U.S.
        SECURITIES AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-KSB
 
 ANNUAL
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
        1934
 
 (Mark
        One)
 
 [X]
        Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
        Act of
        1934 for the fiscal year ended December 31, 2006
 
 [ 
]
        Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
        Act
        of 1934
 
 For
        the
        transition period from _______________ to _______________
 
 Commission
        File No. 000-27365
  
 
 **MANAKOA
        SERVICES CORPORATION**
 (Exact
        name of registrant as specified in its charter)
   Nevada
              000-27365
              88-0440528(State
                  or other Jurisdiction of incorporation)
              (Commission
                  File Number)
              (I.R.S.
                  Employer Identification No.)
 
  
 7203
        W. Deschutes Avenue, Suite B, Kennewick, WA 99336
 (Address
        of principal executive offices) (Zip Code)
 
 
 Registrant's
        telephone number, including area code: (509) 736-7000
 Securities
        registered pursuant to Section 12(b) of the Exchange Act:
 
 None
 Securities
        registered pursuant to Section 12(g) of the Exchange Act:
 Common
        Stock, $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 preceding 12 months (or for such shorter
        period that the Company was required to file such reports), and (2) has been
        subject to such filing requirements for the past 90 days. Yes [X] No [ 
]
 
 Check
        if
        there is no disclosure contained herein of delinquent filers in response
        to Item
        405 of Regulation S-B, and will not be contained, to the best of the Company'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.
        [  ]
 
 The
        Issuer's revenues for its year ended December 31, 2006 were $
        7,909.00.
 
 1
 
 
 As
        of
        April 11, 2007, the aggregate market value of the voting and non-voting common
        equity held by non-affiliates was approximately $ 1,743,000 based upon the
        closing price per share as reported on the NASDAQ Bulletin Board Market of
        $0.07
 
 There
        were 59,145,854 outstanding shares of the issuer's Common Stock on December
        31,
        2006.
 
 **DOCUMENTS
        INCORPORATED BY REFERENCE**
 
 None.
 
 **FORWARD-LOOKING
        STATEMENTS**
 
 Statements
        contained in this report, which are not historical in nature, are
        forward-looking statements within the meaning of the Private Securities
        Litigation Reform Act of 1995. These forward-looking statements include
        statements in Item 1 - Business, Item 5 - Market for Common Equity and Related
        Stockholder Matters, and Item 6 - Management's Discussion and Analysis of
        Financial Condition and Results of Operations, which can be identified by
        the
        use of forward-looking terminology such as believes, expects, plans, estimates,
        predicts, potential, continue, may, will, should, or anticipates or the negative
        thereof or other variations thereon or comparable terminology, or by discussions
        of strategy. These statements are only predictions and involve known and
        unknown
        risks, uncertainties and other factors, including the risks in the section
        entitled "Risk Factors” that may cause our or our industry's actual results,
        levels of activity, performance or achievements to be materially different
        from
        any future results, levels of activity, performance or achievements expressed
        or
        implied by these forward-looking statements. Although we believe that the
        expectations reflected in the forward-looking statements are reasonable,
        we
        cannot guarantee future results, levels of activity, performance or
        achievements. Except as required by applicable law, including the securities
        laws of the United States, we do not intend to update any of the forward-looking
        statements to conform these statements to actual results.
 
 Such
        forward-looking statements involve certain risks and uncertainties that could
        cause actual results to differ materially from anticipated results. These
        risks
        and uncertainties include regulatory constraints, changes in laws or regulations
        governing the Company's products and international trade, the ability of
        the
        Company to market successfully its products in an increasingly competitive
        worldwide market, changes in the Company's operating or expansion strategy,
        failure to consummate or successfully integrate proposed product developments,
        the ability of the Company to manage growth, the general economy of the United
        States and the specific global markets in which the Company competes, the
        availability of financing from internal and external sources and other factors
        as may be identified from time to time in the Company's filings with the
        Securities and Exchange Commission or in the Company's press
        releases.
 
 
 2
 
 
 MANAKOA
        SERVICES CORPORATION
 
 FORM
        10-KSB
 FOR
        THE
        FISCAL YEAR ENDED DECEMBER 31, 2006
  PageITEM
                  1
              DESCRIPTION
                  OF BUSINESS
              4ITEM
                  2
              DESCRIPTIONS
                  OF PROPERTIES
              9ITEM
                  3
              LEGAL
                  PROCEEDINGS
              9ITEM
                  4
              SUBMISSIONS
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              10ITEM
                  5
              MARKETS
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
              10ITEM
                  6
              MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              12ITEM
                  7
              FINANCIAL
                  STATEMENTS
              14ITEM
                  8
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE
              33ITEM
                  8A
              CONTROLS
                  AND PROCEDURES
              33ITEM
                  9
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                  SECTION
                  16(a) OF THE EXCHANGE ACT
              33ITEM
                  10
              EXECUTIVE
                  COMPENSATION
              35ITEM
                  11
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDER MATTERS
              36ITEM
                  12
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS
              36ITEM
                  13
              EXHIBITS
                  AND REPORTS ON FORM 8-K
              36ITEM
                  14
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              37SIGNATURES
              37
 
 
 
   3
 
 **ITEM
        1 DESCRIPTION OF BUSINESS**
 
 **Background**
 
 The
        Company was incorporated in Nevada on May 14, 1992 and its principal business
        activities were directed towards the development and marketing of contact-less
        smart ID card systems (Smart Card(s) or Smart ID Card System(s). This
        development effort was unsuccessful. The Company then proceeded to look for
        other business opportunities.
 
 The
        Company located a business opportunity in the form of Manakoa Services
        Corporation. As was disclosed in the Company's Form 8-K filed on December
        16,
        2003, the Company entered into a Stock Purchase Agreement to acquire Manakoa
        Services Corporation, a Washington corporation. As disclosed in the Company's
        Form 8-K filed on March 15, 2004, this acquisition closed in March 2004.
        The
        Company, which is a Nevada corporation, changed its name to Manakoa Services
        Corporation as well. At this time, the Washington Company is a subsidiary
        of the
        Nevada Corporation. It is anticipated that the Washington Corporation will
        be
        merged into the Nevada Corporation. Whenever necessary to be clear, the
        Washington Corporation is referred to as "MSC Washington".
 
 Manakoa
        set ought to develop a suite of products to meet the vertical security and
        risk
        management requirements of organizations complying with regulations stemming
        from the Gramm Leach Bliley Act (GLBA), Health Insurance Portability
        Accountability Act (HIPAA), Sarbanes Oxley Act, USA Patriot Act, and Federal
        Informational Security Management Act (FISMA). The Company anticipated expanding
        its support to other U.S. regulations plus international regulatory requirements
        emerging in Europe. This development effort was unsuccessful and the Company
        then proceeded to look for other business opportunities.
 
 In
        the
        SEC Form 8-K dated November 15, 2005, the Company issued a press release
        to
        announce that it had reached a partner agreement with Secure Venture
        Technologies (S.V.T.) of Berthoud, CO. S.V.T. agreed to serve as its ongoing
        agent to provide sales, software development and product support for the
        Manakoa
        KnowledgeBase(TM) regulatory compliance research engine and System Controls
        MP
        (SCMP) product lines.
 
 The
        company spent the first half of 2006 transitioning out of the enterprise
        risk
        management solutions and regulatory compliance market, while investigating
        opportunities to accelerate near-term growth by acquiring or partnering with
        companies which are synergistic with its desired business model. The company
        researched evolving trends and key market success factors and identified
        several
        markets that share substantial synergies with its desired business model
        to
        enhance both near- and long-term growth prospects.
 
 The
        balance of this Form 10-KSB filing describes the business of Manakoa Services
        Corporation ("Manakoa", the "Company" or "we"). Manakoa was a development
        stage
        company throughout the 2006 calendar year
 
 **Overview**
 
 Manakoa
        Services Corporation (www.Manakoa.com) is a technology supplier focusing
        on
        solutions that require the most secure asset tracking, and authentication
        systems for industry leaders and government agencies. Manakoa plans on sourcing,
        engineering and integrating these solutions for each customer in a
        collaborative, business-to-business environment, ensuring each set of exacting
        individual requirements are met.
 
 Manakoa
        will develop technologies and intellectual property for a discrete set of
        strategic business segments within four targeted industries: Petrochemical,
        Agriculture, Healthcare, and National Security. The Company plans to grow
        by the
        advancement of existing and future technologies, using licenses, sublicenses,
        acquisitions, and other instruments of ventures, with very modest organic
        growth
        utilizing outsourcing to meet the needs of each of the four segments’ Product
        Managers. The Product Managers will develop Business-to-Business relationships
        with Channel Partners who are the market leaders, to ensure Manakoa’s technology
        investments are market requirements driven. The four principal Channel Partners
        will serve as the main integrators of Manakoa’s technology, where they actually
        formulate and deliver the product/solution to their customers. The Company
        will
        accelerate its enterprise value with novel intellectual property assets and
        equity building from its own generation of patents, as well as its participation
        in strategic licenses from technology suppliers, such as the National
        Laboratories .
  **Principle
        Markets**
 
 Manakoa
        will focus on filling security-related technology gaps that protect key
        industries such as the Petrochemical, Agriculture, Healthcare, and National
        Security sectors. These industry segments all share a common requirement;
        the
        need to track people, places and products. For the past decade, industry
        has
        made great strides using Radio Frequency Identification (RFID) to track,
        trace,
        and in some cases, authenticate objects. More recently, attempts to use
        Deoxyribonucleic Acid (DNA) as the ultimate forensic authentication technology
        for track and trace applications has met with more limited success. The initial
        DNA solutions were technically effective; however, implementation proved
        inefficient logistically and cost prohibitive to reliably implement. Although
        the global commerce infrastructure has accepted RFID as a viable standard
        method
        of track and trace, it too has considerable limitations. Manakoa believes
        that
        its early business success will be based upon developing and owning the
        technology space that finally integrates the best of both--a fully integrated
        and proprietary, forensic Molecular/RFID asset management system.
 
 4
 
  
 **Competitive
        Situation**
 
 Considerable
        competition exists with RFID-based track and trace solutions. Embodiments
        of
        RFID range from layered electronics, chips, microprocessors, etc., at the
        high
        end, to printed tags at the lower end of the price spectrum. RFID signatures
        are
        comprised of digital communication protocol between the tag itself, and a
        handheld reader. Counterfeiting, corrupting and mimicking RFID signals are
        already creating disruption in the global supply chain. Manakoa will be using
        the only RFID whose signal is analog, which is far more difficult to mimic
        or
        corrupt. Manakoa believes it will be the first to market with an RFID system
        that contains encrypted molecules that can forensically authenticate the
        RFID
        tag, and the
        tagged item, as well as the container factory seal, which greatly adds to
        savings in product  originality
        concerns.
 
 The
        company makes no representation that despite its investigation that other
        companies may exist and directly compete in the precisely same market sectors.
 
 **Risk
        Factors**
 
 An
        investment in our securities is very risky. You should carefully consider
        the
        risk factors described below, together with all other information herein,
        before
        making an investment decision. The trading price of our common stock could
        decline due to any of these risks, and you could lose all or part of your
        investment. The investment is only suitable to qualified investors who have
        no
        immediate need for liquidity in their investment and who can bear the risk
        of
        potential total loss. You also should refer to the other information set
        forth
        herein, including our financial statements and the related notes
        thereto.
 
 If
        we do
        not successfully address any of the risks described below, there could be
        a
        material adverse effect on our business, financial condition or results of
        operations, and the trading price of our common stock may decline and investors
        may lose all or part of their investment. We cannot assure any investor that
        we
        will successfully address these risks.
 
 Our
        products require additional enhancements to achieve commercial
        viability.
 
 We
        are
        still in the development phase for many of our products. Substantial additional
        efforts and expenditures to enhance their capabilities are critical to our
        commercial viability. There is no assurance given that we will achieve such
        enhancements or such commercial viability.
  We
        are in
        an early stage of organization without any proven track record in achieving
        our
        objectives.
 
 We
        have
        no material revenues from operations and no significant tangible assets.
        Accordingly, there is no assurance that we will ever operate at a profitable
        level. Our business involves the development, production and marketing of
        software based products. Future development and operating results will depend
        on
        many factors, including the completion of developed products, demand for
        our
        products, level of product and price competition, success in setting up and
        expanding distribution channels, and whether we can develop and market new
        products and control costs. In addition, our future prospects must be considered
        in light of the risks, expenses and difficulties frequently encountered in
        establishing a new business in the software industry, which is characterized
        by
        intense competition and rapid technological change. There is no assurance
        that
        our future financial forecasts will be met. If we are unable to generate
        an
        operating profit at some future date, we may eventually have insufficient
        working capital to maintain operations.
 
 We
        may
        incur substantial operating losses for several years, may never generate
        profits
        and will need additional capital.
 
 It
        is
        very possible that we will incur significant operating losses and generate
        negative cash flow from operating activities during the next few years, while
        we
        develop additional technologies and products. There is no assurance that
        we will
        be able to obtain sufficient additional debt or equity financing or achieve
        or
        sustain profitability or positive cash flow from operating activities in
        the
        future or that we will generate sufficient cash flow to service any debt
        requirements.
 
 We
        will
        be dependent on third parties for other matters.
 
 We
        are a
        small enterprise and have yet to establish substantial internal management,
        personnel and other resources. We depend substantially upon third parties
        for
        several critical elements of our business including, among other things,
        promotion and marketing, technology and infrastructure development and
        distribution activities. The loss of or inability to engage additional third
        party suppliers, providers or personnel would impair or interfere with our
        operations and, accordingly, could have a material, adverse effect on our
        revenues and financial results. We will need future strategic partnerships
        in
        order to achieve financial success.
 
 5
 
  
 The
        successful execution of our business strategy is dependent upon enlisting
        key
        strategic partners in order to assist in product development, the marketing
        effort and to provide financial strength. There is no assurance that we will
        be
        successful in developing such strategic partnerships on a timely basis or
        in
        developing enough strategic partnerships to successfully market our technologies
        and products globally.
 
 If
        we are
        not able to maintain our management team, it will be more difficult for us
        to
        manage our operations and our operating performance would suffer.
 
 We
        are
        reliant on our management team. We do not have written employment agreements
        with our management team. Without written employment agreements there is
        no
        assurance that we will be able to retain the services of one or more members
        of
        our management team. In addition, we may not have adequate resources to replace
        any of the management team who may leave us or to recruit necessary additional
        key members of our management team.
 
 Despite
        our dependence on certain members of management, we do not maintain any key
        life
        insurance on them.
 
 We
        are a
        growing company dependent upon the services of certain management and technical
        personnel, for day-to-day operations and for development of new products.
        The
        loss of the services of any one of these persons, or an inability to recruit
        and
        retain additional qualified personnel, could have a material adverse effect
        on
        us. We have no plans at present to obtain key person life insurance for officers
        and directors. In the event of the death of any of such persons, we may
        experience, at least for a short period, a delay in the growth of our revenues
        and any profits could decrease substantially without life insurance benefits
        to
        offset at least a portion of such revenues or profits.
  The
        market for our products is new and evolving.
 
 The
        markets for our products have only recently begun to develop. As is typical
        in
        the case of a new and rapidly evolving industry, demand and market acceptance
        for recently introduced products and services are subject to a high level
        of
        uncertainty and risk. Because the markets for our products are new and evolving,
        it is difficult to accurately predict the future growth rate, if any, and
        size
        of this market. There is no assurance either that the markets for our products
        will emerge or become sustainable. If the markets fail to develop, develop
        more
        slowly than expected or become saturated with competitors, or if our products
        do
        not achieve or sustain market acceptance, our business, results of operations
        and financial condition will be materially and adversely affected.
 
 We
        will
        compete with a substantial number of other companies, many of which have
        larger
        technical staffs, established market shares and greater financial and
        operational resources than we do. These greater resources permit our competitors
        to implement extensive advertising and promotional programs, which we have
        not
        been, and may never be, able to meet. As these competitors enter the field,
        our
        market share may fail to increase or may decrease despite our efforts to
        continue to produce superior products. The risk management and regulatory
        compliance industry is characterized by rapidly evolving technology and
        potentially intense competition. We will be at a disadvantage with respect
        to
        many other companies. There is no assurance that we will be able to compete
        successfully. There is no assurance that our competitors will not succeed
        in
        developing products or competing technologies that are more effective or
        more
        effectively marketed than products marketed by us, or that render our technology
        obsolete. Earlier entrants into a market often obtain and maintain significant
        market share relative to later entrants. We believe that an increasing number
        of
        products in the market and the desire of other companies to obtain market
        share
        will result in increased price competition. Price reductions by us in response
        to competitive pressure could have a material, adverse effect our business,
        financial condition, and results of operations.
 
 If
        our
        competition misappropriates our proprietary know-how and trade secrets, we
        will
        have greater difficulty in competing with them for business.
 
 Our
        chances of success will depend in part on our ability to preserve and protect
        our trade secrets and any proprietary technology, and to operate without
        infringing upon the patents or proprietary rights of third parties in both
        the
        United States and other countries. At this time we have no pending patents.
        We
        currently seek to protect our proprietary technology through copyrights and
        agreements with employees and others requiring that such information be kept
        confidential and that software code is not reverse engineered. There can
        be no
        assurance that such protection will be sufficient or that copyright claims
        will
        not be challenged. We may have to sue to defend our intellectual property,
        to
        prosecute infringers, or to defend ourselves from infringement claims by
        others.
        Intellectual property litigation is expensive and time-consuming, and can
        be
        used by well-funded adversaries as a strategy for depleting the resources
        of a
        small company such as we are. There is no assurance that we will have sufficient
        resources to successfully prosecute our interests in any patent-related
        litigation that may be brought.
 
 6
 
  
 If
        we are
        found to have infringed on patents or copyrights held by others, our business
        would suffer.
 
 The
        possibility exists that we could be found to be infringing on patents or
        copyrights held by others. We are not aware of any disputes with respect
        to any
        of our intellectual property at this time. The possibility exists, however,
        that
        either the company or its subsidiaries could be found to infringe on patents,
        service marks, trade marks or copyrights held by others. The use of trademarks,
        service marks, trade names, slogans, phrases and other expressions in the
        course
        of our business or the business of our subsidiaries may be the subject of
        dispute and possible litigation.
  If
        we
        cannot keep pace with technological developments, our products could become
        obsolete.
 
 Technological
        obsolescence of our products remains a possibility. There is no assurance
        that
        our competitors will not succeed in developing related products using similar
        processes and marketing strategies before we do, or that they will not develop
        products that are more effective than any which have been or are being developed
        by us. Accordingly, our ability to compete will be dependent on timely
        enhancement and development of our products, as well as the development and
        enhancement of future products.
 
 We
        need
        to manage our growth and maintain procedures and controls.
 
 If
        we are
        to grow, we can expect to place a significant strain on our management,
        operational and financial resources. Such growth may require development
        of and
        improvements in our operational, accounting and information systems, procedures
        and controls.
 
 Our
        management may have conflicts of interest from time to time.
 
 Management,
        Board Members, Board of Advisors and other controlling persons may have
        conflicts of interest with regard to potential business clients and partners.
        These conflicts will be disclosed and appropriately managed.
 
 If
        you
        purchase our securities and later decide to sell shares of common stock,
        you may
        have difficulty selling the shares, and the price at which you can sell the
        shares (if at all) could be less than you might otherwise obtain if a broad
        public market for the common stock existed.
 
 Our
        common stock is quoted on the OTC electronic bulletin board (symbol): MKOS
        There
        can be no assurance that a stable market for our common stock will ever develop
        or, if it should develop, be sustained. It should be assumed that the market
        for
        our common stock will continue to be highly illiquid, sporadic and volatile.
        Our
        stock should not be purchased by anyone who cannot afford the loss of the
        entire
        investment.
 
 We
        are
        required to maintain status as a "reporting" issuer under the Securities
        Exchange Act of 1934 in order to be traded by broker-dealers regulated by
        NASD
        ("NASD"). If we fail to continue to be a reporting issuer, management may
        encounter difficulty in maintaining or expanding a trading market in the
        near
        term, if at all, and shareholders may not be able to sell their shares in
        the
        public market. While management currently intends to maintain status as a
        reporting issuer under the Exchange Act, there can be no assurance that we
        can
        or will maintain such status.
 
 We
        will
        need additional funding in order to succeed.
 
 We
        recognize that substantial additional funding will be needed to achieve our
        objectives. No assurance is given that such funding will be obtained. If
        we
        cannot obtain such financing, it is possible that we will be unable to
        successfully commercialize and market our products, ultimately resulting
        in our
        failure.
 
 Future
        financings could adversely affect your ownership interest and rights in
        comparison with those of other shareholders.
 
 If
        additional funds are raised through the issuance of equity or convertible
        debt
        securities, the percentage ownership of our shareholders will be reduced,
        and
        these newly-issued securities may have rights, preferences or privileges
        senior
        to those of existing shareholders.
  Our
        common stock is subject to penny stock regulation that may affect the liquidity
        for our common stock.
 
 7
 
 
 Shares
        of
        our common stock are subject to the rules adopted by the Securities and Exchange
        Commission has adopted rules that regulate broker-dealer practices in connection
        with transactions in "penny stocks." Penny stocks generally are equity
        securities with a price of less than $5.00 per share (other than securities
        registered on certain national securities exchanges or quoted on the NASDAQ
        system, if current price and volume information with respect to transactions
        in
        such securities is provided by the exchange or system). The penny stock rules
        require a broker-dealer, before consummation of a transaction in a penny
        stock
        not otherwise exempt from the rules, to deliver a standardized risk disclosure
        document prepared by the SEC that contains the following:
 
 o
              a
                  description of the nature and level of risk in the market for penny
                  stocks
                  in both public offerings and secondary trading;o
              a
                  description of the broker's or dealer's duties to the customer
                  and of the
                  rights and remedies available to the customer with respect to violation
                  to
                  such duties or other requirements of securities' laws;o
              a
                  brief, clear, narrative description of a dealer market, including
                  "bid"
                  and "ask" prices for penny stocks and significance of the spread
                  between
                  the "bid" and "ask" price;o
              a
                  toll-free telephone number for inquiries on disciplinary actions;
                  definitions of significant terms in the disclosure document or
                  in the
                  conduct of trading in penny stocks; ando
              such
                  other information and is in such form (including language, type,
                  size and
                  format), as the Commission shall require by rule or
                  regulation.
  Prior
        to
        effecting any transaction in penny stock, the broker-dealer also must provide
        the customer the following:
 
 o
              the
                  bid and offer quotations for the penny stock;o
              the
                  compensation of the broker-dealer and its salesperson in the
                  transaction;o
              the
                  number of shares to which such bid and ask prices apply, or other
                  comparable information relating to the depth and liquidity of the
                  market
                  for such stock; ando
              to
                  the depth and liquidity of the market for such stock;
                  ando
              monthly
                  account statements showing the market value of each penny stock
                  held in
                  the customer's account.
 
 In
        addition, the penny stock rules require that prior to a transaction in a
        penny
        stock not otherwise exempt from those rules, the broker-dealer must make
        a
        special written determination that the penny stock is a suitable investment
        for
        the purchaser and receive the purchaser's written acknowledgment of the receipt
        of a risk disclosure statement, a written agreement to transactions involving
        penny stocks, and a signed and dated copy of a written suitably statement.
        These
        disclosure requirements may have the effect of reducing the trading activity
        in
        the secondary market for a stock such as our common stock that is subject
        to the
        penny stock rules. Our board of directors has the power to issue additional
        shares of common stock and shares of preferred stock.
 
 Our
        Certificate of Incorporation authorizes the issuance of 200,000,000 shares
        of
        common stock and 25,000,000 shares of preferred stock. Our Board of Directors
        may issue all such shares that are not yet issued, without stockholder approval,
        and has the right to determine the rights, preferences and privileges of
        any
        preferred stock issued. Our Board of Directors may choose to issue some or
        all
        of such shares to acquire one or more businesses or other types of property,
        or
        to provide additional financing in the future. The issuance of any such shares
        may result in a reduction of the book value or market price of the outstanding
        shares of our common stock. If we do issue any such additional shares, such
        issuance also will cause a reduction in the proportionate ownership and voting
        power of all other shareholders. Further, any such issuance may result in
        our
        being subject to a change of control.
 
 We
        do not
        intend to declare any cash dividends in the foreseeable future.
 
 We
        have
        never paid cash dividends on our common stock and do not anticipate paying
        any
        dividends on common stock in the foreseeable future. The declaration and
        payment
        of dividends are subject to the discretion of our Board of Directors. Any
        determination as to the payment of dividends in the future will depend upon
        results of operations, capital requirements, and restrictions in loan
        agreements, if any, and such other factors as the Board of Directors may
        deem
        relevant.
  Our
        stock
        option plan could result in the dilution of existing shareholders. Such options
        may be granted under certain circumstances at exercise prices below market
        at
        the time of grant. In any event, if the price of our common stock should
        increase, the difference between the current market stock price the exercise
        prices of outstanding options will increase.
 
 The
        existence of below-market options could adversely affect the market price
        of our
        common stock and impair our ability to raise additional capital through the
        sale
        of our equity securities or debt financing.
 
 8
 
 Exercise
        of any such options will result in dilution of the proportional interests
        of
        shareholders at the time of exercise, and, to the extent that the exercise
        price
        is less than the book value of the common stock at that time, to the book
        value
        per share of the common stock.
 
 **Patents,
        Licenses, Trademarks, etc.**
 
 The
        Company has engaged counsel for the purpose of securing patents, copyrights,
        and
        trademarks. The Company has the following patents and trademarks:
 
 **Intellectual
                  Assets****Project
                  Name**
              **Description**
              **Licenses,
                  US Patent Serial #**Molecular
                  Trademark
              Super-Adjacent
                  Thin-Film Substrate “SATISF-ID”
              Application
                  FiledManakoa
                  US Utility Patent
              Method
                  to couple molecular tags to thin-film RFID Substrates
              Application
                  PendingLANL
                  University of California License, (Exclusive, World-wide)
              Identification
                  coding systems for modulated reflection systems
              7,095,311Long-range,
                  full-duplex, modulated-reflective cell phone for voice/data transmission
              6,434,372
 
 
 **Number
        of Employees - Part and Full Time.**
 
 The
        Company had 4 full-time employees and 3 consultants at year-end 2006. Our
        employees are not represented by a labor union and we have never suffered
        an
        interruption of business as a result of a labor dispute. We consider our
        relations with our employees to be good.
  **ITEM
        2 DESCRIPTION OF PROPERTY**
 
 Our
        Company's headquarters are located in Kennewick, WA. The following table
        sets
        forth certain information regarding the principal properties used by Manakoa
        Services, all of which are leased:
  LOCATION
              FUNCTION
              LEASE
                  TERM BEGINNING
                AND
                  END (MM/DD/YR)
              SQUARE
                  FOOTAGE
              COST
                  PER MO.Kennewick,
                  WA
              Company
                  Headquarters (1)
              month-to-month
              2,500
              $5,000 (2)
  (1)
              The
                  Company's headquarters is shared with one of its shareholders,
                  Apogee
                  Biometrics, Inc., in Kennewick, Washington.(2)
              The
                  lease began at $1,500 for the first 6 months and is now $5,000
                  per month
                  for one-year with two one-year
                  extensions
 
 We
        believe the facilities we occupy are well maintained and in good operating
        condition.  The
        company closed its engineering facilities in Boulder, Colorado November,
        2005.
 
 **ITEM
        9 - LEGAL PROCEEDINGS**
 
 On
        January 16, 2006, Edward Nichols, a former employee, filed suit in Boulder
        County, Colorado against the Company and its Board of Directors claiming
        default
        on a note he holds with the company for $100,000 for purported past services
        while with Secure Logistix Corporation. Also included in the suit were demands
        for past wages and expenses while employed by the Company.
 
 On
        September 25, 2006, a Stipulation for Judgment was entered into among the
        Company and Mr. Nichols. Mr. Nichols was awarded a judgment in the principal
        amount of $49,416, a statutory penalty of $24,708 and attorney fees of $9,170
        for a total judgment of $83,294 on the wage claim cause of action. The Company
        agreed to pay Mr. Nichols $49,416 in quarterly installments of $12,354 on
        September 29, 2006, December 29, 2006, March 29, 2007 and June 29, 2007.
        The
        Company also agreed to deliver 250,000 shares of Manakoa’s common stock to Mr.
        Nichols. The Company made the initial payment under the judgment prior to
        September 29, 2006 and issued the 250,000 shares subsequent to September
        30,
        2006.
 
 9
 
 In
        return
        for the payment of $49,416 and the delivery of the 250,000 shares of Manakoa’s
        common stock, Mr. Nichols agreed that execution shall be stayed on the wage
        claim judgment. If the Company makes all payments in a timely manner, the
        judgment of $83,294 shall be vacated. The balance owed on the judgment as
        of
        December 31, 2006, totaling $24,708, is included in the accompanying financial
        statements as Judgment payable.
 
 Mr.
        Nichols shall be entitled to a judgment on the promissory note cause of action
        in the amount of $100,000 plus interest, and agrees that execution of the
        aforementioned note shall be stayed until June 30, 2008, should the Company
        be
        successful in its arbitration case, on or before June 30, 2008, if the company
        is successful in obtaining a judgment against ex-CEO and director Robert
        Williams and others represented as consultants, employees and founders of
        Secure
        Logistix (see below). The $100,000 principal balance owed as of December
        31,
        2006 is included in the accompanying financial statements as part of Notes
        payable, other. The balance owed for accrued interest as of December 31,
        2006,
        totaling $24,773, is included in the accompanying financial statements as
        Accrued interest payable, other.
 
 On
        May 5,
        2006, the Company received from former employee Jon Foucault a demand letter
        regarding a demand promissory note dated December 30, 2004, in the original
        amount of $25,000 due him by the Company.
 
 On
        or
        about November 1, 2006, the Company filed a Notice of Intent to Arbitrate
        naming
        ex-CEO Robert Williams, ex-VP Software Development Tony Noblett, ex-VP Platform
        Architecture Mark Walla, ex-VP Business Development Edward Nichols, and former
        employees and consultants Ellen Gardner and Jeremiah Beckett. All parties
        listed
        are third party beneficiaries, receiving benefits from the Stock Purchase
        Agreement between Manakoa, Secure Logistix, and Williams.
 
 Manakoa
        intends to arbitrate full restoration of the parties, including those named
        third party beneficiaries, to their original position prior to entry of the
        Stock Purchase Agreement, including restoration of all assets and return
        of all
        issued and outstanding stock of Manakoa from all parties to the contract,
        including the named third party beneficiaries, as well as cancellation of
        the
        notes to all parties to the contract, including the named third party
        beneficiaries. Manakoa further intends to arbitrate all claims of material
        breach and material misrepresentation and the damages related there from
        by Mr.
        Williams and Secure Logistix to Manakoa. Manakoa further intends to arbitrate
        all issues of self-dealing, fraud, tortious interference with business
        expectancy by virtue of the conduct by Mr. Williams, individually, as a
        shareholder, past CEO, and director of Manakoa and a shareholder and director
        of
        Secure Logistix.
 
 **ITEM
        4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None
        during the year ended December 31, 2006.
 
 **ITEM
        5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS**
 
 REPORTS
        TO SECURITY HOLDERS. We are a reporting company with the Securities and Exchange
        Commission, or SEC. The public may read and copy any materials filed with
        the
        SEC at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington,
        D.C. 20549. The public may also obtain information on the operation of the
        Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains
        an
        Internet site that contains reports, proxy and information statements, and
        other
        information regarding issuers that file electronically with the SEC. The
        address
        of that site is http://www.sec.gov.
 
 PRICES
        OF
        COMMON STOCK. We participate in the OTC Bulletin Board, an electronic quotation
        medium for securities traded outside of the NASDAQ Stock Market, and prices
        for
        our common stock are published on the OTC Bulletin Board under the trading
        symbol "MKOS". This market is extremely limited and the prices quoted are
        not a
        reliable indication of the value of our common stock.
  Following
        is information about the range of high and low bid prices for our common
        stock
        for each fiscal quarter since our stock commenced trading. These quotations
        reflect inter-dealer prices, without retail mark-up, mark-down or commission,
        and may not necessarily represent actual transactions.
 
 The
        Company's Common Stock is currently quoted on the OTC Bulletin Board under
        the
        symbol MKOS.OB. The Company's Common Stock was previously quoted on NASD
        Pink
        Sheet market under the symbol EIDT, until March 19, 2004. The following table
        sets forth, for the periods indicated the range of high and low closing sales
        prices per share of the Company's Common Stock, as reported on NASD
        Over-The-Counter Bulletin Board
 
 
 10
 
  FISCAL
                  PERIOD
              FISCAL
                  2004
              FISCAL
                  2005
              FISCAL
                  2006HIGH
              LOW
              HIGH
              LOW
              HIGH
              LOWFirst
                  Fiscal Quarter
              $1.50
              $0.50
              $1.15
              $0.42
              $0.09
              $0.05Second
                  Fiscal Quarter
              $1.00
              $0.45
              $0.65
              $0.30
              $0.18
              $0.07Third
                  Fiscal Quarter
              $1.00
              $0.50
              $0.40
              $0.115
              $0.18
              $0.08Fourth
                  Fiscal Quarter
              $2.00
              $0.23
              $0.18
              $0.05
              $0.13
              $0.06
  (Note)
        The source of this information is from quotation services and broker-dealers
        making a market in the Company's common stock. These prices reflect inter-dealer
        prices, without retail markup, markdown or commission and may not represent
        actual transactions.
 
 As
        of
        December 31, 2006 there were 357 shareholders of record
 
 The
        Company has not declared or paid dividends on its Common Stock since its
        formation, and the Company does not anticipate paying dividends in the
        foreseeable future. Although the Company does not currently have a credit
        facility, future credit facilities, if any, are likely to prohibit the payment
        of dividends. Declaration or payment of dividends, if any, in the future,
        will
        be at the discretion of the Board of Directors and will depend on the Company's
        then current financial condition, results of operations, capital requirements
        and other factors deemed relevant by the Board of Directors.
 
 The
        Transfer Agent and Registrar for our common stock is American Registrar &
Transfer Co., 342 East 900 South, and Salt Lake City, Utah 84111.
 
 OUR
        STOCK
        PRICE MAY BE VOLATILE AND AN INVESTMENT IN SUCH COMMON STOCK COULD SUFFER
        A
        DECLINE IN VALUE:
 
 The
        market price of our common stock may fluctuate significantly and violently
        in
        response to a number of factors, some of which are beyond our control. These
        factors include:
 
 o
              government
                  regulatory action affecting the Companies services or competitors'
                  services;o
              actual
                  or anticipated fluctuations in operating results;o
              the
                  loss of key management or other personnel;o
              the
                  loss of major customers;o
              the
                  outcome of any future litigation;o
              broad
                  market fluctuations; and economic conditions in the United States
                  or
                  abroad.






11
 
 **ITEM
        6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
        OPERATION**
 
 The
        following discussion should be read in conjunction with, and is qualified
        in its
        entirety by, our consolidated financial statements and notes thereto included
        elsewhere in the annual report. Historical results are not necessarily
        indicative of trends in operating results for any future period.
 
 The
        statements contained in the annual report that are not historical facts are
        forward-looking statements that involve a number of risks and uncertainties.
        The
        actual results of the future events described in such forward-looking statements
        in this annual report could differ materially from those stated in such
        forward-looking statements.
 
 The
        Company embarked upon an entirely new business enterprise apart from the
        original Electronic Identification, Inc. "EIDT" contact less smart ID card
        systems. Prior to the merger, EIDT had abandoned the smart ID card system
        business. The technology being developed by the old EIDT, on information
        and
        belief, was not well received by a market place where technologically superior
        solutions emerged. There are no plans to utilize the smart ID card
        system.
 
 Manakoa
        Services Corporation was a privately held Washington state corporation prior
        to
        any merger activity. It was a consulting services start up without sales
        but
        with a focus on the financial sector. The merger between Manakoa-Washington
        and
        SLX occurred as a result of the value perceived by the principals of the
        two
        private companies. No financial impact analysis entered into the decision
        to
        merge. It was based solely on the belief of private owners that a merger
        was
        appropriate based on mutual interest and strategies. The reverse merger with
        EIDT occurred as the method to become a public company. The Board of Directors
        of EIDT did conduct an independent analysis and determined it was to the
        benefit
        of its stockholders to approve the action. The financial impact of that merger
        is documented in the pre and post merger financial statements on file with
        the
        SEC. (please refer to: www.sec.gov)
 
 Manakoa
        Corporation acquired Secure Logistix Corporation (SLX) in November 2003.
        SLX was
        organized in October 2001 as a Colorado corporation in specific response
        to
        terrorist attacks. SLX, through its (as represented) employees and consultants
        (since found to be only Williams), developed contingency plans and models
        in
        conjunction with a number of governmental and private sector organizations.
 
 The
        ‘team’ recognized that a number of government regulations and laws (Sarbanes
        Oxley Act, USA Patriot Act, etc.) would soon be driving organizations to
        take
        these issues seriously. Based upon these two findings, the Company made a
        strategic decision to shift from an emphasis on consulting services to a
        product
        driven organization dedicated to the development of an integrated solution
        that
        addresses basic risk management best practices and the resolution of related
        regulatory compliance. The next step was to validate the conceptual underpinning
        of a new product as an integrated software platform. This effort included
        (1)
        review of the precise impact of the regulations, (2) assessment of available
        software platforms that would permit rapid, repeatable, and scalable solutions,
        (3) potential customer assessment of interest in the conceptual product,
        and (4)
        exploration of channel relationships. The initial product offerings were
        not
        well received by a market place where technologically superior solutions
        emerged
        and it was easily determined that the management and development team behind
        this approach had failed.
 
 On
        November 25, 2005, Manakoa Services Corporation issued a press release to
        announce its Board of Directors intent to re-assess the focus, financing
        and
        direction of the company. After extensive research and review and through
        a
        series of announcements the company forged its new strategic
        direction.
 
 Manakoa
        Services Corporation (www.Manakoa.com) will develop technologies and
        intellectual property for secure asset tracking and authentication systems
        for a
        discrete set of strategic business segments within four targeted industries:
        Petrochemical, Agriculture, Healthcare, and National Security. The Company
        plans
        to grow by the advancement of existing and future technologies, using licenses,
        sublicenses, acquisitions, and other instruments of ventures, with very modest
        organic growth utilizing outsourcing to meet the needs of each of the four
        segments’ Product Managers. The Product Managers will develop
        Business-to-Business relationships with Channel Partners who are the market
        leaders, to ensure Manakoa’s technology investments are market requirements
        driven. The four principal Channel Partners will serve as the main integrators
        of Manakoa’s technology, where they actually formulate and deliver the
        product/solution to their customers. The Company will accelerate its enterprise
        value with novel intellectual property assets and equity building from its
        own
        generation of patents, as well as its participation in strategic licenses
        from
        technology suppliers, such as the National Laboratories .
 
 The
        Company will be involved in research, design, product prototyping and initial
        sales throughout the 2007 calendar year.
  **Product
        Overview**
 
 A
        major
        part of the Company business will be in the development and collection of
        intellectual assets that relate to security markers, and their counterpart
        detection, measurement and reader system technologies. The Company’s business
        model will not only support their use but promotes the licensing of these
        technologies to industry leaders in the form of Manakoa Channel Partners,
        as
        described previously.
 
 12
 
  
 **Market
        Opportunity**
 
 The
        tag
& trace security-related market is rapidly expanding as evidenced by current
        industry pricing strategies, security markers, and tagging and track and
        trace
        solutions are fast becoming a commodity. The Company is sensitive to this
        pricing climate, and has developed an approach to market strategy it believes
        will capitalize on this reality. Rather than turning to technologies and
        solutions which will ultimately focus on cost pricing (NRE, manufacturing,
        marketing, distribution, etc.) the Company will concentrate on the value
        pricing
        model to be at the core of its revenue management and expectations. There
        will
        undoubtedly be exceptions to this rule, for unique high value/high risk
        circumstances—National Security for example---but for the purposes of developing
        financial projections, they will not be incorporated in its plan. The Company
        will use its size, efficiency and speed as an early asset for the Company,
        generating revenues from a variety of fee-based licensing, venture agreements,
        and not from the sale of any product produced by Manakoa. Fee agreements
        will,
        however be based upon unit sales and other metrics as defined by the parties,
        again, with the value and scope of the problem being solved.
 
 The
        risks
        associated with failure to complete projects in a timely fashion are fairly
        typical and beyond the risk associated with internal schedule delays, changes
        in
        the timing, tone and specific requirements set forth by industry leaders
        may
        also have an impact. Finally, competition is also a real risk component.
        By
        failing to come to market in a timely fashion, others could enter and capture
        market share.
 
 **Need
        for Additional Financing**
 
 The
        Company will need to raise additional funds in the next twelve months to
        satisfy
        its cash requirements. The Company is currently seeking to raise $2 million
        in a
        private placement of securities and intends to seek an additional $5 million
        in
        public offering of securities. The Company anticipates, based on currently
        proposed plans and assumptions relating to its operations, that these
        financings, or other sources of additional funding, will be essential for
        the
        Company to satisfy its cash requirements for more than approximately eighteen
        months. In the event that the Company's plans change, its assumptions prove
        to
        be inaccurate or its cash flow proves to be insufficient (due to unanticipated
        expenses, inadequate revenues, difficulties, problems or otherwise), the
        Company
        may be required to obtain financing sooner than anticipated, seek further
        additional financing or curtail its activities. Any issuance of equity
        securities would result in dilution to the interests of the Company's
        stockholders and any issuance of debt securities would subject the Company
        to
        risks that interest rates may increase or cash flow may be insufficient to
        repay
        such indebtedness.
  The
        Company envisions a requirement for two rounds of funding. Initially, it
        is
        expected that the Company will raise $2.0 million in a private placement
        in
        order to accelerate the development and market entry for its compliance
        solutions and provide general administrative expenses. A second round of
        public
        financing will be sought for $5 million to advance market penetration and
        support second-generation product development. The Company currently has
        no
        commitments or understandings for these or any other additional financings
        and
        there can be no assurance that any additional financing will be available
        to the
        Company.
  MANAKOA
                  Use of Proceeds
              Initial
                  Round
              Second
                  Round-$5.0 millionAdministrative/Funding
                  Costs
              $250,000
              $
                  625,000Product
                  Development
              $800,000
              $1,500,000Market
                  Validation and Use Cases
              $225,000
              $
                  400,000Expand
                  Facilities and Infrastructure
              $250,000
              $
                  850,000Market
                  Development and Demand Creation
              $275,000
              $
                  625,000Working
                  Capital
              $200,000
              $1,000,000
  **Plant
        & Equipment**
 
 The
        Company foresees no expected purchase or sale of plant or related facilities
        at
        this time.
 
 **Dependence
        Upon Qualified Personnel and Executive Officers**
 
 The
        Company's operations depend in part upon its ability to retain and hire
        qualified personnel, of which there can be no assurance. The Company's
        operations are also dependent upon the continued services of its executive
        management team and certain other consultants. The loss of services of the
        Chief
        Executive Officer, its executive management team or any of its consultants,
        whether as a result of death, disability or otherwise, could have a material
        adverse effect upon the Company's operations. The Company does not have
        employment agreements with its executive officers.
  **Revenue
          Model**
 
 As
          a new
          product in an emerging market, The Company has conducted preliminary validation
          for pricing and plans to generate revenue from a variety of fee-based licensing,
          venture agreements, and not from the sale of any product produced by Manakoa
          Services Corporation. Fee agreements will, however be based upon unit sales
          and
          other metrics as defined by the parties, again, with the value and scope
          of the
          problem being solved.
  
 13


Report
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheet at December 31, 2006
              F-3Consolidated
                  Statements of Operations for the years ended December 31, 2006
                  and 2005, and from November 21, 2001 (inception) through December
                  31, 2006
              F-4Consolidated
                  Statement of Changes in Shareholders' Deficit for the period from
                  November 21, 2001 (inception) through December 31,
                  2006
              F-5
                  - F-6Consolidated
                  Statements of Cash Flows for the years ended December 31, 2006
                  and 2005, and from November 21, 2001 (inception) through December
                  31, 2006
              F-7
                  - F-8Notes
                  to Consolidated Financial Statements
              F-9








14




**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Shareholders
 Manakoa
        Services Corporation:
 
 
 We
        have
        audited the consolidated balance sheet of Manakoa Services Corporation (a
        development stage enterprise) as of December 31, 2006, and the related
        consolidated statements of operations, changes in shareholder’s deficit, and
        cash flows, for the years ended December 31, 2006 and 2005, and from November
        21, 2001 (inception) through December 31, 2006. 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 audits.
 
 We
        conducted our audits in accordance with the 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
        consolidated 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
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of Manakoa Services Corporation
        as of December 31, 2006, and the results of their operations and their cash
        flows for the years ended December 31, 2006 and 2005, and from November 21,
        2001
        (inception) through December 31, 2006 in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        the
        Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has incurred recurring losses
        and
        has negative working capital and a net capital deficiency at December 31,
        2006.
        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.
 
 
 
 Cordovano
        and Honeck LLP
 Englewood,
        Colorado
 April
        13,
        2007
















F-2
 15




**MANAKOA
                  SERVICES CORPORATION****(A
                  Development Stage Company)**Consolidated
                  Balance Sheets**December
                  31, 2006****Assets**Prepaid
                  expenses:Prepaid
                  expenses, related party (Note 2)
              
              $
              316Prepaid
                  expenses, other
              
              
              2,637Property
                  and equipment, net of accumulated depreciation of
                  $575 (Note 3)
              
              
              816$
              3,769**Liabilities
                  and Shareholders' Deficit**Liabilities:Bank
                  overdraft
              
              $
              11,940Accounts
                  payable, related party (Note 2)
              
              
              81,634Accounts
                  payable, other
              
              
              479,594Judgement
                payable (Note 8)
              
              
              24,708Accrued
                  payroll and payroll taxes
              
              
              680,999Notes
                  payable:Related
                  parties  (Note 2)
              
              
              273,991Other
                  (Note 5)
              
              
              1,421,500Accrued
                  interest payable:Related
                  party (Note 2)
              
              
              53,982Other
                  (Note 5)
              
              
              348,887Indebtedness
                  to related parties (Note 2)
              
              
              340,111Other
                  accrued liabilities
              
              
              12,105Total
                  liabilities
              
              
              3,729,451Shareholders'
                  deficit (Notes 2, 5 and 6):Preferred
                  stock, $.001 par value; 25,000,000 shares authorized,-0-
                  shares issued and outstanding
              
              
              —Common
                  stock, $.001 par value; 200,000,000 shares authorized,59,145,854
                  shares issued and outstanding
              
              
              59,146Additional
                  paid-in capital
              
              
              7,916,353Common
                  stock issued for prepaid services (Note 2)
              
              
              (175,000
              )Deficit
                  accumulated during the development stage
              
              
              (11,526,181
              )Total
                  shareholders’ deficit
              
              
              (3,725,682
              )$
              3,769


See
        accompanying notes to condensed consolidated financial statements






F-3
 16




**MANAKOA
                  SERVICES CORPORATION****(A
                  Development Stage Company)**Consolidated
                  Statements of Operation**November
                  21,****2001****(Inception)****For
                  the Years Ended**
              
              
              **Through****December
                  31,**
              
              
              **December
                  31,****2006**
              
              
              **2005**
              
              
              **2006**Service
                  revenue
              
              $
              7,909
              
              $
              21,856
              
              $
              119,390Operating
                  expenses:Cost
                  of services
              
              
              440
              
              
              —
              
              
              84,215Research
                  and development
              
              
              280
              
              
              666,757
              
              
              2,013,293Loss
                  on disposal of assets
              
              
              —
              
              
              26,664
              
              
              26,664Impairment
                  of license rights (Note 8)
              
              
              —
              
              
              126,137
              
              
              126,137Rent
                  and utilities, related party (Note 2)
              
              
              —
              
              
              70,629
              
              
              194,593General
                  and administrative costs:Salaries
                  and payroll taxes
              
              
              344,197
              
              
              469,696
              
              
              1,203,659Professional
                  fees
              
              
              56,222
              
              
              195,102
              
              
              569,404Consulting
              
              
              24,301
              
              
              306,520
              
              
              669,669Insurance
              
              
              —
              
              
              41,443
              
              
              122,430Stock-based
                  compensation (Note 2,6)
              
              
              1,421,967
              
              
              540,427
              
              
              4,540,486Extinguishment
                of liabilities (Note 6)
              
              
              5,578
              
              
              —
              
              
              5,578Other
              
              
              140,078
              
              
              271,138
              
              
              532,273Total
                  operating expenses
              
              
              1,993,063
              
              
              2,714,513
              
              
              10,088,401Loss
                  from operations
              
              
              (1,985,154
              )
              
              (2,692,657
              )
              
              (9,969,011
              )Interest
                  expense:Debt
                  issue costs (Note 5)
              
              
              —
              
              
              (517,500
              )
              
              (1,035,000
              )Related
                  party (Note 2)
              
              
              (23,348
              )
              
              (15,300
              )
              
              (53,148
              )Other
              
              
              (177,835
              )
              
              (200,414
              )
              
              (469,022
              )Total
                  interest expense
              
              
              (201,183
              )
              
              (733,214
              )
              
              (1,557,170
              )Loss
                  before income taxes
              
              
              (2,186,337
              )
              
              (3,425,871
              )
              
              (11,526,181
              )Income
                  tax provision (Note 4)
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              $
              (2,186,337
              )
              $
              (3,425,871
              )
              $
              (11,526,181
              )Basic
                  and diluted loss per common share
              
              $
              (0.04
              )
              
              (0.09
              )Weighted
                  average common shares outstanding...
              
              
              56,177,872
              
              
              37,970,622




See
        accompanying notes to condensed consolidated financial statements
   F-4
 17


**MANAKOA
                  SERVICES CORPORATION****(A
                  Development Stage Company)**Consolidated
                  Statement of Charges in Shareholders' Deficit**Common**
              
              
              **Deficit****Stock**
              
              
              **Accumulated****Common**
              
              
              **Additional**
              
              
              **Issued
                  for**
              
              
              **During
                  the****Common
                  Stock**
              
              
              **Stock**
              
              
              **Paid-In**
              
              
              **Prepaid**
              
              
              **Development****Shares**
              
              
              **Par
                  Value**
              
              
              **Subscriptions**
              
              
              **Capital**
              
              
              **Services**
              
              
              **Stage**
              
              
              **Total**Balance,
                  November 21, 2001 (inception)
              
              
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Balance,
                  December 31, 2001
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —January
                    1, 2002, stock sold to an officer (Note 2)
              
              
              6,100,000
              
              
              6,100
              
              
              —
              
              
              (6,000
              )
              
              —
              
              
              —
              
              
              100Management
                  and administrative servicescontributed
                  by an officer (Note 2)
              
              
              —
              
              
              —
              
              
              —
              
              
              75,000
              
              
              —
              
              
              —
              
              
              75,000Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (167,871
              )
              
              (167,871
              )Balance,
                  December 31, 2002
              
              
              6,100,000
              
              
              6,100
              
              
              —
              
              
              69,000
              
              
              —
              
              
              (167,871
              )
              
              (92,771
              )November
                  24, 2003, stock issued toacquire
                  net liabilities of ManakoaServices
                  Corporation (Note 1)
              
              
              12,200,000
              
              
              12,200
              
              
              (610
              )
              
              (13,626
              )
              
              —
              
              
              —
              
              
              (2,036
              )November
                  25, 2003, followingrecapitalization
              
              
              18,300,000
              
              
              18,300
              
              
              (610
              )
              
              55,374
              
              
              —
              
              
              (167,871
              )
              
              (94,807
              )December
                  2003, stock issued in exchangefor
                    software development services(Note 6)
              
              
              1,000,000
              
              
              1,000
              
              
              —
              
              
              479,000
              
              
              —
              
              
              —
              
              
              480,000December
                  18, 2003, stock issued toacquire
                    net liabilities of ElectronicIdentification, Inc. (Note
                    1)
              
              
              8,553,783
              
              
              8,554
              
              
              —
              
              
              (409,769
              )
              
              —
              
              
              —
              
              
              (401,215
              )December
                  19, 2003, followingrecapitalization
              
              
              27,853,783
              
              
              27,854
              
              
              (610
              )
              
              124,605
              
              
              —
              
              
              (167,871
              )
              
              (16,022
              )Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,220,577
              )
              
              (1,220,577
              )Balance,
                  December 31, 2003
              
              
              27,853,783
              
              
              27,854
              
              
              (610
              )
              
              124,605
              
              
              —
              
              
              (1,388,448
              )
              
              (1,236,599
              )Receipt
                  of stock subscription
              
              
              —
              
              
              —
              
              
              610
              
              
              —
              
              
              —
              
              
              —
              
              
              610Common
                    stock issued in exchange for services (Note 6)
              
              
              2,433,000
              
              
              2,433
              
              
              —
              
              
              1,312,567
              
              
              —
              
              
              —
              
              
              1,315,000July
                    2004, warrants granted as debt issue costs (Note
                    5)
              
              
              —
              
              
              —
              
              
              —
              
              
              1,035,000
              
              
              —
              
              
              —
              
              
              1,035,000September
                    2004, sale of common stock ($.50/share) (Note
                    6)
              
              
              500,000
              
              
              500
              
              
              —
              
              
              249,500
              
              
              —
              
              
              —
              
              
              250,000September
                  2004, common stock issuedto
                    acquire Advanced Cyber Security, Inc. (Note 9)
              
              
              1,900,000
              
              
              1,900
              
              
              —
              
              
              179,837
              
              
              —
              
              
              —
              
              
              181,737September
                  to December 2004, grantedcommon
                  stock options (Note 6)
              
              
              —
              
              
              —
              
              
              —
              
              
              526,050
              
              
              —
              
              
              —
              
              
              526,050October
                  2004, common stock issuedto
                  repay convertible debt (Note 5)
              
              
              125,000
              
              
              125
              
              
              —
              
              
              49,875
              
              
              —
              
              
              —
              
              
              50,000December
                  2004, common stock issued topay
                    for shareholder obligations andservices rendered (Note
                    2)
              
              
              1,750,000
              
              
              1,750
              
              
              —
              
              
              873,250
              
              
              —
              
              
              —
              
              
              875,000Cancellation
                  of common shares
              
              
              (50,270
              )
              
              (50
              )
              
              —
              
              
              50
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (4,525,525
              )
              
              (4,525,525
              )Balance,
                  December 31, 2004
              
              
              34,511,513
              
              
              34,512
              
              
              —
              
              
              4,350,734
              
              
              —
              
              
              (5,913,973
              )
              
              (1,528,727
              )


F-5
 18


Consolidated
      Statement of Charges in Shareholders'
      Deficit - continued


February
                  2005, common stock optionsexercised
            
            
            150,000
            
            
            150
            
            
            —
            
            
            1,350
            
            
            —
            
            
            —
            
            
            1,500February
                2005, beneficial conversionfeature
                related to issuance of convertiblepromissory
                notes (Note 5)
            
            
            —
            
            
            —
            
            
            —
            
            
            24,100
            
            
            —
            
            
            —
            
            
            24,100March
                2005, common stock issuedin
                exchange for services (Note 6)
            
            
            11,250
            
            
            11
            
            
            —
            
            
            6,177
            
            
            —
            
            
            —
            
            
            6,188March
                2005, common stock warrantsexercised
            
            
            125,000
            
            
            125
            
            
            —
            
            
            7,375
            
            
            —
            
            
            —
            
            
            7,500March
                to June 2005, common stock issuedto
                repay convertible debt and relatedaccrued
                interest (Note 5)
            
            
            2,456,230
            
            
            2,456
            
            
            —
            
            
            1,155,483
            
            
            —
            
            
            —
            
            
            1,157,939May
                2005, common stock optionsexercised
            
            
            50,000
            
            
            50
            
            
            —
            
            
            450
            
            
            —
            
            
            —
            
            
            500June
                  2005, common stock warrants exercised
            
            
            1,500,000
            
            
            1,500
            
            
            —
            
            
            13,500
            
            
            —
            
            
            —
            
            
            15,000July
                2005, common stock issued toacquire
                Vigilant assets (Note 2)
            
            
            5,365,854
            
            
            5,366
            
            
            —
            
            
            523,634
            
            
            —
            
            
            —
            
            
            529,000July
                2005, common stock issuedin
                exchange for services (Note 6)
            
            
            95,000
            
            
            95
            
            
            —
            
            
            30,305
            
            
            —
            
            
            —
            
            
            30,400Common
                stock options vested in 2005
            
            
            —
            
            
            —
            
            
            —
            
            
            60,881
            
            
            —
            
            
            —
            
            
            60,881Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,425,871
            )
            
            (3,425,871
            )Balance,
                December 31, 2005
            
            
            44,264,847
            
            
            44,265
            
            
            —
            
            
            6,173,989
            
            
            —
            
            
            (9,339,844
            )
            
            (3,121,590
            )February
                2006, common stock issuedin
                exchange for services
            
            
            7,000,000
            
            
            7,000
            
            
            —
            
            
            343,000
            
            
            (100,000
            )
            
            —
            
            
            250,000March
                2006, sale of equity units
            
            
            555,555
            
            
            555
            
            
            —
            
            
            24,445
            
            
            —
            
            
            —
            
            
            25,000March
                2006, common stock issued inexchange
                for services
            
            
            3,000,000
            
            
            3,000
            
            
            —
            
            
            177,000
            
            
            —
            
            
            —
            
            
            180,000March
                2006, common stock issued aspayment
                for debt service fees
            
            
            3,000,000
            
            
            3,000
            
            
            —
            
            
            207,000
            
            
            —
            
            
            —
            
            
            210,000April
                2006, equity units issued toofficers
                and directors as paymentfor
                debt, interest and servicesfor
                debt and interest (Note 2)
            
            
            1,666,665
            
            
            1,667
            
            
            —
            
            
            190,000
            
            
            —
            
            
            —
            
            
            191,667April
                2006, loss on fair value of equityunits
                issued to officers and directors(Note
                2)
            
            
            —
            
            
            —
            
            
            —
            
            
            (196,666
            )
            
            —
            
            
            —
            
            
            (196,666
            )June
                2006, common stock issued inexchange
                for services
            
            
            983,077
            
            
            983
            
            
            —
            
            
            126,817
            
            
            (127,800
            )
            
            —
            
            
            —June
                2006, cancellation of outstandingcommon
                shares
            
            
            (4,100,000
            )
            
            (4,100
            )
            
            —
            
            
            4,100
            
            
            —
            
            
            —
            
            
            —July
                2006, common stock issued inexchange
                for services
            
            
            1,000,000
            
            
            1,000
            
            
            —
            
            
            159,000
            
            
            —
            
            
            —
            
            
            160,000August
                2006, common stock issued in
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            —exchange
                for services
            
            
            1,217,500
            
            
            1,218
            
            
            —
            
            
            111,158
            
            
            —
            
            
            —
            
            
            112,376September
                2006, common stock issuedin
                exchange for services
            
            
            308,210
            
            
            308
            
            
            —
            
            
            34,093
            
            
            —
            
            
            —
            
            
            34,401October
                2006, common stock issued inexchange
                for services
            
            
            250,000
            
            
            250
            
            
            —
            
            
            27,250
            
            
            —
            
            
            —
            
            
            27,500Prepaid
                services expensed in 2006
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            52,800
            
            
            —
            
            
            52,800Common
                stock options/warrantsvested
                in 2006
            
            
            —
            
            
            —
            
            
            —
            
            
            535,167
            
            
            —
            
            
            —
            
            
            535,167Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (2,186,337
            )
            
            (2,186,337
            )Balance
                December 31, 2006
            
            
            59,145,854
            
            $
            59,146
            
            $
            —
            
            $
            7,916,353
            
            $
            (175,000
            )
            $
            (11,526,181
            )
            $
            (3,725,682
            )


See
      accompanying notes to condensed consolidated
      financial statements


F-6
 19




**MANAKOA
                  SERVICES
                  CORPORATION****(A
                  Development Stage
                  Company)****Consolidated
                  Statements of Cash Flows****November
                  21,****2001****(Inception)****For
                  the Years Ended**
              
              
              **Through****December
                  31,**
              
              
              **December
                  31,****2006**
              
              
              **2005**
              
              
              **2005**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (2,186,337
              )
              $
              (3,425,871
              )
              $
              (11,526,181
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
                  and amortization
              
              
              279
              
              
              5,197
              
              
              29,255Stock-based
                  compensation - services (Note  2,6)
              
              
              886,800
              
              
              479,546
              
              
              3,850,332Stock-based
                  compensation - options (Note 2,6)
              
              
              535,167
              
              
              60,881
              
              
              1,122,098Debt
                  issue costs, net (Note  5)
              
              
              —
              
              
              517,500
              
              
              1,035,000Loss
                  on disposal of assets
              
              
              —
              
              
              26,664
              
              
              26,664Loss
                  on impairment of license rights (Note 8)
              
              
              —
              
              
              126,137
              
              
              126,137Services
                  contributed by an officer
              
              
              —
              
              
              —
              
              
              75,000Changes
                  in operating assets and liabilities:Prepaid
                  expenses
              
              
              232,528
              
              
              459,102
              
              
              (2,953
              )Bank
                  overdraft
              
              
              11,940
              
              
              —
              
              
              11,940Accounts
                  payable
              
              
              53,612
              
              
              441,790
              
              
              926,047Accrued
                  liabilities
              
              
              344,511
              
              
              776,547
              
              
              1,095,973Net
                  cash used inoperating
                  activities
              
              
              (121,500
              )
              
              (532,507
              )
              
              (3,230,688
              )Cash
                  flows from investing activities:Property
                  and equipment purchases
              
              
              —
              
              
              (8,579
              )
              
              (33,701
              )Cash
                  acquired in EIDT merger
              
              
              —
              
              
              —
              
              
              4,797Net
                  cash used ininvesting
                  activities
              
              
              —
              
              
              (8,579
              )
              
              (28,904
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of convertible debt (Note 1)
              
              
              —
              
              
              57,500
              
              
              915,000Principal
                  payments on promissory noteowed
                  to an officer (Note 1,2)
              
              
              —
              
              
              —
              
              
              (15,000
              )Proceeds
                  from issuance of promissory notes (Note 2)
              
              
              96,500
              
              
              188,991
              
              
              2,074,382Proceeds
                  from exercise of common stock awards
              
              
              —
              
              
              9,500
              
              
              9,500Proceeds
                  from sale of common stock (Note 6)
              
              
              25,000
              
              
              —
              
              
              275,710Net
                  cash provided byfinancing
                  activities
              
              
              121,500
              
              
              255,991
              
              
              3,259,592Net
                  change in cash
              
              
              —
              
              
              (285,095
              )
              
              —Cash,
                  beginning of period
              
              
              —
              
              
              285,095
              
              
              —Cash,
                  end of period
              
              $
              —
              
              $
              —
              
              $
              —


F-7
 20


Consolidated
      Statements of Cash Flows -
      continued


Supplemental
                disclosure of cash flow information:Cash
                paid during the period for:Income
                taxes
            
            $
            —
            
            $
            —
            
            $
            —Interest
            
            $
            —
            
            $
            —
            
            $
            —Non-cash
                investing and financing activities:Common
                stock issued to acquire assets ofVigilant
                Network Technologies, Inc. (Note 2)
            
            $
            —
            
            $
            529,000
            
            $
            529,000Common
                stock issued to repay debt andrelated
                accrued interest (Note 6,8)
            
            $
            215,278
            
            $
            1,157,940
            
            $
            1,373,218Common
                stock issued to acquire AdvancedCyber
                Security, Inc. (Note 2)
            
            $
            —
            
            $
            —
            
            $
            181,737Common
                stock issued to extinguish aconvertible
                promissory note (Note 6)
            
            $
            —
            
            $
            —
            
            $
            50,000Common
                stock issued for prepaidconsulting
                services (Note 6)
            
            $
            —
            
            $
            —
            
            $
            (442,958
            )Common
                stock issued in Manakoa/SLXStock
                Purchase Agreement (Note 1)
            
            $
            —
            
            $
            —
            
            $
            (2,036
            )Common
                stock issued in Manakoa/EIDTStock
                Purchase Agreement (Note 1)
            
            $
            —
            
            $
            —
            
            $
            (401,215
            )




See
      accompanying notes to condensed consolidated
      financial statements






F-8
 21




**MANAKOA
        SERVICES CORPORATION**
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 
 **Note
        1: Nature of organization and summary of significant accounting
        policies**
 
 ***Nature
        of Organization***
 
 Manakoa
        Services Corporation (the “Company” or “Manakoa”) was incorporated under the
        laws of Colorado on November 21, 2001 as Secure Logistix Corporation (“SLX”). On
        November 25, 2003, the Company entered into a Stock Purchase Agreement with
        Manakoa Services Corporation-Private Company (“MSC”). On December 19, 2003, the
        Company entered into a Stock Purchase Agreement with Electronic Identification,
        Inc. (“EIDT”), a public company registered with the Securities and Exchange
        Commission (“SEC”). The Company is a development stage enterprise in accordance
        with Statement of Financial Accounting Standard (“SFAS”) No. 7.
 
 The
        Company is currently in a research and development phase, anticipating during
        2007 to become a technology supplier focusing on solutions that require secure
        asset tracking and authentication systems for industry leaders and government
        agencies.
 
 **MSC
        Recapitalization**
 
 On
        November 25, 2003, MSC, a private shell company incorporated on May 20, 2003,
        entered into a Stock Purchase Agreement with SLX (now known as Manakoa, or
        the
        Company). Under the terms of the agreement, MSC agreed to acquire all of
        the
        issued and outstanding common stock of SLX in exchange for 6,100,000 shares
        of
        MSC common stock and $300,000 cash. The parties subsequently amended the
        agreement to replace the $300,000 cash with the assumption of $300,000 in
        liabilities. Following the acquisition, SLX became a wholly-owned subsidiary
        of
        MSC. However, for accounting purposes, the acquisition has been treated as
        a
        recapitalization of SLX, with MSC the legal surviving entity. Since MSC had
        minimal assets and no operations, the recapitalization has been accounted
        for as
        the sale of 12,200,000 shares of SLX common stock for the net liabilities
        of
        MSC. Therefore, the historical financial information prior to the date of
        the
        recapitalization, is the financial information of SLX.
 
 In
        addition to the above terms of the Stock Purchase Agreement, the Company
        granted
        1,000,000 compensatory common stock options (see Note 8) and agreed to pay
        $500,000 to its(SLX) purported employees and contractors as payment for 2003
        services. The $500,000 is currently due in the form of promissory notes within
        the accompanying consolidated financial statements (see Note 8).
 
 **EIDT
        Recapitalization**
 
 On
        December 18, 2003, the Company entered into a Stock Purchase Agreement with
        EIDT, a Nevada corporation. Under the terms of the Agreement, EIDT agreed
        to
        acquire all of the issued and outstanding common stock of the Company in
        exchange for 19,300,000 shares of EIDT’s common stock. This acquisition has been
        treated as a recapitalization of Manakoa, with EIDT the legal surviving entity.
        Since EIDT had minimal assets and no operations, the recapitalization has
        been
        accounted for as the sale of 8,553,783 shares of Manakoa common stock for
        the
        net liabilities of EIDT. Therefore, the historical financial information
        prior
        to the date of the recapitalization, is the financial information of Manakoa.
        Costs of the transaction have been charged to the period. The recapitalization
        took place on December 18, 2003; however, the consolidated financial statements
        have been prepared as if the recapitalization took place on December 31,
        2003.
 
 **Going
        Concern**
 
 The
        accompanying consolidated financial statements have been prepared on a going
        concern basis, which contemplates the realization of assets and satisfaction
        of
        liabilities in the normal course of business. As shown in the accompanying
        consolidated financial statements, the Company has incurred recurring losses
        and
        has negative working capital and a net capital deficiency at December 31,
        2006.
        These factors, among others, may indicate that the Company will be unable
        to
        continue as a going concern.
 
 The
        consolidated financial statements do not include any adjustments relating
        to the
        recoverability and classification of liabilities that might be necessary
        should
        the Company be unable to continue as a going concern. The Company’s continuation
        as a going concern is dependent upon its ability to generate sufficient cash
        flow to meet its obligations on a timely basis and ultimately to attain
        profitability. The Company plans to seek additional funding to maintain its
        operations through debt and equity financing. There is no assurance that
        the
        Company will be successful in its efforts to raise additional working capital
        or
        achieve profitable operations. The consolidated financial statements do not
        include any adjustments that might result from the outcome of this uncertainty.
 
 
  F-9
 22
  ***Summary
        of Significant Accounting Policies***
 
 **Use
        of estimates**
 
 The
        preparation of the 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 disclosure of contingent assets and
        liabilities at the date of the consolidated financial statements and the
        reported amounts of revenues and expenses during the reporting period. Actual
        results could differ from those estimates.
 
 **Cash
        equivalents**
 
 For
        the
        purposes of the statement of cash flows, the Company considers all highly
        liquid
        debt instruments purchased with an original maturity of three months or less
        to
        be cash equivalents. The Company had no cash equivalents at December 31,
        2006.
 
 **Principles
        of Consolidation**
 
 The
        consolidated financial statements included in this report include the accounts
        of Manakoa Services Corporation and its wholly owned subsidiaries, Cyber
        Security, Inc. and Vigilant Network Technologies, Inc., both of which do
        not
        have any operations. All significant intercompany balances and transactions
        have
        been eliminated in consolidation.
 
 **Property,
        equipment and depreciation**
 
 Property
        and equipment are stated at cost and are depreciated over their estimated
        useful
        lives, approximately five years, using the straight-line method.
 
 Upon
        retirement or disposition of equipment, the cost and accumulated depreciation
        are removed from the accounts and any resulting gain or loss is reflected
        in
        operations. Repairs and maintenance are charged to expense as incurred and
        expenditures for additions and improvements are capitalized.
 
 **Software
        Development Costs**
 
 Software
        development costs are recorded in accordance with Statement on Financial
        Accounting Standards (“SFAS”) Statement No. 86, “Accounting for the Costs of
        Computer Software to be Sold, Leased or Otherwise Marketed”. Costs incurred to
        establish the technological feasibility of computer software to be sold,
        leased,
        or otherwise marketed are expensed as incurred to research and development
        costs. Once technological feasibility is established, the cost of producing
        product masters for the software is capitalized. Capitalization of the software
        development costs ceases and amortization of the capitalized costs commences
        when the product is available for general release to customers. Capitalized
        costs are amortized based on the greater of (a) the ratio of current gross
        revenues to the total current and anticipated future gross revenues, or (b)
        the
        straight-line method over the remaining estimated economic life of the product.
 
 Research
        and development costs totaled $280 and $666,757 for the years ended December
        31,
        2006 and 2005, respectively. The Company has not capitalized any software
        development costs as of December 31, 2006.
 
 **Impairment
        of Software Development Costs**
 
 The
        Company will review software development costs for impairment whenever events
        or
        changes in circumstances indicate that the carrying amount of these assets
        may
        not be recoverable. These assets are assessed for impairment based on estimated
        undiscounted future cash flows from these assets. If the carrying value of
        the
        assets exceeds the estimated future undiscounted cash flows, a loss is recorded
        for the excess of the asset’s carrying value over the fair value. The Company
        did not have any capitalized software development costs at December 31, 2006.
 
 **Impairment
        of Long-Lived Assets**
 
 The
        Company evaluates the carrying value of its long-lived assets under the
        provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of
        Long-Lived Assets”. Statement No. 144 requires impairment losses to be recorded
        on long-lived assets used in operations when indicators of impairment are
        present and the undiscounted future cash flows estimated to be generated
        by
        those assets are less than the assets’ carrying amount. If such assets are
        impaired, the impairment to be recognized is measured by the amount by which
        the
        carrying amount of the assets exceeds the fair value of the assets. Assets
        to be
        disposed of are reported at the lower of the carrying value or fair value,
        less
        costs to sell.
  23
  
 **Net
        loss per share**
 
 Basic
        earnings/loss per share is computed by dividing income available to common
        shareholders (the numerator) by the weighted-average number of common shares
        (the denominator) for the period. The computation of diluted earnings per
        share
        is similar to basic earnings per share, except that the denominator is increased
        to include the number of additional common shares that would have been
        outstanding if potentially dilutive common shares had been issued.
 
 At
        December 31, 2006, there was no variance between basic and diluted loss per
        share as all potentially dilutive common shares outstanding (including
        11,950,000 common stock options and 3,922,220 common stock warrants) were
        anti-dilutive.
 
 **Income
        taxes**
 
 Income
        taxes are provided for the tax effects of transactions reported in the
        consolidated financial statements and consist of taxes currently due plus
        deferred taxes related primarily to differences between the recorded book
        basis
        and the tax basis of assets and liabilities for financial and income tax
        reporting. The deferred tax assets and liabilities represent the future tax
        return consequences of those differences, which will either be taxable or
        deductible when the assets and liabilities are recovered or settled. Deferred
        taxes are also recognized for operating losses that are available to offset
        future taxable income and tax credits that are available to offset future
        federal income taxes.
 
 **Revenue
        recognition**
 
 Service
        revenue is recognized after services are provided and collection is probable.
        Expenses are recognized when incurred. The Company did not make any sales
        of
        software products during the periods presented in the accompanying consolidated
        financial statements.
 
 **Fair
        value of financial instruments**
 
 The
        carrying amounts of cash, accounts and notes payable and other accrued
        liabilities approximate fair value due to the short-term maturity of the
        instruments.
 
 **Stock-based
        compensation**
 
 On
        January 1, 2006, the Company adopted SFAS 123 (revised 2004), *Share-Based
        Payment* (“SFAS
        123(R)”), which requires the measurement and recognition of compensation expense
        for all share-based awards made to employees and directors, including employee
        stock options and shares issued through its employee stock purchase plan,
        based
        on estimated fair values. In March 2005, the Securities and Exchange Commission
        issued Staff Accounting Bulletin 107 (“SAB 107”) relating to SFAS 123(R). The
        Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).
        The Company adopted SFAS 123(R) using the modified prospective transition
        method, which requires the application of the accounting standard as of the
        beginning in 2006. The Company’s financial statements as of and for the year
        ended December 31, 2006 reflect the impact of SFAS 123(R). In accordance
        with the modified prospective transition method, the Company’s financial
        statements for prior periods do not include the impact of SFAS
        123(R).
  Stock
        compensation expense recognized during the period is based on the value of
        share-based awards that are expected to vest during the period. Stock
        compensation expense in 2006 includes compensation expense for the share-based
        awards granted subsequent to January 1, 2006 based on the grant date fair
        value estimated in accordance with the provisions of SFAS 123(R). 2006 stock
        compensation also includes expense for the share-based awards granted prior
        to
        January 1, 2006, but vested subsequent to January 1, 2006, based on the
        grant date fair value estimated in accordance with the provisions of SFAS
        123(R). As stock compensation expense recognized in the statement of operations
        is based on awards ultimately expected to vest, it has not been reduced for
        estimated forfeitures because they are estimated to be negligible. SFAS 123(R)
        requires forfeitures to be estimated at the time of grant and revised, if
        necessary, in subsequent periods if actual forfeitures differ from those
        estimates.
  The
        Company’s determination of estimated fair value of share-based awards utilizes
        the Black-Scholes option-pricing model. The Black-Scholes model is affected
        by
        the Company’s stock price as well as assumptions regarding certain highly
        complex and subjective variables. These variables include, but are not limited
        to; the Company’s expected stock price volatility over the term of the awards
        and actual and projected employee stock option exercise behaviors.
 
 Prior
        to
        the adoption of SFAS 123(R), The Company accounted for stock-based awards
        to
        employees and directors using the intrinsic value method in accordance with
        Accounting Principles Board Opinion 25, *Accounting
        for Stock Issued to Employees* (“APB
        25”). Under the intrinsic value method that was used to account for stock-based
        awards prior to January 1, 2006, which had been allowed under the original
        provisions of SFAS 123, compensation expense is recorded on the date of grant
        if
        the current market price of the underlying stock exceeded the exercise price.
  24
   
 **Recent
        accounting pronouncements**
  In
        February 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 155 (SFAS 155), Accounting for Certain
        Hybrid Financial Instruments- an amendment of FASB Statements No. 133 and
        No.
        140. This Statement resolves issues addressed in Statement 133 Implementation
        Issue No. D1, “Application of Statement 133 to Beneficial Interests in
        Securitized Financial Assets.” This Statement is effective for all financial
        instruments acquired or issued after the beginning of an entity’s first fiscal
        year that begins after September 15, 2006. The fair value election provided
        for
        in paragraph 4(c) of this Statement may also be applied upon adoption of
        this
        Statement for hybrid financial instruments that had been bifurcated under
        paragraph 12 of Statement 133 prior to the adoption of this Statement. The
        Company does not expect the adoption of SFAS 155 to materially impact its
        financial position or results of operations.
 
 In
        March
        2006, the Financial Accounting Standards Board issued Statement of Financial
        Accounting Standards No. 156 (“SFAS 156”), Accounting for Servicing of
        Financial Assets—an amendment of FASB Statement No. 140, which requires an
        entity to recognize a servicing asset or servicing liability each time it
        undertakes an obligation to service a financial asset by entering into a
        servicing contract under certain circumstances. The Company does not expect
        the
        adoption of SFAS 156 to materially impact its financial position or results
        of
        operations.
 
 In
        July
        2006, the Financial Accounting Standards Board issued Interpretation No. 48
        (“FIN 48”), Accounting for Uncertainty in Income Taxes, which clarifies the
        accounting for uncertainty in income taxes recognized in an enterprise’s
        financial statements in accordance with FASB Statement No. 109, Accounting
        for Income Taxes. FIN 48 provides guidance on the financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        tax return. FIN 48 also provides guidance on derecognition, classification,
        interest and penalties, accounting in interim periods, disclosures, and
        transition. FIN 48 is effective for fiscal years beginning after
        December 15, 2006. The Company does not expect the adoption of FIN 48 to
        materially impact its financial position or results of operations.
 
 In
        September 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 157 (“SFAS 157”), Fair Value
        Measurements. SFAS 157 clarifies the principle that fair value should be
        based
        on the assumptions market participants would use when pricing an asset or
        liability and establishes a fair value hierarchy that prioritizes the
        information used to develop those assumptions. Under the standard, fair value
        measurements would be separately disclosed by level within the fair value
        hierarchy. SFAS 157 is effective for financial statements issued for fiscal
        years beginning after November 15, 2007 and interim periods within those
        fiscal years, with early adoption permitted. The Company does not expect
        the
        adoption of SFAS 157 to materially impact its financial position or results
        of
        operations.
 
 In
        February 2007, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 159 (“SFAS 159”), The Fair Value Option
        for Financial Assets and Financial Liabilities—Including an amendment of FASB
        Statement No. 115. This Statement permits entities to choose to measure many
        financial instruments and certain other items at fair value. The objective
        is to
        improve financial reporting by providing entities with the opportunity to
        mitigate volatility in reported earnings caused by measuring related assets
        and
        liabilities differently without having to apply complex hedge accounting
        provisions. This Statement is expected to expand the use of fair value
        measurement, which is consistent with the Board’s long-term measurement
        objectives for accounting for financial instruments. SFAS 157 is effective
        for
        financial statements issued for fiscal years beginning after November 15,
        2007. The Company has not determined the affect of adopting this
        standard.
 
 **Note
        2: Related party transactions**
 
 Indebtedness
        to related parties
 
 At
        December 31, 2006, the Company owed an officer and a former director $81,634,
        respectively, for services performed on behalf of the Company. This balance
        is
        included in the accompanying consolidated financial statements as “Accounts
        payable, related parties”.
 
 As
        of
        December 31, 2006, the Company owed its officers and employees a total of
        $340,111 for working capital advances and expenses paid on behalf of the
        Company. These liabilities are non-interest bearing and are due on demand.
        Management plans to settle these liabilities with cash or stock. The $340,111
        is
        included in the accompanying consolidated financial statements as “Indebtedness
        to related parties”.
 
 Promissory
        notes payable to related parties consist of the following at December 31,
        2006:
 Note
                payable to former CEO issued on November 23, 2003,matures
                March 31, 2006, 8% annual interest rate,unsecured
                (In Default) (see Note 8)
              
              $
              185,000Note
                payable to an officer issued on
                December 31, 2005,  payable
                on demand after June 30, 2006, 10% annualinterest
                rate, unsecured (In Default)
              
              
              50,991Note
                payable to an officer issued on December 31, 2005,payable
                on demand after June 30, 2006, 10% annualinterest
                rate, unsecured (In Default)
              
              
              38,000$
              273,991
 
 Accrued
        interest payable on the above notes totaled $53,982 at December 31,
        2006.  25
 
 Rent
        and other administrative expenses
 
 The
        Company began renting office space located in Kennewick, Washington from
        Apogee
        Biometrics, Inc. (“ABI”), an affiliate under common control, in December 2003.
        Commencing January 1, 2004, the parties verbally agreed that the Company
        would
        make monthly rent payments of $5,000 on a month-to-month basis. In addition,
        the
        Company pays 50% of certain administrative expenses utilized by both parties.
        During the year ended December 31, 2005, the Company paid ABI for rent and
        administrative expenses totaling $70,629. During the year ended December
        31,
        2006, the Company incurred rent and administrative expenses which it paid
        directly to the landlord and utility companies totaling $62,399. As of December
        31, 2006, the Company had prepaid ABI a total of $316 for rent and
        administrative expenses.
 
 Common
        stock transactions
 
 During
        July 2006, the Company issued 1,000,000 shares of its common stock to its
        president as a bonus under the terms of an employment agreement. The transaction
        was initially recorded at fair value and stock-based compensation of $140,000
        was recorded. However, in February 2007 the president resigned and agreed
        to
        terminate the stock issuance. As a result, the stock was returned and cancelled
        by the Company and the related stock-based compensation was
        eliminated.
 
 On
        April
        14, 2006, the Company issued 1,666,665 equity units to four officers and
        directors, and one affiliate in exchange for debts totaling $75,000, or $.045
        per unit. Each unit contains one share of common stock and a warrant to purchase
        an additional share of common stock at a price of $.09 per share. The quoted
        market price of the common stock was $.115 on the grant date, resulting in
        a
        total fair value of $191,666. The Company valued the warrants in accordance
        with
        SFAS 123R. The fair value of the warrants total $.048 per share, resulting
        in a
        value of $80,000. The transaction resulted in a loss on the extinguishment
        of
        debt totaling $196,666. However, because the transaction occurred between
        related parties, the loss has been recorded as a reduction of paid-in capital.
 
 The
        fair
        value of the above stock awards was estimated at the date of grant using
        the
        Black-Scholes option-pricing model with the following assumptions:
 
  Risk-free interest rate
              4.96%Dividend yield
              0.00%Volatility factor
              80.050%Weighted average expected
                life
              3
                  years
  During
        the year ended December 31, 2006, the Company issued 8,000,000 shares of
        its
        common stock to three directors in exchange for director services. The
        transaction was recorded at fair value. Stock-based compensation expense
        of
        $430,000 has been recognized in the accompanying consolidated financial
        statements for the year ended December 31, 2006.
 
 During
        February 2006, the Company issued a total of 5,000,000 shares of its common
        stock to two directors in exchange for director services. The transaction
        was
        recorded at fair value. Stock-based compensation expense of $250,000 has
        been
        recognized in the accompanying consolidated financial statements for the
        year
        ended December 31, 2006.
 
 On
        January 1, 2002, the Company sold 6,100,000 shares of its $.001 par value
        common
        stock to the officer for $100.
 
 **Note
        3: Property and Equipment**
 
 Property
        and equipment consisted of the following at December 31, 2006:
  Computer
                equipment
              
              $
              1,391Less
                accumulated depreciation
              
              
              (575
              )$
              816
  Depreciation
        expense totaled $279 and $5,197 for the years ended December 31, 2006 and
        2005,
        respectively.
 
  26
  **Note
        4: Income taxes**
 
 A
        reconciliation of the U.S. statutory federal income tax rate to the effective
        rate is as follows:
 December
                    31,2006
                
                
                2005U.S.
                    federal statutory graduated rate
                
                
                34.00
                %
                
                34.00
                %State
                    income tax rate, net of federal benefit
                
                
                3.06
                %
                
                3.06
                %Net
                    operating loss for which no tax benefitis
                    currently available
                
                
                -37.06
                %
                
                -37.06
                %Effective
                    rate
                
                
                0.00
                %
                
                0.00
                %
  At
        December 31, 2006, deferred taxes consisted of a net tax asset of $4,231,105,
        due to operating loss carryforwards of approximately $11,357,038, which was
        fully allowed for in the valuation allowance of $4,231,105. The valuation
        allowance offsets the net deferred tax asset for which there is no assurance
        of
        recovery. The deferred tax assets for the years ended December 31, 2006 and
        2005
        were $809,693 and $1,269,484, respectively. The change in the valuation
        allowance for the years ended December 31, 2006 and 2005 were also $809,693
        and
        $1,269,484, respectively. Net operating loss carryforwards will expire through
        2026.
 
 The
        valuation allowance will be evaluated at the end of each year, considering
        positive and negative evidence about whether the asset will be realized.
        At that
        time, the allowance will either be increased or reduced; reduction could
        result
        in the complete elimination of the allowance if positive evidence indicates
        that
        the value of the deferred tax asset is no longer impaired and the allowance
        is
        no longer required.
 
 Should
        the Company undergo an ownership change as defined in Section 382 of the
        Internal Revenue Code, the Company’s tax net operating loss carryforwards
        generated prior to the ownership change will be subject to an annual limitation,
        which could reduce or defer the utilization of these losses.
 
 **Note
        5: Notes payable**
 
 The
        Company’s promissory notes payable consist of the following at December 31,
        2006:
  Note
                payable to an individual issued on June 30, 2004,matured
                June 30, 2005, convertible to the Company'scommon
                stock at a rate of $.50 per share, 15%annual
                interest rate (In Default
              
              $250,000Note
                payable to an individual issued on November 15, 2004,payable
                on demand after February 15, 2005, 15% annualinterest
                rate, unsecured (Payment demanded and in Default)
              
              150,000Note
                payable to an individual issued on December 3, 2004,payable
                on demand after June 30, 2005, 15% annualinterest
                rate, unsecured
              
              300,000Note
                payable to an individual issued on August 15, 2006,matured
                on September 1n 2006, 18% annual interest rate,unsecured
                (In Default)
              
              10,000Note
                payable to an individual issued on August 15, 2006,matured
                on September 1n 2006, 18% annual interest rate,unsecured
                (In Default)
              
              10,000Note
                payable to an individual issued on April 13, 2005,payable
                on demand after June 30, 2005, 10% annualinterest
                rate, unsecured
              
              100,000Note
                payable to an individual issued on December 30, 2004,payable
                on demand after June 30, 2005, 15% annualinterest
                rate, unsecured (Payment demanded and in Default)
              
              25,000Note
                payable to an individual issued on November 25, 2003,payable
                on demand, 8% annual interest rate, unsecured(Payment
                demanded and in Default)
              
              100,000Note
                payable to an individual issued on November 25, 2003,payable
                on demand, 8% annual interest rate, unsecured
              
              
              135,000Note
                payable to an individual issued on November 25, 2003,payable
                on demand, 8% annual interest rate, unsecured
              
              
              265,000Note
                payable to an individual issued on November 30, 2006,payable
                on demand, 10% annual interest rate, unsecured
              
              
              65,000Loan
                payable to an institution issued on August 4, 2006,payable
                on demand, no interest rate, unsecured.
              
              
              11,500$
              1,421,500
 Accrued
        interest payable on the above notes totaled $348,887 at December
        31, 2006.  27
 In
        June
        2004, the Company issued to the $250,000 note holder, warrants to purchase
        1,500,000 shares of common stock as a loan origination fee. The exercise
        price
        on the warrants was $.01 per share and the warrants were to expire on July
        1,
        2005. The warrants were issued below the quoted market price ($.70 per share)
        of
        the common stock on the grant date. Accordingly, the Company determined the
        fair
        value of the warrants in accordance with SFAS 123 and capitalized debt issue
        costs of $1,035,000 at July 1, 2004. The debt issue costs were amortized
        to
        interest expense over the term of the loan (one year). As of June 30, 2005,
        all
        $1,035,000 was amortized to interest expense. On June 30, 2005, the note
        holder
        exercised the warrants. Accrued interest expense on the promissory note was
        reduced by $15,000 as payment to exercise the warrants.
 
 The
        fair
        value for the warrants granted with the loan was estimated at the date of
        grant
        using the Black-Scholes option-pricing model with the following
        assumptions:
  Risk-free
                    interest rate
                2.00%Dividend
                    yield
                0.00%Volatility
                    factor
                785.38%Weighted
                    average expected life
                5
                    years
 
 **Note
        6: Shareholders’ deficit**
 
 Common
        stock
 
 During
        the year ended December 31, 2006, the Company issued 3,923,077 shares of
        its
        common stock in exchange for consulting services to be performed through
        June
        30, 2008. The transactions were recorded at fair value. Stock-based compensation
        expense of $205,000 has been recognized in the accompanying consolidated
        financial statements for the year ended December 31, 2006. The remaining
        $175,000 is reported as a reduction of shareholders’ equity in the accompanying
        consolidated financial statements.
 
 During
        the year ended December 31, 2006, the Company issued 390,000 shares of its
        common stock in exchange for consulting services. The transactions were recorded
        at fair value. Stock-based compensation expense of $41,800 has been recognized
        in the accompanying consolidated financial statements for the year ended
        December 31, 2006.
 
 During
        the year ended December 31, 2006, the Company issued 1,445,710 shares of
        its
        common stock as payment for $134,700 of accounts payable and accrued
        liabilities. The fair value of the common stock issued on the transaction
        dates
        was $140,278. As a result, the Company recognized $5,578 as a loss on the
        extinguishment of liabilities in the accompanying consolidated financial
        statements.
 
 During
        March 2006, the Company sold 555,555 equity units for $25,000. Each unit
        contains one share of common stock and a warrant to purchase an additional
        share
        of common stock at a price of $.09 per share.
 
 During
        March 2006, the Company issued 3,000,000 shares of its common stock to a
        debt
        holder in exchange for debt service fees. The transaction was recorded at
        fair
        value. Stock-based debt service costs of $210,000 have been recognized in
        the
        accompanying consolidated financial statements for the year ended December
        31,
        2006.
 
 During
        July 2005, the Company issued 95,000 shares of its common stock in exchange
        for
        business consulting services. The transaction was recorded at fair value.
        Stock-based compensation expense of $30,400 has been recognized in the
        accompanying consolidated financial statements for the year ended December
        31,
        2005.
 
 During
        March 2005, the Company issued 11,250 shares of its common stock in exchange
        for
        business consulting services. The transaction was recorded at fair value.
        Stock-based compensation expense of $6,188 has been recognized in the
        accompanying consolidated financial statements for the year ended December
        31,
        2005.
 
 Stock
        awards granted to consultants
 
 On
        August
        31, 2006, the Company granted two sales consultants options to purchase a
        total
        of 1,000,000 shares of the Company’s common stock. The options carry an exercise
        price of $.09 per share and vest on the date of grant. The options expire
        on
        August 31, 2007.
          The
          quoted market price of the common stock was $.09 per share on the grant
          date.
          The Company valued the options in accordance with SFAS 123R. The fair value
          of
          the options was $.03 per share and resulted in $30,000 that was recorded
          as
          stock-based compensation in the accompanying consolidated financial statements
          for the year ended December 31, 2006.
  28
  
 On
        August
        24, 2006, the Company granted two sales consultants options to purchase
        3,000,000 shares of the Company’s common stock. The options carry an exercise
        price of $.14 per share and vest based on the achievement of milestones,
        as
        follows:
 
 1,000,000
        shares upon the agent reaching $1,000,000 in gross sales;
 1,000,000
        shares upon the agent reaching $2,000,000 in gross sales;
 1,000,000
        shares upon the agent reaching $5,000,000 in gross sales;
 
 The
        options expire on August 24, 2009. The quoted market price of the common
        stock
        was $.08 per share on the grant date. The Company valued the options in
        accordance with SFAS 123R. The fair value of the options was $.033 per share
        and
        resulted in $99,000 that will be recorded as stock-based compensation as
        the
        above milestones are achieved.
 
 On
        July
        1, 2006, the Company granted a marketing consultant options to purchase
        3,000,000 shares of the Company’s common stock. The options carry an exercise
        price of $.14 per share and vest based on the achievement of milestones,
        as
        follows:
 
 1,000,000
        shares upon the agent reaching $1,000,000 in gross sales;
 1,000,000
        shares upon the agent reaching $2,000,000 in gross sales;
 1,000,000
        shares upon the agent reaching $4,000,000 in gross sales;
 
 The
        options expire on July 1, 2011. The quoted market price of the common stock
        was
        $.16 per share on the grant date. The Company valued the options in accordance
        with SFAS 123R. The fair value of the options was $.112 per share and resulted
        in $336,000 that will be recorded as stock-based compensation as the above
        milestones are achieved.
 
 On
        June
        27, 2006, the Company granted a financial advisor warrants to purchase 1,700,000
        shares of the Company’s common stock. The options carry an exercise price of
        $.0001 per share and vest on the date of grant. The options expire on June
        27,
        2011. The quoted market price of the common stock was $.15 per share on the
        grant date. The Company valued the options in accordance with SFAS 123R.
        The
        fair value of the options was $.15 per share and resulted in $255,000 that
        was
        recorded as stock-based compensation in the accompanying consolidated financial
        statements for the year ended December 31, 2006.
 
 Stock
        awards granted to employees
 
 Effective
        January 1, 2006, the Company adopted SFAS No. 123R, “Share Based Payment”. SFAS
        123R requires a public entity to measure the cost of employee services received
        in exchange for an award of equity instruments based on the grant-date fair
        value of the award (with limited exceptions). In prior years, employee
        stock-based compensation awards were measured based on the intrinsic value
        method. As a result of the change in accounting policy, the Company recorded
        $26,917 as stock-based compensation on employee options that vested during
        the
        year ended December 31, 2006.
 
 On
        January 31, 2006, the Company granted two officers options to purchase 3,500,000
        shares of the Company’s common stock. The options carry an exercise price of
        $.08 per share and vest on the date of grant. 500,000 options expire on January
        31, 2009 and the remaining 3,000,000 options expire on January 31, 2011.
        The
        quoted market price of the common stock was $.06 per share on the grant date.
        The Company valued the options in accordance with SFAS 123R. The fair value
        of
        the options ranged between $.028 and $.037 per share and resulted in $125,000
        that was recorded as stock-based compensation in the accompanying consolidated
        financial statements for the year ended December 31, 2006.
 
 April
        14,
        2006, the Company granted an officer options to purchase 250,000 shares of
        the
        Company’s common stock. The options carry an exercise price of $.08 per share
        and vest on the date of grant. The options expire on April 14, 2009. The
        quoted
        market price of the common stock was $.115 per share on the grant date. The
        Company valued the options in accordance with SFAS 123R. The fair value of
        the
        options total $.073 per share, resulting in stock-based compensation totaling
        $18,250.
 
 The
        fair
        value of the options was estimated at the date of grant using the Black-Scholes
        option-pricing model with the following assumptions:
  Risk-free interest rate
              4.47%
                  - 5.19%Dividend yield
              0.00%Volatility factor
              80.050%Weighted average expected
                life
              1
                  to 5 years
  29
  Had
        the
        compensation expense in prior periods been recorded based on the fair value
        at
        the grant date, and charged to expense over vesting periods, consistent with
        the
        provisions of SFAS 123, the Company’s net loss and net loss per share would have
        increased to the pro forma amounts indicated below:
 
 For
                    The Years EndedDecember
                    31,2006
                
                2005Net
                    loss, as reported
                
                $
                (2,186,337
                )
                $
                (3,425,871
                )Stock-based
                    employee compensation, as reported
                
                $
                26,917
                
                $
                34,300Stock-based
                    employee compensation, fair value
                
                $
                26,917
                
                $
                68,467Pro
                    forma net loss
                
                $
                (2,186,337
                )
                $
                (3,460,038
                )Basic
                    and diluted net loss per commonshare,
                    as reported.
                
                $
                (0.04
                )
                $
                (0.09
                )Pro
                    forma basic and diluted net lossper
                    common share
                
                $
                (0.04
                )
                $
                (0.09
                )
 
 On
        June
        14, 2006, the Company granted its newly appointed president options to purchase
        5,000,000 shares of the Company’s common stock. The options carried an exercise
        price of $.14 per share and were to vest based on the achievement of milestones.
        However, in February 2007 the president resigned and agreed to terminate
        the
        stock options.
 
 The
        following schedule summarizes the changes in the Company’s stock
        awards:




Weighted
              
              WeightedAwards
                  Outstanding
              
              
              Average
              
              
              Average
              
              
              AggregateNumber
                  of
              
              
              Exercise
                  Price
              
              
              Exercise
                  Price
              
              
              Remaining
              
              
              IntrinsicShares
              
              
              Per
                  Share
              
              
              Per
                  Share
              
              
              Contractual
                  Life
              
              
              ValueBalance
                  at January 1, 2005
              
              
              6,058,000
              
              $
              .01
                  to $1.10
              
              $
              0.43Awards
                  granted
              
              
              1,400,000
              
              $
              .01
                  to $1.10
              
              $
              1.00Awards
                  exercised
              
              
              (1,825,000
              )
              $
              .01
                  to $.06
              
              $
              0.01Awards
                  cancelled/expired.
              
              
              (4,318,000
              )
              $
              .01
                  to $1.10
              
              $
              0.77Balance
                  at December 31, 2005
              
              
              1,315,000
              
              $
              .01
                  to $1.10
              
              $
              0.43Awards
                  granted
              
              
              14,672,220
              
              $
              .0001
                  to $.14
              
              $
              0.10Awards
                  exercised
              
              
              -
              
              
              N/A
              
              
              N/AAwards
                  cancelled/expired
              
              
              (115,000
              )
              $
              1.10
              
              $
              1.10Balance
                  at December 31, 2006
              
              
              15,872,220
              
              $
              .0001
                  to $1.10
              
              $
              0.13
              
              
              2.85
                  years
              
              $
              134,300Awards
                  exercisable atDecember
                  31, 2006
              
              
              9,872,220
              
              $
              .0001
                  to $1.10
              
              $
              0.12
              
              
              2.40
                  years
              
              $
              134,300








The
      weighted average grant date fair value for all awards granted in 2006 totaled
      $.06.





The
      following schedule summarizes the non-vested stock awards for the year ended
      December 31, 2006:





30





Weighted
              
              WeightedAverage
              
              AverageNumber
                  of
              
              Exercise
                  Price
              
              Grant
                  DateShares
              
              Per
                  Share
              
              Fair
                  ValueBalance
                  at January 1, 2006
              -
              
              N/A
              
              N/AAwards
                  granted
              6,000,000
              
              0.14
              
              0.07Awards
                  exercised
              -
              
              N/A
              
              N/AAwards
                  cancelled/expired
              -
              
              N/A
              
              N/ABalance
                  at December 31, 2006
              6,000,000
              
              $
                  0.14
              
              $
                  0.07





**Note
      7: License rights and impairment**





Advanced
      Cyber Security, Inc. ("ACSI"), the Company's wholly-owned subsidiary, acquired
      license rights to a prototype program for systems administrator simulation
      training (SAST) from Battelle Memorial Institute (the "Licensor") in August
      2004. The program purportedly provided rapid evaluation of the cyber security
      experience of system administrators to identify, circumvent or recover from
      hacker activity. Manakoa management subsequently concluded that material
      deficiencies existed in the purported functionality of the licensed matter.
      These discrepancies were documented by Manakoa and set forth Battelle officials
      without satisfactory resolution. As stated in the 8K filing dated July 13,
      2005,
      Manakoa Services Corporation and Battelle Corporation have bi-laterally
      terminated the agreement disclosed in the 8K filing dated September 7, 2004.
      Manakoa conducted discussions with Pacific Northwest National Laboratory managed
      by the Battelle Corporation regarding the technological viability of licensed
      technology beginning in the fourth quarter of 2004. Despite documented concerns
      from Manakoa management, roadmap discussions with PNNL lab officials continued
      from December 2004 through April 2005. Manakoa’s internal analysis of the
      licensed technology continued through the second quarter of 2005 including
      investigations on adopting the Cyber Attack Simulator Trainer in its conceptual
      form and bundling off-the-shelf alternatives technologies. The Company still
      believes in the concept but concluded that the actual source material that
      was
      licensed from Battelle lacked commercial value. Officials at the national
      laboratory were apprised of the issues and they agreed to renegotiate the
      contract. Manakoa renegotiated its professional services contract with Battelle
      Corporation under which the Pacific Northwest National Laboratories would
      perform an expanded set of functions including review and verification of
      Manakoa technology. Requests for support under this amended agreement occurred
      in the second quarter. Telephone and e-mail exchanges regarding non-performance
      occurred in the May to June timeframe. The two organizations have subsequently
      given notice of termination.





During
      the three months ended June 30, 2005, the Company completed a review of the
      license technology and determined that the carrying amount of the license rights
      were not recoverable. As a result of this review, the Company recorded an asset
      impairment charge of $126,137 during the quarter ended June 30, 2005 for the
      write-off of the carrying value of the license rights.





**Note
      8: Litigation**





Stipulation
      for Judgment




On
      January 16, 2006, Edward Nichols, a former employee, filed suit in Boulder
      County, Colorado against the Company and its Board of Directors claiming default
      on a note he holds with the Company for $100,000 for purported past services
      while with Secure Logistix Corporation. Also included in the suit were demands
      for past wages and expenses while employed by the Company.





On
      September 25, 2006, a Stipulation for Judgment was entered into among the
      Company and Mr. Nichols. Mr. Nichols was awarded a judgment in the principal
      amount of $49,416, a statutory penalty of $24,708 and attorney fees of $9,170
      for a total judgment of $83,294 on the wage claim cause of action. The Company
      agreed to pay Mr. Nichols $49,416 in quarterly installments of $12,354 on
      September 29, 2006, December 29, 2006, March 29, 2007 and June 29, 2007. The
      Company also agreed to deliver 250,000 shares of Manakoa’s common stock to Mr.
      Nichols. The Company made the initial payment under the judgment prior to
      September 29, 2006 and issued the 250,000 shares in October 2006.





In
      return
      for the payment of $49,416 and the delivery of the 250,000 shares of Manakoa’s
      common stock, Mr. Nichols agreed that execution shall be stayed on the wage
      claim judgment. If the Company makes all payments in a timely manner, the
      judgment of $83,294 shall be vacated. The balance owed on the judgment as of
      December 31, 2006, totaling $24,708, is included in the accompanying financial
      statements as Judgment payable.





Mr.
      Nichols shall be entitled to a judgment on the promissory note cause of action
      in the amount of $100,000 plus interest, and agrees that execution of the
      aforementioned note shall be stayed until June 30, 2008, should the Company
      be
      successful in its arbitration case, on or before June 30, 2008, if the Company
      is successful in obtaining a judgment against former CEO and director Robert
      Williams and others represented as consultants, employees and founders of Secure
      Logistix (see below). The $100,000 principal balance owed as of December 31,
      2006 is included in the accompanying financial statements as part of Notes
      payable, other. The balance owed for accrued interest as of December 31, 2006,
      totaling $24,773, is included in the accompanying financial statements as
      Accrued interest payable, other.





31










Notice
      of Intent to Arbitrate





On
      or
      about November 1, 2006, the Company filed a Notice of Intent to Arbitrate naming
      former CEO Robert Williams, former vice president of software development Tony
      Noblett, former vice president of platform architecture Mark Walla, former
      vice
      president of business development Edward Nichols, and former employees and
      consultants Ellen Gardner and Jeremiah Beckett. All parties listed are third
      party beneficiaries, receiving benefits from the Stock Purchase Agreement
      between Manakoa, Secure Logistix, and Mr. Williams.





Manakoa
      intends to arbitrate full restoration of the parties, including those named
      third party beneficiaries, to their original position prior to entry of the
      Stock Purchase Agreement, including restoration of all assets and return of
      all
      issued and outstanding stock of Manakoa from all parties to the contract,
      including the named third party beneficiaries, as well as cancellation of the
      notes to all parties to the contract, including the named third party
      beneficiaries, as well as financial restitution. Manakoa further intends to
      arbitrate all claims of material breach and material misrepresentation and
      the
      damages related therefrom by Mr. Williams and Secure Logistix to Manakoa.
      Manakoa further intends to arbitrate all issues of self-dealing, fraud, tortuous
      interference with business expectancy by virtue of the conduct by Mr. Williams,
      individually, as a shareholder of Manakoa, and past CEO of Manakoa, as well
      as a
      past director of Manakoa, and a shareholder and director of Secure Logistix,
      along with Messrs. Walla, Gardner and Noblett as co-conspirators.





An
      estimate of any possible gain or loss, or range of gain or loss, cannot be
      made
      at this time.





**Note
      9: Subsequent events**





Three
      sales and marketing consultants were terminated in 2007, causing the expiration
      of 4,000,000 common stock options and the cancellation of 1,000,000 common
      shares.





On
      January 3, 2007, an officer was awarded 1,000,000 shares as a sign-on
      bonus.





On
      February 12, 2007, the Company issued two consultants 3,200,000 warrants at
      an
      exercise price of $.001 per share. The warrants were subsequently exercised;
      resulting in the issuance of 3,200,000 shares of the Company’s restricted common
      stock.





On January
      8, 2007, the Company purchased from Utek Corporation (AMEX: UTK) a
      subsidiary, Infinite Identification Technologies, Inc. (“Infinite”), in exchange
      for 100,000 shares of the Company’s convertible preferred stock. Infinite holds
      a License Agreement from the Los Alamos National Laboratory, operated by Los
      Alamos National Security, LLC, for the U.S. Department of Energy. Under the
      terms of the agreement, the Company prepaid certain consulting fees totaling
      $50,000.










32




**ITEM
        8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
 
 NONE.
 
 **ITEM
        8A CONTROLS AND PROCEDURES**
 
 The
        chief
        executive officer and the president of the Company have concluded based on
        their
        evaluation that as of the end of the period covered by this report the Company's
        disclosure controls and procedures are effective to ensure that information
        required to be disclosed by the Company in the reports filed or submitted
        by it
        under the Securities Act of 1934, as amended, is recorded, processed, summarized
        and reported within the time periods specified in the Securities and Exchange
        Commission's rules and forms, and include controls and procedures designed
        to
        ensure that information required to be disclosed by the Commission in such
        reports is accumulated and communicated to the Company's management, including
        the president, as appropriate to allow timely decisions regarding required
        disclosure.
 
 There
        were no significant changes in the Company's internal controls or in other
        factors that could significantly affect these controls subsequent to the
        date of
        the period covered by this report.
 
 **ITEM
        9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH
        SECTION 16(a) OF THE EXCHANGE ACT**
 
 The
        members of the Board of Directors of the Company serve until the next annual
        meeting of the stockholders, or until their successors have been elected.
        The
        officers are appointed by the Board of Directors and hold office until their
        earlier death, retirement, resignation or removal.
 
 There
        are
        no agreements for any officer or director to resign at the request of any
        other
        person, and none of the officers or directors named below is acting on behalf
        of, or at the direction of, any other person.
  Name
              Age
              Position
              Year
                  first electedStuart
                  Platt
              73
              Chairman
                  of The Board
              2003James
                  C. Katzaroff
              50
              CEO,
                  Director
              2003Ken
                  Hatch
              71
              Director
              2004Robert
                  A. Papke
              50
              COO,Director
                  and Secretary
              2004
 
 Executive
        Officers of the Company are elected on an annual basis and serve at the
        discretion of the Board of Directors. Directors of the Company are elected
        on an
        annual basis. All directors agreed to remain until the 2005 annual
        meeting.
 
 Rear
        Admiral (ret) Stuart Platt--MS, MBA, Chairman of the Board
 
 The
        author of THE ARMAMENT TIDE - REARMING AMERICA and LETTERS FROM THE FRONT
        LINES
        - IRAQ AND AFGHANISTAN, Stuart Platt was promoted early ahead of his peers;
        he
        went on to become a Rear Admiral and completed a distinguished 31 year military
        career as a highly decorated Vietnam veteran. He has followed his military
        success with an equally successful executive career in business, principally
        in
        the technology and defense sectors. Appointed by President Reagan as the
        Navy's
        first Competition Advocate General, he led an historic reform program to
        improve
        the way the Navy buys ships, aircraft, and weapon systems. He also served
        as
        deputy commander of the Naval Sea Systems Command, where he was responsible
        for
        acquiring Navy surface ships and submarines during the build-up of the 600
        ship
        Navy. He was recently honored by being named to the Cold War Leadership Hall
        of
        Fame by the Submarine Force Library & Museum Association, and was a
        presidential appointee to the Board of Governors of the United States Merchant
        Marine Academy. Admiral Platt has a Master of Science from the William E.
        Simon
        Graduate School of Business at the University of Rochester, an MBA from the
        School of Business at the University of Michigan, and is a graduate of the
        Executive Program, Graduate School of Business at Stanford
        University.
  James
        C.
        Katzaroff, C.E.O. and Director
 
 Mr.
        Katzaroff brings a wealth of business and corporate finance experience to
        Manakoa. Since 1998, Mr. Katzaroff has held senior positions at Telemac,
        including Chief Financial Officer, Senior Vice President-Finance, Sr. Vice
        President, and Corporate Secretary of Telemac,
        Inc., an international communications venture active in the wireless telephony
        market. At Telemac, he was responsible for the venture's corporate strategy,
        investors and investment banking relationships, and the creation of the original
        executive team. Prior to Telemac, Mr. Katzaroff was a financial consultant
        with
        Smith Barney, Bateman Eichler and E.F. Hutton. Mr. Katzaroff has been a
        financial advisor for numerous start-up and development stage companies,
        and has
        assisted numerous companies with their initial public offerings. Mr. Katzaroff
        holds a Bachelor's Degree in Business Economics from the University of
        California, Santa Barbara, and has completed advanced management courses
        at the
        University of Washington.
  33
  
 Paul
        J.
        Reep, President & Chief Technology Officer
 
 Mr.
        Reep
        has an excellent 15 year history with the Federal Laboratory System and the
        Department of Energy. He has extensive formal and technical management training
        through DOE’s operating contractors, EG&G, Bechtel Corp, and Lockheed
        Martin. Paul directed projects with DOD, NASA, USDA, Members of Congress
        and the
        Cabinet. As a DOE Program Director, Paul spearheaded a multi-agency technology
        transfer initiative between USDA and DOE, which is now well-known as the
        Bio-Energy Program. Prior to working with the DOE, Paul worked with Lockheed
        Aircraft and Rockwell International. Paul left the DOE system in 1996, to
        start
        his own sensor and instrument company, which was soon purchased by a public
        security company, where became President and Chief Operating Officer, securing
        purchasing contracts from the Justice Department and the Federal Aviation
        Administration, the Department of Defense, Department of Homeland Security,
        and
        other Federal and State agencies. Paul has numerous patents and awards for
        his
        management excellence, as well as several notable Committee
        appointments.
  Robert
        A.
        Papke, C.O.O. and Director
 
 Mr.
        Papke
        has served as Manakoa's VP and Corporate Secretary for several years. He
        has
        held senior management/executive positions with a number of companies and
        is
        currently President and board member of Apogee Biometrics, Inc. Prior to
        ABI,
        Mr. Papke was the Founder & CEO of IMGI, marketing & distribution
        company that licensed and leveraged existing brands into complimentary markets.
        Prior to IMGI, Mr. Papke served as President/CEO of PhotoTrust, a professional
        B2B enterprise solutions company. Mr. Papke has also served as General Manager-
        Professional Services Business Unit for Intel Corporation. Mr. Papke holds
        a
        Bachelor's Degree in Business Administration from the University of Southern
        California.
 
 Ken
        Hatch
        - Member, Board of Directors
 
 Mr.
        Hatch
        is a respected business executive who has served on numerous corporate, charity,
        civic and higher education Boards of Directors. Mr. Hatch currently is CEO
        of
        Hatch Enterprises, Inc. which he founded in 1997 to provide organizational
        and
        corporate image communications consulting for corporations under development,
        in
        transition, or in crisis. He previously was President of the Pacific Institute
        from 1995-1997. The Pacific Institute does business in 41 countries and in
        13
        languages. Mr. Hatch was Chairman and President of KIRO, Inc. a Seattle CBS
        television and radio station complex, from 1980-1995. He also served as the
        Senior Vice President, Broadcast Division for the A. H. Belo Corporation,
        then
        the 11th largest U.S. communication company.
 
 **Conflicts
        of Interest Related to Other Business Activities**
 
 James
        C.
        Katzaroff, Chief Executive Officer, is also Chairman and CEO of Apogee
        Biometrics, a shareholder that currently owns approximately 1,441,476 shares
        or
        2.4% of Manakoa Services Corporation. The company rents space from Apogee
        Biometrics, Inc. for $5,000 per month. Robert Papke is President of Apogee
        Biometrics, Inc.
 
 Section
        16(a) Beneficial Ownership Reporting Compliance
 
 Section
        16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
        requires that the Company's officers and directors, and persons who own more
        than ten percent (10%) of a registered class of the Company's equity securities,
        file reports of ownership and changes of ownership with the SEC. Officers,
        directors and greater than ten percent (10%) shareholders are required by
        SEC
        regulation to furnish the Company with copies of all such reports they
        file.
 
 The
        following table furnishes compensation information for the year ending for
        the
        Company Officers; the Chief Executive Officer and President. The company
        does
        not have any employment contracts or change of control agreements with the
        parties.
 
  34
  ANNUAL
                  COMPENSATION
              LONG
                  TERM COMPENSATIONNAME
                  AND PRINCIPAL
                POSITION
              YEAR
              SALARY
                  ($)
              BONUS
                  ($)
              OTHER
                  ANNUAL COMPENSATION ($)
              AWARDS
              PAYOUTS
              ALL
                  OTHER
                COMPENSATIONRESTRICTED
                STOCK
                  AWARDS($)
              SECURITIES
                UNDERLYING
                OPTIONS/SARS
                  (#)*
              PAYOUTS
                **
              LTIP($)James
                  C Katzaroff
                None
                Chief
                  Executive Officer
              2006
              144,000
                  (1)
              None
              None
              None
              None
              None
              NoneRobert
                  A. Papke,
                None
                Chief
                  Operating Officer
              2006
              108,000
                  (2)
              None
              None
              None
              None
              None
              NoneDebra
                  S. Kasparek
                Chief
                  Financial Officer
                None
              2006
              40,000
                  (3)
              None
              None
              None
              None
              None
              NoneChris
                  O. Outwater
                None
                Former
                  President
              2006
              14,943
                  (4)
              None
              None
              None
              None
              None
              NonePaul
                  Reep
                None
                President
              2006
              9,350
                  (5)
              None
              None
              None
              None
              None
              None
 
 (1)
        James
        C. Katzaroff received $62,397 in salary for 2005, and deferred $34,526 for
        2005
        and $144,000 for 2006, which is carried as an account payable.
 (2)
        Robert A. Papke received $16,470 in salary for 2005, and deferred $52,068
        for
        2005 and $108,000 for 2006, which is carried as an account payable.
 (3)
        Debra
        S. Kasparek received $9,038 in salary for 2005, and deferred $7,740 for 2005
        and
        $40,000 for 2006, which is carried as an account payable
 (4)
        Chris
        O. Outwater received $14,943 in salary for 2006, and deferred $17,869, which
        is
        carried as an account payable.
 (5)
        Paul
        Reep received $9,350 in salary for 2006, and $2,427 as advanced salary for
        2007.
 
 **Compensation
        of Outside Directors.**
 
 Any
        compensation received by our officers, directors, and management personnel,
        will
        be determined from time to time by our board of directors. Our officers,
        directors, and management personnel will be reimbursed for any out-of-pocket
        expenses incurred on our behalf.
 
 **Board
        of Directors Committees**
 
 Pursuant
        to Company by-laws the company has two committees: an Audit and Compensation
        Committees. The Audit Committee is chaired by Admiral Stuart Platt. The
        Compensation Committee is chaired by Ken Hatch. Each committee member's term
        on
        the respective committees shall run co-terminously with their term as director,
        unless terminated by the Board of Directors prior to said natural expiration
        of
        said term or terminated due to said Director's resignation from the Board
        of
        Directors.
 
 **Stock
        Option Plan**
 
 The
        Board
        of Directors adopted and a majority of the shareholders approved the Company's
        2004 Combined Incentive and Non-Qualified Stock Option Plan that authorized
        the
        granting of options for up to 3,000,000 shares of the Company's common. A
        copy
        of the full text of the plan was filed with the Company's Form 8-K filed
        on
        March 15, 2004.
 
 
 
  35
  
 **ITEM
        11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
        STOCKHOLDER MATTERS**
 
 The
        following table sets forth certain information concerning the ownership of
        the
        Company's common stock as of December 31, 2006, with respect to: (i) each
        person
        known to the Company to be the beneficial owner of more than five percent
        of the
        Company's common stock; (ii) all directors; and (iii) directors and executive
        officers of the Company as a group.
  Title
                  Class
              Name
                  of Beneficial Owner of Group
              Nature
                  of Beneficial Ownership
              Amount
              Percent
                  of ClassCommon
              James
                  C. Katzaroff
              CEO/Director
              11,225,416
              19%*1,2Common
              Utek
                  Corporation
              Investor
              8,082,064
              13.7%*5,6Common
              Robert
                  A. Papke
              President/Director
              3,252,778
              5.5%*5,6Common
              Dr.
                  G. Robert Williams
              Founder
              6,103,000
              10.3%*8Common
              Admiral
                  Stuart Platt
              Director
              3,352,808
              5.7%*3Common
              Kenneth
                  L. Hatch
              Director
              3,300,000
              5.6%*4Common
              Kenin
                  M.
                  Spivak
              Investor
              3,000,000
              5.1%Common
              Debra
                  S. Kasparek
              CFO
              838,888
              1.4%*7Common
              Common
                  All Directors and Executive Officers As a Group (5 in number)
              
              26,976,055
              45.7%
 
 **ITEM
        12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 James 
        C.  Katzaroff, Chief Executive Officer, directly owns an
        approximate 15% interest in Apogee Biometrics, Inc.
 
 *1  
        James C. Katzaroff, President of Manakoa, directly owns 7,580,972 common
        shares
        of Manakoa and 3,000,000 options and 644,444 warrants.
 *2  
        James C.  Katzaroff is Chairman and CEO of
        Apogee Biometrics, Inc., and indirectly owns 1,441,476
        shares.
 *3  
        Admiral Stuart Platt owns 3,152,808 common shares and 200,000
        options.
 *4  
        Kenneth L. Hatch owns 3,000,000 common shares and 300,000 options.
 *5  
        Robert A. Papke owns 2,288,889 common shares and 675,000 options and 288,889
        warrants.
 *6  
        Robert A. Papke is President of Apogee Biometrics, Inc., and indirectly owns
        1,441,476 shares.
 *7
        Debra
        Kasparek owns 44,444 common shares and 750,000 options and 44,444
        warrants.
 *8
        Dr. G
        Robert Williams owns 6,103,000 common shares. (see Note 8,
        litigation)
 
 **ITEM
        13 EXHIBITS AND REPORTS ON FORM 8-K**
 
 **Exhibits**
 
 3.1
              Articles
                  of Incorporation (incorporated by reference to the Company's SEC
                  Form
                  10KSB/A filed with the SEC on June 20,
                  2000)
 
 3.2
              Certificate
                  of Amendment to Articles of Incorporation (incorporated by reference
                  to
                  the Company's Form 8-K filed with the SEC on March 15,
                  2004)
 
 3.3
              By
                  Laws (incorporated by reference to the Company's SEC Form 10KSB/A
                  filed
                  with the SEC on June 20, 2000)
 
 10.1
              2004
                  Combined Incentive and Non-Qualified Stock Option Plan (incorporated
                  by
                  reference to the Company's Form 8-K filed with the SEC on March
                  15,
                  2004)
 
 31.1
              *Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of James
                  C.
                  Katzaroff, as Principal Executive
                  Officer.
 
 31.2
              *Certification
                  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Debra
                  Kasparek, as Principal Financial
                  Officer.
 
 32.1
              *Certification
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of  James.
                  C. Katzaroff, CEO, as Principal Executive Officer and Debra Kasparek,
                  Interim-CFO, as Principal Financial
                  Officer.
 
 *Filed
        herewith
 
 
 36
 **ITEM
        14 PRINCIPAL ACCOUNTANT FEES AND SERVICES**
 
 Cordovano
        and Honeck, P.C., Denver, Colorado served as independent auditors of the
        Company
        for the year ended December 31, 2006.
 
 The
        Company's board of directors pre-approves all services performed by the
        Company's principal auditor.
  2006
              
              
              2005Audit
                  Fees
              
              $
              24,590.00
              
              $
              20,893.75Tax
                  Fees
              
              
              0.00
              
              
              0.00$
              24,590.00
              
              $
              20,893.75
  The
        Audit
        fees for the years ended December 31, 2006 and 2005 were for professional
        services rendered for the audit of the annual consolidated financial statements
        and review of the financial statements included in the of the Company's form
        10KSB.
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned hereunto
        duly authorized.
  Manakoa
                  Services CorporationDate: April
                  13, 2007
              By:
              /s/ James
                  C. KatzaroffJames
                  C. KatzaroffC.E.O.
 
 37