**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**





x
            **Annual
                Report under Section 13 or 15(d) of the Securities Exchange Act of
                1934**




For
      the
      fiscal period ended: December 31, 2006





o
            **Transition
                Report under Section 13 or 15(d) of the Exchange Act of
                1934**





For
      the
      transition period from to ________ to ________





Commission
      File Number: 000-51213





**XL
      GENERATION INTERNATIONAL INC.**


(Name
      of
      Small Business Issuer as specified in its charter)





**NEVADA**
            **20-0909393**(State
                or other jurisdiction of)
              incorporation
                or organization
            (IRS
                Employer )
              Identification
                Number





**Sumpfstrasse
      32**


**6304
      Zug, Switzerland**


(Address
      of principal executive offices)





**4141
      723 1090**


(Issuer’s
      telephone number, including area code)





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, par value
      $.001 per share





Check
      whether the Issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the Issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 12 months (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past
      90 days. Yes x No o





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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x





State
      issuer's revenues for its most recent fiscal year: $4,846,157





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days: $7,029,816 as of March 31,
      2007





The
      Issuer had 34,578,268 shares of Common Stock, par value $.001, outstanding
      as of
      March 31, 2007.





Documents
      incorporated by reference: None.





Transitional
      Small Business Disclosure format (Check one):  Yes o No x







**TABLE
      OF CONTENTS**





PART
                IItem
                1.
            
            Description
                of Business
            
            2Item
                2.
            
            Description
                of Property
            
            5Item
                3.
            
            Legal
                Proceedings
            
            5Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            7PART
                IIItem
                5.
            
            Market
                for Common Equity, Related Stockholder Matters and Small Business
                Issuer
                Purchases of Equity Securities
            
            8Item
                6.
            
            Management’s
                Discussion and Analysis or Plan of Operation
            
            9Item
                7.
            
            Financial
                Statements
            
            14Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            25Item
                8A.
            
            Controls
                and Procedures
            
            25Item
                8B.
            
            Other
                Information
            
            25PART
                IIIItem
                9.
            
            Directors,
                Executive Officers, promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act
            
            26Item
                10.
            
            Executive
                Compensation
            
            28Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            29Item
                12.
            
            Certain
                Relationships and Related Transactions
            
            30Item
                13.
            
            Exhibits
            
            33Item
                14.
            
            Principal
                Accountant Fees and Services
            
            37SIGNATURES
            
            39





ii


*FORWARD
      LOOKING STATEMENTS*





*This
      Annual Report on Form 10-KSB (this “Annual Report”) includes forward-looking
      statements within the meaning of the Private Securities Litigation Reform Act
      of
      1995, Section 27A of the Securities Act of 1933 and Section 21E of the
      Securities Exchange Act of 1934. These forward-looking statements can be
      identified by the use of forward-looking terminology, including the words
“believes,” “contemplates,” “continues,” “estimates,” “anticipates,” “expects,”
“intends,” “may,” “will” or “should,” or, in each case, their negative or other
      variations or comparable terminology. You should read statements that contain
      these words carefully because they:*





·
            
            discuss
                future expectations;




·
            
            contain
                projections of future results of operations or financial condition;
                or




·
            
            state
                other “forward-looking”
information.




*We
      believe it is important to communicate our expectations to our stockholders.
      However, there may be events in the future that we are not able to predict
      accurately or over which we have no control. The risk factors and cautionary
      language discussed in this Annual Report provide examples of risks,
      uncertainties and events that may cause actual results to differ materially
      from
      the expectations described by us in such forward-looking statements, including
      among other things:*




·
            
            the
                impact of legislative and regulatory actions and reforms and regulatory,
                supervisory or enforcement actions of government actions relating
                to the
                Company;





·
            
            changes
                in political, economic or industry conditions, the interest rate
                environment or financial and capital markets, which could result
                in
                changes in demand for products or
                services;





·
            
            terrorist
                activities and international hostilities, which may adversely affect
                the
                general economy, financial and capital
                markets;





·
            
            the
                Company’s business strategy and
                plans;




·
            
            the
                introduction, withdrawal, success and timing of business initiatives
                and
                strategies;




·
            
            harm
                to the Company’s reputation;




·
            
            fluctuations
                in customer demand;




·
            
            management
                of rapid growth;




·
            
            the
                impact of increased competition;




·
            
            the
                impact of future acquisitions; and




·
            
            the
                ability to attract and retain highly talented
                professionals.




** ** ** *By
      their nature, forward-looking statements involve risks and uncertainties because
      they relate to events and depend on circumstances that may or may not occur
      in
      the future. We caution you that forward-looking statements are not guarantees
      of
      future performance and that our actual results of operations, financial
      condition and liquidity, and developments in the industry in which we operate
      may differ materially from those made in or suggested by the forward-looking
      statements contained in this Annual Report. In addition, even if our results
      of
      operations, financial condition and liquidity, and developments in the industry
      in which we operate, are consistent with the forward-looking statements
      contained in this Annual Report, those results or developments may not be
      indicative of results or developments in subsequent periods. You are cautioned
      not to place undue reliance on these forward-looking statements, which speak
      only as of the date of such statements.*









*All
      forward-looking statements included herein are expressly qualified in their
      entirety by the cautionary statements contained or referred to in this Annual
      Report. Except to the extent required by applicable laws and regulations, the
      Company undertakes no obligation to update these forward-looking statements
      to
      reflect events or circumstances after the date of this Annual Report or to
      reflect the occurrence of unanticipated events.*




*Unless
      otherwise provided in this Annual Report, references to the “Company,” the
“Registrant,” the “Issuer,” “we,” “us,” and “our” refer to XL Generation
      International Inc.*




**PART
      I**





**Item
      1.**  **Description
      of Business**





**Introduction**





XL
      Generation International Inc. is the holding company of a Swiss entity, XL
      Generation AG, which is the manufacturer of an artificial sport surface called
      “XL Turf.” XL Turf is designed to reduce accidents while reproducing the natural
      feeling of playing on grass. Until September 2006, the Company aspired to become
      a leading global force in the artificial turf and flooring markets by building
      on the strength of the XL Generation brand and developing strategic partnerships
      with key regional turf and flooring providers. However, because of worsening
      financial conditions, irregularities regarding registration of certain
      intellectual property rights and deterioration of the brand name of the Company,
      the Board of Directors have decided that it is in the Company’s and investors’
best interest to initiate a complete and total withdrawal from the artificial
      flooring sector, artificial turf and all related concerns as soon as possible.





**Business
      Development**





The
      Company was incorporated in the State of Nevada on March 18, 2004, as Cygni
      Systems Corporation. It was originally formed with the intent of raising funds
      and entering into business as a software design company. From the date of its
      incorporation until June 17, 2005, the Company was in the development stage
      of
      its business of developing online and network security management software
      and
      online and network security consulting services.





A
      change
      of control occurred on June 17, 2005. In connection with this change of control,
      the Company's purpose became to seek, investigate and, if such investigation
      warranted, merge or acquire an interest in business opportunities presented
      to
      it by persons or companies who or which desired to seek the perceived advantages
      of a Securities Exchange Act of 1934 registered corporation.





On
      June
      29, 2005, the Company entered into a Letter of Intent (the "Letter of Intent")
      regarding a share exchange with XL Generation AG. Pursuant to the terms of
      the
      Letter of Intent, the Company agreed to acquire all of the issued and
      outstanding shares of common stock of XL Generation AG in exchange for the
      issuance at closing of an aggregate of 15 Million shares of restricted common
      stock (the "Common Stock") of the Company (the "Exchange Offer"). The Letter
      of
      Intent provided that in the event that substantially all of XL Generation AG's
      stockholders agreed to participate in the Exchange Offer on that date, such
      stockholders would thereafter collectively own approximately 60% of the issued
      and outstanding shares of the Company's Common Stock as of such date, and the
      Company would hold all or substantially all of the issued and outstanding shares
      of XL Generation AG's common stock. XL Generation AG is domiciled in Zug,
      Switzerland.




2





On
      August
      19, 2005, the Company entered into and closed a Share Exchange Agreement (the
      "Share Exchange Agreement") with XL Generation AG. Pursuant to the terms of
      the
      Share Exchange Agreement, the Company acquired all of the issued and outstanding
      shares of common stock of XL Generation AG. In connection with the closing
      of
      the Exchange Offer, the Company appointed Mr. Alain Lemieux, as President and
      CEO, Mr. Daniel Courteau, as Secretary, and Mr. Flemming Munck, as Chief
      Financial Officer. Four new directors joined Mr. Pellerin on the Company’s Board
      of Directors. These new directors were Mr. Lemieux, Mr. Munck, Mr. Courteau,
      and
      Alexander C. Gilmour.





On
      August
      23, 2005, the Company filed a Certificate of Amendment with the States of
      Nevada, changing its name to "XL Generation International Inc." The Company
      changed its stock symbol to XLGI. The Company has also changed its fiscal year
      end from April 30 th to
      December 31 st .





**Our
      Business**





Until
      fall of 2006, XL Generation AG was the Company’s sole operating subsidiary,
      based in Zug, Switzerland, and designing specific flooring products for sports,
      recreational and commercial markets. XL Generation AG developed artificial
      turf
      systems for sports fields. XL Generation AG held the worldwide commercial and
      manufacturing rights for the "XL technology." The “XL technology” consists of
      six patents owned by WKF5/Ltd. However, on October 2, 2006, WKF5/Ltd served
      a
      notice to XLG terminating the usage of the XL Technology. This Notice claimed
      that WKF/5 Ltd has the right to terminate the License, and claimed the alleged
      insolvency of XLG as the cause of such right of termination.





The
      Company has no employees other than those employed by XL Generation AG and
      since
      May 26, 2006 XL Generation AG has had no employees.





Initially,
      XL Generation AG's core business was the production, distribution and sales
      of
      artificial turf sport surfaces, using Expanded Polypropylen (EPP) as a
      replacement for the usual infill (sand and/or rubber) used in the installation
      of artificial sport surfaces (and used by a number of our competitors). These
      products could have been used for European football (soccer), field hockey,
      baseball, American football, tennis and paintball. XL Generation AG was
      producing 3 soccer products on a commercial scale, 1 rugby product, 1 American
      football product, 1 tennis product, 1 baseball product, 1 paintball product
      and
      1 landscape product. The XL Turf market was based mainly in Europe and North
      America.





XL
      Generation AG had a range of all weather and indoor sports surface products
      which were satisfying the criteria of certain sports organizations including
      the
      Federation International de Football Association (FIFA) and the Union des
      associations europeennes de football (UEFA), as well as having been endorsed
      by
      a number of professional soccer players.





The
      Company aspired to become a leading global force in the artificial turf and
      flooring markets by building both the strength of the XL brand and strategic
      partnerships with key regional turf and flooring providers. Our vision was
      to
      develop a variety of products other than for sports, aimed at all types of
      play
      space, including for landscape and playgrounds. However, due to pending
      litigation, described in detail in Item 3 of this Annual Report, and because
      of
      the severe deterioration of the brand name of the Company and the poor quality
      of the products produced at XL Generation AG’s request, the Company has decided
      to initiate a complete and total exit of the artificial turf
      business.





The
      Company's plan is now to seek, investigate and, if such investigation warrants,
      merge or acquire an interest in business opportunities presented to it by
      persons or companies who or which desired to seek the perceived advantages
      of a
      Securities Exchange Act of 1934 registered corporation. The Company's discretion
      in the selection of business opportunities is unrestricted, subject to the
      availability of such opportunities, economic conditions, and other
      factors.




3





**Competition
      of XL Generation AG**





Our
      products for soccer, football and rugby competed with companies and brands
      including FieldTurf, Tarkett Group, Polytan, Greenfield, Italgreen, Domo, and
      Desso. Our product for tennis competed with Tiger-Turf. Our playground product
      competed with Softile, Sportplay, Rubber-Cal, and Silisport.





**Suppliers
      of Raw Material**





XL
      Generation AG was party to a Supply Contract with Febra-Kunststoffe GmbH
      (“Febra”) and BASF Aktiengesellschaft (“BASF”). Pursuant to this agreement,
      Febra purchased certain raw materials from BASF, and in turn provided XL
      Generation AG with molded EPP padding sheets. XL Generation AG had agreed to
      purchase at least 100 metric tons of padding sheets per year. The term of this
      agreement ended on December 31, 2006.





Polyform
      Inc., a Canadian corporation, was XL Generation AG’s main supplier of molded EPP
      blocks, but these beads can be molded into EPP block of different sizes by
      other
      molders around the world. XL Generation AG had no written agreement with
      Polyform Inc., and purchased EPP blocks as needed pursuant to purchase
      orders.





Polyprod
      Inc., a Canadian corporation, provided the assembly of the final product, using
      a combination of turf, glue, and EPP. Pursuant to an Exclusive Manufacturing
      License Agreement entered into as of January 2, 2005, between XL Generation
      AG
      and Polyprod Inc., Polyprod Inc. manufactured XL Generation AG’s products on a
      cost plus basis. This Exclusive Manufacturing License Agreement was for a term
      of ten (10) years. The Company had determined that Polyprod Inc. was a related
      party due to the control of Polyprod Inc. by XL Generation AG through this
      contractual relationship. However, since September 19, 2006, the Exclusive
      Manufacturing Licence Agreement has been suspended because of pending litigation
      involving Polyprod Inc., as described in Item 3 of this Annual
      Report.





The
      fiber
      used in XL Generation AG's products was produced by Ten Cate Thiolon, one of
      the
      main producers of synthetic fiber in the world. XL Generation AG had no written
      agreement with Ten Cate Thiolon. XL Generation AG used the services of several
      "tufters" based in Dalton, Georgia, who added this fiber to the final product.
      However, given the Company has initiated a complete and total exit of the
      artificial turf business, the business relationship between the Company and
      Ten
      Cate Thiolon has been terminated with no prejudice against the XL Generation
      AG
      or the Company.





**Intellectual
      Property**





The
      current relationship between XL Generation AG and the patents, patents pending
      and all the intellectual and industrial property rights (collectively, the
      "Intellectual Property") which XL Generation AG was using is as follows:





The
      Intellectual Property is owned by WKF/5 Ltd, a Maltese corporation controlled
      (and majority owned) by a related party, the Alain Lemieux Trust. Mr. Alain
      Lemieux served as President and CEO of the Company until August 18, 2006. WKF/5
      Ltd owns the worldwide commercial and manufacturing rights for the "XL
      technology." The “XL technology” consists of six patents. Of these six patents,
      one is patented in 38 countries, with patents pending in 6 more countries;
      another is patented in 16 countries, with patents pending in 28 more; two of
      these patents are pending in seven countries; and two of the six patents are
      pending in one country each.





On
      January 1, 2005, XL Generation AG was granted a worldwide exclusive license
      (the
      "License Agreement") to manufacture, assemble, sell, distribute and promote
      all
      the products covered by the Intellectual Property. It was provided that the
      License Agreement shall continue in full force and effect until it automatically
      expires upon the later of (a) the termination or expiration date of the latest
      patent granted; or (b) the expiration date of any extension made by Licensee
      pursuant to the License Agreement. On October 2, 2006, WKF5/Ltd served a notice
      to XLG terminating the License agreement. This Notice claims that WKF/5 Ltd
      has
      the right to terminate the License, and claims the alleged insolvency of XLG
      as
      the cause of such right of termination.




4





There
      was
      no minimum quota required the License Agreement. The royalty rate had been
      determined at 5% of gross sales of XL Generation AG. Subsequently, it was agreed
      by XL Generation AG and WKF/5 Ltd that the initial lump sum royalty fee would
      be
      first $416,047. Pursuant to the same agreement entered into by WKF/5 Ltd, the
      lump sum royalty fee of $416,047 was assumed by a trust controlled by Alain
      Lemieux which assumed XL Generation AG’s duty to pay WKF/5 Ltd, XL Generation AG
      was released of the said payment.





Irregularities
      concerning the duly and proper registration of the trademarks “XL Turf” and “XL
      Generation” served as the basis of a legal action against WKF/5 Ltd, where the
      Company claimed that the Register of Trade-marks relating to registration no.
      671 108 (application no. 1 266 983) for the trade-mark XLGENERATION, registered
      on August 24, 2006, be struck on the grounds that at the date of the application
      or at the date of registration, the entry as it appears on the Register does
      not
      accurately express or define the existing rights of the person appearing to
      be
      the registered owner of the mark. Furthermore, the Company asked for an order
      declaring that WKF/5 Ltd was not and is not entitled to obtain registration
      of
      any trade-mark containing the word XLGENERATION on the claim that the
      registration in the name of WKF/5 Ltd of the trade-mark XLGENERATION is contrary
      to the Company’s rights, as detailed in Item 3 of this Annual
      Report.





**Item
      2.**  **Description
      of Property**





The
      Company does not own any real estate. The Company does not plan on investing
      in
      real estate in the near future.





At
      the
      present time, the Company has no operations. Previously, the Company conducted
      its operations out of three locations. One of the Company's directors, Albert
      Beerli, rented XL Generation AG office space at his offices in Zug, Switzerland.
      Mr. Beerli was charging 2,000 Swiss Francs per month (approximately U.S. $1,538)
      for this space.





XL
      Generation AG was also renting office space from Polyprod Inc. in Montreal.
      Polyprod Inc. is a Canadian corporation. Pursuant to an Exclusive Manufacturing
      License Agreement entered into as of January 2, 2005, between XL Generation
      AG
      and Polyprod Inc., Polyprod Inc. was manufacturing XL Generation AG’s products.
      XL Generation AG was paying Polyprod $2,500 a month in rent. There was no
      written lease. However, given the legal actions undertaken by the Company
      against Polyprod Inc, as detailed in Item 3 of this Annual Report, the office
      space rented by the Company from Polyprod Inc. has been emptied until complete
      resolution of this litigation.





On
      September 15, 2005, XL Generation AG entered into a lease for office space
      in
      New York City expiring on September 14, 2008, with a base rent of $8,046.00
      per
      month. Since October 1, 2006, the Company has stopped leasing the office
      described above without any prejudice or recourse undertaken by the Landlord,
      and this office is now occupied by a third party.





**Item
      3.** ****  **Legal
      Proceedings**





During
      the period covered by this Annual Report, the Company has been a party to the
      following legal proceedings:





·
            On
                September 19, 2006, the Company filed judicial proceedings seeking
                injunctive and other relief against Polyprod Inc. in the Quebec Superior
                Court of the district of Montreal (Court file number 500-17-032933-064)
                to
                allow the Company to halt Polyprod Inc. from locking the Company
                out of
                the production site, and to force Polyprod Inc. to allow the Company
                access to said production site.




5




·
            On
                October 6, 2006, the Company filed a motion in the Québec Superior Court
                of the District of Montreal (Court file number 500-11-029010-069)
                seeking
                to have Polyprod Inc. declared bankrupt pursuant to applicable law
                for an
                unpaid claim totalling $1,052,069 CAD. This amount represents monetary
                advances towards the production of artificial turf and related products,
                made by XL Generation AG to Polyprod Inc. from January 5, 2006 to
                October
                10, 2006.





·
            On
                October 26, 2006, XLGI filed a motion against WKF/5 LTD, the Alain
                Lemieux
                Trust (Jersey) and Professional Trust Company Limited in the Canadian
                Federal Court of the District of Montreal (Court file number T-1872-06).
                The Company claimed that the Register of Trade-marks relating to
                registration no. 671 108 (application no. 1 266 983) for the trade-mark
                XLGENERATION, registered on August 24, 2006, be struck on the grounds
                that
                at the date of the application or at the date of registration, the
                entry
                as it appears on the Register does not accurately express or define
                the
                existing rights of the person appearing to be the registered owner
                of the
                mark. Furthermore, the Company asked for an order declaring that
                WKF/5 Ltd
                was not and is not entitled to obtain registration of any trade-mark
                containing the word XLGENERATION on the claim that the registration
                in the
                name of WKF/5 Ltd of the trade-mark XLGENERATION is contrary to the
                Company’s rights.





·
            On
                November 10, 2006, XLGI filed a motion seeking injunctive relief
                against
                Solutions Highmedia Interactif Inc. and Domenico Malatesta, in the
                Quebec
                Superior Court of the District of Montreal (Court file number
                500-17-033768-063) to forbid the selling, and prevent the cession
                of the
                internet domain name and emails of the Company and its affiliates,
                and to
                reactivate the Company’s and its affiliates related internet
                services.




·
            On
                November 14, 2006, XLGI filed a motion seeking the annulment of the
                Share
                Exchange Agreement signed on August 19, 2005 between the Company
                and XL
                Generation AG. In addition, this action seeks to require certain
                of the
                Company’s former management and affiliated parties to pay $11,000,000 in
                damages and to order Wuersch & Gering LLP and Pacific Stock Transfer
                Company to deposit the 13,500,000 shares of the Company issued to
                the
                Alain Lemieux Trust and Professional Trust Company Limited at the
                Quebec
                Superior Court of the District of Montreal (Court file number
                500-17-033823-066). This action alleges misconduct by former officers
                and
                directors of the Company, including unjustified and irresponsible
                spending
                of the Company’s financial resources.





·
            On
                November 16, 2006, Solutions Highmedia Interactif Inc. filed a motion
                for
                monetary claim against XLGI, XL Generation AG and XL Canada, in the
                Quebec
                Court of the District of Montreal (Court file number 500-22-129010-065)
                totalling $54,418 CAD covering expenses for webdesign, printing,
                translation, and webhosting mandates performed towards the website
                of the
                Company and its affiliates between January 1, 2006 and August 15,
                2006.





·
            On
                December 5, 2006, former French employees of XLAG filed legal proceedings
                against XL Generation AG for unpaid salaries at the Tribunal du Commerce
                de Paris, in France.





·
            On
                December 15, 2006, Expo Futbol S.L. filed legal proceedings for monetary
                claims against XL Generation AG in Zug, Switzerland for a total amount
                of
                87,000 euros for services provided during the event of the Planet
                Futbol
                exposition held in Barcelona, Spain from April 19thto
                April 23rd2006. (Court file number: 2061494)





·
            On
                December 20, 2006, a demand for Arbitration, between the Company
                and the
                United States National Soccer Team Players Association, was filed
                at the
                American Arbitration Association concerning a contract dispute regarding
                the agreement for use of marks and logos of the United States National
                Soccer Team Players Association (“USNSTPA” and Support in the marketing of
                the Company’s fields and technology.(Reference number: 50 181 T 000607).
                On May 17, 2006, an Agreement for use of marks and logos of the United
                States National Soccer Team Players Association and support in the
                marketing of XLGI Fields and Technology was entered between UNSTPA
                and
                XLGI. Under this agreement, XLGI was meant to be the only Official
                Turf
                and Technology System of the US National Soccer Team Players’, in
                counterpart XLGI and its North American subsidiary was allowed to
                use the
                USNSTPA’s logo in XLGI’s website and all of XLGI’s promotional materials,
                for a term lasting to February 11, 2009. The licensing fee payable
                in
                consideration for USNSTPA services from XLGI was of $25,000 per year
                to be
                paid upon the initial execution of this Agreement as advancement
                and on or
                before each anniversary of that date (May 17, 2007, and May 17, 2008).
                In
                addition to the licensing payments, XLGI was obliged to pay the USNSTPA
                1%
                of the total net sales revenues received from customers during the
                term of
                this Agreement. On February 9, 2007, the Company filed a suspension
                of the
                arbitration process to the International Centre for Dispute Resolution
                and
                initiated the procedures to begin a mediation
                process.




6




As
      of the
      date of this Annual Report, the Board of Directors of the Company is engaged
      in
      negotiations to settle the files number 500-17-033823-066, 500-11-290010-069,
      500-17-033768-063, and 500-17-032933-064, in the Superior Court of Quebec and
      the file number T-1872-06 in the Canadian Federal Court.





·
            On
                October 23, 2006, the City of Interlaken, Switzerland filed a claim
                totalling 360,000 USD at the Interlaken courthouse for defective
                turf
                products. On January 9, 2007, XL Generation AG entered into a settlement
                agreement providing that before July, 2007, the defective turf will
                be
                removed and replaced, along with a payment in the amount of 5,000
                CHF.





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





In
      the
      fourth quarter of the fiscal year ended December 31, 2006, no matters were
      submitted to the Company's security holders for a vote.




7


**PART
      II**





**Item
      5.** **** **Market
      for Common Equity, Related Stockholder Matters and Small Business Issuer
      Purchases of Equity Securities**




**MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**





***(a)
      Market Information.***





The
      Company's common equity is traded on the over-the-counter bulletin board under
      the symbol XLGI.





The
      following table sets forth for the periods indicated the high and low close
      prices for the Common Shares in U.S. Dollars. These quotations reflect only
      inter dealer prices, without retail mark up, mark down or commissions and may
      not represent actual transactions.





Quarter
                Ended
            
            High
            
            LowSeptember
                30, 2005
            
            $
            2.55
            
            
            2.04December
                31, 2005
            
            $
            4.18
            
            
            2.07March
                31, 2006
            
            $
            4.05
            
            
            2.15June
                30, 2006
            
            $
            3.50
            
            
            2.15September
                30, 2006
            
            $
            2.3
            
            
            0.75December
                31, 2006
            
            $
            0.80
            
            
            0.27





The
      trading data available for the quarter ended June 30, 2005 indicates that shares
      of the Company's stock were traded for $.10 a share and $.12 a share on June
      12,
      2005. To the Company’s knowledge, there was no active trading market in the
      Company’s stock and no earlier trading data is reasonably
      available.





***(b)
      Holders.***





As
      of
      March 31, 2007, the Company had 12 stockholders of record.





***(c)
      Dividends.***





The
      Company has never declared or paid cash dividends. There are currently no
      restrictions which limit the ability of the Company to pay dividends in the
      future.





***(d)
      Securities authorized for issuance under equity compensation
      plans.***





On
      March
      30, 2006, the Company adopted its 2006 Equity Incentive Plan (the “Plan”),
      effective as of March 24, 2006. Under the Plan, the Company may issue options,
      stock appreciation rights, restricted shares, deferred shares or performance
      shares. The maximum number of such shares of the Company’s common stock that may
      be issued under the Plan is 2,000,000 shares. The Company’s officers, directors,
      employees and consultants, as well as those of its subsidiaries, may participate
      in the Plan, as the Company’s Compensation Committee may deem to be advisable
      and in the best interests of the Company. No one individual may be awarded
      options to purchase more than 500,000 shares in any one fiscal year. No one
      individual may be granted more than 250,000 shares in any one fiscal year.
      The
      terms and conditions of each grant shall be as set forth in an award agreement
      approved by the Compensation Committee.




**RECENT
      SALES OF UNREGISTERED SECURITIES**





Not
      Applicable.




8





**PURCHASES
      OF EQUITY SECURITIES BY THE COMPANY AND AFFILIATED
      PURCHASERS**





None.





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





**The
      Company's Operations**





The
      following discussion of the financial condition and results of operations of
      XL
      Generation International Inc. (referred to herein as the "Company") should
      be
      read in conjunction with the financial statements and the related notes thereto
      included elsewhere in this Annual Report on Form 10-KSB for the period ended
      December 31, 2006 (this “Report”). This Report contains certain forward-looking
      statements and the Company's future operating results could differ materially
      from those discussed herein. Certain statements contained in this Report,
      including, without limitation, statements containing the words "believes",
      "anticipates," "expects" and the like, constitute "forward-looking statements"
      within the meaning of Section 27A of the Securities Act of 1933, as amended,
      and
      Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). However, as the Company issues “penny stock,” as such term is defined in
      Rule 3a51-1 promulgated under the Exchange Act, the Company is ineligible to
      rely on these safe harbor provisions. Such forward-looking statements involve
      known and unknown risks, uncertainties and other factors which may cause the
      actual results, performance or achievements of the Company to be materially
      different from any future results, performance or achievements expressed or
      implied by such forward-looking statements. Given these uncertainties, readers
      are cautioned not to place undue reliance on such forward-looking statements.
      The Company disclaims any obligation to update any such factors or to announce
      publicly the results of any revisions of the forward-looking statements
      contained or incorporated by reference herein to reflect future events or
      developments.





The
      Company was incorporated in the State of Nevada on March 18, 2004 as Cygni
      Systems Corporation. On August 19, 2005, the Company entered into a Share
      Exchange Agreement with XL Generation AG ("XLG"). Pursuant to the terms of
      the
      Share Exchange Agreement, the Company acquired all of the issued and outstanding
      shares of common stock of XLG in exchange for the issuance at closing of an
      aggregate of 15 Million shares of restricted Common Stock of the Company.





In
      connection with the Share Exchange Agreement (“SEA”), the Company commenced
      actions to provide for the revision of the Company's capital structure. Pursuant
      to such actions, DT Crystal Holdings Ltd., the controlling shareholder of the
      Company prior to entry into the Share Exchange Agreement, as inducement to
      the
      stockholders of XLG to enter into the Share Exchange Agreement, agreed to cancel
      four million shares of the Company’s Common Stock and accept in consideration
      thereof an option exercisable for 500,000 shares of the Company. In addition,
      the Company made a stock split to stockholders of record of the Company of
      9
      shares of Common Stock for each share of Common Stock held, provided, however,
      each of DT Crystal Holdings Ltd. and the Alain Lemieux Trust, a trust formed
      in
      the Jersey Islands, and Mr. Albert Beerli waived their respective rights to
      such
      stock split (the record date for such split was set as August 29, 2005).





XLG,
      is
      based in Zug, Switzerland, which core business was designing specific flooring
      products for sports, recreational and commercial markets. XLG was holding the
      worldwide commercial and manufacturing rights for the "XL technology" Owned
      by
      WKF5/Ltd. The “XL technology” consists of six patents registered under the WKF/5
      Ltd name. XLG was producing its product lines under the "XL Generation"
      trademark, including the "genuine" XLTURF sport systems. XLG also distributed
      its products worldwide through an extensive licensed distribution network,
      designing and manufacturing private labeled products using the "XL technology."




On
      August
      23, 2005, the Company filed a Certificate of Amendment with the States of
      Nevada, changing its name to "XL Generation International Inc." The Company
      also
      changed its stock symbol to XLGI.





9




Following
      the SEA, the Company served as the holding company for XLG. The Company has
      adopted XLG's fiscal year end and the following Management's Discussion and
      Analysis of Financial Condition and Results of Operations describes the
      financial condition and results of operations for XLG. The Company has no other
      operations other than XLG and has no employees other those employed by XLG.
      At
      the present moment XLG has no employees.





XLG
      was
      incorporated in 1991, and was inactive until March of 2004, when WKF/5 Ltd
      granted it the exclusive worldwide right to manufacture, promote and sell XL
      Turf products. XL Turf is an artificial pitch used primarily in soccer stadiums
      and indoor recreational facilities.





Under
      a
      License Agreement dated January 1, 2005, XLG acquired from WKF/5 Ltd the
      exclusive right to produce and market certain artificial turf products worldwide
      (the “License”). On October 2, 2006, WKF5/Ltd has served a notice to XLG
      terminating the License agreement. This Notice claims that WKF/5 Ltd has the
      right to terminate the License, and claims the alleged insolvency of XLG as
      the
      cause of such right of termination.





On
      March
      30, 2006, the Company adopted its 2006 Equity Incentive Plan (the “Plan”),
      effective as of March 24, 2006. Under the Plan, the Company may issue options,
      stock appreciation rights, restricted shares, deferred shares or performance
      shares. The maximum number of such shares of the Company’s common stock that may
      be issued under the Plan is 2,000,000 shares. The Company’s officers, directors,
      employees and consultants, as well as those of its subsidiaries, may participate
      in the Plan, as the Company’s Compensation Committee may deem to be advisable
      and in the best interests of the Company. No one individual may be awarded
      options to purchase more than 500,000 shares in any one fiscal year. No one
      individual may be granted more than 250,000 shares in any one fiscal year.
      The
      terms and conditions of each grant shall be as set forth in an award agreement
      approved by the Compensation Committee.





On
      August
      18, 2006, Mr. Alain Lemieux resigned as the Chief Executive Officer (“CEO”) and
      as a director of the Company. The Company expects to conduct a search for a
      new
      CEO as soon as reasonably possible. The Chairman of the Board, Mr. Alexander
      C.
      Gilmour, has agreed to serve as Acting CEO in the interim.





On
      October 2, 2006, XL Generation AG, a wholly-owned subsidiary of XL Generation
      International Inc. (the “Company”), received an Notice of Termination of License
      (“Notice”) from WKF/5 Ltd, a company registered in Malta and controlled by the
      Alain Lemieux Trust (Jersey). This Notice claims that WKF/5 Ltd has the right
      to
      terminate the License, and claims the alleged insolvency of XLG as the cause
      of
      such right of termination.





The
      Company is currently seeking new business opportunities. The Company's plan
      is
      now to seek, investigate and, if such investigation warrants, merge or acquire
      an interest in business opportunities presented to it by persons or companies
      who or which desired to seek the perceived advantages of a Securities Exchange
      Act of 1934 registered corporation. The Company's discretion in the selection
      of
      business opportunities is unrestricted, subject to the availability of such
      opportunities, economic conditions, and other factors.





**Results
      of Operations**





**For
      the Twelve Month Periods ended December 31, 2006**





**Overview**





The
      Company posted net losses of $17,748,354 for the year ended December 31, 2006
      as
      compared to $5,356,281 last year.





**Sales**





For
      the
      year ended December 31, 2006, the Company achieved gross revenues of $4,846,157.
      This compared to $2,892,513 for last year. During the year ended December 31,
      2006, the company realized 85% of its gross sales in Europe with the remaining
      being achieved in North America. During the twelve months ended December
      31, 2006, the Company delivered on significant sales, mostly XL Pro EF products,
      two in Switzerland, one for the Municipality of Riehen ($277,000) and the second
      one for the Municipality of Buhrain ($389,000). The third sale closed in Norway
      for the Hammar Olympic Properties ($419,000). The latter sale was the first
      large project we have implemented in Norway and extends our coverage in the
      Scandinavian market. In July and August two other fields were sold in Norway
      to
      the city of Stockholm ($400,000) and to Goteborg ($416,000). Two other sales
      were concluded in Switzerland, Munsingen ($425,000) and Bern ($550,000).




10





**Total
      Cost and Expenses**





For
      the
      year ended December 31, 2006, the Company incurred total cost and expenses
      of
      $22,594,512. This compared to $8,248,794 for last year. The increase in total
      cost and expenses was caused by a significant cost increase in corporate
      overhead, expanding expenses related to the sponsoring of major events,
      increasing marketing and merchandising expenses, additional provisions for
      warranty cost and provisions against advances made to a related party. The
      Company has undertaken a review of corporate overhead and implemented measures
      to reduce corporate overhead to a level more sustainable and in relation to
      current revenue volume and management’s expectations.





**Cost
      of Sales**





For
      the
      year ended December 31, 2006, the Company realized a negative gross margins
      of
      (5.6%). These margins reflect substantial weakening against what the Company
      previously achieved last year. This decline in the Company’s gross margins
      resulted from the combination of our introduction of higher quality products
      costing more to produce and, at the same time, our clients benefited during
      the
      latest period in a delay encountered in the adjustment of our pricing
      accordingly.





**Selling,
      General and Administration**





For
      the
      year ended December 31, 2006, the Company incurred selling, general and
      administration expenses of $8,288,058. This compared to $5,989,302 last year.
      The increase was due to an expanding staff and added goals for all with the
      goal
      to improve the Company’s ability to respond to regulatory and market
      requirements. Additional management positions were created in the sales and
      marketing as well as in operational areas in light of the Company’s goals of
      producing quality products, increasing sales, and lowering prices. We also
      re-organized the sales department and took on new sales staff in France and
      a
      new Sales Director in the United States. Further, we continued to work to
      establish the World Sports Alliance (WSA). This has required for the Company
      added resources allocated in Europe and the US for this purpose. The resources
      required were in the areas of sales, promotions, legal and marketing. In
      addition to their duties with WSA these individuals were also required to assist
      in sales projects in their geographical area as applicable. The Company has
      undertaken a review of corporate overhead and implemented measures to reduce
      corporate overhead to a level more sustainable and in relation to current
      revenue volume and management’s expectations.





**Warranty**





For
      the
      year ended December 31, 2006, the Company posted warranty expenses of
      $1,641,000. In 2005, our management undertook a major review of warranty
      policies and reserves required as a consequence of significant warranty request
      from customers in North America and Europe. The Company now takes warranty
      reserve based upon management experience and assessment of potential replacement
      costs. The Company management will continue to monitor the stability of its
      products and will adjust the provision accordingly. In the year ended December
      31, 2006, the Company replaced the field in Wohlen, Switzerland at a cost of
      approximately $350,000 including transport and installation. The Company
      replaced faulty products in the US for $150,000.




11





**Other
      Charges**





The
      Company has reviewed the recoverability of a receivable from XL Generation
      Canada Inc., a related party. For the year ended December 31, 2006, the Company
      has taken a charge of $5,946,531 in respect of such receivable. The funds
      underlying the receivable were previously forwarded to XL Generation Canada
      Inc.
      for Company-related activities in Canada, including the building up of inventory
      to facilitate shorter delivery periods. As XL Generation Canada Inc. does not
      have sufficient cash resources to repay the advance, management determined
      to
      take a charge for the full amount of such outstanding advances.





**Depreciation
      and Amortization**





Depreciation
      and amortization for year ended December 31, 2006 were $16,776.





**Interest**





For
      the
      year ended December 31, 2006, the Company had a charge of $302,085. This
      compared to $158,774 for last year. This significant increase mirrors the
      increase liabilities which the Company has assumed to finance its operations.





**Loss
      on settlement of debt**





On
      April
      19, 2006, the Company, in accordance to a Stock Purchase Agreement (the "Stadium
      Stock Purchase Agreement"), issued 1,236,824 restricted shares of the Company’s
      Common Stock at a value of $3.15 per share. The loss results from the difference
      between the indebtedness amount and the value of the stock issued at that date.





**Liquidity
      and Capital Resources**





At
      December 31, 2006, the Company had $128,607 in cash, as opposed to $262,446
      in
      cash at December 31, 2005. Total cash requirements for operations for the twelve
      month period ended December 31, 2006 was $8,588,146. As a result of certain
      measures implemented to reduce corporate overhead, management estimates that
      cash requirements through the end of fiscal 2007 will be between $1.0 million
      to
      $2.5 million. As of the date of this report, the Company does not have available
      resources sufficient to cover the expected cash requirements through the end
      of
      the second quarter 2007 or the balance of the year. As a result, there is
      substantial doubt that we can continue as an ongoing business without obtaining
      additional financing. Management's plans for maintaining
      Company operations and continued existence include selling additional
      equity securities and borrowing additional funds to pay operational
      expenses with enhanced efforts to market and sell Company products.
      There is no assurance that the Company will be able to generate sufficient
      cash
      from operations, sell additional shares of Common Stock or borrow additional
      funds. The Company's inability to obtain additional cash could have a material
      adverse effect on our financial position, results of operations
      and the Company's ability to continue its existence. If our losses continue
      and we are unable to secure additional financing, we may ultimately be required
      to seek protection from creditors under applicable bankruptcy laws.





At
      December 31, 2006, the Company had total assets of $199,304 compared to total
      assets of $1,568,532 at December 31, 2005. The decrease is mainly due to poor
      sales in comparison of the expenses incurred for the operations. The total
      assets are decrease by provisions made against advances to XL Generation Canada
      Inc., an operational agent based in Montreal, providing financial and accounting
      services for the bureau liaison in Montreal, Canada.





At
      December 31, 2006, the Company had total current liabilities and total
      liabilities of $11,611,577 compared to total current liabilities and total
      liabilities of $4,328,978 at December 31, 2005. The liabilities are mainly
      due
      to (i) accrued operational costs; (ii) loan notes from stockholders and
      suppliers; and (iii) warranty costs.





12




The
      prepaid expenses and sundry current assets are composed of a stock subscription
      receivable of $41,345 at December 31, 2006.





XL
      Generation AG is a party to a lease for its New York office (the “New York
      Lease”), at a minimum annual rental of approximately $96,000 per year. The New
      York Lease expires in August 2008. In August, 2006, the Company decided to
      close
      its New York office, and it was determined that XL Generation AG would enter
      into an agreement with a third party who would assume XL Generation AG’s
      obligations under the New York Lease. Since that time, a third party has taken
      over the payment of the rent due under the New York Lease, but no formal
      agreement has been entered into between XL Generation AG and the third party.





Since
      its
      formation, XL Generation AG has received advances from Mr. Albert Beerli, a
      stockholder and (since March 2006) a director, to cover the general overhead
      and
      running costs of XL Generation AG's offices in Zug, Switzerland. The total
      balance of amounts advanced by Mr. Beerli as of December 31, 2006 was equal
      to
      $119,858. This compared to $676,873 as of December 31, 2005.





On
      December 30, 2005, the Company had received loans from CAPEX Investment Limited,
      a shareholder, in the amount of $835,000. In 2006, the Company received
      additional loans from CAPEX Investment Limited in the amount of $1,233,474.
      These loans carry an interest of 10% and are payable on demand.





In
      2006,
      the Company allocated considerable resources on further developing its outdoor
      turf products. In addition, the Company also experienced increased costs for
      sales and marketing, employee travel and operational expenses in connection
      with
      entering into new sales agreements.





The
      financial conditions of the Company raise substantial doubt about the Company's
      ability to continue as a going concern. Management's plan for the Company's
      continued existence includes selling additional stock through private placements
      and borrowing additional funds to pay overhead expenses while maintaining
      marketing efforts to raise the Company’s sales volume. The future success of the
      Company is dependent upon its ability to achieve profitable operations, generate
      cash from operating activities and obtain additional financing. There is no
      assurance that the Company will be able to generate sufficient cash from
      operations, sell additional shares of Common Stock or borrow additional funds.
      The inability of the Company to obtain additional cash could have a material
      adverse effect on its financial position, results of operations and its ability
      to continue as a going concern.





**Off-Balance
      Sheet Arrangements**





The
      Company is not a party to any off-balance sheet arrangements.




13





[Letterhead
      of Paritz & Company, P.A.]


To
        the
        Stockholders’ and Board of Directors of XL Generation International,
        Inc.
 
 We
        have
        audited the accompanying consolidated balance sheet of XL Generation
        International, Inc. as of December 31, 2006, and the related statements of
        operations, stockholders’ deficiency, and cash flows for the years ended
        December 31, 2006 and 2005. These financial statements are the responsibility
        of
        the Company’s management. Our responsibility is to express an opinion on these
        consolidated financial statements based on our 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 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 an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provided 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 XL Generation International,
        Inc.
        as of December 31, 2006, and the results of their operations and their cash
        flows for the years ended December 31, 2006 and 2005, in conformity with
        U.S.
        generally accepted accounting principles.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. The Company has suffered recurring net
        losses
        and as of December 31, 2006 its current liabilities exceeded its current
        assets
        by $11,441,625 and its total liabilities exceeded its total assets by
        $11,412,273. These factors, among others, raise substantial doubt about the
        Company’s ability to continue as a going concern. The accompanying financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
 
 /s/
        Paritz & Company, P.A.
 
 April
        13,
        2007
 Hackensack,
        New Jersey


14


**Item
      7.**  **Financial
      Statements**





XL
      GENERATION INTERNATIONAL INC.


BALANCE
      SHEET


December
      31, 2006




ASSETSCURRENT
                  ASSETS:Cash
              
              
              128,607Prepaid
                  expenses and sundry current assets
              
              
              41,345TOTAL
                  CURRENT ASSETS
              
              
              169,952PROPERTY
                  AND EQUIPMENT, AT COST,LESS
                  ACCUMULATED DEPRECIATION
              
              
              29,352TOTAL
                  ASSETS
              
              
              199,304LIABILITIES
                  AND STOCKHOLDERS’ DEFICIENCYCURRENT
                  LIABILITIES:Stock
                  subscription payable
              
              
              1,000,000Note
                  payable-stockholders
              
              
              2,188,332Accounts
                  payable-related party
              
              
              5,060,586Accrued
                  expenses and sundry current liabilities
              
              
              3,362,659TOTAL
                  CURRENT LIABILITIES
              
              
              11,611,577STOCKHOLDERS'
                  DEFICIENCYCommon
                  stock
              
              
              97,502Additional
                  paid in capital
              
              
              13,329,355Accumulated
                  Deficit
              
              
              (25,059,593
              )Other
                  comprehensive income
              
              
              220,463TOTAL
                  STOCKHOLDERS' DEFICIENCY
              
              
              (11,412,273
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIENCY
              
              
              199,304
  15
 
 XL
          GENERATION INTERNATIONAL INC.


STATEMENTS
        OF STOCKHOLDERS’ DEFICIENCY
 Year
        ended December 2006 and 2005


Shares
                
                Common
                    Stock, 100,000,000 Shares Authorized, Par Value $.001
                
                Additional
                  Paid
                  in
                    Capital
                
                Accumulated
                  Deficit
                
                Other
                  Comprehensive
                  Income
                    (Loss)
                
                TotalJanuary
                    1, 2005
                
                
                25,466,000
                
                
                88,390
                
                
                0
                
                
                (1,954,958
                )
                
                (149,897
                )
                
                (2,016,465
                )Proceeds
                    fromthe
                    issuance ofcommon
                    stock
                
                
                4,533,333
                
                
                4,533
                
                
                4,195,467
                
                
                -
                
                
                -
                
                
                4,200,000Net
                    Loss
                
                
                
                
                
                -
                
                
                -
                
                
                (5,356,281
                )
                
                
                
                
                (5,356,281
                )Other
                    comprehensiveLoss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                412,300
                
                
                412,300December
                    31, 2005
                
                
                29,999,333
                
                
                92,923
                
                
                4,195,467
                
                
                (7,311,239
                )
                
                262,403
                
                
                (2,760,446
                )Proceeds
                    fromthe
                    issuance ofCommon
                    stock
                
                
                3,342,111
                
                
                3,342
                
                
                8,449,254
                
                
                -
                
                
                -
                
                
                8,452,596Shares
                    issued for settlement of a debt
                
                
                1,236,824
                
                
                1,237
                
                
                
                
                
                
                
                
                
                
                
                1,237Stockbased
                    Compensation
                
                
                
                
                
                
                
                
                684,634
                
                
                
                
                
                
                
                
                684,634Net
                    Loss
                
                
                
                
                
                -
                
                
                -
                
                
                (17,748,354
                )
                
                
                
                
                (17,748,354
                )Other
                    comprehensiveIncome
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (41,940
                )
                
                (41,940
                )December
                    31, 2006
                
                
                34,578,268
                
                
                97,502
                
                
                13,329,355
                
                
                (25,059,593
                )
                
                220,463
                
                
                (11,412,273
                )







16




XL
      GENERATION INTERNATIONAL INC.


STATEMENTS
      OF OPERATIONS





Year
      ended December 2006 and 2005




2006
              
              2005SALES
              
              
              4,846,157
              
              
              2,892,513COSTS
                  AND EXPENSES:Cost
                  of sales
              
              
              5,121,762
              
              
              2,067,412Selling,
                  general and administrative
              
              
              8,288,058
              
              
              5,989,302Write
                  off of related party note receivable - Note 10
              
              
              5,946,531Loss
                  on settlement of debt to related party - Note 7
              
              
              2,314,192Stock
                  based compensation expense
              
              
              684,634Interest
              
              
              302,085
              
              
              158,774Foreign
                  exchange loss
              
              
              (62,751
              )
              
              33,306TOTAL
                  COSTS AND EXPENSES
              
              
              22,594,512
              
              
              8,248,794NET
                  LOSS
              
              
              (17,748,354
              )
              
              (5,356,281
              )Net
                  Loss Per Share
              
              $
              0.53
              
              $
              0.56Average
                  weighted Number of Shares
              
              
              33,779,448
              
              
              9,533,903


17




XL
      GENERATION INTERNATIONAL INC.


STATEMENTS
      OF CASH FLOWS


Year
      ended December 31, 2006 and 2005




December
                  31
              
              December
                  312006
              
              2005Net
                  loss
              
              
              (17,748,354
              )
              
              (5,356,281
              )Adjustment
                    to reconcile net loss to net cash used in operating
                    activitiesDepreciation
                  and amortization
              
              
              16,776
              
              
              2,004Write
                  off of related partynote
                  receivable
              
              
              5,946,531Stock
                  based compensation
              
              
              684,634Reclassification
                  of stockholdersloan
                  to royalty fee expense
              
              
              0
              
              
              470,695Changes
                  in operating assets and liabilities:Inventory
              
              
              54,971
              
              
              (72,340
              )Note
                  receivable - Related Party
              
              
              0
              
              
              (1,378,658
              )Prepaid
                  expenses and sundry current assets
              
              
              115,999
              
              
              (73,378
              )Accrued
                  expenses and sundry current liabilities
              
              
              2,341,297
              
              
              1,304,735Net
                  cash used in operating activities
              
              
              (8,588,146
              )
              
              (5,103,223
              )Investing
                  activitiesAcquisitions
                  of property and equipment
              
              
              0
              
              
              (58,703
              )Net
                  cash used in investing activities
              
              
              0
              
              
              (58,703
              )Financing
                  activitiesStock subscription
                payable
              
              
              1,000,000
              
              
              0Advances
                  to related party
              
              
              (4,898,888
              )
              
              293,573Advances
                  to stockholders
              
              
              
              
              
              (377,832
              )Sale
                  of common stock
              
              
              8,453,833
              
              
              4,200,000Proceeds
                  of loans payable stockholders
              
              
              1,211,459
              
              
              337,262Proceeds
                  (repayments) of loans from suppliers
              
              
              2,729,843
              
              
              541,189Net
                  cash provide by financing activities
              
              
              8,496,247
              
              
              4,994,192Effect
                  of exchange rate on cash
              
              
              (41,940
              )
              
              (4,014
              )Decrease
                  in cash
              
              
              (133,839
              )
              
              (171,748
              )Cash-
                  beginning of period
              
              
              262,446
              
              
              434,194Cash-
                  end of period
              
              
              128,607
              
              
              262,446Supplemental
                  Disclosure of Cash Flow information Non cash financing
                  activities:Satisfaction
                  of account payable by issuance of stock
              
              
              2,314,192Interest
                  paid
              
              
              56,892
  18




XL
      GENERATION INTERNATIONAL INC.


NOTES
      TO
      FINANCIAL STATEMENTS





NOTE
      1 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


NATURE
      OF
      BUSINESS





XL
      Generation International Inc. (the "Company") was incorporated in Nevada on
      March 18, 2004 as Cygni Systems Corporation and changed its name to XL
      Generation International Inc. on August 23, 2005. On August 19, 2005, the
      Company entered into a Share Exchange Agreement (”SEA”) with XL Generation AG
      ("XLG") pursuant to which the Company acquired all of the issued and outstanding
      shares of common stock of XLG in exchange for the issuance of 15 Million shares
      of restricted common stock (the "Common Stock").





In
      connection with the SEA, the Company commenced actions to provide for the
      revision of the Company's capital structure. Pursuant to such actions, DT
      Crystal Holdings Ltd., the controlling shareholder of the Company prior to
      entry
      into the SEA, as inducement to the stockholders of XLG to enter into the Share
      Exchange Agreement, agreed to cancel four million shares of the Company’s Common
      Stock and accept in consideration thereof an option exercisable for 500,000
      shares of the Company. In addition, the Company made a stock split to
      stockholders of record of the Company of 9 shares of Common Stock for each
      share
      of Common Stock held, provided, however, each of DT Crystal Holdings Ltd. and
      the Alain Lemieux Trust, a trust formed in the Jersey Islands, and Mr. Albert
      Beerli waived their respective rights to such stock dividend (the record date
      for such split was set as August 29, 2005).





The
      Company now serves as the holding company for XLG. The Company has no other
      operations other than XLG.





XLG
      was
      incorporated in 1991, and was inactive until March of 2004, when it was granted
      the exclusive worldwide right to manufacture, promote and sell XL Turf products.
      XL Turf is an artificial pitch used primarily in soccer stadiums and indoor
      recreational facilities. XLG has its operational headquarters in Zug,
      Switzerland. XLG is a provider of artificial turf to international soccer clubs,
      educational institutions and other leisure providers across North America,
      Europe and Asia. XLG has developed new artificial turf systems for sports
      fields. Until October 2, 2006 when XLG receive a notice of Termination of it’s
      license from WKF\5 LTD., XLG was holding the worldwide commercial and
      manufacturing rights for the "XL technology." The “XL technology” is owned by
      WKF\5 LTD. and consists of six patents. Of these six patents, one is patented
      in
      38 countries, with patents pending in 6 more countries; another is patented
      in
      16 countries, with patents pending in 28 more; two of these patents are pending
      in seven countries; and two of the six patents are pending in one country each.
      XLG produces its owned product lines under the "XL Generation" trademark,
      including the "genuine" XLTURF sport systems. XLG also distributed its products
      worldwide through an extensive licensed distribution network, designing and
      manufacturing private labeled products using the "XL technology."





PRINCIPLES
      OF CONSOLIDATION




The
      consolidated financial statements include the accounts of the Company and its
      subsidiary XLG after the elimination of inter-company accounts and transactions.
      As required by the SEC in Reverse Takeover transactions, the operating entity,
      in this case XLG, is deemed to be the acquirer whose results are reported in
      these financial statements.


CASH
      AND
      CASH EQUIVALENTS





The
      Company considers all highly liquid debt instruments with original maturities
      not exceeding three months to be cash equivalents.


19





PROPERTY
      & OFFICE EQUIPMENT





Equipment
      is stated at cost. Depreciation is computed using the straight-line method
      over
      3 to 10 years.


December
                  31
              
              December
                  31,2006
              
              2005Computer
                  equipment--3 yrs
              
              $
              2,904
              
              $
              2,904Furniture
                  & fixtures--5 yrs
              
              
              46,364
              
              
              46,364$
              49,268
              
              $
              49,268Less:
                  accumulated depreciation
              
              
              ($19,916
              )
              
              ($3,140
              )Balance
                  December 31, 2006
              
              $
              29,352
              
              $
              46,128


REVENUE
        RECOGNITION





The
      Company recognizes revenue when it is realized or realizable and earned. The
      Company considers revenue realized or realizable and earned when persuasive
      evidence of an arrangement exists, the product has been shipped or the services
      have been provided to the customer, the sales price is fixed or determinable
      and
      collectibility is reasonably assured. The Company reduces revenue for estimated
      customer returns, rotations and sales rebates when such amounts are estimable.
      When not estimable, the Company defers revenue until the product is sold to
      the
      end customer. As part of its product sales price, the Company provides support,
      which is generally utilized by the customer shortly after the
      sale.





INCOME
      TAXES





The
      asset
      and liability approach is used to account for income taxes by recognizing
      deferred tax assets and liabilities for the expected future tax consequences
      of
      temporary differences between the carrying amounts and the tax bases of assets
      and liabilities. The Company records a valuation allowance to reduce the
      deferred tax assets to the amount that is more likely than not to be
      realized.





LOSS
      PER
      COMMON SHARE





The
      basic
      net loss per common share is computed by dividing the net loss by the weighted
      average number of common shares outstanding.





Diluted
      net loss per common share is computed by dividing the net loss, adjusted on
      an
      "as if converted" basis, by the weighted average number of common shares
      outstanding plus potential dilutive securities.





WARRANTY
      PROVISIONS





The
      Company provides a reserve based upon management experience and assessment
      of
      potential replacement costs. Company management will continue to monitor the
      stability of its products and will adjust the provision accordingly.





USE
      OF
      ESTIMATES





In
      preparing financial statements, management makes estimates and assumptions
      that
      affect the reported amounts of assets and liabilities in the balance sheet and
      revenue and expenses in the income statement. Actual results could differ from
      those estimates.




STOCK
        BASED COMPENSATION
 
 The
        Company accounts for stock options and similar equity instruments issued
        in
        accordance with SFAS No. 123(revised), " Share-Based Payment". 
Accordingly, compensation costs attributable to stock options or similar
        equity
        instruments granted are measured at the fair value at the grant date, and
        expensed over the expected vesting period. Transactions in which goods or
        services are received in exchange for the issuance of equity instruments
        are
        accounted for based on the fair value of the consideration received or the
        fair
        value of the equity instruments issued, whichever is more reliably
        measurable. SFAS No. 123(revised) requires excess tax benefits be
        reported as a financing cash inflow rather than as a reduction of taxes
        paid.




NOTE
      2--GOING CONCERN





The
      Company's consolidated financial statements have been prepared on a going
      concern basis, which contemplates the realization of assets and settlement
      of
      liabilities and commitments in the normal course of business. During the years
      ended December 31, 2006 and 2005, the Company incurred losses of
      $17,748,354 and $5,356,281 respectively. The Company has negative working
      capital of $11,441,625 and $2,806,574 at December 31, 2006 and 2005,
      respectively and a stockholders deficiency of $ 11,412,273 and $2,760,445 at
      December 31, 2006 and 2005. These factors among others raise substantial doubt
      about the Company's ability to continue as a going concern.




20





Management's
      plans for the Company's continued existence include selling additional stock
      and
      borrowing additional funds to pay overhead expenses while current marketing
      efforts continue to raise its sales volume.





The
      Company's future success is dependent upon its ability to achieve profitable
      operations, generate cash from operating activities and obtain additional
      financing. There is no assurance that the Company will be able to generate
      sufficient cash from operations, sell additional shares of common stock or
      borrow additional funds.





The
      Company's inability to obtain additional cash would have a material adverse
      effect on its financial position, results of operations and its ability to
      continue in existence. The consolidated financial statements do not include
      any
      adjustments that might result from the outcome of this
      uncertainty.





NOTE
      3 -
      ACCRUED EXPENSES AND SUNDRY CURRENT LIABILITIES





Accrued
      expenses consisted of the following at December 31, 2006:


Accrued
                  interest
              
              $
              252,000Accrued
                  operating expenses
              
              
              1,468,365Warranty
              
              $
              1,641,000$
              3,361,365Movement
                  in the Warranty provision:Balance
                  as at January 1, 2006
              
              $
              500,000Charges
                  Offs
              
              
              (350,000
              )Additional
                  provision
              
              $
              1,491,000Balance
                  as at December 31, 2006
              
              $
              1,641,000




As
      at
      December 31, 2006 we were due to replace three products in Switzerland
      and two in North America. The reserves required to replace these products
      were estimated at approximately $1,641,000.




NOTE
        4 -
        STOCK SUBSCRIPTION PAYABLE
 
 The
        Company received a deposit of five hundred thousand dollars ($500,000) from
        Aton
        Select Fund Ltd on July 6, 2006 to purchase from the Company (i) 250,000
        shares
        of the Company's common stock. The shares have not been issued as of the
        date of
        the accompanying financial statements. The Company received a deposit of
        five
        hundred thousand dollars ($500,000) from Emper Overseas S.A. on August 10,
        2006
        to purchase from the Company (i) 400,000 shares of the Company's common stock;
        and (ii) Series A Warrants to purchase up to an additional 400,000 shares
        of the
        company's common stock at an exercise price initially set at $1.25 per
        share.
 
 NOTE
        5 - ACCOUNTS PAYABLE- RELATED PARTY
 
 The
        accounts payable are non interests bearing and payable on
        demand.




NOTE 6
      - PAYABLE - STOCKHOLDERS




Mr.
      Albert Beerli, a significant stockholder, advanced funds and then was partially
      repaid by the Company during the year. The total note balance at December 31,
      2006 was $119,858 ($676,873 as of December 31, 2005). The note carries an
      interest of 4.5% and is payable on demand.





On
      December 30, 2005, the Company had received loans from CAPEX Investment Limited,
      a stockholder, in the amount of $835,000. In 2006, the Company received
      additional loans from CAPEX Investment Limited in the amount of $1,233,474.
      These loans carry an interest of 10% and are payable on demand.


Components
        of payable stockholders at December 31, 2006 are as follows:
 
 Payable
                  A.Beerli
              
              $
              119,858Payable
                  Capex Investment Ltd
              
              
              2,068,474Payable
                  stockholders
              
              $
              2,188,332




NOTE 7
      - CAPITAL STOCK





The
      company is authorized to issue 100,000,000 shares of common stock (par value
      $0.001) of which 34,578,268 were issued and outstanding at of December 31,
      2006.
      During the year, the Company issued a total of 4,578,935 new shares.  On
      April
      19, 2006, the Company, in accordance with a Stock Purchase Agreement issued
      1,236,824 restricted shares of the Company’s Common Stock at a value of $3.15
      per share. The loss results from the difference between the indebtedness amount
      and the value of the stock issued at that date.




21





STOCK-BASED
      COMPENSATION EXPENSE





During
      the year ended December 31, 2006, the Company issued 1,455,000 stock options
      to
      officers and directors of the Company with an average exercise price of $1.05
      per share. Of the stock options issued, 320,000 were vested on September 6,
      2006, 150,000 were vested on September 7, 2006, 25,000 were vested on
      September 15, 2006, 150,000 were vested on December 25, 2006, 660,000 will
      vest
      on September 6, 2007 and the balance will vest on September 6, 2008. These
      options expire on September 6, 2008 (240,000), September 15, 2008 (25,000),
      December 25, 2006 (150,000), September 6, 2013 (440,000) and September 6, 2016
      (600,000). The options had a fair value of $1,526,989 at the date of grant.
      The Company valued these options using the Black-Scholes option -pricing
      valuation model. The model uses market sourced inputs such as interest rates,
      stock prices, and option volatilities, the selection of which requires Company
      management’s judgment, and which may impact the value of the options. The
      assumptions used in the Black-Scholes valuation model were: a risk-free interest
      rate of 3.8%, 3.9% and 4.0%; the current stock price at date of issuance of
      $1.04, $1.10 and $0.90 per share; the exercise price of the options of $1.05
      and
      $0.01 per share; the term of 2, 7 and 10 years; volatility of 315% and 311%.
      For
      the year ended December 31, 2006, the Company recorded compensation expense
      of
      $684,634. As of December 31, 2006, there was $842,355 of total unrecognized
      compensation cost related to non-vested share-based compensation. No options
      were exercised during year ended December 31, 2006.





A
      summary
      of option activity for the year ended December 31, 2006 is presented below:





Options
            
            Shares
            
            Weighted-Average
                Exercise Price
            
            Weighted-Average
                Remaining Contractual TermOutstanding
                at December 31, 2005
            
            
            -
            
            
            -
            
            
            -Granted
            
            
            1,455,000
            
            $
            1.48
            
            
            5.72Exercised,
                forfeited, or expired
            
            
            -
            
            
            -
            
            
            -Outstanding
                at December 31, 2006
            
            
            1,455,000
            
            $
            1.48
            
            
            5.72Exercisable
                at December 31, 2006
            
            
            620,000
            
            $
            1.48
            
            
            5.72





The
      weighted-average grant-date fair value of options granted during the period
      ended December 31, 2006 was $1.05 per share.





NOTE 8
      - INCOME TAXES





Income
      taxes are not due since the Company has incurred a loss since inception. The
      Company has net operating losses carry forwards approximately
      $25,200,000 at December 31, 2006. These losses expire as follows: in 2023
      $626,000 will expire and in 2024 $2,142,000 will expire.





Components
      of deferred tax assets and liabilities at December 31, 2006 are as
      follows:


December
                  31, 2006:
              
              December
                  31, 2005:Deferred
                  tax asset
              
              $
              8,800,000
              
              $
              2,768,000Valuation
                  allowance
              
              
              (8,800,000
              )
              
              (2,768,000
              )Net
                  deferred tax asset
              
              $
              0
              
              $
              0




22





The
      Company has recorded a full valuation allowance against its deferred tax asset
      since it believes it is more likely than not that such deferred tax asset will
      not be realized.





NOTE 9
      - COMMITMENTS AND CONTINGENCIES





XL
      Generation AG, a wholly owned subsidiary of the Company, is a party to a lease
      for its New York office (the “New York Lease”), at a minimum annual rental of
      approximately $96,000 per year. The New York Lease expires in August 2008.




NOTE 10
      - RELATED PARTY TRANSACTIONS





Mr.
      Albert Beerli, a significant stockholder, advanced funds and then was partially
      repaid by the Company during the year. The total note balance at December 31,
      2006 was $119,858 ($676,873 as of December 31, 2005). The note carries an
      interest of 4.5% and is payable on demand.




XLG
      was
      charged during 2006 $131,159 ($146,300 for 2005) for fees and expenses by
      Greendale Consulting Limited (“Greendale”) for the provision of financial and
      commercial consulting and support services to the Company. Greendale, an entity
      formed in the United Kingdom, is controlled by Flemming Munck, who was a
      director of the Company, as well as the Company's CFO and Treasurer until his
      resignation in August 2006. The outstanding amount owed to Greendale as of
      September 30, 2006 was $0 ($0 for 2005). On August 21, 2006, Mr. Munck and
      the
      Company entered into a Mutual Release and Waiver, providing that Mr. Munck
      will
      receive 25,000 shares of the Company’s common stock in exchange for the waiver
      of any and all potential claims he may have against the Company, pursuant to
      his
      employment agreement or otherwise.





In
      September, 2005, the Company signed an agreement with Mr. Daniel Courteau,
      a
      director of the Company, for the transfer of Mr. Courteau’s rights in the
      bankruptcy of Symbior Technology Ltd for an amount of $60,000 Canadian Dollars
      (CAD). In September 2006, Mr. Courteau resigned as director of the Company.
      As
      of December 31, 2006, the outstanding amount owed to Mr. Courteau in regard
      to
      the said agreement was $0 ($50,000 as of December 31, 2005).





The
      Company has reviewed the recoverability of a receivable from XL Generation
      Canada Inc., a related party. The Company has taken a charge of $5,946,431
      in
      respect of such receivable. The funds underlying the receivable were previously
      forwarded to XL Generation Canada Inc. for Company-related activities in Canada,
      including building up inventory with our suppliers to facilitate shorter
      delivery periods. As XL Generation Canada Inc. does not have sufficient cash
      resources to repay the advance, management determined to take a charge for
      the
      full amount of such outstanding advances.







23




NOTE
        11 -
        RECENTLY ISSUED ACCOUNTING STANDARDS




In
      December 2004, the FASB issued SFAS No. 153, "Exchanges on Nonmonetary Assets
      An
      Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions" (SFAS
      153) SFAS eliminates the exception from fair value measurement for nonmonetary
      exchanges of similar productive assets in paragraph 21(b) of APB Opinion No.
      29,
      "Accounting for Nonmonetary Transactions," and replaces it with an exception
      for
      exchanges that do not have commercial substance. SFAS 153 specifies that a
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. SFAS
      153 is effective for fiscal periods beginning after June 15, 2005. The Company
      does not expect the adoption of this statement to have a material effect on
      its
      consolidated financial statements.





In
      May
      2005, the FASB issued SFAS No. 154, "ACCOUNTING FOR CHANGES AND ERROR
      CORRECTIONS, A REPLACEMENT OF APB OPINION NO. 20 AND FASB STATEMENT NO. 3"
      SFAS
      154 applies to all voluntary changes in accounting principle and requires
      retrospective application to prior periods' financial statements of changes
      in
      accounting principle. This statement also requires that a change in
      depreciation, amortization, or depletion method for long-lived, nonfinancial
      assets be accounted for as a change in accounting estimate effected by a change
      in accounting principle. SFAS 154 carries forward without change the guidance
      contained in Opinion No. 20 for reporting the correction of an error in
      previously issued financial statements and a change in accounting estimate.
      This
      statement is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. The Company does not expect
      the
      adoption of this standard to have a material impact on its financial condition,
      results of operations, or liquidity.


NOTE
        12 - LITIGATION
 
 The
        Company is subject to various legal proceedings during the course of the
        years
        ended December 31, 2006 and 2005. Among those are:
 
 ·
              On
                  September 19, 2006, the Company filed judicial proceedings seeking
                  injunctive and other relief against Polyprod Inc. in the Quebec
                  Superior
                  Court of the district of Montreal (Court file number 500-17-032933-064)
                  to
                  allow the Company to halt Polyprod Inc. from locking the Company
                  out of
                  the production site, and to force Polyprod Inc. to allow the Company
                  access to said production site.
 
 ·
              On
                  October 6, 2006, the Company filed a motion in the Québec Superior Court
                  of the District of Montreal (Court file number 500-11-029010-069)
                  seeking
                  to have Polyprod Inc. declared bankrupt pursuant to applicable
                  law for an
                  unpaid claim totalling $1,052,069 CAD.  This amount represents
                  monetary advances towards the production of artificial turf and
                  related
                  products, made by XL Generation AG to Polyprod Inc. from January
                  5, 2006
                  to October 10, 2006.
 
 ·
              On
                  October 26, 2006, XLGI filed a motion against WKF/5 LTD, the Alain
                  Lemieux
                  Trust (Jersey) and Professional Trust Company Limited in the Canadian
                  Federal Court of the District of Montreal (Court file number T-1872-06).
                  The Company claimed that the Register of Trade-marks relating to
                  registration no. 671 108 (application no. 1 266 983) for the trade-mark
                  XLGENERATION, registered on August 24, 2006, be struck on the grounds
                  that
                  at the date of the application or at the date of registration,
                  the entry
                  as it appears on the Register does not accurately express or define
                  the
                  existing rights of the person appearing to be the registered owner
                  of the
                  mark. Furthermore, the Company asked for an order declaring that
                  WKF/5 Ltd
                  was not and is not entitled to obtain registration of any trade-mark
                  containing the word XLGENERATION on the claim that the registration
                  in the
                  name of WKF/5 Ltd of the trade-mark XLGENERATION is contrary to
                  the
                  Company’s rights.
 
 ·
              On
                  November 10, 2006, XLGI filed a motion seeking injunctive relief
                  against
                  Solutions Highmedia Interactif Inc. and Domenico Malatesta, in
                  the Quebec
                  Superior Court of the District of Montreal (Court file number
                  500-17-033768-063) to forbid the selling, and prevent the cession
                  of the
                  internet domain name and emails of the Company and its affiliates,
                  and to
                  reactivate the Company’s and its affiliates related internet
                  services.
  ·
              On
                  November 14, 2006, XLGI filed a motion seeking the annulment of
                  the Share
                  Exchange Agreement signed on August 19, 2005 between the Company
                  and XL
                  Generation AG.  In addition, this action seeks to require certain of
                  the Company’s former management and affiliated parties to pay $11,000,000
                  in damages and to order Wuersch & Gering LLP and Pacific Stock
                  Transfer Company to deposit the 13,500,000 shares of the Company
                  issued to
                  the Alain Lemieux Trust and Professional Trust Company Limited
                  at the
                  Quebec Superior Court of the District of Montreal (Court file number
                  500-17-033823-066).  This action alleges misconduct by former
                  officers and directors of the Company, including unjustified and
                  irresponsible spending of the Company’s financial resources.
  ·
              On
                  November 16, 2006, Solutions Highmedia Interactif Inc. filed a
                  motion for
                  monetary claim against XLGI, XL Generation AG and XL Canada, in
                  the Quebec
                  Court of the District of Montreal (Court file number 500-22-129010-065)
                  totalling $54,418 CAD covering expenses for webdesign, printing,
                  translation, and webhosting mandates performed towards the website
                  of the
                  Company and its affiliates between January 1, 2006 and August 15,
                  2006.
 
 ·
              On
                  December 5, 2006, former French employees of XLAG filed legal proceedings
                  against XL Generation AG for unpaid salaries at the Tribunal du
                  Commerce
                  de Paris, in France.
 
 ·
              On
                  December 15, 2006, Expo Futbol S.L. filed legal proceedings for
                  monetary
                  claims against XL Generation AG in Zug, Switzerland for a total
                  amount of
                  87,000 euros for services provided during the event of the Planet
                  Futbol
                  exposition held in Barcelona, Spain from April 19thto April 23rd2006. (Court file number: 2061494)
 
 ·
              On
                  December 20, 2006, a demand for Arbitration, between the Company
                  and the
                  United States National Soccer Team Players Association, was filed
                  at the
                  American Arbitration Association concerning a contract dispute
                  regarding
                  the agreement for use of marks and logos of the United States National
                  Soccer Team Players Association (“USNSTPA” and Support in the marketing of
                  the Company’s fields and technology.(Reference number: 50 181 T 000607).
                  On May 17, 2006, an Agreement for use of marks and logos of the
                  United
                  States National Soccer Team Players Association and support in
                  the
                  marketing of XLGI Fields and Technology was entered between UNSTPA
                  and
                  XLGI. Under this agreement, XLGI was meant to be the only Official
                  Turf
                  and Technology System of the US National Soccer Team Players’, in
                  counterpart XLGI and its North American subsidiary was allowed
                  to use the
                  USNSTPA’s logo in XLGI’s website and all of XLGI’s promotional materials,
                  for a term lasting to February 11, 2009. The licensing fee payable
                  in
                  consideration for USNSTPA services from XLGI was of $25,000 per
                  year to be
                  paid upon the initial execution of this Agreement as advancement
                  and on or
                  before each anniversary of that date (May 17, 2007, and May 17,
                  2008). In
                  addition to the licensing payments, XLGI was obliged to pay the
                  USNSTPA 1%
                  of the total net sales revenues received from customers during
                  the term of
                  this Agreement.  On February 9, 2007, the Company filed a suspension
                  of the arbitration process to the International Centre for Dispute
                  Resolution and initiated the procedures to begin a mediation
                  process.
 
 As
        of the date of this Annual Report, the Board of Directors of the Company
        is
        engaged in negotiations to settle the files number 500-17-033823-066,
        500-11-290010-069, 500-17-033768-063, and 500-17-032933-064, in the Superior
        Court of Quebec and the file number T-1872-06 in the Canadian Federal Court.
 
 ·
              On
                  October 23, 2006, the City of Interlaken, Switzerland filed a claim
                  totalling 360,000 USD at the Interlaken courthouse for defective
                  turf
                  products.  On January 9, 2007, XL Generation AG entered into a
                  settlement agreement providing that before July, 2007, the defective
                  turf
                  will be removed and replaced, along with a payment in the amount
                  of 5,000
                  CHF.





24




**Item
      8.**  **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      8A.**  **Controls
      and Procedures**





As
      of the
      end of the period covered by this report, an evaluation was carried out under
      the supervision and with the participation of the Company’s management,
      including the Company’s Chief Executive Officer and Chief Financial Officer, of
      the effectiveness of the Company’s disclosure controls and procedures, as
      defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act
      of
      1934 (the “Exchange Act”). Based on their evaluation, the Company’s Chief
      Executive Officer and Chief Financial Officer have concluded that the Company’s
      disclosure controls and procedures are effective to ensure that information
      required to be disclosed by the Company in reports that it files or submits
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in Securities and Exchange Commission rules and
      forms.





There
      have been no changes in the Company’s internal controls over financial reporting
      during the Company’s most recently completed fiscal quarter that have materially
      affected, or are reasonably likely to materially affect, our internal controls
      over financial reporting.





**Item
      8B.**  **Other
      Information**





None.




25




**PART
      III**





**Item
      9.**  **Directors,
      Executive Officers, promoters and Control Persons; Compliance with Section
      16(a)
      of the Exchange Act**





The
      following table presents information with respect to our officers, directors
      and
      significant employees as of the date of this Report:





Name
            
            Age
            
            PositionAlexander
                C. Gilmour CVO
            
            75
            
            Chairman
                of the BoardArthur
                Rawl
            
            65
            
            DirectorClaude
                Pellerin
            
            37
            
            DirectorAlbert
                Beerli
            
            65
            
            DirectorMichel
                St-Pierre
            
            44
            
            Acting
                Chief Financial Officer





Each
      director serves until our next annual meeting of the stockholders or unless
      they
      resign earlier. The Board of Directors elects officers and their terms of office
      are at the discretion of the Board of Directors.





Each
      of
      our directors serves until his or her successor is elected and qualified. Each
      of our officers is elected by the board of directors to a term of one (1) year
      and serves until his or her successor is duly elected and qualified, or until
      he
      or she is removed from office. The board of directors has a compensation
      committee consisting of Mr. Gilmour. The board of directors has no nominating
      committee. At the present time, members of the board of directors are not
      compensated for their services to the board. The board has an audit committee
      consisting of Mr. Rawl. Mr. Rawl currently serves as the audit committee
      financial expert.




**BIOGRAPHICAL
      INFORMATION REGARDING OFFICERS AND DIRECTORS**





**Alexander
      Clement Gilmour, Director and Chairman of the Board** .
      Mr.
      Gilmour has served as a director of the Company since August, 2005. Mr. Gilmour
      was a corporate finance stockbroker with Joseph Sebag and Carr Sebag from 1957
      until 1982. Since then he has served on the Board of several companies in the
      United Kingdom and Hungary, including Konzum, from 1996 until 2000, and Pharma
      Ltd. from 1997 until 1999. His other activities have included serving as a
      Governor of the London School of Economics for over 25 years (he is now an
      Honorary Fellow), Chairman of the National Playing Fields Association for 13
      years, President of the South London Chamber of Commerce, Director of the Tate
      Gallery Foundation, as well as being associated with the Community Foundation
      movement and other charities in the United Kingdom. For his volunteer work
      he
      was made a Commander of the Royal Victorian Order (CVO). He is an Associate
      of
      the British Garden in Hanover Square, New York. Since 2003, he has served as
      a
      consultant to the eye2 group of companies in the United Kingdom.





**Arthur
      Rawl, Director and Chairman of the Audit Committee** .
      Mr.
      Rawl has served as a director of the Company since September, 2006. Mr. Rawl
      has
      been Chairman and Chief Executive Officer of Rawl & Associates, a private
      strategic consulting firm, since May 2003.  From September 1999 until May
      2003, he was President and Chief Executive Officer of Brazil American Auto
      Group, Inc., a Sao Paulo-based consolidator of South American automotive
      retailers.  From 1997 to 1999, Mr. Rawl was a consultant to Chrysler
      Financial Corp. in connection with the development of a new structured financial
      product line.  From 1994 to 1997, he was Executive Vice President and Chief
      Financial Officer of United Auto Group, Inc., a consolidator and operator of
      automobile dealerships and related businesses.  From 1990 to 1994, Mr. Rawl
      was Executive Vice President of Hanlin Group, Inc., a chemical and PVC products
      manufacturer.  Prior to that time, he had a 23 year tenure at Deloitte
& Touche LLP, including 12 years as a partner.  Mr. Rawl is a Director
      of Quipp Inc. Mr. Rawl is the Board Chairman of the British Memorial Garden
      Trust, Inc., a public charity.  Mr. Rawl is a certified public
      accountant.





**Claude
      Pellerin, Director** .
      Mr.
      Pellerin is a corporate attorney and a partner in the law firm of Hovington
      Pellerin S.e.n.c. Since 2002, Mr. Pellerin has served as Director, President,
      Treasurer and Secretary of Capex Investments (Canada) Limited, an investments
      and financing corporation based in Montreal, Quebec. From 2001-2002, Mr.
      Pellerin served as a Secretary for Equilar Capital Corporation, an Ontario
      Corporation listed on the Toronto Stock exchange. Between 2002 and 2004, Mr.
      Pellerin served as Vice President for legal affairs for Manaris Corporation,
      a
      Nevada corporation listed on the OTCBB. Since 2003, Mr. Pellerin has served
      as
      Secretary of Gourmet Flash Inc., a Quebec corporation, and from 2004-2005 served
      as a Director to Canadian Security Agency (2004) Inc. Mr. Pellerin served as
      the
      Company's President, Secretary and Treasurer from June 17, 2005 until August
      19,
      2005, at which time he resigned as an officer but remained a director of the
      Company.




26




**Albert
      Beerli, Director** .
      Mr.
      Beerli has served as a director of the Company since March, 2006. Mr. Beerli
      is
      a scientist, having received his Ph.D in chemical engineering in 1969. Since
      1988 Mr. Beerli has been the Chief Executive Officer of Zenwex AG in Zug,
      Switzerland. Zenwex AG provides consulting services on scientific and technical
      matters.





**Michel
      St-Pierre, Acting Chief Financial Officer.** Mr. St-Pierre has
      served as the Company’s Acting Chief Financial Officer since July
      2006, Mr.St-Pierre is a registered chartered accountant in Quebec, Canada. Before working
      for the Company, Mr. St-Pierre held positions as the Finance Director
      (comparable to Corporate Treasurer) at SPB Canada Inc. (from 2004-2006), Symbior
      Technologies Inc. (from 2003-2004), Boulangeries Comas Inc. (from 2000-2003).
      Prior to these positions, Mr. St-Pierre served as the Director of Administrative
      Services for Cossette Communication Group (from
      1997-2000).




**COMPLIANCE
      WITH SECTION 16(A) OF THE EXCHANGE ACT**





Section
      16(a) of the Exchange Act requires our executive officers and directors, and
      persons who beneficially own more than 10% of our equity securities, to file
      reports of ownership and changes in ownership with the Securities and Exchange
      Commission. Officers, directors and greater than 10% stockholders are required
      by SEC regulation to furnish the Company with copies of all Section 16(a) forms
      they file. Based on our review of the copies of such forms we received, we
      believe that during the fiscal year ended December 31, 2006 all such filing
      requirements applicable to our officers and directors were complied with, except
      that reports were filed late by the following persons:





Name
                and principal position
            
            Number
                of Late Reports
            
            Transactions
                Not Timely Reported
            
            Known
                Failures to File a Required FormKim
                Friesen(1)
            
            2
            
            2
            
            0Andrea
                Meakin(2)
            
            2
            
            2
            
            0Albert
                Beerli(3)
            
            1
            
            1
            
            0Arthur
                Rawl(4)
            
            1
            
            1
            
            0




(1)
            Kim
                Freisen was an officer, director and 10% shareholder of the Company
                until
                June 17, 2005, at which time Kim Freisen sold all of his shares of
                the
                Company’s common stock to DT Crystal Holdings Ltd. and resigned as an
                officer and director of the Company. Mr. Freisen did not file a Form
                3 in
                connection with his status as an officer, director and 10% shareholder
                of
                the Company until March 1, 2006, which Form 3 was subsequently amended
                on
                March 20, 2006. Mr. Freisen did not file a Form 4 in connection with
                the
                June 17, 2005 sale of his shares of the Company’s common stock and his
                resignation as an officer and director of the Company until March
                1, 2006,
                which Form 4 was subsequently amended on March 20,
                2006.(2)
            Andrea
                Meakin was an officer, director and 10% shareholder of the Company
                until
                June 17, 2005, at which time Ms. Meakin sold all of her shares of
                the
                Company’s common stock to DT Crystal Holdings Ltd. and resigned as an
                officer and director of the Company. Ms. Meakin did not file a Form
                3 in
                connection with her status as an officer, director and 10% shareholder
                of
                the Company until March 1, 2006, which Form 3 was subsequently amended
                on
                March 20, 2006. Ms. Meakin did not file a Form 4 in connection with
                the
                June 17, 2005 sale of her shares of the Company’s common stock and her
                resignation as an officer and director of the Company until March
                1, 2006,
                which Form 4 was subsequently amended on March 20,
                2006.


(3)
            Albert
                Beerli is a director and shareholder of the Company. Albert Beerli
                was
                appointed to the Board of directors of XL Generation International
                Inc. on
                March 17, 2006.(4)
            Arthur
                Rawl became a director of XL Generation International Inc. on May
                24,
                2006.




27




**CODE
      OF ETHICS**





The
      Company has not adopted a code of ethics at the present time, due to the change
      of the material situation of the Company.





**CORPORATE
      GOVERNANCE**





During
      the period covered by this Annual Report, there have been no changes in
      procedures for the nomination of directors.








**Item
      10.**  **Executive
      Compensation**





The
      following table sets forth compensation for each of the past three fiscal years
      with respect to each person who served as Chief Executive Officer of the Company
      and each of the four most highly-compensated executive officers of the Company
      who earned a total annual salary and bonuses that exceeded $100,000 in any
      of
      the three preceding fiscal years.





**Summary
      Compensation Table**





**Annual
                Compensation****(a)**
            
            **(b)**
            
            **(c)**
            
            **(d)**
            
            **(e)**
            
            **(f)****Salary**
            
            **Bonus**
            
            **Other
                Annual Compensation**
            
            **All
                Other Compensation****Name
                and Principal**
              **Position**
            
            **Year(1)**
            
            **($)**
            
            **($)**
            
            **($)**
            
            **($)**Alain
                Lemieux (2) (3))
              Director,
                President and CEO
            
            
            2006
              2005
            
            
            240,000
              65,000
            
            
            0
            
            
            0
            
            
            0Claude
                Pellerin (4)
              Director,
                President and CEO
            
            
            2006
              2005
            
            
            0
              0
            
            
            0
            
            
            0
            
            
            0Kim
                Friesen (5)
              Director,
                President and CEO
            
            
            2005
              2004
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0
            
            
            0
              0Daniel
                Courteau(6)
              Director,
                Vice-President and Secretary
            
            
            2006
            
            
            175,000
            
            
            0
            
            
            0
            
            
            0Flemming
                Munck (7)
              Director,
                and CFO
            
            
            2006
            
            
            150,000
            
            
            0
            
            
            0
            
            
            0Eric
                Giguère (8)
              COO
            
            
            2006
            
            
            150,000
            
            
            50,000
            
            
            0
            
            
            0Michel
                St-Pierre (9)
              CFO
            
            
            2006
            
            
            150,000
            
            
            0
            
            
            0
            
            
            0








(1)
            Prior
                to the acquisition of XL Generation AG, the Company's fiscal year
                ended
                April 30th. XL Generation AG, the Company's wholly-owned subsidiary,
                has a
                fiscal year ending December 31st. In connection with the acquisition
                of XL
                Generation AG, the Company has adopted the fiscal year end of XL
                Generation AG.





(2)
            Mr.
                Lemieux has been President and CEO of the Company since August 19,
                2005.
                He has been President and CEO of XL Generation AG since February,
                2004. He
                resigned on August 18, 2006.





(3)
            Mr.
                Lemieux was paid $65,000 in the year ended December 31, 2005 by XL
                Generation AG.





(4)
            Mr.
                Pellerin was the Company's President, CEO and a Director from June
                17,
                2005 until August 19, 2005. He remains a Director of the
                Company.




28




(5)
            Ms.
                Friesen was the Company's President, CEO and a Director from the
                date of
                its inception, on March 18, 2004, until her resignation on June 17,
                2005.





(6)
            Daniel
                Courteau was the Company’s Director, Vice-President Legal Affairs and
                Secretary until his resignation on September 14,
                2006.





(7)
            Flemming
                Munck was the Company’s Director and Chief Financial Officer until his
                formal resignation on August 16,
                2006.




(8)
            Eric
                Giguère was the Company’s Chief Operating Officer until his resignation on
                June 1, 2006.





(9)
            Michel
                St-Pierre has been the Company’s Acting Chief Financial
                Officer since July 28, 2006.





**Compensation
      of Directors**





In
      the
      year ended December 31, 2006, the Company's directors were not compensated
      for
      their services to the Company as directors.





**Employment
      Contracts**





During
      the fiscal year ended December 31, 2006, the Company had no employment
      agreements with employees or directors of the Company.





**Item
      11.**  **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters**





**SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**





The
      following table sets forth certain information regarding the beneficial
      ownership of Common Stock as of the date of this Report by (i) each director
      of
      the Company, (ii) each of the Company's officers named in the Summary
      Compensation Table, (iii) each person who is known by the Company to be the
      beneficial owner of more than five percent of the Company's outstanding Common
      Stock, and (iv) all directors and executive officers as a group. Except as
      otherwise indicated below, each person named has sole voting and investment
      power with respect to the shares indicated. The percentage of ownership set
      forth below reflects each holder's ownership interest in the 34,578,268 shares
      of the Company's common stock outstanding as of March 30, 2007.





Amount
      and Nature of Beneficial Ownership





Name
                and Address of Beneficial Owner (1)
            
            Shares
            
            Options/
                Warrants
            
            Total
            
            PercentAlain
                Lemieux (2)(3)
            
            
            13,000,000
            
            
            0
            
            
            13,000,000
            
            
            37.6
            %Flemming
                Munck (4)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            %Alexander
                C. Gilmour (5)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            %Daniel
                Courteau (2)(6)
            
            
            500,000
            
            
            0
            
            
            500,000
            
            
            1.44
            %Claude
                Pellerin (7)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            %Albert
                Beerli (8)
            
            
            1,500,000
            
            
            0
            
            
            1,500,000
            
            
            4.33
            %Arthur
                Rawl (9)
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            %Capex
                Investments Limited (10)
            
            
            2,222,222
            
            
            0
            
            
            2,222,222
            
            
            6.42
            %Cede
                & Co (11)
            
            
            10,517,000
            
            
            0
            
            
            10,517,000
            
            
            30.4
            %All
                executive officers and directors as a group (7 persons)
            
            
            15,000,000
            
            
            0
            
            
            25,517,000
            
            
            73.79
            %





(1)
      The
      mailing address for each of the listed individuals is c/o XL Generation
      International Inc., Sumpfstrasse 32, 6304 Zug, Switzerland.




(2)
      13,500,000 shares of the Company's common stock are held by the Alain Lemieux
      Trust. Of these shares, 13,000,000 may be deemed to be beneficially owned by
      Mr.
      Lemieux and 500,000 may be deemed to be beneficially owned by Mr. Courteau.
      Mr.
      Peter Nicole, of Professional Trust Company Limited, has voting and investment
      control over the securities held by the Alain Lemieux Trust and is therefore
      deemed to be the beneficial owner of such securities.




29




(3)
      Former CEO, President, Director and owner of 5% or more of the Company's common
      stock.




(4)
      Former CFO and Director.




(5)
      Chairman of the Board of Directors.




(6)
      Former Secretary and Director.




(7)
      Director.




(8)
      Director.




(9)
      Director




(10)
      Owner of 5% or more of the Company's common stock. Mr. Robert Clarke, President
      and Sole Director of Capex Investments Limited, has voting and investment
      control over the securities held by Capex Investments Limited, and is therefore
      deemed to be the beneficial owner of such securities.




(11)
      Owner of 5% or more of the Company’s Common Stock.




**SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**





The
      Company, from inception through December 31, 2006, has paid equity compensation
      to only one officer and one employee. During the fiscal year ended December
      31,
      2006, the Company did not have an authorized equity compensation plan. On March
      31, 2006, the Company adopted its 2006 Equity Incentive Plan.








**Item
      12.**  **Certain
      Relationships and Related Transactions**





**Advances
      from Albert Beerli**





Since
      the
      date of its formation, XL Generation AG has received advances from Mr. Albert
      Beerli to cover general overhead and running costs of XL Generation AG's offices
      in Zug, Switzerland. Mr. Beerli provides XL Generation AG office space at his
      personal offices, for which he currently charges 2,000 Swiss Francs per month
      (approximately US $1,538). Mr. Beerli undertook to advance payments on behalf
      of
      the Company during the year to cover general overhead items related to the
      running cost of the Zug office. The balance as of December 31, 2006 was
      $119,858.





**Transactions
      with Capex Investments Limited**





In
      2006,
      the Company received loans from CAPEX Investment Limited in the amount of
      $835,000. These loans carry an interest of 10% and are payable on demand. As
      of
      December 31, 2006, total loans from CAPEX Investment Limited amounted to
      $2,068,474.




**License
      Agreement with WKF/5 Ltd**





On
      January 1, 2005, XLG was granted a worldwide exclusive license (the "License
      Agreement") to manufacture, assemble, sell, distribute and promote all the
      products (the “Products”) covered by all the intellectual property and
      industrial property rights (collectively, the "Intellectual Property") which
      XL
      Generation AG is currently utilizing. The Intellectual Property is owned by
      WKF/5 Ltd, a Maltese corporation controlled (and majority-owned) by the Alain
      Lemieux Trust, a Jersey trust. The Alain Lemieux Trust is the owner of
      13,500,000 shares of the Company's common stock, constituting approximately
      41%
      of all issued and outstanding common stock as of the date of this report. Of
      such shares owned by the Alain Lemieux Trust, 13,000,000 shares may be deemed
      to
      be beneficially owned by Mr. Alain Lemieux, who was the Company’s CEO, President
      and a Director. The balance of 500,000 shares owned by the Alain Lemieux Trust
      may be deemed to be beneficially owned by Mr. Daniel Courteau, who served as
      the
      Company's Secretary and Director until May 18 th 2006
      when he resigned on September 14, 2006.





The
      License Agreement was supposed to continue in full force and effect until it
      automatically expires upon the later of (a) the termination or expiration date
      of the latest patent granted within the scope of the Intellectual Property;
      or
      (b) the expiration date of any extension made by the Licensee pursuant to the
      License Agreement. Pursuant to the License Agreement, XL Generation AG had
      to
      comply with certain quality control standards in the production of the Products.
      Such quality control standards were to be set by WKF/5 Ltd and were supposed,
      pursuant to License Agreement, to be reasonable. XL Generation AG was not
      authorized to produce and sell goods which competed with the Products. WKF/5
      Ltd
      was obligated to maintain all intellectual property rights related to the
      Intellectual Property. The License Agreement required that XL Generation pay
      WKF/5 Ltd (i) an initial lump sum royalty fee, which was subsequently mutually
      set at $416,047; (ii) an annual renewal fee of one Euro; and (iii) royalties
      at
      rate of 5% of the gross sales of XL Generation AG, with no minimum royalty.
      WKF/5 Ltd had the right to audit the books and records of XL Generation AG
      in
      connection with such royalties. XL Generation AG advanced $416,047 to Fiducie
      Alain Lemieux, a trust in Quebec as to which Alain Lemieux is the main
      beneficiary (the “Quebec Trust”), as of December 31, 2004 as mutually agreed
      between XL Generation AG and the Quebec Trust. Pursuant to a supplement to
      the
      License Agreement, dated June 30, 2005, the Quebec Trust agreed to assume the
      XL
      Generation AG obligation of payment of $416,047 to WKF/5 Ltd. The Board of
      Directors of the Company ratified and approved of the foregoing License
      Agreement transactions among the Company and Messrs. Lemieux and Courteau as
      related parties to the Company. In the course of review for such ratification
      and approval, Messrs. Lemieux and Courteau recused themselves from all
      deliberations and voting. On the basis of its review, the Board of Directors
      concluded that the terms and conditions of the License Agreement and the related
      agreements are fair and reasonable to the Company. The Board of Directors of
      the
      Company furthermore concluded that the License Agreement and related agreements
      will ultimately benefit the Company’s stockholders notwithstanding the
      related-party aspect of the transactions.




30




However,
      on October 2, 2006, WKF5/Ltd has served a notice to XLG terminating the usage
      of
      the XL Technology. This Notice claimed that WKF/5 Ltd has the right to terminate
      the License, and claimed the alleged insolvency of XLG as the cause of such
      right of termination. Following the said notice, on October 26, 2006 the Company
      served WKF/5Ltd with a statement of claim at the Canadian Federal court to
      order
      that the entry on the Register of Trade-marks relating to registration no.
      671
      108 (application no. 1 266 983) for the trade-mark XLGENERATION, registered
      on
      August 24, 2006 be struck on the grounds that at the date of the application
      or
      at the date registration, the entry as it appears on the Register does not
      accurately express or define the existing rights of the person appearing to
      be
      the registered owner of the mark and that the decision ordering such expungement
      be forwarded to the Registrar of Trade-Marks so that the appropriate entries
      be
      made on the Register. Furthermore, the Company requested that a permanent
      injunction restraining WKF5/Ltd and their officers, agents, servants, employees,
      attorneys and all other persons having knowledge of this Order or acting in
      concert with any of WKF5/Ltd from either directly or indirectly using
      XLGENERATION along, in any stylized form, or in association with any other
      word
      in connection with any of the services specified in registration number 671
      108.
      Moreover, the Company has requested an order declaring that WKF5/Ltd was not
      and
      is not entitled to obtain registration of any trademark containing the word
      XLGENERATION alone, or in any stylized form.





**Law
      Firm of Degrandpre, Chait**





In
      the
      fiscal year ended December 31, 2006, the law firm of Degrandpre, Chait
      (Montreal) received CAD $57,014.56 (approximately US $50,037.57) from XL
      Generation AG for legal services rendered. Most of these legal services involved
      the intellectual property utilized by XL Generation AG. Mr. Daniel Courteau,
      one
      of the Company’s former directors, is a partner of the law firm of Degrandpre,
      Chait, although the majority of the legal services were provided to XL
      Generation AG by other attorneys at the law firm.





**XL
      Generation Canada Inc. Management Agreement**





In
      February of 2004, XL Generation AG entered into a Management Agreement (the
      “Management Agreement”) with XL Generation Canada Inc. (“XL Canada”), a Canadian
      company which was, at such date, a wholly-owned subsidiary of XL Generation
      AG.
      The Management Agreement provided that XL Canada would act as XL Generation
      AG’s
      representative in Canada. The Management Agreement provided that XL Canada
      would
      (i) register with Canadian tax authorities; (ii) employ the staff required
      by XL
      Generation AG in Canada; (iii) pay the salary of XL Generation AG’s Canadian
      staff; (iv) reimburse employees of XL Generation AG, upon the approval of XL
      Generation AG; (v) pay certain consulting fees on behalf of XL Generation AG;
      (vi) pay certain fees to Polyprod Inc.; (vii) maintain a separate bank account;
      (viii) represent XL Generation AG in transactions with Polyprod Inc.; and (ix)
      serve as the vendor for any sales of XL Generation AG products in Canada. The
      Management Agreement further provides that in the event of a change of control,
      XL Canada would continue to act on behalf of XL Generation AG in Canadian,
      but
      any profits would be paid to XL Generation AG. In the event of a change of
      control, XL Generation AG would have the right to appoint another party to
      act
      as its agent in Canada. The Management Agreement provided that in the event
      of a
      change of control, in consideration for the services to be rendered by XL Canada
      to XL Generation AG, a fee would be negotiated by the parties which shall
      represent the fair market value of services rendered. The Management Agreement
      has no set termination date, but may be terminated at any time by a written
      notice sent to the other party at least two (2) months prior to the termination
      date. In September of 2004, a change of control occurred, whereby the ownership
      of XL Canada was transferred to Mr. Albert Beerli for a nominal sum. Mr. Beerli
      was at that time a stockholder and director of XL Generation AG, and is
      currently a stockholder and director of the Company. XL Canada has never charged
      a fee to XL Generation AG for services rendered. Mr. Beerli, acting both on
      his
      own behalf and on behalf of XL Generation AG, has executed a memorandum (the
      “Memorandum”) with XL Generation AG and XL Generation International Inc.,
      memorializing certain oral agreements previously reached between the Company,
      XL
      Generation AG and XL Canada. Pursuant to the Memorandum, Mr. Beerli is not
      entitled to receive any compensation or equity benefit from XL Canada or for
      his
      ownership of XL Canada. Any profits from the sales of products of XL Generation
      AG in Canada shall pass-through XL Canada to XL Generation AG. All advances
      made
      to XL Canada shall be allocated solely for the benefit of XL Generation AG.




31




However,
      since September 19 th 2006,
      when XLGI filed judicial proceedings seeking injunctive and other relief against
      Polyprod Inc. at the Quebec Superior Court of the district of Montreal (Court
      file number 500-17-032933-064) to allow the Company to proceed to the changing
      of the locks of Polyprod Inc.’s production site, to force Polyprod Inc to allow
      a complete access to the said production site to XL Generation AG’s employees
      and to force Polyprod Inc. as well as its officers and directors not to proceed
      to the changing of the locks on the said production site, and followed by a
      motion filed by the Company on October 6 th 2006, at
      the Québec Superior Court of the District of Montreal (Court file number
      500-11-029010-069) seeking to have Polyprod Inc. declared bankrupt pursuant
      to
      applicable law for an unpaid claim totalling $1,052,069 CAD covering monetary
      advances towards the production of artificial turfs and related products, made
      from XL Generation AG to Polyprod Inc. from January 5, 2006 to October 10,
      2006,
      all activities and employees were suspended.




32




**Item
      13.**  **Exhibits**





The
      following documents have been filed as a part of this Report:





Exhibit
                No.
            
            Description
                of ExhibitsExhibit
                3.1
            
            Articles
                of Incorporation, as amended, incorporated by reference to Exhibit
                3.1 to
                the Company's Registration Statement on Form SB-2 filed with the
                Securities and Exchange commission on May 28, 2004.Exhibit
                3.2
            
            Bylaws,
                incorporated by reference to Exhibit 3.2 to the Company's Registration
                Statement on Form SB-2 filed with the Securities and Exchange Commission
                on May 28, 2004.Exhibit
                3.3
            
            Certificate
                of Amendment to Articles of Incorporation, as filed with the State
                of
                Nevada on August 23, 2005, incorporated by reference to Exhibit 3.3
                to the
                Company's Quarterly Report on Form 10-QSB, filed with the Securities
                and
                Exchange Commission on December 30, 2005.Exhibit
                3.4
            
            Bylaws,
                as amended on March 17, 2006, incorporated by reference to Exhibit
                3.4,
                incorporated by reference to Exhibit 3.4 to the Company's Annual
                Report on
                Form 10-KSB filed with the Securities and Exchange Commission on
                April 13,
                2006.Exhibit
                10.1
            
            Letter
                of Intent, dated as of June 29, 2005, between the Company and XL
                Generation AG, incorporated by reference to Exhibit 99.1 to the Company's
                Report on Form 8-K, filed with the Securities and Exchange Commission
                on
                July 6, 2005.Exhibit
                10.2
            
            Share
                Exchange Agreement, dated as of August 19, 2005, between the Company
                and
                XL Generation AG, incorporated by reference to Exhibit 99.1 to the
                Company's Report on Form 8-K, filed with the Securities and Exchange
                Commission on August 19, 2005.Exhibit
                10.3
            
            Loan
                Agreement, dated as of September 12, 2005, between Capex Investments
                Limited and XL Generation AG, incorporated by reference to Exhibit
                99.1 to
                the Company's Report on Form 8-K, filed with the Securities and Exchange
                Commission on September 14, 2005.Exhibit
                10.4
            
            Form
                of Indemnification Agreement, entered into between XL Generation
                International Inc. and the Company's officers and directors, incorporated
                by reference to Exhibit 10.4 to the Company's Report on Form 8-K/A,
                filed
                with the Securities and Exchange Commission on November 1,
                2005.Exhibit
                10.5
            
            Common
                Stock Purchase Agreement, dated as of November 8, 2005, by and among
                XL
                Generation International Inc. and Capex Investments Limited, incorporated
                by reference to Exhibit 10.5 to the Company's Report on Form 8-K,
                filed
                with the Securities and Exchange Commission on November 15,
                2005.Exhibit
                10.6
            
            Common
                Stock Purchase Agreement, dated as of November 8, 2005, by and among
                XL
                Generation International Inc. and Aton Select Fund Limited, incorporated
                by reference to Exhibit 10.6 to the Company's Report on Form 8-K,
                filed
                with the Securities and Exchange Commission on November 15,
                2005.Exhibit
                10.7
            
            Common
                Stock Purchase Agreement, dated as of November 8, 2005, by and among
                XL
                Generation International Inc. and Asset Protection Fund Limited,
                incorporated by reference to Exhibit 10.7 to the Company's Report
                on Form
                8-K, filed with the Securities and Exchange Commission on November
                15,
                2005.Exhibit
                10.8
            
            Series
                A Warrant to Purchase Shares of Common Stock of XL Generation
                International Inc., issued as of November 8, 2005 to Capex Investments
                Limited, incorporated by reference to Exhibit 10.8 to the Company's
                Report
                on Form 8-K, filed with the Securities and Exchange Commission on
                November
                15, 2005.




33




Exhibit
                10.9
            
            Series
                A Warrant to Purchase Shares of Common Stock of XL Generation
                International Inc., issued as of November 8, 2005 to Aton Select
                Fund
                Limited, incorporated by reference to Exhibit 10.9 to the Company's
                Report
                on Form 8-K, filed with the Securities and Exchange Commission on
                November
                15, 2005.




Exhibit
                10.10
            
            Series
                A Warrant to Purchase Shares of Common Stock of XL Generation
                International Inc., issued as of November 8, 2005 to Asset Protection
                Fund
                Limited, incorporated by reference to Exhibit 10.10 to the Company's
                Report on Form 8-K, filed with the Securities and Exchange Commission
                on
                November 15, 2005.Exhibit
                10.11
            
            Registration
                Rights Agreement, dated as of November 8, 2005, by and among XL Generation
                International Inc. and Capex Investments Limited, incorporated by
                reference to Exhibit 10.11 to the Company's Report on Form 8-K, filed
                with
                the Securities and Exchange Commission on November 15,
                2005.Exhibit
                10.12
            
            Registration
                Rights Agreement, dated as of November 8, 2005, by and among XL Generation
                International Inc. and Aton Select Fund Limited, incorporated by
                reference
                to Exhibit 10.12 to the Company's Report on Form 8-K, filed with
                the
                Securities and Exchange Commission on November 15,
                2005.Exhibit
                10.13
            
            Registration
                Rights Agreement, dated as of November 8, 2005, by and among XL Generation
                International Inc. and Asset Protection Fund Limited, incorporated
                by
                reference to Exhibit 10.13 to the Company's Report on Form 8-K, filed
                with
                the Securities and Exchange Commission on November 15,
                2005.Exhibit
                10.14
            
            Amendment
                to the Common Stock Purchase Agreement by and between XL Generation
                International Inc. and Aton Select Fund Limited, dated as of December
                5,
                2005, incorporated by reference to Exhibit 10.14 to the Company's
                Report
                on Form 8-K, filed with the Securities and Exchange Commission on
                December
                8, 2005.Exhibit
                10.15
            
            Amendment
                to the Common Stock Purchase Agreement by and between XL Generation
                International Inc. and Asset Protection Fund Limited, dated as of
                December
                5, 2005, incorporated by reference to Exhibit 10.15 to the Company's
                Report on Form 8-K, filed with the Securities and Exchange Commission
                on
                December 8, 2005.Exhibit
                10.16
            
            Lease
                Agreement, dated as of August, 2005, between 866 U.N. Plaza Associates
                LLC
                and XL Generation AG, incorporated by reference to Exhibit 10.16
                to the
                Company's Quarterly Report on Form 10-QSB, filed with the Securities
                and
                Exchange Commission on December 30, 2005.Exhibit
                10.17
            
            Exclusive
                Manufacturing License Agreement and Non Exclusive Distribution Agreement,
                dated as of September 23, 2005, by and between APW Inc. and XL Generation
                AG, incorporated by reference to Exhibit 10.17 to the Company's Quarterly
                Report on Form 10-QSB, filed with the Securities and Exchange Commission
                on December 30, 2005.Exhibit
                10.18
            
            Common
                Stock Purchase Agreement, dated as of December 6, 2005, by and among
                XL
                Generation International Inc. and Professional Trading Services SA,
                incorporated by reference to Exhibit 10.18 to the Company's Registration
                Statement on Form SB-2 filed with the Securities and Exchange Commission
                on January 13, 2006.




34




Exhibit
                10.19
            
            Series
                B Warrant to Purchase Shares of Common Stock of XL Generation
                International Inc., issued as of December 6, 2005 to Professional
                Trading
                Services SA, incorporated by reference to Exhibit 10.19 to the Company's
                Registration Statement on Form SB-2 filed with the Securities and
                Exchange
                Commission on January 13, 2006.Exhibit
                10.20
            
            Registration
                Rights Agreement, dated as of December 6, 2005, by and among XL Generation
                International Inc. and Professional Trading Services SA, incorporated
                by
                reference to Exhibit 10.20 to the Company's Registration Statement
                on Form
                SB-2 filed with the Securities and Exchange Commission on January
                13,
                2006.Exhibit
                10.21
            
            Amended
                and Restated Common Stock Purchase Agreement, dated as of December
                27,
                2005, by and among XL Generation International Inc. and Bank Sal.
                Oppenheim jr. & Cie. (Switzerland) Limited, incorporated by reference
                to Exhibit 10.21 to the Company's Registration Statement on Form
                SB-2
                filed with the Securities and Exchange Commission on January 13,
                2006.





Exhibit
                10.22
            
            Series
                B Warrant to Purchase Shares of Common Stock of XL Generation
                International Inc., issued as of December 27, 2005 to Bank Sal. Oppenheim
                jr. & Cie. (Switzerland) Limited, incorporated by reference to Exhibit
                10.22 to the Company's Registration Statement on Form SB-2 filed
                with the
                Securities and Exchange Commission on January 13, 2006.Exhibit
                10.23
            
            Agreement
                of Withdrawal from Stadium SA, by and between Stadium SA and XL Generation
                AG, incorporated by reference to Exhibit 10.23 to the Company's
                Registration Statement on Form SB-2 filed with the Securities and
                Exchange
                Commission on January 13, 2006.Exhibit
                10.24
            
            License
                Agreement, dated January 2005, between XL Generation AG and WKF/5
                Ltd,
                incorporated by reference to Exhibit 10.24 to the Company's Registration
                Statement on Form SB-2 filed with the Securities and Exchange Commission
                on January 13, 2006.Exhibit
                10.25
            
            Amendment
                to License Agreement, dated June 30, 2005, between XL Generation
                AG, WKF/5
                Ltd and Alain Lemieux, incorporated by reference to Exhibit 10.25
                to the
                Company's Registration Statement on Form SB-2 filed with the Securities
                and Exchange Commission on January 13, 2006.Exhibit
                10.26
            
            Form
                of Subscription Agreement, incorporated by reference to Exhibit 99.1
                to
                the Company's Registration Statement on Form SB-2 filed with the
                Securities and Exchange Commission on May 28,
                2004.




Exhibit
                10.27
            
            Employment
                Agreement, dated as of March 30, 2006, by and among XL Generation
                AG and
                Alain Lemieux, incorporated by reference to Exhibit 10.27 to the
                Company's
                Annual Report on Form 10-KSB filed with the Securities and Exchange
                Commission on April 13, 2006.Exhibit
                10.28
            
            Employment
                Agreement, dated as of March 30, 2006, by and among XL Generation
                AG and
                Daniel Courteau, incorporated by reference to Exhibit 10.28 to the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.29
            
            Employment
                Agreement, dated as of March 30, 2006, by and among XL Generation
                AG and
                Flemming Munck, incorporated by reference to Exhibit 10.29 to the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.30
            
            Employment
                Agreement, dated as of October 20, 2005, by and among XL Generation
                AG and
                Eric Giguère, incorporated by reference to Exhibit 10.30 to the Company's
                Annual Report on Form 10-KSB filed with the Securities and Exchange
                Commission on April 13, 2006.




35




Exhibit
                10.31
            
            Endorsement
                Agreement, by and between La Societe 421 Productions and XL Generation
                AG,
                incorporated by reference to Exhibit 10.31 to the Company's Annual
                Report
                on Form 10-KSB filed with the Securities and Exchange Commission
                on April
                13, 2006.Exhibit
                10.32
            
            Summary
                of terms and conditions of Oral Consulting Agreement by and between
                XL
                Generation AG and Greendale Consulting Limited, incorporated by reference
                to Exhibit 10.32 to the Company's Annual Report on Form 10-KSB filed
                with
                the Securities and Exchange Commission on April 13,
                2006.Exhibit
                10.33
            
            Exclusive
                Manufacturing License Agreement, dated as of January 2, 2005, by
                and
                between XL Generation AG and Polyprod Inc., incorporated by reference
                to
                Exhibit 10.33 to the Company's Annual Report on Form 10-KSB filed
                with the
                Securities and Exchange Commission on April 13, 2006.Exhibit
                10.34
            
            Management
                Fee Arrangement, dated as of January 2006, by and between XL Generation
                AG
                and Polyprod Inc., incorporated by reference to Exhibit 10.34 to
                the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.35
            
            Supply
                Contract, effective as of April 1, 2005, by and between Febra-Kunststoffe
                GmbH, XL Generation AG and BASF Aktiengesellschaft, incorporated
                by
                reference to Exhibit 10.35 to the Company's Annual Report on Form
                10-KSB
                filed with the Securities and Exchange Commission on April 13,
                2006.


Exhibit
                10.36
            
            Loan
                Agreement by and between XL Generation AG and Fiducie Alain Lemieux,
                incorporated by reference to Exhibit 10.36 to the Company's Annual
                Report
                on Form 10-KSB filed with the Securities and Exchange Commission
                on April
                13, 2006.Exhibit
                10.37
            
            Confirmation
                of Debt, addressed to XL Generation AG, incorporated by reference
                to
                Exhibit 10.37 to the Company's Annual Report on Form 10-KSB filed
                with the
                Securities and Exchange Commission on April 13, 2006.Exhibit
                10.38
            
            Agreement
                dated as of May 25, 2005, by and between XL Generation AG and Daniel
                Courteau regarding Repayment of loans to Symbior Technologies Inc.,
                incorporated by reference to Exhibit 10.38 to the Company's Annual
                Report
                on Form 10-KSB filed with the Securities and Exchange Commission
                on April
                13, 2006.Exhibit
                10.39
            
            XL
                Generation International Inc. 2006 Equity Incentive Plan, incorporated
                by
                reference to Exhibit 10.39 to the Company's Annual Report on Form
                10-KSB
                filed with the Securities and Exchange Commission on April 13,
                2006.Exhibit
                10.40
            
            Loan
                Agreement by and between XL Generation AG and Albert Beerli, incorporated
                by reference to Exhibit 10.40 to the Company's Annual Report on Form
                10-KSB filed with the Securities and Exchange Commission on April
                13,
                2006.Exhibit
                10.41
            
            Summary
                of terms and conditions of Loan Agreement by and between XL Generation
                AG
                and Albert Beerli, incorporated by reference to Exhibit 10.41 to
                the
                Company's Annual Report on Form 10-KSB filed with the Securities
                and
                Exchange Commission on April 13, 2006.Exhibit
                10.42
            
            Lease
                Agreement dated as of April 1, 2004, by and between XL Generation
                AG and
                Albert Beerli, incorporated by reference to Exhibit 10.42 to the
                Company's
                Annual Report on Form 10-KSB filed with the Securities and Exchange
                Commission on April 13, 2006.




36




Exhibit
                10.43
            
            Memorandum
                regarding XL Generation Canada Inc., incorporated by reference to
                Exhibit
                10.43 to the Company's Annual Report on Form 10-KSB filed with the
                Securities and Exchange Commission on April 13, 2006.Exhibit
                10.44
            
            Stock
                Purchase Agreement, executed as of April 6, 2006, by and among XL
                Generation International Inc., XL Generation AG and Stadium SA,
                incorporated by reference to Exhibit 10.44 to the Company's Annual
                Report
                on Form 10-KSB filed with the Securities and Exchange Commission
                on April
                13, 2006.


Exhibit
                10.45
            
            Common
                Stock Purchase Agreement, executed as of April 28, 2006, by and among
                XL
                Generation International Inc. and Poma Management SA, incorporated
                by
                reference to Exhibit 10.45 to the Company's Quarterly Report on Form
                10-QSB filed with the Securities and Exchange Commission on September
                13,
                2006.Exhibit
                10.46
            
            Common
                Stock Purchase Agreement, executed as of June 7, 2006, by and among
                XL
                Generation International Inc. and Aton Select Fund Limited, incorporated
                by reference to Exhibit 10.46 to the Company's Quarterly Report on
                Form
                10-QSB filed with the Securities and Exchange Commission on September
                13,
                2006.Exhibit
                21
            
            Subsidiaries
                of XL Generation International Inc.Exhibit
                31.1
            
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.Exhibit
                31.2
            
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.Exhibit
                32.1
            
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.Exhibit
                32.2
            
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





**Item
      14.**  **Principal
      Accountant Fees and Services**





The
      Company’s financial statements for the years ended December 31, 2005 and
      December 31, 2006 were audited by Paritz & Company, P.A.





**Audit
      Fees**





The
      aggregate fees of Paritz & Company, P.A. for professional services rendered
      for the audit of the Company's annual financial statements for the year ended
      December 31, 2005 totalled $25,000. The aggregate fees of Paritz & Company,
      P.A. for professional services rendered for the audit of the Company's annual
      financial statements for the year ended December 31, 2006 totalled
      $33,000.




37




**Audit-Related
      Fees**





The
      aggregate fees billed by Paritz & Company, P.A. for audit related services
      for the year ended December 31, 2005, and which are not disclosed in "Audit
      Fees" above, were $15,000. The aggregate fees billed by Paritz & Company,
      P.A. for audit related services for the year ended December 31, 2006, and which
      are not disclosed in "Audit Fees" above, were $13,000.





**Tax
      Fees**





The
      aggregate fees billed by Paritz & Company, P.A. for tax compliance for the
      year ended December 31, 2005 was $0. The aggregate fees billed by Paritz &
Company, P.A. for tax compliance for the year ended December 31, 2006 was
      $0.





**All
      Other Fees**





The
      aggregate fees billed by Paritz & Company, P.A. or services other than those
      described above, for the year ended December 31, 2005, were $0. The aggregate
      fees billed by Paritz & Company, P.A. or services other than those described
      above, for the year ended December 31, 2006, were $0.





**Audit
      Committee Pre-Approval Policies**





Our
      Audit
      Committee reviewed the audit and non-audit services rendered by Paritz &
Company, P.A. during the periods set forth above and concluded that such
      services were compatible with maintaining the auditors’ independence. All audit
      and non-audit services performed by our independent accountants are pre-approved
      by our Audit Committee to assure that such services do not impair the auditors’
independence from us.




38




**SIGNATURES**




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





**XL
                GENERATION INTERNATIONAL INC.**April
                16, 2007By:
            /s/
                Alexander C. Gilmour, CVOName:Alexander
                C. Gilmour, CVOTitle:Acting
                Principal Executive Officer





By:
            /s/
                Michel St-PierreName:Michel
                St-PierreTitle:Acting
                Principal Financial Officer and
              Acting
                Principal Accounting Officer





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




/s/ Alexander
                C. Gilmour, CVOName:Alexander
                  C. Gilmour, CVO
                Title:Chairman
                  of the Board
                Dated:April
                  16, 2007
  /s/ Claude
                PellerinName:Claude
                  Pellerin
                Title:Director
                Dated:April
                  16, 2007




/s/ Albert
              BeerliName:Albert
                Beerli
              Title:Director
              Dated:April
                16, 2007




/s/ Arthur
              RawlName:Arthur
                Rawl
              Title:Director
              Dated:April
                16, 2007




39