UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

(Mark One)

þ		ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006.

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

FOR THE TRANSITION PERIOD FROM                      TO                     

SIENA TECHNOLOGIES, INC.

(Exact name of issuer as specified in its charter)

Nevada		88-0390360
State or other jurisdiction of incorporation or organization		(IRS Employer Identification Number)

5625 South Arville Street, Suite E, Las Vegas Nevada		89118
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (702) 889-8777

		Securities registered under Section 12(b) of the Exchange Act:		None.
		Securities registered under Section 12(g) of the Exchange Act:		Common stock, par value $0.001 per share. (Title of class)

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

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

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes    þ No

State issuer’s revenues for its most recent fiscal year: $18,758,496.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of May 10, 2007: $3,327,494 (Based on 22,183,294 shares held by non-affiliates and the closing price of our stock of $0.15 on May 10, 2007.)

State the number of shares outstanding of each of the registrant’s classes of common stock as of May 10, 2007: 42,163,691.

Documents incorporated by reference: None.

Transitional Small Business Disclosure Format (Check one): Yes o;    No þ

 

 

SIENA TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Network Installation Corp.)
TABLE OF CONTENTS

				Page
PART I					1
Item 1.		DESCRIPTION OF BUSINESS.			1
Item 2.		DESCRIPTION OF PROPERTY.			6
Item 3.		LEGAL PROCEEDINGS.			7
Item 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.			7
PART II					8
Item 5.		MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.			8
Item 6.		MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.			9
Item 7.		FINANCIAL STATEMENTS.			24
Item 8.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.			57
Item 8A.		CONTROLS AND PROCEDURES.			57
Item 8B.		OTHER INFORMATION.			57
PART III					58
Item 9.		DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.			58
Item 10.		EXECUTIVE COMPENSATION.			59
Item 11.		BENEFICIAL OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.			61
Item 12.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.			61
Item 13.		EXHIBITS.			63
Item 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES.			66
List of Subsidiaries
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of Officers Pursuant to Section 906

PART I

ITEM 1. DECRIPTION OF BUSINESS.

OVERVIEW

We are a company that currently does business through our wholly owned subsidiary, Kelley Communication Company, Inc. (“Kelley”). Kelley has two operating divisions, Kelley Technologies and Enhance Home Technology (“Enhance”). Kelley specializes in the design, development and integration of automated system networks known as “smart technologies,” primarily for the gaming, entertainment and luxury residential markets. Kelley has developed a Patent-Pending, proprietary, next-generation Race and Sports Book technology platform designed for the gaming industry. In addition, Kelley has acquired exclusive rights to sell Techcierge™, a “smart building” software management system. The rights are exclusive in Nevada, Arizona and California with regard to the Multiple Dwelling Unit (“MDU”) marketplace and the rights are exclusive on a worldwide basis with regard to the gaming and casino marketplace. In addition, Kelley has acquired non-exclusive rights to sell Condoplex, a “smart building” security and surveillance software and hardware system.

Kelley’s systems networks include: data, telecommunications, audio and video components, casino surveillance, security and access control systems, entertainment audio and video, special effects and multi-million dollar video conference systems. Kelley does work primarily in the Las Vegas area, but has also done projects in New Jersey, Oklahoma, Colorado, California, Texas and the Caribbean.

Kelley Technologies services commercial customers primarily in the gaming, entertainment and MDU markets. Enhance services customers who own high-end single family homes as well as condominium owners in MDU hi-rise buildings. From these two operating divisions, Kelley generates revenues from multiple sources including:

	•		Design fees;
	•		Build and project management fees;
	•		Software licensing fees;
	•		Design and build of Patent-Pending race and sports book technology platforms;
	•		Licensing of building management software;
	•		Design and sale of high end home automation technologies (“Smart Homes”).

In the future, we may also offer Triple Play services to condominium owners in MDU developments. Triple Play services include providing cable television, hi-speed internet and telephone/voice services. If we are successful in our efforts, our revenue streams will then also include monthly recurring revenues from cable television services, high speed internet service and telephone/voice services.

HISTORY

We incorporated in the State of Nevada as Color Strategies on March 24, 1998. On December 23, 1999, we changed our name to Infinite Technology Corporation. On April 25, 2000, we changed our name to Flexxtech Holdings, Inc. On July 10, 2003, we changed our name to Network Installation Corp. On October 25, 2006, we changed our name from Network Installation Corp. to Siena Technologies, Inc. (“Siena”).

In May 2003, we acquired Irvine, California-based Network Installation Corporation. Network Installation, or NIC, was established in July 1997 as a California corporation. At the time of acquisition, NIC provided products, project management, design and installation within the networking and communications sector.

On March 1, 2004, we acquired Del Mar Systems International, Inc., a telecommunications solutions provider. The acquisition of Del Mar allowed us to provide integrated telecom solutions to our customers.

In January 2005, we acquired COM Services, Inc. (“COM”), a privately-held California corporation. COM provided installations of cabling infrastructure for school districts and universities and colleges.

On September 22, 2005, we acquired Kelley Communication Company, Inc. Kelley has two operating divisions, Kelley Technologies and Enhance Home Technology. Kelley specializes in the design, development and integration of automated system networks known as “smart technologies,” primarily for the gaming, entertainment and luxury residential markets.

On November 4, 2005, we announced the acquisition of Spectrum Communications Cabling Services, Inc., a complete solution network service firm which provides network design, installation and maintenance of voice and data network systems. On January 6,

2006, we announced the rescission of our acquisition of Spectrum due to material philosophical differences between the parties regarding operations as well as our future direction.

In the second quarter of 2006, we finalized our plans to discontinue operations at our NIC and COM subsidiaries. We decided to close down these operations primarily because they were incurring operating losses, had low gross margins and were experiencing cash flow shortages, in addition to the fact that these businesses were not consistent with the core business of our subsidiary, Kelley.

INDUSTRY OVERVIEW — GAMING

The gaming industry is a high growth industry with ownership increasingly consolidated among several large casino and hotel owners, and a large number of much smaller competitors. The industry tends to be clustered in Las Vegas, Nevada, but also has a presence in Atlantic City, New Jersey and the Caribbean, and on Indian land in many states across the U.S. Casinos, resorts and hotels in the gaming industry, more than most leisure industries, depend on flashy special effects, large video boards and advanced audio systems to compete for the attention of gamblers and consumers. We believe this offers us a growth opportunity to sell our automated system networks known as “smart technologies.”

INDUSTRY OVERVIEW — MULTIPLE DWELLING UNITS

We believe there is a trend developing in the U.S. whereby Multiple Dwelling Units, or MDUs, are increasingly being built in urban areas around the country. Miami, San Diego and Las Vegas seem to be at the center of this trend. The high-rise MDUs cater to upscale residents and visitors, many of which desire “smart home” products for their condos. “Smart homes” include a level of automation that allows touch panel control for any/all of the following systems: audio, video, telephone, data, lighting, shades, HVAC, vacuum and security. Due to less and less buildable land close in to these urban centers, the trend of building upward seems likely to continue, as it did in larger cities that ran out of space earlier in their development cycles. We believe this increase in MDU developments will offer us the opportunity to sell our automated system networks, Techcierge™ (a proprietary “smart building” software management system), Condoplex (a proprietary “smart building” security and surveillance system) as well as our “smart home” technology systems to homeowners, and we have begun to target this industry as a potential area of growth for us, however there can be no assurances that our efforts will be successful. In addition, in certain MDU opportunities, we have the ability to provide cable, high speed internet and telephone services, known in our industry as the “Triple Play.” Since we are in discussions with developers and owners of MDU properties early on in their life cycles, we have the unique ability to pitch and bid on providing these services to their condominium owners throughout the building, usually in an arrangement that provides us with exclusivity. We have entered into a contract to provide the Triple Play services with a multiple mid-rise condominium development, One Las Vegas, in Las Vegas, Nevada and we are actively pursuing other similar opportunities, although there can be no assurance our efforts will be successful. The Triple Play service model will provide us with a monthly, recurring revenue stream, which is something we have made concerted efforts to achieve in our business. The systems that allow us to provide the Triple Play services at One Las Vegas are estimated to cost us approximately $350,000 and we are schedule to begin building and testing those systems in the third quarter of 2007, with a projected date of December 1, 2007 to turn the systems on and begin providing service.

OUR BUSINESS

Prior to our acquisition of Kelley in September 2005, our business was located in Irvine, California. We focused on the design, installation, and deployment of specialty communication systems for data, voice, video and telecom. Our technicians designed the applications required for network build-outs, structured cabling, deployment, security, training, and technical support and Wi-Fi, Voice over Internet Protocol, or VoIP, and traditional telecom products. During 2005, we earned revenue from: (i) the installation of data, voice, video and telecom networks; (ii) the resale of installed networking products; and (iii) consulting services in the assessment of existing networks. Our customers included Fortune 1000 companies, K-12 schools, colleges and local and regional municipalities.

After our acquisition of Kelley in September 2005, we focused our efforts on Kelley’s primary markets as we believe those markets offer the best opportunity for growth. We also analyzed our two locations and determined we could decrease costs by consolidating our operations in Las Vegas. As a result, in the fourth quarter of 2005, we began to migrate our business toward Kelley’s opportunities. We stopped taking on new business through our subsidiaries located in California, NIC and COM, and finished our existing projects. In March 2006, we moved our corporate offices from Irvine, California to Las Vegas, Nevada so we would be better able to serve the Las Vegas market. We no longer have any operations in our NIC and COM subsidiaries and we continue to focus our efforts on developing our Kelley subsidiary.

Some of our recent projects include designing and installing the following systems:

•		Restaurant sound and plasma displays;
•		Patent-Pending Race & Sports Book technology platforms, including satellite, cable tv, live horse racing, state of the art video displays with audio, voice and data;

•		Spa and health club audio and video;
•		Hotel guest room television, audio, telecommunications and internet, and control systems to manage them;
•		Convention center and meeting room technologies, including drop down video projection, audio, voice and data networks;
•		Back of the house closed circuit television and audio, voice and data;
•		Hotel and casino public area audio, television voice and data services;
•		Large casino surveillance and security systems;
•		Access control systems;
•		Corporate boardroom touch screen controlled audio, video, video conference, internet, data and telecommunications systems;
•		Large casino wide data networks for slot machines, cash machines, point of sale devices and casino player tracking;
•		Casino wide networked plasma displays for advertising;
•		Casino parking garage and public area background music and paging systems, access control and point of sale networks;
•		Main showroom audio and video systems, theatrical lighting and special effects;
•		Lounge and nightclub systems, video projection, special effects, point of sale networks, theatrical lighting; and
•		Security and surveillance systems and control centers.

We are also offering Triple Play services to condominium owners in MDU developments. If we are successful in our efforts, our revenue streams will then also include monthly recurring revenues from cable television services, high speed internet service and telephone/voice services.

SUPPLIERS

While we are predominately a service company, we purchase and resell products such as networking controllers, cable, TV, software, audio, video, surveillance and other equipment involved in our projects. We purchase our products from various distributors, and, in some cases, directly from the manufacturer. Should any of these distributors and vendors cease operations, our business would not be materially affected because most of these products are readily available from multiple distributors locally, regionally or nationally.

OPERATIONS

After the acquisition of Kelley, we switched our focus to design, development and integration of automated system networks known as “smart technologies,” primarily for the gaming, entertainment and luxury residential markets. We also fabricate the servers, routers and other control equipment that run the systems we design. Our employees provide the consulting, design and project management services to our customers. However, we do not have employees to install cable in the projects we design, nor do we install equipment. We fabricate all racked equipment at our facility, test such equipment and then deliver the equipment to the job site. Racked equipment is equipment contained in a rack or cabinet. The racked electronics, speakers, equipment, televisions, conduit or cable on any project are installed by the general or the electrical contractor.

SALES AND MARKETING

Through our wholly owned subsidiary, Kelley, we focus primarily on the gaming, entertainment and luxury residential markets. We believe we are uniquely positioned to serve this market with nearly two decades of service, long standing relationships with key decision-makers, proprietary technologies, and a high quality design and project management team. Additionally, we offer a one-stop shop for high quality, reliable, and efficient system designs, which few of our competitors can do. We believe we have significant growth opportunities within these industries as the industries continue to grow and develop new properties and continue to rely on improved security, audio/visual effects, and other technology advancements.

We generate most new business through repeat business from existing or former clients. We are also contacted directly by customers who learn about us from our reputation in the marketplace. In the past, Kelley did not use sales people to market its services and relied heavily on repeat business from existing customers and word of mouth to generate new sales leads. We have recently restructured our organization chart at Kelley and have shifted the focus of certain employees to promote a much more aggressive sales and marketing strategy. In addition to aggressive outreach for new sales opportunities, we have made numerous changes in our sales and marketing strategy which include but are not limited to: bidding on “build opportunities” from already existing designs; focusing on our proprietary Patent-Pending Race and Sports Book technology platform and aggressively marketing this product to casino owners; establishing a dedicated internal sales team to sell Techcierge™, our proprietary building management software platform, for which we have certain exclusive sales rights; building an in-house showroom to display our product offerings; expanding our geographic outreach, investigating joint venture opportunities with synergistic businesses, and hiring additional sales personnel.

We market our services to the MDU industry because we believe this market poses a growth opportunity for us. In Las Vegas, these high-rises are often affiliated and in some cases attached to existing casino and hotels complexes. Since Kelley has established relationships with many of the developers, architects, and owners of MDU projects, and since the design and project management for the communication technology and

systems networks needs of this segment are similar to that for other hi-rise buildings such as the hotel towers attached to casinos, we believe we can enter this market successfully. In addition, Kelley is often introduced to a new MDU opportunity by an architect or by the developer or owner directly. We are then able to upsell many of our services to these customers, who may have initially invited Kelley to the project for its design and build expertise of the “smart building” technologies that these MDU projects need. This gives us a competitive advantage being that we are involved with the decision makers in the project very early on in the process, many of whom prefer to work with Kelley as a one-source solution provider for all of the “smart building” technology needs. This allows us the opportunity to sell many more of our offerings than we were originally called on to provide.

CUSTOMERS

Since our acquisition of Kelley in September 2005, we provide our services primarily to the gaming and MDU industries. We typically work with developers who put the building project together. We also work with architects who oversee the primary design of the project. These individuals will subcontract out specific projects to us as part of an overall building plan.

While the majority of our projects are in Las Vegas, we work with customers in the gaming and luxury residential industries outside of Las Vegas including Atlantic City, New Jersey, Oklahoma, Colorado, California, Texas and the Caribbean.

During 2006, we provided services to Red Rock Hotel Casino Resort and Spa (“Red Rock”), Green Valley Ranch, Santa Fe Station and Fiesta Station, all of which are owned in whole or in part by Station Casinos, Inc. and all are located in Las Vegas, Nevada. The contracts with Stations Casinos accounted for approximately $12.5 million, or approximately 67.6%, of our net revenues for the year ended December 31, 2006.

We believe the Red Rock project was important to us not only for the revenues it generated but also as a platform to showcase our unique experience in developing systems for the gaming industry. As part of the Red Rock project, we developed a proprietary, Patent-Pending Race and Sports Book technology platform. This platform includes three side-by-side jumbo screens that are each 18 by 32 feet. Each of the screens can be divided into ten configurations to display horse races, sporting events and Station Casinos odds. Additionally, there are 213 seats each with TV monitors. We believe this project set a new standard for casinos and will further establish our reputation in the industry, as evidenced by contracts and delivery on three additional Race and Sports Book technology platforms during 2006 and contracts to design two additional Race & Sports Book technology platforms in 2007.

Station Casinos was the first resort and gaming company to purchase our proprietary, Patent-Pending Race and Sports Book technology platform. Subsequent to the delivery on the Red Rock contract, Station Casinos then contracted us to design and deliver our Patent-Pending Race and Sports Book technology platform at Green Valley Ranch and Santa Fe Station, along with an upgrade of their Race and Sports Book systems at Fiesta Station. We successfully designed and delivered on these contracts during 2006. In addition, we have been contracted by Station Casinos to design two additional Race and Sports Book technology platforms for their planned construction of Aliente Station Casino and Resort and Durango Station Casino and Resort and we believe we will also be contracted to deliver the Race and Sports Book technology platform to both properties, each of which could be valued at $3 million. New construction at these two locations is scheduled for late 2007 into 2008. In addition to contracts for the Race and Sports Book technology platforms, there will be opportunities at these properties to bid on the design and delivery of many other “smart building” technology systems at these properties and we plan to aggressively market our services and bid on the contracts for this additional work, however, there can be no assurance that we will be successful in our efforts. We generate a substantial amount of our revenues from our relationship with Stations Casinos, Inc. If this relationship were to end, our net revenues, cash flows and net income would likely decrease in at least the short-term. If this were to happen, we would increase our efforts to find other customers to replace any lost business. However, we may need to lower our bid prices for projects to generate additional business, which could negatively impact our revenues and earnings. Additionally, we may need to increase our marketing expenses to find new customers which could increase our costs.

During 2006, we also designed and delivered our Patent-Pending Race Book technology platform to the Borgata Hotel, Casino & Spa, located in Atlantic City, New Jersey, a joint venture of MGM Mirage and The Boyd Group, in the approximate amount of $1.5 million, and we provided services to Palms Hotel and Casino, located in Las Vegas, Nevada, in the approximate amount of $1.1 million, which included automated “smart building” technology systems at the high profile Playboy Club and the brand new Moon Bar. We also provided automated “smart building” technology to the new Beatles Revolution Lounge at the MGM Mirage Hotel in Las Vegas, valued at approximately $750,000.

As our “smart building” and “smart home” technologies continue to expand, our potential customer base is also expanding. We are currently providing services to the Miracle Mile mall located on the Las Vegas strip, in the approximate amount of $1.7 million, which we expect to complete during the third quarter of 2007. We are also aggressively seeking an additional $1.5 million worth of business at this location as well.

We are currently providing “smart building” and “smart home” technologies to four mid-rise residential condominium projects: One Las Vegas and Mira Villa, located in Las Vegas, Nevada and Houston Mosaic and Endeavor, both located in Houston, Texas. Recently, we were awarded the exclusive rights to market and sell “smart home” technologies to condominium owners in the high profile Panorama Towers located in Las Vegas, Nevada.

STRATEGIC ALLIANCES

Kelley has an agreement dated December 30, 2005, with Simplikate Systems to resell Techcierge™. Techcierge™ is a “smart building” management software that ties amenity, security and management functions together under one simple interface that can be accessed by any PC over the web or integrated with many types of wireless and in-wall touch panels. We resell this smart software as part of our integrated “smart building” technology solutions to our customers. Kelley has the worldwide distribution rights within the hotel and casino market to resell Techcierge™. Kelley was also awarded the exclusive reseller rights to Techcierge™ for the MDU market in Arizona, Nevada and California (our “Market”).

The agreement is for a term of five years, with two automatic renewals for one year terms. We are required to pay $10,000 per month to Simplikate. The sales price to our customers is $50,000 as a one time set up fee for the software, which we then install. In addition, we generate revenues from building management of $10.00 per unit, per month, for condominium owners who have access to the system. Our costs include a one time payment to Simplikate of $35,000 associated with the sale of the system, plus a fee of $7.00 per month, per unit for unit owners who have access to the system. Therefore the net revenues to us are equal to $15,000 on the sale of the system and $3.00 per month, per unit, for owners who have access to the system. In addition, we are entitled to receive a fee of 15% (our “Commission”) of any recurring fees Simplikate received for Techcierge™ from sales made by any authorized reseller of Techcierge™ to developers of new communities, associations or other entities within our Market.

Kelley has an agreement in place with DirecTV to resell DirecTV to approximately 30 casino-based Race and Sports Books. As part of this service, we handle all billing and customer service. We receive a 10% commission from DirecTV for the services purchased.

When we acquired Kelley, it had in place a strategic alliance with a real estate developer to provide approximately 1,900 homes with cable tv, and high speed internet services. We have built the systems necessary to provide basic, expanded and high definition cable tv services and hi-speed internet services and we are currently servicing customers in that community with our services. On April 9, 2007 we sold 50% of our interest in this project to a third party. We now share equally in all revenues, expenses and capital expenditures with that third party on this project. We entered into a Contribution, Assignment and Assumption Agreement (the “Contribution Agreement”) with MCS Services LLC (“MCS”) and Tuscany Services LLC (“Tuscany Services”) pursuant to which Kelley contributed substantially all of its assets used in the operation of the cable system in the Tuscany Community located in Henderson, Nevada (the “Tuscany Assets”) for a 50% interest in Tuscany Services. The Tuscany Assets were valued at $750,000 in the transaction. Pursuant to the Contribution Agreement, MCS contributed $375,000 in cash to Tuscany Services for a 50% interest in Tuscany Services. Upon the closing of the transaction, Tuscany Services immediately distributed $375,000 in cash to Kelley. Kelley incurred approximately $59,000 of professional fees related to this transaction. In connection with the Contribution Agreement, Kelley and MCS also entered into an operating agreement dated April 9, 2007 with respect to the operations of Tuscany Services (the “Operating Agreement”). Pursuant to the Operating Agreement, Kelley and MCS each appointed a manager of Tuscany Services. The managers have equal authority and will direct the day-to-day operations of Tuscany Services. Pursuant to the Operating Agreement, Kelley and MCS are obligated to equally fund Tuscany Services’ cash flow shortage each month, if any, including an initial contribution by Kelley and MCS of $25,000 cash each. Additionally, the Operating Agreement contains a “buy-sell” provision that allows either MCS or Kelley to initiate buy-sell proceedings after the two year anniversary of the Operating Agreement; provided that purchase price for the non-initiating member’s membership interest cannot be less than that member’s capital account plus a 15% annualized rate of return.

INTELLECTUAL PROPERTY

We filed for a Patent-Pending on July 19, 2005 for integrating casino race and sports book information (video and wagering information) and then displaying it to multiple movie theatre sized screens. Capable of displaying dozens of sporting events and horse races simultaneously, this technology allows casino management to immediately change video sources, as well as display them at various sized images of choice, based on the operator’s desire. In addition, this technology enables casino management to have wagering information shown anywhere on the screens. We recently installed this technology at Red Rock on a 100-foot-wide screen, at Green Valley Ranch, Santa Fe Station and Borgata Hotel and Casino and we expect to use this technology in future projects this year. We regard this technology as an important part of our service offerings.

Additionally we regard domain names, trade secrets, proprietary technologies, and similar intellectual property as important to our success, and we rely on trademark, and copyright law, trade-secret protection, and confidentiality and/or license agreements with our employees, customers, partners, and others to protect our proprietary rights. We have licensed in the past, and expect that we may license in the future, certain

proprietary rights, technologies or copyrighted materials, from third parties and we rely on those third parties to defend their proprietary rights, copyrights and technologies.

Policing unauthorized use of our proprietary rights is inherently difficult, and we may not be able to determine the existence or extent of any unauthorized use. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, we cannot be certain that the steps we take to protect our intellectual property will adequately protect our rights or that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights.

COMPETITION

While there are companies that provide communication technology and systems networks, we believe the market is very fragmented and there is no one dominant competitor. Our competitors offer some of the same services we offer but we are not aware of any competitors that offer the same combination of expertise, services and products that we offer to the gaming, resort and hospitality industries. Additionally, we have nearly two decades of service, long standing relationships with key decision-makers, and a high-quality design and project management team. While it is possible that our competitors will increase their service offerings or develop expertise similar to ours, we believe we can compete favorably in the industry.

EMPLOYEES

As of May 15, 2007, we employ 48 full time employees, eight are executives, three are in sales and marketing, seven are administrative, and the bulk of the employees are either in design, fabrication/installation, or project management roles. We believe our relations with all of our employees are good.

SUBSIDIARIES

As of May 15, 2007, we have three wholly-owned subsidiaries: Network Installation Corporation, Kelley Communication Company, Inc., and COM Services, Inc.

ITEM 2. DESCRIPTION OF PROPERTY.

On June 29, 2004, we entered into a lease agreement with Alton Plaza Property Inc. for office space located at 15235 Alton Parkway, Suite 200, Irvine, CA. Our rent was approximately $13,475 per month and the lease had a term of 51 months. We terminated the lease on February 28, 2006, and forfeited approximately $26,000, which included our security deposit and one month’s rent, in order to consolidate our operations in Las Vegas and continue to expand our operations around the Kelley subsidiary.

On April 1, 2003, Kelley entered into a lease agreement with RMS Limited Partnership, for office and warehouse space located at 5625 South Arville Street, Las Vegas, Nevada. The lease term is for 66 months and ends on September 30, 2008. We acquired this obligation with the acquisition of Kelley. Rent expense for the year ended December 31, 2006 amounted to approximately $186,000. Kelley is obligated to pay rent amounts as follows:

For the year ended:
December 31, 2007										$	160,000
December 31, 2008										$	110,000

Kelley may extend the lease for two additional terms of three years from October 1, 2008 to September 30, 2011 and from October 1, 2011 to September 30, 2014, at a 4% annual increase in rent.

ITEM 3. LEGAL PROCEEDINGS.

In March 2006, Lisa Cox sued Kelley, Mr. Kelley personally and us, claiming damages related to promises she alleges were made to her husband, prior to her husband’s death. The alleged promises made resulted from business transactions with Kelley and/or its affiliates and/or subsidiaries, prior to our acquisition of Kelley. The suit was filed in Clark County, Nevada. This suit was settled on February 26, 2007, (effective January 31, 2007) whereby we agreed to pay $90,000 to Mrs. Cox and to issue 280,000 restricted shares or our common stock to her as well. We paid $30,000 to Mrs. Cox at settlement and we are obligated to pay her $15,000 per year for the next four years on January 31, 2008, 2009, 2010 and 2011. We issued 280,000 restricted shares of our common stock on February 26, 2007. The shares are restricted as follows; 100,000 shares are restricted for 12 months. The restrictions on the remaining 180,000 shares are removed in 15,000 share increments on a monthly basis during months 13 to 24 from settlement.

On April 25, 2007, we received a summons and were sued by a company to pay them certain amounts of the profits we may generate in the future related to our contracts that we are currently performing on related to the One Las Vegas project. That company is claiming that we entered into a Joint Venture with them, however, there are no signed term sheets or contracts, nor have term sheets or contracts ever been drafted. The company is basing its request on verbal and email communications we had with them. It is likely that this situation will go to mediation, however, the overall exposure at this point is difficult to determine. We believe that our exposure is limited and that the outcome of this situation will not have a material impact on our financial statements, and that it is too premature at this time to estimate what losses, if any, may be incurred.

We may be involved in litigation, negotiation and settlement matters that may occur in our day-to-day operations. Management does not believe the implication of this type of litigation will, including those discussed above, have a material impact on our financial statements.

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

On October 25, 2006, we held an annual meeting of our shareholders. The business of the meeting included the election of the following individuals as directors for one year terms or until their successors have been elected and qualified:

														Broker
Director		Votes For				Votes Against				Abstentions				Non-Votes
Jeffrey R. Hultman			21,049,019				43,412				—				3,865,537
James Michael Kelley			21,048,239				44,192				—				3,865,537
Christopher G. Pizzo			21,017,839				70,492				4,100				3,865,537

At the meeting, our shareholders also voted to approve the Network Installation Corp. 2005 Stock Option Plan. The table below sets forth the voting for such proposal:

										Broker
Votes For		Votes Against				Abstentions				Non-Votes
16,369,652			161,457				38,612				8,388,247

Our shareholders voted to change our name from Network Installation Corp. to Siena Technologies, Inc. The table below sets forth the voting for such proposal:

										Broker
Votes For		Votes Against				Abstentions				Non-Votes
21,000,461			88,120				4,320				2,192,901

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

Bid and ask quotations for our common shares are routinely submitted by registered broker dealers who are members of the National Association of Securities Dealers on the NASD Over-the-Counter Electronic Bulletin Board. These quotations reflect inner-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low bid information for our shares for each quarter for the last two years, so far as information is reported, through the quarter ended December 31, 2006, as reported by the Bloomberg Financial Network, are as follows:

Quarter Ended		High Bid				Low Bid
March 31, 2005		$	2.17			$	1.74
June 30, 2005		$	1.90			$	0.84
September 30, 2005		$	1.24			$	0.71
December 31, 2005		$	1.12			$	0.60
March 31, 2006		$	0.65			$	0.40
June 30, 2006		$	0.65			$	0.28
September 30, 2006		$	0.50			$	0.20
December 31, 2006		$	0.45			$	0.22

NUMBER OF SHAREHOLDERS

As of May 10, 2007, we had approximately 1,040 shareholders of record.

DIVIDEND POLICY

We have not paid any dividends since inception and presently anticipate that all earnings, if any, will be retained for development of our business. We expect that no dividends on the shares of common stock will be declared in the foreseeable future. Any future dividends will be subject to the discretion of our Board of Directors and will depend upon, among other things, our future earnings, operating and financial condition, capital requirements, general business conditions and other pertinent facts.

Equity Compensation Plan Information

     The following table gives information about our common stock that may be issued upon the exercise of options, warrants and rights under our existing equity compensation plans (including individual compensation arrangements) as of December 31, 2006.

(c)

Number of

securities

(a)

remaining available

Number of

for future issuance

securities to be

(b)

under equity

issued upon

Weighted average

compensation plans

exercise of

exercise price of

(excluding

outstanding

outstanding

securities

options, warrants

options, warrants

reflected in column

Plan category

and rights

and rights

(a))

Equity compensation plans approved by security holders

3,760,000

$

.45

2,240,000

Equity compensation plans not approved by security holders

3,555,000

$

.10

0

Total

7,315,000

$

.28

2,240,000

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

EXPLANATORY NOTE

The audited financial statements included in this Annual Report on Form 10-KSB for the year ended December 31, 2005 have been amended and restated. In addition, our interim unaudited financial statements reported on Forms 10-QSB for the three months ended March 31, 2006 and 2005, for the three and six months ended June 30, 2006 and 2005 and for the three and nine months ended September 30, 2006 and 2005 have also been amended and restated. The adjustments to these previous filings have been presented in the footnotes to our audited financial statements in this Form 10-KSB.

The restatements that relate to the quarterly periods and the year ended December 31, 2005 adjust our accounting for our issuance of convertible debentures to be in conformity with EITF 00-19, whereby we were required to bifurcate the conversion feature of our convertible debentures from the debt hosts and account for the convertible feature as a derivative liability with changes in fair value being reported in the income statement. In addition, the warrants issued along with the convertible debentures were also required to be classified as derivative liabilities with changes in fair value being reported in the income statement as well.

The restatements that relate to the three quarterly periods ended September 30, 2006 adjust our accounting for; (i) our issuance of convertible debentures, and warrants, to be in conformity with EITF 00-19, (ii) our issuance of a warrant in exchange for common stock in March of 2006, by classifying the warrant as a derivative liability with changes in fair value being reported in the income statement and (iii) our issuance of stock options to employees in accordance with SFAS 123R, due to late adoption.

The financial information included in this 10-KSB referring to the year ended December 31, 2005, and to the quarterly periods ending March 31, 2005 and 2006, June 30, 2005 and 2006 and September 30, 2005 and 2006 includes each accounting restatement.

With regard to our issuances of convertible debentures and related warrants, the change in the value of the derivative liabilities amounted to $3,861,915 for the year ended December 31, 2006 (and also for the six months ended June 30, 2006 and for the nine months ended September 30, 2006 as a result of the retirement of all warrants and beneficial conversion features effective June 30, 2006) and ($1,067,734) for the year ended December 31, 2005. We also incurred interest expense related to the fair value of the beneficial conversion features and the related warrants in excess of proceeds received in the amounts of $1,836,945 and $2,759,752 for the years ended December 31, 2006 and 2005, respectively.

The warrant we issued in exchange for common stock generated a derivative liability in the amount of $1,497,416, with changes in the fair value of $316,761, $403,150, and ($259,168) at March 31, June 30, and September 30, 2006, respectively.

Employee stock option expense that should have been recorded in accordance with SFAS 123R amounted to $36,372, $57,089 and $68,085 for the three months ended March 31, 2006, June 30, 2006 and September 30, 2006, respectively.

Our management and our Board of Directors have discussed these matters with Jaspers + Hall, PC, its independent accounting firm for the fiscal year ended December 31, 2005. (Refer to Note 2 to the Consolidated Financial Statements of this 10-KSB for additional detail).

You should read this section together with our consolidated financial statements and related notes thereto included elsewhere in this report.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve risks and uncertainties. We generally use words such as “believe,” “may,” “could,” “will,” “intend,” “expect,” “anticipate,” “plan,” and similar expressions to identify forward-looking statements, including statements regarding our ability to continue to create innovative technology products, our ability to continue to generate new business based on our sales and marketing efforts, referrals and existing relationships, our financing strategy and ability to access the capital markets and other risks

discussed in our Risk Factor section below. Although we believe the expectations expressed in the forward-looking statements included in this Form 10-KSB are based on reasonable assumptions within the bounds of our knowledge of our business, a number of factors could cause our actual results to differ materially from those expressed in any forward-looking statements. We cannot assure you that the results or developments expected or anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

EFFECT OF DISCONTINUANCE OF NIC AND COM OPERATIONS ON PRESENTATION

We acquired Kelley on September 22, 2005. With the acquisition of Kelley, we acquired in excess of 60 contracts with over 50 customers. Subsequent to our acquisition of Kelley, management decided to relocate the business from California to Nevada and to focus on Kelley’s operation. As a result, the operations of NIC and COM were wound down and the financial results of their operations were reclassified into Loss from Discontinued Operations in the accompanying financial statements.

After the discontinuance of NIC and COM, our only operating subsidiary is Kelley. Because we reclassified the financial results of NIC and COM into Loss from Discontinued Operations our consolidated financial statements and this Management’s Discussion and Analysis or Plan of Operation only reflect the results of our operations and the results of operations of Kelley for the year ended December 31, 2006. Since we acquired Kelly on September 22, 2005, the financial statements for the year ended December 31, 2005 only include three months and eight days of Kelley’s operations (from September 22, 2005, the date we acquired Kelley, through December 31, 2005). The comparisons in this Management’s Discussion and Analysis or Plan of Operation should be read with these facts in mind.

CRITICAL ACCOUNTING POLICIES

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout this section where such policies affect our reported and expected financial results. Our preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. Our actual results may differ from those estimates.

Our accounting policies that are the most important to the portrayal of our financial condition and results of operations, and which require the highest degree of management judgment relate to revenue recognition (specifically, related to the estimated gross margins on long term construction contracts), the provision for the uncollectible accounts receivable, analysis of the value of goodwill, the issuance of derivative financial instruments such as convertible debt, stock options and warrants, the issuance of our common stock for services, the deferred tax asset valuation allowance, and useful lives for depreciable and amortizable assets.

Revenue Recognition

Our revenue recognition policies are in compliance with all applicable accounting regulations, including American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. Revenues from design, fabrication of racked equipment, project management and delivery generated by Kelley, and installations, cabling and networking contracts generated by NIC and COM subsidiaries in 2005, are recognized using the percentage-of-completion method of accounting. Accordingly, income is recognized in the ratio that costs incurred bears to estimated total costs. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. The aggregate of costs incurred and income recognized on uncompleted contracts in excess of related billings is shown as a current asset, and the aggregate of billings on uncompleted contracts in excess of related costs incurred and income recognized is shown as a current liability.

Our revenue recognition policy during 2005 at our NIC and COM subsidiaries for sale of network products is in compliance with Staff Accounting Bulletin or (SAB) 104. Revenue from the sale of network products is recognized when a formal arrangement exists, the price is fixed or determinable, the delivery is completed and collectibility is reasonably assured. NIC and COM have been discontinued.

Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluations of our customers and historic credit losses have been within management’s expectations.

We estimate the likelihood of customer payment based principally on a customer’s credit history and our general credit experience. To the extent our estimates differ materially from actual results, the timing and amount of revenues recognized or bad debt expense recorded may be materially misstated during a reporting period.

Accounts Receivable and Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts, when appropriate, for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, our actual losses may exceed our estimates, and additional allowances would be required.

Goodwill

In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, or SFAS 142, Goodwill and Other Intangible Assets. As required by SFAS 142, goodwill is subject to annual impairment tests, or earlier if indicators of potential impairment exist and suggest that the carrying value of goodwill may not be recoverable from estimated discounted future cash flows. Because we have one reporting segment under SFAS 142, we utilize the entity-wide approach to assess goodwill for impairment and compare our market value to our net book value to determine if an impairment exists. These impairment tests have resulted in impairments of approximately $4.2 million in 2005 and may result in additional impairment losses that could have a material adverse impact on our results of operations in the future.

Stock Based Compensation

We have historically accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” Compensation cost for stock options, if any, is measured as the excess of the fair value of our stock at the date of grant over the amount an employee must pay to acquire the stock. Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans.

In December 2004, the FASB issued SFAS No. 123 (Revised), “Share-based Payment” (“SFAS 123(R)”). SFAS 123(R) replaces SFAS 123 and supersedes APB 25. SFAS 123(R) is effective as of the beginning of the first interim period or annual reporting period that begins after December 15, 2005. SFAS 123(R) requires that the costs resulting from all share-based payments transactions be recognized in the financial statements. SFAS 123(R) applied to all awards granted after the required effective date and shall not apply to awards granted in periods before the required effective date, except if prior awards are modified, repurchased, or cancelled after the effective date.

Going Concern

Our audited financial statements for the fiscal year ended December 31, 2006, reflect a net loss of ($589,818). These conditions raise substantial doubt about our ability to continue as a going concern if we do not acquire sufficient additional funding or alternative sources of capital to meet our working capital needs. Without such external funding, we would have to materially curtail our operations and plans for expansion.

Cash and Cash Equivalents

We consider all highly liquid debt instruments, purchased with an original maturity at date of purchase of three months or less, to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates market value.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets, e.g. computers (5 years), software (3 years), office furniture and equipment (3 to7 years), and tenant improvements (life of the lease-approximately 60 months).

Inventory

Inventory consists of hardware, equipment and system networking materials that are primarily to be used for existing customer projects at years end. We generally do not buy or keep inventory on hand for stock. Inventories are stated at the lower of cost or market. Cost is determined by the average cost method at the Kelley subsidiary and the first-in-first-out method at the COM and NIC subsidiaries, respectively. At December 31, 2006, there is no inventory on hand related to NIC and COM. We have reviewed our inventory for obsolescence on a quarterly basis since operations began and have written-off $529,097 at its Kelley subsidiary, for the year ended December 31, 2006, due to obsolescence.

Fair Value of Financial Instruments

Our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates their face value, due to the relatively short maturity of these instruments. As of December 31, 2006 and 2005, our notes payable have stated borrowing rates that are consistent with those currently available to us and, accordingly, we believe the carrying value of these debt instruments approximates their fair value.

Accounting for Impairments in Long Lived Assets

Long-lived assets and identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. We periodically evaluate the carrying value and the economic useful life of our long-lived assets based on our operating performance and the expected future undiscounted cash flows and will adjust the carrying amount of assets which may not be recoverable. At December 31, 2006, we wrote down the carrying amounts of our Tuscany asset held for sale in the amount of $477,295.

Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates made in preparing these financial statements include estimates that are required to be made in reporting revenue recognition (specifically, related to the estimated gross margins on long term construction contracts), the provision for the uncollectible accounts receivable, analysis of the value of goodwill, the issuance of derivative financial instruments such as convertible debt, stock options and warrants, the issuance of our common stock for services, the deferred tax asset valuation allowance, and useful lives for depreciable and amortizable assets. Actual results could differ from those estimates.

Basic and Diluted Net Loss Per Share

Net loss per share is calculated in accordance with the Statement of Financial Accounting Standards No. 128 (SFAS No. 128), “Earnings Per Share”. Basic net loss per share is based upon the weighted average number of common shares outstanding. For all periods, all of our common stock equivalents were excluded from the calculation of diluted loss per common share because they were anti-dilutive, due to our net losses.

The significant components of our common stock equivalents are our convertible debentures and warrants, which have all been retired effective June 30, 2006, and issuance of stock options.

Stock options, which would have had an anti-dilutive effect on the net loss per common share once exercised, to purchase 3,685,000 and 972,500 shares of common stock remained outstanding as of December 31, 2006 and 2005, respectively. These stock options have various vesting periods between two and three years from the date of grant.

Convertible debentures, which can be exercised on any date subsequent to the issuance of the convertible debentures, would have an anti-dilutive effect on the net loss per common share once and if the holders elect to exchange the convertible debentures for shares of common stock. The number of common shares which could be exchanged by us for a full release of the obligation to repay the principal and interest balances associated with all convertible debentures will possibly be based in part on our price per common share as quoted on the OTC bulletin board on the date of conversion. Since management can not determine the price per common share of its common stock in the future, management does not believe it can reasonably determine the number of common shares to be issued pursuant to an exchange of its convertible debentures for common shares. Therefore, management cannot accurately determine the number of common shares which could be exchanged by us that are related to the convertible debentures as of December 31, 2005. Effective June 30, 2006, all of our convertible debentures were retired.

Warrants, which would have an anti-dilutive effect on the net loss per common share once exercised, to purchase 12,034,645 shares of common stock remained outstanding as of December 31, 2006 at strike prices that vary from $.01 per share to $.88 per share. An additional 7,231,250 warrants to purchase our common stock at an exercise price of $.50 per share were issued on January 23, 2007.

TWELVE MONTH PERIOD ENDED DECEMBER 31, 2006 AS COMPARED TO TWELVE MONTH PERIOD ENDED DECEMBER 31, 2005.

NET REVENUES

Net revenues for the year ended December 31, 2006 were $18,758,496 compared to $2,827,835 for the year ended December 31, 2005. The increase in revenues for this year when compared to last year is due to the inclusion of a full year’s worth of revenues from our Kelley subsidiary, for the year ended December 31, 2006 as compared to only including revenues for three months and eight days (since the time we acquired Kelley) of operations from our Kelley subsidiary, for the year ended December 31, 2005.

COST OF REVENUES

Cost of revenues for the year ended December 31, 2006 were $14,684,296 compared to $2,495,671 for the year ended December 31, 2005. Our cost of revenues increased for the 12 months ended December 31, 2006 when compared to the same period in 2005 due to the inclusion of a full year’s worth of cost of revenues from our Kelley subsidiary, for the year ended December 31, 2006 as compared to only including cost of revenues for three months and eight days (since the time we acquired Kelley) of operations from our Kelley subsidiary, for the year ended December 31, 2005.

GROSS PROFITS

Gross profits for the year ended December 31, 2006 were $4,074,200 or 21.7% compared to $332,164 or 13.3% for the year ended December 31, 2005. The increase in gross margin is attributable to management’s decision to focus on improved contract pricing, negotiating more favorable contract terms, longer lead times for purchasing of materials, negotiating for better payment terms and obtaining discounts with vendors and suppliers.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 2006 were $4,770,411 compared to $7,916,345 for the year ended December 31, 2005. The decrease was due to issuance of warrants to Company executives that resulted in a non-cash officer compensation charge of $6,476,085 during the year ended December 31, 2005. Such decreases were offset by an increase in salaries from $226,965 for the year ended December 31, 2005 to $2,388,722 for the year ended December 31, 2006, because the salaries for the year ended December 31, 2006 includes salaries at our Kelley subsidiary for the full year as compared to only including salaries for eight days and three months (the time we acquired Kelley) for the year ended December 31, 2005. Other significant components of operating expenses for the year ended December 31, 2006 included consulting fees of $247,993, insurance expense of $343,034, rent of $182,731, and professional fees of $265,411.

OTHER INCOME (EXPENSE)

Other income (expense) for the year ended December 31, 2006 was $1,018,411 compared to ($1,061,103) for the year ended December 31, 2005 as restated. The decrease from other expense in 2005 to other income in 2006 is primarily due to impairment of goodwill related to the Kelley acquisition in 2005 in the amount of $3,800,000 for the year ended December 31, 2005, compared to $0 for the year ended December 31, 2006, gain on debt restructuring of $1,229,954 for the year ended December 31, 2006 compared to $0 for the year ended December 31, 2005, and decrease in interest expense from $3,749, 965 for the year ended December 31, 2005, as restated, to $3,114,725 for the year ended December 31, 2006. The decrease was offset by a decrease in adjustments to the fair market value of derivative liabilities of $4,262,043 for the year ended December 31, 2006 compared to $6,488,862 for the year ended December 31, 2005. We also experienced a net loss on the disposition of assets of $522,141 (net of a gain on the disposition of assets of $6,955), impairment of assets held for sale of $477,295, and litigation losses of $108,900 for the year ended December 31, 2006, compared to $0 for the year ended December 31, 2005.

The adjustments to the fair market value of our derivative liabilities relate to the warrant issued to Dutchess in March 2006, the warrants issued in connection with our private placement in November 2006, with no comparable transactions for 2005, and adjustments to the fair market value of our derivative liabilities related to the beneficial conversion features in our convertible debentures and the warrants that were issued in conjunction with our convertible debentures. On a quarterly basis, the change in the fair market value of the derivative liability related to the issuance of a warrant to Dutchess amounted to $316,761, $403,150, ($259,168) and $0 for the four quarters ended December 31, 2006, respectively. The change in market value of this derivative liability was not recorded in our unaudited interim financial statements for the three quarterly periods ended September 30, 2006 on our Forms 10-QSB, as originally filed. The change in the fair market value of the derivative liability related to the issuance of warrants in connection with our private placement in November 2006 amounted to ($60,615) for the quarter ended December 31, 2006. On a quarterly basis, the change in the fair market value of the derivative liability related to the beneficial conversion features in our convertible debentures and the warrants that were issued in conjunction with our convertible debentures amounted to $1,680,538 and $381,878 for the three months ended March 31, 2006 and 2005 (as restated), respectively, $2,181,377 and $3,875,100 for the three months ended June 30, 2006 and 2005 (as restated), respectively, $3,861,915 and $4,256,978 for the six months ended June 30, 2006 and 2005 (as restated), respectively, $0 and $1,067,734 for the three months ended September 30, 2006 and 2005 (as restated),

respectively, and $3,861,915 and $2,807,366 for the nine months ended September 30, 2006 and 2005 (as restated), respectively. All convertible debentures, beneficial conversion features, and related warrants were retired effective June 30, 2006. The quarterly amounts indicated above, were not included in our previous filings on Form 10-KSB at and for the year ended December 31, 2005 and on Forms 10-QSB for the three quarters ended September 30, 2006 and 2005.

We also incurred interest expense related to the fair market value of our beneficial conversion features and warrants related to the issuance of our convertible debentures in excess of proceeds received. On a quarterly basis related interest expense amounted to ($341,860) and ($481,148) for the three months ended March 31, 2006 and 2005 (as restated), respectively, ($1,114,917) and ($998,753) for the three months ended June 30, 2006 and 2005 (as restated), respectively, ($1,456,777) and ($1,479,901) for the six months ended June 30, 2006 and 2005 (as restated), respectively, $0 and ($896,885) for the three months ended September 30, 2006 and 2005 (as restated), respectively, and ($1,456,777) and ($2,376,786) for the nine months ended September 30, 2006 and 2005 (as restated), respectively. The quarterly amounts indicated above, were not included in our previous filings on Form 10-KSB at and for the year ended December 31, 2005 and on Forms 10-QSB for the three quarters ended September 30, 2006 and 2005.

In addition, we incurred $250,525 of employee stock option expense for the year ended December 31, 2006, compared to $0 for the year ended December 31, 2005 as a result of our adoption of SFAS 123R, effective January 1, 2006. On a quarterly basis, the employee stock option expense amounted to $36,372, $57,089, $68,085 and $88,879 for the quarters ended March 31, June 30, September 31, and December 31, 2006, respectively, compared to $0 for all quarterly periods in 2005. The quarterly amounts for the three quarters ended September 30, 2006 were not recorded in our unaudited interim financial statements included on Forms 10-QSB due to late adoption of SFAS 123R.

NET LOSS

Net loss for the year ended December 31, 2006 was ($589,818) compared to ($11,522,788) for the year ended December 31, 2005, as restated. The decrease in net losses are attributable to an increase in revenues and gross profits from $2,827,835 and $332,164, respectively, for the year ended December 31, 2005 to $18,758,496 and $4,074,200, respectively for the year ended December 31, 2006, partially offset by an increase in salaries from $226,965 to $2,388,722 and an increase in other operating expenses from $962,160 to $2,172,532 for the year ended December 31, 2005 to the year ended December 31, 2006. The increases in salaries and other operating expenses are primarily due to the inclusion of the results of Kelley’s operations for a full year in 2006, compared to three months and eight days (the time when we acquired Kelley) for 2005. The decrease in net loss is also attributable to non-cash officer compensation of $6,476,085 in 2005 compared to $0 in 2006 and a decrease in the losses from discontinued operations of $2,877,504 in 2005 to $912,018 in 2006.

Other income (expense) for the year ended December 31, 2006 was $1,018,411 compared to ($1,061,103) for the year ended December 31, 2005 as restated. The decrease from other expense in 2005 to other income in 2006 is primarily due to impairment of goodwill related to the Kelley acquisition in 2005 in the amount of $3,800,000 for the year ended December 31, 2005, compared to $0 for the year ended December 31, 2006, gain on debt restructuring of $1,229,954 for the year ended December 31, 2006 compared to $0 for the year ended December 31, 2005, and decrease in interest expense from $3,749,965 for the year ended December 31, 2005, as restated, to $3,114,725 for the year ended December 31, 2006. The decrease was offset by a decrease in adjustments to the fair market value of derivative liabilities of $4,262,043 for the year ended December 31, 2006 compared to $6,488,862 for the year ended December 31, 2005. We also experienced a net loss on the disposition of assets of $522,141 (net of a gain on the disposition of assets of $6,955), impairment of assets held for sale of $477,295, employee stock option expense of $250,525 and litigation losses of $108,900 for the year ended December 31, 2006, compared to $0 for the year ended December 31, 2005.

BASIC AND DILUTED LOSS PER SHARE

Our basic and diluted loss for the year ended December 31, 2006 was ($0.01) compared to ($0.49) for the year ended December 31, 2005, as restated) due to a decrease in our net loss, as described above, coupled with a larger average number of shares outstanding for the year.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2006, our Current Assets were $2,562,411 and Current Liabilities were $6,027,026. Cash and cash equivalents were $7,808. Our Stockholders’ Deficit at December 31, 2006 was ($2,974,321). We had a net usage of cash from operating activities for the years ended December 31, 2006 and 2005 of ($1,703,781) and ($2,811,342) respectively. We had a net usage of cash from investing activities for the years ended December 31, 2006 and 2005, of ($1,067,853) and ($82,437), respectively. We had net cash provided by financing activities of $2,363,505 and $3,330,514 for the years ended December 31, 2006 and 2005, respectively. We had $2,803,712 from borrowings in the period ended December 31, 2006 as compared to $3,357,114 in the corresponding period last year.