To: yardslave who wrote (6577 ) 9/8/2006 9:55:04 AM From: scion Respond to of 12518 Included in general and administrative expenses for the year ended December 31, 2005 is approximately $27,336,651 of salary expense. 10KSB 15th "Page" of 54secinfo.com The Company had a total of $6,293,238 in assets for the year ended 2005. We incurred operating expenses, consisting of selling, general (“SG&A”) and administrative expenses in the amount of $31,958,888 for the year ended 2005, as opposed to $73,448,109 for the year ended 2004. The total other income for the year ended 2005 was $327,646. Included in general and administrative expenses for the year ended December 31, 2005 is approximately $27,336,651 of salary expense. This increase can be explained by salary and consulting expenses as well as financial service expenses. We expect increases in expenses through the year 2006 as we move towards developing our business plan. We expect the increase to be primarily in sales related expenses such as marketing, advertising and sales. Net loss for the year ended 2005 was ($31,659,904) and the basic loss per share was ($0.01) as opposed to the loss for the year ended 2004 which was ($73,648,555) and the basic loss per share was ($0.05). We will likely continue to incur losses through the year 2006. In addition, there can be no assurance that we will achieve or maintain profitability or that our revenue growth can be sustained in the future. Our Total Liabilities and Stockholder’s Equity (Deficit) for year ending 2005 was $6,293,238, as opposed to $659,549 for the year ended 2004. As set forth on the Statement of Operations, the Net Sales for the company for the year ended 2005 was $65,565; The Cost of Sales for the year ended 2005 was ($94,227) and the Gross Margin was ($28,662). The operating results during 2005 and 2004 were largely due to non-cash expense items and one time expenses incurred in the acquisition of companies, auditing and legal fees and that normal operating expense levels are approximately $120,000 per month.