UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
      For the fiscal year ended December 31, 2004

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
      For the transition period from __________________ to _________________

                         Commission file number: 0-29781

                       CRYSTALIX GROUP INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)

                  NEVADA                                    65-0142472
(State or other jurisdiction of incorporation            (I.R.S. Employer
             or organization)                           Identification No.)

         5275 SOUTH ARVILLE STREET, SUITE B-116, LAS VEGAS, NEVADA 89118
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (702) 740-4616

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

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

                         COMMON STOCK, $0.001 PAR VALUE
                                (Title of class)

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

Check  if no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation S-B is 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. [ ]

State issuer's revenues for its most recent fiscal year:  $4,628,674

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: $1,796,255 AS OF MARCH 22, 2005

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 37,132,192 AS OF MARCH 22, 2005

Transitional Small Business Disclosure Format (Check one):    Yes    ; No  X
                                                                 ----    ----


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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

BUSINESS DEVELOPMENT

         We were originally incorporated in the state of Florida on August 22,
1989 under the name First Zurich Investments, Inc. On November 15, 1996, the
name of the company was changed to Terra International Pharmaceuticals, Inc. On
August 11, 1999, we acquired Veltre Enterprises, Inc. dba Unique Images. Unique
Images designed and manufactured Hollywood and sports memorabilia for
memorabilia galleries, as well as provided custom picture framing services. On
September 7, 1999, we changed our name to americabilia.com, Inc. and on
September 14, 1999, we conducted a recapitalization through the merger of
americabilia.com Nevada with and into Worldwide Collectibles, Inc., a Nevada
corporation and a wholly owned subsidiary we formed for the purpose of the
merger. We issued a total of 6,115,000 shares of our common stock to the former
stockholders of americabilia.com Nevada. In January 2001, we merged Unique
Images into Worldwide Collectibles. As americabilia.com, Inc., we engaged in
direct Internet merchandising of American-themed collectibles, gifts and
memorabilia. On June 25, 2002, we announced our plans to cease business
operations.

         On October 4, 2002, we acquired all of the outstanding common stock of
Crystalix USA Group, Inc. in exchange for 23,300,000 shares of our common stock
and an exclusive technology license from Crystalix Technology, Inc. in exchange
for 7,000,000 shares of our Class A preferred stock. We changed our name to
Crystalix Group International, Inc. on November 22, 2002 and changed our
domicile to Nevada on November 26, 2002.

         On December 23, 2002, we acquired all of the outstanding common stock
of Lazer-Tek Designs, Inc. and Lazer-Tek Designs, Ltd. (collectively
"Lazer-Tek") in exchange for 1,250,000 shares of our common stock valued at
$1,125,000 and an acquisition consulting fee obligation of $400,000. In
addition, we loaned $1,000,000 to Lazer-Tek to repay existing debt, which is
carried as an intercompany receivable from Lazer-Tek and eliminated in the
financial statement consolidation. We also entered into a promissory note for
$852,680. Lazer-Tek was acquired for several strategic marketing and operation
reasons. With a wide base of corporate awards and gift clients to collegiate
giftware and traditional advertising specialty groups, and with a collection of
valuable engineered art pieces, Lazer-Tek was poised for market penetration with
the added collectibles provided by Crystalix USA. Additionally, our management
realized that with our advanced software and laser technologies, we could
improve both production time and quality at Lazer-Tek, thereby enhancing the
overall operations of Lazer-Tek.

         On December 15, 2002, we executed an agreement to acquire 50% of the
ownership interest of Vitro Laser GmbH, a German corporation ("Vitro"), for
consideration consisting of cash and the right to acquire shares of our common
stock. Vitro manufactures laser-etching equipment used in the glassware
industry. No formal agreements were consummated. We had advanced $500,000 to
Vitro and have written this amount off during the fiscal year ended December 31,
2003 to other expense due to the uncertainty about successfully completing this
acquisition. We sued Vitro and subsequently settled the litigation.

OUR PRODUCTS

         Our principal products are personalized three-dimensional engraved
glass blocks that feature the facial image of one or more persons, custom
three-dimensional images, and two-dimensional portraits, as well as the laser
subsurface engraving equipment. We, through our wholly-owned subsidiary,
Lazer-Tek Designs, are one of only two entities licensed under the patent
governing subsurface decorative laser marking in crystal, glass, and other clear
materials to produce and sell these products in the U.S. corporate market.
Further, we are the only licensed company that manufactures its owns laser
subsurface engraving equipment and that has the right to sublicense purchasers
of this equipment.

         Our engraving process involves the use of a high-resolution digital
camera, a laser image scanner, and a laser that is configured together by a
standard desktop personal computer, using our proprietary software and a Windows
operating system. The laser image scanner converts images from the digital
camera, a customer's digital image, or a hard copy photograph into a
two-dimensional digitally formatted image that will be engraved into the


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center of the glass block by the laser. The scanner processes the
three-dimensional image from several angles to create a three-dimensional or
two-dimensional digital model of the image and plots the points where the laser
will be directed to engrave the image in the glass. The scanner and software
generally complete the conversion process in 15 to 30 seconds. The glass block
is then placed into the laser chamber for engraving. The engraving process
generally takes a few minutes or less, depending on the number of images to be
engraved, the degree of detail in the images, and whether titles, names, or
other materials are to be added with the images.

         The image can be engraved into glass blocks of different sizes and
shapes. The suggest retail price of the engraved glass ranges from $59 to $400,
depending on the size of the glass block and number of images to be engraved,
with a typical glass block retailing for $100 to $150. Engraved glass pieces for
corporate customers carry suggest retail prices from $19 to as much as several
thousands of dollars. We also offer a variety of accessories and bases on which
to display the engraved glass blocks.

PRODUCT LINES

         There are numerous applications for our engraving system. We are
currently focusing on the following product lines:
           o   two-dimensional portraits;
           o   corporate/award items;
           o   giftware;
           o   three-dimensional facial images;
           o   two-dimensional images;
           o   licensed images and logos;
           o   tabletop items; and
           o   gallery pieces.

DISTRIBUTION

         We sell our products
     o   to corporate distributors;
     o   to mass marketing organizations, such as QVC;
     o   through retail kiosks owned by us and by our independent distributors;
     o   through college catalogs and bookstores;
     o   through photo distributors and retail outlets; and
     o   through art galleries.

         PHOTO INDUSTRY. As of December 2004, we are producing our
two-dimensional portrait products for a national portrait studio in over 900 of
its stores. Entering 2005, we are in negotiations with other national portrait
studios as the two-dimensional portrait demand continues to grow at a rapid
pace. We are focused on building strategic relationships in this industry and
will aggressively continue to seek market share. We believe our unique software
platform allows companies to merge seamlessly photography and image data via the
Internet, thus providing photographers of any size the ability to offer our
product with little or no additional overhead.

         CORPORATE SALES. With the acquisition of Lazer-Tek and the presence of
Crystalix USA at the promotional product industry trade shows, corporate
application of our laser engraved products for awards, gifts and presentation
has been growing steadily at 15-20% quarterly.

         INFINITY BUYING CLUBS. We have been aggressively pursuing mass
marketing organizations such as NASCAR, the National Basketball Association,
Major League Baseball, and the Kentucky Derby, and have sold products to these
organizations or teams within these organizations. With wholesale and retail
ability available in these venues, we will explore large sales opportunities for
our entire market lines.

         RETAIL KIOSKS. The kiosks typically occupy no more than 120 square feet
and can be operated by only one or two employees. As of December 31, 2004, the
following kiosks were in operation by our independent distributors:

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        ------------------------------------------------------------------------
        DATE OPENED                  LOCATION
        ------------------------------------------------------------------------
        March 2002                   DFS Galleria - Honolulu, Hawaii
        ------------------------------------------------------------------------
        May 2002                     Park Meadows Mall - Parker, Colorado
        ------------------------------------------------------------------------
        May 2002                     First Street Station - Rehoboth Beach,
                                     Delaware
        ------------------------------------------------------------------------
        May 2002                     Mall of America - Bloomington, Minnesota
        ------------------------------------------------------------------------
        June 2002                    Desert Passage, Aladdin - Las Vegas, Nevada
        ------------------------------------------------------------------------
        August 2002                  Tacoma Mall - Tacoma, Washington
        ------------------------------------------------------------------------
        September 2002               Dubai International Airport - Dubai, United
                                     Arab Emirates
        ------------------------------------------------------------------------
        November 2002                Fisherman's Wharf - Monterey, California
        ------------------------------------------------------------------------
        November 2002                1145 Prospect Street - La Jolla, California
        ------------------------------------------------------------------------
        November 2002                3rd Street Promenade - Santa Monica,
                                     California
        ------------------------------------------------------------------------
        November 2002                Disney Arribas - Orlando, Florida
        ------------------------------------------------------------------------
        November 2002                622 Royal Street - New Orleans, Louisiana
        ------------------------------------------------------------------------
        December 2002                Stratosphere Shops - Las Vegas, Nevada
        ------------------------------------------------------------------------
        December 2002                Beach Towers - Atlantis Paradise Island
                                     Resort, Nassau, Bahamas
        ------------------------------------------------------------------------
        February 2003                Crystalix of Henderson - Henderson, Nevada
        ------------------------------------------------------------------------
        February 2003                Harrah's Carnival Court - Las Vegas, Nevada
        ------------------------------------------------------------------------
        February 2003                Prudential Center Marketplace - Boston,
                                     Massachusetts
        ------------------------------------------------------------------------
        April 2003                   Chicago - Gurnee, Illinois
        ------------------------------------------------------------------------
        April 2003                   Harrahs - Laughlin, Nevada
        ------------------------------------------------------------------------
        April 2003                   Village Shops - Gatlinburg, Tennessee
        ------------------------------------------------------------------------
        November 2003                Bluewater - Greenhithe - Ken, United
                                     Kingdom
        ------------------------------------------------------------------------
        December 2003                Deira City Center - Dubai, United Arab
                                     Emirates
        ------------------------------------------------------------------------
        December 2003                The Square - Tallaght - Dublin, Ireland
        ------------------------------------------------------------------------
        December 2003                ABC Shopping Mall - Beirut, Lebanon
        ------------------------------------------------------------------------
        December 2003                Monte Casino - Johannesburg, South Africa
        ------------------------------------------------------------------------
        February 2004                OCBC Center  - Singapore, Singapore
        ------------------------------------------------------------------------
        February 2004                Marafi Building - Kuwait
        ------------------------------------------------------------------------
        May 2004                     Pacific Fair - Broadbeach - Queensland,
                                     Australia
        ------------------------------------------------------------------------
        June 2004                    Mid Summer Arcade - Central Milton
        ------------------------------------------------------------------------
        September 2004               The Grosvenor Shopping Center - Chester,
                                     United Kingdom
        ------------------------------------------------------------------------

We also had the following company-owned retail locations:

        ------------------------------------------------------------------------
        DATE OPENED                   LOCATION
        ------------------------------------------------------------------------
        November 2003                 Jervis Shopping Center - Dublin, Ireland
        ------------------------------------------------------------------------
        September 2004                Sony Center - Berlin, Germany
        ------------------------------------------------------------------------
        December 2004                 Blanchards Town - Dublin, Ireland
        ------------------------------------------------------------------------
        December 2004                 Harvey Norman Store - Dublin Ireland
        ------------------------------------------------------------------------


         INDEPENDENT DISTRIBUTORS. Through our software license, we grant our
independent distributors a non-exclusive right to operate our laser engraving
system during a specified term and any extensions thereof in an identified
exclusive territory. We also make available to our independent distributors
glass blanks, light bases, collection images, and related products from a
pre-approved vendor or us to assure quality.

         In 2004, we paid royalties for many of our independent distributors
that were not current with Norwood's licensing requirements, as a result of
their neglecting to submit their quarterly royalty payments for the patent
sub-license. These royalties were due for their sub-license of the patent on
their laser-imaged optic glass sales. Our agreement with Norwood and subsequent
right to grant sub-licenses to our distributors require us to submit royalties
on all US independent distributor kiosk sales or to take action against them. We
are currently re-negotiating licensing agreements to bring all independent
distributors into compliance. All independent distributors are being asked to
sign a new contract and comply with the royalty payments. While this failure to
pay royalties has had a

                                       4
<PAGE>


negative effect on our revenues in the short term, we believe this should be
corrected by the middle of the second quarter, which is the target date to have
all independent distributors under new contracts. Our independent distributors
can extend the terms of their agreements if they are in good standing under the
new lease/licensing agreements and reach a royalty settlement. We did not allow
any new independent distributors in the United States during the restructuring
period of 2004. A few of the affiliates may elect to not sign the new contract.
It is anticipated that if we fail to renegotiate to the satisfaction of certain
independent contractors, mediation or litigation may become necessary.

         COLLEGE CATALOGS AND BOOKSTORES. We manufacture certain licensed
articles under the line name of "Collegiate Crystal". The line consists of laser
reproductions of collegiate logos, mascots, buildings, and landmarks inside of
high-quality glass cubes pursuant to orders from our collegiate distributor,
Jardine Associates. We plan to expand this line by the end of the third quarter
of 2005.

         INTERNATIONAL OPERATIONS. Crystalix USA formed a wholly owned
subsidiary on October 24, 2002, Crystalix Imaging Limited, doing business as
Crystalix Europe, to explore the marketability for corporate owned locations in
the western European countries of Ireland, England and France. Through December
2004, Crystalix Europe opened locations in Dublin, Ireland, with independent
distributors. These locations are being well received and we plan to open other
locations worldwide. In addition, our production facility in Berlin, Germany,
has a kiosk at the Sony Center, which has also been very well received and
generated numerous inquiries for kiosk sales that will be pursued in 2005.
Revenues from our international operations were approximately $990,612.

LASER EQUIPMENT

         Our laser systems consist of components purchased from outside vendors.
We then configure these components with our proprietary software and make
necessary adjustments to laser, mirrors, and electrical and computerized
components as required. When the laser system is properly configured, we enclose
the components with a customized casing and perform quality control tests on the
system prior to release.

REVENUE COMPONENTS

         We have three major components of revenue:
   o     product revenue, which includes both the sale of glass product and
         laser system machinery;
   o     lease revenues; and
   o     royalty revenues.

         In 2004 the product sales were virtually split between glass and
machinery. We expect the machinery to become a much more significant portion of
revenue as we sell our laser system into the U.S. market in 2005. Glass product
sales will also increase, even though it will become a smaller percentage of
product sales. As we enter into a full year of two-dimensional portrait studio
production, we anticipate a large growth in this market. In the fourth quarter
of 2004, two-dimensional portrait sales represented almost $250,000 of total
revenues.

         Another major revenue component is lease revenues. This has been a
major revenue component since all laser equipment was sold on a lease basis
prior to 2004. Since most of these leases were 60-month leases from 2002 and
2003, we anticipate these revenues to still play a significant portion of our
revenue for 2005.

         Royalty revenues should grow again in 2005 as we grow our independent
distributor base within the U.S.

SUPPLIERS

         The equipment components for our laser engraving system are available
from several suppliers. Currently, we use a high-resolution digital camera and
laser image scanner, a laser that uses neodymium: yttrium aluminum garnet
(Nd:YAG) as the material used for light emission, and a desktop personal
computer. We had minimum purchase contracts with many of our equipment suppliers
and are renegotiating our supplier contracts as we continue to seek better
technology, pricing, and service. We currently do not have any significant
vendor contracts.

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<PAGE>

         We have secured suppliers in China for our glass blocks, which are
lead-free and arsenic-free. We believe that there are only a limited number of
suppliers of glass that can meet our needs. We have identified two potential
suppliers in the United States, several potential European suppliers, and one
other Chinese supplier. The glass that we use has the following characteristics:

   o   High transmittance and refraction of light throughout the visible and
       near infrared spectra;
   o   Extremely low bubble and inclusion content;
   o   Requires no special handling and has stable chemical properties;
   o   Capable of being precision-engraved using available laser technology; and
   o   Environmentally acceptable due to absence of lead and arsenic.

INTELLECTUAL PROPERTY

         PATENTS; LICENSES; ROYALTY AGREEMENTS. Our laser engraving system is
derived in large part from patents held by others. Laser Design International,
LLC ("LDI") had exclusive license rights to a family of patents which govern
subsurface decorative laser marking in crystal, glass, and other clear
materials. These patents were first filed in 1991 and have been issued in the US
and almost every part of the world. LDI purchased the actual patents in February
2003, as opposed to having had only the exclusive rights to those patents
previously. In addition, LDI has another US patent, which improves on the
original claims and more specifically applies them to the use of the process for
manufacture of decorative crystal and glass giftware. These patents cover both
the process of manufacturing laser-etched crystal giftware, as well as the
manufacturing machine and finished giftware products themselves.

         In 1995, LDI issued a license for these patent rights and the
underlying technology to Janesville Group, Ltd. of Janesville, Wisconsin, which
is now a part of Norwood Promotional Products, Inc., based in Austin, Texas.
That license granted certain exclusive rights for manufacture of corporate
giftware in North and South America. Norwood Promotional Products, Inc. markets
20 product lines with over 6,000 products through promotional product
distributors, and is believed to be the world's largest supplier of promotional
products.

         In February 1999, LDI and the Janesville Group, Ltd. granted Lazer-Tek
a non-exclusive license for the manufacture and sale of decorative products for
the specialty advertising, premium, and retail markets in the US, Canada,
Mexico, the United Kingdom, Central America, South America, and the Caribbean.
Lazer-Tek paid a royalty of 17% of net sales for annual sales of up to $500,000
and 20% of net sales for annual sales of $500,000 or more. This obligation was
contracted to continue until April 27, 2010.

         In October 2001, LDI granted Crystalix USA a non-exclusive
non-transferable license to use this technology for the manufacture and sale of
decorative products in the giftware market segments, the wearable jewelry and
gemstone material market segments, and the flat glass and architectural glass
market segments. LDI also granted us a non-exclusive non-transferable license to
manufacture, use, sell and lease laser subsurface engraving machines to LDI
subsurface engraving licensees. These licenses granted by LDI are subject to the
limitation that our activities cannot conflict with the exclusive rights granted
to the Janesville Group unless the Janesville Group expressly agrees in writing
to allow the activity. We paid LDI $25,000 for the license and are obligated to
pay LDI a royalty of 10% of the net sales for decorative products sold to all
market segments except the flat glass and architectural glass market segments.
For those sales, the royalty rate is 3% of net sales. The obligation to pay
royalties continues until April 27, 2010 or termination of the license
agreement. By letter dated January 1, 2002, LDI agreed that our royalty
obligations shall be no higher than $3.00 per block, recognizing that our
business included facial marking and three-dimensional imaging improvements that
are outside of the patents licensed to us.

         Effective October 1, 2003, we entered into an amended and restated
patent license agreement with LDI and Norwood, which superseded the February
1999 and October 2001 agreements described above. We now have a non-exclusive,
non-transferable, royalty-bearing sub-license from LDI to make, use, offer for
sale, and sell decorative products using the technology other than in the United
States for a royalty of $3.00 per image. Norwood granted us a non-exclusive,
non-transferable (other than reseller licenses to permitted resellers),
revocable and royalty-bearing sub-license for the United States in the retail
market segment. Norwood also granted Lazer-Tek a non-exclusive, non-transferable
(other than reseller licenses to permitted resellers), revocable and
royalty-bearing

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<PAGE>

sub-license for the United States in the corporate market segment. All
applications for a permitted reseller license must be approved by Norwood. We
are required to pay Norwood royalty payments based on a percentage of 10% of net
sales in the United States in the retail market and corporate market segments on
a quarterly basis.

         In addition to the patents described above, we have the exclusive
worldwide rights to other proprietary technology. Rainer Eissing, our chief
executive officer, has developed certain facial marking and three-dimensional
imaging improvements that are outside of the engraving patents licensed by us.
We obtained the rights to Mr. Eissing's technology by issuing Crystalix
Technology 7,000,000 shares of our Class A preferred stock.

         We are currently negotiating with LDI to purchase its patents and
anticipate completion of the negotiations by April 2005. The patents are an
integral part of our business and will continue to be so through the duration of
the patents, which is August 15, 2011.

         Lazer-Tek has an interest in US Patent No. 6,087,617 - computer
graphics system for generating an image reproducible inside optically
transparent material. Lazer-Tek has full rights to and possession of the patent,
which is co-owned with Igor Troitski. The patent expires May 7, 2016.

         TRADEMARK AND TRADE NAME. In January 2003, we applied for federal
trademark registration of Crystalix and the diamond logo (serial number
76/489692). As of the date of this report, such registration has not been
obtained. We hold Nevada trademarks on the Crystalix name.

         Lazer-Tek has the following federally registered trademarks, which are
effective for ten years from the date of registration:
           o   For "LTD" - No. 2,021,941 registered December 10, 1996
           o   For "Collegiate Crystal" - No. 2,504,803 registered November 6,
               2001
           o   For "Photocrystals" - No. 2,787,498 registered November 25, 2003

COMPETITION

         We compete generally with many other manufacturers and retailers in the
giftware industry and specifically with those who offer personalized and
engraved products. With regard to manufacturers of laser subsurface engraved
optic glass items, we are aware of other competitors in the United States, but
only a few that comply with the patents described above. Most of the competition
has not received use of the patent rights and many are currently in mediation
with the patent owner regarding alleged infringements. As described above, we,
through our wholly-owned subsidiary, Lazer-Tek Designs, are one of only two
entities licensed under the patent governing subsurface decorative laser marking
in crystal, glass, and other clear materials to produce and sell these products
in the U.S. corporate market. Further, we are the only licensed company that
manufactures its owns laser subsurface engraving equipment and that has the
right to sublicense purchasers of this equipment.

         There are several companies that offer laser subsurface engraved glass
products for sale to the public. However, many only offer decorative glass
pieces that are already engraved, as opposed to offering custom-engraved
products. We believe that we compete favorably, due to the breadth of our
product lines and methods of distribution.

         We believe that we compete on the basis of
            o   Image quality, definition and accuracy;
            o   Crystal quality;
            o   Crystal selection;
            o   Production/turnaround times;
            o   Retail location and accessibility; and
            o   Creativity with respect to the art image and glass shape.


                                       7
<PAGE>


RESEARCH AND DEVELOPMENT

         During the fiscal years ended December 31, 2004 and 2003, we spent $nil
and $397,067, respectively, on research and development activities.

GOVERNMENT REGULATION AND COMPLIANCE WITH ENVIRONMENTAL LAWS

         Our independent distributors and we are subject to the type of
government regulation typically associated with the operation of retail
locations. These regulations pertain to the safe operation of the retail space,
wages and working conditions for employees, and the proper collection of various
taxes. We do not believe that compliance with these regulations presents any
unusual hardship or cost.

         Compliance with environmental laws generally does not affect our
business.

EMPLOYEES

         As of December 31, 2004, we employed a total of 31 persons, of which 25
were full-time. None of our employees is covered by a collective bargaining
agreement.

RISK FACTORS

         Due to the nature of our business and the present stage of development
of our business, the following risk factors apply to our operations:

DUE TO OUR SUBSTANTIAL STOCKHOLDERS' DEFICIT AT DECEMBER 31, 2004, OPERATING
LOSSES, AND WORKING CAPITAL DEFICIENCY, THE REPORT OF OUR AUDITOR CONTAINS A
PARAGRAPH EXPRESSING SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN.

         To date, we have not had profitable operations. We expect to continue
to incur additional losses for the current year. We generated a net loss of
$8,302,578 for the year ended December 31, 2004, and had a stockholders' deficit
of $5,413,587 as of December 31, 2004. These conditions raise substantial doubt
about our ability to continue as a going concern. In order to become profitable
and sustain profitability, we will need to generate significant revenues to
offset our cost of revenues and general and administrative expenses. We may
never be able to achieve or sustain our revenue or profit goals.

WE HAVE A WORKING CAPITAL DEFICIENCY AND INSUFFICIENT CASH.

         At December 31, 2004, we had a working capital deficiency of
$4,262,946. Accordingly, we are dependent upon external financing such as an
offering of debt and/or equity securities or borrowing to continue operations.
We estimate that we will require external financing of at least $1,000,000
within the next few weeks to complete the purchase of patent rights and an
additional $2,000,000 during the next few months to finance the manufacture of
equipment for resale and pay operating expenses. If we can obtain this funding,
we believe we will be able to increase our revenues sufficiently to sustain and
grow our operations for the remainder of the fiscal year. If we cannot obtain at
least $1,000,000 or obtain this amount within the next month, our cash needs
will grow.

WE HAVE ONLY A LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO EVALUATE
AN INVESTMENT IN OUR STOCK.

         An evaluation of our business will be difficult because we have a
limited operating history. Crystalix has been in business since November 2001.
We face a number of risks encountered by early-stage companies, including our
need to develop infrastructure to support growth and expansion; our need to
obtain long-term sources of financing; our need to establish our marketing,
sales and support organizations, as well as our distribution channels; our need
to manage expanding operations; and our dependence on technology which could
become incompatible or out of date. Our business strategy may not be successful,
and we may not successfully address these risks.


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<PAGE>


WE HAVE PLEDGED ALL OF OUR ASSETS TO OBTAIN OUTSIDE FINANCING, WHICH MAY IMPAIR
OUR ABILITY TO OBTAIN ADDITIONAL FINANCING.

         Because of our historical inability to generate sufficient revenues, we
rely upon external sources of financing to supplement our sales revenue. Since
our inception in November 2001, we have financed our operations externally
through the sale of our stock and by borrowing from various parties. We have
pledged all of our assets to obtain these loans. Kevin Ryan, our largest
shareholder and chief executive officer, has a first position on all of our
assets. We will need financing to expand our operations and attain the growth
goals of our business plan. Sources of external financing may include short-term
loans from affiliates of our company, bank borrowings, joint ventures, and
future debt and equity offerings. We cannot makes any assurances that debt
financing will be available on acceptable terms, or at all, as prospective
lender may not want to subordinate their debt to that of Mr. Ryan or to make
unsecured loans. Any additional financing may result in dilution to our
shareholders. Our failure to obtain external financing will have a material
adverse effect on our results of operations and financial condition. If we
cannot obtain external financing when needed, we may be forced to reduce the
growth target of our business plan and/or curtail operations.

OUR CURRENT GROWTH STRATEGY IS DEPENDENT UPON OUR ABILITY TO OBTAIN AND SUPPORT
INDEPENDENT DISTRIBUTORS AND TO SELL TO CORPORATE ACCOUNTS.

         Our growth is dependent upon our ability to obtain more independent
distributors throughout the United States and in selected locations around the
world to purchase laser machinery for a retail operation. To be successful, we
need to be able to identify suitable partners, provide them with adequate
training, and manage competently the infrastructure to support their efforts.

         Our growth is also dependent upon sales to corporate accounts. To be
successful in this effort, we must be able to compete with other products in the
image promotion industry.

         Our growth is also dependent on the development of the two-dimensional
portrait photo industry. To be successful, we must continue to contract with
national studio chains to carry our two-dimensional portrait products. We must
also be able to grow our production facility to meet increased demand.

SINCE WE OPERATE IN THE GIFTWARE INDUSTRY, WE ARE AFFECTED BY ECONOMIC
CONDITIONS AND CONSUMER TRENDS.

         Since we manufacture and market items that would be considered
giftware, our success will depend upon a number of factors relating to consumer
spending, including future economic conditions affecting disposable consumer
income, such as employment, business conditions, interest rates, and taxation.
If existing economic conditions deteriorate, consumer spending may decline,
thereby adversely affecting our business and results of operations.

         We must be able to anticipate and respond to changing merchandise
trends and consumer demands in a timely manner. If we should miscalculate
consumers' purchasing habits and tastes, we will not be able to compete against
other gift products.

WE FACE COMPETITION FROM EXISTING AND POTENTIAL COMPETITORS.

         We face substantial competition in the glass subsurface engraving
industry, as well as competition from others offering business opportunities.
Due to our small size, it can be assumed that most if not all of our competitors
have significantly greater financial, technical, marketing and other competitive
resources. Many of our competitors and potential competitors have greater name
recognition and more extensive customer bases that could be leveraged, for
example, to position themselves as being more experienced, having better
products, and being more knowledgeable than us. To compete, we may be forced to
offer lower prices and narrow our marketing focus, resulting in reduced
revenues, if any. Additionally, we need to continue to pursue enforcement of the
United States patent for the subsurface laser engraving process against the
majority of our competition, which does not have license to use the patented
process.


                                       9
<PAGE>


OUR SUCCESS AND ABILITY TO COMPETE DEPENDS UPON OUR ABILITY TO SECURE AND
PROTECT OUR PROPRIETARY TECHNOLOGY.

         Our success depends on our ability to protect our proprietary
technology. In the event that a third party misappropriates or infringes on our
intellectual property, our business would be seriously harmed. Third parties may
independently discover or invent competing technologies or reverse engineer our
software. We expect that if we should successfully market franchises and
licenses to use our software, competitors may attempt to duplicate our
technology. Even if we were to obtain copyright protection on the software, we
would still have to enforce our rights against those who might attempt to
infringe on our intellectual property. Such enforcement efforts are likely to be
expensive and time-consuming.

THE LOSS OF OUR OFFICERS AND DIRECTORS OR OUR FAILURE TO ATTRACT AND RETAIN
ADDITIONAL PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.

         Our success depends largely upon the efforts, abilities, and
decision-making of our executive officers and directors. Although we believe
that we maintain a core group sufficient for us to effectively conduct our
operations, the loss of any of our key personnel could, to varying degrees, have
an adverse effect on our operations and system development. We do not currently
maintain "key-man" life insurance on any of our executives or directors, and
there is no contract in place assuring their services for any length of time.
The loss of any one of them would have a material adverse affect on us. There
can be no assurance that the services of any member of our management will
remain available to us for any period of time, or that we will be able to enter
into employment contracts with any of our management, or that any of our plans
to reduce dependency upon key personnel will be successfully implemented.

         The knowledge and expertise of our officers and directors are critical
to our operations. There is no guarantee that we will be able to retain our
current officers and directors, or be able to hire suitable replacements in the
event that some or all of our current management leave our company. In the event
that we should lose key members of our staff, or if we are unable to find
suitable replacements, we may not be able to maintain our business and might
have to cease operations, in which case an investment in our stock could be
lost.

DUE TO THE LIMITED PUBLIC MARKET FOR OUR COMMON STOCK, INVESTORS MAY EXPERIENCE
A DECLINE IN THE SHARE PRICE OR HAVE DIFFICULTY IN SELLING THEIR SHARES.

         While our common stock trades on the OTC Bulletin Board, the market has
been limited and volatile at times. For example, only 346,936 shares were traded
during the month of February 2005. We cannot make any assurances that the public
market for our common stock will continue to develop. If an active market for
our common stock does not develop, the liquidity of an investment in our common
stock may be limited, and the price of our common stock may decline below what
was paid for it.

A LIMITED NUMBER OF STOCKHOLDERS WILL COLLECTIVELY CONTINUE TO OWN A MAJORITY OF
OUR COMMON STOCK AND MAY ACT, OR PREVENT CERTAIN TYPES OF CORPORATE ACTIONS, TO
THE DETRIMENT OF OTHER STOCKHOLDERS.

         As of March 22, 2005, our directors and officers own more than 39% of
our outstanding common stock, excluding shares issuable as payment on
outstanding notes and assuming that none of the preferred stock is converted
into common stock and that none of the warrants is exercised. Accordingly, these
stockholders may, if they act together, exercise significant influence over all
matters requiring stockholder approval, including the election of a majority of
the directors and the determination of significant corporate actions. This
concentration could also have the effect of delaying or preventing a change in
control that could otherwise be beneficial to our stockholders.


                                       10

<PAGE>


OUR COMMON STOCK IS SUBJECT TO PENNY STOCK REGULATION THAT MAY AFFECT THE
LIQUIDITY FOR OUR COMMON STOCK.

         Our common stock is subject to regulations of the Securities and
Exchange Commission relating to the market for penny stocks. These regulations
generally require that a disclosure schedule explaining the penny stock market
and the risks associated therewith be delivered to purchasers of penny stocks
and impose various sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors. The
regulations applicable to penny stocks may severely affect the market liquidity
for our common stock and could limit the ability to sell our securities in the
secondary market.

OUR ISSUANCE OF THE CONVERTIBLE NOTES AND WARRANTS COULD SUBSTANTIALLY DILUTE
THE INTERESTS OF SHAREHOLDERS AND DEPRESS THE MARKET PRICE FOR OUR COMMON STOCK.

         The $9,220,764 in convertible notes we issued in July and September
2004 are convertible by the holders into shares of our common stock at any time
prior to their maturity in 2007 at a conversion price of the lesser of the
average closing price of our common stock immediately prior to conversion or
$0.08, subject to adjustments for stock splits, stock dividends, stock
combinations, and other similar transactions. In addition, we issued to the
holders of convertible notes in July and September 2004 seven-year warrants
entitling the warrant holders to purchase an aggregate of 4,375,000 shares of
our common stock at an exercise price of $0.08 per share. Accordingly, our
issuance of the convertible notes and warrants could substantially dilute the
interests of our shareholders.

         We have filed a registration statement that covers the resale of
44,514,549 shares issuable as partial payment of principal and interest on the
notes and the 4,375,000 shares issuable upon exercise of the warrants. If all of
these shares are issued, the number of shares outstanding will increase from
37,132,192 to 86,021,741 and number of shares in the "public float," which was
15,145,431 as of March 24, 2005, would increase to 64,034,980. These increases
could depress the market price for our common stock.

WE ARE OBLIGATED TO MAKE SIGNIFICANT PERIODIC PAYMENTS OF PRINCIPAL AND INTEREST
UNDER OUR NOTES.

         At December 31, 2004, notes payable in the principal amount of
$7,350,242, net of debt discounts, were due to Kevin Ryan, we are obligated to
make monthly principal payments of $318,447 and accrued interest. If we at any
time default on our payment obligations the creditors will have all rights
available under the instrument, including acceleration, termination, and
enforcement of security interests. Such security interests cover all of our
assets and those of our subsidiaries.

FUTURE EQUITY TRANSACTIONS, INCLUDING EXERCISE OF OPTIONS OR WARRANTS, COULD
RESULT IN DILUTION.

         From time to time, we sell restricted stock, warrants, and convertible
debt to investors in private placements. Because the stock is restricted, the
stock is sold at a greater discount to market prices compared to a public stock
offering, and the exercise price of the warrants sometimes is at or even lower
than market prices. These transactions cause dilution to existing stockholders.
Also, from time to time, options are issued to officers, directors, or
employees, with exercise prices equal to market. Exercise of in-the-money
options and warrants will result in dilution to existing stockholders. The
amount of dilution will depend on the spread between the market and exercise
price, and the number of shares involved.

TRADING IN OUR COMMON STOCK ON THE OTC BULLETIN BOARD MAY BE LIMITED THEREBY
MAKING IT MORE DIFFICULT FOR INVESTORS TO RESELL THEIR SHARES OF OUR COMMON
STOCK.

         Our common stock trades on the OTC Bulletin Board. The OTC Bulletin
Board is not an exchange and, because trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on an
exchange or NASDAQ, investors may have difficulty reselling any of their shares
of our common stock.


                                       11
<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY.

         Our principal offices are located at 5275 South Arville Street, Suite
B-116, Las Vegas, Nevada 89118. We lease approximately 12,000 square feet within
three centrally located buildings. We have recently renegotiated a new lease
agreement to reduce rent costs, and are inquiring regarding the availability of
more warehouse space in our current location.


ITEM 3.  LEGAL PROCEEDINGS.

         We are not a party to any pending legal proceedings, other than routine
litigation deemed incidental to our business, except for the following:

         On February 12, 2003, Vitro Laser Group USA, Inc. and Kenneth Morrison
filed an original petition and application for injunctive relief in the District
Court of Dallas County, Texas, against Vitro Laser GmbH ("Vitro") and us. The
plaintiffs allege that Vitro and we wrongfully took two laser systems. We picked
the laser systems up the request of the owner of the lasers, Vitro, and returned
them to their possession. Neither our subsidiaries nor we used these lasers in
our operations. The plaintiffs seek a temporary and permanent injunction
enjoining, prohibiting, and restraining Vitro and us from interfering with
plaintiffs' rights in the laser systems and in their business facilities and
operations. In addition, the plaintiffs seek from us exemplary damages for
conversion of the equipment, statutory damages of $2,000 and attorneys' fees for
theft of the laser systems, actual damages for unjust enrichment, and actual and
exemplary damages for tortious interference with plaintiffs' contract with
Vitro. With respect to Vitro, the plaintiffs seek exemplary damages for fraud,
actual damages for negligent misrepresentation, actual damages and attorneys'
fees for breach of contract, and actual damages for breach of fiduciary duty.
Vitro asserts that it was not properly served and that it is not amenable to
suit or service in the United States since it is a German company. We filed a
special appearance in the lawsuit to contest the court's jurisdiction over it.
The court found that the court had jurisdiction over us and we appealed that
ruling. On March 19, 2005, the plaintiffs agreed to release and discharge all
claims against for a payment of $5,000.

         In January 2005, Crystal Clear LLC filed a complaint, alleging that it
was fraudulently induced to become a marketing affiliate of ours and breach of
contract. The plaintiff seeks a judgment declaring that it was fraudulently
induced to enter into the master equipment lease and software license agreement
in October 2002, a rescission of the agreement, unspecified damages, interest,
and costs. This action has been held in abeyance while negotiations are taking
place to settle the matter.


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

         None.







                                       12

<PAGE>
                                     PART II

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

MARKET INFORMATION

         Our common stock has been trading on the over-the-counter bulletin
board ("OTCBB") since March 2000. The common stock traded under the symbol
"ABIL" from March 2000 to December 9, 2002. Since December 9, 2002, it has
traded under the symbol "CYXG." The following table sets forth the range of high
and low bid quotations for each fiscal quarter for the last two fiscal years.
These quotations reflect inter-dealer prices without retail mark-up, mark-down,
or commissions and may not necessarily represent actual transactions.


         FISCAL QUARTER ENDING                       HIGH BID          LOW BID

         March 31, 2002..........................    $   0.37         $   0.17
         June 30, 2002............................   $   0.24         $   0.004
         September 30, 2002......................    $   0.06         $   0.02
         December 31, 2002.......................    $   1.50         $   0.02

         March 31, 2003..........................    $   0.97         $   0.55
         June 30, 2003...........................    $   0.91         $   0.21
         September 30, 2003......................    $   0.91         $   0.10
         December 31, 2003.......................    $   0.92         $   0.38

         March 31, 2004..........................    $   0.76         $   0.39
         June 30, 2004...........................    $   0.67         $   0.15
         September 30, 2004......................    $   0.28         $   0.07
         December 31, 2004.......................    $   0.24         $   0.09

         On March 22, 2005, the closing bid price for the common stock on the
OTC Bulletin Board was $0.08.

HOLDERS

         As of March 22, 2005 there were 486 record holders of our common stock.

DIVIDENDS

         We have not paid any dividends on any of our shares. We have no present
intention of paying dividends on any of our shares, as we anticipate that all
available funds will be invested to finance the growth of our business.


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

OVERVIEW

         Effective October 4, 2002, an arrangement was completed between the
company, then known as Americabilia.com, Inc. and Crystalix USA Group, Inc., a
Nevada corporation, whereby the shareholders of Crystalix USA exchanged all of
their common shares for 23,300,000 shares of Americabilia common stock. At the
same time, we issued 7,000,000 shares of Americabilia Class A preferred stock to
acquire a technology license from Crystalix Technology, Inc.

         Immediately following the acquisition, the former shareholders of
Crystalix USA held approximately 77.6% of Americabilia's total issued and
outstanding common shares. Crystalix USA was thereby deemed to be the acquiror
and surviving company for accounting purposes. Accordingly, the transaction has
been accounted for as a reverse acquisition using the purchase method whereby
the assets and liabilities of Americabilia have been recorded at their fair
market values and operating results have been included in the company's
financial statements from the


                                       13
<PAGE>

effective date of purchase. The net assets of Crystalix USA are included in the
balance sheet at their historical book values and its results of operations have
been presented for the comparative prior period.

         On December 23, 2002, we acquired Lazer-Tek for 1,250,000 shares of our
common stock valued at $1,125,000 and an acquisition consulting fee obligation
of $400,000. This acquisition has been accounted for using the purchase method.
The purchase price was allocated to the assets purchased and liabilities assumed
based upon their estimated fair values as determined by management, upon
reliance on an independent valuation report, on the date of acquisition, which
approximated $3.2 million. The excess of fair value of the acquired net assets
over the cost has been allocated as a pro rata reduction of all the acquired
assets, excluding financial assets, assets to be disposed of by sale, deferred
tax assets, pension or other post-retirement benefit plans, and any other
current assets.

GOING CONCERN

         The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America, which contemplate continuation of us as a going concern. We incurred
a net loss for the year ended December 31, 2004 of $8,302,578, used cash for
operating activities of $3,936,800 for the year ended December 31, 2004, and at
December 31, 2004 had an accumulated deficit of $16,045,562 and a working
capital deficit of $4,262,946. These conditions raise substantial doubt as to
our ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. These consolidated financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.

         We plan to take the following steps that we believe will be sufficient
to provide us with the ability to continue in existence. We have recently
re-negotiated the repayment term of certain debt and have issued a $2,000,000
convertible promissory note to an unrelated third party. In July 2004, we
changed our senior management by naming Mr. Kevin Ryan as Chief Executive
Officer and Mr. Robert McDermott as Chief Financial Officer and believe that the
new management team will be able to achieve profitable operations, but there can
be no assurance that we will be able to raise sufficient capital and generate
positive cash flows from operations sufficient to sustain operations. Our
discussion in "Plan of Operation" below details additional sales strategies to
sustain operations.

         During the year ended December 31, 2004, we have significantly reduced
our overhead expenses while maintaining our manufacturing facilities and
equipment. We have eliminated non-critical personnel and expenditures, frozen
wages and marketing expenditures, reduced travel and renegotiated leases. We
believe we can grow revenues during the next twelve months without a significant
increase to overhead. We have already begun selling our new laser machinery and
have the current capacity to produce up to 36 units annually without any
increases in overhead. We also have several internal machines currently
operating under capacity that will allow us to increase sales of imaged glass
with a minimal increase in overhead expenses. We also believe the impending
patent litigation against the alleged infringers will increase our revenues as
violators leave the industry and reduce competition.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our discussion and analysis of our financial condition and results of
operations are based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosures
of contingent assets and liabilities. On an ongoing basis, we evaluate our
estimates, including those related to impairment of long-lived assets, any
potential losses from pending litigation and deferred tax asset or liability. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.


                                       14
<PAGE>

         LEASE REVENUE. We previously entered into licensing agreements to lease
our laser equipment and our licensed laser inscription technology to individuals
and businesses that open retail establishments to sell laser inscribed glass
products. The terms of these licensing agreements are typically for five years.
The lease payments were generally paid in one or two installments upon signing
the agreement and we recognize lease revenue ratably over the term of the
contract.

         MACHINE SALES. Laser equipment is no longer leased, but rather sold to
our independent distributors/retailers in three installment payments as follows:
40% upon order, 40% prior to delivery, and 20% upon completion of installation
of equipment at the retail location. We retain ownership of the proprietary
software and license use of the software to the distributor/retailer for a
monthly fee, which is normally $500.

         PRODUCT SALES. Revenue from the sale of laser inscribed products is
recognized when title to the products is transferred to the customer, which is
point of sale at retail locations or customer acceptance for custom-designed
products, and only when no further contingencies or material performance
obligations are warranted. Revenue from the sale of glass cube products is
recognized when title to the products is transferred to the
distributor/retailer, which is upon shipment, and only when no further
contingencies or material performance obligations are warranted.

         ROYALTY REVENUE. We recognize royalty revenue from licensing our
technology only when earned with no further contingences or material performance
obligations are warranted.

         DEFERRED REVENUE. Deferred revenue represents amounts received as
non-refundable payments upon the signing of the contract and delivery of the
laser system unit, for which revenue will be recognized over the term of the
license period. Deposits received from potential customers, who have not yet
received the laser system units, are accounted as refundable customer deposits
on the balance sheet.

         STOCK-BASED TRANSACTIONS. Shares of our common stock issued for
services, compensation or financing costs is valued at the market value of our
common stock at the date of issuance.

         INTANGIBLE ASSETS. Intangible assets consist of product and laser
licenses, capitalized software costs, website development costs, artwork and
copyrights, trademarks, trade names, customer lists and relationships and were
mostly acquired with the purchase of Laser-Tek. In accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets," we evaluate intangible assets and other
long-lived assets for impairment, at least on an annual basis and whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable from its estimated future cash flows. Recoverability of intangible
assets and other long-lived assets is measured by comparing their net book value
to the related projected undiscounted cash flows from these assets, considering
a number of factors including past operating results, budgets, economic
projections, market trends and product development cycles. If the net book value
of the asset exceeds the related undiscounted cash flows, the asset is
considered impaired, and a second test is performed to measure the amount of
impairment loss. Amortization is computed using the straight-line method over
the estimated useful life of the assets.

RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 2004 COMPARED TO DECEMBER 31, 2003. Our net
revenues are derived from product sales, lease revenue, and royalty revenue.

         PRODUCT SALES. We generate product sales through the sale of engraved
glass products to customers in our retail kiosks, to corporate customers,
through portrait studios, and through the sale of glass blanks, display bases,
and related products to our independent distributors. Our product sales revenue
for the year ended December 31, 2004 decreased by $835,462 or 19.7% from
$4,233,846 for the year ended December 31, 2003 to $3,398,384 for the year ended
December 31, 2004. The decrease is principally due the disposition of our retail
stores in Las Vegas, Nevada in April 2003 that generated sales of approximately
$186,000 during the first four months of 2003 and a reduction in the glass
products we sell our licensees due to the closing of certain licensee locations
during the latter half of 2003 and 2004. These decreases were offset by an
increase of approximately $172,000 in corporate product sales.


                                       15
<PAGE>

         The cost of revenue with regard to product consists of the cost of the
glass blanks, bases, and other items that we purchase from our suppliers. Our
cost of revenue for product sales also decreased by $1,076,298 or 39.6% from
$2,719,153 for 2003 to $1,642,855 for 2004. The decrease is due to the decrease
in product sales, but also due to a shift in selling higher margin products,
such as our corporate gift/promotional lines, resulting in an increase in our
gross margin from 35.8% in 2003 to 51.7% in 2004.

         LEASE REVENUE. We receive lease revenues from our independent
distributors under the terms of master equipment leases they have executed with
us. Our lease revenue for the year ended December 31, 2004 decreased by $615,001
or 35.4% from $1,739,538 for the year ended December 31, 2003 to $1,124,537 for
the year ended December 31, 2004. The reduction in our lease revenue is due to
ten licensees canceling their contracts in late 2003 and early 2004 and the
temporary cessation of machine sales in the U.S. market in 2004. The licensee
contracts were cancelled at the request of the licensees. The requests for
cancellation were granted based on the financial condition of the licensees and
their inability to continue to run a viable business enterprise. Management
believes that up to five licensees could cease operations during the next twelve
months. Due to the negotiations with current distributors and disputes regarding
their individual receivable balance, we have allowed for potential
uncollectibility of these disputed amounts, totaling approximately 43% of our
total receivables BALANCE. Most of these amounts in disputed arose prior to our
new management team taking over the operations of the company. Since most of
these amounts are 1 to 2 years old, we have deemed them uncollectible and have
established an allowance for uncollectible accounts.

         The lease cost of revenue consists primarily of the amortization of
property, plant, and equipment, including the direct personnel costs and direct
product costs associated with the assembly of the leased equipment. Our cost of
lease revenue also decreased by $314,681 or 43.1% from $730,490 for 2003 to
$415,809 for 2004 due to a decrease in lease revenue. Our gross margin increased
from 58.0% in 2003 to 63.0% in 2004 due to lower assembly costs for new leased
equipment since we did not enter into any new agreements with independent
distributors in 2004.

         ROYALTY REVENUE. We receive royalty revenues from our independent
distributors under the terms of master equipment leases and software license
agreements they have executed with us. Our royalty revenue for the year ended
December 31, 2004 decreased by $285,368 or 73.0% from $391,121 for the year
ended December 31, 2003 to $105,753 for the year ended December 31, 2004. The
reduction in our royalty revenue is due to the cancellation of licensee
contracts and temporary cessation of machine sales as described above and a
reduction of sales subject to royalties generated by our independent
distributors.

         Royalty cost of revenue consists of the royalty payments we make to
Laser Design International for the license rights on the patent protecting the
laser imaging process. Our cost of royalty revenue decreased by $341,948 or
84.8% from $403,064 for 2003 to $61,116 for 2004. The decrease is principally
due to the cancellation of licensee contracts and temporary cessation of machine
sales as described above and a reduction of sales subject to royalties.
Accordingly, we did not have a gross margin for 2003, but had a gross margin of
42.2% for 2004.

         Research and development for the year ended December 31, 2004 decreased
by $397,067 or 100.0% from $397,067 for the year ended December 31, 2003 to $0
for the year ended December 31, 2004. The decrease is principally due to lack of
funds to finance such activities including the completion of our new laser
system.

         Payroll and related benefits for the year ended December 31, 2004
decreased by $590,698 or 23.4% from $2,525,318 for the year ended December 31,
2003 to $1,934,620 for the year ended December 31, 2004. The decrease is a
result of a reduction in personnel due to corporate downsizing in light of the
reduction on revenue and a reduction in personnel in our retail sales staff as a
result of the sale of our retail stores in Las Vegas in April 2003.

         General and administrative expenses for the year ended December 31,
2004 decreased by $811,291 or 15.6% from $5,187,854 for the year ended December
31, 2003 to $4,376,563 for the year ended December 31, 2004. The decrease is
principally due to a reduction in legal fees associated with litigation with
certain of our former officers in 2003, consulting fees and a reduction in
general overhead due to corporate downsizing in light of the reduction in
revenue. Included in general and administrative expenses for the year ended
December 31, 2003 is $1,345,000, which is the valuation for 2,590,000 shares of
our common stock issued for management consulting services rendered. Also, for
the year ended December 31, 2004 we took a charge taken to earnings for the
value of


                                       16
<PAGE>

certain Series A preferred shares of $462,775 that were reallocated to certain
members of the Company's senior management team.

         Impairment expense for the year ended December 31, 2004 decreased by
$186,898 or 46.8% from $399,113 for the year ended December 31, 2003 to $212,215
for the year ended December 31, 2004. The 2004 expenses were comprised of a
write down of capitalized software costs of $176,052 and website development
costs of $36,163. The 2003 expenses were comprised of a write down of certain
property and equipment of $243,893 and our customer list and relationships of
$155,220.

         During the year ended December 31, 2003, we wrote off our investment in
Vitro Laser Gmbh of $500,000. We had originally paid Vitro an advance of
$500,000 that was to be applied to the purchase price of that company. In
accordance with the legal settlement on November 14, 2003, we allowed Vitro to
retain the advance.

         Other expense, net for the year ended December 31, 2004 decreased by
$49,809 from other expense of $27,309 for the year ended December 31, 2003 to
other income of $22,500 for the year ended December 31, 2004.

         Interest expense for the year ended December 31, 2004 increased by
$3,402,096 or 374% from $908,478 for the year ended December 31, 2003 to
$4,310,574 for the year ended December 31, 2004. The significant increase is due
to the increase in debt, the amortization of debt issue costs of $460,816 and a
charge to interest expense of $2,747,011 for the issuance of common stock and
the reallocation of certain Series A preferred shares to Kevin Ryan and John
Woodward as additional consideration for funding the company. Included in
interest expense for the year ended December 31, 2003 is $528,000, which is the
valuation of 660,000 shares of our common stock issued as consideration to John
Woodward for extending the repayment terms of a loan to us of $1,500,000.

LIQUIDITY AND CAPITAL RESOURCES

         AS OF DECEMBER 31, 2004. At December 31, 2004, we had a working capital
deficit of $4,262,946, as compared to $6,311,497 at December 31, 2003. We had
cash and cash equivalents of $270,024 at December 31, 2004 as compared to cash
and cash equivalents of $58,881 at December 31, 2003. The decrease in the
working capital deficit is principally due to the restructuring of related party
debt and the issuance of a $2,000,000 convertible promissory note to
CMKXTREME.COM (also DBA CMKXTREME, Inc.), an unrelated third party.

         Our current cash on hand plus cash expected to be generated from
operations will not be sufficient to sustain our current operations and service
our outstanding debt for the next twelve months. In order to meet our short-term
cash needs, we will need to issue debt or equity securities of at least
$3,000,000 in order to service existing debt requirements and to sustain
operations until such time that we can generate positive cash flow from our
operations. If we can obtain financing to meet these short-term needs, then we
should be able to generate a positive cash flow in the long-term from the sales
generated from the machinery that would be manufactured using funds received
from the financing. In the first quarter of 2005, we have introduced our new
retail machine within the U.S. market and are taking deposits on their delivery.
Two machines were sold in February. The sale of these machines will provide
operating capital necessary to meet overhead and to buy parts for the
manufacture of additional retail machines. Glass orders are also growing as we
penetrate the promotional product industry. Additional capital will be necessary
to close on the purchase of LDI and also purchase components for the manufacture
of production machines to sell and use internally. As of March 13, 2005, we have
received a verbal commitment for the investment in capital of a minimum of
$1,000,000. This amount would be sufficient to close on the LDI purchase and
begin manufacturing machines for resale. An additional $2,000,000 would be
required during the next few months to finance the mass manufacture of equipment
for resale and pay off some operating expenses. If we can obtain this funding,
we believe we will be able to increase our revenues sufficiently to sustain and
grow our operations for the remainder of the fiscal year.

         During the year ended December 31, 2004, our financing activities
provided cash of $4,345,695, while our operating and investing activities used
cash of $3,936,800 and $198,347, respectively. The cash used in operating
activities was principally a result of the net loss we incurred. Our negative
cash flow from operations was principally funded by borrowing additional amounts
from a related party, Kevin Ryan, and the issuance of a $2,000,000 convertible
promissory note to CMKXTREME.COM.


                                       17
<PAGE>

         During the year ended December 31, 2004, we obtained $2,452,825 from
advances from a related party, Kevin Ryan, and $2,000,000 from the issuance of a
convertible promissory note to an unrelated third party, CMKXTREME.COM.

         We recently restructured all of our related party debt as follows:

   o     On July 21, 2004, we issued a convertible promissory note to Mr. John
         Woodward, our former President, in the amount of $1,824,000, which
         represents principal due on a previously issued note payable in the
         amount of $1,343,722 plus accrued interest in the amount of $480,279.
         This note bears interest at 10% per annum and calls for monthly
         interest payments from August 1, 2004 to December 1, 2004. Beginning on
         January 1, 2005, this note requires monthly principal payments of
         $50,405 plus accrued interest with any unpaid principal and interest
         due on July 1, 2007. The monthly principal and interest payments can be
         paid with shares of our common stock at the option of the holder. The
         conversion price is the lesser of the average closing price of our
         common stock five business days immediately prior to the conversion
         notice or $0.08. We have agreed to register the shares issuable upon
         conversion of this note. We have determined that there is a beneficial
         conversion feature associated with this convertible promissory note in
         the amount of $615,600. This amount will be amortized as financing
         costs over the term of the note. This note is secured by all of our
         assets, subordinated to Mr. Ryan's secured position. The note is in
         default on certain interest payments, but the default provisions have
         been waived by the holder for the next year. The effective interest
         rate on this promissory note is approximately 21%.

   o     On July 21, 2004, we issued a convertible promissory note to Mr. Kevin
         Ryan, our Chief Executive Officer, in the amount of $5,396,764, which
         represents (a) principal due on two previously issued notes payable in
         the amounts of $852,680 and $1,010,000, (b) principal due under a
         revolving credit agreement in the amount of $1,766,500, (c) principal
         due under an additional note payable in the amount of $1,500,000 and
         (d) accrued interest on the above mention obligations in the amount of
         $267,584. This note bears interest at 10% per annum and calls for
         monthly principal payments from August 1, 2004 to December 1, 2004 of
         $45,000. On the last day of the month beginning on August 31, 2004
         through November 30, 2004, the accrued interest will be added to the
         principal amount. Beginning on January 1, 2005, this note requires
         monthly principal payments of $174,584 with any unpaid principal and
         interest due on July 1, 2007. The monthly principal and interest
         payments can be paid with shares of our common stock at the option of
         the holder. The conversion price is the lesser of the average closing
         price of our common stock five business days immediately prior to the
         conversion notice or $0.08. In addition, we granted to Mr. Ryan a
         warrant to purchase 1,875,000 shares of our common stock. The exercise
         price is $0.08 per share and may be exercised by the holder at any time
         prior to July 21, 2011. The warrants also include a cashless exercise
         feature that allows the holder to pay the exercise price by
         surrendering a sufficient number of warrants to pay for the exercise
         price of the warrants being exercised as follows: warrants to be
         surrendered equals the total exercise price of warrants being exercised
         divided by the fair value of our common stock at the date of exercise.
         We have agreed to register the shares issuable upon conversion of this
         note and exercise of the warrant. In accordance with EITF 00-27, we
         first determined the value of the note and the fair value of the
         detachable warrants issued in connection with this note. The estimated
         value of the warrants of $200,625 was determined using the
         Black-Scholes option pricing model and the following assumptions: term
         of 7 years, a risk free interest rate of 3.5%, a dividend yield of 0%
         and volatility of 371%. The face amount of the note payable of
         $5,396,764 was proportionately allocated to the note and the warrants
         in the amounts of $5,203,330 and $193,434, respectively. The value of
         the note was then allocated between the note and the beneficial
         conversion feature, which amounted to $3,188,488 and $2,014,842,
         respectively. The combined total discount is $2,208,276, and is being
         amortized over the term of the note. This note is secured by all of our
         assets. The note is in default on certain principal and interest
         payments, but the default provisions have been waived by the holder for
         the next year. The effective interest rate on this promissory note is
         approximately 24%.

   o     On July 21, 2004, we issued a promissory note to Ryan Capital
         Management, Inc. (this company is controlled by Kevin Ryan) in the
         amount of $452,137, which represents principal due on a previously
         issued note payable in the amount of $400,000 plus accrued interest in
         the amount of $52,137. This note bears interest at 10% per annum and
         calls for monthly interest payments from August 1, 2004 to December 1,
         2004. Beginning on January 1, 2005, this note requires monthly
         principal payments of $37,902 plus

                                       18
<PAGE>

         accrued interest with any unpaid principal and interest due on December
         1, 2005. This note is secured by all of our assets. The note is in
         default on certain interest payments, but the default provisions have
         been waived by the holder for the next year.

   o     On August 1, 2004, we issued a promissory note to McCary & Rood (this
         company is controlled by Kevin Ryan) in the amount of $280,000, which
         represents past due consulting fees under a consulting agreement dated
         May 28, 2003. This note calls for monthly payments beginning August 1,
         2004 of $30,000 with any unpaid principal due on May 1, 2005. This note
         is secured by all of our assets. The note is in default on certain
         principal payments, but the default provisions have been waived by the
         holder for the next year.

   o     On August 1, 2004, we issued a promissory note to McCary & Rood in the
         amount of $214,037, which represents past due reimbursable expenses
         under a consulting agreement dated May 28, 2003. This note calls for
         monthly payments beginning August 1, 2004 of $30,000 with any unpaid
         principal due on March 1, 2005. This note is secured by all of our
         assets. The note is in default on certain principal payments, but the
         default provisions have been waived by the holder for the next year.

   o     On September 23, 2004, we issued a convertible promissory note to
         CMKXTREME.COM in the amount of $2,000,000. This note bears interest at
         10% per annum and calls for monthly principal payments of $83,333 plus
         accrued interest beginning November 1, 2004 with any unpaid principal
         and interest due on October 1, 2006. The monthly principal and interest
         payments can be paid with shares of our common stock at the option of
         the holder. The conversion price is the lesser of the average closing
         price of our common stock five business days immediately prior to the
         conversion notice or $0.08. In addition, we granted to CMKXTREME.COM a
         warrant to purchase 2,500,000 shares of our common stock. The exercise
         price is $0.08 per share and may be exercised by the holder at any time
         prior to September 23, 2011. The warrants also include a cashless
         exercise feature that allows the holder to pay the exercise price by
         surrendering a sufficient number of warrants to pay for the exercise
         price of the warrants being exercised as follows: warrants to be
         surrendered equals the total exercise price of warrants being exercised
         divided by the fair value of our common stock at the date of exercise.
         We have agreed to register the shares issuable upon conversion of this
         note and exercise of the warrant. In accordance with EITF 00-27, we
         first determined the value of the note and the fair value of the
         detachable warrants issued in connection with this note. The estimated
         value of the warrants of $200,000 was determined using the
         Black-Scholes option pricing model and the following assumptions: term
         of 7 years, a risk free interest rate of 3.5%, a dividend yield of 0%
         and volatility of 371%. The face amount of the convertible promissory
         note of $2,000,000 was proportionately allocated to the note and the
         warrants in the amounts of $1,818,182 and $181,818, respectively. The
         value of the note was then allocated between the note and the
         beneficial conversion feature, which amounted to $1,636,364 and
         $181,818, respectively. The combined total discount is $363,636, and is
         being amortized over the term of the note. This note is secured by all
         of our assets, subordinated to Mr. Ryan's secured position. The note is
         in default on certain principal and interest payments, but the default
         provisions have been waived by the holder for the next year. The
         effective interest rate on this promissory note is approximately 19%.

         The obligations owed to Kevin Ryan and his entities are secured by a
pledge of all our assets, under the terms of a security agreement dating back to
December 2002. Mr. Ryan obtained a Writ of Possession in May 2003, as a result
of his enforcement of the security agreement. Under the terms of a settlement
agreement reached in July 2004, we entered into the notes described above with
Mr. Ryan and his entities and agreed that these obligations would continue to be
secured by the pledge of assets contained in the security agreement. Mr. Ryan
dismissed the legal proceeding through which he obtained the Writ of Possession.
Mr. Woodward's note is also secured by the same security agreement.

         In addition, on July 21, 2004, we issued 3,019,000 shares of our common
stock to Kevin Ryan as additional consideration for the financing provided to
us. Also, certain holders of our Series A preferred stock reallocated 2,647,900
of their shares to Kevin Ryan and John Woodward and senior members of our
management team as an inducement to investors to restructure their notes and as
an inducement to management to remain with the company. We will take a charge to
financing costs and compensation expense of $2,747,011 and $409,275,
respectively, related to the issuance and reallocation of these common and
preferred shares.


                                       19
<PAGE>

PLAN OF OPERATION

         We believe that we have positioned Crystalix to become a leader in the
sub-surfaced glass etching industry, now that our reorganization is almost
complete. Our management has developed a plan of operation for 2005. In our Las
Vegas corporate headquarters, we have put into place officers and department
heads bringing various areas of expertise to design and implement our plan of
operation.

         Our sales push began in 2005 at the Promotional Product Industry
Convention, where our goal is to increase sales in the corporate and promotional
lines. The two-dimensional portrait line is growing rapidly as we have just
closed on our first Christmas season producing two-dimensional portraits for a
national portrait studio in over 900 of its stores. Entering 2005, we are in
negotiations with other national portrait studios as the two-dimensional
portrait demand continues to grow at a rapid pace.

         As a result of not marketing retail laser engraving equipment in the
United States in 2004, we have accumulated numerous inquiries for new
independent distributorships and aggressively resumed negotiations in the first
quarter of 2005 to sell the laser engraving equipment in the United States. We
expect to start delivering units with the United States market by the beginning
of the second quarter of 2005. We have a sales office in Dublin, Ireland, that
sold the new laser equipment within Europe during 2004 and intend to accelerate
that pace this year. We believe that this sales effort should have an immediate
positive impact on revenues and cash flow as early as the end of the first
quarter of 2005.

         The production facility based in Berlin, Germany, had finalized the
research and development of the new machine in 2003 and we began producing and
selling the new laser equipment in 2004. First quarter estimates are for the
production of three new machines, for which all should have a sales commitment
by April 2005. The production should then increase to five machines per month
for the second quarter, with anticipated demand for all machines within the same
quarter. We have set the same sales targets for the last two quarters of 2005.
We believe there is worldwide demand for the machines greater than current
production capacity. Accordingly, we will continue to seek outside financing to
increase production capacity while machine and glass sales continue to move us
towards financial stability and growth within the current structure.

         We plan to initiate a second phase of our independent distributors
program. For a reduced fee, we will sell a satellite laser system to a satellite
partner, consisting of a three-dimensional scanner/camera and computer
workstation. We will offer an optional sales booth and display counter. Instead
of producing the glass products at the retail location, a satellite partner
would scan a customer's facial image, e-mail the image and order information to
us, and allow us to produce the actual glass product. The satellite partner
would pay us a software-licensing fee of 10% of gross sales and a facial image
production fee. In addition, a satellite partner would have the option to
purchase corporate awards, wedding, and giftware items at wholesale prices for
resale to the public.

         We have secured direct glass suppliers in China, which should help
reduce glass and component costs. With the completion of the new laser-engraving
machine, we expect expenses to decrease in 2005 and our production efficiencies
to increase and lead to a lower cost of manufacturing the machine. Negotiations
are in progress with major component suppliers, which should result in quantity
discounts on purchases. Accordingly, we expect cost of goods sold to decrease as
a percentage of sales in both glass and machine segments.

FORWARD-LOOKING STATEMENTS

         Certain statements in this Annual Report on Form 10-KSB, as well as
statements made by the company in periodic press releases, oral statements made
by the company's officials to analysts and shareholders in the course of
presentations about the company, constitute "forward-looking statements." All
statements other than statements of historical facts included or incorporated by
reference in this report, including, without limitation, statements regarding
our future financial position, business strategy, budgets, projected costs and
plans and objectives of management for future operations, are forward-looking
statements. In addition, forward-looking statements generally can be identified
by the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "project," "estimate," "anticipate," "believe," or "continue" or the
negative thereof or variations thereon or similar terminology. Although we
believe that the expectations reflected in such forward-looking statements are


                                       20
<PAGE>

reasonable, we cannot give any assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to differ
materially from our expectations ("Cautionary Statements") include, but are not
limited to, (1) risks pertaining to implementation of our proposed expansion of
our distribution network; (2) competitive pressures in the giftware industry;
(3) disputes or claims regarding the company's proprietary rights to its
software and intellectual property; (4) acceptance of our products by corporate
customers; (5) costs of desirable retail locations; (6) availability of suitable
optic glass and laser equipment components; (7) general economic and business
conditions; (8) ability to successfully integrate acquired operations; and (9)
other factors over which we have little or no control. All subsequent written
and oral forward-looking statements attributable to us, or persons acting on our
behalf, are expressly qualified in their entirety by the cautionary statements.
We assume no duty to update or revise our forward-looking statements based on
changes in internal estimates or expectations or otherwise.


ITEM 7.  FINANCIAL STATEMENTS.

         See pages beginning with page F-1.


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

         On May 10, 2004, our directors approved the election of De Joya &
Company to audit the financial statements for the fiscal year ended December 31,
2004. Also on May 10, 2004, we dismissed the former accountants, Stonefield
Josephson, Inc. The decision to change auditors was based upon financial
considerations. Our board of directors recommended De Joya & Company. During the
two most recent fiscal years and the subsequent interim period, neither we nor
anyone on our behalf consulted De Joya & Company regarding the application of
accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that might be rendered on our financial statements. We
did not receive, and De Joya & Company did not provide, any written or oral
advice that was an important factor in reaching a decision as to an accounting,
auditing or financial reporting issue prior to its engagement by us.

         Stonefield Josephson, Inc. had audited our financial statements for
each of the last two fiscal years ended December 31, 2003. The report of
Stonefield Josephson, Inc. did not contain an adverse opinion or disclaimer of
opinion and was not modified as to uncertainty, audit scope, or accounting
principles, except as follows:

         The audit report of Stonefield Josephson, Inc. on our financial
statements as of and for the fiscal year ended December 31, 2003 contained a
separate paragraph stating:

         "The accompanying consolidated financial statements have been prepared
         assuming that the Company will continue as a going concern. As
         discussed in Note 1, the Company has incurred a net loss of $7,433,341,
         used cash for operations of $1,170,778 in the year ended December 31,
         2003, is a party to various litigation, has a stockholders' deficit of
         $3,382,628 as of December 31, 2003 and has a working capital deficit of
         $6,311,497 as of December 31, 2003. These conditions raise substantial
         doubt about the Company's ability to continue as a going concern.
         Management's plans in regard to these matters are also described in
         Note 1. The consolidated financial statements do not include any
         adjustments that might result from the outcome of this uncertainty."

         During the two most recent fiscal years and the subsequent interim
period through May 10, 2004, there were no disagreements with Stonefield
Josephson, Inc. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction of Stonefield Josephson, Inc., would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.

         There were no other "reportable events" as that term is described in
Item 304a(1)(v) of Regulation S-K occurring within our two most recent fiscal
years and the subsequent interim period ending May 10, 2004.


                                       21
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES.

         As required by SEC rules, we have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures at the end of the
period covered by this report. This evaluation was carried out under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer. Based on this
evaluation, these officers have concluded that the design and operation of our
disclosure controls and procedures are effective. There were no changes in our
internal control over financial reporting or in other factors that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

         Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.


ITEM 8B. OTHER INFORMATION.

         None.

















                                       22

<PAGE>


                                    PART III

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

DIRECTORS AND EXECUTIVE OFFICERS

         Our executive officers, directors, and key employees are:

        NAME                       AGE     POSITION

        Kevin T. Ryan               54     Chief Executive Officer and Director

        Doug Lee                    40     President

        Rainer Eissing              47     Chief Technical Officer and Director

        Robert McDermott            59     Executive Vice President, Treasurer,
                                           Chief Financial Officer and Director

        Oswaldus Van Dam            47     Director of Technical Operations,
                                           Assistant Secretary and Director

        Patty Hill                  46     Corporate Secretary, Vice President
                                           Finance and Administration and
                                           Controller

        John Lais                   49     Vice President Sales and Chief
                                           Marketing Officer

        Marc Janssens               49     Director

        John S. Woodward            52     Director

         Our shareholders elect our directors annually and our board of
directors appoints our officers annually. Vacancies in our board are filled by
the board itself. Set forth below are brief descriptions of the recent
employment and business experience of our executive officers and directors.

KEVIN T. RYAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR

         Mr. Ryan was the president of Lazer-Tek Designs from February 2002
until its acquisition by us in December 2002. He became our president and chief
executive officer and a director in July 2004 and then resigned as president in
January 2005. Since January 1998, he has served as president of Ryan Capital
Management and Charan Industries, Inc., Westbury, New York. Charan Industries,
Inc. is currently involved in construction and redevelopment, product line
development for coin-operated games and the food and beverage industry, and
special situations in hotel and marina operations. From 1992 to 1996, Mr. Ryan
was the president of Bowling Corporation of America, a subsidiary of Charan.
During that period, Charan's bowling, leisure, and gaming activities accounted
for 80% of Charan's corporate sales and had 4,000 full and part-time employees.
In 1996, Bowling Corporation of America was sold to AMF, Inc. Mr. Ryan also
serves as president of McCary & Rood, an international trading company, since
January 1999.

DOUG LEE, PRESIDENT

         In January 2005, Mr. Lee was elected as president to succeed Mr. Ryan.
Immediately prior to his election, he was our executive vice president and
director of operations. Mr. Lee joined us in December 2002, when we acquired
Lazer-Tek Designs. Mr. Lee served as executive vice president for Lazer-Tek
Designs from November 1999 to the acquisition date, where he managed operations
and directed marketing and sales. In the 1990's, he founded TD Sports, which
organized training camps sponsored by corporations in the Midwest. He is a
frequent

                                       23
<PAGE>

motivational speaker and has extensive experience in the media. Since 1988, he
has co-hosted a National Football League radio show, as well as served as color
commentator for several professional and collegiate sporting events. Mr. Lee
also served as an advisor during the National Basketball Association collective
bargaining agreement in the mid 1990's. He has been the co-owner of Springboard
Agency, a web and marketing company based in Dallas, Texas, since June 2004. Mr.
Lee was involved in professional basketball from 1988 to 2000 as a player and
consultant. He played in the National Basketball Association and several teams
in Europe, as well as Israel and Japan. He has served on several boards
including Fellowship of Christian Athletes of Nevada from 2001 to 2002, and is
currently serving a second 4-year term on the advisory council for Purdue
University. Mr. Lee attended Texas A&M University and Purdue University where he
received a BS in RHI Business with "Big Ten" Academic Honors.

RAINER EISSING, CHIEF TECHNICAL OFFICER AND DIRECTOR

         Mr. Eissing has been our executive vice president and chief technical
officer since July 2004. He previously served as chairman of the board of
directors and chief executive officer from October 2002 to July 2004. He has
been a director since October 2002. He is the developer of the 3-D software and
the laser unit used by Crystalix. Mr. Eissing founded Crystalix USA in 2001 and
Crystalix GmbH Berlin in 1997 and has served as the chief executive officer of
both companies since their inception. Mr. Eissing was a founder of EWS Rainer
Eissing, a German laser development company that has provided consulting
services to electronic manufacturers since 1994. Mr. Eissing is the holder of
four patents, including two German patents involving our technology. Mr. Eissing
received a degree in electrical engineering from the TU Institute of Electro
Technical Engineering in Berlin, Germany. Mr. Eissing has not served for any
directorships in any other reporting companies.

ROBERT MCDERMOTT, EXECUTIVE VICE PRESIDENT, TREASURER, CHIEF FINANCIAL OFFICER
AND DIRECTOR

         Mr. McDermott has been our executive vice president, treasurer, chief
financial officer, and a director since July 2004. As the chief financial
officer of Charan Industries, Inc. and/or Ryan Capital Management since April 4,
1977, he has been involved in all of the business ventures of those companies
for over 25 years. Mr. McDermott is a certified public accountant and brings
both domestic and international finance expertise to our company.

OSWALDUS ("EDGAR") VAN DAM, DIRECTOR OF TECHNICAL OPERATIONS, ASSISTANT
SECRETARY, DIRECTOR OF TECHNICAL OPERATIONS AND DIRECTOR

         Mr. Van Dam has been a director since February 2003 and the vice
president and assistant secretary since July 2004. He served as the director of
technical operations of Crystalix USA from July 2002 and now serves in that
capacity for us. In 1989, Mr. Van Dam founded Van Dam European, an automobile
dealership located in San Francisco, California. He served as its general
manager until joining Crystalix USA in 2002. Mr. Van Dam has not served as a
director for any other reporting companies.

PATTY HILL, CORPORATE SECRETARY, VICE PRESIDENT FINANCE AND ADMINISTRATION AND
CONTROLLER

Ms. Hill has been the controller of Lazer-Tek since October 2002 and became our
controller in December 2002. She became our corporate secretary and vice
president finance and administration in July 2004. From November 2000 to April
2002, she was the controller for 1st National Processing, Inc., a credit card
processing company in Las Vegas, Nevada, where she was responsible for
development, implementation, and management of internal accounting for that
company. Ms. Hill was the controller for Forefront, Inc., a multinational
software corporation in Clearwater, Florida, from January 1997 to September
2000. From July 1994 to November 1996, she was the assistant business manager
for Citicaster, Inc./WTSP-TV in St. Petersburg, Florida. From May 1986 to May
1994, she worked for companies in St. Paul, Minnesota, in management accounting.
Ms. Hill received a bachelor of science degree as an accounting major from the
University of Minnesota School of Management.


                                       24
<PAGE>


JOHN LAIS, VICE PRESIDENT SALES AND CHIEF MARKETING OFFICER

         Mr. Lais has been our vice president sales and chief marketing officer
since July 2004. He manages our sales, marketing, advertising, and licensing
efforts for our domestic and worldwide efforts. From October 2003 to July 2004,
Mr. Lais was the chief marketing officer for Lazer-Tek Designs. From July 2002
to October 2003, Mr. Lais was executive vice president of business development,
licensing and sponsorships for TicToc, a division of Omnicom Group Inc. in
Dallas, Texas. During the period from August 2001 to July 2002, Mr. Lais
provided sales and management consulting services independently in Dallas,
Texas. He was senior vice president of business development for HALO Industries,
Dallas, Texas, from February 2001 through August 2001. From June 1989 through
January 2001, he was founded and president of Image Marketing, a sales promotion
and marketing company located in Dallas, Texas. Mr. Lais received a bachelor of
science degree in kinesiology and physical education from Pepperdine University
in 1979.

MARC JANSSENS, DIRECTOR

         Mr. Janssens has been a director since October 2002. He also served as
our secretary and treasurer from October 2002 to March 2003 and our president
from March 2003 to April 2003. Mr. Janssens has served as the secretary and
treasurer of Crystalix USA since its inception in November 2001. From 1995 to
2001, Mr. Janssens served as the director of marketing and sales for Spartacus
Management Company, Inc., an advertising and promotional company in Chatsworth,
California, that manufactured promotional logo recognition products. In 1990,
Mr. Janssens founded Benchmarc Communications, Chatsworth, California, and
served as its president to 1995. Benchmarc Communications provided organization
services for US conventions and international incentive travel. From 1986 to
1990, Mr. Janssens was a sales and marketing officer for United States
Lines-International Container Transport. From 1982 to 1986, Mr. Janssens served
as an account executive for McCann-Erickson Advertising Group in Brussels, Paris
and Amsterdam, where he was responsible for advertising accounts such as BMW,
Benelux, Tupperware Europe, Van Heusen Fashions, Opel Automotive, and Proctor
and Gamble. Mr. Janssens received a bachelor's degree in marketing and
advertising sciences from the Stedelijk Instituut in Brussels, Belgium and
graduated from Antwerp Atheneum, Belgium (a three-year course), having studied
business English and business German. Mr. Janssens has not served as a director
for any other reporting companies.

JOHN S. WOODWARD, DIRECTOR

         Mr. Woodward became a director in February 2003 and served as our
president from April 2003 to July 2004. Mr. Woodward is a semi-retired estate
planning attorney, and has been licensed in California since 1980. He joined
Crystalix USA in the spring of 2002 as a partner in one of the company-owned
locations at the Forum Shops at Caesars Palace in Las Vegas, Nevada. Mr.
Woodward received a degree in psychology from the University of Southern
California and his law degree from Southwestern School of Law. He participates
on boards of many foundations and charitable organizations and consults to a
limited number of clients.

CODE OF ETHICS

         We have not yet adopted a code of ethics that applies to our principal
executive officers, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, since we have been focusing
our efforts on obtaining financing for the company. We expect to adopt a code by
the end of the current fiscal year.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires our
officers, directors, and persons who beneficially own more than 10% of our
common stock to file reports of securities ownership and changes in such
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10% beneficial owners are also required by rules
promulgated by the SEC to furnish us with copies of all Section 16(a) forms they
file.

         Based solely upon a review of the copies of such forms furnished to us,
or written representations that no Form 5 filings were required, we believe that
during the fiscal year ended December 31, 2004, there was compliance


                                       25
<PAGE>

with all Section 16(a) filing requirements applicable to our officers, directors
and greater than 10% beneficial owners except as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
REPORTING PERSON                                    DATE REPORT DUE                       DATE REPORT FILED
--------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                                    <C>
John S. Woodward                                       02/14/04                               02/24/04
--------------------------------------------------------------------------------------------------------------------
Rainer Eissing                                         04/06/04                               04/28/04
--------------------------------------------------------------------------------------------------------------------
Robert McDermott                                       07/30/04                               09/23/04
--------------------------------------------------------------------------------------------------------------------
Kevin Ryan                                             07/23/04                               09/23/04
--------------------------------------------------------------------------------------------------------------------
Kevin Ryan                                             07/30/04                               09/23/04
--------------------------------------------------------------------------------------------------------------------
Kevin Ryan                                             08/26/04                               09/23/04
--------------------------------------------------------------------------------------------------------------------
Patty Hill                                             07/30/04                               09/27/04
--------------------------------------------------------------------------------------------------------------------
Tamer Muftizade                                        07/30/04                               10/06/04
--------------------------------------------------------------------------------------------------------------------
Doug Lee                                               07/30/04                               12/17/04
--------------------------------------------------------------------------------------------------------------------
Marc Janssens                                          07/22/04                               Not filed
--------------------------------------------------------------------------------------------------------------------
Oswaldus Van Dam                                       07/22/04                               Not filed
--------------------------------------------------------------------------------------------------------------------
Rainer Eissing                                         07/22/04                               Not filed
--------------------------------------------------------------------------------------------------------------------
John S. Woodward                                       07/22/04                               Not filed
--------------------------------------------------------------------------------------------------------------------
John S. Woodward                                       08/26/04                               Not filed
--------------------------------------------------------------------------------------------------------------------
</TABLE>


ITEM 10. EXECUTIVE COMPENSATION.

         The following table sets forth information the remuneration of our
chief executive officers and our four most highly compensated executive officers
who earned in excess of $100,000 per annum during any part of our last three
fiscal years:

<TABLE>
                           SUMMARY COMPENSATION TABLE
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

                                                                          LONG TERM COMPENSATION
                                                                    -------------------------------------
                                ANNUAL COMPENSATION                         AWARDS             PAYOUTS
                   --------------------------------------------------------------------------------------
                                                         OTHER      RESTRICTED   SECURITIES
   NAME AND                                             ANNUAL        STOCK      UNDERLYING      LTIP      ALL OTHER
   PRINCIPAL       FISCAL                              COMPENSA-     AWARD(S)     OPTIONS/      PAYOUTS    COMPENSA-
   POSITION         YEAR    SALARY ($)    BONUS ($)     TION($)        ($)        SARS (#)        ($)       TION($)
-----------------------------------------------------------------------------------------------------------------------
<S>                 <C>     <C>              <C>          <C>          <C>        <C>            <C>       <C>
Kevin T. Ryan       2004        -0-          -0-          -0-          -0-          -0-          -0-          -0-
  (1)<F1>
-----------------------------------------------------------------------------------------------------------------------
John S. Woodward    2004        -0-          -0-          -0-          -0-          -0-          -0-          -0-
   President        2003    170,000 (3)<F3>  -0-          -0-          -0-          -0-          -0-          -0-
    (2) <F2>
-----------------------------------------------------------------------------------------------------------------------
 Rainer Eissing,    2004      246,450        -0-          -0-          -0-          -0-          -0-          -0-
Chief Technology    2003      189,450        -0-          -0-          -0-          -0-          -0-        -0-(4)<F4>
    Officer         2002      226,000        -0-          -0-          -0-        800,000        -0-        -0-(4)<F4>
 (5)<F5> (6)<F6>
-----------------------------------------------------------------------------------------------------------------------
Armin Van Damme,    2003      78,170         -0-          -0-          -0-          -0-          -0-        232,700
   President        2002      218,584        -0-          -0-          -0-        800,000        -0-        -0-(4)<F4>
 (6)<F6> (7)<F7>
-----------------------------------------------------------------------------------------------------------------------
 Othmar Van Dam,    2003      95,637         -0-          -0-          -0-          -0-          -0-        205,482
 Executive Vice     2002      199,885        -0-          -0-          -0-        800,000        -0-        -0-(4)<F4>
   President
(6)<F6> (7)<F7>
-----------------------------------------------------------------------------------------------------------------------
 Gary R. Moore,     2002        -0-          -0-          -0-          -0-          -0-          -0-          -0-
  President
    (8)<F8>
-----------------------------------------------------------------------------------------------------------------------
-----------------
<FN>
(1)<F1>  Mr. Ryan became our president and chief executive officer in July 2004.
(2)<F2>  Mr. Woodward was our president from April 2003 to July 2004.
(3)<F3>  We issued Mr. Woodward 340,000 shares of common stock valued at
         $170,000 for his services.
(4)<F4>  Does not include the value of a car furnished by us for use by Rainer
         Eissing, Armin Van Damme, and Othmar Van Dam.
(5)<F5>  Includes amounts paid to Mr. Eissing through his company. See "Certain
         Relationships and Related Transactions."
(6)<F6>  Such officers commenced their employment with us on October 4, 2002.
         The compensation shown includes that paid by Crystalix USA Group in
         2002.
(7)<F7>  Such officers resigned in February 2003.
(8)<F8>  Mr. Moore was the President from September 1999 to October 2002.
</FN>
</TABLE>

                                       26
<PAGE>

         Stock options granted to Armin Van Damme and Othmar Van Dam were
relinquished in 2003. Stock options granted to Rainer Eissing were cancelled in
2004. There were no stock options granted in 2003 and no options are outstanding
at December 31, 2004.

COMPENSATION OF DIRECTORS

         Directors do not receive compensation but are reimbursed for their
expenses for each meeting of the board that they attend.

STOCK OPTION PLANS

         We do not have any stock option plans at this time, but plan to adopt a
plan for our employees in the near future.


ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table provides certain information as to our officers and
directors individually and as a group, and the holders of more than 5% of our
common stock, as of March 22, 2005. Except as otherwise indicated, the persons
named in the table have sole voting and investing power with respect to all
shares of stock owned by them.

<TABLE>
                         AMOUNT OF BENEFICIAL OWNERSHIP
<CAPTION>
                                                                              TOTAL ASSUMING
    NAME AND ADDRESS OF                                CLASS A PREFERRED      CONVERSION OF           PERCENT
    BENEFICIAL OWNER (1)<F1>        COMMON STOCK              STOCK          PREFERRED STOCK       OF CLASS (2)<F2>

<S>                              <C>                     <C>                    <C>                    <C>
Kevin Ryan                       32,716,427 (3)<F3>      3,637,500 (3)<F3>      69,091,427 (3)<F3>     73.1%
3950 E. Patrick Lane                   (4)<F4>
Suite 101
Las Vegas, NV 89120

Rainer Eissing                       6,058,000               962,100            15,679,000             20.5%

John S. Woodward                   5,535,389 (4)<F4>         800,000            13,535,389             16.7%

CMKXTREME.COM (5)<F5>              8,749,895 (4)<F4>            0               8,749,895              10.3%
136 Arbor Way
Henderson, NV  89074

Marc Janssens                        2,796,000               110,000            3,896,000              5.1%

Oswaldus Van Dam                     1,631,000               200,000            3,631,000              4.8%

Robert McDermott                         0                   100,000            1,000,000              1.3%

Doug Lee                              175,000                12,500              300,000               0.4%

Patty Hill                               0                   10,000              100,000               0.1%

John Lais                                0                      0                   0                   --

All officers and directors         37,767,947 (4)<F4>       3,800,000           75,367,947             77.3%
as a group (9 persons)
------------------------

                                       27
<PAGE>
<FN>
(1)<F1>  To our knowledge, except as set forth in the footnotes to this table
         and subject to applicable community property laws, each person named in
         the table has sole voting and investment power with respect to the
         shares set forth opposite such person's name. Except as otherwise
         indicated, the address of each person beneficially owning more than 5%
         of our common stock is c/o Crystalix Group International, Inc., 5275
         South Arville, Suite B-116, Las Vegas, Nevada 89118.

(2)<F2>  Percentages are based on 37,132,192 shares of common stock outstanding
         and 3,920,000 shares of Class A preferred stock outstanding, for a
         fully diluted total of 76,332,192 shares. If a person listed on this
         table has the right to obtain additional shares of common stock within
         sixty (60) days from March 22, 2005, the additional shares are deemed
         to be outstanding for the purpose of computing the percentage of class
         owned by such person, but are not deemed to be outstanding for the
         purpose of computing the percentage of any other person.

(3)<F3>  Includes shares owned by Rainer Eissing, John W. Woodward, Marc
         Janssens, and Oswaldus Van Dam, since they have granted Ryan Capital
         Management, Inc. an irrevocable proxy to vote their shares. Ryan
         Capital Management, Inc. is owned and controlled by Kevin Ryan. The
         proxy expires upon the later of (i) December 1, 2004, or (ii) 90 days
         after repayment in full of all amounts owed by us to the bridge lender,
         Kevin Ryan (or assignee), and John S. Woodward (or assignee). Also
         includes 1,875,000 shares issuable upon exercise of a warrant.

(4)<F4>  Includes shares issuable upon payment of principal and interest on
         notes through May 22, 2005 and exercise of warrants, assuming that no
         payments of interest have been made on the notes.

(5)<F5>  Urban Casavant exercises voting and/or dispositive powers with respect
         to these shares.
</FN>
</TABLE>

         Rainer Eissing and Kevin Ryan may be deemed to be the "parents" of our
company within the meaning of the rules and regulations of the Securities and
Exchange Commission.

EQUITY COMPENSATION PLANS

         As of December 31, 2004, our equity compensation plans were as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                NUMBER OF SECURITIES TO BE    WEIGHTED AVERAGE EXERCISE
                                  ISSUED UPON EXERCISE OF       PRICE OF OUTSTANDING         NUMBER OF SECURITIES
                                   OUTSTANDING OPTIONS,         OPTIONS, WARRANTS AND       REMAINING AVAILABLE FOR
        PLAN CATEGORY               WARRANTS AND RIGHTS                RIGHTS                   FUTURE ISSUANCE
-------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                           <C>                         <C>
Equity compensation plans                  None                          N/A                         None
approved by security holders
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans not              None                          N/A                         None
approved by security holders
-------------------------------------------------------------------------------------------------------------------
Total                                      None                                                      None
-------------------------------------------------------------------------------------------------------------------
</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Other than as disclosed below, none of our present directors, officers
or principal shareholders, nor any family member of the foregoing, nor, to the
best of our information and belief, any of our former directors, senior officers
or principal shareholders, nor any family member of such former directors,
officers or principal shareholders, has or had any material interest, direct or
indirect, in any transaction, or in any proposed transaction which has
materially affected or will materially affect us.

         RAINER EISSING. During the years ended December 31, 2004 and 2003,
purchases of equipment from Entwicklungen Werbetechnik Software, a company
wholly-owned by Rainer Eissing, amounted to approximately $0


                                       28
<PAGE>

and $19,046, respectively. This related party vendor does not have any formal
agreement. Management believes that these transactions are negotiated at arm's
length. In 2003, Mr. Eissing was paid $189,450 through his company, Innovative
Motions and was paid $246,450 in 2004. We have included these amounts in the
Summary Compensation Table in "Executive Compensation" above.

         JOHN S. WOODWARD. On December 20, 2002, we borrowed $1,500,000 from
John S. Woodward. At the time of the loan, Mr. Woodward was not an officer or
director of our company. He became a director in February 2003. The note accrued
interest at the annual rate of 7-1/8% but provided for an increase in order to
maintain a 4% margin above Mr. Woodward's borrowing rate. Interest was payable
on the first day of each month, beginning January 1, 2003. The note was
originally due June 30, 2003 and secured by all of the assets and our ownership
interest in Lazer-Tek Designs, Ltd. Mr. Woodward agreed to extend his note to
January 20, 2004 in exchange for guaranteed interest. We issued a total of
1,000,000 shares of our common stock to Mr. Woodward, 660,000 of which were for
the extension of the repayment terms and 340,000 of which were for his services.

         On July 21, 2004, we issued a convertible promissory note to Mr.
Woodward in the amount of $1,824,000, which represents principal due on a
previously issued note payable in the amount of $1,343,722 plus accrued interest
in the amount of $480,279. This note bears interest at 10% per annum and calls
for monthly interest payments from August 1, 2004 to December 1, 2004. Beginning
on January 1, 2005, this note requires monthly principal payments of $50,405
plus accrued interest with any unpaid principal and interest due on July 1,
2007. The monthly principal and interest payments can be paid with shares of our
common stock at the option of the holder. The conversion price is the lesser of
the average closing price of our common stock five business days immediately
prior to the conversion notice or $0.08. We have agreed to register the shares
issuable upon conversion of this note.

         ARMIN VAN DAMME. In April 2003, we entered into an agreement with Armin
Van Damme, a former officer and director and founder of Crystalix USA Group, to
transfer the four company-owned retail locations in Las Vegas for the surrender
of all of his Class A preferred stock and common stock remaining after permitted
transfers of the common stock. As a result of this transaction, we have canceled
5,126,000 shares of common stock and 1,540,000 shares of Class A preferred stock
owned by Mr. Van Damme and removed the net book value of the assets related to
the four company-owned retail location in the amount of $237,826. In addition,
Mr. Van Damme resigned as an employee of the company and agreed to assume
liability of the lease of his automobile, which had been leased by the company,
and liability of the lease of office space at 5720 South Arville, Suite 114, Las
Vegas, Nevada. The transfer was effective as of April 28, 2003. No gain or loss
was recognized from this related party transaction. Mr. Van Damme was to pay us
a license fee of 5% of gross sales generated from the transferred locations and
agreed to purchase all supplies and equipment needed for the operation of the
locations from us at its cost plus 10%. The agreement provided for termination
by us upon 30 days' prior written notice in the event of Mr. Van Damme's failure
to make payments or submit reports on a timely basis.

         As a result of a settlement agreement with us, which was made effective
in November 2003, this agreement was declared null and void. Under the terms of
the settlement, Mr. Van Damme is to keep the locations and the equipment at the
locations. However, it is contemplated that he will replace the equipment and
arrange for his own licensing of the proprietary technology within six months.
While our equipment is in his possession, he is to pay a flat licensing and
royalty fee of $500 per month per laser. Armin Van Damme is the brother of
Oswaldus Van Dam, one of our current officers and directors.

         OTHMAR VAN DAM. In April 2003, we entered into an employment agreement
with Othmar Van Dam, a former officer and director and founder of Crystalix USA
Group. He is the brother of Oswaldus Van Dam, one of our current officers and
directors. Mr. Van Dam was to serve as our head of Marketing and Development of
Affiliate Sales Locations for a three-year term beginning April 1, 2003 at a
base salary of $120,000. In addition, Mr. Van Dam was to receive a performance
bonus equal to 5% of the gross revenues generated by the Company through its
affiliate locations. In consideration for the employment agreement, Mr. Van Dam
surrendered all of his Class A preferred stock and agreed to reduce his
ownership of common stock to 4.9%. Upon Mr. Van Dam's resignation, his
employment was terminated in May 2003. As a result of a settlement agreement
with us, which was made effective in November 2003, Othmar Van Dam relinquished
all of his stock in the company.

         KEVIN RYAN. In connection with the Lazer-Tek acquisition, we owed Kevin
Ryan, a former creditor of Lazer-Tek, the principal amount of $1,252,680,
consisting of $852,680, which was due April 1, 2003, and $400,000


                                       29
<PAGE>

owed to Kevin Ryan in quarterly payments beginning April 1, 2003 for consulting
fees. Neither of these obligations was paid. Mr. Ryan obtained a Writ of
Possession entitling him to all of our assets as of June 2, 2003.

         We entered into a consulting agreement with McCary & Rood dated May 28,
2003 under which Kevin Ryan provided advice to the President and CEO of the
company pertaining to all matters including acquisitions, management, marketing,
financial controls and other financial matters; settlement of disputes with
creditors and former officers and directors; relations with affiliates; and
other matters as may be requested by us. As compensation for the satisfactory
performance by Mr. Ryan under the agreement, we agreed to pay a fee of $20,000
per month that Mr. Ryan performed as determined by us. This agreement was
terminated effective July 31, 2004.

         In addition to the two obligations described above, through December
31, 2003, Kevin Ryan had advanced a total of $823,675 to us under a revolving
line of credit agreement dated December 1, 2003. Interest on the outstanding
balance accrued at 10% per annum and was payable monthly. On December 1, 2003,
we entered into a Secured Promissory Note with Kevin Ryan in the amount of
$1,010,000. Interest accrued on the note at 10% per annum and was payable
monthly. All principal and unpaid accrued interest under the Secured Promissory
Note is due and payable no later than December 1, 2004.

         In December 2003, Rainer Eissing, Marc Janssens, and Oswaldus Van Dam
agreed to transfer a portion of their Class A preferred stock to Kevin Ryan,
John S. Woodward, and other individuals in consideration of the continuing
financial support and involvement of Messrs. Ryan and Woodward and these other
individuals. The shares of Messrs. Eissing, Janssens, and Van Dam were
reallocated as of July 21, 2004.

         In addition, Rainer Eissing, John S. Woodward, Marc Janssens, and
Oswaldus Van Dam granted Ryan Capital Management, Inc. an irrevocable proxy to
vote their shares. Ryan Capital Management, Inc. is owned and controlled by
Kevin Ryan. The proxy expires upon the later of (i) December 1, 2004, or (ii) 90
days after repayment in full of all amounts owed by us to the bridge lender,
Kevin Ryan (or assignee), and John S. Woodward (or assignee).

         On July 21, 2004, we issued a convertible promissory note to Mr. Ryan
in the amount of $5,396,764, which represents (a) principal due on two
previously issued notes payable in the amounts of $852,680 and $1,010,000, (b)
principal due under a revolving credit agreement in the amount of $1,766,500,
(c) principal due under an additional note payable in the amount of $1,500,000
and (d) accrued interest on the above mention obligations in the amount of
$267,584. This note bears interest at 10% per annum and calls for monthly
principal payments from August 1, 2004 to December 1, 2004 of $45,000. On the
last day of the month beginning on August 31, 2004 through November 30, 2004,
the accrued interest will be added to the principal amount. Beginning on January
1, 2005, this note requires monthly principal payments of $174,584 with any
unpaid principal and interest due on July 1, 2007. The monthly principal and
interest payments can be paid with shares of our common stock at the option of
the holder. The conversion price is the lesser of the average closing price of
our common stock five business days immediately prior to the conversion notice
or $0.08. In addition, we granted to Mr. Ryan a warrant to purchase 1,875,000
shares of our common stock. The exercise price is $0.08. We have agreed to
register the shares issuable upon conversion of this note and exercise of the
warrant.

         On July 21, 2004, we issued a promissory note to Ryan Capital
Management, Inc. (this company is controlled by Kevin Ryan) in the amount of
$452,137, which represents principal due on a previously issued note payable in
the amount of $400,000 plus accrued interest in the amount of $52,137. This note
bears interest at 10% per annum and calls for monthly interest payments from
August 1, 2004 to December 1, 2004. Beginning on January 1, 2005, this note
requires monthly principal payments of $37,902 plus accrued interest with any
unpaid principal and interest due on December 1, 2005.

         On August 1, 2004, we issued a promissory note to McCary & Rood (this
company is controlled by Kevin Ryan) in the amount of $280,000, which represents
past due consulting fees under a consulting agreement dated May 28, 2003. This
note calls for monthly payments beginning August 1, 2004 of $30,000 with any
unpaid principal due on May 1, 2005.

                                       30
<PAGE>


         On August 1, 2004, we issued a promissory note to McCary & Rood in the
amount of $214,037, which represents past due reimbursable expenses under a
consulting agreement dated May 28, 2003. This note calls for monthly payments
beginning August 1, 2004 of $30,000 with any unpaid principal due on March 1,
2005.

         FUTURE TRANSACTIONS. All future affiliated transactions will be made or
entered into on terms that are no less favorable to us than those that can be
obtained from any unaffiliated third party. A majority of the independent,
disinterested members of our board of directors will approve future affiliated
transactions. We believe that of the transactions described above have been on
terms as favorable to us as could have been obtained from unaffiliated third
parties as a result of arm's length negotiations.

         CONFLICTS OF INTEREST. In accordance with the laws applicable to us,
our directors are required to act honestly and in good faith with a view to our
best interests. In the event that a conflict of interest arises at a meeting of
the board of directors, a director who has such a conflict will disclose the
nature and extent of his interest to the meeting and abstain from voting for or
against the approval of the matter in which he has a conflict.


ITEM 13. EXHIBITS.

--------------------------------------------------------------------------------
    REGULATION
    S-B NUMBER                          EXHIBIT
--------------------------------------------------------------------------------
       2.1          Stock Purchase Agreement, dated October 4, 2002, between
                    Americabilia.com, Inc. and Crystalix USA Group, Inc. (1)
--------------------------------------------------------------------------------
       2.2          Plan and Agreement of Merger dated November 12, 2002 between
                    Crystalix Group International, Inc., a Florida corporation,
                    and Crystalix Group International, Inc., a Nevada
                    corporation (2)
--------------------------------------------------------------------------------
       2.3          Common Stock Purchase Agreement, dated December 23, 2002,
                    among Crystalix Group International, Inc., Lazer-Tek
                    Designs, Inc., Lazer-Tek Designs, Ltd. and Lena Walther (3)
--------------------------------------------------------------------------------
       3.1          Articles of Incorporation of Crystalix Group International,
                    Inc. (4)
--------------------------------------------------------------------------------
       3.2          Bylaws of Americabilia.com, Inc. (5)
--------------------------------------------------------------------------------
       10.1         Form of Master Equipment Lease and Software License
                    Agreement (4)
--------------------------------------------------------------------------------
       10.2         Patent Sub-License Agreement, dated January 1, 2002, between
                    Laser Design International, LLC and Crystalix USA Group (4)
--------------------------------------------------------------------------------
       10.3         Patent Sub-License Agreement, dated February 17, 1999,
                    between Janesville Group Limited and Lazer-Tek Designs, Ltd.
                    (4)
--------------------------------------------------------------------------------
       10.4         Sub-Lease Agreement, dated December 13, 2001, among Arville
                    & Russell, LLC, Western Window & Door Company and Crystalix
                    USA Group, and amendment thereto (4)
--------------------------------------------------------------------------------
       10.5         Lease Agreement, dated April 5, 2001 between South Tech
                    Hacienda, LLC and Lazer-Tek Designs, Ltd. (4)
--------------------------------------------------------------------------------
       10.6         Promissory note to John S. Woodward dated December 20, 2002
                    (4)
--------------------------------------------------------------------------------
       10.7         Promissory note to Kevin Ryan dated December 23, 2002 (4)
--------------------------------------------------------------------------------
       10.8         Bridge Loan Agreement dated October 21, 2003 (6)
--------------------------------------------------------------------------------
       10.9         Revolving Credit Agreement dated as of December 1, 2003 with
                    Kevin Ryan (7)
--------------------------------------------------------------------------------

                                       31
<PAGE>

--------------------------------------------------------------------------------
    REGULATION
    S-B NUMBER                          EXHIBIT
--------------------------------------------------------------------------------
      10.10         Secured Promissory Note dated December 1, 2003 to Kevin Ryan
                    (7)
--------------------------------------------------------------------------------
      10.11         Consulting Agreement made as of May 28, 2003 with McCary &
                    Rood (7)
--------------------------------------------------------------------------------
      10.12         Irrevocable Proxy Coupled with an Interest granted to Ryan
                    Capital Management, Inc. dated November 26, 2003 (7)
--------------------------------------------------------------------------------
      10.13         Settlement Agreement and Release between Crystalix Group
                    International, Inc. and John S. Woodward dated July 21, 2004
                    (8)
--------------------------------------------------------------------------------
      10.14         Amended and Restated Convertible Promissory Note to John S.
                    Woodward dated July 21, 2004 (8)
--------------------------------------------------------------------------------
      10.15         Settlement Agreement and Release among Crystalix Group
                    International, Inc. Kevin T. Ryan, Ryan Capital Management,
                    Inc. and McCary & Rood dated July 21, 2004 (8)
--------------------------------------------------------------------------------
      10.16         Amended and Restated Convertible Promissory Note to Kevin T.
                    Ryan dated July 21, 2004 (8)
--------------------------------------------------------------------------------
      10.17         Promissory Note to Ryan Capital Management, Inc. dated July
                    21, 2004 (8)
--------------------------------------------------------------------------------
      10.18         Promissory Note for $280,000 to McCary & Rood dated August
                    1, 2004  (8)
--------------------------------------------------------------------------------
      10.19         Promissory Note for $214,037 to McCary & Rood dated August
                    1, 2004 (8)
--------------------------------------------------------------------------------
      10.20         Amended and Restated Warrant to Purchase Common Stock of
                    Crystalix Group International, Inc. issued to Kevin T. Ryan
--------------------------------------------------------------------------------
      10.21         Registration Rights Agreement (8)
--------------------------------------------------------------------------------
      10.22         Convertible Promissory Note to CMKXTREME.COM dated September
                    23, 2004 (9)
--------------------------------------------------------------------------------
      10.23         Amended and Restated Warrant to Purchase Common Stock issued
                    to CMKXTREME.COM
--------------------------------------------------------------------------------
       16.1         Letter from Stonefield Josephson, Inc. (10)
--------------------------------------------------------------------------------
       21.1         Subsidiaries of Crystalix Group International, Inc. (4)
--------------------------------------------------------------------------------
       31.1         Rule 13a-14(a) Certification of Chief Executive Officer
--------------------------------------------------------------------------------
       31.2         Rule 13a-14(a) Certification of Chief Financial Officer
--------------------------------------------------------------------------------
       32.1         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
                    Chief Executive Officer
--------------------------------------------------------------------------------
       32.2         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
                    Chief Financial Officer
--------------------------------------------------------------------------------

---------------------
(1)  Incorporated by reference to the exhibits to the registrant's current
     report on Form 8-K, filed October 9, 2002.
(2)  Incorporated by reference to the exhibits to the registrant's current
     report on Form 8-K, filed December 4, 2002.
(3)  Incorporated by reference to the exhibits to the registrant's current
     report on Form 8-K, filed December 30, 2002.
(4)  Incorporated by reference to the exhibits to the registrant's annual report
     on Form 10-KSB for the fiscal year ended December 31, 2002.


                                       32
<PAGE>

(5)  Incorporated by reference to the exhibits to the registrant's registration
     statement on Form 10-SB, filed March 3, 2000.
(6)  Incorporated by reference to the exhibits to the registrant's quarterly
     report on Form 10-QSB for the quarter ended September 30, 2003.
(7)  Incorporated by reference to the exhibits to the registrant's annual report
     on Form 10-KSB for the year ended December 31, 2003.
(8)  Incorporated by reference to the exhibits to the registrant's quarterly
     report on Form 10-QSB/A for the quarter ended June 30, 2004.
(9)  Incorporated by reference to the exhibits to the registrant's current
     report on Form 8-K, filed September 29, 2004.
(10) Incorporated by reference to the exhibits to the registrant's amended
     current report on Form 8-K, filed July 13, 2004.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         On May 10, 2004, we dismissed Stonefield Josephson, Inc. ("Stonefield")
as our independent public accountants. Stonefield had audited our financial
statements for the fiscal years ended December 31, 2003 and 2002. On May 10,
2004, we engaged De Joya & Company ("De Joya") to serve as our independent
public accountants for the fiscal year ending December 31, 2004.

AUDIT FEES

         For the fiscal year ended December 31, 2004, De Joya is expected to
bill approximately $95,500 for the audit of our annual financial statements and
for the review of our Form 10-QSB filings. For the fiscal year ended December
31, 2003, Stonefield billed $255,052 for the audit of our annual financial
statements and review of our Form 10-QSB filings.

AUDIT-RELATED FEES

         There were no fees billed for services reasonably related to the
performance of the audit or review of our financial statements outside of those
fees disclosed above under "Audit Fees" for fiscal years 2004 and 2003.

TAX FEES

         For the fiscal year ended December 31, 2004, DeJoya is expected to bill
approximately $0 for tax compliance, tax advice, and tax planning services. For
the fiscal year ended December 31, 2003, Stonefield billed $50,000 for such
services.

ALL OTHER FEES

         For the fiscal years ended December 31, 2004 and 2003, Stonefield
billed $0 and $18,797, respectively, in connection with the review of our
registration statement on Form SB-2 and review of our current reports on Form
8-K.

PRE-APPROVAL POLICIES AND PROCEDURES

         Prior to engaging our accountants to perform a particular service, our
audit committee obtains an estimate for the service to be performed. The audit
committee in accordance with procedures for the company approved all of the
services described above.



                                       33

<PAGE>


                                   SIGNATURES

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

                                       CRYSTALIX GROUP INTERNATIONAL, INC.



Date:   April 14, 2005                 By:  /s/ KEVIN T. RYAN
                                          --------------------------------------
                                          Kevin T. Ryan, Chief Executive 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.

<TABLE>
<CAPTION>
SIGNATURE                                TITLE                                          DATE
<S>                                      <C>                                            <C>

/s/ KEVIN T. RYAN                         Chief Executive Officer and Director
---------------------------------        (Principal Executive Officer)                  April 14, 2005
Kevin T. Ryan
                                         Executive Vice President, Treasurer, Chief
/s/ ROBERT MCDERMOTT                     Financial Officer, and Director (Principal
---------------------------------        Financial Officer)                             April 14, 2005
Robert McDermott
                                         Corporate Secretary, Vice President Finance
/s/ PATTY HILL                           and Administration and Controller (Principal
---------------------------------        Accounting Officer)                            April 14, 2005
Patty Hill

                                         Executive Vice President, Chief Technical
---------------------------------        Officer and Director                           April __, 2005
Rainer Eissing

                                         Vice President, Assistant Secretary, Director
/s/ OSWALDUS VAN DAM                     of Technical Operations and Director           April 14, 2005
---------------------------------
Oswaldus Van Dam


---------------------------------        Director                                       April __, 2005
Marc Janssens


/s/ JOHN S. WOODWARD                     Director                                       April 14, 2005
---------------------------------
John S. Woodward

</TABLE>


<PAGE>



              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



<TABLE>
                                    CONTENTS
<CAPTION>

                                                                                       Page
<S>                                                                                     <C>

Reports of Independent Registered Public Accounting Firms:

     Report on Audited Consolidated Financial Statements for 2004                       F-1

     Report on Audited Consolidated Financial Statements for 2003                       F-2

Financial Statements:

     Consolidated Balance Sheet as of December 31, 2004                                 F-3

     Consolidated Statements of Operations for the years ended
            December 31, 2004 and 2003                                                  F-4

     Consolidated Statements of Comprehensive Loss for the years ended
            December 31, 2004 and 2003                                                  F-5

     Consolidated Statement of Stockholders' Deficit for the years ended
          December 31, 2004 and 2003                                                    F-6

     Consolidated Statements of Cash Flows for the years ended
            December 31, 2004 and 2003                                                  F-7

     Notes to Consolidated Financial Statements                                         F-8

</TABLE>





<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To The Board of Directors and Stockholders of
Crystalix Group International, Inc.
Las Vegas, Nevada

We have audited the accompanying  consolidated  balance sheet of Crystalix Group
International,  Inc. and  Subsidiaries  as of December 31, 2004, and the related
consolidated statements of operations, comprehensive loss, stockholders' deficit
and cash flows for the year then ended. These consolidated  financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Crystalix Group  International,  Inc. and  Subsidiaries as of December 31, 2004,
and the  consolidated  results of their  operations  and cash flows for the year
then ended, in conformity with accounting  principles  generally accepted in the
United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in Note 1, the
Company  has  incurred a net loss of  $8,302,578,  used cash for  operations  of
$3,936,800 for the year ended  December 31, 2004, has an accumulated  deficit of
$16,045,562  as of  December  31,  2004 and has a  working  capital  deficit  of
$4,262,946 as of December 31, 2004.  These conditions  raise  substantial  doubt
about the Company's ability to continue as a going concern.  Management's  plans
in  regard  to these  matters  are also  described  in Note 1. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



/s/ DeJoya & Company
CERTIFIED PUBLIC ACCOUNTANTS

Henderson, Nevada
March 18, 2005


                                      F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To The Board of Directors and Stockholders of
Crystalix Group International, Inc.
Las Vegas, Nevada

We  have  audited  the  accompanying   consolidated  statements  of  operations,
comprehensive  loss,  stockholders'  deficit  and cash  flows for the year ended
December 31, 2003 of Crystalix Group International, Inc. and Subsidiaries. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows of Crystalix Group International,  Inc. and Subsidiaries for the year
ended  December 31, 2003, in conformity  with  accounting  principles  generally
accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in Note 1, the
Company  has  incurred a net loss of  $7,433,341,  used cash for  operations  of
$1,170,778 for  the  year  ended  December  31,  2003,  is a  party  to  various
litigation,  has a  stockholders'  deficit of $3,382,628 as of December 31, 2003
and has a working capital  deficit of $6,311,497 as of December 31, 2003.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 1. The consolidated  financial statements do not include any adjustments
that might result from the outcome of this uncertainty.



/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS

Santa Monica, California
February 27, 2004





                                      F-2
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                                 DECEMBER
                                                                                                 31, 2004
                                                                                          -------------------
<S>                                                                                       <C>
                                     ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                                               $          270,024
   Accounts receivable, net of allowance of $334,000                                                  439,633
   Inventory                                                                                        1,069,003
   Other current assets                                                                               227,760

                                                                                           -------------------
TOTAL CURRENT ASSETS                                                                                2,006,420
                                                                                           -------------------

PROPERTY AND EQUIPMENT, net (including equipment
   acquired from related party of $2,300,000 in 2002)                                               1,890,175

INTANGIBLE ASSETS
   Licenses and related costs, net of accumulated amortization of $536,760                          1,353,141
   Capitalized software costs, net of accumulated amortization of $28,627                              18,217
   Customer lists and relationships, net of accumulated amortization of $45,000                        67,500
   Artwork library, net of accumulated amortization of  $597,330                                      298,665
   Tradename and trademark, net of accumulated amortization of $6,288                                   9,431
                                                                                           -------------------
                                                                                                    1,746,954
                                                                                           -------------------

OTHER ASSETS                                                                                            6,004

                                                                                           -------------------
TOTAL ASSETS                                                                               $        5,649,553
                                                                                           ===================


                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable and accrued expenses ($363,362 to related parties)                      $        1,527,826
   Customer deposits                                                                                    23,421
   Notes payable (including $2,763,675 to related parties), net of discounts of $1,107,911           3,749,793
   Current portion of deferred revenue                                                                 968,326

                                                                                            -------------------
TOTAL CURRENT LIABILITIES                                                                            6,269,366
                                                                                            -------------------

NOTES PAYABLE, net of current portion (including $2,917,564 to related parties),
   net of discounts of $1,618,785                                                                    3,600,449
DEFERRED REVENUE, less current portion                                                               1,193,325

                                                                                            -------------------
TOTAL LIABILITIES                                                                                   11,063,140
                                                                                            -------------------

COMMITMENTS AND CONTINGENCIES                                                                              -

STOCKHOLDERS' DEFICIT
   Preferred stock - Class A, $0.001 par value; 10,000,000 shares
     authorized; 3,920,000 Class A shares issued and outstanding                                         3,920
   Common stock; $0.001 par value; 300,000,000 shares
     authorized; 37,132,192 shares issued and outstanding                                               37,132
   Additional paid-in capital                                                                       10,705,413
   Other comprehensive loss - foreign currency translation                                            (114,490)
   Accumulated deficit                                                                             (16,045,562)

                                                                                            -------------------
TOTAL STOCKHOLDERS' DEFICIT                                                                         (5,413,587)
                                                                                            -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                 $        5,649,553
                                                                                            ===================

</TABLE>
       The accompanying notes are an integral part of these consolidated
                              financial statements

                                     F - 3
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                     YEARS ENDED
                                                            ------------------------------
                                                               December          December
                                                               31, 2004          31, 2003
                                                            --------------    --------------
<S>                                                        <C>               <C>
REVENUE
    Product sales                                          $    3,398,384    $    4,233,846
    Lease revenue                                               1,124,537         1,739,538
    Royalty revenue                                               105,753           391,121
                                                           ---------------   ---------------
TOTAL REVENUE                                                   4,628,674         6,364,505
                                                           ---------------   ---------------

COST OF REVENUE
    Product sales                                               1,642,855         2,719,153
    Lease revenue                                                 415,809           730,490
    Royalty revenue                                                61,116           403,064
                                                           ---------------   ---------------
TOTAL COST OF REVENUE                                           2,119,780         3,852,707
                                                           ---------------   ---------------

                                                           ---------------   ---------------
GROSS PROFIT                                                    2,508,894         2,511,798
                                                           ---------------   ---------------

OPERATING EXPENSES
    Research and development                                          -             397,067
    Payroll and related benefits                                1,934,620         2,525,318
    General and administrative                                  4,376,563         5,187,854
    Impairment expense                                            212,215           399,113
                                                           ---------------   ---------------
TOTAL OPERATING EXPENSES                                        6,523,398         8,509,352
                                                           ---------------   ---------------

LOSS FROM OPERATIONS                                           (4,014,504)       (5,997,554)
                                                           ---------------   ---------------

OTHER INCOME (EXPENSES):
    Write off of advances to Vitro Laser GmbH                         -            (500,000)
    Other expense, net                                             22,500           (27,309)
    Amortization of debt discounts                               (460,816)              -
    Interest expense and financing costs
      ($3,797,155 to related parties)                          (3,849,758)         (908,478)
                                                           ---------------   ---------------
TOTAL OTHER INCOME (EXPENSE)                                   (4,288,074)       (1,435,787)
                                                           ---------------   ---------------

LOSS BEFORE PROVISION FOR INCOME TAXES                         (8,302,578)       (7,433,341)

PROVISION FOR INCOME TAXES
    Current                                                           -             550,000
    Deferred                                                          -            (550,000)
                                                           ---------------   ---------------

NET LOSS                                                   $   (8,302,578)   $   (7,433,341)
                                                           ===============   ===============

NET LOSS PER SHARE - BASIC AND DILUTED                     $        (0.23)   $        (0.19)
                                                           ===============   ===============

WEIGHTED AVERAGE COMMON EQUIVALENT
    SHARES OUTSTANDING - BASIC AND DILUTED                      35,441,222       39,340,124
                                                           ===============   ===============
</TABLE>
        The accompanying notes are an integral part of these consolidated
                              financial statements

                                     F - 4
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


                                                          YEARS ENDED
                                            ------------------------------------
                                                 December            December
                                                 31, 2004            31, 2003
                                            ----------------    ----------------

NET LOSS                                    $    (8,302,578)    $    (7,433,341)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT             (72,179)            (41,416)
                                            ----------------    ----------------

COMPREHENSIVE LOSS                          $    (8,374,757)    $    (7,474,757)
                                            ================    ================


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




                                     F - 5



<PAGE>

              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


<TABLE>
<CAPTION>
                                                  PREFERRED STOCK                                     ADDITIONAL       OTHER
                                                      CLASS A                 COMMON STOCK             PAID-IN     COMPREHENSIVE
                                                SHARES       AMOUNT        SHARES       AMOUNT         CAPITAL         LOSS
                                          ------------------------------------------------------------------------------------------
<S>                                          <C>          <C>           <C>           <C>           <C>             <C>

BALANCE, DECEMBER 31, 2002                    7,000,000   $    7,000     39,995,192   $    39,995   $  2,671,105    $     (895)

Sale of shares through private placement
     offering                                                             1,120,000         1,120        258,880
Shares issued for financing costs                                           660,000           660        527,340
Shares issued for services                                                2,590,000         2,590      1,342,410
Exchange of shares with former officers
   for Company assets (at cost carryover
  basis)                                    (3,080,000)      (3,080)    (10,252,000)      (10,252)      (435,101)
Foreign currency translation adjustment                                                                                 (41,416)
Net loss
                                          ---------------------------- ---------------------------  --------------------------------
BALANCE, DECEMBER 31, 2003                   3,920,000        3,920      34,113,192        34,113      4,364,634        (42,311)

Shares issued for financing costs                                         3,019,000         3,019        320,014
Value of Class A Preferred Stock re-allocated
  to investors and senior management                                                                   2,833,253
Value of beneficial conversion feature and
  value of warrants issued in connection
  with convertible notes payable                                                                       3,187,512
Foreign currency translation adjustment                                                                                 (72,179)
Net loss

                                          ---------------------------- ---------------------------  --------------------------------
BALANCE, DECEMBER 31, 2004                   3,920,000   $    3,920      37,132,192   $    37,132   $ 10,705,413    $  (114,490)
                                          ============================ ===========================  ================================



<CAPTION>

                                               ACCUMULATED
                                                 DEFICIT        TOTAL
                                            ------------------------------
<S>                                         <C>             <C>

BALANCE, DECEMBER 31, 2002                  $   (309,643)   $  2,407,562

Sale of shares through private placement
     offering                                                    260,000
Shares issued for financing costs                                528,000
Shares issued for services                                     1,345,000
Exchange of shares with former officers
   for Company assets (at cost carryover
  basis)                                                        (448,433)
Foreign currency translation adjustment                          (41,416)
Net loss                                      (7,433,341)     (7,433,341)
                                            ------------------------------
BALANCE, DECEMBER 31, 2003                     (7,742,984)    (3,382,628)

Shares issued for financing costs                                323,033
Value of Class A Preferred Stock re-allocated
  to investors and senior management                           2,833,253
Value of beneficial conversion feature and
  value of warrants issued in connection
  with convertible notes payable                               3,187,512
Foreign currency translation adjustment                          (72,179)
Net loss                                       (8,302,578)    (8,302,578)

                                            ------------------------------
BALANCE, DECEMBER 31, 2004                 $(16,045,562)   $ (5,413,587)
                                            ===============================

</TABLE>

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

                                     F - 6
<PAGE>

                      CRYSTALIX GROUP INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                            YEARS ENDED
                                                               -------------------------------------
                                                                    DECEMBER           December
                                                                   31, 2004            31, 2003
                                                               -----------------  ------------------
<S>                                                            <C>                  <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net loss                                                     $      (8,302,578)   $    (7,433,341)
  Adjustment to reconcile net loss to net cash
   used in operating activities
    Depreciation and amortization                                      1,101,181          1,296,786
    Provision for doubtful accounts                                       74,000            156,819
    Common stock issued and reallocation of Series A                   2,747,011            528,000
    preferred stock for financing costs
    Common stock issued and reallocation of Series A                     409,275          1,345,000
    preferred stock for services
    Amortization of debt discounts                                       460,816                -
    Exchange gain                                                        (72,774)           (45,321)
    (Gain) loss on disposal of fixed assets                               (1,973)           243,893
    Write off of deferred offering costs                                     -              212,797
    Write off of advances to Vitro Laser, Gmbh                               -              500,000
    Write down of intangible assets                                      212,215            155,220
  Changes in operating assets and liabilities:
  (Increase) decrease in:
   Accounts receivable                                                   (54,580)           234,266
   Inventory                                                            (316,990)           508,696
   Other current assets                                                 (203,646)           166,622
   Deposits                                                                4,269            (10,273)
  Increase (decrease) in:
   Accounts payable and accrued expenses                               1,060,768            991,733
   Customer deposits                                                     (57,267)          (290,276)
   Deferred revenue                                                     (996,527)           268,601
                                                                -----------------    ---------------
Net cash used in operating activities                                 (3,936,800)        (1,170,778)
                                                                -----------------    ---------------

CASH FLOW FROM INVESTING ACTIVITIES:
  Advances to acquire Vitro Laser, Gmbh                                      -             (300,000)
  Payment to repurchase laser                                            (39,006)               -
  Payments to acquire property and equipment                            (159,341)        (1,390,947)
                                                                -----------------    ---------------
Net cash used in investing activities                                   (198,347)        (1,690,947)
                                                                -----------------    ---------------

CASH FLOW FROM FINANCING ACTIVITIES:
  Net advances from related party                                      2,452,825            823,675
  Proceeds from issuance of notes payable                              2,000,000                -
  Proceeds from issuance of notes payable - related parties                  -            1,010,000
  Payments on notes payable                                               (3,600)           (16,754)
  Payments on notes payable - related parties                           (103,530)          (152,748)
  Payments for deferred offering costs                                       -             (136,797)
  Proceeds from sale on common stock, including stock                        -              748,000
  subscription receivable
                                                                -----------------    ---------------
Net cash provided by financing activities                              4,345,695          2,275,376
                                                                -----------------    ---------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                 595              3,905
                                                                -----------------    ---------------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                       211,143           (582,444)

CASH AND CASH EQUIVALENTS, Beginning of year                              58,881            641,325
                                                                -----------------    ---------------

CASH AND CASH EQUIVALENTS, End of year                         $         270,024    $        58,881
                                                                =================    ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Interest Paid                                                $             -      $         4,023
                                                                =================    ===============
  Income taxes paid                                            $             -      $           -
                                                                =================    ===============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
  ACTIVITIES
  Exchange of net assets to acquire common and Series A
    preferred stock from former officer                        $             -      $       448,433
                                                               ==================   ================
  Discounts on convertible notes payable                       $       3,187,512    $           -
                                                               ==================   ================
  Payments on notes payable from sale of vehicles              $          85,499    $           -
                                                               ==================   ================
</TABLE>
        The accompanying notes are an integral part of these consolidated
                              financial statements

                                      F - 7
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION

         Crystalix Group International,  Inc. (formerly Americabilia.com,  Inc.)
         was  incorporated  under the laws of the State of Florida on August 22,
         1989 as a C-Corporation.  Pursuant to a Stock Purchase  Agreement dated
         October  4,  2002  between  Crystalix  USA  Group,  Inc.  ("CUSA")  and
         Americabilia.com,  Inc.  ("ABIL"),  and a Technology  License Agreement
         between  Crystalix  USA Group,  Inc.  and  Crystalix  Technology,  Inc.
         ("CTI"),  also dated October 4, 2002, the former  shareholders  of CUSA
         and CTI acquired 23,300,000 newly issued shares of common stock of ABIL
         and  7,000,000  shares of ABIL's  Class A preferred  stock with 10 to 1
         limited voting and conversion  rights only. At the date of consummation
         of  these  transactions,   these  shareholders  effectively  controlled
         approximately  77.6% of the issued and outstanding common stock of ABIL
         and  93.7%  of the  voting  control  and  ownership  of  ABIL  assuming
         conversion of the Class A preferred  shares.  Since the shareholders of
         CUSA obtained  control of ABIL,  according to FASB  Statement No. 141 -
         "Business  Combinations,"  this  acquisition  has  been  treated  as  a
         recapitalization  for  accounting  purposes,  in a  manner  similar  to
         reverse acquisition accounting. In accounting for this transaction:

            o     CUSA  is  deemed to be the purchaser and surviving company for
                  accounting  purposes. Accordingly, its net assets are included
                  in the balance  sheet  at their historical book values and the
                  results of operations  of  CUSA  have  been  presented for the
                  comparative  prior  period.  The  statement  of  stockholder's
                  deficit  is that of  CUSA with  an  increase in the  number of
                  shares  outstanding  of  6,669,192 that  represents the shares
                  retained by the ABIL stockholders;

            o     Control of  the  net assets  and business of ABIL was acquired
                  effective October 4, 2002. This transaction has been accounted
                  for as a purchase of the  assets  and  liabilities  of ABIL by
                  CUSA.  The  historical  cost  of  the  net assets acquired was
                  $5,000.

         Effective  November  22,  2002,  the ABIL changed its name to Crystalix
         Group  International,  Inc.  On  November  26,  2002,  ABIL merged with
         Crystalix Group International,  Inc., a Nevada corporation, in a merger
         solely for the purpose of redomicile.

         BASIS OF PRESENTATION

         The accompanying  consolidated  financial statements have been prepared
         in conformity  with  accounting  principles  generally  accepted in the
         United States of America, which contemplate continuation of the Company
         as a going concern.  The Company incurred a net loss for the year ended
         December 31, 2004 of $8,302,578,  used cash for operating activities of
         $3,936,800  for the year ended  December  31, 2004 and at December  31,
         2004, had an accumulated  deficit of $16,045,562  and a working capital
         deficit of  $4,262,946.  In addition,  the Company is in default on the
         payment of certain note payable  obligations.  These  conditions  raise
         substantial  doubt as to the  Company's  ability to continue as a going
         concern.  These  consolidated  financial  statements do not include any
         adjustments  that might  result from the  outcome of this  uncertainty.
         These consolidated  financial statements do not include any adjustments
         relating to the  recoverability  and  classification  of recorded asset
         amounts,  or amounts and  classification  of liabilities  that might be
         necessary should the Company be unable to continue as a going concern.

                                      F-8
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         The Company plans to take the following  steps that it believes will be
         sufficient  to provide  the  Company  with the  ability to  continue in
         existence.  The Company has recently  re-negotiated the repayment terms
         of certain  debt and has issued a  convertible  promissory  note in the
         amount of $2,000,000  to an unrelated  third party.  In July 2004,  the
         Company has changed its senior  management  by naming Mr. Kevin Ryan as
         Chief  Executive  Officer and Mr. Robert  McDermott as Chief  Financial
         Officer  and  believes  that the new  management  team  will be able to
         achieve profitable  operations,  but there can be no assurance that the
         Company will be able to raise sufficient  capital and generate positive
         cash flows from operations sufficient to sustain operations.

         During the year ended  December 31, 2004 the Company has  significantly
         reduced its  overhead  expenses  while  maintaining  its  manufacturing
         facilities  and  equipment.  The Company has  eliminated  non  critical
         personnel and  expenditures,  frozen wages and marketing  expenditures,
         reduced travel and  renegotiated  leases.  The Company  believes it can
         grow revenues during the next 12 months without a significant  increase
         to  overhead.  The  Company  has  already  begun  selling its new laser
         machinery  and has the  current  capacity  to  produce  up to 36  units
         without  any  increases  in  overhead.  The  Company  also has  several
         internal  machines  currently  operating under capacity that will allow
         the Company to increase  sales of imaged glass with a minimal  increase
         in overhead  expenses.  The Company also believes the impending  patent
         litigation against the alleged infringers will increase its revenues as
         violators leave the industry and reduce competition.

         PRINCIPLES OF CONSOLIDATION

         The accompanying consolidated financial statements include the accounts
         of  Crystalix  Group  International,  Inc.  and its wholly  owned legal
         subsidiaries,  Crystalix USA Group,  Inc.,  Crystalix  Imaging  Limited
         (incorporated on October 24, 2002 in Ireland d.b.a.  Crystalix Europe),
         Lazer-Tek  Designs,  Inc. and Lazer-Tek  Designs Ltd  (collectively the
         "Company").  The accompanying  consolidated  financial  statements have
         been  prepared  in  accordance  with  accounting  principles  generally
         accepted in the United  States of America.  All material  inter-company
         accounts and transactions have been eliminated in consolidation.

         LINES OF BUSINESS

         The Company  assembles and leases its LaserMark II equipment,  together
         with its licensed laser  inscription  technology,  to  individuals  and
         privately held businesses throughout the United States.

         Lazer-Tek designs, manufactures and sells laser inscribed gift crystals
         to privately  held  businesses and corporate  customers  throughout the
         United States.

         STOCK BASED COMPENSATION

         SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  establishes
         and encourages the use of the fair value based method of accounting for
         stock-based compensation  arrangements under which compensation cost is
         determined using the fair value of stock-based  compensation determined
         as of the date of grant and is recognized over the periods in which the
         related services are rendered.  The statement also permits companies to
         elect to continue using the current  intrinsic value accounting  method
         specified  in  Accounting  Principles  Board  ("APB")  Opinion  No. 25,


                                      F-9
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

         "Accounting  for Stock Issued to Employees," to account for stock-based
         compensation.  The Company has elected to use the intrinsic value based
         method and has  disclosed  the pro forma effect of using the fair value
         based method to account for its stock-based  compensation.  The Company
         uses the fair value method for options  granted to  non-employees.  For
         the years  ended  December  31,  2004 and 2003,  there  were no options
         granted to employees of the Company.

         USE OF ESTIMATES

         The preparation of consolidated financial statements in conformity with
         accounting  principles  generally  accepted  in the  United  States  of
         America  requires  management to make  estimates and  assumptions  that
         affect the reported  amounts of assets and  liabilities and disclosures
         of contingent  assets and  liabilities at the date of the  consolidated
         financial  statements and the reported  amounts of revenue and expenses
         during the reporting periods. As of December 31, 2004, the Company used
         estimates in determining  the  realization of its accounts  receivable,
         inventory,  its intangible  assets,  accrued  expenses and the value of
         equity  instruments,  including  common stock and  warrants  issued for
         compensation  expense and financing costs.  Actual results could differ
         from these estimates.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         For certain of the Company's  financial  instruments,  including  cash,
         accounts receivable,  inventory, other current assets, accounts payable
         and accrued  expenses,  and customer  deposits,  the  carrying  amounts
         approximate fair value due to their short maturities. The amounts shown
         for notes and loans payable also approximate fair value because current
         interest  rates and terms  offered to the Company for similar  debt are
         substantially the same.

         CASH AND CASH EQUIVALENTS

         For purposes of the statements of cash flows,  the Company defines cash
         equivalents  as all highly  liquid debt  instruments  purchased  with a
         maturity of three months or less, plus all certificates of deposit.

         CONCENTRATION OF CREDIT RISK

         Financial  instruments,   which  potentially  subject  the  Company  to
         concentrations   of  credit   risk,   consist  of  cash  and   accounts
         receivables.  The Company  places its cash with high quality  financial
         institutions and at times may exceed the FDIC $100,000 insurance limit.
         The Company  extends  credit based on an evaluation  of the  customer's
         financial condition,  generally without collateral.  Exposure to losses
         on receivables is principally  dependent on each  customer's  financial
         condition.  The Company  monitors its  exposure  for credit  losses and
         maintains  allowances for anticipated losses, as required.  The Company
         is currently in negotiations  with existing  distributors over disputes
         regarding  amount owed to the Company for purchases of crystal  blocks.
         Most of these  amounts in  disputed  arose prior to the  Company's  new
         management  team taking over the operations of the Company.  Since most
         of these  amounts  are 1 to 2 years old,  the  Company  has deemed them
         uncollectible  and  has  established  an  allowance  for  uncollectible
         accounts.   The  Company  regularly  reviews  its  accounts  receivable
         balances  for   collectibility   and   establishes   an  allowance  for
         uncollectible  accounts.  During the years ended  December 31, 2004 and
         2003, the Company recognized $74,000 and $156,819, respectively, in bad
         debt expense.


                                      F-10
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         INVENTORY

         Inventory,  consisting  primarily  of solid  blank glass  cubes,  laser
         inscribed gift crystals and related  accessories  and electronic  parts
         and accessories, are valued at the lower of cost (first-in,  first-out)
         or market.

         PROPERTY AND EQUIPMENT

         Property  and   equipment   consisting  of   improvements,   machinery,
         equipment,  computers, furniture and fixtures are recorded at cost, and
         are  depreciated  using the  straight-line  method over their estimated
         useful lives.  Expenditures  for maintenance and repairs are charged to
         earnings  as  incurred;   additions,   renewals  and   betterments  are
         capitalized.  When  property  and  equipment  are retired or  otherwise
         disposed of, the related cost and accumulated  depreciation are removed
         from  the  respective  accounts,  and any gain or loss is  included  in
         operations. A summary of the estimated useful lives is as follows:

                 DESCRIPTION                       USEFUL LIFE

             Machinery and equipment                 5-7 years
             Vehicles                                  5 years
             Furniture and fixtures                    5 years
             Computers and software                  3-5 years


         IMPAIRMENT OF LONG-LIVED ASSETS

         In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for
         Impairment or Disposal of Long-Lived Assets", which supersedes SFAS No.
         121,  "Accounting  for the  Impairment  of  Long-Lived  Assets  and for
         Long-Lived  Assets to Be Disposed Of", and the accounting and reporting
         provision   of  APB   Opinion   No.   30,"Reporting   the   Results  of
         Operations-Reporting  the  Effects  of  Disposal  of  a  Segment  of  a
         Business, and Extraordinary,  Unusual and Infrequently Occurring Events
         and  Transactions",  for the disposal of a segment of a business.  This
         statement also amends ARB No. 51, "Consolidated  Financial Statements",
         to eliminate the exception to consolidation  for a subsidiary for which
         control is likely to be impaired. SFAS No. 144 requires that long-lived
         assets  to be  disposed  of by sale,  including  those of  discontinued
         operations,  be measured at the lower of carrying  amount or fair value
         less cost to sell,  whether  reported in  continuing  operations  or in
         discontinued  operations.  SFAS  No.  144  broadens  the  reporting  of
         discontinued  operations  to include all  components  of an entity with
         operations  that can be  distinguished  from the rest of the entity and
         that will be eliminated from the ongoing  operations of the entity in a
         disposal  transaction.  SFAS No. 144 also establishes a "primary-asset"
         approach to determine  the cash flow  estimation  period for a group of
         assets and  liabilities  that  represents  the unit of accounting for a
         long-lived asset to be held and used. The Company's  adoption effective
         January  1,  2002  did not  have a  material  impact  to the  Company's
         financial position or results of operations.

                                      F-11
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         INTANGIBLE ASSETS

         Intangible  assets consist of product and laser  licenses,  capitalized
         software  costs,  website  development  costs,  artwork and copyrights,
         trademarks,  trade names,  customer  lists and  relationships  and were
         mostly acquired with the purchase of Laser-Tek. In accordance with SFAS
         No. 142, "Goodwill and Other Intangible  Assets," the Company evaluates
         intangible assets and other long-lived assets for impairment,  at least
         on an annual  basis and  whenever  events or changes  in  circumstances
         indicate  that  the  carrying  value  may not be  recoverable  from its
         estimated future cash flows.  Recoverability  of intangible  assets and
         other  long-lived  assets is measured by comparing their net book value
         to the related  projected  undiscounted  cash flows from these  assets,
         considering  a number of  factors  including  past  operating  results,
         budgets,  economic  projections,  market trends and product development
         cycles.  If the  net  book  value  of the  asset  exceeds  the  related
         undiscounted cash flows, the asset is considered impaired, and a second
         test  is   performed  to  measure  the  amount  of   impairment   loss.
         Amortization  is  computed  using  the  straight-line  method  over the
         estimated useful life of the assets (3-10 years) as follows:

                                                           USEFUL LIFE
               Licenses and related costs                    10 years
               Artwork library                                3 years
               Customer lists and relationships               5 years
               Trade name and trademark                       5 years

         For the years ended December 31, 2004 and 2003, the Company  recognized
         an  impairment  loss on  intangible  assets of $212,215  and  $155,220,
         respectively,   which  is  included  in   impairment   expense  in  the
         accompanying consolidated statement of operations. Amortization expense
         amounted to $662,430 and $689,745 for the years ended December 31, 2004
         and  2003,  respectively.  Amortization  expense  for the  years  ended
         December  31,  2005,  2006,  2007,  2008  and 2009 is  estimated  to be
         $519,104, $207,426, $197,524, $164,580 and $164,580, respectively.

         WEBSITE DEVELOPMENT COSTS

         The Company  accounts for the costs of computer  software  developed or
         obtained  for  internal  use in  accordance  with EITF 00-2 -  "WEBSITE
         COSTS" and  Statement of Position  98-1,  "ACCOUNTING  FOR THE COSTS OF
         COMPUTER SOFTWARE  DEVELOPED OR OBTAINED FOR INTERNAL USE." The Company
         capitalizes   costs  of   materials,   consultants,   and  payroll  and
         payroll-related costs for employees incurred in developing internal-use
         computer  software.  Amortization  is computed using the  straight-line
         method over the  estimated  useful  life of the asset (3 years).  Costs
         incurred during the preliminary project and post-implementation  stages
         are charged to research and development expense.

         CAPITALIZED SOFTWARE COSTS

         The Company  capitalizes  costs incurred for the production of computer
         software that generates the  functionality  within its laser  equipment
         units.  Capitalized costs include direct labor and related overhead for
         software  produced by the  Company  and the cost of software  purchased
         from third  parties.  All costs in the  software  development  process,
         which are  classified  as research  and  development,  are  expensed as
         incurred until technological feasibility has been established ("beta").
         Once  technological  feasibility has been  established,  such costs are
         capitalized  until the  software  has  completed  beta  testing  and is
         available for mass-marketing.  Amortization, a cost of revenue, will be
         provided on a product-by-product basis, using the straight-line method,
         not to


                                      F-12

<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         exceed  three  years,  commencing  the month  after the date of product
         release.  Quarterly,  the Company  reviews and expenses the unamortized
         cost of any feature  identified  as being  impaired.  The Company  also
         reviews  recoverability  of the total  unamortized cost of all features
         and  software  products in relation to  estimated  service and relevant
         cash flows from  revenues  and, when  necessary,  makes an  appropriate
         adjustment to net realizable value.  Amortization is computed using the
         straight-line  method  over the  estimated  useful life of the asset (3
         years).

         REVENUE RECOGNITION

         LEASE REVENUE
         The  Company  enters  into  licensing  agreements  to lease  its  laser
         equipment  and  its  licensed   laser   inscription   technology   with
         individuals and businesses who open retail establishments to sell laser
         inscribed crystal blocks.  The terms of these licensing  agreements are
         typically  for five years.  The lease  payments  are paid in one or two
         installments,  generally  upfront,  and the  Company  recognizes  lease
         revenue ratably over the term of the contract.

         PRODUCT SALES
         Revenue from the sale of laser  inscribed  products are recognized when
         title  to  the  products  are  transferred  to the  customer  (customer
         acceptance  for  custom  designed  crystals)  and only when no  further
         contingencies or material  performance  obligations are warranted,  and
         thereby have earned the right to receive and retain reasonably  assured
         payments for products sold and delivered. Shipping and handling charges
         are not a  significant  portion of  revenue and  are included  in gross
         revenue, with the related costs included in cost of revenue.

         Revenue from the sale of glass cube products is  recognized  when title
         to the products are transferred to the customer-lessee  (upon shipment)
         and  only  when  no  further   contingencies  or  material  performance
         obligations are warranted, and thereby have earned the right to receive
         and retain reasonably assured payments for products sold and delivered.

         ROYALTY REVENUE
         The  Company  also  recognizes   royalty  revenue  from  licensing  its
         technology,  only when earned with no further contingencies or material
         performance  obligations  are  warranted,  and thereby  have earned the
         right to receive and retain reasonably  assured payments.  During 2003,
         the Company changed its estimation of computing and recognizing royalty
         revenues to only upon collection.

         DEFERRED REVENUE
         Deferred revenue represent amounts received as non-refundable  payments
         upon the  signing  of the  licensing  agreements  and  delivery  of the
         LaserMark II equipment,  for which,  revenue is  recognizable  over the
         term of the  agreement  (See Lease  Revenue).  Deposits  received  from
         potential customers/lessees, who have not yet received the LaserMark II
         equipment or products,  are  accounted  as  refundable  customer-lessee
         deposits.

         COSTS OF REVENUE

         Cost of revenue  includes  raw  materials,  component  parts,  shipping
         supplies,  freight cost  and  customs,  direct  labor,  and an overhead
         allocation based on manufacturing  facility use.  Shipping and handling
         costs are not a significant portion of the cost of revenue.


                                      F-13
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         During  the  years  ended  December  31,  2004 and  2003,  the  Company
         purchased  products from one vendor that represented  approximately 42%
         and 8% of total cost of revenue.

         ADVERTISING AND MARKETING COSTS

         The Company  expenses  advertising  and  marketing  costs as  incurred.
         Advertising and marketing expense for the years ended December 31, 2004
         and 2003 amounted to $32,001 and $125,507, respectively.

         INCOME TAXES

         The Company  accounts for income taxes in accordance with SFAS No. 109,
         "Accounting  for Income  Taxes."  Deferred  taxes are  provided  on the
         liability  method  whereby  deferred  tax  assets  are  recognized  for
         deductible  temporary  differences,  and deferred tax  liabilities  are
         recognized for taxable temporary differences. Temporary differences are
         the differences  between the reported amounts of assets and liabilities
         and their tax bases.  Deferred  tax assets are  reduced by a  valuation
         allowance  when, in the opinion of  management,  it is more likely than
         not  that  some  portion  or all of the  deferred  tax  assets  will be
         realized.  Deferred  tax assets and  liabilities  are  adjusted for the
         effects of changes in tax laws and rates on the date of enactment.

         EARNINGS (LOSS) PER SHARE

         The Company  reports  earnings (loss) per share in accordance with SFAS
         No. 128,  "Earnings  per  Share."  Basic  earnings  (loss) per share is
         computed by dividing income (loss) available to common  shareholders by
         the  weighted  average  number  of  common  shares  available.  Diluted
         earnings (loss) per share is computed  similar to basic earnings (loss)
         per share  except  that the  denominator  is  increased  to include the
         number of additional  common shares that would have been outstanding if
         the  potential  common  shares had been  issued  and if the  additional
         common shares were dilutive.  Diluted earnings (loss) per share has not
         been presented since the effect of the assumed  exercise of options and
         warrants to purchase common shares would have an anti-dilutive  effect.
         The  following  potential  common  shares have been  excluded  from the
         computation  of diluted net loss per share for the years ended December
         31, 2004 and 2003 because the effect would have been anti-dilutive:

                                                               2004       2003
            Warrants issued with convertible debentures     4,375,000      --

         SEGMENT INFORMATION

         The Company follows the provisions of SFAS No. 131,  "Disclosures about
         Segments of an Enterprise and Related  Information."  SFAS 131 requires
         public companies to report financial and descriptive  information about
         their  reportable  operating  segments.   The  Company  identifies  its
         operating  segments  based  on  how  management   internally  evaluates
         separate financial information (if available),  business activities and
         management  responsibility.  The  management  believes it operates in a
         single business  segment.  During the years ended December 31, 2004 and
         2003,  Crystalix  Europe  had  net  sales  of  $990,612  and  $327,050,
         operating  loss of $484,904  and  $313,148 and net loss of $494,702 and
         $316,564,  respectively.  Total assets of Crystalix  Europe at December
         31, 2004 were $631,739.


                                      F-14
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         COMPREHENSIVE LOSS

         SFAS No. 130, "Reporting Comprehensive Loss," establishes standards for
         the reporting and display of comprehensive income and its components in
         the  financial  statements.  For the year ended  December  31, 2004 and
         2003, the foreign currency translation  adjustment has been included in
         the consolidated  statement of stockholders' deficit showing the change
         in comprehensive loss.

         RESEARCH AND DEVELOPMENT

         Research and development costs are expensed as incurred.

         RECLASSIFICATION

         Certain  reclassifications  have  been  made to the  2003  balances  to
         conform to the 2004 presentation.

         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In March 2004, the FASB approved the consensus  reached on the Emerging
         Issues   Task  Force   (EITF)   Issue  No.   03-1,   "The   Meaning  of
         Other-Than-Temporary   Impairment   and  Its   Application  to  Certain
         Investments."  The  objective of this Issue is to provide  guidance for
         identifying   impaired   investments.   EITF  03-1  also  provides  new
         disclosure   requirements   for  investments  that  are  deemed  to  be
         temporarily  impaired.  In September 2004, the FASB issued a FASB Staff
         Position  (FSP)  EITF  03-1-1  that  delays the  effective  date of the
         measurement and  recognition  guidance in EITF 03-1 until after further
         deliberations  by the FASB. The disclosure  requirements  are effective
         only for annual  periods  ending after June 15,  2004.  The Company has
         evaluated the impact of the adoption of the disclosure  requirements of
         EITF 03-1 and does not believe it will have an impact to the  Company's
         overall combined results of operations or combined financial  position.
         Once  the  FASB  reaches  a  final  decision  on  the  measurement  and
         recognition  provisions,  the Company  will  evaluate the impact of the
         adoption of EITF 03-1.

         In November  2004, the FASB issued SFAS No. 151  "Inventory  Costs,  an
         amendment  of ARB No. 43,  Chapter 4 (" SFAS No. 151".  The  amendments
         made by  SFAS  151  clarify  that  abnormal  amounts  of idle  facility
         expense,  freight,  handling  costs,  and wasted  materials  (spoilage)
         should  be  recognized  as  current-period   charges  and  require  the
         allocation  of fixed  production  overheads to  inventory  based on the
         normal capacity of the production facilities. The guidance is effective
         for inventory  costs incurred  during fiscal years beginning after June
         15, 2005. Earlier application is permitted for inventory costs incurred
         during fiscal years  beginning after November 23, 2004. The Company has
         evaluated  the impact of the adoption of SFAS 151, and does not believe
         the impact will be  significant  to the  Company's  overall  results of
         operations or financial position.

         In December  2004,  the FASB issued SFAS No.152,  "Accounting  for Real
         Estate Time-Sharing Transactions-an amendment of FASB Statements No. 66
         and 67" ("SFAS 152") SFAS 152 amends SFAS No. 66, "Accounting for Sales
         of Real Estate",  to reference the financial  accounting  and reporting
         guidance for real estate time-sharing  transactions that is provided in
         AICPA  Statement of Position  (SOP) 04-2,  "Accounting  for Real Estate
         Time-Sharing   Transactions".   SFAS  152  also  amends  SFAS  No.  67,
         "Accounting  for Costs and  Initial  Rental

                                      F-15

<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         Operations of Real Estate Projects", to state that the guidance for (a)
         incidental  operations  and (b)  costs  incurred  to sell  real  estate
         projects does not apply to real estate time-sharing  transactions.  The
         accounting for those operations and costs is subject to the guidance in
         SOP 04-2.  SFAS 152 is effective  for financial  statements  for fiscal
         years  beginning   after  June  15,  2005,  with  earlier   application
         encouraged.  The Company has  evaluated  the impact of the  adoption of
         SFAS 152, and does not believe the impact will be  significant  if any,
         to the Company's  overall  results of operations or financial  position
         since the Company does not enter into such transactions.

         In  December  2004,   the  FASB  issued  SFAS  No.153,   "Exchanges  of
         Nonmonetary  Assets, an amendment of APB Opinion No. 29, Accounting for
         Nonmonetary Transactions." The amendments made by SFAS 153 are based on
         the principle that  exchanges of nonmonetary  assets should be measured
         based  on  the  fair  value  of  the  assets  exchanged.  Further,  the
         amendments eliminate the narrow exception for nonmonetary  exchanges of
         similar  productive  assets and replace it with a broader exception for
         exchanges of nonmonetary assets that do not have commercial  substance.
         Previously,  Opinion 29 required that the accounting for an exchange of
         a  productive  asset for a similar  productive  asset or an  equivalent
         interest in the same or similar productive asset should be based on the
         recorded  amount of the asset  relinquished.  Opinion  29  provided  an
         exception to its basic measurement principle (fair value) for exchanges
         of  similar  productive  assets.  That  exception  required  that  some
         nonmonetary  exchanges,   although  commercially  substantive,   to  be
         recorded on a carryover  basis.  By focusing the exception on exchanges
         that lack commercial substance,  the FASB believes SFAS No.153 produces
         financial  reporting that more  faithfully  represents the economics of
         the  transactions.  SFAS  No.153 is  effective  for  nonmonetary  asset
         exchanges  occurring in fiscal periods  beginning  after June 15, 2005.
         Earlier  application  is  permitted  for  nonmonetary  asset  exchanges
         occurring in fiscal periods  beginning after the date of issuance.  The
         provisions of SFAS No.153 shall be applied  prospectively.  The Company
         has  evaluated  the impact of the  adoption  of SFAS 153,  and does not
         believe the impact will be significant to the Company's overall results
         of operations or financial position.

         In  December  2004,  the  FASB  issued  SFAS  No.123   (revised  2004),
         "Share-Based  Payment"  ("SFAS  123(R)").   SFAS  123(R)  will  provide
         investors  and other users of financial  statements  with more complete
         and neutral  financial  information by requiring that the  compensation
         cost  relating to  share-based  payment  transactions  be recognized in
         financial  statements.  That  cost will be  measured  based on the fair
         value of the equity or liability instruments issued. SFAS 123(R) covers
         a wide range of share-based  compensation  arrangements including share
         options,  restricted  share  plans,   performance-based  awards,  share
         appreciation  rights,  and employee share purchase  plans.  SFAS 123(R)
         replaces SFAS No. 123, "Accounting for Stock-Based  Compensation",  and
         supersedes  APB  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
         Employees".  SFAS 123, as  originally  issued in 1995,  established  as
         preferable a  fair-value-based  method of  accounting  for  share-based
         payment transactions with employees.  However, that Statement permitted
         entities the option of  continuing to apply the guidance in Opinion 25,
         as long as the  footnotes to financial  statements  disclosed  what net
         income would have been had the preferable  fair-value-based method been
         used.  Public  entities  (other  than  those  filing as small  business
         issuers)  will be required to apply SFAS 123(R) as of the first interim
         or annual  reporting  period  that  begins  after June 15,  2005.  This
         pronouncement is effective for the Company, a small business issuer, as
         of the  first  interior  annual  reporting  period  that  begins  after
         December 15, 2005. The Company has evaluated the impact of the adoption
         of SFAS 123(R),  and does not believe the impact will be significant to
         the Company's overall results of operations or financial position.

                                      F-16

<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 2 - INVENTORY

         Inventory at December 31, 2004, consist of the following:

             Glass blocks, pre-made images and related products    $    708,584
             Electronic parts and accessories                           360,419
                                                                   -------------
                                                                   $  1,069,003
                                                                   =============

Note 3 - Property and Equipment

         Property and equipment at December 31, 2004, consist of the following:

             Equipment under operating leases as lessor            $  1,775,003
             Computers and equipment                                    784,652
             Vehicles                                                     4,000
             Furniture and fixtures                                     180,249
             Leasehold improvements                                      32,188
                                                                   -------------
                                                                      2,776,092
             Less accumulated depreciation and amortization            (885,917)
                                                                   -------------
                                                                   $  1,890,175
                                                                   =============

         Depreciation expense for the years ended December 31, 2004 and 2003 was
         $438,752 and $607,041, respectively. During the year ended December 31,
         2003,  the Company  recognized a loss on disposal of certain  assets of
         $243,893  and during the year ended  December  31,  2004,  the  Company
         recognized a gain on disposal of certain assets of $1,973.

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts  payable and accrued expenses at December 31, 2004, consist of
         the following:

               Accounts payable - trade                       $       502,619
               Royalties payable                                      325,292
               Accrued interest ($363,362 to related parties)         415,965
               Accrued legal                                          125,000
               Accrued payroll                                         59,251
               Other accrued expenses                                  99,699
                                                              ---------------
                                                              $     1,527,826
                                                              ===============

NOTE 5 - DEFERRED REVENUE

         Deferred revenue represent amounts received as non-refundable  payments
         upon the  signing  of the  licensing  agreements  and  delivery  of the
         LaserMark  II  equipment,   for  which,   the  lease  revenue  will  be
         recognizable over the term of the agreement.

         The  following  table  summarizes  the annual  estimated  revenue to be
         recognized from deferred revenue, as of December 31, 2004:

                                      F-17


<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


               Year ending December 31,
                   2005                                   $       968,326
                   2006                                           765,691
                   2007                                           427,634
                                                          ----------------
                                                                2,161,651
               Less current portion                              (968,326)
                                                          ----------------
               Long-term portion                          $     1,193,325
                                                          ================


NOTE 6 - NOTES PAYABLE - INCLUDING RELATED PARTIES

       Notes payable at December 31, 2004 consist of the following:

              John Woodward. (a)                          $     1,824,000
              Kevin Ryan (b)                                    5,396,764
              Ryan Capital Management, Inc. (c)                   362,137
              McCary & Rood, Inc. (d)                             280,000
              McCary & Rood, Inc. (e)                             214,037
              CMKXTREME.COM (f)                                 2,000,000
                                                           ---------------
                                                               10,076,938
              Less debt discounts                              (2,726,696)
                                                           ---------------
              Net amount of notes payable                       7,350,242
              Less current portion                             (3,424,637)
                                                           ---------------
              Long-term portion                           $     3,925,605
                                                           ===============

     a.  On  July 21, 2004, the  Company  issued a convertible  promissory  note
         to Mr. John Woodward, the Company's former President,  in the amount of
         $1,824,000,  which represents principal due on a previously issued note
         payable in the amount of $1,343,722 plus accrued interest in the amount
         of  $480,278.  This note bears  interest at 10% per annum and calls for
         monthly  interest  payments  from  August 1, 2004 to  December 1, 2004.
         Beginning  on January 1, 2005,  this note  requires  monthly  principal
         payments of $50,405 plus accrued interest with any unpaid principal and
         interest  due on July 1,  2007.  The  monthly  principal  and  interest
         payments can be paid with shares of the  Company's  common stock at the
         option of the holder. The conversion price is the lesser of the average
         closing  price  of  the  Company's  common  stock  five  business  days
         immediately  prior to the conversion  notice or $0.08.  The Company has
         agreed to register the shares  issuable  upon  conversion of this note.
         The  Company  has  determined  that  there is a  beneficial  conversion
         feature associated with this convertible  promissory note in the amount
         of $615,600.  This amount will be amortized as financing costs over the
         term of the  note.  This  note is  secured  by all  the  assets  of the
         Company,  subordinated to Mr. Ryan's secured  position.  The note is in
         default on certain interest  payments,  but the default provisions have
         been  waived by the holder for the next year.  The  effective  interest
         rate on this promissory note is approximately 21%.

     b.  On July 21, 2004,  the Company  issued a  convertible  promissory  note
         to Mr. Kevin Ryan, the Company's Chief Executive Officer, in the amount
         of $5,396,764,  which  represents (a) principal due on a two previously
         issued  notes  payable in the amounts of $852,680 and  $1,010,000,  (b)
         principal  due under a  revolving  credit  agreement  in the  amount of
         $1,766,500,  (c) principal due under an additional  note payable in the
         amount of  $1,500,000  and (d) accrued  interest  on the above  mention
         obligations in the amount of $267,584.  This note bears interest at


                                      F-18
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



         10% per annum and calls for monthly  principal  payments from August 1,
         2004 to  December  1,  2004 of  $45,000.  On the last day of the  month
         beginning  on August 31, 2004 through  November  30, 2004,  the accrued
         interest will be added to the principal amount. Beginning on January 1,
         2005, this note requires  monthly  principal  payments of $174,584 with
         any unpaid  principal  and  interest  due on July 1, 2007.  The monthly
         principal  and  interest  payments  can  be  paid  with  shares  of the
         Company's  common  stock at the option of the  holder.  The  conversion
         price is the  lesser  of the  average  closing  price of the  Company's
         common stock five business  days  immediately  prior to the  conversion
         notice or $0.08. In addition, the Company granted to Mr. Ryan a warrant
         to purchase 1,875,000 shares of the Company's common stock at $0.08 per
         share and my be  exercised  by the holder at any time prior to July 21,
         2011. The warrants also include a cashless exercise feature that allows
         the  holder to pay the  exercise  price by  surrendering  a  sufficient
         number of warrants to pay for the exercise  price of the warrants being
         exercised  as  follows:  warrants  to be  surrendered  equals the total
         exercise price of warrants being exercised divided by the fair value of
         the  Company's  common stock at the date of  exercise.  The Company has
         agreed to register the shares issuable upon conversion of this note and
         exercise of the warrant.  In  accordance  with EITF 00-27,  the Company
         first  determined  the  value of the  note  and the  fair  value of the
         detachable  warrants issued in connection with this note. The estimated
         value  of  the   warrants  of  $200,625   was   determined   using  the
         Black-Scholes option pricing model and the following assumptions:  term
         of 7 years,  a risk free interest rate of 3.5%, a dividend  yield of 0%
         and  volatility  of  371%.  The face  amount  of the  note  payable  of
         $5,396,764 was  proportionately  allocated to the note and the warrants
         in the amounts of $5,203,330 and $193,434,  respectively.  The value of
         the note  was  then  allocated  between  the  note  and the  beneficial
         conversion  feature,  which  amounted  to  $3,188,488  and  $2,014,842,
         respectively.  The combined total discount is $2,208,276,  and is being
         amortized  over the term of the note.  This note is  secured by all the
         assets of the Company.  The note is in default on certain principal and
         interest  payments,  but the default provisions have been waived by the
         holder  for  the  next  year.  The  effective  interest  rate  on  this
         promissory note is approximately 24%.

     c.  On July 21, 2004, the Company  issued a promissory note to Ryan Capital
         Capital Management,  Inc. (this company is controlled by Kevin Ryan) in
         the amount of $452,137,  which represents principal due on a previously
         issued note payable in the amount of $400,000 plus accrued  interest in
         the amount of  $52,137.  This note bears  interest at 10% per annum and
         calls for monthly interest  payments from August 1, 2004 to December 1,
         2004.  Beginning  on  January  1,  2005,  this  note  requires  monthly
         principal  payments of $37,902  plus accrued  interest  with any unpaid
         principal and interest due on December 1, 2005. This note is secured by
         all the  assets  of the  Company.  The note is in  default  on  certain
         interest  payments,  but the default provisions have been waived by the
         holder for the next year.

     d.  On  August 1, 2004,  the Company  issued  a promissory note to McCary &
         Rood  (this  company  is  controlled  by Kevin  Ryan) in the  amount of
         $280,000,  which represents past due consulting fees under a consulting
         agreement  dated May 28,  2003.  This note calls for  monthly  payments
         beginning  August 1, 2004 of $30,000 with any unpaid  principal  due on
         May 1, 2005. This note is secured by all the assets of the Company. The
         note is in default  on  certain  principal  payments,  but the  default
         provisions have been waived by the holder for the next year.

     e.  On  August 1, 2004,  the Company  issued a  promissory note to McCary &
         Rood in the amount of $214,037,  which represents past due reimbursable
         expenses  under a consulting  agreement  dated May 28, 2003.  This note
         calls for monthly payments beginning August 1, 2004 of

                                      F-19
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

         $30,000 with any unpaid  principal  due on March 1, 2005.  This note is
         secured  by all the  assets of the  Company.  The note is in default on
         certain principal  payments but the default provisions have been waived
         by the holder for the next year.

     f.  On  September 23, 2004, the Company  issued  a  convertible  promissory
         note to  CMKXTREME.COM  in the  amount of  $2,000,000.  This note bears
         interest at 10% per annum and calls for monthly  principal  payments of
         $83,333  plus  accrued  interest  beginning  November  1, 2004 with any
         unpaid  principal  and  interest  due on October 1, 2006.  The  monthly
         principal  and  interest  payments  can  be  paid  with  shares  of the
         Company's  common  stock at the option of the  holder.  The  conversion
         price is the  lesser  of the  average  closing  price of the  Company's
         common stock five business  days  immediately  prior to the  conversion
         notice or $0.08. In addition,  the Company  granted to  CMKXTREME.COM a
         warrant to purchase  2,500,000  shares of the Company's common stock at
         $0.08 per shares and my be exercised by the holder at any time prior to
         September  23,  2011.  The warrants  also  include a cashless  exercise
         feature  that  allows  the  holder  to  pay  the   exercise   price  by
         surrendering  a  sufficient  number of warrants to pay for the exercise
         price of the  warrants  being  exercised  as  follows:  warrants  to be
         surrendered equals the total exercise price of warrants being exercised
         divided by the fair value of the Company's  common stock at the date of
         exercise.  The Company has agreed to register the shares  issuable upon
         conversion of this note and exercise of the warrant. In accordance with
         EITF 00-27,  the Company first determined the value of the note and the
         fair value of the detachable  warrants  issued in connection  with this
         note.  The estimated  value of the warrants of $200,000 was  determined
         using  the  Black-Scholes   option  pricing  model  and  the  following
         assumptions:  term of 7 years,  a risk free  interest  rate of 3.5%,  a
         dividend  yield of 0% and  volatility  of 371%.  The face amount of the
         convertible promissory note of $2,000,000 was proportionately allocated
         to the note and the warrants in the amounts of $1,818,182 and $181,818,
         respectively,  using the relative fair value  method.  The value of the
         note was then allocated between the note and the beneficial  conversion
         feature, which amounted to $1,636,364 and $181,818,  respectively.  The
         combined  total discount is $363,636,  and is being  amortized over the
         term of the  note.  This  note is  secured  by all  the  assets  of the
         Company,  subordinated to Mr. Ryan's secured  position.  The note is in
         default on certain  principal  and interest  payments,  but the default
         provisions  have  been  waived by the  holder  for the next  year.  The
         effective interst rate on this promissory note is approximately 19%.

         The following  table  summarizes the aggregate  maturities of the notes
         payable as of December 31, 2004:

               Year ending December 31,
                   2005                                        $     4,857,704
                   2006                                              3,533,206
                   2007                                              1,686,028
                                                                ---------------
                                                                    10,076,938
               Less current portion                                 (4,857,704)
                                                                ---------------
               Long-term portion                               $     5,219,234
                                                               ================

               Current portion                                 $     4,857,704
               Less discount attributed to current portion          (1,107,911)
                                                               ----------------
                                                               $     3,749,793
                                                               ================

               Long-term portion                                     5,219,234
               Less discount attributed to long-term portion        (1,618,785)
                                                               ----------------
               Long-term portion                               $     3,600,449
                                                               ================


                                      F-20
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 7 - STOCKHOLDERS' DEFICIT

         COMMON STOCK ISSUED IN PRIVATE PLACEMENTS

         On November  26, 2002,  the Board of Directors of the Company  approved
         and initiated another private placement offering (the "November Private
         Placement")  of the Company's  Rule 144  restricted  common stock at an
         average offering price of $0.50 per share, on a best efforts basis. The
         Private  Placement was exempt from the  registration  provisions of the
         Securities  and  Exchange  Commission  Act  of  1933  and  Rule  506 of
         Regulation D. As of December 31, 2002,  the Company sold 176,000 shares
         for proceeds of $88,000, all of which was collected in January 2003. In
         January 2003, the Company sold an additional  120,000 common shares for
         proceeds of $60,000.  Also in March 2003,  the Company  sold  1,000,000
         shares for proceeds of  $200,000.  The Company did not incur or pay any
         offering costs.

         COMMON STOCK ISSUED FOR  ACQUISITION  OF  LAZER-TEK  DESIGNS,  INC. AND
         LAZER-TEK DESIGNS, LTD

         On December  23,  2002,  the  Company  issued  1,250,000  shares of the
         Company's  common  stock to  acquire  Lazer-Tek,  valued  at a total of
         $1,125,000  using the Company's  trading price as of December 23, 2002.
         Pursuant to the agreement,  these shares had registration  rights until
         April 30,  2003.  The Company  has no  obligation  beyond a  reasonable
         effort to have these shares registered.

         COMMON STOCK AND  PREFERRED  STOCK  ISSUED FOR  SERVICES AND  FINANCING
         COSTS

         During 2003, the Company issued 660,000 shares of its common stock,  as
         consideration  to the  holder  of the $1.5  million  loan  payable  for
         extending  the  repayment  terms.  The shares were valued at their fair
         market value of $528,000 and included in interest expense.  The Company
         also issued 2,340,000 shares of its common stock for services  rendered
         that were valued at a fair market value of $1,170,000.

         Also during 2003, the Company issued 250,000 shares of its common stock
         to three consultants. The shares were valued at their fair market value
         of $175,000 which was determined using the value of the Company's stock
         at the date the consulting agreements were signed.

         On July 21, 2004,  the Company  issued  3,019,000  common shares of the
         Company's  common stock to Kevin Ryan as additional  consideration  for
         the financing provided to the Company. The value of these common shares
         issued to Mr.  Ryan  (determined  using the 10-day  average  per shares
         price of the  Company's  common stock prior to the  issuance  date) was
         $323,033.  Also,  certain  holders of the Company's  Series A preferred
         stock  reallocated  2,647,900 of their shares to certain  investors and
         senior  members of the Company's  management  team.  The value of these
         Series A  preferred  shares  (determined  using the 10-day  average per
         shares price of the  Company's  common stock prior to the issuance date
         multiplied by the 10 to 1 conversion rate) was $2,833,253.  The Company
         took a charge to financing costs and compensation expense of $2,747,011
         and  $409,275,  respectively,  related to the issuance of common shares
         and reallocation of the Series A preferred shares.


                                      F-21
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         SHARES OF COMMON AND PREFERRED STOCK EXCHANGED FOR CERTAIN ASSETS

         During the second quarter of 2003, in accordance with an agreement with
         a former officer, the Company canceled 5,126,000 shares of common stock
         and  1,540,000  shares  of Class A  preferred  stock  owned by a former
         officer of the Company in exchange  for the  Company  transferring  the
         ownership to four retail store locations in Las Vegas, Nevada that were
         previously  owned by the  Company (See  Note 9) Since this  transaction
         occurred with a related party, the cost carryover basis of $237,826 was
         used and no gain or loss was recognized from this transaction.

         During the fourth quarter of 2003, in accordance with an agreement with
         a former officer, the Company canceled 5,126,000 shares of common stock
         and  1,540,000  shares  of Class A  preferred  stock  owned by a former
         officer of the Company in exchange  for the  Company  transferring  the
         ownership of certain laser  equipment  located on cruise ships that was
         previously  owned by the Company (See Note 9).  Since this  transaction
         occurred with a related party, the cost carryover basis of $210,607 was
         used and no gain or loss was recognized from this transaction.

         STOCK OPTION PLAN

         The Company  does not have a formal stock  option  plan,  however,  the
         Board of  Directors  and the  management  may grant  options to acquire
         common  stock of the  Company  ("Options").  Options  may be  issued to
         directors, executives, key employees and consultants providing valuable
         services to the Company.  The Board of Directors and management  select
         recipients  to whom options are granted,  and  determine  the number of
         shares  to be  granted.  Options  granted  are  exercisable  at a price
         determined  by the Board of  Directors  and  management  at the time of
         grant,  but in no event  less  than fair  market  value.  During  2002,
         3,000,000  options  had been  granted  to  certain  key  employees  and
         management at an exercise price of $0.25 per share underlying the stock
         option  when the  trading  price as of the date of grant  was $0.16 per
         share.

         The following is table summarizes the options outstanding:

                                                      Weighted-
                                                       Stock          Average
                                                       Option         Exercise
                                                        Plan           Price
                                                   ------------    -------------

               Balance, December 31, 2002            3,000,000     $       0.25
                   Canceled                         (3,000,000)    $       0.25
                                                   ------------

               Balance, December 31, 2003                    -     $         -
                                                   ============

         In  connection  with the  exchange  of common and  preferred  stock for
         certain  assets of the Company and the  resignation  of certain  former
         officers of the Company,  1,600,000  options to purchase  shares of the
         Company's  common stock for $0.25 per share were canceled  during 2003.
         Also, in 2003,  the  remaining  1,400,000  options were also  canceled.
         There  were no options  granted,  canceled  or expired  during the year
         ended December 31, 2004.

                                      F-22
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 8 - INCOME TAXES

         Deferred  income  taxes  reflect  the  net  tax  effects  of  temporary
         differences  between the carrying amounts of assets and liabilities for
         financial  statement  purposes  and the  amounts  used for  income  tax
         purposes.   Significant   components  of  the  Company's  deferred  tax
         liabilities and assets as of December 31, 2004 are as follows:

            Deferred tax assets:
               Net operating loss                               $     3,240,000
               Deferred revenue                                         998,000
               Stock issued for services and financing costs          1,647,000
               Advances to Crystalix Europe                             136,000
               Allowance for doubtful accounts                          113,000
                                                                ----------------
                                                                      6,134,000
            Deferred tax liabilities:
               Step-up of basis of intangible assets                   (554,000)
               Depreciation of property and equipment                  (678,000)
               Other basis differences for assets acquired             (251,000)
                                                                ----------------
                                                                     (1,483,000)
                                                                ----------------
               Net deferred tax asset                                 4,651,000
               Less valuation allowance                              (4,651,000)
                                                                ----------------

                                                                $            --
                                                                ================
         At December  31,  2004,  the Company  had  federal net  operating  loss
         ("NOL") carryforwards of approximately $9,700,000.  Federal NOLs could,
         if unused, begin to expire in 2018.

         The valuation  allowance  increased by $2,628,000 and $1,272,000 during
         2004 and 2003, respectively.

         The  reconciliation  of the  effective  income tax rate to the  federal
         statutory  rate for the years  ended  December  31, 2004 and 2003 is as
         follows:

                                                           2004           2003
             Federal income tax rate                     (34.0%)        (34.0%)
             State tax, net of federal benefit             --             --
             Loss for which no federal benefit was
               received                                   34.0%          34.0%
                                                        -------         ------
             Effective income tax rate                     0.0%           0.0%
                                                        =======         ======

         Utilization of the net operating loss and tax credit  carryforwards  is
         subject  to  significant  limitations  imposed by the change in control
         under I.R.C. 382,  limiting its annual  utilization to the value of the
         Company at the date of change in  control  times the  federal  discount
         rate.

NOTE 9 - RELATED PARTY TRANSACTIONS

         During the years ended December 31, 2004 and 2003  purchased  equipment
         from a related party vendor  amounting to $0 and $8,300,  respectively.
         This   related   party   vendor   is   wholly   owned  by  a   minority
         (non-controlling)  shareholder  of the  Company  and  does not have any
         formal  agreement.  Management  believes  that these  transactions  are
         negotiated at arms length.


                                      F-23
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         During  the year  ended  December  31,  2004  and  2003,  purchases  of
         technology  consulting  services  from the same  related  party  vendor
         amounted to approximately $88,290 and $189,450, respectively.

         During the year ended  December 31,  2004,  the Company paid $1,995 for
         computer   consulting   services  from  a  company  that  our  majority
         shareholder has an ownership interest.

         On May 28, 2003, the Company  entered into a consulting  agreement with
         McCary & Rood, a company  controlled  by Mr. Kevin Ryan,  that provides
         for a monthly  consulting fee of $20,000.  The agreement expires on the
         earlier  of May 27,  2006 or on the date on which  Mr.  Ryan  accepts a
         position  as an officer of the  Company.  Mr. Ryan became an officer of
         the Company in July 2004,  which  terminated  this  agreement.  For the
         years ended December 31, 2004 and 2003,  consulting expenses related to
         this agreement amounted to $140,000 and $140,000, respectively.

         In April 2003,  the Company  entered into an  agreement  with Armin Van
         Damme,  a former  officer and  director  and founder of  Crystalix  USA
         Group, to transfer the four Company-owned retail locations in Las Vegas
         for the  surrender  of all of his Class A  preferred  stock and  common
         stock  remaining  after  permitted  transfers of the common stock. As a
         result of this transaction,  the Company has canceled  5,126,000 shares
         of common stock and 1,540,000  shares of Class A

         preferred  stock  owned by Mr. Van Damme and removed the net book value
         of the assets related to the four Company-owned retail locations in the
         amount of $237,826. In addition,  Mr. Van Damme resigned as an employee
         of the  Company  and  agreed  to assume  liability  of the lease of his
         automobile  which had been leased by the Company,  and liability of the
         lease of office  space at 5720 South  Arville,  Suite  114,  Las Vegas,
         Nevada.  The  transfer was  effective as of April 28, 2003.  No gain or
         loss was recognized from this related party transaction.  Mr. Van Damme
         was to pay the  Company a license  fee of 5% of gross  sales  generated
         from the transferred  locations and agreed to purchase all supplies and
         equipment needed for the operation of the locations from the Company at
         its cost  plus 10%.  The  agreement  provided  for  termination  by the
         Company  upon 30 days'  prior  written  notice in the event of Mr.  Van
         Damme's failure to make payments or submit reports on a timely basis.

         As a result of the  settlement  agreement,  this agreement was declared
         null and void.  Under the terms of the settlement,  Mr. Van Damme is to
         keep the locations and the equipment at the locations.  However,  it is
         contemplated that he will replace the equipment and arrange for his own
         licensing of the proprietary  technology  within six months.  While the
         Company's equipment is in his possession, he is to pay a flat licensing
         and royalty fee of $500 per month per laser.

         In April 2003,  the Company  entered into an  agreement  with Other Van
         Dam, a former  officer and director and founder of Crystalix USA Group,
         to transfer  ownership  of certain  laser  equipment  aboard the cruise
         ships owned by the  Starboard  Cruise line for the  surrender of all of
         his Class A  preferred  stock  and  common  stock.  As a result of this
         transaction,  the Company canceled 5,126,000 shares of common stock and
         1,540,000  shares of Class A  preferred  stock owned by Mr. Van Dam and
         used the net  book  value  of the  laser  equipment  in the  amount  of
         $210,607 as the cost basis for the stock redemption.

         See Notes 4, 6 and 9 for additional related party transaction.

                                      F-24
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 10 - COMMITMENTS AND CONTINGENCIES

         CONTRACTS

         Acquisition  Target - On  December  15,  2002,  the  Company  signed an
         agreement to acquire 50% of the ownership  interest of Vitro Laser GmbH
         ("Vitro"), a German Corporation,  for consideration  consisting of cash
         and the right to acquire  shares of the  Company's  common  stock.  The
         Company  advanced  $500,000  to Vitro  through  March  31,  2003 and in
         accordance  with a legal  settlement on November 14, 2003,  the Company
         allowed Vitro to retain the advance.  After new  management  terminated
         the process of acquiring  Vitro in June 2003, the $500,000  advance was
         expensed during the same period.

         Royalty Agreement - Effective October 1, 2003, the Company entered into
         an amended and  restated  patent  license  agreement  with Laser Design
         International,  LLC  ("LDI")  and Norwood  Promotional  Products,  Inc.
         ("Norwood"),  which  superseded  the  February  1999 and  October  2001
         agreements.  The  Company  now has a  non-exclusive,  non-transferable,
         royalty-bearing  sub-license from LDI to make, use, offer for sale, and
         sell decorative  products using the technology other than in the United
         States.  Norwood granted the Company a non-exclusive,  non-transferable
         (other than reseller  licenses to permitted  resellers),  revocable and
         royalty-bearing  sub-license for the United States in the retail market
         segment.    Norwood   also   granted    Lazer-Tek   a    non-exclusive,
         non-transferable (other than reseller licenses to permitted resellers),
         revocable and royalty-bearing  sub-license for the United States in the
         corporate market segment.  Norwood is to approve all applications for a
         permitted  reseller  license.  The  Company is  required to pay LDI and
         Norwood  royalty  payments  based  on a  percentage  of net  sales on a
         quarterly basis. The royalty  agreement expires on the earlier of April
         27, 2010, a material  breach of  contract,  or mutual  recession of all
         parties.

         LEASES

         The following is a schedule by years of future minimum rental  payments
         required under operating leases that have non-cancelable lease terms in
         excess of one year as of December 31, 2004:

                Year ending December 31,
                  2005                             $          51,946
                  2006                                        70,819
                  2007                                        72,944
                  2008                                        18,370
                                                   -----------------

                                                   $         214,079
                                                   =================

         Rent  expense  amounted to $229,937  and  $545,597  for the years ended
         December 31, 2004 and 2003, respectively.

         LITIGATION

         The Company may be named as a defendant in legal  actions  arising from
         its normal  operations,  and from time-to-time is presented with claims
         for damages  arising out of its actions.  The management of the Company
         anticipates  that any damages or  expenses  it may incur in  connection
         with these  actions,  individually  and  collectively,  will not have a
         material  adverse  effect on the Company.  As of December 31, 2004, the
         Company was not a named party to any pending legal

                                      F-25
<PAGE>
              CRYSTALIX GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


         proceedings,  other than routine  litigation  deemed  incidental to our
         business, except for the following:

         VITRO LASER GROUP USA -- On February 12,  2003,  Vitro Laser Group USA,
         Inc. and Kenneth  Morrison filed an original  petition and  application
         for injunctive  relief in the District  Court of Dallas County,  Texas,
         against  Vitro Laser GmbH  ("Vitro")  and the Company.  The  plaintiffs
         allege that Vitro and the Company  wrongfully  took two laser  systems.
         The Company  picked the laser systems up at the request of the owner of
         the lasers,  Vitro, and returned them to their possession.  Neither the
         Company nor its subsidiaries  used these lasers in its operations.  The
         plaintiffs  seek  a  temporary  and  permanent  injunction   enjoining,
         prohibiting,  and  restraining  Vitro and the Company from  interfering
         with  plaintiffs'  rights in the laser  systems  and in their  business
         facilities and  operations.  In addition,  the plaintiffs seek from the
         Company  exemplary  damages for conversion of the equipment,  statutory
         damages of $2,000 and  attorneys'  fees for theft of the laser systems,
         actual damages for unjust enrichment,  and actual and exemplary damages
         for tortious  interference  with plaintiffs'  contract with Vitro. With
         respect to Vitro,  the  plaintiffs  seek  exemplary  damages for fraud,
         actual  damages for  negligent  misrepresentation,  actual  damages and
         attorneys'  fees for breach of contract,  and actual damages for breach
         of fiduciary  duty.  Vitro asserts that it was not properly  served and
         that it is not  amenable to suit or service in the United  States since
         it is a German company.  The Company filed a special  appearance in the
         lawsuit to contest  the court's  jurisdiction  over it. The court found
         that the  court  had  jurisdiction  over the  Company  and the  Company
         appealed  that ruling.  On March 19,  2005,  the  plaintiffs  agreed to
         release and discharge all claims against for a payment of $5,000.

NOTE 11 - IMPAIRMENT EXPENSE

         For the years  ended  December  31, 2004 and 2003,  impairment  expense
         consisted of the following:


                                                            2004          2003
                                                        -----------  -----------

            Impairment of property and equipment        $         -  $   243,893
            Impairment of value of customer lists                 -      155,220
            Impairment of capitalized software costs        176,052            -
            Impairment of website development costs          36,163            -
                                                        -----------  -----------
                                                        $   212,215  $   399,113
                                                        ===========  ===========

NOTE 12 - SUBSEQUENT EVENTS

         In April  2005,  the Company  entered  into a new lease  agreement  for
         rental of its corporate office space in Las Vegas,  Nevada that expires
         in March 2008. The future minimum lease  payments are  incorporated  in
         the table presented on Note 10.





                                      F-26