SCTN Schimatic Technologies Inc (CE)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is a development stage enterprise in the business of research, development and integration of proprietary processes and software technologies for the electronic payment industry, primarily involving consumer loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC. The Company licenses, markets and develops smart-card loyalty products through its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The Company was incorporated in Florida as Apple Tree Capital Corp. in October 1996 and remained inactive until it merged in November 1998 with and concurrently changed its name to Schimatic Cash Transactions Network.com, Inc.

In September 1999, the Company acquired all of the outstanding shares of IC One, Inc. (IC One). The exchange was accounted for as a reverse acquisition since the former shareholders and members of the IC One owned a majority of the outstanding common stock of the Company after the transaction. Accordingly, the combination of IC One and the Company was recorded as a recapitalization of IC One, pursuant to which IC One was treated, as the acquirer for accounting purposes and the historical financial statements presented are those of IC One from its inception on February 26, 1997.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements have been prepared according to United States Generally Accepted Accounting Principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development stage enterprise and has incurred net losses of $79,462,079 since inception. Additionally, the Company had a net working capital deficiency of $19,237,301 and a total shareholders' deficiency of $19,237,301 at December 31, 2005. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and recognizes the need to raise capital through the future issuance of stock and/or

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

debentures in order to develop a viable business. The Company continues to implement cost-cutting measures. It may also rely increasingly on strategic alliances with others who will assume responsibility for financing specific required development tasks, thus, reducing the Company's financial requirements for the exploitation of its intellectual properties.

As of December 31, 2005, current liabilities are substantially past due. In the event demands are made upon the Company which cannot be met and the associated creditors successfully pursue action against the Company, the Company could be exposed to additional costs of legal fees, interest or penalties, and may be forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital through the private placement of common stock and the issuance of convertible debt.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.

Software development costs are expensed as incurred until technology feasibility has been established. The Company defines the establishment of technological feasibility as the completion of all planning, designing, coding and testing activities that are necessary to establish products that meet design specifications including functions, features and technical requirements.

Research and development expenditures are charged to expense as incurred, unless such costs are expected to be reimbursed. The Company capitalizes costs related to acquired technologies that have achieved technological feasibility and have alternative uses. Research and development expenses totaled approximately $1,643,055 and $1,908,055 for the years ended December 31, 2005 and 2004, respectively.

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by straight-line method over the assets estimated lives. Leasehold improvements are amortized over the lesser of the lease term or the assets' useful lives. Upon sale or retirement of plant and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. Prior to January 1, 2003, the assets were fully depreciated.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intellectual Property is recorded at cost less impairment written down. Impairment tests are performed at least once a year and when conditions indicating possible impairment exist, intellectual property is written down if the carrying amount exceeds the fair value or if significant doubt exists with respect to recoverability. During the year ended December 31, 2003, Patents were written down to nil value.

The Company follows Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes accounting and reporting standards for stock-based employee compensation plans. This statement allows companies to choose between the fair value based method of accounting as defined in this statement and the intrinsic value based method of accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided by APB 25, as permitted for stock-based compensation relative to the Company's employees. Stock and options granted to other parties in connection with providing goods and services to the Company are accounted for under the fair value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 also requires that those effects be disclosed more prominently by specifying the form, content, and location of those disclosures. We have adopted the increased disclosure requirements of SFAS No. 148 for the fiscal year ended December 31, 2005.

 For Years Ended December 31,
 2005 2004
 ---- ----
Net loss attributable to common stockholders,
 as reported $(7,642,069) $(4,229,168)

Add: Stock-based compensation expense included
 in reported net income, net of related
 tax effect 13,114 90,049

Less: Total stock-based compensation expense
 determined under the Black-Scholes fair value-based
 method for all awards * (13,114) (90,049)
 ----------- -----------
Proforma net loss attributable to common
 stockholders $(7,642,069) $(4,229,168)
 =========== ===========
Basic and diluted net loss attributable to common stockholders:
 As reported $ (0.04) $ (0.03)
 =========== ===========
 Proforma $ (0.04) $ (0.03)

* The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the years 2005 and 2004: annual dividends of $0; expected volatility range of 51.78% to 58.02% for 2005 and 51.52% to 160.73% for 2004, respectively; risk-free interest rate of 3% for 2005 and 2.75% to 3% for 2004; and expected life of five to ten years.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.

SFAS 152 - Accounting for Real Estate Time-Sharing Transactions -- an amendment of FASB Statements No. 66 and 67 This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. The company believes that this standard would not have a material impact on its financial position, results of operations or cash flows.

SFAS 153 - Exchanges of Non-monetary Assets -- an amendment of APB Opinion No.
29. The guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The company believes that this standard would not have a material impact on its financial position, results of operations or cash flows.

SFAS 123R - In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment" ("SFAS 123R"). SFAS 123R revises FASB Statement No. 123 "Accounting for Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for Stock Issued to Employees". SFAS 123R requires all public and non-public companies to measure and recognize compensation expense for all stock-based payments for services received at the grant-date fair value, with the cost recognized over the vesting period (or the requisite service period). SFAS 123R is effective for non-small business issuers for all interim periods beginning after June 15, 2005. SFAS 123R is effective for small business issuers for all interim periods beginning after December 15, 2005. As such, the Company is required to adopt these provisions commencing January 1, 2006. The Company is currently evaluating the impact of SFAS 123R on its consolidated financial statements.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

SFAS 154 - Financial Accounting Standards Board ("FASB") Statement No. 154 Accounting Changes and Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3. This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle.

This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable.

This Statement defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity. This Statement also redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. This Statement requires that retrospective application of a change in accounting principle be limited to the direct effects of the change. Indirect effects of a change in accounting principle, such as a change in nondiscretionary profit-sharing payments resulting from an accounting change, should be recognized in the period of the accounting change. This Statement also requires that a change in depreciation, amortization, or depletion method for long-lived, non financial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. This Statement carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This Statement also carries forward the guidance in Opinion 20 requiring justification of a change in accounting principle on the basis of prefer ability. FASB Statement No. 154 is effective for fiscal years beginning after December 15, 2005.

SFAS 155 - In February 2006, the FASB issued SAFS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS is an amendment to SFAS 133 and 140. SFAS 155 improves financial reporting by eliminating the exception from applying SFAS 133 to interest in securitized financial assets so similar instruments are accounted for similarly regardless of the form of instruments. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company does not expect the adoption of SFAS 155 to have an impact on its financial position or results of operation.

SFAS 156 - In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets", which amends SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". In a significant change to current guidance, SFAS No. 156 permits an entity to choose either of the following subsequent measurement methods for each class of separately recognized servicing assets and servicing liabilities: (1) Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is effective as of the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company is currently reviewing the effect, if any, the proposed guidance will have on its financial position and operations.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

SFAS 157 -In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements, however the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company would be its fiscal year beginning November 1, 2008. The Company is currently reviewing the effect, if any, SFAS 157 will have on its financial position and operations.

SFAS 158 - In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)". This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.

SAB 108 - In September 2006, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 108 (Topic 1N), "Quantifying Misstatements in Current Year Financial Statements" ("SAB No. 108"). SAB No. 108 addresses how the effect of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires SEC registrants (i) to quantify misstatements using a combined approach which considers both the balance sheet and income statement approaches; (ii) to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors; and (iii) to adjust their financial statements if the new combined approach results in a conclusion that an error is material. SAB No. 108 addresses the mechanics of correcting misstatements that include effects from prior years. It indicates that the current year correction of a material error that includes prior year effects may result in the need to correct prior year financial statements even if the misstatement in the prior year or years is considered immaterial. Any prior year financial statements found to be materially misstated in years subsequent to the issuance of SAB No. 108 would be restated in accordance with SFAS No. 154, "Accounting Changes and Error Corrections." Because the combined approach represents a change in practice, the SEC staff will not require registrants that followed an acceptable approach in the past to restate prior years' historical financial statements. Rather, these registrants can report the cumulative effect of adopting the new approach as an adjustment to the current year's beginning balance of retained earnings. If the new approach is adopted in a quarter other than the first quarter, financial statements for prior interim periods within the year of adoption may need to be restated. SAB No. 108 is effective for fiscal years ending after November 15, 2006, which for the Company would be its fiscal year beginning November 1, 2007. The implementation of SAB No. 108 is not expected to have a material impact on the Company's results of operations and financial condition.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

SFAS 159 - In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") - the fair value option for financial assets and liabilities including in amendment of SFAS 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair value measurements. The Company is currently evaluating the impact of SFAS No. 159 on its consolidated financial statements.

NOTE 3 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 4 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 5 - CONVERTIBLE NOTES PAYABLE

At December 31, 2005, secured convertible notes payable of $ 2,991,316 (2004: $ 2,766,316) bear interest at a rate of 12% annually and are secured by Company's intellectual property. The notes mature at various dates extending through September 2004. In a letter to Note holders on December 30, 2004, the Company advised all note holders that there had been a technical delay in conversion to Common Stock, and that notes would be extended on a month-by-month basis until resolution. The issue was resolved on November 30, 2006 when the number of authorized shares was increased.

The Company has the option to repay the notes and interest in cash or convert them into common stock based on a conversion price of $.05 per share or the holder can elect to convert the notes to common stock based on the above stated conversion price. The holder can convert their notes anytime. If the Company should force a conversion of these notes into common stock, then the holder will receive an additional amount equal in value to 25% of the principal amount in stock options priced at $0.05 per share that can be exercised within a 5 year period in accordance with the terms and conditions of the note.

At December 31, 2005, these notes are convertible into 59,826,325 shares of common stock (2004: 55,326,320).

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 6 - LOANS PAYABLE - CEO AMERICA

On May 17, 2002, the Company signed an agreement with CEO America, a wholly-owned subsidiary of Consumer Economic Opportunities, whereby CEO America agreed to pay an initial $150,000 to the Company and a second payment of $350,000 on June 20, 2002 for ownership of the SCTN Patents with exclusive rights for use of the patents being retained by SCTN. The agreement was to include a 20% equity swap of the two companies. On June 4, 2002, the Company placed title to the patents in escrow. In connection with the agreement, the Company placed in escrow a certificate for 30,116,134 shares of SCTN common stock as collateral. On July 2, 2002, CEO had not delivered the balance of the money, nor had they complied with any other conditions of the escrow agreement. The patent title and stock certificate were to remain in escrow pending either repayment of the original $150,000 to CEO, or until the matter is settled. The shares of common stock deposited in escrow were not considered to have been issued or outstanding, and on April 19, 2005 the share certificate for 30,116,134 shares was cancelled. The $150,000 received from CEO America is recorded as a non-interest bearing liability.

NOTE 7 - DEFERRED COMPENSATION

In July 2002, various consultants, who were owed fees and/or other compensation, signed deferred payment/compensation stock option agreements. The deferred compensation agreements allow the holders to defer payment of their owed compensation by electing to receive cash, common stock or stock options in accordance with the terms of their agreements.

At December 31, 2005, deferred compensation, if the holders so elect, is convertible into stock options totaling 22,212,917 shares (2004: 18,493,000 shares) of common stock which are potentially dilutive to earnings per share.

NOTE 8 - INCOME TAXES

At December 31, 2005, the Company has available unused net operating loss carryovers of approximately $67,600,000 that may be applied against future taxable income and expire at various dates through 2025. The Company has a deferred tax asset arising from such net operating loss deductions and has recorded a valuation allowance for the full amount of such deferred tax asset since the likelihood of realization of the tax benefits cannot be determined. These losses may be subject to substantial limitations as a result of IRC
Section 382 rules governing changes in control.

Further, the Company has not filed any federal, state or local income or franchise tax returns for the years ended December 31, 2005, 2004, 2003, 2002 and 2001. Such failure may have a material adverse effect on the amount of any net operating loss carry forwards and may subject the Company to fines.

Deferred tax asset: 2005 2004

 Net operating loss carry forward $ 27,040,000 $ 24,000,000
 Valuation allowance (27,040,000) (24,000,000)
 ------------ ------------

 Net Deferred Tax Asset $ - $ -
 ============ ============

For the year ended December 31, 2005, the valuation allowance increased approximately $3,040,000.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 9 - SHAREHOLDERS' DEFICIENCY

On February 2, 2005 the Company issued 250,000 common shares in exchange for services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash. The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash. The shares were issued at $0.068.

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968, 150,000 and 1,000,000 common shares in exchange for cash. The shares were issued at $0.05, $0.056, $0.07, $0.08, $0.09, $0.123 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past services valued at $53. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest payments of $1,884,829. The shares were issued at $0.082.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash. The shares were issued at $0.068.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash. The shares were issued at $0.08.

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash. The shares were issued at $0.05.

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

On June 15, 2005, the Company issued 100,000 common shares in exchange for services valued at $4,750. The shares were issued at $0.048.

On July 9, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were issued at $0.05.

On July 21, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were valued at $0.05.

On September 14, 2005, the Company issued 58,413 common shares in exchange for cash. The shares were valued at $ $0.06.

On October 31, 2005, the Company issued 323,494 common shares in exchange for cash. The shares were valued at $ $0.05

On December 1, 2005, the Company issued 88,669 common shares in exchange for services valued at $5,320. The shares were valued at $0.06.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 9 - SHAREHOLDERS' DEFICIENCY (Continued)

On January 13, 2004 the Company issued 2,586,310 common shares in exchange for cash. The shares were issued at $0.05.

On January 13, 2004 the Company issued 150,000 and 200,000 common shares in exchange for services valued at $15,000 and $30,000, respectively. The shares were issued at $0.10 and $0.15 respectively.

On January 29, 2004 the Company issued 250,000 common shares in exchange for cash. The shares were issued at $0.30.

On February 24, 2004 the Company issued 62,500 commons shares in exchange for cash. The shares were issued at $0.08.

On February 27, 2004 the Company issued 280,419 and 175,841 common shares for interest payments of $36,454 and $29,013, respectively. The shares were issued at $0.13 and $0.165, respectively.

On February 27, 2004 the Company issued 83,333 common shares in exchange for cash. The shares were issued at $0.30.

On August 10, 2004 the Company issued 689,655 common shares in exchange for services valued at $100,000. The shares were issued at $0.145.

On August 23, 2004 the Company issued 500,000 common shares in exchange for services valued at $40,000. The shares were issued at $0.08.

On November 22, 2004 the Company issued 66,667 common shares, 11,111 common shares, 90,000 common shares and 100,000 common shares in exchange for cash. The shares were issued at $0.06, $0.09, $0.09 and $0.065, respectively.

As an alternative, the Company may purchase shares of common stock in the open market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved amendments to the Articles of Incorporation to adopt an increase in the capital stock of the Company's common stock from 200,000,000 to 500,000,000 shares. Furthermore, during a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000. (Refer subsequent events).

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 10 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the "Plan"). The Board of Directors administers the Plan. Under the Plan, the Company may grant stock options, which may be incentive stock options ("ISO's") as defined in the Internal Revenue Code, and stock awards or options which do not qualify as ISO's to employees and officers. All employees of the Company are eligible to participate in the Plan.

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the years 2005 and 2004: annual dividends of $0; expected volatility range of 51.78% to 58.02% for 2005 and 51.52% to 160.73% for 2004, respectively; risk-free interest rate of 3.0% for 2005 and 2.75% to 3.0% for 2004; and expected life of five to ten years. The estimated weighted - average fair values of stock options granted to employees, officers and directors during the year 2005 and 2004 was approximately $.03 and $.08 respectively. The market price of shares during the time of grants ranged from $0.05 to $0.07 in 2005 and from $0.07 to $0.17 in 2004.

 Stock Options
 ------------------------
 Weighted
 Average
 Exercise
 Shares Price
 ------ -----
Outstanding at December 31, 2003 47,225,299 $0.09
 Granted 1,200,000 $0.11
 Exercised - -
 Cancelled - -
Outstanding at December 31, 2004 48,425,299 $0.11
 Granted 400,000 0.06
 Exercised - -
 Cancelled (7,142,470) $0.17
Outstanding at December 31, 2005 41,682,829 $0.10

The following table summarizes the Company's stock options outstanding and exercisable at December 31, 2005:

 Options Outstanding Options Exercisable
 ---------------------------------------- ----------------------------
 Weighted
 Average Weighted Weighted
 Remaining Average Average
 Range of Exercise Number Contractual Exercise Number Exercise
 Prices Outstanding Life Price Exercisable Price
 ------ ----------- ---- ----- ----------- -----
 (In Thousands) (In Years) (In Thousands)
$0.00 - $0.23 38,970 3.32 $0.08 38,970 $0.08
$0.48 - $0.49 2,713 4.64 $0.48 2,713 $0.48
 ------ ------
 41,683 41,683
 ====== ======

The market price of the 400,000 stock options granted in 2005 ranged from $0.05 to $0.07.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 11 -OUTSIDE RESEARCH AND DEVELOPMENT SERVICES

The Company retained a third-party vendor in 1997 to perform certain research and development services relating to the Company's database technology. As of December 31, 1999, cumulative costs incurred approximated $2,170,000, for which the Company made cash payments of $200,000 in 1999 for such services rendered. In 1999, the Company also issued to this vendor 2,100,000 shares of common stock as collateral of the unpaid balance.

In June 2001, the Company reached a settlement and agreed to reduce the balance of accounts payable to them by $770,000, to $1,200,000. The agreement resulted in an extraordinary gain from settlement of $770,000. The agreement also calls for the return to the Company of 2,100,000 shares of common stock placed in escrow as collateral for the obligation. The agreement permits the Company to repay the remaining amount over a period of time as long as fifteen months, starting no later than September 30, 2001. The amounts expected to be repaid will increase from $70,000 per month in September 2001 to $90,000 per month through December 2002. During 2001, the Company made two of the four payments due in 2001 which totaled to $140,000. The unpaid balance is $1,963,800, including accrued interest charges of $903,800, as of December 31, 2005. In December 2003, the Company received certificates for the return of all of the 2,100,000 shares of common stock which were then cancelled.

NOTE 12 - SHORT TERM LOANS

These short term loans and advances are non-interest bearing and were converted to stock in 2006.

NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions arising in the ordinary course of business. There can be no assurance, the Company will be successful in defending these actions.

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D. Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and attorney's fees, under the lease on our former principal executive offices in Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541 on December 7, 2000, IC One reached a payment arrangement under which we are obligated to pay $5,000 per month, plus ongoing obligations under the lease. The settlement obligation is guaranteed by the Company, and is secured by the equipment, inventory, accounts and chattel paper of both the parent and IC One. The Company is in default in its obligations under this agreement. Upon the expiration of the lease, an amended judgment of $222,765 (a provision has been provided for in the financial statements at December 31, 2003) was entered to reflect the additional unpaid rent, interest and attorney's fees.

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. Accordingly, the case was dismissed on August 4, 2004.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

On April 4, 2003, Greg Morrison initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on those amounts from the date of termination, court costs and attorney's fees. The Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The Company's final payment under this agreement was made prior to July 31, 2004, and this matter has be dismissed.

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the Company in the Superior Court of New Jersey, Hudson County for unpaid amounts owed for services provided in the amount of approximately $4,000. On July 18, 2003, a judgment was entered against the Company (a provision of $4,000 has been provided for in the financial statements at December 31, 2004). The Company is currently in default of the judgment and would be liable to pay interest from the date of judgment until paid in full.

The Company is reviewing, with the advice of legal counsel, whether the Company has legal claims that may be asserted against James E. Biorge, a founder and officer and director of IC One at the time it was acquired in September 1999. At the time of such acquisition, the Company set aside in a special trust approximately 7.8 million shares of common stock to be used to resolve claims that may be asserted against IC One by persons claiming an interest in or claim against IC One as a successor-in-interest to the assets, operations and liabilities of CardOne, which Mr. Biorge had also been instrumental in founding and which had been involved in the initial development of the intellectual properties subsequently acquired by IC One before IC One was acquired by us. The Company believes that all or a portion of the 7.8 million shares then reserved to satisfy such claims, all of which have subsequently been used for such purpose, should properly be the responsibility of Mr. Biorge. On the basis of our previous assertion that the Company may make such a claim against Mr. Biorge and perhaps other reasons not known to the Company, Mr. Biorge has refused to accept certificates for 11,503,138 shares of Company's common stock to which he would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter) initiated an action against the company in the United States District Court for the District of Utah (Case # 07cv00129), seeking the above-noted shares which were previously cancelled by the Company, as well as attorney's fees and punitive damages. The Company plans to vigorously defend itself and believes that there is a reasonable possibility that the outcome of any claim would not be unfavorable to the Company. Additionally, the Company may pursue claims against Mr. Biorge and seek damages in addition to cancellation of the shares.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us and signed agreements to accept their compensation on a deferred basis. In December 2002, they signed additional agreements releasing all rights to any claims based on the CardOne entities, terminating their association with the Company, and agreed to accept options to purchase 725,000 shares of common stock each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of our stock for work performed through December 2002.

On March 18, 2005, Richard Hauge and John Hipsley initiated an action against the Company in the Third Judicial District Court, Salt Lake County, State of Utah (Case # 050905213 alleging the Company breached prior employment and settlement agreements. On July 16, 2007, Richard Hauge and the Company entered into a separate Settlement Agreement, and the Company continues to vigorously defend itself in the matter against John Hipsley.

From time to time, the Company is threatened by creditors to initiate litigation to collect amounts owed by the Company and reported on its financial statements. In cases in which litigation is threatened or initiated, the Company seeks to negotiate a settlement or forbearance agreement.

NOTE 14 - PAYROLL TAXES

The Company's wholly owned subsidiary, IC One, Inc., has received notification from the Internal Revenue Service that IC One has an unpaid liability for employment taxes and amounts withheld from employees' wages for the periods from July 1, 1999, through September 30, 2001. IC One erroneously filed an employer tax report for the quarter ended September 30, 2001, even though it did not have any employees and paid no payroll after June 30, 2001. Accordingly, IC One was not required to make federal tax deposits for the periods after June 30, 2001. The Internal Revenue Service has filed tax liens against the Company with respect to such amounts outstanding. As of December 31, 2005, the aggregate amount owed by IC One, together with applicable penalties and interest, for the period from July 1, 1999, through June 30, 2001, was approximately $1,335,575. The Company is attempting to negotiate with the Internal Revenue Service regarding payment of the amounts owed by IC One.

The total amount of unpaid employment taxes owed by the Company was approximately $1,335,575 (including interest and penalties of approximately $383,090). The Company continues to work with the Internal Revenue Service via the appeals process to resolve its outstanding liability. The Company does not believe that the liability will hinder the progress of the Company.

The State of Utah has filed tax liens against the Company of approximately $57,000 as of December 31, 2005, for unpaid employee withholding taxes and related amounts.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

NOTE 14 - PAYROLL TAXES-Continued

The State of California has filed tax liens against the Company for unpaid employee withholding taxes and related amounts aggregating approximately $74,874 as of December 31, 2005.

The State of Nebraska has filed tax liens against the Company for unpaid employee withholding taxes and related amounts aggregating approximately $5,500 as of December 31, 2005. On June 26, 2007, the Company paid its tax obligation to the State of Nebraska in full.

NOTE 15 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and services. (Refer Note 20 - Subsequent Events for licensing agreements signed with Retention Management Group, Inc. and Phoenix Technology Holdings, Inc.)

NOTE 16 - EMPLOYMENT AGREEMENTS

As of December 31, 2005, the Company was obligated under two employment agreements with certain officers. Compensation under the agreements include annual salaries approximately $150,000.

NOTE 17 - RELATED PARTY TRANSACTIONS

As of December 31, 2005 and 2004 the Company is liable to executive officers and directors for secured convertible promissory notes for $1,220,462, with interest at 12%. Interest on such notes accrued approximates $189,000 for 2005 (2004:
$169,000). These notes were assigned to Phoenix Technology Holdings Inc. in April 2006 (see Note 20 - Subsequent Events) Also during 2005, a director maintained a current account with the Company to assist the Company meet its operating expenses. As of December 31, 2005, there was a payable of $27.000 (2004: $19,000) approximately to this director.

NOTE 18 - LEASE COMMITMENT

The Company leased office space under an operating lease, which expired in 2003. The Company now rents its principal executive offices at Las Vegas, Nevada on a month-to-month basis, for combined rent of $12,000 per year.

NOTE 19 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades over the counter on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential fines or penalties that may result from such delisting or late filings.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

(A Development Stage Enterprise)

Notes to Consolidated Financial Statements December 31, 2005 and 2004
(Amounts expressed in US Dollars)

First Quarter (through March 31, 2005)......................................F-40

Condensed Notes to First Quarter Financial Statements.......................F-54

Second Quarter (through June 30, 2005)......................................F-68

Condensed Notes to Second Quarter Financial Statements......................F-82

Third Quarter (through September 30, 2005)..................................F-97

Condensed Notes to Third Quarter Financial Statements......................F-111

 (Unaudited) (Audited)
 March 31, December 31,
 2005 2004
 $ $
 ASSETS
 ------

CURRENT ASSETS:
 Cash 164,587 14,086
 Prepaid Expenses and other 62,504 58,571
 ----------- -----------
 TOTAL CURRENT ASSETS 227,091 72,657
 ----------- -----------
 TOTAL ASSETS 227,091 72,657
 =========== ===========
 LIABILITIES AND SHAREHOLDERS' DEFICIENCY
 ----------------------------------------
CURRENT LIABILITIES:
 Accounts payable - Vendor 1,773,000 1,709,400
 Accounts payable - other 5,065,728 4,425,895
 Accrued wages and payroll taxes (note 11) 1,455,484 1,439,795
 Deferred compensation 2,497,907 2,074,276
 Loans - CEO America 150,000 150,000
 Amounts owed to employees and officers (notes 5 and 6) 1,151,573 1,097,273
 Short term loans 168,000 197,885
 Convertible notes payable (including amounts owed to officers
 $1,220,462 prior year $1,220,462) 2,966,316 2,766,316
 ----------- -----------
 TOTAL CURRENT LIABILITIES 15,228,008 13,860,840
 ----------- -----------


SHAREHOLDERS' DEFICIENCY (note 7):
 Common stock - $.001 par value; 200,000,000 shares
 authorized; 166,404,341 shares issued and outstanding 166,404 165,714
 (2004: 165,714,436)
 Additional paid-in capital 57,668,541 57,616,113
 Common stock subscription receivable (200,000) (250,000)
 Common stock subscribed 500,000 500,000
 Deficit accumulated during the development stage (73,135,862) (71,820,010)
 ----------- -----------
 TOTAL SHAREHOLDERS' DEFICIENCY (15,000,917) (13,788,183)
 ----------- -----------
 TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 227,091 72,657
 =========== ===========

 For the Period
 For the Quarter From Inception
 Ended March 31, February 26, 1997)
 --------------------------------- through March 31,
 2005 2004 2005
 ---- ---- ----
 $ $ $ $
EXPENSES:
 Selling, general and administrative (note 12) 712,950 (10,781) 58,426,498
 Depreciation and amortization - - 365,010
 Write-off of common stock subscription
 receivable - - 2,125,000
 Loss on impairment of intangible assets - - 703,211
 Interest expense 602,902 163,792 10,584,933
 ------------- ------------- ------------
 TOTAL EXPENSES 1,315,852 153,011 72,204,652
 ------------- ------------- ------------
LOSS BEFORE EXTRAORDINARY ITEM (1,315,852) (153,011) (72,204,652)

EXTRAORDINARY ITEM - LOSS ON
 EXTINGUISHMENT OF DEBT - - (931,210)
 ------------- ------------- ------------
NET LOSS $ (1,315,852) $ (153,011) $(73,135,862)
 ============= ============= ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.01) $ (0.00)

 ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING, BASIC AND DILUTED 165,801,515 162,774,572
 ============= =============

COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:

Net loss $ (1,315,852) $ (153,011)
Other comprehensive income (loss) foreign currency
Translation - -
Comprehensive Loss $ (1,315,852) $ (153,011)

 Deficit
 Common Common Accumulated
 Common Stock Additional Stock Stock Deferred During the
 Number of Paid-in Subscription to be Compen- Development
 Shares Amount Capital Receivable Issued sation Stage Total
Balance - February 26, 1997 (Inception) - $ - $ - $ - - - $ - $ -

Issuance of common stock for cash:
 ($1.32 per share, March) 35,676 36 46,964 - - - - 47,000
 ($0.92 per share, April) 10,032 10 9,207 - - - - 9,217
 ($0.75 per share, June) 28,085 28 20,972 - - - - 21,000
 ($0.71 per share, July) 452,223 452 322,434 - - - - 322,886
 ($0.69 per share, August) 695,447 695 477,005 - - - - 477,700
 ($0.68 per share, September) 42,128 42 28,487 - - - - 28,529
 ($0.81 per share, November) 32,715 33 26,517 - - - - 26,550
Issuance of common stock for legal, - -
financial, development and
administrative services - -
 ($1.32 per share, March) 759 1 999 - - - - 1,000
 ($0.92 per share, April) 379,528 380 349,620 - - - - 350,000
 ($0.92 per share, May) 12,870,501 12,871 11,811,512 - - - - 11,824,383
 ($0.71 per share, July) 3,779,301 3,779 2,684,854 - - - - 2,688,633
 ($0.69 per share, August) 1,479,869 1,480 1,012,322 - - - - 1,013,802
 ($0.68 per share, September) 263,471 263 178,162 - - - - 178,425
 ($0.81 per share, November) 74,957 75 61,150 - - - - 61,225
 Net loss - - - - - - (17,349,205) (17,349,205)

Balance - December 31, 1997
(Audited) 20,144,692 20,145 17,030,205 0 0 0 (17,349,205) (298,855)

 Issuance of common stock for cash: - -
 ($2.63 per share, January) 94,882 95 249,905 - - - - 250,000
 ($0.87 per share, February) 108,469 108 94,342 - - - - 94,450

 F-42

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 ($0.69 per share, March) 176,131 176 122,094 - - - - 122,270
 ($0.70 per share, April) 206,944 207 144,026 - - - - 144,233
 ($0.67 per share, May) 471,374 471 317,029 - - - - 317,500
 ($2.45 per share, June) 26,567 27 64,973 - - - - 65,000
 ($1.24 per share, July) 19,356 19 23,981 - - - - 24,000
 ($2.63 per share, August) 1,898 2 4,998 - - - - 5,000
 ($0.68 per share, September) 284,393 284 194,383 - - - - 194,667
 ($0.66 per share, October) 68,315 68 44,932 - - - - 45,000
 ($0.65 per share, November) 523,935 524 338,874 - - - - 339,398
 ($0.66 per share, December) 37,953 38 24,962 - - - - 25,000
Issuance of common stock for notes
 ($0.69 per share, July) 1,897,639 1,898 1,298,102 (1,300,000) - - - -
Issuance of common stock for legal,
financial, development and
administrative services:
 ($0.69 per share, March) 3,795 4 2,631 - - - - 2,635
 ($0.70 per share, April) 67,708 68 47,122 - - - - 47,190
 ($0.67 per share, May) 340,057 340 228,710 - - - - 229,050
 ($2.45 per share, June) 379,528 380 928,191 - - - - 928,571
 ($1.24 per share, July) 815,985 816 1,010,949 - - - - 1,011,765
 ($0.68 per share, September) 152,388 152 104,158 - - - - 104,310
 ($0.66 per share, October) 15,181 15 9,985 - - - - 10,000
 ($0.65 per share, November) 51,616 52 33,384 - - - - 33,436
 Net loss - - - - - - (5,448,335) (5,448,335)

Balance - December 31, 1998
(Audited) 25,888,806 25,889 22,317,936 (1,300,000) 0 0 (22,797,540) (1,753,715)

Issuance of common stock in exchange 18,597,792 18,597 777,516 - - - 796,113
Issuance of common stock for cash:
 ($0.66 per share, January) 713,512 713 469,287 - - - 470,000
 ($0.68 per share, February) 129,799 130 87,870 - - - 88,000
 ($0.66 per share, March) 151,811 152 99,848 - - - 100,000
 ($0.68 per share, April) 179,137 179 120,821 - - - 121,000
 ($0.66 per share, May) 38,712 39 25,461 - - - 25,500

 F-43

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 ($0.23 per share, July) 1,009,905 1,010 232,874 - - - 233,884
 ($0.66 per share, September) 325,557 325 214,124 - - - 214,449
Issuance of common stock for:
Computer services ($2.34 per share,
September) 11,357 11 26,572 - - - 26,583

Shareholder's loan ($2.75 per share,
November) 175,000 175 481,075 - - - 481,250

Investment in real estate joint 420,000 420 419,580 - 114000 (114,000) 420,000
venture ($1.00 per share, December)

Issuance of common stock for notes
($1.32 per share, July) 759,056 759 999,241 (1,000,000)

Issuance of common stock for software
($0.66 per share, August) 174,583 175 114,825 - 115,000
Issuance of common stock for legal,
financial, development and
administrative services:
 ($0.68 per share, February) 1,968,326 1,968 1,332,506 - 1,334,474
 ($0.68 per share, April) 1,913,579 1,914 1,290,633 - 1,292,547
 ($0.66 per share, May) 57,157 57 37,593 - 37,650
 ($0.66 per share, September) 1,500,860 1,501 986,242 - 987,743
 Net loss - - - - (7,894,949) (7,894,949)

BALANCE - December 31, 1999
(Audited) 54,014,949 54,014 30,034,004 (2,300,000) 114,000 0 (30,806,489) (2,904,471)
Issuance of common stock for cash:
 ($0.60 and $1.00 per share,
 January) 120,733 121 82,320 - - - - 82,441
 ($0.60 and $1.00 per share,
 February 653,466 653 399,427 - - - - 400,080
 ($0.60 and $1.00 per share,
 March) 508,567 508 413,393 - - - - 413,901
 ($0.60 and $1.00 per share,
 April) 512,081 512 355,138 - - - - 355,650
 ($0.60 per share, May) 475,834 476 285,024 - - - - 285,500
 ($0.21 and $0.60 per share,
 June) 761,667 762 132,838 - - - - 133,600
 ($0.21 per share, July) 160,000 160 95,840 - - - - 96,000
 ($0.60 per share, August) 108,667 109 65,091 - - - - 65,200

 F-44

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 ($0.40 per share, September) 110,062 110 43,915 - - - - 44,025
 ($0.40 per share, October) 25,000 25 9,975 - - - - 10,000
 ($0.40 per share, November) 100,000 100 39,900 - - - - 40,000
Issuance of common stock for cash
received in 1999 ($0.54 per share,
January) 211,669 212 113,788 - (114,000) -
Issuance of common stock for debt
and interest:
 ($1.50 per share, April) 1,122,918 1,123 1,683,254 - - - - 1,684,377
 ($0.60 per share, October) 2,632 3 1,576 - - - - 1,579
 ($0.43 per share, November) 55,814 56 23,944 - - - - 24,000
 ($0.40 per share, December) 77,083 77 30,756 - - - - 30,833
Issuance of common stock for
financial and development services:
 ($2.66 per share, February) 22,768 23 60,449 - - - - 60,472
 ($2.50 per share, March) 139,988 140 349,830 - - - - 349,970
 ($1.97 per share, April) 28,527 29 56,066 - - - - 56,095
 ($1.43 per share, May) 3,000 3 4,287 - - - - 4,290
 ($1.94 per share, June) 90,700 91 175,485 - - - - 175,576
 ($1.42 per share, July) 28,640 29 40,642 - - - - 40,671
 ($0.98 per share, August) 16,114 16 15,842 - - - - 15,858
 ($0.66 per share, September) 40,067 40 26,398 - - - - 26,438
 ($0.64 per share, October) 58,397 58 37,278 - - - - 37,336
 ($0.40 per share, November) 21,155 21 8,441 - - - - 8,462
Issuance of common stock for legal
services
 ($0.35 per share, November) 500,000 500 174,500 - - - - 175,000
Issuance of common stock for
investment in Real estate joint
venture:
 ($2.00 per share, March) 28,432 28 56,836 - - - - 56,864
 ($0.33 per share, October) 101,975 102 33,550 - - - - 33,652
Issuance of common stock to IC One
shareholders, January 119,905 120 (120) - - - -
Cancellation of shares of common stock
issued in exchange, January (286,267) (286) 286 - - - -

 F-45

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

Issuance of common stock for equipment
 ($1.00 per share, January) 8,000 8 7,992 - - - - 8,000
Issuance of common stock to settle
CardOne potential claims ($1.05 per 294,180 294 308,595 - - - - 308,889
share, August)
 Stock option compensation:
 January - - 29,588 - - - - 29,588
 February - - 29,588 - - - - 29,588
 March - - 29,588 - - - - 29,588
 April - - 407,476 - - - - 407,476
 May - - 815,726 - - - - 815,726
 June - - 109,334 - - - - 109,334
 July - - 109,335 - - - - 109,335
 August - - 109,335 - - - - 109,335
 September - - 1,599,960 - - - - 1,599,960
 October - - 109,335 - - - - 109,335
 November - - 109,335 - - - - 109,335
 December - - 109,335 - - - - 109,335
 Net loss - - - - - - (10,485,935) (10,485,935)

BALANCE, December 31, 2000
(Audited) 60,236,723 60,237 38,734,475 (2,300,000) 0 0 (41,292,424) (4,797,712)

Issuance of common stock for
financial, development and
administrative services:
 ($0.25 per share, February) 21,386 21 5,326 - 5,347
 ($0.22 per share, March) 622,916 623 141,075 - 141,698
 ($0.15 per share, April) 402,210 402 58,017 - 58,419
 ($0.18 per share, May) 55,000 55 9,570 - 9,625
 ($0.19 per share, June) 62,115 62 11,740 - 11,802
 ($0.19 per share, July) 1,101,580 1,102 204,601 - 205,703
 ($0.16 per share, August) 270,047 270 44,118 - 44,388
 ($0.13 per share, September) 68,348 68 9,134 - 9,202
 ($0.20 per share, October) 286,406 287 57,717 - 58,004
 ($0.20 per share, November) 308,189 308 59,789 - 60,097
 ($0.23 per share, December) 395,400 395 89,297 - 89,692

 F-46

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

Cancellation of common stock issued
for financial services ($1.50 per
share, December) (55,000) (55) (82,445) - (82,500)
Issuance of common stock for
directors' fees
 ($1.29 per share, March) 335,000 335 432,365 - 432,700
Adjustment to issuance of common
stock:
 February 76,527 77 (77) -
 October 35,655 36 (36) -
Settlement of subscription notes
receivable:
 July - - - 1,225,000 1,225,000
 December - - - 75,000 75,000
Issuance of common stock for debt:
 ($0.02 per share, October) 1,385,710 1,386 23,614 - 25,000
 $2.74 per share, November) 105,128 105 287,895 - 288,000
Issuance of common stock for
interest:
 ($0.18 per share, January) 400,000 400 73,134 - 73,534
 ($0.18 per share, February) 400,000 400 73,133 - 73,533
 ($0.18 per share, March) 419,394 419 76,314 - 76,733
 ($0.21 per share, April) 548,160 548 113,652 - 114,200
 ($0.21 per share, May) 559,589 560 115,640 - 116,200
 ($0.20 per share, June) 835,145 835 164,965 - 165,800
 ($0.15 per share, July) 1,459,568 1,460 222,340 - 223,800
 $0.15 per share, August) 1,677,982 1,678 253,792 - 255,470
 ($0.15 per share, September) 1,793,356 1,793 268,677 - 270,470
 ($0.15 per share, October) 1,335,406 1,335 304,473 - 305,808
 $0.19 per share, November) 1,709,659 1,710 323,125 - 324,835
 ($0.63 per share, December) 339,398 339 180,273 - 180,612
Valuation adjustment for
collateralized shares - - - 863,370 863,370
Adjustment for variable option
accounting - - 55,160 - 55,160
Adjustment to issuance of common
stock forstock options, August (24,000) (24) 24 -
Loans payable - shareholder,
at $0.13 per share, July 1,992,187 1,992 253,008 - 255,000
Stock options granted for wages, July - - 919,197 - 919,197

 F-47

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

Issuance of additional stock for sale
of common stock for cash in 2000,
December 250,000 250 (250) -
 Stock option compensation:
 January - - 360,757 - 360,757
 February - - 333,674 - 333,674
 March - - 326,903 - 326,903
 April - - 316,732 - 316,732
 May - - 316,732 - 316,732
 June - - 316,732 - 316,732
 July - - 3,477,119 - 3,477,119
 August - - 316,731 - 316,731
 September - - 324,131 - 324,131
Issuance of common stock to Card
One:
 ($0.21 per share, July) 3,341,974 3,342 698,473 - 701,815
 ($0.16 per share, August) 3,944,986 3,945 627,253 - 631,198
 ($0.12 per share, September) 8,060 8 959 - 967
 Net loss - - - - (14,774,236)(14,774,236)

BALANCE, December 31, 2001 (Audited) 86,704,204 86,704 50,899,028 (136,630) 0 0 (56,066,660) (5,217,558)

 Issuance of common stock for
 debt:
 ($0.37 per share, May) 114,308 114 41,723 - - - 41,837
 ($0.37 per share, July) 18,180 18 6,636 - - - 6,654
 ($0.37 per share, September) 24,645 25 8,995 - - - 9,020
 Issuance of common stock for
 interest:
 ($0.12 per share, January) 3,679,936 3,680 419,513 - - - 423,193
 ($0.11 per share, February) 3,947,206 3,947 430,245 - - - 434,192
 ($0.12 per share, March) 3,690,397 3,690 439,157 - - - 442,847
 ($0.06 per share, April) 7,380,795 7,381 435,467 - - - 442,848
 ($0.08 per share, May) 5,094,311 5,094 427,922 - - - 433,016
 ($0.08 per share, June) 5,273,031 5,273 427,116 - - - 432,389
 ($0.06 per share, July) 7,848,393 7,849 423,812 - - - 431,661
 ($0.08 per share, August) 5,743,000 5,743 424,982 - - - 430,725

 F-48

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 ($0.07 per share, September) 6,759,204 6,759 422,299 - - - 429,058
 ($0.07 per share, October) 140,000 140 8,960 - - - 9,100
 ($0.08 per share, November) 113,750 114 8,986 - - - 9,100
 ($0.04 per share, December 211,628 212 8,889 - - - 9,101
 Issuance of common stock for
 financial, development and
 administrative services:
 ($0.19 per share, March) 200,000 200 37,800 - - - 38,000
 ($0.08 per share, July) 200,000 200 16,040 - - - 16,240
 ($0.18 per share, August) 452,429 453 79,225 - - - 79,678
 ($0.06 per share, September) 120,000 120 7,440 - - - 7,560
 ($0.07 per share, November) 1,263,242 1,263 80,847 - - - 82,110
 ($0.05 per share, December) 480,000 480 21,120 - - - 21,600
 ($0.06 per share, December) 700,000 700 41,800 - - - 42,500
 Cancellation of common stock
 issued for directors' fees:
 ($1.29 per share, April) (110,000) (110) (141,790) - - - (141,900)
 ($1.29 per share, June) (75,000) (75) (96,675) - - - (96,750)
 Compensation for consultants - 328,665 - - - 328,665
 Accrued compensation converted
 into options - 145,000 - - - 145,000
 Stock option compensation:
 March - 233,579 - (22,919) - 210,660
 April - 790 - - - 790
 May - 790 - - - 790
 June - 791 - - - 791
 July - 72,479 - - - 72,479
 August - 7,712 - - - 7,712
 September - 15,680 - - - 15,680
 October - 790 - - - 790
 November - 790 - - - 790
 December - 37,650 - (6,890) - 30,760
 Amortization of deferred
 option compensation:
 January - - - -
 February - - - -

 F-49

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 March - - - -
 April - - - 790 - 790
 May - - - 790 - 790
 June - - - 791 - 791
 July - - - 790 - 790
 August - - - 790 - 790
 September - - - 791 - 791
 October - - - 790 - 790
 November - - - 790 - 790
 December - - - 791 - 791
 Valuation adjustment for
 collateralized shares - 103,991 - 103,991
 Shares issued for settlements:
 ($0.08 per share, September) 286,267 286 22,615 - - - 22,901
 ($0.05 per share, December) 30,588 31 1,498 - - - 1,529
 Net loss - - - - (7,738,743) (7,738,743)
 BALANCE, December 31, 2002
 (Audited) 140,290,514 140,291 55,748,366 (32,639) (22,696)(63,805,403) (7,972,081)

 Issuance of stock for services
 rendered:

 ($0.05 per share, February) 1,530,588 1,530 75,030 76,560
 ($0.05 per share, March) 500,000 500 24,500 25,000
 ($0.05 per share, June) 466,378 466 22,853 23,319
 ($0.05 per share, October) 7,050 7 345 352
 ($0.05 per share, November) 5,002,144 5,002 245,105 250,107
 ($0.05 per share, December) 240,916 241 11,805 12,046
 ($0.06 per share, December) 700,000 700 41,300 42,000
Issuance of stock in lieu of interest
payments:
 ($0.05 per share, March) 1,625,792 1,626 84,541 86,167
 ($0.05 per share, December) 12,206,425 12,207 627,387 639,594
 Issuance of stock for cash: 250,000 250 24,750 25,000

 Common stock subscribed (525,000) 600,000 75,000
Issuance of stock for settlement of
 debt:
 ($0.05 per share, November) 389,052 389 19,065 19,454

 F-50

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 ($0.05 per share, December) 400,000 400 19,600 20,000
 Stock option compensation: 79,139 79,139
 Amortization of deferred
 option compensation:
 Net Stock cancellation 22,696 22,696
 adjustment (3,140,259) (3,140) 3,140 -
 Write-off of stock subscription
 receivable 32,639 32,639
 Net Loss (3,785,439) (3,785,439)
 BALANCE, December 31, 2003
 (Audited) 160,468,600 160,469 57,026,926 (525,000) 600,000 - (67,590,842) (10,328,447)
 Issuance of stock for services
 rendered:
 ($0.10 per share, January) 150,000 150 14,850 15,000
 ($0.15 per share, January) 200,000 200 29,800 30,000
 ($0.145 per share, August) 689,655 690 99,310 100,000

 ($0.08 per share, August) 500,000 500 39,500 40,000
 Issue of stock in lieu of
 interest payments:
 ($0.13 per share, February) 280,419 280 36,174 36,454
 ($0.165 per share, February) 175,841 176 28,838 29,014
 Issue of stock for cash:
 ($0.05 per share, January) 2,586,310 2,586 126,729 129,315
 ($0.30 per share, January) 250,000 250 74,750 (75,000) -
 ($0.08 per share, February) 62,500 63 4,937 5,000
 ($0.30 per share, February) 83,333 83 24,917 (25,000) -
 ($0.06 per share, November) 66,667 66 3,934 4,000
 ($0.06 per share, November) 101,111 101 8,999 9,100
 (0.065 per share, November) 100,000 100 6,400 6,500
 Common stock subscription
 received 275,000 275,000
 Stock option compensation 90,049 90,049
 Net Loss (4,229,168) (4,229,168)
 BALANCE, December 30, 2004
 (Audited) 165,714,436 165,714 57,616,113 (250,000) 500,000 - (71,820,010) (13,788,183)

 F-51

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through March 31, 2005
(Amounts expressed in US dollars)

 Issuance of stock for services
 rendered:
 ($0.05 per share, February) 250,000 250 12,250 12,500
 Issue of stock for cash:
 ($0.07 per share, March) 70,355 70 4,855 4,925
 ($0.068 per share, March) 369,550 370 24,590 24,960
 Common stock subscription
 received 50,000 50,000
 Stock option compensation 10,733 10,733
 Net Loss (1,315,852) (1,315,852)

 BALANCE, March 31, 2005
 (Unaudited) 166,404,341 166,404 57,668,541 (200,000) 500,000 - (73,135,862) (15,000,917)

 For the Period
 Three Months Ended From Inception
 March 31, (February 26, 1997)
 --------------------------------------- Through March 31,
 2005 2004 2005
 -----------------------------------------------------------
 $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,315,852) (153,011) (73,135,862)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - - 365,010
Stock option compensation 10,733 42,131 10,514,387
Adjustment for variable accounting of options 55,160
Amortization of deferred option compensation - - 22,696
Common stock issued for services
and compensation 12,500 45,000 24,882,521
Common stock issued for interest expense - 65,468 7,020,283
Common stock issued to settle CardOne
Claims 1,667,299
Common stock issued for directors' fees 432,700
Write-off of common stock subscription
receivable - - 2,125,000
(Gain) loss on extinguishment of debt - - 931,210
Loss on impairment of assets - - 703,211
Changes in current assets and liabilities:
Prepaid Expenses and other (3,933) (12,957) (32,486)
Accounts payable and accrued expenses 1,142,753 (210,707) 13,295,067
 -----------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (153,799) (224,076) (11,153,804)
 -----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - - (347,349)
Acquisition of patents - - (46,854)
Investment in real estate joint venture - - (36,515)
 -----------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (430,718)
 -----------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - (29,885) 76,793 423,000
shareholders
Loans - CEO America - - 150,000
Proceeds from notes payable 200,000 35,000 3,711,827
Proceeds from common stock subscription
received 50,000 50,000 575,000
Sales of common stock 29,885 - 5,938,615
Amounts owed to employees and officers 54,300 103,899 950,667
 -----------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 304,300 265,692 11,749,109
 -----------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 150,501 41,616 164,587

CASH AT BEGINNING OF PERIOD 14,086 42,570 -
 -----------------------------------------------------------
CASH AT END OF PERIOD 164,587 84,186 164,587
 -----------------------------------------------------------

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is a development stage enterprise in the business of research, development and integration of proprietary processes and software technologies for the electronic payment industry, primarily involving consumer loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC. The Company licenses, markets and develops smart-card loyalty products through its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the three months ended March 31, 2005, are not indicative of the results that may be expected for the year ended December 31, 2005. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2004.

NOTE 2- GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development-stage enterprise and has incurred a net loss of $73,135,862 since inception. Additionally, the Company had a net working capital deficiency of $15,000,917 and a total shareholders' deficiency of $15,000,917 at March 31, 2005. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and recognizes the need to raise capital through the future issuance of stock and/or debentures in order to develop a viable business. The Company continues to implement cost-cutting measures. It may also rely increasingly on strategic alliances with others who will assume responsibility for financing specific required development tasks, thus, reducing the Company's financial requirements for the exploitation of its intellectual properties.

As of March 31, 2005, current liabilities are substantially past due. In the event demands are made upon the Company which cannot be met and the associated creditors successfully pursue action against the Company, the Company could be exposed to additional costs of legal fees, interest or penalties, and may be forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital through the private placement of common stock and the issuance of convertible debt.

NOTE-3 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4-STOCK BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes accounting and reporting standards for stock-based employee compensation plans. This statement allows companies to choose between the fair value based method of accounting as defined in this statement and the intrinsic value based method of accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided by APB 25, as permitted for stock-based compensation relative to the Company's employees. Stock and options granted to other parties in connection with providing goods and services to the Company are accounted for under the fair value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 also requires that those effects be disclosed more prominently by specifying the form, content, and location of those disclosures. We have adopted the increased disclosure requirements of SFAS No. 148 for the three month period ended March 31, 2005.

The additional disclosures required by SFAS No. 148 are as follows:

 For the Three Months
 Ended March 31,
 2005 2004
 ---- ----
 Net loss attributable to common stockholders,
 as reported .................................... $(1,315,852) $ (153,011)
 Add: Stock-based employee compensation
 expense included in reported net income,
 net of related tax effect ...................... 10,733 42,131
 Less: Total stock-based compensation
 expense determined under the Black-Scholes fair value
 based method of all awards* .................... (10,733) (42,131)
 Pro forma net loss attributable to
 common stockholders ............................ $(1,315,852) $ (153,011)
 =========== ===========
 Basic and diluted net loss attributable to
 common stockholders
 As reported ...................................... $ (0.01) $ (0.00)
 =========== ===========



Pro forma ......................................... $ (0.01) $ (0.00)

* The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the three months ended March 31, 2005: annual dividends of $0; expected volatility range of 147.12% to 160.73%, risk-free interest rate of 2.75%; and expected life of five years.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4- STOCK BASED COMPENSATION-Continued

Loss Per Share

Basic and diluted loss per share has been calculated based upon the weighted average number of common shares outstanding and excludes any potentially dilutive securities. Stock options and convertible notes have been excluded as common stock equivalents in the computation of diluted loss per share since the results would be anti-dilutive. Obligations to issue additional shares, which could potentially dilute earnings per share, were approximately 144,800,000 at March 31, 2005.

NOTE 5 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 6 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 7 - SHAREHOLDERS' DEFICIENCY

On February 2, 2005 the Company issued 250,000 common shares in exchange for services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash. The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash. The shares were issued at $0.068.

On January 13, 2004 the Company issued 2,586,310 common shares in exchange for cash. The shares were issued at $0.05.

On January 13, 2004 the Company issued 150,000 and 200,000 common shares in exchange for services valued at $15,000 and $30,000, respectively. The shares were issued at $0.10 and $0.15 respectively.

On January 29, 2004 the Company issued 250,000 common shares in exchange for cash. The shares were issued at $0.30.

On February 24, 2004 the Company issued 62,500 commons shares in exchange for cash. The shares were issued at $0.08.

On February 27, 2004 the Company issued 280,419 and 175,841 common shares for interest payments of $36,454 and $29,014 respectively. The shares were issued at $0.13 and $0.165, respectively.

On February 27, 2004 the Company issued 83,333 common shares in exchange for cash. The shares were issued at $0.30.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 8- AUTHORIZED SHARES

As at March 31, 2005, the Company is authorized to issue 200,000,000 shares of common stock. At March 31, 2005, the Company had common stock shares outstanding of 166,404,341 and an additional 144,788,270 shares issuable upon the conversion of stock options, convertible debt and deferred compensation. As a result, the Company would exceed the authorized amount by 111,192,611. The Company would be required to seek shareholder approval to increase the shares authorized limits in order to satisfy its potential conversion of dilutive securities.

As an alternative, the Company may purchase shares of common stock in the open market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved amendments to the Articles of Incorporation to adopt an increase in the capital stock of the Company's common stock from 200,000,000 to 500,000,000 shares. Furthermore, during a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000. (Refer Note 16 - Subsequent Events).

NOTE 9 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the "Plan"). The Board of Directors administers the Plan. Under the Plan, the Company may grant stock options, which may be incentive stock options ("ISO's") as defined in the Internal Revenue Code, and stock awards or options which do not qualify as ISO's to employees and officers. All employees of the Company are eligible to participate in the Plan.

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the three months ended March 31, 2005: annual dividends of $0; expected volatility range of 147.12% to 160.73%, risk-free interest rate of 2.75% and expected life of five years.

On January 31, 2005, the Company issued 100,000 options at a strike price of $0.065 for services rendered.

On February 28, 2005, the Company issued 100,000 options at a strike price of $0.072 for services rendered.

On March 31, 2005, the Company issued 100,000 options at a strike price of $0.07 for services rendered.

 Stock Options
 -----------------------
 Weighted
 Average
 Exercise
 Shares Price
 ------ -----

Outstanding at December 31, 2003 47,225,299 $0.09
 Granted 1,200,000 $0.11
 Exercised - -
 Cancelled - -
Outstanding at December 31, 2004 48,425,299 $0.11
 Granted 300,000 $0.07
 Exercised - -
 Cancelled - -
 Outstanding at March 31, 2005 48,725,299 $0.11

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

 Options Outstanding Options Exercisable
 ---------------------------------------- --------------------------
 Weighted
 Average Weighted Weighted
 Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
 Prices Outstanding Life Price Exercisable Price
 ------ ----------- ---- ----- ----------- -----
 (In Thousands) (In Years) (In Thousands)
$0.00 - $0.23 45,145 4.49 $0.09 45,145 $0.09
$0.48 - $0.49 3,247 5.40 $0.48 3,247 $0.48
$0.64 - $0.80 333 5.09 $0.64 333 $0.64
 ------ ------
 48,725 48,725
 ====== ======

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions arising in the ordinary course of business. There can be no assurance, the Company will be successful in defending these actions.

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D. Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and attorney's fees, under the lease on our former principal executive offices in Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541 on December 7, 2000, IC One reached a payment arrangement under which we are obligated to pay $5,000 per month, plus ongoing obligations under the lease. The settlement obligation is guaranteed by the Company, and is secured by the equipment, inventory, accounts and chattel paper of both the parent and IC One. The Company is in default in its obligations under this agreement. Upon the expiration of the lease, an amended judgment of $222,765 (a provision has been provided for in the financial statements at December 31, 2003) was entered to reflect the additional unpaid rent, interest and attorney's fees.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS-Continued

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. Accordingly, the case was dismissed on August 4, 2004.

In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the Eximsoft entities that IC One had contracted and received computer software development and programming services and had failed to pay as agreed. IC One agreed to pay $30,000 and provided Eximsoft with a confession of judgment that could be filed in the Third District Court in Salt Lake City, Utah, in the event that IC One failed to make the agreed payments. IC One paid the agreed $30,000 during 2002 and the original confession of judgment was returned by Eximsoft to us in November 2003.

On August 16, 2002, Sandra Lueck initiated an action against the Company for unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment was entered against the Company in the amounts of $11,400 for unpaid wages, $3,300 as a continuation of wages, court costs and attorney's fees of $1,753, and interest from the date of judgment until paid in full. On or about June 30, 2003, the Company entered into a release and settlement agreement compromising, resolving, and settling all matters and issues between the parties. The Company paid a total of $18,750 and a satisfaction of judgment was filed with the Third Judicial District Court on October 14, 2003.

On April 4, 2003, Greg Morrison initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on those amounts from the date of termination, court costs and attorney's fees. The Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The Company's final payment under this agreement was made prior to July 31, 2004, and this matter has be dismissed.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS-Continued

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the Company in the Superior Court of New Jersey, Hudson County for unpaid amounts owed for services provided in the amount of approximately $4,000. On July 18, 2003, a judgment was entered against the Company (a provision of $4,000 has been provided for in the financial statements at December 31, 2004). The Company is currently in default of the judgment and would be liable to pay interest from the date of judgment until paid in full.

The Company is reviewing, with the advice of legal counsel, whether the Company has legal claims that may be asserted against James E. Biorge, a founder and officer and director of IC One at the time it was acquired in September 1999. At the time of such acquisition, the Company set aside in a special trust approximately 7.8 million shares of common stock to be used to resolve claims that may be asserted against IC One by persons claiming an interest in or claim against IC One as a successor-in-interest to the assets, operations and liabilities of CardOne, which Mr. Biorge had also been instrumental in founding and which had been involved in the initial development of the intellectual properties subsequently acquired by IC One before IC One was acquired by us. The Company believes that all or a portion of the 7.8 million shares then reserved to satisfy such claims, all of which have subsequently been used for such purpose, should properly be the responsibility of Mr. Biorge. On the basis of our previous assertion that the Company may make such a claim against Mr. Biorge and perhaps other reasons not known to the Company, Mr. Biorge has refused to accept certificates for 11,503,138 shares of Company's common stock to which he would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter) initiated an action against the company in the United States District Court for the District of Utah (Case # 07cv00129), seeking the above-noted shares which were previously cancelled by the Company, as well as attorney's fees and punitive damages. The Company plans to vigorously defend itself and believes that there is a reasonable possibility that the outcome of any claim would not be unfavorable to the Company. Additionally, the Company may pursue claims against Mr. Biorge and seek damages in addition to cancellation of the shares.

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us and signed agreements to accept their compensation on a deferred basis. In December 2002, they signed additional agreements releasing all rights to any claims based on the CardOne entities, terminating their association with the Company, and agreed to accept options to purchase 725,000 shares of common stock each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of our stock for work performed through December 2002.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 11 - PAYROLL TAXES

NOTE 12- SELLING GENERAL AND ADMINISTRATIVE EXPENSES

For the three month period ended March 31, 2005, selling, general and administrative expenses totalled $712,950.

NOTE 13 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and services. (Refer Note 16 - Subsequent Events for licensing agreements signed with Retention Management Group, Inc. and Phoenix Technology Holdings, Inc.)

NOTE 14 - EMPLOYMENT AGREEMENTS

As of March 31, 2005, the Company was obligated under two employment agreements with certain officers. Compensation under the agreements include annual salaries approximately $150,000.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 15 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades over the counter on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential fines or penalties that may result from such delisting or late filings.

NOTE 16- SUBSEQUENT EVENTS

A) Subsequent issue of common shares:

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968, 150,000 and 1,000,000 common shares in exchange for cash. The shares were issued at $0.05, $0.06, $0.07, $0.08, $0.09, $0.12 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past services valued at $52.50. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest payments of $1,884,829.40. The shares were issued at $0.08.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash. The shares were issued at $0.07.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash. The shares were issued at $0.08.

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash. The shares were issued at $0.05.

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

On June 15, 2005, the Company issued 100,000 common shares in exchange for services valued at $5,000. The shares were issued at $0.05.

On July 9, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were issued at $0.05.

On July 21, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were valued at $0.05.

On September 14, 2005, the Company issued 58,413 common shares in exchange for cash. The shares were valued at $ $0.06.

On October 31, 2005, the Company issued 323,494 common shares in exchange for cash. The shares were valued at $ $0.05

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16-SUBSEQUENT EVENTS-Continued

A) Subsequent issue of common shares-Continued:

On December 1, 2005, the Company issued 88,669 common shares in exchange for services valued at $5,320.14. The shares were valued at $0.06.

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for past services valued at $100,000. The shares were issued at $0.05.

On July 14, 2006, the Company issued 200,000 common shares in exchange for past services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for past services valued at $70,000. The shares were issued at $0.07.

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for past services valued at $49,678. The shares were issued at $0.07.

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for past services valued at $55,418. The shares were issued at $0.05.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and 2,054,079 common shares in exchange for past services valued at $54,000, $59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10, $0.05, $0.07 and $0.05, respectively.

On January 30, 2007, the Company issued 5,850,000 common shares for past services valued at $292,500. The shares were issued at $0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in exchange for past services valued at $1,260,000 and $56,000, respectively. The shares were issued at $0.06 and $0.07, respectively.

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for past services valued at $ 278,250.00 and $54,000, respectively. The shares were issued at $0.05 and $0.10, respectively.

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for cash and past services, respectively valued at $75,000.00 and $135,000, respectively. The shares were issued at $0.05.

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash and past services, respectively valued at $25,000.00 and $2,426, respectively. The shares were issued at $0.05.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16-SUBSEQUENT EVENTS-Continued

A) Subsequent issue of common shares-Continued:

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash valued at $20,000.00. The shares were issued at $0.05. On June 12, 2007, the Company issued 100,324,827 common shares to convert secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash valued at $58,000.00. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services valued at $400,646. The shares were issued at $0.06.

On August 2, 2007, the Company issued 63,742,180 common shares to convert secured notes valued at 3,187,164. The shares were valued at $0.05.

On July 20, 2007, the Company issued 8,661,648 common shares for past services valued at $432,542. The shares were issued at $0.05.

B) Options:

On April 30, 2005, the Company issued 100,000 options at a strike price of $0.05 for services rendered.

On September 19, 2005, the Company cancelled 2,679,167 options that had been issued to a past employee.

On November 30, 2005, the Company cancelled 4,463,303 options that had been issued to a past employee.

On March 3, 2006, the Company cancelled 1,937,333 options that had been issued to a past employee.

On April 3, 2006, the Company cancelled 1,301,667 options that had been issued to a past employee.

On December 15, 2006 and December 16, 2006, the Company cancelled 527,296 and 1,000,000 options, respectively, that had been issued to consulting companies for services rendered.

On March 9, 2007, the Company cancelled 19,161,876 options that had been issued to past employees.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16-SUBSEQUENT EVENTS-Continued

B) Options-Continued

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and 1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to past employees.

C) Events

On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of Administration and Finance. In addition to these duties, on November 12, 2004 Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of the Company and resigned his previous position on December 16, 2004. On January 26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the Company in the Superior Court of California, County of Los Angeles bearing case number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint against the Company in the Superior Court of California, County of Los Angeles bearing case number LC-070495. On February 3, 2006, the parties entered into a Settlement and Release Agreement which resolved the matters and they were subsequently dismissed by the Courts.

On April 20, 2004, the Canadian Intellectual Property Office granted the Company patent number 2,182,596.

On July 25, 2004, the Company entered into a Licensing Agreement with Retention Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a license to market, distribute and sublicense SCTN applications and products. On March 10, 2006, the Company asserted claims against RMG in case no. A518577 filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31, 2006, the Company and RMG entered into a Settlement Agreement and Release. Under the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the Licensing Agreement between the Company and RMG was terminated. Accordingly, case no. A518577 was dismissed by the Court on June 23, 2006.

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. The case was dismissed on August 4, 2004.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16-SUBSEQUENT EVENTS-Continued

C) Events-Continued:

Concurrent with Mr. Diamond being relieved as CEO of the Company on December 16, 2004, David Simon assumed the role of CEO.

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an action in The Superior Court of the State of Washington, In and For the County of King, case no. 05-2-18115-0-SEA in which the Company was named one of several defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and Release. Accordingly, the Company was dismissed as a defendant in the case.

On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development partner, was elected to the Board of Directors. On August 17, 2005, Mr. Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.

On November 30, 2005, Verlo Howell initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah, civil no. 05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired as the Company's Executive Vice-President of Sales and Marketing pursuant to an Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's employment was terminated with cause by the Company. We intend to assert and pursue offsetting defenses and believe that there is a reasonable possibility that the outcome of any claim, if asserted, would not be unfavorable to us.

As of December 31, 2005, certain accounts payable of the Company are Statute-Barred under Utah law from being collected by creditors. However, under US GAAP, the Company still records them as a liability. As of December 31, 2005, the amount is approximately 41,000.

On April 6, 2006, the Company entered into a License Agreement with Phoenix Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of the agreement, the Company granted Phoenix an exclusive license to use the Company's technology. Also, certain portions of the Company's debt, including a significant portion of the Senior Secured Convertible Notes, unpaid amounts owing to Airos Group for services rendered, and accrued salaries were assumed by Phoenix and ceased accruing additional interest. Further, the agreement provides for Phoenix to loan monies to the Company, at Phoenix's discretion, at the rate of one percent (1%) per month, compounded monthly until paid in full. Any such loan shall be deducted from any payments due by Phoenix under the agreement. In order to maintain exclusivity, the Agreement calls for certain performance targets to be met. As of April 18, 2007, these targets have been met.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements March 31, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16-SUBSEQUENT EVENTS-Continued

C) Events-Continued:

During a special meeting of the Board of Directors on November 30, 2006, the Board voted to approve a resolution to convert the Company from a Florida corporation to a Nevada corporation.

During a special meeting of the Board of Directors on November 30, 2006, the Board voted to approve a resolution to increase the number of authorized shares to 500,000,000.

During a meeting of the Board of Directors on May 18, 2007, the Board voted to approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's independent registered public accounting firm and engaged Schwartz Levitsky Feldman LLP as the Company's independent registered public accounting firm. The change in independent registered public accounting firms is not the result of any disagreement with Marcum & Kliegman, LLP.

In Janaury of 2007, Noteholders which did not elect to assign their debt to Phoenix Technology Holding, Inc. were given the option to receive their principal investment plus accrued interest either in the form of cash or shares in the Company. By June 2007, the last of these repayments were made, and all Senior Secured Notes have been retired.

During a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000.

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based company, initiated an action in the United States District Court for the District of Nevada, case # 07-CV-1178, in which the Company was named as a co-defendant. The company plans to vigorously defend and counter sue TII for breach of contract, fraud, interference with contractual relations, misappropriation of trade secrets, conversion, unjust enrichment and to seek both compensatory and punitive damages well in excess of $100 million.

As of September 20, 2007, certain accounts payable of the Company are Statute-Barred under Utah law from being collected by creditors. However, under US GAAP, the Company still records them as a liability. As of September 20, 2007, the amount is approximately 43,000. This amount includes the $41,000 previously Statute-Barred as of December 31, 2005.

 (Unaudited) (Audited)
 June 30, December 31,
 2005 2004
 $ $
 ASSETS
 ------
CURRENT ASSETS:
 Cash 12,820 14,086
 Prepaid Expenses and other 146,593 58,571
 ----------- -----------
 TOTAL CURRENT ASSETS 159,413 72,657
 ----------- -----------
 TOTAL ASSETS 159,413 72,657
 =========== ===========
 LIABILITIES AND SHAREHOLDERS' DEFICIENCY
 ----------------------------------------
CURRENT LIABILITIES:
 Accounts payable - Vendor 1,836,600 1,709,400
 Accounts payable - other 5,685,915 4,425,895
 Accrued wages and payroll taxes (note 11) 1,465,603 1,439,795
 Deferred compensation 1,810,461 2,074,276
 Loans - CEO America 150,000 150,000
 Amounts owed to employees and officers (notes 5 and 6) 1,205,731 1,097,273
 Short term loans 40,179 197,885
 Convertible notes payable (including amounts owed to officers
 $1,220,462 prior year $1,220,462) 2,966,316 2,766,316
 ----------- -----------
 TOTAL CURRENT LIABILITIES 15,160,805 13,860,840
 ----------- -----------


SHAREHOLDERS' DEFICIENCY (note 7):
 Common stock - $.001 par value; 200,000,000 shares
 authorized; 192,403,427 shares issued and outstanding 192,403 165,714
 (2004: 165,714,436)
 Additional paid-in capital 59,962,375 57,616,113
 Common stock subscription receivable (175,000) (250,000)
 Common stock subscribed 200,000 500,000
 Deficit accumulated during the development stage (75,181,170) (71,820,010)
 ----------- -----------
 TOTAL SHAREHOLDERS' DEFICIENCY (15,001,392) (13,788,183)
 ----------- -----------
 TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 159,413 72,657
 =========== ===========

 For the Period
 For the Quarter For the Six Months From Inception
 Ended June 30, Ended June 30, February 26, 1997)
 ------------------------------ ------------------------------ through June 30,
 2005 2004 2005 2004 2005
 ---- ---- ---- ---- ----
 $ $ $ $ $
EXPENSES:
 Selling, general and administrative (note 12) 663,417 967,775 1,376,366 956,970 59,089,915
 Depreciation and amortization - - - - 365,010
 Write-off of common stock subscription
 receivable - - - - 2,125,000
 Loss on impairment of intangible assets - - - - 703,211
 Interest expense 1,381,891 444,197 1,984,794 608,012 11,966,824
 ------------- ------------- ------------- ------------- -------------
 TOTAL EXPENSES 2,045,308 1,411,972 3,361,160 1,564,982 74,249,960
 ------------- ------------- ------------- ------------- -------------
LOSS BEFORE EXTRAORDINARY ITEM (2,045,308) (1,411,972) (3,361,160) (1,564,982) (74,249,960)

EXTRAORDINARY ITEM - LOSS ON
 EXTINGUISHMENT OF DEBT - - - - (931,210)
 ------------- ------------- ------------- ------------- -------------
NET LOSS $ (2,045,308) $ (1,411,972) $ (3,361,160) $ (1,564,982) $ (75,181,170)
 ============= ============= ============= ============= =============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.01) $ (0.01) $ (0.02) $ (0.01)

 ============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING, BASIC AND DILUTED 175,043,600 164,257,003 170,473,902 163,515,788
 ============= ============= ============= =============

COMPREHENSIVE LOSS
The components of comprehensive loss are as
follows:

Net loss $ (2,045,308) $ (1,411,972)
Other comprehensive income (loss) foreign
currency
Translation - -
Comprehensive Loss $ (2,045,308) $ (1,411,972)

 Deficit
 Common Common Accumulated
 Common Stock Additional Stock Stock Deferred During the
 Number of Paid-in Subscription to be Compen- Development
 Shares Amount Capital Receivable Issued sation Stage Total
Balance - February 26, 1997 (Inception) - $ - $ - $ - - - $ - $ -

Issuance of common stock for cash:
 ($1.32 per share, March) 35,676 36 46,964 - - - - 47,000
 ($0.92 per share, April) 10,032 10 9,207 - - - - 9,217
 ($0.75 per share, June) 28,085 28 20,972 - - - - 21,000
 ($0.71 per share, July) 452,223 452 322,434 - - - - 322,886
 ($0.69 per share, August) 695,447 695 477,005 - - - - 477,700
 ($0.68 per share, September) 42,128 42 28,487 - - - - 28,529
 ($0.81 per share, November) 32,715 33 26,517 - - - - 26,550
Issuance of common stock for legal, - -
financial, development and
administrative services - -
 ($1.32 per share, March) 759 1 999 - - - - 1,000
 ($0.92 per share, April) 379,528 380 349,620 - - - - 350,000
 ($0.92 per share, May) 12,870,501 12,871 11,811,512 - - - - 11,824,383
 ($0.71 per share, July) 3,779,301 3,779 2,684,854 - - - - 2,688,633
 ($0.69 per share, August) 1,479,869 1,480 1,012,322 - - - - 1,013,802
 ($0.68 per share, September) 263,471 263 178,162 - - - - 178,425
 ($0.81 per share, November) 74,957 75 61,150 - - - - 61,225
 Net loss - - - - - - (17,349,205) (17,349,205)

Balance - December 31, 1997
 (Audited) 20,144,692 20,145 17,030,205 0 0 0 (17,349,205) (298,855)

Issuance of common stock for cash: - -
 ($2.63 per share, January) 94,882 95 249,905 - - - - 250,000
 ($0.87 per share, February) 108,469 108 94,342 - - - - 94,450

 F-70

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 ($0.69 per share, March) 176,131 176 122,094 - - - - 122,270
 ($0.70 per share, April) 206,944 207 144,026 - - - - 144,233
 ($0.67 per share, May) 471,374 471 317,029 - - - - 317,500
 ($2.45 per share, June) 26,567 27 64,973 - - - - 65,000
 ($1.24 per share, July) 19,356 19 23,981 - - - - 24,000
 ($2.63 per share, August) 1,898 2 4,998 - - - - 5,000
 ($0.68 per share, September) 284,393 284 194,383 - - - - 194,667
 ($0.66 per share, October) 68,315 68 44,932 - - - - 45,000
 ($0.65 per share, November) 523,935 524 338,874 - - - - 339,398
 ($0.66 per share, December) 37,953 38 24,962 - - - - 25,000
Issuance of common stock for notes
 ($0.69 per share, July) 1,897,639 1,898 1,298,102 (1,300,000) - - - -
Issuance of common stock for legal,
financial, development and
administrative services: - -
 ($0.69 per share, March) 3,795 4 2,631 - - - - 2,635
 ($0.70 per share, April) 67,708 68 47,122 - - - - 47,190
 ($0.67 per share, May) 340,057 340 228,710 - - - - 229,050
 ($2.45 per share, June) 379,528 380 928,191 - - - - 928,571
 ($1.24 per share, July) 815,985 816 1,010,949 - - - - 1,011,765
 ($0.68 per share, September) 152,388 152 104,158 - - - - 104,310
 ($0.66 per share, October) 15,181 15 9,985 - - - - 10,000
 ($0.65 per share, November) 51,616 52 33,384 - - - - 33,436
 Net loss - - - - - - (5,448,335) (5,448,335)

Balance - December 31, 1998 (Audited) 25,888,806 25,889 22,317,936 (1,300,000) 0 0 (22,797,540) (1,753,715)

Issuance of common stock in exchange 18,597,792 18,597 777,516 - - - 796,113
Issuance of common stock for cash:
 ($0.66 per share, January) 713,512 713 469,287 - - - 470,000
 ($0.68 per share, February) 129,799 130 87,870 - - - 88,000
 ($0.66 per share, March) 151,811 152 99,848 - - - 100,000
 ($0.68 per share, April) 179,137 179 120,821 - - - 121,000
 ($0.66 per share, May) 38,712 39 25,461 - - - 25,500

 F-71

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 ($0.23 per share, July) 1,009,905 1,010 232,874 - - - 233,884
 ($0.66 per share, September) 325,557 325 214,124 - - - 214,449
Issuance of common stock for:
Computer services ($2.34 per share,
September) 11,357 11 26,572 - - - 26,583

Shareholder's loan ($2.75 per share,
November) 175,000 175 481,075 - - - 481,250

Investment in real estate joint venture
($1.00 per share, December) 420,000 420 419,580 - 114000 (114,000) 420,000

Issuance of common stock for notes
($1.32 per share, July) 759,056 759 999,241 (1,000,000)


Issuance of common stock for software 174,583 175 114,825 - 115,000
($0.66 per share, August)
Issuance of common stock for legal,
financial, development and
administrative services:
($0.68 per share, February) 1,968,326 1,968 1,332,506 - 1,334,474
($0.68 per share, April) 1,913,579 1,914 1,290,633 - 1,292,547
($0.66 per share, May) 57,157 57 37,593 - 37,650
($0.66 per share, September) 1,500,860 1,501 986,242 - 987,743
Net loss - - - - (7,894,949) (7,894,949)

BALANCE - December 31, 1999
(Audited) 54,014,949 54,014 30,034,004 (2,300,000) 114,000 0 (30,806,489) (2,904,471)
Issuance of common stock for cash:
 ($0.60 and $1.00 per share,
 January) 120,733 121 82,320 - - - - 82,441
 ($0.60 and $1.00 per share,
 February) 653,466 653 399,427 - - - - 400,080
 ($0.60 and $1.00 per share,
 March) 508,567 508 413,393 - - - - 413,901
 ($0.60 and $1.00 per share,
 April) 512,081 512 355,138 - - - - 355,650
 ($0.60 per share, May) 475,834 476 285,024 - - - - 285,500
 ($0.21 and $0.60 per share,
 June) 761,667 762 132,838 - - - - 133,600
 ($0.21 per share, July) 160,000 160 95,840 - - - - 96,000
 ($0.60 per share, August) 108,667 109 65,091 - - - - 65,200

 F-72

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 ($0.40 per share, September) 110,062 110 43,915 - - - - 44,025
 ($0.40 per share, October) 25,000 25 9,975 - - - - 10,000
 ($0.40 per share, November) 100,000 100 39,900 - - - - 40,000
Issuance of common stock for cash
received in 1999 ($0.54 per share,
January) 211,669 212 113,788 - (114,000) -
Issuance of common stock for debt
and interest:
 ($1.50 per share, April) 1,122,918 1,123 1,683,254 - - - - 1,684,377
 ($0.60 per share, October) 2,632 3 1,576 - - - - 1,579
 ($0.43 per share, November) 55,814 56 23,944 - - - - 24,000
 ($0.40 per share, December) 77,083 77 30,756 - - - - 30,833
Issuance of common stock for financial
and development services:
 ($2.66 per share, February) 22,768 23 60,449 - - - - 60,472
 ($2.50 per share, March) 139,988 140 349,830 - - - - 349,970
 ($1.97 per share, April) 28,527 29 56,066 - - - - 56,095
 ($1.43 per share, May) 3,000 3 4,287 - - - - 4,290
 ($1.94 per share, June) 90,700 91 175,485 - - - - 175,576
 ($1.42 per share, July) 28,640 29 40,642 - - - - 40,671
 ($0.98 per share, August) 16,114 16 15,842 - - - - 15,858
 ($0.66 per share, September) 40,067 40 26,398 - - - - 26,438
 ($0.64 per share, October) 58,397 58 37,278 - - - - 37,336
 ($0.40 per share, November) 21,155 21 8,441 - - - - 8,462
Issuance of common stock for
legal services
 ($0.35 per share, November) 500,000 500 174,500 - - - - 175,000
Issuance of common stock for
investment in Real estate joint
venture:
 ($2.00 per share, March) 28,432 28 56,836 - - - - 56,864
 ($0.33 per share, October) 101,975 102 33,550 - - - - 33,652
Issuance of common stock to IC One
shareholders, January 119,905 120 (120) - - - -
Cancellation of shares of common stock
issued in exchange, January (286,267) (286) 286 - - - -
Issuance of common stock for equipment

 F-73

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 ($1.00 per share, January) 8,000 8 7,992 - - - - 8,000
Issuance of common stock to settle
CardOne potential claims ($1.05 per
share, August) 294,180 294 308,595 - - - - 308,889
 Stock option compensation:
 January - - 29,588 - - - - 29,588
 February - - 29,588 - - - - 29,588
 March - - 29,588 - - - - 29,588
 April - - 407,476 - - - - 407,476
 May - - 815,726 - - - - 815,726
 June - - 109,334 - - - - 109,334
 July - - 109,335 - - - - 109,335
 August - - 109,335 - - - - 109,335
 September - - 1,599,960 - - - - 1,599,960
 October - - 109,335 - - - - 109,335
 November - - 109,335 - - - - 109,335
 December - - 109,335 - - - - 109,335
 Net loss - - - - - - (10,485,935) (10,485,935)

BALANCE, December 31, 2000
(Audited) 60,236,723 60,237 38,734,475 (2,300,000) 0 0 (41,292,424) (4,797,712)

Issuance of common stock for financial,
development and administrative
services:
 ($0.25 per share, February) 21,386 21 5,326 - 5,347
 ($0.22 per share, March) 622,916 623 141,075 - 141,698
 ($0.15 per share, April) 402,210 402 58,017 - 58,419
 ($0.18 per share, May) 55,000 55 9,570 - 9,625
 ($0.19 per share, June) 62,115 62 11,740 - 11,802
 ($0.19 per share, July) 1,101,580 1,102 204,601 - 205,703
 ($0.16 per share, August) 270,047 270 44,118 - 44,388
 ($0.13 per share, September) 68,348 68 9,134 - 9,202
 ($0.20 per share, October) 286,406 287 57,717 - 58,004
 ($0.20 per share, November) 308,189 308 59,789 - 60,097
 ($0.23 per share, December) 395,400 395 89,297 - 89,692

 F-74

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

Cancellation of common stock issued
for financial services ($1.50 per
share, December) (55,000) (55) (82,445) - (82,500)
Issuance of common stock for
directors' fees
 ($1.29 per share, March) 335,000 335 432,365 - 432,700
Adjustment to issuance of common
stock:
 February 76,527 77 (77) -
 October 35,655 36 (36) -
Settlement of subscription notes
receivable:
 July - - - 1,225,000 1,225,000
 December - - - 75,000 75,000
Issuance of common stock for debt:
 ($0.02 per share, October) 1,385,710 1,386 23,614 - 25,000
 $2.74 per share, November) 105,128 105 287,895 - 288,000
Issuance of common stock for interest:
 ($0.18 per share, January) 400,000 400 73,134 - 73,534
 ($0.18 per share, February) 400,000 400 73,133 - 73,533
 ($0.18 per share, March) 419,394 419 76,314 - 76,733
 ($0.21 per share, April) 548,160 548 113,652 - 114,200
 ($0.21 per share, May) 559,589 560 115,640 - 116,200
 ($0.20 per share, June) 835,145 835 164,965 - 165,800
 ($0.15 per share, July) 1,459,568 1,460 222,340 - 223,800
 $0.15 per share, August) 1,677,982 1,678 253,792 - 255,470
 ($0.15 per share, September) 1,793,356 1,793 268,677 - 270,470
 ($0.15 per share, October) 1,335,406 1,335 304,473 - 305,808
 $0.19 per share, November) 1,709,659 1,710 323,125 - 324,835
 ($0.63 per share, December) 339,398 339 180,273 - 180,612
Valuation adjustment for
collateralized shares - - - 863,370 863,370
Adjustment for variable option
accounting - - 55,160 - 55,160
Adjustment to issuance of common
stock for stock options, August (24,000) (24) 24 -
Loans payable - shareholder, at $0.13
per share, July 1,992,187 1,992 253,008 - 255,000
Stock options granted for wages, July - - 919,197 - 919,197

 F-75

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

Issuance of additional stock for sale
of common stock for cash in 2000,
December 250,000 250 (250) -
 Stock option compensation:
 January - - 360,757 - 360,757
 February - - 333,674 - 333,674
 March - - 326,903 - 326,903
 April - - 316,732 - 316,732
 May - - 316,732 - 316,732
 June - - 316,732 - 316,732
 July - - 3,477,119 - 3,477,119
 August - - 316,731 - 316,731
 September - - 324,131 - 324,131
Issuance of common stock to Card One:
 ($0.21 per share, July) 3,341,974 3,342 698,473 - 701,815
 ($0.16 per share, August) 3,944,986 3,945 627,253 - 631,198
 ($0.12 per share, September) 8,060 8 959 - 967
 Net loss - - - - (14,774,236) (14,774,236)

BALANCE, December 31, 2001
(Audited) 86,704,204 86,704 50,899,028 (136,630) 0 0 (56,066,660) (5,217,558)

 Issuance of common stock for debt:
 ($0.37 per share, May) 114,308 114 41,723 - - - 41,837
 ($0.37 per share, July) 18,180 18 6,636 - - - 6,654
 ($0.37 per share, September) 24,645 25 8,995 - - - 9,020
 Issuance of common stock for
 interest:
 ($0.12 per share, January) 3,679,936 3,680 419,513 - - - 423,193
 ($0.11 per share, February) 3,947,206 3,947 430,245 - - - 434,192
 ($0.12 per share, March) 3,690,397 3,690 439,157 - - - 442,847
 ($0.06 per share, April) 7,380,795 7,381 435,467 - - - 442,848
 ($0.08 per share, May) 5,094,311 5,094 427,922 - - - 433,016
 ($0.08 per share, June) 5,273,031 5,273 427,116 - - - 432,389
 ($0.06 per share, July) 7,848,393 7,849 423,812 - - - 431,661
 ($0.08 per share, August) 5,743,000 5,743 424,982 - - - 430,725

 F-76

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 ($0.07 per share, September) 6,759,204 6,759 422,299 - - - 429,058
 ($0.07 per share, October) 140,000 140 8,960 - - - 9,100
 ($0.08 per share, November) 113,750 114 8,986 - - - 9,100
 ($0.04 per share, December 211,628 212 8,889 - - - 9,101
 Issuance of common stock for
 financial, development and
 administrative services:
 ($0.19 per share, March) 200,000 200 37,800 - - - 38,000
 ($0.08 per share, July) 200,000 200 16,040 - - - 16,240
 ($0.18 per share, August) 452,429 453 79,225 - - - 79,678
 ($0.06 per share, September) 120,000 120 7,440 - - - 7,560
 ($0.07 per share, November) 1,263,242 1,263 80,847 - - - 82,110
 ($0.05 per share, December) 480,000 480 21,120 - - - 21,600
 ($0.06 per share, December) 700,000 700 41,800 - - - 42,500
 Cancellation of common stock
 issued for directors' fees:
 ($1.29 per share, April) (110,000) (110) (141,790) - - - (141,900)
 ($1.29 per share, June) (75,000) (75) (96,675) - - - (96,750)
 Compensation for consultants - 328,665 - - - 328,665
 Accrued compensation converted - 145,000 - - - 145,000
 into options
 Stock option compensation:
 March - 233,579 - (22,919) - 210,660
 April - 790 - - - 790
 May - 790 - - - 790
 June - 791 - - - 791
 July - 72,479 - - - 72,479
 August - 7,712 - - - 7,712
 September - 15,680 - - - 15,680
 October - 790 - - - 790
 November - 790 - - - 790
 December - 37,650 - (6,890) - 30,760
 Amortization of deferred option
 compensation:
 January - - - -
 February - - - -

 F-77

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 March - - - -
 April - - - 790 - 790
 May - - - 790 - 790
 June - - - 791 - 791
 July - - - 790 - 790
 August - - - 790 - 790
 September - - - 791 - 791
 October - - - 790 - 790
 November - - - 790 - 790
 December - - - 791 - 791
 Valuation adjustment for
 collateralized shares - 103,991 - 103,991
 Shares issued for settlements:
 ($0.08 per share, September) 286,267 286 22,615 - - - 22,901
 ($0.05 per share, December) 30,588 31 1,498 - - - 1,529
 Net loss - - - - (7,738,743) (7,738,743)
 BALANCE, December 31, 2002
 (Audited) 140,290,514 140,291 55,748,366 (32,639) (22,696)(63,805,403) (7,972,081)
 Issuance of stock for services
 rendered:

 ($0.05 per share, February) 1,530,588 1,530 75,030 76,560
 ($0.05 per share, March) 500,000 500 24,500 25,000
 ($0.05 per share, June) 466,378 466 22,853 23,319
 ($0.05 per share, October) 7,050 7 345 352
 ($0.05 per share, November) 5,002,144 5,002 245,105 250,107
 ($0.05 per share, December) 240,916 241 11,805 12,046
 ($0.06 per share, December) 700,000 700 41,300 42,000
Issuance of stock in lieu of interest
payments:
 ($0.05 per share, March) 1,625,792 1,626 84,541 86,167
 ($0.05 per share, December) 12,206,425 12,207 627,387 639,594
Issuance of stock for cash: 250,000 250 24,750 25,000

Common stock subscribed (525,000) 600,000 75,000
Issuance of stock for settlement
 of debt:
 ($0.05 per share, November) 389,052 389 19,065 19,454

 F-78

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 ($0.05 per share, December) 400,000 400 19,600 20,000
 Stock option compensation: 79,139 79,139
 Amortization of deferred option
 compensation: 22,696 22,696
 Net Stock cancellation
 adjustment (3,140,259) (3,140) 3,140 -
 Write-off of stock subscription
 receivable 32,639 32,639
 Net Loss (3,785,439) (3,785,439)
 BALANCE, December 31, 2003
 (Audited) 160,468,600 160,469 57,026,926 (525,000) 600,000 - (67,590,842) (10,328,447)
 Issuance of stock for services
 rendered:
 ($0.10 per share, January) 150,000 150 14,850 15,000
 ($0.15 per share, January) 200,000 200 29,800 30,000
 ($0.145 per share, August) 689,655 690 99,310 100,000

 ($0.08 per share, August) 500,000 500 39,500 40,000
 Issue of stock in lieu of
 interest payments:
 ($0.13 per share, February) 280,419 280 36,174 36,454
 ($0.165 per share, February) 175,841 176 28,838 29,014
 Issue of stock for cash:
 ($0.05 per share, January) 2,586,310 2,586 126,729 129,315
 ($0.30 per share, January) 250,000 250 74,750 (75,000) -
 ($0.08 per share, February) 62,500 63 4,937 5,000
 ($0.30 per share, February) 83,333 83 24,917 (25,000) -
 ($0.06 per share, November) 66,667 66 3,934 4,000
 ($0.06 per share, November) 101,111 101 8,999 9,100
 (0.065 per share, November) 100,000 100 6,400 6,500
 Common stock subscription
 received 275,000 275,000
 Stock option compensation 90,049 90,049
 Net Loss (4,229,168) (4,229,168)
 BALANCE, December 31, 2004
 (Audited) 165,714,436 165,714 57,616,113 (250,000) 500,000 - (71,820,010) (13,788,183)

 F-79

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through June 30, 2005
(Amounts expressed in US dollars)

 Issuance of stock for services
 rendered:
 ($0.05 per share, February) 250,000 250 12,250 12,500
 ($0.05 per share, May) 1,050 1 52 53
 ($0.048 per share, June) 100,000 100 4,650 4,750
 Issue of stock in lieu of
 interest payments:
 (0.082 per share, May) 22,934,690 22,935 1,861,894 1,884,829
 Issue of stock for cash:
 ($0.07 per share, March) 70,355 70 4,855 4,925
 ($0.068 per share, March) 369,550 370 24,590 24,960
 ($0.07 per share, April) 100,000 100 6,900 7,000
 ($0.09 per share, April) 100,000 100 8,900 9,000
 ($0.05 per share, May) 248,000 248 12,152 12,400
 ($0.056 per share, May) 23,571 23 1,297 1,320
 ($0.07 per share, May) 142,857 143 9,857 10,000
 ($0.08 per share, May) 125,000 125 9,875 10,000
 ($0.09 per share, May) 47,968 48 4,269 4,317
 ($0.123 per share, May) 150,000 150 18,225 18,375
 ($0.30 per share, May) 1,000,000 1,000 299,000 (300,000) -
 ($0.068 per share, May) 13,450 13 895 908
 ($0.08 per share, June) 62,500 63 4,937 5,000
 ($0.05 per share, June) 800,000 800 39,200 40,000
 ($0.05 per share, June) 100,000 100 4,900 5,000
 ($0.09 per share, June) 50,000 50 4,450 4,500
 Common stock subscription
 received 75,000 75,000
 Stock option compensation 13,114 13,114
 Net Loss (3,361,160) (3,361,160)

 BALANCE, June 30, 2005
 (Unaudited) 192,403,427 192,403 59,962,375 (175,000) 200,000 - (75,181,170) (15,001,392)

 For the Period
 Six Months Ended From Inception
 June 30, (February 26, 1997)
 -------------------------------------- Through June 30,
 2005 2004 2005
 ----------------------------------------------------------
 $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (3,361,160) (1,564,982) (75,181,170)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - - 365,010
Stock option compensation 13,114 60,470 10,516,768
Adjustment for variable accounting of options 55,160
Amortization of deferred option compensation - - 22,696
Common stock issued for services
and compensation 17,303 45,000 24,887,323
Common stock issued for interest expense 1,884,829 65,468 8,905,112
Common stock issued to settle CardOne
Claims 1,667,299
Common stock issued for directors' fees 432,700
Write-off of common stock subscription
receivable - - 2,125,000
(Gain) loss on extinguishment of debt - - 931,210
Loss on impairment of assets - - 703,211
Changes in current assets and liabilities:
Prepaid Expenses and other (88,022) (45,775) (116,575)
Accounts payable and accrued expenses 1,149,212 1,029,333 13,301,526

 ----------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (384,724) (410,486) (11,384,730)
 ----------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - - (347,349)
Acquisition of patents - - (46,854)
Investment in real estate joint venture - - (36,515)

 ----------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (430,718)
 ----------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - (157,705) 116,590 295,180
shareholders
Loans - CEO America - - 150,000
Proceeds from notes payable 200,000 65,000 3,711,827
Proceeds from common stock subscription
received 75,000 125,000 600,000
Sales of common stock 157,705 - 6,066,435
Amounts owed to employees and officers 108,459 177,629 1,004,826

 ----------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 383,459 484,219 11,828,268
 ----------------------------------------------------------

NET INCREASE (DECREASE) IN CASH (1,266) 73,733 12,820

CASH AT BEGINNING OF PERIOD 14,086 42,570 -

 ----------------------------------------------------------
CASH AT END OF PERIOD 12,820 116,303 12,820
 ----------------------------------------------------------

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is a development stage enterprise in the business of research, development and integration of proprietary processes and software technologies for the electronic payment industry, primarily involving consumer loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC. The Company licenses, markets and develops smart-card loyalty products through its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the six months ended June 30, 2005, are not indicative of the results that may be expected for the year ended December 31, 2005. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2004.

NOTE 2- GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development-stage enterprise and has incurred a net loss of $75,181,170 since inception. Additionally, the Company had a net working capital deficiency of $15,001,392 and a total shareholders' deficiency of $15,001,392 at June 30, 2005. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and recognizes the need to raise capital through the future issuance of stock and/or debentures in order to develop a viable business. The Company continues to implement cost-cutting measures. It may also rely increasingly on strategic alliances with others who will assume responsibility for financing specific required development tasks, thus, reducing the Company's financial requirements for the exploitation of its intellectual properties.

As of June 30, 2005, current liabilities are substantially past due. In the event demands are made upon the Company which cannot be met and the associated creditors successfully pursue action against the Company, the Company could be exposed to additional costs of legal fees, interest or penalties, and may be forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital through the private placement of common stock and the issuance of convertible debt.

NOTE-3 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005

(Amounts expressed in US Dollars)

(Unaudited)

NOTE 4-STOCK BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes accounting and reporting standards for stock-based employee compensation plans. This statement allows companies to choose between the fair value based method of accounting as defined in this statement and the intrinsic value based method of accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided by APB 25, as permitted for stock-based compensation relative to the Company's employees. Stock and options granted to other parties in connection with providing goods and services to the Company are accounted for under the fair value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 also requires that those effects be disclosed more prominently by specifying the form, content, and location of those disclosures. We have adopted the increased disclosure requirements of SFAS No. 148 for the six month period ended June 30, 2005.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

 For the Three Months For the Six Months
 Ended June 30, Ended June 30,
 2005 2004 2005 2004
 ---- ---- ---- ----
 Net loss attributable to common stockholders,
 as reported ...................................... $(2,045,308) $(1,411,972) $(3,361,160) $(1,564,982)
 Add: Stock-based employee compensation
 expense included in reported net income,
 net of related tax effect ........................ 2,381 18,339 13,114 60,470
 Less: Total stock-based compensation
 expense determined under the Black-Scholes fair value
 based method of all awards* ...................... (2,381) (18,339) (13,114) (60,470)
 Pro forma net loss attributable to
 common stockholders .............................. $(2,045,308) $(1,411,972) $(3,361,160) $(1,564,982)
 =========== =========== =========== ===========
 Basic and diluted net loss attributable to
 common stockholders
 As reported ........................................ $ (0.01) $ (0.01) $ (0.02) $ (0.01)
 =========== =========== =========== ===========


Pro forma ........................................... $ (0.01) $ (0.01) $ (0.02) $ (0.01)

* The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the six months ended June 30, 2005: annual dividends of $0; expected volatility range of 51.88% to 58.02%, risk-free interest rate of 3.00%; and expected life of five years.

Loss Per Share

Basic and diluted loss per share has been calculated based upon the weighted average number of common shares outstanding and excludes any potentially dilutive securities. Stock options and convertible notes have been excluded as common stock equivalents in the computation of diluted loss per share since the results would be anti-dilutive. Obligations to issue additional shares, which could potentially dilute earnings per share, were approximately 148,000,000 at June 30, 2005.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 5 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 6 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 7 - SHAREHOLDERS' DEFICIENCY

On February 2, 2005 the Company issued 250,000 common shares in exchange for services valued at $12,500. The shares were issued at $0.05. On March 29, 2005 the Company issued 70,355 common shares in exchange for cash. The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash. The shares were issued at $0.068.

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968, 150,000 and 1,000,000 common shares in exchange for cash. The shares were issued at $0.05, $0.056, $0.07, $0.08, $0.09, $0.123 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past services valued at $53. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest payments of $1,884,829. The shares were issued at $0.082.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash. The shares were issued at $0.068.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash. The shares were issued at $0.08.

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash. The shares were issued at $0.05.

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

On June 15, 2005, the Company issued 100,000 common shares in exchange for services valued at $4,750. The shares were issued at $0.048.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 7 - SHAREHOLDERS' DEFICIENCY-Continued

Equity Transactions-Continued

On January 13, 2004 the Company issued 2,586,310 common shares in exchange for cash. The shares were issued at $0.05.

On January 13, 2004 the Company issued 150,000 and 200,000 common shares in exchange for services valued at $15,000 and $30,000, respectively. The shares were issued at $0.10 and $0.15 respectively.

On January 29, 2004 the Company issued 250,000 common shares in exchange for cash. The shares were issued at $0.30.

On February 24, 2004 the Company issued 62,500 commons shares in exchange for cash. The shares were issued at $0.08.

On February 27, 2004 the Company issued 280,419 and 175,841 common shares for interest payments of $36,454 and $29,014 respectively. The shares were issued at $0.13 and $0.165, respectively.

On February 27, 2004 the Company issued 83,333 common shares in exchange for cash. The shares were issued at $0.30.

As an alternative, the Company may purchase shares of common stock in the open market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved amendments to the Articles of Incorporation to adopt an increase in the capital stock of the Company's common stock from 200,000,000 to 500,000,000 shares. Furthermore, during a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000. (Refer Note 16 - Subsequent Events).

NOTE 9 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the "Plan"). The Board of Directors administers the Plan. Under the Plan, the Company may grant stock options, which may be incentive stock options ("ISO's") as defined in the Internal Revenue Code, and stock awards or options which do not qualify as ISO's to employees and officers. All employees of the Company are eligible to participate in the Plan.

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the three months ended June 30, 2005: annual dividends of $0; expected volatility range of 51.88% to 58.02%, risk-free interest rate of 3.00% and expected life of five years.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 9 - STOCK OPTION PLAN-Continued

On January 31, 2005, the Company issued 100,000 options at a strike price of $0.065 for services rendered.

On February 28, 2005, the Company issued 100,000 options at a strike price of $0.072 for services rendered.

On March 31, 2005, the Company issued 100,000 options at a strike price of $0.07 for services rendered.

On April 30, 2005, the Company issued 100,000 options at a strike price of $0.05 for services rendered.

 Stock Options
 --------------------------
 Weighted
 Average
 Exercise
 Shares Price
 ------ -----

Outstanding at December 31, 2003 47,225,299 $0.09
 Granted 1,200,000 $0.11
 Exercised - -
 Cancelled - -
Outstanding at December 31, 2004 48,425,299 $0.11
 Granted 400,000 $0.06
 Exercised - -
 Cancelled - -
 Outstanding at June 30, 2005 48,825,299 $0.11

The following table summarizes the Company's stock options outstanding and exercisable at June 30, 2005:

 Options Outstanding Options Exercisable
 --------------------------------------- --------------------------
 Weighted
 Average Weighted Weighted
 Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
 Prices Outstanding Life Price Exercisable Price
 ------ ----------- ---- ----- ----------- -----
 (In Thousands) (In Years) (In Thousands)
$0.00 - $0.23 45,245 4.24 $0.09 45,245 $0.09
$0.48 - $0.49 3,247 5.15 $0.48 3,247 $0.48
$0.64 - $0.80 333 4.84 $0.64 333 $0.64
 ------ ------
 48,825 48,825
 ====== ======

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions arising in the ordinary course of business. There can be no assurance, the Company will be successful in defending these actions.

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D. Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and attorney's fees, under the lease on our former principal executive offices in Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541 on December 7, 2000, IC One reached a payment arrangement under which we are obligated to pay $5,000 per month, plus ongoing obligations under the lease. The settlement obligation is guaranteed by the Company, and is secured by the equipment, inventory, accounts and chattel paper of both the parent and IC One. The Company is in default in its obligations under this agreement. Upon the expiration of the lease, an amended judgment of $222,765 (a provision has been provided for in the financial statements at December 31, 2003) was entered to reflect the additional unpaid rent, interest and attorney's fees.

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. Accordingly, the case was dismissed on August 4, 2004.

In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the Eximsoft entities that IC One had contracted and received computer software development and programming services and had failed to pay as agreed. IC One agreed to pay $30,000 and provided Eximsoft with a confession of judgment that could be filed in the Third District Court in Salt Lake City, Utah, in the event that IC One failed to make the agreed payments. IC One paid the agreed $30,000 during 2002 and the original confession of judgment was returned by Eximsoft to us in November 2003.

On August 16, 2002, Sandra Lueck initiated an action against the Company for unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment was entered against the Company in the amounts of $11,400 for unpaid wages, $3,300 as a continuation of wages, court costs and attorney's fees of $1,753, and interest from the date of judgment until paid in full. On or about June 30, 2003, the Company entered into a release and settlement agreement compromising, resolving, and settling all matters and issues between the parties. The Company paid a total of $18,750 and a satisfaction of judgment was filed with the Third Judicial District Court on October 14, 2003.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS-Continued

On April 4, 2003, Greg Morrison initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on those amounts from the date of termination, court costs and attorney's fees. The Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The Company's final payment under this agreement was made prior to July 31, 2004, and this matter has be dismissed.

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the Company in the Superior Court of New Jersey, Hudson County for unpaid amounts owed for services provided in the amount of approximately $4,000. On July 18, 2003, a judgment was entered against the Company (a provision of $4,000 has been provided for in the financial statements at December 31, 2004). The Company is currently in default of the judgment and would be liable to pay interest from the date of judgment until paid in full.

The Company is reviewing, with the advice of legal counsel, whether the Company has legal claims that may be asserted against James E. Biorge, a founder and officer and director of IC One at the time it was acquired in September 1999. At the time of such acquisition, the Company set aside in a special trust approximately 7.8 million shares of common stock to be used to resolve claims that may be asserted against IC One by persons claiming an interest in or claim against IC One as a successor-in-interest to the assets, operations and liabilities of CardOne, which Mr. Biorge had also been instrumental in founding and which had been involved in the initial development of the intellectual properties subsequently acquired by IC One before IC One was acquired by us. The Company believes that all or a portion of the 7.8 million shares then reserved to satisfy such claims, all of which have subsequently been used for such purpose, should properly be the responsibility of Mr. Biorge. On the basis of our previous assertion that the Company may make such a claim against Mr. Biorge and perhaps other reasons not known to the Company, Mr. Biorge has refused to accept certificates for 11,503,138 shares of Company's common stock to which he would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter) initiated an action against the company in the United States District Court for the District of Utah (Case # 07cv00129), seeking the above-noted shares which were previously cancelled by the Company, as well as attorney's fees and punitive damages. The Company plans to vigorously defend itself and believes that there is a reasonable possibility that the outcome of any claim would not be unfavorable to the Company. Additionally, the Company may pursue claims against Mr. Biorge and seek damages in addition to cancellation of the shares.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS-Continued

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us and signed agreements to accept their compensation on a deferred basis. In December 2002, they signed additional agreements releasing all rights to any claims based on the CardOne entities, terminating their association with the Company, and agreed to accept options to purchase 725,000 shares of common stock each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of our stock for work performed through December 2002.

NOTE 11 - PAYROLL TAXES

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 12- SELLING GENERAL AND ADMINISTRATIVE EXPENSES

For the six month period ended June 30, 2005, selling, general and administrative expenses totaled $1,376,366.

NOTE 13 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and services. (Refer Note 16 - Subsequent Events for licensing agreements signed with Retention Management Group, Inc. and Phoenix Technology Holdings, Inc.)

NOTE 14 - EMPLOYMENT AGREEMENTS

As of June 30, 2005, the Company was obligated under two employment agreements with certain officers. Compensation under the agreements include annual salaries approximately $150,000.

NOTE 15 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades over the counter on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential fines or penalties that may result from such delisting or late filings.

NOTE 16- SUBSEQUENT EVENTS

A) Subsequent issue of common shares:

On July 9, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were issued at $0.05.

On July 21, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were valued at $0.05.

On September 14, 2005, the Company issued 58,413 common shares in exchange for cash. The shares were valued at $ $0.06.

On October 31, 2005, the Company issued 323,494 common shares in exchange for cash. The shares were valued at $ $0.05

On December 1, 2005, the Company issued 88,669 common shares in exchange for services valued at $5,320.14. The shares were valued at $0.06.

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for past services valued at $100,000. The shares were issued at $0.05.

On July 14, 2006, the Company issued 200,000 common shares in exchange for past services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for past services valued at $70,000. The shares were issued at $0.07.

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for past services valued at $49,678. The shares were issued at $0.07.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

A) Subsequent issue of common shares-Continued

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for past services valued at $55,418. The shares were issued at $0.05.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and 2,054,079 common shares in exchange for past services valued at $54,000, $59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10, $0.05, $0.07 and $0.05, respectively.

On January 30, 2007, the Company issued 5,850,000 common shares for past services valued at $292,500. The shares were issued at $0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in exchange for past services valued at $1,260,000 and $56,000, respectively. The shares were issued at $0.06 and $0.07, respectively.

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for past services valued at $ 278,250.00 and $54,000, respectively. The shares were issued at $0.05 and $0.10, respectively.

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for cash and past services, respectively valued at $75,000.00 and $135,000, respectively. The shares were issued at $0.05.

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash and past services, respectively valued at $25,000.00 and $2,426, respectively. The shares were issued at $0.05.

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash valued at $20,000.00. The shares were issued at $0.05.

On June 12, 2007, the Company issued 100,324,827 common shares to convert secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash valued at $58,000.00. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services valued at $400,646. The shares were issued at $0.06.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

A) Subsequent issue of common shares-Continued

On August 2, 2007, the Company issued 63,742,180 common shares to convert secured notes valued at 3,187,164. The shares were valued at $0.05.

On July 20, 2007, the Company issued 8,661,648 common shares for past services valued at $432,542. The shares were issued at $0.05.

B) Options:

On September 19, 2005, the Company cancelled 2,679,167 options that had been issued to a past employee.

On November 30, 2005, the Company cancelled 4,463,303 options that had been issued to a past employee.

On March 3, 2006, the Company cancelled 1,937,333 options that had been issued to a past employee.

On April 3, 2006, the Company cancelled 1,301,667 options that had been issued to a past employee.

On December 15, 2006 and December 16, 2006, the Company cancelled 527,296 and 1,000,000 options, respectively, that had been issued to consulting companies for services rendered.

On March 9, 2007, the Company cancelled 19,161,876 options that had been issued to past employees.

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and 1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to past employees.

C) Events

On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of Administration and Finance. In addition to these duties, on November 12, 2004 Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of the Company and resigned his previous position on December 16, 2004. On January 26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the Company in the Superior Court of California, County of Los Angeles bearing case number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint against the Company in the Superior Court of California, County of Los Angeles bearing case number LC-070495. On February 3, 2006, the parties entered into a Settlement and Release Agreement which resolved the matters and they were subsequently dismissed by the Courts.

On April 20, 2004, the Canadian Intellectual Property Office granted the Company patent number 2,182,596.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

C) Events-Continued

On July 25, 2004, the Company entered into a Licensing Agreement with Retention Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a license to market, distribute and sublicense SCTN applications and products. On March 10, 2006, the Company asserted claims against RMG in case no. A518577 filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31, 2006, the Company and RMG entered into a Settlement Agreement and Release. Under the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the Licensing Agreement between the Company and RMG was terminated. Accordingly, case no. A518577 was dismissed by the Court on June 23, 2006.

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. The case was dismissed on August 4, 2004.

Concurrent with Mr. Diamond being relieved as CEO of the Company on December 16, 2004, David Simon assumed the role of CEO.

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an action in The Superior Court of the State of Washington, In and For the County of King, case no. 05-2-18115-0-SEA in which the Company was named one of several defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and Release. Accordingly, the Company was dismissed as a defendant in the case.

On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development partner, was elected to the Board of Directors. On August 17, 2005, Mr. Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

C) Events-Continued

On November 30, 2005, Verlo Howell initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah, civil no. 05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired as the Company's Executive Vice-President of Sales and Marketing pursuant to an Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's employment was terminated with cause by the Company. We intend to assert and pursue offsetting defenses and believe that there is a reasonable possibility that the outcome of any claim, if asserted, would not be unfavorable to us.

As of December 31, 2005, certain accounts payable of the Company are Statute-Barred under Utah law from being collected by creditors. However, under US GAAP, the Company still records them as a liability. As of December 31, 2005, the amount is approximately 41,000.

On April 6, 2006, the Company entered into a License Agreement with Phoenix Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of the agreement, the Company granted Phoenix an exclusive license to use the Company's technology. Also, certain portions of the Company's debt, including a significant portion of the Senior Secured Convertible Notes, unpaid amounts owing to Airos Group for services rendered, and accrued salaries were assumed by Phoenix and ceased accruing additional interest. Further, the agreement provides for Phoenix to loan monies to the Company, at Phoenix's discretion, at the rate of one percent (1%) per month, compounded monthly until paid in full. Any such loan shall be deducted from any payments due by Phoenix under the agreement. In order to maintain exclusivity, the Agreement calls for certain performance targets to be met. As of April 18, 2007, these targets have been met.

During a special meeting of the Board of Directors on November 30, 2006, the Board voted to approve a resolution to convert the Company from a Florida corporation to a Nevada corporation.

During a special meeting of the Board of Directors on November 30, 2006, the Board voted to approve a resolution to increase the number of authorized shares to 500,000,000.

During a meeting of the Board of Directors on May 18, 2007, the Board voted to approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's independent registered public accounting firm and engaged Schwartz Levitsky Feldman LLP as the Company's independent registered public accounting firm. The change in independent registered public accounting firms is not the result of any disagreement with Marcum & Kliegman, LLP.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements June 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

C) Events-Continued

In Janaury of 2007, Noteholders which did not elect to assign their debt to Phoenix Technology Holding, Inc. were given the option to receive their principal investment plus accrued interest either in the form of cash or shares in the Company. By June 2007, the last of these repayments were made, and all Senior Secured Notes have been retired.

During a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000.

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based company, initiated an action in the United States District Court for the District of Nevada, case # 07-CV-1178, in which the Company was named as a co-defendant. The company plans to vigorously defend and counter sue TII for breach of contract, fraud, interference with contractual relations, misappropriation of trade secrets, conversion, unjust enrichment and to seek both compensatory and punitive damages well in excess of $100 million.

As of September 20, 2007, certain accounts payable of the Company are Statute-Barred under Utah law from being collected by creditors. However, under US GAAP, the Company still records them as a liability. As of September 20, 2007, the amount is approximately 43,000. This amount includes the $41,000 previously Statute-Barred as of December 31, 2005.

 (Unaudited) (Audited)
 September 30, December 31,
 2005 2004
 $ $
 ASSETS
 ------
CURRENT ASSETS:
 Cash 24,082 14,086
 Prepaid Expenses and other 68,245 58,571
 ----------- -----------
 TOTAL CURRENT ASSETS 92,327 72,657
 ----------- -----------
 TOTAL ASSETS 92,327 72,657
 =========== ===========
 LIABILITIES AND SHAREHOLDERS' DEFICIENCY
 ----------------------------------------
CURRENT LIABILITIES:
 Accounts payable - Vendor 1,900,200 1,709,400
 Accounts payable - other 6,195,594 4,425,895
 Accrued wages and payroll taxes (note 11) 1,489,914 1,439,795
 Deferred compensation 2,955,560 2,074,276
 Loans - CEO America 150,000 150,000
 Amounts owed to employees and officers (notes 5 and 6) 1,255,831 1,097,273
 Short term loans 16,675 197,885
 Convertible notes payable (including amounts owed to officers
 $1,220,462 prior year $1,220,462) 2,966,316 2,766,316
 ----------- -----------
 TOTAL CURRENT LIABILITIES 16,930,090 13,860,840
 ----------- -----------


SHAREHOLDERS' DEFICIENCY (note 7):
 Common stock - $.001 par value; 200,000,000 shares
 authorized; 192,861,840 shares issued and outstanding 192,862 165,714
 (2004: 165,714,436)
 Additional paid-in capital 59,985,422 57,616,113
 Common stock subscription receivable (175,000) (250,000)
 Common stock subscribed 200,000 500,000
 Deficit accumulated during the development stage (77,041,047) (71,820,010)
 ----------- -----------
 TOTAL SHAREHOLDERS' DEFICIENCY (16,837,763) (13,788,183)
 ----------- -----------
 TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 92,327 72,657
 =========== ===========

 For the Period
 For the Quarter For the Nine Months From Inception
 Ended Sept 30, Ended Sept 30, February 26, 1997)
 -------------------------- -------------------------- through Sept 30,
 2005 2004 2005 2004 2005
 ---- ---- ---- ---- ----
 $ $ $ $ $
EXPENSES:
 Selling, general and administrative (note 12) 585,048 869,933 1,961,414 1,826,901 59,674,962
 Depreciation and amortization - - - - 365,010
 Write-off of common stock subscription
 receivable - - - - 2,125,000
 Loss on impairment of intangible assets - - - - 703,211
 Interest expense 1,274,829 457,631 3,259,623 1,065,645 13,241,654
 ----------- ------------ ------------ ----------- ------------
 TOTAL EXPENSES 1,859,877 1,327,564 5,221,037 2,892,546 76,109,837
 ----------- ------------ ------------ ----------- ------------
LOSS BEFORE EXTRAORDINARY ITEM (1,859,877) (1,327,564) (5,221,037) (2,892,546) (76,109,837)

EXTRAORDINARY ITEM - LOSS ON
 EXTINGUISHMENT OF DEBT - - - - (931,210)
 ----------- ------------ ------------ ----------- ------------
NET LOSS $(1,859,877) $ (1,327,564) $ (5,221,037) $(2,892,546) $(77,041,047)
 =========== ============ ============ =========== ============
NET LOSS PER SHARE, BASIC AND DILUTED $(0.01) $(0.01) $(0.03) $(0.02)

 ====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING, BASIC AND DILUTED 192,707,375 164,644,934 177,826,814 163,894,917
 =========== =========== =========== ===========

COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:

Net loss $(1,859,877) $ (1,327,564)
Other comprehensive income (loss) foreign currency
Translation - -
Comprehensive Loss $(1,859,877) $ (1,327,564)

 Deficit
 Common Common Accumulated
 Common Stock Additional Stock Stock Deferred During the
 Number of Paid-in Subscription to be Compen- Development
 Shares Amount Capital Receivable Issued sation Stage Total
Balance - February 26, 1997 (Inception) - $ - $ - $ - - - $ - $ -

Issuance of common stock for cash: - -
 ($1.32 per share, March) 35,676 36 46,964 - - - - 47,000
 ($0.92 per share, April) 10,032 10 9,207 - - - - 9,217
 ($0.75 per share, June) 28,085 28 20,972 - - - - 21,000
 ($0.71 per share, July) 452,223 452 322,434 - - - - 322,886
 ($0.69 per share, August) 695,447 695 477,005 - - - - 477,700
 ($0.68 per share, September) 42,128 42 28,487 - - - - 28,529
 ($0.81 per share, November) 32,715 33 26,517 - - - - 26,550
Issuance of common stock for legal, - -
financial, development and
administrative services
 ($1.32 per share, March) 759 1 999 - - - - 1,000
 ($0.92 per share, April) 379,528 380 349,620 - - - - 350,000
 ($0.92 per share, May) 12,870,501 12,871 11,811,512 - - - - 11,824,383
 ($0.71 per share, July) 3,779,301 3,779 2,684,854 - - - - 2,688,633
 ($0.69 per share, August) 1,479,869 1,480 1,012,322 - - - - 1,013,802
 ($0.68 per share, September) 263,471 263 178,162 - - - - 178,425
 ($0.81 per share, November) 74,957 75 61,150 - - - - 61,225
 Net loss - - - - - - (17,349,205) (17,349,205)

Balance - December 31, 1997
(Audited) 20,144,692 20,145 17,030,205 0 0 0 (17,349,205) (298,855)

Issuance of common stock for cash: - -
 ($2.63 per share, January) 94,882 95 249,905 - - - - 250,000
 ($0.87 per share, February) 108,469 108 94,342 - - - - 94,450

 F-99

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 ($0.69 per share, March) 176,131 176 122,094 - - - - 122,270
 ($0.70 per share, April) 206,944 207 144,026 - - - - 144,233
 ($0.67 per share, May) 471,374 471 317,029 - - - - 317,500
 ($2.45 per share, June) 26,567 27 64,973 - - - - 65,000
 ($1.24 per share, July) 19,356 19 23,981 - - - - 24,000
 ($2.63 per share, August) 1,898 2 4,998 - - - - 5,000
 ($0.68 per share, September) 284,393 284 194,383 - - - - 194,667
 ($0.66 per share, October) 68,315 68 44,932 - - - - 45,000
 ($0.65 per share, November) 523,935 524 338,874 - - - - 339,398
 ($0.66 per share, December) 37,953 38 24,962 - - - - 25,000
Issuance of common stock for notes
 ($0.69 per share, July) 1,897,639 1,898 1,298,102 (1,300,000) - - - -
Issuance of common stock for legal,
financial, development and
administrative services:
 ($0.69 per share, March) 3,795 4 2,631 - - - - 2,635
 ($0.70 per share, April) 67,708 68 47,122 - - - - 47,190
 ($0.67 per share, May) 340,057 340 228,710 - - - - 229,050
 ($2.45 per share, June) 379,528 380 928,191 - - - - 928,571
 ($1.24 per share, July) 815,985 816 1,010,949 - - - - 1,011,765
 ($0.68 per share, September) 152,388 152 104,158 - - - - 104,310
 ($0.66 per share, October) 15,181 15 9,985 - - - - 10,000
 ($0.65 per share, November) 51,616 52 33,384 - - - - 33,436
 Net loss - - - - - - (5,448,335) (5,448,335)

Balance - December 31, 1998
(Audited) 25,888,806 25,889 22,317,936 (1,300,000) 0 0 (22,797,540) (1,753,715)

Issuance of common stock in exchange 18,597,792 18,597 777,516 - - - 796,113
Issuance of common stock for cash:
 ($0.66 per share, January) 713,512 713 469,287 - - - 470,000
 ($0.68 per share, February) 129,799 130 87,870 - - - 88,000
 ($0.66 per share, March) 151,811 152 99,848 - - - 100,000
 ($0.68 per share, April) 179,137 179 120,821 - - - 121,000
 ($0.66 per share, May) 38,712 39 25,461 - - - 25,500

 F-100

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 ($0.23 per share, July) 1,009,905 1,010 232,874 - - - 233,884
 ($0.66 per share, September) 325,557 325 214,124 - - - 214,449
Issuance of common stock for:
Computer services ($2.34 per share,
September) 11,357 11 26,572 - - - 26,583

Shareholder's loan ($2.75 per share,
November) 175,000 175 481,075 - - - 481,250

Investment in real estate joint venture
($1.00 per share, December) 420,000 420 419,580 - 114000 (114,000) 420,000


Issuance of common stock for notes
($1.32 per share, July) 759,056 759 999,241 (1,000,000)


Issuance of common stock for software 174,583 175 114,825 - 115,000
($0.66 per share, August)
Issuance of common stock for legal,
financial, development and
administrative services:
($0.68 per share, February) 1,968,326 1,968 1,332,506 - 1,334,474
($0.68 per share, April) 1,913,579 1,914 1,290,633 - 1,292,547
($0.66 per share, May) 57,157 57 37,593 - 37,650
($0.66 per share, September) 1,500,860 1,501 986,242 - 987,743
Net loss - - - - (7,894,949) (7,894,949)

BALANCE - December 31, 1999 (Audited) 54,014,949 54,014 30,034,004 (2,300,000) 114,000 0 (30,806,489) (2,904,471)
Issuance of common stock for cash:
 ($0.60 and $1.00 per share,
 January) 120,733 121 82,320 - - - - 82,441
 ($0.60 and $1.00 per share,
 February) 653,466 653 399,427 - - - - 400,080
 ($0.60 and $1.00 per share,
 March) 508,567 508 413,393 - - - - 413,901
 ($0.60 and $1.00 per share,
 April) 512,081 512 355,138 - - - - 355,650
 ($0.60 per share, May) 475,834 476 285,024 - - - - 285,500
 ($0.21 and $0.60 per share,
 June) 761,667 762 132,838 - - - - 133,600
 ($0.21 per share, July) 160,000 160 95,840 - - - - 96,000
 ($0.60 per share, August) 108,667 109 65,091 - - - - 65,200

 F-101

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 ($0.40 per share, September) 110,062 110 43,915 - - - - 44,025
 ($0.40 per share, October) 25,000 25 9,975 - - - - 10,000
 ($0.40 per share, November) 100,000 100 39,900 - - - - 40,000
Issuance of common stock for cash
received in 1999 ($0.54 per share,
January) 211,669 212 113,788 - (114,000) -
Issuance of common stock for debt
and interest:
 ($1.50 per share, April) 1,122,918 1,123 1,683,254 - - - - 1,684,377
 ($0.60 per share, October) 2,632 3 1,576 - - - - 1,579
 ($0.43 per share, November) 55,814 56 23,944 - - - - 24,000
 ($0.40 per share, December) 77,083 77 30,756 - - - - 30,833
Issuance of common stock for
financial and development services:
 ($2.66 per share, February) 22,768 23 60,449 - - - - 60,472
 ($2.50 per share, March) 139,988 140 349,830 - - - - 349,970
 ($1.97 per share, April) 28,527 29 56,066 - - - - 56,095
 ($1.43 per share, May) 3,000 3 4,287 - - - - 4,290
 ($1.94 per share, June) 90,700 91 175,485 - - - - 175,576
 ($1.42 per share, July) 28,640 29 40,642 - - - - 40,671
 ($0.98 per share, August) 16,114 16 15,842 - - - - 15,858
 ($0.66 per share, September) 40,067 40 26,398 - - - - 26,438
 ($0.64 per share, October) 58,397 58 37,278 - - - - 37,336
 ($0.40 per share, November) 21,155 21 8,441 - - - - 8,462
Issuance of common stock for legal
services
 ($0.35 per share, November) 500,000 500 174,500 - - - - 175,000
Issuance of common stock for
investment inReal estate joint venture:
 ($2.00 per share, March) 28,432 28 56,836 - - - - 56,864
 ($0.33 per share, October) 101,975 102 33,550 - - - - 33,652
Issuance of common stock to IC One
shareholders, January 119,905 120 (120) - - - -
Cancellation of shares of common stock
issued in exchange, January (286,267) (286) 286 - - - -

 F-102

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

Issuance of common stock for equipment
 ($1.00 per share, January) 8,000 8 7,992 - - - - 8,000
Issuance of common stock to settle
CardOne potential claims ($1.05 per
share, August) 294,180 294 308,595 - - - - 308,889
 Stock option compensation:
 January - - 29,588 - - - - 29,588
 February - - 29,588 - - - - 29,588
 March - - 29,588 - - - - 29,588
 April - - 407,476 - - - - 407,476
 May - - 815,726 - - - - 815,726
 June - - 109,334 - - - - 109,334
 July - - 109,335 - - - - 109,335
 August - - 109,335 - - - - 109,335
 September - - 1,599,960 - - - - 1,599,960
 October - - 109,335 - - - - 109,335
 November - - 109,335 - - - - 109,335
 December - - 109,335 - - - - 109,335
 Net loss - - - - - - (10,485,935) (10,485,935)

BALANCE, December 31, 2000
(Audited) 60,236,723 60,237 38,734,475 (2,300,000) 0 0 (41,292,424) (4,797,712)

Issuance of common stock for financial,
development and administrative
services:
 ($0.25 per share, February) 21,386 21 5,326 - 5,347
 ($0.22 per share, March) 622,916 623 141,075 - 141,698
 ($0.15 per share, April) 402,210 402 58,017 - 58,419
 ($0.18 per share, May) 55,000 55 9,570 - 9,625
 ($0.19 per share, June) 62,115 62 11,740 - 11,802
 ($0.19 per share, July) 1,101,580 1,102 204,601 - 205,703
 ($0.16 per share, August) 270,047 270 44,118 - 44,388
 ($0.13 per share, September) 68,348 68 9,134 - 9,202
 ($0.20 per share, October) 286,406 287 57,717 - 58,004
 ($0.20 per share, November) 308,189 308 59,789 - 60,097
 ($0.23 per share, December) 395,400 395 89,297 - 89,692

 F-103

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

Cancellation of common stock issued
for financial services ($1.50 per
share, December) (55,000) (55) (82,445) - (82,500)
Issuance of common stock for
directors' fees
 ($1.29 per share, March) 335,000 335 432,365 - 432,700
Adjustment to issuance of common
stock:
 February 76,527 77 (77) -
 October 35,655 36 (36) -
Settlement of subscription notes
receivable:
 July - - - 1,225,000 1,225,000
 December - - - 75,000 75,000
Issuance of common stock for debt:
 ($0.02 per share, October) 1,385,710 1,386 23,614 - 25,000
 $2.74 per share, November) 105,128 105 287,895 - 288,000
Issuance of common stock for interest:
 ($0.18 per share, January) 400,000 400 73,134 - 73,534
 ($0.18 per share, February) 400,000 400 73,133 - 73,533
 ($0.18 per share, March) 419,394 419 76,314 - 76,733
 ($0.21 per share, April) 548,160 548 113,652 - 114,200
 ($0.21 per share, May) 559,589 560 115,640 - 116,200
 ($0.20 per share, June) 835,145 835 164,965 - 165,800
 ($0.15 per share, July) 1,459,568 1,460 222,340 - 223,800
 $0.15 per share, August) 1,677,982 1,678 253,792 - 255,470
 ($0.15 per share, September) 1,793,356 1,793 268,677 - 270,470
 ($0.15 per share, October) 1,335,406 1,335 304,473 - 305,808
 $0.19 per share, November) 1,709,659 1,710 323,125 - 324,835
 ($0.63 per share, December) 339,398 339 180,273 - 180,612
Valuation adjustment for
collateralized shares - - - 863,370 863,370
Adjustment for variable option
accounting - - 55,160 - 55,160
Adjustment to issuance of common stock
for stock options, August (24,000) (24) 24 -
Loans payable - shareholder, at $0.13
per share, July 1,992,187 1,992 253,008 - 255,000
Stock options granted for wages, July - - 919,197 - 919,197

 F-104

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

Issuance of additional stock for sale
of common stock for cash in 2000,
December 250,000 250 (250) -
 Stock option compensation:
 January - - 360,757 - 360,757
 February - - 333,674 - 333,674
 March - - 326,903 - 326,903
 April - - 316,732 - 316,732
 May - - 316,732 - 316,732
 June - - 316,732 - 316,732
 July - - 3,477,119 - 3,477,119
 August - - 316,731 - 316,731
 September - - 324,131 - 324,131
Issuance of common stock to Card One:
 ($0.21 per share, July) 3,341,974 3,342 698,473 - 701,815
 ($0.16 per share, August) 3,944,986 3,945 627,253 - 631,198
 ($0.12 per share, September) 8,060 8 959 - 967
 Net loss - - - - (14,774,236) (14,774,236)

BALANCE, December 31, 2001
(Audited) 86,704,204 86,704 50,899,028 (136,630) 0 0 (56,066,660) (5,217,558)

 Issuance of common stock for
 debt:
 ($0.37 per share, May) 114,308 114 41,723 - - - 41,837
 ($0.37 per share, July) 18,180 18 6,636 - - - 6,654
 ($0.37 per share, September) 24,645 25 8,995 - - - 9,020
 Issuance of common stock for
 interest:
 ($0.12 per share, January) 3,679,936 3,680 419,513 - - - 423,193
 ($0.11 per share, February) 3,947,206 3,947 430,245 - - - 434,192
 ($0.12 per share, March) 3,690,397 3,690 439,157 - - - 442,847
 ($0.06 per share, April) 7,380,795 7,381 435,467 - - - 442,848
 ($0.08 per share, May) 5,094,311 5,094 427,922 - - - 433,016
 ($0.08 per share, June) 5,273,031 5,273 427,116 - - - 432,389
 ($0.06 per share, July) 7,848,393 7,849 423,812 - - - 431,661
 ($0.08 per share, August) 5,743,000 5,743 424,982 - - - 430,725

 F-105

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 ($0.07 per share, September) 6,759,204 6,759 422,299 - - - 429,058
 ($0.07 per share, October) 140,000 140 8,960 - - - 9,100
 ($0.08 per share, November) 113,750 114 8,986 - - - 9,100
 ($0.04 per share, December 211,628 212 8,889 - - - 9,101
 Issuance of common stock for
 financial, development and
 administrative services:
 ($0.19 per share, March) 200,000 200 37,800 - - - 38,000
 ($0.08 per share, July) 200,000 200 16,040 - - - 16,240
 ($0.18 per share, August) 452,429 453 79,225 - - - 79,678
 ($0.06 per share, September) 120,000 120 7,440 - - - 7,560
 ($0.07 per share, November) 1,263,242 1,263 80,847 - - - 82,110
 ($0.05 per share, December) 480,000 480 21,120 - - - 21,600
 ($0.06 per share, December) 700,000 700 41,800 - - - 42,500
 Cancellation of common stock
 issued for directors' fees:
 ($1.29 per share, April) (110,000) (110) (141,790) - - - (141,900)
 ($1.29 per share, June) (75,000) (75) (96,675) - - - (96,750)
 Compensation for consultants - 328,665 - - - 328,665
 Accrued compensation converted
 into options - 145,000 - - - 145,000
 Stock option compensation:
 March - 233,579 - (22,919) - 210,660
 April - 790 - - - 790
 May - 790 - - - 790
 June - 791 - - - 791
 July - 72,479 - - - 72,479
 August - 7,712 - - - 7,712
 September - 15,680 - - - 15,680
 October - 790 - - - 790
 November - 790 - - - 790
 December - 37,650 - (6,890) - 30,760
 Amortization of deferred option
 compensation:
 January - - - -
 February - - - -

 F-106

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 March - - - -
 April - - - 790 - 790
 May - - - 790 - 790
 June - - - 791 - 791
 July - - - 790 - 790
 August - - - 790 - 790
 September - - - 791 - 791
 October - - - 790 - 790
 November - - - 790 - 790
 December - - - 791 - 791
 Valuation adjustment for
 collateralized shares - 103,991 - 103,991
 Shares issued for settlements:
 ($0.08 per share, September) 286,267 286 22,615 - - - 22,901
 ($0.05 per share, December) 30,588 31 1,498 - - - 1,529
 Net loss - - - - (7,738,743) (7,738,743)
 BALANCE, December 31, 2002
 (Audited) 140,290,514 140,291 55,748,366 (32,639) (22,696)(63,805,403) (7,972,081)

Issuance of stock for services rendered:

 ($0.05 per share, February) 1,530,588 1,530 75,030 76,560
 ($0.05 per share, March) 500,000 500 24,500 25,000
 ($0.05 per share, June) 466,378 466 22,853 23,319
 ($0.05 per share, October) 7,050 7 345 352
 ($0.05 per share, November) 5,002,144 5,002 245,105 250,107
 ($0.05 per share, December) 240,916 241 11,805 12,046
 ($0.06 per share, December) 700,000 700 41,300 42,000
Issuance of stock in lieu of
interest payments:
 ($0.05 per share, March) 1,625,792 1,626 84,541 86,167
 ($0.05 per share, December) 12,206,425 12,207 627,387 639,594
Issuance of stock for cash: 250,000 250 24,750 25,000

Common stock subscribed (525,000) 600,000 75,000
Issuance of stock for settlement
of debt:
 ($0.05 per share, November) 389,052 389 19,065 19,454

 F-107

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 ($0.05 per share, December) 400,000 400 19,600 20,000
 Stock option compensation: 79,139 79,139
 Amortization of deferred option
 compensation: 22,696 22,696
 Net Stock cancellation
 adjustment (3,140,259) (3,140) 3,140 -
 Write-off of stock subscription 32,639
 receivable 32,639
 Net Loss (3,785,439) (3,785,439)
 BALANCE, December 31, 2003
 (Audited) 160,468,600 160,469 57,026,926 (525,000) 600,000 - (67,590,842) (10,328,447)
 Issuance of stock for services
 rendered:
 ($0.10 per share, January) 150,000 150 14,850 15,000
 ($0.15 per share, January) 200,000 200 29,800 30,000
 ($0.145 per share, August) 689,655 690 99,310 100,000

 ($0.08 per share, August) 500,000 500 39,500 40,000
 Issue of stock in lieu of
 interest payments:
 ($0.13 per share, February) 280,419 280 36,174 36,454
 ($0.165 per share, February) 175,841 176 28,838 29,014
 Issue of stock for cash:
 ($0.05 per share, January) 2,586,310 2,586 126,729 129,315
 ($0.30 per share, January) 250,000 250 74,750 (75,000) -
 ($0.08 per share, February) 62,500 63 4,937 5,000
 ($0.30 per share, February) 83,333 83 24,917 (25,000) -
 ($0.06 per share, November) 66,667 66 3,934 4,000
 ($0.06 per share, November) 101,111 101 8,999 9,100
 (0.065 per share, November) 100,000 100 6,400 6,500
 Common stock subscription received 275,000 275,000
 Stock option compensation 90,049 90,049
 Net Loss (4,229,168) (4,229,168)
 BALANCE, December 31, 2004
 (Audited) 165,714,436 165,714 57,616,113 (250,000) 500,000 - (71,820,010) (13,788,183)

 F-108

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)

Interim Consolidated Statements of Changes in Stockholders' Deficiency

For the Period from Inception (February 26, 1997) Through September 30, 2005
(Amounts expressed in US dollars)

 Issuance of stock for services
 rendered:
 ($0.05 per share, February) 250,000 250 12,250 12,500
 ($0.05 per share, May) 1,050 1 52 53
 ($0.048 per share, June) 100,000 100 4,650 4,750
 Issue of stock in lieu of
 interest payments:
 (0.082 per share, May) 22,934,690 22,935 1,861,894 1,884,829
 Issue of stock for cash:
 ($0.07 per share, March) 70,355 70 4,855 4,925
 ($0.068 per share, March) 369,550 370 24,590 24,960
 ($0.07 per share, April) 100,000 100 6,900 7,000
 ($0.09 per share, April) 100,000 100 8,900 9,000
 ($0.05 per share, May) 248,000 248 12,152 12,400
 ($0.056 per share, May) 23,571 23 1,297 1,320
 ($0.07 per share, May) 142,857 143 9,857 10,000
 ($0.08 per share, May) 125,000 125 9,875 10,000
 ($0.09 per share, May) 47,968 48 4,269 4,317
 ($0.123 per share, May) 150,000 150 18,225 18,375
 ($0.30 per share, May) 1,000,000 1,000 299,000 (300,000) -
 ($0.068 per share, May) 13,450 13 895 908
 ($0.08 per share, June) 62,500 63 4,937 5,000
 ($0.05 per share, June) 800,000 800 39,200 40,000
 ($0.05 per share, June) 100,000 100 4,900 5,000
 ($0.09 per share, June) 50,000 50 4,450 4,500
 ($0.05 per share, July) 200,000 200 9,800 10,000
 ($0.05 per share, July) 200,000 200 9,800 10,000
 ($0.06 per share, September) 58,413 58 3,447 3,505
 Common stock subscription
 received 75,000 75,000
 Stock option compensation 13,114 13,114
 Net Loss (5,221,037) (5,221,037)

 BALANCE, September 30, 2005
 (Unaudited) 192,861,840, 192,862 59,985,422 (175,000) 200,000 - (77,041,047) (16,837,763)

 For the Period
 Nine Months Ended From Inception
 Sept 30, (February 26, 1997)
 --------------------------------------- Through Sept 30,
 2005 2004 2005
 ------------------------------------------------------------
 $ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (5,221,037) (2,892,546) (77,041,047)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - - 365,010
Stock option compensation 13,114 77,128 10,516,768
Adjustment for variable accounting of options 55,160
Amortization of deferred option compensation - - 22,696
Common stock issued for services
and compensation 17,303 185,000 24,887,323
Common stock issued for interest expense 1,884,829 65,468 8,905,112
Common stock issued to settle CardOne
Claims 1,667,299
Common stock issued for directors' fees 432,700
Write-off of common stock subscription
receivable - - 2,125,000
(Gain) loss on extinguishment of debt - - 931,210
Loss on impairment of assets - - 703,211
Changes in current assets and liabilities:
Prepaid Expenses and other (9,674) (53,380) (38,227)
Accounts payable and accrued expenses 2,891,902 1,921,525 15,044,217

 ------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (423,563) (696,806) (11,423,568)
 ------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - - (347,349)
Acquisition of patents - - (46,854)
Investment in real estate joint venture - - (36,515)

 ------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (430,718)
 ------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - (181,210) 143,410 271,675
shareholders
Loans - CEO America - - 150,000
Proceeds from notes payable 200,000 65,000 3,711,827
Proceeds from common stock subscription
received 75,000 175,000 600,000
Sales of common stock 181,210 - 6,089,940
Amounts owed to employees and officers 158,559 284,119 1,054,926

 ------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 433,559 667,529 11,878,368
 ------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH 9,996 (29,276) 24,082

CASH AT BEGINNING OF PERIOD 14,086 42,570 -

 ------------------------------------------------------------
CASH AT END OF PERIOD 24,082 13,293 24,082
 ------------------------------------------------------------

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is a development stage enterprise in the business of research, development and integration of proprietary processes and software technologies for the electronic payment industry, primarily involving consumer loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC. The Company licenses, markets and develops smart-card loyalty products through its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the nine months ended September 30, 2005, are not indicative of the results that may be expected for the year ended December 31, 2005. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2004.

NOTE 2- GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is a development-stage enterprise and has incurred a net loss of $77,041,047 since inception. Additionally, the Company had a net working capital deficiency of $16,837,763 and a total shareholders' deficiency of $16,837,763 at September 30, 2005. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and recognizes the need to raise capital through the future issuance of stock and/or debentures in order to develop a viable business. The Company continues to implement cost-cutting measures. It may also rely increasingly on strategic alliances with others who will assume responsibility for financing specific required development tasks, thus, reducing the Company's financial requirements for the exploitation of its intellectual properties.

As of September 30, 2005, current liabilities are substantially past due. In the event demands are made upon the Company which cannot be met and the associated creditors successfully pursue action against the Company, the Company could be exposed to additional costs of legal fees, interest or penalties, and may be forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital through the private placement of common stock and the issuance of convertible debt.

NOTE-3 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4-STOCK BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes accounting and reporting standards for stock-based employee compensation plans. This statement allows companies to choose between the fair value based method of accounting as defined in this statement and the intrinsic value based method of accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided by APB 25, as permitted for stock-based compensation relative to the Company's employees. Stock and options granted to other parties in connection with providing goods and services to the Company are accounted for under the fair value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 also requires that those effects be disclosed more prominently by specifying the form, content, and location of those disclosures. We have adopted the increased disclosure requirements of SFAS No. 148 for the nine month period ended September 30, 2005.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

 For the Three Months For the Nine Months
 Ended September 30, Ended September 30,
 2005 2004 2005 2004
 ---- ---- ---- ----
 Net loss attributable to common stockholders,
 as reported ..................................... $(1,859,877) $(1,327,564) $(5,221,037) $(2,892,546)
 Add: Stock-based employee compensation
 expense included in reported net income,
 net of related tax effect ....................... - 16,658 13,114 77,128
 Less: Total stock-based compensation
 expense determined under the Black-Scholes fair value
 based method of all awards* ..................... - (16,658) (13,114) (77,128)
 Pro forma net loss attributable to
 common stockholders ............................. $(1,859,877) $(1,327,564) $(5,221,037) $(2,892,546)
 =========== =========== =========== ===========
 Basic and diluted net loss attributable to
 common stockholders
 As reported ....................................... $ (0.01) $ (0.01) $ (0.03) $ (0.02)
 =========== =========== =========== ===========




Pro forma .......................................... $ (0.01) $ (0.01) $ (0.03) $ (0.02)

* The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the nine months ended September 30, 2005: annual dividends of $0; expected volatility range of 51.78% to 58.02%, risk-free interest rate of 3.00%; and expected life of five years.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4- STOCK BASED COMPENSATION-Continued

Loss Per Share

Basic and diluted loss per share has been calculated based upon the weighted average number of common shares outstanding and excludes any potentially dilutive securities. Stock options and convertible notes have been excluded as common stock equivalents in the computation of diluted loss per share since the results would be anti-dilutive. Obligations to issue additional shares, which could potentially dilute earnings per share, were approximately 148,400,000 at September 30, 2005.

NOTE 5 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 6 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of the Company that are unsecured and payable on demand.

NOTE 7 - SHAREHOLDERS' DEFICIENCY

On February 2, 2005 the Company issued 250,000 common shares in exchange for services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash. The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash. The shares were issued at $0.068.

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash. The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968, 150,000 and 1,000,000 common shares in exchange for cash. The shares were issued at $0.05, $0.056, $0.07, $0.08, $0.09, $0.123 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past services valued at $53. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest payments of $1,884,829. The shares were issued at $0.082.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash. The shares were issued at $0.068.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash. The shares were issued at $0.08.

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash. The shares were issued at $0.05.

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 7 - SHAREHOLDERS' DEFICIENCY-Continued

On July 9, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were issued at $0.05.

On July 21, 2005, the Company issued 200,000 common shares in exchange for cash. The shares were valued at $0.05.

On September 14, 2005, the Company issued 58,413 common shares in exchange for cash. The shares were valued at $ $0.06.

On January 13, 2004 the Company issued 2,586,310 common shares in exchange for cash. The shares were issued at $0.05.

On January 13, 2004 the Company issued 150,000 and 200,000 common shares in exchange for services valued at $15,000 and $30,000, respectively. The shares were issued at $0.10 and $0.15 respectively.

On January 29, 2004 the Company issued 250,000 common shares in exchange for cash. The shares were issued at $0.30.

On February 24, 2004 the Company issued 62,500 commons shares in exchange for cash. The shares were issued at $0.08.

On February 27, 2004 the Company issued 280,419 and 175,841 common shares for interest payments of $36,454 and $29,014 respectively. The shares were issued at $0.13 and $0.165, respectively.

On February 27, 2004 the Company issued 83,333 common shares in exchange for cash. The shares were issued at $0.30.

On August 10, 2004 the Company issued 689,655 common shares in exchange for services valued at $100,000. The shares were issued at $0.145.

On August 23, 2004 the Company issued 500,000 common shares in exchange for services valued at $40,000. The shares were issued at $0.08.

As an alternative, the Company may purchase shares of common stock in the open market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved amendments to the Articles of Incorporation to adopt an increase in the capital stock of the Company's common stock from 200,000,000 to 500,000,000 shares. Furthermore, during a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000. (Refer Note 16 - Subsequent Events).

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 9 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the "Plan"). The Board of Directors administers the Plan. Under the Plan, the Company may grant stock options, which may be incentive stock options ("ISO's") as defined in the Internal Revenue Code, and stock awards or options which do not qualify as ISO's to employees and officers. All employees of the Company are eligible to participate in the Plan.

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted during the three months ended June 30, 2005: annual dividends of $0; expected volatility range of 51.78% to 58.02%, risk-free interest rate of 3.00% and expected life of five years.

On January 31, 2005, the Company issued 100,000 options at a strike price of $0.065 for services rendered.

On February 28, 2005, the Company issued 100,000 options at a strike price of $0.072 for services rendered.

On March 31, 2005, the Company issued 100,000 options at a strike price of $0.07 for services rendered.

On April 30, 2005, the Company issued 100,000 options at a strike price of $0.05 for services rendered.

 Stock Options
 ---------------------------
 Weighted
 Average
 Exercise
 Shares Price
 ------ -----

Outstanding at December 31, 2003 47,225,299 $0.09
 Granted 1,200,000 $0.11
 Exercised - -
 Cancelled - -
Outstanding at December 31, 2004 48,425,299 $0.11
 Granted 400,000 $0.06
 Exercised - -
 Cancelled (2,679,167) $0.19
 Outstanding at September 30, 2005 46,146,132 $0.11

 Options Outstanding Options Exercisable
 --------------------------------------- --------------------------
 Weighted
 Average Weighted Weighted
 Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
 Prices Outstanding Life Price Exercisable Price
 ------ ----------- ---- ----- ----------- -----
 (In Thousands) (In Years) (In Thousands)
$0.00 - $0.23 42,899 3.86 $0.09 42,899 $0.09
$0.48 - $0.49 3,247 4.90 $0.48 3,247 $0.48
$0.64 - $0.80 - - - - -
 ------ ------
 46,146 46,146
 ====== ======

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions arising in the ordinary course of business. There can be no assurance, the Company will be successful in defending these actions.

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D. Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and attorney's fees, under the lease on our former principal executive offices in Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541 on December 7, 2000, IC One reached a payment arrangement under which we are obligated to pay $5,000 per month, plus ongoing obligations under the lease. The settlement obligation is guaranteed by the Company, and is secured by the equipment, inventory, accounts and chattel paper of both the parent and IC One. The Company is in default in its obligations under this agreement. Upon the expiration of the lease, an amended judgment of $222,765 (a provision has been provided for in the financial statements at December 31, 2003) was entered to reflect the additional unpaid rent, interest and attorney's fees.

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. Accordingly, the case was dismissed on August 4, 2004.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS-Continued

In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the Eximsoft entities that IC One had contracted and received computer software development and programming services and had failed to pay as agreed. IC One agreed to pay $30,000 and provided Eximsoft with a confession of judgment that could be filed in the Third District Court in Salt Lake City, Utah, in the event that IC One failed to make the agreed payments. IC One paid the agreed $30,000 during 2002 and the original confession of judgment was returned by Eximsoft to us in November 2003.

On August 16, 2002, Sandra Lueck initiated an action against the Company for unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment was entered against the Company in the amounts of $11,400 for unpaid wages, $3,300 as a continuation of wages, court costs and attorney's fees of $1,753, and interest from the date of judgment until paid in full. On or about June 30, 2003, the Company entered into a release and settlement agreement compromising, resolving, and settling all matters and issues between the parties. The Company paid a total of $18,750 and a satisfaction of judgment was filed with the Third Judicial District Court on October 14, 2003.

On April 4, 2003, Greg Morrison initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on those amounts from the date of termination, court costs and attorney's fees. The Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The Company's final payment under this agreement was made prior to July 31, 2004, and this matter has be dismissed.

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the Company in the Superior Court of New Jersey, Hudson County for unpaid amounts owed for services provided in the amount of approximately $4,000. On July 18, 2003, a judgment was entered against the Company (a provision of $4,000 has been provided for in the financial statements at December 31, 2004). The Company is currently in default of the judgment and would be liable to pay interest from the date of judgment until paid in full.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS-Continued

The Company is reviewing, with the advice of legal counsel, whether the Company has legal claims that may be asserted against James E. Biorge, a founder and officer and director of IC One at the time it was acquired in September 1999. At the time of such acquisition, the Company set aside in a special trust approximately 7.8 million shares of common stock to be used to resolve claims that may be asserted against IC One by persons claiming an interest in or claim against IC One as a successor-in-interest to the assets, operations and liabilities of CardOne, which Mr. Biorge had also been instrumental in founding and which had been involved in the initial development of the intellectual properties subsequently acquired by IC One before IC One was acquired by us. The Company believes that all or a portion of the 7.8 million shares then reserved to satisfy such claims, all of which have subsequently been used for such purpose, should properly be the responsibility of Mr. Biorge. On the basis of our previous assertion that the Company may make such a claim against Mr. Biorge and perhaps other reasons not known to the Company, Mr. Biorge has refused to accept certificates for 11,503,138 shares of Company's common stock to which he would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter) initiated an action against the company in the United States District Court for the District of Utah (Case # 07cv00129), seeking the above-noted shares which were previously cancelled by the Company, as well as attorney's fees and punitive damages. The Company plans to vigorously defend itself and believes that there is a reasonable possibility that the outcome of any claim would not be unfavorable to the Company. Additionally, the Company may pursue claims against Mr. Biorge and seek damages in addition to cancellation of the shares.

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us and signed agreements to accept their compensation on a deferred basis. In December 2002, they signed additional agreements releasing all rights to any claims based on the CardOne entities, terminating their association with the Company, and agreed to accept options to purchase 725,000 shares of common stock each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of our stock for work performed through December 2002.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 11 - PAYROLL TAXES

NOTE 12- SELLING GENERAL AND ADMINISTRATIVE EXPENSES

For the nine month period ended September 30, 2005, selling, general and administrative expenses totaled $1,961,414.

NOTE 13 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and services. (Refer Note 16 - Subsequent Events for licensing agreements signed with Retention Management Group, Inc. and Phoenix Technology Holdings, Inc.)

NOTE 14 - EMPLOYMENT AGREEMENTS

As of September 30, 2005, the Company was obligated under two employment agreements with certain officers. Compensation under the agreements include annual salaries approximately $150,000.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 15 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades over the counter on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential fines or penalties that may result from such delisting or late filings.

NOTE 16- SUBSEQUENT EVENTS

A) Subsequent issue of common shares:

On October 31, 2005, the Company issued 323,494 common shares in exchange for cash. The shares were valued at $ $0.05

On December 1, 2005, the Company issued 88,669 common shares in exchange for services valued at $5,320.14. The shares were valued at $0.06.

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for past services valued at $100,000. The shares were issued at $0.05.

On July 14, 2006, the Company issued 200,000 common shares in exchange for past services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for past services valued at $70,000. The shares were issued at $0.07.

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for past services valued at $49,678. The shares were issued at $0.07.

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for past services valued at $55,418. The shares were issued at $0.05.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and 2,054,079 common shares in exchange for past services valued at $54,000, $59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10, $0.05, $0.07 and $0.05, respectively.

On January 30, 2007, the Company issued 5,850,000 common shares for past services valued at $292,500. The shares were issued at $0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in exchange for past services valued at $1,260,000 and $56,000, respectively. The shares were issued at $0.06 and $0.07, respectively.

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for past services valued at $ 278,250.00 and $54,000, respectively. The shares were issued at $0.05 and $0.10, respectively.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

A) Subsequent issue of common shares-Continued:

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for cash and past services, respectively valued at $75,000.00 and $135,000, respectively. The shares were issued at $0.05.

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash and past services, respectively valued at $25,000.00 and $2,426, respectively. The shares were issued at $0.05.

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash valued at $20,000.00. The shares were issued at $0.05.

On June 12, 2007, the Company issued 100,324,827 common shares to convert secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash valued at $58,000.00. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services valued at $400,646. The shares were issued at $0.06.

On August 2, 2007, the Company issued 63,742,180 common shares to convert secured notes valued at 3,187,164. The shares were valued at $0.05.

On July 20, 2007, the Company issued 8,661,648 common shares for past services valued at $432,542. The shares were issued at $0.05.

B) Options:

On November 30, 2005, the Company cancelled 4,463,303 options that had been issued to a past employee.

On March 3, 2006, the Company cancelled 1,937,333 options that had been issued to a past employee.

On April 3, 2006, the Company cancelled 1,301,667 options that had been issued to a past employee.

On December 15, 2006 and December 16, 2006, the Company cancelled 527,296 and 1,000,000 options, respectively, that had been issued to consulting companies for services rendered.

On March 9, 2007, the Company cancelled 19,161,876 options that had been issued to past employees.

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and 1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to past employees.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

C) Events

On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of Administration and Finance. In addition to these duties, on November 12, 2004, Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of the Company and resigned his previous position on December 16, 2004. On January 26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the Company in the Superior Court of California, County of Los Angeles bearing case number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint against the Company in the Superior Court of California, County of Los Angeles bearing case number LC-070495. On February 3, 2006, the parties entered into a Settlement and Release Agreement which resolved the matters and they were subsequently dismissed by the Courts.

On April 20, 2004, the Canadian Intellectual Property Office granted the Company patent number 2,182,596.

On July 25, 2004, the Company entered into a Licensing Agreement with Retention Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a license to market, distribute and sublicense SCTN applications and products. On March 10, 2006, the Company asserted claims against RMG in case no. A518577 filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31, 2006, the Company and RMG entered into a Settlement Agreement and Release. Under the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the Licensing Agreement between the Company and RMG was terminated. Accordingly, case no. A518577 was dismissed by the Court on June 23, 2006.

On September 18, 2001, we were served with a summons and complaint for an action filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County, Utah, for breach of an independent contractor's contract and seeking unspecified damages. On October 12, 2001, the Company filed an answer and a counterclaim against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had taken no further action in this case and the court indicated that, unless Ms. Grish certified she was ready for trial by August 4, 2004, the case would be dismissed. The case was dismissed on August 4, 2004.

Concurrent with Mr. Diamond being relieved as CEO of the Company on December 16, 2004, David Simon assumed the role of CEO.

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an action in The Superior Court of the State of Washington, In and For the County of King, case no. 05-2-18115-0-SEA in which the Company was named one of several defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and Release. Accordingly, the Company was dismissed as a defendant in the case.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

C) Events-Continued

On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development partner, was elected to the Board of Directors. On August 17, 2005, Mr. Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.

On November 30, 2005, Verlo Howell initiated an action against the Company in the Third Judicial District Court for Salt Lake County, Utah, civil no. 05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired as the Company's Executive Vice-President of Sales and Marketing pursuant to an Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's employment was terminated with cause by the Company. We intend to assert and pursue offsetting defenses and believe that there is a reasonable possibility that the outcome of any claim, if asserted, would not be unfavorable to us.

As of December 31, 2005, certain accounts payable of the Company are Statute-Barred under Utah law from being collected by creditors. However, under US GAAP, the Company still records them as a liability. As of December 31, 2005, the amount is approximately 41,000.

On April 6, 2006, the Company entered into a License Agreement with Phoenix Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of the agreement, the Company granted Phoenix an exclusive license to use the Company's technology. Also, certain portions of the Company's debt, including a significant portion of the Senior Secured Convertible Notes, unpaid amounts owing to Airos Group for services rendered, and accrued salaries were assumed by Phoenix and ceased accruing additional interest. Further, the agreement provides for Phoenix to loan monies to the Company, at Phoenix's discretion, at the rate of one percent (1%) per month, compounded monthly until paid in full. Any such loan shall be deducted from any payments due by Phoenix under the agreement. In order to maintain exclusivity, the Agreement calls for certain performance targets to be met. As of April 18, 2007, these targets have been met.

During a special meeting of the Board of Directors on November 30, 2006, the Board voted to approve a resolution to convert the Company from a Florida corporation to a Nevada corporation.

During a special meeting of the Board of Directors on November 30, 2006, the Board voted to approve a resolution to increase the number of authorized shares to 500,000,000.

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Condensed Notes to Interim Consolidated Financial Statements September 30, 2005
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS-Continued

C) Events-Continued

During a meeting of the Board of Directors on May 18, 2007, the Board voted to approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's independent registered public accounting firm and engaged Schwartz Levitsky Feldman LLP as the Company's independent registered public accounting firm. The change in independent registered public accounting firms is not the result of any disagreement with Marcum & Kliegman, LLP.

In Janaury of 2007, Noteholders which did not elect to assign their debt to Phoenix Technology Holding, Inc. were given the option to receive their principal investment plus accrued interest either in the form of cash or shares in the Company. By June 2007, the last of these repayments were made, and all Senior Secured Notes have been retired.

During a special meeting of the Board of Directors on July 20, 2007, the Board voted to approve a resolution to increase the number of authorized shares to 600,000,000.

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based company, initiated an action in the United States District Court for the District of Nevada, case # 07-CV-1178, in which the Company was named as a co-defendant. The company plans to vigorously defend and counter sue TII for breach of contract, fraud, interference with contractual relations, misappropriation of trade secrets, conversion, unjust enrichment and to seek both compensatory and punitive damages well in excess of $100 million.

As of September 20, 2007, certain accounts payable of the Company are Statute-Barred under Utah law from being collected by creditors. However, under US GAAP, the Company still records them as a liability. As of September 20, 2007, the amount is approximately 43,000. This amount includes the $41,000 previously Statute-Barred as of December 31, 2005.