company’s policy of accounting for software development cost, the
          $1,320,000 was fully amortized by December 31, 2006.
 Revenues
        and expenses are included in the Company’s statement of operations from October
        10, 2005 through December 31, 2005.   No revenues were realized
        during this period.  Subsequent to December 31, 2005 the Company made
        the strategic decision to consolidate the technical staff of Sleipner with
        that
        of the Company at the offices in Miami, Florida.
 
 The
        following unaudited pro forma data summarizes the results of operations of
        the
        Company for the years ended December 31, 2005 and 2004 as if the acquisition
        had
        been completed on January 1, 2004.  The pro forma data gives effect to
        the actual operating results prior to acquisition.  The pro forma
        results do not purport to be indicative of the results that would have actually
        been achieved if the acquisition had occurred on January 1, 2004 or may be
        achieved in the future.
 
 December
                  31, 2005
              
              
              December
                  31, 2004Revenues
              
              $
              480,000
              
              
              $
              675,500Net
                  income (loss)
              
              
              (10,789,000
              )
              
              
              (11,376,000
              )Basic
                  net earnings (loss) per share
              
              
              (0.09
              )
              
              
              (0.11
              )
 
 **RV
        Technology Limited**
 
 Effective
        July 22, 2005, the Company entered into an agreement (the "Agreement") to
        acquire a 25% interest in RV Technology Limited (RV Tech), a limited company
        incorporated under the laws of Hong Kong.  The Company immediately
        acquired 16.8% of RV Tech by paying $1,000,000 in cash ($666,666 in working
        capital to RV Tech and $333,334 to the shareholders of RV Tech) and issuing
        1,000,000 shares of the Company's restricted common stock.  The
        Company issued a note in the amount of $1,333,334 to acquire an additional
        5.6%
        interest in RV Tech; however, the Company would not receive the additional
        shares of RV Tech until the note is paid by the Company.  In addition,
        the Agreement provides for the Company to acquire an additional 2.6% of RV
        Tech
        by paying $666,667 in cash when RV Tech meet certain milestones such as RV
        Tech
        achieving CE and FCC certification of the first functioning Dual Mode (GSM/GPRS
        and WiFi) model cellular telephone.  The Agreement also gave the
        Company exclusive rights to acquire the remaining 75% of RV Tech by issuing
        6,000,000 shares of the Company's restricted common stock and paying $3,000,000
        in cash to the shareholders of RV Tech.  The option to acquire the
        remaining 75% of RV Tech expires in 9 months from the closing date of the
        original transaction.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 Subsequent
        to the acquisition, the Company changed it focus from developer and supplier
        of
        real-time video cellular phones to a developer and supplier of real-time
        cellular phones software only.  Therefore, the Company has decided to
        not continue with the transaction and did not acquire any additional
        ownership in RV Tech.  Because there are no assets that meet the
        definition of capitalizable assets under SFAS Number 142 and RV Tech has
        deficit
        equity, the investment has been impaired to a value of $1.  This
        impairment cost has been recognized as an expense in 2005
 
 **(3)**
              **Property
                  and Equipment**
 
 Major
        classes of property and equipment together with their estimated useful lives,
        consisted of the following:
 
 December
                    31Years
                
                
                2006Laboratory
                    equipment
                
                3-5
                
                
                $
                -Office
                    furniture and equipment
                
                3-5
                
                
                
                76,69476,694Less
                    accumulated depreciation
                
                
                
                
                
                
                (50,810
                )Net
                    property and equipment
                
                
                
                
                
                $
                25,884
 **(4)**
              **Software
                  Development Costs**
 
 Software
        development costs represent capitalized costs incurred in the development
        of the
        cellular phones and telecommunications infrastructure software.  The
        Company began capitalizing this cost once technological feasibility had been
        established during the first quarter of 1999.  All costs incurred
        prior to establishment of technological feasibility were expensed as research
        and development expenses.  The Company began amortizing this cost once
        the products were available for general release to
        customers.  Effective January 1, 2004, the Company began amortizing
        the balance of software development costs over a three-year
        period.  For the years ended December 31, 2006 and 2005, amortization
        expense for software development costs were $2,684,129 and $1,741,270,
        respectively.  Effective January 1, 2005, Company is no longer
        capitalizing software development costs from internal
        operations.  During 2005, the Company acquired $1,320,000 in software
        development by acquiring Sleipner, S.A. The technology acquired in the
        transaction enhanced the value and utilization of the Company’s existing
        patented technology and the company made the determination that it should
        be
        capitalized.  This addition to software development costs is being
        amortized over the remaining life of the previously capitalized costs, a
        fourteen (14) month period.  At December 31, 2006, software
        development costs have been fully amortized.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 **(5)**
              **Capital
                  Stock, Options and
                  Warrants**
  The
        Company is authorized to issue up to 200,000,000 shares of Common Stock,
        of
        which 168,229,868 were issued and outstanding as of December 31,
        2006.  At December 31, 2006, 2,722,648 shares were reserved for
        the exercise of stock options and warrants.
 
 The
        following table summarizes information about options and warrants outstanding
        at
        December 31, 2006 and 2005:
 
 Shares
              
              
              Weighted
                  Average Exercise Price December 31, 2006
              
              
              Shares
              
              
              Weighted
                  Average Exercise Price December 31, 2005Outstanding
                  at beginning of year
              
              
              1,501,806
              
              
              $
              .96
              
              
              
              615,000
              
              
              $
              1.58Granted
              
              
              1,220,840
              
              
              
              .59
              
              
              
              886,806
              
              
              
              1.04Exercised
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Canceled
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
                  at end of year
              
              
              2,722,646
              
              
              $
              .80
              
              
              
              1,501,806
              
              
              $
              .96Weighted
                  average fair value of options and warrants granted during the
                  period
              
              None
              
              
              $
              .59
              
              
              None
              
              
              $
              1.04Exercisable
                  at end of month
              
              
              2,722,646
              
              
              $
              .80
              
              
              
              1,501,806
              
              
              $
              .96
 
 Stock-based
        compensation is composed of the following for the year ended December 31,
        2006
        and 2005:
 
 2006
              
              
              2005Options
                  and warrants
              
              $
              -Stock-based
                  compensation at fair value
              
              
              240,650
              
              
              
              5,495,000Total
                  stock-based compensation expense
              
              $
              240,650
              
              
              
              5,495,000
 
 **(6)**
              **Income
                  Taxes**
 
 A
        reconciliation of income taxes at the federal statutory rate to amounts provided
        for the years ended December 31, are as follows:
 
 December
                  312006
              
              
              2005Tax
                  expense/(benefit) computed at statutory rate for continuing
                  operations
              
              $
              (1,650,000
              )
              
              $
              (3,646,000
              )Tax
                  (benefit) of operating loss carryforwards
              
              
              1,650,000
              
              
              
              3,646,000Tax
                  expense/(benefit) for continuing operations
              
              $
              
              
              
              $
              -
  ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 The
        Company has current net operating loss carryforwards in excess of $35,000,000
        as
        of December 31, 2006, to offset future taxable income, which expires in various
        years through 2026.
 
 Deferred
        taxes are determined based on the temporary differences between the financial
        statement and income tax bases of assets and liabilities as measured by the
        enacted tax rates, which will be in effect when these differences
        reverse.  The components of deferred income tax assets are as
        follows:
 
 December
                  312006
              
              
              2005Deferred
                  tax assets:Net
                  operating loss
              
              $
              12,106,000
              
              
              $
              10,456,000Total
                  deferred tax assets
              
              
              12,106,000
              
              
              
              10,456,000Valuation
                  allowance
              
              
              (12,106,000
              )
              
              
              (10,456,000
              )Net
                  deferred assets
              
              $
              -
              
              
              $
              -
 
 At
        December 31, 2006, the Company provided a 100% valuation allowance for the
        deferred tax asset because realization cannot be assured due to the continuing
        losses of the company and the requirement that profitability be achieved
        in the
        future.  In addition certain losses may not be utilized in the United
        States of America, but may be available for use in the other countries that
        the
        company does business.   Utilization of those expenses will
        depend upon profitable operations and the tax laws of the other countries
        involved.
 
 **(7)**
              **Related
                  Party Advance**
 
 Related
        party advance consist of the following at December 31, 2006:
  During
          2005, the Company was advanced $161,000 from InterCapital - Logistic Specialist
          Investments, Inc.  The advance was non-interest bearing.  A
          subscription agreement dated January 22, 2007 was negotiated with the Company
          which will convert the advance to 5,366,666 shares of the Company's common
          stock
          during the first quarter of 2007.
 All
          shares to be used for the above noted subscription agreements are restricted
          shares. The shares have been valued at the value on the applicable
          liability.
 ***Table
            of Contents***
  **CALYPSO
          WIRELESS, INC. AND SUBSIDIARIES**
 (A
          Development Stage Company)
 
 **Notes
          to Consolidated Financial Statements**
 
 December
          31, 2006 and 2005
 **(8)**
              **Other
                  Commitments and
                  Contingencies**
 
 **Lease
        Agreement**
  The
            Company leases office space under noncancellable-operating lease which
            expire
            December 31, 2008. Future minimum lease payments under the operating
            lease are
            as follows:
 Year
                  December
                    31,
                
                Amount2007
                
                $
                43,2002008
                
                
                43,200$
                86,400
 **Other
        Contingencies**
 
 In
        the
        normal course of business, the Company is involved in certain litigation
        as
        summarized below:
  On
        October 6, 2005, Robert Leon, the Company's former Chief Technology Officer,
        commenced an action against the Company seeking additional compensation and
        reimbursement of certain expenses. This matter has been amicably settled
        in a
        manner that serves the mutual benefit of both parties.
 
 ***Table
              of Contents***
 
 **CALYPSO
        WIRELESS, INC. AND SUBSIDIARIES**
 (A
        Development Stage Company)
 
 **Notes
        to Consolidated Financial Statements**
 
 December
        31, 2006 and 2005
 
 
 On
        November 5, 2004, Drago Daic d/b/a Tribeca Inc, filed a lawsuit against
        the Company, Texas, alleging that the Company delivered restricted shares
        rather than registered shares in a stock purchase; that he was assigned an
        interest in a lawsuit and the Company refused to acknowledge his interest;
        that
        he was hired to assist in obtaining the grant of a patent in exchange for
        4,500,000 shares.  Although, the Company disputes the claims; has
        never issued any shares to Mr. Drago, is not pursuing litigation against
        anyone,
        never signed a contract for assistance with the patent and has used its
        attorneys Malloy & Malloy to obtain such patent. On December 8, 2006, the
        Court rendered in judgment against Calypso in the amount of $117,000,000. 
Our attorney's felt that the Company had not adequately presented information
        in
        its defense due to certain limitations.  Therefore, after entry of this
        judgment, Calypso has filed a lawsuit seeking a "bill of reviews".  In
        effect a suit to set aside the Daic judgment, based on new information. 
The bill of review was granted: *Calypso Wireless, Inc. v. Drago Daic*,
        Cause No. 2007-22571 in the 151st District Court of Harris County, Texas. 
Trial date has been set for November 7, 2007.  The Company believes that
        this new trial will reverse the judgment; however the outcome of this case
        is
        uncertain.
 
 On
        March
        3, 2006, Canal Place Ltd. commenced an action against the Company seeking
        unpaid
        rent for the term of certain leased property in Akron Ohio in the amount
        of
        $27,755.56.  The Company had moved certain technical employees from
        Akron to Miami and decided to abandon the lease in Akron.
 
 Employment
        Engagements
 
 The
        company has entered into  employment agreements with a number of
        Employees and consultants this provide for various severance benefits, bonus
        payments based on various performance and technical achievements and often
        include extra payments in the case of a change of control .
  **(9)**
              **Going
                  Concern**
 
 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.  The Company is in the development stage
        has primarily been involved in research and development and capital raising
        activities; as such the Company has incurred significant losses from operations
        during 2006 and 2005.
  ***Table
            of Contents***
  **CALYPSO
          WIRELESS, INC. AND SUBSIDIARIES**
 (A
          Development Stage Company)
 
 **Notes
          to Consolidated Financial Statements**
 
 December
          31, 2006 and 2005
 As
        a
        result the company has an immediate need for capital to continue its operations,
        and it will need to raise additional funds to implement its business
        plan.  In view of these matters, realization of a major portion of the
        assets in the accompanying consolidated balance sheet is dependent upon
        continued operations of the Company and the success of raising additional
        capital through debt and/or equity financing.  Management believes
        that actions presently being taken to obtain additional debt and/or equity
        financing will provide the opportunity to continue as a going
        concern.
  **(`10)**
              **SEC
                  Investigation**
  During
        2006 the Company was contacted by the Securities Exchange Commission regarding
        the investigation of certain consulting contracts and the resulting stock
        issuances that were executed in 2003 and 2004.  The Company had previously
        restated the financial statements for those periods as a result of facts
        disclosed to the former outside auditors during the review of subsequent
        periods.  The error that led to the restatements was the results of the
        Company's misinterpretation of reporting requirements related to the
        Issuances.  The Company has fully cooperated with the investigation and
        believe there will be no adverse consequences for the Company.
  **(11)**
                  **Related
                      Party Stock Transactions**
  During
            the periods presented, the Company received advances from various sources
            that
            were initially recorded as interest free advances. Subsequent to the
            receipt the
            Company negotiated stock subscription agreements for sales of unregistered
            stock
            for the advances at rates below the quoted prices for registered stock.
            Some of
            these advances may have come from entities owned by or controlled by
            existing
            shareholders. Because the Company was unable to obtain any other financing
            at
            the time, it is believed that the rates are substantially equivalent
            to what
            might have been obtained from completely independent third parties. The
            transactions have been recorded as stock subscriptions at the prices
            negotiated
            and no additional financing cost or dividends have been recorded.
  During
              2006, the Company was advanced $121,576 from I. Medicas Central.  The
              advance was non-interest bearing.  A subscription agreement dated
              December 22, 2006 was negotiated with the Company which converted the
              advance to
              3,039,400 shares of the Company's common stock as of the date of the
              subscription agreement.
 
 During
              2005, the Company was advanced $115,000 from Link Systems Group,
              Inc.  The advance was non-interest bearing.  A subscription
              agreement dated October 12, 2006 was negotiated with the Company which
              converted
              the advance to 3,833,333 shares of the Company's common stock as of
              the date of
              the subscription agreement.
 
 During
              2005, the Company was advanced $115,000 from Marker Ventures,
              Inc.  The advance was non-interest bearing.  A subscription
              agreement dated October 9, 2006 was negotiated with the Company which
              converted
              the advance to 3,833,333 shares of the Company's common stock as of
              the date of
              the subscription agreement.
 
 During
              2006, the Company was advanced $85,000 from Importadora Exportadora
              Istmo,
              SA.  The advance was non-interest bearing.  A subscription
              agreement dated October 10, 2006 was negotiated with the Company which
              converted
              the advance to 2,833,333 shares of the Company's common stock as of
              the date of
              the subscription agreement.
 
 During
              2005, the Company was advanced $60,000 from Marker Ventures, Inc.  The
              advance was non-interest bearing.  A subscription agreement dated
              August 31, 2006 was negotiated with the Company which converted the
              advance to
              2,000,000 shares of the Company's common stock as of the date of the
              subscription agreement.
 
 During
              2006, the Company was advanced $51,000 from Inversiones - Logistic
              Specialist
              Investments, Inc.  The advance was non-interest bearing.  A
              subscription agreement dated October 12, 2006 was negotiated with the
              Company
              which converted the advance to 1,700,000 shares of the Company's common
              stock as
              of the date of the subscription agreement.
 
 During
              2005, the Company was advanced $41,000 from Manuel Antonio - Interfactoring
              Finance Corp.  The advance was non-interest bearing.  A
              subscription agreement dated October 12, 2006 was negotiated with the
              Company
              which converted the advance to 1,366,666 shares of the Company's common
              stock as
              of the date of the subscription agreement.
 
 During
              2005, the Company was advanced $38,200 from Cacovisa - Project Development
              Capital.  The advance was non-interest bearing.  A
              subscription agreement dated October 12, 2006 was negotiated with the
              Company
              which converted the advance to 1,273,333 shares of the Company's common
              stock as
              of the date of the subscription agreement.
 
 During
              2005, the Company was advanced $25,000 from I. Medicas Central.  The
              advance was non-interest bearing.  A subscription agreement dated
              December 22, 2006 was negotiated with the Company which converted the
              advance to
              625,000 shares of the Company's common stock as of the date of the
              subscription
              agreement.
  All
            shares issued for the above noted subscription agreements were restricted
            shares.  The shares have been valued at the value on the applicable
            liability.