U.
S. SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-KSB






[X] ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
fiscal year ended December 31,
2007


[X] 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: 333-138083





AUDIOSTOCKS,
INC.


(Name of
small business issuer as specified in its charter)





Delaware
            20-2197964(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer
              Identification
      No.)2038
      Corte Del Nogal, Suite 110
              Carlsbad,
      CA 92011
              ________________________________________________________________________
              (Address
      of principal executive offices, including zip
  code)







Registrant’s
telephone number, including area
code:                                                                                                           760-804-8844


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


Securities
registered pursuant to Section 12(g) of the
Act:                                                                      $.001 par value common
stock


___________________





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





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





The
issuer’s revenues for the most recent fiscal year were $3,587,802.





The
aggregate market value of the common equity held by non-affiliates of the
registrant was approximately $3,005,980 based upon the closing price of our
common stock which was $1.75 on January 11, 2008.  Shares of common
stock held by each officer and director and by each person or group who owns 10%
or more of the outstanding common stock amounting to 15,784,787 shares have been
excluded in that such persons or groups may be deemed to be
affiliates.  This determination of affiliate status is not necessarily
a conclusive determination for other purposes.





As of
March 20, 2008, 17,503,090 shares of our common stock were issued and
outstanding.





Documents
Incorporated by Reference:      None.





Transitional
Small Business Disclosure Format:  No.















PART
I





Item
1.   Description of Business





Company
Overview





Audiostocks
is an internet based publishing platform designed to compile, catalogue,
distribute and make functional, financial content and data related to that
content.  Audiostocks.com solutions generate rich fact-based media
exposure for public and private companies, industry groups and investment
professionals through the Audiostocks.com software platform.  Our
software is primarily used to: (1) facilitate executive and company
participation in industry and event-based roundtables and conferences; (2)
create and distribute audio-based content related to a particular private or
public company; (3) append interview-related and other rich media content to
traditional press releases; and (4) for registered investment professionals
only, to add interview-based audio content to financial research.  Our
content is distributed online to individual investors and finance professionals
including North American buy-side analysts, investment research professionals
and portfolio managers.  All content is copyrighted to protect
licensing partners.





Our
corporate headquarters are located at 2038 Corte Del Nogal, Suite 110, Carlsbad,
California 92011. Our telephone number at our corporate head office is (760)
804-8844.





Corporate
History





We were
originally incorporated under the laws of the State of Delaware on January 22,
2002, as Jupiter Processing Inc. On January 13, 2005, we changed our name to
Audiostocks, Inc.  Our fiscal year end is December 31.





General





Audiostocks.com is a financial media
and technology company. Our revenue streams can be categorized into three
service divisions:





·
            
            Introductory
      Program;·
            
            Accountability
      Plus; and·
            
            Distribution
      Pro.





We are a
media platform for publicly traded small and micro capitalization companies,
providing the latest fact-based information to current and prospective
shareholders. Our content is distributed online to individuals, financial
professionals, investment research professionals and portfolio
managers.





In
today’s financial environment, fact-based information is one of the most
essential tools an investor can utilize to make successful investment decisions.
Unfortunately, investors, and even investment professionals, are often unable to
find current and up-to-date information on small and micro capitalization
companies. Ordinarily, the investing public is forced to rely upon periodic
reports filed by small and micro capitalization companies with the Securities
and Exchange Commission. These reports often do not provide a comprehensive
depiction of a company’s overall operations, goals and strategies in a format
that is understandable to many shareholders. Investors need a continuous stream
of up-to-date information in order to make sound investment
decisions.





Audiostocks.com
seeks to bridge that gap in information by providing an online forum where small
and micro capitalization companies can disseminate, and the investment public
can obtain, the most current and up-to-date, fact-based investment information
available. We provide the investing public with a product that integrates
traditional publishing with an audio interview format and other leading edge
software and electronic communication tools.





Rather
than solely offering text based reports and information, investors browsing the
Audiostocks.com website can find exclusive audio and video interviews directly
from the executives managing our client companies. These interviews typically
cover general business profiles, emerging industry trends, evolving business
plans, new target markets and short and long term corporate strategies. Our
AudioNewsTM service
provides client company executives and representatives the opportunity to
discuss at length, the information contained within recent press releases.
AudioNewsTM bridges the gap between current company news and past information
from SEC forms 10-K, 10-Q, and 8-K essentially creating an educational platform
for investors to fortify their understanding of the client’s
development.





All
recipients of Audiostock’s content receive Audiostock’s content because they
have filled out a user request form and have requested to receive Audiostock’s
content.





We do not
offer investment advice. We are not brokers or dealers in securities. All
information posted on the Audistocks.com website is provided to us by the client
companies or is originated by Audiostocks.com in direct cooperation with a
client company and approved by the client company before posting.





Products
And Services





Our
understanding of internet based financial technology and media has enabled us to
leverage our products and services to enter new markets and secure new clients.
Using a common integrated technology platform, we have developed three main
levels of service: the Introductory Program; Accountability Plus; and
Distribution Pro, as described below:





Introductory Program
provides clients with our introductory services. The client’s company profile is
posted in the “Companies” section of Audiostocks.com, and includes:





·
            
            A
      brief description of the client·
            
            A
      description of the client’s key products and services·
            
            The
      posting of the client’s logo·
            
            The
      posting of the client’s executive photos·
            
            The
      posting of a 10 minute overview interview or one AudioNewsTM
      story·
            
            A
      link to the client’s homepage·
            
            A
      link to the client’s SEC filings





Accountability
Plusis
designed to communicate the client’s company story and track how well the client
message is being received.





Accountability
Plus also provides the client with exposure to the AudioNewsTM
format.  We view each significant development of a client as a
"chapter" in the client’s book or business strategy.  Problems can
arise when shareholders or the marketplace "forget" about prior chapters in the
"book."  AudioNewsTM is designed to pull the client’s "chapters"
together, and show how each chapter integrates into the successful execution of
the client’s business plan.  AudioNewsTM accomplishes this through an
audio interview format and by including an AudioNewsTM Interview hyperlink at the
bottom of a press release.  Accountability Plus also includes the
following:





·
            
            Access
      to the backend Audiostocks database, allowing the client to (i) track user
      activity directed to the client, (ii) respond to user "Q & A"
      inquiries and (iii) record all responses·
            
            The
      client will become a “featured” company on the Audiostocks.com home
      page·
            
            The
      posting of a ten minute corporate overview interview·
            
            Four
      earnings call interviews·
            
            Four
      AudioNewsTM interviews·
            
            Brief
      description of the client and their products and
  services·
            
            The
      client logo, executive photographs and biographies·
            
            A
      corporate fact sheet·
            
            A
      link to the client’s homepage and SEC filings·
            
            The
      client will be able to post additional documents in multiple
      formats








Distribution Prois designed to
consistently distribute a variety of client materials specifically to opt in
institutional investors.   The Distribution Pro program also
provides the client with a personal Audiostocks.com shareholder communications
manager who is able to field and respond to shareholder inquiries on a daily
basis.  Additional benefits include:





·
            
            The
      client will be introduced to Audiostocks’ institutional
      relationships·
            
            Posting
      of an in depth audio-based corporate overview·
            
            Eight
      AudioNewsTM interviews·
            
            Direct
      mail to existing shareholders·
            
            Daily
      access to a personal shareholder communications manager·
            
            Four
      earnings calls·
            
            A
      client fact sheet will be distributed via email to Audiostocks.com opt-in
      users·
            
            Posting
      of documents in various formats·
            
            Inclusion
      in Audiostocks.com newsletters·
            
            Participation
      in industry related, public company conferences·
            
            Description
      of the client’s products and services·
            
            Posting
      of client logo, executive photographs and biographies·
            
            Access
      to the backend Audiostocks database, allowing the client to (i) track user
      activity directed to the client, (ii) respond to user "Q & A"
      inquiries and (iii) record all
responses





Audiostocks’
programs are available to our clients in combinations of any of our offered
service packages.





We have
built and maintain our data processing solution that aggregates the multiple
feeds, translates and builds a common database infrastructure. Our system then
cleans, filters and maintains the data for use by our various data-driven
services. We have a sophisticated server and security system which runs this
content/data management system. Our services include providing client
fundamentals, links to regulatory filings and client profiles.





The
applications are delivered to customers in three different formats:





·
            
            Through
      our software via the world wide web on
  www.Audiostocks.com;·
            
            Through
      email to subscribers who register at
  www.Audiostocks.com.





Competition





The
market for our Internet products and services is relatively new and has been
highly fragmented, but we have seen a trend toward consolidation of the market
in recent months. We compete intensely with other companies providing similar
services to us. Many of those services are commodity-like and not easily
differentiated. Our competition includes direct competitors such as CEOCast.com,
Stockgroup Information Systems, Inc., and www.WallStreet.net, as well as
general-purpose Internet portals such as Yahoo! and AOL, who provide financial
and investment research information. Our competition in the advertising market
includes other financial and business related Websites such as Thestreet.com and
Globeandmail.com. We expect our competitors to remain strong as the Internet
industry further consolidates.





Employees





We currently have seven full time
employees.  Additionally, we hire independent contract labor on an as
needed basis.  We have not entered into a collective bargaining
agreement with any union.  We have not experienced any work stoppages
and consider the relations with the individuals that work for us to be good. Due
to planned growth, we anticipate hiring additional full time employees over the
course of the calendar year 2008.





Section
17(b) Disclosures





Section 17(b) of the Securities Act of
1933 requires certain disclosures by any person that publishes, gives publicity
to, or circulates any notice, circular, advertisement, newspaper, article,
letter, investment service, or communication which, though not purporting to
offer a security for sale, describes such security for a consideration received
or to be received, directly or indirectly, from an issuer, underwriter, or
dealer. In the event Section 17(b) applies, certain disclosures must be made
regarding the compensation received including the nature of the compensation,
the amount of the compensation and the source of the compensation.





All required compensation disclosures
and information under Section 17(b) are posted and may be viewed on the
“Disclosures” section of our website at www.audiostocks.com.





Regulatory
Issues





Aside
from the above 17(b) disclosures, we do not believe we are subject to
governmental regulation in our Internet publishing efforts, nor do we know of
any pending legislation or regulation which may impose regulatory requirements
on our Internet activities. We believe that we are in compliance in all material
respects with all laws, rules, regulations and requirements that affect our
business, and that compliance with such laws, rules, regulations and
requirements does not impose a material impediment on our ability to conduct our
business.





Subsidiaries





We own no
subsidiaries at this time.





Item
1A.   Risk Factors and Cautionary Statement Regarding
Forward-Looking Information





The
following factors should be considered carefully in evaluating Audiostocks and
its business.  We have a limited operating history upon which an
evaluation of our current business and prospects can be based. Our limited
operating history makes it difficult for you to judge our prospects. We have
reported losses for each fiscal year since we became incorporated. You should
consider any purchase of our shares in light of the risks, expenses and problems
frequently encountered by all companies in the early stages of its corporate
development, such as lack of capital, difficulty attracting high quality
personnel, lack of market exposure, and uncertainty about the viability of our
business plan.





RISKS RELATED TO OUR
BUSINESS





Liquidity
and capital resources are uncertain.





You
should be cautioned that there can be no assurance that revenue, margins, and
profitability will increase. There can be no assurance that we will be
successful in raising a sufficient amount of additional capital or in internally
generating a sufficient amount of capital to meet our operational
requirements.





Our
ability to continue as a going concern is uncertain.





In view
of our liquidity conditions, our ability to continue as a going concern is
uncertain and dependent upon achieving a profitable level of operations and, if
necessary, on our ability to obtain necessary financing to fund ongoing
operations. As well, our ability to absorb a large unforeseen expenditure or
other disaster is limited by our current lack of capital resources. Our
auditors' report also discusses substantial doubt about our ability to continue
as a going concern.





Computer
equipment problems and failures could adversely affect our
business.





Problems
or failures in Internet-related equipment, including file servers, computers and
software, could result in interruptions or slower response times for our
Web-based services, which could reduce the attractiveness of our Website,
financial tools or investor relations services to advertisers and users. Should
such interruptions continue for an extended period we could lose significant
business and reputation. Equipment problems and failures could result from a
number of causes, including an increase in the number of users of our Website,
computer viruses, outside programmers penetrating and disrupting software
systems, human error, fires, floods, power and telecommunications failures and
internal breakdowns. In addition, any disruption in Internet access and data
feeds provided by third parties could have a material and adverse effect on our
businesses. Our limited resources do not currently permit us to maintain an
off-site disaster recovery facility. As a result, if we experience a major
disaster such as a fire, theft, or intentional destruction of our computer
equipment, it could have catastrophic results for our business.





Our
computer systems may not be able to accommodate increases in the number of users
of our services.





In the
past, our Website has experienced significant increases in traffic when there is
noteworthy business or financial news stories. In addition, the number of our
users has continued to increase over time as we continue to seek further
increases in our user base. Consequently, our Website must accommodate a high
volume of traffic and deliver frequently updated information. Our Website has in
the past and may in the future experience slower response times or other
problems for a variety of reasons.





We
may not be able to compete successfully against current and future
competitors.





We
currently compete with several other companies offering similar services. Many
of these companies have significantly greater financial resources, name
recognition, and technical and marketing resources, and virtually all of them
are seeking to improve their technology, products and services. We can not
assure you that we will have the financial resources or the technological
expertise to successfully meet this competition. Increased competition could
result in price reductions, reduced margins, or loss of market share, any of
which would adversely affect our business.





We
are significantly influenced by our officers, directors and entities affiliated
with them.





In the
aggregate, ownership of Audiostocks shares by management, and /or entities
affiliated with management, represents a majority of our present issued and
outstanding shares of common stock. These shareholders, if acting together, will
be able to significantly influence all matters requiring approval by
shareholders, including the election of directors and the approval of mergers or
other business combinations.





We
license our software from a third party licensor.





We do not own and currently license our
software from a third party licensor. The use of this software currently
provides us with all of our revenues. In the event we lose the license rights to
this software, our business operations will be severely hindered and may result
in a loss all revenue streams





We
pay significant software licensing fees to our third party
licensor.





Licensing
fees and royalties under our software licensing agreement include (i) royalty
payments of fifty nine and one half percent of revenues or (ii) special
dividends equal to fifty nine and one half percent of revenues.





We
are highly dependent on revenue referrals.





We
currently obtain a significant number of our business referrals through third
party referral sources. They may not continue to provide referrals to us and we
may not be able to establish relationships with new referral sources to ensure a
steady flow of clients companies. Our inability to acquire suitable referrals in
the future or the loss of our current referral source and our failure to replace
them may result in a loss of all revenue streams.





A
large portion of our current revenues are received in the form of restricted
stock.





Many of our customers provide payment
for our services in restricted stock. Pursuant to United States securities laws
and Securities and Exchange Commission rules and guidelines, we are often
restricted in our ability to freely sell the stock underlying these payments.
Due to these restrictions, these shares are subject to fluctuations and
volatility in the stock market, as well as risks related to the cancellation of
these shares by our clients before they can be sold. These market fluctuations
may cause us to make substantial adjustments to our revenues reported in our
periodic financial statements.





We
may not be unable to protect the intellectual property rights upon which our
business relies.





We have
pursued or may pursue certain trademarks, and we have brand names and certain
subscriber lists which make up the intellectual property we view as important to
our business. It may be possible for a third party to copy or otherwise obtain
or use our intellectual property without authorization or to develop similar
technology independently. There can also be no assurance that our business
activities will not infringe upon the proprietary rights of others, nor that
other parties will not assert infringement claims against us, including claims
that by, directly or indirectly, providing hyperlink text links to Websites
operated by third parties, we have infringed upon the proprietary rights of
other third parties. Due to the global nature of the Internet, there can be no
assurance that obtaining trademark protection in the United States will prevent
infringements on our trademarks by parties in other countries.





We
may be held liable for online information or services provided by us or third
parties.





Because
materials may be downloaded by the public on Internet services offered by us or
the Internet access providers with whom we have relationships, and because third
party information may be posted by third parties on our Website through
discussion forums and otherwise, there is the potential that claims will be made
against us for defamation, negligence, copyright or trademark infringement or
other theories. The imposition of liability based on such claims could
materially and adversely affect us.





Even to
the extent such claims do not result in liability, we could incur significant
costs in investigating and defending against such claims. The imposition on us
of potential liability for information or services carried on or disseminated
through our Website could require implementation of measures to reduce exposure
to such liability, which may require the expenditure of substantial resources
and limit the attractiveness of services to members and users.





Even if
we obtain general liability insurance, it will not cover all potential claims to
which we are exposed or may not be adequate to indemnify us for all liability
that may be imposed. In any event, even if we obtain general liability
insurance, any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial condition.





Government
regulation and legal uncertainties relating to the web could hinder the
popularity of internet services.





There are
currently few laws or regulations that specifically regulate communications or
commerce on the web. However, laws and regulations may be adopted in the future
that address issues such as user privacy, pricing, and the characteristics and
quality of products and services. Several telecommunications companies have
petitioned the federal communications commission to regulate Internet service
providers and online services providers in a manner similar to long distance
telephone carriers and to impose access fees on these companies. This could
increase the cost of transmitting data over the Internet. Moreover, it may take
years to determine the extent to which existing laws relating to issues such as
property ownership, libel and personal privacy are applicable to the web. Any
new laws or regulations relating to the web could adversely affect our
business.




We
are highly dependent on activity levels in the securities market.




Our
business is dependent upon the health of the financial markets. Some of the
financial data and information market demand is dependent on activity levels in
the securities markets. In the event that the U.S. or international financial
markets suffer a prolonged downturn that results in a significant decline in
investor activity, our revenue levels could be materially adversely
affected.




Our
business and revenues may be affected by restrictions on use of third party
information.





We post
news clippings from other third party news websites on the Audiostocks.com
website with links to the source site. Most publishers currently encourage this
practice.  To the extent that a large majority of news publishers
prohibit posting of their stories on our Websites or begin charging royalty fees
for such stories, our Website traffic could decrease or our costs could
increase, thereby adversely impacting our profitability.





We
could face liability for the information displayed on our Website.





We may be
subjected to claims for defamation, negligence, and copyright or trademark
infringement relating to the information we publish on our web site. These types
of claims have been brought, sometimes successfully, against online services in
the past. We could also be subjected to claims based upon the content that is
accessible from our Website through links to other websites.





We
may attempt to raise additional capital through the sale of additional common
stock in the near future.  Future issuances of common stock may dilute
your position in us.





Our stock
price is highly vulnerable to buying and selling pressures. As there is a
limited market for our common stock, there may be considerable volatility in our
stock price due to selling and buying pressures. Future sales of shares by our
existing or future shareholders could cause the market price of our common stock
to decline.





Our
board of directors has authorized preferred shares.





Our board
of directors has the authority to issue certain preferred shares with rights,
preferences and/or privileges senior to or on parity with the rights of the
holders of common stock. The potential consequences to our investors include,
but are not limited to, a loss of perceived value of the stock in the market, a
loss of voting powers and a loss of future earnings and dividends, if and when
dividends are declared.





Future
sales of our equity securities will dilute current investors.





To fully
execute our long-term business plan, we will need to raise debt and equity
capital in the future. We will need to raise additional equity capital as we
raise additional debt capital to keep our debt to equity ratio in a range
acceptable to the financial institutions providing debt capital. Such additional
equity capital when and if it is raised would result in an investor being
diluted.





We
plan to grow very rapidly, which will place strains on our management team and
other company resources.





We plan
to grow rapidly and significantly expanded our operations. This growth will
place a significant strain on our management systems and resources. We will not
be able to implement our business strategy in a rapidly evolving market without
an effective planning and management process. We will not be able to increase
revenues unless we continue to improve our transaction-processing, operational,
financial and managerial controls and reporting systems and procedures, expand,
train and manage our work force and manage multiple relationships with third
parties.





INVESTMENT
RISKS





Our
common stock price is likely to be highly volatile.





The
market price for our common stock is likely to be highly volatile. We cannot
assure you that our common stock will trade at the same levels of other stock in
our industry. The following factors will add to our common stock price's
volatility:





·  our
ability to execute our business plan and significantly grow our
business;


·  our
ability to further develop and enhance our services and products;


·  our
ability to generate a market and recognition for our products and
services;


·  increased
competition from competitors who offer competing services; and


·  our
financial condition and results of our operations.


·  actual or
anticipated variations in our quarterly operating results,


·  new sales
formats or new products or services offered by us, or our
competitors,


·  conditions
or trends in our industry in general,


·  announcements
by us or our competitors of significant acquisitions, strategic partnerships or
joint ventures,


·  our
capital commitments,


·  additions
or departures of our key personnel, and


·  sales of
our common stock.





Many of
these factors are beyond our control. These factors may decrease the market
price of our common stock, regardless of our operating performance.





Trading
of our stock may be restricted by the SEC's penny stock regulations which may
limit a stockholder's ability to buy and sell our stock.





The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price (as
defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are currently covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock. Future issuances of shares
may adversely impact the value of our stock.





Investors
may face significant restrictions on the resale of our stock due to state blue
sky laws





Each
state has its own securities laws, often called “blue sky laws,” which (1) limit
sales of stock to a state's residents unless the stock is registered in that
state or qualifies for an exemption from registration and (2) govern the
reporting requirements for broker-dealers and stock brokers doing business
directly or indirectly in the state. Before a security is sold in a state, there
must be a registration in place to cover the transaction, and the broker must be
registered in that state, or otherwise be exempt from registration. We do not
know whether our stock will be registered under the laws of any states. A
determination regarding registration will be made by the broker-dealers, if any,
who agree to serve as the market-makers for our stock. There may be significant
state blue sky law restrictions on the ability of investors to sell, and on
purchasers to buy, our securities.





Accordingly,
investors should consider the secondary market for our securities to be a
limited one. Investors may be unable to resell their stock, or may be unable to
resell it without the significant expense of state registration or
qualification.





Investors
may face significant restrictions on the resale of our stock due to federal
regulations of penny stock.





Our stock
differs from many stocks, in that it is a “penny stock.” The Securities and
Exchange Commission has adopted a number of rules to regulate “penny stocks.”
These rules include, but are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3,
15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as
amended.





Because
our securities probably constitute "penny stock" within the meaning of the
rules, the rules would apply to us and our securities. The rules may further
affect the ability of owners of our stock to sell their securities in any market
that may develop for them. There may be a limited market for penny stocks, due
to the regulatory burdens on broker-dealers. The market among dealers may not be
active. Investors in penny stock often are unable to sell stock back to the
dealer that sold them the stock. The mark-ups or commissions charged by the
broker-dealers may be greater than any profit a seller may make. Because of
large dealer spreads, investors may be unable to sell the stock immediately back
to the dealer at the same price the dealer sold the stock to the investor. In
some cases, the stock may fall quickly in value. Investors may be unable to reap
any profit from any sale of the stock, if they can sell it at all.





Stockholders
should be aware that, according to the Securities and Exchange Commission
Release No. 34- 29093, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. These patterns include:





·
            control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or
issuer;


·
            manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;


·
            "boiler
      room" practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales
  persons;


·
            excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers; and


·
            the
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      inevitable collapse of those prices with consequent investor
      losses.





Shares
eligible for future sale by our current shareholders may decrease the price of
our common stock.





If our
shareholders sell substantial amounts of our common stock in the public market
following future offerings, then the market price of our common stock could
fall. Restrictions under the securities laws limit the number of shares of
common stock available for sale in the public market.
























Cautionary
Statement Concerning


Forward-Looking
Statements





Some of
the statements in this annual report are forward looking statements, which are
subject to risks and uncertainties.  These risks and uncertainties
could cause actual results to differ materially from those expressed in
forward-looking statements.  We base these forward-looking statements
on our expectations and projections about future events, which we derive from
the information currently available to us.  Such forward-looking
statements relate to future events or our future
performance.  Forward-looking statements are only
predictions.  The forward-looking events discussed in this annual
report, the documents to which we refer you and other statements made from time
to time by us or our representatives, may not occur, and actual events and
results may differ materially and are subject to risks, uncertainties and
assumptions about us.  For these statements, we claim the protection
of the “bespeaks caution” doctrine.  The forward-looking statements
speak only as of the date hereof, and we expressly disclaim any obligation to
publicly release the results of any revisions to these forward-looking
statements to reflect events or circumstances after the date of this
filing.





Item
2.  Description of Property





Intellectual
Property, Proprietary Rights And Domain Names





We
presently rent the domain name www.Audiostocks.com from a licensor, and it is
our intention to purchase additional domain names in the future as the nature of
our business, and the products and services we offer, continues to expand. We
believe our rental and ownership of these domain names gives us adequate
protection over them and we intend to continue to keep them in our
possession.





Our
licensor is in the process of filing the requisite paperwork to obtain a
trademark in the United States on "www.Audiostocks.com", "Audiostocks",
“AudioNews” and the Audiostocks logo. We have no other plans to register
significant trademarks as of the date of this report. We may pursue other
trademarks in the future.





We
protect our other intellectual property through a combination of trademark law,
trade secret protection and confidentiality agreements with our employees,
customers, independent contractors, agents and vendors. We pursue the
registration of our domain names, trademarks and service marks in the United
States and internationally. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which our
services and products are made available on-line. We create some of our own
content and obtain the balance of our content from third parties. It is possible
that we could become subject to infringement actions based upon the content
obtained from these third parties. In addition, others may use this content and
we may be subject to claims from our licensors. We currently have no patents or
patents pending and do not anticipate that patents will become a significant
part of our intellectual property in the future. We enter into confidentiality
agreements with our employees and independent consultants and have instituted
procedures to control access to and distribution of our technology,
documentation and other proprietary information and the proprietary information
of others from whom we license content. The steps we take to protect our
proprietary rights may not be adequate and third parties may infringe or
misappropriate our trademarks, service marks and similar proprietary rights. In
addition, other parties may assert claims of infringement of intellectual
property or alter proprietary rights against us. The legal status of
intellectual property on the Internet is currently subject to various
uncertainties as legal precedents have not been set and are still to be
determined in many areas of Internet law.





Real
Property





At
present, we do not own any property.  Our executive offices currently
consist of shared leased office space located at:  2038 Corte Del
Nogal, Suite 110, Carlsbad, California 92011 and our phone number is
760-804-8844.  We are currently negotiating our lease terms. We may
require a larger office space if we grow.  We believe there is an
adequate supply of suitable office space in surrounding areas on terms
acceptable to us.





Item
3.  Legal Proceedings





None.





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





None.

















PART
II





Item
5.  Market for Common Equity and Related Stockholder
Matters.





Our
common stock is currently traded over the counter and is listed on the OTC
Bulletin Board under the symbol "AUIO" and did not begin trading until 2008. As
such, there are no historical trading prices for our common stock during the
past two years.





The most
recent closing price for our common stock was on January 11, 2008 at $1.75 per
share. The trading price of our common stock may be volatile with dramatic
changes over short periods. The trading price may reflect imbalances in the
supply and demand for shares of the Company, market reaction to perceived
changes in the industry in which we sell products and services, general economic
conditions, and other factors. Investors are cautioned that the trading price of
the common stock can change dramatically based on changing market perceptions
that may be unrelated to us and our activities.





Holders





As of
December 31, 2007 there were approximately 171 record holders of our common
stock.





Dividends





We have
declared one stock dividend in January, 2005 for 99 shares of our common stock
to each shareholder of record. We do not contemplate paying dividends in the
foreseeable future.  It is anticipated that earnings, if any, will be
retained to retire debt and for the operation of the business.





Securities
Authorized for Issuance Under Equity Compensation Plans.





None.





Recent
Sales of Unregistered Securities:





During
January 2002 to December 2004, the Company issued 51,439 shares of common stock
for services valued at $0.001 per share.





During
January 2005, the Board of Directors approved a 200 to 1 reverse
split.  These financial statements have been retroactively restated to
reflect this change.





During
January 2005, the Company issued 72 shares of common stock due to the 200 to 1
reverse split.





During
January 2005, the Company issued 17,148,561 shares of common stock for services
valued at $0.001 per share.





During
January 2005, the Company issued 16,236 shares of common stock as a dividend
valued at $0.001 per share.





During
July 2007, the Company reacquired and immediately retired 800,000 shares of
common stock valued at $0.03 per share.





During
July 2007, the Company reacquired and immediately retired 24,281 shares of
common stock at par value





During
July 2007, the Company issued 420,308 shares of common stock as officer
compensation valued at $0.001 per share.





During
October 2007, the Company issued 1,000 shares of common stock in exchange of
cash valued at $0.75 per share.





During
October 2007, the Company issued 609,755 shares of common stock pursuant to a
stock exchange agreement valued at $0.22 per share.





All of
the issuances of securities described above were deemed to be exempt from
registration in reliance on Section 4(2) of the Securities Act of 1933 as
transactions by an issuer not involving a public offering.  We made the
determination that each investor had enough knowledge and experience in finance
and business matters to evaluate the risks and merits of the investment.
 There was no general solicitation or general advertising used to market
the securities.  We provided each investor with disclosure of all aspects
of our business, including providing the investor with press releases, access to
our auditors, and other financial, business, and corporate information. A legend
was placed on the stock certificates stating that the securities have not been
registered under the Securities Act and cannot be sold or otherwise transferred
without an effective registration or an exemption therefrom.





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





The
following discussion and analysis should be read in conjunction with our audited
consolidated financial statements and related notes included in this
report.  This report contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.  The
statements contained in this report that are not historic in nature,
particularly those that utilize terminology such as “may,” “will,” “should,”
“expects,” “anticipates,” “estimates,” “believes,” or “plans” or comparable
terminology are forward-looking statements based on current expectations and
assumptions.





Various
risks and uncertainties could cause actual results to differ materially from
those expressed in forward-looking statements.  Factors that could
cause actual results to differ from expectations include, but are not limited
to, those set forth under the section “Risk Factors” set forth in this
report.





The
forward-looking events discussed in this report, the documents to which we refer
you and other statements made from time to time by us or our representatives,
may not occur, and actual events and results may differ materially and are
subject to risks, uncertainties and assumptions about us.  For these
statements, we claim the protection of the “bespeaks caution”
doctrine.  All forward-looking statements in this document are based
on information currently available to us as of the date of this report, and we
assume no obligation to update any forward-looking
statements.  Forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements.





Critical
Accounting Policies





Our
critical and significant accounting policies, including the assumptions and
judgments underlying them, are disclosed in the Notes to the Financial
Statements.  These policies have been consistently applied in all
material respects and address such matters as revenue recognition and
depreciation methods.  The preparation of the financial statements in
conformity with generally accepted accounting principles in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period.  Actual results
could differ from those estimates.  The accounting treatment of a
particular transaction is specifically dictated by accounting principles,
generally accepted in the United States of America, with no need for
management’s judgment in their application.  There are also areas in
which management’s judgment in selecting any viable alternative would not
produce a materially different result.  See our audited financial
statements and notes thereto which contain accounting policies and other
disclosures required by accounting principles, generally accepted in the United
States of America.





Plan
of Operation





Our
current operations are centered around our internet based publishing platform,
Audiostocks.com.  Audiostocks is an internet based publishing platform
designed to compile, catalogue, distribute and make functional, financial
content and data related to that content.  Audiostocks.com solutions
generate rich fact-based media exposure for public and private companies,
industry groups and investment professionals through the Audiostocks.com
software platform.  Our software is primarily used to: (1) facilitate
executive and company participation in industry and event-based roundtables and
conferences; (2) create and distribute audio-based content related to a
particular private or public company; (3) append interview-related and other
rich media content to traditional press releases; and (4) for registered
investment professionals only, to add interview-based audio content to financial
research.  Our content is distributed online to individual investors
and finance professionals including North American buy-side analysts, investment
research professionals and portfolio managers.  All content is
copyrighted to protect licensing partners.





Liquidity
and Capital Resources





At
December 31, 2007, we had $27,181 cash on hand. As of the date of this report,
we require additional capital investments or borrowed funds to meet cash flow
projections and carry forward our business objectives.  There can be
no assurance that we will be able to raise capital from outside sources in
sufficient amounts to fund our new business.





We may
continue to seek additional capital over the next 12 months from the additional
sale of our securities.  The amount and timing of our future capital
requirements will depend upon many factors, including the level of funding
received by us, anticipated private placements of our common stock, the level of
funding obtained through other financing sources, and the timing of such
funding.  In the event we are unable to raise additional capital, we
will be unable to expand operations as desired.





We intend
to retain any future earnings, if any, to retire any existing debt, finance the
expansion of our business and any necessary capital expenditures and for general
corporate purposes.





Inflation





Although
management expects that our operations will be influenced by general economic
conditions, we do not believe that inflation had a material effect on our
results of operations during the year ending December 31, 2007.





Going
Concern





The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern.  The history of losses and the inability
for the Company to produce substantial cash flow has raised doubt about our
ability to continue as a going concern.





Expenses





Our total
operating expenses for the year ending December 31, 2007 were $2,921,433 as
compared to $323,529 for the year ending December 31, 2006. General and
administrative expenses for the year ending December 31, 2007 totaled
$31,837.  Software licensing fees for the period ending December 31,
2007 totaled $2,088,337. Professional consulting fees for the year ended
December 31 2007 amounted to $37,096.





Results
of Operations for the Year Ended December 31, 2007.





We had
$3,587,802 in total revenues for the year ended December 31, 2007 as compared to
$354,910 in total revenues for the year ended December 31, 2006. Total operating
expenses for the year ended December 31, 2007 amounted to $2,921,433 as compared
to total operating expenses for the year ended December 31, 2006 of $323,529.
Total income for the year ended December 31, 2007 was $3,661 as compared to
total income for the year ended December 31, 2006 of $18,881.


























Item 7.  Financial Statements
































AUDIOSTOCKS,
      INC.Report
      of Independent Registered Public Accounting FirmBalance
      Sheets at December 31, 2007 and 2006Statements
      of Operations and Comprehensive Income for the years ended December 31,
      2007 and 2006Statements
      of Stockholders Deficit for the years ended December 31, 2007 and
      2006Statements
      of Cash Flows for the years ended December 31, 2007 and
    2006Notes
      to Financial Statements

































































REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Shareholders of


AudioStocks,
Inc.





We have
audited the accompanying balance sheets of AudioStocks, Inc. as of December 31,
2007and 2006 , and the related statements of operations, stockholders’ equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.





We
conducted our audits in accordance with standards of the PCAOB (United States).
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of AudioStocks, Inc. at December 31,
2007and 2006 , and the results of its operations and cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.





The
accompanying financial statements have been prepared assuming that AudioStocks,
Inc. will continue as a going concern. As discussed in Note 2 to the financial
statements, AudioStocks, Inc.  has a significant working capital
deficit and is dependent of financing to continue operations. These issues raise
substantial doubt about the company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.








/s/Chisholm, Bierwolf &
Nilson


Chisholm,
Bierwolf & Nilson, LLC


Bountiful,
UT


April 10,
2008









































AUDIOSTOCKS, INCBALANCE
      SHEETSDecember
      31,
            
            December
      31,2007
            
            2006ASSETSCurrent
      assetsCash
            $
            27,181
            
            6Accounts
      Receivable
            
            -
            
            4,280Total
      current assets
            
            27,181
            
            4,286Fixed
      AssetsProperty,
      Plant and Equipment
            $
            202,782
            
            -Less:
      Accumulated Depreciation
            
            (5,869)
            
            -Total
      Fixed Assets
            
            196,913
            
            -Other
      AssetsSecurities
      Available for Sale
            $
            211,194
            
            236,174Deposits
            
            3,296
            
            -Employee
      Receivable
            
            22,095
            
            -Deferred
      Expenses
            
            267,447
            
            206,745Total
      Other Assets
            
            504,032
            
            442,919TOTAL
      ASSETS
            
            728,125
            
            447,205LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilitiesLicensing
      Fees Payable - Related Party
            $
            267,362
            
            280,111Deferred
      Revenues
            
            407,543
            
            369,870Shareholder
      Loan
            
            15,000
            
            100Accounts
      Payable and Accrued Liabilities
            
            109,675
            
            73,204Convertible
      Debentures - Short Term - Related Party
            
            50,000
            
            -Stock
      To Be Issued
            
            40,000
            
            -Taxes
      Payable
            
            14,744
            
            12,500Accrued
      Interest
            
            2,000
            
            -Total
      current liabilities
            
            906,324
            
            735,785Long
      Term LiabilitiesConvertible
      Debentures
            
            25,000
            
            -Total
      Long Term Liabilities
            
            25,000
            
            -TOTAL
      LIABILITIES
            
            931,324
            
            735,785COMMITMENTSSTOCKHOLDERS'
      DEFICITPreferred
      stock, 5,000,000 shares authorized, $0.001 par valuenone
      issued and outstanding
            
            -
            
            -Common
      stock, 95,000,000 shares authorized, $0.001 par valueissued
      and outstanding 17,423,090 and 17,216,308 sharesat
      December 31, 2007 and 2006, respectively
            
            17,423
            
            17,216Additional
      Paid in Capital
            
            13,563
            
            0Retained
      Earnings/(Deficit)
            
            (18,945)
            
            1,593Accumulated
      Other Comprehensive Income
            
            (215,239)
            
            (307,389)TOTAL
      STOCKHOLDERS' DEFICIT
            
            (203,198)
            
            (288,580)TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
            $
            728,125
            
            447,205The
      accompanying notes are an integral part of these financial
      statements





































AUDIOSTOCKS, INC.STATEMENTS
      OF OPERATIONSFor
      the periods endedDecember
      31,
              
              December
      31,2007
              
              2006RevenuesNet
      Revenues
              $
              3,587,802
              $
              354,910Total
      revenues
              
              3,587,802
              
              354,910ExpensesLicensing
      fees
              
              2,088,337
              
              250,303Professional
      fees
              
              38,096
              
              71,726General
      and administrative
              
              40,221
              
              1,500Contract
      Labor
              
              42,264
              
              -Wages
              
              31,979
              
              -Officer
      Compensation
              
              223,061
              
              -Sales
      Commissions
              
              451,607
              
              -Depreciation,
      depletion, and amortization
              
              5,869
              
              -Total
      operating expenses
              
              2,921,433
              
              323,529Income
      from Operations
              
              666,369
              
              31,381Other
      Income (Expense)Interest
      Income
              
              169
              
              -Interest
      Expense
              
              (2,008)
              
              -Other
      Income
              
              -
              
              -Gain/Loss
      on Sale of Securities
              
              (658,625)
              
              -Total
      Other Income (Expense)
              
              (660,464)
              
              -Income
      Before Income Taxes
              
              5,905
              
              31,381Provision
      for Income Taxes
              
              2,244
              
              12,500NET
      INCOME/LOSS
              $
              3,661
              $
              18,881Basic
      earnings per common share
              $
              0.00
              $
              0.00Diluted
      earnings per common share
              
              0.00
              
              0.00Weighted
      average common andcommon
      equivalent shares outstandingBasic
              
              17,127,449
              
              17,216,308Diluted
              
              17,377,449
              
              17,216,308Net
      Income
              $
              3,661
              
              18,881Other
      Comprehensive IncomeSecurities
      Available for Sale-fair
      value adjustments
              
              92,150
              
              (307,389)Comprehensive
      Income/Loss
              
              95,811
              
              (288,508)The
      accompanying notes are an integral part of these financial
      statements

















AUDIOSTOCKS,
      INC.STATEMENTS
      OF STOCKHOLDERS'' EQUITY (DEFICIT)From
      December 31, 2004 through December 31, 2007Other
            
            TotalPreferred
      Stock
            
            Common
      Stock
            
            Additional
            
            
            
            ComprehensivePar
            
            
            
            Par
            
            Paid-in
            
            Retained
            
            IncomeShares
            
            Value
            
            Shares
            
            Value
            
            Capital
            
            Earnings
      and DeficitBalance
      at December 31, 2005
            -
            $
            $         -
            
            17,216,308
            $
            17,216
            $
            -
            $
            (17,288)
            $
            -
            $
            (72)Net
      Income
            
            
            
            
            
            
            
            
            
            
            18,881
            
            
            
            18,881Fair
      Value Adjustments of Marketable Securities
            
            
            
            
            
            
            
            
            
            
            
            
            (307,389)
            
            (307,389)Balance
      at December 31, 2006
            -
            $
            -
            
            17,216,308
            $
            17,216
            $
            -
            $
            1,593
            $
            (307,389)
            $
            (288,580)Cancellation
      of 24,281 shares
            
            
            
            
            (24,281)
            
            (24)
            
            24
            
            
            
            
            
            0Buyback
      and Cancellation of 800,000 shares
            
            
            
            
            (800,000)
            
            (800)
            
            
            
            (24,200)
            
            
            
            (25,000)Issuance
      of common stock as compensationvalued
      at $0.001 per share
            
            
            
            
            420,308
            
            420
            
            
            
            
            
            
            
            420Issuance
      of common stock in exchange of cashvalued
      at $0.75 per share
            
            
            
            
            1,000
            
            1
            
            749
            
            
            
            
            
            750Issuance
      of common stock as a share exchange
            
            
            
            
            609,755
            
            610
            
            12,789
            
            
            
            
            
            13,399agreement
      valued at $0.22 per shareNet
      Income
            
            
            
            
            
            
            
            
            
            
            3,661
            
            
            
            3,661Fair
      Value Adjustments of Marketable Securities
            
            
            
            
            
            
            
            
            
            
            
            
            92,150
            
            92,150Balance
      at December 31, 2007
            -
            $
            -
            
            17,423,090
            $
            17,423
            $
            13,563
            $
            (18,945)
            $
            (215,239)
            $
            (203,199)The
      accompanying notes are an integral part of these financial
      statements






































AUDIOSTOCKS, INC.STATEMENT
      OF CASH FLOWSFor
      the periods endedDecember
      31,
            
            December
      31,2007
            
            2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
            $
            3,661
            $
            18,881Adjustments
      to Reconcile Net Earnings to Net Cash Usedby
      Operating Activities:Depreciation
            
            5,869
            
            -Stock
      issued for services
            
            420
            
            -Changes
      in Assets and LiabilitiesDecrease
      in Accounts Receivable
            
            4,280
            
            (4,280)Decrease
      in Securities Available for Sale
            
            51,712
            
            (236,174)Decrease
      in Securities Available for Saledue
      to market adjustments
            
            (677,790)
            
            (414,326)Increase
      in Deferred Expenses
            
            (60,702)
            
            (206,745)Increase
      in Deposits
            
            (3,296)
            
            -Increase
      in Employee Receivable
            
            (22,095)
            
            -Decrease
      in Licensing Fees Payable
            
            (12,749)
            
            280,111Decrease
      in Licensing Fees Payable in the form ofsecurities
      available for sale due to market adjustments
            
            621,765
            
            106,937Increase
      in Deferred Revenues
            
            37,673
            
            369,870Decrease
      in Accounts Payable and Accrued Liabilities
            
            78,471
            
            73,204Decrease
      in Payables in the form ofsecurities
      available for sale due to market adjustments
            
            148,175
            
            -Increase
      in Taxes Payable
            
            2,244
            
            12,500NET
      CASH USED IN OPERATING ACTIVITIES
            
            177,638
            
            (22)INVESTING
      ACTIVITIESAdditions
      to Securities Available for Sale
            
            (13,333)Additions
      to Fixed Assets
            
            (202,782)
            
            -NET
      CASH FROM INVESTING ACTIVITIES
            
            (216,115)
            
            -FINANCING
      ACTIVITIESPurchase
      and cancellation of treasury stock
            
            (25,000)
            
            -Proceeds
      from the issuance of stock
            
            750
            
            -Proceeds
      from Convertible Debentures
            
            75,000
            
            -Proceeds
      from Shareholder Loans
            
            14,900
            
            -NET
      CASH FROM FINANCING ACTIVITIES
            
            65,650
            
            -NET
      CHANGE IN CASH
            
            27,174
            
            (22)CASH
      BALANCESBeginning
      of period
            
            6
            
            28End
      of period
            $
            27,181
            
            6SUPPLEMENTAL
      DISCLOSURE:Interest
      paid
            $
            8Income
      taxes paidNON-CASH
      ACTIVITIES:Stock
      issued in exchange of stock investment
            
            13,999Stock
      issued as compensation
            
            420Compensation
      to be converted into common stock
            
            40,000The
      accompanying notes are an integral part of these financial
      statements








































AUDIOSTOCKS,
INC.


Notes
to the Financial Statements


December
31, 2007 and 2006





NOTE
      1.
            SUMMARY
      OF ACCOUNTING POLICIES





a.  Organization





Audiostocks,
Inc. (the Company) was incorporated in the state of Delaware on January 15, 2002
as Jupiter Processing, Inc.. On January 13, 2005, the Company changed its name
to Audiostocks, Inc.





AudioStocks’
solutions generate rich media exposure for public and private companies,
industry groups and investment professionals through the AudioStocks.com
proprietary software platform. AudioStocks.com software is primarily used to:
(1) facilitate executive and company participation in industry and event-based
roundtables and conferences; (2) create and distribute audio-based content
related to a particular private or public company or an industry in which a
company conducts business; (3) append interview-related and other rich media
content to traditional press releases; and (4) for registered investment
professionals only, to add interview-based audio content to financial research.
AudioStocks.com content is distributed to millions of individuals online and
over 30,000 financial professionals, including North American and international
buy-side analysts, investment research professionals and portfolio
managers.





The
software platform used by AudioStocks is licensed from BCGU, LLC
(“Licensor”).





b.  Accounting
Method





The
Company's policy is to use the accrual method of accounting to prepare and
present financial statements, which conform to generally accepted accounting
principles ("GAAP'). The company has elected a December 31,
year-end.





c.
Revenues





Service
revenue was recognized on a straight-line basis, over the contractual term of
the arrangement. Revenues related to contracts paid with restricted stock were
booked at fair market value.  Revenue on services described above is
recognized when the four revenue recognition requirements of SAB 104 have been
met. The company’s revenue recognition policy is consistent with the
requirements of Statement of Position (SOP) 97-2, Software Revenue Recognition
and Staff Accounting Bulletin 104 (SAB 104). In general, the company records
revenue when it is realized, or realizable and earned. The company considers
revenue to be realized or realizable and earned when the following revenue
recognition requirements are met: persuasive evidence of an arrangement exists,
which is a customer contract; the products or services have been provided to the
customer; the sales price is fixed or determinable within the contract; and
collectibility is probable. Recognition of revenues that do not meet the four
criteria mentioned above is deferred to future periods.





d.
Licensing Expense and Licensing Fees Payable – Related Party





All
software and intellectual property used by Audiostocks, Inc belongs to BCGU, LLC
a related party. A Licensing Agreement between the Company and BCGU, LLC was
executed in consideration for the use of Licensor’s software used by the
Audiostocks, Inc.  The Licensing Expense consists of 59.5% of contract
revenues, with rare exceptions. These Licensing Expenses are pursuant to the
Company’s licensing agreement with BCGU, LLC and exceptions are documented
through a contract addendum. Whenever the contract is paid with restricted
stock, the Licensing Expense is booked using the stock’s fair market value.
Payment of the licensing fees are made in the form of restricted stock and
therefore mark to market adjustments are necessary related to the expense and
the associated liabilities as well.  Licensing Expenses were deferred
to reflect the length of the contract using the same criteria described in the
Revenues section, above.





The
balance of $ 267,362 in Licensing Fees Payable on the Balance Sheet reflects a
$728,702 mark to market adjustment. Without such adjustment, the ending balance
in the Licensing Fees Payable would have been $ 996,064.





During
the year of 2007, $1,584,147 was paid in Licensing Fees in the form of available
for sale securities.  This amount is based on the market value of the
security received at the closing date.





e.  Marketable
Securities and Other Comprehensive Income





A
significant portion of payments for the service contracts is received in form of
restricted stock from those companies purchasing our services.  The
restriction of all stock received is typically one year for non-reporting
companies and six months for reporting companies. Before such securities are
sold in the marketplace, they must either be registered with the SEC or they
must be exempted from the SEC’s registration requirements by meeting the
requirements of Rule 144. Rule 144 allows public resale of restricted and
control securities if a number of conditions are met. Our accounting policy is
to book all restricted and publicly tradable securities under Securities
Available for Sale and, as such, are carried at fair value based on quoted
market prices.





Unrealized
holding gains and losses for Securities Available for Sale are excluded from
earnings and reported as a separate component of stockholder’s equity as Other
Comprehensive Income. Realized and unrealized gains and losses for securities
classified as available-for-sale are included in the statement of operations and
cash flow statement, respectively.  The change in value of marketable
securities is included in the operating portion of the Cash Flow statement
because of the nature of our business in which we receive stock as compensation
and make payments of liabilities in the same form.  Therefore, the
changes to marketable securities that we receive as compensation is not
reflected in the investing portion of our Cash Flow statement.  All
restricted stock received in exchange for services are marked to market at the
end of the accounting period.  Likewise, licensing fees recorded in
conjunction with revenues are also marked to market. The adjustment to the value
of such restricted stock takes into consideration the value of the stock as of
the last day of the accounting period in question and a Discount Factor
(“Discount”). The factors that are considered when calculating the Discount are:
Trading Market, Liquidity, Volatility and Financial Performance.





As of
December 31, 2007, the company owned $ 211,194 in form of Restricted Stock,
based upon the fair value of the marketable securities, all of which was
received in consideration for services rendered by the Company.





The
balance of $ 211,194 in Securities Available for sale on the Balance Sheet
reflects a $1,092,116 mark to market adjustment. Without such adjustment, the
ending balance in Securities Available for Sale would have been $
1,303,310.





Changes
in value of restricted securities are accounted for in other comprehensive
income, without impacting the income statement, until the securities are
disposed of. Upon disposal, the changes accumulated in other comprehensive
income are to be recognized in income.





Marketable
securities classified as available for sale consisted of the following as of
December 31, 2007:





Marketable
      Securities
            Cost
            Accumulated
      Unrealized Gain/Loss
            Gain
      (Loss) on Sale of Securities
            Market
      ValuePositions
      as of 12/31/2006
            720,500
            (554,632)
            -
            165,868Minus
      Securities Sold
            993,825
            683,611
            -
            310,214Gain(Loss)
      on Sale of Securities
            658,625
            
            (658,625)
            -Securities
      Purchased
            53,399
            (33,534)
            -
            19,865Securities
      Received
            3,479,004
            (2,847,747)
            -
            631,257Minus
      Payments in Form of Securities 2007
            1,394,683
            1,228,270
            -
            166,413Minus
      Payments in Form of Securities 2006
            561,085
            431,916
            -
            129,169Positions
      as of 12/31/2007
            1,961,935
            (1,092,116)
            (658,625)
            211,194Reconciliation
      of OCIBalance
      in Mark to Market  for marketable securities as of end of
      2007
            -
            (1,092,116)
            -
            -Market
      Adjustment of Liabilities
            -
            876,877
            -
            -Accumulated
      Other Comprehensive Income
            -
            (215,239)
            -
            -





f.  Cash
and Cash Equivalents





The
Company considers all highly liquid investments with maturities of three months
or less when purchased to be cash equivalents.





g.  Property,
Plant and Equipment





Property,
plant and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over estimated useful
lives of the asset.





In
accordance with American Institute of Certified Public Accountants Statement of
Position 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use,” the Company capitalizes certain costs incurred in
connection with developing or obtaining internal use software. Costs incurred in
the preliminary project stage are expensed. All direct external costs incurred
to develop internal-use software during the development stage are capitalized
and amortized using the straight-line method over the remaining estimated useful
lives. Costs such as maintenance and training are expensed as
incurred.





2007
            2006Property
      Plant and Equipment, net:Computer
      Software
            174,508
            -Furniture
      and Equipment
            20,105Building
      and Improvements
            2,508
            -Work
      in Progress
            5,661
            -202,782
            -Accumulated
      Depreciation
            (5,869)$  196,913
            $                 -





h.  Earnings Per
Share





Net
earnings (loss) per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), “Earnings per share.”
Basic net earnings per share is based upon the weighted average number of common
shares outstanding. Fully diluted earnings per share are computed by applying
the treasury stock method. Under this method, options and warrants are assumed
to be exercised at the beginning of the period (or at the time of issuance, if
later), and as if funds obtained thereby were used to purchase common stock at
the average market price during the period.





There are
two convertible securities in the Company’s books as of December 31, 2007 and
none in 2006.  Both convertible securities were issued on 7/1/07 and
are convertible at a conversion rate $0.15 per share.  The stock
equivalents convert into 500,000 shares.





2007
            2006Numerator
      – Income/Loss
            $3,661
            $18,881.00Denominator
      - weighted average number of shares outstanding – Basic
            17,127,449
            17,216,308Effect
      of dilutive securities:Convertible
      Debentures
            250,000
            -Denominator
      – weighted average number of shares outstanding - Diluted
            17,377,449
            17,216,308Earnings
      Per Share – Basic
            $0.00
            $0.00Earnings
      Per Share - Diluted
            $0.00
            $0.00





i.  Comprehensive
Income





Statement
of financial accounting standards No. 130, Reporting comprehensive income (SFAS
No. 130), establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity, except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in
financial statements that are displayed with the same prominence as other
financial statements





j.  Provision
for Income Taxes





We
account for income taxes according to the provisions of SFAS No. 109, Accounting
for Income Taxes ("SFAS 109"). SFAS 109 requires recognition of deferred tax
assets and liabilities to reflect the expected future tax consequences of
temporary differences between the financial statement and tax basis of assets
and liabilities.





The
components of income tax expense are as follows:





2007
            2006Federal
      taxes
            $
            1,771
            9,267State
      taxes
            $
            473
            2,774Benefit
      of utilization of operating loss carryforward
            $
            0
            (5,700)Change
      in Valuation Allowance
            
            0
            5,700Income
      Tax Expense
            $
            2,244
            12,500





As of December 31, 2007, we had a NOL
carryforward of $ 0.00.





Deferred
tax assets and the valuation account is as follows at December 31, 2007 and
2006:





2007
            2006NOL
      Carryforward
            $
            0
            0Valuation
      Allowance
            $
            0
            0Net
      deferred tax assets
            $
            0
            0





k.  Recent Accounting
Pronouncements





In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No.
115” (“SFAS 159”).  SFAS 159 permits companies to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value, and establishes presentation
and disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS
160”).  SFAS 160 will change the accounting and reporting for minority
interests, which will be recharacterized as noncontrolling interests and
classified as a component of equity. This new consolidation method will
significantly change the accounting for transactions with minority interest
holders.





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
141(R), “Business Combinations” (“SFAS 141R”).  SFAS 141R establishes
the principles and requirements for how an acquirer recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, any noncontrolling interest in the acquiree, and the goodwill
acquired.  SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination.





The
adoption of these pronouncements will not have a material effect on the
Company’s financial position or results of operation.





l.  Use of
Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period.In these financial
statementsassets and liabilities involve extensive reliance on
management’s estimates.  Actual results could differ from those
estimates.





m.  Financial
Instruments





The
recorded amounts of financial instruments, including cash equivalents accounts
payable and accrued expenses, and long-term debt approximate their market values
as of December 31, 2007 and  2006.





n.  Commitments





The
Company currently holds an employee agreement with our president, Luis Leung, in
the amount of $120,000 per year.  The Company does not have any rental
commitments or operating leases.





o.  Convertible
Notes




In
accordance with EITF 98-5 “Accounting for Convertible Securitas
with Beneficial Conversion Features of Contingently Adjustable,” we
calculated the value of the beneficial conversion feature embedded in the
Convertible Notes.  Since the note is contingently convertible, the
intrinsic value of the beneficial conversion feature is not recorded until the
note becomes convertible.




Convertible
notes are split into two components: a debt component and a component
representing the embedded derivatives in the debt. The debt component represents
the Company’s liability for future interest coupon payments and the redemption
amount. The embedded derivatives represent the value of the option that
debtholders have to convert into ordinary shares of the Company.  Due
to the number of shares that may be required to be issued upon conversion of the
Convertible Notes is indeterminate, the embedded conversion option of the
Convertible Notes are accounted for as a derivative instrument liabilities
rather than equity debt as in accordance with EITF 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled In, a Company’s Own Common
Stock.




The debt
component of the convertible note is measured at amortized cost and therefore
increases as the present value of the interest coupon payments and redemption
amount increases, with a corresponding charge to finance cost – other than
interest. The debt component decreases by the cash interest coupon payments
made. The embedded derivatives are measured at fair value at each balance sheet
date, and the change in the fair value is recognized in the income
statement.




p.
Investments







The
Company determines the appropriate classification of its investments at the time
of acquisition and reevaluates such determination at each balance sheet date.
Trading securities are carried at quoted fair value, with unrealized gains and
losses included in earnings. Available-for-sale securities are carried at quoted
fair value, with unrealized gains and losses reported in shareholders’ equity as
a component of accumulated other comprehensive income. Other investments that do
not have readily determinable fair values are stated at cost and are reported in
other assets. Realized gains and losses are determined using the specific
identification method and are included in interest and other income,
net.





q.
Accounts Receivable





We must
make judgments about the collectibility of our accounts receivable to be able to
present them at their net realizable value on the balance sheet. We analyze the
aging of our customer accounts and review historical bad debt problems. From
this analysis, we record an estimated allowance for receivables that we believe
will ultimately become uncollectible. As of December 31, 2007, we had no
allowance for bad debts since we deemed that 100% of the amount in Accounts
Receivable is collectible.





r.
Deferred Costs





Deferred
fees are intangible assets that are accounted for under SFAS 142. The balance of
$267,446 in deferred fees is made up of $16,240 of officer compensation, $9,634
of commission fees, and $241,572 of licensing fees.  The balance of
these deferred fees resulted in the deferral of the expenses in order to reflect
the length of contracts. The deferral criterion is described in the Revenues
section, above.





s.
Concentration of Risk





Financial
instruments which potentially subject the Company to concentrations of credit
risk are cash and marketable securities. The Company places its cash with
financial institutions deemed by management to be of high credit quality. The
amount on deposit in any one institution that exceeds federally insured limits
is subject to credit risk. All of the Company’s investment in marketable
securities are considered “available-for-sale” and are carried at their fair
value, with unrealized gains and losses (net of income taxes) that are temporary
in nature recorded in accumulated other comprehensive income (loss) in the
accompanying balance sheets. The fair values of the Company’s investments in
marketable securities are determined based on market quotations.





NOTE
2.         GOING
CONCERN





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  The Company has a significant
working capital deficit in past years and is dependant upon outside financing to
continue operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.  It is
management’s plans to raise necessary funds from shareholders to satisfy the
expense requirements of the Company and eventually derive revenues there
from.





NOTE
3.         CONVERTIBLE
DEBENTURE





In
accordance with Emerging Issues Task Force No. 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, and No. 00-27, Application of Issue No. 98-5 to
Certain Convertible Instruments, we recognize the advantageous value of
conversion rights attached to convertible debt. Such rights give the debt holder
the ability to convert his debt into common stock at a price per share that is
less than the trading price to the public on the day the loan is made to the
Company. The beneficial value is calculated as the intrinsic value (the market
price of the stock at the commitment date in excess of the conversion rate) of
the beneficial conversion feature of debentures and related accruing interest is
recorded as a discount to the related debt and an addition to additional paid in
capital. The discount is amortized over the remaining outstanding period of
related debt using the interest method.





On July
1, 2007 a $25,000 0% Convertible Debenture was issued in exchange of cash, which
was used to purchase and retire shares from a shareholder.  The note
is due and payable at the option of the holder: (i) on July 1, 2010; or (ii)
upon the successful completion of Audiostocks, Inc corporate financing exceeding
three hundred thousand dollars. It is convertible into common stock at the price
of $0.15 per share.  The conversion price is subject to proportional
adjustment for reclassification, stock splits, combinations and
dividends.  we believe no beneficial
conversion feature applies to this debenture.  At the time of the note
agreement date, there was no determinable stock price, therefore there is no
beneficial conversion feature that applies to this
debenture.





On July 1
2007 a $50,000 8% Convertible Debenture was issued in exchange of cash to a
related party (see note 8 for further disclosure).  The note and
accrued interest is due and payable at the option of the holder: (i) on January
1, 2008; or (ii) upon the successful completion of Audiostocks, Inc corporate
financing exceeding three hundred thousand dollars.  The note is
convertible into common stock at the price of $0.15 per share.  The
conversion price is subject to proportional adjustment for reclassification,
stock splits, combinations and dividends.  At the time of the note
agreement date, there was no determinable stock price, therefore there is no
beneficial conversion feature that applies to this
debenture.





NOTE
4.         COMMON
STOCK





During
January 2002 to December 2004, the Company issued 51,439 shares of common stock
for services valued at $0.001 per share.





During
January 2005, the Board of Directors approved a 200 to 1 reverse
split.  These financial statements have been retroactively restated to
reflect this change.





During
January 2005, the Company issued 72 shares of common stock due to the 200 to 1
reverse split..





During
January 2005, the Company issued 17,148,561 shares of common stock for services
valued at $0.001 per share.





During
January 2005, the Company issued 16,236 shares of common stock as a dividend
valued at $0.001 per share.





During
July 2007, the Company reacquired and immediately retired 800,000 shares of
common stock valued at $0.03 per share.





During
July 2007, the Company reacquired and immediately retired 24,281 shares of
common stock at no value.





During
July 2007, the Company issued 420,308 shares of common stock as officer
compensation valued at $0.001 per share.





During
October 2007, the Company issued 1,000 shares of common stock in exchange of
cash valued at $0.75 per share.





During
October 2007, the Company issued 609,755 shares of common stock as a stock
exchange agreement valued at $0.22 per share.





NOTE
5.      CAPITAL STRUCTURE





The
stockholders' equity section of the Company contains the following classes of
capital stock as of December 31, 2007:





Common
stock, $0.001 par value; 50,000,000 shares authorized: 17,423,090 shares issued
and outstanding.





Preferred
stock, $0.001 par value; 5,000,000 shares authorized, no shares issued and
outstanding.





NOTE
6.     ISSUANCE OF SHARES FOR SERVICES – STOCK
OPTIONS





The
company has a nonqualified stock option plan, which provides for the granting of
options to key employees, consultants, and non-employee's directors of the
Company. These issuances shall be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued, or
whichever is more readily determinable. The Company has elected to account for
the stock option plan in accordance with paragraph 30 of SFAS 123R where the
compensation to employees should be recognized over the period(s) in which the
related employee services are rendered. In accordance with paragraph 19 of SFAS
123R the fair value of a stock option granted is estimated using an
option-pricing model. As of December 31, 2007 no stock options were
outstanding.





NOTE
7.         RELATED PARTY
TRANSACTIONS





As at
December 31, 2007, the Company has Accounts Payable to Related Parties
consisting of monies borrowed during the year of 2007 to the Company from Luis
Leung in the amount of $15,000.  The Company has made no payments to
Mr. Leung related to the monies borrowed for the years ended December 31, 2007
and 2006.  Mr. Leung is our President.





The
Company has Accounts Payable to Related Parties consisting of licensing fees
payable to BCGU, LLC in the amount of $267,362 as at December 31, 2007 and
$280,111 as at December 31, 2006.  During the year ended December 31,
2007 the Company made payments  to BCGU, LLC in the amount of $639,593
and $0 in the year ended December 31, 2006.  The software platform
used by the Company is licensed from BCGU, LLC and BCGU, LLC is the majority
shareholder in the Company.





The
Company has a liability to Related Parties consisting of Convertible Debentures
issued to Black Forest International, LLC (“BFI”) in the amount of
$50,000.  BFI is managed by BCGU, LLC.  The software
platform used by the Company is licensed from BCGU, LLC and BCGU, LLC is the
majority shareholder in the Company.





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





None.





Item
8A.  Controls and
Procedures.





Under the
supervision and with the participation of our management, currently consisting
of Luis J. Leung, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period
covered by this annual report, and based on their evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company’s periodic SEC filings. There were no significant changes in our
internal control over financial reporting that could significantly affect this
control since our last fiscal quarter.




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





Item
8A(T).  Management’s Report on Internal Control Over Financial
Reporting.





Internal
control over financial reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial Officer, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles, and includes those policies and
procedures that:





·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of our
      assets;





·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that our receipts and expenditures are being
      made only in accordance with authorization of our management and
      directors; and





·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisitions, use or disposition of our assets that could
      have a material effect on the financial
  statements.





Internal
control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of its inherent
limitations.  It is a process that involves human diligence and
compliance and is subject to lapses in judgment and breakdowns resulting from
human failures.  It also can be circumvented by collusion or improper
management override.





Because
of such limitations, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial
reporting.  However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process certain safeguards to reduce, though not eliminate, this
risk.





The
Company’s management is responsible for establishing and maintaining effective
internal control over financial reporting (as defined in Rule 13a-15(f) of
the Securities Exchange Act). Management assessed the effectiveness of the
Company’s internal control over financial reporting as of December 31,
2007. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based
on that assessment, management believes that, as of December 31, 2007, the
Company’s internal control over financial reporting was effective based on the
COSO criteria, with the exception of the following:





·
            There
      is a lack of segregation of duties relating to cash, receivables and
      safeguarding of assets.





·
            Several
      of our procedures require additional documentation.  It is our
      belief that those control procedures are being performed, however
      documentation of their execution is not
  available.





The
Company intends to take a number of corrective actions to address the above
mentioned material weakness as promptly as practicable.





During
the year ended December 31, 2007, there were no changes in the Company’s
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





Item
8B.  Other
Information.





None.








PART
III





Item
      9.
            Directors,
      Executive Officers, Promoters And Control Persons; Compliance With Section
      16(A) Of The Exchange Act





Executive
Officer, Directors and Control Persons





The
following table sets forth, as of the date of this report, the name, age and
position of our directors, executive officers and other significant
employees:





Officers And Directors





NAME
            AGE
            SINCE
            POSITIONLuis
      Leung
            38
            2006
            President,
      Chief Executive Officer, Chief Financial Officer, Secretary and
      Director





The
backgrounds of our directors, executive officers and significant employees are
as follows:





Luis
Leung, President, Chief Executive Officer, Chief Financial Officer, Secretary
and Director





Mr. Leung is our
President, Chief Executive Officer, Chief Financial Officer, Secretary and one
of our Directors. Mr. Leung began his career in São Paulo, Brazil in 1988
with Smar Equipamentos Industrias Ltd as a Research and Development Software
Engineer. In 1991 he was helped establish the company’s operations in the United
States and was promoted to CIO and Comptroller.  From 1994 to 1997 Mr.
Leung helped structure operations and systems for the company’s headquarters as
well as for its subsidiaries in Germany, France and Singapore. In 2004, Mr.
Leung co-founded Scitus Corporation, a Microsoft VAR and ISV, and the Alba
Spectrum Group a consulting company. The Alba Spectrum Group has operations in
Chicago, Houston and São Paulo, Brazil. Its line of products includes Microsoft,
SAP and Oracle. In 2001, Mr. Leung co-founded Advent Corporation, a
software development company and Microsoft Partner. The company merged with
Enterlogix Corporation in 1992. Enterlogix Corporation, after the merger, was
the largest Microsoft Great Plains implementation practice in the state of
Texas.  In 1997, Mr. Leung started his consulting career at Hein +
Associates LLP in Houston, TX as a Project Manager. In 1999 he was hired by
Grant Thornton, LLP as a Consulting Manager and participated in several
multi-country systems implementations. In 2000, he worked at eParners Inc as a
CRM Practice Leader.  Mr. Leung holds a Bachelors of Science from Instituto
Tecnologico Aerospacial, Brazil





Audit
Committee





We do not
have an audit committee at this time.





Code
of Ethics





Effective
February 10, 2006, our board of directors adopted the Audiostocks, Inc. Code of
Business Conduct and Ethics. The board of directors believes that our Code of
Business Conduct and Ethics provides standards that are reasonably designed to
deter wrongdoing and to promote the following: (1) honest and
ethical conduct, including the ethical handling of actual or apparent conflicts
of interest between personal and professional relationships;(2)
full, fair, accurate, timely, and understandable disclosure in reports and
documents that we file with, or submits to, the Securities and Exchange
Commission; (3) compliance with applicable governmental laws,
rules and regulations;the prompt internal reporting of
violations of the Code of Business Conduct and Ethics to an appropriate person
or persons; and(4) accountability for adherence to the Code of
Business Conduct and Ethics.  We will provide a copy of our Code of
Business Conduct and Ethics by mail to any person without charge upon written
request to us at:  2038 Corte Del Nogal, Suite 110, Carlsbad, CA
92011.





Section
16(a) Beneficial Ownership Reporting Compliance





Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires our directors,
executive officers, and stockholders holding more than 10% of our outstanding
common stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in beneficial ownership of our
common stock.  Executive officers, directors and greater-than-10%
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file.  As of the date of this report
we believe our Directors, Officers and Stockholders holding more than 10% of our
outstanding common stock have filed these reports.





Item
10. Executive Compensation





The
following table sets forth the compensation paid to the Chief Executive Officer
and to all other executive officers for services rendered, and to be rendered,
for 2007.





Annual
      Compensation
            
            Long-Term
      CompensationCommonSharesUnderlying
            
            AllRestricted
            
            Options
            
            OtherOther
      Annual
            
            Stock
            
            Granted
            
            CompenName
      and Position
            
            Year
            
            Salary
            
            Bonus
            
            Compensation
            
            Awards
            
            (#
      Shares)
            
            -sationLuis
      Leung (1)
            
            2007
            
            $120,000
            
            -0-
            
            -0-
            
            420,308
            
            -0-
            
            -0-President,
      ChiefExecutive
      Officer, Chief
            
            2006
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            -0-
            
            -0-Financial
      Officer andSecretary








(1)           Mr.
Luis Leung was appointed to the positions of President, Chief Executive Officer,
Chief Financial Officer and Secretary on December 20, 2006. Pursuant to his
employment agreement executed January 1, 1007, he receives annual compensation
of $120,000 and 420,308 shares of restricted common stock.





Aggregated
Option Exercise In Last Fiscal Year And Fiscal Year End Option
Values





Our
executive officers were not issued any options which could have been exercised
during the fiscal year ended December 31, 2007.





Directors'
Compensation





All
directors receive reimbursement for reasonable out-of-pocket expenses in
attending board of directors meetings and for promoting our
business.  From time to time we may engage certain members of the
board of directors to perform services on our behalf.  In such cases,
we compensate the members for their services at rates no more favorable than
could be obtained from unaffiliated parties.





Compensation
Committee





We have
not formed an independent compensation committee





Item
11.   Security Ownership of Certain Beneficial Owners and
Management.





The
following table sets forth certain information regarding the beneficial
ownership of the 17,216,308 issued and outstanding shares of our common stock as
of the date of this report by the following persons:





1.
            Each
      person who is known to be the beneficial owner of more than five percent
      (5%) of our issued and outstanding shares of common
  stock;2.
            Each
      of our Directors and executive Officers; and3.
            All
      of our Directors and Officers as a
group





Name
      And Address
            Number
      Of Shares Beneficially Owned
            Percentage
      OwnedBCGU,
      LLC(1)
            15,284,479
            87%Luis
      Leung (2)
            500,308
            2%Total
            15,784,787
            89%




(1)  The
address is 2038 Corte Del Nogal, Suite 110, Carlsbad, CA 92011


(2)  The
address is 2038 Corte Del Nogal, Suite 110, Carlsbad, CA 92011





Beneficial
ownership is determined in accordance with the rules and regulations of the
SEC.  The number of shares and the percentage beneficially owned by
each individual listed above include shares that are subject to options held by
that individual that are immediately exercisable or exercisable within 60 days
from the date of this report and the number of shares and the percentage
beneficially owned by all officers and directors as a group includes shares
subject to options held by all officers and directors as a group that are
immediately exercisable or exercisable within 60 days from the date of this
report.





Item
12. Certain Relationships and Related Transactions.





None





Item
13. Exhibits.





Exhibit
            
            Description3.1.1
            
            Certificate
      of Incorporation filed as an exhibit to our Registration Statement on Form
      SB-2 filed with the Commission on October 19, 2006 and incorporated herein
      by reference.3.1.2
            
            Amended
      and Restated Certificate of Incorporation filed as an exhibit to our
      Registration Statement on Form SB-2 filed with the Commission on October
      19, 2006 and incorporated herein by reference.3.2.1
            
            Bylaws
      filed as an exhibit to our Registration Statement on Form SB-2 filed with
      the Commission on October 19, 2006 and incorporated herein by
      reference.31.1
            
            Certification
      of Luis Leung pursuant to Rule 13a-14(a)32.2
            
            Certification
      of Luis Leung pursuant to 18 U.S.C Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002.





Item
14.  Principal Accountant Fees and Services.





Appointment
of Auditors




Our Board
of Directors selected Chisholm, Bierwolf and Nilson, LLC as our auditors for the
year ended December 31, 2007 and 2006.





Audit
Fees





Chisholm,
Bierwolf and Nilson, LLC, billed us $18,000 in fees for review of our quarterly
financial statements and annual audit for the year ended December 31,
2007.





Chisholm,
Bierwolf and Nilson, LLC, billed us $15,000 in fees for review of our quarterly
financial statements and annual audit for the year ended December 31,
2006.








Audit-Related
Fees




We
did not pay any fees to Chisholm, Bierwolf and Nilson, LLC for assurance and
related services that are not reported under Audit Fees above, during our fiscal
years ending December 31, 2007 or December 31, 2006.





Tax
and All Other Fees




We did not pay any fees to Chisholm,
Bierwolf and Nilson, LLC for tax compliance, tax advice, tax planning or other
work during our fiscal years ending December 31, 2007 or December 31,
2006.





Pre-Approval
Policies and Procedures





We have
implemented pre-approval policies and procedures related to the provision of
audit and non-audit services.  Under these procedures, our board of
directors pre-approves all services to be provided by Chisholm, Bierwolf and
Nilson, LLC and the estimated fees related to these services.





With
respect to the audit of our financial statements as of December 31, 2007, and
for the year then ended, none of the hours expended on Chisholm, Bierwolf and
Nilson, LLC’s engagement to audit those financial statements were attributed to
work by persons other than Chisholm, Bierwolf and Nilson, LLC’s full-time,
permanent employees.






































Signatures





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





AUDIOSTOCKS, INC.








By:   /s/ Luis
Leung


Luis
Leung


Chief
Executive Officer and Chief Financial Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.





SignaturesTitleDate








/s/ LuisLeungPresident, Chief Executive
Officer,                                                                                                                       
   July 9, 2007


Luis
Leung                                                     
Chief Financial Officer and Director