**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**




**(Mark
      One)**





**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      Fiscal Year Ended December 31, 2006





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





For
      the
      transition period from _______________ to ________________





Commission
      File Number 000-09489





**SWISS
      MEDICA, INC.** ****


(Name
      of
      Small Business Issuer in its charter)





Delaware
            98-0355519(State
                or other jurisdiction
              of
                incorporation or organization)
            (I.R.S.
                Employer
              Identification
                No.)





375
      Britannia Road East, Unit B


Mississauga,
      Ontario, Canada L4Z 3E2


(Address
      of principal executive offices)(Zip code)





Issuer's
      telephone number, including area code: (905) 501-0118





Securities
      registered pursuant to Section 12(b) of the Act:





Title
                of each class
            Name
                of each exchange on which each is registeredNone
            None




Securities
      registered pursuant to Section 12(g) of the Act:





Class
      A Common Stock, par value $0.001 per share


(Title
      of
      class)





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports); and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o




Check
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B is
      not
      contained in this form, and will not be contained, to the best of registrant’s
      knowledge, in definitive proxy or information statements incorporated by
      reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o





The
      issuer’s revenues for the fiscal year ended December 31, 2006 totaled
      $1,051,422.





The
      number of shares of the issuer’s Class A common stock, no par value per share,
      outstanding as of June 6, 2007 was 146,961,491




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the registrant on April 12, 2007, based on the average bid
      and
      ask price on the OTC Bulletin Board as of such date, was approximately
      $0.007.





DOCUMENTS
      INCORPORATED BY REFERENCE:  None





Transition
      Small Business Disclosure Format:  Yes o No x









**TABLE
      OF CONTENTS**


PagePART
                  IITEM
                  1.
              DESCRIPTION
                  OF BUSINESS
              
              4ITEM
                  2.
              DESCRIPTION
                  OF PROPERTY
              
              10ITEM
                  3.
              LEGAL
                  PROCEEDINGS
              
              10ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              11PART
                  IIITEM
                  5.
              MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
              
              12ITEM
                  6.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
                  CONDITION
              
              13ITEM
                  7.
              FINANCIAL
                  STATEMENTS
              
              24ITEM
                  8.
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE
              
              24ITEM
                  8A.
              CONTROLS
                  AND PROCEDURES
              
              24PART
                  IIIITEM
                  9.
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                  SECTION16(a) OF THE EXCHANGE ACT
              
              25ITEM
                  10
              EXECUTIVE
                  COMPENSATION
              
              28ITEM
                  11.
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
              
              32ITEM
                  12.
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
                  INDEPENDENCE
              
              33ITEM
                  13.
              EXHIBITS
              
              34ITEM
                  14.
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              
              37FINANCIAL
                  STATEMENTS
              
              F-1SIGNATURES
              
              38
  2





**Note
      Regarding Forward Looking Statements**





This
      report by Swiss Medica, Inc. (“we”, “us”, “our”, “Swiss Medica” or the
      "Company") contains forward-looking statements. These are statements regarding
      financial and operating performance and results and other statements that are
      not historical facts. The words "expect," "project," "estimate," "believe,"
      "anticipate," "intend," "plan," "forecast," and similar expressions are intended
      to identify forward-looking statements. Certain important risks could cause
      results to differ materially from those anticipated by some of the
      forward-looking statements. Some, but not all, of the risks that could cause
      actual results to differ from those suggested by the forward-looking statements
      include, among other things:





·
            our
                ability to obtain debt or equity financing as and when we need
                it;




·
            the
                loss of the services of any member of our management team and, in
                particular, the loss of the services of Raghunath Kilambi, Chief
                Executive
                Officer and Chief Financial
                Officer;





·
            our
                ability to successfully manufacture, market and sell the products
                we
                acquire or license;




·
            whether
                or not our products are able to compete successfully with existing
                products and whether or not some or all of our products are rendered
                obsolete by newer products;





·
            our
                ability to continue to find and acquire/license patented, clinically
                tested natural products with demonstrated competitive
                advantages;





·
            the
                implementation of any government regulation that could make it more
                difficult or more costly to bring our products to market; and





·
            other
                factors, all of which are difficult to predict and many of which
                are
                beyond our control.




You
      are
      cautioned not to place undue reliance on these forward-looking statements,
      which
      relate only to events as of the date on which the statements are made. We
      undertake no obligation to publicly revise these forward-looking statements
      to
      reflect events or circumstances that arise after the date hereof. You should
      refer to and carefully review the information in future documents we file with
      the Securities and Exchange Commission.




3




**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS**





**BUSINESS
      OVERVIEW**





Swiss
      Medica, Inc. is a specialty pharmaceutical company focused on over-the-counter,
      clinically tested, patented, all-natural products that relieve chronic
      ailments.





Swiss
      Medica's first patented product is an all-natural essential oil product line
      called "O24 Pain Neutralizer" ("O24") and has been medically proven to provide
      temporary relief for minor pains associated with arthritis, backaches and other
      chronic pains. In March, 2005 the Company announced the results of the
      randomized double blind clinical trial conducted during the fourth quarter
      of
      2004, comparing the Company's O24 pain reliever against a placebo on patients
      suffering from fibromyalgia. Fibromyalgia is a common and chronic disorder
      characterized by widespread muscle pain, fatigue, and multiple tender points.
      According to the National Fibromyalgia Association it is estimated that
      approximately 3-6% of the U.S. population has fibromyalgia. Based upon the
      latest expert estimates, fibromyalgia may affect between 8 million and 17
      million Americans.





The
      study
      revealed that the group treated with O24 compared to placebo showed
      statistically significant improvement when measured on the Visual Analog Scale
      for pain, according to Dr. Gordon Ko, the Head of the Fibromyalgia clinic at
      the
      Sunnybrook & Women's Health Sciences Centre at the University of Toronto and
      the Medical Director for the Canadian Centre for Integrative Medicine in
      Markham, Ontario.





Based
      on
      these results of this medical study the Company has developed, and successfully
      launched in August 2005, an O24 product line extension specifically for the
      fibromyalgia market, `O24 Fibromyalgia'.





As
      part
      of the launch of `O24 Fibromyalgia', the Company also announced a strategic
      partnership with the National Fibromyalgia Association (NFA). As part of this
      strategic partnership, the non-profit NFA will receive a percentage of the
      proceeds from the sale of O24 Fibromyalgia. This revenue will directly benefit
      people with fibromyalgia by supporting the programs and services of the
      NFA.





During
      2004 and early 2005, we launched the distribution of O24 Pain Neutralizer into
      major retail outlets, regional pharmacies and massage clinics in both the United
      States and Canada. Our
      retail distribution includes national chains including: Rite Aid Drug Stores,
      CVS/pharmacy, Shoppers Drug Market and Wal-Mart Canada. In late
      2005 the Company also launched the distribution of O24 Fibromyalgia into retail
      outlets throughout North America.





In
      2005
      the Company introduced its second line of patented natural products for
      depression related symptoms. Specifically, on April 12, 2005, the Company
      announced the launch of PMS Escape. PMS Escape is an over-the-counter product
      for the treatment of mood and appetite symptoms associated with Premenstrual
      Syndrome (PMS). Swiss Medica acquired the exclusive US and Canadian rights
      to
      PMS Escape as part of its acquisition of Anti-Depression BioHealth Solutions
      Inc., in March of 2005. PMS Escape is available in select retailers in the
      United States and Canada.





It
      is the
      Company's intention to expand its product offerings through acquisitions,
      product licenses or product extensions from its current patent portfolio. All
      future products that Swiss Medica expects to commercialize will have the
      following attributes:





·
            Patent
                and/or trade secret protection;




·
            Clinical
                and/or medical studies demonstrating their efficacy;
                and,




4




·
            Over-the-counter,
                all-natural relief products that address chronic
                ailments.





Our
      goal
      is to bring natural, healthy, clinically-proven and proprietary products that
      address chronic ailments, into the mainstream food, drug and mass retail
      channels and out of their traditional market niche of specialty retailers.





We
      estimate that the global market for chronic ailment products is in excess of
      $100 billion and is currently dominated by prescription, chemical based drugs.
      We believe that consumers are deeply concerned about the management and cost
      of
      their health care and the expensive, chemical-based prescription drug approach
      predominant in modern medicine. We believe that this concern will increase
      the
      demand for bioscience health products since natural products are considered
      to
      be effective against many ailments and are more accessible than prescription
      medications.





The
      Company intends to support its O24 Pain Neutralizer, O24 Fibromyalgia and PMS
      Escape products with point-of-presence marketing, sampling, print and in-store
      advertisements, radio spots, and extensive use of public relations, including
      testimonials and endorsements from medical professionals and recognized
      celebrities.





**History
      and Company Development**





Swiss
      Medica, Inc., a Delaware corporation, was, prior to May 16, 2003, a holding
      company focused on acquiring, expanding and developing technology companies
      and
      we had no operations.





As
      of May
      16, 2003 we began to implement a new business plan pursuant to which we market
      and distribute proprietary bioscience health products, focused on chronic
      ailments. We retained a new management team to implement this new business
      plan.
      The global market for natural, herbal and bioscience products is currently
      estimated to be over $60 billion and growing rapidly.





On
      May
      16, 2003 we acquired certain assets of General Cosmetics Corporation, a Delaware
      corporation based in Munich, Germany. The main product acquired is O24. The
      acquisition was made by issuing to General Cosmetics Corporation 6,750,000
      shares of our Class A Common Stock, subject to adjustment based on the terms
      of
      the March 31, 2003 definitive agreement. The assets we acquired included a
      patented essential oil bioscience product family that has been developed for
      pain relief, menstrual cramps, cold sores and other ailments. We intend to
      introduce these products to the market over time and we are currently marketing
      and selling the pain relief formulations called "O24 Pain Neutralizer" and
      O24
      Fibromyalgia in both Canada and the United States. O24 Pain Neutralizer complies
      with FDA regulations and can be sold in the United States pursuant to an FDA
      monograph. As yet, we have not determined when and if the remaining products
      will be introduced. In 2003, the combined U.S. over-the-counter and
      prescription-only market for pain relief products was estimated to be $12
      billion.





ADBSI
      Acquisition





On
      March
      31, 2005, we acquired Anti-Depression BioHealth Solutions, Inc. ("ADBSI"),
      a
      subsidiary of UTEK Corporation, in a cash and stock transaction. The main
      product line of ADBSI is PMS Escape. All outstanding shares of common stock
      of
      ADBSI were exchanged for 2,105,263 restricted shares of Class A common stock
      of
      the Company in a transaction accounted for using the purchase method of
      accounting. As additional consideration pursuant to the terms of the Acquisition
      Agreement, the Company paid UTEK, the sole shareholder of ADBSI, $96,673 in
      cash. As result of the closing under the Acquisition Agreement on March 31,
      2005, ADBSI became a wholly-owned subsidiary of the Company. Related to the
      acquisition, we also developed a business relationship with two Massachusetts
      Institute of Technology (MIT) scientists.




5




We
      will
      continue to look for quality proprietary, natural consumer healthcare products
      to license and/or acquire. We plan to sell our products through multiple
      distribution channels including, via retail outlets, the Internet, and via
      healthcare professionals.





**Business
      Strategy**





Swiss
      Medica is focused on commercializing proprietary, effective, safe and natural
      products that address chronic ailments such as, chronic pain and depression.
      We
      seek to commercialize products with the following attributes:





·
            Patented
                and/or intellectual property,





·
            Clinical
                and/or medical studies,





·
            Over-the-counter,
                natural solutions for chronic ailments,




Our
      goal
      is to bring natural, healthy, clinically-proven and proprietary products that
      address chronic ailments, into the mainstream food, drug and mass retail
      channels and out of their traditional market niche of specialty retailers.





**Product
      Offerings**





Swiss
      Medica commercializes patented, clinically tested, all-natural, over-the-counter
      (“OTC”) products that relieve chronic ailments, including pain and premenstrual
      syndrome.





Swiss
      Medica's flagship product, the O24 Pain Neutralizer (“O24”), holds US Patent
      #6,444,238B1 and has been medically and clinically tested in Europe. The O24
      pain relief solution has been recommended and praised for its fast-acting and
      long-lasting benefits by healthcare professionals and athletes in the United
      States, Canada and Europe.





Swiss
      Medica has recently launched patented O24 Fibromyalgia pain reliever (US Patent
      #6,444,238B1). O24 Fibromyalgia is the first product specifically for
      Fibromyalgia that is available in national pharmacies and was clinically tested
      in a randomized double blind placebo controlled clinical trail. 88% of the
      patients who were using O24 reported mild to markedly better improvement on
      the
      7-point Lanier rating scale, versus only 7% who were on the placebo. The results
      of the study were published in the January 2006 issue of Practical Pain
      Management.





Swiss
      Medica also manufactures PMS Escape (US Patent #’s 5760014 and 5612320), and.
      was developed at Massachusetts Institute of Technology (MIT), and has undergone
      two multi-site, double blind, placebo controlled clinical studies performed
      at
      Harvard’s Massachusetts General Hospital, Duke University, University of North
      Carolina, and the University of Pennsylvania, with the results published in
      the
      American Journal of Obstetrics and Gynecology. PMS Escape is a specially
      formulated group of carbohydrates, vitamins and minerals clinically proven
      to
      reduce changes in mood and appetite that women experience during the
      premenstrual period by working naturally with the body to increase serotonin
      levels in the brain.




6




Swiss
      Medica’s products are available in over 15,000 pharmacies in United States and
      Canada including CVS, Rite-Aid, Shoppers Drug Mart and Wal-Mart Canada.





O24
      Essential Oil Pain Neutralizer and O24 Fibromyalgia comply with FDA regulations
      and can be sold in the United States pursuant to an FDA monograph.





PMS
      Escape is marketed and sold under the Food and Drug Administration Dietary
      Supplement Health and Education Act (DSHEA) of 1994.





We
      may
      also seek to acquire additional consumer healthcare products or companies that
      address other chronic health markets





**Intellectual
      Property**





We
      own
      United States Patent Number 6,444,238 (issued September 3, 2002) which covers
      both O24TM Pain Neutralizer and O24TM Fibromyalgia products, and we have the North
      American exclusive license for PMS Escape (US Patent #’s 5760014 and 5612320)
      however, there is no assurance we will be able to obtain patent protection
      for
      any derivative uses of O24TM, or for any other products we may later acquire or
      develop. We also cannot assure that we will be able to obtain foreign patents
      to
      protect our products.





Litigation
      may be required to enforce our intellectual property rights, protect our trade
      secrets or determine the validity and scope of proprietary rights of others.
      Any
      action we take to protect our intellectual property rights could be costly
      and
      could absorb significant management time and attention. In addition, as a result
      of any such litigation, we could lose any proprietary rights we have. If any
      of
      the foregoing occurs, we may be unable to execute on our business plan and
      you
      could lose your investment.





**Government
      Regulation**





In
      the
      United States, governmental agencies and extensive federal regulations regulate
      the manufacture, packaging, labeling, advertising, promotion, distribution
      and
      sale of our products. In the United States, O24TM products are regulated by the
      Food and Drug Administration (FDA) with regards to safety and effectiveness
      of
      the product and the Federal Trade Commission (FTC) regulates how we advertise
      and market our products. Since O24TM is classified as a drug, it carries an FDA
“monograph” (written description of the medication’s properties and usages)
      enabling the Company to make certain efficacy claims. Swiss Medica is using
      an
      FDA designated laboratory, an FDA certified bottler and FDA certified
      manufacturer to ensure product compliance. PMS Escape is governed under the
      Food
      and Drug Administration DIETARY SUPPLEMENT HEALTH AND EDUCATION ACT (DSHEA)
      OF
      1994. DSHEA governs the safety; provides guidelines for how literature is
      displayed where supplements are sold; provides for use of claims and nutritional
      support statements; monitors ingredient and nutrition labeling; and grants
      the
      FDA the authority to establish good manufacturing practice (GMP)
      regulations.





O24TM,
      PMS
      Escape and any other products we may manufacture or sell in the future are
      also
      subject to regulation in the United States by, among other regulatory entities,
      the Consumer Product Safety Commission, the U.S. Department of Agriculture,
      and
      the Environmental Protection Agency. The laws, regulations and enforcement
      policies governing our products are relatively new and still evolving, and
      we
      cannot predict what enforcement positions the FDA or other governmental agencies
      may take with respect to our products. We cannot at this time determine the
      extent to which FDA and other regulations will impact our business.




7




There
      are
      similar regulatory bodies and regulations in Canada, and other countries in
      which we may decide to market, sell and distribute our products. In Canada,
      Health Canada controls over-the-counter drugs and a special application is
      needed for most national retailers. Health Canada regulates the safety, efficacy
      and permissible claims of certain products and their
      manufacturers/representatives. The Company is required to ensure that O24,
      PMS
      Escape and its other products are manufactured using Health Canada’s Good
      Manufacturing Process (“GMP”) guidelines. The recent Natural Health Product
      (“NHP”) Act allows companies that sell nutraceutical products to make additional
      health benefit claims for products that comply with the regulations and
      monographs.





We
      cannot
      be certain that we comply or will comply with all laws and regulations in this
      area. Enforcement actions by any of these regulatory agencies can result in
      civil and criminal penalties, an injunction to stop or modify certain selling
      methods, seizure of products, adverse publicity or voluntary recalls and
      labeling changes. If any governmental agency were to undertake an enforcement
      action against us, this could cause an immediate decrease in our revenues,
      cause
      us to incur significant additional expenses and result in a decrease in our
      stock price.





**Sales
      & Marketing**





Swiss
      Medica sells O24(TM) and intends to sell its other products through various
      distribution channels including mass-food and drug retail outlets, international
      sales and through professional sales organizations. The Company intends to
      support O24(TM) and its other products with point-of-presence marketing,
      sampling, print and in-store advertisements, radio spots, and extensive use
      of
      public relations, including testimonials and endorsements from medical
      professionals and recognized celebrities.





**Competition**





The
      market for health-related retail goods and services is characterized by intense
      competition. We believe that the principal competitive factors for companies
      in
      the industries in which we compete are:




·
            functionality;·
            quality
                of merchandise;





·
            discounts
                and rewards;·
            brand
                recognition;





·
            customer
                loyalty; and·
            price.





While
      competition in the over-the-counter arthritis pain relief products market is
      highly fragmented, there are a few significant brand names that have managed
      to
      acquire the majority of retail shelf space. Some of these treatments are general
      pain relief tablets such as AleveTM from Roche Laboratories (Germany: RO), BayerTM
from Bayer AG (NYSE:BAY), and TylenolTM from Mc-Neil Consumer & Specialty
      Pharmaceuticals (a division of Johnson & Johnson, NVSE:JNJ). Additionally,
      in the topical analgesic or rub market in which O24 Pain Neutralizer and O24
      Fibromyalgia compete, our competition includes Ben-GayTM from Pfizer Inc.
      (NYSE:PFE), Joint-RitisTM (privately held), Mineral IceTM from Bristol-Myers
      Squibb Company (NYSE:BMY), and Icy HotTM and related products by Chattem, Inc.
      (NASD:CHTT). In 2005, the topical pain relief market generated approximately
      $300 million in revenue.





Although
      the Company does not view pharmaceutical products as direct competitors, we
      believe that eventually mainstream consumers will view natural products as
      alternatives to prescription medication.




8




Nearly
      all of our existing and potential competitors have longer operating histories,
      greater experience, greater name recognition, larger customer bases and
      significantly greater financial, technical and marketing resources than Swiss
      Medica. Due to their greater resources, our competitors are able to undertake
      more extensive marketing campaigns for their brands and services, and make
      more
      attractive offers to potential employees, retail affiliates, and others. We
      cannot assure you that we will be able to compete successfully against our
      current or future competitors or that our business and financial results will
      not suffer from competition.





**Manufacturing**





We
      rely
      on third-party manufacturers to fulfill all of our manufacturing requirements.





**Research
      & Development**




We
      do not
      anticipate incurring material research and development costs during the next
      12
      months, nor do we anticipate the acquisition or sale of any material property,
      plant or equipment during the next 12 months, with the exception of the possible
      acquisition of additional consumer healthcare or herbal health products and
      their related infrastructure.





There
      were no funds expended on research and development during the fiscal years
      ending December 31, 2006 and 2005.





**Dependence
      on one or more customer**





As
      of
      December 31, 2006 one or more of the Company’s products were on the shelves at
      North American drug store chains such as Rite-Aid Corporation, CVS/Pharmacy
      and
      Shopper’s Drug Mart.




For
      the
      year ended December 31, 2006, sales to four major customers accounted for 83%
      of
      our total sales, including Brooks Pharmacy, Shoppers Drug Mart, CVS Pharmacy
      and
      McKesson’s.





**Employees**





As
      of
      December 31, 2006 we had thirteen full-time employees. Of these employees,
      three
      were in sales, one was in accounting, two were in manufacturing, four were
      in
      customer care and logistics and three were in administration and general
      operations. We believe our relations with our employees are good.





**Enforceability
      of Civil Liabilities Against Foreign Persons**





We
      are a
      company incorporated under the laws of Delaware but because we are a company
      headquartered in Canada our investors may not be able to enforce civil
      liabilities under the U.S. federal securities laws against our officers and
      directors. Some of our directors and officers reside in Canada. Because some
      of
      our assets are located outside the U.S., it may be difficult for an investor
      to
      sue, for any reason, us or any of our directors or officers through U.S.
      jurisdictions. If an investor was able to obtain a judgment against us or any
      of
      our directors or officers in a U.S. court based on U.S. securities laws or
      other
      reasons, it may be difficult to enforce such judgment in Canada. We have been
      advised by our Canadian counsel that there is uncertainty as to the
      enforceability, in original actions in Canadian courts, of liability based
      upon
      the U.S. federal securities laws and as to the enforceability in Canadian courts
      of judgments of U.S. courts obtained in actions based upon the civil liability
      provisions of the U.S. federal securities laws.





9




**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**




We
      currently lease two offices, including our 14,600 square foot corporate
      headquarters located at 375 Britannia Road East, Unit B, Mississauga, Ontario,
      which commenced July 1, 2006, and will expire on May 31, 2011.We also lease
      office, production and development space at 1110 East Collins Blvd., Suite
      132,
      Richardson, Texas which commenced April 1, 2005. This facility houses our
      production and development staff and will expire on April 1, 2009.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




**Westwood
      One, Inc. v. Swiss Medica, Inc. (Case No. 06-114192).**





In
      or
      about the early part of 2006, certain disputes arose between Westwood One
      and the Company in connection with certain agreements for advertising and
      promotional services.  Westwood One alleged that the Company had
      breached certain advertising agreements by failing to pay certain
      invoices.  The Company alleged that Westwood One had breached an
      advertising agreement by misrepresenting certain terms.  On March 20, 2006,
      the Company entered into an Affidavit of Confession of Judgment. On or about
      October 3, 2006, after the Company failed to make settlement payments to
      Westwood One, Westwood One entered judgment against the Company in the Supreme
      Court for the County of New York in the state of New York (Index No. 06-114192)
      in the amount of $217,382.81. The Company has paid $75,000 of this judgment
      and
      has entered into a subsequent settlement agreement in which it agreed to pay
      the
      balance of $142,381 by April 10, 2007. The Company has paid approximately
      $19,000 of this amount, but did not pay the entire balance by April 10,
      2007.





As
      of May
      18, 2007, Westwood One has caused certain accounts held in the Company’s name,
      at various financial and other institutions, to be attached, garnished and/or
      frozen pursuant to the judgment.





**Garden
      State Nutritionals v. Swiss Medica, Inc. (Case No.:
      L-2758-06)**





Garden
      State Nutritionals filed this action in the Superior Court of New Jersey Law
      Division Essex County on March 28, 2006. Garden alleged causes of action for
      breach of contract, quantum meruit and book account arising out of payments
      allegedly due under contract. On or about, September 19, 2006, the Company
      filed
      an answer to Garden’s complaint, counter-claim and demand for jury trial. The
      Company alleges causes of action for breach of contract, breach of express
      warranty, breach of implied warranty of merchantability, fraud and negligent
      misrepresentation for failure to manufacture and deliver Garden’s product
      pursuant to the same contract. During the initial discovery stages of this
      matter, the parties agreed to settle the matter. A joint stipulation to dismiss
      the entire action with prejudice was submitted to the Court in April
      2007.





**American
      Carton Company v. Swiss Medica, Inc. (Case No.
      352-216751-06)**





American
      Carton Company (“ACC”) filed this action in the District Court of Tarrant
      County, Texas, 352nd Judicial District on or about February 24, 2006. ACC
      asserted claims for certain unpaid invoices against the Company. The Company
      maintains it was never properly served with the summons and complaint. A default
      judgment was entered against the Company in the principal amount of $141,107.54
      along with pre-judgment interest of $1,081.92 and attorneys’ fees of $800 on May
      19, 2006. The Company and ACC subsequently entered into a settlement agreement
      to resolve the matter in March 2007 and the Company agreed to pay ACC
      approximately $18,000.





**Salem
      Radio Network v. Swiss Medica, Inc. (Case No.
      06-10177-D)**





Salem
      Radio Network (“Salem”) filed this action in the County Court of Law, No. 4, in
      Dallas County, Texas in 2006. Salem asserted claims for certain unpaid invoices
      against the Company. The Company maintains it was never properly served with
      the
      summons and complaint. A default judgment was entered against the Company in
      the
      principal amount of $77,807.50 along with pre-judgment interest of $8,169.00
      and
      attorneys’ fees of $25,000 on August 16, 2006. The Company and Salem
      subsequently entered into a settlement agreement to resolve the matter in May
      2007 for approximately $63,000.





Occasionally
      we may be named as a party in claims and legal proceedings arising out of the
      normal course of our business. These claims and legal proceedings may relate
      to
      contractual rights and obligations, employment matters, or to other matters
      relating to our business and operations.




10




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





In
      August
      2006, our Board of Directors and stockholders owning an aggregate of 2,000,000
      shares of Class B common stock and 10,498,609 shares of Class A common stock
      outstanding as of the Record Date (or 54.8% of the outstanding stockholder
      votes) have consented in writing to the following actions (1) to authorize
      the
      Company to effect a reverse stock split of the Company's common stock at a
      ratio
      to be later determined by the Board of Directors of at least 1-for-2 but no
      greater than 1-for-10; and (2) to approve the 2006 Equity Incentive Plan under
      which 15,000,000 shares of the Company’s Class A common stock will be reserved
      for issuance. No options have been granted under the 2006 Equity Incentive
      Plan
      to date, and there is no plan by the Company to issue any options at this
      time.




11




**PART
      II**





**ITEM
      5.**  **MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





Our
      common stock is quoted on the National Association of Securities Dealers, Inc.
      Electronic Bulletin Board (the “OTC Bulletin Board”), and is traded under the
      symbol “SWME”.





The
      table
      below sets forth the range of high and low bid quotes of our common stock for
      each quarter for the last fiscal year, the only full fiscal year during which
      our common stock traded, as reported by Stockgroup Information Systems Inc.
      The
      bid prices represent inter-dealer quotations, without adjustments for retail
      mark-ups, markdowns or commissions and may not necessarily represent actual
      transactions.





**2006**
            
            **High
                Bid**
            
            **Low
                Bid**First
                Quarter
            
            $
            0.220
            
            $
            0.110Second
                Quarter
            
            $
            0.190
            
            $
            0.075Third
                Quarter
            
            $
            0.145
            
            $
            0.050Fourth
                Quarter
            
            $
            0.070
            
            $
            0.014**2005**
            
            
            **High
                Bid**
            
            
            **Low
                Bid**First
                Quarter
            
            $
            0.46
            
            $
            0.25Second
                Quarter
            
            $
            0.39
            
            $
            0.22Third
                Quarter
            
            $
            0.30
            
            $
            0.18Fourth
                Quarter
            
            $
            0.23
            
            $
            0.12




As
      of
      June 6, 2007, there were approximately 2,954 holders of record of our Class
      A
      common stock. This number does not include an indeterminate number of
      shareholders whose shares are held by brokers in street name.





Since
      becoming a reporting company, we have never declared or paid any cash dividends
      on our common stock and do not expect to declare or pay any cash dividends
      in
      the foreseeable future. Prior to becoming a reporting company, we were an S
      corporation for tax reporting purposes and we paid dividends to our sole
      shareholder.





**Recent
      Sales of Unregistered Securities**





In
      September 2006 we issued 186,000 Class A Common Shares for services rendered
      by
      certain consultants. The securities were issued in reliance upon the exemption
      provided in Section 4(2) of the Securities Act of 1933.





In
      November 2006 we issued 231,000 Class A Common Shares for services rendered
      by
      certain consultants. The securities were issued in reliance upon the exemption
      provided in Section 4(2) of the Securities Act of 1933.




In
      December 2006 we issued 182,000 Class A Common Shares for interest charges
      related to financing fees. The securities were issued in reliance upon the
      exemption provided in Section 4(2) of the Securities Act of 1933.





12




**ITEM
                6.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
                CONDITION**





The
      following discussion and analysis is qualified by, and should be read in
      conjunction with, our audited financial statements and the notes thereto
      included in Item 7 of this Annual Report on Form 10-KSB.





Management's
      discussion and analysis of results of operations and financial condition are
      based on our financial statements. These statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America. These principles require management to make certain estimates,
      judgments and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. On an on-going basis, we evaluate our estimates based on
      historical experience and various other assumptions that are believed to be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions. References to "we", "our",
      "us" or the "Company" are to Swiss Medica, Inc., a Delaware corporation, and
      its
      subsidiaries.





**Recent
      Developments**





*May
      2007 Debt Financing*





On
      May
      10, 2007 (the “Closing Date”), the Company closed a financing transaction in
      which it sold convertible notes (the “Notes”) to certain investors (each, an
“Investor” and collectively, the “Investors”) to raise up to an aggregate of
      $2,240,000 pursuant to a Subscription Agreement dated May 10, 2007 (the
“Subscription Agreement”). The Company received aggregate gross proceeds of
      $600,000 on the Closing Date (the “Aggregate Purchase Price”).




The
      Company granted the Investors the Notes in the aggregate principal amount of
      $672,000, each dated May 10, 2007 or 1.12 times the Aggregate Purchase Price.
      The Notes mature on November 10, 2007 (the “Maturity Date”). The Investors
      cannot convert the Notes into shares of the Company’s $0.001 par value common
      stock (the “Common Stock”), in whole or in part, November 10, 2007 (the
“Conversion Date”). If converted, the price per share shall equal seventy-five
      percent (75%) of the average of the closing bid prices of the Common Stock
      during the five (5) trading days immediately preceding the Conversion Date
      as
      reported by Bloomberg L.P. None of the Investors may, however, convert the
      Notes
      nor may the Finder exercise the Finder Warrant (as defined below) if such
      conversion or exercise would result in the Investor or Finder (as defined
      below), together with any affiliate thereof, beneficially owning (as determined
      in accordance with Section 13(d) of the Securities Exchange Act of 1933 and
      the
      rules promulgated thereunder) in excess of 4.99% of the then issued and
      outstanding shares of Common Stock.




The
      Company agreed to reserve for issuance not less than an amount of Common Stock
      equal to 150% of the amount of shares of Common Stock issuable upon the full
      conversion of the Notes (“Reserved Shares”) within 14 days of the closing and
      reserve such shares until such time as all obligations under the Notes have
      been
      satisfied. The Reserved Shares have been reserved but have not actually been
      issued and such shares will not be issued if the Company pays all amounts it
      owes under, and makes such payment in accordance with the terms of, the
      Notes.




Pursuant
      to the Subscription Agreement, the Company agreed to pay Inglewood Holdings
      Ltd.
      (“Finder”) a due diligence fee in the form of (i) a cash payment of ten percent
      (10%) of the Aggregate Purchase Price, and (ii) a three (3) year warrant to
      purchase 10,000,000 shares of Common Stock at an exercise price of $0.02 per
      share (the “Finder Warrant”). The Company paid Finder $60,000 in cash and issued
      Finder the Finder Warrant on the Closing Date upon the funding of $600,000
      of
      the Notes. The Finder Warrant expires on May 10, 2010 and may be exercised
      on a
“cashless” basis if the shares underlying the Finder Warrant have not been
      registered.





13




*Restructuring
      Double U Master Fund Notes and Warrant*




The
      Company and Double U Master Fund L.P. (“Double U”) are parties to Subscription
      Agreements dated June 20, 2005, December 29, 2005, as amended pursuant to a
      Modified Agreement dated June 8, 2006, and August 24, 2006 relating to aggregate
      investments by Double U of $560,000, $250,000, and $594,000, respectively,
      of
      principal amount of promissory notes of the Company convertible into shares
      of
      the Company’s Common Stock (each, a “Double U Note” and collectively, the
“Double U Notes”). On May 9, 2007, the Company and Double U entered into a
      Second Modification and Amendment Agreement (the “Amendment”) whereby the
      Company restructured the terms of the Double U Notes, and Double U waived
      certain defaults. Pursuant to the Amendment, the annual simple interest payable
      on each Double U Note is twelve percent (12%) and is payable monthly commencing
      May 31, 2007 and on March 31, 2008 (the “Maturity Date”) when the principal and
      remaining accrued but unpaid interest is due and payable. From May 1, 2007
      to
      October 31, 2007, the Company must pay three percent (3%) of the outstanding principal
      amount due under each Double U Note at the end of each three (3) month period
      starting May 1, 2007. From November 1, 2007 to March 31, 2008, the Company
      must
      pay one percent (1%) of the outstanding principal amount due under each Double
      U
      Note at the end of each monthly period starting November 31, 2007.




Pursuant
      to the Amendment, the Company paid to Double U $115,000 in accrued interest
      with
      proceeds from the May 10, 2007 financing described above. The Company agreed
      to
      pay $60,000 in accrued interest and $10,000 for the extension of the maturity
      date of the Double U Notes with proceeds from a future debt
      financing.




On
      May 8,
      2007, pursuant to the Amendment, the Company issued a three (3) year warrant
      to
      purchase up to 1,500,000 shares of Common Stock at an exercise price of $0.02
      per share (the “Double U Warrant”). The Double U Warrant expires on May 9, 2010.




The
      issuance of the Double U Warrant is exempt from registration under federal
      securities laws pursuant to Section 4(2) of the Securities Act of 1933, as
      amended (the “Act”). This announcement is not an offer to sell securities of the
      Company.





**Critical
      Accounting Policies and Estimates**





The
      preparation of our financial statements in conformity with accounting principles
      generally accepted in the United States requires us to make estimates and
      judgments that affect our reported assets, liabilities, revenues, and expenses,
      and the disclosure of contingent assets and liabilities. We base our estimates
      and judgments on historical experience and on various other assumptions we
      believe to be reasonable under the circumstances. Future events, however, may
      differ markedly from our current expectations and assumptions. While there
      are a
      number of significant accounting policies affecting our consolidated financial
      statements; we believe the following critical accounting policies involve the
      most complex, difficult and subjective estimates and judgments:





·
            Stock-based
                compensation;





·
            Intangible
                assets; and





·
            Research
                and Development.





Stock-Based
      Compensation





On
      December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
      Statement No. 123R (revised 2004), Share-Based Payment" which is a revision
      of
      FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
      123R supersedes APB opinion No. 25, "Accounting for Stock Issued to Employees",
      and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
      approach in Statement 123R is similar to the approach described in Statement
      123. However, Statement 123R requires all share-based payments to employees,
      including grants of employee stock options, to be recognized in the income
      statement based on their fair values. Pro-forma disclosure is no longer an
      alternative. This statement does not change the accounting guidance for share
      based payment transactions with parties other than employees provided in
      Statement of Financial Accounting Standards No. 123(R). This statement does
      not
      address the accounting for employee share ownership plans, which are subject
      to
      AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock
      Ownership Plans.” On April 14, 2005, the SEC amended the effective date of the
      provisions of this statement. The effect of this amendment by the SEC is that
      the Company had to comply with Statement 123R and use the Fair Value based
      method of accounting no later than the first quarter of 2006. The Company
      implemented SFAS No. 123(R) on January 1, 2006 using the modified
      prospective method. The fair value of each option grant issued after January
      1,
      2006 was determined as of grant date, utilizing the Black-Scholes option pricing
      model.





14


Acquired
      Intangible Assets





Acquisitions
      of intangible assets are accounted for under Statement of Financial Accounting
      Standard No. 142, *Goodwill
      and Other Intangible Assets* .
      These
      standards require that certain identifiable assets be amortized over their
      expected useful lives. Intangible assets that have indefinite useful lives
      are
      not subject to amortization, but rather will be tested at least annually for
      impairment.





Research
      and Development





The
      Company accounts for research and development costs in accordance with the
      Financial Accounting Standards Board’s Statement of Financial Accounting
      Standards No. 2 (“SFAS 2”), “Accounting for Research and Development Costs.
      Under SFAS 2, all research and development costs must be charged to expense
      as
      incurred. Accordingly, internal research and development costs are expensed
      as
      incurred. Third-party research and developments costs are expensed when the
      contracted work has been performed or as milestone results have been achieved.
      Company-sponsored research and development costs related to both present and
      future products are expensed in the period incurred.


****


**Results
      of Operations**





***Overview***





We
      market
      and distribute proprietary, all-natural, clinically tested consumer healthcare
      products designed to enhance the well-being and health of individuals. We
      believe that consumers are deeply concerned about the management and cost of
      their health care and the expensive, chemical-based prescription drug approach
      predominant in modern medicine. We believe that this concern will increase
      the
      demand for all-natural, clinically tested consumer healthcare products because
      natural products are considered to be safer, more effective against many
      ailments and are more accessible than prescription medications. The global
      market for chronic ailment products is in excess of $100 billion and is
      currently dominated by prescription, chemical based drugs.





We
      will
      continue to look for quality proprietary, natural consumer healthcare products
      to license and, or acquire. We plan to sell our products through multiple
      distribution channels including, via retail outlets, e-commerce, and via health
      care professionals.





To
      date
      during 2005 and early 2006, we have further expanded the distribution of O24
      Essential Oil Pain Neutralizer, O24 Fibromyalgia and PMS Escape into major
      retail outlets in the United States and Canada, as well as professional offices
      in the United States and Canada, including doctors, chiropractors and
      clinics.




15




***Results
      of Year ended December 31, 2006 compared with year ended December 31,
      2005(Restated)***





The
      following is a summary of financial information for the years ended December
      31,
      2006 and 2005:





Years
                ending
              December
                31,____2006
            
            2005(Restated)Net
                Sales:
            
            $
            1,051,422
            
            $
            5,233,956Cost
                of Sales:
            
            
            1,674,000
            
            
            1,101,990Gross
                Profit:
            
            
            (622,578
            )
            
            4,131,966Operating
                expenses:Marketing
                & Promotions*
            
            
            4,301,163
            
            
            4,235,356General
                & administrative expenses*
            
            
            3,715,828
            
            
            5,807,769Depreciation
                and amortization:
            
            
            195,417
            
            
            193,449Impairment
                of goodwill:
            
            
            500,000Total
                operating expenses:
            
            
            8,712,407
            
            
            10,236,574Loss
                from operations:
            
            
            9,334,985
            
            
            6,104,608Interest
                expense:
            
            
            (2,476,098
            )
            
            (269,158
            )Net
                Gain on Revaluation of warrant liability:
            
            
            2,529,159
            
            
            -Net
                loss:
            
            
            9,281,924
            
            
            6,373,766Loss
                per Common Share:
            
            $
            0.09
            
            $
            0.07




*
      Stock
& Warrant based compensation to Consultants, Professional Advisors ,
      Directors and Officers, totaled $412,128 for the year ending December 31, 2006
      and $746,928 for the year ending December 31, 2005





**Sales**





Our
      revenues from operations for the years ended December 31, 2006 and 2005 were
      $1,051,422 and $5,233,956 respectively. For the year ending December 31, 2006,
      sales were generated predominately from American and Canadian retail pharmacies.





**Cost
      of Sales and Gross Profit**





Our
      2006
      cost of sales of $1,674,000, generated a percentage margin on sales of 66%.
      We
      anticipate 2007 gross profit percentages to be between 70% and 80%, depending
      on
      the distribution mix of our revenue. It should be noted that the raw materials
      used in the O24 product formulation are all commodities and prices may vary
      significantly, causing fluctuations in our profit margins.





**Research
      and Development**





There
      were no funds expended on research and development during the fiscal years
      ending December 31, 2006 or 2005. We do not anticipate any major research and
      development costs during fiscal year ending December 31, 2007.




16




**Selling,
      General and Administrative Expenses**





Selling,
      General and Administrative costs for the year ending December 31, 2006 totaled
      $8,016,990.





Marketing
      and promotion expense for the year ending December 31, 2006 totaled
      $4,301,163





Advertising
                and promotion:
            
            $
            3,564,121Marketing
                and promotion:
            
            
            737,042$
            4,301,163





Stock
      based compensation to Consultants, Professional Advisors, Directors and
      Officers, totaled $412,128 ($746,928 for 2005). Stock based compensation was
      granted to recruit and compensate executives, directors, legal advisors,
      marketing, promotion, business and development advisors.





Cash
      based compensation was paid to our staff of thirteen full-time employees,
      consulting fees for outside directors, legal advisors and marketing consultants.





Other
      selling, general and administrative costs include investor relations fees,
      payroll, insurance, finance fees, travel, rent and other office expenses.





**Depreciation
      & Amortization**





Depreciation
      & Amortization expenses of $129,450 were incurred during the year ending
      December 31, 2006 to amortize the intangible assets acquired from the General
      Cosmetics Corporation acquisition, and $65,967 to amortize the tangible assets
      in our Dallas and Toronto offices.





**Interest
      Expense**





Interest
      expenses of $2,476,098 were incurred during the year ending December 31, 2006
      (269,158 for 2005) and relate to interest paid on promissory notes and
      redeemable debentures, including non cash charges of approximately $1,411,266
      to
      amortize discount on convertible debentures




***Liquidity
      and Capital Resources***





As
      of
      December 31, 2006, we had a working capital deficit of $7,581,624, and as a
      result of our operating losses in 2006, we generated a cash flow deficit of
      $3,386,441 from operating activities. We used $150,000 in connection with
      investing activities in 2006, and met our cash requirements through the private
      placement of:





·
            413,089
                shares of common stock in exchange for options exercised, generating
                $33,000; and





·
            promissory
                note advances of $581,786 from secured and unsecured, third parties.





17




We
      will
      be seeking to continue funding our operations through





·
            debt
                instruments: we are currently seeking debt financing in order to
                provide
                the necessary working capital to fund our ongoing
                operations.





·
            additional
                sales of our equity securities




·
            the
                continued exercise of warrants outstanding in exchange for common
                shares





·
            management
                and/or shareholder loans





There
      is
      no guarantee that we will be successful in completing these contemplated
      financings, nor can we assure you that we will be successful in obtaining any
      additional financing should it be required. If we cannot secure additional
      financing when needed, we may be required to cease operations **.**





By
      adjusting its operations and development to the level of capitalization,
      management believes it has sufficient capital resources to meet projected cash
      flow deficits through the next two months . However, if thereafter, we are
      not
      successful in generating sufficient liquidity from operations or in raising
      sufficient capital resources, on terms acceptable to us, this could have a
      material adverse effect on our business, results of operations liquidity and
      financial condition.





Our
      independent certified public accountants have stated in their report, which
      is
      included with our audited financial statements in the Form 10-KSB for the period
      ended December 31, 2006, that we have incurred operating losses in the last
      two
      years and that we are dependent on management's ability to raise capital and
      develop profitable operations. These factors, among others, may raise
      substantial doubt about our ability to continue as a going
      concern.





New
      Accounting Pronouncements




In
      September 2006, the FASB issued SFAS 157, *Fair
      Value Measurements* ,
      which
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (“GAAP”), and expands disclosures about
      fair value measurements. The Company will be required to adopt SFAS 157
      effective for the fiscal year beginning January 1, 2008. The requirements
      of SFAS 157 will be applied prospectively except for certain derivative
      instruments that would be adjusted through the opening balance of retained
      earnings in the period of adoption. The Company is currently evaluating the
      impact of the adoption of SFAS 157 on the Company’s consolidated financial
      statements and the management believes that the adoption of SFAS 157 will not
      have a significant impact on its consolidated results of operations or financial
      position.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106, and 132R* (‘SFAS
      158’).  SFAS 158 changes current practice by requiring employers to
      recognize the overfunded or underfunded positions of defined benefit
      postretirement plans, including pension plans, on the balance sheet.  The
      funded status is defined as the difference between the projected benefit
      obligation and the fair value of plan assets.  SFAS 158 also requires
      employers to recognize the change in funded status in other comprehensive income
      (a component of shareholders’ equity).  SFAS 158 does not change the
      requirements for the measurement and recognition of pension expense in the
      statement of income.  SFAS 158 is effective for fiscal years ending after
      December 15, 2006.  The Company does not anticipate any material impact to
      its financial condition or results of operations as a result of the adoption
      of
      SFAS 158.




18




In
      September 2006, the SEC issued Staff Accounting Bulletin 108, *Considering
      the Effects of Prior Year Misstatements When Quantifying Misstatements in
      Current Year Financial Statements* (‘SAB
      108’).  SAB 108 provides interpretive guidance on how the effects of the
      carryover or reversal of prior year financial statement misstatements should
      be
      considered in quantifying a current year misstatement.  SAB 108 is
      effective for financial statements covering the first fiscal year ending after
      November 15, 2006.  The Company does not anticipate any material impact to
      its financial condition or results of operations as a result of the adoption
      of
      SAB 108.





In
      December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
      Payment Arrangements (" FSP
      00-19 -2")
      which addresses accounting for registration payment arrangements. FSP
      00-19 -2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB Statement No. 5, Accounting for Contingencies. FSP
      00-19 -2
      further clarifies that a financial instrument subject to a registration payment
      arrangement should be accounted for in accordance with other applicable
      generally accepted accounting principles without regard to the contingent
      obligation to transfer consideration pursuant to the registration payment
      arrangement. For registration payment arrangements and financial instruments
      subject to those arrangements that were entered into prior to the issuance
      of
      EITF 00-19-2, this guidance shall be effective for financial statements issued
      for fiscal years beginning after December 15, 2006 and interim periods within
      those fiscal years. The Company has not yet determined the impact that the
      adoption of FSP
      00-19 -2
      will
      have on its financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
      to measure many financial instruments, and certain other items, at fair value.
      SFAS 159 applies to reporting periods beginning after November 15, 2007. The
      adoption of SFAS 159 is not expected to have a material impact on the Company’s
      financial condition or results of operations.





****Use
      of
      Estimates




*The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.*




**Factors
      Affecting Business, Operating Results and Financial
      Condition**





An
      investment in us involves a high degree of risk and should be undertaken only
      by
      persons whose financial resources are sufficient to enable them to assume such
      risk and to bear the total loss of their investment. This section sets forth
      a
      brief summary of some of the principal risk factors. If the Company is unable
      to
      address and deal with one or more of the risks described below or any other
      risks which it may face, then its business, operating results and financial
      condition could be materially adversely affected, and you could lose all or
      part
      of your investment. For these reasons, prospective investors should carefully
      consider the risks described below as well as any other possible risks that
      could be important.





THERE
      IS
      SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN





Our
      independent accountants have included an explanatory paragraph in our financial
      statements included in our public filings stating that we have incurred
      operating losses in the last two years and that we are dependent on our
      management's ability to develop profitable operations, and that these factors,
      among others, may raise substantial doubt about our ability to continue as
      a
      going concern.





We
      have
      been dependent primarily on private placements of our equity securities and
      shareholder loans to fund our operations. In the near term, we intend to focus
      on increasing our marketing efforts for our existing products. Such funding
      may
      not be available to us when needed, on commercially reasonable terms, or at
      all.
      If we are unable to obtain additional financing if needed, we will likely be
      required to curtail our marketing and operating plans and possibly cease our
      operations. In addition, any additional equity financing may involve substantial
      dilution to our then-existing stockholders.





WE
      MAY
      NEVER BECOME PROFITABLE AND IF WE DO NOT BECOME PROFITABLE WE MAY HAVE TO CEASE
      OUR OPERATIONS





We
      have
      incurred net operating losses in each fiscal quarter since we have been in
      business. We expect to continue to experience losses until the time, if ever,
      when we are able to sell products sufficient to generate revenues adequate
      to
      support our operations. If we fail to become profitable, we may be forced to
      cease operations.





19





WE
      MAY
      RAISE ADDITIONAL CAPITAL THROUGH A SECURITIES OFFERING THAT COULD DILUTE YOUR
      OWNERSHIP INTEREST





We
      require substantial working capital to fund our business. If we raise additional
      funds through the issuance of equity, equity-related or convertible debt
      securities, these securities may have rights, preferences or privileges senior
      to those of the holders of our common stock. The issuance of additional common
      stock or securities convertible into common stock by our management will also
      have the effect of further diluting the proportionate equity interest and voting
      power of holders of our common stock.





In
      addition, under our Certificate of Incorporation, the Board is authorized to
      issue, without obtaining shareholder approval, shares of preferred stock having
      the rights, privileges and designates as determined by the Board. Therefore,
      the
      Board could issue shares of preferred stock that would have preferential
      liquidation, distribution, voting, dividend or other rights, which would be
      superior to the rights of common stockholders.





WE
      HAVE
      NOT PAID CASH DIVIDENDS AND IT IS UNLIKELY THAT WE WILL PAY CASH DIVIDENDS
      IN
      THE FORESEEABLE FUTURE





We
      plan
      to use all of our earnings to the extent we have earnings, to fund our
      operations. We do not plan to pay any cash dividends in the foreseeable future.
      We cannot guarantee that we will, at any time, generate sufficient surplus
      cash
      that would be available for distribution as a dividend to the holders of our
      common stock. You should not expect to receive cash dividends on our common
      stock.





WE
      ARE A
      DEVELOPMENT STAGE COMPANY WITH A LIMITED OPERATING HISTORY AND WE MAY BE
      UNSUCCESSFUL





We
      have
      been engaged in our current business for approximately less than three years.
      Accordingly, we have a limited operating history and our operations are subject
      to all the risks inherent in a business enterprise with such a limited operating
      history, including limited capital, possible delays in the development and
      implementation of our business plan, uncertain markets, and the absence of
      an
      operating history. The likelihood that we will succeed must be considered in
      light of the problems, expenses, and delays frequently encountered in connection
      with the development of new businesses, as well as many other factors. We may
      not be able to successfully develop the business we are pursuing. We cannot
      be
      certain that our business will be successful or that we will generate
      significant revenues.





THE
      MARKET PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED IF TOO MUCH OF IT
      IS
      SOLD AT ONCE





Sales
      of
      substantial amounts of our common stock in the public market could adversely
      affect the market price of the common stock. Such sales also might make it
      more
      difficult for us to sell equity or equity-related securities in the future
      at a
      time and price that we deem appropriate.




In
      addition, we often compensate consultants who provide services to the Company
      through the issuance to them of shares of publicly traded Class A Common Stock
      and other securities. We also issue our employees options to purchase common
      stock at fair market value that we have registered under a Form S-8 Registration
      Statement. The sale of any of those shares will likely adversely affect the
      market price of the Class A Common Stock. Your ability to sell shares of our
      common stock may be prevented, or the price adversely affected as a result
      of
      this increased selling pressure.





OUR
      STOCK
      IS QUOTED ON THE OTC BULLETIN BOARD AND COULD BE SUBJECT TO EXTREME
      VOLATILITY





Our
      common stock is currently quoted under the symbol "SWME" on the OTC Bulletin
      Board, which is often characterized by low trading volume. A large volume of
      stock being sold into the market at any one time could cause the stock to
      rapidly decline in price. In addition, we must comply with ongoing eligibility
      rules to ensure our common stock is not removed from the OTC Bulletin Board,
      which would materially adverse affect the liquidity and volatility of our common
      stock. These factors may limit your ability to sell shares of our common
      stock.





20


THERE
      IS
      A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK AND OUR STOCKHOLDERS MAY BE UNABLE
      TO LIQUIDATE THEIR SHARES





Our
      common stock is listed on the Over-the-Counter Bulletin Board, and there is
      a
      limited volume of sales, thus providing a limited liquidity into the market
      for
      our shares. As a result of the foregoing, stockholders may be unable to
      liquidate their shares.





OUR
      EXECUTIVE OFFICERS AND DIRECTORS CONTROL A LARGE PERCENTAGE OF OUR COMMON STOCK,
      WHICH ALLOW THEM TO CONTROL MATTERS SUBMITTED TO STOCKHOLDERS FOR
      APPROVAL





Our
      executive officers and directors (and their affiliates), in the aggregate,
      own
      approximately 16% of our outstanding Class A common stock, and a majority
      (approximately 51%) of our outstanding voting stock.  There is currently an
      aggregate of 143,961,491 shares of Class A and Class B Common Stock outstanding.
      The holders of the Class A and Class B Common Stock vote together on all matters
      submitted to a shareholder vote. Raghunath Kilambi, our Chief Executive Officer
      and director, owns 5,459,451 shares of our Class A Common Stock, and 2,000,000
      shares of our Class B Common Stock which constitute all outstanding shares
      of
      our Class B Common Stock. Each share of Class B Common Stock is entitled to
      fifty votes of Class A Common Stock. Therefore our executive officers and
      directors have the ability to decide the outcome of matters submitted to our
      stockholders for approval (including the election and removal of directors
      and
      any merger, consolidation or sale of all or substantially all of our assets)
      and
      to control our management and affairs. Accordingly, such concentration of
      ownership may have the effect of delaying, deferring or preventing a change
      in
      control, impede a merger, consolidation, take over or other business combination
      or discourage a potential acquirer from making a tender offer or otherwise
      attempting to obtain control, which in turn could have an adverse effect on
      the
      market price of our common stock.




WE
      MAY BE
      SUBJECT TO PRODUCT LIABILITY CLAIMS FOR OUR PRODUCTS WHICH COULD HAVE A
      SUBSTANTIAL, ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL RESULTS





Customers
      may sue us if any of our products sold to them injure the user. Liability claims
      could require us to spend significant time and money in litigation and pay
      significant damages. As a result, any of these claims, whether or not valid
      or
      successfully prosecuted, could have a substantial, adverse effect on our
      business and financial results. We currently have product liability insurance,
      however, the amount of damages awarded against us in such a lawsuit may exceed
      the policy limits.





WE
      ARE
      SUBJECT TO GOVERNMENT REGULATIONS WHICH MAY HINDER OUR GROWTH





In
      the
      United States, governmental agencies and extensive federal regulations regulate
      the manufacture, packaging, labeling, advertising, promotion, distribution
      and
      sale of our products. The Food and Drug Administration (FDA) regulates the
      safety and effectiveness of our products and the Federal Trade Commission (FTC)
      regulates how we advertise and market our products. O24 and any other products
      we may manufacture or sell in the future are also subject to regulation by,
      among other regulatory entities, the Consumer Product Safety Commission, the
      U.S. Department of Agriculture, and the Environmental Protection Agency. The
      laws, regulations and enforcement policies governing our products are relatively
      new and are still evolving, and we cannot predict what enforcement positions
      the
      FDA or other governmental agencies may take with respect to our
      products.





There
      are
      similar regulatory bodies and regulations in Canada, and other countries in
      which we may decide to market, sell and distribute our products. We cannot
      be
      certain that we comply or will comply with all laws and regulations in this
      area. Enforcement actions by any of these regulatory agencies can result in
      civil and criminal penalties, an injunction to stop or modify certain selling
      methods, seizure of products, adverse publicity or voluntary recalls and
      labeling changes. If any governmental agency were to undertake an enforcement
      action against us, this could cause an immediate decrease in our revenues,
      cause
      us to incur significant additional expenses and result in a decrease in our
      stock price.





WE
      MAY
      NOT BE SUCCESSFUL IN ACQUIRING OR LICENSING NEW PRODUCTS WHICH COULD HAVE A
      MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





We
      are
      currently seeking to license or acquire new products or companies with
      bioscience products, manufacturing or distribution capabilities consistent
      with
      our commercial objectives. We may not be able to acquire such products. We
      may
      not be able to find and acquire additional bioscience products with
      demonstrative competitive advantages. We presently do not have the capital
      to
      make acquisitions. Accordingly, in the near term, any such acquisitions would
      most likely require that we issue stock in our Company to effect acquisitions
      which would result in dilution to our shareholders.




21





WE
      HAVE
      RISKS ASSOCIATED WITH OUR DEPENDENCE ON THIRD PARTY MANUFACTURING WHICH COULD
      HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS





We
      depend
      upon third parties to manufacture our products. The inability of a manufacturer
      to ship orders of our products in a timely manner, including as a result of
      local financial market disruption which could impair the ability of such
      manufacturers to finance their operations, or to meet quality standards, could
      cause us to miss the delivery date requirements of our customers for those
      items, which could result in cancellation of orders, refusal to accept
      deliveries or a reduction in purchase prices, any of which could have a material
      adverse effect on our financial condition and results of operations. We have
      no
      long-term formal arrangements with any of our third party manufacturers.
      Although we believe we could replace such manufacturers if necessary, without
      a
      material adverse effect on us, these manufacturers may not be replaced in a
      timely manner, and the loss of such manufacturers could have a material adverse
      effect on our business, financial condition and results of
      operations.





WE
      ARE
      DEPENDENT ON OUR TRADEMARKS AND PATENTS AND THE FAILURE TO OBTAIN TRADEMARK
      PROTECTION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS





The
      market for certain of our products will be, in part, dependent upon the goodwill
      engendered by our trademarks and trade names. Trademark protection is therefore
      material to a portion of our business. The failure to obtain trademark
      protection, or illegal use of any trademarks we may obtain, may have an adverse
      effect on our business, financial condition and operating results.





The
      Company owns United States Patent Number 6,444,238 (issued September 3, 2002)
      which covers our O24 products, and have North American licenses to US Patents
      #’s 5760014 and 5612320 for our PMS Escape product. However, we may not be able
      to obtain patent protection for any derivative uses of O24 and/or PMS Escape
      or
      for any other products we may later acquire or develop. We also cannot assure
      you that we will be able to obtain foreign patents to protect our
      products.





The
      failure to protect our patent, trademarks and trade names, may have a material
      adverse effect on our business, financial condition and operating results.
      Litigation may be required to enforce our intellectual property rights, protect
      our trade secrets or determine the validity and scope of proprietary rights
      of
      others. Any action we take to protect our intellectual property rights could
      be
      costly and could absorb significant management time and attention. In addition,
      as a result of any such litigation, we could lose any proprietary rights we
      have. If any of the foregoing occurs, we may be unable to execute on our
      business plan and you could lose your investment.




WE
      NEED
      TO BUILD OUT OUR SALES AND MARKETING ORGANIZATION OTHERWISE OUR BUSINESS WILL
      BE
      EFFECTED ADVERSELY





We
      are
      and shall continue marketing our existing products and future products that
      we
      may license or acquire either through the utilization of contract sales
      representatives and brokers, the establishment of our own sales force, strategic
      alliances and various other methods. We are in the early stages of developing
      such sales and marketing channels, and further development of those channels
      will require an investment of substantial amounts of capital which we currently
      do not possess and which we may never be able to access. Accordingly, despite
      our plans, we may be unable to substantially develop our own marketing
      channels.





WE
      DEPEND
      ON KEY PERSONNEL AND WILL REQUIRE ADDITIONAL SKILLED EMPLOYEES TO EXECUTE OUR
      GROWTH PLANS OTHERWISE THE DEVELOPMENT OF OUR BUSINESS COULD BE DELAYED OR
      PREVENTED





Our
      potential for success depends significantly on our executive officers,
      including, Raghunath Kilambi, our Chief Executive Officer, and Grant Johnson,
      our President. These individuals do not have employment agreements with the
      Company. We do not carry key-man life insurance on any executive. Given the
      early stage of our development and our plans for rapid expansion, the loss
      of
      the services of any executive or the services of any other key employees we
      may
      hire in the future would have a substantial, adverse effect on our business.
      We
      believe that our future success will depend in large part on our ability to
      attract and retain highly skilled sales, marketing and management personnel.
      If
      we are unable to hire the necessary personnel, the development of our business
      will likely be delayed or prevented. Competition for these highly skilled
      employees is intense. As a result, we cannot assure you that we will be
      successful in retaining our key personnel or in attracting and retaining the
      personnel we require for expansion.





22




WE
      FACE
      SIGNIFICANT COMPETITION AND OUR BUSINESS AND FINANCIAL RESULTS COULD SUFFER
      FROM
      COMPETITION





The
      market for health-related retail goods and services is characterized by intense
      competition. We believe that the principal competitive factors for companies
      in
      the industries in which we compete are:





·
            functionality;





·
            quality
                of merchandise;





·
            discounts
                and rewards;





·
            brand
                recognition;





·
            customer
                loyalty; and





·
            price.




Nearly
      all of our existing and potential competitors have longer operating histories,
      greater experience, greater name recognition, larger customer bases and
      significantly greater financial, technical and marketing resources than we
      do.
      Because of their greater resources, our competitors are able to undertake more
      extensive marketing campaigns for their brands and services, and make more
      attractive offers to potential employees, retail affiliates, and others. We
      may
      not be able to compete successfully against our current or future competitors
      and our business and financial results could suffer from such
      competition.




FUTURE
      SALES BY OUR STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND OUR ABILITY
      TO RAISE FUNDS IN NEW STOCK OFFERINGS





Sales
      of
      shares of our Class A common stock in the public market could lower the market
      price of our common stock. Sales may also make it more difficult for us to
      sell
      equity securities or equity-related securities in the future at a time and
      price
      that our management deems acceptable or at all. Of the 141,961,491 shares of
      Class A common stock outstanding as of April 12, 2007, 115,558,116 shares are,
      or will be, freely tradable without restriction, unless held by our
      "affiliates." The remaining 26,403,375 shares of Class A common stock which
      will
      be held by existing stockholders, including the officers and directors, are
      "restricted securities" and may be resold in the public market only if
      registered or pursuant to an exemption from registration. Some of these shares
      may currently be resold under Rule 144.





OUR
      COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
      FOR
      INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS





Our
      common stock is deemed to be "penny stock" as that term is defined in Rule
      3a51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks
      are
      stocks:





·
            With
                a price of less than $5.00 per
                share;





·
            That
                are not traded on a "recognized" national
                exchange;





·
            Whose
                prices are not quoted on the Nasdaq automated quotation
                system;





·
            Nasdaq
                stocks that trade below $5.00 per share are deemed a "penny stock"
                for
                purposes of Section 15(b)(6) of the Exchange Act;





·
            In
                issuers with net tangible assets less than $2.0 million (if the issuer
                has
                been in continuous operation for at least three years) or $5.0 million
                (if
                in continuous operation for less than three years), or with average
                revenues of less than $6.0 million for the last three
                years.




23


Broker/dealers,
      dealing in penny stocks are required to provide potential investors with a
      document disclosing the risks of penny stocks. Moreover, broker/dealers are
      required to determine whether an investment in a penny stock is a suitable
      investment for a prospective investor. These requirements may reduce the
      potential market for our common stock by reducing the number of potential
      investors. This may make it more difficult for investors in our common stock
      to
      sell shares to third parties or to otherwise dispose of them. This could cause
      our stock price to decline.





**ITEM
      7.**  **FINANCIAL
      STATEMENTS**





The
      financial statements, together with the independent auditors’ report thereon,
      appear beginning on page F-1 of this report.





**ITEM
      8.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





None.





**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**





a)  Evaluation
      of Disclosure Controls and Procedures:




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our reports filed under the Exchange Act is
      accumulated and communicated to management, including the Chief Executive
      Officer and Chief Financial Officer as appropriate, to allow timely decisions
      regarding required disclosure. Management recognizes that any controls and
      procedures, no matter how well designed and operated, can provide only
      reasonable assurance of achieving their objectives, and management necessarily
      applies its judgment in evaluating the cost-benefit relationship of possible
      controls and procedures.





Based
      on
      the evaluation of our disclosure controls and procedures as of December 31,
      2006, our Chief Executive Officer and Chief Financial Officer concluded that,
      as
      of such date, our disclosure controls and procedures were not effective due
      to
      the material weakness discussed below.  A material weakness is a control
      deficiency, or combination of control deficiencies, that results in more than
      a
      remote likelihood that a material misstatement of the annual or interim
      financial statements will not be prevented or detected.





As
      previously disclosed in a Current Report on Form 8-K , which we filed on May
      30,
      2007, our Board of Directors authorized us to amend and restate the financial
      statements contained in the previously-filed Annual Report on Form 10-KSB for
      the fiscal year ended December 31, 2005 and Quarterly Reports on Form 10-QSB
      or
      Form 10-QSB for the quarterly periods ended March 31, 2006, June 30, 2006,
      September 30, 2006, (collectively, the “Financial Statements”). During the
      Company’s review of its prior sales, the Company concluded that certain sales
      that were recorded in the year ended December 31, 2005 did not meet the criteria
      as described in Staff Accounting Bulletin no. 104 Revenue Recognition which
      superseded Staff Accounting Bulletin no. 101 Revenue Recognition in Financial
      Statements.  See Note R to the 2006 consolidated financial statements
      included herein for more information.  In addition the Company concluded
      that it did not properly account for derivatives related to a convertible
      security for the Quarterly Reports on 10QSB for the quarterly periods ended
      June
      30, 2006, September 30, 2006.





In
      connection with the restatement, our Chief Executive Officer and our Chief
      Financial Officer considered the effect of the errors on the adequacy of our
      disclosure controls and procedures as of the end of the period covered by this
      Annual Report on Form 10-KSB for the year ended December 31, 2006. Due to the
      restatement, the certifying officer determined that a material weakness had
      occurred in relation to our reporting at December 31, 2005 through September
      30,
      2006 and that the disclosure controls and procedures relating to this subject
      matter were therefore not effective.





24




b)  Changes
      in internal  controls:





Except 
      as described below, there were no changes in internal  controls over
      financial  reporting that occurred  during the  period 
covered  by this  report  that  have  materially 
affected,  or are reasonably  likely to materially  effect, 
our internal  control over  financial reporting.





Significant
      Deficiencies In Disclosure Controls and Procedures or Internal
      Controls





We
      have  subsequently  implemented  the  following additional
      measures to address the identified material weaknesses:


· We
          reviewed all convertible  securities to  identify any securities
          that   may   have  embedded  
beneficial  conversion    features or  
derivatives;


· We have 
          improved  the  supervision and  training 
of   our   accounting  staff  to  
understand   and    implement   
applicable  accounting requirements, policies and procedures 
applicable to revenue recognition on sales transactions.


**PART
      III**





**ITEM
      9.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a)
      OF THE SECURITIES EXCHANGE ACT**





**Identification
      of Directors and Executive Officers**





The
      following table sets forth certain information regarding our directors and
      executive officers.





**Name**
            
            **Age**
            
            **Title**Raghunath
                Kilambi
            
            41
            
            Chief
                Executive Officer and DirectorGrant
                Johnson
            
            47
            
            President,
                Chief Operating Officer and DirectorRonald
                Springer
            
            54
            
            DirectorSam
                Halim
            
            43
            
            DirectorBryson
                Farrill
            
            75
            
            Director




There
      are
      no family relationships among any of the directors or officers of the
      Company.





25




**Business
      Experience**





**Raghunath
      Kilambi** has
      served and is currently serving as our Chief Executive Officer, and a Director
      since May 2003. Prior to launching Swiss Medica, Mr. Kilambi served as a general
      partner of Rubicon Investment Group, a Canada-based merchant banking firm
      between January 2001 and May 2003. Between 1998 and 2000, Mr. Kilambi was CFO
      and Director of FutureLink Corp., a California based application service
      provider. Mr. Kilambi is also currently a director of private companies; Rubicon
      Investment Group, Inc and Broker Processing Service Inc. Prior to Future Link,
      Mr. Kilambi was a principal at New Economy Capital from 1993 to 1998 and worked
      at Canada Starch Company from 1990 to 1993. Mr. Kilambi began his career with
      Touche Ross & Co. and is a Chartered Accountant holding a Bachelor of
      Commerce and a Graduate Diploma in Public Accounting from McGill University,
      in
      Montreal, Canada.





**Grant
      Johnson** has
      served as our President, Chief Operating Officer and Director since April 2003.
      From November 2001 until December 2002, before joining Swiss Medica, Mr. Johnson
      was an outside consultant and senior advisor to Scarab Systems Inc. From April
      1999 until March 2002, Mr. Johnson was CEO of HLNT Networks International,
      a
      company that designed, built and maintained health Web sites. From September
      1996 to February 1999 Mr. Johnson was the VP of Corporate Development at Starnet
      Communications, a software company which built and designed online gaming
      systems for clients. Mr. Johnson received a bachelor's degree in Economics
      from
      University of Western Ontario in 1983.





**Bryson
      Farrill** serves
      as Chairman and Director of Swiss Medica Inc. since July 2002 Mr. Farrill has
      been a Financial Consultant for the past five years most recently acting as
      a
      Senior Partner of Belgravia Financial, a European real estate investment company
      based in London, England. Previously, he was a Member of the New York Stock
      Exchange and held various senior and executive-level positions at McLeod Young
      Weir and Mcleod Young Weir International (now Scotia McLeod). Mr. Farrill
      currently serves on the boards of directors of several leading public companies,
      including Power Technology, Inc., a designer and manufacturer of laser diodes
      (OTC:PWTC), Devine Entertainment, an media entertainment company (PK:DVNNF)
      and
      Crowflight Minerals Inc., a mining and exploration company (TSX:CML). He is
      also
      a director of a private company called Belgravia Financial Services Limited,
      a
      real estate investment company.





**Sam
      Halim** has
      served as a Director since February 20, 2006. Mr. Halim is a trained physician
      and has over 15 years of business experience in the healthcare, financial
      services and real estate industries. Mr. Halim founded, acquired and managed
      Pinnacle Healthcare Technologies a company that operated multiple medical
      service facilities in Florida, which he sold in February 2002. Mr. Halim has
      served as an advisory member of GPE, Inc., a company that offers marketing
      and
      consulting services to technology and financial institutional service providers.
      Mr. Halim recently launched North American Physicians Inc. to distribute Swiss
      Medica’s OTC products to the healthcare industry. Mr. Halim studied at
      University of Cairo Medical School (in association with University of London),
      New Jersey School of Osteopathic Medicine and Columbia University.




**Ronald
      Springer** has
      served as a Director since May 2003. Mr. Springer has been the President and
      CEO
      of General Cosmetics Corporation since 1993. Prior to building General
      Cosmetics, he founded several other companies, including Heaven from Earth
      Corp., Ceo-Capital Corp, Global Capital Security Inc., Limardo Productions,
      ISB
      Overseas GmbH and Doitsu Shinpo. He also held positions at Esarco LTD. and
      Hynolds Ltd.





No
      individual on our Board of Directors possesses all of the attributes of an
      audit
      committee financial expert and no one on our Board of Directors is deemed to
      be
      an audit committee financial expert. In forming our Board of Directors, we
      sought out individuals who would be able to guide our operations based on their
      business experience, both past and present, or their education. Our business
      model is not complex and our accounting issues are straightforward.
      Responsibility for our operations is centralized within management, which is
      comprised of four people. We rely on the assistance of others, such as our
      accountant, to help us with the preparation of our financial information. We
      recognize that having a person who possesses all of the attributes of an audit
      committee financial expert would be a valuable addition to our Board of
      Directors, however, we are not, at this time, able to compensate such a person
      therefore, we may find it difficult to attract such a candidate.





26




**Director
      Compensation**





Two
      of
      our Directors are also employees and do not receive separate board compensation.
      Two of our remaining three directors each accrue a fee of $3,000 per month,
      plus
      any related expenses incurred, and the fourth Director (also Chairman of our
      Board) accrues a fee of $5,000 per month, plus any related expenses incurred.





**Term
      of Office**





The
      directors named above will serve until the next annual meeting of our
      shareholders. In absence of an employment agreement, officers hold their
      positions at the pleasure of the Board of Directors.





**Code
      of Ethics**





On
      March
      29, 2004 our Board of Directors adopted a Code of Business Conduct and Ethics
      that applies to all of our officers, directors and employees.





**Compliance
      With Section 16(a) of Exchange Act**





Section
      16(a) of the Securities Exchange Act requires our directors, executive officers
      and persons who own more than 10% of our common stock to file reports of
      ownership and changes in ownership of our common stock with the Securities
      and
      Exchange Commission. Directors, executive officers and persons who own more
      than
      10% of our common stock are required by Securities and Exchange Commission
      regulations to furnish to us copies of all Section 16(a) forms they
      file.





To
      our
      knowledge, based solely upon review of the copies of such reports received
      or
      written representations from the reporting persons, we believe that during
      our
      2006 fiscal year our directors, executive officers and persons who own more
      than
      10% of our common stock complied with all Section 16(a) filing requirements
      with
      the exception of the following: none of the current officers and directors
      have
      filed a Form 3 yet.




27


**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





During
      the 2006 fiscal year, Mr. Raghunath Kilambi, our Chief Executive Officer and
      Grant Johnson, our President and Chief Operating Officer were the only executive
      officers receiving compensation of at least $100,000 per year.




The
      following table sets forth information as to the compensation paid or accrued
      to
      Mr. Kilambi, our Chief Executive Officer and Mr. Johnson, our President,
      Chief Operating Officer:





**SUMMARY
      COMPENSATION TABLE**





**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Stock
                Awards**
            
            **Option/**
              **Warrant
                Awards**
            
            **Non-Equity**
              **Incentive
                Plan Compen-sation**
            
            **All
                Other Compensation**
            
            **Total**Raghunath
                Kilambi
            
            
            2006
            
            $
            140,000
            
            $
            —
            
            $
            —
            
            $
            0
            
            $
            —
            
            $
            29,417
            (2)
            $
            140,000Chief
                  Executive Officer
            
            
            2005
            
            $
            135,000
            
            $
            —
            
            $
            —
            
            $
            0
            
            $
            —
            
            $
            7,000
            (3)
            $
            135,000and
                DirectorGrant
                Johnson
            
            
            2006
            
            $
            140,000
            
            $
            —
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            140,000President,Chief
                  Operating Officer and Director
            
            
            2005
            
            $
            135,000
            
            $
            —
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            135,000




We
      do not
      have a long term incentive plan or arrangement of compensation with any
      individual in the group of officers and directors.




28




**Outstanding
      Equity Awards at Fiscal Year-End**





The
      following table summarizes the amount of our executive officers’ equity-based
      compensation outstanding at the fiscal year ended December 31,
      2006.




**Outstanding
                Equity Awards at Fiscal Year-End****Options
                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**
              **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**(#)
            
            (#)
            
            (#)
            
            (
                $
                )
            
            
            
            (#)
            
            ($)
            
            (#)
            
            ($)Raghunath
                Kilambi
            
            
            630,000
            
            
            —
            
            
            —
            
            $
            0.10
            
            
            05/31/03
            
            
            —
            
            
            —
            
            
            —
            
            $
            —Grant
                Johnson
            
            
            880,000
            
            
            —
            
            
            —
            
            $
            0.10
            
            
            05/31/03
            
            
            —
            
            $
            —
            
            
            —
            
            $
            —





**Employment
      Agreements**





There
      are
      no employment contracts currently in place for our senior
      management.





**Stock
      Options and Stock Appreciation Rights**





As
      of
      October 10, 2004 (“Grant Date”), we granted to the following named executive
      officers and directors, options to purchase the following shares of our Class
      A
      Common Stock at $0.10 per share.





**Officer/Director**
            
            **Class
                A**
              **Common
                Shares**
            
            **Vesting**
              **Commencement**
              **Date**Raghunath
                Kilambi
            
            
            880,000
            
            
            May
                31, 2003Grant
                Johnson
            
            
            880,000
            
            
            May
                31, 2003Ronald
                Springer
            
            
            80,000
            
            
            May
                31, 2003Bryson
                Farrill
            
            
            200,000
            
            
            August
                1, 2003





These
      options expire on October 10, 2009. The options become exercisable over a
      two-year period from the vesting commencement date; provided, however, that
      no
      option would be exercisable prior to October 6, 2005.





No
      other
      stock options or other derivative stock-based rights were granted to any of
      the
      other named executive officers during the 2006 fiscal year.





29


**Aggregated
      Option**  **Fiscal
      Year-End Value**





The
      following table provides information, with respect to the named executive
      officers, concerning unexercised options held by them at the end of the 2006
      fiscal year.




**Aggregated
      Option Exercises During 2006 and Fiscal Year-End Option
      Table**





The
      following table summarizes information regarding stock options exercised by
      the
      Named Executive Officers in 2006 and the value of unexercised “in-the-money”
options they held at December 31, 2006.





**Shares
                of Common Stock Acquired on**
            
            **Value**
            
            **Number
                of Securities Underlying Unexercised Options at**
              **December
                31, 2006**
            
            **Value
                of Unexercised**
              **In-the-Money
                Options at**
              **December
                31, 2006****Name**
            
            **Exercise**
            
            **Realized**
            
            **Exercisable**
            
            **Unexercisable**
            
            **Exercisable**
            
            **Unexercisable**Raghunath
                Kilambi
            
            
            —
            
            
            —
            
            
            630,000
            
            
            
            
            
            0Grant
                Johnson
            
            
            —
            
            
            —
            
            
            880,000
            
            
            
            
            $
            0




**Equity
      Compensation and Consultant Plan Information**





Plan
                Category
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted
                average exercise price of outstanding options warrants and
                rights
            
            Number
                of securities remaining available for future issuance under the equity
                compensation planEquity
                Compensation Plans approved by security holders
            
            
            2,425,000
            
            $
            0.11
            
            
            15,301,098(2
            )Equity
                compensation plans not approved by security holders
            
            
            20,804,675
            (1)
            $
            0.26
            
            
            (2
            )





(1)
      Includes warrants granted to consultants in exchange for services
      rendered.





(2)
      Equity securities may be issued under the Company’s 2006 Equity Incentive Plan,
      the 2003 Equity Incentive Plan or the 2003 Consultant Stock Plan. Pursuant
      to
      the terms of the 2006 and 2003 Equity Incentive Plans, awards may be granted
      for
      options (both incentive stock options and non-qualified stock options) and
      for
      restricted stock and stock bonuses. Under the 2003 Consultant Stock Plan, awards
      may be granted to consultants in vested or unvested stock. As of December 31,
      2006, there were an aggregate of 15,301,098 Common A Shares reserved for
      issuance under both plans.




30


**2003
      Equity Incentive Plan**




Our
      Board
      of Directors has approved the Swiss Medica, Inc. 2003 Equity Incentive Plan
      which permits us to grant, for a ten year period, stock awards, stock bonuses
      and stock options. We had originally reserved 4,500,000 shares of our Class
      A
      common stock for issuance to our directors, employees and consultants under
      the
      Plan. The Plan is administered by the Board of Directors. As the administrator
      of the Plan, the Board of Directors has the authority and discretion, subject
      to
      the provisions of the Plan, to select persons to whom stock awards, bonuses
      or
      options will be granted, to designate the number of shares to be covered by
      each
      option or stock award, to specify the type of consideration to be paid, and
      to
      establish all other terms and conditions of each option or stock award. Options
      granted under the Plan will not have a term that exceeds ten years from date
      of
      grant. As of December 31, 2006, we granted stock awards and bonuses equal to
      4,198,902 shares of our Class A common stock under the Plan.





**2006
      Equity Incentive Plan**




Our
      Board
      of Directors has approved the Swiss Medica, Inc. 2006 Equity Incentive Plan
      which permits us to grant, for a ten year period, stock awards, stock bonuses
      and stock options. . We had originally reserved 15,000,000 shares of our Class
      A
      common stock for issuance to our directors, employees and consultants under
      the
      Plan. The Plan is administered by the Board of Directors. As the administrator
      of the Plan, the Board of Directors has the authority and discretion, subject
      to
      the provisions of the Plan, to select persons to whom stock awards, bonuses
      or
      options will be granted, to designate the number of shares to be covered by
      each
      option or stock award, to specify the type of consideration to be paid, and
      to
      establish all other terms and conditions of each option or stock award. Options
      granted under the Plan will not have a term that exceeds ten years from date
      of
      grant. As of December 31, 2006, we granted no stock awards and bonuses under
      the
      Plan.





**2003
      Consultant Stock Plan**





Our
      Board
      of Directors has also approved the 2003 Consultant Stock Plan which permits
      us
      to grant, for a ten year period, stock issuances subject to vesting provisions,
      or “unvested stock” or stock awards without such restrictions. We had originally
      reserved 6,000,000 shares of our Class A common stock for issuance to
      consultants under the Consultant Plan. The Consultant Plan is administered
      by
      the Board of Directors. As the administrator of the Consultant Plan, the Board
      of Directors has the authority and discretion, subject to the provisions of
      the
      Consultant Plan, to select persons to whom stock awards or unvested stock will
      be granted, to designate the number of shares to be covered by each stock
      issuance, to specify the type of consideration to be paid, and to establish
      all
      other terms and conditions of each stock issuance. As of December 31, 2006,
      we
      granted stock awards (all vested) equal to 6,000,000 shares of our Class A
      common stock under the Consultant Plan.




31


**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**





The
      following table sets forth certain information as of April 12, 2007 with respect
      to the beneficial ownership of the Company’s Common Stock prior to this
      Offering, by (i) each person who beneficially owns more than 5% of our voting
      securities; (ii) each Director; (iii) each Executive Officer and (iv) all
      directors and executive officers as a group. Unless otherwise indicated, all
      persons named as beneficial owners of our voting securities, have sole voting
      and sole investment power with respect to the shares indicated as beneficially
      owned, and beneficial ownership includes shares issuable upon conversion of
      shares of Series Common Stock. As of April 12, 2007, the Company’s issued and
      outstanding capital stock consisted of 143,961,491shares of Common Stock,
      including 141,961,491 shares of Class A Common Stock and 2,000,000 shares of
      Class B Common Stock.




**Name
                and Address****of
                Beneficial Owner(1)(2)**
            
            **Total
                Outstanding Class A Common Stock Beneficially**
              **Owned**
            
            **Total
                Outstanding Class B Common Stock Beneficially
                Owned**
            
            **Percent
                of Shares of Class A and Class B Common Stock
                Beneficially**
              **Owned****Raghunath
                Kilambi********Chief
                Executive Officer, and Director (3)
            
            
            6,089,451
            
            
            2,000,000
            
            
            10.5
            %**Grant
                Johnson**,
                President, Chief Operating Officer and Director
            
            
            7,391,870
            
            
            —
            
            
            4.8
            %**Bryson
                Farrill**,
                Chairman
            
            
            3,100,000
            
            
            —
            
            
            2.0
            %**Ronald
                Springer**,
                Director (4)
            
            
            2,280,000
            
            
            —
            
            
            1.5
            %**Sam
                Halim**
            
            
            2,429,923
            
            
            
            
            
            1.6
            %**All
                directors and officers as a group (6 persons)**
            
            
            21,294,244
            
            
            2,000,000
            
            
            20.6
            %







*
            Less
                than 1%.




(1)
            Unless
                otherwise indicated, the address of the persons named in this column
                is
                c/o Swiss Medica, Inc., 375 Yonge Street, Unit B, Mississauga, Ontario,
                Canada L4Z 3E2.





(2)
            Included
                in this calculation are shares deemed beneficially owned by virtue
                of the
                individual’s right to acquire them within 60 days of the date of this
                report that would be required to be reported pursuant to Rule 13d-3
                of the
                Securities Exchange Act of 1934.





(3)
            Each
                Class B Share is entitled to vote as 50 shares of Class A Common
                Stock,
                and may be converted to Class A Common Stock at a ratio of 5:1.





(4)
            Includes
                1,000,000 Class A Shares owned by General Cosmetics Corporation,
                a
                corporation controlled by Ronald
                Springer.


32


**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





Since
      January 1, 2006 there has not been any transaction or series of similar
      transactions to which the Company was or is a party in which the amount involved
      exceeded or exceeds the lesser of $120,000 or 1% of the average of the Company’s
      total assets at year-end for the last three completed fiscal years, and in
      which
      any director, executive officer, holder of more than 5% of any class of our
      voting securities, or any member of the immediate family of any of the foregoing
      persons had or will have a direct or indirect material interest, other than
      as
      set forth above under “Executive Compensation” or as described
      below.





North
      American Physicians, Inc.





On
      June
      15, 2006, the Company and North American Physicians, Inc. (“NAPI”), a
      corporation that is owned by Sam Halim, entered into a License and Distribution
      Agreement under which NAPI was granted exclusive rights to distribute the
      Company’s products within the healthcare community, including physician offices,
      hospitals and therapy clinics in the United States. NAPI retained its exclusive
      distributor relationship; provided that if it failed to meet certain minimum
      purchase targets then the Company had the right to terminate the agreement
      on
      thirty-days notice. In addition, NAPI would receive certain warrants to purchase
      Common Stock upon meeting additional minimum sales requirements. At December
      31,
      2006, no warrants were issued under this Agreement to NAPI.





Kilambi
      Loan





Mr
      Kilambi, our Chief Executive Officer has loaned the Company $213,254. As of
      December 31, 2006, the amount outstanding under these loans were $213,254.
      These
      loans are non-interest bearing and due upon demand.





**Director
      Independence**




We
      use
      the definition of independence set forth in Rule 4200 of the listing standards
      of the Nasdaq Stock Market (“Nasdaq”) and the interpretations there under to
      determine if our members of our board of directors are independent. In making
      this determination, our board of directors considered, among other things,
      transactions and relationships between each director or his or her immediate
      family and the Company, including those reported in the section below captioned,
      “Certain Relationships and Related Transactions.” The purpose of this review was
      to determine whether any such relationships or transactions were material and,
      therefore, inconsistent with a determination that the directors are independent.
      As a result of this review, our board affirmatively determined, based on its
      understanding of such transactions and relationships, that Messrs. Farrill
      and
      Springer are independent of the Company *.*




33





**ITEM
      13.**  **EXHIBITS
      AND REPORTS ON FORM 8-K**





Exhibit
                No.
            
            Description
                of Exhibit2.1
            
            Agreement
                for Purchase and Sale of Stock between Goldcrown Holdings Ltd. and
                Oxford
                Capital Group dated as of January 10, 2000. (1)2.2
            
            Agreement
                for Purchase and Sale of Stock between Bodet Ltd. and Oxford Capital
                Group
                dated as of January 10, 2000. (1)2.3.
            
            Acquisition
                Agreement between Associated Medical Devices, Inc. and Euro American
                Business Group, Inc. dated July 1, 1999.(2)2.4
            
            Agreement
                and Plan of Merger of Yournet, Inc. with and into Global Path Incorporated
                dated June 25, 2001.(3)2.5
            
            Asset
                Purchase Agreement dated as of March 31, 2003, by and among Global
                Path
                Incorporated, Swiss Medica, Inc, General Cosmetics Corporation, and
                the
                shareholder of General Cosmetics named therein. (4)2.6
            
            Agreement
                and Plan of Acquisition, dated March 31, 2005, by and between the
                Registrant, Anti-Depression BioHealth Solutions, Inc. and UTEK
                Corporation. (14)3.1
            
            Certificate
                of Incorporation, as amended.(3)3.2
            
            Bylaws
                of Swiss Medica, Inc (5)3.3
            
            Certificate
                of Incorporation, as amended.(17)4.1
            
            Registration
                Rights Agreement by and among the Registrant and Platinum Partners
                Global
                Macro Fund L.P. (“Platinum”) and Fennmore Holdings (“Fennmore”) dated
                February 19, 2004 (5)10.1
            
            2003
                Equity Incentive Plan (6)10.2
            
            2003
                Consultant Stock Plan (7)10.3
            
            2002
                Amended and Restated Stock Option, Stock Warrant and Stock Award
                Plan
                (8)10.4
            
            2001
                Employees Stock Incentive Plan (9)10.5
            
            2001
                Director and Officer Stock Option and Stock Award Plan
                (9)10.6
            
            Lease
                Agreement between Paul Millar and Swiss Medica, Inc. for the premises
                53
                Yonge Street, Third Floor Toronto, Canada, M5E 1J3 dated as of July
                1,
                2003. (5)10.7
            
            Securities
                Purchase Agreement by and among the Registrant and Platinum and Fennmore
                dated February 19, 2004 (5)10.8
            
            Form
                of Warrant. (5)10.9
            
            Securities
                Purchase Agreement with Highgate House, Ltd. and Montgomery Equity
                Partners, Ltd. dated December 23, 2004 (12)10.10
            
            Termination
                Agreement with Highgate House, Ltd. and Montgomery Equity Partners,
                Ltd.
                dated January 19, 2005, terminating the Securities Purchase Agreement
                dated December 23, 2004 (13)


10.11
            
            Warrant
                issued to Highgate House, Ltd. and Montgomery Equity Partners, Ltd.,
                dated
                January 19, 2005 (13)




34





10.12
            
            Standby
                Equity Distribution Agreement dated December 23, 2004 with Cornell
                Capital
                Partners, LP (12)10.13
            
            Placement
                Agent Agreement with Sloan Securities Corporation dated December
                23, 2004
                and terminated on January 19, 2005 (13)10.14
            
            Termination
                Agreement with Cornell Capital Partners, LP
              dated
                January 19, 2005, terminating the Standby Equity Distribution Agreement
                dated December 23, 2004 (13)10.15
            
            Warrant
                to Purchase Series A Common Stock of Swiss Medica, Inc. issued to
                Strategic Equity Corp. dated December 6, 2004
                (11)




10.16
            
            Note
                and Purchase Warrant Agreement between Swiss Medica, Inc. and Strategic
                Equity Corp. dated December 6, 2004 (11)10.17
            
            Note
                and Purchase Warrant Agreement Amendment between Swiss Medica, Inc.
                and
                Strategic Equity Corp. effective as of December 7, 2004
                (11)10.18
            
            Security
                Agreement between Swiss Medica, Inc. and Strategic Equity Corp. dated
                December 6, 2004 (11)10.19
            
            Security
                Agreement Amendment between Swiss Medica, Inc. and Strategic Equity
                Corp.
                dated December 7, 2004 (11)10.20
            
            Secured
                Promissory Note issued to Strategic Equity Corp., dated December
                6, 2004
                (11)10.21
            
            Secured
                Promissory Note issued to Strategic Equity Corp., dated December
                7, 2004
                (11)10.22
            
            Secured
                Promissory Note issued to Strategic Equity Corp., dated January 3,
                2005
                (13)10.23
            
            Secured
                Promissory Note issued to Double U Master Fund, LLP., dated June
                20, 2005
                (15)10.24
            
            Class
                B Common Stock Conversion Agreement with Raghunath Kilambi, dated
                June 28,
                2005 (16)10.25
            
            Resolution
                approved to increase the total number of authorized shares of the
                Corporation’s capital stock (16)10.26
            
            Secured
                Promissory Note issued to Strategic Equity Corp., dated October 28,
                2005
                (17)10.27
            
            Secured
                Promissory Note issued to Reid and Partners 1 Inc., dated December
                23,
                2005 (18)14.1
            
            Code
                of Business Conduct and Ethics.(5)23.1
            
            Consent
                of Russell Bedford Stefanou Mirchandani, LLP.(5)24.1
            
            Power
                of Attorney (5)


31.1
            
            Certification
                pursuant to Rule 13a-14(a) and
                15d-14(a).(5)


35





32.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.(5)





(1)
            Incorporated
                by reference to the registrant’s Form 8-K filed March 28,
                2000


(2)
            Incorporated
                by reference to the registrant’s Form 10-KSB filed April 14, 2000




(3)
            Incorporated
                by reference to the registrant’s Preliminary Proxy Statement filed June
                26, 2001





(4)
            Incorporated
                by reference to the registrant’s Form 10-QSB filed on August 20,
                2003





(5)
            Filed
                herewith


(6)
            Incorporated
                by reference to the registrant’s Form S-8 filed on November 28, 2003.





(7)
            Incorporated
                by reference to the registrant’s Form S-8 filed on August 27,
                2003.





(8)
            Incorporated
                by reference to the registrant’s Amendment to Form S-8 filed on March
                11,2002.





(9)
            Incorporated
                by reference to the registrant’s Form S-8 filed on November 19,
                2001.





(10)
            Incorporated
                by reference to the registrant’s Form S-8 filed on November 19,
                2001.





(11)
            Incorporated
                by reference from the Company's Registration Statement on Form SB-2
                filed
                onFebruary
                14, 2004.





(12)
            Incorporated
                by reference from the Company's Form 8-K filed on December 29,
                2004.





(13)
            Incorporated
                by reference from the Company's Form 8-K filed on January 20,
                2005.




(14)
            Incorporated
                by reference to the registrant’s Form 8-K filed on April 6,
                2005.





(15)
            Incorporated
                by reference to the registrant’s Form 8-K filed on June 24,
                2005.





(16)
            Incorporated
                by reference to the registrant’s Form 8-K filed on June 28,
                2005.





(17)
            Incorporated
                by reference to the registrant’s Form 8-K filed on November 18,
                2005.





(18)
            Incorporated
                by reference to the registrant’s Form 8-K filed on January 30,
                2006.




36


**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





The
      following table sets forth fees billed to us by our auditors during the fiscal
      years ended December 31, 2006 and December 31, 2005 for: (i) services rendered
      for the audit of our annual financial statements and the review of our quarterly
      financial statements, (ii) services by our auditor that are reasonably related
      to the performance of the audit or review of our financial statements and that
      are not reported as Audit Fees, (iii) services rendered in connection with
      tax
      compliance, tax advice and tax planning, and (iv) all other fees for services
      rendered.




December
                31, 2006
            
            
            December
                31, 2005(i)
            
            Audit
                Fees
            
            
            $
            83,343
            
            
            $
            44,250(ii)
            
            Audit
                Related Fees
            
            
            $
            0
            
            
            $
            0(iii)
            
            Tax
                Fees
            
            
            $
            0
            
            
            $
            0(iv)
            
            All
                Other Fees
            
            
            $
            0
            
            
            $
            0




AUDIT
      FEES. Consists of fees billed for professional services rendered for the audit
      of Swiss Medica. Inc.’s financial statements and review of the interim
      consolidated financial statements included in quarterly reports and services
      that are normally provided by Russell Bedford Stefanou Mirchandani LLP in
      connection with statutory and regulatory filings or engagements.





AUDIT-RELATED
      FEES. Consists of fees billed for assurance and related services that are
      reasonably related to the performance of the audit or review of Swiss Medica,
      Inc. financial statements and are not reported under "Audit Fees."





TAX
      FEES.
      Consists of fees billed for professional services for tax compliance, tax advice
      and tax planning. There were no tax services provided in fiscal 2006 or
      2005.





ALL
      OTHER
      FEES. Consists of fees for products and services other than the services
      reported above. There were no management consulting services provided in fiscal
      2006 or 2005.





**POLICY
      ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
      OF
      INDEPENDENT AUDITORS**





The
      Company currently has does not have a designated Audit Committee, and
      accordingly, the Company's Board of Directors' policy is to pre-approve all
      audit and permissible non-audit services provided by the independent auditors.
      These services may include audit services, audit-related services, tax services
      and other services. Pre-approval by the Board of Directors is generally provided
      for up to one year and any pre-approval is detailed as to the particular service
      or category of services and is generally subject to a specific budget. The
      independent auditors and management are required to periodically report to
      the
      Company's Board of Directors regarding the extent of services provided by the
      independent auditors in accordance with this pre-approval, and the fees for
      the
      services performed to date. The Board of Directors may also pre-approve
      particular services on a case-by-case basis.




37





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized on this 7th day of June 2007.


**SWISS
                MEDICA, INC.**By:
            /s/
                Raghunath KilambiRaghunath
                Kilambi,Chief
                Executive Officer




**POWER
      OF ATTORNEY**





KNOW
      ALL
      PERSONS BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints Raghunath Kilambi, jointly and severally, his or her
      attorneys-in-fact, each with the power of substitution, for him or her in any
      and all capacities, to sign any amendments to this Report on Form 10-KSB, and
      to
      file the same, with exhibits thereto and other documents in connection therewith
      with the Securities and Exchange Commission, hereby ratifying and confirming
      all
      that each of said attorneys-in-fact, or his or her substitute or substitutes
      may
      do or cause to be done by virtue hereof.





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.





Signature
            
            Title
            
            Date/s/
                Raghunath Kilambi
            
            Chief
                Executive Officer and Director
            
            June
                7, 2007Raghunath
                Kilambi/s/
                Grant Johnson
            
            President,
                Chief Operating Officer
            
            June
                7, 2007Grant
                Johnson
            
            and
                Director/s/
                Bryson Farrill
            
            Chairman,
                Director
            
            June
                7, 2007Bryson
                Farrill/s/
                Ronald Springer
            
            Director
            
            June
                7, 2007Ronald
                Springer/s/
                Sam Halim
            
            Director
            
            June
                7, 2007Sam
                Halim




38





**SECURITIES
      AND EXCHANGE COMMISSION**





**WASHINGTON,
      D.C. 20549**




**FINANCIAL
      STATEMENTS**





**DECEMBER
      31, 2006 and 2005**





**FORMING
      A PART OF ANNUAL REPORT**


**PURSUANT
      TO THE SECURITIES EXCHANGE ACT OF 1934**





**SWISS
      MEDICA, INC.**






F-1




**SWISS
      MEDICA, INC.**




**Index
      to Financial Statements**





**Page**Report
                of Independent Registered Certified Public Accounting Firm
            
            F-3Consolidated
                Balance Sheets at December 31, 2006 and 2005
            
            F-4Consolidated
                Statements of Losses for the years ended December 31, 2006 and
                2005
            
            F-5Consolidated
                Statements of (Deficiency in) Stockholders’ Equity for the years ended
                December 31, 2006 and 2005
            
            F-6
                ~ F-7Consolidated
                Statements of Cash Flows for the years ended December 31, 2006 and
                2005
            
            F-8
                ~ F-9Notes
                to Consolidated Financial Statements
            
            F-10
                - F-39




F-2




**RUSSELL
      BEDFORD STEFANOU MIRCHANDANI LLP**


**Certified
      Public Accountants**





**REPORT
      OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING
      FIRM**





Board
      of
      Directors


Swiss
      Medica, Inc.


Toronto,
      Ontario




We
      have
      audited the consolidated balance sheets of Swiss Medica, Inc. (the “Company”) as
      of December 31, 2006 and 2005 and the related consolidated statements of losses,
      deficiency in stockholders’ equity, and cash flows for each of the two years in
      the period ended December 31, 2006. These financial statements are the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on the financial statements based upon our audits.




We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States of America). Those standards require
      that we plan and perform the audits to obtain reasonable assurance about whether
      the financial statements are free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe our audits
      provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company at December
      31,
      2006 and 2005 and the results of its operations and its cash flows for each
      of
      the two years in the period ended December 31, 2006 in conformity with
      accounting principles generally accepted in the United States of
      America.





As
      discussed in Note A to the consolidated financial statements, the Company
      adopted the provisions of Statement of Financial Accounting Standards No.
      123(R), "Share-Based Payment", effective January 1, 2006.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note Q, the
      Company is experiencing difficulty in generating sufficient cash flow to meet
      its obligations and sustain its operations, which raises substantial doubt
      about
      its ability to continue as a going concern. Management’s plans in regard to
      these matters are also described in Note Q. The accompanying statements do
      not
      include any adjustments that might result from the outcome of this
      uncertainty.




As
      discussed in Note R, the Company restated its consolidated financial statements
      as of December 31, 2005 and for the year ended December 31,
      2005.





/s/
                RUSSELL BEDFORD STEFANOU MIRCHANDANI LLPRussell
                Bedford Stefanou Mirchandani LLP
              Certified
                Public AccountantsNew
                York, New York
              May
                31, 2007




F-3




**SWISS
                MEDICA, INC.****CONSOLIDATED
                BALANCE SHEETS****DECEMBER
                31, 2006 AND 2005**2006
            
            2005(Restated-Note
                R)**ASSETS:**Cash
                and cash equivalents
            
            $
            14,446
            
            $
            45,700Restricted
                cash
            
            
            -
            
            
            150,000Accounts
                receivable, net of allowance for discounts of $337,226 and $29,625
                at
                December 31, 2006 and December 31, 2005, respectively
            
            
            64,755
            
            
            1,739,949Inventories
                (Note B)
            
            
            825,798
            
            
            2,723,286Prepaid
                expenses and deposits (Note J)
            
            
            39,684
            
            
            144,816Total
                current assets
            
            
            944,683
            
            
            4,803,751Property
                and equipment: (Note D)Property
                and equipment:
            
            
            329,837
            
            
            329,837Less:
                accumulated depreciation
            
            
            124,997
            
            
            59,030Total
                property and equipment
            
            
            204,840
            
            
            270,807Other
                assets:Intangible
                assets, net of accumulated amortization of $581,757 and $452,307
                at
                December 31, 2006 and December 31, 2005, respectively (Note C)
            
            
            177,993
            
            
            307,442Prepaid
                and other (Note J)
            
            
            105,422
            
            
            204,480Goodwill
            
            
            -
            
            
            500,000Total
                other assets
            
            
            283,415
            
            
            1,011,922Total
                assets
            
            **$**
            **1,432,938**
            
            **$**
            **6,086,480****LIABILITIES
                AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY:**Accounts
                payable and accrued liabilities (Note E)
            
            $
            4,567,657
            
            $
            2,653,953Notes
                payable, current portion (Note F)
            
            
            2,764,986
            
            
            2,186,800Convertible
                notes payable, current maturities (Note G)
            
            
            1,193,664
            
            
            -Total
                current liabilities
            
            
            8,526,307
            
            
            4,840,753Convertible
                notes payable (Note G)
            
            
            284,903
            
            
            -Fair
                value of debt derivative and allocated fair value of related warrants
                (Note L)
            
            
            911,249
            
            
            -Accrued
                liabilities, long-term portion
            
            
            10,379
            
            
            14,463Commitment
                and contingencies (Note O)
            
            
            -
            
            
            -Total
                long term liabilities
            
            
            1,206,531
            
            
            14,463(Deficiency
                in) Stockholders' Equity:Preferred
                stock, par value $.001 per share; 10,000,000 shares authorized; none
                issued at December 31, 2006 and 2005, respectively (Note H)
            
            
            -
            
            
            -Class
                A Common stock, par value $ .001 per share; 200,000,000 shares authorized;
                111,221,973 and 98,062,892 shares issued at December 31, 2006 and
                2005,
                respectively (Note H)
            
            
            111,222
            
            
            98,063Class
                B Common stock, par value $.001 per share; 5,000,000 shares authorized;
                2,000,000 shares issued at December 31, 2006 and 2005, respectively(Note
                H)
            
            
            2,000
            
            
            2,000Additional
                paid-in capital
            
            
            33,630,924
            
            
            33,893,323Accumulated
                deficit
            
            
            (42,044,046
            )
            
            (32,762,122
            )Total
                (deficiency in) stockholders' equity
            
            
            (8,299,901
            )
            
            1,231,264Total
                liabilities and (deficiency in) stockholders' equity
            
            **$**
            **1,432,938**
            
            **$**
            **6,086,480**




See
      accompanying notes to consolidated financial statements


F-4




**SWISS
                MEDICA, INC.****CONSOLIDATED
                STATEMENTS OF LOSSES****FOR
                THE YEARS ENDED DECEMBER 31, 2006 AND 2005****2006**
            
            **2005**(Restated-Note
                R)Revenues,
                net
            
            **$**
            1,051,422
            
            $
            5,233,956Cost
                of Sales
            
            
            1,674,000
            
            
            1,101,990**Gross
                (Loss) Profit**
            
            
            **(622,578**
            **)**
            
            **4,131,966**Operating
                Expenses:Selling,
                General and Administrative
            
            
            8,016,990
            
            
            10,043,125Impairment
                of Goodwill
            
            
            500,000
            
            
            -Depreciation
                and Amortization
            
            
            195,417
            
            
            193,449Total
                Operating Expenses
            
            
            8,712,407
            
            
            10,236,574**Loss
                from Operations**
            
            
            (9,334,985
            )
            
            (6,104,608
            )Interest
                Expense, net
            
            
            (2,476,098
            )
            
            (269,158
            )Net
                Gain on Revaluation of Warrant Liability
            
            
            2,529,159
            
            
            -**Net
                Loss before Provision for Income Taxes**
            
            
            (9,281,924
            )
            
            (6,373,766
            )Provision
                for Income Taxes
            
            
            -
            
            
            -**Net
                Loss**
            
            **$**
            (9,281,924
            )
            **$**
            (6,373,766
            )Loss
                per common share (basic and assuming dilution)
            
            $
            (0.09
            )
            $
            (0.07
            )Weighted
                average common shares outstanding
            
            
            101,385,760
            
            
            87,169,503




See
      accompanying notes to consolidated financial statements


F-5




**SWISS
      MEDICA, INC.**


**CONSOLIDATED
      STATEMENTS OF (DEFICIENCY IN) STOCKHOLDERS' EQUITY**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





Class
                A Common Stock
            
            Class
                B Common Stock
            
            Additional
                  Paid-in
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            Total**Balance
                January 1, 2005**
            
            
            **66,493,654**
            
            **$**
            **66,494**
            
            
            **2,000,000**
            
            **$**
            **2,000**
            
            **$**
            **26,628,844**
            
            **$**
            (26,388,356
            )
            **$**
            **308,982**Common
                shares issued in exchange for warrants exercised, net of costs and
                fees
                (Note I)
            
            
            20,556,500
            
            
            20,556
            
            
            -
            
            
            -
            
            
            4,851,644
            
            
            -
            
            
            4,872,200Common
                shares issued in exchange for options exercised, net of costs and
                fees
                (Note I)
            
            
            280,000
            
            
            280
            
            
            -
            
            
            -
            
            
            27,720
            
            
            -
            
            
            28,000General
                Cosmetics cancelled shares
            
            
            (250,000
            )
            
            (250
            )
            
            -
            
            
            -
            
            
            (167,250
            )
            
            -
            
            
            (167,500
            )Common
                shares issued in exchange for services rendered
            
            
            4,123,673
            
            
            4,124
            
            
            -
            
            
            -
            
            
            742,802
            
            
            -
            
            
            746,926Common
                shares issued in exchange for financing expenses
            
            
            388,802
            
            
            389
            
            
            -
            
            
            -
            
            
            49,611
            
            
            -
            
            
            50,000Common
                shares issued in exchange for interest expenses and deferred
                interest
            
            
            465,000
            
            
            465
            
            
            -
            
            
            -
            
            
            78,540
            
            
            -
            
            
            79,005Common
                shares issued in exchange for previously incurred debt
            
            
            3,900,000
            
            
            3,900
            
            
            -
            
            
            -
            
            
            1,039,100
            
            
            -
            
            
            1,043,000Warrants
                issued in exchange for deferred interests
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            44,417
            
            
            -
            
            
            44,417Common
                shares issued in connection with acquisition of ADBSI (Note
                C)
            
            
            2,105,263
            
            
            2,105
            
            
            -
            
            
            -
            
            
            597,895
            
            
            -
            
            
            600,000Net
                loss (Restated - Note R)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (6,373,766
            )
            
            (6,373,766
            )**Balance
                at December 31, 2005 (Restated-Note R)**
            
            
            **98,062,892**
            
            **$**
            **98,063**
            
            
            **2,000,000**
            
            **$**
            **2,000**
            
            **$**
            **33,893,323**
            
            **$**
            (32,762,122
            )
            **$**
            **1,231,264**





See
      accompanying notes to consolidated financial statements


F-6




**SWISS
      MEDICA, INC.**


**CONSOLIDATED
      STATEMENTS OF (DEFICIENCY IN) STOCKHOLDERS' EQUITY
      (CONTINUED)**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





Class
                A Common Stock
            
            Class
                B Common Stock
            
            Additional
                  Paid-in
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            Total**Balance
                carry forward**
            
            
            **98,062,892**
            
            **$**
            **98,063**
            
            
            **2,000,000**
            
            **$**
            **2,000**
            
            **$**
            **33,893,323**
            
            **$**
            (32,762,122
            )
            **$**
            **1,231,264**Common
                shares issued in exchange for options exercised, net of costs and
                fees
                (Note I)
            
            
            413,089
            
            $
            413
            
            
            -
            
            
            -
            
            
            32,587
            
            
            -
            
            
            33,000Common
                shares issued in exchange for services rendered (Note H)
            
            
            3,799,331
            
            $
            3,800
            
            
            -
            
            
            -
            
            
            408,329
            
            
            -
            
            
            412,129Common
                shares issued in exchange for interest expenses
            
            
            929,222
            
            $
            929
            
            
            -
            
            
            -
            
            
            84,495
            
            
            
            
            
            85,424Common
                shares issued in exchange for previously incurred debt
            
            
            8,017,439
            
            $
            8,017
            
            
            -
            
            
            -
            
            
            159,983
            
            
            -
            
            
            168,000Black
                Scholes value for Warrant issuances
            
            
            -
            
            
            
            
            
            -
            
            
            -
            
            
            169,080
            
            
            
            
            
            169,080Employee
                option amortization
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            5,433
            
            
            
            
            
            5,433Record
                fair value of debt derivatives & warrants
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            (1,122,306
            )
            
            
            
            
            (1,122,306
            )Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (9,281,924
            )
            
            (9,281,924
            )**Balance
                at December 31, 2006**
            
            
            **111,221,973**
            
            **$**
            **111,222**
            
            
            **2,000,000**
            
            **$**
            **2,000**
            
            **$**
            **33,630,924**
            
            $
            (42,044,046
            )
            $
            (8,299,901
            )




See
      accompanying notes to consolidated financial statements




F-7




**SWISS
      MEDICA, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For
      the years ended December 31, 2006 and 2005**





**2006**
            
            **2005******(Restated-Note
                R)Cash
                flows from operating activities:Net
                loss
            
            $
            (9,281,924
            )
            $
            (6,373,766
            )Adjustments
                to reconcile net loss to net cash (used in) operating
                activities:Common
                stock issued in exchange for services rendered
            
            
            412,129
            
            
            746,926Common
                stock issued in exchange for financing costs
            
            
            -
            
            
            50,000Cancellation
                of common stock issued in prior year in connection with acquisition
                of
                research and development costs
            
            
            -
            
            
            (167,500
            )Warrant
                amortization charged to interest expense
            
            
            208,427
            
            
            5,069Share
                issuances charged to interest expense
            
            
            116,383
            
            
            48,045Convertible
                debenture amortization charged to interest expense
            
            
            1,352,670
            
            
            -Stock
                based compensation
            
            
            5,433
            
            
            -Net
                gain on revaluation of warrant liability
            
            
            (2,529,159
            )
            
            -Depreciation
                and amortization
            
            
            195,417
            
            
            193,449Impairment
                of goodwill (Note C)
            
            
            500,000
            
            
            -(Increase)
                decrease in prepaid expense
            
            
            105,132
            
            
            74,933(Increase)
                decrease in accounts receivable
            
            
            1,675,194
            
            
            (1,679,537
            )(Increase)
                decrease in inventories
            
            
            1,897,488
            
            
            (2,100,065
            )(Increase)
                decrease in deposits and other assets
            
            
            28,750
            
            
            (65,623
            )Increase
                (decrease) in cash disbursed in excess of available funds
            
            
            -
            
            
            -Increase
                in accounts payable and accrued liabilities
            
            
            1,927,620
            
            
            1,960,301Net
                cash (used in) operating activities
            
            
            (3,386,441
            )
            
            (7,307,766
            )Cash
                flows from investing activities:Restricted
                cash - term deposit
            
            
            150,000
            
            
            (150,000
            )Net
                cash paid for acquisition
            
            
            -
            
            
            (96,638
            )Purchase
                of property and equipment
            
            
            -
            
            
            (275,455
            )Net
                cash provided by (used in) investing activities
            
            
            150,000
            
            
            (522,093
            )Cash
                flows from financing activities:Proceeds
                from notes payable, net of repayments
            
            
            578,186
            
            
            1,844,800Proceeds
                from sale of common stock and exercise of stock options, net of costs
                and
                fees
            
            
            33,000
            
            
            4,900,200Proceeds
                from (repayments to) convertible debentures
            
            
            2,594,000
            
            
            (500,000
            )Net
                cash provided by financing activities
            
            
            3,205,186
            
            
            6,245,000Net
                (decrease) in cash and cash equivalents
            
            
            (31,255
            )
            
            (1,584,859
            )Cash
                and cash equivalents at the beginning of the period
            
            
            45,700
            
            
            1,630,559Cash
                and cash equivalents at the end of the period
            
            $
            14,446
            
            $
            45,700





See
      accompanying notes to consolidated financial statements


F-8




**SWISS
      MEDICA, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)**


**For
      the years ended December 31, 2006 and 2005**





2006
            
            2005(Restated-Note
                R)Supplemental
                Disclosures of Cash Flow Information:Interest
                paid in cash
            
            $
            798,618
            
            $
            269,158Income
                taxes paid in cash
            
            
            -
            
            
            -Issuance
                of common stock in exchange for services (Note H)
            
            
            412,129
            
            
            746,926Common
                stock issued in exchange for deferred interest expense (Note
                H)
            
            
            -
            
            
            40,505Common
                stock issued in exchange for interest expense (Note H)
            
            
            116,383
            
            
            38,500Common
                stock issued in exchange for financing expense (Note H)
            
            
            -
            
            
            50,000Cancellation
                of common stock issued in prior year in connection with acquisition
                of
                research and development costs
            
            
            -
            
            
            167,500Issuance
                of common stock in exchange for previously incurred debt (Note
                H)
            
            
            18,000
            
            
            1,043,000Issuance
                of common stock in exchange for convertible debenture (Note F and
                G)
            
            
            150,000
            
            
            -Warrants
                issued in exchange for deferred financing costs (Note I)
            
            
            -
            
            
            44,417Common
                stock issued in connection with Acquisition of ADBSI (Note
                C)
            
            
            -
            
            
            600,000




See
      accompanying notes to consolidated financial statements




F-9




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





A
      summary
      of the significant accounting policies applied in the preparation of the
      accompanying consolidated financial statements follows.





Business
      Operations





Swiss
      Medica, Inc., formerly Global Path Incorporated (the "Company") was
      reincorporated under the laws of the State of Delaware in September 2001. The
      Company is engaged in the business of marketing and distributing proprietary
      bioscience health products, with the focus on chronic ailments.





On
      March
      31, 2005, the Company entered into an Agreement and Plan of Acquisition (the
      "Acquisition Agreement") with Anti-Depression BioHealth Solutions, Inc., a
      Florida corporation ("ADBSI") and UTEK Corporation, a Delaware corporation
      ("UTEK"). All outstanding shares of common stock of ADBSI were exchanged for
      2,105,263 restricted shares of Class A common stock of the Company in a
      transaction accounted for using the purchase method of accounting. As additional
      consideration pursuant to the terms of the Acquisition Agreement, the Company
      paid UTEK, the sole shareholder of ADBSI, $96,637 in cash. As a result of the
      closing under the Acquisition Agreement on March 31, 2005, ADBSI became a
      wholly-owned subsidiary of the Company (see Note C).





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, Anti-Depression BioHealth Solutions, Inc. All
      significant inter-company transactions and balances have been eliminated in
      consolidation.





Cash
      and Cash Equivalents





For
      purposes of the Statements of Cash Flows, the Company considers all highly
      liquid debt instruments purchased with a maturity date of three months or less
      to be cash equivalents.




Property
      and Equipment





Property
      and equipment are stated at cost. When retired or otherwise disposed, the
      related carrying value and accumulated depreciation are removed from the
      respective accounts and the net difference less any amount realized from
      disposition, is reflected in earnings. For financial statement purposes,
      property and equipment are depreciated using the straight-line method over
      their
      estimated useful lives of the assets.





Long-Lived
      Assets





The
      Company has adopted Statement of Financial Accounting Standards No. 144 (“SFAS
      144”). The Statement requires that long-lived assets and certain identifiable
      intangibles held and used by the Company be reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset
      may not be recoverable. Events relating to recoverability may include
      significant unfavorable changes in business conditions, recurring losses, or
      a
      forecasted inability to achieve break-even operating results over an extended
      period. The Company evaluates the recoverability of long-lived assets based
      upon
      forecasted undiscounted cash flows. Should an impairment in value be indicated,
      the carrying value of intangible assets will be adjusted, based on estimates
      of
      future discounted cash flows resulting from the use and ultimate disposition
      of
      the asset. SFAS No. 144 also requires assets to be disposed of be reported
      at
      the lower of the carrying amount or the fair value less costs to sell.




F-10




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





Income
      Taxes





The
      Company has implemented the provisions on Statement of Financial Accounting
      Standards No. 109, "Accounting for Income Taxes" (“SFAS 109”). SFAS 109 requires
      that income tax accounts be computed using the liability method. Deferred taxes
      are determined based upon the estimated future tax effects of differences
      between the financial reporting and tax reporting bases of assets and
      liabilities given the provisions of currently enacted tax laws.





Net
      Earnings (Losses) Per Common Share





The
      Company computes earnings (losses) per share under Statement of Financial
      Accounting Standards No. 128, "Earnings Per Share" (“SFAS 128”). Net earnings
      (losses) per common share is computed by dividing net income (loss) by the
      weighted average number of shares of common stock and dilutive common stock
      equivalents outstanding during the year. Dilutive common stock equivalents
      consist of shares issuable upon conversion of convertible preferred shares
      and
      the exercise of the Company's stock options and warrants (calculated using
      the
      treasury stock method). During the year ended December 31, 2006 and 2005, common
      stock equivalents are not considered in the calculation of the weighted average
      number of common shares outstanding because they would be anti-dilutive, thereby
      decreasing the net loss per common share.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.





Revenue
      Recognition





For
      revenue from product sales, the Company follows a policy of recognizing revenues
      as products are shipped. The Company recognizes revenue in accordance with
      Staff
      Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which superseded
      Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS
      ("SAB101"). SAB 101 requires that four basic criteria must be met before revenue
      can be recognized: (1) persuasive evidence of an arrangement exists; (2)
      delivery has occurred; (3) the selling price is fixed and determinable; and
      (4)
      collectibility is reasonably assured. Determination of criteria (3) and (4)
      are
      based on management’s judgments regarding the fixed nature of the selling prices
      of the products delivered and the collectibility of those amounts. Provisions
      for discounts and rebates to customers, estimated returns and allowances, and
      other adjustments are provided for in the same period the related sales are
      recorded. The Company defers any revenue for which the product has not been
      delivered or is subject to refund until such time that the Company and the
      customer jointly determine that the product has been delivered or no refund
      will
      be required.





SAB
      104
      incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
      MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting
      for
      arrangements that may involve the delivery or performance of multiple products,
      services and/or rights to use assets. The effect of implementing EITF 00-21
      on
      the Company's consolidated financial position and results of operations was
      not
      significant.




F-11




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





Revenue
      Recognition (Continued)





The
      Company recognizes revenue when persuasive evidence of an arrangement exists,
      the price to the customer is fixed, collectibility is reasonably assured and
      title and risk of ownership is passed to the customer, which is usually upon
      delivery. However, in limited circumstances, certain customers requested to
      take
      title and risk of ownership prior to shipment. Revenue for these transactions
      is
      recognized only when:





(1)
      Title
      and risk of ownership have passed to the customer;


(2)
      The
      Company has obtained a written fixed purchase commitment;


(3)
      The
      customer has requested in writing the transaction be on a bill and hold
      basis;


(4)
      The
      customer has provided a delivery schedule;


(5)
      All
      performance obligations related to the sale have been completed;


(6)
      The
      product has been processed to the customer's specifications, accepted by the
      customer and made ready for shipment; and


(7)
      The
      product is segregated and is not available to fill other orders.





The
      Company records any payment received in advance from customer not meeting
      revenue recognition criteria as deferred revenue in liability section of the
      balance sheet. At December 31, 2006 and 2005, deferred revenue balance (included
      in accounts payable) was $140,000 and $50,000, respectively.




Significant
      Returns





During
      the second quarter of 2006 a major retailer returned one sku of the Company’s
      O24 product. Although it was a sell through contract and the retailer had made
      payments in connection with this sale, the decision to accept the return and
      issue a refund to the retailer was predicated upon maintaining an ongoing
      business relationship with this retailer, and accordingly the Company has
      charged $300,647 to operations relating to these returns. Additionally, during
      the second quarter of 2006 a major retailer returned two skus of O24 product
      which was purchased around August of 2005. Management did not anticipate a
      return for this sale and therefore no reserve was established in prior periods
      based upon retail sell through experienced at similar retailers, as well as
      other evaluation. The Company’s management has determined that in future
      periods, additional measures will be taken to evaluate and estimate the
      potential for product returns. Should a product return be indicated or
      predicted, an accrual for product returns will be established.





Advertising





In
      accordance with American Institute of Certified Public Accountants (“AICPA”)
      Statement of Position (“SOP”) No. 93-7, “Reporting on Advertising Costs”,
      advertising costs, including the costs to produce advertising, are expensed
      when
      the advertisement is first exhibited. In accordance with EITF Issue No. 01-09,
      “Accounting for Consideration Given by a Vendor to a Customer or a Reseller
      of
      the Vendor’s Products”, costs of out-of-store advertising paid to wholesale
      customers under cooperative advertising programs are expensed as an advertising
      cost if both identified advertising benefit is sufficiently separable from
      the
      purchase of the Company’s products by customers and the fair value of such
      benefit is measurable. Otherwise, such costs are reflected as a reduction of
      revenue. Costs of in-store advertising paid to wholesale customers under
      cooperative advertising programs are not included in advertising costs, but
      are
      reflected as a reduction in revenues since the benefits are not sufficiently
      separable from the purchases of the Company’s products by customers. For
      certain customers the Company also receives in return, invoices for advertising
      and marketing expenses which are offset to any amounts receivable from the
      Customer.





The
      Company incurred advertising expenses of $4,301,163 and $4,235,356 for the
      years
      ended December 31, 2006 and 2005, respectively. For the years ended December
      31,
      2006 and 2005, the Company recorded $0 as a reduction in revenue as described
      in
      EITF Issue No. 01-09 above.





Research
      and Development





The
      Company accounts for research and development costs in accordance with the
      Financial Accounting Standards Board’s Statement of Financial Accounting
      Standards No. 2 (“SFAS 2”), “Accounting for Research and Development Costs.”
Under SFAS 2, all research and development costs must be charged to expense
      as
      incurred. Accordingly, internal research and development costs are expensed
      as
      incurred. Third-party research and developments costs are expensed when the
      contracted work has been performed or as milestone results have been achieved.
      Company-sponsored research and development costs related to both present and
      future products are expensed in the period incurred. During the year ended
      December 31, 2006 and 2005, the Company’s expenditures on research and product
      development were immaterial.




F-12




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




Foreign
      Currency Translation





The
      Company translates the foreign currency financial statements in accordance
      with
      the requirements of Statement of Financial Accounting Standards No. 52, "Foreign
      Currency Translation." Assets and liabilities are translated at the rates of
      exchange at the balance sheet date, and related revenue and expenses are
      translated at average monthly exchange rates in effect during the period.
      Resulting translation adjustments are recorded as a separate component in
      stockholders' equity. Foreign currency transaction gains and losses are included
      in the statement of income.





The
      Company’s primary office is located in Canada. However, the Company’s management
      has determined to use US Dollar as its functional and reporting currency based
      upon consideration of economic and other factors. The books of record are
      consistently maintained in US Dollar. Accordingly, translation of functional
      currency into the reporting currency is obviated.





Liquidity





As
      shown
      in the accompanying financial statements, the Company incurred a net loss of
      $9,281,924 and $6,373,766 for the year ended December 31, 2006 and 2005,
      respectively. The Company's current liabilities exceeded its current assets
      by
      $7,581,624 as of December 31, 2006.





Concentrations
      of Credit Risk





Financial
      instruments and related items, which potentially subject the Company to
      concentrations of credit risk, consist primarily of cash, cash equivalents
      and
      related party receivables. The Company places its cash and temporary cash
      investments with credit quality institutions. At times, such investments may
      be
      in excess of the FDIC insurance limit. The Company periodically reviews its
      trade receivables in determining its allowance for doubtful accounts. The
      allowance for doubtful accounts was $337,236 and $29,625 at December 31, 2006
      and 2005, respectively.




F-13




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





Comprehensive
      Income (Loss)





The
      Company adopted Statement of Financial Accounting Standards No. 130, “Reporting
      Comprehensive Income”. SFAS No. 130 establishes standards for the reporting and
      displaying of comprehensive income and its components. Comprehensive income
      is
      defined as the change in equity of a business during a period from transactions
      and other events and circumstances from non-owner sources. It includes all
      changes in equity during a period except those resulting from investments by
      owners and distributions to owners. SFAS No. 130 requires other comprehensive
      income (loss) to include foreign currency translation adjustments and unrealized
      gains and losses on available-for-sale securities.





Fair
      Value of Financial Instruments





Statement
      of Financial Accounting Standards No. 107, "Disclosures About Fair Value of
      Financial Instruments," requires disclosure of the fair value of certain
      financial instruments. The carrying value of cash and cash equivalents, accounts
      receivable, accounts payable and short-term borrowings, as reflected in the
      balance sheets, approximate fair value because of the short-term maturity
      of


these
      instruments.





Stock
      Based Compensation




On
      December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
      Statement No. 123R (revised 2004), Share-Based Payment" which is a revision
      of
      FASB Statement No. 123, "Accounting for Stock-Based Compensation". Statement
      123R supersedes APB opinion No. 25, "Accounting for Stock Issued to Employees",
      and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
      approach in Statement 123R is similar to the approach described in Statement
      123. However, Statement 123R requires all share-based payments to employees,
      including grants of employee stock options, to be recognized in the income
      statement based on their fair values. Pro-forma disclosure is no longer an
      alternative. This statement does not change the accounting guidance for share
      based payment transactions with parties other than employees provided in
      Statement of Financial Accounting Standards No. 123(R). This statement does
      not
      address the accounting for employee share ownership plans, which are subject
      to
      AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock
      Ownership Plans.” On April 14, 2005, the SEC amended the effective date of the
      provisions of this statement. The effect of this amendment by the SEC is that
      the Company had to comply with Statement 123R and use the Fair Value based
      method of accounting no later than the first quarter of 2006. The Company
      implemented SFAS No. 123(R) on January 1, 2006 using the modified
      prospective method. The fair value of each option grant issued after January
      1,
      2006 was determined as of grant date, utilizing the Black-Scholes option pricing
      model. The amortization of each option grant will be over the remainder of
      the
      vesting period of each option grant.





As
      more
      fully described in Note I below, the Company granted stock options over the
      years to employees of the Company under a non-qualified employee stock option
      plan. As of December 31, 2005, 3,130,000 stock options were outstanding and
      exercisable.





In
      prior
      years, the Company applied the intrinsic-value method prescribed in Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees,” to account for the issuance of stock options to employees and
      accordingly compensation expense related to employees’ stock options were
      recognized in the prior year financial statements to the extent options granted
      under stock incentive plans had an exercise price less than the market value
      of
      the underlying common stock on the date of grant.





Had
      compensation for the Company’s stock options been determined based on the fair
      value at the grant dates for the awards, the Company’s net loss and loss per
      share would be as follows:





2005(Restated-Note
                R)Net
                loss - as reported
            
            $
            (6,373,766Add:
                Total stock based employee compensation expense as reported under
                intrinsic value method (APB. No. 25)
            
            
            -Deduct:
                Total stock based employee compensation expense as reported under
                fair
                value based method (SFAS No. 123)
            
            
            (226,570Net
                loss - Pro Forma
            
            $
            (6,600,336Net
                loss attributable to common stockholders - Pro forma
            
            $
            (6,600,336Basic
                (and assuming dilution) loss per share - as reported
            
            $
            (0.07Basic
                (and assuming dilution) loss per share - Pro forma
            
            $
            (0.08




Disclosure
      for the period ended December 31, 2006 is not presented because the amounts
      are
      recognized in the consolidated financial statements.




F-14




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**





Segment
      Information





Statement
      of Financial Accounting Standards No. 131, “Disclosures about Segments of an
      Enterprise and Related Information” (“SFAS 131”) establishes standards for
      reporting information regarding operating segments in annual financial
      statements and requires selected information for those segments to be presented
      in interim financial reports issued to stockholders. SFAS 131 also establishes
      standards for related disclosures about products and services and geographic
      areas. Operating segments are identified as components of an enterprise about
      which separate discrete financial information is available for evaluation by
      the
      chief operating decision maker, or decision-making group, in making decisions
      how to allocate resources and assess performance. The information disclosed
      herein materially represents all of the financial information related to the
      Company’s principal operating segment.




New
      Accounting Pronouncements





In
      February 2006, the FASB issued SFAS No. 155. “ *Accounting
      for certain Hybrid Financial Instruments an amendment of FASB Statements No.
      133
      and 140,”* or SFAS
      No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial
      instrument that contains an embedded derivative that otherwise would require
      bifurcation, clarifies which interest-only strips and principal-only strips
      are
      not subject to the requirements of Statement No. 133, establishes a requirement
      to evaluate interests in securitized financial assets to identify interests
      that
      are freestanding derivatives or that are hybrid financial instruments that
      contain an embedded derivative requiring bifurcation, clarifies that
      concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on a
      qualifying special purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. SFAS 155 is effective for all financial instruments acquired or
      issued after the beginning of an entity’s first fiscal year that begins after
      September 15, 2006. We do not expect the adoption of SFAS 155 to have a material
      impact on our consolidated financial position, results of operations or cash
      flows.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
      did
      not have a material impact on the Company's financial position and results
      of
      operations.





In
      July
      2006, the FASB issued Interpretation No. 48 (FIN 48). “ *Accounting
      for uncertainty in Income Taxes”.* FIN 48
      clarifies the accounting for Income Taxes by prescribing the minimum recognition
      threshold a tax position is required to meet before being recognized in the
      financial statements. It also provides guidance on derecognition, measurement,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition and clearly scopes income taxes out of SFAS 5,
“ *Accounting
      for Contingencies”.* FIN
      48 is
      effective for fiscal years beginning after December 15, 2006. We have not yet
      evaluated the impact of adopting FIN 48 on our consolidated financial position,
      results of operations and cash flows.





In
      September 2006 the Financial Account Standards Board (the “FASB”) issued its
      Statement of Financial Accounting Standards 157, Fair Value Measurements. This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. FAS 157 effective date is for fiscal
      years beginning after November 15, 2007. The Company does not expect adoption
      of
      this standard will have a material impact on its financial position, operations
      or cash flows.




In
      September 2006 the FASB issued its Statement of Financial Accounting Standards
      158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans”. This Statement improves financial reporting by requiring an employer to
      recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity or changes in unrestricted net assets of a not-for-profit
      organization. This Statement also improves financial reporting by requiring
      an
      employer to measure the funded status of a plan as of the date of its year-end
      statement of financial position, with limited exceptions. The effective date
      for
      an employer with publicly traded equity securities is as of the end of the
      fiscal year ending after December 15, 2006. The Company does not expect adoption
      of this standard will have a material impact on its financial position,
      operations or cash flows.





F-15




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**




New
      Accounting Pronouncements (Continued)




In
      September 2006, the SEC issued Staff Accounting Bulletin 108, *Considering
      the Effects of Prior Year Misstatements When Quantifying Misstatements in
      Current Year Financial Statements* (‘SAB
      108’).  SAB 108 provides interpretive guidance on how the effects of the
      carryover or reversal of prior year financial statement misstatements should
      be
      considered in quantifying a current year misstatement.  SAB 108 is
      effective for financial statements covering the first fiscal year ending after
      November 15, 2006.  As disclosed in Note R, the Company restated its
      Financial Statements for the year ending December 31, 2005 after review of
      its
      prior year sales, in compliance with the SEC issued Staff Accounting Bulletin
      104.  The
      adoption of Staff Accounting Bulletin 108 is not expected to have a material
      impact on the Company’s financial condition or results of
      operations.





In
      December 2006, the FASB issued FSP EITF 00-19-2, Accounting for Registration
      Payment Arrangements (" FSP
      00-19 -2")
      which addresses accounting for registration payment arrangements. FSP
      00-19 -2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB Statement No. 5, Accounting for Contingencies. FSP
      00-19 -2
      further clarifies that a financial instrument subject to a registration payment
      arrangement should be accounted for in accordance with other applicable
      generally accepted accounting principles without regard to the contingent
      obligation to transfer consideration pursuant to the registration payment
      arrangement. For registration payment arrangements and financial instruments
      subject to those arrangements that were entered into prior to the issuance
      of
      EITF 00-19-2, this guidance shall be effective for financial statements issued
      for fiscal years beginning after December 15, 2006 and interim periods within
      those fiscal years. The Company has not yet determined the impact that the
      adoption of FSP
      00-19 -2
      will
      have on its financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
      to measure many financial instruments, and certain other items, at fair value.
      SFAS 159 applies to reporting periods beginning after November 15, 2007. The
      adoption of SFAS 159 is not expected to have a material impact on the Company’s
      financial condition or results of operations.





Reclassifications





Certain
      reclassifications have been made in prior year’s financial statements to conform
      to classifications used in the current year.





**NOTE
      B - INVENTORIES**





Inventories
      are stated at the lower of cost or market determined by the first-in, first-out
      (FIFO) method. Inventories primarily consist of cosmetic oils and packaging
      materials. Components of inventories as of December 31, 2006 and 2005 are as
      follows:





2006
            
            2005(Restated-Note
                R)Raw
                Materials
            
            $
            301,684
            
            $
            854,424Finished
                Goods
            
            
            524,114
            
            
            1,868,862$
            825,798
            
            $
            2,723,286




**NOTE
      C - BUSINESS COMBINATIONS**




Intangible
      Assets Acquired





On
      May
      20, 2003 the Company acquired equipment, nine patented bioscience products
      and
      related intangible assets from General Cosmetics Corporation. In consideration
      for the acquisition of the tangible and intangible assets, the Company issued
      a
      total of 6,750,000 shares of restricted Class A common stock. The Company has
      adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, whereby the
      Company periodically tests its intangible assets for impairment. On an annual
      basis, and when there is reason to suspect that their values have been
      diminished or impaired, these assets are tested for impairment, and write-downs
      will be included in results from operations.


F-16




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      C - BUSINESS COMBINATIONS (Continued)**





Intangible
      Assets Acquired (Continued)





The
      intangible assets and related accumulated amortization balance at December
      31,
      2006 are:





Gross
                Carrying Amount
            
            Accumulated
                Amortization
            
            Net
            
            Residual
                Value
            
            Weighted
                Average Amortization Period (Years)Amortizable
                Intangible Assets:Patents
            
            $
            563,250
            
            $
            (408,356
            )
            $
            154,894
            
            $
            -
            
            
            5.0Customer
                mailing Lists
            
            
            30,000
            
            
            (21,750
            )
            
            8,250
            
            
            -
            
            
            5.0Trademarks
            
            
            45,000
            
            
            (32,625
            )
            
            12,375
            
            
            -
            
            
            5.0Non-compete
                agreements
            
            
            112,500
            
            
            (112,500
            )
            
            -
            
            
            -
            
            
            2.0Other
            
            
            9,000
            
            
            (6,526
            )
            
            2,474
            
            
            -
            
            
            5.0Total
            
            $
            759,750
            
            $
            (581,757
            )
            $
            177,993
            
            $
            -
            
            
            4.6





Total
      amortization expense charged to operations for the year ended December 31,
      2006
      and 2005 were $129,450 and $150,545. Estimated amortization expense as of
      December 31, 2006 is as follows:





2007
            
            $
            129,4502008
            
            
            48,543Total
            
            $
            177,993


F-17




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      C - BUSINESS COMBINATIONS (Continued)**





Acquisition
      of Anti-Depression BioHealth Solutions, Inc.





On
      March
      31, 2005, Swiss Medica, Inc., a Delaware corporation (the "Company"),
      Anti-Depression BioHealth Solutions, Inc., a Florida corporation ("ADBSI")
      and
      UTEK Corporation, a Delaware corporation ("UTEK") entered into an Agreement
      and
      Plan of Acquisition (the "Acquisition Agreement"). ADBSI was formed in March
      2005, owned minimal assets, had no liabilities, and no business activities
      prior
      to this transaction. The acquisition of ADBSI was completed pursuant to the
      terms of the Acquisition Agreement and closed on March 31, 2005. All outstanding
      shares of common stock of ADBSI were exchanged for 2,105,263 restricted shares
      of Class A common stock of the Company in a transaction accounted for using
      the
      purchase method of accounting. As additional consideration pursuant to the
      terms
      of the Acquisition Agreement, the Company paid UTEK, the sole shareholder of
      ADBSI, $96,637 in cash. As a result of the closing under the Acquisition
      Agreement, ADBSI became a wholly-owned subsidiary of the Company. The main
      product of ADBSI is PMS Escape.





The
      following summarizes the acquisition of ADBSI:





Assets
                acquired
            
            $
            196,637Goodwill
            
            
            500,000Total
                purchase Price
            
            $
            696,637Issuance
                of 2,105,263 shares of common stock (Note G)
            
            $
            600,000Cash
                paid
            
            
            96,637Total
                purchase price
            
            $
            696,637





The
      Company valued the common stock issued to the UTEK at $0.285 per share,
      which approximated the fair value of the Company’s common stock at the date of
      acquisition. The Company has recorded the carryover basis of the net assets
      acquired, which did not differ materially from their fair value and its
      operating results have been included in the Company’s consolidated financial
      statements since the date of purchase. The Company believes the acquisition
      resulted in the recognition of goodwill primarily because of its industry
      position, management strength and potential to serve as a platform for
      consolidation.





The
      Company has adopted SFAS No. 142, “Goodwill and Other Intangible Assets”,
      whereby the Company periodically tests its intangible assets for impairment.
      On
      an annual basis, and when there is reason to suspect that their values have
      been
      diminished or impaired, these assets are tested for impairment, and write-downs
      will be included in results from operations. At September 30, 2006, it was
      determined that the value of the goodwill was impaired. An expense of $500,000
      was charged against earnings for the year ended December 31, 2006.





Option
      Agreement : On March
      31, 2005, in connection with the Acquisition Agreement, ADBSI obtained a
      48-month exclusive option to acquire an exclusive license to Nutraceutical
      intellectual property and products developed or manufactured using the
      Nutraceutical intellectual property from Back Bay Scientific, Inc., a Delaware
      corporation ("Back Bay") pursuant to the terms of the Option Agreement. ADBSI
      may exercise this option after receipt of Back Bay's notice of completion of
      the
      development of Nutraceutical intellectual property or related products, or
      upon
      termination of an existing license agreement relating to the Nutraceutical
      technology. In consideration for the Option, ADBSI agreed to pay Back Bay
      $60,000 in four equal payments of $15,000. The first payment was made upon
      the
      effectiveness of the Option Agreement, and the remaining three payments are
      due
      on the first, second and third anniversary dates of the Option Agreement. ADBSI
      paid the first $15,000 installment on March 31, 2005. The second installment
      was
      due March 31, 2006 but the Company’s management has decided to let the Option
      lapse. Pursuant to the terms Option Agreement, the Option becomes void when
      the
      Company fails to make the payment within 30 days from the payment due date.


F-18




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      C - BUSINESS COMBINATIONS (Continued)**




Acquisition
      of Anti-Depression BioHealth Solutions, Inc. (Continued)





License
      Agreement : ADBSI's
      assets include an exclusive license to, among other things, develop and market
      patented and proprietary PMS Escape product pursuant to the Patent License
      Agreement. This royalty-bearing exclusive license gives ADBSI rights to use,
      manufacture and distribute the PMS Escape product or any other product developed
      from certain patent rights licensed to Back Bay in the United States and Canada.
      This agreement also gives ADBSI the rights to use all intellectual property
      related to PMS Escape, except the patent rights, in connection with the
      marketing, sale and distribution of the product. Upon the execution of this
      agreement, ADBSI agrees to pay a one-time, non-refundable fee of $125,000 to
      Back Bay and to prepay for Back Bay's finished PMS Escape and packaging
      inventory. The $125,000 fee was paid on ADBSI's behalf by UTEK. The Company
      is
      currently in default of its obligation of its License Agreement with Back
      Bay.





Prepaid
      Expense : ADBSI
      also entered into a Consulting Agreement with Back Bay and its principals on
      March 31, 2005. Pursuant to the terms of the Consulting Agreement, Back Bay’s
      principals will provide consulting services relating to PMS Escape and other
      products to which ADBSI obtains rights under the Patent License Agreement.
      The
      initial term of the Consulting Agreement expires on April 1, 2009 and
      automatically renews for additional one-year terms. In consideration for the
      Consulting Agreement, ADBSI agreed to pay Back Bay $200,000 in four equal
      payments of $50,000. The first payment was made upon the effectiveness of the
      Consulting Agreement, the remaining installments were due on the first, second
      and third anniversary dates of the Consulting Agreement. On March 31, 2006,
      the
      Company has re-negotiated the terms of the Consulting Agreement with Back Bay
      and its principals, revised consulting fees are $6,000 payable quarterly. The
      Company is currently in default of this revised Consulting
      Agreement.




**NOTE
      D - PROPERTY AND EQUIPMENT**





During
      the years ended December 31, 2006 and 2005, the Company also acquired furniture
      and equipment for its facilities in Texas and Toronto. Property and equipment
      are depreciated over their estimated useful life of 5 years. Property and
      equipment at December 31, 2006 and 2005 consists of the following:





2006
            
            2005Office
                furniture and equipment
            
            $
            329,837
            
            $
            329,837Accumulated
                depreciation
            
            
            (124,997
            )
            
            (59,030
            )Net
            
            $
            204,840
            
            $
            270,807





Depreciation
      expense included as a charge to operations amounted to $65,967 and $42,905
      for
      the year ended December 31, 2006 and 2005, respectively.


F-19




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      E - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**




Accounts
      payable and accrued liabilities at December 31, 2006 and 2005 are as
      follows:




2006
            
            2005Accounts
                payable
            
            $
            3,965,462
            
            $
            2,600,196Other
                accrued expenses
            
            
            602,195
            
            
            53,757Total
            
            $
            4,567,657
            
            $
            2,653,953





**NOTE
      F - NOTES PAYABLE**





A
      summary
      of notes payable at December 31, 2006 and 2005 is as follows:





2006
            
            2005Notes
                payable to Strategic Equity Corp.; interest rate 24% per annum; interest
                only payable monthly, maturity date is April 28, 2006. (b)
            
            $
            -
            
            $
            554,400Notes
                payable to Strategic Equity Corp.; interest rate 24% per annum; interest
                only payable monthly, maturity date is June 5, 2006. (a)
            
            
            -
            
            
            621,600Notes
                payable to Strategic Equity Corp.; interest rate 24% per annum; principal
                and interest payable monthly, maturity dates are October 30, 2006
                and
                December 15, 2006. (c)
            
            
            1,345,102
            
            
            -Notes
                payable to Double U Master Fund.; interest rate 24% per annum; interest
                only payable monthly, maturity date is December 20, 2006. (d)
            
            
            560,000
            
            
            560,000Notes
                payable to Double U Master Fund.; interest rate 24% per annum; interest
                only payable monthly, maturity date is December 20, 2006. (e)
            
            
            250,000
            
            
            250,000


F-20




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      F - NOTES PAYABLE (Continued)**





(Continued)
            
            2006
            
            ,
                2005Notes
                payable to Cigam Trust.; interest rate 18% per annum; interest only
                payable monthly, maturity date is in June 2006. (f)
            
            
            50,000
            
            
            50,000Notes
                payable to G. Feldbaum.; interest rate 18% per annum; interest only
                payable monthly, maturity date is in June 2006. (f)
            
            
            50,000
            
            
            50,000Notes
                payable to Goulet.; interest rate 20% per annum; interest only payable
                monthly, maturity date is in February 2006. (h)
            
            
            84,000
            
            
            84,000Notes
                payable on demand; interest rate 18% per annum; interest only payable
                monthly. (i)
            
            
            16,800
            
            
            16,800Notes
                payable to a related party, due upon demand; non interest bearing.
                (j)
            
            
            213,254
            
            
            -Notes
                payable to an individual, due August 11, 2006. The Company is in
                default
                under the terms of the note (k)
            
            
            174,000
            
            
            -Notes
                payable on demand, non interest bearing (l)
            
            
            21,830
            
            
            -Total
            
            
            2,764,986
            
            
            2,186,800Less:
                current portion
            
            
            (2,764,986
            )
            
            (2,186,800
            )Long
                term portion
            
            $
            -
            
            $
            -





a)
            Notes
                Payable:On
                June 6, 2005, the Company entered into a Security Agreement and Security
                Agreement Amendment (together the “Agreement”) with Strategic Equity Corp.
                (“Strategic Equity”) for the sum of $660,000 Canadian Dollar (CAD)
                (approximately $534,600 USD) being delivered to the Company on or
                before
                June 6, 2005. Pursuant to the Agreement, the Company issued to Strategic
                Equity 100,000 shares of the Company’s Class A common stock as extra
                financing charges. The Company valued the common shares issued at
                $0.30
                per share, and the value of common shares issued was charged to operations
                during the year ended December 31, 2005. The promissory note in the
                amount
                of $660,000 CAD is interest only payable monthly at 24% per annum
                with the
                maturity dates on December 5, 2005. This note was cancelled on December
                5,
                2005 and replaced with a new note for the sum of $740,000 CAD
                (approximately $621,600 USD). Pursuant to the Agreement, the Company
                issued to Strategic Equity 70,000 warrants to purchase an aggregate
                of
                70,000 shares of the Company’s Class A common stock, at $0.20 per share,
                exercisable at any time after the issuance and expiring on the day
                prior
                to the 3rd anniversary of the warrant issue date. The Company valued
                the
                warrants using the Black-Scholes option pricing model, applying a
                life of
                three years, a risk free interest rate of 4.5%, a volatility of 220%
                and a
                deemed fair value of common stock of $0.14 which was the closing
                price of
                the Company’s common stock on December 5, 2005. The Company valued the
                warrants granted in the amount of $9,177, and accounted for as a
                deferred
                financing cost. During the year ended December 31, 2006, $9,177 of
                non-cash interest expense was charged to operations in connection
                with the
                amortization of deferred financing cost. This note was cancelled
                on April
                28, 2006 and replaced with a new note for the sum of $1,575,000 CAD.


F-21




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      F - NOTES PAYABLE (Continued)**





b)
            Notes
                Payable:On
                October 28, 2005, the Company entered into a Security Agreement and
                Security Agreement Amendment (together the “Agreement”) with Strategic
                Equity Corp. (“Strategic Equity”) for the sum of $660,000 Canadian Dollar
                (CAD) (approximately $554,400 USD) being delivered to the Company
                on or
                before October 28, 2005. Pursuant to the Agreement, the Company issued
                to
                Strategic Equity 175,000 shares of the Company’s Class A common stock as
                extra financing charges. The Company valued the common shares issued
                at
                $0.129 per share, and the value of common shares issued was charged
                to
                operations during the year ended December 31, 2005. The Company also
                issued to Strategic Equity 50,000 warrants to purchase an aggregate
                of
                50,000 shares of the Company’s Class A common stock, at $0.20 per share,
                exercisable at any time after the issuance and expiring on the day
                prior
                to the 3rd anniversary of the warrant issue date. The Company valued
                the
                warrants using the Black-Scholes option pricing model, applying a
                life of
                three years, a risk free interest rate of 4.5%, a volatility of 220%
                and a
                deemed fair value of common stock of $0.12 which was the closing
                price of
                the Company’s common stock on October 28, 2005. The Company valued the
                warrants granted in the amount of $5,590, and accounted for as a
                deferred
                financing cost. The deferred financing cost is amortized and charged
                to
                operations over the term of the note. During the year ended December
                31,
                2006, $5,590 of non-cash interest expense was charged to operations
                in
                connection with the amortization of deferred financing cost. The
                promissory note in the amount of $660,000 CAD is interest only payable
                monthly at 24% per annum with the maturity date of April 28, 2006.
                The
                promissory note is secured by the Company’s trade accounts receivable and
                a security charge over all unsecured assets of the Company. This
                note was
                cancelled on April 28, 2006 and replaced with a new note for the
                sum of
                $1,575,000 CAD.





d)
            Notes
                Payable:On
                April 28, 2006, the Company entered into a Security Agreement and
                Security
                Agreement Amendment (together the “Agreement”) with Strategic Equity Corp.
                (“Strategic Equity”) for the sum of $1,575,000 Canadian Dollar (CAD)
                (approximately $1,357,758 USD) being delivered to the Company on
                or before
                April 28, 2006. Pursuant to the Agreement, the Company issued to
                Strategic
                Equity 722,222 shares of the Company’s Class A common stock as extra
                financing charges valued at $79,444, and the value of common shares
                issued
                was charged to operations during the nine months ended September
                30, 2006.
                The promissory note in the amount of $1,575,000 CAD is interest and
                principal payable monthly at 24% per annum with the maturity dates
                on
                October 30, 2006 ($739,910 CAD) and December 15, 2006 ($835,090 CAD).
                Pursuant to the Agreement, the Company issued to Strategic Equity
                600,000
                warrants to purchase an aggregate of 600,000 shares of the Company’s Class
                A common stock, at $0.20 per share, exercisable at any time after
                the
                issuance and expiring on the day prior to the 3rd anniversary of
                the
                warrant issue date. The Company valued the warrants using the
                Black-Scholes option pricing model, applying a life of three years,
                a risk
                free interest rate of 4.875%, a volatility of 199% and a deemed fair
                value
                of common stock of $0.148 which was the average closing price of
                the
                Company’s common stock on September 30, 2006. The Company valued the
                warrants granted in the amount of $83,040, and accounted for as a
                deferred
                financing cost. The deferred financing cost is amortized and charged
                to
                operations over the term of the note. During the year ended December
                31,
                2006, $83,040 of non-cash interest expense was charged to operations
                in
                connection with the amortization of deferred financing cost. The
                promissory note is secured by the Company’s trade accounts receivable and
                a security charge over all unsecured assets of the Company. During
                the
                year ended December, 2006, the Company paid down $28,906CAD in principal.
                The balance of the note at December 31, 2006 amounted $1,546,094
                CAD
                (approximately $1,345,102 USD). The Company is currently in default
                under
                the terms of the note
                agreement.


F-22





**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      F - NOTES PAYABLE (Continued)**





e)
            Notes
                Payable:On
                June 21, 2005, the Company entered into a Security Agreement and
                Security
                Agreement Amendment (together the “Agreement”) with Double U Master Fund
                for the sum of $560,000 being delivered to the Company on or before
                June
                21, 2005. The promissory note in the amount of $560,000 is interest
                only
                payable monthly at 15% per annum with the maturity dates on December
                20,
                2005. The promissory note was secured by the Company’s inventory and
                accounts receivable. This note was cancelled on December 20, 2005
                and
                replaced with a new note for the sum of $560,000 being delivered
                to the
                Company on or before December 20, 2005. Pursuant to the Agreement,
                the
                Company issued to Double U Master Fund warrants to purchase an aggregate
                of 250,000 shares of the Company’s Class A common stock, at $0.20 per
                share, exercisable at any time after the issuance and expiring on
                the day
                prior to the 5thanniversary of the effective date of the Company’s next Registration
                Statement. The Company valued the warrants using the Black-Scholes
                option
                pricing model, applying a life of 5.50 years, a risk free interest
                rate of
                4.5%, a volatility of 220% and a deemed fair value of common stock
                of
                $0.12 which was the closing price of the Company’s common stock on
                December 20, 2005. The Company valued the warrants granted in the
                amount
                of $29,650, and accounted for them as a deferred financing cost which
                were
                amortized and charged to operations over the term of the note. During
                the
                year ended December 31, 2006, $27,858 of non-cash interest expense
                was
                charged to operations in connection with the amortization of deferred
                financing cost. The promissory note in the amount of $560,000 is
                interest
                only payable monthly at 24% per annum with the maturity date of June
                20,
                2006. The promissory note is secured by the Company’s inventory and
                accounts receivable. This note was cancelled on June 20, 2006 and
                replaced
                with a new note for the sum of $560,000 being delivered to the Company
                on
                or before June 20, 2006. Pursuant to the Agreement, the Company issued
                to
                Double U Master Fund 600,000 warrants to purchase an aggregate of
                600,000
                shares of the Company’s Class A common stock, at $0.20 per share,
                exercisable at any time after the issuance and expiring on the day
                prior
                to the 5thanniversary of the effective date of the Company’s next Registration
                Statement. The Company valued the warrants using the Black-Scholes
                option
                pricing model, applying a life of 5.0 years, a risk free interest
                rate of
                4.875%, a volatility of 199% and a deemed fair value of common stock
                of
                $0.148 which was the average closing price of the Company’s common stock
                on June 20, 2006. The Company valued the warrants granted in the
                amount of
                $86,040, and accounted for them as a deferred financing cost which
                were
                amortized and charged to operations over the term of the note. During
                the
                year ended ended December 31, 2006, $86,040 of non-cash interest
                expense
                was charged to operations in connection with the amortization of
                deferred
                financing cost. The promissory note in the amount of $560,000 is
                interest
                only payable monthly at 24% per annum with the maturity date of December
                20, 2006. The promissory note is secured by the Company’s inventory and
                accounts receivable. The Company is currently in default under the
                terms
                of the note agreement.




f)
            Notes
                Payable:On
                December 20, 2005, the Company entered into a Security Agreement
                and
                Security Agreement Amendment (together the “Agreement”) with Double U
                Master Fund for the sum of $250,000 being delivered to the Company
                on or
                before December 20, 2005. The promissory note in the amount of $250,000
                is
                interest only payable monthly at 24% per annum with the maturity
                date of
                June 20, 2006. The promissory note is secured by the Company’s inventory
                and accounts receivable. This note was cancelled on June 20, 2006
                and
                replaced with a new note for the sum of $560,000 being delivered
                to the
                Company on or before June 20, 2006. The promissory note in the amount
                of
                $250,000 is interest only payable monthly at 24% per annum with the
                maturity date of December 20, 2006. The promissory note is secured
                by the
                Company’s inventory and accounts receivable. The Company is currently in
                default under the terms of the note
                agreement.


F-23




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      F - NOTES PAYABLE (Continued)**




g)
            Notes
                Payable:On
                June 10 and June 13, 2005, the Company entered into an Agreement
                with each
                of Cigham Trust and G. Feldbaum for the sum of $50,000 being delivered
                to
                the Company on or before June 10 and June 13, 2005 respectively.
                Pursuant
                to the Agreement, the Company issued to each of Cigham and Feldbaum,
                10,000 shares of the Company’s Class A common stock at approximately $0.30
                per share. Interest expense of $13,500 was charged to operations
                during
                the three month period ended September 30, 2006. Each promissory
                note in
                the amount of $50,000 is interest only payable monthly at 18% per
                annum
                and is due upon demand. These notes are unsecured. The Company is
                currently in default under the terms of the note
                agreement.




h)
            Demand
                Note:
                On August 3, 2005, the Company entered into an Agreement for the
                sum of
                $100,000 Canadian Dollar (CAD) (approximately $84,000 USD) being
                delivered
                to the Company on or before August 3, 2005. The promissory note in
                the
                amount of $100,000 (CAD) is interest only payable monthly at 20%
                per annum
                and is due upon demand. This note is unsecured. The Company is currently
                in default under the terms of the note
                agreement.




i)
            Demand
                Note:
                On July 5, 2005, the Company entered into an Agreement for the sum
                of
                $20,000 Canadian Dollar (CAD) (approximately $16,800 USD) being delivered
                to the Company on or before July 5, 2005. The promissory note in
                the
                amount of $20,000 (CAD) is interest only payable monthly at 18% per
                annum
                and is due upon demand. This note is unsecured The Company is currently
                in
                default under the terms of the note
                agreement.




j)
            Demand
                Note:
                During the year ended December 31, 2006 the Company entered into
                an
                Agreement with a related party for the sum of $235,500Canadian Dollar
                (CAD) (approximately $204,885 USD) and $8370 (USD) being delivered
                to the
                Company on or before December 31, 2006. These promissory notes are
                interest free and are due upon demand. These notes are unsecured.





k)
            Demand
                Note:
                On July 29, 2006 the Company entered into an Agreement with an individual
                for the sum of $200,000 Canadian Dollar (CAD) (approximately $174,000
                USD)
                being delivered to the Company on or before July 29, 2006. The promissory
                note in the amount of $200,000 (CAD) is non interest bearing, with
                an
                $8,000 fee payable upon maturity, with a maturity date of August
                11, 2006.
                This unsecured note is guaranteed by a related party. The Company
                is
                currently in default under the terms of the note
                agreement.




l)
            Demand
                Note:
                On September 20, 2006, the Company entered into an Agreement for
                the sum
                of $14,000 USD and $9,000Canadian Dollar (CAD) (approximately $7,830
                USD)
                being delivered to the Company on or before December 31, 2006. These
                promissory notes are interest free and are due upon demand. These
                notes
                are unsecured. This note is unsecured. The Company is currently in
                default
                under the terms of the note
                agreement.




Additionally,
      the Company entered into an Agreement on January 4, 2006 for the sum of $400,000
      Canadian Dollar (CAD) (approximately $348,000 USD) being delivered to the
      Company on or before January 4, 2006. The promissory note in the amount of
      $400,000 (CAD) is non interest bearing, with a $25,000 (CAD) fee payable upon
      maturity, with a maturity date of March 28, 2006. On March 28, 2006, this note
      was renewed upon the same terms for a further three month period, with a
      maturity date of June 28, 2006, with an additional $25,000 (CAD) fee payable
      upon maturity. On June 28, 2006 this note was renewed for a further one month
      period, with a maturity date of July 28, 2006, and an additional $10,000 (CAD)
      fee payable upon maturity. This note is secured by the personal assets of a
      related party. This note was paid in full on August 25, 2006.


F-24




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTEG
      - CONVERTIBLE NOTES PAYABLE**




December
                31, 2006
            
            December
                31, 2005Convertible
                notes payable dated April 11, 2006; interest rate 12% per annum for
                the
                first 150 days, 8% thereafter; due December 7, 2007; note holder
                has the
                option to convert unpaid note principal the Company’s common stock at the
                lower of (i) $0.175 or (ii) 80% of the lowest closing bid price of
                the
                Company’s common stock during the five days immediately preceding the
                conversion date. The Company granted the note holder a security interest
                in all of the Company’s assets and registration rights. Net of unamortized
                debt discount of $550,336.
            
            $
            599,664
            
            $
            -Convertible
                notes payable dated June 12, 2006; interest rate 12% per annum for
                the
                first 150 days, 8% thereafter; due February 8, 2008; note holder
                has the
                option to convert unpaid note principal the Company’s common stock at the
                lower of (i) $0.175 or (ii) 80% of the lowest closing bid price of
                the
                Company’s common stock during the five days immediately preceding the
                conversion date. The Company granted the note holder a security interest
                in all of the Company’s assets and registration rights. Net of unamortized
                debt discount of $415,096.
            
            
            284,904
            
            
            -




Convertible
                notes payable dated August 24, 2006; effective interest rate 23%
                per
                annum; originally due December 29, 2006; note holder has the option
                to
                convert unpaid note principal the Company’s common stock at 75% of the
                average closing bid price of the Company’s common stock for the five days
                immediately preceding the conversion date. The Company granted the
                note
                holder a security interest in all of the Company’s assets and registration
                rights. Net of unamortized debt discount of $-0-. The note is currently
                in
                default.
            
            
            594,000
            
            
            -1,478,568
            
            
            -Less
                current maturities
            
            
            (1,193,664
            )
            
            -Long
                term portion
            
            $
            284,904
            
            $
            -





Convertible
      Notes dated April 11, 2006 and June 12, 2006:





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on April 11, 2006 for the issuance of an aggregate of $2,000,000 of convertible
      notes (“Convertible Notes”), and attached to the Convertible Notes were warrants
      to purchase 2,000,000 shares of the Company’s common stock. The Convertible
      Notes accrues interest at 12% per annum for the first 150 days, 8% thereafter,
      payable and due as described above. The note holder has the option, commencing
      after 150 calendar days, to convert any unpaid note principal to the Company’s
      common stock at a rate of the lower of (i) $0.175, with certain reset
      provisions, or (ii) 80% the lowest price per share in the last reported trade
      of
      the Company’s common stock on the OTC - Bulletin Board or on the exchange which
      the common stock is then listed, as quoted by Bloomberg, LP, for the five
      trading days immediately preceding the conversion date. The Company has certain
      early redemption provisions. As of December 31, 2006, the Company issued to
      the
      investors Convertible Notes in a total amount of $2,000,000 in exchange for
      net
      proceeds of $1,782,500. The proceeds that the Company received were net of
      related fees and costs of $217,500. Capitalized financing costs were amortized
      over the maturity period of the convertible notes.


F-25




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTEG
      - CONVERTIBLE NOTES PAYABLE  (Continued)**




The
      Notes
      include certain features that are considered embedded derivative financial
      instruments, such as a variety of conversion options, a variable interest rate
      feature, events of default and a reset provision clause.





The
      initial relative fair value assigned to the embedded derivatives was
      $1,403,164.





The
      warrants are exercisable until three years from April 11, 2006 until April
      10,
      2009 at a price of $0.20 per share. The Company has the right, but not the
      obligation, to call these warrants for based on the following
      criteria:





From
                date of issuance:
            
            Callable
                price:From
                1 to 150 days
            
            
            Not
                callableFrom
                151 to 180 days
            
            $
            0.075From
                181 to 210 days
            
            
            0.125From
                211 to 240 days
            
            
            0.150From
                241days after
            
            
            0.200





The
      accounting treatment of the derivatives and warrants requires that the Company
      record the warrants at their fair values as of the inception date of the debt
      issuance, which totaled $320,938.





The
      Company recorded the fair value of the derivatives ($1,403,164) and warrants
      ($320,938) to debt discount, aggregating $1,724,102, which will be amortized
      to
      interest expense over the term of the Notes. Amortization of $758,670 was
      recorded for the year ended December 31, 2006.





Convertible
      Note dated August 24, 2006:





The
      Company entered into a Securities Purchase Agreement with an accredited investor
      on August 24, 2006 for the issuance of a $594,000 convertible note (“Convertible
      Note”) and attached to the Convertible Note were warrants to purchase 5,500,000
      shares of the Company’s common stock. The net proceeds of the Convertible Note
      were discounted to an effective interest rate of 23% per annum. The noteholder
      has the option, commencing at the maturity date of December 29, 2006, to convert
      any unpaid note principal to the Company’s common stock at a rate of 75% of the
      average closing bid price per share for the five days immediately preceding
      the
      conversion date. As of December 31, 2006, the Company issued to the investor
      a
      Convertible Note in a totaling $594,000 in exchange for net proceeds of 550,000.
      The proceeds that the Company received were net of related fees, interest and
      costs of $44,000.





The
      Notes
      include certain features that are considered embedded derivative financial
      instruments.





The
      initial relative fair value assigned to the embedded derivatives was
      $392,874.





The
      warrants are exercisable for five years from August 23, 2006 at a price of
      $0.20
      per share.





The
      accounting treatment of the derivatives and warrants requires the Company record
      the warrants at their fair values as of the inception date of the debt issuance
      up to the allocated net proceeds of the debt, which totaled
      $252,182





The
      Company recorded the fair value of the derivatives ($341,818) and warrants
      ($252,182) to debt discount, aggregating $594,000, which will be amortized
      to
      interest expense over the term of the Note. Amortization of $594,000 was
      recorded for the year ended December 31, 2006.





The
      market price of the Company's common stock significantly impacts the extent
      to
      which the Company may be required or may be permitted to convert the Convertible
      Notes into shares of the Company's common stock. The lower the market price
      of
      the Company's common stock at the due date, the more shares the Company will
      need to issue to convert the principal and interest payments then due on the
      Notes.


F-26




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      H - CAPITAL STOCK**





The
      Company is authorized to issue 10,000,000 shares of preferred stock with par
      value $.001 per share, 200,000,000 shares of Class A common stock with par
      value
      of $.001 per share, and 5,000,000 shares of Class B common stock with par value
      $.001 per share.





On
      June
      27, 2005, the Company's Board of Directors and Shareholders approved resolutions
      to increase the total number of authorized shares of the Company’s capital stock
      from 160,000,000 shares to 215,000,000 shares as follows: (1) increase the
      authorized number of shares of Class A Common Stock from 100,000,000 shares
      to
      200,000,000 shares and (2) to decrease the authorized number of shares of Class
      B Common Stock from 50,000,000 shares to 5,000,000 shares. Authorized share
      for
      preferred shares were kept unchanged at 10,000,000 shares of preferred stock
      with par value $.001 per share. On November 27, 2002, the Company effected
      a
“one-for-one hundred” reverse stock split of its outstanding shares of Class A
      common stock. All references in the financial statements and notes to financial
      statements, numbers of shares and share amounts have been retroactively restated
      to reflect the reverse split.




As
      of
      December 31, 2006 and 2005, the Company has no preferred stock issued and
      outstanding. The Company has 111,221,973 and 98,062,892 shares of Class A common
      stock issued and outstanding at December 31, 2006 and 2005, respectively. The
      Company also has issued and outstanding 2,000,000 shares of Class B common
      stock
      at December 31, 2006 and 2005.




For
      the
      year ended December 31, 2005, the Company issued an aggregate of 4,123,673
      shares of Class A common stock to attorneys and consultants for services
      rendered in the amount of $746,926. All valuations of common stock issued for
      services were based upon the value of the services rendered, which did not
      differ materially from the fair value of the Company's common stock during
      the
      period the services were rendered. The Company issued an aggregate of 3,900,000
      shares of Class A common stock in exchange for $1,043,000 of accrued
      liabilities. The Company issued an aggregate of 20,556,500 shares of Class
      A
      common stock in exchange for warrants exercised (Note H) at $0.16 to $0.30
      per
      share for total gross proceeds of $4,872,200. The Company issued an aggregate
      of
      388,802 shares of common stock in exchange for financing expense of $50,000
      (Note F), and 465,000 shares of common stock in exchange for deferred interest
      and interest expense of $79,005 (Note F). Additionally, the Company issued
      an
      aggregate of 2,105,263 shares of Class A common stock, valued at $600,000,
      in
      connection with acquisition of ADBSI (Note C). The Company cancelled 250,000
      shares of common stock issued in prior year in exchange for research and
      development costs in the amount of $167,500. The Company issued an aggregate
      of
      280,000 shares of Class A common stock in exchange for options exercised (Note
      H) at $0.10 per share.





For
      the
      year ended December 31, 2006, the Company issued an aggregate of 3,799,331
      shares of Class A common stock to attorneys and consultants for services
      rendered in the amount of $412,129. All valuations of common stock issued for
      services were based upon the value of the services rendered, which did not
      differ materially from the fair value of the Company's common stock during
      the
      period the services were rendered. The Company issued an aggregate of 929,222
      shares of Class A common stock in exchange for interest expense in the amount
      of
      $85,424 and 110,294 shares issued for previously incurred debt in the amount
      of
      $18,000. The Company issued an aggregate of 330,000 shares of Class A common
      stock in exchange for 330,000 stock options exercised at $0.10 per share, and
      83,089 shares of common stock in exchange for 200,000 stock options exercised
      on
      a cashless basis (Note F). The Company issued an aggregate of 7,907,145 shares
      of common stock in exchange for $150,000 of its convertible debenture.




In
      June
      2005, the Company entered into a Class B Common Stock Conversion Agreement
      (the
      "Agreement") with its Chief Executive Officer ("Holder"). Holder is the only
      holder of shares of Company's Class B common stock. The Agreement provides
      that
      upon the occurrence of certain events, the Company shall convert shares of
      its
      Class B common stock into shares of its Class A common stock at a ratio of
      five
      (5) Class A shares for every one Class B share. As of December 31, 2006, the
      conversion has not occurred.




In
      2006
      our Board of Directors approved the Swiss Medica, Inc. 2006 Equity Incentive
      Plan which permits us to grant, for a ten year period, stock awards, stock
      bonuses and stock options. . We had originally reserved 15,000,000 shares of
      our
      Class A common stock for issuance to our directors, employees and consultants
      under the Plan. As of December 31, 2006, we granted no stock awards and bonuses
      under the Plan.


F-27




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      I - OPTIONS AND WARRANTS**





Warrants





In
      accordance with SFAS 133 “Accounting for Derivative Instruments and Hedging
      Activities”, the Company revalued the warrants as of December 31, 2006 using the
      Black-Scholes option pricing model. The difference between the fair value of
      the
      warrants as of December 31, 2006 and the previous valuation as of September
      30,
      2006 has been recorded as a gain on revaluation of warrant liability, and
      included in the accompanying consolidated financial statements.





The
      following table summarizes the changes in warrants outstanding and the related
      prices for the shares of the Company’s common stock. These warrants were granted
      in lieu of cash compensation for services performed or in connection with debt
      or equity financing, each warrant to purchase one share of the Company’s Class A
      common stock.





Warrants
                Outstanding
            
            Warrants
                ExercisableExercise
                Prices
            
            Number
                Outstanding
            
            Weighted
                Average Remaining Contractual Life (Years)
            
            Weighted
                Average Exercise Price
            
            Number
                Exercisable
            
            Weighted
                Average Exercise Price$
                75.00
            
            
            8,675
            
            
            0.01
            
            $
            75.00
            
            
            8,675
            
            $
            75.000.42
            
            
            350,000
            
            
            2.93
            
            
            0.42
            
            
            350,000
            
            
            0.420.30
            
            
            5,625,000
            
            
            0.25
            
            
            0.30
            
            
            5,625,000
            
            
            0.300.20
            
            
            14,821,000
            
            
            2.62
            
            
            0.20
            
            
            14,821,000
            
            
            0.2020,804,675
            
            
            1.98
            
            $
            0.26
            
            
            20,804,675
            
            $
            0.26


F-28




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      I - OPTIONS AND WARRANTS (Continued)**





Warrants
      (Continued)





Transactions
      involving warrants issued to non-employees are summarized as
      follows:





Number
                of Warrants
            
            Weighted
                Average Price Per ShareOutstanding
                at December 31, 2004
            
            
            27,331,175
            
            $
            0.34Granted
            
            
            6,495,000
            
            
            0.30Exercised
                (Note H)
            
            
            (20,556,500
            )
            
            0.24Canceled
                or expired
            
            
            (265,000
            )
            
            0.25Outstanding
                at December 31, 2005
            
            
            13,004,675
            
            $
            0.30Granted
            
            
            8,700,000
            
            
            0.20Exercised
                (Note H)
            
            
            -
            
            
            -Canceled
                or expired
            
            
            (900,000
            )
            
            0.20Outstanding
                at December 31, 2006
            
            
            20,804,675
            
            $
            0.26





The
      weighted-average fair value of warrants granted to non-employees during the
      years ended December 31, 2006 and 2005 and the weighted-average significant
      assumptions used to determine those fair values, using a Black-Scholes option
      pricing model are as follows:





2006
            
            2005Significant
                assumptions (weighted-average):Risk-free
                interest rate at grant date
            
            
            4.5
            %
            
            4.5
            %Expected
                stock price volatility
            
            
            220
            %
            
            220
            %Expected
                dividend payout
            
            
            -
            
            
            -Expected
                warrant life-years (a)
            
            
            1
                to 5 years
            
            
            1
                to 5 years




(a)
      The
      expected warrant life is based on contractual expiration dates.




During
      the year ended December 31, 2006 and 2005, the Company granted an aggregate
      of
      8,700,000 and 6,495,000 warrants to investors in connection with debt and equity
      financing. The Company fair valued the warrants granted in connection with
      debt
      financing and accounted for as deferred financing costs. The deferred financing
      cost is amortized and charged to operations over the term of the note (Note
      F).





Employee
      Stock Options




The
      following table summarizes the changes in stock options outstanding and the
      related prices for the shares of the Company’s common stock issued to employees
      and directors, provided that no stock options vested prior to October 6,
      2005.


F-29




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      I - OPTIONS AND WARRANTS (Continued)**





Employee
      Stock Options (Continued)




Options
                Outstanding
            
            Options
                ExercisableExercise
                Prices
            
            Number
                Outstanding
            
            Weighted
                Average Remaining Contractual Life (Years
            
            Weighted
                Average Exercise Price
            
            Number
                Exercisable
            
            Weighted
                Average Exercise Price$0.10
            
            
            2,256,098
            
            
            2.77
            
            $
            0.10
            
            
            2,256,098
            
            $
            0.10$0.25
            
            
            168,902
            
            
            3.84
            
            $
            0.25
            
            
            118,902
            
            $
            0.252,425,000
            
            
            2.85
            
            $
            0.11
            
            
            2,375,000
            
            $
            0.11





Transactions
      involving stock options issued to employees and directors are summarized as
      follows:




Number
                of Options
            
            Weighted
                Average Price Per ShareOutstanding
                at December 31, 2004
            
            
            3,431,098
            
            $
            0.10Granted
            
            
            168,902
            
            
            0.25Exercised
                (Note H)
            
            
            (280,000
            )
            
            0.10Canceled
                or expired
            
            
            (190,000
            )
            
            0.10Outstanding
                at December 31, 2005
            
            
            3,130,000
            
            $
            0.11Granted
            
            
            -
            
            
            -Exercised
                (Note H)
            
            
            (530,000
            )
            
            0.10Canceled
                or expired
            
            
            (175,000
            )
            
            0.10Outstanding
                at December 31, 2006
            
            
            2,425,000
            
            $
            0.11





There
      were no employee stock options granted and 60,000 employee stock options vested
      during the year ended December 31, 2006. The financial statements for the year
      ended December 31, 2005 have not been restated upon adoption of SFAS 123R.
      Had
      compensation expense for employee stock options granted under the plan been
      determined based on the fair value at the grant date consistent with SFAS 123R,
      the Company’s pro forma net loss and loss per share would have been $(5,627,736)
      and $(0.06), for the year ended December 31, 2005.





The
      estimated value of the employee stock options vested during the year period
      ended December 31, 2006 was determined using the Black-Scholes option pricing
      model and the following assumptions: expected option life of 5 years, a risk
      free interest rate of 3.875%, and a dividend yield of 0% and volatility of
      115%.
      Total stock-based compensation expense recognized in the consolidated statement
      of earnings for the year ended December 31, 2006 was $5,433, net of tax
      effect.





**NOTE
      J - PREPAID EXPENSES AND OTHER**





Prepaid
      expenses and other assets at December 31, 2006 and 2005 are as
      follows:





2006
            
            2005(Restated-Note
                R)Prepaid
                Services Fees
            
            $
            9,201
            
            $
            71,321Prepaid
                Insurance
            
            
            30,483
            
            
            51,065License
                Agreement, net (Note C)
            
            
            81,250
            
            
            106,250Deferred
                financing costs, net
            
            
            -
            
            
            70,308Other
                prepaid expenses
            
            
            24,171
            
            
            50,352Total
            
            $
            145,105
            
            
            349,296




F-30




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      K - RELATED PARTY TRANSACTIONS**





One
      of
      the Company’s Officers and Directors has short-term loans to the Company of
      $213,254 as at December 31, 2006. These loans are non-interest bearing and
      due
      upon demand.





**NOTE
      L - DEBT DERIVATIVE AND WARRANT LIABILITY**




In
      accordance with SFAS 133 "Accounting for Derivative Instruments and Hedging
      Activities and EITF 00-19 "Accounting for Derivative Financial Instruments
      Indexed to, and Potentially Settled in, a Company's Own Stock", the Company
      accounted for identified embedded derivatives and related detachable warrants
      to
      purchase its common stock that provide for the payment of liquidated damages
      if
      the stipulated registration deadlines were not met as liabilities.





Convertible
      Notes dated April 11, 2006 and June 12, 2006:





The
      Company determined the fair value of the embedded derivatives and valued the
      related warrants using the Binomial Lattice option pricing model. Assumptions
      regarding the life were one to two years, expected dividend yield of 0%, a
      risk
      free rate of 4.74 to 4.91%, and a volatility of 175.38% to 198.44%. The
      determined value of both the warrants and the underlying embedded derivatives
      as
      of December 31, 2006 was $597,436. The net change in the fair value of the
      derivative and warrant liability values from the initial fair value
      determination has been recorded as a gain from change in debt derivative and
      warrant liabilities in the consolidated statement of losses.





Convertible
      Note dated August 24, 2006:





The
      Company determined the fair value of the embedded derivatives and valued the
      related warrants using the Black Scholes option pricing model. Assumptions
      regarding the life for the embedded derivatives were 1 day, expected dividend
      yield of 0%, a risk free rate of 4.75%, and a volatility of 133.1%. Assumptions
      regarding the life for the warrants were 1,696 days, expected dividend yield
      of
      0%, a risk free interest rate of 4.70%, and a volatility of 133.1% The
      determined value of both the warrants and the underlying embedded derivatives
      as
      of December 31, 2006 was $283,161. The net change in the fair value of the
      derivative and warrant liability values from the initial fair value
      determination has been recorded as a gain from change in debt derivative and
      warrant liabilities in the consolidated statement of losses.





Additionally,
      in accordance with SFAS 133 "Accounting for Derivative Instruments and Hedging
      Activities and EITF 00-19 "Accounting for Derivative Financial Instruments
      Indexed to, and Potentially Settled in, a Company's Own Stock", the Company
      accounted for unrelated warrants to purchase its common stock due to the
      circumstances described above as liabilities. Assumptions regarding the life
      were one to five years, expected dividend yield of 0%, a risk free rate of
      4.74
      to 5.02%, and a volatility of 133.1%. The determined fair value of the warrants
      and options as of December 31, 2006 was $21,363. The net change in the fair
      value of the derivative and warrant liability values from the initial fair
      value
      determination has been recorded as a gain from change in debt derivative and
      warrant liabilities in the consolidated statement of losses.


F-31




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      M - INCOME TAXES**





Statement
      of Financial Accounting Standards No. 109 requires the recognition of deferred
      tax liabilities and assets for the expected future tax consequences of events
      that have been included in the financial statement or tax returns. Under this
      method, deferred tax liabilities and assets are determined based on the
      difference between financial statements and tax bases of assets and liabilities
      using enacted tax rates in effect for the year in which the differences are
      expected to reverse. Temporary differences between income reported for financial
      reporting purposes and income tax purposes are insignificant.




For
      income tax reporting purposes, the Company’s aggregate unused net operating
      losses approximate $42,000,000 which expires through 2026, subject to
      limitations of Section 382 of the Internal Revenue Code, as amended. The
      deferred tax asset related to the carryforward is approximately $14,700,000.
      The
      Company has provided a valuation reserve against the full amount of the net
      operating loss benefit, because in the opinion of management based upon the
      earning history of the Company, it is more likely than not that the benefits
      will not be realized.





Components
      of deferred tax assets as of December 31, 2006 are as follows:





Non
                current:Net
                operating loss carryforward
            
            $
            14,700,000Valuation
                allowance
            
            
            (14,700,000
            )Net
                deferred tax asset
            
            $
            -





**NOTE
      N - LOSSES PER COMMON SHARE**





The
      following table presents the computation of basic and diluted loss per share
      for
      the years ended December 31, 2006 and 2005:





2006
            
            2005(Restated
                - Note R)Net
                loss available for common shareholders
            
            $
            (9,281,924
            )
            $
            (6,373,766
            )Basic
                and fully diluted loss per share
            
            $
            (0.09
            )
            $
            (0.07
            )Weighted
                average common shares outstanding, as adjusted
            
            
            101,385,760
            
            
            87,169,503





For
      the
      years ended December 31, 2006 and 2005, 10,000,000 and 12,897,474 potential
      shares, respectively, were excluded from shares used to calculate diluted losses
      per share as their inclusion would reduce net losses per share.





**NOTE
      O - COMMITMENTS AND CONTINGENCIES**





Lease
      Commitments





The
      Company leases office and warehouse facilities on a four year lease basis in
      Richardson, Texas, expiring April 1, 2009. Monthly rents under the lease are
      $1,694. The Company leases office and warehouse facilities on a five year basis
      in Mississauga, Ontario, Canada, expiring May 31, 2011. Gross monthly rents
      under the lease are $11,558, CAD. Rental expenses charged to operations during
      the year ended December 31, 2006 and 2005 were $121,318 and $99,646,
      respectively. The Company is in default relating to both lease commitments.
      Commitments for minimum rentals under non cancelable leases at December 31,
      2006
      are as follows:


F-32




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      O - COMMITMENTS AND CONTINGENCIES (Continued)**





Lease
      Commitments (Continued)





2007
            
            $
            141,0062008
            
            
            141,0062009
            
            
            130,7882010
            
            
            127,0292011
            
            
            77,015Total
            
            $
            616,842




Employment
      and Consulting Agreements





The
      Company has employment agreements with certain of its key employees, and
      consulting agreements with outside contractors to provide marketing and
      financial advisory services. The Agreements are generally for a term of 12
      months from inception and renewable from year to year unless either the Company,
      employees or consultants terminates such engagement by written
      notice.





Commitments





On
      March
      31, 2005, in connection with the Acquisition Agreement, ADBSI obtained a
      48-month exclusive option ("Option Agreement") to acquire an exclusive license
      to Nutraceutical intellectual property and products developed or manufactured
      using the Nutraceutical intellectual property from Back Bay Scientific, Inc
      (Note B). In consideration for the option, ADBSI agreed to pay Back Bay $60,000
      in four equal payments of $15,000. The first payment was made upon the
      effectiveness of the Option Agreement on March 31, 2005, and the remaining
      three
      payments are due on the first, second and third anniversary dates of the Option
      Agreement. The second installment was due March 31, 2006 but the Company’s
      management has decided to let the Option lapse. Pursuant to the terms Option
      Agreement, the Option becomes void when the Company fails to make the payment
      within 30 days from the payment due date.





On
      March
      31, 2005, ADBSI entered into a Consulting Agreement with Back Bay and its
      principals (Note C). In consideration for the Consulting Agreement, ADBSI agreed
      to pay Back Bay $200,000 in four equal payments of $50,000. The first payment
      was made upon the effectiveness of the Consulting Agreement on March 31, 2005,
      and the remaining three payments are due on the first, second and third
      anniversary dates of the Consulting Agreement. On March 31, 2006, the Company
      has re-negotiated the terms of the Consulting Agreement with Back Bay and its
      principals, revised consulting fees are $6,000 payable quarterly. The Company
      is
      currently in default of this revised Consulting Agreement.





On
      February 8, 2005 the Company entered into an agreement with UPS Supply Chain
      Solutions to handle warehousing and distribution services on behalf of the
      Company, for the warehousing and distribution of its products from three
      strategically located warehouses in the U.S. On February 8, 2005 the Company
      issued an irrevocable letter of credit in the amount of $150,000 in favor of
      UPS
      Supply Chain Solutions as security for these services to be rendered. In
      November of 2006, this agreement with UPS Supply Chain Solutions was terminated.





On
      July
      15, 2005 the Company entered into a license agreement with the National
      Fibromyalgia Association ("NFA") for the right to use NFA's Seal of Approval.
      Swiss Medica shall pay to NFA a licensing contribution equal to $0.25 for each
      package of 'one ounce' or 'twenty pack' 'O24 Fibromyalgia' product sold and
      for
      which Swiss Medica collects payment. The minimum monthly payment shall be
      $10,000 under the agreement (starting October 2005) with a minimum annual fee
      of
      $200,000.


F-33




**SWISS
      MEDICA, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      O - COMMITMENTS AND CONTINGENCIES (Continued)**





In
      August
      2006, our Board of Directors and stockholders owning an aggregate of 2,000,000
      shares of Class B common stock and 10,498,609 shares of Class A common stock
      outstanding as of the Record Date (or 54.8% of the outstanding stockholder
      votes) have consented to authorize the Company to effect a reverse stock split
      of the Company's common stock at a ratio to be later determined by the Board
      of
      Directors of at least 1-for-2 but no greater than 1-for-10.





Litigation





During
      the year ended December 31, 2006, Westwood One, Inc. filed a complaint against
      the Company and for unpaid advertising invoices totaling $217,382.81 of which
      the Company has subsequently paid approximately $75,000 pursuant to a settlement
      agreement. As of May18, 2007 Westwood One has caused certain accounts held
      in
      the Company’s name at various financial and other institutions to be garnished
      pursuant to a judgment received. Subsequent to the year ended December 31,
      2006
      the Company has paid an additional $19,000 towards settlement of this
      debt.





During
      the year ended December 31, 2006, Garden State Nutritionals filed a complaint
      against the Company for breach of contract and unpaid book accounts. On
      September 19, 2006 the Company made counter claim for breach of contract and
      failure to manufacture and deliver product pursuant to terms of the contract.
      Both parties have subsequently agreed to settle the matter and a joint
      stipulation to dismiss the entire action was submitted to the Court in April
      2007.





During
      the year ended December 31, 2006 American Carton Company (“ACC”) filed a
      complaint against the Company for unpaid invoices. Default judgment was entered
      against the Company on May 19, 2006 in the principal amount of $141,107.54.
      In
      March 2007 the Company subsequently entered into a settlement agreement to
      resolve the matter and the Company agreed to pay ACC approximately
      $18,000.





During
      the year ended December 31, 2006 Salem Radio Network (“Salem”) filed a complaint
      against the Company for unpaid invoices. A default judgment was entered against
      the Company and in May 2007 the Company and Salem entered into a settlement
      agreement for approximately $63,000 to resolve the matter.





The
      Company is subject to other legal proceedings and claims, which arise in the
      ordinary course of its business. Although occasional adverse decisions or
      settlements may occur, the Company believes that the final disposition of such
      matters should not have a material adverse effect on its financial position,
      results of operations or liquidity.





**NOTE
      P - MAJOR CUSTOMERS AND VENDORS**





Revenue
      from four (4) major customers, which accounted for greater than 10% of total
      sales, approximated $872,865 or 83% of sales for the year ended December 31,
      2006, and four (4) major customer with total sales of 4,073,865 or 78% of sales
      for the year ended December 31, 2005.





There
      were no purchases from major suppliers that accounted for greater than 10%
      of
      total purchases for the year ended December 31, 2006. Total purchases from
      three
      (3) major suppliers, which accounted for more than 10% of total purchases,
      approximated $1,555,000 or 56% of purchases for the year ended December 31,
      2005. Total accounts payable of $128,347, or 3% of total accounts payable was
      due to these suppliers as of December 31, 2006.





**NOTE
      Q - GOING CONCERN MATTERS**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. As shown in the accompanying financial
      statements during the years ended December 31, 2006 and 2005, the Company
      incurred losses of $9,281,924 and $6,373,766, respectively. The Company’s
      current liabilities exceeded its current assets by $7,581,624 and the
      accumulated deficit amounted to $42,044,046 as of December 31, 2006. These
      factors among others may indicate that the Company will be unable to continue
      as
      a going concern for a reasonable period of time.




F-34





The
      Company's existence is dependent upon management's ability to develop profitable
      operations and resolve its liquidity problems. Management anticipates the
      Company will attain profitable status and improve its liquidity through
      continued growth, distribution and sale of its products, and additional equity
      investment in the Company. The accompanying consolidated financial statements
      do
      not include any adjustments that might result should the Company be unable
      to
      continue as a going concern.





In
      order
      to improve the Company’s liquidity, the Company is actively pursuing additional
      debt and equity financing through discussions with investment bankers and
      private investors. There can be no assurance the Company will be successful
      in
      its effort to secure additional equity financing.





If
      operations and cash flows improve, management believes that the Company can
      continue to operate. However, no assurance can be given that management’s
      actions will result in profitable operations or the resolution of its liquidity
      problems.




**NOTE
      R - RESTATEMENT OF CONSOLIDATED FINANCAL STATEMENTS**





The
      Company concluded that a class of sales transactions that were recorded in
      the
      fourth quarter of 2005 and first quarter of 2006 did not meet the criteria
      as
      described in Staff Accounting Bulletin no. 104 - Revenue Recognition which
      superseded Staff Accounting Bulletin no. 101 - Revenue Recognition in Financial
      Statements.





Accordingly
      the accompanying consolidated financial statements as of December 31, 2005
      and
      for the year ended December 31, 2005 have been restated to reverse sales
      recorded in error. The effects of these adjustments are:





1.
            Reversal
                of recorded sales resulting in a decrease in accounts receivable
                and sales
                of $1,192,944 and related inventory increase of
                $220,344.




The
      net
      effect of these adjustments is an increase in net loss from $5,401,166 to
      $6,373,766 or $972,600 increase for the year ended December 31, 2005 with no
      net
      effect on cash flows. The loss per common share increased from $.06 to $0.07
      or
      $0.01 per share.




F-35





The
      following tables summarizes the effects of these adjustments on the Company’s
      consolidated balance sheet as of December 31, 2005; consolidated statement
      of
      losses and statement of cash flow for the year ended December 31,
      2005:





Consolidated
      Balance Sheet


December
      31, 2005




As
                PreviouslyReported
            
            Adjustment
            
            Reference
            
            As
                RestatedAssets:Current
                assets:Cash
                and cash equivalents
            
            $
            45,700
            
            $
            -
            
            
            
            
            $
            45,700Restricted
                cash
            
            
            150,000
            
            
            -
            
            
            
            
            
            150,000Accounts
                receivable
            
            
            2,932,893
            
            
            (1,192,944
            )
            
            (a
            )
            
            1,739,949Inventories
            
            
            2,502,942
            
            
            220,344
            
            
            (a
            )
            
            2,723,286Prepaid
                expenses
            
            
            144,816
            
            
            -
            
            
            
            
            
            144,816Total
                current assets:
            
            
            5,776,351
            
            
            (972,600
            )
            
            (a
            )
            
            4,803,751Property
                and equipment
            
            
            329,837
            
            
            -
            
            
            
            
            
            329,837Less
                accumulated depreciation
            
            
            (59,030
            )
            
            -
            
            
            
            
            
            (59,030
            )Net
            
            
            270,807
            
            
            -
            
            
            
            
            
            270,807Other
                assets:Intangible
                assets
            
            
            307,442
            
            
            -
            
            
            
            
            
            307,442Prepaid
                and other
            
            
            204,480
            
            
            -
            
            
            
            
            
            204,480Goodwill
            
            
            500,000
            
            
            -
            
            
            
            
            
            500,000Total
                other assets
            
            
            1,011,922
            
            
            -
            
            
            
            
            
            1,011,922Total
                assets
            
            $
            7,059,080
            
            $
            (972,600
            )
            
            (a
            )
            $
            6,086,480Liabilities
                and (deficiency) inStockholders'
                Equity:Current
                liabilities:Accounts
                payable and accrued liabilities
            
            $
            2,653,953
            
            $
            -
            
            
            
            
            $
            2,653,953Notes
                payable, current portion
            
            
            2,186,800
            
            
            -
            
            
            
            
            
            2,186,800Total
                current liabilities
            
            
            4,840,753
            
            
            -
            
            
            
            
            
            4,840,753Accrued
                liabilities, long term
            
            
            14,463
            
            
            -
            
            
            
            
            
            14,463(Deficiency
                in ) Stockholders' Equity:Preferred
                stock
            
            
            -
            
            
            -
            
            
            
            
            
            -Class
                A common stock
            
            
            98,063
            
            
            -
            
            
            
            
            
            98,063Class
                B common stock
            
            
            2,000
            
            
            -
            
            
            
            
            
            2,000Additional
                paid in capital
            
            
            33,893,323
            
            
            -
            
            
            
            
            
            33,893,323Accumulated
                deficit
            
            
            (31,789,522
            )
            
            (972,600
            )
            
            (a
            )
            
            (32,762,122
            )Total
                (deficiency in) stockholders' equity
            
            
            2,203,864
            
            
            (972,600
            )
            
            (a
            )
            
            1,231,264Total
                liabilities and (deficiency in) stockholders' equity
            
            $
            7,059,080
            
            $
            (972,600
            )
            
            (a
            )
            $
            6,086,480





F-36





Consolidated
      Statement of Losses


Year
      ended December 31, 2005


As
                  PreviouslyReported
              
              Adjustment
              
              Reference
              
              As
                  RestatedRevenues,
                  net
              
              $
              6,426,900
              
              $
              (1,192,944
              )
              
              (a
              )
              $
              5,233,956Cost
                  of sales
              
              
              1,322,334
              
              
              (220,344
              )
              
              (a
              )
              
              1,101,990Gross
                  profit
              
              
              5,104,566
              
              
              (972,600
              )
              
              (a
              )
              
              4,131,966Operating
                  expenses:Selling,
                  general and administrative
              
              
              10,043,125
              
              
              -
              
              
              
              
              
              10,043,125Depreciation
                  and amortization
              
              
              193,449
              
              
              -
              
              
              
              
              
              193,449Total
                  operating expenses
              
              
              10,236,574
              
              
              -
              
              
              
              
              
              10,236,574Loss
                  from operations
              
              
              (5,132,008
              )
              
              (972,600
              )
              
              (a
              )
              
              (6,104,608
              )Interest
                  expense, net
              
              
              (269,158
              )
              
              -
              
              
              
              
              
              (269,158
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              
              
              
              -Net
                  loss
              
              $
              (5,401,166
              )
              $
              (972,600
              )
              
              (a
              )
              $
              (6,373,766
              )Loss
                  per common share (basic and assuming dilution)
              
              $
              (0.06
              )
              $
              (0.01
              )
              
              (a
              )
              $
              (0.07
              )




F-37




Consolidated
      Statement of Cash Flows


Year
      ended December 31, 2005


As
                  PreviouslyReported
              
              Adjustment
              
              Reference
              
              As
                  RestatedCash
                  flows from operating activities:Net
                  loss
              
              $
              (5,401,166
              )
              $
              (972,600
              )
              
              (a
              )
              $
              (6,373,766
              )Adjustments
                  to reconcile net loss to netcash
                  (used in) operating activities:Common
                  stock issued in exchange for services rendered
              
              
              746,928
              
              
              -
              
              
              
              
              
              746,928Common
                  stock issued in exchange for financing costs
              
              
              50,000
              
              
              -
              
              
              
              
              
              50,000Cancellation
                        of common stock issued in prior year in connection with acquisition
                        of
                        research and development costs
              
              
              (167,500
              )
              
              -
              
              
              
              
              
              (167,500
              )Warrant
                  amortization charged to interest expense
              
              
              5,069
              
              
              -
              
              
              
              
              
              5,069Share
                  issuances charged to interest expense
              
              
              48,045
              
              
              -
              
              
              
              
              
              48,045Depreciation
                  and amortization
              
              
              193,449
              
              
              -
              
              
              
              
              
              193,449(Increase)
                  decrease in prepaid expense
              
              
              74,933
              
              
              -
              
              
              
              
              
              74,933(Increase)
                  decrease in accounts receivable
              
              
              (2,872,481
              )
              
              1,192,944
              
              
              (a
              )
              
              (1,679,537
              )(Increase)
                  decrease in inventories
              
              
              (1,879,721
              )
              
              (220,344
              )
              
              (a
              )
              
              (2,100,065
              )(Increase)
                  decrease in deposits and other assets
              
              
              (65,623
              )
              
              -
              
              
              
              
              
              (65,623
              )Increase
                    (decrease) in accounts payable and accrued
                    liabilities
              
              
              1,960,301
              
              
              -
              
              
              
              
              
              1,960,301Net
                  cash (used in ) operating activities
              
              
              (7,307,766
              )
              
              -
              
              
              
              
              
              (7,307,766
              )Net
                  cash (used in) investing activities:Restricted
                  cash - term deposit
              
              
              (150,000
              )
              
              -
              
              
              
              
              
              (150,000
              )Net
                  cash paid for acquisition
              
              
              (96,638
              )
              
              -
              
              
              
              
              
              (96,638
              )Purchase
                  of property and equipment
              
              
              (275,455
              )
              
              -
              
              
              
              
              
              (275,455
              )Net
                  cash (used in) investing activities
              
              
              (522,093
              )
              
              -
              
              
              
              
              
              (522,093
              )Net
                  cash provided by financing activities:Proceeds
                  from notes payable, net of repayments
              
              
              1,844,800
              
              
              -
              
              
              
              
              
              1,844,800Proceeds
                      from sale of common stock and exercise of stock options, net
                      of costs and
                      fees
              
              
              4,900,200
              
              
              -
              
              
              
              
              
              4,900,200Proceeds
                  from (prepayments to) convertible debentures
              
              
              (500,000
              )
              
              -
              
              
              
              
              
              (500,000
              )Net
                  cash provided by financing activities:
              
              
              6,245,000
              
              
              -
              
              
              
              
              
              6,245,000Net
                  increase (decrease) in cash and cash equivalents
              
              
              (1,584,859
              )
              
              -
              
              
              
              
              
              (1,584,859
              )Cash
                  and cash equivalents at beginning of period
              
              
              1,630,559
              
              
              -
              
              
              
              
              
              1,630,559Cash
                  and cash equivalents at end of period
              
              $
              45,700
              
              $
              -
              
              
              
              
              $
              45,700




(a)
            The
                Company concluded that certain sales that were recorded in the year
                ended
                December 31, 2005 did not meet the criteria as described in Staff
                Accounting Bulletin no. 104 - Revenue Recognition which superseded
                Staff
                Accounting Bulletin no. 101 - Revenue Recognition in Financial Statements.
                Therefore, the Company reversed $1,192,944 of previously recorded
                sales
                and reclassified the related inventory of $220,344. The net effect
                to
                operations was $972,600.




F-38




**NOTE
      S - SUBSEQUENT EVENTS**





On
      May
      10, 2007 the Company closed a financing transaction in which it sold unsecured
      convertible notes (the "Notes") to certain investors pursuant to a Subscription
      Agreement dated May 10, 2007. The Company received aggregate gross proceeds
      of
      $600,000 on the Closing. The net proceeds, after legal and banking fees, have
      been reserved in a legal restructuring bank account for secured and unsecured
      debt restructuring settlement payments including payments to unsecured creditors
      who have signed releases to write off a significant portion of their receivables
      from the Company.





The
      Company granted the Investors the Notes in the aggregate principal amount of
      $672,000, each dated May 10, 2007 or 1.12 times the Aggregate Purchase Price.
      The Notes mature on November 10, 2007 (the "Maturity Date"). The Investors
      cannot convert the Notes into shares of the Company's $0.001 par value common
      stock (the "Common Stock"), in whole or in part, prior to November 10, 2007.





Subsequent
      to the year ending December 31, 2006 the Company issued 18,239,518 Class A
      common shares to Montgomery Equity Partners as $101,750 principal payment
      towards its convertible debenture with Montgomery. The Company also issued
      12,950,000 Class A common shares to various employees and Directors under its
      2006 Equity Incentive Plan, and 4,550,000 shares issued to various corporations
      and individuals to pay down accounts payable debt.





The
      Company filed Form 8-K on May 30, 2007 which included report relating to error
      in recording sales in first quarter of 2006 and error in second and third
      quarter of 2006 relating to accounting for the contractually re-pricing of
      the
      stated exercise price of the warrants to acquire the Company’s common stock
      issued to the holders of the Company’s debentures. Accordingly, the Company is
      finalizing corrections and plan to accordingly restate first three quarters
      of
      2006.


F-39