Table of Contents





UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





FORM
10-KSB





(Mark
One)





x       ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2007.





o      TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______





Commission
File Number 000-31431





US
      BIODEFENSE, INC.
              (Name
      of small business issuer in its charter)Utah
              (State
      or other jurisdiction of
              incorporation
      or organization)
            33-0052057
              (IRS
      Employer Identification No.)300
      State Street East, Suite 226
              Oldsmar,
      Florida
              (Address
      of principal executive offices)
            34677
              (Zip
      Code)





(727)
417-7807


(Issuer’s
telephone number)





Securities
registered under Section 12(b) of the Exchange
Act:  None.





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





Common
Stock, $0.001 par value


(Title of
Class)





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





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and disclosure 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





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





State
issuer’s revenues for its most recent fiscal
year:  $25,000





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. As of March 13,
2008:  $975,945 based on a total of 813,284 shares of our common stock
held by non-affiliates on March 13, 2008 at a closing price of $1.20 per
share.





State the
number of shares outstanding of each of the registrant’s classes of common stock
as of March 13, 2008:  11,214,075





Documents
incorporated by reference:  None.





Traditional
Small Business Disclosure Format (Check One): Yes o  No x




Table of Contents




US
BIODEFENSE, INC.


FORM
10-KSB


For
the fiscal year ended November 30, 2007





TABLE OF CONTENTS




ITEM
            
            PAGEPart
      IItem
      1. Description of Business
            
            2Item
      2. Description of Property
            
            3Item
      3. Legal Proceedings
            
            3Item
      4. Submission of Matters to a Vote of
      Security Holders
            
            3Part
      IIItem
      5. Market for Common Equity and Related
      Stockholder Matters and Small Business Issuer Purchases of Equity
      Securities
            
            4Item
      6. Management’s Discussion and Analysis or Plan of
      Operation
            
            4Item
      7. Financial
Statements
            
            6Item
      8. Changes in and Disagreements With
      Accountants on Accounting and Financial Disclosure
            
            7Item
      8A(T). Controls and
      Procedures
            
            7Item
      8B. Other Information
            
            7Part
      IIIItem
      9. Directors, Executive Officers, Promoters,
      Control Persons and Corporate Governance; Compliance with Section 16(a) of
      the Exchange Act
            
            7Item
      10. Executive Compensation
            
            7Item
      11. Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters
            
            7Item
      12. Certain Relationships and Related
      Transactions, and Director Independence
            
            8Item
      13. Exhibits
            
            8Item
      14. Principal Accounting Fees and
      Services
            
            8







1


Table of Contents





PART
I





Forward
Looking Statements





This
annual report on Form 10-KSB contains forward-looking statements that involve
risks and uncertainties. You should not place undue reliance on these
forward-looking statements. Our actual results could differ materially from
those anticipated in the forward-looking statements for many reasons, including
the risks described in this report and other filings we make from time to time
with the U.S. Securities and Exchange Commission. Although we believe the
expectations reflected in the forward-looking statements are reasonable, they
relate only to events as of the date on which the statements are made. We do not
intend to update any of the forward-looking statements after the date of this
report to conform these statements to actual results or to changes in our
expectations, except as required by law.





Item
1. Description of Business





Business
History





We
incorporated in Utah on June 29, 1983 under the name Teal Eye, Inc. In 1984, we
merged with Terzon Corporation and changed our name to Terzon Corporation. On
September 7, 1984, we changed our name to Candy Stripers Candy Corporation and
engaged in the business of manufacturing and selling candy and gift items to
hospital gift shops across the country. In 1986, we ceased the candy
manufacturing operations and filed for Chapter 11 Bankruptcy protection. After
emerging from bankruptcy in 1993, we remained dormant until January 1998, when
we changed our name to Piedmont, Inc. On May 12, 2003, we changed our name from
Piedmont, Inc. to US Biodefense, Inc.





On August
7, 2006, we completed the acquisition of Emergency Disaster Systems, Inc., a
California corporation incorporated on July 19, 2006. Emergency Disaster Systems
is engaged in the business of disaster mitigation and emergency preparedness. We
purchased a 100% interest in Emergency Disaster Systems for an aggregate of
$25,000 in cash. The Emergency Disaster Systems, Inc. system  was
designed in 1989 to provide earthquake preparedness supplies to communities in
California. On September 24, 2007, we distributed all of the shares of Emergency
Disaster Systems, Inc. stock to our stockholders on a pro rata basis and thus
exited that business.





Effective
January 10, 2008, we experienced a change in control as the result of a series
of transactions. Effective on that date, we executed an employment agreement
with Scott Gallagher pursuant to which he became our Chairman of the board of
directors and Chief Executive Officer. Simultaneously, our former Chairman,
David Chin, resigned as an officer and director of the corporation leaving Mr.
Gallagher as our sole director. Also effective of that date, Mr. Gallagher and a
Company controlled by him, 221 Fund, LLC acquired 95.6% of our common stock. As
a result of these transactions Mr. Gallagher assumed control of our Company. On
the same date, we changed our business direction and began doing business as
“Internet Holdings” to focus on acquiring direct navigation Internet domain
names that could be developed into profitable business ventures.





On
February 12, 2008, we announced our intention to acquire 100% of the shares of
Elysium Internet, Inc., a direct navigation Internet media company in exchange
for stock and a note to FTS Group, Inc. Our Chairman and Chief Executive
Officer, Scott Gallagher, is also the Chairman and Chief Executive Officer of
FTS Group, Inc. As of the date of this annual report, the transaction has not
closed.





Business
of Issuer





Principal
Products and Principal Markets





During
fiscal year 2007, we focused our efforts on evaluating the economic potential of
new biological technologies as we discovered them. However, we were not in the
business of researching and developing such technologies ourselves. We intended
to license intellectual property from researchers or organizations to evaluate
its commercial feasibility. We planned to develop relationships with
universities and private entities to utilize research facilities and manpower to
appraise the marketability of the technologies. In the event a technology was
found to have viable commercial applications, we would seek third-parties to
manufacture items for sale to government and corporate customers. We
planned to rely upon marketing, distribution and co-promotion agreements for the
dissemination of the items produced.





Our
primary source of revenues in 2007 was derived from our emergency disaster
preparedness subsidiary, Emergency Disaster Systems, Inc., which we acquired in
August 2006. Emergency Disaster Systems provides mitigation services, emergency
preparedness, and first response products to communities, government agencies,
corporations and healthcare organizations. The basic kits contain a three day
supply of food and water, in addition to first aid, lighting, hygiene and
personal care items and can be scaled for individual use or for a family.
Emergency Disaster Systems also sells a stand-alone emergency radio siren
product. We believe these items help mitigate a person’s vulnerability to
disasters such as fires, floods and earthquakes.





In
September 2007, we effectuated a spin-out of Emergency Disaster Systems through
a pro rata distribution of Emergency Disaster Systems, Inc. stock to our
stockholders. Subsequent to our fiscal year end, on January 10, 2008, we
experienced a change in control. As a result,  we changed our business
focus to acquiring and developing direct navigation Internet domain names and
began doing business as “Internet Holdings.”  On February 12, 2008 we
announced our intention to acquire Elysium Internet Inc., an Internet Media
Company operating in the direct navigation Internet Directory space. As of the
date of this report, the acquisition has not closed.





Distribution
Methods of Our Products





During
2007, we primarily used a direct sales approach to sell our products. Sales
personnel would contact existing customers to encourage recurring purchases. To
attract new customers, we primarily relied upon word-of-mouth referrals, as well
as conducting, supporting or attending community outreach events to generate
awareness of our brand and product offerings. In addition to our direct
sales efforts, we established a website at www.EDisasterSystems.com as an
e-commerce website for consumers to purchase our disaster preparedness
products.





Competitive
Business Conditions and the Issuer's Competitive Position





Our
Emergency Disaster Systems business was highly competitive.  We had a
large number of competitors, all of which were established longer and had
substantially greater financial resources and larger technical
staffs.  We also competed with specialized entities that were able to
concentrate their resources on particular areas.




Employees





As of
November 30, 2007, we had one employee. Subsequent to our change in control, at
March 13, 2008, we had one part-time employee. We anticipate hiring additional
employees as our business needs increase. We also intend to control costs by
using the services of independent consultants and contractors when possible
rather than hiring employees.





Risk Factors





We
will not be able to attain profitability without additional funding, which may
be unavailable.





We have
limited capital resources. Additionally, we distributed the assets of our last
business in September 2007. We agreed to acquire Elysium Internet, Inc. in
February 2008, but the acquisition has not yet closed. As of the date this
Annual Report is filed, we do not own assets that can generate sufficient
revenues to cover our expenses. To date, we have funded our operations from the
sale of equity securities and limited cash from our prior operations. Unless we
begin to generate sufficient recurring revenues to finance our current
operations, we will experience liquidity and solvency problems. Such liquidity
and solvency problems may force us to go out of business if additional financing
is not available. No alternative sources of funds are available to us in the
event we are unable to identify adequate capital.





Our
independent registered public accountants have qualified their report to express
substantial doubt about our company’s ability to continue as a going
concern.





As of
November 30, 2007, we have an accumulated deficit in the amount of $4,883,975.
Taking this fact into account, our independent registered public accountants
have expressed substantial doubt about our ability to continue as a going
concern in their report to the financial statements included in this annual
report. If our business fails, you may face a complete loss of your
investment.




We
intend to undertake a rescission offer related to our spin-out of Emergency
Disaster Systems, Inc. We could be subject to certain contingent liabilities as
a result of the rescission offer which would be adverse to our business and
operations.




We intend
to undertake a rescission offer to recipients of the shares of Emergency
Disaster Systems, Inc. common stock that we distributed in September 24, 2007.
We are issuing this rescission offer because we believe the distribution may
have been in violation of certain registration requirements under the Securities
Act of 1933, as amended.





If all
the eligible purchasers elect to accept the rescission offer, we believe we will
be required to pay an estimated $18,985 representing the estimated value of the
shares of Emergency Disaster Systems, Inc. at the time of the distribution, plus
additional legal and accounting costs. Because our prior management participated
in the spin-off and have indicated they are not interested in rescission, we
believe that holders of a majority of the shares of Emergency Disaster Systems,
Inc. will waive their rescission rights, and the amount we may be required to
pay will be lower than the total estimated value of Emergency Disaster Systems,
Inc. shares. However, we have not yet received such waivers.





There is
considerable legal uncertainty under both federal and state securities laws
concerning the efficacy of rescission offers and general waivers and releases
with respect to barring claims that would be based on securities law violations.
The rescission offer may not terminate any or all potential contingent liability
that we may have in connection with that distribution. In addition, we may not
be able to enforce the waivers we may receive in connection with the rescission
offer to bar any claims based on allegations of federal or state securities law
violations that the rescission offerees who accept our offer may have, until the
applicable statutes of limitations have run.





While we
believe that this rescission offer will satisfy certain requirements and laws,
the conditions and criteria for satisfying federal and most state rescission
requirements are predicated primarily on factual circumstances rather than on
objective standards. Given the size of our company and our working capital
deficit, we may not have sufficient funds to satisfy any additional rescission
rights and costs in which case our future results of operations could be
adversely affected and we could be forced to cease operations.





The
Rescission Offer could strain our current finances and could delay our
implementation of our business plan.





We
estimate that the rescission offer of our September 2007 distribution of shares
of Emergency Disaster Systems could cost us $18,985 plus additional legal and
accounting expenses. We currently do not have sufficient cash to pay for such
rescission offer. We believe we will not need the total amount of such funds
because we believe the holders of a majority of the shares distributed will not
participate in such rescission. However, if we do have to pay the total amount,
we will have to borrow funds to cover those expenses. We may not have access to
such funds which could cause further liability under federal and state law.
Additionally, if we borrow such funds, it will increase our debt which could
inhibit us from implementing our business plan.






2


Table of Contents




We
have a new and unproven business model and we may not be able to implement the
business plan.





Our
proposed business model is unproven and may not be successful. In February 2008,
we agreed to acquire Elysium Internet, Inc., a direct navigation internet media
company. The success of our proposed business model will depend upon acceptance
of our products and services by the market. However, there can be no certainty
regarding how well our new business will be accepted by the market. Moreover, if
the new business model is not favorably received by the market, we may not be
able to recoup any investment in our new business, and our business may
fail.




Our
management is involved with other business activities, which could reduce the
time they allocate to our operations.





Our
operations depend substantially on the skills and experience of Mr. Scott
Gallagher, our Chief Executive Officer. Mr. Gallagher is currently involved in
other business activities and may, in the future, become involved in other
business opportunities. If a specific business opportunity becomes
available, Mr. Gallagher may face a conflict in selecting between US Biodefense
and his other business interests. We have not yet formulated a policy for the
resolution of such conflicts.





Our
stock is a speculative investment that may result in losses to
investors.





The
trading price of our common stock is subject to wide fluctuations in response to
various events or factors, many of which are beyond our control. In addition,
the stock market may experience extreme price and volume fluctuations, which,
without a direct relationship to the operating performance, may affect the
market price of our stock.





Our current management may control the
right to vote our common stock and they may be able to control our company
indefinitely.





As of March 13, 2008, our Chief
Executive Officer owns or controls the right to vote over 89.17% of our
outstanding common stock. As a result, our Chief Executive Officer may be able
to effectively control our management and affairs and all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions, for an indefinite period of time. This
concentration of ownership might adversely affect the market value of our common
stock in the future and the voting and other rights of our other
stockholders.





“Penny
Stock” rules may make buying or selling our securities difficult which may make
our stock less liquid and make it harder for investors to buy and sell our
shares.





Trading
in our securities is subject to the SEC's "penny stock" rules and it is
anticipated that trading in our securities will continue to be subject to the
penny stock rules for the foreseeable future. The SEC has adopted regulations
that generally define a penny stock to be any equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. These rules
require that any broker-dealer who recommends our securities to persons other
than prior customers and accredited investors must, prior to the sale, make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to execute the transaction. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated with trading in the penny stock market. In
addition, broker-dealers must disclose commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities they offer. The additional burdens imposed upon broker-dealers by
these requirements may discourage broker-dealers from recommending transactions
in our securities, which could severely limit the liquidity of our securities
and consequently adversely affect the market price for our
securities.





Our
securities have been thinly traded on the Over-the-Counter Bulletin Board, which
may not provide liquidity for our investors.





Our
securities are quoted on the Over-the-Counter Bulletin Board. The
Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that
provides significantly less liquidity than the NASDAQ Stock Market or national
or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board
are usually thinly traded, highly volatile, have fewer market makers and are not
followed by analysts. The Securities and Exchange Commission's order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the
Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices
for securities traded solely on the Over-the-Counter Bulletin Board may be
difficult to obtain and holders of our securities may be unable to resell their
securities at or near their original acquisition price, or at any
price.





Investors
must contact a broker-dealer to trade Over-the-Counter Bulletin Board
securities. As a result, you may not be able to buy or sell our securities
at the times that you may wish.





Even
though our securities are quoted on the Over-the-Counter Bulletin Board, the
Over-the-Counter Bulletin Board may not permit our investors to sell securities
when and in the manner that they wish. Because there are no automated systems
for negotiating trades on the Over-the-Counter Bulletin Board, they are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place market orders, an order
to buy or sell a specific number of shares at the current market price, it is
possible for the price of a stock to go up or down significantly during the
lapse of time between placing a market order and its execution.





We
do not intend to pay dividends in the foreseeable future. Therefore, you
may never see a return on your investment.





We do not
anticipate the payment of cash dividends on our common stock in the foreseeable
future. We anticipate that any profits from our operations will be devoted to
our future operations. Any decision to pay dividends will depend upon our
profitability at the time, cash available and other factors. Therefore, you may
never see a return on your investment. Investors who anticipate a need for
immediate income from their investment should not purchase the
securities.




Item
2. Description of Property





Description of Property





Until
January 10, 2008, we leased an approximately 6,012 square foot office and
warehouse space located at 375 South 6th Avenue,
City of Industry, CA 91746 at a rate of $6,290 per month. On January 10, 2008,
we moved our principal offices to 300 State Street East, Suite 226, Oldsmar,
Florida 34677. We rent space on a month to month basis from FTS Group, Inc. at a
rate of $1,000 per month. We do not have a formal lease agreement in place at
this time. We believe that this arrangement is suitable given the nature of our
current operations.





Item
3. Legal Proceedings




On
November 6, 2006, Sandra Sawyer filed a suit in Los Angeles Superior Court
against US Biodefense, Inc. and David Chin, one of our officers and directors at
the time the lawsuit was filed, alleging a breach of contract by Mr. Chin in
relation to the purchase of our Company by Mr. Chin from Ms. Sawyer. On April
20, 2007, Mr. Chin filed a cross-complaint against the plaintiff alleging breach
of contract. On November 21, 2007, we reached a settlement with Ms. Sawyer,
whereby we agreed to pay to Ms. Sawyer an aggregate sum of $90,000 over 15
months. In the event of default, we will be required to pay Ms. Sawyer a sum of
$225,000 less any payments made under this agreement. We were in compliance with
this settlement agreement through February 29, 2008.
 There are
no other material litigations, claims or assessments pending or threatened
against the Company or its officers or directors in their capacity as
such.


Item 4. Submission of Matters to a Vote of Security
Holders





On
September 24, 2007, a stockholder holding 61.8% of our issued and outstanding
common stock voted to approve the distribution to our stockholders as of
September 7, 2007, all shares of Emergency Disaster Systems, Inc. then held by
us. On September 24, 2007, we distributed to our stockholders on a pro rata
basis, 100% of the outstanding shares of Emergency Disaster Systems, Inc. As a
result, we no longer hold any shares of Emergency Disaster Systems,
Inc.





On
December 3, 2007, a stockholder holding 61.8% of our issued and outstanding
common stock voted to authorize a one for one thousand reverse split of our
outstanding common stock. On December 3, 2007, we effectuated a reverse
split of our outstanding shares of common stock. Immediately after the
reverse split, we had 63,284 shares of common stock outstanding.




3


Table of Contents




PART
II





Item
5. Market for Registrant’s Common Equity and Related
Stockholder Matters and Small Business Issuer Purchases of Equity
Securities





Market
Information





Our
common stock is currently traded on the Over-the-Counter Bulletin Board under
the stock ticker symbol “USBF.”  The following table sets forth the
monthly high and low prices for our common stock on the OTCBB for each quarter
of the last two fiscal years.





Quarter
      Ended
            High
            LowNovember
      30, 2007
            $0.005
            $0.005August
      31, 2007
            $0.014
            $0.009May
      31, 2007
            $0.016
            $0.012February
      28, 2007
            $0.025
            $0.020November
      30, 2006
            $0.15
            $0.04August
      31, 2006
            $1.60
            $0.04May
      31, 2006
            $4.28
            $1.50February
      28, 2006
            $4.40
            $1.85





On
December 3, 2007, we effectuated a reverse split of our outstanding common stock
on a 1 for 1,000 basis. Prior to the reverse split, our common stock traded on
the OTCBB under the ticker symbol “UBDE.” After the reverse split was completed
our ticker symbol was changed to “USBF.”





Holders





As of
March 11, 2008, we had approximately 11,214,075 shares of common stock, par
value $0.001, issued and outstanding held by approximately 637 stockholders of
record.





Dividends





We have
never declared or paid any cash dividends on our common stock. For the
foreseeable future, we intend to retain any earnings to finance the development
and expansion of our business, and we do not anticipate paying any cash
dividends on our common stock. Any future determination to pay dividends will be
at the discretion of our Board of Directors and will be dependent upon then
existing conditions, including our financial condition and results of
operations, capital requirements, contractual restrictions, business prospects,
and other factors that the board of directors considers relevant.





Recent
Sales of Unregistered Securities





On August
7, 2006, we entered into a Stock Purchase Agreement with Equity Solutions, Inc.,
a California
corporation, whereby we sold an aggregate of 2,000,000 shares of restricted
common stock to Equity Solutions at a price per share of $0.10, for total cash
proceeds of $200,000.





On
January 10, 2008, we issued 5,000,000 shares of common stock to Scott Gallagher.
The shares were valued at $150,000.





On
January 10, 2008, we issued 5,000,000 shares of common stock to 221 Fund, LLC.
The shares were valued at $150,000.





For these
issuances, we relied on the exemption from the registration requirements of the
Securities Act provided by Rule 506 of Regulation D.  The persons who
received such unregistered shares were either accredited investors (as that term
is defined in Rule 501(a) of Regulation D), or alone or through a purchaser
representative had such knowledge and experience in financial and business
matters as to be capable of evaluating the risks of the investment, and received
information regarding our Company and the acquisition
transaction.  All stock certificates bear a restrictive legend stating
that the shares have not been registered under the Securities Act and cannot be
sold or otherwise transferred without an effective registration or an exemption
there from.




Securities Authorized for
Issuance Under Equity Compensation Plans




This information is incorporated by reference
to Item 12 of this annual report.





Item
6. Management’s Discussion and Analysis or Plan of
Operation





Introduction





The
following discussion and analysis of financial condition and results of
operations is based upon, and should be read in conjunction with our audited
consolidated financial statements and related notes thereto included elsewhere
in this report that have been prepared in accordance with accounting principles
generally accepted in the United States.





Overview





We
incorporated in the State of Utah on June 29, 1983 under the name Teal Eye,
Inc.  In 1984, we merged with Terzon Corporation and changed our name
to Terzon Corporation. On September 7, 1984, we changed our name to Candy
Stripers Candy Corporation and engaged in the business of manufacturing and
selling candy and gift items to hospital gift shops across the country. In
1986, we ceased the candy manufacturing operations and filed for Chapter 11
Bankruptcy protection. After emerging from Bankruptcy in 1993, we remained
dormant until January 1998, when we changed our name to Piedmont, Inc. On
May 12, 2003, we changed our name from Piedmont, Inc. to US Biodefense,
Inc.





On August
7, 2006, we completed the acquisition of Emergency Disaster Systems, Inc., a
California corporation incorporated on July 19, 2006. Emergency Disaster
Systems is engaged in the business of disaster mitigation and emergency
preparedness. We purchased a 100% interest in Emergency Disaster Systems
for an aggregate of $25,000 in cash. The Emergency Disaster Systems, Inc.
system  was designed in 1989 to provide earthquake preparedness
supplies to communities in California. On September 24, 2007, we distributed all
of the shares of Emergency Disaster Systems, Inc. stock to our stockholders on a
pro rata basis and thus exited that business.





Effective
January 10, 2008, we experienced a change in control as the result of a series
of transactions. Effective on that date, we executed an employment agreement
with Scott Gallagher pursuant to which he became our Chairman of the board of
directors and Chief Executive Officer. Simultaneously, our former Chairman,
David Chin, resigned as an officer and director of the corporation leaving Mr.
Gallagher as our sole director. Also effective of that date, Mr. Gallagher and a
Company controlled by him, 221 Fund, LLC acquired 95.6% of our common
stock.  As a result of these transactions Mr. Gallagher assumed
control of our Company. On the same date, we changed our business direction and
began doing business as “Internet Holdings” to focus on acquiring direct
navigation Internet domain names that could be developed into profitable
business ventures.





On
February 12, 2008, we announced our intention to acquire 100% of the shares of
Elysium Internet, Inc., a direct navigation Internet media company in exchange
for stock and a note to FTS Group, Inc. Our Chairman and Chief Executive
Officer, Scott Gallagher, is also the Chairman and Chief Executive Officer of
FTS Group, Inc. As of the date of this annual report, the transaction has not
closed.





Critical
Accounting Policies





We have identified the policies below as
critical to our business operations and the understanding of our results of
operations. The impact and any associated risks related to these policies
on our business operations are discussed throughout this section. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.





The
Company recognizes revenue from the sale of products, and from the performance
of services to both related and non-related parties. The Company recognizes
revenue from the sale of products on the gross amount charged basis. Under this
method of recording the sale of products, the cost of goods sold reflects the
cost of the goods sold to the customer plus the Company's cost of executing the
transaction. The Company has chosen this method since it takes ownership of the
products that it purchases for resale and assumes the risks and rewards of
ownership of the goods.
  For sale
of products, revenue is generally recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the contract price is fixed or
determinable, title and risk of loss has passed to the customer and collection
is reasonably assured. The Company's sales are typically not subject to rights
of return and, historically, sales returns have not been
significant.
  Revenues
from services are recognized upon provision of services to the customer.
Unearned service revenue is deferred and recognized ratably over the duration of
the service term.
  Accounts
receivable of the Company are reviewed to determine if their carrying value has
become impaired. The Company considers the assets to be impaired if the balances
are greater than six months old. Management regularly reviews accounts
receivable and will establish an allowance for potentially uncollectible amounts
when appropriate. When accounts are written off, they will be charged against
the allowance. Receivables are not collateralized and do not bear
interest.


Inventory
- Inventory was stated at the lower of cost or market. Inventory consisted
of purchased items held for resale. Inventory was monitored by our management
for excess and obsolete items, and we made the necessary valuation adjustment
when required.




Fixed
Assets - Fixed assets are stated at cost, less accumulated depreciation.
Depreciation is provided principally on the straight-line method over the
estimated useful lives of the assets, which is generally 3 to 10 years. The cost
of repairs and maintenance is charged to expense as incurred. Expenditures
for property betterments and renewals are capitalized. Upon sale or other
disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income
(expense).




We
periodically evaluate whether events and circumstances have occurred that may
warrant revision of the estimated useful lives of fixed assets or whether the
remaining balance of fixed assets should be evaluated for possible impairment.
We use an estimate of the related undiscounted cash flows over the remaining
life of the fixed assets in measuring their recoverability.




Comprehensive
Income - Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. For the
years ended November 30, 2007 and 2006, we had items that represent other
comprehensive income, and accordingly, have included a schedule of comprehensive
income in the financial statements.





Income
taxes - We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, which requires recognition of deferred tax assets
and liabilities for future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and tax credit carry-forwards. We
measure deferred tax assets and liabilities using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.





Stock-based
compensation - On January 1, 2006, we adopted SFAS No. 123 (R) "Share-Based
Payment" which requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors including
employee stock options and employee stock purchases related
to an Employee Stock Purchase Plan based on the estimated fair
values. Prior to January 1, 2006, we measured compensation cost for
stock-based employee compensation plans using the intrinsic value method of
accounting as prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. For
non-employee stock-based compensations, we recognize expense in accordance with
SFAS 123(R) and value the equity securities based on the fair value of the
security on the date of grant.




4


Table of Contents





Results
of Operations





REVENUE





Revenue
for the period ending November 30, 2007 was $25,000 for services compared to
revenue of $96,667 for the same the period ending November 30, 2006. Revenue
from services is derived from the recognition of deferred revenues from stock
received relating to our arrangement to identify technology commercialization
opportunities for Diamond I to research universities, government laboratories
and third member private parties. The decrease in revenue was related to a
decrease in stock received for services performed during the period. The
decrease is also related to a decrease in related party revenue from
Financialnewsusa.com, a related party, to which we provided biodefense-related
industry news and information to Financialnewsusa.com.





EXPENSES


Total
expenses for the year ended November 30, 2007 were $743,633 compared to expenses
of $364,577 for the period ending November 30, 2006. The increase of $379,056 is
primarily related to increased costs stemming from stock issued for consulting
services as well as $190,000 in settlement reserve expenses relating to a
lawsuit in which the Company was named and the possibility of the Company
effecting a rescission offer during the next 12 months. Expenses relating to
stock issuances to consultants increased to $467,190 from $270,200 for the same
period of 2006 resulting in an increase of $196,990.


General
and administrative expenses increased to $86,443 for the period ending November
30, 2007 compared to general and administrative expenses of $36,206 for the same
period of 2006. The increase in general and administrative expenses is related
to increased costs surrounding our spin-off of Emergency Distribution
Systems.





We expect
to continue to incur expenditures in the foreseeable future related to the
development and future expansion of our business operations. Over the next
12-month period we expect overall operating expenses to increase as we pursue
business opportunities in the Internet domain and related Internet media
space.





LOSSES




Our loss
from continuing operations for the period ending November 30, 2007 was $718,633
compared to a loss from continuing operations of $248,955 for the same period of
2006. We experienced a loss of $110,237 from discontinued operations compared to
income from discontinued operations of $35,206 for the same period of 2006. Our
net loss for the period ending November 30, 2007 was $828,870 compared to a net
loss of $213,749 for the same period of 2006. The $615,121 year over year
increase in our net loss was related to increased stock issuance costs and
increased general and administrative costs primarily related to the spin-off of
Emergency Disaster Systems as well as $190,000 in settlement reserve expenses
relating to a lawsuit in which we were named and the possibility that we intend
to effect a rescission offer during the next 12 months. For at least the next 12
months, we expect net losses to continue until such time we develop or acquire a
business that can sustain itself based on operations. We believe that as we
develop or acquire Internet domain and media related assets and businesses we
can meet our goal of turning profitable in the next 12 to 24 months. However,
due to funding needs, market uncertainties and a variety of other factors that
are out of our control we cannot guarantee the accuracy of our expectations and
when or if we will ever become a profitable business.


LIQUIDITY
AND CAPITAL RESOURCES





As of
November 30, 2007 we had total assets of $49,451 consisting of $359 in cash,
$47,500 in marketable securities and $1,592 of property and equipment. As of
November 30, 2007 we had total liabilities of $245,146 consisting of $47,946 of
accounts payable, $7,200 due to related parties and $190,000 as a settlement
reserve.





We have
limited cash on hand and will require additional capital to support strategic
acquisitions and to fund our current expansion plans. We may be unable to
continue operations for the next 12 months if we are unable to generate revenues
or obtain capital infusions by issuing equity or debt securities in exchange for
cash. There can be no assurance that we will be able to secure additional
funds in the future to stay in business. Our principal accountants have
expressed substantial doubt about our ability to continue as a going concern
because we have limited operations.





We expect
to close the acquisition of Elysium Internet, Inc. in the near term. The
completion of this acquisition would have a significant impact on our
operations. However, we cannot predict with certainty whether the proposed
transaction will be consummated or whether the proposed acquisition will become
profitable.





Our
management anticipates the need to hire additional full or part-time employees
over the next 12 months as we continue to increase our operations. At this
time we believe that our operations are currently on a small scale that is
manageable by our current staff. While we believe that the addition of employees
is required over the next 12 months, we have retained two independent
consultants and contractors to perform development related activities and market
Internet related products and services we are currently developing.





We do not
have any off-balance sheet arrangements.




5







Table of Contents


Item
7. Financial Statments
  The
following documents (pages F-1 to F-9) form part of the report on the Financial
Statements
 
 PAGEIndependent Auditor’s Report
              F-1Consolidated Balance Sheets
              F-2Consolidated Statements of
      Operations
              F-3Consolidated Statements of Comprehensive
      Income
              F-4Consolidated Statements of Stockholders’
      Equity (Deficit)
              F-5Consolidated Statements of Cash
    Flows
              F-6Notes to Financial Statements
              F-7
   6
 Table of Contents


Gruber & Company, LLC





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








TO
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF


US
BIODEFENSE, INC.




We have
audited the accompanying consolidated balance sheets of US Biodefense,
Inc.  as of November 30, 2007 and 2006, and the related
consolidated statements of operations, comprehensive income, stockholder’s
equity (deficit)  and cash flows for the each of the years then
ended.  These consolidated financial statements are the responsibility
of the Company’s management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform an audit of the
Company's internal control over its financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as  evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of US Biodefense,
Inc.  as of November 30, 2007 and 2006, and the results of its
consolidated operations and cash flows for each of the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
  The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern.
 As described in Note1to the financial
statements conditions exist which raise substantial doubt about the Company’s
ability to continue as a going concern unless it is able to generate sufficient
cash flows to meet its obligations and sustain its operations.  Those
conditions raise substantial doubt about its ability to continue as a going
concern.  Management’s plans regarding those matters are also described in
Note1.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 Gruber
& Company, LLC
  Lake
Saint Louis, Missouri
  March 13,
2008


F-1


Table of Contents




US BIODEFENSE, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSNOVEMBER 30, 2007 AND 2006Assets20072006Current assetsCash and cash equivalents$359$22,663Marketable securities available for sale47,50073,000Accounts receivable, net of allowance of $20,000 in 2006-54,827Inventory-75,355Total Current assets47,859225,845Property and equipment, net of accumulated depreciation of$885 and $59 at November 30, 2007 and 20061,5922,418Customer List-7,500Deposits-1,000Total Assets49,451236,763Liabilities and Stockholders' Equity (Deficit)Current liabilitiesAccounts payable and accrued expenses47,94619,278Due to related parties7,200-Deferred revenues-25,000Total current Liabilites55,14644,278Settlement reserve190,000-Total liabilities245,14644,278Stockholders' equity:Common stock 100,000,000 shares authorized, $0.001par value,  63,284,047and 39,059,047 shares issued63,28439,059and outstanding at November 30, 2007 and 2006Additional paid in capital4,677,4964,235,531Other comprehensive income (deficit)(52,500)(27,000)Accumulated deficit(4,883,975)(4,055,105)Total stockholders' equity (deficit)(195,695)192,485Total Liabilities and stockholders' equity (deficit)49,451236,763See notes to the financial statements. F-2


Table of Contents






US
      BIODEFENSE, INC. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF
    OPERATIONSFOR
      THE YEARS ENDED NOVEMBER 30, 2007 AND 20062007
            
            
            2006REVENUESRevenues
      from services
            
            $
            25,000
            
            
            $
            50,000Revenues-Related
      parties
            
            
            -
            
            
            
            46,667Total
      Revenues
            
            
            25,000
            
            
            
            96,667EXPENSESResearch
      and development expenses
            
            
            -
            
            
            
            32,171General
      and administrative expenses
            
            
            86,443
            
            
            
            36,206General
      and administrative expenses:Related
      party
            
            
            -
            
            
            
            3,500Stock
      issued for consulting services
            
            
            467,190
            
            
            
            270,200Impairment
      of assets
            
            
            -
            
            
            
            22,500Settlement
      reserve
            
            
            190,000
            
            
            
            -Total
      Expenses
            
            
            743,633
            
            
            
            364,577Loss
      from continuing operations before income tax benefit
            
            
            (718,633
            )
            
            
            (267,910
            )Income
      tax benefit
            
            
            -
            
            
            
            18,955Loss
      from continuing operations
            
            
            (718,633
            )
            
            
            (248,955
            )Discontinued
      Operations (Note 11)Income (loss) from operations of discontinued emergency
      disasterpreparedness subsidiary (including gain on disposal of
      $235,148)
            
            
            (110,237
            )
            
            
            44,565Income
      tax
            
            
            -
            
            
            
            (9,359
            )Income
      (loss) on discontinued operations
            
            
            (110,237
            )
            
            
            35,206Net
      loss
            
            
            (828,870
            )
            
            
            (213,749
            )Weighted
      average number of sharesoutstanding
            
            
            51,661,547
            
            
            
            33,867,797Basic
      and diluted net income (loss)per
      common share
            
            $
            (.02
            )
            
            $
            (0.01
            )See
      notes to the financial statements.




F-3


Table of Contents





US BIODEFENSE, INC. AND
      SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE
  INCOMEFOR THE YEARS ENDED
      NOVEMBER 30, 2007 AND 20062007
              
              
              2006Net loss
              
              
              $
              (828,870
              )
              
              $
              (213,749
              )Unrealized income (loss) on
      securities held for resale,net of (inclusive of) income tax
      of $19,150 in 2006
              
              
              (25,500
              )
              
              
              (57,850
              )Total comprehensive
      income
              
              
              $
              (854,370
              )
              
              $
              (271,599
              )See
      notes to the financial statements.




F-4


Table of Contents





US BIODEFENSE, INC. AND
      SUBSIDIARIESCONSOLIDATED STATEMENTS OF
      STOCKHOLDERS' EQUITYFOR THE YEARS ENDED
      NOVEMBER 30, 2007 AND 2006OtherCommon
Stock
              
              
              
              
              
              Additional
              
              
              Accumulated
              
              
              ComprehensiveShares
              
              
              Amount
              
              
              Paid-In
    Capital
              
              
              Deficit
              
              
              Income
              
              
              TotalBalance, November 30,
      2005
              
              
              30,304,047
              
              
              $
              30,304
              
              
              $
              3,773,086
              
              
              $
              (3,841,356
              )
              
              $
              30,850
              
              
              $
              (7,116
              )Stock issued for
      cash
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              198,000
              
              
              
              
              
              
              
              
              
              
              
              200,000Stock issued for consulting
      services
              
              
              6,755,000
              
              
              
              6,755
              
              
              
              263,445
              
              
              
              
              
              
              
              
              
              
              
              270,200Capitalization of acquired
      company
              
              
              
              
              
              
              
              
              
              
              1,000
              
              
              
              
              
              
              
              
              
              
              
              1,000Change in unrealized gain on
      available for salesecurities,
      inclusive of tax effects of $19,150
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (57,850
              )
              
              
              (57,850
              )Net loss for the year
      endedNovember 20,
      2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (213,749
              )
              
              
              
              
              
              
              (213,749
              )Balance, November 30,
      2006
              
              
              39,059,047
              
              
              $
              39,059
              
              
              $
              4,235,531
              
              
              $
              (4,055,105
              )
              
              $
              (27,000
              )
              
              $
              192,485Stock issued for
      compensation
              
              
              10,000,000
              
              
              
              10,000
              
              
              
              90,000
              
              
              
              
              
              
              
              
              
              
              
              100,000Stock issued for consulting
      services
              
              
              14,225,000
              
              
              
              14,225
              
              
              
              352,965
              
              
              
              
              
              
              
              
              
              
              
              367,190Remove capitalization
      of  spun-off company
              
              
              
              
              
              
              
              
              
              
              (1,000
              )
              
              
              
              
              
              
              
              
              
              
              (1,000
              )Change in unrealized gain on
      available for salesecurities,
      inclusive of tax effects of $0
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (25,500
              )
              
              
              (25,500
              )Net loss for the year
      endedNovember 30,
      2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (828,870
              )
              
              
              
              
              
              
              (828,870
              )63,284,047
              
              
              $
              63,284
              
              
              $
              4,677,496
              
              
              $
              (4,883,975
              )
              
              $
              (52,500
              )
              
              $
              (195,695
              )See
      notes to the financial statements.






F-5


Table of Contents







US BIODEFENSE, INC. AND
      SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED
      NOVEMBER 30, 2007 AND 20062007
            
            
            2006Cash flows from operating
      activities:Net income (loss)
            $
            (828,870
            )
            $
            (213,749
            )Adjustments to reconcile net income (loss) to net cashfrom
      operating activities:Gain on
      spin-off subsidiary
            
            (235,148
            )
            
            -Depreciation
            
            826
            
            
            59Impairment of
      assets
            
            25,500
            
            
            22,500Consulting
      services received by receipt of stock
            
            -
            
            
            (50,000
            )Stock
      issued for consulting services
            
            367,190
            
            
            270,200Stock
      issued for compensation
            
            100,000Provision for
      bad debts
            
            -
            
            
            20,000Forgiveness of
      debt
            
            -
            
            
            (79,167
            )Changes
      in operating assets and liabilities:Accounts receivable
            
            54,827
            
            
            (74,827
            )Inventory
            
            75,355
            
            
            (75,355
            )Prepaid expenses
            
            -
            
            
            20,000Band overdraft
            
            -
            
            
            (3,947
            )Accounts payable and accrued expenses
            
            (67,224
            )
            
            9,682Deferred revenues
            
            (25,000
            )
            
            (26,667
            )Settlement reserve
            
            190,000
            
            
            -Total cash flows from operating
      activities
            
            
            (342,544
            )
            
            
            (181,271
            )Cash flows from financing
      activities:Advances from (repayments to) related parties, net
            
            
            311,740
            
            
            
            (1,812
            )Proceeds from sale of common stock
            
            
            -
            
            
            
            201,000Total cash flows from financing
      activities
            
            
            311,740
            
            
            
            199,188Cash flows from investing
      activites:Decrease in
      Deposit
            
            
            1,000
            
            
            
            -Purchase
      (disposal) of customer list
            
            
            7,500
            
            
            
            (7,500
            )Purchase of
      license
            
            
            -
            
            
            
            (2,500
            )Purchase of
      equipment
            
            
            -
            
            
            
            (2,477
            )Total cash flows from investing
      activities
            
            
            8,500
            
            
            
            (12,477
            )Increase (decrease in) cash and
      cash equivalents
            
            
            (22,304
            )
            
            
            5,440Cash and cash equivalents,
      beginning of year
            
            
            22,663
            
            
            
            17,223Cash and cash equivalents, end of
      year
            
            $
            359
            
            
            $
            22,663Income taxes
      paid
            
            $
            -
            
            
            $
            -Interest expense
      paid
            
            $
            -
            
            
            $
            -See
      notes to the financial statements.






F-6


Table of Contents




US
Biodefense, Inc.


Notes to Financial Statements




Note 1 - Background and Summary of
Significant Accounting Policies




Background




US
Biodefense, Inc. (the "Company"), a Utah corporation was headquartered in the
City of Industry, California at November 30, 2007.
Effective January 10, 2008, corporate headquarters has relocated
to Oldsmar, Florida. The Company is a registered government contractor with
the Department of Defense Logistics Agency. At November 30, 2007, the Company
was focused on designing and developing homeland security and biodefense
products.




The
Company originally incorporated under the name Teal Eye, Inc. in Utah on June
29, 1983. The Company then merged with Terzon Corp. and amended its Articles of
Incorporation to change the name to Terzon Corp. On September 7, 1984, the
Company amended its Articles of Incorporation changing its name to Candy
Stripers Corporation, Inc. On January 6, 1998, the Company amended its Articles
of Incorporation changing its name to Piedmont, Inc. On May 31, 2003, the
Company amended its Articles of Incorporation and changed its name to US
Biodefense, Inc.





Effective
January 10, 2008, the Company experienced a change in control as the result of a
series of transactions. Effective on that date, the Company executed an
employment agreement with Scott Gallagher pursuant to which he became the
Chairman of the board of directors and Chief Executive Officer of the Company.
Simultaneously, the former Chairman David Chin, resigned as an officer and
director of the Company leaving Mr. Gallagher as its sole director. Also
effective as of that date, Mr. Gallagher and a Company controlled by him, 221
Fund, LLC acquired 95.6% of the Company, and as a result of these transactions
Mr. Gallagher assumed control of the Company. On the same date the Company
changed its business direction and began doing business as (DBA) “Internet
Holdings” to focus on acquiring direct navigation Internet domain names that
could be developed into profitable business ventures.




The
accompanying financial statements for the year ended November 30, 2007,
include the accounts of the Company and its wholly-owned subsidiary Emergency
Disaster Systems, Inc. All significant intercompany transactions and balances
have been eliminated.




Basis of
Presentation




The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company incurred
a net loss for the twelve months ended November 30, 2007 of $828,870 and at
November 30, 2007, had an accumulated deficit of $4,883,975. In addition, the
Company generates minimal revenue from its operations. These conditions raise
substantial doubt as to the Company's ability to continue as a going concern.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.




Management
plans to take the following steps that it believes will be sufficient to provide
the Company with the ability to continue in existence.




Management
intends to raise financing through the issuance of its common stock or other
means and interests that it deems necessary. Additionally, management
intends to acquire or develop business and business assets related to its
new Internet domain and media oriented business model.




Use of
Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.




Fair
Value of Financial Instruments




For
certain of the Company's financial instruments, including cash and cash
equivalents, prepaid expenses, accounts payable and deferred revenues, the
carrying amounts approximate fair value due to their short
maturities.




Revenue
Recognition




The
Company recognizes revenue from the sale of products, and from the performance
of services to both related and non-related parties. The Company recognizes
revenue from the sale of products on the gross amount charged basis. Under this
method of recording the sale of products, the cost of goods sold reflects the
cost of the goods sold to the customer plus the Company's cost of executing the
transaction. The Company has chosen this method since it takes ownership of the
products that it purchases for resale and assumes the risks and rewards of
ownership of the goods.




For sale
of products, revenue is generally recognized when persuasive evidence of an
arrangement exists, delivery has occurred, the contract price is fixed or
determinable, title and risk of loss has passed to the customer and collection
is reasonably assured. The Company's sales are typically not subject to rights
of return and, historically, sales returns have not been
significant.




Revenues
from services are recognized upon provision of services to the customer.
Unearned service revenue is deferred and recognized ratably over the duration of
the service term.




Accounts
receivable of the Company are reviewed to determine if their carrying value has
become impaired. The Company considers the assets to be impaired if the balances
are greater than six months old. Management regularly reviews accounts
receivable and will establish an allowance for potentially uncollectible amounts
when appropriate. When accounts are written off, they will be charged against
the allowance. Receivables are not collateralized and do not bear
interest.




Concentration
of Credit Risk




Financial
instruments which subject the Company to concentrations of credit risk include
cash and cash equivalents.




The
Company maintains its cash in well-known banks selected based upon management's
assessment of the bank's financial stability. Balances may periodically exceed
the $100,000 federal depository insurance limit; however, the Company has not
experienced any losses on deposits. The Company extends credit based on an
evaluation of the customer's financial condition, generally without collateral.
Exposure to losses on receivables is principally dependent on each customer's
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses, as required.




Cash
Equivalents




For
purposes of reporting cash flows, the Company considers all short-term
investments with an original maturity of three months or less to be cash
equivalent.




Inventory




Inventory
is stated at the lower of cost or market. Inventory consisted of purchased items
held for resale. Inventory was monitored by Company management for excess and
obsolete items, and valuation adjustments were made when required. As a result
of the Emergency Disaster Systems, Inc. spin-off, the Company has no
inventory remaining at November 30, 2007.




Fixed
Assets




Fixed
assets are stated at cost, less accumulated depreciation. Depreciation is
provided principally on the straight-line method over the estimated useful lives
of the assets, which are generally 3 to 10 years. The cost of repairs and
maintenance is charged to expense as incurred. Expenditures for property
betterments and renewals are capitalized. Upon sale or other disposition of a
depreciable asset, cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in results of
operations.




The
Company will periodically evaluate whether events and circumstances have
occurred that may warrant revision of the estimated useful lives of fixed assets
or whether the remaining balance of fixed assets should be evaluated for
possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the fixed assets in measuring
their recoverability.




Comprehensive
Income




Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. For the years ended
November 30, 2007 and 2006, the Company has items that represent other
comprehensive income, and accordingly, has included a schedule of comprehensive
income in the financial statements.




Advertising
Costs




Advertising
costs are expensed as incurred.  Advertising costs totaled $0 and $399
for the years ended November 30, 2007 and 2006.




Shipping and
Handling




Costs
incurred by the Company for shipping and handling are included in costs of
revenues.




Income
Taxes




The
Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes."
Under the asset and liability method of  SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.




F-7


Table of Contents




Loss per
Share




In
accordance with SFAS No. 128, "Earnings Per Share," the basic income / (loss)
per common share is computed by dividing net income / (loss) available to common
stockholders by the weighted average number of common shares
outstanding.  Diluted income per common share is computed similar to
basic income per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive.  As of November 30, 2007 and 2006, the Company does not have
any equity or debt instruments outstanding that can be converted into common
stock.




Stock-Based
Compensation




EffectiveJanuary 1, 2006, the
Company prospectively adopted SFAS 123 R, "Share-Based Payments," and related
Securities and Exchange Commission rules included in  Staff Accounting
Bulletin No. 107. Under this method, compensation cost recognized beginning
January 1, 2006 includes costs related to all share-based payments granted
subsequent to December 31, 2005 based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123 R. Compensation cost for stock
options granted to employees is recognized ratably over the vesting
period.




Prior to
January 1, 2006, the Company measured compensation cost for stock-based employee
compensation plans using the intrinsic value method of accounting as prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. For non-employee stock based
compensations, the Company recognizes expense in accordance with SFAS 123R and
values the equity securities based on the fair value of the security on the date
of grant.




Recent Accounting
Pronouncements




In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123R"). SFAS 123R provides investors and other users of
financial statements with more complete and neutral financial information by
requiring that the compensation costs relating to share-based payment
transactions be recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instruments issued. SFAS 123R
covers a wide range of share-based compensation arrangements including share
option, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans. SFAS 123R replaces SFAS No. 123,
"Accounting for Stock-Based Compensation," and supercedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees." SFAS 123, as originally issued in
1995, established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that statement
permitted entities the option of continuing to apply the guidance in Opinion 25,
as long as the footnotes to financial statements disclosed what net income would
have been had the preferable fair-value based method.




In March, 2005, the SEC issued guidance
on FASB SFAS 123R, "Share-Based Payments"("SFAS No. 123R"). Staff Accounting
Bulletin No. 107 ("SAB 107") was issued to assist preparers by simplifying some
of the implementation challenges of SFAS No. 123R while enhancing the
information that investors receive. SAB 107 creates a framework that is premised
on two themes: (a) considerable judgment will be required by preparers to
successfully implement SFAS No. 123R, specifically when valuing employee stock
options; and (b) reasonable individuals, acting in good faith, may conclude
differently on the fair value of employee stock options. Key topics covered by
SAB 107 include (a) valuation models - SAB 107 reinforces the flexibility
allowed by SFAS No. 123R to choose an option-pricing model that meets the
standard's fair value measurement objective; (b) expected volatility - SAB 107
provides guidance on when it would be appropriate to rely exclusively on either
historical or implied volatility; and ( c) expected term - the new guidance
includes examples and some simplified approaches to determining the expected
term under certain circumstances. The Company applied the principles of SAB 107
in conjunction with its adoption of SFAS No.123R.




In June, 2005, the Emerging Issues Task
Force (EITF) issued No. 05-06, "Determining the
Amortization Period of Leasehold Improvements Acquired in a Business
Combination"(EITF No. 05-06). EITF No. 05-06
provides that the amortization period for leasehold improvements acquired in
a business combination or purchased after the inception of a lease to be
the shorter of (a) the useful life of the assets or (b) a term that includes
required lease periods and renewals that are reasonably assured upon the
acquisition of the purchase. The guidance in EITF No. 05-06 is effective for
periods beginning after June 29, 2005. The Company does not believe its
adoption had a material impact on its consolidated results of operations or
financial position.




In June,
2005, the Financial Accounting Standards Board ('FASB") issued SFAS No. 154,
Accounting Changes and Error Corrections - a
replacement of APB No. 20 and FAS No. 3" ("SFAS No. 154").SFAS
No. 154 provides guidance on the accounting for and reporting of accounting
changes and error corrections. It establishes, unless impracticable,
retrospective application as the required method for reporting a change in
accounting principle in the absence of explicit transition requirements specific
to the newly adopted accounting principle. SFAS No. 154 also provides guidance
for determining whether retrospective application of a change in a accounting
principle is impracticalable. The correction of an error in previously issued
financial statements is not an accounting change. However, the reporting of an
error correction involves adjustments to previously issued financial statements
similar to those generally applicable to reporting an accounting change
retrospectively. Therefore, the reporting of a correction of an error by
restating previously issued financial is also addressed by SFAS No. 154. SFAS
No. 154 is required to be adopted in fiscal years beginning after December
15, 2005. The Company's adoption in fiscal year 2007 did not have a
material impact on its results of operations or financial position.




In
February, 2006, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 155, "Accounting for Certain
Hybrid Instruments" (SFAS 155), which amends SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities," and SFAS 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities."
SFAS 155 allows financial instruments that have embedded derivatives to  be
accounted for as a whole (eliminating the need to bifurcate the derivative from
its host) if the holder elects to account for the whole instrument on a fair
value basis. SFAS 155 also clarifies and amends certain other provisions of SFAS
133 and SFAS 140. This statement is effective for all financial instruments
acquired or issued in the fiscal year beginning after September 15, 2006. The
Company's adoption of this standard did not have a material impact on
the Company's financial position, results of operations or cash
flows.




In March,
2006, the FASB issued SFAS No. 156 "Accounting for Servicing of Financial Assets
- an amendment of FASB Statement No. 140" ("SFAS 156"). This statement was
issued to simplify the accounting for servicing assets and liabilities, such as
those common with mortgage securitization activities. The statement addresses
the recognition and measurement of separately recognized servicing assets and
liabilities and provides an approach to simplify hedge-like (offset) accounting.
SFAS 156 clarifies when an obligation to service financial assets should be
separately recognized (as servicing asset or liability), requires initial
measurement at fair value and permits an entity to select either the
Amortization Method or the Fair Value Method. This statement is effective for
fiscal years beginning after September 15, 2006. The Company's adoption of this
standard did not have a material impact on the Company's financial position,
results of operations or cash flows.




In July,
2006, the FASB issued interpretation No. 48, "Accounting for Uncertainty in
Income Taxes," ("FIN 48"), which is effective for fiscal years beginning after
December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in the financial statements in accordance with FASB Statement
No. 109, "Accounting for Income Taxes." This interpretation prescribes a
comprehensive model for how a company should recognize, measure, present, and
disclose in its financial statements uncertain tax positions that the company
has taken or expects to take on a tax return. The Company does not expect that
the implementation of FIN 48 will have a material impact on its financial
position, results of operations or cash flows.




In
September, 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS 157 is effective in fiscal years beginning after
November 15, 2007. Management is currently evaluating the impact that the
adoption of this statement will have on the Company's consolidated financial
statements.




In
September, 2006, the FASB issued SFAS No. 158 "Employers' Accounting for Defined
Pension and Other Postretirement Plans." This Statement requires recognition of
the funded status of a single-employer defined benefit postretirement plan as an
asset or liability in its statement of financial position. Funded status is
determined as the difference between the fair value of plan assets and the
benefit obligation. Changes in that funded status should be recognized in other
comprehensive income. This recognition provision and the related disclosures are
effective as of the end of the fiscal year ending after December 15, 2006. The
Statement also requires the measurement of plan assets and benefit obligations
as of the date of the fiscal years ending after December 15, 2008. The Company
does not expect its adoption of this new standard to have a material impact on
the Company's financial position, results in operations or cash
flows.




On
September 13, 2006 the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 108 ("SAB 108") which provides interpretive guidance on
how the effects of the carryover or reversal of prior year misstatements should
be considered in quantifying a current year misstatement. SAB 108 is effective
for fiscal years ending after November 15, 2006. The Company's adoption of this
pronouncement did not have a material impact on the Company's
financial statements.







Note 2 - Marketable Securities
Available For Sale




On May
11, 2005, the Company entered into an agreement with a Partner. The
Company agreed to assist the Partner in identifying opportunities for
commercialization of their listed technologies, while maintaining the
confidentiality of the Partner.




As
compensation for providing these services, the Partner gave the Company
5,000,000 shares of Section 144 stock which is restricted from sale for twelve
months from date of issue, May 11, 2005. The agreement is for a period of
twenty-four months.




The
Company recorded the stock at the value of the services to be provided which is
estimated to be $100,000. The Company recorded revenue for the six-month period
from May through November, 2005 in the amount of $25,000, $50,000 for the year
ended November 30, 2006, and $25,000 for the year ended November 30,
2007.




The
Company has adopted SFAS 130 as required by the Financial Accounting Standards
Board. SFAS 130 requires that securities that are available for sale be
presented at market value on the balance sheet date. Unrealized gains and losses
are recognized as a separate component of stockholders' equity. The specific
identification method is used in calculating realized gains and losses. SFAS 130
also requires a statement of comprehensive income which adjusts net income for
the unrealized activity. At November 30, 2007, the fair market value of common
equity securities with a cost of $100,000 was $47,500. The unrealized loss of
$52,500, is included as a component of other comprehensive income.




F-8


Table of Contents


US
Biodefense, Inc.
 Notes
to Financial Statements


Note 3 - Licenses




The
Company agreed to exercise options to license stem cell technology through the
University of British Columbia under two option agreements.





Having
passed the initial validation phase, the Company was working toward a full
licensing relationship and to begin pre-clinical analysis of how the cell
line could be utilized. The Company was considering investigating the stem
cells applications in combating ALS and Parkinson's disease.




As of
August 31, 2006, Company management determined that the value of the licenses
had become impaired since the Company was no longer pursuing stem cell research.
This determination was based on the resignation of the head of the Company's
stem cell research department and the inability to locate a replacement at an
economically feasible compensation package. The resignation was effective during
the Company's third quarter of 2006. The balance of $22,500 below was written
off in full as an impairment loss at August 31, 2006.




Balance, May
      31, 2006
            
            $ 30,000Additions
            
            2,500License
      balance due, but cancelled
            
            (10,000)$ 22,500




The
Company had accrued expenditures related to the stem cell technology licenses in
the amount of $79,167. These expenditures related to the second stage of
licensing, after the initial evaluation phase. Since the Company is no longer
pursuing stem cell research, the second stage will not be undertaken, and the
related liabilities have been recorded as forgiveness of debt, and is included
as a reduction of total expenses on the Company's Statement of Operations at
November 30, 2006.




Note 4 - Property and
Equipment




Property
and equipment consists of the following at November 30, 2007:





Furniture
      and fixtures (at cost)
            
            $
      2,477Accumulated
      depreciation
            
            885$1,592




Note 5 - Comprehensive
income




Accounting
principles generally require that recognized revenues, expenses, gains and
losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available for sale
securities are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income.




The
components of other comprehensive income and related tax effects for the year
ended November 30, 2007 are unrealized holding loss on available for sale
securities in the amount of $52,500.




Note 6 - Income
Taxes




The
income tax provision reflected in the statement of operations consists of the
following components for the year ended November 30, 2007:




Current income taxes
      payable:Federal
            
            -0-State
            
            -0--0-The items accounting for the difference
      between income taxes computed at the federal statutory rate and the
      provision for income taxes as follows:Impact
      onAmount
            
            RateIncome tax at federal
    rate
            
            (223,000)
            
            35.00%State tax, net of federal
      effect
            
            (38,000)
            
            6.00%Net operating loss
    deduction
            
            261,000-0-




Note 7 - Earnings per
share




Basic
earnings per share are calculated by dividing net income by the weighted average
number of common shares outstanding during the period.




Note 8 - Related parties and
Concentrations




The
Company owes related parties $7,200 at November 30, 2007. The notes are
non-interest bearing, and are due on demand.




Note 9 -
Acquisition




On August
7, 2006, the Company acquired 100% of the outstanding stock of Emergency
Disaster Systems, Inc. a retailer of emergency disaster equipment. Emergency
Disaster Systems, Inc. was incorporated on July 17, 2006, by its majority
stockholder who had been in the disaster preparedness industry for over
seventeen years. The Company paid $25,000 in cash for the stock. The Company
recorded the transaction as follows:




Inventory
            
            $
      17,500Customer
      list
            
            7,500$
      25,000




Note
10 - Common Stock Transactions




During
the three months ended May 31, 2007, the Company issued 9,245,000 shares of
common stock to two entities as consulting fees totaling $337,350.




During
the three months ended May 31, 2007, the Company issued 10,000,000 shares of
common stock to its Chief Executive Officer for salary totaling
$100,000.




During
the three months ended August 31, 2007, the Company issued 2,000,000 shares of
common stock to an individual as consulting fees totaling $22,000.




During the three months ended August 31, 2007, the
Company issued 980,000 shares of common stock to an individual as consulting
fees totaling $7,840.




Note
11 - Discontinued Operations





As
of September 24, 2007, the Company completed the spin-off of Emergency Disaster
Systems, Inc., a wholly-owned subsidiary of US Biodefense, Inc., whereby
stockholders of record as of September 7, 2007 received one share of common
stock of Emergency Disaster Systems, Inc. for every 100 shares of common
stock of US Biodefense such holders possessed. Stockholders received cash
in lieu of fractional shares for amounts less than one full Emergency Disaster
Systems, Inc. share.




In
accordance with Statement of Financial Standards No. 144 “Accounting for the
Impairment or Disposal of Long-Lived Assets," (SFAS 144) revenues and expenses
associated with Emergency Disaster Systems, Inc. are classified as
discontinued operations for the year ended November 30, 2007. The same
classification as discontinued operations required by SFAS 144 is also required
for previously issued financial statements for each year incorporated in this
report. Consequently, the comparative income statement for the year ended
November 30, 2006 has been revised to reflect the operation of Emergency
Disaster Systems, Inc. as discontinued operation.




Results
from discontinued operations were as follows:




Years
      Ended November 30,2007
            
            2006Revenues
            
            
            
            
            $
            194,132
            $
            353,169Cost
      of tangible products sold
            
            
            
            155,306
            
            135,73838,826
            
            217,431Expenses
            
            
            
            
            
            384,211
            
            182,225Income
      (loss) from discontinued operations (net ofTax
      provision of $9,359 in 2006)
            
            
            $
            (345,385)
            $
            35,206Basic
      and diluted net income (loss) per common share
            $
            (0.01)
            $
            0.00Gain
      on disposal of EDS
            
            
            $
            235,148





Note
12 - Subsequent Events





Effective
January 10, 2008, the Company experienced a change in control as the result of a
series of transactions. Effective on that date, the Company executed an
employment agreement with Scott Gallagher pursuant to which he became the
Chairman of the board of directors and Chief Executive Officer of the Company.
Simultaneously, the former Chairman David Chin, resigned as an officer and
director of the corporation leaving Mr. Gallagher as its sole director. Also
effective as of that date, Mr. Gallagher and a Company controlled by him,
221 Fund, LLC acquired 95.6% of the Company. As a result of these transactions
Mr. Gallagher assumed control of the Company. On the same date, the Company
changed its business direction and began doing business as “Internet Holdings”
to focus on acquiring direct navigation Internet domain names that could be
developed into profitable business ventures.





On
February 12, 2008, the Company announced its intention to acquire 100% of the
shares of Elysium Internet, Inc., a direct navigation Internet media company in
exchange for stock and a note to FTS Group, Inc. The Company’s Chairman and
Chief Executive officer Scott Gallagher is also the Chairman and Chief Executive
Officer of FTS Group, Inc. As of the date of this annual report, the transaction
has not closed.





Upon
taking control of the Company, new management identified a problem relating to
the Company’s spin-off of its wholly-owned subsidiary Emergency Disaster
Systems, Inc. which occurred on September 24, 2007. The Company
intends to undertake a rescission offer to recipients of shares of Emergency
Disaster Systems, Inc. in the September 24, 2007 distribution. The Company is
issuing this rescission offer because it believes the distribution may have been
in violation of certain registration requirements under the Securities Act of
1933, as amended.





New
management determined that the controls and procedures utilized by previous
management were not sufficient. Management has corrected the problem to ensure
that information is accumulated and communicated to management, including the
Chief Executive Officer and Acting Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.





If all
the eligible purchasers elect to accept the rescission offer, the Company
believes it will be required to pay an estimated $18,985 representing the
estimated value of the shares of Emergency Disaster Systems, Inc. at the time of
the distribution, plus additional legal and accounting costs. Because prior
management participated in the spin-off and has indicated it is not
interested in rescission, the Company believes that holders of a majority of the
shares of Emergency Disaster Systems, Inc. will waive their rescission rights,
and the amount it may be required to pay will be lower than the total estimated
value of Emergency Disaster Systems, Inc. shares. There is considerable
legal uncertainty under both federal and state securities laws concerning the
efficacy of rescission offers and general waivers and releases with respect to
barring claims that would be based on securities law violations. The rescission
offer may not terminate any or all potential contingent liability that the
Company may have in connection with that distribution. In addition, it may not
be able to enforce the waivers it may receive in connection with the rescission
offer to bar any claims based on allegations of federal or state securities law
violations that the rescission offerees who accept the offer may have,
until the applicable statutes of limitations have run.





While the
Company believes this rescission offer will satisfy certain requirements and
laws, the conditions and criteria for satisfying federal and most state
rescission requirements are predicated primarily on factual circumstances rather
than on objective standards. Given the size of the Company and its
working capital deficit, the Company may not have sufficient funds to satisfy
any additional rescission rights and costs in which case the Company's
future results of operations could be adversely affected and it could be forced
to cease operations.




Note 13 - Commitments and
Contingencies




On
November 6, 2006, Sandra Sawyer filed a suit in Los Angeles Superior Court
against US Biodefense, Inc. and David Chin, one of our officers and directors at
the time the lawsuit was filed, alleging a breach of contract by Mr. Chin in
relation to the purchase of our Company by Mr. Chin from Ms. Sawyer. On April
20, 2007, Mr. Chin filed a cross-complaint against the plaintiff alleging breach
of contract. On November 21, 2007, we reached a settlement with Ms. Sawyer,
whereby we agreed to pay to Ms. Sawyer an aggregate sum of $90,000 over 15
months. In the event of default, we will be required to pay Ms. Sawyer a sum of
$225,000 less any payments made under this agreement. We were in compliance with
this settlement agreement through February 29, 2008.
  We
estimate that the rescission offer of our September 2007 distribution of shares
of Emergency Disaster Systems could cost us $18,985 plus additional legal and
accounting expenses. We currently do not have sufficient cash to pay for such
rescission offer. We believe we will not need the total amount of such funds
because we believe the holders of a majority of the shares distributed will not
participate in such rescission. However, if we do have to pay the total amount,
we will have to borrow funds to cover those expenses. We may not have access to
such funds which could cause further liability under federal and state law.
Additionally, if we borrow such funds, it will increase our debt which could
inhibit us from implementing our business plan. We have set up a reserve account
of up to $100,000 to cover any and all anticipated legal, accounting and filing
costs related to the spin-off and rescission offer.




F-9


Table of Contents




Item
8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure





None.





Item
8A(T).  Controls and
Procedures




Disclosure
Controls and Procedures
  Our Chief
Executive Officer/Acting Chief Financial Officer evaluated the effectiveness of
our disclosure controls and procedures as of the end of the period covered by
this annual report on Form 10-KSB. Based on this evaluation, our Chief Executive
Officer/Acting Chief Financial Officer has concluded that our disclosure
controls and procedures, including internal control over financial reporting,
were not effective as of November 30, 2007, to ensure that information we are
required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934, as amended (i) is recorded, processed, summarized, and
reported within the time periods specified in Securities and Exchange Commission
rules and forms, and (ii) is accumulated and communicated to our management,
including our Chief Executive Officer/Acting Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. Our
disclosure controls and procedures are intended to be designed to provide
reasonable assurance that such information is accumulated and communicated to
our management. Our management concluded that prior management did not maintain
effective controls to ensure the accuracy of disclosures in our financial
statements and classification of certain financial transactions in our financial
statements.
  Our
disclosure controls and procedures include components of our internal control
over financial reporting. In designing and evaluating our disclosure controls
and procedures management recognizes that any controls, no matter how well
designed and operated, can provide only reasonable, but not absolute, assurance
that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, with our company have been
detected.
 
 On
January 10, 2008, we experienced a change in control and Scott Gallagher was
appointed as our Chief Executive Officer and Acting Chief Financial
Officer.  Our new management identified control deficiencies (a) in
our procedures for reconciling and compiling our books for the 2007 fiscal year,
(b) in our procedures for evaluating and accounting for equity transactions and
(c) in our ability to timely produce accurate financial statements that we
believe constitute individually, or in the aggregate, material weaknesses with
respect to those matters.
 
 A
“material weakness” is defined as a significant deficiency, or a combination of
significant 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.  A “significant deficiency” is a control
deficiency, or a combination of control deficiencies, that adversely affects a
company’s ability to initiate, authorize, record, process or report external
financial data reliably in accordance with generally accepted accounting
principles such that there is more than a remote likelihood that a misstatement
of the annual or interim financial statements that is more than inconsequential
will not be prevented or detected.
 
 In
preparing our financial statements and in reviewing the effectiveness of the
design and operation of our internal accounting controls and procedures and our
disclosure controls and procedures for the fiscal year ended November 30, 2007,
we performed transaction reviews and control activities in connection with
reconciling and compiling our financial records for the 2007 fiscal
year.  These reviews and procedures were undertaken in order to
confirm that our financial statements for the year ended November 30, 2007 are
prepared in accordance with generally accepted accounting principles, fairly
presented and free of material errors.
 
 Based on
our review of our accounting controls and procedures, we believe the control
deficiencies resulted primarily from the following contributing
factors:
 
 ·  We had
one person performing the roles of all executive officers.  As a
result, we did not maintain adequate segregation of duties within our critical
financial reporting applications, the related modules and financial reporting
processes.  This control deficiency could result in a
misstatement of balance sheet and income statement accounts in our interim or
annual consolidated financial statements that would not be prevented or
detected. Accordingly, management has determined that this control deficiency
constitutes a material weakness.
 ·  We had
insufficient resources in the accounting department and a lack of accounting
expertise at our Company.
 ·  We failed
to accurately account for certain equity instruments, due, at least in part, to
a lack of sufficient financial expertise in prior management.  Failure
to maintain detailed records and human error also may have played a
role.
 
 Changes
in Internal Control over Financial Reporting
  There was
no change in our internal control over financial reporting, as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act, identified in connection with
the evaluation of our internal control that occurred during the fiscal quarter
ended November 30, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
 
 Our new
management team has addressed the deficiencies both in the legal and accounting
areas. Management has strengthened our accounting capacity by retaining an
independent peer review accounting firm to advise management on matters relating
to internal accounting. With regards to its legal matters management has
retained retained a qualified securities law firm to advise management on legal
matters relating to its public filings. During 2008, we intend to continually
improve our internal controls and procedures by hiring additional employees or
consultants as needed.
 
 We
believe that the steps outlined above will strengthen our internal control over
financial reporting and address the material weakness described above. As part
of our 2008 assessment of internal control over financial reporting, our
management will test and evaluate these additional controls to be implemented to
assess whether they are operating effectively.
  We intend
to continue to remediate material weaknesses and enhance our internal controls
but cannot guarantee that our efforts will result in remediation of our material
weakness or that new issues will not be exposed in this process.
 
 This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to the temporary rules of the
Securities and Exchange Commission that permit us to provide only management’s
report in this annual report.


Item
8B. Other Information





None.






PART
III





Item
9. Directors, Executive Officers, Promoters,
Control Persons and Corporate Governance; Compliance with Section 16(a) of the
Exchange Act





The
following table sets forth certain information with respect to our chief
executive officer and director.





NAME
            AGE
            POSITIONScott  Gallagher
            41
            Chief
      Executive Officer, Acting Chief Financial Officer and
    Director





Directors
hold office until the next annual meeting or until their successors are duly
appointed or elected.





Directors,
Executive Officers and Significant Employees





Scott
Gallagher.  Scott Gallagher has served as our Chief Executive
Officer, Acting Chief Financial Officer and Director since January 10,
2008. Mr. Gallagher has served as the Chief Executive Officer and Chairman
of the Board of Directors of FTS Group, Inc. since January 2002. Prior to
joining FTS, Mr. Gallagher was founder and President of About-Face
Communications, LLC, a privately-held business consulting firm located in
Yardley, Pennsylvania. Prior to founding About-Face Communications, LLC,
Mr. Gallagher was the Chief Investment Officer and a general partner with the
Avalon Investment Fund, a private hedge fund based in New York City and
Philadelphia. Mr. Gallagher previously held SEC licenses series 7, 63 and
24, all of which were retired in good standing.





Board
Committees





We
currently do not have a compensation committee, an audit committee or any other
committee performing equivalent functions. Currently, our board of
directors perform the functions of audit and compensation committees. As of
November 30, 2007, we did not have a director on our board who meets the
definition of  “audit committee financial expert” as that term is set forth
in Item 407(d)(5)(ii). However, as of March 13, 2008, we are actively
seeking individuals to fill this need.





SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our directors
and executive officers, and persons who beneficially own more than 10% of a
registered class of our equity securities, to file reports of beneficial
ownership and changes in beneficial ownership of our securities with the SEC on
Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of
Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial
Ownership of Securities). Directors, executive officers and beneficial owners of
more than 10% of our common stock are required by SEC regulations to furnish us
with copies of all Section 16(a) forms that they file.  Except as
otherwise set forth herein, based solely on review of the copies of such forms
furnished to us we  believe that for the fiscal year ended November
30, 2007 beneficial owners did not comply with Section 16(a) filing requirements
applicable to them.





Code
of Ethics





We have
not adopted a Code of Ethics that applies to our principal executive officer,
principal accounting officer or controller or persons performing similar
functions in that our sole officer and director serves in all of the above
capacities.





Nominating
Committee





Each member of our Board participates in
the consideration of director nominees. Stockholders may submit the names
and five year backgrounds for the Board’s consideration in its selection of
nominees for directors in writing to US Biodefense, Inc., 300 State Street East,
Suite 226, Oldsmar, FL 34677. Currently, our share ownership is concentrated in
our directors and officers; as such, it is improbable that any Board nominee
found to be unqualified or unacceptable by these majority stockholders could be
selected as a member of the Board. Accordingly, there is no nominating
committee and we do not rely on pre-approval policies and procedures for our
nomination process. We intend to implement the necessary formation of a
nominating committee and will establish policies and procedures upon such time
as our share ownership is more diversified.





Item
10. Executive Compensation





Summary
Compensation Table





The
following table presents a summary of the compensation paid to our Chief
Executive Officer during the last two fiscal years.  No other
executive officer received compensation in excess of $100,000 during 2007 or
2006. Except as listed below, there are no bonuses, other annual
compensation, restricted stock awards or stock options/SARs or any other
compensation paid to our executive officers.





Name
      and Principal Position
            Year
            Salary
              ($)
            Stock
      Awards
              ($)
            Total
              ($)David
      Chin
              President
      and Treasurer
            2007
            
            100,000
            100,0002006
            4,000
            
            4,000




(1) Mr. Chin received
10,000,000 shares of our common stock valued at $0.01 per share as full
compensation for service as our Chief Executive Officer in
2007.




We do not
have employment agreements with our executive officers. We have yet to
determine the appropriate terms needed for the creation of employment agreements
for our officers. There has been no discussion with any of our officers
regarding any potential terms of these agreements, nor have such terms been
determined with any specificity.





Director
Compensation





We have
no formal or informal arrangements or agreements to compensate our directors for
services they provide as our directors.





Item
11. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters





Securities
Authorized for Issuance Under Equity Compensation Plans





The
following table provides the following information as of November 30, 2007, for
equity compensation plans previously approved by security holders, as well as
those not previously approved by security holders:





1.
            The
      number of securities to be issued upon the exercise of outstanding
      options, warrants and rights;





2.
            The
      weighted-average exercise price of the outstanding options, warrants and
      rights; and





3.
            Other
      than securities to be issued upon the exercise of the outstanding options,
      warrants and rights, the number of securities remaining available for
      future issuance under the plan.





Plan
      Category
            Title
      of Plan
            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(a)
            (b)
            (c)Equity
      compensation plans approved by security holders
            2006
      Qualified Stock Option Plan
            10,000,000
            $0.04
            0Equity
      compensation plans not approved by security holders
            2007
      Stock Option Plan
            10,000,000
            $0.013
            0Total
            
            20,000,000
            $0.03
            0





Security
Ownership of Certain Beneficial Owners and Management as of March 11,
2008





The
following table sets forth as of March 11, 2008, certain information
regarding the beneficial ownership of our common stock by (1) Each person
who is known to us to be the beneficial owner of more than 5% of the common
stock, (2) Each of our directors and executive officers and (3) All of our
directors and executive officers as a group.





Except as
otherwise indicated, the persons or entities listed below have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them, except to the extent such power may be shared with a
spouse.





Name and Address
            
            Amount and Nature
            
            Percent ofTitle of Class
            
            of Beneficial Owner
            
            of Beneficial Ownership
            
            Class
       (1)Common
      Stock
            
            Scott
      Gallagher, Chief Executive Officer
            
            10,000,000(2)
            
            89.17%300
      State Street East, Suite 226Oldsmar,
      Florida 34677221
      Fund, LLC
              300
      State Street East, Suite 226
              Oldsmar,
      Florida 34677
            
            5,000,000
            
            44.59%All
      Officers and Directors(1)
            
            10,000,000
            
            89.17%





(1) Based
on 11,214,075 shares of common stock issued and outstanding on March 11,
2008.





(2) Mr.
Gallagher became our Chief Executive Officer in a change of control transaction
on January 10, 2008. Mr. Gallagher owns 5,000,000 shares of our common
stock directly and 5,000,000 shares of our common stock indirectly through 221
Fund, LLC, of which Mr. Gallagher serves as the Chief Investment
Officer. The shares were purchased on January 10, 2008, for total
consideration of $300,000.




7


Table of Contents




Item
12. Certain Relationships and Related
Transactions, and Director Independence





Certain
Relationships and Related Transactions





During
the fiscal year ended November 30, 2007, we issued 10 million shares to our
former Chairman and Chief Executive Officer valued at $0.01 as full compensation
for the year.





On
January 10, 2008, we issued 5,000,000 shares of common stock to Scott Gallagher
in exchange for $150,000. Mr. Gallagher became our Chief Executive Office and
Chairman of our Board of Directors on January 10, 2008.





On
January 10, 2008, we issued 5,000,000 shares of common stock to 221 Fund, LLC in
exchange for $150,000. 221 Fund, LLC is controlled by Scott Gallagher, our Chief
Executive Officer and Chairman.





On
January 10, 2008, we moved our principal offices to 300 State Street East, Suite
226, Oldsmar, Florida 34677. We rent space on a month to month basis from FTS
Group, Inc. at a rate of $1,000 per month. We do not have a formal lease
agreement in place at this time. Our Chairman and Chief Executive Officer,
Scott Gallagher, is the Chairman and Chief Executive Officer of FTS Group,
Inc.





On
February 12, 2008, we announced our intention to acquire 100% of the shares of
Elysium Internet, Inc., a direct navigation Internet media company in exchange
for stock and a note to FTS Group, Inc. The terms of the transaction have not
yet been finalized. Our Chairman and Chief Executive Officer, Scott Gallagher,
is also the Chairman and Chief Executive Officer of FTS Group, Inc. As of
the date of this annual report, the transaction has not closed.





Director
Independence





We do not
have any independent directors currently serving on our Board of Directors. We
are seeking additional board members.




Item
13. Exhibits, Financial Statement
Schedules





3.1.
            Articles
      of Incorporation, dated June 24, 1983 (included as Exhibit 3.1 to the Form
      10SB12G filed September 1, 2000, and incorporated herein by
      reference).





3.2
            Amendment
      to the Articles of Incorporation, dated July 17, 1984 (included as Exhibit
      3.2 to the Form 10SB12G filed September 1, 2000, and incorporated herein
      by reference).





3.3
            Amendment
      to the Articles of Incorporation, dated September 7, 1984 (included as
      Exhibit 3.3 to the Form 10SB12G filed September 1, 2000, and incorporated
      herein by reference).





3.4
            Amended
      and Restated Articles of Incorporation, dated December 29, 1997 (included
      as Exhibit 3.4 to the Form 10SB12G filed September 1, 2000, and
      incorporated herein by reference).





3.5
            By-Laws
      (included as Exhibit 3.5 to the Form 10SB12G filed September 1, 2000, and
      incorporated herein by reference).





3.6
            Certificate
      of Amendment to the Articles of Incorporation, dated May 12, 2003
      (included as Exhibit 3 to the Form 10-QSB filed July 15, 2003, and
      incorporated herein by reference).





4.1
            US
      Biodefense, Inc. 2006 Qualified Stock Option Plan, dated April 26, 2006
      (included as Exhibit 4.1 to the Form S-8 filed July 25, 2006, and
      incorporated herein by reference).





4.2
            US
      Biodefense, Inc. 2007 Stock Incentive Plan, dated April 1, 2007 (included
      as Exhibit 4 to the Form S-8 filed May 4, 2007, and incorporated herein by
      reference).





4.3
            US
      Biodefense, Inc. 2008 Stock Incentive Plan, dated February 15, 2008
      (included as Exhibit 10.1 to the Form S-8 filed February 15, 2008, and
      incorporated herein by reference).





10.1
            Stock
      Purchase Agreement between the Company and Charles Wright, dated August 7,
      2006 (included as Exhibit 2 to the Form 8-k filed August 14, 2006, and
      incorporated herein by reference).





10.2
            Stock
      Purchase Agreement between the Company and Equity Solutions, Inc., dated
      August 7, 2006 (included as Exhibit 10.1 to the Form 8-k filed August 14,
      2006, and incorporated herein by
reference).





10.3
            Consulting
      Agreement between the Company and Charles Wright, dated August 21, 2006
      (included as Exhibit 10 to the Form 8-K filed August 30, 2006, and
      incorporated herein by reference).





10.4
            Executive
      Employment Agreement between the Company and Scott Gallagher, dated
      January 10, 2008 (included as Exhibit 10.1 to the Form 8-K filed January
      10, 2008, and incorporated herein by
reference).





10.5
            Agreement
      for Purchase and Sale of Stock between the Company and Scott Gallagher,
      dated January 10, 2008 (included as Exhibit 10.2 to the Form 8-K filed
      January 10, 2008, and incorporated herein by
  reference).





10.6
            Agreement
      for Purchase and Sale of Stock between the Company and 221 Fund, LLC,
      dated January 10, 2008 (included as Exhibit 10.3 to the Form 8-K filed
      January 10, 2008, and incorporated herein by
  reference).





17.1
            Letter of
      Resignation to the Company from David Chin, dated January 10, 2008
      (included as Exhibit 17.1 to the Form 8-K filed January 10, 2008, and
      incorporated herein by reference).




31.1
            Certification
      of the Chief Executive Officer and Acting Chief Financial Officer pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
      herewith).





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





Item
14. Principal Accounting Fees and
Services





The
following table sets forth fees billed to us by our independent auditors for the
fiscal years ended 2007 and 2006 for (i) services rendered for the audit of our
annual financial statements and review of our quarterly financial statements,
(ii) services rendered that are reasonably related to the performance of the
audit or review of our financial statements that are not reported as Audit Fees
and (iii) services rendered in connection with tax preparation, compliance,
advice and assistance.





Services
            2007
            2006Audit
      Fees
            $7,500
            $11,428Audit-related
      Fees
            $2,500
            -Tax
      Fees
            
            -All
      Other Fees
            
            -Total
      Fees
            $10,000
            $11,428








SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





US BIODEFENSE, INC.





By: /s/ Scott
Gallagher


Scott Gallagher


Chief Executive Officer, Acting
Chief


Financial
Officer, Principal Accounting Officer and Chairman of the Board of
Directors





Dated:
March 18,
2008






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