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<TITLE>Converted by EDGARwiz</TITLE>
<META NAME="author" CONTENT="Jeff &nbsp;Conrad">
<META NAME="date" CONTENT="09/10/2007">
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<DIV style="width:576px"><P style="margin:0px" align=center>&nbsp;</P>
<P style="line-height:26.667px; margin:0px; font-size:24px" align=center><B>UNITED STATES</B></P>
<P style="line-height:26.667px; margin:0px; font-size:24px" align=center><B>SECURITIES AND EXCHANGE COMMISSION</B></P>
<P style="margin:0px" align=center><B>Washington, D.C. 20549</B></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="line-height:26.667px; margin:0px; font-size:24px" align=center><B>FORM 8-K</B></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="line-height:18.667px; margin:0px; font-size:16px" align=center><B>CURRENT REPORT</B></P>
<P style="line-height:18.667px; margin:0px; font-size:16px" align=center><B>Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934</B></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px">Date of Report (Date of earliest event reported)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>September 20, 2007</B></P>
<P style="margin:0px">&nbsp;</P>
<P style="line-height:26.667px; margin:0px; font-size:24px" align=center><B>GENESIS BIOVENTURES, INC.</B></P>
<P style="margin:0px" align=center>(Exact name of registrant as specified in its charter)</P>
<P style="margin:0px" align=center>&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0 align=center><TR><TD width=184.267></TD><TD width=11.533></TD><TD width=184.333></TD><TD width=11.533></TD><TD width=184.333></TD></TR>
<TR><TD valign=top width=184.267><P style="margin:0px" align=center><B>New York</B></P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px"><B>&nbsp;</B></P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center><B>1-16291</B></P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px"><B>&nbsp;</B></P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center><B>98-0225226</B></P>
</TD></TR>
<TR><TD valign=top width=184.267><P style="margin:0px" align=center>(State or other jurisdiction</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>(Commission</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>(IRS Employer</P>
</TD></TR>
<TR><TD valign=top width=184.267><P style="margin:0px" align=center>of incorporation)</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>File Number)</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>Identification No.)</P>
</TD></TR>
<TR><TD valign=top width=184.267><P style="margin:0px" align=center>&nbsp;</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>&nbsp;</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=380.133 colspan=3><P style="margin:0px" align=center><B>10940 Wilshire Boulevard, Suite 600, Los Angeles, CA</B></P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px"><B>&nbsp;</B></P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center><B>90024</B></P>
</TD></TR>
<TR><TD valign=top width=380.133 colspan=3><P style="margin:0px" align=center>(Address of principal executive offices)</P>
</TD><TD valign=bottom width=11.533><P style="margin:0px; font-size:1.333px">&nbsp;</P>
</TD><TD valign=top width=184.333><P style="margin:0px" align=center>(Zip Code)</P>
</TD></TR>
</TABLE>
<P style="margin:0px; padding-left:144px; text-indent:48px">&nbsp;</P>
<P style="margin:0px">Registrant&#146;s telephone number, including area code&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(310) 443-4102</B></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px" align=center>(Former name or former address, if changed since last report.)</P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px; font-family:Wingdings"><FONT FACE="Wingdings">o</FONT><FONT FACE="Times New Roman">&nbsp; Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</FONT></P>
<P style="margin:0px"><FONT FACE="Times New Roman">&nbsp;</FONT></P>
<P style="margin:0px; font-family:Wingdings"><FONT FACE="Wingdings">o</FONT><FONT FACE="Times New Roman">&nbsp; Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</FONT></P>
<P style="margin:0px"><FONT FACE="Times New Roman">&nbsp;</FONT></P>
<P style="margin:0px; font-family:Wingdings"><FONT FACE="Wingdings">o</FONT><FONT FACE="Times New Roman">&nbsp; Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</FONT></P>
<P style="margin:0px"><FONT FACE="Times New Roman">&nbsp;</FONT></P>
<P style="margin:0px; font-family:Wingdings"><FONT FACE="Wingdings">o</FONT><FONT FACE="Times New Roman">&nbsp; Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</FONT></P>
<P style="margin:0px" align=center><FONT FACE="Times New Roman">&nbsp;</FONT></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px" align=center><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=center>&nbsp;</P>
<P style="margin-top:0px; margin-bottom:-16px; padding-left:96px; text-indent:-96px"><B>Item 4.02</B></P>
<P style="margin:0px; padding-left:96px"><B>Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.</B></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; text-indent:48px">On April 17, 2007 the Company filed an amended Form 10-QSB for the periods ending March 31, 2006, June 30, 2006 and September 30, 2006 and on April 18, 2007filed an amended Form 10-KSB for the fiscal year ended December 31, 2006 because the Board of Directors, upon the recommendation of the Chief Executive Officer and Interim Principal Accounting Officer of the Company, concluded that adjustments were required to the consolidated financial statements included in each of the aforementioned filings and that therefore, such consolidated financial statements as originally filed on May 16, 2006, August 22, 2006 and December 1, 2006 and April 18, 2007 (respectively) no longer should be relied upon because in the aggregate, the cumulative effect of such adjustments can be viewed as material errors in these financial statements.</P>
<P style="margin:0px; text-indent:48px">&nbsp;</P>
<P style="margin:0px; text-indent:48px" align=justify>The Company has restated its previously issued March 31, 2006 consolidated financial statements for matters related to the following previously reported items: an embedded derivative and consulting and management expense related to an unrecorded accrual for unpaid severance fees. The financial statements for the three month period ended March 31, 2006 have been restated to reflect the corrections in accordance with Statement of Financial Accounting Standards Board No. 154, &#147;Accounting Change and Error Correction&#148;. The following is a summary of the restatements for March 31, 2006:</P>
<P style="margin:0px" align=justify>&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=511.6></TD><TD width=78.8></TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">Increase (decrease) of previously reported accrued liabilities:</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px; text-indent:16px">- unrecorded accrual of severance pay</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>12,000</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px; text-indent:16px">- rounding adjustment </P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>(2)</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px; text-indent:16px">Increase of previously reported convertible notes payable, related party:</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px; text-indent:16px">- unrecorded convertible notes payable, adjusted by embedded derivative</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>104,325</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px; text-indent:16px">Increase of previously reported derivative liability, related party:</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">- unrecorded embedded derivative on convertible notes payable</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=78.8><P style="margin:0px" align=right>164,724</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin-top:1.133px; margin-bottom:0px; text-indent:32px">Total increase in previously reported liabilities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=78.8><P style="margin:0px" align=right>281,047</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">Increase of previously reported (deficit) accumulated during development stage:</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px; text-indent:16px">- correction of erroneous adjustments to retained earnings</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>(1,049)</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">- total increase in net loss due to correction of errors</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=78.8><P style="margin:0px" align=right>(279,998)</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin-top:1.133px; margin-bottom:0px; text-indent:32px">Total increase in previously reported stockholders&#146; equity</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=78.8><P style="margin:0px" align=right>(281,047)</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px"><I>Effects of above referenced adjustments on net loss:</I></P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right><I>&nbsp;</I></P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">Increase of previously reported consulting and management expenses</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>300,000</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">Decrease of previously reported miscellaneous expenses</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>(1,051)</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">Increase of previously reported interest expense</P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>2,531</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin:0px">Increase of previously reported unrealized gain related to adjustment of </P>
</TD><TD valign=top width=78.8><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin-top:1.133px; margin-bottom:0px; text-indent:10px">Derivative to fair value of underlying securities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=78.8><P style="margin:0px" align=right>(21,482)</P>
</TD></TR>
<TR><TD valign=top width=511.6><P style="margin-top:1.667px; margin-bottom:0px; text-indent:32px">Total increase in net loss</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=78.8><P style="margin:0px" align=right>$ 279,998</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">The effect on the Company&#146;s previously issued March 31, 2006 financial statements are summarized as follows:</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px" align=center><I>Consolidated Balance Sheet as of March 31, 2006</I></P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=204></TD><TD width=116.867></TD><TD width=22.8></TD><TD width=108.267></TD><TD width=23.2></TD><TD width=115.267></TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=116.867><P style="margin:0px" align=center><I>Previously Reported</I></P>
</TD><TD valign=top width=22.8><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=108.267><P style="margin:0px" align=center><I>Net</I></P>
<P style="margin:0px" align=center><I>Change</I></P>
</TD><TD valign=top width=23.2><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=115.267><P style="margin:0px" align=center><BR>
<I>Restated</I></P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px">Assets</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px">Current assets</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px; text-indent:7px">Cash </P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>$ 143,747</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>$ 143,747</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px; text-indent:6px">Accounts and other receivables</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>1,721</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>1,721</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=204></TD><TD width=116.867></TD><TD width=22.8></TD><TD width=108.267></TD><TD width=23.2></TD><TD width=115.267></TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.133px; margin-bottom:0px; text-indent:6px">Advances receivable - PDL</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=116.867><P style="margin:0px" align=right>269,085</P>
</TD><TD valign=top width=22.8><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=115.267><P style="margin:0px" align=right>269,085</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.133px; margin-bottom:0px; text-indent:12px">Total current assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=116.867><P style="margin:0px" align=right>414,553</P>
</TD><TD valign=top width=22.8><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=115.267><P style="margin:0px" align=right>414,553</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.133px; margin-bottom:0px; text-indent:6px">Fixed assets, net</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=116.867><P style="margin:0px" align=right>4,397</P>
</TD><TD valign=top width=22.8><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=115.267><P style="margin:0px" align=right>4,397</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px">Other assets</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px; text-indent:6px">Medical licenses</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>4,821,311</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>4,821,311</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.133px; margin-bottom:0px; text-indent:6px">Intangible asset</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=116.867><P style="margin:0px" align=right>1,462</P>
</TD><TD valign=top width=22.8><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=115.267><P style="margin:0px" align=right>1,462</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.133px; margin-bottom:0px; text-indent:12px">Total other assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=116.867><P style="margin:0px" align=right>4,822,773</P>
</TD><TD valign=top width=22.8><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=108.267><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=23.2><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=115.267><P style="margin:0px" align=right>4,822,773</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=116.867><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=108.267><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=23.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=115.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=204><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=116.867><P style="margin:0px" align=right>$ 5,241,723</P>
</TD><TD valign=top width=22.8><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=108.267><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=23.2><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=115.267><P style="margin:0px" align=right>$ 5,241,723</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=201.667></TD><TD width=118></TD><TD width=22.067></TD><TD width=107.8></TD><TD width=22.467></TD><TD width=118.4></TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px">Current liabilities</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:6px">Accounts payable and</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:12px">accrued expenses</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>981,943</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>11,998</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>993,941</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:6px">Notes payable</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>3,722,985</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>3,722,985</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:6px">Notes payable &#150; related party</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>75,500</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>75,500</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:7px">Convertible notes &#150; related party</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>104,325</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>104,325</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin-top:1.133px; margin-bottom:0px; text-indent:6px">Derivative liability &#150; related party</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.067><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=107.8><P style="margin:0px" align=right>164,724</P>
</TD><TD valign=top width=22.467><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118.4><P style="margin:0px" align=right>164,724</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin-top:1.133px; margin-bottom:0px; text-indent:12px">Total current liabilities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118><P style="margin:0px" align=right>4,780,428</P>
</TD><TD valign=top width=22.067><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=107.8><P style="margin:0px" align=right>281,047</P>
</TD><TD valign=top width=22.467><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118.4><P style="margin:0px" align=right>5,061,475</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px">Stockholders&#146; equity</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:6px">Preferred stock</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>6</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>6</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:7px">Common stock</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>5,336</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>5,336</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:6px">Additional paid-in capital</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>47,944,514</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>47,944,514</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px; text-indent:6px">(Deficit) accumulated during</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">development stage</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118><P style="margin:0px" align=right>(47,488,561)</P>
</TD><TD valign=top width=22.067><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=107.8><P style="margin:0px" align=right>(281,047)</P>
</TD><TD valign=top width=22.467><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118.4><P style="margin:0px" align=right>(47,769,608)</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin-top:1.133px; margin-bottom:0px; text-indent:12px">Total stockholders&#146; equity</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118><P style="margin:0px" align=right>461,295</P>
</TD><TD valign=top width=22.067><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=107.8><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=22.467><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=118.4><P style="margin:0px" align=right>180,248</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=107.8><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=22.467><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=118.4><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=201.667><P style="margin-top:1.667px; margin-bottom:0px; text-indent:6px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=118><P style="margin:0px" align=right>$ 5,241,723</P>
</TD><TD valign=top width=22.067><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=107.8><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=22.467><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=118.4><P style="margin:0px" align=right>$ 5,241,723</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px" align=center><I>Statement of Operations for the Three Months Ended March 31, 2006</I></P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0 align=center><TR><TD width=242.733></TD><TD width=104.933></TD><TD width=17.733></TD><TD width=94></TD><TD width=17.733></TD><TD width=113.267></TD></TR>
<TR><TD valign=top width=242.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.933><P style="margin:0px" align=center><I>Previously Reported</I></P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94><P style="margin:0px" align=center><I>Net</I></P>
<P style="margin:0px" align=center><I>Change</I></P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=113.267><P style="margin:0px" align=center><BR>
<I>Restated</I></P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Revenue</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>$ -</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Depreciation and amortization</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>451,997</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>451,997</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Consulting and management expense</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>141,000</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>300,000</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>441,000</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Rent</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>10,130</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>10,130</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Salaries and benefits</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>54,611</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>54,611</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Professional fees</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>79,959</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>79,959</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Financing costs</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>82,000</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>82,000</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin-top:1.133px; margin-bottom:0px">General &amp; administrative</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>102,971</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>(1,051)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>101,920</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=94><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=113.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Net operating Loss</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>(922,668)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>(298,949)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>(1,221,617)</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Interest expense, net</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>(121,553)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>(2,531)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>(124,084)</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Amortization of discount</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>(26,250)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>(26,250)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:13.333px" cellspacing=0 align=center><TR><TD width=242.733></TD><TD width=104.933></TD><TD width=17.733></TD><TD width=94></TD><TD width=17.733></TD><TD width=113.267></TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Foreign currency loss</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>(3,492)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>(3,492)</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">Unrealized gain related to</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px; text-indent:6px">adjustment of derivative to fair</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin-top:1.133px; margin-bottom:0px; text-indent:6px">value of underlying securities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=94><P style="margin:0px" align=right>21,482</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=113.267><P style="margin:0px" align=right>21,482</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=94><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=113.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=242.733><P style="margin-top:1.667px; margin-bottom:0px">Net Income (Loss)</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=104.933><P style="margin:0px" align=right>$ (1,073,963)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px" align=right>&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=94><P style="margin:0px" align=right>$ (279,998)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px" align=right>&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=113.267><P style="margin:0px" align=right>$ (1,353,961)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; text-indent:48px">The Company has restated its previously issued June 30, 2006 consolidated financial statements for matters related to the following previously reported items: an embedded derivative; warrant costs; consulting and management expense; financing costs; merger costs; debt conversions; and an asset purchase. The financial statements for the three and six month periods ended June 30, 2006 have been restated to reflect the corrections in accordance with statement of financial accounting standards No. 154, &#147;Accounting Change and Error Corrections&#148;. The following is a summary of the restatements for June 30, 2006:</P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=485.8></TD><TD width=104.6></TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">Increase of previously reported other assets</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">- unrecorded licensing agreement purchased with stock</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.6><P style="margin:0px" align=right>$36,000</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin-top:1.133px; margin-bottom:0px; text-indent:40px">Total increase in previously reported assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.6><P style="margin:0px" align=right>36,000</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">Increase (decrease) of previously reported accrued liabilities</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- unrecorded accrual of severance pay</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>24,000</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- unrecorded accrual of directors&#146; fees</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>4,500</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- adjustment on derivative associated with convertible notes</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>(722)</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- correction of accrued interest on notes payable</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>(52,589)</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">Increase of previously reported notes payable</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- note payable recorded as a conversion to common stock</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>917,500</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- finance fees previously recorded as note payable conversion</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>650,000</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- correction of amortization of deemed discount</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>26,250</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">Increase of previously reported convertible notes payable, related party:</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px; text-indent:20px">- unrecorded convertible notes payable, adjusted by embedded derivative</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>18,918</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">Increase of previously reported derivative liability, related party:</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">- unrecorded embedded derivative on convertible notes payable</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.6><P style="margin:0px" align=right>137,948</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin-top:1.133px; margin-bottom:0px; text-indent:40px">Total increase in previously reported liabilities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.6><P style="margin:0px" align=right>1,725,805</P>
</TD></TR>
<TR><TD valign=top width=485.8><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=104.6><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;&nbsp;&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=485.133></TD><TD width=105.267></TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px">Increase of previously reported shares authorized and unissued:</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- unrecorded common stock authorized for consulting services</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>125</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px">(Increase) of previously reported unamortized warrants and options:</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- correction of miscalculated warrant value using black-scholes</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>(620,793)</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px">(Increase) of previously reported prepaid share-based compensation</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- unrecorded common stock authorized for consulting services </P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>(140,124)</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px">Increase of previously reported additional paid in capital: </P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- correction of note payable recorded as a common stock conversion</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>(515,537)</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- unrecorded common stock authorized for consulting services</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>282,875</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- correction of miscalculated warrant value using black-scholes</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>744,486</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px">Increase of previously reported (deficit) accumulated during development stage:</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin:0px; text-indent:20px">- correction of erroneous adjustments to retained earnings</P>
</TD><TD valign=top width=105.267><P style="margin:0px" align=right>(4,542)</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">- total increase in net loss due to correction of errors</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=105.267><P style="margin:0px" align=right>(1,436,295)</P>
</TD></TR>
<TR><TD valign=top width=485.133><P style="margin-top:1.133px; margin-bottom:0px; text-indent:40px">Total increase in previously reported stockholders&#146; equity</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=105.267><P style="margin:0px" align=right>(1,689,805)</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px" align=center><I>Effects of above referenced adjustments on net loss:</I></P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=485.467></TD><TD width=104.933></TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Increase of previously reported consulting and management expenses</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>418,069</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=485.467></TD><TD width=104.933></TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Increase of previously reported financing costs</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>1,040,375</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Decrease of previously reported miscellaneous expenses</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>(4,824)</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Increase of previously reported interest expense</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>4,402</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Increase of previously reported debt discounts </P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px; text-indent:20px">- incorrect amortization of debt discounts</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>26,250</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Increase of previously reported foreign currency loss</P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>281</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin:0px">Increase of previously reported unrealized gain related to adjustment of </P>
</TD><TD valign=top width=104.933><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin-top:1.133px; margin-bottom:0px; text-indent:12px">Derivative to fair value of underlying securities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=104.933><P style="margin:0px" align=right>(48,258)</P>
</TD></TR>
<TR><TD valign=top width=485.467><P style="margin-top:1.667px; margin-bottom:0px; text-indent:40px">Total increase in net loss</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=104.933><P style="margin:0px" align=right>$ 1,436,295</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">The effect on the Company&#146;s previously issued June 30, 2006 financial statements are summarized as follows:</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px" align=center>&nbsp;<I>Consolidated Balance Sheet as of June 30, 2006</I></P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=282.267></TD><TD width=91.667></TD><TD width=18.4></TD><TD width=87.667></TD><TD width=18.4></TD><TD width=92></TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=91.667><P style="margin:0px" align=center><I>Previously Reported</I></P>
</TD><TD valign=bottom width=18.4><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=87.667><P style="margin:0px" align=center><I>Net</I></P>
<P style="margin:0px" align=center><I>Change</I></P>
</TD><TD valign=bottom width=18.4><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92><P style="margin:0px" align=center><I>Restated</I></P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">Assets</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">Current assets</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Cash </P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>$ 47,867</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>$ 47,867</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">Note receivable</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>282,114</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>282,114</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total current assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>329,981</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>329,981</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">Other assets</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Medical licenses</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>4,369,314</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>4,369,314</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">Intangible asset</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>36,000</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>36,000</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total other assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>4,369,314</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>36,000</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>4,405,314</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=91.667><P style="margin:0px" align=right>$ 4,699,295</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=87.667><P style="margin:0px" align=right>$ 36,000</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92><P style="margin:0px" align=right>$ 4,735,295</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">Current liabilities</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Accounts payable and</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:16px">accrued expenses</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>1,086,338</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>(24,811)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>1,061,527</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Notes payable</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>925,419</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>1,593,750</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>2,519,169</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Notes payable &#150; related party</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>136,500</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>136,500</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Convertible notes &#150; related party</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>18,918</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>18,918</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">Derivative liability &#150; related party</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>137,948</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>137,948</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total current liabilities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>2,148,257</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>1,725,805</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>3,874,062</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">Stockholders&#146; equity</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Preferred stock</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>6</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>6</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Common stock</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>6,730</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>6,730</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Shares authorized and un-issued</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>177</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>125</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>302</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Unamortized warrants and options</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>(332,119)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>(620,793)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>(952,912)</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Prepaid share-based compensation</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>(378,970)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>(140,124)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>(519,094)</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">Additional paid-in capital</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>52,218,087</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>511,824</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>52,729,911</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px; text-indent:8px">(Deficit) accumulated during</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">development stage</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>(48,962,873)</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>(1,440,837)</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>(50,403,710)</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total stockholders&#146; equity</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=91.667><P style="margin:0px" align=right>2,551,038</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=87.667><P style="margin:0px" align=right>(1,689,805)</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>861,233</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=91.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=87.667><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=282.267><P style="margin-top:1.667px; margin-bottom:0px; text-indent:8px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=91.667><P style="margin:0px" align=right>$ 4,699,295</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=87.667><P style="margin:0px" align=right>$ 36,000</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92><P style="margin:0px" align=right>$ 4,735,295</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always" align=center><I>Statement of Operations for the Three Months Ended June 30, 2006</I></P>
<P style="margin:0px"><BR></P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=276.2></TD><TD width=92.333></TD><TD width=18.4></TD><TD width=92.333></TD><TD width=18.4></TD><TD width=92.733></TD></TR>
<TR><TD valign=top width=276.2><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92.333><P style="margin:0px" align=center><I>Previously Reported</I></P>
</TD><TD valign=bottom width=18.4><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92.333><P style="margin:0px" align=center><I>Net</I></P>
<P style="margin:0px" align=center><I>Change</I></P>
</TD><TD valign=bottom width=18.4><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92.733><P style="margin:0px" align=center><I>Restated</I></P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Revenue</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>$ -</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Depreciation and amortization</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>908,391</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>908,391</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Consulting and management expense</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>833,429</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>418,069</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>1,251,498</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Rent</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>25,567</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>25,567</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Salaries and benefits</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>111,247</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>111,247</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Professional fees</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>182,272</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>182,272</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Financing costs</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>105,848</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>1,040,375</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>1,146,223</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin-top:1.133px; margin-bottom:0px">General &amp; administrative</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>145,622</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(4,824)</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>140,798</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92.733><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Net operating Loss</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(2,312,376)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(1,453,620)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>(3,765,996)</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Interest expense, net</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(209,650)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(4,402)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>(214,052)</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Amortization of discount</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(26,250)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(26,250)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>(52,500)</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Foreign currency loss</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(3,492)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>(281)</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>(3,773)</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">Unrealized gain related to</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px; text-indent:8px">adjustment of derivative to fair</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">value of underlying securities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92.333><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92.333><P style="margin:0px" align=right>48,258</P>
</TD><TD valign=top width=18.4><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92.733><P style="margin:0px" align=right>48,258</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.333><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=18.4><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.733><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=276.2><P style="margin-top:1.667px; margin-bottom:0px">Net Income (Loss)</P>
</TD><TD width=92.333><P style="font-size:2pt">&nbsp;</P></TD><TD width=18.4><P style="font-size:2pt">&nbsp;</P></TD><TD width=92.333><P style="font-size:2pt">&nbsp;</P></TD><TD width=18.4><P style="font-size:2pt">&nbsp;</P></TD><TD width=92.733><P style="font-size:2pt">&nbsp;</P></TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; text-indent:48px" align=justify>The Company has restated its previously issued September 30, 2006 consolidated financial statements for matters related to the following previously reported items: an embedded derivative; warrant costs; and consulting and management expense. The financial statements for the three and nine month periods ended September 30, 2006 have been restated to reflect the corrections in accordance with statement of financial accounting standards No. 154, &#147;Accounting Change and Error Corrections&#148;. The following is a summary of the restatements for September 30, 2006:</P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=486.867></TD><TD width=103.533></TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase (decrease) of previously reported accrued liabilities:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- unrecorded accrual of severance pay</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>36,000</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- unrecorded accrual of director&#146;s fees </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>18,000</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- adjustment on derivative associated with convertible notes </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>(2,541)</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- rounding adjustment </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>1</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase of previously reported notes payable, related party:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- correct classification to convertible notes, related party</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>(168,000)</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase of previously reported convertible notes payable, related party:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- unrecorded convertible notes payable, adjusted by embedded derivative </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>109,576</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase of previously reported derivative liability, related party:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">- unrecorded embedded derivative on convertible notes payable</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=103.533><P style="margin:0px" align=right>100,131</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin-top:1.133px; margin-bottom:0px; text-indent:44px">Total increase in previously reported liabilities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=103.533><P style="margin:0px" align=right>93,167</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=486.867></TD><TD width=103.533></TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase of previously reported shares authorized and un-issued:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- unrecorded common stock authorized for directors&#146; fees</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>30</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">(Increase) of previously reported unamortized warrants and options:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- correction of miscalculated warrant value using black-scholes </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>(487,634)</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">(Increase) of previously reported prepaid share-based compensation:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- unrecorded common stock authorized for directors&#146; fees</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>(54,624)</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase of previously reported additional paid in capital:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- unrecorded common stock authorized for consulting services </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>56,970</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- correction of miscalculated warrant value using black-scholes </P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>744,486</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=486.867></TD><TD width=103.533></TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px">Increase of previously reported (deficit) accumulated during development stage:</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin:0px; text-indent:20px">- correction of erroneous adjustments to retained earnings</P>
</TD><TD valign=top width=103.533><P style="margin:0px" align=right>(1,052)</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">- total increase in net loss due to correction of errors</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=103.533><P style="margin:0px" align=right>(351,343)</P>
</TD></TR>
<TR><TD valign=top width=486.867><P style="margin-top:1.133px; margin-bottom:0px; text-indent:40px">Total increase in previously reported stockholders&#146; equity</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=103.533><P style="margin:0px" align=right>(93,167)</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=46.067></TD><TD width=354.067></TD></TR>
<TR><TD valign=top width=46.067><P style="margin:0px"><I>&nbsp;</I></P>
</TD><TD valign=top width=354.067><P style="margin:0px"><I>Effects of above referenced adjustments on net loss:</I></P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=487.533></TD><TD width=102.867></TD></TR>
<TR><TD valign=top width=487.533><P style="margin:0px">Increase of previously reported consulting and management expenses</P>
</TD><TD valign=bottom width=102.867><P style="margin:0px" align=right>433,228</P>
</TD></TR>
<TR><TD valign=top width=487.533><P style="margin:0px">Decrease of previously reported miscellaneous expenses</P>
</TD><TD valign=bottom width=102.867><P style="margin:0px" align=right>(1,051)</P>
</TD></TR>
<TR><TD valign=top width=487.533><P style="margin:0px">Increase of previously reported interest expense</P>
</TD><TD valign=bottom width=102.867><P style="margin:0px" align=right>5,241</P>
</TD></TR>
<TR><TD valign=top width=487.533><P style="margin-top:1.133px; margin-bottom:0px">Increase of previously reported unrealized gain related to adjustment of derivative to fair value of underlying securities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=102.867><P style="margin:0px" align=right>(86,075)</P>
</TD></TR>
<TR><TD valign=top width=487.533><P style="margin-top:1.667px; margin-bottom:0px; text-indent:40px">Total increase in net loss</P>
</TD><TD style="border-bottom:4px double #000000" valign=bottom width=102.867><P style="margin:0px" align=right>$ 351,343</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px">The effect on the Company&#146;s previously issued September 30, 2006 financial statements are summarized as follows:</P>
<P style="margin:0px">&nbsp;&nbsp;</P>
<P style="margin:0px" align=center><I>Consolidated Balance Sheet as of September 30, 2006</I></P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=289.533></TD><TD width=92></TD><TD width=17.733></TD><TD width=81.4></TD><TD width=17.733></TD><TD width=92></TD></TR>
<TR><TD valign=bottom width=289.533><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92><P style="margin:0px" align=center><I>Previously Reported</I></P>
</TD><TD valign=bottom width=17.733><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=81.4><P style="margin:0px" align=center><I>Net</I></P>
<P style="margin:0px" align=center><I>Change</I></P>
</TD><TD valign=bottom width=17.733><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92><P style="margin:0px" align=center><I>Restated</I></P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">Assets</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">Current assets</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Cash </P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>$ 18,702</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>$ 18,702</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Advances receivable - PDL</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>292,867</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>292,867</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">Prepaid expenses</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>60,136</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>60,136</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total current assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>371,705</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>371,705</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px">Fixed assets, net</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>1,274</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>1,274</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">Other assets</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Medical licenses</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>3,917,332</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>3,917,332</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Intangible asset</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>36,000</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>36,000</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">Deposits</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>4,327</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>4,327</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total other assets</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>3,957,659</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>3,957,659</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92><P style="margin:0px" align=right>$ 4,330,638</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=81.4><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92><P style="margin:0px" align=right>$ 4,330,638</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">Current liabilities</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Accounts payable and</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:16px">accrued expenses</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>1,216,901</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>51,460</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>1,268,361</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Notes payable</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>2,564,147</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>2,564,147</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Notes payable &#150; related party</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>339,239</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>(168,000)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>171,239</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Convertible notes &#150; related party</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>109,576</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>109,576</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">Derivative liability &#150; related party</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>100,131</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>100,131</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total current liabilities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>4,120,287</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>93,167</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>4,213,454</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">Stockholders&#146; equity</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Preferred stock</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>6</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>6</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Common stock</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>6,785</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>6,785</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Shares authorized and un-issued</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>282</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>30</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>312</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Unamortized warrants and options</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>(266,843)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>(487,634)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>(754,477)</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Prepaid share-based compensation</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>(383,113)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>(54,624)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>(437,737)</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=289.533></TD><TD width=92></TD><TD width=17.733></TD><TD width=81.4></TD><TD width=17.733></TD><TD width=92></TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">Additional paid-in capital</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>52,053,390</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>801,456</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>52,854,846</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px; text-indent:8px">(Deficit) accumulated during</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:20px">development stage</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>(51,200,156)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>(352,395)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>(51,552,551)</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.133px; margin-bottom:0px; text-indent:16px">Total stockholders&#146; equity</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>210,351</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=81.4><P style="margin:0px" align=right>(93,167)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92><P style="margin:0px" align=right>117,184</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=81.4><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=289.533><P style="margin-top:1.667px; margin-bottom:0px; text-indent:8px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92><P style="margin:0px" align=right>$ 4,330,638</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=81.4><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92><P style="margin:0px" align=right>$ 4,330,638</P>
</TD></TR>
</TABLE>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px" align=center><I>Statement of Operations for the Nine Months Ended September 30, 2006</I></P>
<P style="margin:0px">&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=284.867></TD><TD width=92.067></TD><TD width=17.733></TD><TD width=85.933></TD><TD width=17.733></TD><TD width=92.067></TD></TR>
<TR><TD valign=bottom width=284.867><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92.067><P style="margin:0px" align=center><I>Previously Reported</I></P>
</TD><TD valign=bottom width=17.733><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=85.933><P style="margin:0px" align=center><I>Net</I></P>
<P style="margin:0px" align=center><I>Change</I></P>
</TD><TD valign=bottom width=17.733><P style="margin-top:1.133px; margin-bottom:0px" align=center><I>&nbsp;</I></P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=bottom width=92.067><P style="margin:0px" align=center><I>Restated</I></P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Revenue</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>$ -</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>$ -</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Depreciation and amortization</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>1,360,400</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>1,360,400</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Consulting and management expense</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>1,329,949</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>433,228</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>1,763,177</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Rent</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>36,052</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>36,052</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Salaries and benefits</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>162,852</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>162,852</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Professional fees</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>191,937</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>191,937</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Financing costs</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>1,146,223</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>1,146,223</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin-top:1.133px; margin-bottom:0px">General &amp; administrative</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>192,675</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>(1,051)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>191,624</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=85.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-top:1.333px solid #000000" valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Net operating Loss</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(4,420,088)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>(432,177)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(4,852,265)</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Interest expense, net</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(309,427)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>(5,241)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(314,668)</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Amortization of discount</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(52,500)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(52,500)</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Foreign currency loss</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(3,546)</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>(3,546)</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">Unrealized gain related to</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px; text-indent:8px">adjustment of derivative to fair</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin-top:1.133px; margin-bottom:0px; text-indent:8px">value of underlying securities</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92.067><P style="margin:0px" align=right>-</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=85.933><P style="margin:0px" align=right>86,075</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.133px; margin-bottom:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=92.067><P style="margin:0px" align=right>86,075</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=85.933><P style="margin:0px" align=right>&nbsp;</P>
</TD><TD valign=top width=17.733><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=92.067><P style="margin:0px" align=right>&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=284.867><P style="margin-top:1.667px; margin-bottom:0px">Net Income (Loss)</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92.067><P style="margin:0px" align=right>$ (4,785,561)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px" align=right>&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=85.933><P style="margin:0px" align=right>$ (351,343)</P>
</TD><TD valign=top width=17.733><P style="margin-top:1.667px; margin-bottom:0px" align=right>&nbsp;</P>
</TD><TD style="border-bottom:4px double #000000" valign=top width=92.067><P style="margin:0px" align=right>$ (5,136,904)</P>
</TD></TR>
</TABLE>
<P style="margin:0px" align=justify>&nbsp;</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; text-indent:48px">The initial filing of the Form 10-KSB, the Company discovered that it had inadvertently included an incorrect version of the Consolidated Statements of Cash Flows within its Annual Report of Form 10-KSB for the year ended December 31, 2006 (the &#147;Original Filing&#148;). The Company has amending its Annual Report on Form 10-KSB with this Amendment No. 1 in order to insert the correct version of the audited Consolidated Cash Flows for the periods of December 31, 2006 and September 19, 1994 (Inception) to December 31, 2006. No disclosure was changed as a result of providing the correct version of the Consolidated Statements of Cash Flows and there were no other changes to the Form 10-KSB for the year ended December 31, 2006.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px; text-indent:48px">&nbsp;In connection with the restatements, under the direction of its Chief Executive Officer and Interim Principal Accounting Officer, the Company has reevaluated its disclosure controls and procedures and identified the following material weaknesses which existed at the time of the filing of the March 31, 2006, June 30, 2006 September 30, 2006 Quarterly Financials and December 31, 2006 Annual Report on Form 10-KSB: (1) insufficient accounting expertise to apply accounting principles generally accepted in the United States and (2) inadequate segregation of duties, including insufficient supervision and review of accounting staff work. As a result of these weaknesses the Company concluded that its disclosure controls were not effective as of March 31, 2006, June 30, 2006 September 30, 2006 Quarterly Financials and December 31, 2006 Annual Report of Form 10-KSB (respectively). The Company took action to correct these weaknesses by hiring an interim accountant with experience in public company filings, SEC compliance and financial statement preparation, hired new SEC legal counsel and engaged a new </P>
<P style="margin:0px"><BR>
<BR></P>
<HR style="margin-top:9.6px; margin-bottom:9.6px" noshade size=1.333>
<P style="margin:0px; page-break-before:always">independent registered public accounting firm. The Company is the process of evaluating its Disclosure Controls and Procedures and will implement the requisite changes to ensure proper financial disclosures.</P>
<P style="margin:0px"><BR></P>
<P style="margin:0px">&nbsp;</P>
<P style="margin:0px" align=center><B>SIGNATURE</B></P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px; text-indent:48px">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P>
<P style="margin:0px" align=center>&nbsp;</P>
<P style="margin:0px" align=center>&nbsp;</P>
<TABLE style="font-size:13.333px" cellspacing=0><TR><TD width=28.867></TD><TD width=225.533></TD><TD width=37.067></TD><TD width=284.533></TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=284.533><P style="margin:0px" align=center>Genesis Bioventures, Inc.</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px" align=center>(Registrant)</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px">&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=28.867><P style="margin:0px">Date</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=225.533><P style="margin:0px">&nbsp;&nbsp;September 20, 2007</P>
</TD><TD valign=top width=37.067><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px">&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px">&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD style="border-bottom:1.333px solid #000000" valign=top width=284.533><P style="margin:0px" align=center>/s/ Douglas Lane</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px" align=center>(Signature)</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px">Print Name: Douglas C. Lane</P>
</TD></TR>
<TR><TD valign=top width=291.467 colspan=3><P style="margin:0px">&nbsp;</P>
</TD><TD valign=top width=284.533><P style="margin:0px">Title: Chief Executive Officer</P>
</TD></TR>
</TABLE>
<P style="margin:0px"><BR></P>
<P style="margin:0px"><BR>
<BR></P>
</DIV></BODY>
</HTML>
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{"company-data": {"conformed-name": "GENESIS BIOVENTURES INC", "cik": "0001084966", "assigned-sic": "8071", "irs-number": "980163232", "state-of-incorporation": "NY", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-16291", "film-number": "071127632"}, "business-address": {"street1": "10940 WILSHIRE BOULEVARD", "street2": "SUITE 600", "city": "LOS ANGELES", "state": "CA", "zip": "90024", "phone": "310-443-4102"}, "mail-address": {"street1": "10940 WILSHIRE BOULEVARD", "street2": "SUITE 600", "city": "LOS ANGELES", "state": "CA", "zip": "90024"}, "former-company": {"former-conformed-name": "BIOLABS INC", "date-changed": "19990811"}}
Converted by EDGARwiz
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 20, 2007
GENESIS BIOVENTURES, INC.
(Exact name of registrant as specified in its charter)
New York
1-16291
98-0225226
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)
10940 Wilshire Boulevard, Suite 600, Los Angeles, CA
90024
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code
(310) 443-4102
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 4.02
Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On April 17, 2007 the Company filed an amended Form 10-QSB for the periods ending March 31, 2006, June 30, 2006 and September 30, 2006 and on April 18, 2007filed an amended Form 10-KSB for the fiscal year ended December 31, 2006 because the Board of Directors, upon the recommendation of the Chief Executive Officer and Interim Principal Accounting Officer of the Company, concluded that adjustments were required to the consolidated financial statements included in each of the aforementioned filings and that therefore, such consolidated financial statements as originally filed on May 16, 2006, August 22, 2006 and December 1, 2006 and April 18, 2007 (respectively) no longer should be relied upon because in the aggregate, the cumulative effect of such adjustments can be viewed as material errors in these financial statements.
The Company has restated its previously issued March 31, 2006 consolidated financial statements for matters related to the following previously reported items: an embedded derivative and consulting and management expense related to an unrecorded accrual for unpaid severance fees. The financial statements for the three month period ended March 31, 2006 have been restated to reflect the corrections in accordance with Statement of Financial Accounting Standards Board No. 154, "Accounting Change and Error Correction". The following is a summary of the restatements for March 31, 2006:
Increase (decrease) of previously reported accrued liabilities:
- unrecorded accrual of severance pay
12,000
- rounding adjustment
(2)
Increase of previously reported convertible notes payable, related party:
- unrecorded convertible notes payable, adjusted by embedded derivative
104,325
Increase of previously reported derivative liability, related party:
- unrecorded embedded derivative on convertible notes payable
164,724
Total increase in previously reported liabilities
281,047
Increase of previously reported (deficit) accumulated during development stage:
- correction of erroneous adjustments to retained earnings
(1,049)
- total increase in net loss due to correction of errors
(279,998)
Total increase in previously reported stockholders' equity
(281,047)
Effects of above referenced adjustments on net loss:
Increase of previously reported consulting and management expenses
300,000
Decrease of previously reported miscellaneous expenses
(1,051)
Increase of previously reported interest expense
2,531
Increase of previously reported unrealized gain related to adjustment of
Derivative to fair value of underlying securities
(21,482)
Total increase in net loss
$ 279,998
The effect on the Company's previously issued March 31, 2006 financial statements are summarized as follows:
Consolidated Balance Sheet as of March 31, 2006
Previously Reported
Net
Change
Restated
Assets
Current assets
Cash
$ 143,747
$ -
$ 143,747
Accounts and other receivables
1,721
-
1,721
Advances receivable - PDL
269,085
-
269,085
Total current assets
414,553
-
414,553
Fixed assets, net
4,397
-
4,397
Other assets
Medical licenses
4,821,311
-
4,821,311
Intangible asset
1,462
-
1,462
Total other assets
4,822,773
-
4,822,773
$ 5,241,723
$ -
$ 5,241,723
Current liabilities
Accounts payable and
accrued expenses
981,943
11,998
993,941
Notes payable
3,722,985
-
3,722,985
Notes payable – related party
75,500
-
75,500
Convertible notes – related party
-
104,325
104,325
Derivative liability – related party
-
164,724
164,724
Total current liabilities
4,780,428
281,047
5,061,475
Stockholders' equity
Preferred stock
6
-
6
Common stock
5,336
-
5,336
Additional paid-in capital
47,944,514
-
47,944,514
(Deficit) accumulated during
development stage
(47,488,561)
(281,047)
(47,769,608)
Total stockholders' equity
461,295
-
180,248
$ 5,241,723
$ -
$ 5,241,723
Statement of Operations for the Three Months Ended March 31, 2006
Previously Reported
Net
Change
Restated
Revenue
$ -
$ -
$ -
Depreciation and amortization
451,997
-
451,997
Consulting and management expense
141,000
300,000
441,000
Rent
10,130
-
10,130
Salaries and benefits
54,611
-
54,611
Professional fees
79,959
-
79,959
Financing costs
82,000
-
82,000
General & administrative
102,971
(1,051)
101,920
Net operating Loss
(922,668)
(298,949)
(1,221,617)
Interest expense, net
(121,553)
(2,531)
(124,084)
Amortization of discount
(26,250)
-
(26,250)
Foreign currency loss
(3,492)
-
(3,492)
Unrealized gain related to
adjustment of derivative to fair
value of underlying securities
-
21,482
21,482
Net Income (Loss)
$ (1,073,963)
$ (279,998)
$ (1,353,961)
The Company has restated its previously issued June 30, 2006 consolidated financial statements for matters related to the following previously reported items: an embedded derivative; warrant costs; consulting and management expense; financing costs; merger costs; debt conversions; and an asset purchase. The financial statements for the three and six month periods ended June 30, 2006 have been restated to reflect the corrections in accordance with statement of financial accounting standards No. 154, "Accounting Change and Error Corrections". The following is a summary of the restatements for June 30, 2006:
Increase of previously reported other assets
- unrecorded licensing agreement purchased with stock
$36,000
Total increase in previously reported assets
36,000
Increase (decrease) of previously reported accrued liabilities
- unrecorded accrual of severance pay
24,000
- unrecorded accrual of directors' fees
4,500
- adjustment on derivative associated with convertible notes
(722)
- correction of accrued interest on notes payable
(52,589)
Increase of previously reported notes payable
- note payable recorded as a conversion to common stock
917,500
- finance fees previously recorded as note payable conversion
650,000
- correction of amortization of deemed discount
26,250
Increase of previously reported convertible notes payable, related party:
- unrecorded convertible notes payable, adjusted by embedded derivative
18,918
Increase of previously reported derivative liability, related party:
- unrecorded embedded derivative on convertible notes payable
137,948
Total increase in previously reported liabilities
1,725,805
Increase of previously reported shares authorized and unissued:
- unrecorded common stock authorized for consulting services
125
(Increase) of previously reported unamortized warrants and options:
- correction of miscalculated warrant value using black-scholes
(620,793)
(Increase) of previously reported prepaid share-based compensation
- unrecorded common stock authorized for consulting services
(140,124)
Increase of previously reported additional paid in capital:
- correction of note payable recorded as a common stock conversion
(515,537)
- unrecorded common stock authorized for consulting services
282,875
- correction of miscalculated warrant value using black-scholes
744,486
Increase of previously reported (deficit) accumulated during development stage:
- correction of erroneous adjustments to retained earnings
(4,542)
- total increase in net loss due to correction of errors
(1,436,295)
Total increase in previously reported stockholders' equity
(1,689,805)
Effects of above referenced adjustments on net loss:
Increase of previously reported consulting and management expenses
418,069
Increase of previously reported financing costs
1,040,375
Decrease of previously reported miscellaneous expenses
(4,824)
Increase of previously reported interest expense
4,402
Increase of previously reported debt discounts
- incorrect amortization of debt discounts
26,250
Increase of previously reported foreign currency loss
281
Increase of previously reported unrealized gain related to adjustment of
Derivative to fair value of underlying securities
(48,258)
Total increase in net loss
$ 1,436,295
The effect on the Company's previously issued June 30, 2006 financial statements are summarized as follows:
Consolidated Balance Sheet as of June 30, 2006
Previously Reported
Net
Change
Restated
Assets
Current assets
Cash
$ 47,867
$ -
$ 47,867
Note receivable
282,114
-
282,114
Total current assets
329,981
-
329,981
Other assets
Medical licenses
4,369,314
-
4,369,314
Intangible asset
-
36,000
36,000
Total other assets
4,369,314
36,000
4,405,314
$ 4,699,295
$ 36,000
$ 4,735,295
Current liabilities
Accounts payable and
accrued expenses
1,086,338
(24,811)
1,061,527
Notes payable
925,419
1,593,750
2,519,169
Notes payable – related party
136,500
-
136,500
Convertible notes – related party
-
18,918
18,918
Derivative liability – related party
-
137,948
137,948
Total current liabilities
2,148,257
1,725,805
3,874,062
Stockholders' equity
Preferred stock
6
-
6
Common stock
6,730
-
6,730
Shares authorized and un-issued
177
125
302
Unamortized warrants and options
(332,119)
(620,793)
(952,912)
Prepaid share-based compensation
(378,970)
(140,124)
(519,094)
Additional paid-in capital
52,218,087
511,824
52,729,911
(Deficit) accumulated during
development stage
(48,962,873)
(1,440,837)
(50,403,710)
Total stockholders' equity
2,551,038
(1,689,805)
861,233
$ 4,699,295
$ 36,000
$ 4,735,295
Statement of Operations for the Three Months Ended June 30, 2006
Previously Reported
Net
Change
Restated
Revenue
$ -
$ -
$ -
Depreciation and amortization
908,391
-
908,391
Consulting and management expense
833,429
418,069
1,251,498
Rent
25,567
-
25,567
Salaries and benefits
111,247
-
111,247
Professional fees
182,272
-
182,272
Financing costs
105,848
1,040,375
1,146,223
General & administrative
145,622
(4,824)
140,798
Net operating Loss
(2,312,376)
(1,453,620)
(3,765,996)
Interest expense, net
(209,650)
(4,402)
(214,052)
Amortization of discount
(26,250)
(26,250)
(52,500)
Foreign currency loss
(3,492)
(281)
(3,773)
Unrealized gain related to
adjustment of derivative to fair
value of underlying securities
-
48,258
48,258
Net Income (Loss)
The Company has restated its previously issued September 30, 2006 consolidated financial statements for matters related to the following previously reported items: an embedded derivative; warrant costs; and consulting and management expense. The financial statements for the three and nine month periods ended September 30, 2006 have been restated to reflect the corrections in accordance with statement of financial accounting standards No. 154, "Accounting Change and Error Corrections". The following is a summary of the restatements for September 30, 2006:
Increase (decrease) of previously reported accrued liabilities:
- unrecorded accrual of severance pay
36,000
- unrecorded accrual of director's fees
18,000
- adjustment on derivative associated with convertible notes
(2,541)
- rounding adjustment
1
Increase of previously reported notes payable, related party:
- correct classification to convertible notes, related party
(168,000)
Increase of previously reported convertible notes payable, related party:
- unrecorded convertible notes payable, adjusted by embedded derivative
109,576
Increase of previously reported derivative liability, related party:
- unrecorded embedded derivative on convertible notes payable
100,131
Total increase in previously reported liabilities
93,167
Increase of previously reported shares authorized and un-issued:
- unrecorded common stock authorized for directors' fees
30
(Increase) of previously reported unamortized warrants and options:
- correction of miscalculated warrant value using black-scholes
(487,634)
(Increase) of previously reported prepaid share-based compensation:
- unrecorded common stock authorized for directors' fees
(54,624)
Increase of previously reported additional paid in capital:
- unrecorded common stock authorized for consulting services
56,970
- correction of miscalculated warrant value using black-scholes
744,486
Increase of previously reported (deficit) accumulated during development stage:
- correction of erroneous adjustments to retained earnings
(1,052)
- total increase in net loss due to correction of errors
(351,343)
Total increase in previously reported stockholders' equity
(93,167)
Effects of above referenced adjustments on net loss:
Increase of previously reported consulting and management expenses
433,228
Decrease of previously reported miscellaneous expenses
(1,051)
Increase of previously reported interest expense
5,241
Increase of previously reported unrealized gain related to adjustment of derivative to fair value of underlying securities
(86,075)
Total increase in net loss
$ 351,343
The effect on the Company's previously issued September 30, 2006 financial statements are summarized as follows:
Consolidated Balance Sheet as of September 30, 2006
Previously Reported
Net
Change
Restated
Assets
Current assets
Cash
$ 18,702
$ -
$ 18,702
Advances receivable - PDL
292,867
-
292,867
Prepaid expenses
60,136
-
60,136
Total current assets
371,705
-
371,705
Fixed assets, net
1,274
-
1,274
Other assets
Medical licenses
3,917,332
-
3,917,332
Intangible asset
36,000
-
36,000
Deposits
4,327
-
4,327
Total other assets
3,957,659
-
3,957,659
$ 4,330,638
$ -
$ 4,330,638
Current liabilities
Accounts payable and
accrued expenses
1,216,901
51,460
1,268,361
Notes payable
2,564,147
-
2,564,147
Notes payable – related party
339,239
(168,000)
171,239
Convertible notes – related party
-
109,576
109,576
Derivative liability – related party
-
100,131
100,131
Total current liabilities
4,120,287
93,167
4,213,454
Stockholders' equity
Preferred stock
6
-
6
Common stock
6,785
-
6,785
Shares authorized and un-issued
282
30
312
Unamortized warrants and options
(266,843)
(487,634)
(754,477)
Prepaid share-based compensation
(383,113)
(54,624)
(437,737)
Additional paid-in capital
52,053,390
801,456
52,854,846
(Deficit) accumulated during
development stage
(51,200,156)
(352,395)
(51,552,551)
Total stockholders' equity
210,351
(93,167)
117,184
$ 4,330,638
$ -
$ 4,330,638
Statement of Operations for the Nine Months Ended September 30, 2006
Previously Reported
Net
Change
Restated
Revenue
$ -
$ -
$ -
Depreciation and amortization
1,360,400
-
1,360,400
Consulting and management expense
1,329,949
433,228
1,763,177
Rent
36,052
-
36,052
Salaries and benefits
162,852
-
162,852
Professional fees
191,937
-
191,937
Financing costs
1,146,223
-
1,146,223
General & administrative
192,675
(1,051)
191,624
Net operating Loss
(4,420,088)
(432,177)
(4,852,265)
Interest expense, net
(309,427)
(5,241)
(314,668)
Amortization of discount
(52,500)
-
(52,500)
Foreign currency loss
(3,546)
-
(3,546)
Unrealized gain related to
adjustment of derivative to fair
value of underlying securities
-
86,075
86,075
Net Income (Loss)
$ (4,785,561)
$ (351,343)
$ (5,136,904)
The initial filing of the Form 10-KSB, the Company discovered that it had inadvertently included an incorrect version of the Consolidated Statements of Cash Flows within its Annual Report of Form 10-KSB for the year ended December 31, 2006 (the "Original Filing"). The Company has amending its Annual Report on Form 10-KSB with this Amendment No. 1 in order to insert the correct version of the audited Consolidated Cash Flows for the periods of December 31, 2006 and September 19, 1994 (Inception) to December 31, 2006. No disclosure was changed as a result of providing the correct version of the Consolidated Statements of Cash Flows and there were no other changes to the Form 10-KSB for the year ended December 31, 2006.
In connection with the restatements, under the direction of its Chief Executive Officer and Interim Principal Accounting Officer, the Company has reevaluated its disclosure controls and procedures and identified the following material weaknesses which existed at the time of the filing of the March 31, 2006, June 30, 2006 September 30, 2006 Quarterly Financials and December 31, 2006 Annual Report on Form 10-KSB: (1) insufficient accounting expertise to apply accounting principles generally accepted in the United States and (2) inadequate segregation of duties, including insufficient supervision and review of accounting staff work. As a result of these weaknesses the Company concluded that its disclosure controls were not effective as of March 31, 2006, June 30, 2006 September 30, 2006 Quarterly Financials and December 31, 2006 Annual Report of Form 10-KSB (respectively). The Company took action to correct these weaknesses by hiring an interim accountant with experience in public company filings, SEC compliance and financial statement preparation, hired new SEC legal counsel and engaged a new
independent registered public accounting firm. The Company is the process of evaluating its Disclosure Controls and Procedures and will implement the requisite changes to ensure proper financial disclosures.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Genesis Bioventures, Inc.
(Registrant)
Date
September 20, 2007
/s/ Douglas Lane
(Signature)
Print Name: Douglas C. Lane
Title: Chief Executive Officer