UNITED STATES

| Colorado                             | 84-1579760               |
|--------------------------------------|--------------------------|
| (State      or other jurisdiction of | (I.R.S.      Employer    |
| incorporation      or organization)  | Identification      No.) |

|                                                                          |            |
|-------------------------------------------------------------------------------|-----------------|
| The      Green House, Beechwood Business Park North, Inverness,      Scotland | IV2      3BL    |
| (Address      of principal executive offices)                                 | (Zip      Code) |

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| ·   | The significant terms of our convertible preferred      stock; |
|--------------------|----------------------------------------------------------------|

| ·   | Our consolidated statement of cash flows in accordance      with paragraph 32 of SFAS 95; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Additional disclosures to provide clarity around our      stock options and outstanding loan notes; |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | Revisions made to Executive Compensation which are      consistent with regulation S-B Item 402; |
|--------------------|--------------------------------------------------------------------------------------------------|

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| TABLE      OF CONTENTS                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                       |   |
| ITEM      NUMBER AND CAPTION                                                                                                                                                               | PAGE |
|                                                                                                                                                                                       |   |
|                                                                                                                                                                                       |   |
|                           PART I                                                       |   |
|                                                                                                                                                                                       |   |
| 1.      Description of Business                                                                                                                                                            | 4 |
|                                                                                                                                                                                       |   |
| 2.      Description of Property                                                                                                                                                            | 16 |
|                                                                                                                                                                                       |   |
| 3.      Legal Proceedings                                                                                                                                                                  | 16 |
|                                                                                                                                                                                       |   |
| 4.      Submission of Matters to a Vote of Security Holders                                                                                                                                | 16 |
|                                                                                                                                                                                       |   |
|                             PART      II                                     |   |
|                                                                                                                                                                                       |   |
| 5.      Market for Common Equity and Related Stockholder Matters                                                                                                                           |  17 |
|                                                                                                                                                                                       |   |
| 6.      Management's Discussion and Analysis or Plan of Operation                                                                                                                          | 18 |
|                                                                                                                                                                                       |   |
| 7.      Financial Statements                                                                                                                                                               | 24 |
|                                                                                                                                                                                       |   |
| 8.      Changes in and Disagreements with Accountants on Accounting and Financial      Disclosure                                                                                          | 25 |
|                                                                                                                                                                                       |   |
| 8A.      Controls and Procedures                                                                                                                                                           | 25 |
|                                                                                                                                                                                       |   |
| 8B.      Other Information                                                                                                                                                                 | 25 |
|                                                                                                                                                                                       |   |
|                                PART      III                  |   |
|                                                                                                                                                                                       |   |
| 9.  Directors,      Executive Officers, Promoters, Control Persons and Corporate Governance;      Compliance with Section 16(a) of          the Exchange Act | 26 |
|                                                                                                                                                                                       |   |
| 10.      Executive Compensation                                                                                                                                                            | 27 |
|                                                                                                                                                                                       |   |
| 11.      Security Ownership of Certain Beneficial Owners and Management and Related      Stockholders                                                                                      | 29 |
|                                                                                                                                                                                       |   |
| 12.      Certain Relationships and Related Transactions                                                                                                                                    | 31 |
|                                                                                                                                                                                       |   |
| 13.      Exhibits                                                                                                                                                                          | 32 |
|                                                                                                                                                                                       |   |
| 14.      Principal Accountant Fees and Services                                                                                                                                            | 36 |
|                                                                                                                                                                                       |   |
| SIGNATURES                                                                                                                                                                                 | 37 |

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| · | issued      to the former holders of 8,000,000 shares of In Vivo DE preferred stock,      an aggregate of 34,343,662 shares of our 4% voting redeemable convertible      preferred stock (the "4% PreferredStock"); |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | issued      to the former holders of shares of In Vivo DE common stock, an aggregate      of 38,636,453 shares of our commonstock; |
|--------|------------------------------------------------------------------------------------------------------------------------------------|

| · | issued      1,636,233 additional shares of our common stock to holders of $467,495 of      promissory notes ($450,000 of which was converted by July 31, 2004),      issued by In Vivo DE's wholly owned subsidiaries, Hall Effect Technologies      Ltd. and Jopejo Ltd., in exchange for the cancellation of such notes;      and |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | agreed      to cause the resignation of all current members of our board of directors      and appoint new directors as designated by certain shareholders or      affiliates of In Vivo DE. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Issuance of Secured Subordinated Convertible Debentures toLongview Fund, L.P.

| · | We      shall pay Montgomery an aggregate of $348,000.00 (the "Funds") which      represents all amounts owed by us to Montgomery under the Debenture as of      the date hereof including outstanding principal and interest. We shall pay      the Funds to Montgomery monthly at the rate of $29,000.00 ("Monthly      Payment") per calendar month, with the first payment being due and payable      on November 15, 2006 and each subsequent payment being due and payable on      the first business day of each subsequent month until the Funds are repaid      in full. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | Montgomery      shall continue to have valid, enforceable and perfected first-priority      liens upon and security interests in the Pledged Property and the Pledged      Shares (each as defined in the Purchase Agreement transaction      documents). |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | The      Company and Montgomery agree that during the term of the Settlement      Agreement, the Debenture shall not bear any interest and no liquidated      damages shall accrue under any of the financing  documents. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | The      Conversion Price (as set forth in the Debenture) in effect on any      Conversion Date (as set forth in the Debenture) from and after the date      hereof shall be adjusted to equal $0.05, which may be subsequently      adjusted pursuant to the other terms of the  Debenture. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Montgomery      shall retain the Warrants issued in accordance with the Securities      Purchase Agreement. |
|--------|-------------------------------------------------------------------------------------------------------------|

| · | The      Company and Cornell agree to terminate the Distribution Agreement and      related transaction documents. Cornell shall retain the 472,000 shares of      the Company's common stock. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Technology                           | Product                                                                                                          | Key      Applications/Market                                                                                                                                                        | Advantage                                                                                                                                       |
|--------------------------------------|------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| Blood      Analyte measurement       | Prothrombin      Blood Clotting measuring deviceStatus:Completed and about to be      released to global markets | Minimally-Invasive,      Accurate and Safe, Characteristic measuring device for heart attack and      Stroke sufferers                                                              | Small,      Cheap device with rapid measurement using world leading blood sample      size                                                      |
| Disposable      Digital Strip Reader | Digital      read out of Immunoassay Lateral flow Strip ResultsStatus:In Final Stage of      Development         | All      YES / NO Immunoassay applications                                                                                                                                          | Accurate,      Low cost and Eco friendly                                                                                                        |
| Labor Predictor                      | Predictor      of Labor Onset Status:Ready for Licensing / extended      clinical trials                    | Accurate      prediction of onset labor from 6 weeks out. Consumer device for maternity      planning. Professional care for mothers identified at risk for pre-term      delivery. | High      negative and positive predictive success. Ease o use. No competition      exists either in professional medical or consumer  markets. |
| Blood      Analyte measurement       | Biomarker      monitorStatus:In Development – Assay      platform available at demonstration level .       | Accurate      measurement using very low blood volume of a number of Biomarkers      including Heart attack, HIV, Cholesterol and Cancer                                       | Highly      sensitive, very low cost in comparison to any competitive system. Multiple      measurements with one blood sample.                 |
| Blood      Analyte measurement       | Blood      Glucose monitor Status:In    Research                                                            | Non-Invasive,      Accurate and safe, Glucose (and other) concentration continuous bulk      measuring device                                                                       | Small,      Inexpensive device with rapid assay                                                                                                 |
| Medical      Imaging                 | Digital      Scanning MachineStatus:In    Research                                                               | Non-Invasive,      Safe, High Resolution alternative 2D X-Ray scanning                                                                                                              | Portable,      Inexpensive, continuous display, No Ionizing radiation                                                                           |
| Bone      Density Monitor            | Osteoporosis      detection and monitoring device                                                                | Non-invasive      instant display of Bone mineral density of osteoporosis      patients                                                                                             | No      ionizing radiation. Inexpensive andaccurate                                                                                             |

| · | our      devices represent the transfer of known technology from physics to      medicine;          |
|--------|-----------------------------------------------------------------------------------------------------|
| · | our      technology can measure non-invasively or with very low analyte/sample      size;           |
| · | the      magnetic fields applied to human use are benign and  safe;                                 |
| · | our      devices can be produced and sold at a much lower cost than most      competitive products; |
| · | our      devices give 'next generation' technical superiorityby:                                    |
| · | operating      from direct current to high alternating current    frequencies;                      |
| · | measuring      very low levels of displacement; and                                                 |
| · | working      with low level magnetic fields.                                                        |

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Intellectual Property

| · | to      work at an appropriate physical level to specify magnetic      systems                                                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------|
| · | to      develop high sensitivity Hall Effect devices using Molecular Beam Epitaxy      (manufacturing) techniques;             |
| · | to      use the Hall Effect in high precision proportional measurement      applications;                                      |
| · | to      provide advanced signal processing and control techniques to extract low      level signals in biological systems; and |
| · | to      establish techniques for measuring low-level effects with high levels of      precision.                               |

| Patents                                                                    | Pending                                                             | Granted |
|----------------------------------------------------------------------------|---------------------------------------------------------------------|---------|
| Blood      Coagulation (Unipath)                                           | China,      European Patent, Japan, US                              |    |
| PCT/GB2004/02401                                                           |                                                                |    |
| Blood      Coagulation                                                     | China,      Europe, Japan, US                                       |    |
| PCT/GB2005/002427                                                          |                                                                |    |
| Blood      Coagulation (low volume)                                        | China,      Europe, Japan, US                                       |    |
| PCT/GB2006/000964                                                          |                                                                |    |
| Blood      Coagulation (low volume)  China, Europe, Japan,    US |                                                                |    |
| PCT/GB2006/005076                                                          |                                                                |    |
| Magnetic      Scanner                                                      | China,      Europe, Japan, US                                       | Europe  |
| PCT/GB01/01136                                                             |                                                                |    |
| Labour      Prediction (updated                                            | First      filing                                                   |    |
| software)                                                                  |                                                                |    |
| UK0605950.5                                                                |                                                                |    |
| Blood      Monitor                                                         | China,      European Patent, Japan, US    China |    |
| (Susceptibility)                                                           |                                                                |    |
| PCT/GB02/01953                                                             |                                                                |    |
| Labor      Prediction                                                      | European      Patent, Japan                                         | United  |
| PCT/GB02/04880                                              | Kingdom,      US                                                    |    |
| Magnetic      Separation                                                   | First      Filing                                                   |    |
| (Immunoassay)                                                              |                                                                |    |
| PCT/GB2005/002427                                                          |                                                                |    |
| Immunoassay      - measurement of                                          | First      Filing                                                   |    |
| Presence      and concentration                                            |                                                                |    |
| Of      compounds in fluids                                                |                                                                |    |
| Supersedes      Magnetic                                                   |                                                                |    |
| Seperation                                                                 |                                                                |    |
| UK0615738.2                                                                |                                                                |    |
| Hand      Held Digital Strip Reader                                        |                                                                |    |
| Assay      reading                                                         | First      Filing                                                   |    |
| Apparatus      and method                                                  |                                                                |    |
| Ref:      UK0619585.3                                                      |                                                                |    |
| Yes      / No magnetic immunoassay                                         |                                                                |    |
|                                                                       |                                                                |    |

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We have embarked on discussions with a number of companies for anew digital immunoassay reader which has minimal electronic components, moresensitive, easy to use, no battery required and environmental friendly. Thefirst application of this is likely to be in Digital Pregnancy Tests but theplatform is available for the reading of any thresholdimmunoassay.

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| Feature             | CoaguChek                              | IVMD                           |
|---------------------|----------------------------------------|--------------------------------|
| Pain      of use    | Inhibitive                             | Micro-lance      - `pin-prick' |
| Blood      volume   | 20      micro liters                   | <3      micro liters        |
| Ease      of use    | Complex      & error prone process | Easy      simple process       |
| Size      of device | Desk      top                          | Hand-held;      mobile phone   |
| Cost      of device | $1,295                                 | <$30                        |
| Cost      of strip  | $4.83                                  | <0.50c                      |
| Cost      of strip  | $4.83                                  | <0.50c                      |

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The technology that we have in development utilizes a small dropof blood taken from a finger and placed on a strip. By employing advancedtechniques utilizing magnetically tagged probes and micro fluidics to look forbiomarkers in blood samples we are able to provide a sensitive point of carediagnostic tool. High sensitivity is an essential requirement in order toaccurately provide diagnosis.

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Our Glucose Blood Monitoring product is being designed to be apocket calculator sized device with a small clip to attach to the ear lobe orfinger to obtain a reading. The advantages are that it will be safe, trulynon-invasive and accurately monitor and provide continuous, bulk trends in realtime. It can be produced very cheaply and provide substantial cost savings andhealth benefits to users over time.

|                                                                                                                                                                                                                                                                                                                                                                                                                           | No      of              | 25      year           | Memo:                          | Memo:     |   | Target      use    |          |  Target      sales  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|------------------------------------------|-------------------------------|--------|--------------------|---------------|-------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                           | diagnosed                                                                           |   predicted                                               | Self                 |  Self          |   | within             |          |  volume      by     |
|                                                                                                                                                                                                                                                                                                                                                                                                                           | diabetics                                                                      | growth                                                              | monitoring           | monitoring               |   | diabetic           |          |  year      5        |
|                                                                                                                                                                                                                                                                                                                                                                                                                           |  (`000)                                                         |  (%)                                                      | market      size                    | market         |   | population      at |          |   (`000)*      |
|                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                     |                                                                     |   ($m)     |   forecast     |   |               |          |                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                     |                                                                     |                                     |   year      5  |   |               |          |                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                     |                                                                     |                                     | growth      (%)          |   |               |          |                          |
| UK                                                                                                                                                                                                                                                                                                                                                                                                                             | 1,440                                                                                    | 27                                                                       | 154.4                                    | 16.0                          |   | 1      in 15       |          | 96                            |
| USA                                                                                                                                                                                                                                                                                                                                                                                                                            | 10,300                                                                                   | 47                                                                       | 1001.6                                   | 13.8                          |   | 1      in 15       |          | 687                           |
| W.      Europe                                                                                                                                                                                                                                                                                                                                                                                                                 | 7,100                                                                                    | 35                                                                       | 982.4                                    | 16.0                          |   | 1      in 25       |          | 355                           |
| Other      Regions**                                                                                                                                                                                                                                                                                                                                                                                                           | 30,400                                                                                   | 32                                                                       | 639.2                                    |                          |   |               | 1      in 100 |                          | 304 |
| India                                                                                                                                                                                                                                                                                                                                                                                                                          | 22,900                                                                                   | 150                                                                      |                                     |                          |   |               | 1      in 200 |                          | 115 |
| China                                                                                                                                                                                                                                                                                                                                                                                                                          | 18,600                                                                                   | 102                                                                      |                                     |                          |   |               | 1      in 250 |                          | 75 |
| Memo:      World Total                                                                                                                                                                                                                                                                                                                                                                                                         | 154,400                                                                                  | 94                                                                       | 2777.6                                   | $6.4      billion             |   |               |          |                          |   |
|                                                                       |                                                                                     |                                                                     |                                     |        by year 5         |   |               |          |                          |   |

| · | Oxygen      - continuous oximetry                                  |
|--------|--------------------------------------------------------------------|
| · | Estrogen      - fertility measurement                              |
| · | Protein      markers - for gene evaluation / modification programs |
| · | Drugs                                                              |
| · | Alcohol                                                            |

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 US figures are shown in the tablebelow.

|                                                                                                                                                                                                              |   | 1999      $ million |   |   | %      Market Share 1999 |   |   | 2004      $ million |   |   | %      Market Share 2004 |   |   | AAGR      %1999-2004 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------|--------|-------------------------------|--------|--------|---------------------|--------|--------|-------------------------------|--------|--------|----------------------|--------|
|                                                   |   |                |   |   |                          |   |   |                |   |   |                          |   |   |                 |   |
| X-      ray and                                                                                                                                                                                                                                                                                        |   |                |   |   |                          |   |   |                |   |   |                          |   |   |                 |   |
| digital      X-ray                                                                                                                                                                                                                                                                                     |   |                | 1923.5 |   |                          |   | 47.3   |                |   |   | 2794.5                        |   |   |                 | 52.1   |   |   |   | 7.8 |   |
| CT      and ultrasound                                                                                                                                                                                                                                                                                 |   |                | 1707.2 |   |                          |   |   |                |   |   | 2091.1                        |   |   |                 |   |   |   |   | 4.1 |   |
| Nuclear      medicine                                                                                                                                                                                                                                                              |   |                | 401.7  |   |                          |   |   |                |   |   | 474.4                         |   |   |                 |   |   |   |   | 3.4 |   |
| Total                                                                                                                                                                                                                                                                                                  |   |                | 4033.4 |   |                          |   |   |                |   |   | 5360.0                        |   |   |                 |   |   |   |   | 5.9 |   |

|  Phase      1                                                  |   | Phase      2                                                                        |   | Phase      3                                                                                                                                       |   | Phase      4                                                           |   | Phase      5            |
|---------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|-------------------------|
| Concept      Proving                                                |   | Functionademonstration                                                         |   | Semi      - engineered   prototypes                                                                                                 |   | Fully      - engineered       prototypes |   | Volume      Production  |
|                                                                |   |                                                                                |   |                                                                                                                                                    |   |                                                                        |   |                    |
| Bench      and laboratoryto      substantiate hypothesis  |   | Bench      simulator \which can  demonstrate capabilities  |   | Batch      productionto      finished  design      using some   production  materials      and  techniques |   | As      final productionversion      used forfield      trials inmarket     |   | For      sale to market |

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|                           |   |                    |   |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                             |   |                                               |
|--------------------------------|--------|-------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|
|                           |   |                    |   | 3      and 4 may       concurrently         confidence  materials      and       techniques |   | run       depending      on       levels      in      production           |   | Tooling      will start in      advance of... |
|                           |   |                    |   |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                             |   |                                               |
| 0+      6 months               |   | 0+      10 months  |   |  0+      16 months                                                                                                                                                                                             |   | 0+20      months                                                                                                                                                                                                                 |   | 0+24      months                                   |
|                           |   |                    |   |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                             |   |                                               |
| Capability:                    |   |                    |   |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                             |   |                                               |
|                           |   |                    |   |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                             |   |                                               |
| IVMD  -      current |   | IMDV      + resource    |   | Small      consortiumCurrent      market player                                                                                                                                                                     |   | Larger      consortiumCurrent      market player                                                                                                                                                                                 |   | Current      marketplayer                          |
|                           |   |                    |   |                                                                                                                                                                                                                     |   |                                                                                                                                                                                                                             |   |                                               |

|        The current product      development status of our technology may be summarized as follows:            |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
|   Technology                                                                                                       |   | Product                                                                                             |   | Key      Applications                                             |   | Development      Stage |   |
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
| 1.      Blood analyte                                                                                                   |   | Fast,      sensitive low cost   Biomarker      measurement                                                                                                 |   | Cardiac,      HIV, Drug diagnosis      and      measurement                      |   |  2 |   |
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
| 2.      Blood glucose monitor                                                                            |   | Non-invasive,      accurate      Point      of      care                                            |   | Routine      measurement of glucose   For      self      management        Of      glucose      |   | 1 |   |
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
| 3.      Digital Strip Reader                                                                        |   | Low      cost, hand held yes/no  reader      for immunoassay testing                                                                                                                          |   | various      threshold assays                                                                                                           |   | 3 |   |
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
| 4.      BAM (minimally invasive)                                                                                                  |   | Point      of care blood                                                                                                                                                                           |   | minimally      invasive,      monitoring        Of      clinical conditions such As      coagulation time |   |  3 |   |
|                                                                                                                              |   |                                                                                                                                                                           |   |                                                                                                                                                   |   |   |   |
| 5.      Medical      imaging                                               |   | Professional      medical scannerPortable      imaging device     Dental      imaging device                                                                              |   | Non-invasive,      safe, high - quality      alternative to 2D X- ray      scanning                                                          |   | 3 |   |
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
| 6      Medical imaging                                                                                                  |   | Bone      densitometry Professional medical Non-invasive  and      safe 1 densitometer measurement of onset andOTC      variant for home use status of osteoporosis(esp.      for female use) |   |                                                                                                                                                   |   | 2 |   |
|                                                                                                                              |   |                                                                                                                                                                                                    |   |                                                                                                                                                   |   |   |   |
| 7      Labor predictor                                                                                                            |   | Labor      predictor-OTCLabor      predictor- professional      medical                                                                                                                            |   | Accurate      prediction of onset  of      labor from 6 weeks out                                                                            |   | 3 |   |

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| · | Chinese      manufacturing – IVMD is active in manufacturing and assembling products      via a number of manufacturers in China, particularly “King-I” and “Hen      Young” Manufacturing in the Don Guanprovince. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Patent/IPR      management – IVMD uses Wilson Gun McCaw and Novagraaf to construct and      manage its patent process. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

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|               |   | Fiscal      2007 |   |   | Fiscal      2006 |   |   | Fiscal      2005 |   |
|--------------------|--------|------------------|--------|--------|------------------|--------|--------|------------------|--------|
| Quarter      Ended |   | High             |   |   | Low              |   |   | High             |   |   | Low |   |   | High |   |   | Low |   |
| October      31    |   | $                | 0.110  |   |             | $      | 0.450  |             |   | $ | 0.280 |   |   | $ | 0.130 |   |   | $ | 3.200 |   |   | $ | 1.800 |   |
| January      31    |   | $                | 0.730  |   |             | $      | 0.030  |             |   | $ | 0.013 |   |   | $ | 0.030 |   |   | $ | 2.250 |   |   | $ | 0.920 |   |
| April      30      |   | $                | 0.038  |   |             | $      | 0.008  |             |   | $ | 0.140 |   |   | $ | 0.065 |   |   | $ | 1.270 |   |   | $ | 0.630 |   |
| July      31       |   | $                | 0.013  |   |             | $      | 0.003  |             |   | $ | 0.015 |   |   | $ | 0.070 |   |   | $ | 0.810 |   |   | $ | 0.340 |   |

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Intellectual Property and ProductDevelopment

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Officer's Salaries

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RISK FACTORS

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Achieving marketing acceptance for our technologies and proposedproducts will require substantial marketing efforts and expenditure ofsignificant funds to educate key original equipment manufacturers, or OEMs, asto the distinctive characteristics and anticipated benefits of our products andtechnologies. We currently have limited manufacturing and marketing experienceand limited financial, personnel and other resources to undertake the extensivemarketing activities that are necessary to market our products andtechnologies.

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We may not be able to manage growth and expansioneffectively.

| · | technological      innovations or new products and services by us or our      competitors; |
|--------|--------------------------------------------------------------------------------------------|
| · | additions      or departures of key personnel;                                             |
| · | sales      of our common stock;                                                            |
| · | our      ability to integrate operations, technology, products and      services;          |
| · | our      ability to execute our business plan;                                             |
| · | operating      results below expectations;                                                 |
| · | loss      of any strategic relationship;                                                   |
| · | industry      developments;                                                                |
| · | economic      and other external factors; and                                              |
| · | period-to-period      fluctuations in our financialresults.                                |

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We have not paid dividends in the past and do not expect to paydividends in the future. Any return on investment may be limited to the value ofour common stock

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| Name        |   |   |   Age |   |   |   Position                                                                |
|------------------|--------|--------|------------|--------|--------|--------------------------------------------------------------------------------|
| Graham Cooper    |   |   | 60         |   |   | Chief Executive Officer, President and Chairman of the Board of      Directors |
| Martin Thorp     |   |   | 56         |   |   | Chief Financial Officer and Director                                           |
| John Fuller      |   |   | 47         |   |   | Director  (Non-Executive)                                                 |

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| Name & Principal Position                                                | Year | Salary ($) | Bonus ($) | Stock Awards($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non-Qualified Deferred      Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
|------------------------------------------------------------------------------|------|------------|-----------|-----------------|-------------------|--------------------------------------------|-----------------------------------------------------------------------------------|----------------------------|-----------|
| Graham Cooper President, CEO and Chairman of the Board of      Directors (1) | 2007 | $116,471   | $ -       | $ -             | $ -               | $ -                                        | $ -                                                                               | $ -                        | $116,471  |
|                                                                         | 2006 | $27,000    | $ -       | $ -             | $ -               | $ -                                        | $ -                                                                               | $ -                        | $27,000   |
| Martin Thorp CFO and Director (2)                                            | 2007 | $180,049   | $ -       | $ -             | $ 509,687         | $ -                                        | $ -                                                                               | $ -                        | $ 689,736 |
|                                                                         | 2006 | $175,042   | $ -       | $ -             | $ 10,500          | $ -                                        | $ -                                                                               | $ -                        | $ 185,542 |

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| Option Awards                                                            | Stock Awards                                                               |
|--------------------------------------------------------------------------|----------------------------------------------------------------------------|
| Name                                                                     | Number  of  Securities  Underlying  Unexercised  Options  (#)  Exercisable | Number  of  Securities  Underlying  Unexercised  Options  (#)  Unexercisable | Equity  Incentive  Plan  Awards:  Number  of  Securities Underlying  Unexercised  Unearned  Options  (#) | Option  Exercise  Price  ($) | Option  Expiration  Date | Number  of Shares  or Units  of Stock  That Have  Not  Vested  (#) | Market  Value of  Shares or  Units of  Stock  That Have  Not  Vested  ($) | Equity  Incentive  Plan Awards:  Number  of  Unearned  Shares,  Units or  Other Rights  That Have  Not  Vested  (#) | Equity Incentive  Plan Awards:  Market or Payout  Value  of  Unearned  Shares,  Units or  Other  Rights  That Have  Not  Vested  ($) |
| Graham Cooper President, CEO and Chairman of the Board of      Directors | Nil                                                                        | Nil | Nil | N/A | N/A | Nil | N/A | Nil | N/A |
|                                                                     |                                                                       |   |   |   |   |   |   |   |   |
| Martin Thorp CFO and Director                                            | 2,200,000                                                                  | 5,850,000 | Nil | See footnote 1) | See footnote 1) | Nil | N/A | Nil | N/A |

| Name         | # Options granted | Grant date | Exercise Price | Vesting date | Expiration date |
|--------------|-------------------|------------|----------------|--------------|-----------------|
| Martin Thorp | 2,000,000         | 10/10/2006 | $0.065         | 10/10/2006   | 10/10/2016      |
|         | 2,000,000         | 10/10/2006 | $0.065         | 09/30/2007   | 10/10/2016      |
|         | 2,000,000         | 10/10/2006 | $0.065         | 09/30/2008   | 10/10/2016      |
|         | 1,850,000         | 10/10/2006 | $0.065         | 09/30/2009   | 10/10/2016      |
|         | 150,000           | 01/03/2006 | $0.10          | 01/01/2007   | 01/01/2012      |
|         | 50,000            | 06/01/2005 | $0.55          | 06/01/2006   | 06/01/2015      |

| Risk Free Interest Rate                        |   |   | 4.7       | %      |
|------------------------------------------------|--------|--------|-----------|--------|
| Dividend Yield                                 |   |   | 0         | %      |
| Volatility Factor                              |   |   | 314       | %      |
| Weighted Average Expected Life (yrs)           |   |   | 5         |   |
| No of options expected to vest on vesting date |   |   | 7,850,000 |   |
| Value of on option (Black Scholes)             |   | $      | 0.065     |   |
| Value of option grant (aggregate)              |   | $      | 509,687   |   |

----

| Name                                | Fees Earned or Paid in Cash  ($) | Stock Awards  ($) | Option  Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred      Compensation Earnings | All Other Compensation  ($) | Total  ($) |
|-------------------------------------|----------------------------------|-------------------|--------------------|--------------------------------------------|------------------------------------------------------------------------------|-----------------------------|------------|
| John Fuller  Non-executive Director | $50,000                          | $ -               | $129,856           | $ -                                        | $ -                                                                          | $ -                         | $179,856   |

|       Name      of Beneficial      Owner                                                                                                             |   Number      of Shares  Beneficially Owned   |   Class of      Stock    |  Percentage      Outstanding (1) |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|---------------------------------------------------|---------------------------------------|
|                                             |                                                                        |                                              |                                  |
|                                                                                                                                                                                                                                                               |                                                                        |                                              |                                  |
| Abacus Trust Company      Limited (2)                                                                                                                                                                                                                              | 19,328,381                                                                  | Preferred      Stock               | 20.4%                                 |
| Unit 2, Taurus Park                                                                                                                                                                                                                                                |                                                                        |                                              |                                  |
| Europa Boulevard                                                                                                                                                                                                                                                   |                                                                        |                                              |                                  |
| Warrington WA5 7YT                                                                                                                                                                                                                                                 |                                                                        |                                              |                                  |
| England                                                                                                                                                                                                                                                            |                                                                        |                                              |                                  |
|                                                                                                                                                                                                                                                               |                                                                        |                                              |                                  |
| Rodney Philip      Jackson                                                                                                                                                                                                                                         | 6,392,695                                                                   | Preferred      Stock                    | 6.7%                                  |
| The      Green House                                                                                                                                                                                                                                               |                                                                        |                                              |                                  |
| Beechwood Business      Park North                                                                                                                                                                                                                                 |                                                                        |                                              |                                  |
| Inverness, Scotland      IV2 3BL                                                                                                                                                                                                                                   |                                                                        |                                              |                                  |
|                                                                                                                                                                                                                                                               |                                                                        |                                              |                                  |
| HEMP Trustees      Limited (3)                                                                                                                                                                                                                                     | 12,799,055                                                                  | Common      Stock                       | 13.5%                                 |
| 10      Foster Lane                                                                                                                                                                                                                                                |                                                                        |                                              |                                  |
| London, England                                                                                                                                                                                                                                                    |                                                                        |                                              |                                  |
| EC2V 6HR                                                                                                                                                                                                                                                           |                                                                        |                                              |                                  |
|                                                                                                                                                                                                                                                               |                                                                        |                                              |                                  |
| Rubin Family      Irrevocable Stock                                                                                                                                                                                                                                | 4,674,541                                                                   | Common      Stock                       | 4.9%                                  |
| Trust (4)                                                                                                                                                                                                                                                          |                                                                        |                                              |                                  |
| 25      Highland Boulevard                                                                                                                                                                                                                                         |                                                                        |                                              |                                  |
| Dix      Hills, New York 11730                                                                                                                                                                                                                                     |                                                                        |                                              |                                  |
|                                                                                                                                                                                                                                                               |                                                                        |                                              |                                  |

----

| John Fuller (5)                      | 7,537,487        | Common Stock                        | 7.9%   |
|--------------------------------------|------------------|-------------------------------------|--------|
| Easter Shian, Glen      Quaich       |             |                                |   |
| Amulree, Perthshire                  |             |                                |   |
| PH8      0DB                         |             |                                |   |
| Scotland                             |             |                                |   |
|                                 |             |                                |   |
| Brian Cameron (6)                    | 6,513,335        | Common      Stock         | 6.9%   |
| Campbell Cairns,      Craigellachie  |             |                                |   |
| Aberlour, Banffshire                 |             |                                |   |
| Scotland                             |             |                                |   |
|                                 |             |                                |   |
| Graham      Cooper  (2)    | 0                | Common      Stock         | *      |
| Rock Cottage                         |             |                                |   |
| Finsthwaite                          |             |                                |   |
| Cumbria                              |             |                                |   |
| United Kingdom                       |             |                                |   |
| LA12 8BH                             |             |                                |   |
|                                 |             |                                |   |
| Martin E. Thorp (7)                  | 4,200,000        | Common      Stock    | 4.2%   |
| 31      Vogan's Mill Wharf           |             |                                |   |
| 17      Mill Street,                 |             |                                |   |
| St      Savior's Dock                |             |                                |   |
| Tower Bridge                         |             |                                |   |
| London SE1 2BZ7                      |             |                                |   |
|                                 |             |                                |   |
| All      directors and executive     |  31,065,868 | Common stock                   | 32.8%  |
| officers as a group      (3 persons) |             |                                |   |

----

----

|  Exhibit Number |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|----------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.1                  |   | Share  Purchase  Agreement,  dated      as of June 30,  2004,  among Sports      Information  and  Publishing  Corp.,  Michael  Tanner,  HEMP  Trustees      Limited  (as      the  corporate  trustee  of      the  HEMP  Employees  Benefit Trust), John      Fuller,  Brian Cameron,  Westek Limited and other      holders of securities of In Veritas Medical Diagnostics, Inc. (as      incorporated by  reference  to Form      8-K,  filed with      the  Securities  and  Exchange Commission      on August 10, 2004).                                                                                                       |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.2                  |   | Amendment No. 1 to      Share Exchange Agreement,  effective as of July      31,2004,  among  Sports  Information  and  Publishing  Corp.,  Michael      D. Tanner,  HEMP Trustees  Limited (as the      corporate  trustee of the HEMP Employees Benefit Trust), John      Fuller,  Brian Cameron,  Westek Limited and the other      holders of  securities  of In Vivo      Medical  Diagnostics, Inc.  (formerly  Hall      Effect  Medical  Products)      (as  incorporated  by  reference  to      Form  8-K/A,  filed  with      the  Securities  and  Exchange Commission      on February 3, 2005). |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1                  |   | Articles of      Incorporation  (as incorporated by reference to Form      SB-2,  filed with      the  Securities  and  Exchange  Commission  on      January  24, 2002).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.2                  |   | Articles of      Amendment of Articles of  Incorporation,  dated as of      July  22, 2004 (as  incorporated  by      reference to the Annual  Report on Form 10-KSB,  filed      with the Securities and Exchange Commission on February 3, 2005).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

----

|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.3                                                          |   | Articles  of  Amendment  of  Articles  of  Incorporation,  dated      as of September 20, 2004.                                                                                                                                                                                                                                                                              |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.4                                                          |   | By-Laws      (as  incorporated  by reference  to Form      SB-2,  filed with the Securities and Exchange Commission on      January 24, 2002).                                                                                                                                                                                                                                                             |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.1                                                         |   | Employment Agreement      among Hall Effect Technologies Limited, a companyregistered in      England,  Jonathan Andrew Fuller and Hall Effect      Medical Products Inc., a      Delaware  corporation.  (as incorporated by reference      to the Annual  Report on Form 10-KSB,  filed with      the  Securities  and Exchange Commission on February      3, 2005). |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.2                                                         |   | Employment Agreement      among Hall Effect Technologies Limited, a company registered in      England,  Brian Cameron and Hall Effect Medical      Products Inc., a      Delaware  corporation.  (as  incorporated  by      reference to the Annual Report on Form 10-KSB,  filed with      the  Securities and Exchange Commission on February 3, 2005).              |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.3                                                         |   | Research  and  Development  Agreement  dated      July 1, 2002 between Hall Effect Technologies  Limited and      Unipath Limited.  (as incorporated by reference to the      Amended  Annual Report on      Form  10-KSB/A,  filed with the Securities and      Exchange Commission on August 15, 2005).                                                |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.4                                                         |   | Patent License      Agreement dated September 1, 2002 between Hall Effect      Technologies   Limited  and  Unipath  Limited.   (as  incorporated  by      reference to the Amended  Annual Report on      Form  10-KSB/A,  filed with the Securities and      Exchange Commission on August 15, 2005).                         |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.5                                                         |   | Subscription  Agreement,  dated      December 22, 2004 by and among In Vivo Medical      Diagnostics,  Inc. and NITE Capital,  L.P. (as      incorporated      by reference  to  Form  8-K,  filed  with  the  Securities  and  Exchange      Commission on December 29, 2004).                             |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.6                                                         |   | Registration Rights      Agreement, dated December 22, 2004 by and among In Vivo Medical      Diagnostics, Inc. and NITE Capital, L.P. (as      incorporated by  reference  to Form      8-K,  filed with      the  Securities  and  Exchange Commission      on December 29, 2004).                                                                                         |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.7                                                         |   | Form  of  8%  Promissory  Note  issued  to  NITE  Capital,   L.P.  (as incorporated  by      reference to Form 8-K,  filed with the Securities andExchange      Commission on December 29, 2004).                                                                                                                |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.8                                                         |   | Certificate of the      Powers, Designations, Preferences and Rights of the Series B      Preferred  Stock      (As  incorporated  by  reference to Form 8-K      filed with the Securities and Exchange Commission on April 21, 2005).                                                                                                                                                                    |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.9                                                         |   | Form      of  Subscription  Agreement - April      2005  private  placement  (As      incorporated  by reference to Form 8-K filed with      the  Securities  and Exchange Commission on April 21,      2005).                                                                                                                                                     |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.10                                                        |   | Form of Common Stock      Purchase  Warrant - April 2005 private  placement      (As  incorporated  by reference to Form 8-K filed with      the  Securities and Exchange Commission on April 21, 2005).                                                                                                                                                                                         |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.11                                                        |   | Form of Unit Warrant      - April 2005 private  placement (As  incorporated      by  reference  to Form      8-K  filed  with      the  Securities  and  Exchange Commission      on April 21, 2005).                                                                                                                                               |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.12                                                        |   |  Form of      Registration  Rights Agreement - April 2005      private  placement (As  incorporated  by      reference to Form 8-K filed with the  Securities and Exchange      Commission on April 21, 2005).                                                                                                                                                                              |
|                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.13                                                        |   | Secured      Convertible  Debenture issued to Montgomery dated September 7,      2005 (as incorporated by reference to the Company's  Current      Report on Form  8-K,  filed  with      the  Securities  and  Exchange  Commission  on      September 13, 2005).                                                                             |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14  |   | Warrant issued to      Montgomery dated September 7, 2005 (as incorporated by reference to      the Company's Current Report on Form 8-K, filed with the      Securities and Exchange Commission on September 13, 2005).                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.15  |   | Form of Convertible      Debenture dated September 7, 2005 (as incorporated by reference to      the Company's Current Report on Form 8-K, filed with the      Securities and Exchange Commission on September 13, 2005).                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.16  |   | Investor  Registration      Rights Agreement dated September 7, 2005 by and between the Company      and  Montgomery (as  incorporated  by      reference to the Company's  Current  Report on      Form 8-K,  filed with the Securities and Exchange Commission on      September 13, 2005).                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.17  |   | Pledge and      Escrow  Agreement  dated September 7, 2005 by and      among the      Company,   Montgomery   and  David   Gonzalez  as  escrow   agent  (as      incorporated by reference to the Company's Current Report on Form 8-K,      filed with the  Securities  and      Exchange  Commission  on September 13,2005). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.18  |   | Securities  Purchase  Agreement      dated September 7, 2005 by and betweent he  Company      and  Montgomery  (as  incorporated  by  reference  to      the Company's  Current  Report on Form      8-K,  filed with the Securities and Exchange Commission on      September 13, 2005).                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.19  |   | Security  Agreement      dated September 7, 2005 by and between the Company and Montgomery (as      incorporated by reference to the Company's  Current Report on      Form 8-K, filed with the Securities and Exchange  Commission on      September 13, 2005).                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.20  |   | Standby      Equity  Distribution  Agreement dated September 7,      2005 by and between the Company and Cornell      (as  incorporated  by reference to      the Company's  Current  Report on Form      8-K,  filed with the Securities and Exchange Commission on      September 13, 2005).                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.21  |   | Registration  Rights  Agreement      dated September 7, 2005 by and betweenthe and Cornell (as incorporated by      reference to the Company's Current Report on Form 8-K, filed with the      Securities and Exchange  Commission on September 13, 2005).                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.22  |   | Placement  Agent  Agreement      dated September 7, 2005 by and between the Company and Monitor Capital,      Inc. (as incorporated by reference to      theCompany's  Current  Report on Form      8-K,  filed with the Securities and Exchange Commission on      September 13, 2005).                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.23  |   | Intercreditor  Agreement  dated  September  7,  2005      by and  among the Company, Montgomery and the investors      identified in Schedule I thereto (as incorporated by reference to the      Company's  Current Report on Form  8-K, filed with      the  Securities  and Exchange  Commission on      September  13, 2005).                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.24  |   | Investor  Registration      Rights Agreement dated September 7, 2005 by and      between  the  Company  and  the  investors   identified   thereto  (as incorporated      by reference to the Company's Current Report on Form 8-K, filed with      the  Securities  and      Exchange  Commission  on September 13, 2005).               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.25  |   | Securities Purchase      Agreement dated September 7, 2005 by and between the Company and the      investors identified thereto (as incorporated by reference to the      Company’s Current Report on Form 8-K, filed with the Securities and      Exchange Commission on September 13, 2005).                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.26  |   | Security Agreement      dated September 7, 2005 by and between the Company and the investors      identified thereto (as incorporated by reference to the Company’s Current      Report on Form 8-K, filed with the Securities and Exchange Commission on      September 13, 2005).                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.27  |   | Royalty  Participation  Agreement  dated      May 3, 2006 by and between In      Veritas  Medical  Diagnostics,  Inc. and The      Rubin Family  Irrevocable Stock Trust      (as  incorporated  by reference to      the  Company's  Current Report on Form 8-K filed with      the Securities  and Exchange  Commission on May 11,      2006.               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.28  |   | Termination,  Settlement      and  Forbearance  Agreement dated October 19,2006      between In Veritas Medical      Diagnostics,  Inc.,  Montgomery Equity Partners      Ltd. and Cornell  Capital  Partners L.P.      (as  incorporated by reference to the      Company's  Current Report on Form 8- K filed with      the Securities and Exchange Commission on October 25 2006.        |

----

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.28  |   | Amendment      No.  1  to  Loan  Agreement   between  In  Veritas  Medical  Diagnostics,      Inc. and Triumph Small Cap Fund, Inc. (as incorporated by      reference  to      the  Form  8-K  filed  with      the  Securities  &  Exchange Commission      on November 21, 2006) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.29  |   | Purchase Agreement      between In Veritas Medical Diagnostics, Inc. and Triumph Small Cap Fund,      Inc.                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.30  |   | Exchange Agreement      between In Veritas Medical Diagnostics, Inc. and Triumph Small Cap      Fund, Inc.                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.31  |   | Form of 8% Secured      Subordinated Convertible Debenture                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.32  |   | Subordinated      Security Agreements between In Veritas Medical Diagnostics, Inc. and      Triumph Small Cap Fund, Inc.                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.33  |   | Modification      Agreement dated January 11, 2007, between In Veritas      Medical Diagnostics, Inc. and Longview Fund L.P. (as incorporated by      reference to the Company’s Current Report on Form      8-K,  filed  with      the  Securities  and Exchange Commission on January      18, 2007).                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.34  |   |   18%      Secured Subordinated Convertible Debenture issued to Longview Fund      L.P.dated January 11, 2007 (as incorporated by reference to the Company’s      Current Report on Form 8-K,  filed  with      the  Securities  and  Exchange Commission on      January 18, 2007).                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.35  |   |   18%      Secured Subordinated Convertible Debenture issued to Longview Fund      L.P.dated January 11, 2007 (as incorporated by reference to the Company’s      Current Report on Form 8-K,  filed  with      the  Securities  and  Exchange Commission on      January 18, 2007).                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 14.1   |   |  Code of Ethics      and Business Conduct for Officers, Directors and Employees.  (as      incorporated by reference to the Annual Report on      Form 10-KSB,  filed with the Securities and Exchange      Commission on February 3, 2005).                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 21     |   | List      of  Subsidiaries  (as  incorporated  by  reference  to      the Annual      Report  on  Form  10-KSB,  filed  with  the  Securities  and  Exchange      Commission on February 3, 2005).                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1   |   | Certification by      Graham Cooper, President and Chief Executive Officer, pursuant to Section      302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2   |   | Certification by      Martin Thorp,  Chief      Financial  Officer,  pursuant to Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1   |   | Certification by      Graham Cooper, President and Chief Executive Officer, pursuant to Section      906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.2   |   |  Certification      by Martin Thorp,  Chief      Financial  Officer,  pursuant to  Section 906 of      the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                         |

----

 

----

|                                                 |   |                                       |
|------------------------------------------------------|--------|--------------------------------------------|
|                                                 |   |                                       |   |
| Dated:   February      15, 2008  | By:    | /s/ Graham      Cooper                |   |
|                                                 |   | Graham Cooper                              |   |
|                                                 |   | President and      Chief Executive Officer |   |
|                                                 |   | (Principal      Executive Officer)         |   |

|                                                 | Company Name |                                                                                 |
|------------------------------------------------------|--------------|--------------------------------------------------------------------------------------|
|                                                 |         |                                                                                 |   |
| Dated:   February      15, 2008  | By:          | /s/ Martin      Thorp                                                           |   |
|                                                 |         | Martin Thorp                                                                         |   |
|                                                 |         | Chief Financial      Officer  (Principal Financial and Accounting Officer) |   |
|                                                 |         |                                                                                 |   |

| NAME           |   | TITLE                                           | DATE                               |
|-------------------------------|--------|-----------------------------------------------------------|------------------------------------|
|                          |   |                                                      |                               |
|  /s/ Graham      Cooper  |   | President, Chief      Executive Officer and Chairman | February 15,      2008        |
|  Graham      Cooper      |   | (Principal      Executive Officer)                        |                               |
|                          |   |                                                      |                               |
|  /s/ Martin      Thorp   |   | Chief Financial      Officer and Director                 | February 15,       2008  |
|  Martin      Thorp  |   | (Principal      Financial and Accounting Officer)         |                               |

----

|                                                                                         | Page   |
|----------------------------------------------------------------------------------------------|--------|
| Report      of Independent Registered Public Accounting Firm.                                | F-2    |
|                                                                                         |   |
| Consolidated      Balance Sheet at July 31, 2007.                                            | F-3    |
|                                                                                         |   |
| Consolidated      Statements of Operations for the years                                     |   |
|      ended      July 31, 2007 and 2006 and for the period           |   |
|      from      March 26, 1997 (Inception) through July 31, 2007     | F-4    |
|                                                                                         |   |
| Consolidated      Statements of Accumulated Other Comprehensive Loss for the      years      |   |
|      ended      July 31, 2007 and 2006 and for the period           |   |
|      from      March 26, 1997 (Inception) through July 31, 2007.... | F-5    |
|                                                                                         |   |
| Statement      of Changes in Shareholders' Deficit for the period from                       |   |
|      March      26, 1997 (Inception) through July 31, 2007          | F-6    |
|                                                                                         |   |
| Consolidated      Statements of Cash Flows for the years                                     |   |
|      ended      July 31, 2007 and 2006 and for the period           |   |
|      from      March 26, 1997 (Inception) through July 31, 2007     | F-9    |
|                                                                                         |   |
| Notes      to Consolidated Financial Statements                                              | F-11   |

----

----

----

|                                                                                  |   |          |                      |
|---------------------------------------------------------------------------------------|--------|---------------|---------------------------|
|                                                                                  |   | July      31, |                      |
|                                                                                  |   | 2007          |                      |
| Assets                                                                                |   |          |                      |
| Current      assets:                                                                  |   |          |                      |
| Prepaid      expenses and other                                                       |   | $             | 11,151                    |   |
| Total      current assets                                                             |   |          | 11,151                    |   |
| Property      and equipment, net                                                      |   |          | 5,251                     |   |
| Intangible      assets:                                                               |   |          |                      |   |
| Patent      costs (note 3)                                                            |   |          | 95,545                    |   |
|                                                                                  |   |          |                      |   |
|                                                                                  |   | $             | 111,947                   |   |
|                                                                                  |   |          |                      |   |
| Liabilities      and Shareholders’ Deficit                                      |   |          |                      |   |
|                                                                                  |   |          |                      |   |
| Current      liabilities:                                                             |   |          |                      |   |
| Accounts      payable                                                                 |   | $             | 1,209,162                 |   |
| Overdraft                                                                             |   |          | 1,187                     |   |
| Accrued      interest payable                                                         |   |          | 665,411                   |   |
| Accrued      liabilities                                                              |   |          | 928,958                   |   |
| Indebtedness      to related parties (note 2)                                         |   |          | 215,163                   |   |
| Current      portion of Long Term Notes Payable                                       |   |          |                      |   |
| (net      of unamortized discount of $114,843) (note 9)                               |   |          | 1,208,957                 |   |
| Notes      payable, related party  (note 9)                                      |   |          | 1,800,000                 |   |
| Short      term advance from Related Party (note 9)                                   |   |          | 353,460                   |   |
| Short      term advance                                                               |   |          | 80,000                    |   |
| Total      current liabilities                                                        |   |          | 6,462,298                 |   |
|                                                                                  |   |          |                      |   |
| Long-term      debt:                                                                  |   |          |                      |   |
| Royalty      Participation Agreement advances (note 9)                                |   |          | 657,630                   |   |
| Total      liabilities                                                                |   |          | 7,119,928                 |   |
|                                                                                  |   |          |                      |   |
| Shareholders’      deficit:                                                     |   |          |                      |   |
| Preferred      stock, $.001 par value, 50,000,000 shares authorized      (aggregate   |   |          |                      |   |
| liquidation      preference of $8 million)                                            |   |          |                      |   |
| Series      A Preferred stock, 34,343,662 shares issued and outstanding (note      8) |   |          | 34,344                    |   |
| Common      stock, $.001 par value, 500,000,000 shares authorized,                    |   |          |                      |   |
| 86,103,457      shares issued, 25,685,000 held in escrow, and                         |   |          |                      |   |
| 60,418,457      shares outstanding                                                    |   |          | 86,103                    |   |
| Stock      issued as security for convertible debentues (note 8)                      |   |          | (3,339,050                | ) |
| Additional      paid-in capital                                                       |   |          | 9,119,868                 |   |
| Accumulated      other comprehensive loss- foreign currency adjustment                |   |          | (483,112                  | ) |
| Deficit      accumulated during the development stage                                 |   |          | (12,426,134               | ) |
|                                                                                  |   |          |                      |   |
| Total      shareholders' deficit                                                      |   |          | (7,007,981                | ) |
|                                                                                  |   | $             | 111,947         |   |
|                                                                                  |   |          |                      |   |
|                                                                                  |   |          |                      |   |

----

|                                     |   |                      |       |   |     |   |       | March 26, 1997 |   |
|------------------------------------------|--------|---------------------------|------------|--------|----------|--------|------------|----------------|--------|
|                                     |   |                      |       |   |     |   |       | (Inception)    |   |
|                                     |   | Years ended     |       |   | Through  |   |
|                                     |   | July 31,        |       |   | July 31, |   |
|                                     |   | 2007                      |       |   | 2006     |   |       | 2007           |   |
|                                     |   |                      |       |   |     |   |       |           |   |
| Net sales and gross revenues:            |   |                      |       |   |     |   |       |           |   |
| Net sales                                |   | $                         | —    |   |     | $      | 1,271,130  |           |   | $ | 3,571,807 |   |
| Cost of sales                            |   |                      | —    |   |     |   | —    |           |   |   | 242,097 |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Gross profit                             |   |                      | —    |   |     |   | 1,271,130  |           |   |   | 3,329,710 |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Operating expenses:                      |   |                      |       |   |     |   |       |           |   |   |   |   |
| Research and development                 |   |                      | 711,327    |   |     |   | 1,306,542  |           |   |   | 5,701,048 |   |
| Legal & Professional                 |   |                      | 409,583    |   |     |   | 160,567    |           |   |   | 1,394,643 |   |
| Selling and marketing                    |   |                      | 280,196    |   |     |   | 286,097    |           |   |   | 622,750 |   |
| General and administrative               |   |                      | 1,316,552  |   |     |   | 476,984    |           |   |   | 6,290,492 |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Total operating expenses                 |   |                      | 2,717,658  |   |     |   | 2,230,190  |           |   |   | 14,008,933 |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Loss before other income                 |   |                      | (2,717,658 | )      |     |   | (959,060   | )              |   |   | (10,679,223 | ) |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Nonoperating income (expense):           |   |                      |       |   |     |   |       |           |   |   |   |   |
| UK government grant (Note 1)             |   |                      | —    |   |     |   | 96,502     |           |   |   | 291,398 |   |
| Interest expense                         |   |                      | (953,106   | )      |     |   | (428,215   | )              |   |   | (1,611,863 | ) |
| Loan Finance issue costs                 |   |                      | —    |   |     |   | (307,360   | )              |   |   | (708,279 | ) |
| Costs of aborted financing               |   |                      | —    |   |     |   | (113,400   | )              |   |   | (113,400 | ) |
| Compensation payment to former director  |   |                      | —    |   |     |   | (135,000   | )              |   |   | (135,000 | ) |
| Gain (loss) on foreign exchange          |   |                      | —    |   |     |   | 2,264      |           |   |   | (132,378 | ) |
| Gain (loss) from extinguishments of debt |   |                      | —    |   |     |   | —    |           |   |   | 662,611 |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Loss before income taxes                 |   |                      | (3,670,764 | )      |     |   | (1,848,797 | )              |   |   | (12,426,134 | ) |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Income tax provision                     |   |                      | —    |   |     |   | —    |           |   |   | — |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Net loss                                 |   | $                         | (3,670,764 | )      |     | $      | (1,848,797 | )              |   | $ | (12,426,134 | ) |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Loss applicable to common stock          |   | $                         | (3,670,764 | )      |     | $      | (1,848,797 | )              |   |   |   |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Basic and diluted loss per share         |   | $                         | (0.06      | )      |     | $      | (0.03      | )              |   |   |   |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |
| Weighted average number of common shares |   |                      |       |   |     |   |       |           |   |   |   |   |
| outstanding                              |   |                      | 59,146,019 |   |     |   | 55,094,879 |           |   |   |   |   |
|                                     |   |                      |       |   |     |   |       |           |   |   |   |   |

----

|                                       |   |                                     |       |   |          |   |       | March      26, 1997 |   |
|--------------------------------------------|--------|------------------------------------------|------------|--------|---------------|--------|------------|---------------------|--------|
|                                       |   |                                     |       |   |          |   |       | (Inception)         |   |
|                                       |   |                                     |       |   | Through       |   |
|                                       |   | Period      ended     July 31, |       |   | July      31, |   |
|                                       |   | 2007                                     |       |   | 2006          |   |       | 2007                |   |
|                                       |   |                                     |       |   |          |   |       |                |   |
| Net      loss                              |   | $                                        | (3,670,764 | )      |          | $      | (1,848,797 | )                   |   | $ | (12,426,134 | ) |
|                                       |   |                                     |       |   |          |   |       |                |   |   |   |   |
| Other      comprehensive loss, net of tax: |   |                                     |       |   |          |   |       |                |   |   |   |   |
| Cumulative      translation adjustment     |   |                                     | (34,135    | )      |          |   | (79,486    | )                   |   |   | (483,112 | ) |
|                                       |   |                                     |       |   |          |   |       |                |   |   |   |   |
| Comprehensive      loss                    |   | $                                        | (3,704,899 | )      |          | $      | (1,928,283 | )                   |   | $ | (12,909,246 | ) |
|                                       |   |                                     |       |   |          |   |       |                |   |   |   |   |
|                                       |   |                                     |       |   |          |   |       |                |   |   |   |   |

----

|                                                     |     |   | Preferred      Stock Outstanding            |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    | Accumulated    |   |       |              |   |   |              |    |
|----------------------------------------------------------|----------|--------|---------------------------------------------------------------------------|---------|--------|------------------------------------|---------|---------|--------|--------|---------|----------------|--------|--------|---------|---------|--------|-------------------------------------------------------|------------|---------|----------------|--------|------------|-------------------|--------|--------|-------------------|---------|
|                                                     |     |   | Series      A                                              |    |   | Series      B       |    |    |   |   |    |  Common   |   |   |    |    |   |                                                  |       |    |           |   |       | Deficit           |   |   | Accumulated       |    |   |   |   |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |             StockShares |       |    |           |   |       | Additionalpaid-in |   |   | Stock      issued |    |   | DuringDevelopment |   |   | OtherComprehensive |   |   |   |   |
|                                                     |     |   | Shares                                                                    |    |   | Par      Value                     |    |    | Shares |   |    | Par      Value |   |   | Issued  |    |   | Outstanding                                           |       |    | Par      Value |   |       | capital           |   |   | as      security  |    |   | Stage |   |   | Loss |   |   | Total |   |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |
| Balance,      March 26, 1997                             |     |   | —                                                                   |    |   | $                                  | — |    |   |   | — |           |   | $      | — |    |   |                                                  | —    |    |           |   | —    |              |   | $      | —           |    |   | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | — |   |   | $ | - |   |
| October      2000, sale of stock, ($0.0035/share)        |     |   | 4,366,377                                                                 |    |   |                               | 4,366   |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 10,874 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 15,240 |   |
| December      2001, sale of stock, ($0.0035/share)       |     |   | 6,545,703                                                                 |    |   |                               | 6,546   |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 16,301 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 22,847 |   |
| October      2001, sale of stock, ($0.0202/share)        |     |   | 23,431,582                                                                |    |   |                               | 23,432  |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 448,906 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 472,338 |   |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       | — |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign      currency                                    |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        translation adjustment                       |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 21,203 |   |   |   | 21,203 |   |
| Net      loss                                            |     |   |                                                                      | — |   |                               |    | — |   |   |    | —        |   |   |    | — |   |                                                  |       | — |           |   |       | —           |   |   |              | — |   |   |   | — |   |   |   | — |   |   |   | (1,350,829 | ) |   |   | — |   |   |   | (1,350,829 | ) |
| Balance,      July 31, 2001                              |     |   | 34,343,662                                                                |    |   |                               | 34,344  |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 476,081 |   |   |   | — |   |   |   | (1,350,829 | ) |   |   | 21,203 |   |   |   | (819,201 | ) |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign      currency                                    |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        translation adjustment                       |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (140,377 | ) |   |   | (140,377 | ) |
| Net      loss                                            |     |   |                                                                      | — |   |                               |    | — |   |   |    | —        |   |   |    | — |   |                                                  |       | — |           |   |       | —           |   |   |              | — |   |   |   | — |   |   |   | — |   |   |   | (1,007,362 | ) |   |   | — |   |   |   | (1,007,362 | ) |
| Balance,      July 31, 2002                              |     |   | 34,343,662                                                                |    |   |                               | 34,344  |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 476,081 |   |   |   | — |   |   |   | (2,358,191 | ) |   |   | (119,174 | ) |   |   | (1,966,940 | ) |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       | — |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign      currency                                    |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  | —    |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        translation adjustment                       |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (185,391 | ) |   |   | (185,391 | ) |
| Net      loss                                            |     |   |                                                                      | — |   |                               |    | — |   |   |    | —        |   |   |    | — |   |                                                  |       | — |           |   |       | —           |   |   |              | — |   |   |   | — |   |   |   | — |   |   |   | (1,080,619 | ) |   |   | — |   |   |   | (1,080,619 | ) |
| Balance,      July 31, 2003                              |     |   | 34,343,662                                                                |    |   |                               | 34,344  |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 476,081 |   |   |   | — |   |   |   | (3,438,810 | ) |   |   | (304,565 | ) |   |   | (3,232,950 | ) |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       | — |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merger      with HEMP (Note 8)                           |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 38,397,164 |    |           |   | 38,397,164 |              |   |   | 38,397            |    |   |   | (29,397 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 9,000 |   |
| July      2004, merger with SIPC                         |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 10,550,000 |    |           |   | 10,550,000 |              |   |   | 10,550            |    |   |   | (10,688 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (138 | ) |
| July      2004, issuance of common                       |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        stock for bridge loans, ($0.2750/share)      |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 1,636,233  |    |           |   | 1,636,233  |              |   |   | 1,636             |    |   |   | 448,364 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 450,000 |   |
| July      2004, issuance of common                       |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        stock for services, ($0.4093/share)          |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 239,289    |    |           |   | 239,289    |              |   |   | 239               |    |   |   | 97,702 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 97,941 |   |
| Foreign      currency                                    |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        translation adjustment                       |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (339,570 | ) |   |   | (339,570 | ) |
| Reclassification      of debt forgiveness                |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        by Westek (Notes 2 and 9)                    |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 2,030,298 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 2,030,298 |   |
| Net      loss                                            |     |   |                                                                      | — |   |                               |    | — |   |   |    | —        |   |   |    | — |   |                                                  |       | — |           |   |       | —           |   |   |              | — |   |   |   | — |   |   |   | — |   |   |   | (1,016,972 | ) |   |   | — |   |   |   | (1,016,972 | ) |
| Balance,      July 31, 2004                              |     |   | 34,343,662                                                                |    |   |                               | 34,344  |    |   |   | — |           |   |   | — |    |   |                                                  | 50,822,686 |    |           |   | 50,822,686 |              |   | $      | 50,822            |    |   | $ | 3,012,360 |   |   | $ | — |   |   |   | (4,455,782 | ) |   | $ | (644,135 | ) |   | $ | (2,002,391 | ) |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| August      2004, additional paid in capital from bridge |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        loans exchanged for shares                   |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | —    |    |           |   | —    |              |   |   | —           |    |   |   | 17,495 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 17,495 |   |
|                                                     |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       | — |           |   |       | —           |   |   |              | — |   |   |   | (6,000 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (6,000 | ) |
| Conversion      of Preferred Stock into Debenture        |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 694,550    |    |           |   | 694,550    |              |   |   | 695               |    |   |   | 427,695 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 428,390 |   |
| December      2004, issuance of stock for interest on    |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 60,096     |    |           |   | 60,096     |              |   |   | 60                |    |   |   | 76,100 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 76,160 |   |
|        bridge loan                                  |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March      2005, issuance of stock for services          |     |   | —                                                                   |    |   |                               | — |    |   |   | — |           |   |   | — |    |   |                                                  | 100,000    |    |           |   | 100,000    |              |   |   | 100               |    |   |   | 62,880 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 62,980 |   |
| April      2005, issuance of stock warrants for          |     |   |                                                                      |    |   |                               |    |    |   |   |    |           |   |   |    |    |   |                                                  |       |    |           |   |       |              |   |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     | services |   |                                                                      | — |   |                               |    | — |   |   |    | —        |   |   |    | — |   |                                                  |       | — |           |   |       | —           |   |   |              | — |   |   |   | 17,295 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 17,295 |   |

----

| April      2005, sale of preferred Series B stock                                            |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|----------------------------------------------------------------------------------------------|--------------|--------|------------|---------|--------|--------|---------|---------|--------|--------|----------|---------|--------|--------|---------|---------|--------|--------|------------|-----------|--------|--------|------------|-----------|--------|--------|---------|---------|--------|--------|-----------|---------|--------|--------|------------|---------|--------|--------|------------|------------|--------|--------|----------|---------|--------|--------|------------|------------|
|        net of $97,995 offering costs ($.001 par),                                       |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | —   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | -          |       |
| ($0.65/share)                                                                                |         |   | —    |    |   |   | — |    |   |   | 617,692  |    |   |   | 618     |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 302,887   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 303,505    |       |
| April      2005, issuance of stock for                                                       |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|        debt forgiveness                                                                 |         |   | —    |    |   |   | — |    |   |   | 246,152  |    |   |   | 246     |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 159,754   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 160,000    |       |
| June      2005, issuance of stock options for                                                |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|        services                                                                         |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 35,403    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 35,403     |       |
| Reversal      of conversion of                                                               |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   | —    |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|        convertible preferred shares                                                     |         |   | (1,301,178 | )       |   |   | (1,301  | )       |   |   | —  |    |   |   | — |    |   |   | 1,301,178  |      |   |   | 1,301,178  |      |   |   | 1,301   |    |   |   | —   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | -          |       |
| July      2005, issuance of stock for services                                               |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 120,000    |      |   |   | 120,000    |      |   |   | 120     |    |   |   | 35,288    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 35,408     |       |
| July      2005, issuance of stock for conversion                                             |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|                                                                                         | of      debt |   |       | — |   |   |    | — |   |   |     | — |   |   |    | — |   |   |       | 1,162,791 |   |   |       | 1,162,791 |   |   |    | 1,163   |   |   |      | 278,047 |   |   |       | — |   |   |       | —    |   |   |     | — |   |   |       | 279,210    |   |
| Foreign      currency translation adjustment                                                 |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | —   |    |   |   | —    |    |   |   | —    |       |   |   | 274,643  |    |   |   | 274,643    |       |
| Net      loss                                                                                |         |   |       | — |   |   |    | — |   |   |     | — |   |   |    | — |   |   |       | —   |   |   |       | —   |   |   |    | — |   |   |      | — |   |   |       | — |   |   |       | (2,450,792 | )      |   |     | — |   |   |       | (2,450,792 | ) |
| Balance      July 31, 2005                                                                   |         |   | 33,042,484 |    |   |   | 33,043  |    |   |   | 863,844  |    |   |   | 864     |    |   |   | 54,261,301 |      |   |   | 54,261,301 |      |   |   | 54,261  |    |   |   | 4,419,204 |    |   |   | —    |    |   |   | (6,906,574 | )          |   |   | (369,492 | )       |   |   | (2,768,694 | )          |
|                                                                                         |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |   |
| Conversion      of common stock into debentures                                              |         |   | —    |    |   |   | — |    |   |   | (863,844 | )       |   |   | (864    | )       |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | (555,636  | )       |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | (556,500   | )          |
|        (Note 10)                                                                        |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
| Conversion      of preferred stock into common stock                                         |         |   | 1,301,178  |    |   |   | 1,301   |    |   |   | —  |    |   |   | — |    |   |   | (1,301,178 | )         |   |   | (1,301,178 | )         |   |   | (1,301  | )       |   |   | —   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | -          |       |
| Shares      issued as security for convertible debtures                                      |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 25,685,000 |      |   |   | —    |      |   |   | 25,685  |    |   |   | 3,313,365 |    |   |   | (3,339,050 | )       |   |   | —    |       |   |   | —  |    |   |   | -          |       |
|        (Notes 5 and 10)                                                                 |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
| Stock      Issued for services (August 2005)                                                 |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 28,000     |      |   |   | 28,000     |      |   |   | 28      |    |   |   | 3,612     |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 3,640      |       |
| Stock      Issued for services (August 2005)                                                 |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 472,000    |      |   |   | 472,000    |      |   |   | 472     |    |   |   | 60,888    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 61,360     |       |
| Stock      Issued for services (September 2005)                                              |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 805,000    |      |   |   | 805,000    |      |   |   | 805     |    |   |   | 132,020   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 132,825    |       |
| Stock      Issued for services (September, 2005)                                             |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 750,000    |      |   |   | 750,000    |      |   |   | 750     |    |   |   | 254,250   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 255,000    |       |
| Stock      Issued for services (May 2006)                                                    |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 875,000    |      |   |   | 875,000    |      |   |   | 875     |    |   |   | 86,625    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 87,500     |       |
| Stock      Issued for services (June 2006)                                                   |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 83,334     |      |   |   | 83,334     |      |   |   | 83      |    |   |   | 8,251     |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 8,334      |       |
| Foreign      currency translation adjustment                                                 |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | —   |    |   |   | —    |    |   |   | —    |       |   |   | (79,486  | )       |   |   | (79,486    | )          |
| January,      2006, Issuance of stock options for                                            |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|                                                                                         | services     |   |       | — |   |   |    | — |   |   |     | — |   |   |    | — |   |   |       | —   |   |   |       | —   |   |   |    | — |   |   |      | 62,379  |   |   |       | — |   |   |       | —    |   |   |     | — |   |   |       | 62,379     |   |
| September      2006 issuance of stock warrants                                               |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |
|        in connection with financing                                                     |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 45,164    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 45,164     |       |
| Net      loss                                                                                |         |   |       | — |   |   |    | — |   |   |     | — |   |   |    | — |   |   |       | —   |   |   |       | —   |   |   |    | — |   |   |      | — |   |   |       | — |   |   |       | (1,848,797 | )      |   |     | — |   |   |       | (1,848,797 | ) |
| Balance      July 31, 2006                                                                   |         |   | 34,343,662 |    |   |   | 34,344  |    |   |   | —  |    |   |   | — |    |   |   | 81,658,457 |      |   |   | 55,973,457 |      |   |   | 81,658  |    |   |   | 7,830,122 |    |   |   | (3,339,050 | )       |   |   | (8,755,370 | )          |   |   | (448,977 | )       |   |   | (4,597,275 | )          |
|                                                                                         |         |   |       |    |   |   |    |    |   |   |     |    |   |   |    |    |   |   |       |      |   |   |       |      |   |   |    |    |   |   |      |    |   |   |       |    |   |   |       |       |   |   |     |    |   |   |       |       |   |
| Discount      on issue of loan note (Note 9)                                                 |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 62,640    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 62,640     |       |
| Issuance      of stock for services (October, 2006)                                          |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 1,000,000  |      |   |   | 1,000,000  |      |   |   | 1,000   |    |   |   | 67,000    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 68,000     |       |
| Issuance      of stock for services (October, 2006)                                          |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 1,250,000  |      |   |   | 1,250,000  |      |   |   | 1,250   |    |   |   | 148,749   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 149,999    |       |
| October,      2006 issuance of stock options for services                                    |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 223,844   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 223,844    |       |
| Foreign      currency translation adjustment                                                 |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | —   |    |   |   | —    |    |   |   | —    |       |   |   | (34,135  | )       |   |   | (34,135    | )          |
| Net      Loss                                                                                |         |   |       | — |   |   |    | — |   |   |     | — |   |   |    | — |   |   |       | —   |   |   |       | —   |   |   |    | — |   |   |      | — |   |   |       | — |   |   |       | (3,670,764 | )      |   |     | — |   |   |       | (3,670,764 | ) |
| Partial      conversion of Convertible Loan Note into Common Stock (Dec. 2006) (Note      5) |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | 1,000,000  |      |   |   | 1,000,000  |      |   |   | 1,000   |    |   |   | 49,000    |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 50,000     |       |
| Stock      Option Expense                                                                    |         |   | —    |    |   |   | — |    |   |   | —  |    |   |   | — |    |   |   | —    |      |   |   | —    |      |   |   | — |    |   |   | 466,624   |    |   |   | —    |    |   |   | —    |       |   |   | —  |    |   |   | 466,624    |       |

----

| Beneficial      conversion discount underlying Convertible Loan Notes (Notes 2 &      9) |   |   | —    |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | —    |   |   |   | —    |   |   |   | — |   |   |   | 283,874   |   |   |   | —    |   |   |   | —     |   |   |   | —  |   |   |   | 283,874    |   |
|----------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|--------|--------|------------|--------|--------|--------|-------------|--------|--------|--------|----------|--------|--------|--------|------------|--------|
| Stock      issued for services (December 2006)                                               |   |   | —    |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 850,000    |   |   |   | 850,000    |   |   |   | 850     |   |   |   | 51,000    |   |   |   | —    |   |   |   | —     |   |   |   | —  |   |   |   | 51,850     |   |
| Cashless      conversion - Montgomery                                                        |   |   | —    |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 345,000    |   |   |   | 345,000    |   |   |   | 345     |   |   |   | (345      | )      |   |   | —    |   |   |   | —     |   |   |   | —  |   |   |   | -          |   |
| Imputed      discount cancelled due to loan default                                          |   |   | —    |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | —    |   |   |   | —    |   |   |   | — |   |   |   | (62,640   | )      |   |   | —    |   |   |   | —     |   |   |   | —  |   |   |   | (62,640    | )      |
| Balance      July 31, 2007                                                                   |   |   | 34,343,662 |   |   | $      | 34,344  |   |   |   | — |   |   | $      | — |   |   |   | 86,103,457 |   |   |   | 60,418,457 |   |   | $      | 86,103  |   |   | $      | 9,119,868 |   |   | $      | (3,339,050 | )      |   | $      | (12,426,134 | )      |   | $      | (483,112 | )      |   | $      | (7,007,981 | )      |
|                                                                                         |   |   |       |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |       |   |   |   |       |   |   |   |    |   |   |   |      |   |   |   |       |   |   |   |        |   |   |   |     |   |   |   |       |   |   |
|                                                                                         |   |   |       |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |       |   |   |   |       |   |   |   |    |   |   |   |      |   |   |   |       |   |   |   |        |   |   |   |     |   |   |   |       |   |   |
|                                                                                         |   |   |       |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |       |   |   |   |       |   |   |   |    |   |   |   |      |   |   |   |       |   |   |   |        |   |   |   |     |   |   |   |       |   |   |

----

|                                                   |   |             |       |   |   |   |       | March      26, 1997 |   |
|--------------------------------------------------------|--------|------------------|------------|--------|--------|--------|------------|---------------------|--------|
|                                                   |   |             |       |   |   |   |       | (Inception)         |   |
|                                                   |   | Years      ended |       |   |   |   |       | Through             |   |
|                                                   |   | July      31,    |       |   |   |   |       | July      31,       |   |
|                                                   |   | 2007             |       |   | 2006   |   |       | 2007                |   |
|                                                   |   |             |       |   |   |   |       |                |   |
| Cash      flows from operating activities:             |   |             |       |   |   |   |       |                |   |
|        Net loss                                   |   | $                | (3,670,764 | )      |   | $      | (1,848,797 | )                   |   | $ | (12,426,135 | ) |
| Adjustments      to reconcile net loss to net cash     |   |             |       |   |   |   |       |                |   |   |   |   |
| used      by operating activities:                     |   |             |       |   |   |   |       |                |   |   |   |   |
| Depreciation      and amortization                     |   |             | 8,319      |   |   |   | 16,436     |                |   |   | 159,853 |   |
| Retirement      of patents (written off)               |   |             | 72,571     |   |   |   | —    |                |   |   | — |   |
| Intercompany      interest income                      |   |             | —    |   |   |   | 98,000     |                |   |   | 242,382 |   |
| Interest      imputed (non cash)                       |   |             | 195,190    |   |   |   | 29,000     |                |   |   | 224,190 |   |
| Prepaid      element of expenses and beneficial        |   |             | —    |   |   |   | —    |                |   |   | — |   |
| discounts      on loan note conversions                |   |             | 169,031    |   |   |   | —    |                |   |   | 169,031 |   |
| Stock      issued for compensation and services        |   |             | 960,317    |   |   |   | 656,202    |                |   |   | 2,195,995 |   |
| Stock      issued for interest                         |   |             | —    |   |   |   | —    |                |   |   | 86,160 |   |
| Gain      (loss) on debt forgiveness                   |   |             | —    |   |   |   | —    |                |   |   | (662,610 | ) |
| Changes      in operating assets and liabilities:      |   |             |       |   |   |   |       |                |   |   |   |   |
| Receivables                                            |   |             | 198,511    |   |   |   | (166,999   | )                   |   |   | (21,927 | ) |
| Prepaid      expenses and other current assets         |   |             | 28,567     |   |   |   | 29,275     |                |   |   | 11,099 |   |
| Deferred      debt issue costs                         |   |             | —    |   |   |   | —    |                |   |   | — |   |
| Accounts      payable                                  |   |             | 206,730    |   |   |   | 250,137    |                |   |   | 1,169,523 |   |
| Accrued      expenses                                  |   |             | 1,086,850  |   |   |   | 140,514    |                |   |   | 1,778,046 |   |
| Accounts      payable (related party)                  |   |             | 16,963     |   |   |   | 178,192    |                |   |   | 138,697 |   |
|         Other                                |   |             | —    |   |   |   | (24,516    | )                   |   |   | 45,304 |   |
| Net      cash used in                                  |   |             |       |   |   |   |       |                |   |   |   |   |
| operating      activities                              |   |             | (727,715   | )      |   |   | (642,556   | )                   |   |   | (6,890,392 | ) |
|                                                   |   |             |       |   |   |   |       |                |   |   |   |   |
| Cash      flows from investing activities:             |   |             |       |   |   |   |       |                |   |   |   |   |
| Acquisition      of patents                            |   |             | (69,039    | )      |   |   | (38,339    | )                   |   |   | (168,117 | ) |
| Acquisition      of equipment                          |   |             | —    |   |   |   | —    |                |   |   | (151,209 | ) |
| Net      cash used in                                  |   |             |       |   |   |   |       |                |   |   | — |   |
| investing      activities                              |   |             | (69,039    | )      |   |   | (38,339    | )                   |   |   | (319,326 | ) |
|                                                   |   |             |       |   |   |   |       |                |   |   | — |   |
| Cash      flows from financing activities:             |   |             |       |   |   |   |       |                |   |   | — |   |
| Advances      from affiliates                          |   |             | —    |   |   |   | —    |                |   |   | 4,378,963 |   |
| Proceeds      from debenture issue                     |   |             | 335,000    |   |   |   | —    |                |   |   | 335,000 |   |
| Repayment      of advances from affiliates             |   |             | —    |   |   |   | —    |                |   |   | (728,426 | ) |
| Advances      from related parties                     |   |             | 353,460    |   |   |   | —    |                |   |   | 436,510 |   |
| Proceeds      from issuance of preferred stock         |   |             | —    |   |   |   | —    |                |   |   | 813,930 |   |
| Discount      on notes payable                         |   |             | —    |   |   |   | —    |                |   |   | 144,382 |   |
| Proceeds      from Royalty Participation Agreement     |   |             | —    |   |   |   | 450,000    |                |   |   | 450,000 |   |
| Proceeds      from issue of Loan Notes                 |   |             | —    |   |   |   | 300,000    |                |   |   | 1,262,495 |   |
| Repayment      of notes payable                        |   |             | —    |   |   |   | (10,000    | )                   |   |   | (10,000 | ) |
| Short      term advances                               |   |             | 80,000     |   |   |   | —    |                |   |   | 80,000 |   |
| Net      cash provided by                              |   |             |       |   |   |   |       |                |   |   |   |   |
| financing      activities                              |   |             | 768,460    |   |   |   | 740,000    |                |   |   | 7,162,854 |   |
|                                                   |   |             |       |   |   |   |       |                |   |   | — |   |
| Effect      on cash from foreign currency translation  |   |             | (34,135    | )      |   |   | 121        |                |   |   | (26,894 | ) |
|                                                   |   |             |       |   |   |   |       |                |   |   | — |   |
| Net      change in cash and                            |   |             |       |   |   |   |       |                |   |   | — |   |
| cash      equivalents                                  |   |             | (62,428    | )      |   |   | 59,226     |                |   |   | (73,758 | ) |
|                                                   |   |             |       |   |   |   |       |                |   |   |   |   |
| Cash      and cash equivalents:                        |   |             |       |   |   |   |       |                |   |   |   |   |
| Beginning      of period                               |   |             | 61,241     |   |   |   | 2,015      |                |   |   | — |   |
|                                                   |   |             |       |   |   |   |       |                |   |   | — |   |
| End      of period                                     |   | $                | (1,187     | )      |   | $      | 61,241     |                |   | $ | (73,758 | ) |
|                                                   |   |             |       |   |   |   |       |                |   |   |   |   |
| Supplemental      disclosure of cash flow information: |   |             |       |   |   |   |       |                |   |   |   |   |
| Cash      paid during the year for:                    |   |             |       |   |   |   |       |                |   |   |   |   |
| Income      taxes                                      |   | $                | —    |   |   | $      | —    |                |   | $ | — |   |
| Interest                                               |   | $                | —    |   |   | $      | —    |                |   | $ | — |   |
|                                                   |   |             |       |   |   |   |       |                |   |   |   |   |
| Non-cash      financing activities:                    |   |             |       |   |   |   |       |                |   |   |   |   |
| Conversion      of note payable to common stock        |   | $                | 50,000     |   |   | $      | 250,000    |                |   | $ | 700,000 |   |
| Conversion      of interest to common stock            |   |             | —    |   |   |   | 86,160     |                |   |   |   |   |
| Conversion of preferred stock into debentures          |   |             | —    |   |   |   | —    |                |   |   | 86,160 |   |
|                                                   |   | $                | 50,000     |   |   | $      | 336,160    |                |   | $ | 786,160 |   |
|                                                   |   |             |       |   |   |   |       |                |   |   |   |   |

----

----

----

----

| Related      Party              |   | Purchases      year ended July 31, 2007 |    |   | Purchases      year ended July 31, 2006 |   |
|---------------------------------|--------|-----------------------------------------|---------|--------|-----------------------------------------|--------|
| Westek      Ltd                 |   | $                                       | -0-     |   |                                    | $      | 23,301 |   |
| The      ARM Partnership        |   | $                                       | 180,049 |   |                                    | $      | 175,042 |   |
| Sound      Alert Technology Ltd |   | $                                       | -0-     |   |                                    | $      | 119,352 |   |
| AWY      Ltd                    |   | $                                       | 116,471 |   |                                    | $      | 25,801 |   |
|                            |   | $                                       | 296,520 |   |                                    | $      | 305,788 |   |

| Officers      name | Title                                                                   | Compensation      Year endedJuly      31, 2007 | Compensation      Year endedJuly      31, 2006 |
|--------------------|-------------------------------------------------------------------------|------------------------------------------------|------------------------------------------------|
| Graham      Cooper | President      and Chief Executive Officer from June, 2006 and Chairman | $116,471                                       | $27,000                                        |
|               |                                                                    |                                           |                                           |
| Martin      Thorp  | Chief      Financial Officer                                            | $180,049                                       | $175,042                                       |

| Risk      Free Interest Rate | 4.7 | % |
|------------------------------|-----|---|
| Dividend      Yield          | 0   | % |
| Volatility      Factor       | 314 | % |

----

|                                                |   | July       31, 2007 |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|
| Cost      - start of year                                                                                                                                                                                                                                                            |   | $                        | 99,077  |   |
| Costs      incurred during the year                                                                                                                                                                                                                                                  |   |                     | 69,039  |   |
| Amortization                                                                                                                                                                                                                                                                         |   |                     | 0       |   |
| Retirements                                                                                                                                                                                                                                                                          |   |                     | (72,571 | ) |
| Cost      - end of year                                                                                                                                                                                                                                                              |   | $                        | 95,545  |   |

|                                     |   | July      31, 2007 |      |   | July      31, 2006 |   |
|------------------------------------------|--------|--------------------|-----------|--------|--------------------|--------|
|                                     |   | Number             |      |   | Fair      Value    |   |   | Number |   |   | Fair      Value |   |
|                                     |   | of      Shares     |      |   | of      Shares     |   |   | of      Shares |   |   | of      Shares |   |
| Shareholder                              |   | Issued             |      |   | Issued             |   |   | Issued |   |   | Issued |   |
| CLX      & Associates Inc            |   |               |      |   |               |   |   | $ | 750,000 |   |   | $ | 255,000 |   |
| Sichenzia      Ross Friedman Ference LLP |   |               |      |   |               |   |   |   | 1,680,000 |   |   |   | 220,325 |   |
| Cornell      Capital Partners LP         |   |               |      |   |               |   |   |   | 472,000 |   |   |   | 61,360 |   |
| Monitor      Capital Inc                 |   |               |      |   |               |   |   |   | 28,000 |   |   |   | 3,640 |   |
| Crown      Capital Group Ltd             |   |               | 1,000,000 |   |               |   | 68,000 |   |   |   |   |   |   |   |   |   |
| UTEK      Corporation                    |   |               | 1,250,000 |   |               |   | 150,000 |   |   |   | 83,334 |   |   |   | 8,334 |   |
| Sichenzia      Ross Friedman Ference LLP |   |               | 850,000   |   |               |   | 51,850 |   |   |   |   |   |   |   |   |   |
|                                     |   |               | 3,100,000 |   |               | $      | 269,850 |   |   |   | 3,013,334 |   |   | $ | 548,659 |   |

----

|   | · | During      May 2004, the Company granted 9,659,000 common stock options to two      officers with an exercise price of $1.00per share. The Company's common      stock had no traded market value on the date of grant. The market value of      the stock was determined to be $1.00 per share based on estimates made by      the directors at that time. In March 2006 one of the officers resigned and      the 4,829,500 options granted to him lapsed. Under the terms of the option      award the remaining 4, 829,500 options vest in three equal installments of      1,609,834 each in May 2006, 2007 and 2008, subject to certain operating      performance criteria having been met. The performance criteria have not      been met and therefore the options which were due to vest in 2006 and 2007      have lapsed. Management is of the view that the performance criteria are      unlikely to be met by each of the future vesting  periods. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      June 1, 2005, the Company issued 650,000 options to its staff under the      plan, with an exercise price of $0.55 per share. The market price on June      1, 2005 was also $0.55 per share. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      January 3, 2006, the Company issued 725,000 options to its staff under the      plan, with an exercise price of $0.10 per share. The market price on      January 3, 2006 was also $0.10 pershare. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On      October 10, 2006, the Company issued 16,015,000 options to its staff under      the plan, with an exercise price of $0.065per share. The market price on      October 10, 2006 was also $0.065 per share. The vesting date of these      options varies as set out in the tablebelow: |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Vesting      Date       |   | No      of options |       |
|-------------------------|--------|--------------------|------------|
| October      10, 2006   |   |               | 2,500,000  |   |
| November      30, 2006  |   |               | 500,000    |   |
| December      31, 2006  |   |               | 150,000    |   |
| September      30, 2007 |   |               | 5,515,000  |   |
| September      30, 2008 |   |               | 3,750,000  |   |
| September      30, 2009 |   |               | 3,600,000  |   |
| Total                   |   |               | 16,015,000 |   |

|                                                |   | Grant      Date |   |
|-----------------------------------------------------|--------|-----------------|--------|
|                                                |   | May,      2004  |   |   | June,      2005 |   |   | January,      2006 |   |   | October,      2006 |   |
| Risk      Free Interest Rate                        |   |            | 2.3    | % |   |   | 4.4 | % |   |   | 4.4 | % |   |   | 4.7 | % |
| Dividend      Yield                                 |   |            | 0      | % |   |   | 0 | % |   |   | 0 | % |   |   | 0 | % |
| Volatility      Factor                              |   |            | 0      | % |   |   | 55 | % |   |   | 88 | % |   |   | 314 | % |
| Weighted      Average Expected Life (yrs)           |   |            | 5      |   |   |   | 5 |   |   |   | 5 |   |   |   | 5 |   |
| No      of options expected to vest on vesting date |   |            | 0      |   |   |   | 650,000 |   |   |   | 725,000 |   |   |   | 16,015,000 |   |
| Value      of one option (Black Scholes)            |   | $               | 0.000  |   |   | $ | 0.289 |   |   | $ | 0.070 |   |   | $ | 0.065 |   |
| Value      of option grant (aggregate)              |   | $               | 0      |   |   | $ | 187,850 |   |   | $ | 50,750 |   |   | $ | 1,040,975 |   |

|                                       |   | For      The Years Ended     |       |
|--------------------------------------------|--------|----------------------------------------|------------|
|                                       |   | July      31,                |       |
|                                       |   | 2006                                   |       |   | 2005 |   |
| Net      loss, as reported                 |   | $                                      | (1,848,797 | ) |   | $ | (2,483,429 | ) |
|                                       |   |                                   |       |   |   |   |   |   |
| Pro      forma net loss                    |   | $                                      | (1,958,103 | ) |   | $ | (2,483,429 | ) |
|                                       |   |                                   |       |   |   |   |   |   |
| Basic      and diluted net loss per common |   |                                   |       |   |   |   |   |   |
|    share,      as reported. |   | $                                      | (0.03      | ) |   | $ | (0.05 | ) |
|                                       |   |                                   |       |   |   |   |   |   |
| Pro      forma basic and diluted net loss  |   |                                   |       |   |   |   |   |   |
|    per      common share.   |   | $                                      | (0.04      | ) |   | $ | (0.05 | ) |

----

| Risk-free      interest rate        |   |         | 4.35   | % |
|-------------------------------------|--------|--------------|--------|---|
| Dividend      yield.                |   |         | 0.00   | % |
| Volatility      factor              |   |         | 55.10  | % |
| Weighted      average expected life |   | 5      years |   |

|  Risk-free      interest rate        |   |         | 4.18   | % |
|-------------------------------------------|--------|--------------|--------|---|
|  Dividend      yield                 |   |         | 0.00   | % |
|  Volatility      factor              |   |         | 88.40  | % |
|  Weighted      average expected life |   | 3      years |   |

----

|                          |   |                     |            |                |   | Weighted            |   | Weighted              |   |      |                        |
|-------------------------------|--------|--------------------------|-----------------|---------------------|--------|---------------------|--------|-----------------------|--------|-----------|-----------------------------|
|                          |   | Options      Outstanding |            | Average             |   | Average             |   |   Aggregate |   |
|                          |   | Number      of           |            | Exercise      Price |   | Exercise      Price |   | Remaining             |   | Intrinsic |                        |
|                          |   | Shares                   |            | Per      Share      |   | Per      Share      |   | Contractual      Life |   | Value     |                        |
| Balance      at July 31, 2006 |   |                     | 4,996,436       |                | $      | 0.001-$1.50         |   | $                     | 0.750  |      |                        |   |   |   |   |   |
|                          |   |                     |            |                |   |                |   |                  |   |      |                        |   |   |   |   |   |
| Awards      Granted to Staff  |   |                     | 16,015,000      |                | $      | 0.065               |   | $                     | 0.065  |      |                        |   |   |   |   |   |
| Awards      cancelled/expired |   |                     | 1,609,833  |                | $      | 1.000               |   | $                | 1.000  |      |                        |   |   |   |   |   |
| Warrants      exercised       |   |                     | (350,000        | )                   | $      | 0.001               |   | $                     | 0.001  |      |                        |   |   |   |   |   |
|                          |   |                     |            |                |   |                |   |                  |   |      |                        |   |   |   |   |   |
| Balance      at July 31, 2007 |   |                     | 19,401,603      |                | $      | 0.055-$1.50         |   | $                     | 0.1636 |      |        8.06      years |   | $ | 1,296,238 |   |
|                          |   |                     |            |                |   |                |   |                  |   |      |                        |   |   |   |   |   |
| Awards      exercisable at    |   |                     |            |                |   |                |   |                  |   |      |                        |   |   |   |   |   |
| July      31, 2007            |   |                     | 4,586,769       |                | $      | 0.550-1.50          |   | $                     | 0.1586 |      |        6.91      years |   | $ | 460,949 |   |

|                                                  |   | Years      Ended |   |
|-------------------------------------------------------|--------|------------------|--------|
|                                                  |   | July      30,    |   |
|                                                  |   | 2007             |   |   | 2006 |   |
| U.K.      statutory federal rate                      |   |             | 30.00  | % |   |   | 30.00 | % |
| Net      operating loss for which no tax              |   |             |   |   |   |   |   |   |
|    benefit      is currently available |   |             | -30.00 | % |   |   | -30.00 | % |
|                                                  |   |             | 0.00   | % |   |   | 0.00 | % |
|                                                  |   |             |   |   |   |   |   |   |

----

----

|   | · | The      Company shall pay Montgomery an aggregate of $348,000 (the "Funds") which      represents the agreed amounts owed by the Company to Montgomery under the      Debenture as of October 19, 2006 including outstanding principal and      interest. The Company shall pay the Funds to Montgomery monthly at the      rate of $29,000 ("Monthly Payment") per calendar month, with the first      payment being due and payable on November 15, 2006 and each subsequent      payment being due and payable on the first business day of each subsequent      month until the Funds are repaid infull. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Montgomery      shall continue to have valid, enforceable and perfected first-priority      liens upon and security interests in the Pledged Property and the Pledged      Shares (each as defined in the Purchase Agreement transaction      documents). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Company and Montgomery agree that during the term of the Settlement      Agreement, the Debenture shall not bear any interest and no liquidated      damages shall accrue under any of the financing  documents. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The      Conversion Price (as set forth in the Debenture) in effect on any      Conversion Date (as set forth in the Debenture) from and after the date      hereof shall be adjusted to equal $0.05, which may be subsequently      adjusted pursuant to the other terms of the  Debenture. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Montgomery      shall retain the Warrants issued in accordance with the Securities      Purchase Agreement. |
|--------|--------|-------------------------------------------------------------------------------------------------------------|

|   | · | The      Company and Cornell agree to terminate the Distribution Agreement and      related transaction documents. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | In      the event that the Company defaults under the terms of this agreement      penalties and redemption premiums payable under the original agreement      shall be reinstated. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Secured      convertible note in the principal amount of $261,300 issued in exchange      for the interest and principal outstanding under the Debenture previously      issued to Longview under the terms of the Accredited Investor Purchase      Agreement. The note (a) matures on April 30, 2008; (b) bears interest at      the rate of 18% per annum, which is payable in accordance with the      repayment provisions described in the Note and (c) is convertible at      Longview's option, into shares of the Company’s common stock at a      conversion price of $0.05 per share. Minimum repayments are due under the      note as follows: (i) two installments of $12,500 each were due to be paid      on or before February 28, 2007 and March 30, 2007; (ii) monthly      installments of $15,000 commencing on November 30, 2007; and (iii) the      remaining principal balance plus unpaid interest on the maturity      date. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Secured      convertible note in the principal amount of $48,000 was issued in exchange      for liquidated damages payable as result of the default on the Debenture      previously issued to Longview under the terms of the Accredited Investor      Purchase Agreement. This note has the same interest and conversion terms      as described above, but is repayable on maturity (principal and      interest). |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risk      Free Interest Rate | 4.7 | % |
|------------------------------|-----|---|
| Dividend      Yield          | 0   | % |
| Volatility      Factor       | 413 | % |

| Risk      Free Interest Rate | 4.7 | % |
|------------------------------|-----|---|
| Dividend      Yield          | 0   | % |
| Volatility      Factor       | 314 | % |

|                 |   | Beneficial |    |   |   |   |    | Unamortized |   |
|----------------------|--------|------------|---------|--------|--------|--------|---------|-------------|--------|
|                 |   | Discount   |    |   | Charge |   |    | Amount      |   |
| Westek      (note 2) |   | $          | 113,400 |   |   | $      | 56,700  |        |   | $ | 56,700 |   |
| Triumph              |   | $          | 0       |   |   | $      | 0       |        |   | $ | 0 |   |
| Cornell              |   | $          | 146,160 |   |   | $      | 92,880  |        |   | $ | 53,280 |   |
| Longview             |   | $          | 24,314  |   |   | $      | 19,452  |        |   | $ | 4,863 |   |
|                 |   | $          | 283,874 |   |   | $      | 169,032 |        |   | $ | 114,843 |   |

----

| Total      Amount Advanced                               |   | $ | 450,000 |   |
|----------------------------------------------------------|--------|---|---------|--------|
| Interest      Imputed from inception until July 31, 2007 |   | $ | 207,630 |   |
| Included      in Long Term Debt at July 31, 2007         |   | $ | 657,630 |   |

----

|                                           |   | Total      Principal |      |
|------------------------------------------------|--------|----------------------|-----------|
|                                           |   | Outstanding          |      |
|                                           |   |                 |      |
| Montgomery      Capital Partners               |   |                 | 348,000   |   |
| Triumph      Small Cap Fund                    |   |                 | 450,000   |   |
| Longview                                       |   |                 | 309,300   |   |
| Other      Accredited Investors*               |   |                 | 216,500   |   |
| Total      Notes payable                       |   |                 |      |   |
| (before      beneficial conversion discount**) |   |                 | 1,323,800 |   |

----