**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**




**(Mark
      One)**




**x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL
      YEAR ENDED DECEMBER 31, 2006** ****





**OR**





**o
      TRANSITION REPORT
      PURSUANT TO 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 Company as Specified in its Charter)





Nevada
            90-0142757(State
                or Other Jurisdiction of Incorporation
            (I.R.S.
                Employeror
                Organization)
            Identification
                No.)





4040
                MacArthur Boulevard, Suite 240, Newport Beach,
                California
            92660(Address
                of Principal Executive Offices)
            (Zip
                Code)





Company’s
      telephone number: (949)
      955-5355





Securities
      registered pursuant to Section 12(b) of the Act: None




Securities
      registered pursuant to Section 12(g) of the Act: Common stock, $0.0001 par
      value





Indicate
      by check mark whether the Company (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 Company was required
      to
      file such reports), and (2) been subject to such filing requirements for the
      past 90 days. Yes x No
o .





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is not contained herein, and will not be contained, to the best
      of Company’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB o.





Indicate
      by check mark if the Company is required to file reports pursuant to Section
      13
      or 15(d) of the Securities Exchange Act of 1934. Yes x No
o .





Indicate
      by check mark whether the Company is a shell company (as defined in Rule 12b-2
      of the Securities Exchange Act of 1934): Yes o No x .





The
      Company had revenues of $245,476 for the year ended on December 31, 2006. The
      aggregate market value of the voting stock held by non-affiliates of the Company
      as of March 6, 2007: $4,485,474. As of March 6, 2007, the Company had
      488,888,122 shares of common stock issued and outstanding.





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







**TABLE
      OF CONTENTS**


**PAGE****PART
                I.****ITEM 1.**
              **DESCRIPTION
                  OF BUSINESS**
              **3****ITEM 2.**
              **DESCRIPTION
                  OF PROPERTY**
              **26****ITEM 3.**
              **LEGAL
                  PROCEEDINGS**
              **26****ITEM 4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS**
              **27****PART
                II.****ITEM 5.**
              **MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**
              **27****ITEM 6.**
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS**
              **29****ITEM 7.**
              **FINANCIAL
                  STATEMENTS**
              **41****ITEM 8.**
              **CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE**
              **41****ITEM 8A.**
              **CONTROLS
                  AND PROCEDURES**
              **42****ITEM 8B**
              **OTHER
                  INFORMATION**
              **43****PART
                III.****ITEM 9.**
              **DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                  SECTION
                  16(A) OF THE EXCHANGE ACT**
              **46****ITEM 10.**
              **EXECUTIVE
                  COMPENSATION**
              **49****ITEM 11.**
              **SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND RELATED
                  STOCKHOLDER MATTERS**
              **51****ITEM 12.**
              **CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                  INDEPENDENCE**
              **55****ITEM 13.**
              **EXHIBITS**
              **59****ITEM 14.**
              **PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES**
              **60****SIGNATURES**
              **61**






2




**PART
      I.**





**ITEM
      1. DESCRIPTION OF BUSINESS.**





**Business
      Development.**





Pursuant
      to an Agreement and Plan of Merger (“Acquisition Agreement”) effective May 11,
      2000, World-Am Communications, Inc. (“Company”), a Florida corporation organized
      in 1994, acquired 100% of all the outstanding shares of common stock Allmon
      Corporation, a Delaware corporation (“Allmon”) (“Acquisition”).





The
      Acquisition was approved by the board of directors and a majority of the
      stockholders of Allmon and the Company on May 11, 2000. The Acquisition was
      intended to qualify as a reorganization within the meaning of Section
      368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. Upon
      effectiveness of the Acquisition, pursuant to Rule 12g-3(a) under the Securities
      Exchange Act of 1934, the Company elected to become the successor issuer to
      Allmon for reporting purposes under the Securities Exchange Act of 1934 and
      began reporting under this act on May 11, 2000.





As
      of the
      effective date of the Acquisition Agreement, Allmon amended its Articles of
      Incorporation to change its name to World Am, Inc. The Company’s officers and
      directors became the officers and directors of Allmon. All of the board of
      directors and officers of Allmon, prior to the effective date, resigned
      thereafter.





The
      Company, under the name Bedroc’s of Brandon, Inc., formerly operated a family
      restaurant located in Brandon, Florida, commencing operations in January 1995.
      On January 3, 1996, the restaurant closed for major renovations related to
      the
      changing of the theme of the restaurant. The Company completed renovations
      in
      July 1997 and reopened in August 1997 as the Garden Grille. In March 1998,
      the
      Company discontinued the restaurant operations (its only business segment)
      and
      proceeded to write-off the net book value of the restaurant property and
      equipment. Later that year, the Company changed its name to “World-Am
      Communications, Inc.” and commenced operations as a company that provided analog
      and digital cellular services in West Central Florida and provided digital
      and
      alphanumeric paging services under resale contracts. This business plan was
      unsuccessful and the Company did not have any further operations until February
      2000.





The
      current business of the Company was commenced in February of 2000 after the
      Company, through a stock purchase agreement with Isotec, Inc. (“Isotec”),
      acquired all of the outstanding stock of Isotec; Isotec became a wholly owned
      subsidiary. Shortly thereafter in April 2000, Isotec acquired all of the assets
      of Technology Development International (“TDI”), a sales and marketing company
      representing 23 products in the security industry.





With
      the
      filing of Articles of Merger with the Nevada Secretary of State on December
      20,
      2002, the Company changed its domicile from Florida to Nevada. A Certificate
      of
      Amendment to the Articles of Incorporation, dated August 20, 2002, added to
      the
      authorized stock 80,000,000 shares of preferred stock consisting of 40,000,000
      shares of Class A Preferred Stock, $0.0001 par value and 40,000,000 shares
      of
      Class B Preferred Stock, $0.0001 par value. A Certificate of Amendment to
      Articles of Incorporation, dated December 20, 2002, increased the authorized
      shares of common stock to 800,000,000 shares. A Certificate of Amendment to
      the
      Articles of Incorporation, dated December 1, 2004, increased the authorized
      shares of common stock to 1,500,000,000 shares.




3





On
      August
      31, 2005, the Company consummated an agreement to acquire Senz-It, Inc.
      (“Senz-It”), in exchange for 55 shares of the Company’s Class B preferred stock
      and a warrant to purchase 18,000,000 shares of common stock. The exercise price
      of the common shares under these warrants is $0.0001 per share. The warrants
      vested immediately and expire in August 2010. Each share of Class B preferred
      stock is convertible 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. On
      March 7, 2006, SUTI Holdings, LP (“SUTI”), 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).





Prior
      to
      the transaction, the Company 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, and Senz-It was a non-operating, development stage company.
      The
      transaction is considered to be a capital transaction in substance, rather
      than
      a business combination. In other words, 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. The
      accounting for the transaction is identical to that resulting from a reverse
      acquisition, except goodwill and other intangible assets were not recorded.
      Accordingly, the consolidated financial statements of the Company are the
      historical financial statements of Senz-It, which was incorporated on March
      4,
      2005.





On
      January 22, 2007, Senz-It entered into an exclusive, royalty-bearing license
      with the State University of New York at Buffalo (“SUNY”). This license covers
      patents developed by SUNY that will enable Senz-It to develop technology with
      an
      entirely new approach to sensing, process monitoring, homeland security and
      environmental scanning applications.





On
      June
      20, 2006, 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.





**Business
      of the Company.**





The
      Company currently has three wholly owned subsidiaries: TDI, Isotec, and Senz-It.





**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 is dormant.




4





**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 (“IAQ”)





·
            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.




5





(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 September 11th attacks.





(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 sarin gas or explosive devices.





**Indoor
      Air Quality (“IAQ”).**





Indoor
      air pollution is ranked as the highest risk to human health among all types
      of
      environmental problems, according to the Environmental Protection Agency
      (“EPA”). 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 Centers for Disease Control (“CDC”), food-borne pathogens cause
      325,000 hospitalizations, 5,200 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.




6





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





Senz-It
      intends to subcontract the component manufacturing to two firms, experts in
      their respective fields, and do the final assembly of the product in a
      Company-managed facility. The two firms, both public companies, are based in
      New
      York. The first will manufacture the sensor elements, while the second will
      manufacture and assemble the electronics necessary to read and interpret the
      sensor elements. Memoranda of understanding have been signed with these two
      companies in 2007.





**(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. The first product
      offerings will be sensor units supplied to Isotec to be imbedded within the
      portals and a building air quality product to detect mold and other substances.
      The tasks that must be achieved are: the selection of analytes (substances
      or
      chemical constituents that are undergoing analysis) for Isotec portals,
      development of the sensor elements (sub-contract manufacturing), development
      of
      the electronic components (sub-contract manufacturing), alpha testing,
      development of industrial design and mechanical packaging (in conjunction with
      the Isotec engineering staff for the portal product), development of detection
      algorithms and software (sub-contract development), component integration into
      the final product and beta testing.





**(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. The Company will begin with a western regional office in Southern
      California, 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:




7





·
            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 devices 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.





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.





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





Raw
      materials for the intended Senz-It products are widely available. The Company
      has already contracted with two public companies for component parts, materials
      and packaging.





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




8





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).





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





The
      medical diagnostic products will require a 510(k) FDA submission. 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. The Company will utilize
      the
      services of an outside regulatory affairs consultant.





**(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 andinternationalrepresentatives;





·
            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 five employ ees.





**Isotec,
      Inc.**





Isotec
      is
      a Colorado corporation founded in 1998 as a developer, manufacturer and
      distributor of automated security portals. 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 moulding 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.




9





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.





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.





**(b)**  **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.






10





·
            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 aluminium 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 fibreglass, 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 aluminium 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.





**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 aluminium 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.**




11





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. 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.





**(c)**  **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 4,500 square feet of leased space has 5 employees.





**(d)**  **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.





**(e)**  **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.




12


**(f)**  **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. The Company
      is
      in the process of expanding its sales and marketing network to accommodate
      new
      products under development as well as the products of potential acquisition
      candidates.





**(g)**  **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 the Company and its sales personnel.




The
      Company believes that sensor technologies represent one of the greatest areas
      of
      opportunity both within homeland security and other vertical applications.
      The
      Company is currently pursuing one or more such technologies, in hopes of
      obtaining new technology that will allow it 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 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.





**(h)**  **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.




13





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.





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.





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





To
      date,
      Isotec 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.





**(j)**  **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. Isotec is exploring additional sources of metal
      detectors in China that could potentially provide supply in the event that
      domestic suppliers cannot.





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





Isotec
      is
      dependent upon the federal government and sixteen domestic and international
      distributors for all of its business. Isotec 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.





**(l)**  **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.





**(m)**  **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.





**(n)**  **Management
      and Organization.**




14





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





·
            expand
                its marketing and sales efforts with distributors, government andinternational
                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.





**(o)**  **Employees.**





Isotec
      currently has five employees.





**Risk
      Factors.**





Investing
      in the Company involves a number of significant risks relating to its business.
      In addition to the risk factors described below, other factors that could cause
      actual results to differ materially include:




**Risks
      Related to the Business.**





**(a)**  **History
      of Losses May Continue, Requiring Additional Sources of Capital, Which May
      Result in Curtailing of Operations and Dilution to Existing
      Stockholders.**





The
      Company incurred a net loss of $4,976,646 for the period from inception (March
      4, 2005) through December 31, 2006. The Company cannot provide assurance that
      it
      can achieve or sustain profitability on a quarterly or annual basis in the
      future. If revenues grow more slowly than anticipated, or if operating expenses
      exceed expectations or cannot be adjusted accordingly, the Company will continue
      to incur losses. The Company will continue to incur losses until it is able
      to
      establish significant levels of business. 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 the Company’s 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. In the event
      that the financing arrangement with La Jolla Cove Investors, Inc. is terminated,
      there can be no assurance that financing will be available in amounts or on
      terms acceptable to the Company. 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.




15





**(b)**  **The
      Independent Registered Public Accounting Firm Has Expressed Substantial Doubt
      About the Company’s ability to Continue as a Going Concern, Which May Hinder the
      Ability to Obtain Future Financing.**





In
      its
      report dated March 20 2007, the Company’s independent registered public
      accounting firm stated that the consolidated financial statements for the period
      from inception (March 4, 2005) through December 31, 2006 were prepared assuming
      that the Company would continue as a going concern. The Company’s ability to
      continue as a going concern is an issue raised as a result of cash flow
      constraints, working capital deficiencies, an accumulated deficit of $4,976,646
      at December 31, 2006 and recurring losses from operations. The Company’s ability
      to continue as a going concern is subject to the ability to generate a profit
      and/or obtain necessary funding from outside sources, including obtaining
      additional funding from the sale of securities, increasing sales or obtaining
      loans from various financial institutions where possible. The continued net
      losses and stockholders’ deficit increases the difficulty in meeting such goals
      and there can be no assurances that such methods will prove
      successful.





**(c)**  **The
      Company May Not Be Able to Accommodate Rapid Growth Which Could Decrease
      Revenues and Result in a Loss of Customers.**





The
      Company has developed innovative systems and processes to establish itself
      as a
      factor in the field of transparent security and automated passage control,
      and
      has installed systems for such customers as Lawrence Livermore Labs, Mellon
      Bank, Wells Fargo Bank, the United States Air Force and United States Department
      of Energy. To manage anticipated growth, the Company must continue to implement
      and improve operational, financial and management information systems. The
      Company must also hire, train and retain additional qualified personnel,
      continue to expand and upgrade core technologies, and effectively manage its
      relationships with end users, suppliers and other third parties. The Company’s
      expansion could place a significant strain on its services and support
      operations, sales and administrative personnel, capital and other resources.
      The
      Company could also experience difficulties meeting demand for its services.
      The
      Company cannot guarantee that its systems, procedures or controls will be
      adequate to support operations, or that management will be capable of fully
      exploiting the market. The Company’s failure to effectively manage growth could
      adversely affect its business and financial results.





**(d)**  **Protection
      of Proprietary Rights May Affect the Company’s Success and Ability to
      Compete.**





The
      Company’s success and ability to compete will be dependent in part on the
      protection of its potential patents, trademarks, trade names, service marks
      and
      other proprietary rights. The Company intends to rely on trade secret and
      copyright laws to protect the intellectual property that it plans to develop,
      but there can be no assurance that such laws will provide sufficient protection
      to the Company, that others will not develop products that are similar or
      superior or that third parties will not copy or otherwise obtain and use the
      Company’s proprietary information without authorization. In addition, certain of
      the Company’s know-how and proprietary technology may not be
      patentable.




16





The
      Company may rely on certain intellectual property licensed from third parties
      and may be required to license additional products or services in the future,
      for use in the general operations of its business plan. There can be no
      assurance that these third party licenses will be available or will continue
      to
      be available to the Company on acceptable terms or at all. The inability to
      enter into and maintain any of these licenses could have a material adverse
      effect on the Company’s business, financial condition or operating
      results.




There
      is
      a risk that some of the Company’s products may infringe on the proprietary
      rights of third parties. In addition, whether or not the Company’s products
      infringe on proprietary rights of third parties, infringement or invalidity
      claims may be asserted or prosecuted against it and it could incur significant
      expense in defending them. If any claims or actions are asserted against the
      Company, it may be required to modify its products or seek licenses for these
      intellectual property rights. The Company may not be able to modify its products
      or obtain licenses on commercially reasonable terms, in a timely manner or
      at
      all. The Company’s failure to do so could have a negative affect on its business
      and revenues.





**(e)**  **Dependence
      on Suppliers May Affect the Ability of the Company to Conduct
      Business.**





The
      Company depends upon a number of suppliers for components of its products.
      There
      is an inherent risk that certain components of the Company’s products will be
      unavailable for prompt delivery or, in some cases, discontinued. The Company
      has
      only limited control over any third-party manufacturer as to quality controls,
      timeliness of production, deliveries and various other factors. Should the
      availability of certain components be compromised, it could force the Company
      to
      develop alternative designs using other components, which could add to the
      cost
      of goods sold and compromise delivery commitments. If the Company is unable
      to
      obtain components in a timely manner, at an acceptable cost, or at all, it
      may
      need to select new suppliers, redesign its products or reconstruct processes
      used to build its devices. In such an instance, the Company would not be able
      to
      manufacture any devices for a period of time, which could materially adversely
      affect its business, results from operations and financial condition.





**(f)**  **The
      Company Faces Strong Competition in Its Markets, Which Could Make It Difficult
      for the Company to Generate Revenues.**





The
      market for the Company’s products is competitive. The Company’s future success
      will depend on its ability to adapt to rapidly changing technologies, evolving
      industry standards, product offerings and evolving demands of the marketplace.





Some
      of
      the Company’s competitors have:





·
            longer
                operating histories;





·
            larger
                customer bases;






17





·
            greater
                name recognition and longer relationships with clients;
                and





·
            significantly
                greater financial, technical, marketing, public relations and managerial
                resources than the Company.





Competitors
      may develop or offer services that provide significant technological, creative,
      performance, price or other advantages over the products offered by the Company.
      If the Company fails to gain market share or loses existing market share, its
      financial condition, operating results and business could be adversely affected
      and the value of the investment in the Company could be reduced significantly.
      The Company may not have the financial resources, technical expertise or
      marketing, distribution or support capabilities to compete
      successfully.





**(g)**  **The
      Company Could Fail to Develop New Products to Compete in Industries
      Characterized by Rapidly Changing Technologies, Resulting in Decreased
      Revenues.**





The
      markets in which the Company competes are characterized by rapid technological
      change, frequent new product introductions, evolving industry standards and
      changing needs of customers. There can be no assurance that the Company’s
      existing products will continue to be properly positioned in the market or
      that
      the Company will be able to introduce new or enhanced products into the market
      on a timely basis, or at all. Currently, the Company is focusing on upgrading
      and introducing new products. There can be no assurance that enhancements to
      existing products or new products will receive customer acceptance.




Risks
      associated with the development and introduction of new products include delays
      in development and changes in payment processing and operating system
      technologies that could require the Company to modify existing products. There
      is also the risk that there may be delays in initial shipments of new products.
      Further risks inherent in new product introductions include the uncertainty
      of
      price-performance relative to products of competitors, competitors’ responses to
      the introductions and the desire of customers to evaluate new products for
      longer periods of time.





**(h)**  **New
      Versions of the Company’s Products May Contain Errors or Defects, Which Could
      Affect Its Ability to Compete.**




The
      Company’s products are complex and, accordingly, may contain undetected errors
      or failures when first introduced or as new versions are released. This may
      result in the loss of, or delay in, market acceptance of its products. The
      Company may in the future discover errors and additional scalability limitations
      in new releases or new products after the commencement of commercial shipments
      or be required to compensate customers for such limitations or errors, the
      result of which its business, cash flow, financial condition and results of
      operations could be materially adversely affected.





**(i)**  **The
      Company’s Ability to Grow is Directly Tied to Its Ability to Attract and Retain
      Customers, Which Could Result in Reduced Income.**





The
      Company has no way of predicting whether its marketing efforts will be
      successful in attracting new business and acquiring substantial market share.
      If
      the Company’s marketing efforts fail, it may fail to attract new customers and
      fail to retain existing ones, which would adversely affect its business and
      financial results.




18





**(j)**  **If
      Government Regulation of the Company’s Business Changes, It May Need to Change
      the Manner in Which It Conducts Business or Incur Greater Operating
      Expenses.**





The
      adoption or modification of laws or regulations relating to the Company’s
      business could limit or otherwise adversely affect the manner in which it
      conducts business. If the Company is required to comply with new regulations
      or
      legislation or new interpretations of existing regulations or legislation,
      this
      compliance could cause it to incur additional expenses or alter its business
      model.





The
      manner in which legislation may be interpreted and enforced cannot be precisely
      determined and may subject either the Company or its customers to potential
      liability, which in turn could have an adverse effect on business, results
      of
      operations and financial condition.





**(k)**  **The
      Company’s Success Is Largely Dependent on the Abilities of Its Management and
      Employees.**





The
      Company’s success is largely dependent on the personal efforts and abilities of
      its senior management. The loss of certain members of the Company’s senior
      management, including its chief executive officer, could have a material adverse
      effect on business and prospects.




The
      Company intends to recruit in fiscal year 2007 employees who are skilled in
      the
      industries in which it operates. The failure to recruit these key personnel
      could have a material adverse effect on business. As a result, the Company
      may
      experience increased compensation costs that may not be offset through either
      improved productivity or higher revenue. There can be no assurance that the
      Company will be successful in retaining existing personnel or in attracting
      and
      recruiting experienced qualified personnel.





**(l)**  **Any
      Required Expenditures as a Result of Indemnification Will Result in Increased
      Expenditures.**





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 convertible debenture agreement, where the
      Company may be required to indemnify La Jolla Cove Investors, Inc. for breach
      of
      representation or warranty. The duration of these indemnities and guarantees
      varies, and in certain cases, is indefinite.





19


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 sheet.





In
      addition, the Company’s articles of incorporation include provisions to the
      effect that it may indemnify any director, officer, or employee. In addition,
      provisions of Nevada law provide for such indemnification, as well as for a
      limitation of liability of directors and officers for monetary damages arising
      from a breach of their fiduciary duties.





Any
      limitation on the liability of any director or officer, or indemnification
      of
      any director, officer, employee, or third party could result in substantial
      expenditures being made by the Company in covering any liability of such persons
      or in indemnifying them





**Risks
      Relating to Financing Arrangements.** ****





**(a)**  **The
      Adjustable Conversion Price Feature of the Debenture May Require the Issuance
      of
      a Potentially Infinite Number of Shares, Which May Result in Dilution.**





On
      June
      19, 2006, the Company entered into a Securities Purchase Agreement (to replace
      one dated January 23, 2006), with La Jolla Cove Investors, Inc. (“La Jolla
      Cove”), a company under common control with Golden Gate Investors, Inc. (the
      lender under the first agreement) ( see
      Exhibit 4.8). Under this agreement, La
      Jolla
      Cove agreed
      to purchase from the Company a convertible debenture (“Debenture”) in the
      aggregate principal amount of $500,000 (see Exhibit 4.9). 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 this 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; provided, 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
      (in such case, the number of common shares that the holder receives upon
      conversion of the Debenture will be the amount of the Debenture being converted
      divided by the conversion price).





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 (see Exhibit 4.10). The Company
      also
      issued to La Jolla Cove a warrant, dated June 19, 2006, to purchase up to the
      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 (see Exhibit 4.11) (the shares into which this warrant can be converted
      has been fixed at 266,472,868).




20




As
      of
      March 6, 2007, the Company had 513,695,045 shares of common stock issued and
      outstanding and the principal balance under the Debenture was $275,000. The
      number of shares of common stock issuable upon conversion of the Debenture
      may
      increase if the market price of the Company’s common stock declines. The sale of
      these shares may adversely affect the market price of the Company’s common
      stock.





The
      Company’s obligation to issue shares upon conversion of the Debenture is
      essentially limitless. At 80% of the closing price of $0.009 as of March 6,
      2007
      ($0.0072), the $275,000 principal balance of the Debenture would be convertible
      into 69,444,444 shares of common stock. The following is an example of the
      amount of shares of Company common stock that would be issuable upon conversion
      of the Debenture (excluding accrued interest), based on market prices 25%,
      50%
      and 75% below the closing price as of March 6, 2007 of $0.009 per share:


%
                  Below Market
              
              Price
                  PerShare
              
              With
                  Discountat 80%
              
              Numberof
                  SharesIssuable
              
              %
                  ofOutstandingStock (1)25%
              
              $
              0.00675
              
              $
              0.0054
              
              
              92,592,593
              
              
              16.06
              %50%
              
              $
              0.0045
              
              $
              0.0036
              
              
              138,888,889
              
              
              22.30
              %75%
              
              $
              0.00225
              
              $
              0.0018
              
              
              277,777,778
              
              
              36.47
              %





(1)
      After
      the current outstanding shares are added to the shares issued.





As
      illustrated, the number of shares of common stock issuable upon conversion
      of
      the Debenture will increase if the market price of the stock declines, which
      may
      cause dilution to the existing stockholders. Disclosure in the Company’s 2005
      Form 10-KSB should not have had disclosure in this section regarding the
      $2,750,000 warrant since the conversion price per share for this warrant has
      already been established (as discussed above).





**(b)**  **The
      Conversion Price Feature of the Debenture May Encourage Short Sales in the
      Company’s Common Stock.**





La
      Jolla
      Cove is
      contractually required to exercise its warrants and convert the Debenture on
      a
      concurrent basis, subject to certain conditions. The issuance of shares in
      connection with the conversion of the Debenture results in the issuance of
      shares at an effective 20% discount to the trading price of the common stock
      prior to the conversion. The significant downward pressure on the price of
      the
      common stock as La Jolla Cove converts and sells material amounts of common
      stock could encourage short sales by investors. This could place further
      downward pressure on the price of the common stock. La
      Jolla
      Cove could
      sell common stock into the market in anticipation of covering the short sale
      by
      converting their securities, which could cause the further downward pressure
      on
      the stock price. In addition, not only the sale of shares issued upon conversion
      of the Debenture and warrants, but also the mere perception that these sales
      could occur, may adversely affect the market price of the common stock.





Under
      the
      Securities Purchase Agreement covering the Debenture, La
      Jolla
      Cove has
      contractually agreed that so long as the Debenture is outstanding neither La
      Jolla Cove nor its affiliates will at any time engage in any short sales with
      respect to the Company’s common stock or sell put options or similar instruments
      with respect to the Company’s common stock.




21




**(c)**  **Issuance
      of Shares upon Conversion of the Debenture and Warrants May Cause Substantial
      Dilution to Existing Stockholders.**





The
      issuance of shares upon conversion of the Debenture and exercise of warrants
      may
      result in substantial dilution to the interests of other stockholders since
      La
      Jolla Cove may ultimately convert and sell the full amount issuable on
      conversion. Although La Jolla Cove may not convert the Debenture and/or exercise
      the warrants if such conversion or exercise would cause them to own more than
      9.99% of the Company’s outstanding common stock, this restriction does not
      prevent the La Jolla Cove from converting and/or exercising some of their
      holdings and selling them, and then converting the rest of their holdings.
      In
      this way, La Jolla Cove could sell more than this limit while never holding
      more
      than this limit.





**(d)**  **If
      Stock Price Declines, the Company May Be Required to File A Subsequent
      Registration Statement Covering Additional Shares.**





Based
      on
      the closing price of the Company’s common stock on March 6, 2007 and the
      potential decrease in its market price as a result of the issuance of shares
      upon conversion of the Debenture, the Company has made a good faith estimate
      as
      to the amount of shares of common stock that it is required to register and
      allocate for conversion of the Debenture and the exercise of the warrants.
      In
      the event that the Company’s common stock price remains the same as the closing
      price of $0.009 as of March 6, 2007, or decreases, the shares of common stock
      the Company has allocated for conversion of the Debenture and exercise of the
      warrants hereunder will not be adequate. If the shares allocated to a
      registration statement are not adequate and the Company is required to file
      an
      additional registration statement, the Company may incur substantial costs
      in
      connection with the preparation and filing of such registration statement.





**(e)**  **If
      the Company is Unable to Issue Shares of Common Stock upon Conversion of the
      Convertible Debenture for Any Reason, It Would be Required to Pay Certain
      Penalties.**





If
      the
      Company were unable to issue shares of common stock upon conversion of the
      Debenture or exercise of the warrants for any reason, the Company would be
      required to:




·
                  Pay
                      late payments to La Jolla Cove for late issuance of common
                      stock upon
                      conversion of the Debenture, in the amount of $100 per business
                      day after
                      the delivery date for each $10,000 of Debenture principal amount
                      being
                      converted.





·
            In
                the event the Company is prohibited from issuing common stock, or
                fails to
                timely deliver common stock on a delivery date, or upon the occurrence
                of
                an event of default, then at the election ofLa
                Jolla Cove,the
                Company must pay toLa
                Jolla Covea
                sum of money determined by multiplying up to the outstanding principal
                amount of the convertible Debenture designated byLa
                Jolla Coveby
                130%, together with accrued but unpaid interest
                thereon.




22




·
            If
                ten days after the date the Company is required to deliver common
                stock toLa
                Jolla Covepursuant
                to a conversion,La
                Jolla Covepurchases
                (in an open market transaction or otherwise) shares of common stock
                to
                deliver in satisfaction of a sale byLa
                Jolla Coveof
                the common stock which it anticipated receiving upon such conversion
                (a
                “Buy-In”), then the Company is required to pay in cash toLa
                Jolla Covethe
                amount by which its total purchase price (including brokerage commissions,
                if any) for the shares of common stock so purchased exceeds the aggregate
                principal and/or interest amount of the convertible debenture for
                which
                such conversion was not timely honored, together with interest thereon
                at
                a rate of 15% per annum, accruing until such amount and any accrued
                interest thereon is paid in full.





In
      the
      event that the Company is required to pay penalties to La Jolla Cove, the
      Company may be required to curtail or cease operations.





**(f)**  **Repayment
      of the Debenture, If Required, Would Deplete Available Capital, or Could Result
      in Legal Action if Not Repaid.**





The
      Company anticipates that the full amount of the Debenture, together with accrued
      interest, will be converted into shares of its common stock, in accordance
      with
      the terms of the Debenture. If the Company were required to repay the Debenture,
      it would be required to use its limited working capital and/or raise additional
      funds. If the Company was unable to repay the Debenture when required, La Jolla
      Cove could commence legal action against the Company and foreclose on assets
      to
      recover the amounts due. Any such action may require the Company to curtail
      or
      cease operations.





**Risks
      Relating to the Company’s Common Stock** **.**





**(a)**  **The
      Company’s Common Stock Price May be Volatile.**





The
      trading price of the Company’s common stock may fluctuate substantially. The
      price of the common stock may be higher or lower than the price you pay for
      your
      shares, depending on many factors, some of which are beyond the Company’s
      control and may not be directly related to operating performance. These factors
      include the following:




·
            price
                and volume fluctuations in the overall stock market from time to
                time;





·
            significant
                volatility in the market price and trading volume of securities of
                companies in the same business as the
                Company;





·
            changes
                in regulatory policies with respect to the business of the
                Company;





·
            actual
                or anticipated changes in the Company’s earnings or fluctuations in
                operating results;





·
            general
                economic conditions and trends;





·
            loss
                of a major funding source; or




23




·
            departure
                of key personnel.




Due
      to
      the continued potential volatility of the Company’s common stock price, it may
      become the target of securities litigation in the future. Securities litigation
      could result in substantial costs and divert management’s attention and
      resources from the business.





**(b)**  **The
      Absence Of Cash Dividends May Affect the Investment Value of the Common
      Stock.**





The
      board
      of directors does not anticipate paying cash dividends on the common stock
      for
      the foreseeable future and intends to retain any future earnings to finance
      the
      growth of the business. Payment of dividends, if any, will depend, among other
      factors, on earnings, capital requirements and the general operating and
      financial conditions of the Company as well as legal limitations on the payment
      of dividends out of paid-in capital.





**(c)**  **No
      Assurance of a Public Trading Market And Risk of Low Priced Securities May
      Affect the Market Value of the Common Stock.**





The
      Securities and Exchange Commission (“SEC”) has adopted a number of rules to
      regulate “penny stocks.” Such rules include Rule 3a51-1 and Rules 15g-1 through
      15g-9 under the Securities Exchange Act of 1934, as amended. Because the
      securities of the Company constitute “penny stocks” within the meaning of the
      rules (as any equity security that has a market price of less than $5.00 per
      share or with an exercise price of less than $5.00 per share, largely traded
      on
      the Over-the-Counter Bulletin Board (“Bulletin Board”) or on the Pink Sheets,
      the rules apply to the Company and to its securities.





The
      SEC
      has adopted Rule 15g-9 that establishes sales practice requirements for certain
      low price securities. Unless the transaction is exempt, it shall be unlawful
      for
      a broker or dealer to sell a penny stock to, or to effect the purchase of a
      penny stock by, any person unless prior to the transaction: (i) the broker
      or
      dealer has approved the person’s account for transactions in penny stock
      pursuant to this rule and (ii) the broker or dealer has received from the person
      a written agreement to the transaction setting forth the identity and quantity
      of the penny stock to be purchased. In order to approve a person’s account for
      transactions in penny stock, the broker or dealer must: (iia) obtain from the
      person information concerning the person’s financial situation, investment
      experience and investment objectives; (iib) reasonably determine that
      transactions in penny stock are suitable for that person and that the person
      has
      sufficient knowledge and experience in financial matters that the person
      reasonably may be expected to be capable of evaluating the risks of transactions
      in penny stock; (iic) deliver to the person a written statement setting forth
      the basis on which the broker or dealer made the determination (i) state in
      a
      highlighted format that it is unlawful for the broker or dealer to affect a
      transaction in penny stock unless the broker or dealer has received, prior
      to
      the transaction, a written agreement to the transaction from the person; (ii)
      state in a highlighted format immediately preceding the customer signature
      line
      that (iii) that the broker or dealer is required to provide the person with
      the
      written statement; and (iv) that the person should not sign and return the
      written statement to the broker or dealer if it does not accurately reflect
      the
      person’s financial situation, investment experience, and investment objectives;
      and (d) receive from the person a manually signed and dated copy of the written
      statement. It is also required that disclosure be made the risks of investing
      in
      penny stock and the commissions payable to the broker-dealer, as well as current
      price quotations and the remedies and rights available in cases of fraud in
      penny stock transactions. Statements, on a monthly basis, must be sent to the
      investor listing recent prices for the penny stock and information on the
      limited market.




24




There
      has
      been only a limited public market for the common stock of the Company. The
      Company’s common stock is currently traded on the Bulletin Board. As a result,
      an investor may find it difficult to dispose of or to obtain accurate quotations
      of the market value of the Company’s common stock. The regulations governing
      penny stocks, as set forth above, sometimes limit the ability of broker-dealers
      to sell the Company’s common stock and thus, ultimately, the ability of the
      investors to sell their securities in the secondary market.





Potential
      stockholders of the Company should also be aware that, according to SEC Release
      No. 34-29093, the market for penny stocks has suffered in recent years from
      patterns of fraud and abuse. Such patterns include (i) control of the market
      for
      the security by one or a few broker-dealers that are often related to the
      promoter or issuer; (ii) manipulation of prices through prearranged matching
      of
      purchases and sales and false and misleading press releases; (iii) “boiler room”
practices involving high-pressure sales tactics and unrealistic price
      projections by inexperienced sales persons; (iv) excessive and undisclosed
      bid-ask differential and markups by selling broker-dealers; and (v) wholesale
      dumping of the same securities by promoters and broker dealers after prices
      have
      been manipulated to a desired level, along with the resulting inevitable
      collapse of those prices and with consequent investor losses.




**(d)**  **Failure
      To Remain Current In Reporting Requirements Could Result In Delisting From
      the
      Over-The-Counter Bulletin Board.**





Companies
      trading on the Bulletin Board must be reporting issuers under Section 12 of
      the
      Securities Exchange Act of 1934, as amended, and must be current in their
      reports under Section 13 in order to maintain price quotation privileges on
      the
      Bulletin Board. If the Company fails to remain current in its reporting
      requirements, the Company could be delisted from the Bulletin
      Board.





In
      addition, the National Association of Securities Dealers, Inc. (“NASD”), which
      operates the Bulletin Board, has adopted a change to its Eligibility Rule.
      The
      change makes those Bulletin Board issuers that are cited for filing delinquent
      its Forms 10-KSB/10-QSB three times in a 24-month period and those Bulletin
      Board issuers removed for failure to file such reports two times in a 24-month
      period ineligible for quotation on the Bulletin Board for a period of one year.
      Under this rule, a company filing within the extension of time set forth in
      a
      Notice of Late Filing (Form 12b-25) is not considered late. This rule does
      not
      apply to a company’s Current Reports on Form 8-K.





The
      Company has been late in filing its periodic reports two times within the past
      12 months. Therefore, it the Company files late one more time within the next
      12
      months, its common stock would be delisted from the Bulletin Board. As a result
      of these rules, the market liquidity of the Company’s common stock could be
      severely adversely affected by limiting the ability of broker-dealers to sell
      its securities and the ability of stockholders to sell their securities in
      the
      secondary market.




25




**(e)**  **Failure
      to Maintain Market Makers May Affect the Value of the Common
      Stock.**





If
      the
      Company is unable to maintain NASD member broker/dealers as market makers,
      the
      liquidity of the common stock could be impaired, not only in the number of
      shares of common stock which could be bought and sold, but also through possible
      delays in the timing of transactions and lower prices for the common stock
      than
      might otherwise prevail. Furthermore, the lack of market makers could result
      in
      persons being unable to buy or sell shares of the common stock on any secondary
      market. There can be no assurance the Company will be able to maintain such
      market makers.





**ITEM
      2. DESCRIPTION OF PROPERTY.**





The
      principal executive office of the Company is in Newport Beach, California and
      consists of 500 square feet rented at $800 per month from a related party,
      on a
      month-to-month basis. In addition, Isotec leases a facility with approximately
      4,800 square feet in Westminster, Colorado for monthly rent of $3,905 per month.





**ITEM
      3. LEGAL PROCEEDINGS.**




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





(a)
      On
      October 25, 2004, a complaint was filed in the United States District Court,
      District of Colorado: Mitchell Vince v. Isotec, Inc. and World Am, Inc. 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 December 31, 2006.
      The
      settlement of $120,000 is included in accounts payable in the accompanying
      consolidated balance sheet.





(b)
      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 complaint principally
      alleges that the Company breached an employment agreement with the plaintiff
      by
      not paying certain amounts allegedly owing. The Company has retained counsel
      in
      the matter, and responsive pleadings have been filed. Certain of the claims
      were
      dismissed recently by the court.





Management
      believes the Company has meritorious claims and defenses to the plaintiff’s
      claims and ultimately will prevail on the merits. However, this matter remains
      in the very early stages of litigation and there can be no assurance as to
      the
      outcome of the lawsuit. Litigation is subject to inherent uncertainties, and
      unfavorable rulings could occur. Were unfavorable rulings to occur, there exists
      the possibility of a material adverse impact of monetary damages on the
      Company’s financial condition, results of operations or liquidity.




26




(c)
      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 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 has retained counsel in the matter and responsive pleadings have
      been filed.





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
      the
      Company and SUTI Holdings, LP, dated June 10, 2005.





Management
      believes the Company has meritorious claims and defenses to the plaintiff’s
      claims and ultimately will prevail on the merits. However, this matter remains
      in the very early stages of litigation and there can be no assurance as to
      the
      outcome of the lawsuit. Litigation is subject to inherent uncertainties, and
      unfavorable rulings could occur. Were unfavorable rulings to occur, there exists
      the possibility of a material adverse impact of monetary damages on the
      Company’s financial condition, results of operations or liquidity.





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





None.





**PART
      II.**




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




**Market
      Information** **.**




The
      Company’s common stock trades on the Over-the-Counter Bulletin Board under the
      symbol “WDAM.” Prior to the reverse stock split on January 21, 2005, the symbol
      was “WLDI.” The range of closing bid prices shown below is as reported by the
      Bulletin Board. The quotations shown reflect inter-dealer prices, without retail
      mark-up, markdown or commission and may not necessarily represent actual
      transactions and are shown to reflect the 1 for 100 reverse split of the common
      stock that occurred on January 21, 2005.




Per
      Share
      Common Stock Bid Prices by Quarter


For
      the Fiscal Year Ended December 31, 2006





High
            
            LowQuarter
                Ended December 31, 2006
            
            $
            0.005
            
            $
            0.003Quarter
                Ended September 30, 2006
            
            $
            0.009
            
            $
            0.004Quarter
                Ended June 30, 2006
            
            $
            0.018
            
            $
            0.005Quarter
                Ended March 31, 2006
            
            $
            0.021
            
            $
            0.009




27




Per
      Share
      Common Stock Bid Prices by Quarter


For
      the Fiscal Year Ended December 31, 2005





High
            
            LowQuarter
                Ended December 31, 2005
            
            $
            0.036
            
            $
            0.003Quarter
                Ended September 30, 2005
            
            $
            0.020
            
            $
            0.004Quarter
                Ended June 30, 2005
            
            $
            0.190
            
            $
            0.007Quarter
                Ended March 31, 2005
            
            $
            0.250
            
            $
            0.130





**Holders
      of Common Equity.**




As
      of
      March 6, 2007, the Company had approximately 132 record holders of its common
      stock. The number of record holders was determined from the records of the
      transfer agent and does not include beneficial owners of common stock whose
      shares are held in the names of various security brokers, dealers and registered
      clearing agencies.




**Dividend
      Information.**




The
      Company has not declared or paid a cash dividend to stockholders since it was
      organized. The board of directors presently intends to retain any earnings
      to
      finance operations and does not expect to authorize cash dividends in the
      foreseeable future. Any payment of cash dividends in the future will depend
      upon
      earnings, capital requirements and other factors.




**Equity
      Securities Sold Without Registration** **.**




Except
      as
      follows, all sales of unregistered (restricted) securities during the fiscal
      year ended December 31, 2006 have been previously reported either in a Form
      10-QSB or in a Form 8-K:




(a) During
      the first quarter 2006, the Company granted options to purchase 1,711,538 shares
      of common stock to a former officer and director, James Alexander, to cover
      salaries accrued by the Company. Additionally, 5,278,462 options were granted
      to
      employees to cover salaries owed them by the Company. Lastly, 5,523,077 options
      were granted to consultants to cover services performed for the Company. These
      options were exercisable into free-trading shares of common stock under the
      Company’s Employee Stock Incentive Plan (“ESIP”). All of these options were
      exercised in the first quarter of 2006.





(b) 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 consisted 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 and warrants representing 16,250,000 shares
      of
      common stock were sold, for a total consideration of $325,000. Subsequent to
      year-end, an additional twenty-one units and warrants representing 26,250,000
      were sold for a total consideration of $525,000.




28




In
      connection with these sales, commissions totalling $27,500 were paid. These
      sales were undertaken under Rule 506 of Regulation D under the Securities Act
      of
      1933. Each of the transactions did not involve a public offering and each of
      the
      investors represented that he/she was a “sophisticated” or “accredited” investor
      as defined in Rule 502 of Regulation D.




**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.**





The
      following discussion and analysis of financial condition and results of
      operations of the Company is based upon, and should be read in conjunction
      with,
      its audited consolidated financial statements and related notes included
      elsewhere in this Form 10-KSB, which have been prepared in accordance with
      accounting principles generally accepted in the United States of
      America.





World-Am,
      Inc. has two operating wholly owned subsidiaries: Senz-It and
      Isotec.




(a)
      Senz-It intends to manufacture sensors in the field of rapid detection. Senz-It
      represents an innovative advancement in the field of micro-sensors that has
      applications in Homeland Security, Indoor Air Quality Monitoring, Food
      Processing and Health Care. Senz-It’s products are being designed to identify
      patterns of molecules present in liquid, blood and air for significantly less
      cost than current modalities.





The
      technology is based on molecular imprinted xerogel (“MIX”) processes with a
      florescent reporter molecule affixed to the immediate proximity of the target
      analytesbinding site. The advantages of MIXbased materials include: specificity
      comparable to a biomolecule; robustness and stability under extreme chemical
      and
      physical conditions; and, 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 and
      continuous onsite detection and measurement of biological and chemical
      substances in water, blood and air. It virtually eliminates false positives,
      is
      comparable to advanced laboratory tests and detects in seconds, not
      hours.





Senz-It’s
      marketing department began its effort to participate in associations and special
      interest groups that are part of the target markets. Senz-It executives have
      taken on leadership roles in the American Public Transportation Association
      and
      the International Association for Food Protection (Committee for Control of
      Food
      Borne Illness). In addition, the first electronic and printed brochure has
      been
      completed.





During
      April 2007, Senz-It intends to move to a 20,000 square foot shared facility
      with
      a integrated laboratory in order to produce designs and demonstration devices.
      The laboratory will incorporate software architecture, a material chemistry
      processing lab, an optics design lab and a sensor device development, micro
      processing/testing lab.





Senz-It
      continues to pursue exciting opportunities to develop proprietary solutions
      for
      the rapid detection of biological, chemical and explosive compounds in the
      environment; preliminary results are promising.





29


(b)
      Isotec designs and integrates custom automated security portals that provide
      access control, weapons control and materials control security solutions.
      Automated security portals rigorously control entry or exit of people and
      materials at secure facilities, 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, application-optimized solutions at the lowest cost
      in
      the shortest timeframe.





2006
      has
      been a positioning and building year for Isotec. Facilities were consolidated
      into a single unit. It was identified that the sales and marketing effort,
      materials and training needed to be significantly improved in order to attract
      additional distributors both domestically and internationally and improve
      activity from the current base.





An
      effort
      was undertaken to provide information, literature and training to improve sales
      productivity. The above was accomplished and all current dealers and/or
      distributors were visited and trained. An updated website was completed, a
      competitive matrix was compiled and a complete set of AutoCad compatible
      mechanical drawings was put in place. Sixteen new distributors were added during
      the year.





Also
      identified was the need to better understand and market to various governmental
      agencies. The first early success was a $332,000 order from a nuclear test
      sight. Several significant requests for quotations and requests for proposals
      have been received and responded to in a timely fashion. It is anticipated
      this
      will result in orders being placed in 2007.





In
      the
      product development area, there was a major redesign of the firmware, and
      display software and an upgraded color touch screen was added. A redesign of
      the
      weight system was completed along with an automated tray transport system.
      For
      the government, a sensitive nuclear material (“SNM”) system integration program
      was designed. A miniature, fully working portal unit for trade shows and
      promotional activities was completed. Improved process and product documentation
      and after-market training materials were finalized along with an evaluation
      for
      capacity increase.





In
      2007,
      Isotec hopes to complete the design and development of an airborne particle
      capture system, a particle dislodgement system and a physical airflow system.
      Management has made considerable progress this year that it anticipates will
      result in improved performance in 2007.





**Results
      of Operations.**





The
      acquisition of Senz-It was considered to be a capital transaction in substance,
      rather than a business combination. Inasmuch, 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. The accounting for the transaction is identical to that
      resulting from a reverse acquisition, except goodwill and other intangible
      assets were not recorded. Accordingly, these consolidated financial statements
      are the historical financial statements of Senz-It.




30




Senz-It
      was incorporated in the State of California on March 4, 2005.





**(a)**  **Revenues.**





Revenues
      were $245,476 for the year ended December 31, 2006 and $212,772 for the period
      ended December 31, 2005, an increase of $32,704 or approximately 15%. The cost
      of revenues was $82,827 for the year ended December 31, 2006 and $115,785 for
      the period ended December 31, 2005, a decrease of $32,958 or approximately
      28%.
      The gross profit percentage was 66.3% and 45.6% for the periods ended December
      31, 2006 and 2005, respectively. Although the gross profit has improved, the
      Company’s ability to continue as a going concern is still in doubt due to the
      Company’s low sales volume.





**(b)**  **General
      and Administrative Expenses.**





General
      and administrative expenses were $2,062,487 for the year ended December 31,
      2006
      and $787,491 for the period ended December 31, 2005, an increase of $1,274,996
      or approximately 162%. The major expense categories for the year ended December
      31, 2006 included:





Year
                Ended
              December
                31, 2006Patent
                expense
            
            $
            49,177Professional
                fees
            
            
            786,666Payroll
                expenses
            
            
            453,612Management
                fees
            
            
            264,250Rent
            
            
            57,124Warrant
                expense
            
            
            35,430





The
      increase in expense for the year ended December 31, 2006 over the period ended
      December 31, 2005 resulted from: (a) an increase in 2006 of shares issued for
      services; (b) the fees payable under the Venture Acceleration Agreement between Select
      University Technologies, Inc., the general partner of SUTI ;
      (c) the
      increased number of employees; and (d) the payment of initial fees under the
      exclusive, royalty-bearing license with the SUNY.





**(c)**  **Other
      Income (Expense).**





The
      Company realized other expense of $2,476,301 for the year ended December 31,
      2006 and other income of $89,997 for the year ended December 31,
      2005 .
      The
      primary components of other expense for the year ended December 31, 2006 were
      interest expense of $3,138,687, which includes the initial fair value of
      derivative and warrant liabilities of $3,040,453, the $64,286 of amortization
      of
      the discount on convertible debt and $33,948 in interest expense related to
      existing debt, offset by income from the change in the fair value of derivative
      and warrant liabilities of $663,793. The income of $89,997 for the year ended
      December 31, 2005 resulted primarily in a $116,000 gain recorded related to
      a
      previously recorded legal settlement that was determined to be unenforceable
      in
      the State of Colorado and prohibited from presentation in any other
      jurisdiction. ****




31




**(d)**  **Net
      Loss.**





The
      net
      loss was $4,376,139 for the year ended December 31, 2006 and $600,507 for the
      period ended December 31, 2005, an increase of $3,775,632 or approximately
      629%.
      Management attempted to control expenses and increase the net results of
      operations. The main reason for the increase in the loss was the costs
      associated with the conversion feature of the Debentures and the attached
      warrants. Also contributing were lower than expected revenues and continued
      dependence upon stock compensation to employees, consultants and professionals.





**(e)**  **Net
      Operating Loss Carry Forward.**





The
      Company has federal and state tax net operating loss carry forwards available
      for future periods of approximately $13,258,043, 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. The realization of deferred tax assets is dependent upon future
      earnings, if any, the timing and the amount of which are uncertain. Accordingly,
      the net deferred tax asset has been fully offset, due to the uncertainty of
      the
      realization, by a valuation allowance.




**Factors
      That May Affect Operating Results.**





The
      Company’s operating results can vary significantly, depending upon a number of
      factors, many of which are outside the Company’s control. General factors that
      may affect the Company’s operating results include:





·
            market
                acceptance of and change in demand for products and
                services;





·
            change
                in the distributor channel;





·
            a
                small number of customers account for, and may in future periods
                account
                for, substantial portions of the Company’s revenue, and revenue could
                decline because of delays of customer orders or the failure to retain
                customers;





·
            gain
                or loss of clients or strategic relationships;





·
            announcement
                or introduction of new services and products by the Company or by
                its
                competitors;





·
            the
                ability to build brand recognition;





·
            timing
                of sales to customers;





·
            price
                competition;





·
            the
                ability to upgrade and develop systems and infrastructure to accommodate
                growth;




32




·
            the
                ability to introduce and market products and services in accordance
                with
                market demand;





·
            changes
                in governmental regulation; and





·
            reduction
                in or delay of capital spending by clients due to the effects of
                terrorism, war and political
                instability.





The
      Company believes that its planned growth and profitability will depend in large
      part on the ability to promote its services, gain clients and expand its
      relationships with current clients. Accordingly, the Company intends to invest
      in marketing, strategic partnerships and development of its client base. If
      the
      Company is not successful in promoting its services and expanding its client
      base, this may have a material adverse effect on its financial condition and
      the
      ability to continue to operate its business.





**Operating
      Activities.**





Net
      cash
      used in operating activities was $445,053 and $335,923 for the years ended
      December 31, 2006 and 2005, respectively, an increase of $109,130 or
      approximately 32%. The principal components of the increase net cash used in
      operations was a net loss of $4,376,139, offset by the initial fair value of,
      and change in, fair value of derivative and warrant liabilities of $2,376,660,
      stock issued for services in the amount of $643,064, an increase in inventories
      of $67,649, an increase in accounts payable and accrued liabilities of $802,625
      and an increase in deferred revenue of $61,347.





**Investing
      Activities.**





Net
      cash
      used in investing activities was $26,409 for the year ended December 31, 2006
      which was composed of acquisitions of fixed and intangible assets of $1,409
      and
      $25,000, respectively, compared to cash acquired in reverse merger of $935
      for
      the period ended December 31, 2005.





**Financing
      Activities.**





Net
      cash
      provided by financing activities was $583,067 for the year ended December 31,
      2006, from the following; (a) exercise of warrants amounting to $27,788, (b)
      proceeds from the exercise of stock options of $194,490, (c) proceeds from
      the
      issuance of the Debenture of $275,000, (d) proceeds from sales of common stock
      to investors in a private stock offering of $318,930 and proceeds from exercise
      of stock option of $6,794 offset by repayments of notes payable to related
      parties of $232,601.





**Liquidity
      and Capital Resources.**





As
      of
      December 31, 2006, the Company had total current assets of $225,643 and total
      current liabilities of $1,920,720, resulting in a working capital deficit of
      $1,695,077. At December 31, 2006, the Company’s assets consisted primarily of
      cash of $122,008, net accounts receivable of $18,474 and inventories of $79,801.
      As a development stage company that began operations in 2005, the Company has
      incurred $4,976,646 in cumulative total losses from inception through December
      31, 2006.




33




The
      above
      factors raise substantial doubt as to the Company’s ability to continue as a
      going concern. The Company’s independent registered public accounting firms’
audit reports included in this Form 10-KSB include explanatory paragraphs
      regarding the Company’s ability to continue as a going concern.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company continues as a going concern and contemplates the realization of
      assets and the satisfaction of liabilities in the normal course of business.
      The
      ability of the Company to continue as a going concern on a long-term basis
      will
      be dependent upon its ability to generate sufficient cash flows from operations
      to meet its obligations on a timely basis, to obtain additional financing and
      to
      ultimately attain profitability.





The
      Company’s current cash flow from operations will not be sufficient to maintain
      its capital requirements for the year. Therefore, the Company’s continued
      operations, as well as the implementation of its business plan, will depend
      upon
      its ability to raise additional funds through bank borrowings and equity or
      debt
      financing of up to $5,000,000 during the year ending December 31, 2007.




34




On
      June
      19, 2006, the Company entered into a Securities Purchase Agreement (to replace
      one dated January 23, 2006), with La Jolla Cove Investors, Inc. (“La Jolla
      Cove”), a company under common control with Golden Gate Investors, Inc. (the
      lender under the first agreement) ( see
      Exhibit 4.8). Under this agreement, La
      Jolla
      Cove agreed
      to purchase from the Company a convertible debenture (“Debenture”) in the
      aggregate principal amount of $500,000 (see Exhibit 4.9) and warrants to
      purchase shares of its common stock. 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





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 elects to convert, plus any accrued and unpaid interest, at 130% 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 (see Exhibit 4.10). The Company
      also
      issued to La Jolla Cove a warrant, dated June 19, 2006, to purchase up to the
      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 (see Exhibit 4.11) (the shares into which this warrant can be converted
      has been fixed at 266,472,868).





In
      connection with this transaction, the Company also granted to La Jolla Cove
      certain rights under a registration rights agreement, dated June 19, 2006,
      for
      the shares to be issued upon conversion of the Debenture and the
      warrants.





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 per calendar month into shares of common stock 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
      in
      any calendar month, the excess over 10% will be credited against the next
      month’s minimum conversion amount. In the event La Jolla Cove does not convert
      at least 10% of the Debenture in any particular calendar month, the Company’s
      remedy will be that La Jolla Cove will not be entitled to collect interest
      on
      the Debenture for that month provided that the Company gives La Jolla Cove
      written notice, at least five business days prior to the end of the month,
      of
      its failure to convert the minimum required amount for that month. In the event
      La Jolla Cove does not convert at least 10% of the Debenture 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.




35




Except
      as
      discussed above, La Jolla Cove agrees that, beginning in the first full calendar
      month after a registration statement is declared effective, it will exercise
      at
      least 10% of the $1.00 warrants per calendar month, provided that the common
      shares are available, registered and freely tradable. If La Jolla Cove exercises
      more than 10% of the warrants in any calendar month, the excess over 10% shall
      be credited against the next month’s minimum exercise amount. In the event La
      Jolla Cove does not exercise at least 10% of the warrants in any particular
      calendar month, La Jolla Cove will not be entitled to collect interest on the
      Debenture for that month, provided that the Company gives La Jolla Cove written
      notice, at least 5 business days prior to the end of the month, of its failure
      to exercise the minimum required amount for that month.





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 a warrant to purchase 5,000,000 shares of common
      stock as 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. In the event that La Jolla Cove fails to enter
      into the additional debenture and warrant in accordance with the terms of this
      paragraph, La Jolla Cove will pay the Company liquidated damages of $100,000.
      If
      the Company does not want La Jolla Cove to enter into the additional debenture
      and warrant, the Company will pay La Jolla Cove liquidated damages of
      $100,000.





The
      Company filed a Form SB-2 registration statement with the SEC on July 13, 2006
      to register all the shares underlying the debenture and warrants. The Company
      received a comment letter from the SEC in which the SEC staff questioned the
      Company on the use of Rule 415 in the delayed secondary offering by La Jolla
      Cove. As a result, the Company withdrew the registration statement on October
      10, 2006 and is in the process of renegotiating the transaction with La Jolla
      Cove.




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





Whereas
      the Company has 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 its equity/debt instruments will be sufficient to meet its capital
      needs, or that financing will be available on terms favorable to the Company.
      The consolidated financial statements do not include any adjustments relating
      to
      the recoverability and classification of assets and liabilities that might
      be
      necessary should the Company be unable to continue as a going
      concern.





If
      funding is insufficient at any time in the future, the Company may not be able
      to take advantage of business opportunities or respond to competitive pressures
      or may be required to reduce the scope of the Company’s 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 on the Company’s financial condition, which could
      require the Company to:





·
            curtail
                operations significantly;




36




·
            sell
                significant assets;





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





·
            explore
                other strategic alternatives including a merger or sale of the
                Company.





To
      the
      extent that the Company raises additional capital through the sale of equity
      or
      convertible debt securities, dilution of the interests of existing stockholders
      may occur. If additional funds are raised 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 the Company’s operations. Regardless of whether the Company’s assets prove to
      be inadequate to meet its operational needs, the Company may seek to compensate
      providers of services by issuance of stock in lieu of cash, which may also
      result in dilution to existing shareholders.





**Contractual
      Obligations.**





**(a)**  **Capital
      Lease.**





The
      Company was obligated under a capital lease for manufacturing equipment. For
      financial reporting purposes, the present value of the future minimum lease
      payments was capitalized and the principal portion of the lease obligation
      was
      included as a liability in the consolidated financial statements. During 2005,
      the principal balance of $8,175 was renegotiated with the lessor. Under the
      terms of the new lease agreement, the Company is no longer obligated to pay
      the
      balance until it chooses to do so. The equipment is now on a month-to-month
      rental at the rate of $425 per month. The Company has the right to return the
      equipment to the lessor at any time.





In
      2005,
      the Company reclassified the obligation from a capital lease to an operating
      lease. This required the Company to remove both the lease obligation and the
      remaining book value of the manufacturing equipment from the consolidated
      balance sheet. Equipment under this capital lease totalled $10,563, net of
      accumulated depreciation of $3,026. The $2,388 in excess of the remaining
      capital lease obligation resulted in a non-cash loss of $2,388.





**(b)**  **Operating
      Leases.**





Isotec
      leases a 4,800 square foot facility with a monthly rent and common area expense
      of $3,905 in Westminster, Colorado. The lease expires December 31, 2011. Rent
      and common area expenses totalled $47,875 and $81,472 for the periods ended
      December 31, 2006 and December 31, 2005, respectively. The decrease in 2006
      versus 2005 is the result of the rental of an additional facility in 2005 that
      did not occur in 2006.




37




As
      of
      December 31, 2006, future minimum non-cancellable rental payments required
      under
      the operating lease are as follows:





2007
            
            $
            48,7342008
            
            
            50,6842009
            
            
            52,7112010
            
            
            54,7202011
            
            
            57,012$
            263,821





**(c)**  **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,
      expiring between December 2006 and June 2007 and may be renewed with the mutual
      consent of both parties. The alliance agreements specify a contract a commission
      of 10% of license fees and 5% of product sales made pursuant to the alliance
      agreements.





**(d)**  **License
      Agreement.**





On
      January 22, 2007, the Company entered into a license agreement with The Research
      Foundation of the State University of New York at Buffalo. See Item 8b, below,
      for a discussion of this agreement.





**(e)**  **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.




38




**Off
      Balance Sheet Arrangements.**





Other
      than operating leases, the Company does not engage in any off balance sheet
      arrangements that are reasonably likely to have a current or future effect
      on
      its financial condition, revenues, results of operations, liquidity or capital
      expenditures.





**Inflation.**





The
      impact of inflation on the costs of the Company and the ability to pass on
      cost
      increases to its customers over time is dependent upon market conditions. The
      Company is not aware of any inflationary pressures that have had any significant
      impact on the Company's operations over the past year and the Company does
      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,
      the Company’s most critical accounting policies 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.





**(a)**  **Valuation
      of Stock-Based Compensation Arrangements.**





The
      Company has issued, and intends to continue to issue, shares of common stock
      and
      options to purchase shares of its common stock to various individuals and
      entities for management, legal, consulting and marketing services. These
      issuances are valued at the fair market value of the service provided. The
      number of shares issued is determined based upon the open market closing price
      of common stock as of the date of each respective transaction. These
      transactions are reflected as a component of selling, general and administrative
      expenses in the accompanying statement of operations.





**(b)**  **Revenue
      Recognition.**





Sales
      and
      construction of customized commercial products are recognized under the
      percentage-of-completion basis when: (a) contracts executed by the parties
      include provisions that clearly specify the enforceable rights regarding goods
      or services to be provided and received by the parties, the consideration to
      be
      exchanged and the manner and terms of settlement; (b) the buyer can be expected
      to satisfy its obligations under the contract; (c) the Company can be expected
      to perform its contractual obligations; and (d) the Company can make reasonably
      dependable estimates of costs to complete and the extent of progress toward
      completion. The Company measures the extent of progress toward completion by
      using a ratio of costs incurred to total estimated costs. The effects of changes
      in estimates, if any, are reported in the period of change and subsequent
      periods. Losses are recognized when the costs incurred plus the estimated costs
      to complete exceed the sale price. Contracts not meeting the above criteria
      are
      reported on the completed contract method. All other sales of products are
      recognized upon delivery.





39


**(c)**  **Realizability
      of Long-Lived Assets.**





The
      Company accounts for its 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. 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, 2006, the Company does not believe there had 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.





**(d)**  **Valuation
      of Derivative Financial Instruments.**





In
      the
      case of 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
      Emerging Issues Task Force (“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. 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 date. 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.
      Derivatives and warrants were valued primarily using the Black-Scholes option
      pricing model with the following assumptions: dividend yield of 0%, annual
      volatility of 127%, and risk free interest rate of 4.70% - 4.74%.





In
      addition, under the provisions of EITF Issue No. 00-19, “Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company’s Own Stock,” 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 option-pricing model with the following assumptions: dividend
      yield of 0%, volatility of 127%, and risk free interest rate of 4.72%. Any
      change in these assumptions could result in substantial changes to the values
      established by the Company.




40





**(e)**  **Valuation
      of 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.





**Forward
      Looking Statements.**





Information
      in this Form 10-KSB contains “forward looking statements” within the meaning of
      Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the
      Securities Exchange Act of 1934, as amended. When used in this Form 10-KSB,
      the
      words “expects,” “anticipates,” “believes,” “plans,” “will” and similar
      expressions are intended to identify forward-looking statements. These are
      statements that relate to future periods and include, but are not limited to,
      statements regarding adequacy of cash, expectations regarding net losses and
      cash flow, statements regarding growth, need for future financing, dependence
      on
      personnel and operating expenses.





Forward-looking
      statements are subject to certain risks and uncertainties that could cause
      actual results to differ materially from those projected. These risks and
      uncertainties include, but are not limited to, those discussed below, as well
      as
      risks related to the Company’s ability to obtain future financing and the risks
      set forth above under “Factors That May Affect Operating Results.” These
      forward-looking statements speak only as of the date hereof. The Company
      expressly disclaims any obligation or undertaking to release publicly any
      updates or revisions to any forward-looking statements contained herein to
      reflect any change in its expectations with regard thereto or any change in
      events, conditions or circumstances on which any such statement is
      based.





**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, 2005 and for the year ended December
      31, 2006, are presented in a separate section of this report following Item
      14.




41




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




(a)
      Effective July 24, 2006, the independent registered public accounting firm
      who
      was previously engaged to audit the Company’s consolidated financial statements,
      L.L. Bradford & Company, LLC, was terminated. This termination was approved
      by the Company’s board of directors. This independent registered public
      accounting firm audited the Registrant’s consolidated financial statements for
      the period from March 4, 2005 (inception) through December 31, 2005. This firm’s
      report on these consolidated financial statements was modified as to uncertainty
      that the Company will continue as a going concern. Other than this, the
      independent registered public accounting firm’s report on the consolidated
      financial statements for that consolidated period neither contained an adverse
      opinion or a disclaimer of opinion, nor was qualified or modified as to
      uncertainty, audit scope or accounting principles.





During
      the Company’s most recent fiscal year, and the subsequent interim period
      preceding such termination, there were no disagreements with the former
      independent registered public accounting firm on any matter of accounting
      principles or practices, financial statement disclosure, or auditing scope
      or
      procedure. In addition, there were no “reportable events” as described in Item
      304(a)(1)(iv)(B)1 through 3 of Regulation S-B that occurred within the Company’s
      most recent fiscal year and the subsequent interim period preceding the former
      independent registered public accounting firm’s termination.





(b)
      Effective July 24, 2006, the firm of KMJ Corbin & Company LLP (formerly
      known as Corbin & Company, LLC) was engaged to serve as the new principal
      independent registered public accounting firm to audit the Company’s financial
      statements. The decision to retain this accountant was approved by the Company’s
      board of directors. During the Company’s most recent fiscal year, and the
      subsequent interim period prior to engaging this accountant, neither the Company
      (nor someone on its behalf) consulted the newly engaged accountant regarding
      any
      matter.





**ITEM
      8A. CONTROLS AND PROCEDURES.**





**Evaluation
      of Disclosure Controls and Procedures.**




The
      Company maintains disclosure controls and procedures (as defined in Rule
      13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as
      amended) that are designed to ensure that information required to be disclosed
      in the Company’s periodic reports filed under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and that such information is accumulated and communicated
      to management, including the Company’s principal executive officer and principal
      financial officer, to allow timely decisions regarding required
      disclosures.





As
      of the
      end of the period covered by this report, management carried out an evaluation,
      under the supervision and with the participation of the Company’s principal
      executive officer and principal financial officer, of the Company’s disclosure
      controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of
      the
      Exchange Act). Based upon the evaluation, the Company’s principal executive
      officer and principal financial officer concluded that its disclosure controls
      and procedures were effective at a reasonable assurance level to ensure that
      information required to be disclosed by the Company in the reports that it
      files
      or submits under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the SEC’s rules and forms. In
      addition, the Company’s principal executive officer and principal financial
      officer concluded that its disclosure controls and procedures were effective
      at
      a reasonable assurance level to ensure that information required to be disclosed
      by the Company in the reports that it files or submits under the Exchange Act
      is
      accumulated and communicated to the Company’s management, including its
      principal executive officer and principal financial officer, to allow timely
      decisions regarding required disclosure.




42




Because
      of the inherent limitations in all internal control systems, no evaluation
      of
      controls can provide absolute assurance that all control issues and instances
      of
      fraud, if any, will be or have been detected. These inherent limitations include
      the realities that judgments in decision-making can be faulty and that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people and/or by management override of controls. The design of any
      system of controls also is based in part upon certain assumptions about the
      likelihood of future events, and there can be no assurance that any design
      will
      succeed in achieving its stated goals under all potential future conditions.
      Over time, controls may become inadequate because of changes in conditions,
      and/or the degree of compliance with the policies and procedures may
      deteriorate. Because of the inherent limitations in a cost-effective internal
      control system, misstatements due to error or fraud may occur and not be
      detected.




**Changes
      in Disclosure Controls and Procedures.**




There
      were no changes in the Company’s disclosure controls and procedures, or in
      factors that could significantly affect those controls and procedures, since
      its
      most recent evaluation.




**ITEM
      8B. OTHER INFORMATION.**





**Subsequent
      Events.**





**(a)**  **Senz-It
      License Agreement.**





Senz-It
      exercised the option it held to enter into an exclusive, royalty-bearing license
      (“License”) with The Research Foundation of the State University of New York at
      Buffalo (“SUNY”) (see Exhibit 10.11). The License is intended to cover patents
      developed by SUNY that will enable Senz-It to develop technology with an
      entirely new approach to sensing, process monitoring, homeland security and
      environmental scanning applications.





On
      January 22, 2007, the Company entered into the License with SUNY. This is an
      exclusive field-of-use license to facilitate the development and
      commercialization of certain technology contained within certain patents and
      patent applications developed by SUNY. Under the terms of the License (effective
      as of December 1, 2006), Senz-It paid, and will pay, fees, royalties and
      research funding to SUNY. In connection with the License, Senz-It will issue
      restricted shares of common stock, and will issue additional such shares to
      SUNY, pursuant to the terms of a Stock Purchase Agreement, so that SUNY will
      maintain a minimum ownership of 10% in Senz-It. Finally, Senz-It entered into
      a
      Stockholders Agreement with SUNY that covers the rights of stockholders of
      Senz-It. For proprietary reasons, these agreements have not been disclosed
      in
      the Form 8-K filing on the License.




43




**(b)**  **Stock
      Issuances.**





(1)  On
      January 2, 2007, the Company issued 900,000 free trading shares of common stock
      for services rendered by consultants valued at $3,510 ($0.0039 per share).





(2)  On
      January 9, 2007, the Company issued 2,021,321 free trading shares of common
      stock as payment of compensation owed employees valued at $8,490
      ($0.0042 per share).





(3)  On
      January 17, 2007, the Company issued 13,515,103 free
      trading shares
      of common stock for services rendered by consultants valued at $66,224 ($0.0049
      per share).




(4)  On
      January 22, 2007, the Company sold 90,000,000 restricted shares of common stock
      to investors in a private placement. The shares were valued at $450,000 ($0.005
      per share).





(5)  On
      January 19, 2007, the Company issued 1,000,000 free trading shares of common
      stock as payment for services rendered by a consultant valued at $6,000 ($0.006
      per share).





(6)  On
      January 25, 2007, the Company issued 714,286 free trading shares of common
      stock
      as payment for services rendered by a consultant valued at $3,714 ($0.0052
      per
      share).





(7)  On
      January 26, 2007, the Company issued 1,461,876 free trading shares of common
      stock as payment of compensation owed employees, valued at $8,040 ($0.0055
      per
      share).





(8)  On
      January 30, 2007, the Company issued 1,090,909 free trading shares of common
      stock as payment for services rendered by a consultant valued at $6,000 ($0.0055
      per share).





(9)  On
      February 5, 2007, the Company issued 1,703,125 shares of free trading shares
      of
      common stock for services rendered by consultants valued at $13,625 ($0.008
      per
      share).





(10)  On
      February 5, 2007, the Company issued 2,500,000 restricted shares of common
      as
      payment for services rendered by a consultant valued at $20,000 ($0.008 per
      share).





(11)  On
      February 9, 2007, the Company sold 10,000,000 restricted shares of common stock
      to investors through a private placement. The shares were valued at $50,000
      ($0.005 per share).




44


(12) On
      February 12, 2007, the Company issued 1,675,301 free trading shares of common
      stock as payment of compensation owed employees, valued at $15,078 ($0.009
      per
      share).





(13)  On
      February 15, 2007, the Company issued 300,000 free trading shares of common
      stock as payment for services rendered by a consultant valued at $2,250 ($0.0075
      per share).





(14)  On
      February 16, 2007, the Company issued 1,000,001 free trading shares of common
      stock as payment for services rendered by consultants valued at $7,500 ($0.0075
      per share).





(15)  On
      February 20 2007, the Company issued 857,143 free trading shares of common
      stock
      as payment for services rendered by a consultant valued at $6,000 ($0.007 per
      share).





(16).  On
      February 21, 2007, the Company sold 5,000,000 restricted shares of common stock
      to an investor through a private placement. The shares were valued at $25,000
      ($0.005 per share).





(17)  On
      February 21, 2007, the Company issued 17,539,233 free trading shares of common
      stock as payment for services rendered by consultants valued at $114,005
      ($0.0065 per share); 7,616,147 of the shares were issued to Robert Hovee, chief
      executive officer, as compensation for services rendered to the Company valued
      at $49,505.





(18)  On
      February 23, 2007, the Company issued 2,072,733 free trading shares of common
      stock as payment of compensation owed employees, valued at $14,509 ($0.007
      per
      share).





(19)  On
      February 26, 2007, the Company issued 500,000 free trading shares of common
      stock as partial payment of monies owed on a convertible note payable, valued
      at
      $3,300 ($0.0066 per share).





**(c)**  **World
      Am 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 of common stock have been granted under this plan in the
      first
      quarter of 2007, including 10,000,000 shares to Robert Hovee, 5,000,000 shares
      to David Barnes and 5,000,000 shares to James Largent.




45




I f
      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 grant, then the
      employee has the right to purchase 1/4 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 will be forfeited.





**(d)**  **Product
      Manufacturing.**





Senz-It
      intends to subcontract the component manufacturing to two firms, experts in
      their respective fields, and do the final assembly of the product in a
      Company-managed facility. The two firms, both public companies, are based in
      New
      York. The first will manufacture the sensor elements while the second will
      manufacture and assemble the electronics necessary to read and interpret the
      sensor elements. Memoranda of understanding have been signed with these two
      companies in 2007.





**(e)**  **Consulting
      Agreement.**





On
      February 21, 2007, the Company entered into a consulting agreement with its
      chief executive officer, Robert Hovee (see Exhibit 10.13) and Item 12 for a
      discussion of this agreement).




**(f)**  **Escrow
      Account.**





The
      Company had previously established an escrow account at Island Stock transfer
      to
      hold shares pending issuance under the Company’s Employee Stock Incentive Plan.
      These shares were considered to be issued but not outstanding. In March 2007,
      the Company cancelled this escrow and returned all such shares to the Company
      for cancellation.





**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
      names, ages and respective positions of the directors and executive officers
      of
      the Company are set forth below. The directors named below will serve until
      the
      next annual meeting of the
      Company’s stockholders or until their successors are duly elected and have qualified.
      Directors are elected for a term ending upon the date of the next annual
      stockholders’ meeting. Officers will hold their positions at the will of the
      board of directors, absent any employment agreement, of which none currently
      exist or are contemplated.





There
      are
      no family relationships between any two or more of the
      Company’s directors or executive officers. There are no arrangements or understandings
      between any two or more of the
      Company’s directors or executive officers. There is no arrangement or understanding
      between any of the
      Company’s directors or executive officers and any other person pursuant to which any
      director or officer was or is to be selected as a director or officer, and
      there
      is no arrangement, plan or understanding as to whether non-management
      stockholders will exercise their voting rights to continue to elect the current
      board of directors. There are also no arrangements, agreements or understandings
      between non-management stockholders that may directly or indirectly participate
      in or influence the management of the
      Company’s affairs.
      There are no other promoters or control persons of the Company. There are no
      legal proceedings involving the executive officers or directors of the Company,
      except as disclosed in Item 3 above.




46




**(a)**  **Robert
      A. Hovee, Chief Executive Officer/Director**





Mr.
      Hovee, age 64, 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.





**(b)**  **David
      J. Barnes, Chief Financial Officer/Director.**





Mr.
      Barnes, age 50, 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.





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.




47




**(c)**  **James
      R. Largent, Secretary/Director.**





Mr.
      Largent, age 57, 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.





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





Section
      16(a) of the Exchange Act requires the Company’s directors, certain officers and
      persons holding 10% or more of the Company’s common stock to file reports
      regarding their ownership and regarding their acquisitions and dispositions
      of
      the Company’s common stock with the SEC. Such persons are required by SEC
      regulations to furnish the Company with copies of all Section 16(a) forms they
      file.





Based
      solely upon a review of Forms 3 and 4, and amendments thereto, furnished to
      the
      Company under Rule 16a-3(d) during fiscal 2006, and certain written
      representations from the Company’s executive officers and directors, the
      Company is aware the following reports were not timely filed: (a) Form 4 for
      Mr.
      Barnes to report the cancellation of an option for 2,000,000 shares of common
      stock on February 13, 2006; (b) Form 4 for Mr. Largent to report the
      cancellation of an option for 2,000,000 shares of common stock on February
      13,
      2006; (c) Form 4 for SUTI Holdings, LP to report the assignment of the warrant
      for 18,000,000 shares of common stock to Select University Technologies, Inc.,
      its general partner; (d) Form 3 for Select University Technologies, Inc. to
      report its status as an affiliate of the Company on the basis of the shares
      of
      common stock acquired as a result of the exercise of the warrant assigned to
      it;
      (e) Form 4 for Mr. Hovee to report the acquisition of shares of common stock
      on
      July 21, 2006; (f) Form 4 for Mr. Hovee to report the sales of common stock
      on
      October 9 and October 10, 2006; (g) Form 4’s for Steven Vicory to report the
      sales of common stock on February 2, February 3, and February 13, 2006; (h)
      Form
      4’s for James Alexander to report several option exercises and the sales of the
      underlying common stock between February 14, 2006 and March 9, 2006; (i) Form
      4
      for Mr. Alexander to report the return and cancellation of the remaining option
      for 42,788,426 shares on November 1, 2006 (the Company has no knowledge of
      the
      status of this unfiled report); and (j) Form 3 and Form 4’s to report the
      options granted to Ray Pironti in 2005 (the amount of each which was calculated
      in 2006), and Form 4’s to report the exercise and sale of a portion of these
      options in May 2006) (these forms are in the process of being prepared for
      filing with the SEC). Other than as noted, all required reports have been
      prepared and filed with the SEC. The Company is unaware that any other required
      reports were not timely filed.




48




**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.**





**Summary
      Compensation Table.**





The
      following table presents compensation information for the year ended
      December 31, 2006 for the persons who served as principal executive officer
      and each of the two other most highly compensated executive officers whose
      aggregate salary and bonus was more than $100,000 in such year.




49






**Name
                  and principal position**
                **(a)**
              
              
              **Year**
                **(b**)****
              
              
              **Salary**
                **($**)****
                **(c**)****
              
              
              **Bonus**
                **($)**
                **(d)**
              
              
              **Stock
                  Awards**
                **($**)****
                **(e**)****
              
              
              **Option**
                **Award(s)**
                **($**)****
                **(f**)****
              
              
              **Non-Equity
                  Incentive Plan Compensation**
                **($**)****
                **(g**)****
              
              
              **Nonqualified
                  Deferred Compensation Earnings**
                **($**)****
                **(h**)****
              
              
              **All
                  Other**
                **Compensation**
                **($**)****
                **(i**)****
              
              
              **Total**
                **($**)****
                **(j**)****Robert
                  A. Hovee,
              
              
              2006
              
              $
              44,000
              (2)
              
              -
              
              $
              64,000
              (2)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              108,000CEO(1)
              
              
              2005
              
              $
              15,000
              
              
              -
              
              
              -
              
              
              -
              (3)
              
              -
              
              
              -
              
              
              -
              
              $
              15,000James
                  H. Alexander,
              
              
              2005
              
              $
              77,025
              
              
              -
              
              
              -
              
              
              -
              (5)
              
              -
              
              
              -
              
              
              -
              
              $
              77,025President(4)
              
              
              2004
              
              $
              85,250
              
              
              -
              
              $
              131,793
              
              
              -
              (6)
              
              -
              
              
              -
              
              $
              525
              
              $
              217,043







(1)
            Mr.
                Hovee was appointed chief executive officer and a director of the
                Company
                on November 7, 2005.





(2)
            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).





(3)
            An
                option was awarded to purchase 18,750,000 shares of common stock,
                exercisable on grant (October 2005), and for a period of 10 years
                thereafter, at80%
                of the closing price on the date of exercise (the
                exercise price of this option was amended on February 7, 2005 to
                $0.015
                per share with the adoption of Company’s Amended and Restated Employee
                Stock Incentive Plan (Amendment No. 4)). 500,000 shares under this
                option
                were exercised on October 17, 2005 and sold on that date, prior to
                Mr.
                Hovee becoming a director of the Company. This option was amended
                on
                November 17, 2005 so that 16,250,000 of the shares under the option
                were
                returned to the Company on that date. The remaining 2,000,000 shares
                under
                this option were returned to the Company on February 14, 2006. Since
                Statement of Financial Accounting Standards (“SFAS”) No123(R)
                was not effective for small businesses until the beginning of the
                first
                interim period or annual reporting period that begins after December
                31,
                2005, there is no value assigned to this option for financial statement
                purposes.





(4)
            Mr.
                Alexander resigned as president of the Company on November 7, 2005
                and
                resigned as a director on November 11,
                2005.





(5)
            This
                option for 45,000,000 shares was granted to Mr. Alexander in October
                2005
                to cover compensation under an existing employment agreement with
                the
                Company that the Company chose to honor as past of the change in
                control
                of the Company. This option was exercisable on grant, and for a period
                of
                10 years thereafter, at80%
                of the closing price on the date of exercise (the
                exercise price of this option was amended on February 7, 2005 to
                $0.015
                per share with the adoption of Company’s Amended and Restated Employee
                Stock Incentive Plan (Amendment No. 4)).
                Between February 14, 2006 and March 9, 2006, Mr. Alexander exercised
                and
                sold 1,711,538. The option for the remaining 42,288,462 shares was
                returned to the Company and cancelled on November 1, 2006. There
                is no value assigned to this option for financial statement purposes
                due
                to the effective date of SFAS No.
                123(R).





(6)
            The
                current balance of this option granted in 2004 is 360,000 (after
                the
                reverse stock split and the stock dividend). As of December 31, 2005,
                there were a total of 236,000 shares that had vested under this option.
                Another 72,000 shares under this option vested in 2006. The remainder
                of
                the option will vest in 2007.There
                was no value assigned to the vested portion of the option as of December
                31, 2005 for financial statement purposes due to the effective date
                of
                SFAS No. 123(R); $3,168 was assigned to the vested portion of the
                option
                in 2006.





50





**Executive
      Officer Contracts.**




As
      of
      December 31, 2006, there were no employment or other agreements in place
      covering any of the executive officers of the Company.




**Outstanding
      Equity Awards at Fiscal Year-End Table** .





There
      were no outstanding equity awards at December 31, 2006 for the directors and
      executive officers of the Company.





**Other
      Compensation.**




There
      are
      no plans that provide for the payment of retirement benefits, or benefits that
      will be paid primarily following retirement, including but not limited to
      tax-qualified defined benefit plans, supplemental executive retirement plans,
      tax-qualified defined contribution plans and nonqualified defined contribution
      plans. In addition, there are no contracts, agreements, plans or arrangements,
      whether written or unwritten, that provide for payment(s) to a named executive
      officer at, following, or in connection with the resignation, retirement or
      other termination of a named executive officer, or a change in control of the
      Company or a change in the named executive officer’s responsibilities following
      a change in control, with respect to each named executive officer.





**Compensation
      of Directors.**





The
      Company provides the following compensation to its two independent directors,
      Mr. Barnes and Mr. Largent: (a) $1,500 per board meeting; and (b) $3,000 per
      quarter.





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





**Security
      Ownership.**




51




The
      following table sets forth information regarding the beneficial ownership of
      shares of the Company’s common stock as of March 6, 2007 (488,888,122 shares
      issued and outstanding (1) )
      by (i)
      all stockholders known to the Company to be beneficial owners of more than
      5% of
      the outstanding common stock; and (ii) all officers and directors of the
      Company, individually and as a group:




**Title
                of Class**
            
            **Name
                and Address of Beneficial Owner**
            
            **Amount
                and Nature of Beneficial Owner****(2)**
            
            **Percent
                of Class****(3)**Common
              Stock
            
            SUTI
                Holdings, LP, 4040 MacArthur Boulevard, Suite 240, Newport Beach,
                California 92660
            
            400,000,040(4)
            
            45.00%Common
              Stock
            
            La
                Jolla Cove Investors, Inc., 7817 Herschel Avenue, Suite 200, La Jolla,
                California 92037
            
            53,676,143(5)
            
            9.99%Common
              Stock
            
            G.
                Raymond Pironti, Jr., 3959 Van Dyke Road, #152, Lutz, Florida 33558
            
            46,998,691(6)
            
            8.85%Common
              Stock
            
            Select
                University Technologies, Inc., 4040 MacArthur Boulevard, Suite 240,
                Newport Beach, California 92660
            
            17,880,000
            
            3.66%Common
              Stock
            
            Robert
                A. Hovee, 4040 MacArthur Boulevard, Suite 240, Newport Beach, California
                92660
            
            15,309,004
            
            3.13%Common
              Stock
            
            David
                R. Barnes, 4040 MacArthur Boulevard, Suite 240, Newport Beach, California
                92660
            
            0
            
            0.00%Common
              Stock
            
            James
                R. Largent, 4040 MacArthur Boulevard, Suite 240, Newport Beach, California
                92660
            
            0
            
            0.00%Common
              Stock
            
            Shares
                of all directors and executive officers as a group (3
                persons)
            
            15,309,004
            
            3.13%





(1)  The
      difference between the issued shares and the issued and outstanding shares
      is
      the number of shares held by the Company’s transfer agent in escrow for future
      issuances under the Company’s Stock Incentive Plan.





(2)  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. The number
      of
      outstanding shares has been adjusted for a one for one hundred reverse split
      effective on January 21, 2005, and a three for two stock dividend effective
      on
      August 15, 2005.




52


(3)  Applicable
      percentage ownership of common stock is based on 488,888,122 shares issued
      and
      outstanding as of March 6, 2007. 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.





(4)  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 488,888,122 shares issued and outstanding stock on March
      6, 2007, the 55 preferred shares would convert into minimum of 7,272,728 times
      55, which equals 400,000,040 shares of common stock.





(5)  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 6, 2007.




(6)  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 (remaining out
      of
      an original balance of 22,500,000), exercisable for a period of three years
      after grant (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.





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





As
      of
      December 31, 2006, 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, 2006. 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, the Company 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, 2006.
      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, the Company 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, 2006.
      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.




53




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




On
      January 5, 2001, the Company 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 10,900,000 shares were issued out of the Non-Employee
      Plan during the year ended December 31, 2006. As of December 31, 2006,
      12,084,363 shares of common stock remain to be issued under the Non-Employee
      Plan.




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




On
      January 22, 2001, the Company 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).





During
      the year ended December 31, 2006: (a) options representing 12,513,077 shares
      of
      common stock were exercised under the ESIP; (b) 98,258,763 shares of common
      stock were awarded out of the ESIP and (c) 4,459,481 ESIP shares, issued in
      2005, were returned and subsequently cancelled in 2006. As of December 31,
      2006,
      there were 9,004,141 shares of common stock remaining to be issued under the
      ESIP.




54




**Equity
                Compensation Plan Information**
              **as
                of December 31, 2006****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:
              12,677,419;
                ESIP:
              1,588,888
            
            2003
                Plan: $0.0122;
              ESIP:
                $0.015
            
            Directors
                and Consultants Stock Plan: 12,084,363; Employee Stock Plan:
                9,004,141Total
            
            2003
                Plan:
              12,677,419;
                ESIP:
              1,588,888
            
            2003
                Plan: $0.0122;
              ESIP:
                $0.015
            
            Directors
                and Consultants Stock Plan: 12,084,141; Employee Stock Plan:
                9,004,141




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.**





**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, 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 warrants, 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
      underlying the warrants 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 (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, 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)
      (the
      balance was exercised on a cashless basis on varying dates in
      2006).




55





(b)  On
      April
      25, 2005, the Company 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, the Company agreed to pay interest at
      an
      annual rate of 18%. At December 31, 2006 and 2005, the amount owed under the
      settlement agreement was $38,941and $46,180, respectively. During 2007, payments
      totalling $5,000 were made. Interest expense on the note was $7,760 and $695
      for
      the periods ended December 31, 2006 and 2005, respectively.





In
      connection with the factoring agreement, the Company granted to JJ Ellis a
      warrant to purchase $60,000 of the Company’s 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).





(c)  On
      June
      10, 2005, the Company 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, the Company 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 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 share into that number
      of
      fully paid and nonassessable shares of common stock equal to 1% of the
      outstanding shares of 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.




56




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;





(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 common
      stock of the Company 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)  the
      Company agreed that no Company securities will be issued without the written
      permission of SUTI, except shares issued for services as agreed by the Company
      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 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
      2006, the Company recorded $332,500 in management fees. As of December 31,
      2006,
      the amount owed to Select University Technologies, Inc. under the terms of
      the
      Venture Acceleration Agreement was $218,329.





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).





57




(e)  On
      June
      13, 2005, the Company borrowed $5,000 under a promissory note from Torrey Peaks
      Ventures, a company controlled by the Company’s 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, the Company granted Mr. Prionti 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, the Company granted options to purchase shares of Company
      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 Company; (iv) 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 (v) 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.





(e)  On
      May
      18, 2006, the Company’s subsidiary, Isotec, issued a demand promissory note in
      favor of the Company’s controlling stockholder, SUTI Holdings, LP. Under this
      note, the Company may borrow up to $100,000. These funds are being used to
      assist in the ongoing operations of the Company. 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. 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%. The Company
      owed $1,465 under this note at December 31, 2006.




(f)  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).





(g)  On
      February 1, 2007, the Company 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 (see Item 8b, Other Information, for a further
      discussion of this plan).




58




(h)  On
      February 13, 2007, the Company granted 7,616,147 shares
      of
      common stock to Mr. Hovee as compensation for services rendered to the Company
      valued at $49,505
      ($0.0065 per share).





(i)  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. (see Exhibit 10.13). 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 1, 2006. 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.





(j)  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 year ended
      December 31, 2006 was $47,719.




For
      each
      of the transactions noted above, the transaction was negotiated, on the part
      of
      the Company, 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 the
      Company’s 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 the Company and such officers and directors. The Company will
      attempt to resolve such conflicts of interest in its favor.





**Director
      Independence.**





The
      Company does 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 Messrs. Barnes
      and Largent (who are both independent directors of the company). Mr Barnes
      has
      been designated as the Audit Committee financial expert.





**ITEM
      13. EXHIBITS.**





Exhibits
      included or incorporated by reference in this document are set forth in the
      Exhibit Index.





59




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





**Audit
      Fees.**





The
      aggregate fees billed for each of the last two fiscal years for professional
      services rendered by L.L. Bradford & Company, LLC and by KMJ Corbin and
      Company LLP (formerly known as Corbin & Company, LLP and replaced L.L.
      Bradford in 2006) for the audit of the Company’s annual financial statements and
      review of financial statements included in the Company’s Forms 10-QSB: 2006:
      L.L. Bradford (approximately $31,000) KMJ Corbin and Company LLP (approximately
      $40,000); and for 2005: L.L. Bradford approximately $18,000.





**Audit-Related
      Fees.**





The
      aggregate fees billed in each of the last two fiscal years for assurance and
      related services by the Accountant that are reasonably related to the
      performance of the audit or review of the Company’s financial statements and are
      not reported under Audit Fees above: $0.





**Tax
      Fees.**





The
      aggregate fees billed in each of the last two fiscal years for professional
      services rendered by the Accountant for tax compliance, tax advice and tax
      planning: $0.





**All
      Other Fees.**





The
      aggregate fees billed in each of the last two fiscal years for products and
      services provided by the Accountant, other than the services reported above:
      $0.





**Audit
      Committee.**





The
      Company’s Audit Committee consists of David J. Barnes and James R. Largent, both
      of whom are independent directors. The Audit Committee has not adopted a written
      charter. Mr. Barnes 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 the Company’s
      financial reporting process on behalf of the Company’s 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 the Company’s 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 the Company’s 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 the
      Company’s annual
      report on Form 10-KSB.





The
      Company’s 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.




60


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Company has duly caused this report to be signed on its behalf by
      the
      undersigned, thereunto duly authorized.


**World
                Am, Inc.**Dated:
              April 2, 2007
            By:
            /s/
              Robert A. HoveeRobert
              A. Hovee,
              Chief
                Executive Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Company and in the
      capacities and on the dates indicated:


SignSignature
              
              Title
              
              Date/s/
                  Robert A. Hovee
              
              Chief
                  Executive Officer/Director
              
              April
                  2, 2007Robert
                  A. Hovee/s/
                  David J. Barnes
              
              Chief
                  Financial Officer/Director
              
              April
                  2, 2007David
                  J. Barnes/s/
                  James R. Largent
              
              Secretary/Director
              
              April
                  2, 2007James
                  R. Largent
 61


REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the
      Board of Directors and Stockholders




World
      Am,
      Inc.




We
      have
      audited the accompanying consolidated balance sheet of World Am, Inc. (a
      development stage company) (the “Company”) as of December 31, 2006, and the
      related consolidated statements of operations, stockholders’ deficit and cash
      flows for the year 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 audit. 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 reports 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 audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company's internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, based on our audit 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, 2006, and the results of its
      operations and its cash flows for the year then ended and for the cumulative
      period from March 4, 2005 (inception) to December 31, 2006 in conformity with
      accounting principles generally accepted in the United States of America.





As
      described in Note 2 to the consolidated financial statements, effective January
      1, 2006, the Company changed its method of accounting for share-based
      compensation to adopt Statement of Financial Accounting Standards No. 123(R),
      “Share-Based Payment.”





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 consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.


/s/
                KMJ Corbin & Company LLPIrvine,
                California
              March
                20, 2007


62




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and Stockholders


World
      Am,
      Inc.


Newport
      Beach, California





We
      have
      audited the accompanying consolidated balance sheet (restated) of World
      Am,
      Inc. as of December
      31, 2005 ,
      and the
      related consolidated statements of operations, stockholders’ deficit (restated),
      and cash flows for the period from March 4, 2005 (Inception) through December
      31, 2005 .
      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 financial position 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, LLCL.L.
                Bradford & Company, LLC
              April
                21, 2006Except
                for Note 1. - “Restatement of Financial Statements,” as to which date is
                March 20, 2007
              Las
                Vegas, Nevada


63





**WORLD
      AM, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      BALANCE SHEETS**




**December
                  31,**
                **2006**
              
              **December
                  31,**
                **2005****(Restated)****ASSETS**Current
                  assetsCash
              
              $
              122,008
              
              $
              10,403Accounts
                  receivable, net of allowance of $0 in 2006 and 2005
              
              
              18,474
              
              
              24,108Inventories
              
              
              79,801
              
              
              12,152Prepaid
                  expenses and other current assets
              
              
              5,360
              
              
              —Total
                  current assets
              
              
              225,643
              
              
              46,663Fixed
                  assets, net
              
              
              4,489
              
              
              5,870Intangible
                  assets
              
              
              25,000
              
              
              —Refundable
                  deposit
              
              
              3,820
              
              
              7,050Total
                  assets
              
              $
              258,952
              
              $
              59,583**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIT**Current
                  liabilitiesAccounts
                  payable
              
              $
              657,769
              
              
              213,264Accrued
                  consultant fees
              
              
              237,250
              
              
              --Accrued
                  wages
              
              
              137,399
              
              
              16,529Due
                  to stockholders
              
              
              326,474
              
              
              559,075Payroll
                  taxes payable
              
              
              328,070
              
              
              296,724Deferred
                  revenue
              
              
              61,347
              
              
              —Notes
                  payable
              
              
              99,441
              
              
              98,180Convertible
                  debenture and accrued interest payable,net
                  of unamortized discount of $210,714
              
              
              72,970
              
              
              —Total
                  current liabilities
              
              
              1,920,720
              
              
              1,183,772Derivative
                  and warrant liabilities
              
              
              2,651,660
              
              
              —Total
                  liabilities
              
              
              4,572,380
              
              
              1,183,772Commitments
                  and contingenciesStockholders’
                  deficitClass
                  A preferred stock, $0.0001 par value (liquidation
                  preferenceof
                  $1,700 per share); 40,000,000 shares authorized, 1369
                  sharesissued
                  and no shares outstanding as of December 31, 2006 and 2005
              
              
              —
              
              
              —Class
                  B preferred stock, $0.0001 par value (liquidation
                  preferenceof
                  $145,455 per share); 40,000,000 shares authorized, 55 shares
  64
 **WORLD
          AM, INC.**
 **(A
          Development Stage Company)**
 **CONSOLIDATED
          BALANCE SHEETS**
 **(continued)**
  **December
                  31,**
                **2006**
              
              
              **December
                  31,**
                **2005****(Restated)**issued
                  and outstanding as of December 31, 2006 and 2005
              
              
              —
              
              
              —Common
                  stock; $0.0001 par value; 1,500,000,000 sharesauthorized,
                  359,844,014 and 131,167,959 shares issuedas
                  of December 31, 2006 and 2005, respectively;
              
              
              —
              
              
              —330,037,091
                  and 113,547,959 shares outstanding as ofDecember
                  31, 2006 and 2005, respectively(1)
              
              
              33,004
              
              
              11,355Additional
                  paid-in capital
              
              
              630,214
              
              
              (310,997
              )Receivable
                  related to issuance of common stock
              
              
              —
              
              
              (224,040
              )Deficit
                  accumulated during the development stage
              
              
              (4,976,646
              )
              
              (600,507
              )Total
                  stockholders’ deficit
              
              
              (4,313,428
              )
              
              (1,124,189
              )Total
                  liabilities and stockholders’ deficit
              
              $
              258,952
              
              $
              59,583


(1)
        The
        difference between the issued shares and the issued and outstanding shares
        is
        the number of shares held by the Company’s transfer agent in escrow for future
        issuance under the Company’s Stock Incentive Plan.


See
      reports of independent registered public accounting firms


and
      notes
      to the consolidated financial statements.




65


**WORLD
      AM, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**Year
                Ended**
              **December
                31,**
              **2006**
            
            **From**
              **March
                4, 2005**
              **(Inception)**
              **Through**
              **December
                31,**
              **2005**
            
            **From**
              **March
                4, 2005**
              **(Inception)**
              **Through**
              **December
                31,**
              **2006**Revenues
            
            $
            245,476
            
            $
            212,772
            
            $
            458,248Cost
                of revenues
            
            
            82,827
            
            
            115,785
            
            
            198,612Gross
                profit
            
            
            162,649
            
            
            96,987
            
            
            259,636General
                and administrativeexpenses
            
            
            2,062,487
            
            
            787,491
            
            
            2,849,978Loss
                from operations
            
            
            (1,899,838
            )
            
            (690,504
            )
            
            (2,590,342
            )Other
                income (expense)Miscellaneous
            
            
            (1,407
            )
            
            (14,090
            )
            
            (15,497
            )Settlement
                gain
            
            
            
            
            
            116,000
            
            
            116,000Interest
                expense
            
            
            (3,138,687
            )
            
            (11,913
            )
            
            (3,150,600
            )Change
                in fair valueof
                derivative andwarrant
                liabilities
            
            
            663,793
            
            
            —
            
            
            (663,793
            )(2,476,301
            )
            
            89,997
            
            
            (2,386,304
            )Loss
                before provision for income taxes
            
            
            (4,376,139
            )
            
            (600,507
            )
            
            (4,976,646
            )Provision
                for income taxes
            
            
            —
            
            
            —
            
            
            —Net
                loss
            
            $
            (
                4,376,139
            )
            $
            (600,507
            )
            $
            (4,976,646
            )Loss
                per common share, basic and diluted
            
            $
            (
                0.02
            )
            $
            (0.01
            )Basic
                and diluted weighted average common shares outstanding
            
            
            191,253,289
            
            
            40,137,947








See
      reports of independent registered public accounting firms


and
      notes
      to the consolidated financial statements.




66


**WORLD
      AM, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
      2006**





**Receivable****Class
                A Preferred Stock**
            
            **Class
                B Preferred Stock**
            
            **Common
                Stock**
            
            **Additional**
            
            **Related
                to**
              **Issuance
                of**
            
            **Deficit**
                **Accumulated
                  During the**
            
            **Total****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Paid-in
                Capital**
            
            **Common**
              **Stock**
            
            **Development
                Stage**
            
            **Stockholders’
                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 (restated)
            
            
            1,369
            
            
            —
            
            
            —
            
            
            —
            
            
            66,570,285
            
            
            6,656
            
            
            (773,977
            )
            
            (220,000
            )
            
            —
            
            
            (987,321
            )Common
                stock issued in September 2005 for services, weighted average $0.004
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            15,410,573
            
            
            1,541
            
            
            52,916
            
            
            —
            
            
            —
            
            
            54,457Common
                stock issued in October 2005 for services, weighted average $0.003
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            12,748,670
            
            
            1,275
            
            
            39,521
            
            
            —
            
            
            —
            
            
            40,796Common
                stock issued in October 2005 for services, weighted average $0.018
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,795,574
            
            
            180
            
            
            31,961
            
            
            —
            
            
            —
            
            
            32,141Common
                stock issued in November 2005 to employees, weighted average $0.024
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            10,375,000
            
            
            1,038
            
            
            249,229
            
            
            —
            
            
            —
            
            
            250,267




67




**WORLD
      AM, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
      2006**


**(continued)**


**Receivable****Class
                  A Preferred Stock**
              
              **Class
                  B Preferred Stock**
              
              **Common
                  Stock**
              
              **Additional**
              
              **Related
                  to**
                **Issuance
                  of**
              
              **Deficit**
                  **Accumulated
                    During the**
              
              **Total****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Paid-in
                  Capital**
              
              **Common
                  Stock**
              
              **Development
                  Stage**
              
              **Stockholders’
                  Deficit**Common
                  stock issued in December 2005 to employees, weighted average $0.024
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,005,000
              
              
              201
              
              
              19,460
              
              
              (4,040
              )
              
              —
              
              
              15,621Conversion
                  of note payable for shares of common stock in December 2005 weighted
                  average of $0.013 per share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              4,642,857
              
              
              464
              
              
              59,893
              
              
              —
              
              
              —
              
              
              60,357Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (600,507
              )
              
              (600,507
              )Balance,
                  December 31, 2005 (restated)
              
              
              1,369
              
              
              —
              
              
              55
              
              
              —
              
              
              113,547,959
              
              
              11,355
              
              
              (310,997
              )
              
              (224,040
              )
              
              (600,507
              )
              
              (1,124,189
              )Common
                  stock issued in January 2006 to employees, weighted average $0.009
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              3,740,000
              
              
              374
              
              
              34,082
              
              
              —
              
              
              —
              
              
              34,456Common
                  stock issued to vendor in January 2006 for services, weighted average
                  $0.010 per share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              12,000,000
              
              
              1,200
              
              
              121,200
              
              
              —
              
              
              —
              
              
              122,400Common
                  stock issued in January 2006, for services, weighted average $0.009
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,700,000
              
              
              270
              
              
              23,310
              
              
              —
              
              
              —
              
              
              23,580




68




**WORLD
      AM, INC.**


**(A
      DEVELOPMENTS STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
      2006**


**(continued)**





**Receivable**
            
            **Deficit****Class
                A Preferred Stock**
            
            **Class
                B Preferred Stock**
            
            **Common
                Stock**
            
            **Additional**
            
            **Related
                to**
              **Issuance
                of**
            
            **Accumulated
                During the**
            
            **Total****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Paid-in
                Capital**
            
            **Common
                Stock**
            
            **Development
                Stage**
            
            **Stockholders’
                Deficit**Common
                stock issued in February 2006 for services, weighted average $0.018
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            2,150,000
            
            
            215
            
            
            38,649
            
            
            —
            
            
            —
            
            38,864Common
                stock issued in March 2006 to employees, weighted average $0.017
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            626,923
            
            
            63
            
            
            10,366
            
            
            —
            
            
            —
            
            10,429Common
                stock issued in March 2006 for exercise of warrant, weighted average
                $0.0001
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            30,879,999
            
            
            3,088
            
            
            24,700
            
            
            —
            
            
            —
            
            27,788Common
                stock issued in March 2006 for services, weighted average $0.014
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            500,000
            
            
            50
            
            
            6,950
            
            
            —
            
            
            —
            
            7,000Common
                stock issued in March 2006 for services, weighted average $0.017
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            673,077
            
            
            67
            
            
            11,131
            
            
            —
            
            
            —
            
            11,198Payment
                for shares issued December 2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            4,040
            
            
            —
            
            4,040Common
                stock issued in April 2006 for services, weighted average $0.015
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            1,600,000
            
            
            160
            
            
            24,382
            
            
            —
            
            
            —
            
            24,542




69




**WORLD
      AM, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
      2006**


**(continued)**


**Receivable****Class
                  A Preferred Stock**
              
              **Class
                  B Preferred Stock**
              
              **Common
                  Stock**
              
              **Additional**
              
              **Related
                  to**
                **Issuance
                  of**
              
              **Deficit**
                  **Accumulated
                    During the**
              
              **Total****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Paid-in
                  Capital**
              
              **Common
                  Stock**
              
              **Development
                  Stage**
              
              **Stockholders’
                  Deficit**Common
                  stock issued in April 2006 to employees, weighted average $0.015
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              350,000
              
              
              35
              
              
              5,215
              
              
              —
              
              
              —
              
              
              5,250Common
                  stock issued in May 2006 to employees, weighted average $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 in June 2006 for services, weighted average $0.007
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              1,500,000
              
              
              150
              
              
              10,350
              
              
              —
              
              
              —
              
              
              10,500Common
                  stock issued in June 2006 to employees, weighted average $0.007
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,200,000
              
              
              220
              
              
              15,880
              
              
              —
              
              
              —
              
              
              16,100Common
                  stock issued in July 2006 for services, weighted average $0.007
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              33,285,713
              
              
              3,329
              
              
              229,671
              
              
              —
              
              
              —
              
              
              233,000Common
                  stock issued in July 2006 to employees, weighted average $0.0081
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              3,595,125
              
              
              359
              
              
              28,595
              
              
              —
              
              
              —
              
              
              28,954




70


**WORLD
      AM, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
      2006**


**(continued)**


**Class
                  A Preferred Stock**
              
              
              **Class B
                  Preferred Stock**
              
              
              **Common
                  Stock**
              
              
              **Additional**
              
              
              **Receivable
                  Related to**
                **Issuance
                  of**
              
              
              **Deficit
                  Accumulated During the**
              
              
              **Total****Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Shares**
              
              
              **Amount**
              
              
              **Paid-in
                  Capital**
              
              
              **Common
                  Stock**
              
              
              **Development
                  Stage**
              
              
              **Stockholders’
                  Deficit**Common
                  stock issued in August 2006 to employees, weighted average $0.0054
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,968,000
              
              
              297
              
              
              15,656
              
              
              —
              
              
              —
              
              
              15,953Common
                  stock issued in August 2006 for services, weighted average $0.006
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,153,846
              
              
              215
              
              
              12,708
              
              
              —
              
              
              —
              
              
              12,923Common
                  stock issued in September 2006 to employees, weighted average $0.0054
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              2,176,240
              
              
              217
              
              
              11,178
              
              
              —
              
              
              —
              
              
              11,395Common
                  stock issued in September 2006 for services, weighted average $0.0045
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              5,952,381
              
              
              595
              
              
              26,189
              
              
              —
              
              
              —
              
              
              26,784Reversal
                  of receivable related to issuance of common stock
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (220,000
              )
              
              220,000
              
              
              —
              
              
              —Common
                  stock issued in October 2006 for services, weighted average $0.005
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              22,362,000
              
              
              2,236
              
              
              109,574
              
              
              —
              
              
              —
              
              
              111,810Exercise
                  of stock option in October 2006 weighted average $0.002 per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              3,396,774
              
              
              340
              
              
              6,454
              
              
              —
              
              
              —
              
              
              6,794Common
                  stock issued in October 2006 to employees, weighted average $0.0048
                  per
                  share
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              3,603,301
              
              
              360
              
              
              16,781
              
              
              —
              
              
              —
              
              
              17,141




71




**WORLD
      AM, INC.**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM MARCH 4, 2005 (INCEPTION) THROUGH DECEMBER 31,
      2006**


**(continued)**




**Class
                A Preferred Stock**
            
            
            **Class
                B Preferred Stock**
            
            
            **Common
                Stock**
            
            
            **Additional**
            
            
            **Receivable**
              **Related
                to**
              **Issuance
                of**
            
            
            ****Deficit****
              **Accumulated
                  During the**
            
            
            **Total****Shares**
            
            
            **Amount**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Paid-in
                Capital**
            
            
            **Common
                Stock**
            
            
            **Development
                Stage**
            
            
            **Stockholders’
                Deficit**Common
                stock issued in November 2006 for services, weighted average $0.0043
                per
                share
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            3,136,905
            
            
            314
            
            
            13,036
            
            
            —
            
            
            —
            
            
            13,350Common
                stock issued in November 2006 to employees, weighted average $0.0041
                per
                share
            
            
            —
            
            
            —-
            
            
            —
            
            
            —
            
            
            4,403,822
            
            
            440
            
            
            17,682
            
            
            —
            
            
            —
            
            
            18,122Common
                stock issued in December 2006 for services, weighted average $0.0041
                per
                share
            
            
            —
            
            
            —-
            
            
            —
            
            
            —
            
            
            2,317,074
            
            
            232
            
            
            9,268
            
            
            —
            
            
            —
            
            
            9,500Common
                stock issued in December 2006 for services, weighted average $0.0040
                per
                share
            
            
            —
            
            
            —-
            
            
            —
            
            
            —
            
            
            4,054,356
            
            
            406
            
            
            15,812
            
            
            —
            
            
            —
            
            
            16,218Common
                stock issued for cash, weighted average $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)




(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
      reports of independent registered public accounting firms and notes to the
      consolidated financial statements.




72


**WORLD
      AM, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





**Year
                Ended December 31,**
              **2006**
            
            **From**
              **March
                4, 2005 (Inception)**
              **Through**
              **December
                31,**
              **2005**
            
            **From**
              **March
                4, 2005 (Inception)**
              **Through**
              **December
                31,**
              **2006**Cash
                flows from operating activities:Net
                loss
            
            $
            (4,376,139
            )
            $
            (600,507
            )
            $
            (4,976,646
            )Adjustments
                to reconcile net loss to netcash
                used in operating activities:Initial
                fair value of derivative andwarrant
                liabilities
            
            
            3,040,453
            
            
            —
            
            
            3,040,453Change
                in fair value of derivative andwarrant
                liabilities
            
            
            (663,793
            )
            
            —
            
            
            (663,793
            )Depreciation
            
            
            2,790
            
            
            1,840
            
            
            4,630Stock
                issued for services
            
            
            643,064
            
            
            187,751
            
            
            830,815Loss
                on reclassification of capital lease asset
            
            
            —
            
            
            2,388
            
            
            2,388Options
                vesting during the period
            
            
            3,168
            
            
            —
            
            
            3,168Settlement
                gain
            
            
            —
            
            
            (116,000
            )
            
            (116,000
            )Accrued
                interest added to principal balance, net ofinterest
                payments
            
            
            9,945
            
            
            —
            
            
            9,945Amortization
                of discount on convertible debt
            
            
            64,286
            
            
            —
            
            
            64,286Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            5,634
            
            
            24,008
            
            
            29,642Inventories
            
            
            (67,649
            )
            
            (1,068
            )
            
            (68,717
            )Prepaid
                expenses and other current assets
            
            
            (5,360
            )
            
            —
            
            
            (5,360
            )Refundable
                deposits
            
            
            3,230
            
            
            3,200
            
            
            6,430Accounts
                payable and accrued expenses
            
            
            802,625
            
            
            50,260
            
            
            852,885Payroll
                taxes payable
            
            
            31,346
            
            
            112,205
            
            
            143,551Deferred
                revenue
            
            
            61,347
            
            
            —
            
            
            61,347Net
                cash used in operating activities
            
            
            (445,053
            )
            
            (335,923
            )
            
            (780,976
            )




73




**WORLD
      AM, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(continued)**





**Year
                Ended December 31,**
              **2006**
            
            **From**
              **March
                4, 2005 (Inception)**
              **Through**
              **December
                31,**
              **2005**
            
            **From**
              **March
                4, 2005 (Inception)**
              **Through**
              **December
                31,**
              **2006**Cash
                flows from investing activities:Cash
                acquired in reverse merger
            
            
            —
            
            
            935
            
            
            935Purchase
                of fixed assets
            
            
            (1,409
            )
            
            —
            
            
            (1,409
            )Purchase
                of intangible assets
            
            
            (25,000
            )
            
            —
            
            
            (25,000
            )Net
                cash (used in) provided by investing activities
            
            
            (26,409
            )
            
            935
            
            
            (25,474
            )Cash
                flows from financing activities:Net
                change in due to related parties (payments of$245,389
                and advances of $12,788)
            
            
            (232,601
            )
            
            115,223
            
            
            (117,378
            )Proceeds
                from exercise of warrants
            
            
            27,788
            
            
            —
            
            
            27,788Proceeds
                from issuance of convertible debenture
            
            
            275,000
            
            
            —
            
            
            275,000


Proceeds
                from sale of preferred stock
            
            
            —
            
            
            10,000
            
            
            10,000Proceeds
                from exercise of employee stock options
            
            
            194,490
            
            
            265,888
            
            
            460,378Principal
                payments on convertible note payable
            
            
            —
            
            
            (30,000
            )
            
            (30,000
            )Proceeds
                from sale of common stock, net of professional fees
            
            
            318,390
            
            
            —
            
            
            318,390Principal
                payments on note payable
            
            
            —
            
            
            (15,720
            )
            
            (15,720
            )Net
                cash provided by financing activities
            
            
            583,067
            
            
            345,391
            
            
            928,458Net
                change in cash
            
            
            111,605
            
            
            10,403
            
            
            122,008Cash,
                beginning of period
            
            
            10,403
            
            
            —
            
            
            —Cash,
                end of period
            
            $
            122,008
            
            $
            10,403
            
            $
            122,008


74


**WORLD
      AM, INC.**


**(A
      Development Stage Company)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(continued)**




**Year
                Ended December 31,**
              **2006**
            
            **From**
              **March
                4, 2005 (Inception)**
              **Through**
              **December
                31,**
              **2005**
            
            **From**
              **March
                4, 2005 (Inception)**
              **Through**
              **December
                31,**
              **2006**Supplemental
                disclosure of cash flow information:Cash
                paid for income taxes
            
            $
            —
            
            $
            —
            
            $
            —Cash
                paid for interest
            
            $
            1,468
            
            $
            4,227
            
            $
            5,695Schedule
                of non-cash operating, investing and financing activities:Acquisition
                of Senz-It, Inc. patent, licenses and options
            
            $
            —
            
            $
            1,063,992
            
            $
            1,063,992Acquisition
                other assets and liabilities in reverse merger
            
            $
            —
            
            $
            (995,956
            )
            $
            (995,956
            )Issuance
                of 55 shares of Class B preferred stock
            
            $
            —
            
            $
            —
            
            $
            —Issuance
                of warrants for purchase of 18,000,000 sharesof
                common stock
            
            $
            —
            
            $
            —
            
            $
            —Reclassification
                of capital lease
            
            $
            —
            
            $
            (8,175
            )
            $
            (8,175
            )Removal
                of fixed asset due to reclassification of capital lease
            
            $
            —
            
            $
            10,563
            
            $
            10,563Discount
                on convertible debt
            
            $
            275,000
            
            $
            —
            
            $
            275,000





See
      reports of independent registered public accounting firms


and
      notes
      to the consolidated financial statements




75


**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 “Company”) was organized 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 founded in 1997 and, at present, is dormant.





Isotec
      is
      a Colorado corporation founded in 1998 that develops, manufactures and
      distributes automated passage control and security devices to government and
      other commercial enterprises. At present, all of the Company’s revenue is
      generated by Isotec.





Senz-It
      is a California corporation founded 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
      Class 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 warrants vested immediately and expire in
      August 2010. Each share of Class B preferred stock is convertible into 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, or a minimum of 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 stock
      at
      the time of the vote. In
      addition, SUTI has selected three directors to sit on the Company 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, Inc.) 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.




76




In
      connection with the acquisition of Senz-It, the Company accrued the cost of
      a
      finder’s fee and other services of $204,400 to a consultant. This fee consists
      of a cash payment of $80,000 and the issuance of 12 million shares of common
      stock, valued at $122,400 on December 31, 2005.




The
      following is a pro forma statement of operations showing the effect as if the
      Company and Senz-It had been combined from the date of Senz-It’s inception:




Condensed
      Pro Forma Statement of Operations Period


from
      Inception through December 31, 2005


(Unaudited)













Revenue
            
            $
            434,763Cost
                of revenues
            
            
            308,273Gross
                profit
            
            
            126,490Selling,
                general and administrative expenses
            
            
            1,861,049Loss
                from operations
            
            
            (1,734,559
            )Other
                expense
            
            
            (166,155
            )Loss
                before provision for income taxes
            
            
            (1,900,714
            )Provision
                for income taxes
            
            
            -Net
                loss
            
            $
            (1,900,714)





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 include the accounts and
      transactions of World Am and its subsidiaries. All intercompany transactions
      and
      balances have been eliminated in consolidation.





The
      Company affected a 100-to-1 reverse stock split in January 2005 and a
      three-for-two stock dividend in August 2005. The financial statements presented
      herein have been restated to reflect the reverse stock splits as if they had
      occurred at the beginning of each period presented.




76





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.





Restatement
      of Financial Statements.





After
      reviewing the accounting for the reverse acquisition, management has determined
      that the initial recording of the reverse acquisition in 2005 was not in
      accordance with the
      Company’s policy
      and needed to be adjusted.





The
      effect of the adjustment on the Company’s 2005 consolidated balance sheet and
      consolidated statement of stockholders’ deficit was a decrease in additional
      paid-in capital of $995,955 and a decrease in the deficit accumulated during
      the
      development stage of $995,955. There was no change in the net loss as reported
      or in the consolidated statement of cash flows.





Going
      Concern.





The
      Company incurred a net loss and had a capital deficit of $4,976,646 for the
      period from inception (March 4, 2005) through December 31, 2006. 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 enjoy 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. There is no assurance that the Company will
      be
      able 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.





In
      view
      of the matters described above, recoverability of a major portion of the
      recorded asset amounts shown in the accompanying consolidated balance sheet
      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 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.




77





Reclassification.





Certain
      amounts in the 2005 consolidated financial statements have been reclassified
      to
      conform to the 2006 presentation.





**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





Use
      of
      Estimates.





The
      preparation of the 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 value of shares 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. As of December 31, 2006 the Company had a balance of approximately
      $28,000 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.**





Three
      and
      two customers accounted for approximately 83% and 87% of revenues in 2006 and
      2005, respectively. Accounts receivable at December 31, 2006 consisted of
      balances due from two customers. One customer owed $17,822. Accounts receivable
      at December 31, 2005 consisted of balances due from seven customers. Once
      customer owed $20,165.





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. Since all outstanding receivables as of December
      31, 2006 and 2005 have been collected, the Company has not provided for any
      allowance for doubtful accounts.




78





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.





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.





Intangible
      Assets.





Intangaible
      assets consist of a license to use the technology developed by SUNY (see Note
      5)
      and is stated at cost. Upon commencement of sales of the product, these amounts
      will be amortized over the shorter of the expected life of the product or the
      remaining term of the license agreement.





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, 2006, 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.




79





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
      the
      case of 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. (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 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 accompanying 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 value of the attached warrants of $2,075,694 as a component of interest
      expense in the accompanying consolidated statements of operations. 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. Derivatives and warrants
      were
      valued primarily using the Black-Scholes option pricing model with the following
      assumptions: dividend yield of 0%, annual volatility of 127%, and risk free
      interest rate of 4.70% - 4.74%. The derivatives are classified as long-term
      liabilities.





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 option-pricing model with the following
      assumptions: dividend yield of 0%, volatility of 127% and risk free interest
      rate of 4.72%. The initial fair value assigned to the non-employee options
      and
      warrants was $106,000, which was recorded as interest expense. At December
      31,
      2006, the fair value of the non-employee warrants was $86,000. The decrease
      in
      the fair value of $20,000 is recorded as other income in the consolidated
      statement of operations.




80





Fair
      Value of Financial Instruments.





The
      Company’s financial instruments consist of cash, accounts receivable, accounts
      payable, accrued expenses, amounts due to stockholders, 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.





Stock-Based
      Compensation.





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 this
      plan
      is 235,000,000.





During
      the year ended December 31, 2006: (a) options representing 12,513,077 shares
      of
      common stock were exercised under the ESIP Plan; (b) 98,258,763 shares of common
      stock were awarded out of the ESIP Plan and (c) 4,459,481 ESIP shares, issued
      in
      2005, were returned and subsequently cancelled in 2006. As of December 31,
      2006,
      there were 9,004,141 shares of common stock remaining to be issued under the
      ESIP 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 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, 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.





A
      total
      of 10,900,000 shares were issued out of the Non-Employee Plan during the year
      ended December 31, 2006. As of December 31, 2006, 12,084,363 shares of common
      stock remain to be issued under the Non-Employee Plan.




81





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.





On
      January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based
      Payment,” (“SFAS No. 123 (R)”) which establishes standards for the accounting of
      transactions in which an entity exchanges its equity instruments for goods
      or
      services, primarily focusing on accounting for transactions where an entity
      obtains employee services in share-based payment transactions. 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. SFAS No. 123(R) supersedes Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees” for periods beginning after December 15, 2005. In March 2005, the
      Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No.
      107 relating to SFAS No. 123(R). The Company has applied the provisions of
      SAB
      No. 107 in its adoption of SFAS No. 123(R).





The
      Company adopted SFAS No. 123(R) using the modified prospective transition
      method, which requires the application of the accounting standard as of January
      1, 2006, the first day of the Company’s fiscal year. The Company’s consolidated
      financial statements as of and for the year ended December 31, 2006 reflect
      the
      impact of SFAS No. 123(R). In accordance with the modified prospective
      transition method, the Company’s consolidated financial statements for the prior
      period have not been restated to reflect, and do not include, the impact of
      SFAS
      No. 123(R).




82





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. Prior to the adoption of SFAS No. 123(R), the Company
      accounted for stock-based awards to employees and directors using the intrinsic
      value method in accordance with APB Opinion No. 25 as allowed under SFAS No.
      123, “Accounting for Stock-Based Compensation.” Under the intrinsic value
      method, no stock-based compensation expense had been recognized in the Company’s
      consolidated statements of operations, other than as related to option grants
      to
      employees and consultants below the fair market value of the underlying stock
      at
      the date of grant.





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 during the periods ended December 31, 2006
      and
      2005. Prior to the adoption of SFAS No. 123(R), those benefits would have been
      reported as operating cash flows had the Company received any tax benefits
      related to stock option exercises.





The
      fair
      value of each stock-based award is estimated on the grant date using the
      Black-Scholes option-pricing model. Expected volatilities are based on the
      historical volatility of the Company’s stock price. The expected term of options
      granted subsequent to the adoption of SFAS No. 123(R) is derived using the
      simplified method as defined in the 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:





2006
            
            2005Risk-free
                interest rate
            
            
            4.7
            %
            
            4.0
            %Expected
                life of the options
            
            
            5
                years
            
            
            5
                yearsExpected
                volatility
            
            
            127
            %
            
            139
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %





A
      summary
      of option activity under the ESIP Plan and changes during the years ended
      December 31, 2006 and December 31, 2005 are presented below:





Weighted-Average
            
            Remaining
            
            AggregateShares
            
            Exercise
                Price(1)
            
            Contractual
              Term
                (Years)
            
            Intrinsic
                ValueOutstanding
                and exercisable at January 1, 2006
            
            
            65,016,000
            (1)
            $
            0.015
            
            
            9.8
            
            $
            —Vested
            
            
            72,000
            
            
            0.015
            
            
            8.8
            
            $
            1,152Granted
            
            
            12,513,077
            
            
            0.015
            
            
            —
            
            $
            —Cancelled/forfeited
            
            
            (63,500,000
            )Exercised
            
            
            (12,513,077
            )
            
            0.015
            
            
            —
            
            $
            —Outstanding
                and exercisable at December 31, 2006
            
            
            1,588,000
            
            $
            0.015
            
            
            8.8
            
            $
            —




(1)
      As of
      January 1, 2006, the exercise price was 80% of the closing price on the date
      of
      exercise per share. The exercise price was changed to $0.015 in the Amended
      and
      Restated Employee Stock Incentive Plan dated February 7, 2006.





83




A
      summary
      of the activity of the Company’s non-vested options is presented
      below:




December
                31, 2006Weighted-Average
            
            Remaining
            
            Remaining
                UnrecognizedShares
            
            Grant-Date
                Fair Value
            
            Months
                to Vest
            
            Compensation
                CostNon-vested
                outstanding at December 31, 2005
            
            
            144,000
            
            $
            0.016
            
            
            24
            
            $
            2,304Granted
            
            
            —
            
            
            —
            
            
            
            
            
            —Vested
            
            
            (72,000
            )
            $
            0.016
            
            
            
            
            
            (1,152
            )Forfeited
            
            
            —
            
            
            —
            
            
            
            
            
            —Non-vested
                outstanding at December 31, 2006
            
            
            72,000
            
            $
            0.016
            
            
            12
            
            $
            1,152





Prior
      to
      fiscal 2006, the weighted-average fair value of stock-based compensation to
      employees was based on the single option valuation approach. Forfeitures were
      recognized as they occurred and it was assumed no dividends would be declared.
      As all stock options vested immediately, all compensation expense was recognized
      on the grant date. Therefore, net loss for the year ended December 31, 2005
      would not have been different than as reported.




84





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
      year ended December 31, 2006 and December 31, 2005, 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 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
      collectibility is probable.





Sales
      and
      manufacture of customized commercial products are recognized under the
      percentage-of-completion basis when: (1) contracts executed by the parties
      normally include provisions that clearly specify the enforceable rights
      regarding goods or service to be provided and received by the parties, the
      consideration to be exchanged, and the manner and terms of settlement; (2)
      the
      buyer can be expected to satisfy his obligations under the contract; (3) the
      Company can be expected to perform its contractual obligations; and (4) the
      Company can make reasonably dependable estimates of costs to complete and the
      extent of progress toward completion. The Company measures the extent of
      progress toward completion by using a ratio of costs incurred to total estimated
      costs. The effects of changes in the estimates, if any, are reported in the
      period of change and subsequent periods. Estimated losses on long-term contracts
      are recorded in the period in which the loss becomes evident. Contracts not
      meeting the above criteria are reported on the completed contract method. All
      other sales of products are recognized upon shipment.





As
      of
      December 31, 2006, the Company recorded deferred revenue of $61,347 that
      represents progress billings on a contract that was placed on hold in the third
      quarter of 2006.





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
      allowability 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.




85





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
      May
      2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154,
“Accounting Changes and Error Corrections,” which replaces APB Opinion No. 20,
“Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim
      Financial Statements,” and changes the requirements for the accounting for and
      reporting of a change in accounting principle. SFAS No. 154 requires
      retrospective application to prior periods’ financial statements of changes in
      accounting principle, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. SFAS No. 154
      is
      effective for accounting changes and corrections of errors made in fiscal years
      beginning after December 15, 2005. The adoption of SFAS No. 154 did not
      have a material impact on the Company’s consolidated financial position or
      results of operations.





In
      July
      2006, the 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 Company has not yet analyzed the impact this
      Interpretation will have on the Company’s financial condition, results of
      operations, cash flows or disclosures.





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 adoption
      of this statement is not expected to have a material impact on the Company’s
      consolidated financial condition or results of operations.




86





**NOTE
      3 - INVENTORIES**





Inventories
      consist of raw materials as of December 31, 2006 and 2005.





**NOTE
      4** - **FIXED ASSETS**





Fixed
      assets consist of the following at December 31:





**2006**
            
            **2005**Furniture
                and equipment
            
            $
            4,209
            
            $
            3,452Computers
            
            
            6,307
            
            
            5,655Machinery
                and equipment
            
            
            7,872
            
            
            7,87218,388
            
            
            16,979Less:
                accumulated depreciation
            
            
            (13,899
            )
            
            (11,109
            )$
            4,489
            
            $
            5,870





Depreciation
      expense was $2,790 and $1,840 for the years ended December 31, 2006 and 2005,
      respectively.





**NOTE
      5** - **INTANGIBLE ASSETS**





Senz-It,
      a wholly owned subsidiary of the Company, exercised its option to enter into an
      exclusive, royalty-bearing license with The Research Foundation of the State
      University of New York at Buffalo (“SUNY”). This license is intended to cover
      patents developed by that university that will enable Senz-It to develop
      technology with an entirely new approach to sensing, process monitoring,
      homeland security and environmental scanning applications. At December 31,
      2006,
      the Company prepaid a license issue fee of $25,000.





On
      January 22, 2007, the Company entered into a license agreement with SUNY. This
      is an exclusive field-of-use license to facilitate the development and
      commercialization of certain technology contained within certain patents and
      patent applications developed at SUNY. Under the terms of this license
      (effective as of December 1, 2006), Senz-It has paid, and will pay, fees,
      royalties, and research funding to SUNY (see Note 14). In connection with this
      license agreement, Senz-It will issue restricted shares of common stock of
      Senz-It (10% of the capital stock on a fully diluted basis as of the effective
      date), and will issue additional such shares, to SUNY, pursuant to the terms
      of
      a Stock Purchase Agreement, so that SUNY will maintain a minimum ownership
      of
      10% in Senz-It. Finally, Senz-It entered into a Stockholders Agreement 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.




87





**NOTE
      6 - DUE TO STOCKHOLDERS**





Due
      to
      stockholders was $326,474 and $559,075 as of December 31, 2006 and 2005,
      respectively. These balances consist of un-reimbursed expenses and accrued
      wages
      to various stockholders and employees, including $251,884 at December 31, 2006
      and $298,921 at December 31, 2005 that is owed to the Company’s former president
      and chief executive officer for accrued salary and reimbursement of expenses.
      Additionally, at December 31, 2005, a company owned and managed by the former
      president and chief executive officer was owed $5,000. These monies were repaid
      in the third quarter 2006.





Also
      included in the 2006 balance was $70,000 payable related to a finder’s fee and
      other service provided by a consultant.





**NOTE
      7 - PAYROLL TAXES PAYABLE**





As
      of
      December 31, 2006, payroll taxes payable consists of late payroll taxes and
      estimated accrued interest and  penalties
      for payroll and stock option activity totalling $328,070 and $296,724 as of
      December 31, 2006 and 2005, respectively. Settlement discussions are presently
      underway to resolve this matter.




**NOTE
      8 - INCOME TAXES**





The
      income tax benefit consists of the following for the periods ended December
      31:





**2006**
            
            **2005**Current:
            
            
            —
            
            
            —Federal
            
            $
            —
            
            $
            —State—
            
            
            —Deferred:Federal
            
            
            (520,657
            )
            
            (186,124
            )State
            
            
            (386,851
            )
            
            (53,085
            )(907,508
            )
            
            (239,208
            )Less
                change in valuation allowance
            
            
            907,508
            
            
            239,208$
            —
            
            $
            —




88




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 $13,258,043, 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, 2006 and 2005,
      the
      Company had federal and California net operating loss carry forwards that
      originated since the merger of $2,519,000 and $601,000 respectively that expire
      in various periods through 2026 and 2016 for federal and state purpose,
      respectively.




The
      components of the net deferred tax asset as of December 31 are as
      follows:





**2006**
            
            **2005**Net
                operating loss carryforwards
            
            $
            2,518,702
            
            $
            239,208Valuation
                allowance
            
            
            (2,518,700
            )
            
            (239,208
            )$
            —
            
            $
            —





The
      Company’s effective tax rate differs from the federal and state statutory rates
      due to certain expenses that are not 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 at the expected
      rates to the income taxes reflected in the statements of
      operations:





**2006**
            
            **2005**Tax
                benefit at federal statutory rate
            
            
            (34
            )%
            
            (34
            )%Non-deductible
                expenses
            
            
            19
            
            
            -State
                tax expense, net of federal tax effect
            
            
            (6
            )
            
            (6
            )Change
                in valuation allowance
            
            
            21
            
            
            40—
            %
            
            —
            %





**NOTE
      9 - WARRANTS AND CONVERTIBLE DEBENTURE**





The
      Company entered into a Securities Purchase Agreement (“Agreement”) (to replace
      one dated January 23, 2006 with Golden Gate Investors, Inc.), dated June 19,
      2006, with La Jolla Cove Investors, Inc. (“La Jolla Cove”), a company under
      common control with Golden Gate. Under the Agreement, La Jolla Cove agreed
      to
      purchase from the Company a convertible debenture (“Debenture”) in the aggregate
      principal amount of $500,000. 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).




89





La
      Jolla
      Cove provided the Company with advances 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 the accompanying consolidated statement of
      operations. The fair value of the conversion feature as of December 31, 2006
      was
      $685,850 and is included in the long-term liabilities in the accompanying
      consolidated balance sheet. The decrease in the fair value of the conversion
      feature of $465,909 is included as other income in the 2006 accompanying
      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 year ended December 31, 2006, was $64,286. Interest
      accrued on the Debenture and added to the principal balance was $12,552 for
      the
      year ended December 31, 2006. An interest payment totalling $3,868 was made
      in
      the fourth quarter 2006. The balance on the Debenture, including accrued
      interest payable (net of unamortized discount of $210,714), was $72,970 as
      of
      December 31, 2006.





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.




90





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. 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. At December
      31,
      2006, the number of common stock shares that the $2,750,000 warrant could be
      converted into was 266,472,868. The accounting treatment of the derivatives
      and
      warrants require that the Company record warrants at their fair values as of
      the
      inception date of the agreement, which totalled $2,057,694, which was charged
      to
      interest expense. At December 31, 2006, the fair value was $1,879,810. The
      decrease in the fair value of the warrants of $177,884 is included as a
      component of other income in the accompanying consolidated statement of
      operations.





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.





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.




91





**NOTE
      10 - NOTES PAYABLE**





The
      Company had a total of $99,441 and $98,180 in notes payable at December 31,
      2006
      and 2005, respectively.





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
      and 2005, the amount owed under the settlement agreement was $38,941 and
      $46,180, respectively. During 2007, payments totalling $5,000 were made.
      Interest expense on the note was $7,760 and $695 for the periods ended December
      31, 2006 and 2005, respectively.





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. Interest
      expense on the note was $4,000 and $0 for the periods ended December 31, 2006
      and 2005, respectively. In 2007, payments in cash and World Am Stock totalling
      $19,300 were made.





The
      remaining $26,500 of notes payable is due on demand, bear no interest, are
      unsecured and were fully repaid in 2007.





**NOTE
      11 - FORMER STOCK PLANS**





2002
      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 this 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 this plan. All remaining shares were removed from
      registration on June 27, 2006.




92





SharesOutstanding
                at December 31, 2005
            
            
            50,976,558Cancelled/forfeited
            
            
            (44,771,760
            )Outstanding
                at December 31, 2006
            
            
            6,204,798





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 this 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.




93


**Weighted-Average**
              
              Remaining
                  Contractual Term
              
              Aggregate
                  IntrinsicShares
              
              Exercise
                  Price
              
              (Years)
              
              ValueOutstanding
                  at December 31, 2005
              
              
              40,406,616
              
              $
              0.0122
              
              
              4.08
              
              $
              —Options
                  exercised
              
              
              (3,774,194
              )Cancelled/forfeited
              
              
              (23,955,003
              )Outstanding
                  and exercisable at December 31, 2006
              
              
              12,677,419
              
              $
              0.0122
              
              
              3.08
              
              $
              —




(1)  Exercise
      price is 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.





**NOTE
      12- 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.





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.




94





**Class
      B.**





The
      Company is authorized to issue up to 40 million shares of Series 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 and warrants representing 16,250,000 shares
      of
      common stock were sold, for a total consideration of $325,000. Subsequent to
      year-end, an additional twenty-one units and warrants representing 26,250,000
      shares of common stock were sold for a total consideration of
      $525,000.





From
      time
      to time, the Company issues its shares and holds the shares in escrow on behalf
      of another party until consummation of certain transactions. Additionally,
      there
      are authorized, but unissued ESIP shares (see Note 16).





Breakdown
      of shares issued during the years ended December 31, 2006 and December 31,
      2005:





**2006**
            
            **2005**Exercise
                of warrants
            
            
            30,879,999
            
            
            —Shares
                issued under the Non-Employee Plan
            
            
            10,900,000
            
            
            —Exercise
                of stock option
            
            
            3,396,774
            
            
            —Options
                exercises under the ESIP Plan
            
            
            12,513,077
            
            
            12,380,000Shares
                issued under the ESIP Plan
            
            
            98,258,763
            
            
            34,597,674Private
                sale of stock
            
            
            65,000,000
            
            
            —Shares
                issued in connection with reverse merger
            
            
            —
            
            
            66,570,285Shares
                cancelled
            
            
            (4,459,481
            )
            
            —Total
                net shares issued
            
            
            216,489,132
            
            
            113,547,959




95




A
      summary
      of the warrant activity:


Balance,
                  March 4, 2005
              
              
              —Warrants
                  issued
              
              
              73,380,000Warrants
                  exercised
              
              
              —Balance,
                  December 31, 2005
              
              
              73,380,000Warrants
                  issued
              
              
              16,250,000Warrants
                  exercised
              
              
              (31,301,052
              )Balance,
                  December 31, 2006
              
              
              58,328,948




**NOTE
      13 - 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 (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, 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). The balance was exercised
      on a
      cashless basis on varying dates in 2006.





(b)  On
      April
      25, 2005, the Company entered into an accounts receivable factoring
      and security agreement 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 and 2005, the amount owed under the
      settlement agreement was $38,941 and $46,180, respectively. During 2007,
      payments totalling $5,000 were made. Interest expense on the note was $7,760
      and
      $695 for the periods ended December 31, 2006 and 2005,
      respectively.





96




In
      connection with the factoring agreement, the Company issued to JJ Ellis a
      warrant to purchase $60,000 of the Company’s 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).





(c)  On
      July
      28, 2005, the Company issued Mr. Prionti 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.





Select
      University Technologies, Inc.





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
      2006, the Company recorded $332,500 in management fees. As of December 31,
      2006,
      the amount owed to Select University Technologies, Inc. was $218,329, which
      consists of amounts due under the terms of the Venture Acceleration Agreement
      and amounts due for rent and reimbursement of operating expenses (see Note
      14) .





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).




97





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,
      2006 the Company owed a total of $1,465 under this note that is included in
      due
      to stockholders in the accompanying consolidated balance sheet as of December
      31, 2006.





Select
      University Technologies, Inc.





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 year ended
      December 31, 2006 was $47,719.





Stockholders.





Included
      in due to stockholders are amounts owed for services rendered by various
      stockholders. Payment of these amounts was made through the issuance of common
      stock. Total amounts due to these individuals as of December 31, 2006 and 2005
      was $328,070 and $296,724, respectively.





**NOTE
      14 - COMMITMENTS AND CONTINGENCIES**





Litigation.





(a)  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 Company settled this matter. Under the terms of this settlement,
      the Company was 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 the Company the sum of $2,000 per installment payment to
      reimburse it for administrative costs in connection with the payment.
      Accordingly, the Company assumed a settlement liability of $116,000 from World
      Am, Inc. on August 31, 2005.




98





Management
      has been advised by legal counsel that the settlement is now unenforceable
      in
      the State of Colorado because the action was dismissed the plaintiff with
      prejudice, and cannot be presented in any other jurisdiction. The actions that
      lead to this involved the procedures under which the complaint was filed and
      the
      settlement reached and recorded. In addition, this legal counsel has advised
      that a new action cannot be refiled since the relevant statute of limitations
      on
      this matter has expired. Accordingly, the Company has eliminated the settlement
      liability and recorded a settlement gain of $116,000 as of December 31,
      2005.





(b)  On
      October 25, 2004, a complaint was filed in the United States District Court,
      District of Colorado: Mitchell Vince v. Isotec, Inc. and World Am, Inc. 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 December 31, 2006.
      The
      settlement of $120,000 is included in accounts payable in the accompanying
      consolidated balance sheet.





(c)  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 complaint principally
      alleges that World Am, Inc. breached an employment agreement with the plaintiff
      by not paying her certain amounts allegedly owing. The Company has retained
      counsel in the matter and responsive pleadings have been filed. Certain of
      the
      claims were dismissed recently by the court.





Management
      believes the Company has meritorious claims and defenses to the plaintiff’s
      claims and ultimately will prevail on the merits. However, this matter remains
      in the very early stages of litigation and there can be no assurance as to
      the
      outcome of the lawsuit. Litigation is subject to inherent uncertainties, and
      unfavorable rulings could occur. If unfavorable rulings were to occur, there
      could be a material adverse impact of on the Company’s financial condition,
      results of operations or liquidity.





(d)  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 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 has retained counsel in the matter and responsive pleadings have
      been filed.





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
      the
      Company and SUTI, dated June 10, 2005.





Management
      believes the Company has meritorious claims and defenses to the plaintiff’s
      claims and ultimately will prevail on the merits. However, this matter remains
      in the very early stages of litigation and 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.





99




Operating
      Leases.





Isotec
      leases a 4,800 square foot facility in Westminster, Colorado with a monthly
      rent
      and common area expense of $3,905 through December 31, 2011. Rent and common
      area expense totalled $47,875 and $81,472 for the years ended December 31,
      2006
      and 2005, respectively. Rent expense for the year ended December 31, 2005
      includes $35,435 incurred for a facility no longer leased by the Company in
      2006.





As
      of
      December 31, 2006 future minimum non-cancellable facility rental payments
      required under the operating lease are as follows:





2007
            
            $
            48,7342008
            
            
            50,6842009
            
            
            52,7112010
            
            
            54,7202011
            
            
            57,012$
            263,861





Contractual
      Obligations.





The
      company was obligated under a capital lease for manufacturing equipment. For
      financial reporting purposes, minimum lease payments relating to the equipment
      were capitalized. The final payment on the capital lease, amounting to $8,175
      was the only remaining capital lease obligation. However, the Company has
      renegotiated the lease terms. The Company is no longer obligated to pay the
      final payment until it chooses to do so. Until the final payment is made, the
      equipment is now on a month-to-month rental; the lessor requires a monthly
      rental payment of $425. The Company has the right to return the equipment to
      the
      lessor at any time.





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,
      expiring between December 2006 and June 2007 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.




100





License
      Agreement.





Senz-It,
      the wholly owned subsidiary of the Company, exercised the option it held to
      enter into an exclusive, royalty-bearing license with The Research Foundation
      of
      the State University of New York at Buffalo (“SUNY”). This license is intended
      to cover patents developed by SUNY that will enable Senz-It to develop
      technology with an entirely new approach to sensing, process monitoring,
      homeland security and environmental scanning applications.





On
      January 22, 2007, the Company entered into a license agreement with SUNY. This
      is an exclusive field-of-use license to facilitate the development and
      commercialization of certain technology contained within certain patents and
      patent applications developed at SUNY. Under the terms of this license
      (effective as of December 1, 2006), Senz-It has paid, and will pay, fees,
      royalties and research funding to SUNY. In connection with this license
      agreement, Senz-It will issue restricted shares of common stock, and will issue
      additional such shares, to the SUNY, pursuant to the terms of a Stock Purchase
      Agreement, so that it will maintain a minimum ownership of 10% in Senz-It.
      Finally, Senz-It entered into a Stockholders Agreement 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.





**NOTE
      15 - RECEIVABLE RELATED TO ISSUANCE OF COMMON STOCK**





During
      May 2004, the Company entered into a Share Exchange Agreement (the “Exchange
      Agreement”) with World Am Security Venture Company, Ltd. (“WSVC”), a privately
      held China corporation. The Company recorded a receivable totalling $220,000
      in
      anticipation that the remaining terms of the Exchange Agreement would be
      fulfilled. During the third quarter 2006, the Company received formal
      notification that WSVC considered the Shares Exchange Agreement to be null
      and
      void. Consequently, the receivable related to stock issuance was reversed
      against additional paid-in capital.




101





**NOTE
      16 - SUBSEQUENT EVENTS**





Stock
      Issuances .





(1)  On
      January 2, 2007, the Company issued 900,000 free trading shares of common stock
      for services rendered by consultants valued at $3,510 ($0.0039 per share).





(2)  On
      January 9, 2007, the Company issued 2,021,321 free trading shares of common
      stock as payment of compensation owed employees valued at $8,490 ($0.0042 per
      share).





(3)  On
      January 17, 2007, the Company issued 13,515,103 free trading shares of common
      stock for services rendered by consultants valued at $66,224 ($0.0049 per
      share).




(4)  On
      January 22, 2007, the Company sold 90,000,000 restricted shares of common stock
      to investors in a private placement. The shares were valued at $450,000 ($0.005
      per share).





(5)  On
      January 19, 2007, the Company issued 1,000,000 free trading shares of common
      stock as payment for services rendered by a consultant valued at $6,000 ($0.006
      per share).





(6)  On
      January 25, 2007, the Company issued 714,286 free trading shares of common
      stock
      as payment for services rendered by a consultant valued at $3,714 ($0.0052
      per
      share).





(7)  On
      January 26, 2007, the Company issued 1,461,876 free trading shares of common
      stock as payment of compensation owed employees, valued at $8,040 ($0.0055
      per
      share).





(8)  On
      January 30, 2007, the Company issued 1,090,909 free trading shares of common
      stock as payment for services rendered by a consultant valued at $6,000 ($0.0055
      per share).





(9)  On
      February 5, 2007, the Company issued 1,703,125 shares of free trading shares
      of
      common stock for services rendered by consultants valued at $13,625 ($0.008
      per
      share).





(10)  On
      February 5, 2007, the Company issued 2,500,000 free trading shares of common
      as
      payment for services rendered by a consultant valued at $20,000 ($0.008 per
      share).





(11)  On
      February 9, 2007, the Company sold 10,000,000 restricted shares of common stock
      to investors in a private placement. The shares are valued at $50,000 ($0.005
      per share).





(12) On
      February 12, 2007, the Company issued 1,675,301 free trading shares of common
      stock as payment of compensation owed employees, valued at $15,078 ($0.009
      per
      share).




102





(13)  On
      February 15, 2007, the Company issued 300,000 free trading shares of common
      stock as payment for services rendered by a consultant valued at $2,250 ($0.0075
      per share).





(14)  On
      February 16, 2007, the Company issued 1,000,001 free trading shares of common
      stock as payment for services rendered by consultants valued at $7,500 ($0.0075
      per share).





(15)  On
      February 20 2007, the Company issued 857,143 free trading shares of common
      stock
      as payment for services rendered by a consultant valued at $6,000 ($0.007 per
      share).





(16)  On
      February 21, 2007, the Company sold 5,000,000 restricted shares of common stock
      to an investor in a private placement. The shares are valued at $25,000 ($0.005
      per share).





(17)  On
      February 21, 2007, the Company issued 17,539,233 free trading shares of common
      stock as payment for services rendered by consultants valued at $114,005
      ($0.0065 per share); 7,616,147 of the shares were issued to Robert Hovee, chief
      executive officer, as compensation for services rendered to the Company valued
      at $49,505.





(18)
      On
      February 23, 2007, the Company issued 2,072,733 free trading shares of common
      stock as payment of compensation owed employees, valued at $14,509 ($0.007
      per
      share).





(19)
      On
      February 26, 2007, the Company issued 500,000 free trading shares of common
      stock as partial payment of monies owed on a convertible note payable, valued
      at
      $3,300 ($0.0066 per share).





World
      Am 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 during 2007 under this plan.




I f
      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, then
      the
      employee has the right to purchase 1/4 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.




103





On
      February 13, 2007, the Company granted options to each of its executive officers
      under that plan as follows: Robert Hovee: 10,000,000 shares; David Barnes:
      5,000,000 shares; and James Largent: 5,000,000 shares.





Product
      Manufacturing.





Senz-It
      intends to subcontract the component manufacturing to two firms, experts in
      their respective fields, and do the final assembly of the product in a
      Company-managed facility. The two firms, both public companies, are based in
      New
      York. The first will manufacture the sensor elements while the second will
      manufacture and assemble the electronics necessary to read and interpret the
      sensor elements. Memoranda of understanding have been signed with these two
      companies in 2007.





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 1, 2006. 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.





Escrow
      Account.





The
      Company had previously established an escrow account at Island Stock transfer
      to
      hold shares pending issuance under the Company’s Employee Stock Incentive Plan.
      These shares were considered to be issued but not outstanding. In March 2007,
      the Company cancelled this escrow and returned all such shares to the Company
      for cancellation.





104


**EXHIBIT
      INDEX**


Number
              
              Description2.1
              
              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).
  105
  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 the Company 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).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).
  106
  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).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).
  107
  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).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).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).
  108
  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 (filed herewith).10.11
              
              $75,000
                  Factoring Agreement between the Company and JJ Ellis, LLC, dated
                  April 25,
                  2005, and attached Warrant (filed herewith).10.12
              
              Addendum
                  to Factoring Agreement, dated August 8, 2005 (filed
                  herewith).10.13
              
              Consulting
                  Agreement between the Company and Robert Hovee, dated February
                  21, 2007
                  (filed herewith)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).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).
  109
  21
              
              Subsidiaries
                  of the Company (incorporated by reference to Exhibit 21 of the
                  Form
                  10-KSB/A filed on June 30, 2006).23.1
              
              Consent
                  of L.L. Bradford & Company, LLC (filed herewith).23.2
              
              Consent
                  of KMJ Corbin & Company, LLP (filed herewith).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 David J. Barnes (filed
                  herewith).32
              
              Section
                  1350 Certification of Robert A. Hovee and David J. Barnes (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).99.3
              
              Press
                  release issued by the Company, dated June 13, 2005 (incorporated
                  by
                  reference to Exhibit 99 of the Form 8-K filed on June 16,
                  2005).99.4
              
              Press
                  Release issued by the Company, dated August 9, 2005 (incorporated
                  by
                  reference to Exhibit 99.2 of the Form 8-K/A filed on September
                  7,
                  2005).99.5
              
              Press
                  Release issued by the Company, dated September 7, 2005 (incorporated
                  by
                  reference to Exhibit 99.3 of the Form 8-K/A filed on September
                  7,
                  2005).99.6
              
              Press
                  Release issued by the Company, dated November 7, 2005 (incorporated
                  by
                  reference to Exhibit 99 of the Form 8-K filed on November 14,
                  2005).99.7
              
              Press
                  Release issued by the Company, dated November 14, 2005 (incorporated
                  by
                  reference to Exhibit 99 of the Form 8-K filed on November 16,
                  2005).99.8
              
              Press
                  Release issued by the Company, dated February 21, 2006 (incorporated
                  by
                  reference to Exhibit 99 of the Form 8-K filed on March 2, 2006).





110