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 March 31, 2007
                                       OR
( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

Commission File No. 0-31679

                                QUANTUM MRI, INC.
                                -----------------
                 (Name of Small Business Issuer in its charter)

                Washington                                  54-0231483
         --------------------------                    --------------------
         (State of incorporation)                        (IRS Employer
                                                       Identification No.)
   4750 Paton Street
   Vancouver, British Columbia, Canada                         V6L 2J1
---------------------------------------------          --------------------
   (Address of Principal Executive Office)                     Zip Code

Registrant's telephone number, including Area Code: (303)-506-1633
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                                ---------------
                                (Title of Class)

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act. [ ]

Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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.
                                 X
                           -------------                ----------
                                YES                        NO

Check  if  disclosure  of  delinquent   filers  in  response  to  Item  405  of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will be
contained,  to the best of the 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.      [X]

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


<PAGE>

The Company's revenues during the year ended March 31, 2007, were $ 0.

The aggregate market value of the voting stock held by non-affiliates of the
Company, (7,799,889 shares) based upon the closing price of the Company's common
stock on July 31, 2007, was approximately $390,000.

Documents incorporated by reference:      None

As of July 31, 2007, the Company had 14,071,391 issued and outstanding shares of
common stock.


          CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


         This report includes "forward-looking statements". All statements other
than statements of historical facts included in this Registration Statement,
regarding the Company's financial position, business strategy, plans and
objectives, are forward-looking statements. Although the Company believes that
the expectations reflected in the forward-looking statements and the assumptions
upon which such forward-looking statements are based are reasonable, it can give
no assurance that such expectations and assumptions will prove to have been
correct.




                                       2
<PAGE>


ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------

      The Company was incorporated in Washington on June 7, 1989, under the name
P.L.D.F.E.T., Inc. On November 17, 2000, the Company changed its name from
P.L.D.F.E.T. to Travelshorts.com, Inc. Between the date of its incorporation and
December 3, 2002, the Company was essentially inactive. On December 3, 2002, the
Company acquired all of the issued and outstanding shares of SETI Corp. ("SETI")
in exchange for 111,275 shares of the Company's common stock. In April 2003 the
Company repurchased 33,178 of these shares from four shareholders at a cost of
$1,300.

      Any reference to the Company, unless otherwise indicated, includes the
operations of SETI.

      In December 2002, the Company changed its trade name to Sharps
Elimination Technologies Inc. ("SETI")

      SETI was incorporated in Delaware on September 25, 2001. On November 12,
2001, SETI acquired from Spectrum Meditech Inc.("Spectrum"), a related party,
the exclusive license, to develop, manufacture, and sell Needle-Ease(TM), a
device used for the safe disposal of used needles and hypodermic syringes. The
acquisition required a cash payment of $300,000 due on December 31,2005.

      The Needle-Ease(TM) is a battery operated incineration system that
destroys a range of needles by passing an electric current through the needle
thereby reducing the steel to ashes in a matter of seconds. The electric charge
is generated from a rechargeable sealed lead-acid battery. The contact points of
the device can be touched directly or with a metal object by the operator or
anyone else without the transfer of current (i.e. shock).

      On May 5, 2005 the shareholders of the Company:

     o    approved  amendments to the Company's Articles of Incorporation  which
          changed the Company's name to Sharps Elimination  Technologies,  Inc.;
          and
     o    approved a 150-for-1 reverse stock split.
     o    approved an  increase to the  Company's  authorized  capital  stock to
          issue 100,000 shares of preffer stock.

      All information in this report concerning the Company's common stock,
except as otherwise indicated, gives effect to the 150-for-1 reverse split.

      Subsequent to the May 5, 2005, shareholders' meeting, the Company decided
it would no longer pursue the Needle-Ease(TM) project.

      In September 2005, the Company changed its name to Quantum MRI, Inc.

      The Company has been inactive since 2005.



                                       3
<PAGE>

      As of June 30, 2007, the Companydid not have any full time employees. The
Company's officers devote only a minimal amount of time to the Company business
employee.

      The Company does not have a website.

      An investment in the Company's securities should only be considered by
persons who can afford a complete loss of their investment. The Company has been
inactive since 2005. As of March 31, 2007, the Company had assets of $1,669,
liabilities of $1,901,909, a working capital deficit of $1,901,767 and an
accumulated deficit of $6,744,884. There has been virtually no trading activity
in the Company's common stock.

      Our auditors have issued a going concern opinion for the year ended March
31, 2007. This means that there is substantial doubt that we can continue as an
ongoing business for the next twelve months. The financial statements do not
contain any adjustments that might result from the uncertainty about the ability
to continue our business. As such, we may have to cease operations and you could
lose your investment.

      The Company's common stock currently trades on the OTC Bulletin Board. The
rules applicable to securities traded on the OTC Bulletin Board provide that if
an issuer is delinquent in filing its 10-KSB or 10-QSB reports on three
occasions in any twenty-four month period the issuer's securities will be
delisted from the OTC Bulletin Board and will not be eligible for relisting
until the issuer has timely filed all of its required annual and quarterly
reports for twelve months. The Company was delinquent in filing its 10-QSB
report in February 2006 and was delinquent in filing this 10-KSB report in July
2007. If the Company is delinquent in filing any other 1934 reports prior to
February 2008, the Company's securities will be delisted from the OTC Bulletin
Board.

ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

      See Item 1.

ITEM 3.  LEGAL PROCEEDINGS.
--------------------------

      In September 2003, Erika Gardner ("Gardner") commenced a civil action in
the Supreme Court of British Columbia against the Company, Kelly Fielder
("Fielder"), the Company's president, and Spectrum. In her complaint Gardner
alleges that the Company and/or Fielder are liable to Gardner for a loan in the
amount of approximately $250,000 (USD), and that Fielder and Spectrum failed to
deliver shares of the Company's common stock which were to be held by Gardner as
security for the loan. As part of this civil action Gardner also obtained an
order from the British Columbia Court which, among other things, restrained
Fielder and Spectrum from selling, transferring or voting any of the Company's
shares, and restrained the Company from making any changes to its capital
structure.

      The Company and Fielder have filed answers to the complaint generally
denying the claims of Gardner. This civil action has been dormant since December
2003 and it is not possible to predict the outcome of this matter.


                                       4
<PAGE>

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

      Not Applicable

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE  REGISTRANT'S  COMMON EQUITY AND
-----------------------------------------------------------------------------
        OTHER SHAREHOLDER MATTERS.
        -------------------------

      The Company's common stock is listed on the OTC Bulletin Board under the
symbol QTMR. The following table sets forth the high and low sale prices of the
Company's common stock during the periods presented as reported by the NASD. The
closing sale prices reflect inter-dealer prices without adjustment for retail
markups, markdowns or commissions and may not reflect actual transactions.

                                             Closing Sale Price
                                                Common Stock
            Quarter Ended                     High           Low
            -------------                    ------         -----

            June 30, 2004                    $0.05 *        $0.02 *
            September 30, 2004               $0.02 *        $0.02 *
            December 31, 2004                $0.02 *        $0.01 *
            March 31, 2005                   $0.03 *        $0.01 *


            June 30, 2005                    $0.33          $0.33
            September 30, 2005               $0.33          $0.33
            December 31, 2005                $0.36          $0.33
            March 31, 2006                   $0.60          $0.33

            June 30, 2006                    $0.70          $0.40
            September 30, 2006               $0.42          $0.07
            December 31, 2006                $0.09          $0.04
            March 31, 2007                   $0.09          $0.07

*   Prices have not been adjusted for 150-for-1 reverse split that was approved
    by the Company's shareholders on May 5, 2005.

      As of July 31, 2007 there were approximately 65 record holders of the
Company's common stock.

      During the year ended March 31, 2007, neither the Company, any officer or
director of the Company, nor any principal shareholder of the Company, purchased
any shares of the Company's common stock either from the Company, from third
parties in a private transaction, or as a result of purchases in the open
market.



                                       5
<PAGE>


      Holders of common stock are entitled to receive dividends as may be
declared by the Board of Directors. The Company' Board of Directors is not
restricted from paying any dividends but is not obligated to declare a dividend.
No dividends have ever been declared and it is not anticipated that dividends
will ever be paid.

       The Company's Articles of Incorporation authorize its Board of Directors
to issue up to 100,000 shares of preferred stock. The provisions in the Articles
of Incorporation relating to the preferred stock allow the Company' directors to
issue preferred stock with multiple votes per share and dividend rights which
would have priority over any dividends paid with respect to the holders of the
Company' common stock. The issuance of preferred stock with these rights may
make the removal of management difficult even if the removal would be considered
beneficial to shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as mergers or tender
offers if these transactions are not favored by the Company's management.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
         --------------------------------------------------------------------
         OF OPERATION
         ------------

      The Company has been inactive since 2005. During the twelve months ended
March 31, 2007, the Company did not have any revenues. During this period of
time, the Company was primarily involved in attempting to raise capital for its
operations.

      As of March 31, 2007 the Company had assets of $1,669, liabilities of
$1,901,909, and an accumulated deficit of $6,744,844. During the year ended
March 31, 2007 the Company incurred a net loss of $1,951,033 and the Company's
operations used $126,455 in cash. The Company satisfied its cash requirements
during fiscal 2007 with loans from Murray Atkins, a principal shareholder of the
Company, and with cash on hand at April 1, 2006.

      The Company does not have any bank lines of credit, or any other
traditional financing arrangements. The Company expects to obtain additional
capital through the private sale of its common stock or from borrowings from
private lenders. There can be no assurance that the Company will be successful
in obtaining the capital which it may need.

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

      See the financial statements attached to this report.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
------------------------------------------------------

      The following 8-K reports, all of which pertain to a change in the
Company's auditors, are incorporated by reference.

            Report filed on 2-19-03
            Report filed on 6-29-04
            Report filed on 10-20-05
            Report filed on 11-22-05


                                       6
<PAGE>


ITEM 8A.  CONTROLS AND PROCEDURES
---------------------------------

      As of the end of the fiscal year ended March 31, 2007, the Company carried
out an evaluation, under the supervision and with the participation of members
of its management, including its Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Rule 13a-15(b) of the U.S.
Securities Exchange Act of 1934 (the "Exchange Act"). Based on this evaluation,
the Company's Chief Executive Officer and Chief Financial Officer concluded
that, as of March 31, 2007, the Company's disclosure controls and procedures,
related to internal control over financial reporting and the recording of
certain equity transactions, were not effective in light of the material
weaknesses described below.

      The Company was advised by Manning Elliott LLP, its independent auditors,
that during their performance of audit procedures related to the Company's
financial statements for the fiscal period ended March 31, 2007, they identified
"material weaknesses" in the Company's internal controls as defined in Statement
on Auditing Standards No. 112, "Communicating Internal Control Related Matters
Identified in an Audit" ("SAS 112"). The material weaknesses are described
below:

Inadequate controls over equity transactions. The Company does not have adequate
review and supervision controls or sufficient supporting documentation of
certain equity-related transactions to ensure that equity transactions are
properly valued and recorded on a timely basis. As a result, adjustments in the
equity accounts and financial statements could occur. If the Company is not, or
is not in future periods, successful in identifying these adjustments, its
quarterly or annual financial statements could be materially misstated, which
could require a restatement.

Inadequate entity level controls. The Company does not have effective entity
level controls. These weaknesses include:

     (i)  weaknesses  in the risk  assessment  controls,  including  the lack of
          adequate   mechanisms  for  anticipating  and  identifying   financial
          reporting  risks;  and  for  reacting  to  changes  in  the  operating
          environment that could have a potential effect on financial reporting;
     (ii) weaknesses  in  monitoring  controls,  including  the lack of adequate
          staffing and  procedures to ensure  periodic  evaluations  of internal
          controls  to  ensure  that  appropriate   personnel  regularly  obtain
          evidence that controls are functioning effectively and that identified
          control deficiencies are timely remedied.

      If the Company is not, or is not in future periods, successful in
identifying these control weaknesses, its quarterly or annual financial
statements could be materially misstated, which could require a restatement.

      The Company's disclosure controls and procedures are designed to ensure
that the information required to be disclosed in its reports filed under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the U.S. Securities and Exchange Commission's (the "SEC")


                                       7
<PAGE>

rules and forms, and to reasonably assure that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met under all potential conditions,
regardless of how remote, and may not prevent or detect all error and all fraud.
Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the company have been prevented or detected.

      The Company continues to improve and refine its internal controls as an
ongoing process. Other than as summarized above, there have been no changes in
the Company's internal controls over financial reporting or other factors that
have materially affected, or are reasonably likely to materially affect, its
internal controls.

      The certifications of the Company's principal executive officer and
principal financial officer required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002 are attached as exhibits to this Annual Report on
Form 10-KSB. The disclosures set forth in this Item 8A contain information
concerning (i) the evaluation of the Company's disclosure controls and
procedures, and changes in internal control over financial reporting, referred
to in paragraph 4 of the certifications, and (ii) material weaknesses in the
design or operation of the Company's internal control over financial reporting,
referred to in paragraph 5 of the certifications. Those certifications should be
read in conjunction with this Item 8A for a more complete understanding of the
matters covered by the certification.

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
---------------------------------------------------------------------

     Name             Age     Position
     ----             ---     --------

     Kelly Fielder    38      Chief Executive Officer, Principal Financial
                              Officer, Principal Accounting Officer and a
                              Director
     Gary Rushin      51      Vice President of Finance

      Kelly  Fielder  has been an officer and  director  of the Company  since
December  31, 2002 and of SETI since  September  25, 2001.  Between  March 22,
2002.  and  September  17,  2002,  Mr.  Fielder was an officer and director of
Armagh  Group,  Inc. Mr.  Fielder has been an officer and director of Spectrum
since 1998.  Mr.  Fielder is also the President of IRG Services Ltd.  ("IRG"),
a management consulting business which he formed in 1996.

      Gary Rushin has been the Company's Vice President of Finance since March
1, 2006. Mr. Rushin has been Vice Chair of the Board of Directors (since 1998),
Adjunct Professor of Accounting and Finance (since 2002) and Visiting Professor
of Accounting (since 2003) of the University of Northern Virginia. Since 2001
Mr. Rushin has also been the President of Decision Analysis, LLC, a business
consulting firm.


                                       8
<PAGE>

      The Company does not have a compensation committee. Gary Rushin serves as
the Company's Audit Committee. Mr. Rushin is a financial expert but is not
independent as that term is defined in Section 121(A) of the Listing Standards
of the American Stock Exchange.

      The Company has not adopted a Code of Ethics applicable to the Company's
principal executive, financial, and accounting officers and persons performing
similar functions. The Company does not believe it needs a Code of Ethics
because the Company has only two officers and one director.

ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth in summary form the compensation earned or
received by (i) the Chief Executive Officer of the Company and (ii) by each
other executive officer of the Company who earned or received in excess of
$100,000 during the fiscal years ended March 31, 2006 and 2007.

                                                                 All
                                                                 Other
                                                                 Annual
                                                Stock   Option  Compen-
Name and Principal     Fiscal  Salary  Bonus    Awards  Awards   sation
  Position              Year    (1)     (2)      (3)      (4)     (5)     Total
---------------        ------  ------  -----    ------  ------  -------  -------

Kelly Fielder,          2007      --      --  $  175,000    --       --      --
President and           2006      --      --  $2,160,000    --       --      --
Chief Executive
Officer since
December 2002

(1)  The dollar value of base salary (cash and non-cash) received.
(2)  The dollar value of bonus (cash and non-cash) received.
(3)  During the periods covered by the table,  the value of the Company's shares
     issued as compensation for services calculated in accordance with FAS 123R.
(4)  The amount  recognized  for financial  statement  reporting  purposes,  and
     calculated  in accordance  with FAS 123R,  for options  awarded  during the
     year.
(5)  All other compensation  received that the Company could not properly report
     in any other column of the table.

      The Company's Board of Directors may increase the compensation paid to the
Company's officers depending upon the results of the Company's future
operations.

      The Company has an employment contract with Kelly Fielder which provides
for an annual salary of $120,000.

      The Company has an employment agreement with Gary Rushin which provides
that Mr. Rushin will be paid a salary of $4,000 per month during the eight month
period ending September 30, 2006. Mr. Rushin is also entitled to receive options
to purchase 300,000 shares of the Company's common stock. As of June 30, 2007
the Company had not issued these options.


                                       9
<PAGE>

      On June 30, 2004, the Company issued 33,333 shares of its common stock to
Kelly Fielder for services provided to the Company.

      In November 2005, the Company issued 6,000,000 shares of common stock to
Kelly Fielder for services rendered.

      In January 2007, the Company issued 2,500,000 shares of common stock to
Kelly Fielder for services rendered. The shares were valued at $0.07 per share
for financial reporting purposes.

Long Term Incentive Plans - Awards in Last Fiscal Year
------------------------------------------------------

      None.

Employee Pension, Profit Sharing or Other Retirement Plans
----------------------------------------------------------

      The Company does not have a defined benefit, pension plan, profit sharing
or other retirement plan, although the Company may adopt one or more of such
plans in the future.

Compensation of Directors
-------------------------

          Standard Arrangements. At present, the Company does not pay its
          directors for attending meetings of the Board of Directors, although
          the Company may adopt a director compensation policy in the future.
          The Company has no standard arrangement pursuant to which directors of
          the Company are compensated for any services provided as a director or
          for committee participation or special assignments.

          Other Arrangements. During the year ended March 31, 2007, and except
          as disclosed elsewhere in this report, no director of the Company
          received any form of compensation from the Company.

Stock Option and Bonus Plans
----------------------------

      The Company has an Incentive Stock Option Plan, a Non-Qualified Stock
Option Plan and a Stock Bonus Plan. In some cases, these Plans are collectively
referred to as the "Plans". A summary description of these Plans follows. The
Plans provide for the granting, to selected employees of the Company and other
persons, of either stock bonuses or options to purchase shares of the Company's
common stock.

    Incentive Stock Option Plan. The Company's Incentive Stock Option Plan
    authorizes the issuance of shares of the Company's Common Stock to persons
    that exercise options granted pursuant to the Plan. Only Company employees
    may be granted options pursuant to the Incentive Stock Option Plan.

    Non-Qualified Stock Option Plan. The Company's Non-Qualified Stock Option
    Plan authorizes the issuance of shares of the Company's Common Stock to
    persons that exercise options granted pursuant to the Plans. The Company's


                                       10
<PAGE>

    employees, directors, officers, consultants and advisors are eligible to be
    granted options pursuant to the Plans, provided however that bona fide
    services must be rendered by such consultants or advisors and such services
    must not be in connection with the offer or sale of securities in a
    capital-raising transaction. The option exercise price is determined by the
    Company's Board of Directors.

    Stock Bonus Plan. The Company's Stock Bonus Plan allows for the issuance of
    shares of Common Stock to the Company's employees, directors, officers,
    consultants and advisors, provided however that bona fide services must be
    rendered by consultants or advisors and such services must not be in
    connection with the offer or sale of securities in a capital-raising
    transaction.

Summary
-------

      The following presents certain information as of July 31, 2007, concerning
the stock options and stock bonuses granted by the Company pursuant to the
Plans. Each option represents the right to purchase one share of the Company's
common stock.

                                  Total      Shares                 Remaining
                                 Shares   Reserved for   Shares      Options/
                               Reserved   Outstanding   Issued As     Shares
Name of Plan                  Under Plans   Options    Stock Bonus  Under Plans
------------                  ----------- ------------ -----------  -----------

Incentive Stock Option Plan    2,000,000          --         N/A     2,000,000
Non-Qualified Stock Option
  Plan                         2,000,000          --         N/A     2,000,000
Stock Bonus Plan               6,000,000         N/A      33,333       966,667

      The person listed below has received options or shares of the Company's
common stock as a stock bonus:

                             Incentive Stock Options
                             -----------------------

                    Shares                         Expiration   Options Expired/
                    Subject    Exercise   Date of    Date of    Exercised as of
Option Holder      To Option     Price     Grant     Option      June 30, 2006
-------------      ---------   --------   -------  ----------   ---------------

                                      None

                           Non-Qualified Stock Options
                           ---------------------------

                    Shares                         Expiration   Options Expired/
                    Subject    Exercise   Date of    Date of    Exercised as of
Option Holder      To Option     Price     Grant     Option      June 30, 2006
-------------      ---------   --------   -------  ----------   ---------------

                                      None


                                       11
<PAGE>


                                  Stock Bonuses
                                  -------------

                              Shares Issued
Name                          as Stock Bonus          Date Issued
----                          --------------          -----------

Kelly Fielder                     33,333                6-30-04

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

      The following table lists the share ownership of the Company's  officers
and directors of each person known by the Company to be the beneficial owner of
more than 5% of the Company's outstanding common stock as of July 31, 2007.
Except as otherwise indicated, the Company believes that the beneficial owners
of the common stock listed below, have sole investment and voting power with
respect to such shares.

                                   Number of Shares            Percent of
Name and Address                  Beneficially Owned       Outstanding Shares

Kelly Fielder                         8,866,000                      63%
4750 Paton St.
Vancouver, B.C.
Canada  V6L 2J1

Gary Rushin                                  -- (1)                   --
706 Clark Court, NE #202
 Leesburg, VA 20176

Spectrum Meditech Inc.                   20,417 (2)                  nil
4750 Paton St.
Vancouver, B.C.
Canada  V6L 2J1

 Murray Atkins                        2,566,818 (3)                18.2%
 Suite 101
 1111-11th Avenue S.W.
 Calgary, Alberta T2R 0G5

 All officers and directors as a      8,886,417                    63.2%
   group (2 persons)                ===========                    =====


(1)  The  Company has agreed to issue Mr.  Ruskin an option to purchase  300,000
     shares of the Company's common stock. The exercise price and the expiration
     date of these options has not been determined.
(2)  Spectrum Meditech, Inc. is controlled by Kelly Fielder.


                                       12
<PAGE>

(3)  Includes  2,500,000  shares owned of record by a corporation  controlled by
     Murray Atkins,  but excluded  5,840,000  shares which, as of June 30, 2007,
     would be  issuable  upon the  conversion  of  promissory  notes held by Mr.
     Atkins.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
---------------------------------------------------------

      The Company acquired its license to the Needle-Ease device from Spectrum
Meditech Inc. Kelly Fielder, an officer, director and principal shareholder of
the Company, is also an officer, director and principal shareholder of Spectrum
Meditech Inc.

      Between April 2003 and June 2004 the Company borrowed $292,275 from Murray
Atkins, a principal shareholder of the Company. The amounts borrowed were
represented by notes which, at the option of Mr. Atkins, were convertible into
shares of the Company's common stock. During March and June 2004 Mr. Atkins
converted the notes into 64,950 shares of the Company's common stock. In
November 2005, the Company issued $292,275 of convertible notes to Murray Atkins
in exchange for common shares held by Mr. Atkins and cash in the amount of
$120,780. At Mr. Atkins' option, the notes are convertible into shares of the
Company's common stock equal in number to the amount determined by dividing each
$1.00 of note principal or accrued interest to be converted by an amount equal
to 90% of average closing bid price of Quantum's common stock for the 30 trading
days preceding the date of conversion. The notes bear interest at 5.5% per year
but all accrued interest has been waived by Mr. Atkins.

      In January 2006, the Company entered into a Note Conversion Agreement with
Mr. Atkins. Under the terms of the Note Conversion Agreement, as amended, Mr.
Atkins agreed to convert a promissory note with a principal balance of $100,000
into 1,000,000 shares of the Company's common stock. Prior to September 30, 2007
Mr. Atkins agreed to sell not more than 50,000 shares per week, and at a price
of not less than $0.40 per share, without the consent of the Company. All
proceeds received by Mr. Atkins from the sale of the shares will reduce the
amounts owed by the Company under the promissory notes. Any shares remaining at
September 30, 2007 can be returned to the Company or retained by Mr. Atkins, at
his option. If shares are returned to the Company, a new promissory note will be
issued to Mr. Atkins for any balance remaining on the $100,000 note. If any
shares are retained by Mr. Atkins, the shares will be valued at 90% of the
average closing price of the Company's common stock for the 30 trading days
preceding September 30, 2007. The value of the shares will then be applied
against amounts owing under any of the notes which remain unpaid at September
30, 2007. If the value of the shares exceeds $100,000 plus the amounts payable
under the remaining unpaid notes, Mr. Atkins will return to the Company that
number of shares determined by dividing the excess value by the average closing
price of the Company's common stock for the 30 trading days preceding September
30, 2007.

      In April 2006 Mr. Atkins agreed to convert promissory notes with a
principal balance of $185,780 into 1,280,000 shares of the Company's common
stock, the note bears interest at 5.5% per year and is due and payable on August
15, 2006. The 1,280,000 shares were issued to eight persons in consideration for
services provided to the Company. Kelly Fielder, the Company's President,
received 300,000 of these shares. In consideration for the conversion of the


                                       13
<PAGE>

notes and the transfer of the shares, the Company issued Mr. Atkins a new
promissory note in the principal amount of $185,780.

      On June 30, 2004 the Company issued 33,333 shares of its common stock to
Kelly Fielder for services rendered.

      On November 15, 2005 the Company issued 6,000,000 shares of its common
stock to Kelly Fielder for services rendered.

      On January 10, 2006 the Company issued 5,000,000 shares of its common
stock to Memphis Capital Corp. for consulting and financial services. The shares
were later returned to the Company and cancelled.

      In April 2006 the Company issued 10,0000 shares of its common stock to an
unrelated party for consulting services.

      In January 2007 the Company issued 2,500,000 shares of common stock to
Kelly Fielder, and 2,500,000 shares of common stock to Blur Investments, a firm
controlled by Murray Atkins. The shares were issued for services rendered and
valued at $0.07 a share for financial reporting purposes.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
Exh. #      Description of Exhibit                                  Page Number
----------  ----------------------                                  -----------

3.1         Certificate of Incorporation                                 *

3.3         Bylaws                                                       *

31          Rule 13a-14(a) Certifications

32          Section 1350 Certifications

*   Incorporated by referenced to the same exhibit filed with the Company's
    registration statement on Form 10-SB.

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

      Manning Elliott LLP, Chartered Accountants ("Manning Elliott"), served as
the Company's independent public accountants during the fiscal year ended March
31, 2002. Spicer Jeffries LLP ("Spicer Jeffries") served as the Company's
independent public accountants during the fiscal year ended March 31, 2003, and
until June 16, 2004.

      Effective February 14, 2003, the Company dismissed Manning Elliott, and
hired Spicer Jeffries as the Company's independent certified public accountants.


                                       14
<PAGE>

      Effective June 16, 2004, Spicer Jeffries resigned as the Company's
independent accountants as a result of the decision by Spicer Jeffries to
discontinue its auditing practice for publicly traded corporations.

      On June 16, 2004, the Company retained Schumacher & Associates, Inc.
("Schumacher & Associates") to act as the Company's independent certified public
accountants.

      Effective September 24, 2004, the Company dismissed Schumacher &
Associates as its independent auditors.

      On May 17, 2005, the Company rehired Manning Elliott as its independent
auditors.

      The following table shows the aggregate fees billed to the Company during
the years ended March 31, 2006, and 2007 by Manning Elliott, and Schumacher &
Associates.


                                               2006         2007

            Audit Fees                      $31,000       $30,750
            Audit-Related Fees                   --            --
            Financial Information Systems        --            --
            Design and Implementation Fees       --            --
            Tax Fees                             --            --
            All Other Fees                       --            --

      Audit fees represent amounts billed for professional services rendered for
the audit of the Company's annual financial statements and the reviews of the
financial statements included in the Company's Forms 10-QSB for the fiscal year.
Before Manning Elliott and Spicer Jeffries were engaged by the Company to render
audit services, the engagements were approved by the Company's Directors.


                                       15
<PAGE>

Quantum MRI, Inc.
(A Development Stage Company)

March 31, 2007

                                                                           Index

Report of Independent Registered Public Accounting Firm....................F-1

Consolidated Balance Sheets................................................F-2

Consolidated Statements of Operations......................................F-3

Consolidated Statements of Cash Flows......................................F-4

Consolidated Statements of Stockholders' Deficit...........................F-5

Notes to the Consolidated Financial Statements.............................F-6






<PAGE>



             Report of Independent Registered Public Accounting Firm

To the Directors and Stockholders
Quantum MRI, Inc.
(A Development Stage Company)

We have audited the accompanying consolidated balance sheets of Quantum MRI,
Inc. as of March 31, 2007 and 2006 and the related consolidated statements of
operations, cash flows and stockholders' equity (deficit) for the years then
ended and accumulated from June 7, 1989 (Date of Inception) to March 31, 2007.
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 audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Quantum
MRI, Inc. as of March 31, 2007 and 2006, and the results of its operations and
its cash flows for the years then ended and accumulated from June 7, 1989 (Date
of Inception) to March 31, 2007, in conformity with accounting principles
generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has not generated any sustained
revenues and has incurred significant operating losses since inception. The
Company has a working capital deficiency and will need additional financing to
sustain operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

As discussed in Note 10 to the consolidated financial statements, the
comparative consolidated balance sheet as of March 31, 2006 and the related,
consolidated statements of operations, cash flows, and stockholders' equity
(deficit) for the year ended March 31, 2006 have been restated to reflect the
cancellation of common shares issued for services.

/s/ MANNING ELLIOTT LLP

                             CHARTERED ACCOUNTANTS

Vancouver, Canada

August 3, 2007

                                      F-1

<PAGE>

Quantum MRI, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US dollars)


                                                           March 31,  March 31,
                                                             2007        2006
                                                               $          $
                                                                      Restated-
                                                                      (Note 10)

ASSETS

Current Assets

Cash                                                             142     75,897
                                                         ------------ ----------
Total Current Assets                                             142     75,897

Property and Equipment (Note 3)                                1,527      3,405
                                                         ------------ ----------
Total Assets                                                   1,669     79,302
                                                         ============ ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

 Accounts payable                                            151,838    142,668
 Accrued liabilities (Note 4(a))                              96,385           -
 Due to related parties (Note 4)                           1,189,931  1,067,703
 Loans payable (Note 5)                                      160,700    100,000
 Convertible notes payable (Note 6)                          303,055    314,230
                                                         ------------ ----------
Total Liabilities                                          1,901,909  1,624,601
                                                         ------------ ----------
Commitments and Contingencies (Notes 1 and 8)

Stockholders' Deficit

Common Stock
Authorized: 50,000,000 shares, par value $0.001
Issued: 14,071,391 and 7,691,391 shares, respectively         14,071      7,691

Additional Paid-in Capital                                 5,365,240  3,799,528

Common Stock Subscribed (Note 7)                             125,550    101,550

Deficit Accumulated During the Development Stage          (7,405,101)(5,454,068)
                                                         ------------ ----------
Total Stockholders' Deficit                               (1,900,240)(1,545,299)
                                                         ------------ ----------
Total Liabilities and Stockholders' Deficit                    1,669     79,302
                                                         ============ ==========

  The accompanying notes are an integral part of these financial statements.

                                       F-2



<PAGE>

Quantum MRI, Inc
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US dollars)

                                           Accumulated From
                                             June 7, 1989         For the
                                          (Date of Inception)    Year Ended
                                             to March 31,         March 31,
                                                 2007         2007         2006
                                                   $            $            $
                                                                       (Restated
                                                                           -
                                                                        Note 10)

Revenue                                           2,731            -          -
                                            ------------  -----------  ---------
Expenses

Consulting                                    1,298,575    1,089,960     36,567
Donated rent (Note 4(c))                        100,065       27,060     25,596
Donated services                                 28,070            -          -
General and administrative                      409,039       29,123     14,697
Impairment loss on intangible asset             252,819            -          -
Management fees (Notes 4(a))                  2,993,000      343,000  2,280,000
Product development                              92,402            -          -
Professional fees                               434,977       71,648     59,851
                                            ------------  -----------  ---------

Total Expenses                                5,608,947    1,560,791  2,416,711
                                            ------------  -----------  ---------
Other Expense

 Beneficial conversion feature of
convertible notes                                66,537       26,034     40,503
 Imputed interest  (Notes 4(b) and 6)           460,398      201,615    120,227
 Interest expense                               381,733      162,593    219,140
 Loss on settlement of debt                     230,000            -    230,000
                                            ------------  -----------  ---------
Net Loss                                     (6,744,884)  (1,951,033)(3,026,581)
                                            ============  =========== ==========
Net Loss Per Share - Basic and Diluted                         (0.19)     (0.99)
                                            ============  =========== ==========
Weighted Average Shares Outstanding                        10,044,000 3,043,000
                                                          =========== ==========

  The accompanying notes are an integral part of these financial statements.

                                      F-3

<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US dollars)

                                         Accumulated from   For the    For the
                                          June 7, 1989    Year Ended  Year Ended
                                       (Date of Inception) March 31,  March 31,
                                                2007         2007        2006
                                                 $            $            $
                                                                       (Restated
                                                                      - Note 10)

Operating Activities

Net loss for the period                   (6,744,884)   (1,951,033) (3,026,581)

Adjustment to reconcile net loss to
net cash used in operating activities
Beneficial conversion feature of

convertible notes                             66,537       26,034       40,503
Depreciation and amortization                 35,624        1,878        1,878
Donated rent                                 128,135       27,060       25,596
Impairment loss on intangible asset          252,819            -            -
Imputed interest                             460,398      201,615      120,227
Loss on disposal of assets                     4,597            -            -
Loss on settlement of debt                   230,000            -      230,000
Stock issued pursuant to loan agreements     101,550            -      101,550
Stock-based compensation                   3,677,296    1,346,775    2,230,521


Changes in operating assets and liabilities:
 Accounts payable and accrued liabilities    258,590       98,988      (7,052)
 Due from related parties                    503,303      122,228       62,902
                                        ------------- ------------ ------------
Net Cash Used in Operating Activities     (1,026,035)    (126,455)    (220,456)
                                        ------------- ------------ ------------
Investing Activities
      Purchase of property and equipment     (19,603)           -            -
                                        ------------- ------------ ------------
Net Cash Used in Investing Activities        (19,603)           -            -
                                        ------------- ------------ ------------
Financing Activities

   Proceeds from loans payable               185,700       85,700      100,000
   Repayment of loans payable                (25,000)     (25,000)           -
   Proceeds from convertible notes payable   433,305            -       45,780
   Repayment of convertible notes payable    (10,000)     (10,000)           -
   Proceeds from issuance of common
    stock, net                               461,775            -      150,450
                                        ------------- ------------ ------------
Net Cash Flows Provided By Financing
Activities                                 1,045,780       50,700      296,230
                                        ------------- ------------ ------------
Increase (Decrease) In Cash                      142      (75,755)      75,774

Cash - Beginning of Period                         -       75,897          123
                                        ------------- ------------ ------------
Cash - End of Period                             142          142       75,897
                                        ============= ============ ============
Non-cash Investing and Financing
Activities

   Share issued pursuant to loan agreement   101,550           -      101,550
   Shares issued on conversion of notes
    payable                                1,288,275     896,000      100,000
   Forgiveness of debt with settlement
    from shareholder                         239,487           -      239,487
   Acquisition of licensing agreement
    with assumption of liabilities           274,964           -            -
   Licensing agreement acquired              918,490           -            -
                                        ============= ============ ============

Supplemental Disclosures

   Interest paid                                   -           -           -
  Income taxes paid                                -           -           -
                                        ============= ============ ============

  The accompanying notes are an integral part of these financial statements.

                                      F-4

<PAGE>


Quantum MRI, Inc.
(formerly Travelshorts.com, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) - continued From June
7, 1989 (Date of inception) to March 31, 2007 (expressed in US dollars)

<TABLE>
<S>                                      <C>            <C>        <C>          <C>        <C>

                                                                             Deficit
                                                                           Accumulated
                                                                Additional  During the
                                            Common Stock         Paid-in   Development
                                        Shares        Amount     Capital       Stage      Total
                                           #            $           $             $          $

Balance -June 7, 1989 (Date of
inception)                                   -             -           -           -          -

Stock issued for services at
$0.045 per share                        50,000            50      (2,450)          -      2,500

Net loss for the period                      -             -           -      (2,500)    (2,500)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31, 1997                50,000            50      (2,450)     (2,500)         -

Sale of common stock for cash
at $1.05 per share                      55,800            56      59,944           -     60,000

Net loss for the year                        -             -           -     (52,100)   (52,100)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31, 1998               105,800           106      62,394     (54,600)     7,900

Sale of common stock for cash
at $6.75 per share                       1,720             2      11,498           -     11,500

Net loss for the year                        -             -           -     (21,400)   (21,400)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31, 1999               107,520           108      73,892     (76,000)    (2,000)

Sale of common stock for cash
at $25.00 per share                      1,460             1      36,499           -     36,500

Net loss for the year                        -             -           -     (12,471)   (12,471)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31,2000                108,980           109     110,391     (88,471)    22,029

Sale of common stock for cash
at $28.35 per share                        657             1      18,624           -     18,625

Stock cancelled and returned            (2,000)           (2)     (1,998)          -     (2,000)

Net loss for the year                        -             -           -     (82,446)   (82,446)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31, 2001               107,637           108     127,017    (170,917)   (43,792)

Stock cancelled and returned              (680)           (1)          1           -          -

Stock reissued                             366             -           -           -          -

Donated capital                              -             -      27,475           -     27,475

  Net loss for the year                      -             -           -     (50,750)   (50,750)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31, 2002               107,323           107     154,493    (221,667)   (67,067)

Acquisition of SETI                    111,275           111      16,580    (660,217)  (643,526)

Cancellation of shares                 (50,000)          (50)     (7,450)          -     (7,500)

Sale of common stock for cash
   at $75.00 per share                   1,933             2     144,998           -    145,000

Offering costs                               -             -      (6,000)          -     (6,000)

Forgiveness of debt                          -             -      20,250           -     20,250

Donated capital                              -             -      26,059           -     26,059

Net loss for the year                        -             -           -    (195,666)  (195,666)
                                    -----------   -----------  ---------- ----------- ----------
Balance - March 31, 2003               170,531           170     348,930  (1,077,550)  (728,450)

Sale of common stock for cash
   at $75.00 per share                     620             1      46,499           -     46,500

Adjustment for non-cancellation
of shares                               50,000            50         (50)          -          -

Shares repurchased                     (33,178)          (33)     (1,267)          -     (1,300)

Donated capital                              -             -      71,767           -     71,767

Net loss for the year                        -             -           -    (915,529)  (915,529)
                                    -----------   -----------  ---------- ----------- ----------

Balance - March 31, 2004               187,973           188     465,879  (1,993,079)(1,527,012)
                                    ===========   ===========  ========== =========== ==========

</TABLE>

  The accompanying notes are an integral part of these financial statements.

                                      F-5


<PAGE>


Quantum MRI, Inc.
(formerly Travelshorts.com, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) - continued From June
7, 1989 (Date of inception) to March 31, 2007 (expressed in US dollars)

<TABLE>
<S>                                      <C>            <C>        <C>         <C>        <C>           <C>

                                                                                        Deficit
                                                                                      Accumulated
                                                                Additional   Common    During the
                                            Common Stock         Paid-in      Stock   Development
                                        Shares        Amount     Capital   Subscribed     Stage        Total
                                           #            $           $           $           $            $

Balance - March 31, 2004                187,973          188      465,879          -   (1,993,079)  (1,527,012)

Stock issued for
conversion of notes
at $4.50 per share                       64,950           65      292,210          -            -      292,275

Stock issued for management
services at $3.00 per share              33,333           33       99,967          -            -      100,000

Donated capital                               -            -       88,609          -            -       88,609

Net loss for the year                         -            -            -          -     (434,408)    (434,408)
                                     ----------- ------------ ------------ ---------- ------------ ------------

Balance - March 31, 2005                286,256          286      946,665          -   (2,427,487)  (1,480,536)

Shares returned to treasury
for cancellation                        (50,000)         (50)          50          -            -            -

Sale of common stock
at $0.29 per share                      485,000          485      139,465          -            -      139,950

Sale of common stock
at $0.30 per share                       35,000           35       10,465          -            -       10,500

Shares issued for
management services
at $0.36 per share                    6,000,000        6,000    2,154,000          -            -    2,160,000

Shares returned to treasury
for cancellation                        (64,950)         (65)    (292,210)         -            -     (292,275)

Shares issued for services at
$0.35 per share                       5,000,000        5,000    1,745,000          -            -    1,750,000

Shares returned to treasury
for cancellation                     (5,000,000)      (5,000)  (1,745,000)         -            -   (1,750,000)

Shares issued on
conversion of debt                    1,000,000        1,000      329,000          -            -      330,000

Shares issuable pursuant to
investment agreements                         -            -            -    101,550            -      101,550

Beneficial conversion feature                 -            -       45,895          -            -       45,895

Donated capital                               -            -       25,596          -            -       25,596

Fair value of warrants issued
pursuant to investment                        -            -       70,520          -            -       70,520

Gain on forgiveness of debt                   -            -      239,487          -            -      239,487

Imputed interest                              -            -      130,595          -            -      130,595

Net loss for the year                         -            -            -          -   (3,026,581)  (3,026,581)
                                     ----------- ------------ ------------ ---------- ------------ ------------
Balance - March 31, 2006
(Restated - Note 10)                  7,691,306        7,691    3,799,528    101,550   (5,454,068)  (1,545,299)
                                     =========== ============ ============ ========== ============ ============

</TABLE>

  The accompanying notes are an integral part of these financial statements.

                                      F-6


<PAGE>


Quantum MRI, Inc.
(formerly Travelshorts.com, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
From June 7, 1989 (Date of inception) to March 31, 2007
(expressed in US dollars)

<TABLE>
<S>                                      <C>            <C>        <C>         <C>        <C>           <C>

                                                                                        Deficit
                                                                                      Accumulated
                                                                Additional   Common    During the
                                            Common Stock         Paid-in      Stock   Development
                                        Shares        Amount     Capital   Subscribed     Stage        Total
                                           #            $           $           $           $            $

Balance - March 31, 2006
(Restated - Note 10)                   7,691,306        7,691    3,799,528   101,550   (5,454,068)  (1,545,299)

Shares issued on
conversion of debt                     1,280,000        1,280      894,720   (90,000)           -      806,000

Shares issued for services at
$0.70 per share                          100,000          100       69,900         -            -       70,000

Shares issued for services at
$0.07 per share                        5,000,000        5,000      345,000         -            -      350,000

Shares issuable pursuant to
loan agreement                                 -            -            -   114,000            -      100,000

Beneficial conversion feature                  -            -       20,642         -            -       20,642

Fair value of warrants issued
pursuant to investment                         -            -        6,775         -            -        6,775

Donated capital                                -            -       27,060         -            -       27,060

Imputed interest                               -            -      201,615         -            -      201,615

Net loss for the year                          -            -            -         -   (1,951,033)  (1,951,033)
                                     ----------- ------------ ------------ ---------- ------------ ------------
Balance - March 31, 2007              14,071,306       14,071    5,365,240   125,550   (7,405,245)  (1,914,240)
                                     =========== ============ ============ ========== ============ ============


</TABLE>

  The accompanying notes are an integral part of these financial statements.

                                      F-7


<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

1. Nature of Operations and Continuance of Business

   Quantum MRI Inc. (the "Company") was incorporated in Washington on June 7,
   1989 under the name P.L.D.F.E.T., Inc. On March 17, 2000, the Company changed
   its name to Travelshorts.com, Inc. On May 5, 2005, the Company changed its
   name to Sharps Elimination Technologies, Inc. On August 25, 2005, the Company
   changed its name to Quantum MRI, Inc. The Company is in the development stage
   as defined by the Statement of Financial Accounting Standard ("SFAS") No. 7
   "Accounting and Reporting by Development Stage Enterprises". The Company's
   principal business is the constructing and operating MRI testing centers in
   the United States and Canada.

   On December 3, 2002, the Company acquired all of the issued and outstanding
   shares of SETI Corp. ("SETI") in exchange for 111,275 newly issued
   split-adjusted shares of the Company's common stock. Prior to the
   acquisition, the Company had no operations and was considered a public shell.
   SETI was also a development stage company with no operations, however had a
   licensing agreement for certain patented technology (see Note 5).
   Accordingly, since SETI was not considered a business, the transaction was
   accounted for as a recapitalization of the public shell and the issuance of
   stock by the Company for the assets and liabilities of SETI. The value of the
   net assets of SETI is the same as their historical book value, which included
   the licensing agreement of $274,964 and liabilities assumed of $918,490. In
   addition, as part of the transaction, the former president returned 50,000
   split-adjusted common shares to the Company for cancellation.

   The accompanying consolidated financial statements include the historical
   accounts of SETI since December 3, 2002. All significant intercompany
   balances and transactions have been eliminated in consolidation.

   At March 31, 2007, the Company had a working capital deficit of $1,901,767
   and accumulated losses of $7,405,101 since inception. The ability of the
   Company to continue as a going concern is dependent on its ability to emerge
   from the development stage with respect to its planned principal business
   activity, attaining profitable operations and raising additional debt and/or
   equity financing to fund its operations. Management's plan in this regard is
   to raise additional funding through private offerings and to operate MRI
   testing centers. These factors raise substantial doubt about the Company's
   ability to continue as a going concern. The consolidated financial statements
   do not include any adjustment relating to the recovery and classification of
   recorded asset amounts or the amount and classification of liabilities that
   might be necessary should the Company discontinue operations.



                                       8
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

2. Significant Accounting Policies

(a)   Basis of Presentation

      These financial statements are prepared in conformity with accounting
      principles generally accepted in the United States and are expressed in US
      dollars. These financial statements include accounts of the Company and
      its wholly-owned subsidiary, SETI Corp. All significant intercompany
      transactions and balances have been eliminated. The Company's fiscal year
      end is March 31.

(b)   Use of Estimates

      The preparation of financial statements in accordance with United States
      generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenue and expenses in the reporting period. The Company
      regularly evaluates estimates and assumptions related to stock-based
      compensation expense, donated expenses, imputed interest, and deferred
      income tax asset valuations. The Company bases its estimates and
      assumptions on current facts, historical experience and various other
      factors that it believes to be reasonable under the circumstances, the
      results of which form the basis for making judgments about the carrying
      values of assets and liabilities and the accrual of costs and expenses
      that are not readily apparent from other sources. The actual results
      experienced by the Company may differ materially and adversely from the
      Company's estimates. To the extent there are material differences between
      the estimates and the actual results, future results of operations will be
      affected.

(c)   Cash Equivalents

      The Company considers all highly liquid instruments with a maturity of
      three months or less at the time of issuance to be cash equivalents.

(d)   Property and Equipment

      Property and equipment are stated at cost less accumulated depreciation
      and consist of computer hardware and office furniture. These assets are
      depreciated on a straight-line basis using an estimated useful life of
      five years.

(e)   Comprehensive Income

      SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
      the reporting and display of comprehensive income and its components in
      the financial statements. As at March 31, 2007 and 2006, the Company has
      no items that represent comprehensive income and, therefore, has not
      included a schedule of comprehensive income in the financial statements.



                                       9
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

2. Significant Accounting Policies (continued)

(f)   Product Development Costs

      Product development costs related to the Needle-Ease(TM) technology are
      expensed as incurred.

(g)   Long-lived Assets

      In accordance with SFAS No. 144, "Accounting for the Impairment or
      Disposal of Long-Lived Assets", the Company tests long-lived assets or
      asset groups for recoverability when events or changes in circumstances
      indicate that their carrying amount may not be recoverable. Circumstances
      which could trigger a review include, but are not limited to: significant
      decreases in the market price of the asset; significant adverse changes in
      the business climate or legal factors; accumulation of costs significantly
      in excess of the amount originally expected for the acquisition or
      construction of the asset; current period cash flow or operating losses
      combined with a history of losses or a forecast of continuing losses
      associated with the use of the asset; and current expectation that the
      asset will more likely than not be sold or disposed significantly before
      the end of its estimated useful life.

      Recoverability is assessed based on the carrying amount of the asset and
      its fair value which is generally determined based on the sum of the
      undiscounted cash flows expected to result from the use and the eventual
      disposal of the asset, as well as specific appraisal in certain instances.
      An impairment loss is recognized when the carrying amount is not
      recoverable and exceeds fair value.

(h)   Foreign Currency Translation

      The Company's functional and reporting currency is the United States
      dollar. The financial statements of the Company are translated to United
      States dollars in accordance with SFAS No. 52 "Foreign Currency
      Translation". Monetary assets and liabilities denominated in foreign
      currencies are translated using the exchange rate prevailing at the
      balance sheet date. Gains and losses arising on translation or settlement
      of foreign currency denominated transactions or balances are included in
      the determination of income. Foreign currency transactions are primarily
      undertaken in Canadian dollars. The Company has not, to the date of these
      financials statements, entered into derivative instruments to offset the
      impact of foreign currency fluctuations.



                                       10
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

2. Significant Accounting Policies (continued)

(i)   Income Taxes

      Potential benefits of income tax losses are not recognized in the accounts
      until realization is more likely than not. The Company has adopted SFAS
      No. 109 "Accounting for Income Taxes" as of its inception. Pursuant to
      SFAS No. 109, the Company is required to compute tax asset benefits for
      net operating losses carried forward. Potential benefit of net operating
      losses have not been recognized in these financial statements because the
      Company cannot be assured it is more likely than not it will utilize the
      net operating losses carried forward in future years.

(j)   Stock-based Compensation

      Prior to January 1, 2006, the Company accounted for stock-based awards
      under the recognition and measurement provisions of Accounting Principles
      Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees"
      using the intrinsic value method of accounting, under which compensation
      expense was only recognized if the exercise price of the Company's
      employee stock options was less than the market price of the underlying
      common stock on the date of grant. Effective January 1, 2006, the Company
      adopted the fair value recognition provisions of SFAS No. 123R "Share
      Based Payments", using the modified prospective transition method. The
      Company has not issued any stock options since its inception. Accordingly,
      there was no effect on the Company's reported loss from operations, cash
      flows or loss per share, as a result of adopting SFAS No. 123R.

(k)   Financial Instruments

      The fair values of cash, accounts payable, accrued liabilities, amounts
      due to related parties, loans payable, and convertible notes payable
      approximate their fair value due to the relatively short maturity of these
      instruments.

(l)   Revenue Recognition

      The Company recognizes revenue in accordance with SEC Staff Accounting
      Bulletin No. 104 when there is persuasive evidence of an arrangement,
      delivery of products has occurred or services have been rendered, the
      seller's price to the buyer is fixed or determinable, and collectibility
      is reasonably assured.



                                       11
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

2. Significant Accounting Policies (continued)

(m) Basic and Diluted Net Income (Loss) per Share

      The Company computes net income (loss) per share in accordance with SFAS
      No. 128, "Earnings per Share", which requires presentation of both basic
      and diluted earnings per shares (EPS) on the face of the income statement.
      Basic EPS is computed by dividing net income (loss) available to common
      shareholders (numerator) by the weighted average number of common shares
      outstanding (denominator) during the period. Diluted EPS gives effect to
      all dilutive potential common shares outstanding during the period
      including stock options, using the treasury stock method, and convertible
      preferred stock, using the if-converted method. In computing diluted EPS,
      the average stock price for the period is used in determining the number
      of shares assumed to be purchased from the exercise of stock options or
      warrants. Diluted EPS excludes all dilutive potential common shares if
      their effect is anti-dilutive.

(n)   Recent Accounting Pronouncements

      In February 2007, the Financial Accounting Standards Board (FASB) issued
      SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an Amendment of FASB Statement No. 115". This
      statement permits entities to choose to measure many financial instruments
      and certain other items at fair value. Most of the provisions of SFAS No.
      159 apply only to entities that elect the fair value option. However, the
      amendment to SFAS No. 115 "Accounting for Certain Investments in Debt and
      Equity Securities" applies to all entities with available-for-sale and
      trading securities. SFAS No. 159 is effective as of the beginning of an
      entity's first fiscal year that begins after November 15, 2007. Early
      adoption is permitted as of the beginning of a fiscal year that begins on
      or before November 15, 2007, provided the entity also elects to apply the
      provision of SFAS No. 157, "Fair Value Measurements". The adoption of this
      statement is not expected to have a material effect on the Company's
      financial statements.

      In September 2006, the SEC issued Staff Accounting Bulletin ("SAB") No.
      108, "Considering the Effects of Prior Year Misstatements when Quantifying
      Misstatements in Current Year Financial Statements." SAB No. 108 addresses
      how the effects of prior year uncorrected misstatements should be
      considered when quantifying misstatements in current year financial
      statements. SAB No. 108 requires companies to quantify misstatements using
      a balance sheet and income statement approach and to evaluate whether
      either approach results in quantifying an error that is material in light
      of relevant quantitative an qualitative factors. SAB No. 108 is effective
      for periods ending after November 15, 2006. The adoption of this statement
      did not have a material effect on the Company's reported financial
      statements.



                                       12
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

2. Significant Accounting Policies (continued)

   (n)Recent Accounting Pronouncements (continued)

      In September 2006, the Financial Accounting Standards Board ("FASB")
      issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension
      and Other Postretirement Plans - an amendment of FASB Statements No. 87,
      88, 106, and 132(R)" ("SFAS 158"). This statement requires employers to
      recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes
      in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net
      assets of a not-for-profit organization. This statement also requires an
      employer to measure the funded status of a plan as of the date of its
      year-end statement of financial position, with limited exceptions. The
      provisions of SFAS 158 are effective for employers with publicly traded
      equity securities as of the end of the fiscal year ending after December
      15, 2006. The adoption of this statement did not have a material effect on
      the Company's financial statements.

      In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
      ("SFAS 157"). The objective of SFAS 157 is to increase consistency and
      comparability in fair value measurements and to expand disclosures about
      fair value measurements. SFAS 157 defines fair value, establishes a
      framework for measuring fair value in generally accepted accounting
      principles, and expands disclosures about fair value measurements. SFAS
      157 applies under other accounting pronouncements that require or permit
      fair value measurements and does not require any new fair value
      measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on
      the Company's future reported financial position or results of operations.

      In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statements No.
      109". FIN 48 clarifies the accounting for uncertainty in income taxes by
      prescribing a two-step method of first evaluating whether a tax position
      has met a more likely than not recognition threshold and second, measuring
      that tax position to determine the amount of benefit to be recognized in
      the financial statements. FIN 48 provides guidance on the presentation of
      such positions within a classified statement of financial position as well
      as on derecognition, interest and penalties, accounting in interim
      periods, disclosure, and transition. FIN 48 is effective for fiscal years
      beginning after December 15, 2006. The adoption of this statement is not
      expected to have a material effect on the Company's future reported
      financial position or results of operations.



                                       13
<PAGE>

Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

2. Significant Accounting Policies (continued)

   (n)Recent Accounting Pronouncements (continued)

      In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
      Financial Assets, an amendment of FASB Statement No. 140, Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities". This statement requires all separately recognized servicing
      assets and servicing liabilities be initially measured at fair value, if
      practicable, and permits for subsequent measurement using either fair
      value measurement with changes in fair value reflected in earnings or the
      amortization and impairment requirements of Statement No. 140. The
      subsequent measurement of separately recognized servicing assets and
      servicing liabilities at fair value eliminates the necessity for entities
      that manage the risks inherent in servicing assets and servicing
      liabilities with derivatives to qualify for hedge accounting treatment and
      eliminates the characterization of declines in fair value as impairments
      or direct write-downs. SFAS No. 156 is effective for an entity's first
      fiscal year beginning after September 15, 2006. The adoption of this
      statement is not expected to have a material effect on the Company's
      future reported financial position or results of operations.

      In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
      Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and
      140", to simplify and make more consistent the accounting for certain
      financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for
      Derivative Instruments and Hedging Activities", to permit fair value
      re-measurement for any hybrid financial instrument with an embedded
      derivative that otherwise would require bifurcation, provided that the
      whole instrument is accounted for on a fair value basis. SFAS No. 155
      amends SFAS No. 140, "Accounting for the Impairment or Disposal of
      Long-Lived Assets", to allow a qualifying special-purpose entity to hold a
      derivative financial instrument that pertains to a beneficial interest
      other than another derivative financial instrument. SFAS No. 155 applies
      to all financial instruments acquired or issued after the beginning of an
      entity's first fiscal year that begins after September 15, 2006, with
      earlier application allowed. The adoption of this statement is not
      expected to have a material effect on the Company's future reported
      financial position or results of operations.

(o)   Reclassification

      Certain reclassifications have been made to the prior year's financial
      statements to conform to the current period's presentation.


                                       14
<PAGE>



Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

3. Property and Equipment

<TABLE>
<S>                                        <C>        <C>           <C>             <C>

                                                                  March 31,      March 31,
                                                                    2007           2006
                                                  Accumulated   Net Carrying   Net Carrying
                                           Cost   Depreciation      Value          Value
                                             $          $             $              $

   Office  furniture and computer
   hardware                                9,391      7,864         1,527          3,405
   ----------------------------------------------------------------------------------------

</TABLE>

4.    Related Party Transactions

(a)   During the fiscal year ended March 31, 2007, management fees of $168,000
      (2006 - $120,000) were charged to operations pursuant to executive
      services agreements with the President of the Company and the
      Vice-President of Finance. As at March 31, 2007, $48,000 owing to the
      Vice-President of Finance has been recorded as accrued liabilities and
      $120,000 owing to the President of the Company has been recorded as due to
      related parties. Refer to Notes 8(b) and (c).

(b)   As of March 31, 2007, the Company's President, and a company controlled by
      the President are owed $1,178,520 relating to amounts assumed by the
      Company at the acquisition of SETI and subsequent advances made to the
      Company. These amounts have no due date and are non-interest bearing.
      During the fiscal year ended March 31, 2007, interest of $184,543 (2006 -
      $120,227) has been imputed at twice prime rate and charged to operations
      with a corresponding credit to additional paid-in capital.

(c)   During the fiscal year ended March 31, 2007, the Company recognized a
      total of $27,060 (2006 - $25,596) for donated rent provided by the
      President of the Company.

(d)   On April 7, 2006, the President of the Company received 300,000 shares of
      common stock in consideration for services provided to the Company as
      described in Note 6.

(e)   On January 10, 2007, the Company issued 2,500,000 shares of common stock
      with a fair value of $175,000 to the President of the Company for services
      provided. The shares were valued at the closing price of the Company's
      common stock on the date of issue.

(f)   As of March 31, 2007, the Company is indebted to a Director of the Company
      for $11,411, representing expenses paid on behalf of the Company. These
      amounts have no due date and are non-interest bearing.


                                       15
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

5.    Loans Payable

(a)   On March 31, 2007, the Company entered into an investment agreement with
      an investor and received $10,700 as a loan repayable on September 1, 2007.
      Pursuant to the agreement, the Company will pay interest of 15% per annum.

(b)   On November 17, 2006, the Company  entered into an unsecured  investment
      agreement  with an investor and received  $50,000 as a loan repayable on
      or before January 20, 2007. Pursuant to the agreement,  the Company will
      pay  interest of 12% per annum and issue the investor  2,000,000  shares
      of the  Company's  common stock.  The  2,000,000  shares of common stock
      was valued at  $100,000  and  recorded  as  interest  expense and common
      stock  subscribed.  During the fiscal  year ended  March 31,  2007,  the
      Company accrued interest of $2,203.  At March 31, 2007, the loan remains
      unpaid and the 2,000,000 shares have not been issued.

(c)   On May 22,  2006,  the  Company  entered  into an  unsecured  investment
      agreement  with an investor and received  $25,000 as a loan repayable on
      July 22, 2006. Pursuant to the agreement,  the Company will pay interest
      of 15% per annum and issue the investor 35,000  restricted shares of the
      Company's  common  stock and a warrant  to  purchase  35,000  restricted
      shares  of the  Company's  common  stock at a price of $0.30  per  share
      until May 22,  2008.  During the fiscal year ended March 31,  2007,  the
      Company accrued  interest of $3,205 and no warrants were exercised.  The
      loan was not repaid on July 22, 2006 and remains  outstanding.  Refer to
      Note 7(d).

(d)   On March 6, 2006, the Company  entered into three  unsecured  investment
      agreements with investors to receive loans totalling $75,000,  repayable
      on May 6,  2006.  Pursuant  to the  agreements,  the  Company  will  pay
      interest  of  $15,000  and issue  the  investors  180,000  shares of the
      Company's  common  stock and  warrants  to purchase  180,000  restricted
      shares  of the  Company's  common  stock at a price of $0.30  per  share
      until May 6, 2007. At March 31, 2007,  the Company  accrued  interest of
      $15,000 and no  warrants  were  exercised.  The loans were not repaid on
      May 6,  2006,  and  remain  outstanding.  Under the terms of the  notes,
      additional  interest  of $2,500  is  charged  for each 30 day  period or
      fraction of 30 day period where the repayment of the  principal  amounts
      are past due. At March 31,  2007,  the  Company  had accrued  additional
      interest  penalties of $27,500  based on  non-payment  of the  principal
      portions of the notes payable.  Refer to Note 7(g).


                                       16
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

5.    Loans Payable (continued)
(e)   On February 8, 2006,  the Company  entered into an unsecured  investment
      agreement  with an investor and received  $25,000 as a loan repayable on
      April  10,  2006.  Pursuant  to the  agreement,  the  Company  will  pay
      interest  of 12% per  annum and issue  the  investor  35,000  restricted
      shares of the  Company's  common stock and a warrant to purchase  35,000
      restricted  shares of the Company's common stock at a price of $0.30 per
      share until  April 10,  2008.  At March 31,  2007,  the Company  accrued
      interest of $477 and no warrants were exercised.  During the fiscal year
      ended March 31, 2007, the loan was repaid.


6.    Convertible Notes Payable

   On November 16, 2005, the Company entered into an Exchange Agreement with the
   holder of all of the Company's outstanding notes payable (the "Creditor").
   Under the terms of the agreement, the Creditor agreed to return for
   cancellation the 64,950 shares of common stock previously received on
   settlement of promissory notes in exchange for three new convertible notes in
   the aggregate principal amount of $292,275. The notes matured on December 17,
   2005 ($100,000), January 15, 2006 ($100,000) and March 15, 2006 ($92,275).
   The Creditor also agreed to cancel the prior outstanding promissory notes
   totalling $85,780 in exchange for a new convertible note for $85,780 that
   matures on June 15, 2006. The Company also issued a new convertible note for
   cash proceeds of $35,000 that matures on August 15, 2006. All notes bear
   interest at 5.5% per annum. The principal and accrued interest on the
   promissory notes may be converted into shares of the Company's common stock
   at the Conversion Price at the option of the holder. The Conversion Price is
   90% of average closing bid price of the Company's common stock for the 30
   trading days preceding the conversion. During the year ended March 31, 2006,
   the creditor agreed to waive interest on all outstanding notes. As at March
   31, 2007, interest of $17,072 was treated as imputed at 5.5% per annum.

   In accordance with EITF 98-5 "Accounting for Convertible Securities with
   Beneficial Conversion Features or Contingently Adjustable Conversion Ratios",
   the Company recognized the value of the embedded beneficial conversion
   feature of $45,895 as additional paid-in capital as the debt was issued with
   an intrinsic value conversion feature. At March 31, 2006, the Company
   recognized $40,503 as interest expense which increased the carrying value of
   the promissory notes to $121,883. The Company recognized $5,392 as interest
   expense during the fiscal year ending March 31, 2007 and repaid $10,000 of
   principal payments, decreasing the carrying value of the promissory notes to
   the face value of $117,275.



                                       17
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

6. Convertible Notes Payable (continued)

    On January 26, 2006, the Company entered into a Note Conversion Agreement
    ("the Agreement") with the holder of the convertible promissory notes (the
    "Creditor"). Under the terms of the agreement, the Creditor agreed to
    convert the promissory note with a principal of $100,000 and a maturity date
    of December 17, 2005 into 1,000,000 shares of common stock. The Creditor
    will dispose of the shares in the market up to a maximum of 50,000 shares
    per week and, prior to March 31, 2006, at no less than $0.40 per share
    without the consent of the Company. All proceeds received by the Creditor to
    March 31, 2006 will reduce the amounts owed by the Company under the
    promissory notes. Any shares remaining at March 31, 2006 can be returned to
    the Company or retained by the Creditor. If shares are returned to the
    Company, a new promissory note will be issued for the balance of principal
    remaining after any reduction applied for proceeds from the sale of common
    stock. If shares are retained by the Creditor, the shares will be valued at
    90% of the average closing price of the Company's common stock for the 30
    trading days preceding March 31, 2006 (the "Calculated Value"). The
    Calculated Value will then be applied against amounts owing under any of the
    notes unpaid at March 31, 2006. If the Calculated Value of the shares
    exceeds $100,000 plus the aggregate amounts payable under the remaining
    unpaid notes (the "Remaining Value"), then the Creditor will return to the
    Company that number of shares determined by dividing the Remaining Value by
    the average closing price of the Company's common stock for the 30 trading
    days preceding March 31, 2006. During the period ended March 31, 2007, the
    Agreement was amended to extend the deadline to May 31, 2007.

   On April 7, 2006, the Company entered into a Note Conversion Agreement ("the
   Agreement") with the holder of the convertible promissory notes (the
   "Creditor"). Under the terms of the agreement, the Creditor agreed to convert
   the promissory note with a principal of $100,000 and a maturity date of
   January 15, 2006 and a note in the principal amount of $85,780 with a
   maturity date of June 15, 2006 into 1,280,000 shares of common stock. The
   shares were issued to eight individuals including 300,000 shares to the
   President of the Company in consideration for services provided to the
   Company. The fair value of the common stock issued exceeded the value of the
   promissory notes by $710,220. This amount has been recognized as the cost of
   the past services provided.


   In consideration for the transfer of the shares described above, the Company
   agreed to issue a promissory note in the amount of $185,780. In accordance
   with EITF 98-5 "Accounting for Convertible Securities with Beneficial
   Conversion Features or Contingently Adjustable Conversion Ratios", the
   Company recognized the value of the embedded beneficial conversion feature of
   $20,642 as additional paid-in capital as the debt was issued with an
   intrinsic value conversion feature. The Company recognized $20,642 as
   interest expense during the year ended March 31, 2007, increasing the
   carrying value of the promissory notes to the face value of $185,780.



                                       18
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

7.    Common Stock

(a)   On January 10, 2007, the Company issued 2,500,000 shares of common stock
      with a fair value of $175,000 for services provided to the Company. The
      shares were valued at the closing price of the Company's common stock on
      the date of issue.

(b)   On January 10, 2007, the Company issued 2,500,000 shares of common stock
      with a fair value of $175,000 to the President of the Company for services
      provided. The shares were valued at the closing price of the Company's
      common stock on the date of issue.

(c)   On November 17, 2006, pursuant to an investment agreement (refer to Note
      5(b)) the Company agreed to issue 2,000,000 shares of the Company's common
      stock with a fair value of $100,000. During the period ended March 31,
      2007, the total fair value of $100,000 was charged to interest expense
      with a corresponding credit of $100,000 to common stock subscribed.

(d)   On May 22,  2006,  pursuant to an  investment  agreement  (refer to Note
      5(c)) the Company agreed to issue 35,000 shares of the Company's  common
      stock with a fair value of  $14,000  and  warrants  to  purchase  35,000
      shares at $0.30 per share  with a fair  value of $6,775  pursuant  to an
      investment  agreement.  During  the period  ended  March 31,  2007,  the
      total fair value of $20,775  was  charged  to  interest  expense  with a
      corresponding  credit  of  $6,775  to  additional  paid in  capital  and
      $14,000 to common stock subscribed.

(e)   On April 10, 2006, the Company issued 100,000 common shares with a fair
      value of $70,000 for services provided to the Company. The shares were
      valued at the closing price of the Company's common stock on the date of
      issue.

(f)   On April 7, 2006, the Company issued 1,280,000 shares with a fair value of
      $896,000 upon the conversion of $185,780 of convertible notes payable
      during the period ended September 30, 2006, the Company recognized
      $710,220 as the cost of the past services provided.

(g)   On March 6, 2006,  the  Company  agreed to issue  180,000  shares of the
      Company's  common  stock with a fair value of $90,000  and  warrants  to
      purchase  180,000 shares at $0.30 per share with a fair value of $63,294
      pursuant  to three  investment  agreements.  During the year ended March
      31,  2006,  the total fair value of  $153,294  was  charged to  interest
      expense with a  corresponding  credit of $63,294 to  additional  paid-in
      capital and $90,000 to common  stock  subscribed.  During the year ended
      March 31,  2007, a  shareholder  transferred  the 180,000  shares of the
      Company's common stock on behalf of the Company in  consideration  for a
      convertible note.  Refer to Note 5(d).





                                       19
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)




7. Common Stock (continued)


   The following table summarizes the continuity of the Company's warrants:

                                                      Weighted
                                                       average
                                        Number of     exercise
                                      split-adjusted    price
                                          shares          $

   Balance, March 31, 2006                735,000      0.44
   Issued                                  35,000      0.30
   Exercised                                    -         -
   Expired                               (485,000)     0.50
                                        ----------------------
   Balance, March 31, 2007                285,000      0.32
                                        ======================


   At March 31, 2007, the following share purchase warrants were outstanding:

     Number of Shares     Exercise Price    Weighted average
                                                remaining
                                               contractual
                                              life (years)
   ------------------------------------------------------------

          35,000               $0.50              0.82
          250,000              $0.30              0.38

8.    Commitments and Contingencies

(a)   On  April  4,  2006,   the  Company   entered  into  a  Standby   Equity
      Distribution   Agreement   with   a   venture   capital   company   (the
      "Purchaser").  Under  the terms of the  Agreement,  the  Purchaser  will
      purchase up to $5,000,000  of the  Company's  common stock over a period
      of 24  months  at  95% of  the  Market  Price  subsequent  to  effective
      registration  of the  Company's  common  stock.  The Market Price is the
      lowest  daily  closing  bid price of the  Company's  common  stock for a
      minimum  of five  trading  days  between  advances.  The  amount  of the
      advances  will be at the  discretion  of the Company up to $100,000  per
      advance,  with a minimum of five  trading days  between  advances.  Upon
      closing of the  transaction,  the Company will issue  $200,000  worth of
      common  stock or cash,  issue a warrant to  purchase  350,000  shares of
      common  stock at an  exercise  price of $0.01  per share for a period of
      five years,  and a warrant to purchase  1,500,000 shares of common stock
      at an exercise  price of $0.25 per share for a period of five years.  At
      March 31, 2007, no shares or warrants had been issued.

(b)   On March 1, 2006, the Company entered into an employment agreement with
      the Company's Vice-President of Finance. Under the terms of the employment
      agreement, the Company must pay $4,000 per month for an initial term of
      eight months, and grant options to acquire 300,000 shares of common stock.
      During the fiscal year ended March 31, 2007, $48,000 was charged to
      operations. At March 31, 2007, the Company had not granted any options.



                                       20
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

8.    Commitments and Contingencies (continued)


(c)   On November 1, 2005, the Company entered into an employment agreement with
      the Company's Chief Executive Officer. Under the terms of the employment
      agreement, the Company must pay $120,000 per annum for the period from
      April 1, 2006 to March 31, 2008. This employment agreement extends the
      terms of the previous employment agreement, which expires on March 31,
      2008. During the fiscal year ended March 31, 2007, $120,000 was charged to
      operations.

(d)   In  September  2003,  a claim was  asserted  against  the  Company,  its
      subsidiary and President  alleging that the Company and/or its President
      are liable to for a loan in the amount of  approximately  $250,000,  and
      that there was a failure to deliver  approximately 53,333 split-adjusted
      shares of the  Company's  common stock which were to be held as security
      for the loan.  The Company  intends to vigorously  defend itself in this
      matter and management feels it has meritorious defenses.  This action is
      in a very  preliminary  stage and it is not  possible to  determine  the
      probable outcome.  The accompanying  financial statements do not include
      any provision for possible loss.

9.    Income Taxes

   The Company accounts for income taxes under SFAS No. 109, "Accounting for
   Income Taxes." Deferred income tax assets and liabilities are determined
   based upon differences between financial reporting and tax bases of assets
   and liabilities and are measured using the enacted tax rates and laws that
   will be in effect when the differences are expected to reverse. Income tax
   expense differs from the amount that would result from applying the U.S
   federal and state income tax rates to earnings before income taxes. The
   Company has a net operating loss carryforward of approximately $6,217,000
   available to offset taxable income in future years which expires in fiscal
   2024. Pursuant to SFAS 109, the potential benefit of the net operating loss
   carryforward has not been recognized in the financial statements since the
   Company cannot be assured that it is more likely than not that such benefit
   will be utilized in future years.



                                       21
<PAGE>


Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

9. Income Taxes (continued)

   The Company is subject to United States federal and state income taxes at an
   approximate rate of 35%. The reconciliation of the provision for income taxes
   at the United States federal statutory rate compared to the Company's income
   tax expense as reported is as follows:


                                               March 31,     March 31,
                                                 2007           2006
                                                   $             $

Income tax recovery at statutory rates        (682,860)     (1,059,300)

Permanent differences                            80,040         51,040

Temporary differences                               660            660

Valuation allowance change                      602,160      1,007,600
-------------------------------------------------------------------------

Provision for income taxes                            -              -
=========================================================================

   Deferred income taxes reflect the net tax effects of temporary differences
   between the carrying amounts of assets and liabilities for financial
   reporting purposes and the amounts used for income tax purposes. Deferred
   income taxes arise from temporary differences in the recognition of income
   and expenses for financial reporting and tax purposes. The significant
   components of deferred income tax assets and liabilities at November 30, 2006
   are as follows:


                                                March 31,     March 31,
                                                  2007          2006
                                                    $             $

Net operating loss carryforward                 2,176,000     1,574,000

Valuation allowance                            (2,176,000)   (1,574,000)
-------------------------------------------------------------------------

Net deferred income tax asset                      -
=========================================================================


   The Company has recognized a valuation allowance for the deferred income tax
   asset since the Company cannot be assured that it is more likely than not
   that such benefit will be utilized in future years. The valuation allowance
   is reviewed annually. When circumstances change and which cause a change in
   management's judgment about the realizability of deferred income tax assets,
   the impact of the change on the valuation allowance is generally reflected in
   current income.



                                       22
<PAGE>



Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

10.   Restatement

   The Company has restated its financial statements as at March 31, 2006 and
   for the year then ended. The financials statements have been restated to
   reflect the cancellation of 5,000,000 shares of common stock at the fair
   value of $1,750,000 that were issued for consulting services. The services
   were not provided and the shares were returned to treasury and cancelled. The
   effect of the restatement is to decrease net loss by $1,750,000 for the year
   ended March 31, 2006, and for the period from June 7, 1989 (date of
   inception) to March 31, 2006. Net loss per share was decreased by $0.16 per
   share to $0.99 per share for the year ended March 31, 2006.

    a)  Consolidated Balance Sheet
                                              Accumulated from June 7, 1989
                                               (Date of Inception) to March
                                                        31, 2006
                                            ------------------------------------
                                            As Reported  Adjustment  As Restated
                                                  $          $            $

    Stockholder's Deficit
    Common Stock                               12,691       (5,000)      7,691
    Additional Paid-in Capital              5,544,528   (1,745,000)  3,799,528
    Deficit Accumulated During the
    Exploration Stage                      (7,204,068)   1,750,000  (5,454,068)

    b)  Consolidated Statement of Operations

                                               Accumulated from June 7, 1989
                                               (Date of Inception) to March
                                                           31, 2006
                                            ------------------------------------
                                            As Reported  Adjustment  As Restated
                                                  $          $            $

   Expenses
     Consulting                             1,958,615    (1,750,000)   208,615
   Total Expenses                           6,276,079    (1,750,000) 4,526,079
   Net Loss                                (6,543,851)    1,750,000 (4,793,851)


                                                  For the year ended March 31,
                                                                     2006
                                            ------------------------------------
                                            As Reported  Adjustment  As Restated
                                                  $          $            $

   Expenses
     Consulting                              1,786,567   (1,750,000)    36,567
   Total Expenses                            4,506,078   (1,750,000) 2,756,078
   Net Loss                                 (4,776,581)   1,750,000 (3,026,581)
   Net Loss Per Share - Basic and Diluted        (1.15)        0.16      (0.99)




      c)  Consolidated Statement of Cash Flows




                                       23
<PAGE>



Quantum MRI, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2007
(Expressed in US dollars)

10. Restatement (continued)
                                                Accumulated from June 7, 1989
                                                (Date of Inception) to March
                                                             31, 2006
                                            ------------------------------------
                                            As Reported  Adjustment  As Restated
                                                  $          $            $

   Operating Activities
   Net loss for the period                  (6,543,851)   1,750,000  (4,793,851)
        Stock-based compensation             4,080,521   (1,750,000)  2,330,521

                                                For the year ended March 31,
                                                            2006
                                            ------------------------------------
                                            As Reported  Adjustment  As Restated
                                                  $          $            $

   Operating Activities
   Net loss for the year                    (4,776,581)   1,750,000  (3,026,581)
        Stock-based compensation             3,980,521   (1,750,000)  2,230,521






<PAGE>


                                   SIGNATURES

      In accordance with Section 13 or 15(a) of the Exchange Act, the Registrant
has caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized on the 9th day of August 2007.

                                  QUANTUM MRI, INC.


                                  By  /s/ Kelly Fielder
                                      ----------------------------------------
                                      Kelly Fielder, President, Chief
                                      Financial Officer and Principal
                                      Accounting Officer



      Pursuant to the requirements of the Securities Act of l934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

                                     Title                    Date

/s/ Kelly Fielder
-------------------------
Kelly Fielder                       Director             August 9, 2007







                                       24
<PAGE>