**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**Form
      10-KSB**





x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





**For
      the fiscal year ended December 31, 2007**





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      transition period from _______________ to _______________.





**Commission
      file number 0-30639**





**World
      Am, Inc.**


(Exact
      name of registrant as specified in its charter)





**Nevada**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            
            **90-0142757**
              (I.R.S.
                Employer
              Identification
                No.)**4340
                Von Karman Avenue**
              **Suite
                200**
              **Newport
                Beach, CA**
              (Address
                of principal executive offices)
            
            **92660**
              (Zip
                Code)





**Registrant’s
      telephone number, including area code (949) 955-5355**





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





**Common
      stock, $0.0001 par value**


(Title
      of
      class)





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





Check
      whether the registrant (1) has filed all reports required to be filed by Section
      13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
      months (or for such shorter period that the registrant was required to file
      such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes x No o .





Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
      S-B is not contained in this form, and no disclosure will be contained, to
      the
      best of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No
x .





State
      issuer’s revenues for its most recent fiscal year. $773,382
      for the year ended December 31, 2007.





State
      the
      aggregate market value of voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked prices of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in rule
      12b-2 of the Exchange Act.) $3,093,920, based on the closing price of $0.003
      for
      the common stock on March 4, 2008.





State
      the
      number of shares outstanding of each of the issuer’s classes of common stock, as
      of the latest practicable date. As of March 4, 2008, there were 1,069,335,511
      shares of common stock, no par value, issued and outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





If
      the
      following documents are incorporated by reference, briefly describe them and
      identify the part of the form 10-KSB (e.g., Part I, Part II, etc.) into which
      the document is incorporated: (1) any annual report to security holders; (2)
      any
      proxy or information statement; and (3) any prospectus filed pursuant to rule
      424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed
      documents should be clearly described for identification purposes (e.g., annual
      report to security holders for fiscal year ended December 24, 1990).
      None.





Transitional
      Small Business Disclosure Format (check one):  Yes o No
x .









**WORLD
      AM, INC.**





**TABLE
      OF CONTENTS**




**PART
                I**ITEM
                1 —
            DESCRIPTION
                OF BUSINESS
            
            1ITEM
                2 —
            DESCRIPTION
                OF PROPERTY
            
            10ITEM
                3 —
            LEGAL
                PROCEEDINGS
            
            10ITEM
                4 —
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            11**PART
                II**ITEM
                5 —
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            
            12ITEM
                6 —
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            
            14ITEM
                7 —
            FINANCIAL
                STATEMENTS
            
            24ITEM
                8 —
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            
            24ITEM
                8A —
            CONTROLS
                AND PROCEDURES
            
            24ITEM
                8A(T) —
            CONTROLS
                AND PROCEDURES
            
            25ITEM 8B —
            OTHER
                INFORMATION
            
            26**PART
                III**ITEM
                9 —
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT
            
            27ITEM
                10 —
            EXECUTIVE
                COMPENSATION
            
            29ITEM
                11 —
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTAND RELATED
                STOCKHOLDER MATTERS
            
            30ITEM
                12 —
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            
            34ITEM
                13 —
            EXHIBITS
            
            37ITEM
                14 —
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            
            41










**PART
      I**





This
      Annual Report includes forward-looking statements within the meaning of the
      Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based
      on management’s beliefs and assumptions, and on information currently available
      to management. Forward-looking statements include the information concerning
      possible or assumed future results of our operations set forth under the heading
      “Management’s Discussion and Analysis of Financial Condition or Plan of
      Operation.” Forward-looking statements also include statements in which words
      such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,”
“consider” or similar expressions are used.





Forward-looking
      statements are not guarantees of future performance. They involve risks,
      uncertainties and assumptions. Our future results and shareholder values may
      differ materially from those expressed in these forward-looking statements.
      Readers are cautioned not to put undue reliance on any forward-looking
      statements.





**ITEM
      1 — DESCRIPTION OF BUSINESS**





**History**





World
      Am,
      Inc. (“We,” “World Am” or “Company”) was incorporated in Florida in 1994. In
      2002, we changed our state of incorporation from Florida to Nevada. We currently
      have two wholly-owned subsidiaries: Technology Development International, Inc.
      (“TDI”), and Isotec, Inc. (“Isotec”). We also have a majority-owned subsidiary,
      Senz-It, Inc. (“Senz-It”). We conduct all of our operations through two of our
      subsidiaries, Isotec and Senz-It.




TDI
      is a
      Colorado corporation incorporated in 1997 and, at present, is
      dormant.





Isotec
      is
      a Colorado corporation incorporated in 1998 that develops, manufactures and
      distributes automated passage control and security devices to government and
      other commercial enterprises. During fiscal year ended December 31, 2007, Istoec
      reported revenue of $657,809, as compared to $245,476 for the fiscal year ended
      December 31, 2006.





Senz-It
      is a California corporation incorporated on March 4, 2005 to develop,
      commercialize and market technology in the field of micro-sensor elements and
      sensor arrays to the homeland security, indoor air quality, food purity and
      processing and medical diagnostic industries. During fiscal year ended December
      31, 2007, Senz-It reported revenue of $115,573, as compared to $-0- for fiscal
      year ended December 31, 2006.





Acquisition
      of Senz-It, Inc. and Reverse Acquisition Accounting.





On
      August
      31, 2005, we consummated an agreement to acquire 100% of the issued and
      outstanding capital stock of Senz-It, Inc. In exchange, we issued a warrant
      to
      purchase 18,000,000 shares of our common stock and 55 shares of its Series
      B
      convertible preferred stock to SUTI Holdings LP (“SUTI”), the sole shareholder
      of Senz-It at the time. The exercise price of the common shares under these
      warrants is $0.001 per share. The warrants vested immediately and expire in
      August 2010. Each share of Class B preferred stock is convertible into the
      greater of (i) 1% of our outstanding common shares at the time of conversion,
      including the common stock equivalents of all unexercised warrants, options
      and
      convertible securities, and (ii) 7,272,728 shares of common stock. The holders
      of the Series B preferred stock are entitled to the number of votes the holder
      would be entitled to had they converted the shares of Series B preferred stock
      at the time of the vote. In addition, SUTI has selected three directors to
      sit
      on our Board of Directors, constituting a majority of the Board.





Due
      to
      the change in voting control and of senior management, the transaction was
      recorded as a “reverse-merger” whereby Senz-It was considered to be the acquirer
      for accounting purposes. The transaction is equivalent to the issuance of stock
      by a development stage company (Senz-It) for the net monetary assets of a public
      company (World Am), accompanied by a recapitalization. Prior to the transaction,
      World Am was a public company with assets of $88,656, liabilities totaling
      $1,075,978 and 66,570,285 shares of common stock issued and outstanding. Senz-It
      was a privately owned, non-operating development stage company. The accounting
      for the transaction is identical to that resulting from a reverse acquisition,
      except goodwill or other intangible assets were not recorded. Accordingly,
      the
      attached financial statements are the historical financial statements of
      Senz-It. The accompanying consolidated financial statements reflect activities
      from March 4, 2005, the date of inception of Senz-It, forward.




1




On
      March
      7, 2006, SUTI Holdings, LP, the former stockholder of Senz-It, assigned the
      warrant to Select University Technologies, Inc., which then exercised the
      warrant in a cashless transaction that resulted in the issuance of 17,880,000
      restricted shares of common stock (the balance of 120,000 shares was withheld
      in
      the cashless exercise of the warrant).





**Business
      Overview**





As
      stated
      above, we currently conduct all of our operations through our wholly-owned
      subsidiary, Isotec and our majority-owned subsidiary, Senz-It. Our third
      wholly-owned subsidiary, TDI, is dormant and without operations.





**Senz-It,
      Inc.**





Senz-It
      has entered into an exclusive, royalty-bearing license with the State University
      of New York at Buffalo (“SUNY”) to market an innovative technology in the field
      of micro-sensor elements and sensor arrays. Senz-It intends to commercialize
      and
      market this technology in the homeland security, indoor air quality, food purity
      and processing and medical diagnostic industries. End-users have a stake in
      a
      quick, reliable, accurate and economical approach to sensing the presence and
      quantifying the amount of various toxic or dangerous substances.





**(a)**  **Services
      and Products.**





The
      business activities of the Senz-It subsidiary will fall into four major segments
      and specific sub-sectors:





·
            Homeland
                security


·
            Cargo
                security


·
            Building
                security


·
            Transportation
                security


·
            Aviation
                security


·
            Ground
                transportation security


·
            Indoor
                air quality (“IAAQ”)


·
            Food
                processing and distribution


·
            Medical
                diagnostics




The
      specific products within each of these segments intended to be manufactured
      by
      Senz-It are:





Homeland
      Security.





Within
      the homeland security market, Senz-It intends to focus on three major
      application areas: cargo security, building security and transportation
      security.





(1)  Cargo
      Security - The vulnerability of cargo containers has become a major focus of
      international and domestic policy with the increase in terrorist activities,
      but
      current customs inspection and tracking systems were designed to protect
      economic interests and not to provide a security barrier. It has become a
      priority to find technological advancements that can simultaneously increase
      security monitoring while decreasing the time, cost, and resources.





(2)  Building
      Security - A major risk category is the protection of power plants,
      petrochemical plants and government buildings. While X-ray and metal detectors
      are routinely used to detect conventional threats, detection methods for
      chemical and biological agents are lacking. The Office of Management and Budget
      (“OMB”) budget request for 2004 was $12.2 billion for infrastructure protection
      efforts of 32 federal agencies. The Department of Homeland Security allocated
      $337 million in their fiscal year 2007 appropriations to develop biological
      countermeasures.





(3)  Transportation
      Security - Aviation security and ground transportation security are significant
      areas of concern since the terrorist attacks of September 11, 2001.




2





(a)  In
      the
      aviation security sector, the Department of Homeland Security has allocated
      over
      $5 billion for the Transportation Security Administration (“TSA”) for its fiscal
      year ended in 2006. Current aviation security utilizes metal detectors and
      X-rays to detect metallic objects, but explosive and chemical agents are often
      omitted from the passenger screening process or limited in
      capability.





(b)  In
      the
      ground transportation sector, a study by the General Accounting Office (“GAO”)
      found that one-third of all terrorist attacks worldwide target transportation
      systems. Surface transportation alone was the target of more than 195 terrorist
      attacks from 1997 to 2000. About 14 million Americans use ground transit every
      workday by way of public systems that are susceptible to chemical and biological
      attacks, such as poisonous gases or explosive devices.





Indoor
      Air Quality (“IAQ”).





According
      to the Environmental Protection Agency’s (“EPA”) “The Inside Story: A Guide to
      Indoor Air Quality,” indoor air pollution is ranked as one of the highest risk
      to human health among all types of environmental problems. Improvements in
      indoor climate control, with advancements in window technology, have reduced
      air
      exchange within enclosed buildings. This leads to stale air (increasing
      concentrations of carbon dioxide), and rising humidity levels. Biological
      pollutants (including allergens, toxic mold, etc.), as well as chemical
      pollutants (off-gas contaminants from cleaners, building materials, etc.) are
      familiar causes of respiratory illnesses.





Food
      Processing and Distribution.




Safety
      of
      the food supply is of paramount concern, and regulatory entities such as the
      U.S. Food and Drug Administration (“FDA”) have strict guidelines and regulations
      for the testing and approvals of raw materials and final food products.
      According to the synopses entitled “Food-Related Illness and Death in the United
      States” published in the September/October 2000 issue of Emerging Infectious
      Diseases put out by the Centers for Disease Control (“CDC”), known food-borne
      pathogens account for an estimated 14,000,000 illnesses cause 60,000
      hospitalizations, 1,800 deaths and an unknown number of chronic conditions
      in
      the U.S.





Medical
      Diagnostics.





Several
      market opportunities exist with medical applications. Respiratory and urinary
      tract infections (“UTI”) are two of the most common recurring infections in the
      general population. A quick diagnostic screening sensor that can indicate the
      presence of a bacterial infection and give a definitive identification of the
      pathogen will provide several benefits to patients, hospitals and laboratories,
      including the administration of the correct treatment from the onset, reduction
      in the number of laboratory tests and reduced exposure to unnecessary
      antibiotics.





**(b)**   **Product
      Manufacturing.**





Senz-It
      is conducting the research and development on its current project in-house.
      However, if Senz-It’s business continues to grow it will consider subcontracting
      certain component manufacturing to outside firms, but those outside firms have
      not been determined and no agreements have been signed.





**(c)**   **New
      Product Development, Patents, and Licenses.**





The
      major
      activity for Senz-It during the coming year is intended to be product
      development, working with the technology developed by Dr. Frank Bright at SUNY,
      and using the SUTI-developed product development methodology. Initially, Senz-It
      believed its first product offerings would be sensor units supplied to Isotec
      to
      be imbedded within the portals and a building air quality product to detect
      mold
      and other substances. However, on November 1, 2007, Senz-It was
      awarded a United States Air Force biological development contract, worth up
      to
      $417,000. Under terms of the Cost Reimbursement Subcontract (the “Subcontract”),
      Senz-It has the opportunity to prove the feasibility of its detection technology
      by providing test stations to detect and measure biological substances that
      are
      potential threats to the U.S. military. Under the terms of the Subcontract,
      Senz-It will be reimbursed for expenses, up to $417,000, spent to set up and
      test its detection technology for the United States Air Force. Senz-It is
      currently in the process of developing and testing the detection
      technology.





3




**(d)**   **Sales,
      Marketing and Distribution.**





The
      Senz-It product lines are intended to be a series of sensor products utilizing
      a
      novel new detection technology that is highly specific and sensitive to target
      analytes. The sensors will be small, economical to produce and use and extremely
      stable, resulting in products that are portable, affordable and can be employed
      for long periods of time in remote and hard to access areas.





The
      Senz-It marketing and sales program is intended to target innovators and early
      adaptors. We began this program by opening a western regional office in Orange
      County, California, with a plan of eventually expanding in subsequent years
      to a
      total of six regional offices. Direct end users, to include government agencies,
      will also be a focus.





**(e)**   **The
      Market.**





Senz-It
      intends to compete in the worldwide sensor industry, with products in the narrow
      category of sensing systems, best understood as electronic noses (“e-nose”) or
      devices for machine olfaction. Senz-It answers challenges in the following
      categories:





·
            Multiple
                target substances;


·
            Multiple
                analytes for each target substance;


·
            Sensing
                that is analogous to human or animal olfaction in discerning patterns
                of
                analytes; and


·
            Sensor
                systems and devises that are small and easily deployed, including
                in
                remote settings.





**(f)**   **Competition.**





The
      standard of use in homeland security for explosive detection is dogs.
      Certification standards for reliability rates are greater than 92%. According
      to
      the Federal Aviation Administration (“FAA”), the cost of maintaining one
      properly trained officer/canine team at a major US airport is about $165,000
      per
      year.





Surface
      Acoustic Wave (“SAW”) technology uses polymers as the active sensing material.
      The polymers can have long-term stability issues that cause a drift in the
      response and therefore may require frequent recalibration.





Conducting
      Polymer Sensors (“CPS”) measure the changes in the conductivity of a polymer as
      it is exposed to various types of chemicals.





Monitoring
      for standard IAQ markers is an established process and there are multiple
      companies that provide sensing devices and/or lab support services for analyzing
      air quality. Our competitors in this field are much larger than we are and
      have
      greater financial resources.





The
      business of food processing diagnostics and analytes is a growing market. There
      are many testing protocols currently in use. Most tests are conducted in the
      laboratory. Sensors are considered to be the next major technology breakthrough
      with advantages in size, portability, sensitivity, specificity, cost and
      response time.





The
      use
      of odor sensors for medical applications is a recent development. There is
      much
      research ongoing to identify compounds related to disease states and metabolic
      disorders. To date, there are only a few instances of the technology in use
      for
      clinical purposes.





**(g)**   **Effects
      of Compliance with Environmental Laws.**





This
      is
      an issue that will be dealt with in the ongoing product development process.
      If
      we are able to execute our business plan we will eventually be dealing with
      explosive materials, which will cause us to need to contract with a third party
      that has the necessary government licensing to work with
      explosives.





**(h)**  **Sources
      and Availability of Raw Materials.**





Raw
      materials for the intended Senz-It products are widely available and we believe
      they will be readily available for our use as needed.





4





**(i)**   **Dependence
      on Major Customers.**





Senz-It
      will have several options in known international distributor channels in the
      four prime markets (food processing, medical diagnostics, homeland security
      and
      indoor air quality). For the year ended December 31, 2007, Senz-It had one
      customer, the United States Air Force for the development of its detection
      technology. We believe Senz-It will increase its customer base during 2008.





**(j)**   **Need
      for Government Approval.**





The
      medical diagnostic products will require a 510(k) FDA submission. We have not
      made this submission and do not plan to for some time due to the difficulty
      involved in this type of detection technology. Other markets will require
      validation through testing, sampling and comparisons with existing products.





**(k)**   **Effect
      of Government Regulation on Business.**





Government
      regulations for the 510(k) process are well known. We will utilize the services
      of an outside regulatory affairs consultant. As noted above, if we are able
      to
      execute our business plan we will eventually be dealing with explosive
      materials, which will cause us to need to contract with a third party that
      has
      the necessary government licensing to work with explosives.





**(l)**   **Management
      and Organization.**





The
      future of Senz-It will depend on management’s ability to:





·
            expand
                the marketing and sales efforts with dealers, government and international
                representatives;


·
            continue
                to maintain the technical edge in its production and
                quality;


·
            develop
                and market innovative products, at profitable price
                points;


·
            manufacture
                units at more cost-effective levels in rapid growth mode;
                and


·
            obtain
                strategic alliances and complimentary businesses to maximize profit
                potential.





**(m)**   **Employees.**





Senz-It
      currently has six employees.





**Isotec,
      Inc.**





Isotec
      is
      a Colorado corporation founded in 1998 as a developer, manufacturer and
      distributor of automated security portals used to control
      entry or exit of people and materials into and/or out of a facility .
      Isotec
      has been aided in its endeavors by alliances with several product developers,
      joint venture partners, sales representatives, dealers, manufacturers and
      suppliers.





Isotec
      has developed innovative systems and processes to establish itself as a factor
      in the field of transparent security and automated passage control. Isotec
      has
      installed systems for such customers as Lawrence Livermore Labs, Mellon Bank,
      Wells Fargo Bank, the United States Air Force and the United States Department
      of Energy.





“Transparent
      security” means any security measure that is unobtrusive and not noticed by
      those being monitored. For example, a metal detection system mounted in an
      ordinary appearing door molding is used to detect persons carrying weapons
      into
      a building, thereby alerting appropriate security personnel, and optionally
      to
      record a photo or video of the event while allowing security personnel an
      opportunity to evaluate and take appropriate action before the person carrying
      the unauthorized weapon is alerted to the fact they have been found
      out.





Automated
      passage control (“APC”) means any system or device used to monitor or control
      access, egress or passage from one area to another. Examples are airport
      security portals, building entries and exits, gates for vehicles or personnel,
      public building access points (schools, courthouses, stores, etc.),
      laboratories, hospitals, government buildings and any other building for which
      the owners desire to control and/or track if someone or something is coming
      or
      going and detect if something is coming or going that should not
      be.





5





Over
      the
      past twenty plus years, systems have evolved from simple metal detection devices
      to sophisticated “man trap” systems employing state-of-the-art electronics and
      detection devices. In recent years, the demand for such devices has escalated
      as
      the instances of international and urban terrorism increase. Today, demand
      for
      automated passage control equipment transcends the past traditional users,
      such
      as high security governmental and military installations, to include banks,
      industrial complexes, laboratories, airports, schools and retail establishments.
      The state-of-the-art in weapons detection design and drastic reduction in the
      package size of such devices has also created a very large international market
      for this equipment, especially in third world countries with histories of
      political unrest.





Likewise,
      Isotec’s product line has evolved from enclosed, inter-locked weapons detection
      and access control portals to Transparent Security and surveillance devices
      using computer integrated video and beam technologies.





Isotec
      has assembled a team of technical, sales/marketing and business personnel
      possessing many years of design and manufacturing experience in the security,
      computer and video fields. Isotec’s technical personnel have been engaged in the
      design and manufacture of APC security and surveillance devices for
      approximately twenty years.




Isotec
      has established a dynamic, fast response development and manufacturing
      organization providing quality, leading edge security products that integrate
      with standard and customized systems. Isotec is able to market these products
      through its distributor (installer) network to commercial organizations,
      original equipment manufacturer (“OEM”) customers, and governmental and defense
      agencies.





**(a)**   **Services
      and Products.**





The
      business activities of Isotec fall into five categories:





·
            Design
                and manufacture of a standard line of APC systems for commercial,
                retail
                and government use.


·
            Customization/modification
                of APC systems per customer specifications**.**


·
            Development
                of security devices for APC.


·
            Acquisition,
                development, sales, marketing and distribution of innovative component
                products.


·
            Acquisition
                and merger activity geared to obtaining complementary businesses
                that
                result in stronger product integration, competitive or other advantages
                and maximize return on capital. This activity may also include strategic
                alliances with synergistic
                partners.





The
      specific product types manufactured by Isotec are:





Weapons
      Control Systems.





These
      systems are fabricated as one or more lane metal detector based structures
      with
      interlocking doors designed to prevent weapons from entering a facility. They
      incorporate a high strength tubular aluminum structure with heavy-duty narrow
      stile doors and closer hardware. Magnetic locks, sensors, displays and control
      electronics are incorporated to monitor all interlock functions while a variety
      of metal detectors can be used to scan for weapons. Ballistic panels up to
      Level
      III can be installed in these structures providing a deterrent as required
      by
      the customer. Site-specific applications employing modular designs and various
      construction materials, i.e. laminated oak and ballistic fiberglass, to match
      architectural requirements are available. This product is used for any
      application requiring weapons monitoring.





Passage
      Control Systems.





These
      systems are fabricated as multi-door bi-directional structures with interlocking
      doors designed to prevent unauthorized individuals from entering a facility.
      These systems incorporate a high strength tubular aluminum structure with
      heavy-duty narrow stile doors and closer hardware. Locks, sensors, displays
      and
      control electronics are incorporated to monitor all interlock functions while
      a
      variety of card readers, keypads and or biometric devices can be installed
      to
      identify the occupant before passage. This system also has the advantage of
      incorporating Isotec proprietary anti-tailgating technology allowing one person
      to pass at a time. This product can be used in any high security application
      requiring personnel monitoring.





6





Asset
      Protection Systems.





These
      systems are fabricated as single door passage monitors with two-door
      bi-directional structures with interlocking systems designed to prevent
      unauthorized materials from entering or leaving a facility. These systems
      incorporate a high strength tubular aluminum structure with heavy-duty narrow
      stile doors and closer hardware. Locks, sensors, displays and control
      electronics are incorporated to monitor all interlock functions. This system
      is
      best suited for applications requiring control of company assets.





Site
      Specific Designs For Any Application.





No
      standard application can solve everyone’s security needs. Isotec provides
      solutions for most passage control situations.





Anti-Tailgating
      System.





Isotec’s
      Anti-Tailgating System is an integrated system that controls entry access
      through a protected doorway by detecting multiple individuals attempting to
      enter through that door without individual authorization.





The
      Anti-Tailgating System combines an overhead video-based monitoring device,
      a
      pair of infrared sensors mounted on the doorjamb, and an internal controller
      with software for which a provisional patent application has been made and
      is
      still in process. The Anti-Tailgating System works with card, PIN or biometric
      access control devices, and connects directly to the user’s existing 24-volt
      door lock, lock sensor and door status sensor to monitor and control access
      through that door. Also provided is a status display to direct personnel through
      the passage process.





The
      Anti-Tailgating System works by enveloping the single entrant in a “video wall”
during each entry sequence. Any other individual either passing through that
      wall (i.e., tailgating) or attempting to depart while the first individual
      is
      entering is detected and an alarm output is generated. Monitoring functions
      are
      also provided to detect someone entering while another individual is exiting
      the
      secured door from the inside.





**(b)**  **Product
      Manufacturing.**





Isotec
      performs the fabrication, assembly and test of the products in its leased
      facilities. Isotec employs experienced mechanical and electronic personnel
      and
      equipment and is able to obtain contract-manufacturing agreements to perform
      manufacturing as required. Isotec’s manufacturing and design function occupies
      approximately 4,800 square feet of leased space and has six employees.





**(c)**  **New
      Product Development, Patents, and Licenses.**





Isotec
      strives for each of its products to contain innovative, modular concepts not
      previously available. On September 2, 2004, acknowledgements of provisional
      patent applications were issued for its Anti-Tailgating products. An additional
      provisional patent was filed in March 2006 for Isotec’s Anti-Tailgating
      products. The provisional patent application permits Isotec to place a “patent
      pending” label on all production units while completing development of the
      product.





**(d)**   **Custom
      Products.**





Isotec’s
      goal is to become the leader in the design and manufacture of quality built
      automated passage control and transparent security devices through the use
      of
      approved material and finish suppliers and the use of in-house quality standards
      and procedures. Many dealers and their customers, as well as government
      agencies, have a specialized application in mind requiring non-standard
      components and/or architectural considerations. Such projects are relatively
      common and may often require little or no customer-paid non-recurring
      engineering. The modular characteristics of their standard design afford Isotec
      a competitive and strategic advantage.





**(e)**   **Sales,
      Marketing, Distribution and Installation.**




One
      of
      the primary strengths of Isotec’s positioning is that all products developed are
      sold both domestically and internationally, either commercially through a
      distributor network or directly to the end user. Each dealer is a professional
      in the field of applications engineering in the security field. Because Isotec
      equipment is modular in design and is shipped disassembled for installation
      in
      the field, all systems, both commercial and retail, are extremely portable
      and
      can be readily disassembled for installation in other locations. We are in
      the
      process of expanding the sales and marketing network to accommodate new products
      under development as well as the products of potential acquisition candidates.
      During 2007, we expanded from five distributors to 19 distributors and expended
      our distributorship network from domestic only to add international distributors
      as well.




7





**(f)**   **The
      Market.**





Although
      management believes Isotec can secure a sizable portion of the market, capacity
      and conservatism have driven the sales estimates. Isotec intends to address
      the
      commercial, national and international market areas through a network of
      established distributors/installers. Government contracts will be handled
      directly by World-Am and its sales personnel.




We
      believe that sensor technologies represent one of the greatest areas of
      opportunity both within homeland security and other vertical applications.
      We
      are currently pursuing one or more such technologies, in hopes of obtaining
      new
      technology that will allow us to have broader market appeal in the security
      market place and possibly in other vertical markets.





In
      addition to homeland security needs, Isotec would like to develop sensor systems
      for other market segments, including financial institutions, government
      applications and commercial and retail establishments. In addition, dealer
      projections for sales to financial institution indicate that inquiries for
      weapons control systems at banks and credit unions are continuous and
      increasing.





**(g)**   **Competition.**





Compared
      to competitive products or the closest product available today, management
      believes Isotec’s products are the only product line able to accommodate
      site-specific design and build capabilities. This ability to adapt systems
      to
      the needs of a specific location is a capability unique to Isotec.





Distributors,
      end users and competitors may recognize that Isotec has an advantage in the
      area
      of design and application flexibility. The prices of Isotec products are
      comparable to those offered by competitors. Isotec’s advantage over its
      competitors is due to incorporating improvements into successive production
      models very rapidly. Isotec’s competitors include: Hamilton Safe and Novacomm.
      Each of these companies offer competing access control systems; however, none
      of
      these firms offer truly “built-to-specification” portals.





Hamilton
      Safe, headquartered in Fairfield, Ohio, is the most competitive access control
      company to Isotec. Hamilton Safe offers a broader product line than Isotec,
      comprised primarily of secure storage solutions, ATM equipment, vaults and
      safes. Although Hamilton Safe offers competitive access control systems, Isotec
      has competed successfully for several installations. Hamilton Safe is larger
      than Isotec and has significantly more assets.





Novacomm
      is a manufacturer of standard weapons control portals located in Puerto Rico,
      who has in the past distributed these products in the USA via Diebold
      Corporation. Novacomm is larger than Isotec and has significantly more
      assets.





Although
      past experience seems to show that Isotec is an adept competitor in its field,
      there can be no assurance these competitive advantages will endure. The strategy
      for meeting the competition is based upon flexible design and engineering,
      excellent customer service and pricing comparable to the nearest
      competitors.





**(h)**   **Effects
      of Compliance with Environmental Laws.**





To
      date,
      Isotec has not encountered any problems in compliance with environmental laws
      at
      the federal, state or local levels. However, there can be no assurance that
      the
      costs associated with such laws and regulations will not become prohibitive
      in
      the future.





8




**(i)**   **Sources
      and Availability of Raw Materials.**





Raw
      materials for Isotec’s products are widely available, with the exception of
      metal detectors (of which there are only a few suppliers). If the latter sources
      were lost, it would hurt production because the weapons detection capability
      of
      the portal would be lost.





**(j)**   **Dependence
      on Major Customers.**





Isotec
      is
      dependent upon the federal government and 19 domestic and international
      distributors for all of its business. As noted above, Isotec has developed
      additional distributors and is in the process of developing new distributors
      in
      order to become less dependent upon any single source. However, there is no
      assurance Isotec will obtain enough distributors to completely eliminate this
      risk.





**(k)**   **Need
      for Governmental Approval.**





Certain
      of Isotec’s products, such as Weapons Control Systems installed in commercial
      facilities, must meet a variety of local and national codes (such as American
      Disabilities Act, National Fire Protection Association, etc). Isotec maintains
      close contact with the leading jurisdictions in these areas, and continues
      to
      update its systems to meet or exceed these requirements. The City of Baltimore
      recently approved Isotec’s design, noting they meet the newly published 2006
      standards. This is a major differentiator in the market, particularly in regard
      to non-domestic competitors. Isotec’s ability to customize its products allows
      the company to adapt to municipal requirements and codes.





**(l)**   **Effect
      of Governmental Regulation on Business.**





Governmental
      regulation is not presently a factor. However, there is no way to predict what
      the government may do that might adversely affect Isotec in the
      future.





**(m)**   **Management
      and Organization.**





The
      future of Isotec will depend on management’s ability to:





·
            expand
                its marketing and sales efforts with distributors, government and
                international representatives;


·
            continue
                to maintain its technical edge in its production and
                quality;


·
            develop
                and market innovative products at profitable price
                points;


·
            manufacture
                units at more cost-effective levels in rapid growth mode;
                and


·
            obtain
                strategic alliances and complimentary businesses to maximize profit
                potential.





**(n)**   **Employees.**





Isotec
      currently has six employees.





**Technology
      Development International.**





TDI
      is a
      Colorado corporation founded in 1997. TDI was engaged in the acquisition,
      development, sales, marketing and distribution of innovative component products.
      At present, TDI has no operations and is dormant.




9




**ITEM
      2 — DESCRIPTION OF PROPERTY** ****





We
      share
      office space with Select University Technologies, Inc. We are charged $800
      per
      month, plus operating and administrative expenses. We share 400 square feet
      of
      office space. The total rent and operating expenses charged to us for the twelve
      months ended December 31, 2007 and 2006 was $7,893 and $47,719,
      respectively.





Our
      subsidiary, Senz-It, leases 934 square feet of office space in Newport Beach,
      California. The initial lease is from October 22, 2007 to October 21, 2008.
      Upon
      expiration, the lease terms will continue for successive thirty-day periods
      until cancelled by either party in writing. Senz-It pays $1,308 per month in
      rent and common area expense. Senz-It’s total rent and common area expenses
      totaled $4,345 for the period ended December 31, 2007.





Our
      subsidiary, Isotec, leases 4,800 square feet of office space, and a design
      and
      manufacturing space, in Westminster, Colorado. The lease runs through December
      31, 2011. Isotec pays $4,061 per month in rent and common area expense. Rent
      and
      common area expense totaled $45,139 and $47,785 for the years ended December
      31,
      2007 and 2006, respectively.





**ITEM
      3 — LEGAL PROCEEDINGS** ****





Other
      than as set forth below, we are not a party to any material pending legal
      proceedings and, to the best of our knowledge, no such action by or against
      us
      has been threatened.





(a)  On
      August
      2, 2006, a complaint was filed in the District Court of Boulder County,
      Colorado: *Karen
      Alexander v. World Am, Inc., Isotec, Inc., Robert A. Hovee, David J. Barnes,
      James R. Largent and Ken* Jochim. The
      lawsuit was based on an alleged employment contract between us and a former
      employee, the wife of our former CEO and Chairman who is also suing us over
      his
      employment contract (see below).  When this lawsuit was originally filed,
      there were seven causes of action involving three additional named
      defendants, including two of our current Board members.  By the time
      of trial, the three additional named defendants had been dismissed and the
      only
      remaining causes of action were breach of contract, intentional interference
      with contract, libel and slander, and a Colorado Wage Act claim.  The libel
      and slander claim was dismissed during trial and, at the close of evidence,
      the
      former employee demanded $1,000,000 in damages.   The jury returned a
      verdict in our favor, finding that there was no breach of contract or
      intentional interference with contract.  The jury did find that we
      owed plaintiff back wages, which is a claim we never disputed.  The
      former employee was awarded $39,000 for these back wages, a portion of
      which was a statutory penalty, and
      reasonable attorney’s fees in an amount yet to be determined.  We
      also
      have claims pending for certain of our attorneys fees incurred on a discovery
      matter. We
      have
      accrued $39,000 in the 2007 consolidated financial statements and have not
      accrued an additional amount for attorney fees as they cannot be reasonably
      estimated at this time.





(b)  On
      September 20, 2006, a complaint was filed in the District Court of Adams County,
      Colorado: James H. Alexander v. World Am, Inc. The complaint principally alleges
      that we breached an employment agreement with the plaintiff by not paying him
      certain amounts allegedly owing and seeks damages in the amount of $714,718.
      The
      matter should go to trial in 2008.




This
      matter was recently moved to the United States District Court, District of
      Colorado. The Company then filed a counterclaim against Mr. Alexander seeking
      damages for breach of fiduciary duty and breach of the duty of loyalty to the
      Company in connection with the Share Exchange Agreement entered into between
      us
      and SUTI, dated June 10, 2005.





Management
      believes we have meritorious claims and defenses to the plaintiff’s claims and
      ultimately will prevail on the merits. However, there can be no assurance as
      to
      the outcome of the lawsuit. Litigation is subject to inherent uncertainties,
      and
      unfavorable rulings could occur. If an unfavorable ruling were to occur, there
      could be a material adverse effect on our financial condition, results of
      operations or liquidity.





(c)  On
      or
      about October 10, 2007, one of our former consultants filed a complaint against
      us alleging breach of contract, account stated and other common counts, and
      seeking to recover $30,108. We are currently in settlement discussions with
      the
      former consultant.




10





(d)  On
      January 30, 2004, a complaint was filed in the District Court of Adams County,
      Colorado: Robert Hainey and Internet Marketing Solutions, Inc. v. World Am
      Communications, Inc. and Isotec, Inc. The complaint, which has causes of action
      for breach of contract and unjust enrichment, alleges that the defendants failed
      to pay the plaintiffs for certain consulting and public relations and related
      work, reimbursement of certain business expenses incurred on behalf of the
      defendants, and to repay a loan made by the plaintiffs to the defendants. The
      complaint sought total monetary damages of approximately $308,000.





On
      July
      27, 2005, the matter was settled. Under the terms of this settlement, we were
      obligated to pay the sum of $116,000 over a period of four years in semi-annual
      installments, beginning on October 1, 2005. The plaintiffs were obligated to
      pay
      us the sum of $2,000 per installment payment to reimburse it for administrative
      costs in connection with the payment of such sum in the form of S-8 stock.
      Accordingly, we assumed a settlement liability of $116,000 on August 31, 2005,
      with $29,000 recorded as short-term or amounts due within one year and $87,000
      recorded as long-term.





Management
      was previously advised by local legal counsel that the settlement was
      unenforceable in the State of Colorado because the action dismissed the
      plaintiff with prejudice, and cannot be presented in any other jurisdiction.
      In
      addition, this legal counsel advised that a new action cannot be re-filed since
      the relevant statute of limitations on this matter has expired. Accordingly,
      we
      eliminated the settlement liability and recorded a settlement gain of $116,000
      as of December 31, 2005.




The
      plaintiff subsequently filed a Motion to Reopen Case and Application for Entry
      of Judgment against World Am. On October 29, 2007, the District Court entered
      a
      judgment against us and found that we breached the previous settlement agreement
      by not paying any portion of the $116,000. The Court did not address the issue
      that the plaintiff never paid the $2,000 per installment fee. On November 9,
      2007, we filed a Motion for Reconsideration of Judgment Entered on October
      29,
      2007 requesting the judgment for $116,000 be withdrawn pending the Plaintiff’s
      request and payment of $2,000 for an installment; alternatively that said
      judgment be amended to $50,000 and no future installment need be made by us
      until a proper tender of $2,000 is made; or alternatively, for vacating said
      judgment pending a hearing to be set on notice by either party on Plaintiffs
      motion.





In
      March
      2008, we settled this matter. Under the terms of the settlement, we agreed
      to
      pay to Robert Haney and Internet Marketing Solutions, Inc., the sum of $116,000.
      Payments will be made as follows: a payment of $6,000 was made in January 2008,
      and another payment of $6,000 was made upon execution of the agreement, March
      4,
      2008. Monthly payments in the amount of $5,000, in stock or cash, will begin
      on
      April 5, 2008 and continuing in the same amount on the fifth day of each month
      thereafter until fully paid in April 2010. The April 2010 payment will be
      $4,000, in cash or stock. In the event that the Company fails to make any of
      the
      aforementioned payments, we agree to pay Robert Haney and Internet Marketing
      Solutions, Inc., a penalty of $1,000 per occurrence. The sum of $116,000 was
      recorded in the consolidated financial statements for the year ended December
      31, 2007.





**ITEM
      4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS** ****





No
      matters were submitted to a vote of the security holders during the fourth
      quarter of the last fiscal year.





11


**PART
      II**





**ITEM
      5 — MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





**Market
      Information**





Our
      common stock is currently quoted on the OTC Bulletin Board of the National
      Association of Securities Dealers, Inc., under the symbol “WDAM.” Our common
      stock is only traded on a limited or sporadic basis and should not be deemed
      to
      constitute an established public trading market. There is no assurance that
      there will be liquidity in the common stock.





The
      following table sets forth the high and low bid information for each quarter
      within the two most recent fiscal years, as provided by the NASDAQ Stock
      Markets, Inc. The information reflects prices between dealers, and does not
      include retail markup, markdown, or commission, and may not represent actual
      transactions.





Bid
                PricesQuarter
                Ended
            
            High
            
            LowMarch
                31, 2006
            
            
            0.021
            
            
            0.009June
                30, 2006
            
            
            0.018
            
            
            0.005September
                30, 2006
            
            
            0.009
            
            
            0.004December
                31, 2006
            
            
            0.005
            
            
            0.003March
                31, 2007
            
            
            0.013
            
            
            0.0037June
                30, 2007
            
            
            0.0078
            
            
            0.0046September
                30, 2007
            
            
            0.0055
            
            
            0.0024December
                31, 2007
            
            
            0.0065
            
            
            0.0025March
                4, 2008
            
            
            0.0034
            
            
            0.002





The
      Securities Enforcement and Penny Stock Reform Act of 1990 requires additional
      disclosure relating to the market for penny stocks in connection with trades
      in
      any stock defined as a penny stock. The Commission has adopted regulations
      that
      generally define a penny stock to be any equity security that has a market
      price
      of less than $5.00 per share, subject to a few exceptions that we do not meet.
      Unless an exception is available, the regulations require the delivery, prior
      to
      any transaction involving a penny stock, of a disclosure schedule explaining
      the
      penny stock market and the risks associated therewith.





**Holders**





As
      of
      March 4, 2008, there were 1,069,335,511 shares of our common stock issued and
      outstanding and held by 285 holders of record. We believe many of the shares
      of
      our common stock are held in “street name” and, therefore, we believe the actual
      number of shareholders is substantially higher.





**Dividend
      Policy**





We
      have
      not paid any dividends on our common stock and do not expect to do so in the
      foreseeable future. We intend to apply our earnings, if any, in expanding our
      operations and related activities. The payment of cash dividends in the future
      will be at the discretion of the Board of Directors and will depend upon such
      factors as earnings levels, capital requirements, our financial condition and
      other factors deemed relevant by the Board of Directors.





**Securities
      Authorized for Issuance under Equity Compensation Plans**





On
      January 2, 2007, our Board of Directors approved the 2007 Stock Option Plan
      (the
“2007 Plan”) with 45,000,000 shares of our common stock available for issuance
      under the plan. The 2007 Plan offers selected employees, directors, and
      consultants an opportunity to acquire our common stock, and serves to encourage
      such persons to remain employed by us and to attract new employees. Options
      covering a total of 44,500,000 shares have been granted for the year ended
      December 31, 2007 leaving a balance of 500,000 shares to be granted from this
      plan.




12





As
      of
      December 31, 2007, the 2007 Plan information is as follows:





**Plan
                Category**
            
            **Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
              **(a)**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
              ******(b)**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column (a))**
              **(c)****Equity
                compensation plans approved by security holders**
            
            
            0
            
            
            0
            
            
            0**Equity
                compensation plans not approved by security
                holders**
            
            
            2007
                Stock Plan: 44,500,000
            
            
            2007
                Stock Plan: $0.005
            
            
            2007
                Stock Plan: 500,000**Total**
            
            
            2007
                Stock Plan: 44,500,000
            
            
            2007
                Stock Plan: $0.005
            
            
            2007
                Stock Plan: 500,000




**Recent
      Issuance of Unregistered Securities**





We
      did
      not issue any unregistered securities during the quarter ended December 31,
      2007.




13


**ITEM
      6 — MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION** ****





**Disclaimer
      Regarding Forward Looking Statements**


Except
      for historical information, the materials contained in this Management's
      Discussion and Analysis are forward-looking (within the meaning of Section
      27A
      of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
      of
      1934) and involve a number of risks and uncertainties. Forward-looking
      statements are, by their very nature, uncertain and risky. These risks and
      uncertainties include international, national and local general economic and
      market conditions; demographic changes; the ability of the Company to sustain,
      manage or forecast its growth; the ability of the Company to successfully make
      and integrate acquisitions; raw material costs and availability; new product
      development and introduction; existing government regulations and changes in,
      or
      the failure to comply with, government regulations; adverse publicity;
      competition; the loss of significant customers or suppliers; fluctuations and
      difficulty in forecasting operating results; changes in business strategy or
      development plans; business disruptions; the ability to attract and retain
      qualified personnel; the ability to protect technology; and other risks detailed
      from time to time in the Company's filings with the Securities and Exchange
      Commission.





Although
      the forward-looking statements in this Annual Report reflect the good faith
      judgment of management, such statements can only be based on facts and factors
      currently known by the Company. Consequently, and because forward-looking
      statements are inherently subject to risks and uncertainties, actual results
      and
      outcomes may differ materially from the results and outcomes discussed in the
      forward-looking statements. Readers are urged to carefully review and consider
      the various disclosures made by the Company in this Annual Report and in its
      other reports, as an attempt to advise interested parties of the risks and
      factors that may affect the Company's business, financial condition, and results
      of operations and prospects.





**Overview**





All
      of
      our operations are conducted through our majority-owned subsidiary, Senz-It
      and
      our wholly owned subsidiary, Isotec, Inc. The combined results of those
      operations are detailed below.





Senz-It,
      Inc. (“Senz-It”)





Senz-It
      intends to manufacture sensors in the field of rapid detection. Senz-It provides
      innovative advancements in the field of micro-sensors that have broad
      application in Food Safety and Processing, Homeland Security, Indoor Air
      Quality, and Water Quality. Senz-It's products are being designed to identify
      patterns of molecules present in liquid and gas quicker and for significantly
      less cost than current modalities.





The
      technology is based on molecular imprinted xerogel (“MIX”) processes whereby
      fluorescent reporter molecules are affixed to each site specific binding site
      for the target analyte. The advantage of MIX based materials include: analyte
      detection specificity exceeding current laboratory standard methods: robustness
      and stability under extreme chemical and physical conditions, an ability to
      design recognition sites even for analytes that lack suitable bio-recognition
      elements.





The
      result is that Senz-It's proposed products are intended to provide rapid,
      simultaneous and continuous on-site detection and measurement of biological
      and
      chemical substances in liquid, gaseous and solid media. The technology virtually
      eliminates false positives, is comparable to advanced laboratory test accuracy
      and precision and detects in seconds, not hours or days.





In
      November, Senz-It was awarded a Phase One United States Air Force biological
      development contract, pursuant to which Senz-It will be reimbursed for expenses,
      up to $417,000, spent to set up and test its detection technology for the United
      States Air Force. Phase two has already been submitted for an additional
      contract of up to $1.4 million. Under Phase One Senz-It has begun developing
      microarrays that are sensitive for ovalbumin, a known simulant of Ricin. These
      microarrays have a xerogel platform that has been selectively imprinted with
      the
      ovalbumin protein. Upon introduction of ovalbumin into the sensing platform,
      fluorescent reporter molecules will emit light wherein the emission intensity
      is
      directly proportional to the ovalbumin concentration. Because the actual protein
      is used in the imprinting process, this sensing system is highly selective
      for
      the analyte it is designed for, and is not prone to interferences from other
      structurally similar molecules. To date, the Senz-It team has successfully
      delivered the first two of four stages to the Air Force in fulfillment of the
      contract.





14





Isotec,
      Inc. (“Isotec”)





Isotec
      develops, integrates and manufactures Automated Security Portal products,
      broadly categorized as Access Control, Weapons Control or Materials Control
      Systems. These structures protect, not just detect, by rigorously controlling
      passage of people and materials into and out of a facility based on specific
      security rules, while reducing the need for security personnel. Applications
      of
      the technology have been delivered to the commercial, retail and government
      sectors. Isotec's experience in this field allows it to provide high quality,
      code compliant, feature-rich application optimized solutions at the lowest
      cost
      in the shortest time frame.





Isotec
      has installed systems for high security United States Department of Energy
      facilities such as Los Alamos Labs, Lawrence Livermore Labs, Sandia Labs and
      military installations for the United States Air Force and Navy. Commercial
      installations include a growing number of commercial banking facilities, and
      various retail facilities such as jewelry stores.





The
      planned growth and profitability will depend in large part on the ability to
      promote and differentiate products, expand relationships with current and new
      distributors and gain new clients. Accordingly, Isotec intends to focus its
      attention and investment of resources in marketing, strategic partnerships
      and
      development of its client base. If Isotec is not successful in promoting its
      products and expanding its client and distributor base, this may have a material
      adverse effect on its financial condition and the ability to continue to operate
      the business.





Isotec's
      objectives for 2007 were focused on expanding and refining the distribution
      channels domestically as well as internationally, and adding selected new
      products to allow Isotec to expand its markets.





Domestically,
      new commercial distributors were added at a significant pace. Total new domestic
      distributors increased from five to sixteen during the last several quarters
      growing the number of sales people by about 800%. This increase in geographic
      coverage has resulted in a substantial increase in quotations over the last
      half
      of the year, and a similar increase in the order pipeline going into 2008.
      In
      addition to the number of salespeople, Isotec embarked on a substantial program
      of training for all field sales personnel to increase their effectiveness,
      as
      well as providing them with an upgraded package of sales material. In parallel,
      Isotec’s web site has been significantly upgraded to include product and market
      data as well as access to support materials. Isotec also developed relationships
      with three engineering organizations that focus on DOE and DOD facilities
      further extending our marketing reach into the government.





Internationally
      Isotec continues to cultivate dealers with educational materials and new sales
      tools. Quote activity in several markets has begun for commercial and government
      applications. During the year, dealer contracts were completed with Australia,
      Korea and Puerto Rico bringing the total worldwide distributor network to
      nineteen.





Additionally,
      several new products were introduced during the year, addressing specific
      inquiries by distributors and end users for extended solutions. A low cost
      compact entry-level system, model 44LC, was completed for smaller size
      applications in retail and international. The 644HS, an ultra sensitive weapons
      control system capable of detecting metal objects as small as a razor blade,
      was
      completed and introduced for prisons and other applications requiring the higher
      sensitivity. An electronics only product was developed for applications where
      existing physical structures are adequate for the security required, but the
      upgraded features and algorithms of the Isotec architecture were needed. Also
      during 2007, Isotec significantly increased the flexibility and feature set
      embodied in our unique Touchscreen user interface and added industry leading
      data logging output capability from our portal products, further widening the
      performance and value gap between Isotec and competitors.





15





**Results
      of Operations for the Year Ended December 31, 2007 compared to the Year Ended
      December 31, 2006.**





Year
                Ended
              December
                31, 2007
            
            Year
                Ended
              December
                31, 2006Revenues:Contract
                research anddevelopment
            
            $
            115,573
            
            $
            --Product
                sales
            
            
            657,809
            
            
            245,476773,382
            
            
            245,476Cost
                and expenses:Cost
                of contract researchand
                development
            
            
            115,573
            
            
            --Cost
                of product sales
            
            
            336,310
            
            
            82,827General
                and administrativeexpenses
            
            
            3,417,247
            
            
            2,062,487Loss
                from operations
            
            
            (3,095,748
            )
            
            (1,899,838
            )Other
                income (expense), net
            
            
            1,131,014
            
            
            (2,476,301
            )Net
                loss
            
            $
            (1,964,734
            )
            $
            (4,376,139
            )





Revenue





Our
      revenue for the year ended December 31, 2007 was $773,382, compared to revenues
      of $245,476 for the year ended December 31, 2006, which was an increase of
      $527,906. The increase in revenue for the year ended December 31, 2007 was
      primarily due to increased sales of Isotec’s security portals to both a
      government institution, as well as a financial institution, through a primary
      distributor, and the contract research and development revenue recognized by
      Senz-It based on their Phase One United States Air Force biological development
      contract. Our total revenues for the period from March 4, 2005 (inception)
      through December 31, 2007 was $1,231,630.





Cost
      of revenue





Our
      cost
      of product sales were $336,310 for the year ended December 31, 2007 compared
      to
      our cost of product sales of $82,827 for the year ended December 31, 2006,
      which
      was an increase of $253,483. Our increased cost of product sales for the year
      ended December 31, 2007 was due to the increase in production costs associated
      with the increased level of sales for the period. Our cost of contract research
      and development was $115,573 and $-0- for the years ended December 31, 2007
      and
      2006, respectively. Our cost of contract research and development for the year
      ended December 31, 2007 related to our work under the Department of the Air
      Force biological development contract, which is a cost reimbursement contract.
      Our gross profit percentage for product sales was 49% for the year ended
      December 31, 2007, compared to 66% for the year ended December 31, 2006. The
      decrease in the gross profit percentage is related to the lower profit margin
      contracts being awarded for the year of 2007. Since the Department of the Air
      Force contract is cost reimbursement only, the gross profit on contract and
      research development was 0%. Our total cost of revenues for the period from
      March 4, 2005 (inception) through December 31, 2007 was $650,495.




16





General
      and administrative expenses





We
      incurred general and administrative expenses of $3,417,247 for the year ended
      December 31, 2007 compared to general administrative expenses of $2,062,487
      for
      the year ended December 31, 2006, which was an increase of $1,354,760. The
      major
      expense categories for year ended December 31, 2007 and 2006 were as
      follows:





Year
                Ended
              December
                31, 2007
            
            Year
                Ended
              December
                31, 2006Professional
                fees
            
            $
            1,033,564
            
            $
            786,666Payroll
                expenses
            
            
            425,516
            
            
            453,612Engineering
                salaries
            
            
            217,343
            
            
            —Rent
            
            
            63,279
            
            
            59,124Patent
                Expense
            
            
            —
            
            
            49,177Management
                fees
            
            
            930,000
            
            
            264,250Director
                fees
            
            
            37,500
            
            
            87,000Legal
                settlement loss
            
            
            116,000
            
            
            —Advertising
                and promotions
            
            
            174,551
            
            
            10,991





Our
      increased expenses for the year ended December 31, 2007 compared to the year
      ended December 31, 2006 were primarily a result of the management fees paid
      under the Venture Acceleration Agreement between Select University Technologies,
      Inc., the general partner of SUTI, coupled with an increase in professional
      fees, engineering salaries, rent, advertising and promotion expenses, settlement
      loss and payroll expenses offset by a reduction in director fees. Our general
      and administrative expenses for the period from March 4, 2005 (inception)
      through December 31, 2007 were $6,151,225. ****





Other
      Income (Expense), Net





Our
      total
      net other income of $1,131,014 for the year ended December 31, 2007 compared
      to
      our total net other expense of ($2,476,301) for the year ended December 31,
      2006, which was an increase in other income (expense), net of $3,607,315. This
      increase was primarily the result of the decrease in the fair value of the
      derivative and warrant liabilities that were caused by the decline in our common
      stock price throughout 2007, which made conversion of the debentures and
      exercise of the warrants less expensive. The initial fair value of the
      derivatives related to our debt financing was included in interest expense
      in
      2006. The initial fair value of the warrant derivatives related to the Company’s
      equity financing was recorded as a reduction in stockholders deficit in 2007.
      Our total net other expense for the period from March 4, 2005 (inception)
      through December 31, 2007 was ($1,371,290). ****





Net
      Loss





We
      had a
      net loss of ($1,964,734) for the year ended December 31, 2007 compared to a
      net
      loss of ($4,376,139) for the year ended December 31, 2006, a decrease of
      $2,411,405 in the reported net loss. The net loss for the year ended December
      31, 2007 was primarily the result of an increase in general and administrative
      expense levels offset by a decrease in the fair value of derivatives and warrant
      liabilities of $539,429. Our net loss for the period from March 4, 2005
      (inception) through December 31, 2007 was $6,941,380.





**Liquidity
      and Capital Resources.**





Introduction





As
      of
      December 31, 2007, we had total current assets of $768,582 and total current
      liabilities of $1,662,281, resulting in a working capital deficit of $893,699.
      As of December 31, 2007, our assets consisted primarily of accounts receivable
      of $77,167, inventory of $44,162, unbilled revenues of uncompleted contracts
      of
      $73,465, prepaid expenses of $32,156, and cash and cash equivalents of $538,373.
      During the period from March 4, 2005 (inception) through December 31, 2007,
      we
      incurred a net loss of $6,941,380, and had a net loss of $1,964,734 for the
      year
      ended December 31, 2007. We had an accumulated deficit of $6,941,380 as of
      December 31, 2007.





Our
      ability to continue, as a going concern on a long-term basis is dependent upon
      our ability to generate sufficient cash flow from operations to meet our
      obligations on a timely basis, to obtain additional financing and ultimately
      attain profitability.




17





Although
      we have been successful in the past in raising capital, no assurance can be
      given that sources of financing will continue to be available and/or that demand
      for our equity/debt instruments will be sufficient to meet our capital needs,
      or
      that financing will be available on favorable terms. Our audited consolidated
      financial statements do not include any adjustments relating to the
      recoverability and classification of assets and liabilities that might be
      necessary should we be unable to continue as a going concern.





If
      funding is insufficient at any time in the future, we may not be able to take
      advantage of business opportunities or respond to competitive pressures or
      may
      be required to reduce the scope of our planned product development and marketing
      efforts, any of which could have a negative impact on business and operating
      results. In addition, insufficient funding may have a material adverse effect
      our financial condition, which could require us to:





·
            curtail
                operations significantly;


·
            sell
                significant assets;


·
            seek
                arrangements with strategic partners or other parties that may require
                us
                to relinquish significant rights to products, technologies or markets;
                or


·
            explore
                other strategic alternatives including a merger or
                sale.





To
      the
      extent that we raise additional capital through the sale of equity or
      convertible debt securities, dilution of the interests of existing shareholders
      may occur. If we raise additional funds through the issuance of debt securities,
      these securities may have rights, preferences and privileges senior to holders
      of common stock and the terms of such debt could impose restrictions on our
      operations. Regardless of whether our assets prove to be inadequate to meet
      our
      operational needs, we may seek to compensate providers of services by issuance
      of stock in lieu of cash, which may also result in dilution to existing
      shareholders.





Our
      cash,
      accounts receivable, inventories, prepaid expenses, total current assets,
      primary current liabilities, and total current liabilities as of December 31,
      2007, compared to the end of our last fiscal year were:





As
                of
              December
                31, 2007
            
            As
                of
              December
                31, 2006
            
            ChangeCash
                and cash equivalents
            
            $
            538,373
            
            $
            122,008
            
            $
            416,365Accounts
                receivable
            
            
            77,167
            
            
            18,474
            
            
            58,693Unbilled
                revenues on uncompleted contracts
            
            
            73,465
            
            
            —
            
            
            73,465Inventories
            
            
            44,162
            
            
            79,801
            
            
            (35,639
            )Prepaid
                expenses and other current assets
            
            
            32,156
            
            
            5,360
            
            
            26,796Total
                current assets
            
            
            768,582
            
            
            225,643
            
            
            542,939Accounts
                payable and accrued expenses
            
            
            744,876
            
            
            811,676
            
            
            (66,800
            )Due
                to related party
            
            
            186,901
            
            
            222,207
            
            
            (35,306
            )Due
                to stockholders
            
            
            321,884
            
            
            325,009
            
            
            (3,125
            )Payroll
                taxes payable
            
            
            192,177
            
            
            328,070
            
            
            (135,893
            )Total
                current liabilities
            
            
            1,662,281
            
            
            1,920,720
            
            
            (258,439
            )





Cash
      Requirements





We
      intend
      to use our available funds as working capital to reduce the outstanding debt
      of
      World Am/Isotec and to expand the operations of Senz-It.





Sources
      and Uses of Cash





*Operating
      Activities*





Our
      net
      cash used in operating activities was $2,449,380 for the year ended December
      31,
      2007 and $483,164 for the year ended December 31, 2006, an increase of
      $1,966,216. The principal components of the net cash used in operations for
      the
      year ended December 31, 2007 was: (a) a net loss of $1,964,734, (b) change
      in
      fair value of derivative and warrant liabilities of ($1,203,222); (c) a decrease
      in accounts payable and accrued liabilities of $68,649; (d) a decrease in
      payroll taxes payable of $135,893, (e) an increase in accounts receivable of
      $58,693, and (f) an increase in unbilled revenue on uncompleted contracts of
      $73,465; offset by (f) stock issued for services in the amount of $953,185,
      and
      (g) amortization of the discount on convertible debt of $92,166. Our net cash
      used in operating activities was $2,887,356 for the period from March 4, 2005
      (inception) through December 31, 2007.




18





*Investing
      Activities*





Our
      net
      cash used in investing activities was $243,896 for the year ended December
      31,
      2007 and was used for acquisitions of fixed and intangible assets of $84,349
      and
      $159,547, respectively, compared to $26,409 for the year ended December 31,
      2006, which was used for the acquisition of fixed assets of $1,409 and the
      purchase of intangible assets of $25,000. Our net cash used in investing
      activities was $269,370 for the period from March 4, 2005 (inception) through
      December 31, 2007.





*Financing
      Activities*





Our
      net
      cash provided by financing activities of $3,109,641 for the year ended December
      31, 2007, which resulted from proceeds from sales of common stock to investors
      in a private stock offering of $3,200,250, proceeds from issuance of notes
      payable of $3,432, proceeds from warrant exercise of $10,000, which were offset
      by repayments of notes payable to related parties of $104,041. Our net cash
      provided by financing activities was $621,178 for the year ended December 31,
      2006, which resulted from proceeds from sales of common stock to investors
      in a
      private stock offering of $318,390, proceeds from exercise of warrants totaling
      $27,788 and proceeds from issuance of convertible debenture of $275,000. Our
      net
      cash provided by financing activities of $3,695,099 for the period from March
      4,
      2005 (inception) through December 31, 2007.





**Contractual
      Obligations.**





Capital
      Lease





We
      were
      obligated under a capital lease for manufacturing equipment. Under the terms
      of
      the current lease agreement, we pay on a month-to-month rental at the rate
      of
      $425 per month. We have the right to return the equipment to the lessor at
      any
      time. This capital lease is no longer in existence because Isotec purchased
      the
      equipment in 2007.





Operating
      Leases.





Isotec
      leases a 4,800 square foot facility in Westminster, Colorado with a monthly
      rent
      and common area expense of $4,061 through December 31, 2011. Rent and common
      area expense totaled $45,139 and $47,875 for the years ended December 31, 2007
      and 2006, respectively.





As
      of
      December 31, 2007 future minimum non-cancellable facility rental payments
      required under the operating lease are as follows:





2008
            
            $
            49,2182009
            
            
            51,1832010
            
            
            53,2322011
            
            
            55,362$
            208,995





Senz-It
      leases a 934 square foot facility in Newport Beach, California. The lease
      commenced October 22, 2007 through October 21, 2008. Upon expiration, the lease
      terms will continue for successive thirty-day periods until cancelled by either
      party in writing. Rent and common area expense totaled $4,345 for the year
      ended
      December 31, 2007. As of December 31, 2007, future minimum non-cancellable
      facility rental payment required under the operating lease for 2008 are
      $11,347.




19





Consulting
      Agreements .





On
      February 21, 2007, we entered into a consulting agreement with our chief
      executive officer, Robert Hovee, through an agreement with RAH Consulting Group,
      Inc. This agreement covers his services to be rendered for us in that position
      for the period of January 1, 2007 through December 31, 2007. In consideration
      of
      the services rendered, we will pay Mr. Hovee a fee of $8,000 per month, in
      cash
      or stock, at our discretion. Mr. Hovee will be eligible to participate in our
      Stock Option Plan, effective on January 2, 2007. We will reimburse Mr. Hovee
      for
      all reasonable business expenses incurred while performing services for us.
      In
      addition, healthcare insurance premiums for Mr. Hovee will be paid by us. This
      agreement is to remain in effect until terminated by either party as of the
      date
      set forth in a written notice to the other party delivered in accordance with
      the notice provisions of the agreement at least 30 days prior to such date.
      In
      the event of the termination of this agreement, any accrued but unpaid fees
      will
      be paid within ten days of the effective date of such termination. On March
      10,
      2008, the provisions of the consulting agreement were renewed.




An
      advance on the consulting fees owed Robert Hovee was made during 2007. These
      monies, $3,259, are shown as an advance to related party in the accompanying
      consolidated balance sheet as of December 31, 2007.





Distributor
      Agreements





We
      have
      entered into several distributor agreements for distribution of our products
      in
      the United States. These agreements call for the provision of services to the
      distributors in exchange for the promotion of our products. The products are
      sold to the distributor at a discount from the list price of 15% to
      25%.





In
      addition, we have alliance agreements to assist us in establishing international
      distributorships. The agreements have one-year terms and may be renewed with
      the
      mutual consent of both parties. The alliance agreements specify a commission
      of
      10% of license fees and 5% of product sales made pursuant to the alliance
      agreements.





On
      May 1,
      2007, we entered into a distributor agreement for the purpose of appointing
      a
      distributor responsible for the worldwide, excluding Singapore, sales and
      marketing of the Senz-It product line for a period of forty-eight months unless
      sooner terminated as specified in the agreement. In addition the distributor
      provides sales and marketing consulting services for an initial term of twelve
      months. As payment for these consulting fees, we agreed to the following
      compensation arrangement: (a) 10,000,000 million shares (50% of the shares
      in
      the form of S-8 shares and 50% of the shares were in the form of Rule 144
      shares) were issued totaling $60,000 (valued at $0.006 on the date issued),
      and
      (b) World Am stock options, fully vested, issued monthly in the amount of
      1,200,000 at an exercise price of $0.02 per share. The stock option shares
      remain exercisable for a period of 36 months from the date of issuance. No
      additional compensation or expense reimbursement shall be made to distributor
      for their efforts in this matter. As of December 31, 2007, a total of 8,400,000
      fully vested options had been issued, valued at $23,770. Of this amount, $2,847
      has been recorded in general and administrative expenses (see Note
      11).




License
      Agreement





During
      the year ended December 31, 2006, Senz-It entered into a technology license
      agreement with the Research Foundation of SUNY (the “Foundation”) (the “License
      Agreement”). The Foundation granted an exclusive field of use license to Senz-It
      to facilitate the development and commercialization of certain technology
      developed at SUNY. Per the License Agreement, Senz-It will have the exclusive
      license to make, have made, use, sell and offer for sale certain licensed
      products over the term of the License Agreement of ten years. In exchange for
      this license, Senz-It is obligated to pay an upfront fee of $25,000, royalties
      of 3% of net sales with an annual minimum of $10,000, 35% of any defined
      sublicensing fees, reimburse the Foundation for certain defined patent costs
      for
      the licensed technologies, and provide additional research funding to SUNY
      as
      follows:




March
                31, 2008:
            
            $
            50,000;March
                31, 2009:
            
            $
            75,000;March
                31, 2010:
            
            $
            100,000;March
                31, 2011:
            
            $
            125,000




During
      2007, we incurred minimum royalty fee of $10,000 and $159,547 for patent cost
      reimbursement. As of December 31, 2007, Senz-It had incurred a total of $184,547
      related to the License Agreement and had recorded the costs as an intangible
      asset in the accompanying consolidated financial statements (see Note 3). Upon
      commencement of sales of the licensed technologies, Senz-It will amortize the
      cost of the intangibles over the lesser of either their estimated useful life
      or
      the remaining term of the License Agreement. Amortizable intangible assets
      are
      tested for impairment based on undiscounted cash flows, and, if impaired,
      written down to fair value based on either discounted cash flows or appraised
      values.




20




In
      connection with the License Agreement (see Note 3), Senz-It will issue
      restricted shares of common stock, none issued as of December 31, 2007, and
      will
      issue additional such shares to SUNY pursuant to the terms of a Stock Purchase
      Agreement dated December 1, 2006,  so
      that
      it will maintain a minimum ownership of 10% in Senz-It. Finally, Senz-It entered
      into a Stockholders Agreement dated  December
      1, 2006 with SUNY that covers the rights of stockholders of Senz-It. At such
      time as Senz-It earns a profit, the minority interest will be allocated to
      SUNY.
      In connection with these agreements, we entered into confidentiality and
      non-disclosure agreements with SUNY as to certain specific terms of the
      agreements.





Indemnities
      and Guarantees





During
      the normal course of business, we have made certain indemnities and guarantees
      under which it may be required to make payments in relation to certain
      transactions. These indemnities include certain agreements with our officers
      under which we may be required to indemnify such persons for liabilities arising
      out of their employment relationship, lease agreements where we may be required
      to indemnify landlords for damages arising from non-compliance with
      environmental laws, contracts where we may be required to indemnify the other
      party from liabilities resulting from claimed infringements of the proprietary
      rights of third parties or confidentiality provisions and the La Jolla Cove
      agreement where we may be required to indemnify La Jolla Cove for breach of
      representation or warranty. The duration of these indemnities and guarantees
      varies, and in certain cases, is indefinite.





The
      majority of these indemnities and guarantees do not provide for any limitation
      of the maximum potential future payments we would be obligated to make.
      Historically, we have not been obligated to make significant payments for these
      obligations and no liability has been recorded for these indemnities in the
      accompanying consolidated balance sheets.





Off
      Balance Sheet Arrangements





Other
      than our operating lease, we do not engage in any off balance sheet arrangements
      that are reasonably likely to have a current or future effect on our
      consolidated financial condition, revenues, and results of operations, liquidity
      or capital expenditures.





Inflation





The
      impact of inflation on our costs and the ability to pass on cost increases
      to
      our customers over time is dependent upon market conditions. We are not aware
      of
      any inflationary pressures that have had any significant impact on our
      operations over the past quarter, and we do not anticipate that inflationary
      factors will have a significant impact on future operations.





**Critical
      Accounting Policies.**





The
      SEC
      has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding
      Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies
      provide additional disclosure and commentary on their most critical accounting
      policies. In FRR 60, the SEC has defined the most critical accounting policies
      as the ones that are most important to the portrayal of a company’s financial
      condition and operating results and require management to make its most
      difficult and subjective judgments, often as a result of the need to make
      estimates of matters that are inherently uncertain. Based on this definition
      and
      in consultation with our Board of Directors, we have identified the following
      accounting policies that we believe are critical to an understanding of our
      financial statements. These are important accounting policies that require
      management’s most difficult, subjective judgments, and include: (a) valuation of
      stock-based compensation arrangements; (b) revenue recognition; (c)
      realizability of long-lived assets; (d) valuation of derivative financial
      instruments; and (e) valuation of income taxes. The methods, estimates and
      judgments the Company uses in applying these most critical accounting policies
      have a significant impact on the results the Company reports in its consolidated
      financial statements.





21




Valuation
      of Stock-Based Compensation Arrangements





All
      issuances of our stock for non-cash consideration have been assigned a per
      share
      amount equaling either the market value of the shares issued or the value of
      consideration received, whichever is more readily determinable. The majority
      of
      the non-cash consideration received pertains to services rendered by consultants
      and others and have been valued at the amount billed by the consultant for
      services provided.




Our
      accounting policy for equity instruments issued to consultants and vendors
      in
      exchange for goods and services follows the provisions of EITF Issue No. 96-18,
      “Accounting for Equity Instruments That are Issued to Other Than Employees for
      Acquiring, or in Conjunction with Selling, Goods or Services,” and EITF Issue
      No. 00-18, “Accounting recognition for Certain Transactions Involving Equity
      Instruments Granted to Other Than Employees.” The measurement date for the fair
      value of the equity instrument issued is determined at the earlier of (a) the
      date at which a commitment for performance by the consultant or vendor is
      reached or (b) the date at which the consultant or vendor’s performance is
      complete. In the case of equity instruments issued to consultants, the fair
      value of the equity instrument is recognized over the term of the consulting
      agreement. In accordance with EITF Issue No. 00-18, an asset acquired in
      exchange for the issuance of fully vested, non-forfeitable equity instruments
      should not be presented or classified as an offset to equity on the grantor’s
      balance sheet once the equity instrument is granted for accounting purposes.
      Accordingly, we will record the fair value of the fully vested non-forfeitable
      common stock issued for future consulting services as prepaid expenses in the
      consolidated balance sheet.




We
      account for our employee stock-based compensation under the provisions of SFAS
      No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”). SFAS No.
      123(R) requires a public entity to measure the cost of employee services
      received in exchange for an award of equity instruments, including stock
      options, based on the grant-date fair value of the award and to recognize it
      as
      compensation expense over the period the employee is required to provide service
      in exchange for the award, usually the vesting period. We have also applied
      the
      provisions of Staff Accounting Bulletin (“SAB”) No. 107 relating to SFAS No.
      123(R).




SFAS
      No.
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service periods in our consolidated statements of
      operations.




Stock-based
      compensation expense recognized during the period is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest during
      the period. SFAS No. 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 forfeiture rate that we presently use is
      0%.




SFAS
      No.
      123(R) requires the cash flows resulting from the tax benefits resulting from
      tax deductions in excess of the compensation cost recognized for those options
      to be classified as financing cash flows. Due to our loss position, there were
      no such tax benefits for the years ended December 31, 2007 and 2006,
      respectively.




Revenue
      Recognition





We
      recognize revenue in accordance with SAB No. 101, “Revenue Recognition in
      Financial Statements,” as revised by SAB No. 104. As such, we recognize revenue
      when persuasive evidence of an arrangement exists, title transfer has occurred,
      the price is fixed or readily determinable and collection is probable.




Our
      revenues were substantially derived from product sales at Isotec, which
      primarily consisted of shipments of security portals. Revenue from product
      sales
      are recorded when products are shipped.




Revenues
      derived from contracts to develop prototypes and provide research, development,
      design, testing and evaluation of complex detection and control defense systems
      contributed $115,573 and $-0- to total revenues during 2007 and 2006,
      respectively. Our 2007 research and development contract is cost reimbursement.
      Our cost reimbursement research and development contracts require our good
      faith
      performance of a statement of work within overall budgetary constraints, but
      with latitude as to resources utilized. Revenues for research and development
      contracts are recognized as costs are incurred in the proportion that costs
      incurred bear to estimated final costs.




22




Costs
      and
      estimated earnings in excess of billings under government research and
      development contracts are accounted for as unbilled revenues on uncompleted
      contracts, stated at estimated realizable value and expected to be realized
      in
      cash within one year.




As
      of
      December 31, 2007, we recorded deferred revenue of $57,563 for customer deposits
      on ordered products.




We
      have
      contracts with various governments and governmental agencies. Government
      contracts are subject to audit by the applicable governmental agency. Such
      audits could lead to inquiries from the government regarding the acceptability
      of costs under applicable government regulations and potential adjustments
      of
      contract revenues. To date, we have not been involved in any such
      audits.




Realizability
      of Long-Lived Assets





The
      third
      critical accounting policy relates to realizability of long-lived assets. We
      account for long-lived assets in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets.” SFAS No. 144 requires that long-lived assets be
      reviewed for impairment whenever events or changes in circumstances indicate
      that the historical cost carrying value of an asset may no longer be
      appropriate. We assess recoverability of the carrying value of an asset by
      estimating the future net cash flows expected to result from the asset,
      including eventual disposition. If the future net cash flows are less than
      the
      carrying value of the asset, an impairment loss is recorded equal to the
      difference between the asset’s carrying value and fair value or disposable
      value. As of December 31, 2007, we do not believe there has been any impairment
      of our long-lived assets. There can be no assurances, however, that demand
      for
      our products and services will continue, which could result in an impairment
      of
      long-lived assets in the future.





Valuation
      of Derivative Financial Instruments





In
      accounting for non-conventional convertible debt, we bifurcate our embedded
      derivative instruments and record them under the provisions of SFAS No. 133,
      “Accounting for Derivative Instruments and Hedging Activities,” as amended, and
      EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed
      to, and Potentially Settled in, a Company’s Own Stock.” Our derivative financial
      instruments consist of embedded derivatives related to a non-conventional
      debenture entered into with Golden Gate Investors, Inc./La Jolla Cove Investors,
      Inc. (“La Jolla Cove”) (see Note 9). These embedded instruments related to the
      Debenture include the conversion feature, liquidated damages related to
      registration rights and default provisions. The accounting treatment of
      derivative financial instruments requires that we record the derivatives and
      related warrants at their fair value as of the inception date of the agreement
      and at fair value as of each subsequent balance sheet date. Any change in fair
      value will be recorded as non-operating, non-cash income or expense at each
      reporting period. If the fair value of the derivatives is higher at the
      subsequent balance sheet date, we will record a non-operating, non-cash charge.
      If the fair value of the derivative is lower at the subsequent balance sheet
      date, we will record non-operating, non-cash income.




During
      the year ended December 31, 2006, we recorded the initial fair value of the
      conversion feature of $1,151,759 of which $876,759 was recorded as interest
      expense in the consolidated statement of operations and $275,000 was recorded
      as
      a discount on the debt and is being amortized to interest expense over the
      life
      of the debt. We also recorded the initial fair value of the attached warrants,
      related to the debt financing in 2006, of $2,075,694 as a component of interest
      expense in the consolidated statements of operations for the year ended December
      31, 2006. The initial fair value of the conversion-related derivatives and
      warrants were valued primarily using the Black-Scholes pricing model with the
      following assumptions: dividend-yield of 0%, annual volatility of 127% and
      risk-free interest rate of 4.70% - 4.74%. At December 31, 2006, the fair value
      of the conversion feature and the warrants amounted to $2,565,660. The decrease
      in the fair value of the conversion features and warrants of $643,793 is
      included as a component of other income in the accompanying consolidated
      statement of operations. At December 31, 2007, the fair value of the La Jolla
      Cove conversion feature and the warrants amounted to $1,788,376. The 2007
      decrease in the fair value of the La Jolla Cove conversion features and warrants
      of $777,284 is included as other income in the accompanying consolidated
      statement of operations..




As
      of
      December 31, 2007, the derivatives and warrants were valued primarily using
      the
      Black-Scholes pricing model with the following assumptions: dividend yield
      of
      0%, annual volatility of 133.2% - 161.8%, and risk free interest rate of 3.07%
      -
      3.45%. The derivatives are classified as long-term liabilities in the
      accompanying consolidated balance sheet.




23




In
      addition, under the provisions of EITF Issue No. 00-19, as a result of entering
      into the convertible debt, we are required to classify all other non-employee
      stock options and warrants as liabilities and mark them to market at each
      reporting date. Non-employee stock options and warrants were valued primarily
      using the Black-Scholes pricing model with the following assumptions: dividend
      yield of 0%, volatility of 138% and risk free interest rate of 4.54%. The
      initial fair value assigned to the non-employee options and warrants prior
      to
      fiscal 2007 was $124,000, which was recorded as interest expense. At December
      31, 2006, the fair value of the non-employee warrant was $86,000. During 2007
      we
      reclassified additional derivative liability of $607,875 from additional
      paid-in-capital for warrants granted primarily in connection with equity
      offerings. Additionally, in the fourth quarter of 2007, 100,000 warrant shares
      were issued to a research company at a price of $0.005 per share, with a
      five-year right of exercise period. These warrants were valued at
      $222.




At
      December 31, 2007, the fair value of the non-employee warrants was $267,937.
      The
      decrease in the fair value of non-employee stock options and warrants in the
      amount of $425,938 since December 31, 2006, is included in other income in
      the
      accompanying consolidated statement of operations.




Valuation
      of Income Taxes





The
      fifth
      critical accounting policy relates to valuation of income taxes. We account
      for
      income taxes under the provisions of SFAS No. 109, “Accounting for Income
      Taxes.” Under SFAS No. 109, deferred tax assets and liabilities are recognized
      for future tax benefits or consequences attributable to temporary differences
      between the financial statement carrying amounts of existing assets and
      liabilities and their respective tax bases. Deferred tax assets and liabilities
      are measured using enacted tax rates expected to apply to taxable income in
      the
      years in which those temporary differences are expected to be recovered or
      settled. A valuation allowance is provided for significant deferred tax assets
      when it is more likely that such assets will not be realized through future
      operations.





**ITEM
      7 — FINANCIAL STATEMENTS** ****





The
      consolidated financial statements as of and for the period from March 4, 2005
      (inception of Senz-It) through December 31, 2007 and for the years ended
      December 31, 2007 and 2006, are presented in a separate section of this report
      following Item 14.





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





There
      have been no events required to be reported by this Item 8.





**ITEM
      8A — CONTROLS AND PROCEDURES**





We
      conducted an evaluation, with the participation of our Chief Executive Officer
      and Chief Financial Officer, of the effectiveness of the design and operation
      of
      our disclosure controls and procedures, as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
      Act, as of December 31, 2007, to ensure that information required to be
      disclosed by us in the reports filed or submitted by us under the Exchange
      Act
      is recorded, processed, summarized and reported, within the time periods
      specified in the Securities Exchange Commission's rules and forms, including
      to
      ensure that information required to be disclosed by us in the reports filed
      or
      submitted by us under the Exchange Act is accumulated and communicated to our
      management, including our principal executive and principal financial officers,
      or persons performing similar functions, as appropriate to allow timely
      decisions regarding required disclosure. Based on that evaluation, our Chief
      Executive Officer and Chief Financial Officer have concluded that as of December
      31, 2007, our disclosure controls and procedures were not effective at the
      reasonable assurance level due to the material weaknesses described
      below.





In
      light
      of the material weaknesses described below, we performed additional analysis
      and
      other post-closing procedures to ensure our financial statements were prepared
      in accordance with generally accepted accounting principles. Accordingly, we
      believe that the consolidated financial statements included in this report
      fairly present, in all material respects, our financial condition, results
      of
      operations and cash flows for the periods presented.




24





A
      material weakness is a control deficiency (within the meaning of the Public
      Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or
      combination of control deficiencies, such that there is a reasonable possibility
      that a material misstatement of the annual or interim financial statements
      will
      not be prevented or detected. Management has identified the following three
      material weaknesses that have caused management to conclude that, as of December
      31, 2007, our disclosure controls and procedures were not effective at the
      reasonable assurance level:





1.  We
      do not
      have formalized documentation related to our internal control policies and
      procedures; however, there are informal policies and procedures that cover
      the
      recording and reporting of financial transactions. Written documentation of
      key
      internal controls over financial reporting is a requirement of Section 404
      of
      the Sarbanes-Oxley Act and will be applicable to us for the year ending December
      31, 2008. Management evaluated the impact of our failure to have written
      documentation of our internal controls and procedures on our assessment of
      our
      disclosure controls and procedures and has concluded that the control deficiency
      that resulted represented a material weakness.





2.  We
      do not
      have sufficient segregation of duties within accounting functions, which is
      a
      basic internal control. Due to our size and nature, segregation of all
      conflicting duties may not always be possible and may not be economically
      feasible. However, to the extent possible, the initiation of transactions,
      the
      custody of assets and the recording of transactions should be performed by
      separate individuals. Management evaluated the impact of our failure to have
      segregation of duties on our assessment of our disclosure controls and
      procedures and has concluded that the control deficiency that resulted
      represented a material weakness.





3.  We
      had a
      significant number of audit adjustments in 2006. .Audit adjustments are the
      result of a failure of the internal controls to prevent or detect misstatements
      of accounting information. The failure could be due to inadequate design of
      the
      internal controls or to a misapplication or override of controls. Management
      evaluated the impact of our significant number of audit adjustments last year
      and has concluded that the control deficiency that resulted represented a
      material weakness.





4.  Subsequent
      to filing our Quarterly Report on Form 10-QSB for the period ended June 30,
      2007, we realized that we did not take into account the warrants that were
      issued related to the sale of our stock in the determination of the change
      in
      warrant and derivative liability account balances. Our management evaluated
      the
      impact of our failure to correctly calculate the change in the warrant and
      derivative accounts and has concluded that the control deficiency that resulted
      represented a material weakness.





To
      address these material weaknesses, management performed additional analyses
      and
      other procedures to ensure that the financial statements included herein fairly
      present, in all material respects, our financial position, results of operations
      and cash flows for the periods presented.





**Remediation
      of Material Weaknesses**




To
      remediate the material weaknesses in our disclosure controls and procedures
      identified above, we have continued to refine our internal procedures to begin
      to implement segregation of duties and to reduce the number of audit
      adjustments.





**Changes
      in Internal Control over Financial Reporting**




Except
      as
      noted above, there were no changes in our internal control over financial
      reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
      during our most recently completed fiscal quarter that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting .




**ITEM
      8A(T) - CONTROLS AND PROCEDURES**





At
      the
      end of the period covered by this report, we carried out the above evaluation,
      under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures pursuant
      to
      Securities Exchange Act Rule 13a-14.




Based
      upon that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that, based on the above factors, our disclosure controls and
      procedures were not effective (1) to provide reasonable assurance that
      information required to be disclosed by us in the reports filed or submitted
      by
      us under the Securities Exchange Act were recorded, processed, summarized and
      reported within the time periods specified in the SEC’s rules and forms, and
      (2) to provide reasonable assurance that information required to be
      disclosed by us in such reports is accumulated and communicated to our
      management, including its Chief Executive Officer and Chief Financial Officer,
      as appropriate to allow for timely decisions regarding required
      disclosure.




25




**MANAGEMENT’S
      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting for the Company. Our internal control over financial
      reporting is a process designed under the supervision of our CEO and CFO to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of our financial statements for external reporting purposes
      in accordance with U.S. generally accepted accounting principles. Management
      has
      made a comprehensive review, evaluation and assessment of the Company's internal
      control over financial reporting as of December 31, 2007. In making its
      assessment of internal control over financial reporting, management used the
      criteria issued by the Committee of Sponsoring Organizations of the Treadway
      Commission (“COSO”) in Internal Control−−Integrated Framework. In accordance
      with Section 404 of the Sarbanes−Oxley Act of 2002, management makes the
      following assertions:





·
            Management
                has implemented a process to monitor and assess both the design and
                operating effectiveness of internal control over financial
                reporting.





·
            All
                internal control systems, no matter how well designed, have inherent
                limitations.  Therefore, even those systems determined to be
                effective can provide only reasonable assurance with respect to financial
                statement preparation and
                presentation.





·
            Our
                management assessed the effectiveness of our internal control over
                financial reporting as of December 31, 2007.   In making this
                assessment, it used criteria set forth by the Committee of Sponsoring
                Organizations of the Treadway Commission (COSO) in Internal Control
                -
                Integrated Framework.  Based on that assessment, we believe
                that, as of December 31, 2007, the Company’s internal  control
                over financial reporting is deficient based on those criteria for
                the
                reasons stated above.





This
      annual report does not include an attestation report of the company's registered
      public accounting firm regarding internal control over financial reporting.
      Management's report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only management's report in this annual
      report.





**ITEM
      8B — OTHER INFORMATION**





**Subsequent
      Events.**





Strategic
      Alliance and Joint Development Agreement





On
      February 29, 2008, Senz-It entered into a strategic alliance and joint
      development agreement with BioMEDIX for the purpose of developing a new testing
      system to more accurately determine levels of decay in fish - one of the world’s
      most perishable foods. The test system is expected to be compact and portable.
      The system is intended to measure not only levels of decomposition, but also
      determine if specific by-products associated with decay are present, and in
      what
      quantities. The test system is expected to be deployed at multiple points in
      the
      supply chain, including but not limited to, fish laboratories, food processors,
      distributors, and retailers.




26


**PART
      III**





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





**Directors
      and Executive Officers**





The
      following table sets forth the names and ages of the current directors and
      executive officers of the Company, the director nominees, and the principal
      offices and positions with the Company held by each person and the date such
      person became a director or executive officer of the Company. The executive
      officers of the Company are appointed by the Board of Directors. The directors
      serve one-year terms until their successors are elected. The executive officers
      serve until their death, resignation or removal by the Board of Directors.
      Unless described below, there are no family relationships among any of the
      directors and officers, and none of our officers or directors serves as a
      director of another reporting issuer.





Name
            
            Age
            
            Position(s)Robert
                A. Hovee
            
            65
            
            President,
                CEO, and DirectorC.
                Robert Kline
            
            62
            
            Chief
                Financial Officer and DirectorJames
                R. Largent
            
            57
            
            Secretary
                and DirectorDavid
                J. Barnes
            
            50
            
            Director





**Robert
      A. Hovee** is a
      veteran senior executive, private investor and entrepreneur. In 1994, he founded
      RAH Consulting Group, Inc., a private company focused on new product
      development, strategic planning, organizational issues, operations and
      international marketing. Mr. Hovee has been an active private investor, board
      member and advisor to early-stage technology companies for the past 12 years.
      Earlier, Mr. Hovee was chairman & CEO of Life Support Products, Inc., a
      private medical technology venture he led from 1983 to 1993. Currently
      Mr. Hovee serves on the boards of directors of Select University
      Technologies, Inc., a licensor of technologies developed by universities (from
      July 1997), Curlin Medical, Inc., an infusion pump manufacturer (from June
      2000), and Metagenics, Inc., a nutraceutical research and manufacturing company
      (from July 1997). He was appointed chief executive officer and a director of
      the
      Company on November 7, 2005.





Mr.
      Hovee
      received two B.A. degrees in marketing and international business from the
      University of Washington, and a Masters degree in international management
      from
      the Garvin Graduate School of International Management (Thunderbird), where
      he
      was the recipient of the Barton Kyle Yount Scholarship.





**C.
      Robert Kline** is
      currently Chairman and President of KTC Global, Inc., headquartered in
      Washington, and Kline Technical Consulting, LLC. KTC Global has two operating
      subsidiaries, one in the USA and one in Europe. From 2001-2006, Dr. Kline held
      the positions of Executive Vice President and Chief Operating Officer for HYTEC,
      Inc., which is a leading manufacturer of nondestructive test equipment notably
      x-ray forensics inspection systems. In Dr. Kline’s experience prior to HYTEC, he
      worked for more than 40 years in the areas of technology selection and planning
      and has helped launch products in generation and storage of energy, information,
      telecommunications, and manufacturing technologies, for such governmental
      agencies as the Departments of Defense, Commerce and Energy, the National
      Security Agency, and the FBI.





Dr.
      Kline
      has worked on behalf of the above agencies for major corporations in partnership
      with such nations as the United Kingdom, Germany, India, Russia, Israel, Finland
      and Taiwan. In 1994, the President of Taiwan awarded Dr. Kline the President’s
      citation for work in the development of hard coatings and their application
      to
      high specific energy density power storage and heavy manufacturing.





In
      addition to his work on behalf of the government and corporations, Dr. Kline
      served as a university professor and leader of university research for many
      years. He has also served as a technology evaluation/selection leader for
      private firms, such as Select University Technologies, Inc., the largest
      shareholder of World Am, public firms including Northrop Grumman, and the
      government, through IBM Federal and E-Systems. Throughout his career, he has
      served several national non-military agencies in designing and programming
      computer systems for large-scale data storage, search, and retrieval.




27





Dr.
      Kline
      has also authored more than 50 books and articles or chapters, focused on
      advanced battery technology, electronic warfare and bioterror countermeasures,
      biomedical engineering, and interpretation theory. He also served in the U.S.
      Marine Corps. He was appointed chief financial officer and Chairman of the
      Audit
      Committee of the Company on November 13, 2007.





**James
      R. Largent** has
      more
      than 30 years experience in the medical device and pharmaceutical industries.
      Since 2002, he has served as a medical device and pharmaceutical consultant
      with
      assignments in the strategic planning, business development and Medicare
      reimbursement areas. From 1991 to 2002, Mr. Largent served in positions of
      increasing responsibility with Irvine, California based Allergan, Inc., which
      engages in the development and commercialization of pharmaceutical products
      for
      the ophthalmic, neurological, dermatological and other markets. From 1996 to
      2002, he served as vice-president, strategic planning, for Allergan and was
      responsible for corporate strategic planning and business development. Mr.
      Largent received a B.A. degree in chemistry in 1972 and a Masters degree in
      business in 1977 from the University of California, Irvine. He was appointed
      a
      director of the Company on November 10, 2005 and secretary on March 20,
      2006.





**David
      J. Barnes** served
      as
      a financial advisor, from 1983 to 1999, with the firms of UBS Paine Webber,
      Prudential Securities and Spelman & Company. At Prudential and Spelman, he
      worked extensively in the areas of corporate finance and corporate and municipal
      cash management.





Mr.
      Barnes served as a board member and chief financial officer of Cage Concepts,
      a
      bone cage manufacturer (June 1999 to October 2002), a board member and chairman
      of the audit committee of Advanced Spine Fixation Systems, Inc., a spinal
      implant manufacturer (October 1990 to February 2003), and a board member of
      Osteo Implants, an orthopedic product manufacturer (January 2003 to September
      2004). Mr. Barnes served as vice-president finance and investor relations with
      Commerce Energy Corporation from August 2004 to December 2004. He was appointed
      a director of the Company on November 10, 2005 and chief financial officer
      on
      February 21, 2006. Effective November 13, 2007, Mr. Barnes resigned from
      his position as chief financial officer and Chairman of the Company’s Audit
      Committee.





From
      January 2000 to the present, Mr. Barnes has served as president of Nexus
      Advisory Corporation. He also serves as chairman of the board and chairman
      of
      the audit committee of DataLabs of Irvine, California, an electronic processor
      of clinical studies (from May 2004). Mr. Barnes received a B.S. degree in
      criminal justice from San Diego State University in 1978 and also completed
      a
      municipal securities management program at Emory University in
      1984.





**Compliance
      with Section 16(a) of the Securities Exchange Act of 1934**





Section
      16(a) of the Securities Exchange Act of 1934 requires the Company’s directors
      and executive officers and persons who own more than ten percent of a registered
      class of the Company’s equity securities to file with the SEC initial reports of
      ownership and reports of changes in ownership of Common Stock and other equity
      securities of the Company. Officers, directors and greater than ten percent
      shareholders are required by SEC regulations to furnish the Company with copies
      of all Section 16(a) forms they file.





During
      the most recent fiscal year, to the Company’s knowledge, the following
      delinquencies occurred:





**Name**
            
            **No.
                of Late Reports**
            
            **No.
                of Transactions Reported Late**
            
            **No.
                of**
              **Failures
                to File**Robert
                Hovee
            
            1
            
            1
            
            0David
                Barnes
            
            1
            
            1
            
            0James
                Largent
            
            1
            
            1
            
            0Robert
                Kline
            
            1
            
            1
            
            0





28




**Board
      Meetings and Committees**





During
      the fiscal year ended December 31, 2007, the Board of Directors met on a regular
      basis and took written action on numerous other occasions. All the members
      of
      the Board attended the meetings. The written actions were by unanimous
      consent.





**Code
      of Ethics.**




The
      Company has adopted a code of ethics that applies to its principal executive
      officer, principal financial officer, principal accounting officer or
      controller, or persons performing similar functions. See Exhibit
      14.








**ITEM
      10 — EXECUTIVE COMPENSATION** ****





**Executive
      Officers and Directors**





The
      following tables set forth certain information about compensation paid, earned
      or accrued for services by (i) our Chief Executive Officer and (ii) all other
      executive officers who earned in excess of $100,000 in the fiscal year ended
      December 31, 2007 (“Named Executive Officers”):





**Name
                and Principal Position**
            
            **Year**
            
            **Salary($)**
            
            **Bonus($)**
            
            **Stock
                Awards($) ***
            
            **Option
                Awards($) ***
            
            **Non-Equity
                Incentive Plan Compensation ($)**
            
            **Nonqualified
                Deferred Compensation ($)**
            
            **All
                Other Compensation($)**
            
            **Total($)**Robert
                A. Hovee
            
            
            2007
            
            
            148,849
            (2)
            
            -
            
            
            19,040
            (2)
            
            30,000
            
            
            -
            
            
            -
            
            
            5,322
            
            
            203,111Director,
                President and CEO
            
            
            2006
            
            
            44,000
            (1)
            
            -
            
            
            64,000
            (1)
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            108,000C.
                Robert Kline
            
            
            2007
            
            
            4,500
            (3)
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            4,500Director
                and Chief Financial Officer
            
            
            2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -James
                R. Largent
            
            
            2007
            
            
            16,500
            (3)
            
            -
            
            
            -
            
            
            15,000
            
            
            -
            
            
            -
            
            
            -
            
            
            31,500Director
                and Secretary
            
            
            2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -David
                J. Barnes
            
            
            2007
            
            
            16,500
            (3)
            
            -
            
            
            -
            
            
            15,000
            
            
            -
            
            
            -
            
            
            324,750
            (4)
            
            356,250Director
            
            
            2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -




*
            Based
                upon the aggregate grant date fair value calculated in accordance
                with the
                Financial Accounting Standards Board (“FASB”) Statement of Financial
                Accounting Standard (“FAS”) No. 123R, Share Based Payment. Our policy and
                assumptions made in valuation of share based payments are contained
                in
                Note 2 to our December 31, 2007 financial statements. The monies
                shown in
                the “option awards” column is the total calculated value for each
                individual.





(1)
            The
                total amount accrued for Mr. Hovee’s salary for 2006 was $108,000. On July
                21, 2006, Mr. Hovee received 9,142,857 shares of free trading common
                stock
                as partial payment for this salary; these shares were valued at $64,000
                ($0.007 per share).


(2)
            The
                total amount for Mr. Hovee’s salary for 2007 was $167,889. On June 11,
                2007, Mr. Hovee received 7,616,147 shares of free trading stock as
                partial
                payment for this salary, these shares were valued at $19,040 ($0.0025
                per
                share).




29







(3)
            These
                monies represent Board fees paid in
                2007.


(4)
            See
                Note 12 to the consolidated financial statements for
                details.





**Employment
      Contracts**





As
      of
      December 31, 2007, there were no employment agreements in place covering any
      of
      our executive officers. However, we did have a consulting agreement with RAH
      Consulting Group Services, Inc. (“RAH”), for the services of our chief executive
      officer, Mr. Robert A. Hovee. On February 21, 2007, we entered into a consulting
      agreement with our chief executive officer, Robert Hovee, through the agreement
      with RAH. This agreement covers his services to be rendered for us in that
      position for the period of January 1, 2007 through December 31, 2007. In
      consideration of the services rendered, we pay Mr. Hovee a fee of $8,000 per
      month, in cash or stock, at our discretion. Mr. Hovee is eligible to participate
      in our Stock Option Plan, effective on January 2, 2007. We will reimburse Mr.
      Hovee for all reasonable business expenses incurred while performing services
      for us. In addition, healthcare insurance premiums for Mr. Hovee will be paid
      by
      us. This agreement is to remain in effect until terminated by either party
      as of
      the date set forth in a written notice to the other party delivered in
      accordance with the notice provisions of the agreement at least 30 days prior
      to
      such date. In the event of the termination of this agreement, any accrued but
      unpaid fees will be paid within ten days of the effective date of such
      termination. On March 10, 2008, the provisions of the consulting agreement
      were
      renewed through December 31, 2008.




An
      advance on the consulting fees owed Robert Hovee was made during 2007. These
      monies, $3,259, are shown as an advance to related party in the accompanying
      consolidated balance sheet as of December 31, 2007.





Other
      Compensation





As
      part
      of the consulting arrangement that Mr. Hovee has with us, he is reimbursed
      for
      his medical insurance and his cell phone bills.





**Director
      Compensation**





**The
      following table sets forth director compensation as of December 31,
      2007:**





Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
                Awards
              ($)
                *
            
            Option
                Awards
              ($)
                *
            
            Non-Equity
                Incentive Plan Compensation
              ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation
              ($)
            
            Total
              ($)Robert
                A. Hovee
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-C.
                Robert Kline
            
            
            4,500
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            4,500James
                R. Largent
            
            
            16,500
            
            
            -0-
            
            
            15,000
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            31,500David
                J. Barnes
            
            
            16,500
            
            
            -0-
            
            
            15,000
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            31,500





*
            Based
                upon the aggregate grant date fair value calculated in accordance
                with the
                Financial Accounting Standards Board (“FASB”) Statement of Financial
                Accounting Standard (“FAS”) No. 123R, Share Based Payment. Our policy and
                assumptions made in valuation of share based payments are contained
                in
                Note 2 to our December 31, 2006 financial statements. The monies
                shown in
                the “option awards” column is the total calculated value for each
                individual.




We
      provide the following compensation to our independent directors, Mr. Barnes,
      Mr.
      Largent and Mr. Kline: (a) $1,500 per board meeting and (b) $3,000 per quarter.





Outstanding
      Equity Awards at Fiscal Year-End





The
      following table sets forth certain information concerning outstanding stock
      awards held by the Named Executive Officers as of December 31,
      2007:





**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number
                of Securities Underlying Unexercised Options**
              **(#)**
              **Exercisable**
            
            **Number
                of Securities Underlying Unexercised Options**
              **(#)**
              **Unexercisable**
            
            **Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options**
              **(#)**
            
            **Option
                Exercise Price**
              **($)**
            
            **Option
                Expiration Date**
            
            **Number
                of Shares or Units of Stock That Have Not Vested**
              **(#)**
            
            **Market
                Value of Shares or Units of Stock That Have Not
                Vested**
              **($)**
            
            **Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested**
              **(#)**
            
            **Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested**
              **($)**Robert
                A. Hovee
            
            
            -0-
            
            
            10,000,000
            
            
            -0-
            
            $
            0.005
            
            
            January
                2, 2017
            
            
            10,000,000
            
            $
            0.0039
            
            
            -0-
            
            
            -0-C.
                Robert Kline
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            N/A
            
            
            N/A
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-James
                R. Largent
            
            
            -0-
            
            
            5,000,000
            
            
            -0-
            
            $
            0.005
            
            
            January
                2, 2017
            
            
            5,000,000
            
            $
            0.0039
            
            
            -0-
            
            
            -0-David
                J. Barnes
            
            
            -0-
            
            
            5,000,000
            
            
            -0-
            
            $
            0.005
            
            
            January
                2, 2017
            
            
            5,000,000
            
            $
            0.0039
            
            
            -0-
            
            
            -0-





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





The
      following table sets forth, as of December 31, 2007, certain information with
      respect to our equity securities owned of record or beneficially by (i) each
      of
      our Officer and Director; (ii) each person who owns beneficially more than
      10%
      of each class of our outstanding equity securities; and (iii) all Directors
      and
      Executive Officers as a group.





**Title
                of Class**
            
            **Name
                and Address of Beneficial Owner**
            
            **Amount
                and Nature of Beneficial Owner****(1)**
            
            **Percent
                of Class****(2)**Common
              Stock
            
            SUTI
                Holdings, LP (6)
              4340
                Von Karman Avenue, Suite 200, Newport Beach, California
                92660
            
            1,559,184,407
            (3)
            55
            %Common
              Stock
            
            La
                Jolla Cove Investors, Inc., 7817 Herschel Avenue, Suite 200, La Jolla,
                California 92037
            
            118,683,055
            (4)
            9.99
            %Common
              Stock
            
            G.
                Raymond Pironti, Jr.
              3959
                Van Dyke Road, #152, Lutz, Florida 33558
            
            46,998,691
            (5)
            4.23
            %




30




Common
              Stock
            
            Select
                University Technologies, Inc. (6)
              4340
                Von Karman Avenue, Suite 200, Newport Beach, California
                92660
            
            17,880,000
            
            1.67
            %Common
              Stock
            
            Robert
                A. Hovee
              4340
                Von Karman Avenue, Suite 200, Newport Beach, California
                92660
            
            15,309,004
            
            1.43
            %Common
              Stock
            
            David
                R. Barnes
              4340
                Von Karman Avenue, Suite 200, Newport Beach, California
                92660
            
            0
            
            0.00
            %Common
              Stock
            
            James
                R. Largent
              4340
                Von Karman Avenue, Suite 200, Newport Beach, California
                92660
            
            0
            
            0.00
            %Common
              Stock
            
            C.
                Robert Kline
              4340
                Von Karman Avenue, Suite 200, Newport Beach, California
                92660
            
            0
            
            0.00
            %Common
              Stock
            
            Shares
                of all directors and executive officers as a group (3
                persons)
            
            15,309,004
            
            1.43
            %





(1)  Except
      as
      noted, none of these security holders has the right to acquire any amount of
      the
      shares within sixty days from options, warrants, rights, conversion privilege,
      or similar obligations. Each person has sole voting power and sole dispositive
      power as to all of the shares shown as beneficially owned by them.





(2)  Applicable
      percentage ownership of common stock is based on 1,069,335,511  shares
      issued and outstanding as of March 4, 2008. Beneficial ownership is determined
      in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
      information is not necessarily indicative of beneficial ownership for any other
      purpose. In computing the number of shares beneficially owned by a person and
      the percentage ownership of that person, shares of common stock subject to
      options or convertible or exchangeable into such shares of common stock held
      by
      that person that are currently exercisable, or exercisable within 60 days,
      are
      included.





(3)  Each
      share of the 55 shares of Class B preferred stock owned by SUTI Holdings LP
      is
      convertible by its terms into 1% of the outstanding common shares of the
      Company, including the common stock equivalents of all unexercised warrants,
      options and convertible securities, or a minimum of 7,272,728 shares of common
      stock. Since there are 1,069,335,511  shares
      issued and outstanding stock on March 4, 2008 (4,394,065,146) fully diluted),
      the 55 preferred shares would convert into 55% of the fully diluted share total,
      which equals 1,559,184,407 shares of common stock.





(4)  This
      amount is based on the current convertibility of both the Debenture and the
      warrants issued to La Jolla Cove Investors, Inc. by the Company in connection
      with the Securities Purchase Agreement between the parties and the limit on
      beneficial ownership as set forth in that agreement of 9.99% of the outstanding
      shares of common stock. The amount was calculated based upon 9.99% of the amount
      of outstanding shares that would result from the conversion by La Jolla Cove,
      plus the current outstanding shares of the Company, on March 4,
      2008.




(5)  This
      amount consists of the following: (a) 4,919,743 shares of common stock; (b)
      warrants for the purchase of 18,078,948 shares of common stock exercisable
      for a
      period of three years after grant date of February 4, 2005 at $0.0025 per share;
      and (c) a warrant for the purchase of 24,000,000 shares of common stock (held
      in
      the name of JJ Ellis, LLC, a company controlled by Mr. Pironti), exercisable
      for
      a period of three years after grant (April 25, 2005) at the lower of $0.0025
      per
      share or 80% of the closing price on the date of exercise. See Certain
      Relationships and Related Transactions for a further discussion of these
      warrants.




31





(6)  SUTI
      Holdings LP and Select University Technologies, Inc. do not have the same
      individuals controlling their investment decisions and, therefore, disclaim
      beneficial ownership of the other company’s World Am shares.





**Securities
      Authorized for Issuance under Equity Compensation Plans.**





As
      of
      December 31, 2007, the Company had adopted four equity compensation plans (none
      of which has been approved by its stockholders) that still have shares remaining
      to be issued as of December 31, 2007. The remaining unissued shares under the
      2002 Stock Compensation Plan and the 2003 Consultants Stock Compensation Plan
      were removed from registration in 2006.




**(a)**   **2002
      Stock Compensation Plan.**




On
      December 16, 2002, we adopted the 2002 Stock Compensation Plan (“2002 Plan”).
      The purpose of the 2002 Plan is to enable the Company to promote the interests
      of the Company by attracting and retaining consultants and independent
      contractors capable of furthering the business of the Company by aligning their
      economic interests more closely with those of the Company’s stockholders, or by
      having the ability to pay their retainer or fees in the form of shares of common
      stock. All 55,000,000 shares of common stock authorized under the 2002 Plan
      have
      been registered under Form S-8 filed with the SEC during December 2002. No
      shares were issued under this plan during the year ended December 31, 2007.
      As
      of December 31, 2005, there were 1,800,000 shares remaining to be issued under
      this plan. All remaining shares were removed from registration on June 27,
      2006.





**(b)**   **2003
      Consultants Stock Compensation Plan.**




On
      August
      19, 2003, we adopted the 2003 Consultants Stock Compensation Plan (“2003 Plan”).
      The purpose of the 2003 Plan is to enable the Company to promote the interests
      of the Company by attracting and retaining consultants and independent
      contractors capable of furthering the business of the Company and by aligning
      their economic interests more closely with those of the Company’s stockholders
      and by having the ability to pay their retainer or fees in the form of shares
      of
      common stock or stock options. All 75,000,000 shares of common stock authorized
      under this plan have been registered under Form S-8 filed with the SEC during
      August 2003. The options are exercisable at a price as determined in each case
      by the board of directors, but in no event shall the price be less than 100%
      of
      the fair market value of the shares on the date of grant. There were no options
      granted under the plan during the year ended December 31, 2007. As of December
      31, 2005, there were 13,000,000 shares of common stock remaining to be issued
      under the 2003 Plan. All remaining shares were removed from registration on
      June
      27, 2006.





**(c)**   **Non-Employee
      Directors and Consultants Retainer Stock Plan.**




On
      January 5, 2001, we adopted the Non-Employee Directors and Consultants Retainer
      Stock Plan (“Non-Employee Plan”) (the Company adopted Amendment No. 6 to this
      plan on December 22, 2005). The purpose of this plan is to enable the Company
      to
      promote the interests of the Company by attracting and retaining consultants
      and
      independent contractors for the Company capable of furthering the business
      of
      the Company and by aligning their economic interests more closely with those
      of
      the Company’s stockholders by paying their retainer or fees in the form of
      shares of common stock or stock options. As of December 31, 2005, all
      291,000,000 shares of common stock authorized under this plan have been
      registered on Form S-8 filed with the SEC (the most recent being in December
      2005). A total of 9,923,086 shares were issued out of the Non-Employee Plan
      during the year ended December 31, 2007. As of December 31, 2007, 2,161,277
      shares of common stock remain to be issued under the Non-Employee
      Plan.




**(d)**   **Employee
      Stock Incentive Plan.**




On
      January 22, 2001, we adopted the Employee Stock Incentive Plan (“ESIP) (the
      Company adopted Amendment No. 4 to this plan on February 7, 2006). The ESIP
      is
      intended to allow directors, officers, employees and certain non-employees
      of
      the Company to receive options to purchase Company common stock and to receive
      common stock grants subject to certain restrictions. The purpose of this plan
      is
      to provide these persons with equity-based compensation incentives to make
      significant and extraordinary contributions to the long-term performance and
      growth of the Company, and to attract and retain employees. All 235,000,000
      shares of common stock authorized under this plan have been registered on Form
      S-8 filed with the SEC (the most recent being in October 2005). The options
      are
      exercisable at 80% of the closing price on the date of exercise (subsequently
      amended in February 2006 to an exercise price of $0.015 per share).




32





During
      the year ended December 31, 2007: (a) 4,203,136 shares, issued in 2006 and
      2005,
      were returned and subsequently cancelled and made available for reissuance,
      (b)
      29,806,923 shares previously issued to an escrow account but not outstanding
      were cancelled and made available for reissuance, (c) a total of 192,435,650
      shares of common stock were awarded; and (d) 250,000,000 shares were added
      to
      the plan in May 2007. As of December 31, 2007, there were 100,578,550 shares
      of
      common stock remaining to be issued und the ESIP plan.





**(e)**  **Employee
      Stock Option Plan.**





On
      January 2, 2007, our Board of Directors approved the 2007 Stock Option Plan
      (the
“2007 Plan”) with 45,000,000 shares of our common stock available for issuance
      under the plan. The 2007 Plan offers selected employees, directors, and
      consultants an opportunity to acquire our common stock, and serves to encourage
      such persons to remain employed by us and to attract new employees. As of
      December 31, 2007, options totaling 44,500,000 shares have been granted leaving
      a balance of 500,000 option shares to be granted.




**Equity
                Compensation Plan Information**
              **as
                of December 31, 2007**




**Plan
                category**
            
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
              **(a)**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
              **(b)**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**
              **(c)**Equity
                compensation plans approved by security holders
            
            0
            
            0
            
            0Equity
                compensation plans not approved by security holders
            
            2003
                Plan: 19,059,990
              ESIP
                Plan: 10,060,000
              2007
                Stock Plan: 44,500,000
            
            2003
                Plan: $0.0122
              ESIP
                Plan: $0.02
              2007
                Stock Plan: $0.005
            
            Employee
                Stock Plan: 100,578,550
              Non-Employee
                Plan: 2,161,277
              2007
                Stock Plan: 500,000Total
            
            2003
                Plan: 19,059,990
              ESIP
                Plan: 10,060,000
              2007
                Stock Plan: 44,500,000
            
            2003
                Plan: $0.0122
              ESIP
                Plan: $0.02
              2007
                Stock Plan: $0.005
            
            Employee
                Stock Plan: 100,578,550
              Non-Employee
                Plan: 2,161,277
              2007
                Stock Plan: 500,000




33




**ITEM
      12 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





**Certain
      Relationships and Related Transactions**





Other
      than as set forth below, during the last two fiscal years there have not been
      any relationships, transactions or proposed transactions to which the Company
      was or is to be a party, in which any of the directors, officers, or 5% or
      greater stockholders (or any immediate family thereof) had or is to have a
      direct or indirect material interest.





(a)  On
      February 4, 2005, we sold three units through a private offering to G. Raymond
      Pironti, Jr. Each unit included a warrant that entitled the holder to acquire
      a
      specific number of shares of our common stock. According to the provisions
      of
      the warrants, the holder has the right and privilege to purchase a number of
      fully paid and non-assessable shares of our common stock at any time through
      February 4, 2008. The number of shares underlying the warrants is obtained
      by
      dividing the purchase price of three units by the lowest reported bid price
      of
      our common stock during the 365-day period following the commencement of the
      pricing period; this number was fixed at 22,500,000 shares on February 4, 2006
      (15,000,000 shares plus 7,500,000 shares based on the 1 for 2 stock dividend
      on
      August 15, 2005). As of December 31, 2007, 18,078,948 shares of common stock
      remain exercisable at $0.0025 per share for a period of three years from the
      date of grant (February 4, 2005) (the balance was exercised on a cashless basis
      on varying dates in 2006).





(b)  On
      April
      25, 2005, we entered into an accounts receivable factoring and security
      agreement with JJ Ellis, LLC (a company controlled by Mr. Pironti) for up to
      $75,000 (see Exhibit 10.11). Thereafter, an Addendum to this agreement, dated
      August 8, 2005, was entered into by the parties (see Exhibit 10.12). However,
      the account receivable that was used as collateral for the factoring agreement
      was not assigned to the lender and when payment from the customer was received,
      the factor was not paid, placing the Company in default on the loan. Under
      the
      Settlement Agreement of December 2005, we agreed to pay interest at an annual
      rate of 18%. This loan was repaid in full during 2007.





In
      connection with the factoring agreement, we granted to JJ Ellis a warrant to
      purchase $60,000 of our common stock. The calculation of the number of shares
      underlying this warrant is based on the lowest bid price recorded ($0.002)
      over
      a 365 day look back period or a 20% discount at time of execution, whichever
      is
      lower. Based on this calculation, the number of shares fixed for this warrant
      on
      April 25, 2006 was 24,000,000. This warrant is exercisable for a period of
      three
      years from grant (April 25, 2005) at the lower of $0.0025 per share or 80%
      of
      the closing price on the date of exercise (none of this warrant has been
      exercised).  The warrant expired in February 2008 and was not
      exercised.





(c)  On
      June 10, 2005, we entered into a Share Exchange Agreement with Senz-It, Inc.,
      a
      California corporation, and its stockholder, SUTI Holdings, LP (see Exhibit
      10.4). Under the terms of this agreement, we issued the following in exchange
      for all 1,000,000 shares of Senz-It common stock outstanding:





(1)  a
      warrant
      to purchase a total of 12,000,000 shares of our common stock, exercisable at
      $0.0001 per share for a period of five years after issuance; and





(2)  55
      shares
      of Series B preferred stock (each share of which is convertible, at the option
      of the holder, at any time after the issuance of such shares into that number
      of
      fully paid and nonassessable shares of common stock equal to 1% of the
      outstanding shares of our common stock then outstanding, after giving
      consideration to the shares issued as a result of the conversion, any options,
      warrants, or other convertible securities then outstanding, and any other
      securities issued simultaneously on the date of conversion). Each share of
      Class
      B preferred stock is entitled to the number of votes to which the holders
      thereof would be entitled if they converted their shares of Class B preferred
      stock at the time of voting.





According
      to the terms of the Share Exchange Agreement, the warrant and the preferred
      stock were issued upon the closing of this transaction.




On
      August
      31, 2005, the parties entered into a first amendment to the Share Exchange
      Agreement and closed this transaction (see Exhibit 10.7). Under the terms of
      this amendment, the parties made the following changes, among
      others:





(1)  the
      warrant was increased to a total of 18,000,000 shares of common
      stock;




34





(2)  the
      conversion terms of the Series B preferred stock was modified so that each
      share
      is convertible into the greater of (i) 1% of the outstanding shares of our
      common stock then outstanding, after giving consideration to the shares issued
      as a result of the conversion, any options, warrants, or other convertible
      securities then outstanding, and any other securities issued simultaneously
      on
      the date of conversion, and (ii) 7,272,728 shares of common stock;




(3)  reference
      to stockholder approval on the part of the Company was deleted since under
      Nevada law such approval is not required; and





(4)  we
      agreed
      that no securities will be issued without the written permission of SUTI, except
      shares issued for services as agreed by us and SUTI unless and until director
      and officer insurance is obtained.





With
      the
      issuance of the Series B convertible preferred stock, SUTI controlled a majority
      of the voting power of the Company.





(d)  On
      June
      20, 2005, Select University Technologies, Inc., the general partner of SUTI
      was
      hired to manage all operations of Senz-It, Inc. under the terms of a Venture
      Acceleration Agreement (see Exhibit 10.9). Under the terms of this agreement,
      Senz-It appointed Select University Technologies, Inc. to provide certain
      services, personnel and property for consideration of a management fee and
      a
      performance fee through October 2009.





The
      management fee calls for a one-time payment of $100,000 payable in $50,000
      of
      common stock and $50,000 of cash, at such time when we have the financial
      capability to pay in cash and an annual management fee of $930,000 payable
      in
      monthly installments of $77,500. Of the monthly management fee, $25,000 is
      payable in cash and the remainder is payable in common stock. In 2007 and 2006,
      we recorded $930,000 and $332,500 in management fees, respectively. As of
      December 31, 2007, the amount owed to Select University Technologies, Inc.
      under
      the terms of the Venture Acceleration Agreement was $186,901.





The
      performance fee is 6% of gross revenue for the first three years of the Venture
      Agreement. Thereafter, the performance fee is to be calculated at 15% of
      quarterly operating profit (as defined in the Agreement).





(e)  On
      June 13, 2005, we borrowed $5,000 under a promissory note from Torrey Peaks
      Ventures, a company controlled by our then president, James Alexander (see
      Exhibit 10.5). This note was amended on July 14, 2005 (see Exhibit 10.6) so
      that: (a) the term was extended to one year from the commencement date, and
      (b)
      the note was assigned to Innovision, Ltd., a firm controlled by Karen Alexander,
      Mr. Alexander’s wife. This note has been repaid and cancelled.





(f)  On
      July
      28, 2005, we granted Mr. Pironti a warrant to purchase 2,516,129 shares of
      common stock for services rendered to the Company (this number was adjusted
      to
      3,774,194 based on the stock dividend). This warrant was exercisable beginning
      on January 29, 2006 for a period of four years thereafter at an exercise price
      of 10% of the closing price on the date of exercise. This warrant was exercised
      on a cashless basis on October 13, 2006.





(g)  On
      October 10, 2005, we granted options to purchase shares of our common stock
      to
      the following current and former directors: (i) James Alexander: 45,000,000
      shares to cover accrued but unpaid salary owed to him by the Company; (ii)
      Robert Hovee: 18,750,000 shares (subsequently reduced on November 17, 2005
      to
      2,000,000 shares) to cover services performed for the Company; (iii) David
      J.
      Barnes: 9,375,000 shares (subsequently reduced on December 8, 2005 to 2,000,000
      shares) to cover services performed for the Company; and (iv) James R. Largent:
      9,375,000 shares (subsequently reduced on December 8, 2005 to 2,000,000 shares)
      to cover services performed for the Company. These options are exercisable
      into
      free trading shares of common stock under the Company’s Employee Stock Incentive
      Plan. On February 13, 2006, all remaining options held by Mr. Hovee, Mr. Barnes,
      and Mr. Largent were returned to the Company and cancelled.





(h)  On
      May
      18, 2006, our subsidiary, Isotec, issued a demand promissory note in favor
      of
      our controlling stockholder, SUTI Holdings, LP. Under this note, we may borrow
      up to $100,000. These funds are being used to assist in with our ongoing
      operations. Under the terms of the promissory note in connection with this
      loan,
      the principal and all accrued interest is to be no later than 30 days following
      the commencement date. The principal amount from time to time outstanding is
      to
      bear simple interest from the commencement date through the maturity date at
      a
      rate equal to 8% of the loan amount. In the event of an Event of Default (as
      defined in the promissory note), all past due principal and, to the extent
      permitted by applicable law, interest upon this note is to bear interest at
      the
      rate per annum equal to 12%. No monies were owed under this note at December
      31,
      2007.




35




(i)  On
      July
      21, 2006, Mr. Hovee received 9,142,857 shares of free trading common stock
      as
      payment for services rendered to the Company. These shares were valued at
      $64,000 ($0.007 per share).





(j)  On
      February 1, 2007, we granted options under the Company’s Directors, Officers and
      Employees Stock Options Plan to each of its executive officers as follows:
      Robert Hovee: 10,000,000 shares; David Barnes: 5,000,000 shares; and James
      Largent: 5,000,000 shares.





(k)  On
      February 13, 2007, we granted 7,616,147 shares of common stock to Mr. Hovee
      as
      compensation for services rendered to the Company valued at $34,273 ($0.0045
      per
      share).





(l)  On
      February 21, 2007, we entered into a consulting agreement with our chief
      executive officer, Robert Hovee, through an agreement with RAH Consulting Group,
      Inc. (see Exhibit 10.13). This agreement covers his services to be rendered
      in
      that position for the period of January 1, 2007 through December 31, 2007.
      In
      consideration of the services rendered, we will pay Mr. Hovee a fee of $8,000
      per month, in cash or stock, at our discretion. Mr. Hovee will be eligible
      to
      participate in the Company’s Stock Option Plan, effective on January 2, 2007. We
      will reimburse Mr. Hovee for all reasonable business expenses incurred while
      performing services for the Company. In addition, healthcare insurance premiums
      for Mr. Hovee will be paid by us. This agreement is to remain in effect until
      terminated by either party as of the date set forth in a written notice to
      the
      other party delivered in accordance with the notice provisions of the agreement
      at least 30 days prior to such date. In the event of the termination of this
      agreement, any accrued but unpaid fees will be paid within ten days of the
      effective date of such termination. The consulting agreement was extended on
      March 10, 2008.





(m)  We
      share
      office space with Select University Technologies, Inc. We are charged $800
      per
      month, plus operating and administrative expenses. The total rent and operating
      expenses charged to us for the years ended December 31, 2007 and 2006 was $7,893
      and $47,719, respectively.




For
      each
      of the transactions noted above, the transaction was negotiated, on our part,
      on
      the basis of what is in the best interests of the Company and its stockholders.
      In addition, in each case the interested affiliate did not vote in favor of
      the
      transaction; however, the full board of directors did make the determination
      that the terms in each case were as favorable as could have been obtained from
      non-affiliated parties.





Certain
      of our officers and directors are engaged in other businesses, either
      individually or through partnerships and corporations in which they have an
      interest, hold an office or serve on a board of directors. As a result, certain
      conflicts of interest may arise between us and such officers and directors.
      We
      will attempt to resolve such conflicts of interest in our favor.





**Director
      Independence**





We
      do not
      have a nominating committee, compensation committee or executive committee
      of
      the board of directors, stock plan committee or any other committees, except
      for
      an Audit Committee, which is composed of Dr. Kline (who is an independent
      director of the company). Dr. Kline has been designated as the Audit Committee
      financial expert.




36


**ITEM
      13 — EXHIBITS**





**(a)**  **Exhibits**





2.1
            
            Agreement
                and Plan of Merger between the Company and Allmon Corporation, dated
                May
                11, 2000 (incorporated by reference to Exhibit 2.1 of the Form 8-K12g-3
                filed on May 16, 2000).2.2
            
            Stock
                Purchase Agreement between the Company, Isotec, Incorporated, and
                selling
                shareholders, dated February 22, 2000 (incorporated by reference
                to
                Exhibit 2.2 of the Form 10-QSB filed on May 21, 2001).2.3
            
            Share
                Exchange Agreement between the Company and World Am Security Venture
                Company, Ltd., dated May 18, 2004 (incorporated by reference to Exhibit
                2
                of the Form 8-K filed on May 26, 2004).3.1
            
            Articles
                of Incorporation, dated July 5, 2002 (incorporated by reference to
                Exhibit
                3.1 of the Form 10-QSB/A filed on February 5, 2004).3.2
            
            Certificate
                of Amendment to Articles of Incorporation, dated August 20, 2002
                (incorporated by reference to Exhibit 3.2 of the Form 10-QSB/A filed
                on
                February 5, 2004).3.3
            
            Certificate
                of Amendment to Articles of Incorporation, dated December 20, 2002
                (incorporated by reference to Exhibit 3.3 of the Form 10-QSB/A filed
                on
                February 5, 2004).3.4
            
            Certificate
                of Amendment to Articles of Incorporation, dated August 2, 2004
                (incorporated by reference to Exhibit 3.4 of the Form 10-QSB filed
                on
                August 20, 2004).3.5
            
            Certificate
                of Amendment of Articles of Incorporation, dated November 8, 2004
                (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on
                November 16, 2004).3.6
            
            Certificate
                of Amendment of Articles of Incorporation, dated December 1, 2004
                (incorporated by reference to Exhibit 3.2 of the Form 8-K filed on
                November 16, 2004).3.7
            
            Bylaws,
                dated May 15, 2000 (incorporated by reference to Exhibit 3.2 of the
                Form
                8-K12g-3 filed on May 16, 2000).4.1
            
            Employee
                Stock Incentive Plan, dated January 22, 2001 (incorporated by reference
                to
                Exhibit 4.1 of the Form S-8 filed on January 29, 2001).4.2
            
            Non-Employee
                Directors and Consultants Retainer Stock Plan, dated January 5, 2001
                (incorporated by reference to Exhibit 4.2 of the Form S-8 filed on
                January
                29, 2001).4.3
            
            Common
                Stock Purchase Agreement between us and Four Way Associates, Inc.,
                dated
                June 1, 2001 (incorporated by reference to Exhibit 4.3 of the Form
                SB-2
                filed on August 28, 2001).4.4
            
            Amended
                and Restated Employee Stock Incentive Plan, dated November 20, 2001
                (incorporated by reference to Exhibit 4.1 of the Form S-8 POS filed
                on
                January 31, 2002).4.5
            
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan,
                dated November 20, 2001 (incorporated by reference to Exhibit 4.2
                of the
                Form S-8 POS filed on January 31, 2002).




37




4.6
            
            2002
                Non-Employee Directors and Consultants Retainer Stock Plan, dated
                September 12, 2002 (incorporated by reference to Exhibit 4 of the
                Form S-8
                filed on September 18, 2002).4.7
            
            2002
                Stock Compensation Plan, dated December 16, 2002 (incorporated by
                reference to Exhibit 4 of the Form S-8 filed on December 23,
                2002).4.8
            
            2003
                Consultants Stock Compensation Plan dated August 19, 2003 (incorporated
                by
                reference to Exhibit 4 of the Form S-8 filed on August 22,
                2003).4.9
            
            2003
                Non-Qualified Stock Option Plan, dated September 29, 2003 (incorporated
                by
                reference to Exhibit 4 of the Form S-8 filed on October 1,
                2003).4.10
            
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 2), dated February 10, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on February 13,
                2004).4.11
            
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 3), dated June 1, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on June 10, 2004).4.12
            
            Amended
                and Restated Employee Stock Incentive Plan (Amendment No. 2), dated
                July
                15, 2004 (incorporated by reference to Exhibit 4 of the Form S-8
                POS filed
                on August 6, 2004).4.13
            
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 4), dated October 12, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on October 19,
                2004).4.14
            
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 5), dated December 1, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on December 13,
                2004).4.15
            
            Amended
                and Restated Employee Stock Incentive Plan (Amendment No. 3), dated
                October 17, 2005 (incorporated by reference to Exhibit 4 of the Form
                S-8
                POS filed on December 6, 2005).4.16
            
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 6), dated December 22, 2005 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on January 6,
                2006).4.17
            
            Securities
                Purchase Agreement between the Company and Golden Gate Investors,
                Inc.,
                dated January 23, 2006 (incorporated by reference to Exhibit 4.1
                of the
                Form 8-K filed on February 10, 2006).4.18
            
            63⁄4%
                Convertible Debenture issued to Golden Gate Investors, Inc., dated
                January
                23, 2006 (incorporated by reference to Exhibit 4.2 of the Form 8-K
                filed
                on February 10, 2006).4.19
            
            Warrant
                to Purchase Common Stock (due January 6, 2009) issued to Golden Gate
                Investors, Inc., dated January 23, 2006 (incorporated by reference
                to
                Exhibit 4.3 of the Form 8-K filed on February 10,
                2006).4.20
            
            Warrant
                to Purchase Common Stock (due January 6, 2011) issued to Golden Gate
                Investors, Inc., dated January 23, 2006 (incorporated by reference
                to
                Exhibit 4.4 of the Form 8-K filed on February 10,
                2006).




38




4.21
            
            Registration
                Rights Agreement between the Company and Golden Gate Investors, Inc.,
                dated January 23, 2006 (incorporated by reference to Exhibit 4.5
                of the
                Form 8-K filed on February 10, 2006).4.22
            
            Addendum
                to Convertible Debenture and Warrant To Purchase Common Stock, dated
                February 7, 2006 (incorporated by reference to Exhibit 4.6 of the
                Form 8-K
                filed on February 10, 2006).4.23
            
            Amended
                and Restated Employee Stock Incentive Plan (Amendment No. 4), dated
                February 7, 2006 incorporated by reference to Exhibit 4 of the Form
                S-8
                POS filed on February 14, 2006).4.24
            
            Cancellation
                Letter between the Company and Golden Gate Investors, Inc., dated
                June 14,
                2006 (incorporated by reference to Exhibit 4.7 of the Form 8-K/A
                filed on
                June 27, 2006).4.25
            
            Securities
                Purchase Agreement between the Company and La Jolla Cove Investors,
                Inc.,
                dated June 19, 2006 (incorporated by reference to Exhibit 4.8 of
                the Form
                8-K/A filed on June 27, 2006).4.26
            
            63⁄4%
                Convertible Debenture issued to La Jolla Cove Investors, Inc., dated
                June
                19, 2006 (incorporated by reference to Exhibit 4.9 of the Form 8-K/A
                filed
                on June 27, 2006).4.27
            
            Warrant
                to Purchase Common Stock (due June 19, 2009) issued to La Jolla Cove
                Investors, Inc., dated June 19, 2006 (incorporated by reference to
                Exhibit
                4.10 of the Form 8-K/A filed on June 27, 2006).4.28
            
            Warrant
                to Purchase Common Stock (due June 19, 2011) issued to La Jolla Cove
                Investors, Inc., dated June 19, 2006 (incorporated by reference to
                Exhibit
                4.11 of the Form 8-K/A filed on June 27, 2006).4.29
            
            Registration
                Rights Agreement between the Company and La Jolla Cove Investors,
                Inc.,
                dated June 19, 2006 (incorporated by reference to Exhibit 4.12 of
                the Form
                8-K/A filed on June 27, 2006).4.30
            
            Additional
                Transaction Letter between the Company and La Jolla Cove Investors,
                Inc.,
                dated June 22, 2006 (incorporated by reference to Exhibit 4.13 of
                the Form
                8-K/A filed on June 27, 2006).4.31
            
            2007
                World Am, Inc. Stock Option Plan, dated January 2, 2007 (filed
                herewith).10.1
            
            Employment
                Agreement between the Company and James Alexander, dated February
                20, 2002
                (incorporated by reference to Exhibit 10.4 of the Form 10-QSB filed
                on May
                14, 2002).10.2
            
            Amendment
                A to Employment Agreement between the Company and James Alexander,
                dated
                as of February 20, 2002 (incorporated by reference to Exhibit 10.1
                of the
                Form 10-KSB filed on April 11, 2003).10.3
            
            Amendment
                B to Employment Agreement between the Company and James Alexander,
                dated
                January 15, 2004 (incorporated by reference to Exhibit 10.3 of the
                Form
                10-KSB filed on April 20, 2004).




39




10.4
            
            Share
                Exchange Agreement between the Company, on the one hand, and Senz-It,
                Inc.
                and the stockholder of Senz-It, on the other hand, dated June 10,
                2005
                (including the following: Exhibit A: Shares to be Issued; Exhibit
                B:
                Warrant; Exhibit C Series B Preferred Stock Certificate of Designation;
                and Exhibit I:Funding
                Schedule) (not including the following: Exhibit D: World Am, Inc.
                Officer’s Certificate; Exhibit E: Senz It, Inc. Officer’s Certificate;
                Exhibit F: Senz It Financial Statements; Exhibit G: Senz It Contracts;
                Exhibit H: World Am Contracts; Exhibit J: Form 8-K; Exhibit K: Press
                Release; Schedule 5.7: Taxes; and Schedule 5.9: Legal Proceedings)
                (incorporated by reference to Exhibit 10.1 of the Form 8-K/A filed
                on
                September 7, 2005).10.5
            
            Promissory
                Note issued by the Company in favor of Torrey Peaks Ventures, dated
                June
                13, 2005(incorporated
                by reference to Exhibit 10.1 of the Form 8-K filed on March 21,
                2006).10.6
            
            Amendment
                “A” to Promissory Note, dated July 14, 2005 (incorporated by reference
                to
                Exhibit 10.2 of the Form 8-K filed on March 21, 2006).10.7
            
            First
                Amendment to Share Exchange Agreement between the Company,
                on the one hand, and Senz-It, Inc. and the stockholder of Senz-It,
                on the
                other hand, dated August 31, 2005 (incorporated by reference to Exhibit
                10.2 of the Form 8-K/A filed on September 7, 2005).10.8
            
            Option
                to Exclusive License Agreement betweenSenz-It
                Inc. andThe
                Research Foundation of State University of New York, dated June 20,
                2005(incorporated
                by reference to Exhibit 10.3 of the Form 8-K/A filed on September
                7,
                2005).10.9
            
            Venture
                Acceleration Agreement between Senz-It, Inc. and Select University
                Technologies, Inc., dated June 20, 2005 (incorporated by reference
                to
                Exhibit 10.4 of the Form 8-K/A filed on November 28,
                2005).10.10
            
            Demand
                Promissory Note issued by the Company in favor of SUTI Holdings,
                LP, dated
                May 18, 2006 (incorporated by reference to Exhibit 10.10 of the Form
                10-KSB filed on April 2, 2007).10.11
            
            $75,000
                Factoring Agreement between the Company and JJ Ellis, LLC, dated
                April 25,
                2005, and attached warrant (incorporated by reference to Exhibit
                10.11 of
                the Form 10-KSB filed on April 2, 2007).10.12
            
            Addendum
                to Factoring Agreement, dated August 8, 2005 (incorporated by reference
                to
                Exhibit 10.12 of the Form 10-KSB filed on April 2,
                2007).10.13
            
            Consulting
                Agreement between the Company and Robert Hovee, dated February 21,
                2007
                (incorporated by reference to Exhibit 10.13 of the Form 10-KSB filed
                on
                April 2, 2007).10.14
            
            Consulting
                Agreement between the Company and Robert Hovee, dated February 19,
                2008
                (filed herewith).10.15*
            
            Cost
                Reimbursement Subcontract dated November 1, 2007 (incorporated by
                reference to Exhibit 10.1 of the Form 8-K filed on December 12,
                2007).14
            
            Code
                of Business Conduct and Ethics, adopted by the Company’s board of
                directors (incorporated by reference to Exhibit 14 of the Form 10-KSB
                filed on April 20, 2004).16.1
            
            Letter
                on Change in Certifying Accountant (incorporated by reference to
                Exhibit
                16 of the Form 8-K/A filed on July 12, 2004).




40




16.2
            
            Letter
                on Change in Certifying Accountant (incorporated by reference to
                Exhibit
                16 of the Form 8-K/A filed on August 3, 2006).21
            
            Subsidiaries
                of the Company (incorporated by reference to Exhibit 21 of the Form
                10-KSB/A filed on June 30, 2006).31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification of Robert A. Hovee (filed
                herewith).31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification of C. Robert Kline (filed
                herewith).32.1
            
            Section
                1350 Certification of Robert A. Hovee (filed herewith).32.2
            
            Section
                1350 Certification of C. Robert Kline (filed herewith).99.1
            
            Confirmation
                of Provisional Patent Application, dated September 2, 2004 (incorporated
                by reference to Exhibit 99.3 of the Form 10-KSB filed on April 21,
                2005).99.2
            
            Confirmation
                of Provisional Patent Application, dated September 2, 2004 (incorporated
                by reference to Exhibit 99.4 of the Form 10-KSB filed on April 21,
                2005).





*
      Portions of the exhibit have been omitted pursuant to a request for confidential
      treatment filed with the Commission.




**ITEM
      14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES**





**Audit
      Fees**





The
      aggregate fees billed in each of the fiscal years ended December 31, 2007 and
      2006 for professional services rendered by the principal accountant for the
      audit of our annual financial statements and review of the financial statements
      included in our Form 10-KSB or services that are normally provided by the
      accountant in connection with statutory and regulatory filings or engagements
      for those fiscal years were $127,600 and $71,000, respectively.





**Audit
      - Related Fees**





There
      were no fees billed for services reasonably related to the performance of the
      audit or review of the financial statements outside of those fees disclosed
      above under “Audit Fees” for fiscal years 2007 and 2006.





**Tax
      Fees**





For
      the
      fiscal years ended December 31, 2007 and, 2006, our principal accountants did
      not render any services for tax compliance, tax advice, and tax planning
      work.





**All
      Other Fees**





None.




41





**Audit
      Committee**




Our
      Audit
      Committee consists of C. Robert Kline, who is an independent director. The
      Audit
      Committee has not adopted a written charter. Dr. Kline has been designated
      as
      the Audit Committee’s “financial expert” as defined in Item 401(e) of Regulation
      S-B.





The
      primary responsibility of the Audit Committee is to oversee our financial
      reporting process on behalf of the Board of Directors and report the result
      of
      their activities to the Board. Such responsibilities include, but are not
      limited to, the selection and if necessary the replacement, of our independent
      registered public accounting firm, and the review and discussion with such
      independent registered public accounting firm (i) the overall scope and plans
      for the audit, (ii) the adequacy and effectiveness of the accounting and
      financial controls, including our system to monitor and manage business risks,
      and legal and ethical programs, and (iii) the results of the annual audit,
      including the consolidated financial statements to be included in our Annual
      Report on Form 10-KSB.





Our
      policy is to pre-approve all audit and permissible non-audit services provided
      by the independent registered public accounting firm. These services may include
      audit services, audit-related services, tax services and other services.
      Pre-approval is generally provided for up to one year and any pre-approval
      is
      detailed as to the particular service or category of services and is generally
      subject to a specific budget. The independent registered public accounting
      firm
      and management are required to periodically report to the Audit Committee
      regarding the extent of services provided by the independent registered public
      accounting firm in accordance with this pre-approval, and the fees for the
      services performed to date. The Audit Committee may also pre-approve particular
      services on a case-by-case basis.





42


REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
        the
        Board of Directors and Stockholders
  World
        Am,
        Inc.
 
 We
        have
        audited the accompanying consolidated balance sheets of World Am, Inc. (a
        development stage company) (the “Company”) as of December 31, 2007 and 2006, and
        the related consolidated statements of operations, stockholders’ deficit and
        cash flows for the years then ended. These financial statements are the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these financial statements based on our audits. We did not audit
        the
        cumulative data from March 4, 2005 (inception) to December 31, 2005 in the
        consolidated statements of operations, stockholders’ deficit and cash flows,
        which were audited by another independent
        registered public accounting firm whose
        report dated April 21, 2006, which expressed an unqualified opinion (the
        report
        was modified related to the uncertainty of the Company’s ability to continue as
        a going concern), has been furnished to us. Our opinion, insofar as it relates
        to the amounts included for the cumulative period from March 4, 2005 (inception)
        to December 31, 2005, is based solely on the report of the other independent
        registered public accounting firm .
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. The Company is not
        required to have, nor were we engaged to perform, an audit of its internal
        control over financial reporting. Our audits included consideration of internal
        control over financial reporting as a basis for designing audit procedures
        that
        are appropriate in the circumstances, but not for the purpose of expressing
        an
        opinion on the effectiveness of the Company's internal control over financial
        reporting. Accordingly, we express no such opinion. An audit also includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements, assessing the accounting principles used and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, based on our audits and the report of the other independent
        registered public accounting firm ,
        the
        consolidated financial statements referred to above present fairly, in all
        material respects, the consolidated financial position of World Am, Inc.
        (a
        development stage company) as of December 31, 2007 and 2006, and the results
        of
        its operations and its cash flows for the years then ended and for the
        cumulative period from March 4, 2005 (inception) to December 31, 2007 in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has incurred recurring losses
        and
        has yet to be successful in establishing profitable operations. Additionally,
        the Company’s current liabilities exceed its current assets. These factors,
        among others, raise substantial doubt about the Company’s ability to continue as
        a going concern. Management’s plans regarding those matters are also described
        in Note 1. The financial consolidated statements do not include any adjustments
        that might result from the outcome of this uncertainty.
  /s/
                  KMJ Corbin & Company, LLPIrvine,
                  California
                April
                  10, 2008
  F-1
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
        the
        Board of Directors and Stockholders
 World
        Am,
        Inc.
 Newport
        Beach, California
 
 We
        have
        audited the consolidated statements of operations, stockholders’ deficit, and
        cash flows for the period from March 4, 2005 (Inception) through December
        31, 2005 of World
        Am, Inc. These financial statements are the responsibility of the Company’s
        management. Our responsibility is to express an opinion on these financial
        statements based on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The
        Company is not required to have, nor were we engaged to perform, an audit
        of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements. An audit also includes assessing
        the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe that
        our
        audit provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the results of operations and cash flows of World
        Am,
        Inc. as of December
        31, 2005 ,
        and the
        results of its operations and cash flows for the period from March 4, 2005
        (Inception) through December
        31, 2005 in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has suffered losses from
        operations and its current liabilities exceed current assets, all of which
        raise
        substantial doubt about its ability to continue as a going concern. Management’s
        plans in regards to these matters are also described in Note 1. The consolidated
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty.
  /s/
                    L.L. Bradford & Company, LLCApril
                    21, 2006
                  Las
                    Vegas, Nevada
 F-2
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **CONSOLIDATED
        BALANCE SHEETS**
  **December
                  31,****2007**
              
              **2006****ASSETS**Current
                  assetsCash
                  and cash equivalents
              
              $
              538,373
              
              $
              122,008Accounts
                  receivable, net of allowance of $0 in 2007 and in 2006
              
              
              77,167
              
              
              18,474Unbilled
                  revenues on uncompleted contracts
              
              
              73,465
              
              
              —Inventories
              
              
              44,162
              
              
              79,801Prepaid
                  expenses and other current assets
              
              
              32,156
              
              
              5,360Advances
                  to related party
              
              
              3,259
              
              
              —Total
                  current assets
              
              
              768,582
              
              
              225,643Intangible
                  assets
              
              
              184,547
              
              
              25,000Fixed
                  assets, net
              
              
              71,675
              
              
              4,489Refundable
                  deposit
              
              
              5,127
              
              
              3,820Total
                  assets
              
              $
              1,029,931
              
              $
              258,952**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIT**Current
                  liabilitiesAccounts
                  payable and accrued liabilities
              
              $
              744,876
              
              $
              811,676Due
                  to stockholders
              
              
              321,884
              
              
              325,009Due
                  to related parties
              
              
              186,901
              
              
              222,207Payroll
                  taxes payable
              
              
              192,177
              
              
              328,070Deferred
                  revenue
              
              
              57,563
              
              
              61,347Notes
                  payable - short term
              
              
              1,193
              
              
              99,441Convertible
                  debenture and accrued interest payable, net of unamortizeddiscount
                  of $118,548 in 2007 and $210,714 in 2006
              
              
              157,687
              
              
              72,970Total
                  current liabilities
              
              
              1,662,281
              
              
              1,920,720Notes
                  payable
              
              
              2,239
              
              
              —Derivative
                  and warrant liabilities
              
              
              2,056,313
              
              
              2,651,660Total
                  liabilities
              
              
              3,720,833
              
              
              4,572,380Commitments
                  and contingenciesStockholders’
                  deficitClass
                  A preferred stock, $0.0001 par value; liquidation preference of
                  $1,700 per
                  share; 40,000,000 shares authorized, 1,369 shares issued and no
                  shares
                  outstanding as of December 31, 2007 and 2006
              
              
              —
              
              
              —Class
                  B preferred stock, $0.0001 par value; liquidation preference of
                  $145,455
                  per share; 40,000,000 shares authorized, 55 shares issued and outstanding
                  as of December 31, 2007 and 2006
              
              
              —
              
              
              —
  F-3
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **CONSOLIDATED
        BALANCE SHEETS**
 **(continued)**
 
 December
                  31,2007
              
              2006Common
                  stock; $0.0001 par value; 1,500,000,000 shares authorized, 1,008,192,691
                  shares issued and outstanding as of December 31, 2007, and 359,844,014
                  shares issued and 330,037,091 shares outstanding as of December
                  31,
                  2006(1)
              
              
              100,819
              
              
              33,004Additional
                  paid-in capital
              
              
              4,149,659
              
              
              630,214Deficit
                  accumulated during the development stage
              
              
              (6,941,380
              )
              
              (4,976,646
              )Total
                  stockholders’ deficit
              
              
              (2,690,902
              )
              
              (4,313,428
              )Total
                  liabilities and stockholders’ deficit
              
              $
              1,029,931
              
              $
              258,952
 
 (1)The
        difference between the issued shares and outstanding shares as of December
        31,
        2006 is the number of shares held by the Company’s transfer agent in escrow for
        future issuance under the Company’s Stock Inventive Plan. The escrow shares were
        cancelled in 2007.
 
 See
        notes
        to the consolidated financial statements.
  F-4
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 
 Year
                  Ended December 31, 2007
              
              Year
                  Ended December 31, 2006
              
              From
                  March 4, 2005 (Inception) Through December 31, 2007Revenues:Contract
                  research and development revenue
              
              $
              115,573
              
              $
              —
              
              $
              115,573Product
                  sales
              
              
              657,809
              
              
              245,476
              
              
              1,116,057773,382
              
              
              245,476
              
              
              1,231,630Cost
                  and expenses:Cost
                  of contract research and development revenue
              
              
              115,573
              
              
              —
              
              
              115,573Cost
                  of product sales
              
              
              336,310
              
              
              82,827
              
              
              534,922General
                  and administrative expenses
              
              
              3,417,247
              
              
              2,062,487
              
              
              6,151,225Loss
                  from operations
              
              
              (3,095,748
              )
              
              (1,899,838
              )
              
              (5,570,090
              )Other
                  income (expense)Change
                  in fair value of derivative andwarrant
                  liabilities
              
              
              1,203,222
              
              
              663,793
              
              
              1,867,015Interest
                  expense
              
              
              (117,369
              )
              
              (3,138,687
              )
              
              (3,267,969
              )Miscellaneous
                  income (expense)
              
              
              (141
              )
              
              (1,407
              )
              
              (15,638
              )Interest
                  income
              
              
              45,302
              
              
              —
              
              
              45,302Total
                  other income (expense)
              
              
              1,131,014
              
              
              (2,476,301
              )
              
              (1,371,290
              )Loss
                  before provision for income taxes
              
              
              (1,964,734
              )
              
              (4,376,139
              )
              
              (6,941,380
              )Provision
                  for income taxes
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              $
              (1,964,734
              )
              $
              (4,376,139
              )
              $
              (6,941,380
              )Loss
                  per common share, basic and diluted
              
              $
              (0.00
              )
              $
              (0.02
              )Basic
                  and diluted weighted averagecommon
                  shares outstanding
              
              
              764,920,875
              
              
              191,253,289
  See
        notes
        to the consolidated financial statements
  F-5
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-In**
                
                **Receivable
                    Related to Issuance of Common**
                
                **Deficit
                    Accumulated During the Development**
                
                **Total**
                  **Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Senz-It,
                    Inc. March 4, 2005 (inception)
                
                
                —
                
                $
                —
                
                
                —
                
                $
                —
                
                
                —
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                —Issuance
                    of shares to Senz-It, Inc. founders
                
                
                —
                
                
                —
                
                
                55
                
                
                —
                
                
                —
                
                
                —
                
                
                10,000
                
                
                —
                
                
                —
                
                
                10,000Assumption
                    by Senz-It, Inc. of World Am, Inc. capital structure and outstanding
                    warrants and options
                
                
                1,369
                
                
                —
                
                
                —
                
                
                —
                
                
                66,570,285
                
                
                6,656
                
                
                (773,977
                )
                
                (220,000
                )
                
                —
                
                
                (987,321
                )Common
                    stock issued for services, at $0.004 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                15,410,573
                
                
                1,541
                
                
                52,916
                
                
                —
                
                
                —
                
                
                54,457Common
                    stock issued for services, at $0.003 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                12,748,670
                
                
                1,275
                
                
                39,521
                
                
                —
                
                
                —
                
                
                40,796Common
                    stock issued in for services, at $0.018 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,795,574
                
                
                180
                
                
                31,961
                
                
                —
                
                
                —
                
                
                32,141Common
                    stock issued to employees, at $0.024 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                12,380,000
                
                
                1,239
                
                
                268,689
                
                
                (4,040
                )
                
                —
                
                
                265,888Conversion
                    of note payable for shares of common stock at $0.013 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                4,642,857
                
                
                464
                
                
                59,893
                
                
                —
                
                
                —
                
                
                60,357Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (600,507
                )
                
                (600,507
                )Balance,
                    December 31, 2005
                
                
                1,369
                
                
                —
                
                
                55
                
                
                —
                
                
                113,547,959
                
                
                11,355
                
                
                (310,997
                )
                
                (224,040
                )
                
                (600,507
                )
                
                (1,124,189
                )
  F-6
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **(continued)**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional**
                    **Paid-in**
                
                **Receivable**
                            **Related
                              to**
                            **Issuance**
                            **of**
                            **Common**
                
                **Deficit**
                          **Accumulated
                            During the**
                          **Development**
                
                **Total**
                      **Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Common
                    stock issued to employees, and for services, at $0.009 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                6,440,000
                
                
                644
                
                
                57,392
                
                
                —
                
                
                —
                
                
                58,036Common
                    stock issued to vendor for services, at $0.010 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                12,000,000
                
                
                1,200
                
                
                121,200
                
                
                —
                
                
                —
                
                
                122,400Common
                    stock issued to employees and for services, at $0.018 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                4,773,077
                
                
                478
                
                
                85,542
                
                
                —
                
                
                —
                
                
                86,020Common
                    stock issued to employees and for services, at $0.017 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,300,000
                
                
                130
                
                
                21,497
                
                
                —
                
                
                —
                
                
                21,627Common
                    stock issued for exercise of warrant, at $0.0001 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                30,879,999
                
                
                3,088
                
                
                24,700
                
                
                —
                
                
                —
                
                
                27,788Common
                    stock issued for services, at $0.014 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                500,000
                
                
                50
                
                
                6,950
                
                
                —
                
                
                —
                
                
                7,000Payment
                    for shares issued December 2005
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                4,040
                
                
                —
                
                
                4,040
 
 F-7
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **(continued)**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-in**
                
                **Receivable
                    Related to**
                  **Issuance
                    of Common**
                
                **Deficit
                    Accumulated During the Development**
                
                **Total
                    Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Common
                    stock issued to employees and for services, at $0.015 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,950,000
                
                
                195
                
                
                29,597
                
                
                —
                
                
                —
                
                
                29,792Common
                    stock issued to employees, at $0.0119 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                1,000,000
                
                
                100
                
                
                11,800
                
                
                —
                
                
                —
                
                
                11,900Cancellation
                    of common stock issued to employee in 2005
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (4,459,481
                )
                
                (446
                )
                
                (47,320
                )
                
                —
                
                
                —
                
                
                (47,766
                )Common
                    stock issued to employees and for services, at $0.007 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                36,985,713
                
                
                3,699
                
                
                255,901
                
                
                —
                
                
                —
                
                
                259,600Common
                    stock issued to employees, at $0.0081 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,595,125
                
                
                359
                
                
                28,595
                
                
                —
                
                
                —
                
                
                28,954Common
                    stock issued to employees and for services, at $0.0054 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                5,144,240
                
                
                514
                
                
                26,834
                
                
                —
                
                
                —
                
                
                27,348Common
                    stock issued for services, at $0.006 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                2,153,846
                
                
                215
                
                
                12,708
                
                
                —
                
                
                —
                
                
                12,923Common
                    stock issued for services, at $0.0045 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                5,952,381
                
                
                595
                
                
                26,189
                
                
                —
                
                
                —
                
                
                26,784
 
 F-8
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **(continued)**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-in**
                
                **Receivable
                    Related to**
                  **Issuance
                    of**
                
                **Deficit
                    Accumulated During the Development**
                
                **Total
                    Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Reversal
                    of receivable related to issuance of common stock
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (220,000
                )
                
                220,000
                
                
                —
                
                
                —Common
                    stock issued for services, at $0.005 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                22,362,000
                
                
                2,236
                
                
                109,574
                
                
                —
                
                
                —
                
                
                111,810Exercise
                    of stock option at $0.002 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,396,774
                
                
                340
                
                
                6,454
                
                
                —
                
                
                —
                
                
                6,794Common
                    stock issued to employees, at $0.0048 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,603,301
                
                
                360
                
                
                16,781
                
                
                —
                
                
                —
                
                
                17,141Common
                    stock issued for services, at $0.0043 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,136,905
                
                
                314
                
                
                13,036
                
                
                —
                
                
                —
                
                
                13,350Common
                    stock issued to employees and for services, at $0.0041 per
                    share
                
                
                —
                
                
                —-
                
                
                —
                
                
                —
                
                
                6,720,896
                
                
                672
                
                
                26,951
                
                
                —
                
                
                —
                
                
                27,623Common
                    stock issued for services, at $0.0040 per share
                
                
                —
                
                
                —-
                
                
                —
                
                
                —
                
                
                4,054,356
                
                
                406
                
                
                15,812
                
                
                —
                
                
                —
                
                
                16,218Common
                    stock issued for cash, at $0.005 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                65,000,000
                
                
                6,500
                
                
                307,850
                
                
                —
                
                
                —
                
                
                314,350Options
                    vesting during the year
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,168
                
                
                —
                
                
                —
                
                
                3,168Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (4,376,139
                )
                
                (4,376,139
                )Balance,
                    December 31, 2006
                
                
                1,369
                
                
                —
                
                
                55
                
                
                —
                
                
                330,037,091
                
                
                33,004
                
                
                630,214
                
                
                —
                
                
                (4,976,646
                )
                
                (4,313,428
                )
  F-9
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **(continued)**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-In**
                
                **Receivable
                    Related to**
                  **Issuance
                    of**
                  **Common**
                
                **Deficit
                    Accumulated During the Development**
                
                **Total**
                  **Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Common
                    stock issued for services, at $0.0049 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                17,220,298
                
                
                1,722
                
                
                83,726
                
                
                —
                
                
                —
                
                
                85,448Common
                    stock issued to employees, at $0.0047 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,483,197
                
                
                348
                
                
                16,182
                
                
                —
                
                
                —
                
                
                16,530Common
                    stock issued for cash, at $0.005 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                105,000,000
                
                
                10,500
                
                
                514,500
                
                
                —
                
                
                —
                
                
                525,000Common
                    stock issued for services, at $0.007 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                15,404,838
                
                
                1,540
                
                
                111,235
                
                
                —
                
                
                —
                
                
                112,775Common
                    stock issued to employees, at $0.0073 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                3,030,387
                
                
                303
                
                
                22,825
                
                
                —
                
                
                —
                
                
                23,128Common
                    stock issued to employees and for services, at $0.008 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                7,323,696
                
                
                732
                
                
                47,437
                
                
                —
                
                
                —
                
                
                48,169Cancellation
                    of common stock issued to a consultant in 2006, subsequently
                    replaced
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (4,103,136
                )
                
                (410
                )
                
                (20,590
                )
                
                —
                
                
                —
                
                
                (21,000
                )Common
                    stock issued to employees and for services, at $0.006 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                69,379,069
                
                
                6,939
                
                
                418,487
                
                
                —
                
                
                —
                
                
                425,426Common
                    stock issued for cash, at $0.008 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                375,000,000
                
                
                37,500
                
                
                2,962,500
                
                
                —
                
                
                —
                
                
                3,000,000Common
                    stock issued to employees and for services, at $0.005 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                9,994,301
                
                
                999
                
                
                49,219
                
                
                —
                
                
                —
                
                
                50,218
 
 F-10
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **(continued)**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-In**
                
                **Receivable
                    Related to Issuance of Common**
                
                **Deficit
                    Accumulated During the Development**
                
                **Total**
                  **Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Cancellation
                    of common stock issued to an employee in 2005
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (100,000
                )
                
                (10
                )
                
                (870
                )
                
                —
                
                
                —
                
                
                (880
                )Initial
                    fair value of warrants reclassified to derivatives and warrant
                    liabilities
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (607,875
                )
                
                —
                
                
                —
                
                
                (607,875
                )Common
                    stock issued to employees and for services, at $0.004 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                9,270,154
                
                
                927
                
                
                39,484
                
                
                —
                
                
                —
                
                
                40,411Common
                    stock issued to employees and for services, at $0.003 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                43,862,741
                
                
                4,386
                
                
                125,322
                
                
                —
                
                
                —
                
                
                129,708Common
                    stock issued to convert debt at calculated price of $.00022 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                4,731,379
                
                
                473
                
                
                527
                
                
                —
                
                
                —
                
                
                1,000Common
                    stock issued for exercise of warrant at $1.00 per share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                10,000
                
                
                1
                
                
                9,999
                
                
                —
                
                
                —
                
                
                10,000
 
 F-11
  **WORLD
        AM, INC.**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS’ DEFICIT**
 **FOR
        THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
        2007**
 **(continued)**
 **Class
                    A Preferred Stock**
                
                **Class
                    B Preferred Stock**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-In**
                
                **Receivable
                    Related to Issuance of Common**
                
                **Deficit
                    Accumulated During the Development**
                
                **Total**
                  **Stockholders’****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Stock**
                
                **Stage**
                
                **Deficit**Common
                    stock issued to employees and for services, at $0.002 per
                    share
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                18,648,676
                
                
                1,865
                
                
                41,387
                
                
                —
                
                
                —
                
                
                43,252Stock
                    issuance costs
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (324,750
                )
                
                —
                
                
                —
                
                
                (324,750
                )Options
                    vesting during the period
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                30,700
                
                
                —
                
                
                —
                
                
                30,700Net
                    loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (1,964,734
                )
                
                (1,964,734
                )Balance,
                    December 31, 2007
                
                
                1,369
                (1)
                $
                —
                
                
                55
                
                $
                —
                
                
                1,008,192,691
                
                $
                100,819
                
                $
                4,149,659
                
                $
                —
                
                $
                (6,941,380
                )
                $
                (2,690,902
                )
  (1)
        In
        January 2006, the Company made the determination to cancel the 1,369 shares
        of
        Class A preferred stock based on non-performance under a related loan agreement.
        Therefore, the Company considers these shares to be issued, since they have
        not
        actually been cancelled yet, but not outstanding.
 
 See
        notes
        to the consolidated financial statements.
  F-12
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 Year
                  Ended December 31, 2007
              
              Year
                  Ended December 31, 2006
              
              From
                  March 4, 2005 (Inception) Through December 31, 2007Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,964,734
              )
              $
              (4,376,139
              )
              $
              (6,941,380
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Initial
                  fair value of derivative and warrant liabilities
              
              
              —
              
              
              3,040,453
              
              
              3,040,453Change
                  in fair value of derivative and warrant liabilities
              
              
              (1,203,222
              )
              
              (663,793
              )
              
              (1,867,015
              )Depreciation
              
              
              17,163
              
              
              2,790
              
              
              21,793Stock
                  issued for services
              
              
              953,185
              
              
              837,554
              
              
              2,244,378Loss
                  of reclassification of capital lease asset
              
              
              —
              
              
              —
              
              
              2,388Options
                  vesting during the period
              
              
              30,700
              
              
              3,168
              
              
              33,868Amortization
                  of discount on convertible debt
              
              
              92,166
              
              
              64,286
              
              
              156,452Changes
                  in operating assets and liabilities:Accounts
                  receivable, net
              
              
              (58,693
              )
              
              5,634
              
              
              (29,051
              )Unbilled
                  revenues on uncompleted contracts
              
              
              (73,465
              )
              
              —
              
              
              (73,465
              )Inventories
              
              
              35,639
              
              
              (67,649
              )
              
              (33,078
              )Prepaid
                  expenses and other current assets
              
              
              (26,796
              )
              
              (5,360
              )
              
              (32,156
              )Refundable
                  deposits
              
              
              (1,307
              )
              
              3,230
              
              
              5,123Accounts
                  payable and accrued expenses
              
              
              (68,649
              )
              
              812,570
              
              
              678,181Due
                  to stockholders
              
              
              (3,125
              )
              
              —
              
              
              (3,125
              )Payroll
                  taxes payable
              
              
              (135,893
              )
              
              31,346
              
              
              7,658Net
                  change in due to related parties
              
              
              (38,565
              )
              
              (232,601
              )
              
              (155,943
              )Deferred
                  revenue
              
              
              (3,784
              )
              
              61,347
              
              
              57,563Net
                  cash used in operating activities
              
              
              (2,449,380
              )
              
              (483,164
              )
              
              (2,887,356
              )
  F-13
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(continued)**
 
 Year
                  Ended December 31, 2007
              
              Year
                  Ended December 31, 2006
              
              From
                  March 4, 2005 (Inception) Through December 31, 2007Cash
                  flows from investing activities:Cash
                  acquired in reverse merger
              
              
              —
              
              
              —
              
              
              935Purchase
                  of fixed assets
              
              
              (84,349
              )
              
              (1,409
              )
              
              (85,758
              )Purchase
                  of intangible assets
              
              
              (159,547
              )
              
              (25,000
              )
              
              (184,547
              )Net
                  cash used in investing activities
              
              
              (243,896
              )
              
              (26,409
              )
              
              (269,370
              )Cash
                  flows from financing activities:Net
                  proceeds from sale of common and preferred stock, net of issuance
                  costs
              
              
              3,200,250
              
              
              318,390
              
              
              3,528,640Proceeds
                  from exercise of warrants
              
              
              10,000
              
              
              27,788
              
              
              37,788Proceeds
                  from issuance of notes payable
              
              
              3,432
              
              
              275,000
              
              
              278,432Principal
                  payments on notes payable
              
              
              (104,041
              )
              
              —
              
              
              (149,761
              )Net
                  cash provided by financing activities
              
              
              3,109,641
              
              
              621,178
              
              
              3,695,099Net
                  change in cash
              
              
              416,365
              
              
              111,605
              
              
              538,373Cash,
                  beginning of period
              
              
              122,008
              
              
              10,403
              
              
              —Cash,
                  end of period
              
              $
              538,373
              
              $
              122,008
              
              $
              538,373
 F-14
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(continued)**
  Year
                  Ended December 31,
              
              From
                  March 4, 2005 (Inception) Through December2007
              
              2006
              
              31,
                  2007Supplemental
                  disclosure of cash flow information:Cash
                  paid for income taxes
              
              $
              800
              
              $
              —
              
              $
              800Cash
                  paid for interest
              
              $
              21,747
              
              $
              1,468
              
              $
              24,442Schedule
                  of non-cash operating, investing and financing activities:Acquisition
                  of Senz-It, Inc. patent, licenses and options
              
              $
              —
              
              $
              —
              
              $
              1,063,992Acquisition
                  other assets and liabilities in reverse merger
              
              $
              —
              
              $
              —
              
              $
              (995,956
              )Reclassification
                  of capital lease
              
              $
              —
              
              $
              —
              
              $
              (8,175
              )Removal
                  of fixed asset due to reclassification of capital lease
              
              $
              —
              
              $
              —
              
              $
              10,563Discount
                  on convertible debt
              
              $
              —
              
              $
              275,000
              
              $
              275,000Initial
                  fair value of warrants reclassified to derivative and warrant
                  liabilities
              
              $
              607,875
              
              $
              —
              
              $
              607,875Conversion
                  of debt to common stock
              
              $
              1,000
              
              $
              —
              
              $
              1,000
  See
        notes
        to the consolidated financial statements
  F-15
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1 - ORGANIZATION AND BASIS OF PRESENTATION**
  Organization.
 
 World
        Am,
        Inc. (“World Am” or “the Company”) was incorporated in Florida in 1994. In 2002,
        World Am changed its domicile from Florida to Nevada. The Company currently
        has
        three wholly-owned subsidiaries: Technology Development International, Inc.
        (“TDI”), Isotec, Inc. (“Isotec”) and Senz-It, Inc. (“Senz-It”).
  TDI
        is a
        Colorado corporation incorporated in 1997 and, at present, is
        dormant.
 
 Isotec
        is
        a Colorado corporation incorporated in 1998 that develops, manufactures and
        distributes automated passage control and security devices to government
        and
        other commercial enterprises. At present, the majority of the Company’s revenue
        is generated by Isotec.
 
 Senz-It
        is a California corporation incorporated on March 4, 2005 to develop,
        commercialize and market technology in the
        field of micro-sensor elements and sensor arrays to the homeland security,
        indoor air quality, food purity and processing and medical diagnostic
        industries.
 
 Acquisition
        of Senz-It, Inc. and Reverse Acquisition Accounting.
 
 On
        August
        31, 2005, the Company consummated an agreement to acquire 100% of the issued
        and
        outstanding capital stock of Senz-It, Inc. In exchange, the Company issued
        a
        warrant to purchase 18,000,000 shares of its common stock and 55 shares of
        its
        Series B convertible preferred stock to SUTI Holdings LP (“SUTI”), the owner of
        Senz-It at the time. The exercise price of the common shares under these
        warrants is $0.001 per share. The warrant vested immediately and expires
        in
        August 2010. Each share of Class B preferred stock is convertible into the
        greater of (i) 1% of the outstanding common shares of the Company at the
        time of
        conversion, including the common stock equivalents of all unexercised warrants,
        options and convertible securities, and (ii) 7,272,728 shares of common stock.
        The holders of the Series B preferred stock are entitled to the number of
        votes
        the holder would be entitled to had they converted the shares of Series B
        preferred stock at the time of the vote. In addition, SUTI has selected three
        directors to sit on the Company’s board of directors, constituting a majority of
        the board.
 
 Due
        to
        the change in voting control and of senior management, the transaction was
        recorded as a “reverse-merger” whereby Senz-It was considered to be the acquirer
        for accounting purposes. The transaction is equivalent to the issuance of
        stock
        by a development stage company (Senz-It) for the net monetary assets of a
        public
        company (the Company), accompanied by a recapitalization. Prior to the
        transaction, World Am was a public company with assets of $88,656, liabilities
        totalling $1,075,978 and 66,570,285 shares of common stock issued and
        outstanding. Senz-It was a privately owned, non-operating development stage
        company. The accounting for the transaction is identical to that resulting
        from
        a reverse acquisition, except goodwill or other intangible assets were not
        recorded. Accordingly, these financial statements are the historical financial
        statements of Senz-It. The accompanying consolidated financial statements
        reflect activities from March 4, 2005, the date of inception of Senz-It and
        forward.
  F-16
  **WORLD
        AM, INC.**
 **(A
        Development Stage Company)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1 - ORGANIZATION AND BASIS OF PRESENTATION** **(continued)**
 
 On
        March
        7, 2006, SUTI Holdings, LP, the former stockholder of Senz-It, assigned the
        warrant to Select University Technologies, Inc., which then exercised the
        warrant in a cashless transaction that resulted in the issuance of 17,880,000
        restricted shares of common stock (the balance of 120,000 shares was withheld
        in
        the cashless exercise of the warrant).
 
 Basis
        of Presentation.
 
 The
        accompanying consolidated financial statements present the consolidated
        financial statements of the Company and its subsidiaries. All intercompany
        transactions and balances have been eliminated in consolidation.
 
 The
        Company is in the development stage, as defined in Statement of Financial
        Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by Development
        Stage Enterprises,” with its principal activity being: (a) developing,
        manufacturing and distributing automatic passage control and security devices,
        and (b) marketing innovative technologies in the field of micro-sensor elements
        and sensor arrays.
  Going
        Concern.
  The
        Company’s net losses and accumulated deficit were $6,941,380 for the period from
        March 4, 2005 (inception) through December 31, 2007. The Company cannot provide
        assurance that it can achieve or sustain profitability on a quarterly or
        annual
        basis in the future. The Company anticipates it will continue to incur losses
        until it is able to establish significant levels of revenue while controlling
        its expenses. The Company’s success is dependent upon the successful development
        and marketing of its products, as to which there is no assurance. Any future
        success that the Company might experience will depend upon many factors,
        including factors out of its control or which cannot be predicted at this
        time.
        These factors may include changes in or increased levels of competition,
        including the entry of additional competitors and increased success by existing
        competitors, changes in general economic conditions, increases in operating
        costs, including costs of supplies, personnel and equipment, reduced margins
        caused by competitive pressures and other factors. These conditions may have
        a
        materially adverse effect upon the Company or may force it to reduce or curtail
        operations. In addition, the Company will require additional funds to sustain
        and expand its sales and marketing activities, particularly if a well-financed
        competitor emerges.
  From
        October 2006 through December 2007, the Company has raised approximately
        $3.8
        million, before stock issuance costs, through private offerings of its common
        stock. Despite the Company’s success in the offerings, there is no assurance
        that the Company will be able to continue to obtain debt or equity financing
        on
        terms acceptable to the Company, if at all. The inability to obtain sufficient
        funds from operations or external sources would require the Company to curtail
        or cease operations. Any additional equity financing may involve substantial
        dilution to then existing stockholders.
  F-17
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        1 - ORGANIZATION AND BASIS OF PRESENTATION** **(continued)**
 
 In
        view
        of the matters described above, recoverability of a major portion of the
        recorded asset amounts shown in the accompanying consolidated balance sheets
        is
        dependent upon continued operations of the Company, which in turn is dependent
        upon the Company’s ability to raise additional capital, obtain financing and to
        succeed in its future operations. The consolidated financial statements do
        not
        include any adjustments relating to the recoverability and classification
        of
        recorded asset amounts and classification of liabilities that might be necessary
        should the Company be unable to continue as a going concern.
  Reclassification.
  Certain
        amounts in the 2006 consolidated financial statements have been reclassified
        to
        conform to the 2007 presentation.
  **NOTE
        2 - 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, disclosure of contingent assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenue and expenses during the reporting period. Significant estimates include
        the realization of accounts receivable and inventories, the realizability
        of
        long-lived assets, the value of shares and options issued for services and
        the
        amount of the deferred tax asset valuation allowance. Accordingly, actual
        results could differ from these estimates.
  Concentration
        of Credit Risk.
  Cash.
  The
        Company maintains its cash balances at credit-worthy financial institutions
        that
        are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to
        $100,000. At December 31, 2007, the Company had approximately $538,000 cash,
        which is in excess of the insured limit. Management believes the risk of
        loss of
        cash balances in excess of the insured limit to be low.
  Customers.
  The
        Company had five and three customers that accounted for approximately 93%
        and
        83% of revenues in 2007 and 2006, respectively. The Company had two customers
        and one customer that accounted for 84% and 96% of accounts receivable at
        December 31, 2007 and 2006, respectively.
  F-18
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  Accounts
        Receivable.
  Accounts
        receivable consists of amounts billed to customers upon performance of service
        or delivery of goods. The Company performs ongoing credit evaluations of
        customers and adjusts credit limits based upon payment history and the
        customers’ current creditworthiness, as determined by its review of their
        current credit information. The Company continuously monitors collections
        and
        payments from its customers and maintains a provision for estimated credit
        losses based upon its historical experience and any customer-specific collection
        issues that it has identified. The Company records specific reserve provisions
        for individual accounts when the Company becomes aware of a customer’s inability
        to meet its financial obligation to the Company.
  Inventories.
  Inventories
        are stated at the lower of cost or market. Cost is principally determined
        by
        using the average cost method. Inventories consist of raw materials,
        work-in-process and finished goods held for sale. The Company’s management
        monitors the inventories for excess and obsolete items and makes necessary
        valuation adjustments when required. Adjustments are considered to be a
        permanent reduction in the cost basis of the corresponding inventory.
        Inventories consist of raw materials used in product sales by Isotec at December
        31, 2007 and 2006. Certain raw materials used in Isotec’s products are only
        available from a few suppliers. If these sources of raw materials are lost,
        Isotec’s production could be significantly affected.
  Estimated
        Costs to Complete and Accrued Loss on Contracts.
  The
        Company reviews and reports on the performance of its contracts against the
        respective plans. These reviews are summarized in the form of estimates of
        costs
        to complete the contracts (“ETC”). ETCs include management’s current estimates
        of remaining amounts for direct labor, material, subcontract support and
        allowable indirect costs based on each contract’s completion status and either
        the current or adjusted future technical requirements under the contract.
        If an
        ETC indicates a potential overrun against budgeted program resources, management
        generally seeks to revise the program plan in a manner consistent with customer
        objectives to eliminate such overrun and to secure necessary customer agreement
        to such revision. To mitigate the financial risk of such revisions, the Company
        attempts to negotiate as much flexibility in deliverable dates as possible.
        When
        revisions to the contract do not appear possible within program budgets,
        an
        accrual for contract overrun is recorded based on the most recent ETC of
        the
        particular program. For the year ended, December 31, 2007 the Company has
        not
        estimated any cost overruns on its contract.
  Fixed
        Assets.
  Fixed
        assets are recorded at cost and are depreciated using the straight-line method
        over the estimated useful lives of the assets. The useful lives for the related
        assets range from three to seven years.
  Maintenance
        and repairs are charged to expense as incurred. Renewals and improvements
        of a
        major nature are capitalized. At the time of retirement or other disposition
        of
        property and equipment, the cost and accumulated depreciation are removed
        from
        the accounts and any resulting gains or losses are reflected in the consolidated
        statement of operations.
  F-19
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  Long-Lived
        Assets.
  The
        Company accounts for its long-lived assets in accordance with SFAS No. 144,
        “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144
        requires that long-lived assets be reviewed for impairment whenever events
        or
        changes in circumstances indicate that the historical cost carrying value
        of an
        asset may no longer be appropriate. The Company assesses recoverability of
        the
        carrying value of an asset by estimating the future net cash flows expected
        to
        result from the asset, including eventual disposition. If the future net
        cash
        flows are less than the carrying value of the asset, an impairment loss is
        recorded equal to the difference between the asset’s carrying value and fair
        value or disposable value. As of December 31, 2007, the Company does not
        believe
        there has been any impairment of its long-lived assets. There can be no
        assurances, however, that demand for the Company’s products and services will
        continue, which could result in an impairment of long-lived assets in the
        future.
  Convertible
        Debenture and Beneficial Conversion Feature.
  If
        the
        conversion feature of conventional convertible debt provides for a rate of
        conversion that is below market value, this feature is characterized as a
        beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a
        debt discount pursuant to Emerging Issues Task Force (“EITF”) Issue No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features
        or
        Contingency Adjustable Conversion Ratio,” and EITF Issue No. 00-27, “Application
        of EITF Issue No. 98-5 to Certain Convertible Instruments.” In those
        circumstances, the convertible debt will be recorded net of the discount
        related
        to the BCF. The Company amortizes the discount to interest expense over the
        life
        of the debt using the effective interest method.
  Derivative
        Financial Instruments.
  In
        accounting for non-conventional convertible debt, the Company bifurcates
        its
        embedded derivative instruments and records them under the provisions of
        SFAS
        No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as
        amended, and EITF Issue No. 00-19, “Accounting for Derivative Financial
        Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” The
        Company’s derivative financial instruments consist of embedded derivatives
        related to a non-conventional debenture entered into with Golden Gate Investors,
        Inc./La Jolla Cove Investors, Inc. (“LaJolla Cove”) (see Note 8). These embedded
        instruments related to the Debenture include the conversion feature, liquidated
        damages related to registration rights and default provisions. The accounting
        treatment of derivative financial instruments requires that the Company record
        the derivatives and related warrants at their fair value as of the inception
        date of the agreement and at fair value as of each subsequent balance sheet
        date. Any change in fair value will be recorded as non-operating, non-cash
        income or expense at each reporting period. If the fair value of the derivatives
        is higher at the subsequent balance sheet date, the Company will record a
        non-operating, non-cash charge. If the fair value of the derivative is lower
        at
        the subsequent balance sheet date, the Company will record non-operating,
        non-cash income.
  During
        the year ended December 31, 2006, the Company recorded the initial fair value
        of
        the conversion feature of $1,151,759 of which $876,759 was recorded as interest
        expense in the consolidated statement of operations and $275,000 was recorded
        as
        a discount on the debt and is being amortized to interest expense over the
        life
        of the debt. The Company also recorded the initial fair value of the attached
        warrants, related to the debt financing in 2006, of $2,075,694 as a component
        of
        interest expense in the consolidated statements of operations for the year
        ended
        December 31, 2006. The initial fair value of the conversion-related
        derivatives and warrants were valued primarily using the Black-Scholes pricing
        model with the following assumptions: dividend-yield of 0%, annual volatility
        of
        127% and risk-free interest rate of 4.70% - 4.74%. At December 31, 2006,
        the
        fair value of the conversion feature and the warrants amounted to $2,565,660.
        The decrease in the fair value of the conversion features and warrants of
        $643,793 is included as a component of other income in the accompanying
        consolidated statement of operations. At December 31, 2007, the fair value
        of
        the La Jolla Cove conversion feature and the warrants amounted to $1,788,376.
        The 2007 decrease in the fair value of the La Jolla Cove conversion features
        and
        warrants of $777,284 is included as other income in the accompanying
        consolidated statement of operations.
  F-20
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  As
        of
        December 31, 2007, the derivatives and warrants were valued primarily using
        the
        Black-Scholes pricing model with the following assumptions: dividend yield
        of
        0%, annual volatility of 133.2% - 161.8%, and risk free interest rate of
        3.07% -
        3.45%. The derivatives are classified as long-term liabilities in the
        accompanying consolidated balance sheet.
  In
        addition, under the provisions of EITF Issue No. 00-19, as a result of entering
        into the convertible debt, the Company is required to classify all other
        non-employee stock options and warrants as liabilities and mark them to market
        at each reporting date. Non-employee stock options and warrants were valued
        primarily using the Black-Scholes pricing model with the following assumptions:
        dividend yield of 0%, volatility of 138% and risk free interest rate of 4.54%.
        The initial fair value assigned to the non-employee options and warrants
        prior
        to fiscal 2007 was $124,000, which was recorded as interest expense. At December
        31, 2006, the fair value of the non-employee warrant was $86,000. During
        2007,
        the Company reclassified additional derivative liability of $607,875 from
        additional paid-in-capital for warrants granted primarily in connection with
        equity offerings. Additionally, in the fourth quarter of 2007, 100,000 warrant
        shares were issued to a research company at a price of $0.005 per share,
        with a
        five-year right of exercise period. These warrants were valued at
        $222.
  At
        December 31, 2007, the fair value of the non-employee warrants was $267,937.
        The
        decrease in the fair value of non-employee stock options and warrants in
        the
        amount of $425,938 since December 31, 2006 is included in other income in
        the
        accompanying consolidated statement of operations.
  F-21
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  Fair
        Value of Financial Instruments.
  The
        Company’s financial instruments consist of cash, accounts receivable, accounts
        payable, accrued expenses, amounts due to stockholders and related parties,
        notes payable and convertible debentures. Pursuant to SFAS No. 107, “Disclosures
        About Fair Value of Financial Instruments,” the Company is required to estimate
        the fair value of all financial instruments at the balance sheet date. The
        Company considers the carrying values of its financial instruments in the
        financial statements to approximate their fair values due to their short
        maturities and rates currently available to the Company for similar debt
        instruments, except for convertible debt, for which an equivalent instrument
        could not be located.
  Stock-Based
        Compensation.
  All
        issuances of the Company’s stock for non-cash consideration have been assigned a
        per share amount equalling either the market value of the shares issued or
        the
        value of consideration received, whichever is more readily determinable.
        The
        majority of the non-cash consideration received pertains to services rendered
        by
        consultants and others and have been valued at the amount billed by the
        consultant for services provided.
  The
        Company’s accounting policy for equity instruments issued to consultants and
        vendors in exchange for goods and services follows the provisions of EITF
        Issue
        No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than
        Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” and
        EITF Issue No. 00-18, “Accounting Recognition for Certain Transactions Involving
        Equity Instruments Granted to Other Than Employees.” The measurement date for
        the fair value of the equity instrument issued is determined at the earlier
        of
        (a) the date at which a commitment for performance by the consultant or vendor
        is reached or (b) the date at which the consultant or vendor’s performance is
        complete. In the case of equity instruments issued to consultants, the fair
        value of the equity instrument is recognized over the term of the consulting
        agreement. In accordance with EITF Issue No. 00-18, an asset acquired in
        exchange for the issuance of fully vested, non-forfeitable equity instruments
        should not be presented or classified as an offset to equity on the grantor’s
        balance sheet once the equity instrument is granted for accounting purposes.
        Accordingly, the Company will record the fair value of the fully vested
        non-forfeitable common stock issued for future consulting services as prepaid
        expenses in the consolidated balance sheet.
  The
        Company accounts for its employee stock-based compensation under the provisions
        of SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”). SFAS
        No. 123(R) requires a public entity to measure the cost of employee services
        received in exchange for an award of equity instruments, including stock
        options, based on the grant-date fair value of the award and to recognize
        it as
        compensation expense over the period the employee is required to provide
        service
        in exchange for the award, usually the vesting period. The Company has also
        applied the provisions of Staff Accounting Bulletin (“SAB”) No. 107 relating to
        SFAS No. 123(R).
  F-22
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  SFAS
        No.
        123(R) requires companies to estimate the fair value of share-based payment
        awards on the date of grant using an option-pricing model. The value of the
        portion of the award that is ultimately expected to vest is recognized as
        expense over the requisite service periods in the Company’s consolidated
        statements of operations.
  Stock-based
        compensation expense recognized during the period is based on the value of
        the
        portion of share-based payment awards that is ultimately expected to vest
        during
        the period. SFAS No. 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 forfeiture rate that the Company presently
        uses
        is 0%.
  SFAS
        No.
        123(R) requires the cash flows resulting from the tax benefits resulting
        from
        tax deductions in excess of the compensation cost recognized for those options
        to be classified as financing cash flows. Due to the Company’s loss position,
        there were no such tax benefits for the years ended December 31, 2007 and
        2006,
        respectively.
  Net
        Loss Per Common Share.
  The
        Company computes net loss per common share in accordance with SFAS No. 128,
        “Earnings per Share,” and SAB No. 98. Under the provisions of SFAS No. 128 and
        SAB No. 98, basic net loss per share is computed by dividing the net loss
        available to common stockholders for the period by the weighted average number
        of shares of common stock outstanding during the period. The calculation
        of
        diluted net loss per share gives effect to common stock equivalents; however,
        potential common shares are excluded if their effect is anti-dilutive. For
        the
        years ended December 31, 2007 and December 31, 2006, basic and diluted earnings
        per share were the same. Had such shares been included in diluted earnings
        per
        share, they would have resulted in weighted-average common shares of
        4,394,065,146 for the year ended December 31, 2007 and 645,703,548 for the
        year
        ended December 31, 2006.
  Revenue
        Recognition.
  The
        Company recognizes revenue in accordance with SAB No. 101, “Revenue Recognition
        in Financial Statements,” as revised by SAB No. 104. As such, the Company
        recognizes revenue when persuasive evidence of an arrangement exists, title
        transfer has occurred, the price is fixed or readily determinable and collection
        is probable.
  The
        Company’s revenues were substantially derived from product sales at Isotec,
        which primarily consisted of shipments of security portals. Revenue from
        product
        sales are recorded when products are shipped.
  Revenues
        derived from contracts to develop prototypes and provide research, development,
        design, testing and evaluation of complex detection and control defense systems
        contributed $115,573and $-0- to total revenues during 2007 and 2006,
        respectively. The Company’s 2007 research and development contract is cost
        reimbursement. The Company’s cost reimbursement research and development
        contracts require the Company’s good faith performance of a statement of work
        within overall budgetary constraints, but with latitude as to resources
        utilized. Revenues for research and development contracts are recognized
        as
        costs are incurred in the proportion that costs incurred bear to estimated
        final
        costs.
  F-23
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  Costs
        and
        estimated earnings in excess of billings under government research and
        development contracts are accounted for as unbilled revenues on uncompleted
        contracts, stated at estimated realizable value and expected to be realized
        in
        cash within one year.
  As
        of
        December 31, 2007, the Company recorded deferred revenue of $57,563 for customer
        deposits on ordered products.
  The
        Company has contracts with various governments and governmental agencies.
        Government contracts are subject to audit by the applicable governmental
        agency.
        Such audits could lead to inquiries from the government regarding the
        acceptability of costs under applicable government regulations and potential
        adjustments of contract revenues. To date, the Company has not been involved
        in
        any such audits.
  Income
        Taxes
  The
        Company accounts for income taxes under the provisions of SFAS No. 109,
“Accounting for Income Taxes.” Under SFAS No. 109, deferred tax assets and
        liabilities are recognized for future tax benefits or consequences attributable
        to temporary differences between the financial statement carrying amounts
        of
        existing assets and liabilities and their respective tax bases. Deferred
        tax
        assets and liabilities are measured using enacted tax rates expected to apply
        to
        taxable income in the years in which those temporary differences are expected
        to
        be recovered or settled. A valuation allowance is provided for significant
        deferred tax assets when it is more likely than not that such assets will
        not be
        realized through future operations.
  Recent
        Accounting Pronouncements.
  In
        December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2 “Accounting
        for Registration Payment Arrangements” (“FSP EITF 00-19-2”), which establishes
        the standard that contingent obligations to make future payments under a
        registration rights arrangement shall be recognized and measured separately
        in
        accordance with Statement 5 and FASB Interpretation No. 14, “Reasonable
        Estimation of the Amount of a Loss.” Early adoption of FSP EITF 00-19-2 is
        permitted, and the Company has elected such early adoption. The adoption
        of FSP
        EITF 00-19-2 did not have a material impact on the Company’s consolidated
        financial position or results of operations.
  In
        July
        2006, the Financial Accounting Standards Board (“FASB”) issued FASB
        Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” This
        interpretation prescribes a recognition threshold and measurement attribute
        for
        the financial statement recognition and measurement of a tax position taken
        or
        expected to be taken in a tax return. This interpretation also provides guidance
        on de-recognition, classification, interest and penalties, accounting in
        interim
        periods, disclosure and transition. The interpretation is effective for fiscal
        years beginning after December 15, 2006. The adoption of FASB Interpretation
        No.
        48 did not have a material impact on the Company’s consolidated financial
        position or results of operations.
  F-24
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (continued)**
  In
        September 2006, the FASB adopted SFAS No. 157, “Fair Value Measurements.” SFAS
        No. 157 establishes a framework for measuring fair value and expands disclosure
        about fair value measurements. Specifically, this standard establishes that
        fair
        value is a market-based measurement, not an entity specific measurement.
        As
        such, the value measurement should be determined based on assumptions the
        market
        participants would use in pricing an asset or liability, including, but not
        limited to assumptions about risk, restrictions on the sale or use of an
        asset
        and the risk of non-performance for a liability. The expanded disclosures
        include disclosure of the inputs used to measure fair value and the effect
        of
        certain of the measurements on earnings for the period. SFAS No. 157 is
        effective for fiscal years beginning after November 15, 2007. The Company
        has
        not yet determined the effect adoption of SFAS No. 157 will have on its
        financial position or results of operations.
  In
        September 2006, the SEC staff issued SAB No. 108, “Considering the Effects of
        Prior Year Misstatements when Quantifying Misstatements in Current Year
        Financial Statements.” SAB No. 108 requires that registrants quantify errors
        using both a balance sheet and income statement approach and evaluate whether
        either approach results in a misstated amount that, when all relevant
        quantitative and qualitative factors are considered, is material. The
        interpretation is effective for fiscal years beginning after November 15,
        2006.
        The adoption of SAB No. 108 did not have a material impact on the Company’s
        consolidated financial position or results of operations.
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities- Including an Amendment of FASB
        Statement No. 115.” SFAS No. 159 would create a fair value option of accounting
        for qualifying financial assets and liabilities under which an irrevocable
        election could be made at inception to measure such assets and liabilities
        initially and subsequently at fair value, with all changes in fair value
        reported in earnings. SFAS No. 159 is effective as of the beginning of the
        first
        fiscal year beginning after November 15, 2007. The Company is currently
        evaluating the impact that the adoption of SFAS No. 159 will have on its
        consolidated financial position, results of operations and cash
        flows.
  In
        June
        2007, the FASB ratified a consensus opinion reached by the EITF on EITF Issue
        07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services
        Received for Use in Future Research and Development Activities” (“EITF Issue
        07-3”). The guidance in EITF Issue 07-3 requires the Company to defer and
        capitalize non-refundable advance payments made for goods or services to
        be used
        in research and development activities until the goods have been delivered
        or
        the related services have been performed. If the goods are no longer expected
        to
        be delivered nor the services expected to be performed, the Company would
        be
        required to expense the related capitalized advance payments. The consensus
        in
        EITF Issue 07-3 is effective for fiscal years, and interim periods within
        those
        fiscal years, beginning after December 15, 2007 and is to be applied
        prospectively to new contracts entered into on or after December 15, 2007.
        The
        Company intends to adopt EITF Issue 07-3 effective January 1, 2008. The impact
        of applying this consensus will apply to Senz-It’s research and development
        contractual arrangements entered into after January 1, 2008 and the Company
        does
        not expect the adoption to have a material impact on its consolidated financial
        position, results of operations or cash flows.
  **NOTE
        3 - INTANGIBLE ASSETS**
  During
        the year ended December 31, 2006, Senz-It entered into a technology license
        agreement with the Research Foundation of SUNY (the “Foundation”) (the “License
        Agreement”). The Foundation granted an exclusive field of use license to Senz-It
        to facilitate the development and commercialization of certain technology
        developed at SUNY. Per the License Agreement, Senz-It will have the exclusive
        license to make, have made, use, sell and offer for sale certain licensed
        products over the term of the License Agreement of ten years. In exchange
        for
        this license, Senz-It paid an upfront fee of $25,000 which it recorded as
        an
        intangible asset, royalties of 3% of net sales with an annual minimum of
        $10,000, 35% of any defined sublicensing fees, reimburse the Foundation for
        certain defined patent costs for the licensed technologies, and provide
        additional research funding to SUNY, which the Company expenses, as
        follows:
  March
        31,
        2007: $25,000; March 31, 2008: $50,000; March 31, 2009: $75,000; March 31,2010:
        $100,000; March 31, 2011: $125,000
  F-25
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  During
        2007, the Company incurred minimum royalty fee expense of $10,000 and $159,547
        for patent cost reimbursement. As of December 31, 2007, Senz-It has incurred
        a
        total of $184,547 related to the License Agreement and has recorded the costs
        as
        an intangible asset in the accompanying consolidated financial statements.
        Upon
        commencement of sales of the licensed technologies, Senz-It will amortize
        the
        cost of the intangibles over the lesser of either their estimated useful
        life or
        the remaining term of the License Agreement. Amortizable intangible assets
        are
        tested for impairment based on undiscounted cash flows, and, if impaired,
        written down to fair value based on either discounted cash flows or appraised
        values.
  **NOTE
        4 - DUE TO STOCKHOLDERS**
  Due
        to
        stockholders was $321,884 and $325,009 as of December 31, 2007 and 2006,
        respectively. The balance consists of un-reimbursed expenses and accrued
        wages
        to various stockholders and employees, including $251,884 that is owed to
        the
        Company’s former president and chief executive officer for accrued salary and
        reimbursement of expenses and $70,000 payable related to a finder’s fee and
        other services provided by a consultant. These amounts are non-interest bearing
        and are due on demand.
  **NOTE
        5 - FIXED ASSETS**
  Fixed
        assets consist of the following at December 31:
  2007
              
              2006Furniture
                  and equipment
              
              $
              4,541
              
              $
              4,209Computers
              
              
              13,985
              
              
              6,307Machinery
                  and equipment
              
              
              84,211
              
              
              7,872102,737
              
              
              18,388Less:
                  accumulated depreciation
              
              
              (31,062
              )
              
              (13,899
              )$
              71,675
              
              $
              4,489
 
 Depreciation
        expense was $17,163 and $2,790 for the years ended December 31, 2007 and
        2006,
        respectively.
  F-26
 
 **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        6 - PAYROLL TAXES PAYABLE**
  As
        of
        December 31, 2007 and December 31, 2006, payroll taxes payable consist of
        late
        payroll taxes and estimated accrued interest and penalties for payroll and
        stock
        option activity totalling $192,177 and $328,070 as of December 31, 2007 and
        2006, respectively. A payment arrangement through 2008 has been agreed upon
        between the parties that will resolve this matter.
  **NOTE
        7 - INCOME TAXES**
  The
        income tax benefit consists of the following for the periods ended December
        31:
  2007
              
              2006Current:Federal
              
              $
              —
              
              $
              —State
              
              
              —
              
              
              ——
              
              
              —Deferred:Federal
              
              
              (792,000
              )
              
              (521,000
              )State
              
              
              (206,000
              )
              
              (387,000
              )(998,000
              )
              
              (908,000
              )Less:
                  change in valuation allowance
              
              
              998,000
              
              
              908,000$
              —
              
              $
              —
  Deferred
        income taxes are provided for the tax effects of temporary differences in
        the
        reporting of income for financial statement and income tax reporting purposes
        and arise principally from net operating loss carry forwards. The Company
        has
        federal and state tax net operating loss carry forwards available for future
        periods of approximately $16,000,000, of which $10,440,629 was incurred by
        the
        Company prior to the merger. Such losses may not be fully deducted due to
        the
        changes in ownership rules under Section 382 of the Internal Revenue Code.
        Management believes that the only net operating loss carry forwards that
        the
        Company will be able to realize are those originating since the Company’s
        inception on March 5, 2005 and accordingly, has recorded the provision for
        income taxes based upon that assumption. As of December 31, 2007 and 2006,
        respectively, the Company had federal and California net operating loss carry
        forwards that originated since the merger of approximately $5,600,000 and
        $2,500,000, respectively, that expire in various periods through 2027 and
        2017
        for federal and state purposes, respectively.
  The
        components of the net deferred tax asset as of December 31 are as
        follows:
  2007
              
              2006Net
                  operating loss carryforwards
              
              $
              2,077,000
              
              $
              1,079,000Valuation
                  allowance
              
              
              (2,077,000
              )
              
              (1,079,000
              )$
              —
              
              $
              —
  F-27
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        7- INCOME TAXES (continued)**
  The
        Company’s effective tax rate differs from the federal and state statutory rates
        due to certain income/ (expense) items that are not includable/deductible
        for
        income tax purposes and the valuation allowance recorded for the deferred
        tax
        asset due to unused net operating loss carry forwards. Such losses may not
        be
        fully deducted due to the changes in ownership rules under Section 382 of
        the
        Internal Revenue Code and the uncertainty of taxable income in future periods.
        The Company has established a valuation allowance for the full tax benefit
        of
        the operating loss carry-forwards due to the uncertainty regarding
        realization.
  The
        following is a reconciliation of the provision for income taxes as the expected
        rates to the income taxes reflected in the statements of
        operations:
  2007
              
              2006Tax
                  benefit at federal statutory rate
              
              
              (34
              )%
              
              (34
              )%Excludable
                  income/non-deductible expenses
              
              
              (18
              )
              
              19State
                  tax expense, net of federal tax effect
              
              
              (6
              )
              
              (6
              )Change
                  in valuation allowance
              
              
              58
              
              
              21—
              %
              
              —
              %
  **NOTE
        8 - WARRANTS AND CONVERTIBLE DEBENTURE**
  The
        Company entered into a Securities Purchase Agreement with La Jolla Cove (see
        Note 2), a company under common control with Golden Gate Investors, Inc.
        (“Golden Gate”) dated June 19, 2006 (the “Agreement”) to replace the agreement
        dated January 23, 2006 with Golden Gate. Under the Agreement, La Jolla Cove
        agreed to provide funds to the Company in the form of a convertible debenture
        (the “Debenture”) in the aggregate principal amount of $500,000 with an annual
        interest rate of 6.25%. The conversion price is equal to the lesser of (i)
        $0.20, or (ii) 80% of the average of the three lowest volume weighted average
        prices during the 20 trading days prior to the election to convert, or (iii)
        80%
        of the volume weighted average price on the trading day prior to the election
        to
        convert. The number of common shares into which the Debenture may be converted
        is equal to the dollar amount of the Debenture being converted multiplied
        by
        eleven, minus the product of the conversion price multiplied by ten times
        the
        dollar amount of the Debenture being converted, and the entire foregoing
        result
        shall be divided by the conversion price. However, if the volume weighted
        average price is below $0.0005 per share during any ten consecutive trading
        days, La Jolla Cove may elect to convert the Debenture only, without exercising
        the related warrants (see below) (in such case, the number of common shares
        that
        the holder receives upon conversion of this Debenture will be the amount
        of the
        Debenture being converted divided by the conversion price).
  F-28
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        8 - WARRANTS AND CONVERTIBLE DEBENTURE (continued)**
  La
        Jolla
        Cove advanced a total of $275,000 in debentures under the Agreement as
        follows:
  ·
              On
                  February 7, 2006, $100,000 was disbursed directly to the Company
                  for the
                  purchase of the Debenture;
  ·
              $50,000
                  was retained for services provided to the Company by various
                  professionals; and
  ·
              Another
                  $125,000 was provided by La Jolla Cove to the Company in July
                  2006.
  The
        initial fair value assigned to the conversion feature was $1,151,759, of
        which
        $275,000 was recorded as a discount on convertible debt and $876,759 was
        included in interest expense in 2006 consolidated statement of operations.
  The
        discount on convertible debt is amortized to interest expense over the life
        of
        the Debenture. Amortization expense charged to operations during the years
        ended
        December 31, 2007 and 2006, was $92,166 and $64,286, respectively. Interest
        accrued on the Debenture and added to the principal balance was $18,403 and
        $12,552 for the years ended December 31, 2007 and 2006, respectively. Interest
        payments totalling $20,652 and $3,868 were made for the years ended December
        31,
        2007 and 2006, respectively. During 2007, 4,731,379 shares of common stock
        were
        issued to La Jolla Cove in connection with the conversion of $1,000 of the
        Debenture at a calculated conversion price of $0.00022, as defined above.
        Additionally, the Company repaid $5,600 of the Debentures in 2007. The balance
        on the debenture, including accrued interest payable (net of unamortized
        discount of $118,548 and $210,714 as of December 31, 2007 and 2006,
        respectively), was $157,687 and $72,970 as of December 31, 2007 and 2006,
        respectively.
  If
        La
        Jolla Cove elects to convert a portion of the Debenture and, on the day that
        the
        election is made, the volume weighted average price is below $0.01 per share,
        the Company will have the right to prepay that portion of the Debenture that
        the
        holder elected to convert, plus any accrued and unpaid interest, at 125%
        of such
        amount. In the event that the Company elects to prepay that portion of the
        Debenture, La Jolla Cove will have the right to withdraw its conversion notice.
        If, at anytime during the month, the volume weighted average price is below
        $0.01 per share, La Jolla Cove will not be obligated to convert any portion
        of
        the Debenture during that month.
  In
        conjunction with the Debenture, the Company issued to La Jolla Cove a warrant,
        dated June 19, 2006, to purchase 5,000,000 shares of common stock of the
        Company, exercisable at $1.00 per share. During 2007, La Jolla Cove exercised
        10,000 warrants at $1.00 per share leaving a warrant balance of 4,990,000
        shares
        at December 31, 2007. The Company also issued to La Jolla Cove a warrant,
        dated
        June 29, 2006, to purchase up to that number of shares of common stock equal
        to
        $2,750,000 divided by 120% of the average of the closing prices of the common
        stock for the 20 trading days prior to June 19, 2006, at a price per share
        equal
        to the 120% of the average of the current market price of the common stock
        for
        the 20 trading days prior to June 19, 2006, totalling 266,472,868 shares.
  F-29
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        8- WARRANTS AND CONVERTIBLE DEBENTURE (continued)**
  In
        connection with this transaction, the Company also granted to La Jolla Cove
        certain rights under a registration rights agreement, dated June 19, 2006,
        which
        requires that the Company register the shares into which the Debenture and
        the
        related warrants may be converted into.
  Beginning
        in the first full calendar month after a registration statement is declared
        effective, La Jolla Cove is required to convert at least 10% of the face
        value
        of the Debenture and exercise 10% of the warrants per calendar month into
        common
        shares of the Company, provided that the common shares are available, registered
        and freely tradable. If La Jolla Cove converts more than 10% of the face
        value
        of the Debenture or exercise more than 10% of the warrants in any calendar
        month, the excess over 10% is to be credited against the next month’s minimum
        conversion or exercise amount. In the event La Jolla Cove does not convert
        at
        least 10% of the Debenture or exercise 10% of the warrants in any particular
        calendar month, the Company’s remedy will be that the La Jolla Cove will not be
        entitled to collect interest on the Debenture for that month if the Company
        gives La Jolla Cove written notice, at least 5 business days prior to the
        end of
        the month, of its failure to convert and/or exercise the minimum required
        amount
        for that month. In the event La Jolla Cove does not convert at least 10%
        of the
        Debenture or exercise 10% of the warrants for two consecutive calendar months,
        in addition to the penalty set forth in the previous sentence, the Company
        may
        repay, at par, an amount of the Debenture equal to two times the differential
        between 10% of the face value of the Debenture and the amount actually converted
        by La Jolla Cove.
  Under
        a
        letter agreement, dated June 22, 2006, the parties agreed to enter into an
        additional debenture and warrant to purchase common stock on the same terms
        and
        conditions as the Debenture and the 5,000,000 share warrant discussed above.
        The
        parties must enter into the additional debenture and warrant no later than
        thirty days after the principal amount of the Debenture is less than $100,000.
        Failure to enter into the additional debenture and warrant by either party
        will
        result in $100,000 of liquidated damages payable by that party. To date,
        the
        parties have not entered into an additional debenture.
  The
        market value of the Company’s common stock significantly impacts the extent to
        which the Company may be required or may be permitted to convert the
        unrestricted portion of the debenture into shares of the Company’s common stock.
        The lower the market price of the Company’s common stock at the respective times
        of conversion, the more shares the Company will need to convert the principal
        and interest payments then due on the Debenture. If the market price of the
        Company’s common stock falls below certain thresholds, the Company will be
        unable to convert any such repayments of principal and interest into equity,
        and
        the Company will be forced to make such repayments in cash. The Company’s
        operations could be materially adversely impacted if the Company is forced
        to
        make repeated cash payments on the Debenture.
  F-30
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        9 - NOTES PAYABLE**
  In
        April
        2005, The Company entered into an accounts receivable factoring
        and security agreement for up to $75,000 with
        a
        financing entity. However, the account receivable that was used as collateral
        for the factoring agreement was not assigned to the lender. When payment
        from
        the customer was received, the factor was not paid, placing the Company in
        default on the loan. Under the Settlement Agreement of December 2005, the
        Company agreed to pay interest at an annual rate of 18%. At December 31,
        2006,
        the amount owed under the settlement agreement was $38,941. Interest expense
        was
        $7,760 for the year ended December 31, 2006. On May 1, 2007, the amount owed
        under the settlement agreement was paid in full. Interest expense on the
        note
        was $1,961 for the year ended December 31, 2007.
  In
        April
        2005, the Company issued a $30,000 note to an individual. The note is due
        on
        demand, is secured by stock and bears interest at the rate of 8% per annum.
        At
        December 31, 2006, the amount owed including interest was $34,000. On August
        8,
        2007, the amount owed under the note was paid in full. During 2007, the Company
        paid $31,524 in cash and issued common stock (500,000 shares of stock valued
        at
        $3,300) to settle this note. Interest expense on the note was $823 and $4,000
        for the years ended December 31, 2007 and 2006, respectively.
  The
        remaining $26,500 of unsecured notes payable, at December 31, 2006 were fully
        repaid in 2007.
  **NOTE
        10 - STOCK COMPENSATION PLANS**
  2002
        Consultants Stock Compensation Plan.
  On
        December 16, 2002, the Company adopted the 2002 Stock Compensation Plan (the
        “2002 Plan”). The purpose of the 2002 Plan was to enable the Company to promote
        the interests of the Company by attracting and retaining consultants and
        independent contractors for the Company capable of furthering the business
        of
        the Company by aligning their economic interests more closely with those
        of the
        Company’s stockholders and allowing the Company to pay their retainer or fees in
        the form of shares of common stock. All 55,000,000 shares of common stock
        authorized under the 2002 Plan were registered on a Form S-8 filed with the
        SEC
        during December 2002. As of December 31, 2005, there were 1,800,000 shares
        remaining to be issued under the 2002 Plan. All remaining shares were removed
        from registration on June 27, 2006.
  2003
        Consultants Stock Compensation Plan.
  On
        August
        19, 2003, the Company adopted the 2003 Consultants Stock Compensation Plan
        (the
“2003 Plan”). The purpose of the 2003 Plan was to enable the Company to promote
        the interests of the Company by attracting and retaining consultants and
        independent contractors for the Company capable of furthering the business
        of
        the Company by aligning their economic interests more closely with those
        of the
        Company’s stockholders and allowing the Company to pay their retainer or fees in
        the form of shares of common stock or stock options. All 75,000,000 shares
        of
        common stock authorized under the 2003 Plan were registered under a Form
        S-8
        filed with the SEC during August 2003. The options were exercisable at a
        price
        as determined in each case by the board of directors, but in no event shall
        the
        price be less than 100% of the fair market value of the shares on the date
        of
        grant. As of December 31, 2005, there were 13,000,000 shares of common stock
        remaining to be issued under the 2003 Plan. All remaining shares were removed
        from registration on June 27, 2006.
  F-31
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        10 - STOCK COMPENSATION PLANS (continued)**
  2005
        Non-Employee Directors and Consultants Retainer Stock Plan.
  The
        World
        Am, Inc. Amended and Restated Non-Employee Directors and Consultants Retainer
        Stock Plan (“Non-Employee Plan”), dated December 22, 2005, is intended to enable
        the Company to promote the interests of the Company by attracting and retaining
        consultants and **** independent
        contractors capable of furthering the business of the Company and by aligning
        their economic interests more closely with those of the Company’s stockholders,
        and allow the Company to pay their retainer or fees in the form of shares
        of
        common stock or stock options. The maximum number of shares of stock that
        may be
        issued under this plan is 291,000,000 as of December 31, 2007.
  A
        total
        of 10,900,000 shares were issued out of the Non-Employee Plan during the
        year
        December 31, 2006. As of December 31, 2006, 12,084,363 shares of common stock
        remain to be issued under the Non-Employee Plan. During the year ended December
        31, 2007, 9,923,086 shares of common stock were issued out of the Non-Employee
        Plan, leaving a balance of 2,161,277 shares to be issued from this plan as
        of
        December 31, 2007.
  2006
        Employee Stock Incentive Plan.
 
 The
        World
        Am, Inc. Amended and Restated Employee Stock Incentive Plan (“ESIP Plan”), dated
        February 7, 2006, is intended to allow designated officers and employees,
        and
        certain non-employees of the Company, to receive options to purchase common
        stock, and to receive common stock grants subject to certain restrictions.
        The
        purpose of this plan is to provide employees with equity-based compensation
        incentives to make significant and extraordinary contributions to the long-term
        performance and growth of the Company, and to attract and retain employees
        of
        exceptional ability. The purchase price of shares under the plan is $0.015
        per
        share. The option period begins on the date of grant and will not exceed
        ten
        years. The maximum number of shares of stock that may be issued under the
        amended ESIP Plan is 485,000,000 as of December 31, 2007.
  During
        the year ended December 31, 2006: (A) 110,771,840 shares of common stock
        were
        awarded out of the ESIP Plan and (B) 4,459,481 ESIP shares, issued in 2005,
        were
        returned and subsequently cancelled in 2006 at the request of an employee.
        As of
        December 31, 2006, there were 9,004,141 shares of common stock remaining
        to be
        issued under the ESIP plan.
  During
        the year ended December 31, 2007: (a) 4,203,136 shares, that were issued
        in 2006
        and 2005 were returned and subsequently cancelled and made available for
        re-issuance due to a lack of available shares for issuance; (b) 29,806,923
        shares previously issued to an escrow account but not outstanding were cancelled
        and made available for re-issuance; (c) a total of 192,435,650 shares of
        common
        stock were awarded (including 4,741,379 shares to La Jolla Cove for conversion
        of debt and exercise of warrants - see Note 8) and (d) 250,000,000 shares
        were
        added to the plan in May 2007. This left a balance of 100,578,550 shares
        of
        common stock remaining to be issued under the ESIP Plan as of December 31,
        2007.
        The monthly fully vested stock option issued to the distributor (see Note
        12),
        totalling 8,400,000 shares at December 31, 2007, will, when exercised, come
        from
        the ESIP Plan.
  F-32
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        10 - STOCK COMPENSATION PLANS (continued)**
  2007
        Stock Option Plan.
 
 The
        World
        Am, Inc. Stock Option Plan, dated January 2, 2007, is intended to allow
        designated directors, officers and employees of the Company, to receive options
        to purchase restricted shares of common stock. The purpose of this plan is
        to
        provide directors, officers and employees with equity-based compensation
        incentives to make significant and extraordinary contributions to the long-term
        performance and growth of the Company and to attract and retain directors,
        officers and employees of exceptional ability. The purchase price of shares
        under the plan is $0.005 per share. The option period begins on the date
        of
        grant and will not exceed ten years. The maximum number of shares of stock
        that
        may be issued under this plan is 45,000,000. Options covering a total of
        44,500,000 shares have been granted for the year ended December 31, 2007
        leaving
        a balance of 500,000 shares to be issued from this plan.
 
 If
        the
        employee has been employed (or in the case of an independent director, been
        in
        such a position) for a period of one year from the date of the option grant,
        then the employee vests in 25% of the total number of shares covered by the
        option, and thereafter, 1/48th of the total number of shares covered by the
        option at the end of each full calendar month. If the employee leaves the
        Company prior to the expiration of the one-year period, then the employee
        does
        not have the right to purchase any shares under the option. The option remains
        valid only while the employee remains with the Company. Upon a termination
        of
        his or her relationship with the Company, the employee has a period of 90
        calendar days thereafter to purchase the amount of shares that are vested
        to
        date or they are forfeited. As of December 31, 2007, none of the options
        have
        vested.
 
 General
        Discussion.
 
 The
        fair
        value of each stock-based award is estimated on the grant date using the
        Black-Scholes pricing model. Expected volatilities are based on the historical
        volatilities of comparable companies. The expected term of options granted
        is
        derived using the simplified method as defined in SAB No. 107. The risk-free
        rate for periods within the contractual life of the option is based on the
        U.S.
        Treasury interest rates in effect at the time of grant. The fair value of
        options granted was estimated using the following weighted-average
        assumptions:
 
 2007
              
              2006Risk-free
                  interest rate
              
              
              3.34%-
                  4.48
              %
              
              4.7%
                  - 4.74
              %Expected
                  life of the options
              
              
              3-6
                  years
              
              
              5
                  yearsExpected
                  volatility
              
              
              127-
                  161.8
              %
              
              127
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
 
 F-33
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        10 - STOCK COMPENSATION PLANS (continued)**
  The
        following is a summary of all stock option activity as of December 31, 2006
        and
        December 31, 2007 respectively, and changes during the years then
        ended:
  Number
                    of Shares
                
                Weighted
                    Average Exercise Price
                
                Weighted
                    Average Remaining Contractual Term (Years)
                
                Aggregate
                    Intrinsic ValueOptions
                    outstanding at January 1, 2006
                
                
                156,720,946
                
                $
                0.012
                
                
                4.08
                
                $
                —Expired/forfeited
                
                
                (132,226,762
                )Exercised
                
                
                (3,396,774
                )Cashless
                    exercise
                
                
                (377,420
                )Options
                    outstanding at December 31, 2006
                
                
                20,719,990
                
                $
                0.012
                
                
                3.08
                
                $
                —Options
                    exercisable at December 31, 2006
                
                
                20,647,990
                
                $
                0.012
                
                
                3.08
                
                $
                —Granted
                
                
                52,900,000
                
                $
                0.007
                
                
                —
                
                $
                —Expired/forfeited
                
                
                —
                
                
                —Exercised
                
                
                —
                
                
                —Options
                    outstanding at December 31, 2007
                
                
                73,619,990
                
                $
                0.009
                
                
                6.30
                
                $
                —Options
                    exercisable at December 31, 2007
                
                
                29,119,990
                
                $
                0.015
                
                
                2.29
                
                $
                —Options
                    expected to vest at December 31, 2007
                
                
                73,619,990
                
                $
                0.009
                
                
                6.30
                
                $
                —
  The
        aggregate intrinsic values set forth in the above table represent the total
        pre-tax intrinsic values, based on the Company’s closing stock price of $0.0025
        as of December 31, 2007, which would have been paid by the optionee had all
        of
        them exercised their options as of that date.
 
 Stock-based
        compensation expense for the year ended December 31, 2007 and 2006 was $30,700
        and $3,168, respectively. These amounts were included in general and
        administrative expenses in the accompanying consolidated statements of
        operations.
  F-34
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
        10 - STOCK COMPENSATION PLANS (continued)**
  A
        following summarizes the activity of the Company’s non-vested
        options:
 
 Weighted-AverageShares
              
              Grant-Date
                  Fair Value
              
              Remaining
                  Months to Vest
              
              Remaining
                  Unrecognized Compensation CostNon-vested
                  outstanding at January 1, 2006
              
              
              144,000
              
              $
              0.016
              
              
              24
              
              $
              2,304Granted
              
              
              —Vested
              
              
              (72,000
              )
              $
              0.016
              
              
              
              
              
              (1,152
              )Forfeited
              
              
              —Non-vested
                  outstanding at January 1, 2007
              
              
              72,000
              
              $
              0.016
              
              
              12
              
              
              1,152Granted
              
              
              52,900,000
              
              $
              0.007
              
              
              36-60
              
              
              157,270Vested
              
              
              (8,472,000
              )
              $
              0.020
              
              
              
              
              
              (30,700
              )Forfeited
              
              
              —
              
              
              —
              
              
              
              
              
              —Non-vested
                  outstanding, related to the 2007 Stock Option Plan, at December
                  31,
                  2007
              
              
              44,500,000
              
              $
              0.005
              
              
              49
              
              $
              127,722
 
 **NOTE
        11 - STOCKHOLDERS’ DEFICIT**
 
 Preferred
        Stock.
 
 **Class
        A.**
 
 The
        Company is authorized to issue up to 40 million shares of Class A convertible
        preferred stock with a par value of $0.0001 per share. Each share has a
        liquidation preference of $1,700 per preferred share. Such amounts shall
        be paid
        on all outstanding Class A preferred shares before any payment shall be made
        or
        any assets distributed to the holders of the common stock or any other stock
        of
        any other series or class-ranking junior to the shares as to dividends or
        assets. Each preferred share is convertible into 1,000,000 shares of the
        Company’s common stock at the option of the holder. Each holder of Class A
        preferred stock is entitled to 1,000,000 votes and is entitled to such dividends
        as may be declared by the board of directors from time to time.
 
 During
        June 2004, the Company entered into a loan agreement with a lender whereby
        the
        lender agreed to use its best efforts to provide the Company a loan in the
        maximum amount of 2,000,000 subject to certain terms and conditions. The
        Company
        agreed to issue 1,370 shares of Class A preferred stock as collateral on
        the
        loan. The shares were issued in June 2004. The lender did not fund the loan
        and
        accordingly, the Company provided a written demand for the return of the
        shares;
        the certificate for 1,370 shares were returned to the Company and
        cancelled.
  F-35
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        11- STOCKHOLDERS’ DEFICIT (continued)**
  During
        May 2005, the lender assigned all rights set forth in the loan agreement
        to
        Coldwater Capital Partners, LLC. On this basis, a certificate for 1,370 shares
        of Class A preferred stock was issued on June 4, 2005. On July 21, 2005,
        the
        Company authorized that one share of the Class A preferred stock be converted
        into 1,000,000 restricted shares of common stock. The Company never received
        any
        funding under this loan agreement. Therefore, in January 2006 the Company
        made
        the determination to cancel the balance of 1,369 shares of Class A preferred
        stock (such shares have not yet been cancelled). The Company is analyzing
        its
        alternatives with regard to the 1,000,000 share conversion.
 
 **Class
        B.**
 
 The
        Company is authorized to issue up to 40 million shares of Class B preferred
        stock with a par value of $0.0001 per share. To the extent assets are available,
        holders of Class B preferred shares have a liquidation preference equal to
        the
        original issue price of the shares of $145,455 per share plus all declared
        but
        unpaid dividends on the Series B preferred shares. Such amounts shall be
        paid on
        all outstanding Class B preferred shares before any payment shall be made
        or any
        assets distributed to the holders of common stock or of any other stock of
        any
        series or class junior to the shares as to dividends or assets, but junior
        to
        Class A preferred shareholders. Each share of Class B preferred stock is
        convertible into the greater of (i) 1% of the shares of common stock outstanding
        on the date of conversion, after giving consideration to shares issued as
        a
        result of the conversion and any options, warrants or other convertible
        securities outstanding and (ii) 7,272,728 shares of common stock. The holders
        of
        these preferred shares shall have the right to vote and cost that number
        of
        votes which the holder would have been entitled to cast had such holder
        converted the shares immediately prior to the record date for such
        vote.
 
 On
        August
        31, 2005, the Company completed a Share Exchange Agreement with Senz-It.
        Under
        this agreement, Senz-It became a wholly owned subsidiary of the Company in
        exchange for 55 shares of Class B convertible preferred stock that were issued
        to SUTI Holdings, LP among other consideration (see Note 1).
 
 Common
        Stock.
 
 The
        holders of the Company’s common stock are entitled to one vote per share of
        common stock held.
 On
          October 11, 2006, the Company commenced a private offering of up to thirty-four
          units at a price of $25,000 per unit. Each unit consist of 5,000,000 shares
          of
          common stock and a warrant that entitled the holder the right and privilege
          to
          purchase 1,250,000 shares of the Company’s common stock at any time up to three
          years after the issuance of the warrant for a price of $0.02 per share.
          As of
          December 31, 2006, thirteen units (65,000,000 shares of common stock) and
          warrants representing 16,250,000 shares of common stock, were sold for
          a total
          consideration of $314,350, net of issuance costs. For the year ended December
          31, 2007, an additional 51 units (30 units at 12,500,000 shares per unit
          and 21
          units at 5,000,000 shares per unit) for a total of 480,000,000 shares of
          common
          stock and warrants representing 120,000,000 shares of common stock, were
          sold
          for a total consideration of $3,200,250, net of issuance
 costs.
          The fair value of the 136,250,000 warrants issued in connection with the
          private
          offering were reclassified to derivative and warrant liabilities at December
          31,
          2007 (see Note 2)
 F-36
 
 **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        11- STOCKHOLDERS’ DEFICIT (continued)**
 
 The
        following summarizes the common stock activity for the years ended December
        31:
 
 2007
              
              2006Shares
                  cancelled
              
              
              (4,203,136
              )
              
              (4,459,481
              )Shares
                  issued under the Non-Employee Plan
              
              
              9,923,086
              
              
              10,900,000Exercise
                  of stock option
              
              
              —
              
              
              3,396,774Exercise
                  of warrants
              
              
              —
              
              
              30,879,999Shares
                  issued under the ESIP Plan
              
              
              192,435,650
              
              
              110,771,840Private
                  sale of stock
              
              
              480,000,000
              
              
              65,000,000Total
                  net shares issued
              
              
              678,155,600
              
              
              216,489,132
 
 A
        summary
        of the warrant activity is as follows:
 
 Warrants
              
              Weighted-Average
                  Exercise Price
              
              Weighted-Average
                  Remaining Contractual LifeBalance,
                  January 1, 2006
              
              
              73,380,000
              
              $
              0.0019
              
              
              32
                  monthsWarrants
                  issued
              
              
              287,722,868
              
              $
              0.02
              
              
              36
                  monthsCashless
                  exercise fee
              
              
              (421,053
              )
              $
              0.002Warrants
                  exercised
              
              
              (30,879,999
              )
              $
              0.0009Balance,
                  January 1, 2007
              
              
              329,801,816
              
              $
              0.019
              
              
              21
                  monthsWarrants
                  issued
              
              
              120,100,000
              
              $
              0.020
              
              
              36
                  monthsWarrants
                  exercised
              
              
              (10,000
              )
              
              1.00Balance,
                  December 31, 2007
              
              
              449,891,816
              
              $
              0.019
              
              
              23
                  months
 
 F-37
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        12 - RELATED PARTY TRANSACTIONS**
 
 G.
        Raymond Pironti, Jr.
 
 (a)
              On
                  February 4, 2005, the Company sold three units through a private
                  offering
                  to G. Raymond Pironti, Jr. Each unit included a warrant that entitled
                  the
                  holder to acquire a specific number of shares of the Company’s common
                  stock. According to the provisions of the warrant, the holder has
                  the
                  right and privilege to purchase a number of fully paid and non-assessable
                  shares of the Company’s common stock at any time through February 4, 2008.
                  The number of shares is obtained by dividing the purchase price
                  of three
                  units by the lowest reported bid price of the Company’s common stock
                  during the 365-day period following the commencement of the pricing
                  period; this number was fixed at 22,500,000 shares on February
                  4, 2006. As
                  of December 31, 2007 and December 31, 2006, 18,078,948 shares of
                  common
                  stock remain exercisable at $0.0025 per share for a period of three
                  years
                  from the date of grant (February 4, 2005). In February 2008, these
                  warrants expired unexercised.
 
 (b)
              On
                  April 25, 2005, the Company entered into accounts receivable factoring
                  and
                  securityagreement
                  with JJ Ellis, LLC (a company controlled by Mr. Pironti) for up
                  to $75,000(and
                  an Addendum to this agreement, dated August 8, 2005). However,
                  the account
                  receivable that was used as collateral for the factoring agreement
                  was not
                  assigned to the lender and when payment from the customer was received;
                  the factor was not paid, placing the Company in default on the
                  loan. Under
                  the Settlement Agreement of December 2005, the Company agreed to
                  pay
                  interest at an annual rate of 18%. At December 31, 2006, the amount
                  owed
                  under the settlement agreement was $38,941. Interest expense on
                  the note
                  was $7,760. On May 1, 2007, the amount owed under the settlement
                  agreement
                  was paid in full for the year ending December 31, 2006. During
                  2007,
                  payments totalling $40,902 were made. Interest expense on the note
                  was
                  $1,961 for the year ended December 31,
                  2007.
  In
        connection with the factoring agreement, the Company issued to JJ Ellis a
        warrant to purchase $60,000 of the Company’s common stock and has been recorded
        as a warrant liability in the accompanying consolidated balance sheet. The
        calculation of the number of shares underlying this warrant is based on the
        lowest bid price recorded ($0.002) over a 365-day look back period or a 20%
        discount at time of execution, whichever is lower. Based on this calculation,
        the number of shares fixed for this warrant on April 25, 2006 was 24,000,000.
        This warrant is exercisable for a period of three years from the grant date
        of
        April 25, 2005 at the lower of $0.0025 per share or 80% of the closing price
        on
        the date of exercise (none of this warrant has been exercised at December
        31,
        2007 and 2006, respectively).
 
 David
        J. Barnes.
 
 For
        the
        year ended December 31, 2007, commissions in the amount of $324,750, have
        been
        paid in connection with the private equity offering (see Note 11) to Mr.
        David
        Barnes, the Company’s former Chief Financial Officer and a Director.
  F-38
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        12 - RELATED PARTY TRANSACTIONS (continued)**
 
 Select
        University Technologies, Inc.
 
 **Venture
        Acceleration Agreement.**
 
 A
        Venture
        Acceleration Agreement, (“Venture Agreement”) was entered into between Senz-It
        and Select University Technologies, Inc., the general partner of SUTI, dated
        June 20, 2005. Under the terms of the Venture Agreement, Senz-It appointed
        Select University Technologies, Inc. to provide certain services, personnel
        and
        property for consideration of a management fee and a performance fee through
        October 2009.
 
 The
        management fee calls for a one-time payment of $100,000, payable in $50,000
        of
        common stock and $50,000 of cash, at such time when the Company has the
        financial capability to pay in cash and an annual management fee of $930,000
        payable in monthly instalments of $77,500. Of the monthly management fee,
        $25,000 is payable in cash and the remainder is payable in common stock.
        For the
        years ended December 31, 2007 and 2006, respectively, the Company recorded
        $930,000 and $332,500, respectively in management fees. As of December 31,
        2007
        and 2006, respectively, the amount owed to Select University Technologies
        Inc.
        was $186,901 and $222,207, respectively, which consists of amounts due under
        the
        terms of the Venture Agreement and amounts due for rent and reimbursement
        of
        operating expenses.
 
 The
        performance fee is 6% of gross revenue for the first three years of the Venture
        Agreement. Thereafter, the performance fee is to be calculated at 15% of
        quarterly operating profit (as defined in the Valuation Agreement). To date,
        no
        amounts are owing related to the performance fee.
 
 Office
        Space.
 
 The
        Company shares office space with Select University Technologies, Inc. The
        Company is charged $800 per month, plus operating and administrative expenses.
        The total rent and operating expenses charged to the Company for the years
        ended
        December 31, 2007 and 2006 was $7,893 and $47,719, respectively.
 
 SUTI
        Holdings, LP.
 
 On
        May
        18, 2006, the Company’s subsidiary, Isotec, issued a demand promissory note in
        favor of the Company’s controlling stockholder, SUTI. Under the terms of the
        promissory note, the Company may borrow up to $100,000 to assist in the ongoing
        operations of the Company.
 
 Principal
        and interest are due no later than 30 days following the commencement date
        of
        May 2006. The outstanding principal amount bears simple interest through
        the
        maturity date at the rate of 8% of the loan amount. After an Event of Default
        (as defined in the promissory note), all past due principal and, to the
 extent
        permitted by applicable law, interest upon this note is to bear interest
        at the
        rate per annum equal to 12%. As of December 31, 2007, the Company did not
        owe
        any monies related to this note.
  F-39
 
 **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **NOTE
        13 - COMMITMENTS AND CONTINGENCIES**
 
 Litigation
 
 (a)  On
        August
        2, 2006, a complaint was filed against the Company and certain individuals
        by
        Karen Alexander. The complaint principally alleges that World Am, Inc. breached
        an employment agreement with the plaintiff by not paying her certain amounts
        allegedly owing.
 
 On
        February 29, 2008, the Boulder County District Court (“the Court”) entered a
        judgment against the Company and found that the Company owed Karen Alexander
        a
        total of $39,000 plus reasonable attorney fees to be determined by the Court.
        Accordingly, the Company recorded $39,000 as accounts payable and accrued
        liabilities in the accompanying consolidated balance sheet; and has not accrued
        an additional amount for attorney fees as they cannot be reasonably estimated
        at
        this time.
 
 (b)  On
        September 20, 2006, a complaint was filed against the Company by James
        Alexander, the Company’s former president and chief executive officer. The
        complaint principally alleges that World Am breached an employment agreement
        with the plaintiff by not paying him certain amounts allegedly owing and
        seeks
        damages in the amount of $714,718. The Company then filed a counterclaim
        against
        Mr. Alexander seeking damages for breach of fiduciary duty and breach of
        the
        duty of loyalty to the Company . The matter should go to trial in
        2008.
  Management
        believes the Company has meritorious claims and defenses to the plaintiff’s
        claims and ultimately will prevail on the merits. However, there can be no
        assurance as to the outcome of the lawsuit. Litigation is subject to inherent
        uncertainties, and unfavorable rulings could occur. If an unfavorable ruling
        were to occur, there could be a material adverse on the Company’s financial
        condition, results of operations or liquidity.
 
 (c)  On
        October 25, 2004, a complaint was filed against the Company by Mitchell Vince.
        The complaint alleges that Isotec terminated Mr. Vince without cause prior
        to
        the expiration of the term of an alleged employment agreement. The complaint
        sought monetary damages of $240,000. This matter has been settled.
 
 Under
        this settlement, Mr. Vince will be paid $6,000 per month in cash or shares
        of
        free trading common stock for a period of 20 months commencing January 1,
        2007.
        The remaining balance on the settlement of $46,735 is included in accounts
        payable in the accompanying consolidated balance sheet as of December 31,
        2007.
 
 (d)  On
        or
        about October 10, 2007, one of the Company’s former consultants filed a
        complaint against the Company alleging breach of contract, account stated
        and
        other common counts, and seeking to recover $30,108. The Company is in
        settlement discussions with the plaintiff.
  F-40
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        13 - COMMITMENTS AND CONTINGENCIES (continued)**
 
 (e)  On
        January 30, 2004, a complaint was filed against the Company by Robert Hainey
        and
        Internet Marketing Solutions, Inc. The complaint, which has causes of action
        for
        breach of contract and unjust enrichment, alleges that the defendants failed
        to
        pay the plaintiffs for certain consulting and public relations and related
        work,
        reimbursement of certain business expenses incurred on behalf of the defendants,
        and to repay a loan made by the plaintiffs to the defendants. The complaint
        sought total monetary damages of approximately $308,000.
 
 In
        March
        2008, the Company agreed to settle this matter. Under the terms of the
        settlement, the Company agreed to pay to Robert Hainey and Internet Marketing
        Solutions, Inc. the sum of $116,000, payments to be made as follows: a payment
        of $6,000 was made in January 2008 and another payment of $6,000 was made
        upon
        execution of the agreement, March 4, 2008. Monthly payments in the amount
        of
        $5,000, in stock or cash, will begin on April 5, 2008 and continuing in the
        same
        amount on the fifth day of each
 month
        thereafter until fully paid in April 2010. The April 2010 payment will be
        $4,000, in cash or stock. In the event that the Company fails to make any
        of the
        aforementioned payments, the Company agrees to pay to Robert Hainey and Internet
        Marketing Solutions, Inc. a penalty of $1,000 for each occurrence. The sum
        of
        $116,000 was recorded as general and administrative expenses in the consolidated
        statement of operations and in accounts payable in the accompanying consolidated
        financial statements as of December 31, 2007.
 
 Operating
        Leases.
 
 Isotec
        leases a 4,800 square foot facility in Westminster, Colorado with a monthly
        rent
        and common area expense of $4,061 through December 31, 2011. Rent and common
        area expense totalled $45,139 and $47,875 for the years ended December 31,
        2007
        and 2006, respectively.
 
 As
        of
        December 31, 2007 future minimum non-cancellable facility rental payments
        required under the operating lease are as follows:
 
 2008
              
              $
              49,2182009
              
              
              51,1832010
              
              
              53,2322011
              
              
              55,362$
              208,995
 
 Senz-It
        leases a 934 square foot facility in Newport Beach, California. The lease
        commenced October 22, 2007 through October 21, 2008. Upon expiration, the
        lease
        terms will continue for successive thirty-day periods until cancelled by
        either
        party in writing. Rent and common area expense totalled $4,345 for the year
        ended December 31, 2007. As of December 31, 2007 future minimum non-cancellable
        facility rental payment required under the operating lease for 2008 are
        $11,347.
  F-41
  **WORLD
            AM, INC.**
 **(A
            Development Stage Company)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        13 - COMMITMENTS AND CONTINGENCIES (continued)**
  Consulting
        Agreement.
  On
        February 21, 2007, the Company entered into a consulting agreement with its
        chief executive officer, Robert Hovee, through an agreement with RAH Consulting
        Group, Inc. This agreement covers his services to be rendered for this Company
        in that position for the period of January 1, 2007 through December 31, 2007.
        In
        consideration of the services rendered, the Company will pay Mr. Hovee a
        fee of
        $8,000 per month, in cash or stock, at the Company’s discretion. Mr. Hovee will
        be eligible to participate in the Company’s Stock Option Plan, effective on
        January 2, 2007. The Company will reimburse Mr. Hovee for all reasonable
        business expenses incurred while performing services for the Company. In
        addition, healthcare insurance premiums for Mr. Hovee will be paid by the
        Company. This agreement is to remain in effect until terminated by either
        party
        as of the date set forth in a written notice to the other party delivered
        in
        accordance with the notice provisions of the agreement at least 30 days prior
        to
        such date. In the event of the termination of this agreement, any accrued
        but
        unpaid fees will be paid within ten days of the effective date of such
        termination. On March 10, 2008, the provisions of the consulting agreement
        were
        renewed.
  An
        advance on the consulting fees owed Robert Hovee was made during 2007. These
        monies, $3,259, are shown as an advance to related party in the accompanying
        consolidated balance sheet as of December 31, 2007.
 
 Distributor
        Agreements
 
 The
        Company has entered into several distributor agreements for distribution
        of the
        Company’s products in the United States. These agreements call for the provision
        of services to the distributors in exchange for the promotion of the Company’s
        products. The products are sold to the distributor at a discount from the
        list
        price of 15% to 25%.
 
 In
        addition, the Company has alliance agreements to assist the Company in
        establishing international distributorships. The agreements have one-year
        terms
        and may be renewed with the mutual consent of both parties. The alliance
        agreements specify a commission of 10% of license fees and 5% of product
        sales
        made pursuant to the alliance agreements.
 
 On
        May 1,
        2007, the Company entered into a distributor agreement for the purpose of
        appointing a distributor responsible for the worldwide, excluding Singapore,
        sales and marketing of the Senz-It product line for a period of forty-eight
        months unless sooner terminated as specified in the agreement. In addition
        the
        distributor provides sales and marketing consulting services for an initial
        term
        of twelve months. As payment for these consulting fees, the Company agreed
        to
        the following compensation arrangement: (a) 10,000,000 million shares (50%
        of
        the shares in the form of S-8 shares and 50% of the shares were in the form
        of
        Rule 144 shares) were issued totalling $60,000 (valued at the closing price
        of
        $0.006 on the date issued), and (b) World Am stock options, fully vested,
        issued
        monthly in the amount of 1,200,000 at an exercise price of $0.02 per share.
        The
        stock option shares remain exercisable for a period of thirty-six months
        from
        the date of issuance. No additional compensation or expense reimbursement
        shall
        be made to
        distributor for their efforts in this matter. As of December 31, 2007, a
        total
        of 8,400,000 fully vested options had been issued, valued at $23,770. Of
        this
        amount, $2,847 has been recorded in general and administrative expenses.
  F-42
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
        13 - COMMITMENTS AND CONTINGENCIES (continued)**
  License
        Agreement
  During
        2007, the Company incurred minimum royalty fee of $10,000 and $159,547 for
        patent cost reimbursement for a total of $184,547 at December 31, 2007 related
        to the License Agreement and has recorded the costs as an intangible asset
        in
        the accompanying consolidated financial statements (see Note 3.) Upon
        commencement of sales of the licensed technologies, Senz-It will amortize
        the
        cost of the intangibles over the lesser of their estimated useful lives or
        over
        the remaining term of the License Agreement. Amortizable intangible assets
        are
        tested for impairment based on undiscounted cash flows, and, if impaired,
        written down to fair value based on either discounted cash flows or appraised
        values.
 
 In
        connection with the License Agreement (see Note 3), Senz-It will issue
        restricted shares of common stock, none issued as of December 31, 2007, and
        will
        issue additional such shares to SUNY pursuant to the terms of a Stock Purchase
        Agreement dated December 1, 2006,  so
        that
        it will maintain a minimum ownership of 10% in Senz-It. Finally, Senz-It
        entered
        into a Stockholders Agreement dated  December
        1, 2006 with SUNY that covers the rights of stockholders of Senz-It. At such
        time as Senz-It earns a profit, the minority interest will be allocated to
        SUNY.
        In connection with these agreements, the Company entered into confidentiality
        and non-disclosure agreements with SUNY as to certain specific terms of the
        agreements.
 
 Indemnities
        and Guarantees.
 
 During
        the normal course of business, the Company has made certain indemnities and
        guarantees under which it may be required to make payments in relation to
        certain transactions. These indemnities include certain agreements with the
        Company’s officers under which the Company may be required to indemnify such
        persons for liabilities arising out of their employment relationship, lease
        agreements where the Company may be required to indemnify landlords for damages
        arising from non-compliance with environmental laws, contracts where the
        Company
        may be required to indemnify the other party from liabilities resulting from
        claimed infringements of the proprietary rights of third parties or
        confidentiality provisions and the La Jolla Cove agreement where the Company
        may
        be required to indemnify La Jolla Cove for breach of representation or warranty.
        The duration of these indemnities and guarantees varies, and in certain cases,
        is indefinite.
 
 The
        majority of these indemnities and guarantees do not provide for any limitation
        of the maximum potential future payments the Company would be obligated to
        make.
        Historically, the Company has not been obligated to make significant payments
        for these obligations and no liability has been recorded for these indemnities
        in the accompanying consolidated balance sheets.
  F-43
  **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
        14 - SUBSEQUENT EVENTS**
 
 The
        Company had the following stock issuances from January 1 through March 4,
        2008:
 
 (1)  Free
        trading shares of common stock were issued to employees and for services,
        at
        $0.0028 per share, totalling 6,969,286 shares valued at $19,514.
 
 (2)  Free
        trading shares of common stock were issued to employees, at $0.0025 per share,
        totaling 4,037,528 shares valued at $10,094.
 
 (3)  Free
        trading shares of common stock were issued to employees and for services,
        at
        $0.003 per share, totalling 16,454,036 shares valued at $49,362.
 
 (4)  Free
        trading shares of common stock were issued for services, at $0.0027 per share,
        totalling 3,518,518 shares valued at $9,500.
 
 (5)  Free
        trading shares of common stock were issued to employees, at $0.002 per share
        totalling 3,561,271 shares valued at $7,123.
 
 (6)  Restricted
        shares of common stock issued to La Jolla Cove for conversion of debt, at
        a
        calculated price of $0.0015571, totalling 26,564,184 shares valued at
        $3,799.
 
 (7)  Restricted
        shares of common stock issued to La Jolla Cove in accordance with the provisions
        of their warrant, at $1.00 per share, for a total of 37,993 shares valued
        at
        $37,993.
 
 Strategic
        Alliance and Joint Development Agreement
 
 On
        February 29, 2008 Senz-It entered into a strategic alliance and joint
        development agreement with BioMEDIX for the purpose of developing a new testing
        system to more accurately determine levels of decay in fish - one of the
        world’s
        most perishable foods. The test system is expected to be compact and portable.
        The system is intended to measure not only levels of decomposition, but also
        determine if specific by-products associated with decay are present, and
        in what
        quantities. The test system is expected to be deployed at multiple points
        in the
        supply chain, including but not limited to, food laboratories, food processors,
        distributors, and retailers.
  F-44


**SIGNATURES**





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




Dated:
      April 11, 2008


World Am, Inc./s/
Robert
              A. HoveeBy:Robert
                A. Hovee
              Its:Chairman,
                  President, CEO, and Director





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




Dated:
              April 11,
              2008
            
            
            /s/
Robert
              A. HoveeBy:Robert
              A. HoveeIts:
                Chairman,
                President, CEO, and Director


Dated:
                April 11,
                2008
              
              
              /s/
C.
                Robert KlineBy:C.
                Robert KlineIts:
                  Chief
                  Financial Officer and
                  Director
 Dated:
                    April 11,
                    2008
                  
                  
                  /s/
James
                    R. LargentBy:James
                    R. LargentIts:
                      Secretary
                      and Director
 Dated:
                        April 11,
                        2008
                      
                      
                      /s/
David
                        R. BarnesBy:David
                        R. BarnesIts:
                          Director