**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**








**FORM
      10-KSB**








x
              **Annual Report Pursuant to
                Section 13
                or 15(d) of theSecurities
                Exchange Act of 1934****For the fiscal year ended
                December
                31, 2006****OR**o
              **Transition Report Pursuant
                to Section
                13 or 15(d) of the SecuritiesExchange
                Act of 1934**







**COMMISSION
      FILE NUMBER: 33-05384**





**IR
      BIOSCIENCES HOLDINGS, INC.**


(Name
      of
      Small Business Issuer in its Charter)








**DELAWARE**
            
            **13-3301899**(State
                or Other Jurisdiction ofIncorporation
                or Organization)
            
            (I.R.S.
                Employer Identification
                No.)**4021
                N. 75th Street, Suite 201,
                Scottsdale, AZ**
            
            **85251**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)





**(480)
      922-3926**


(Issuer's
      Telephone Number, including Area Code)





Securities
      registered under Section 12(b) of the Exchange Act:




**NONE**





SECURITIES
      REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:





**COMMON
      STOCK, $ 0.001 PAR VALUE PER SHARE**


(Title
      of
      class)







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





Check
      whether the issuer: (1) filed all reports required to be filed by Section 13
      or
      15(d) of the 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.





YES x NO
o





Check
      if
      there is no 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 registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes oNo x





State
      issuer's revenues for its most recent fiscal year: $ 0




The
        aggregate market value of the Registrant's issued and outstanding shares
        of
        common stock held by non-affiliates of the Registrant as of April 5, 2007
        (based
        on the average of the bid and asked prices as reported by the NASD OTC Bulletin
        Board as of that date) was approximately $12,639,518.




The
        number of shares outstanding of Registrant's Common Stock, par value $0.001
        as
        of April 5, 2007: 114,318,315.
 
 Documents
        Incorporated by reference: The information required by Part III of Form 10-KSB
        incorporated by reference from the Registrant's definitive proxy statement
        on
        Schedule 14A that will be filed no later than the end of the 120-day period
        following the Registrant's fiscal year end, or, if the Registrant's definitive
        proxy statement is not filed within that time, the information will be filed
        as
        part of an amendment to this Annual Report on Form 10-KSB/A, not later than
        the
        end of the 120-day period.


Transitional
      Small Business Disclosure Format Yes o No x


















**TABLE
      OF CONTENTS**







**Page****PART
                I**Item
                1.     Description of
                Business
            5Item
                2.     Description of
                Property
            33Item
                3.     Legal
                Proceedings
            34Item
                4.     Submission of Matters to a
                Vote of Security Holders
            34**PART
                II**Item
                5.     Market for Registrant's
                Common Stock and Related Stockholder Matters
            35Item
                6.     Management's Discussion and
                Analysis or Plan of Operation
            37Item
                7.     Financial
                Statements
            F-1
                to F-29Item
                8.     Changes in and
                Disagreements with Accountants on Accounting and Financial
                Disclosure
            50Item
                8A.  Controls and
                Procedures
            50Item
                8B.   Other
                Information
            50**PART
                III**Item
                9.     Directors, Executive
                Officers, Promoters and Control Persons; Compliance with Section
                16(a) of
                the Exchange Act
            51Item
                10.   Executive
                Compensation
            51Item
                11.   Security Ownership of Certain
                Beneficial Owners and Management and Related Stockholder
                Matters
            51Item
                12.   Certain Relationships and Related
                Transactions, And Director Independence
            51Item
                13.   Exhibits
            51Item
                14.   Principal Accountant Fees and
                Services
            58Signatures



















**FORWARD-LOOKING
      STATEMENTS**





**THIS
      ANNUAL REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
      RISKS AND UNCERTAINTIES. IN PARTICULAR, STATEMENTS ABOUT OUR EXPECTATIONS,
      BELIEFS, PLANS, OBJECTIVES, ASSUMPTIONS OR FUTURE EVENTS OR PERFORMANCE ARE
      CONTAINED OR INCORPORATED BY REFERENCE IN THIS REPORT. WE HAVE BASED THESE
      FORWARD-LOOKING STATEMENTS ON OUR CURRENT EXPECTATIONS ABOUT FUTURE EVENTS.
      WHILE WE BELIEVE THESE EXPECTATIONS ARE REASONABLE, SUCH FORWARD-LOOKING
      STATEMENTS ARE INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, MANY OF WHICH
      ARE
      BEYOND OUR CONTROL. THE ACTUAL FUTURE RESULTS FOR IR BIOSCIENCES HOLDINGS,
      INC.
      MAY DIFFER MATERIALLY FROM THOSE DISCUSSED HERE FOR VARIOUS REASONS, INCLUDING
      THOSE DISCUSSED IN THIS REPORT UNDER THE HEADING "RISK FACTORS," PART II, ITEM
      6
      ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION" AND
      ELSEWHERE THROUGHOUT THIS ANNUAL REPORT. GIVEN THESE RISKS AND UNCERTAINTIES,
      YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING
      STATEMENTS. THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE MADE
      ONLY
      AS OF THE DATE HEREOF. WE DO NOT UNDERTAKE AND SPECIFICALLY DECLINE ANY
      OBLIGATION TO UPDATE ANY SUCH STATEMENTS OR TO PUBLICLY ANNOUNCE THE RESULTS
      OF
      ANY REVISIONS TO ANY OF SUCH STATEMENTS TO REFLECT FUTURE EVENTS OR
      DEVELOPMENTS. WHEN USED IN THE REPORT, UNLESS OTHERWISE INDICATED, "WE," "OUR,"
      "US," THE "COMPANY" OR "IMMUNEREGEN" REFERS TO IR BIOSCIENCES HOLDINGS, INC.
      AND
      ITS SUBSIDIARY, IMMUNEREGEN BIOSCIENCES, INC.**








**PART
        I**
 
 
 ITEM1.
        DESCRIPTION OF BUSINESS
 
 OVERVIEW
 
 IR
        BioSciences Holdings, Inc. is a development stage biotechnology company.
        Through
        our wholly-owned subsidiary ImmuneRegen BioSciences, Inc., we are engaged
        in the
        research and development of potential drug candidates, HomsperaTM and its
        derivatives , RadilexTM
and ViprovexTM. We defined Radilex and Viprovex as derivatives of Homspera due to
        the potential difference in formulations and indications for use of such
        compounds. Our goal is to develop these potential drug candidates to be used
        as possible countermeasures
        for homeland
        security threats, including radiological, chemical and biological agents,
        such
        as influenza and anthrax. We hope there may
        exist not
        only a
        market
        for products related to biodefense through governmental purchasing, but
        there
        also may exist a potential commercial market for treatments of cancer
        treatment side-effects and seasonal influenza.
 
 Our
        patents, patent applications and continued research are derived from discoveries
        made during research studies related to the function of Substance P ,
        which
        is found in the body and has a large number of actions .
        These
        studies were funded by the Air Force Office of Scientific Research (AFOSR)
        in
        the early 1990s and were conducted by research scientists, including our
        co-founders Drs. Mark Witten and David Harris. In the course of research
        on
        Substance P, these scientists created a number of synthetic analogues,
        structural derivatives with slight chemical differences, for study. One of
        these, which we have named Homspera, is the basis for our drug
        development efforts and our intellectual property. All
        of
        our research and development efforts are early, pre-clinical stage and Homspera
        has only undergone exploratory studies to evaluate its biological activity
        in
        small animals. There can be no assurance that our interpretation of the results
        of our studies will prove to be accurate after further testing and our beliefs
        regarding the potential uses of our drug candidates may never
        materialize.
 
 Our
        current focus is on the development of two  potential
        formulations derived from Homspera, Radilex and Viprovex.
 
 We
        are
        researching Radilex for use as a potential treatment for acute exposure to
        radiation. To date we have sponsored seven studies and co-sponsored three
        studies all of which were conducted utilizing rodents. The results of these
        studies suggest Radilex may play a role in increased survival among tested
        rodents following exposure to lethal doses of gamma radiation. We believe
        that
        Radilex, if developed, may be an acceptable candidate to be marketed to
        governmental agencies for procurement. Further, we believe that a commercial
        market may exist for the use of Radilex as it relates to the treatment of
        radiation-induced side effects of cancer treatments, either as a stand alone
        treatment or as a co-therapeutic agent to be used with other
        therapies.
 
 Viprovex
        is being researched by us for use in potential treatments of exposure to
        biological agents, such as infectious disease, which include influenza and
        anthrax. Based on early studies on Homspera and existing literature on Substance
        P, we are researching the efficacy of Viprovex as a potential treatment for
        exposure to chemical agents, such as formalin. To date we have sponsored
        three
        studies related to the treatment of influenza, three on the exposure to anthrax
        spores and one on exposure to formalin. We believe the results of these studies
        indicated potential efficacy in the use of Viprovex as both a stand alone
        treatment and an adjuvant, to be used in conjunction with other drugs. If
        Viprovex can be developed, we believe that potential applications may exist
        for
        sale to governments for the treatment of exposure to anthrax and pandemic
        influenza. In addition, we believe that potential commercial opportunities
        may
        exist for the treatment of seasonal influenza and other viral or bacterial
        infections, either as a stand-along drug or as an adjuvant to other existing
        drugs.
 
 To
        date
        we have submitted preliminary study data to the U.S. Food and Drug
        Administration (FDA) and have been issued two Pre-Investigational New Drug
        (PIND) numbers, one for the potential use of Radilex in the treatment of
        acute
        radiation syndrome and the other for the potential use of Viprovex in the
        treatment of avian influenza.
 
 We
        have
        filed patent applications and provisional patent applications, for the use
        of
        Homspera and derivatives thereof. We own four registered patents, two issued
        U.S. and two issued foreign patents. We also have 35 pending patents, comprised
        of four pending Patent Cooperation Treaty (PCT) applications, nine pending
        U.S.
        provisional patent applications and 22 pending foreign provisional patent
        applications.
 
 Our
        potential drug candidates, Radilex and Viprovex ,
        are at
        early, pre-clinical stages of development and may not be shown to be safe
        or
        effective and may never receive regulatory approval. Neither Radilex nor
        Viprovex have
        yet
        been tested in large animals or humans. There is no guarantee that regulatory
        authorities will ever permit human testing of Radilex, Viprovex or any other
        potential products derived from Homspera. Even if such testing is permitted,
        none of Radilex, Viprovex or any other potential drug candidates, if any,
        derived from Homspera may be successfully developed or shown to be safe or
        effective.
 
 The
        results of our pre-clinical studies and clinical trials may not be indicative
        of
        future clinical trial results. A commitment of substantial resources to conduct
        time-consuming research, pre-clinical studies and clinical trials will be
        required if we are to develop any commercial applications using Homspera
        or any
        derivatives thereof. Delays in planned patient enrollment in our future clinical
        trials may result in increased costs, program delays or both. None of our
        potential technologies may prove to be safe or effective in clinical trials.
        Approval of the FDA, or other regulatory approvals, including export license
        permissions, may not be obtained and even if successfully developed and
        approved, our potential applications may not achieve market acceptance. Any
        potential applications resulting from our programs may not be successfully
        developed or commercially available for a number of years, if at
        all.
 
 3
  To
        date,
        we have not obtained regulatory approval for or commercialized any applications
        using Homspera or any of its derivatives. We have incurred significant losses
        since our inception and we expect to incur annual losses for at least the
        next
        three years as we continue with our drug research and development
        efforts.
  **SUBSTANCE
        P AND HOMSPERATM**
 
 Our
        patents, patent applications and continued research are derived from discoveries
        made during research studies related to the function of Substance P ,
        which
        is found in the body and has a large number of actions .
        These
        studies were funded by the Air Force Office of Scientific Research (AFOSR)
        in
        the early 1990s and were conducted by research scientists, including our
        co-founders Drs. Mark Witten and David Harris. In the course of this research,
        these scientists created for study a number of analogues, or structural
        derivatives with slight chemical differences, of Substance P. One of these
        analogues of Substance P, which we have termed Homspera, is the basis for
        our
        research and development of potential drug candidates.
 
 Substance
        P
 
 The
        elements carbon, oxygen, nitrogen and hydrogen can be combined to form amino
        acids, a basic building block of life. When amino acids are combined through
        a
        biochemical process they form what are called peptides or proteins. Proteins
        play a number of fundamental roles in living organisms, from structural to
        messaging between cells. When components of the nervous system use chemicals
        to
        transmit signals between  nerves
        and brain cells to
        propagate signaling throughout the body, those chemicals are called
        neurotransmitters. When peptides are released by nerves cells or other cells
        and
        modulate this neurotransmission, they are termed neuropeptides.
 
 One
        such
        neuropeptide is Substance P. Substance
        P is a relatively small peptide made of just eleven amino acids. Substance
        P was
        discovered in 1931 and found to have local blood-pressure reducing effects.
        The
        peptide is difficult to isolate, and consequently was ignored for tens of
        years.
        When science developed to the point that peptides could be recognized by
        their
        amino acid structures, Substance P was one of the first identified. The amino
        acid sequence (using
        the standard three-letter acronyms for amino acids) of Substance P is
        presented below:
 
 Arg-Pro-Lys-Pro-Gln-Gln-Phe-Phe-Gly-Leu-Met-NH 2.
 
 Neuropeptides,
        such as Substance P, were originally identified as being distributed throughout
        the peripheral and central nervous systems of experimental animals, and then
        of
        humans. To date, Substance P has also been shown to be produced in
        non-neuronal  cells
        such as human endothelial cells, Leydig cells, enterochromaffin cells,
        epithelial cells, fibroblasts, keratinocytes, intestinal and airway smooth
        muscle cells, inflammatory and immune cells, and in cells of the female
        reproductive system.
 
 In
        early
        research Substance P was revealed as playing a key role in the transmission
        of
        pain. Later on, Substance P was identified as being involved in the
        pathophysiology of psychiatric disorders, like anxiety and depression.
        Additionally, Substance P has been shown to be involved in a number of
        physiological processes, such as blood vessel and smooth muscle contractions,
        and in the levels and responses of the cells of the blood and immune system.
 
 Substance
        P produces this wide variety of effects by acting through three different
        molecular receptors, located on the surface membrane of sensitive cells.
        These
        receptors are called NK1, NK2 and NK3 receptors, and binding of Substance
        P to
        one receptor subtype or another will cause different chemical signaling to
        occur
        both inside and outside cells. These receptor binding differences are believed
        to be responsible for the different physiological results following the
        stimulation of the different receptor subtypes.
 
 Homspera
 
 Within
        a
        few years following the discovery of the amino acid sequence of Substance
        P,
        numerous synthetic analogues were being produced in an attempt to better
        understand how the structure and function of the molecule were related. One
        particular analogue was produced by the replacement of the amino acid glycine
        (Gly) with Sarcosine (Sar or N-methyl glycine) at the ninth position and
        the
        introduction of oxidized methionine (Met(O 2 ))
        in
        place of methionine (Met) at the eleventh position. The resulting peptide,
        still
        11 amino acids long, but now with a slightly different molecular weight,
        is thus
        called Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P. The amino acid sequence for Homspera  is
        presented below:
 
 Arg-Pro-Lys-Pro-Gln-Gln-Phe-Phe-Sar-Leu-Met( O 2 )-NH 2 .
 
 4
  It
        is
        these specific chemical alterations that are presumably responsible for the
        different physiological actions of Homspera versus endogenous Substance P.
        In
        fact, Sar9, Met (O2)11-Substance P was first
        synthesized in an attempt to make chemicals that had specific distinctions
        in
        their activity from that of the parent Substance P molecule.
 
 Homspera,
        or Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P differs from Substance P in at least two ways. It is reported to be active
        at
        only the NK1 receptor, and to be more resistant to the enzyme that usually
        breaks down Substance P and thereby terminates its action. Thus Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P is both more specific than Substance P, and also more persistent in the
        body.
 
 In
        December 2004 we filed an application with the US Patent and Trademark Office
        in
        an effort to trademark the name Homspera to refer to Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P for its potential usage in a number of applications. Our application is
        still
        pending.
 
 **RadilexTM
        and ViprovexTM**
 
 We
        use
        the trade names Radilex and Viprovex to
        differentiate these derivatives
        of Homspera. The active ingredient, Homspera, is chemically equivalent in
        both
        Radilex and Viprovex ;
        however ,
        since
        both Radilex and Viprovex are to be used in differing potential treatments,
        and
        thus have different indications for use, we anticipate that we will formulate
        them differently in the future to support appropriate (and possibly different)
        modes of administration. For this reason, we have created the trade names
        to
        more easily differentiate the potential formulations, and thus applications,
        with respect to their development and potential future market
        opportunities.
 
 In
        the
        early AFOSR studies, it was observed that the exposure of animals to JP-8
        jet
        fuel resulted in pathological changes in the lungs and immune systems of
        those
        exposed. Homspera was administered to the test animals after prolonged exposure
        to the jet fuel. Based on the results of these studies, we believe that the
        administration of Homspera prevented some of the harmful effects of the jet
        fuel
        exposure in the lungs, as well as having a positive effect on the immune
        system.
        However, there is no guarantee that our interpretation of the results of
        these
        studies will prove to be accurate after further testing.
 
 Based
        on
        our interpretation of these results, our current focus is on the development
        of
        two potential drug applications, Radilex and Viprovex.
 
 We
        are
        researching Radilex for use as a potential treatment for acute exposure to
        radiation. To date we have sponsored seven studies and co-sponsored three
        studies all of which were conducted utilizing rodents. We believe the results
        of
        these and other studies suggest Radilex may
        play a role
        in increasing an individual’s ability to overcome the effects of radiation, and,
        in the cases of exposure to potentially lethal radiation, to play a role
        in
        increased rates of survivability. Based on the sum of these studies, we believe
        that Radilex, once and if developed, could be an acceptable candidate to
        be
        purchased by governmental agencies for national distribution in the event
        of a
        significant nuclear or radiological threat. Further, we believe that a
        commercial market may exist for the use of Radilex as it relates to the
        treatment of radiation-induced side effects of cancer treatments, either
        as a
        stand alone treatment or as a co-therapeutic agent to be used with other
        treatments.
 
 Viprovex
        is being researched by us for use in potential treatments of exposure to
        biological agents, such as anthrax and infectious diseases, including influenza.
        Based on early studies on Homspera and existing literature on Substance P,
        we
        are also researching Viprovex as a potential treatment for exposure to chemical
        agents, such as formalin. Formalin,
        a highly toxic chemical, is a solution of formaldehyde gas dissolved in water
        and used industrially. To
        date
        we have sponsored three studies related to the treatment of influenza, three
        on
        the exposure to anthrax spores and one on exposure to formalin. We believe
        the
        results of these studies indicated potential efficacy in the use of Viprovex
        as
        both a stand alone treatment and to be used in conjunction with other drugs.
        If
        Viprovex can be developed, we believe that potential applications may exist
        for
        sale to governments for the treatment of exposure to anthrax and pandemic
        influenza. In addition, we believe that potential commercial opportunities
        may
        exist for the treatment of seasonal influenza and other viral or bacterial
        infections, either as a stand-alone drug or in conjunction with other existing
        drugs.
 
 **Applications**
 
 Our
        initial pre-clinical applications that we are researching are in the treatment
        of the effects on the body caused by (i) exposure to radiation (Radilex)
        (ii)
        infectious disease and harmful biological materials (Viprovex) and (iii)
        harmful
        chemical agents (Viprovex). In addition to these three potential applications,
        we continue to explore the potential capabilities of Homspera and strive
        to
        better understand the mechanisms of this compound in order to further our
        development efforts with regard to not only our current application research,
        but also potential future applications.
 
 To
        date
        we have sponsored seven radiation studies and co-sponsored three radiation
        studies all of which were conducted utilizing rodents. We have sponsored
        three
        studies on the potential treatment of anthrax exposure and one study on avian
        influenza all of which were conducted utilizing rodents. We have also sponsored
        one chemical study in an attempt to determine initial indications of efficacy
        on
        the treatment of formalin exposure.
 
 5
  All
        our
        product candidates are in the pre-clinical stage of development. They have
        only
        been introduced to FDA via the pre-IND filings, submissions to which the
        FDA
        offers no judgment thereon.  To
        date
        we have been issued two Pre-Investigational New Drug (PIND) numbers by the
        U.S.
        Food & Drug Administration (FDA) - one for the potential use of Radilex in
        the treatment of acute radiation syndrome and one for the potential use of
        Viprovex in the treatment of avian influenza. The table below illustrates
        our
        current product candidates and their current stage of development within
        the FDA
        approval process.
 
 **Product
                  Candidate**
              
              **Pharmacological
                  Identification**
              
              **Animal
                  Safety**
              
              **Pre-Clinical
                  Mechanistic**
              
              **Phase
                  I**
              
              **Phase
                  II**
              
              **Phase
                  III**Acute
                  RadiationSyndromeRadilex
              
              In-progress
              
              In-progress
              
              In-progressInfectious
                  diseaseViprovex
              
              In-progress
              
              In-progress
              
              In-progressChemical
                  exposureViprovex
              
              In-progress
              
              Planned
              
              In-progress
 
 The
        preliminary results of our pre-clinical studies using Radilex or Viprovex
        may
        not be indicative of results that will be obtained from subsequent studies
        or
        from more extensive trials. Further, our pre-clinical or clinical trials
        may not
        be successful, and we may not be able to obtain the required regulatory
        approvals in a timely fashion, or at all. See "Risk Factors."
 
 **RADILEX**
 
 All
        of
        our product candidates based on Radilex are in the pre-clinical stage of
        development. On January 14, 2004, we received a Pre-Investigational New Drug
        Application (PIND) number for the use of Radilex (PIND No. 63,255) in the
        treatment of acute radiation syndrome.
 
 To
        date
        we have sponsored seven radiation studies and co-sponsored three radiation
        studies all of which were conducted utilizing rodents to study dose response
        to
        radiation, the impact on survival and to distinguish survival response using
        different forms of drug delivery. In each of these studies mice were exposed
        to
        varying levels of radiation.
 
 Radiation
        is emitted electromagnetic energy. Excessive exposure to ionizing radiation
        over
        a short period of time, as is the case in nuclear or radiological attacks,
        leads
        to the development of radiation sickness, or Acute Radiation Syndrome (ARS).
        Exposure to lower doses of radiation may, either by design or as a side effect
        of cancer treatment, result in the destruction of bone marrow cells responsible
        for maintaining the levels of red blood cells, white blood cells and platelets,
        which are vital for the formation of blood clots, in the circulation, resulting
        in compromised oxygen carrying capacity, diminished immune system function,
        and
        uncontrollable bleeding.
 
 These
        bone marrow cells are called hematopoietic stem cells, and they can multiply
        and
        mature into precursor cells to the B-cells and T-cells of the immune system,
        or
        into precursors of the red
        blood
        cells and of
        the granulocytes and macrophages ,
        which
        are also
        of
        the immune system , and
        megakaryocytes, which produces platelets. Thus all circulating cells of the
        immune system, red blood cells and platelets derive from these stem
        cells.
 
 In
        studies to date we have collected data that we
        believe suggests
        that Radilex shows efficacy in treating ARS by combating neutropenia and
        thrombocytopenia ,
        which
        is the decrease
        in blood
        levels of white blood cells and platelets ,
        the
        major medical conditions associated with acute exposure to radiation. Loss
        of
        these cells results in increased sensitivity to infection and to uncontrolled
        bleeding, both of which can be potentially life-threatening. Further, as
        treatment for cancer often includes radiation treatment, we believe that
        the
        potential also exists for Radilex to be used for cancer patients as a stand
        alone treatment or a co-therapeutic agent to be used with other drugs as
        treatment.
 
 Data
        collected in studies performed at the Oak Ridge National Laboratory in 2006,
        we
        believe, revealed that Radilex not only prolonged survival of animals exposed
        to
        lethal gamma irradiation, but also appeared to have increased platelet
        concentrations in surviving animals.
 
 There
        is
        also preliminary research data showing that the activity of a specific enzyme
        (poly-(ADP-ribosyl) polymerase, or PARP) ,
        may
        be responsible for repairing DNA that has been damaged by radiation can be modified
        by Substance P. When damage is severe, the activation of this enzyme becomes
        too
        much for the cell to support, and the cell triggers its own destruction.
        The
        chain of events that result in this destruction is called apoptosis , a
        process
        of deliberate life termination that a cell undergoes following exposure to
        high
        levels of stress, and agents that can control the rate of apoptosis are of
        significant importance in controlling the functioning of organs and organisms.
        If a cell can be kept alive long enough to repair cellular damage, it might
        be
        of more value to the organism.
 
 Based
        on
        the above referenced, and other, data, we believe that one possible mechanism
        by
        which Radilex is able to prolong survival in animal models (either in addition
        to its effect on stem cells or perhaps as a mechanism by which it impacts
        stem
        cells), is by modulating the activities of the PARP-1 enzyme within cells..
        By possibly preventing
        cells from dying, Radilex may
        be
        effective in
        treating the impact of cell
        radiation, thereby decreasing
        the likelihood of death.
 
 6
  Further,
        we believe that our survival data from irradiated mice studies and mechanistic
        studies in cell culture have shown indications of hematopoietic stem cell
        replenishment of circulating leukocytes and platelets, which could be of
        value
        in radiation-treated cancer patients.
 
 Acute
        total body irradiation exposure studies have been performed at the University
        of
        Arizona Cancer Center and at Oak Ridge National Laboratories (ORNL). These studies
        show that radiation destroys the immune system resulting in pneumonia and
        death,
        and that Radilex ,
        we
        believe demonstrates
        efficacy at reversing the loss of white blood cells that comprise the immune
        system, as well as platelets necessary to control blood clotting, subsequently
        leading to an increase in survival rates.
 
 We
        believe these animal studies provide support for our continued effort to research
        and develop
        Radilex to treat the effects of exposure to radiation. However,
        there is no
        assurance that our interpretation of the results of the studies will prove
        to be
        accurate after further testing.
 
 **VIPROVEX**
 
 All
        of
        our product candidates based on Viprovex are in the pre-clinical stage of
        development. We are researching the efficacy of Viprovex as a potential
        treatment, either as a stand alone application or as co- therapeutic treatment ,
        for
        exposure to various biological agents, such as infectious disease, including
        influenza and anthrax. We
        are
        also researching the efficacy of Viprovex as a potential treatment for exposure
        to chemical agents, such as formalin. Formalin, a highly toxic chemical,
        is a
        solution of formaldehyde gas dissolved in water and used
        industrially.
 
 Biological
        Exposure Applications
 
 *Infectious
        Disease* *-* *Seasonal
        and Pandemic Influenza*
 
 We
        believe of management that results from our studies may reveal the potential
        ability of Viprovex to enhance flu therapies, minimize the respiratory impact
        of
        influenza infection and augment the capability of vaccination to induce a
        protective immune response.
 
 In
        October 2003 the AFOSR sponsored preliminary studies with the Hong Kong
        influenza virus (A/Hong Kong/8/68) and Viprovex at the University of Arizona,
        Arizona Health Sciences Center, Lung Injury Laboratory. We believe that these
        studies suggest that when mice were exposed to the irritant JP-8 jet fuel
        and
        then inoculated with the Hong Kong respiratory virus (HKV), they experience
        elevated levels of inflammatory cells in their lungs. These levels were reduced
        in animals also treated with Viprovex. In contrast to control
        animals exposed to the virus the JP-8 treated animals also treated with
        Viprovex, did not develop the clinical symptoms of viral infection, which
        included increases in alveolar macrophages and neutrophils in broncho-alveolar
        lavage fluid .
        These
        cells are components of the immune system that are expressed out of the blood
        and into the fluid inside the lungs coating the alveoli. The alveoli, found
        in
        the respiratory zone of the lungs, are primary sites of gas exchange where
        blood
        and air exchange oxygen and carbon dioxide carried by red blood cells. The
        fluid
        is acquired and assayed by washing lavage the lungs with liquid and assessing
        the cells and chemicals in this wash fluid.  Animals
        treated with Viprovex also exhibited lower
        levels of leukotriene B4 (LTB4), a chemical released by white blood cells
        during
        an immune response, than animals not treated with Viprovex .
        Elevated LTB4 would
        attract the inflammatory cells,
        particularly neutrophils, which would follow infection with virus. Electron
        micrographs showed healthier, normal appearing cells in the airways with
        no
        virus particles in the Viprovex-treated animals, in contrast to the HKV/JP-8
        controls, suggesting, in our opinion, that Viprovex actually prevented viral
        replication and pathology, perhaps by stimulating the pulmonary alveolar
        macrophages to actively attack, engulf and destroy the virus more
        effectively.Without
        virus particles in the lungs, there would be no need to mount an immune
        response.Based
        on
        the results of this study, we believe that Viprovex may be potentially used
        to
        increase the ability of the body's own immune system to naturally fight off
        flu
        strains. Thereby, opening up the possibility that Viprovex could be used
        either
        as a stand alone treatment or as an adjunct to a vaccine or other therapy.
 
 On
        November 29, 2005 we applied for a PIND from the Department of Health and
        Human
        Services (HHS) for the use of Viprovex in the treatment of avian influenza.
        The
        PIND number for the use of Viprovex in treating avian influenza was issued
        on
        December 19, 2005 (PIND No. 73,709).
 
 Subsequently,
        we have sponsored three influenza studies conducted at Virion Systems, Inc,
        one
        of which is still ongoing, utilizing rodents to test the efficacy of Viprovex
        in
        treating the avian influenza A/Wuhan/359/95 (H3N2), a model system for studying
        the H5N1 avian influenza.
 
 In
        our
        opinion, the data acquired to date in examining the effect of Viprovex on
        influenza infection suggests an anti-viral action occurs in lungs
        and, more noticeably, in nose. Further, in conjunction with the
        suggested anti-viral effect,
        animal weights and temperatures were normalized. Differences in cytokines
        (small
        peptide signaling molecules released by cells of the immune system to mediate
        inflammation and immune responses) such as certain interleukins and interferons
        were also witnessed. In
        the
        opinion of management, such Viprovex-induced changes in immune response as
        evinced by cytokine signals demonstrate the potential efficacy of Viprovex.
        Based on our results, we believe that Viprovex may show efficacy as a stand
        alone drug in the treatment of influenza. Further, when used in conjunction
        with
        a neuraminidase inhibitor ,
        currently the most effective pharmacological agents (zanamivir (Relenza®,
        GlaxoSmithKline) and oseltamivir (Tamiflu®, Roche) are neuraminidase inhibitors)
        to treat influenza (by inhibiting an enzyme necessary for
        infectivity) ,
        Viprovex might be an effective adjuvant therapeutic on treating or preventing
        influenza.
 
 7
  There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 *Anthrax*
 
 Anthrax
        is an often-fatal human disease resulting from infection of the bacterium *Bacillus
        anthracis* .
        Anthrax
        is most often contracted by skin to skin, or cutaneous, contact with an infected
        lesion ,
        resulting from the handling of infected animal products. Cutaneous anthrax
        has a
        mortality rate of roughly 20%. In contrast, the inhalation of *B.
        anthracis* spores
        results in a significantly more severe and lethal infection, with mortality
        rates of greater than 80%. As a result of the high mortality rate and route
        of
        infection, anthrax is considered a prominent agent
        of
        bioterrorism.
 
 To
        date
        we have sponsored three anthrax studies all of which were conducted utilizing
        rodents to determine if Viprovex will reduce the mortality rate of an active
        infection of pulmonary anthrax. In
        our
        opinion, when treated with Viprovex prior to exposure to anthrax spores,
        Viprovex elicited protective, prophylactic efficacy and when
        treated a short time period after exposure to anthrax spores, Viprovex elicited
        therapeutic efficacy.
 
 In
        2006
        we completed a series of studies with Hyperion Biotechnology Inc. at their
        laboratory facilities located at Brooks City-Base in San Antonio, Texas.
        The
        purpose of these studies was to determine if Viprovex could reduce the mortality
        rate of an active infection of pulmonary anthrax. The first of these studies
        was
        initiated in October 2005. This research indicated, in our opinion, that
        Viprovex offers protection from anthrax exposure in a mouse model. In these
        studies, we witnessed mice treated with Viprovex to have a greater survival
        rate
        11 days post-exposure to anthrax spores. Additionally, based on this research,
        we believe Viprovex to elicit a prophylactic protection from anthrax in a
        mouse
        model.
 
 Further
        research, in our opinion, has supported these findings of prophylactic efficacy
        of Viprovex against anthrax and also demonstrated Viprovex to show efficacy in increasing survival rates in mice
        pretreated with anthrax. Additionally, while these results are preliminary,
        we
        believe that Viprovex, when used as an adjuvant, could play an important
        role,
        in conjunction with other therapies, in improving treatments of anthrax
        exposure.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 *Other
        Infectious* *Diseases*
 
 Melioidosis,
        also called Whitmore's disease, is an infectious disease caused by the bacterium *Burkholderia
        pseudomallei* ,
        and is
        endemic to Southeast Asia and is seen in the South Pacific, Africa, India,
        and
        the Middle East as well. The causative agent, *Burkholderia
        pseudomallei* can be
        transmitted from animals to man as well as from person to person. The bacteria
        can be found in contaminated water and soil and is spread to humans and animals
        through direct contact with the contaminated source. Mortality rate for
        melioidosis varies and is as high as 90% particularly when aerosolized. The
        Centers for Disease Control and Prevention (CDC) considers both *B.
        pseudomallei* and its
        related *B.
        mallei* as
        potential agents for biological warfare and biological terrorism.
 
 In
        March
        2007, we began the first of a series of studies to investigate the therapeutic
        effects of Viprovex on acute melioidosis. These studies are to be performed
        in
        conjunction with Singapore's Defense Medical & Environmental Research
        Institute, DSO National Laboratories ("DSO"). The studies are to be funded
        by
        DSO and are expected to be completed during the third quarter of
        2007.
 Chemical
        Exposure Applications
 
 Based
        on
        early studies on Homspera and existing literature on Substance P, we are
        researching the efficacy of Viprovex as a potential treatment for exposure
        to
        chemical agents, such as formalin. Formalin is a solution of formaldehyde
        gas
        dissolved in water, used industrially and toxic typically via crosslinking
        of
        proteins to other nearby proteins. To date, we have only conducted limited
        preclinical studies with regard to the development of Viprovex for indications
        related to treatment of exposure to harmful chemicals.
 
 *JP-8
        Jet Fuel and Smoke*
 
 We
        believe our early AFOSR rodent studies demonstrated the administration of
        Substance P and Homspera to animals exposed to JP-8 decreased the immune
        system
        effects, while administration of Substance P antagonists compounded the
        deleterious effects. Further experiments performed using Viprovex examined
        effectiveness in preventing lung injury on inhalation of toxic fumes. In
        our
        opinion based on our results, Viprovex has been shown to exhibit
        anti-inflammatory effects in animal models.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 8
  *Formalin*
 
 Formaldehyde
        is one of the 25 most abundantly produced chemicals in the world and has
        use in
        many industries. When dissolved in water at 30% to 50% formaldehyde, and
        often
        with methanol as a stabilizer, the resulting formalin solution is toxic to
        embryos and adult organisms.
 
 We
        have
        conducted one pilot study to determine if aerosolized Viprovex could be
        efficacious in attenuating lung injury after formalin exposure.
 
 In
        rats
        exposed to an aerosol application of formalin data suggests, in our opinion,
        that treatment with Viprovex may minimize lung damage concurrent with formalin
        inhalation.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 **ADJUVANT
        THERAPEUTIC**
 
 Results
        from studies also suggest that Homspera may also have potential value as
        a
        co-therapeutic agent or vaccine adjuvant. Studies performed in animal models
        of
        influenza and acute radiation syndrome have revealed the potential capability
        of
        Homspera to enhance the action of approved anti-viral medications as well as to provide adjunctive impact on anti-tumor radiation therapy.
 
 Adjuvants
        are unique among active ingredients
        in drugs
        in
        that they are designed to not stimulate an immune response against themselves, but
        they
        are required to augment the immune response against other, co-administered
        compounds.
 
 The
        potential efficacy of Homspera as a vaccine adjuvant results from the unique
        mechanism through which Homspera modulates the immune system. The actions
        of
        Homspera are mediated predominately through interactions with the Neurokinin-1
        receptor (NK1-R).
 
 Studies
        in cell culture have revealed elevations in components of what is the most
        basic
        aspect of the immune system, termed the innate immune system, that are
        consistent with activation of specific cell components called Toll-like
        Receptors, a postulated mechanism by which vaccine adjuvants increase immune
        responses to vaccine components. .
        Additionally, the anti-anthrax activity reported by Homspera is similarly
        consistent with activation of components of innate immunity that have been
        reported to have anti-anthrax activity, such as defensins, small peptides
        found
        in immune cells that help destroy invading bacteria.
 
 We
        believe that, in conjunction with other influenza therapeutics,, Homspera
        might
        be an effective adjuvant therapeutic by decreasing the number of viruses
        at
        which the viral neuraminidase-targeted therapeutic must act.
 
 We
        believe that there is also potential for
        Homspera to be used as a co-therapy to what is called adjuvant therapy for
        cancer patients, as secondary treatment often involves radiation treatments
        following chemotherapy, in an attempt to kill more of the cancer cells. Survival
        data from gamma-irradiated mice studies have shown indications of hematopoietic
        stem cell replenishment of circulating leukocytes and platelets, which could
        be
        of value in radiation-treated cancer patients. There is no assurance that
        our
        interpretation of the results of the studies will prove to be accurate after
        further testing.
 
 **POTENTIAL
        FUTURE PIPELINE APPLICATIONS**
 
 During
        our research and development efforts, we may, from time to time, observe
        results
        that may lead to other potential applications using Homspera. At the time
        of
        such an observation, we may design studies to further evaluate the use for
        the
        indication. If these further studies support our initial observations, we
        may
        file provisional patent applications for the use of Homspera with the hope
        of
        protecting future development rights until we have the ability to design
        additional studies and protocols and perform research with regard to such
        applications.
 
 To
        date,
        we have filed use patent applications in multiple jurisdictions, inside and
        outside of the U.S., for use of the active ingredient in Homspera for: treatment
        of avian influenza in mammals, reducing the risk or severity of anthrax
        infection, treatment of blood cell depletion, ameliorating or preventing
        damage
        caused by cigarette smoke, for treating patients with SARS (Severe Acute
        Respiratory Syndrome) or ARDS (Acute Respiratory Distress Syndrome) or to
        prevent those exposed to their causative agents, for inducing new hair growth
        or
        retarding hair loss, for reducing certain ageing effects, such as interrupted
        sleep patterns, residual muscle pain, short term memory loss, diminished
        visual
        accommodation, decreased muscle strength, and arthritic pain, for stimulating
        wound healing in a radiation-exposed mammal, for treating asthma, for treating
        skin diseases, in particular, eczema, psoriasis, acne, and basal cell carcinoma,
        for prophylactically treating domestic fowl to prevent respiratory infections,
        and for maintaining or inducing hair color. To date, our development activities
        in these areas have been limited to only small pilot exploratory studies
        in
        order to observe and collect data that would justify filing use patent
        applications. In the future, we may choose to conduct additional research
        and
        development to further our observations in these areas.
 
 9
  **DEVELOPMENT
        PROGRAM**
 
 Research
        and Development Spending
 
 Due
        to
        our liquidity and limited cash available our spending on research and
        development activities has been limited. We spent approximately $484,029
        and
        $237,005 in 2006 and 2005, respectively, in research and development activities
        related to the development of Radilex and Viprovex as protectants against
        the
        effects of biological and radiological/nuclear threats. From our inception
        in
        October 2002, we have spent $1,026,597 in research and development activities.
        These costs only include the manufacture and delivery of our drug by third
        party
        manufacturers, payments to Contract Research Organizations for consulting
        related to our studies and costs of performing such studies. Significant
        costs
        relating to research and development, such as salary for Dr. Siegel, have
        been
        classified in officer salaries for consistency of financial
        reporting.
 
 We
        anticipate that during the next 12 months we will increase our research and
        development spending to a total of approximately $700,000 in an effort to
        further develop Radilex and Viprovex. This research and development cost
        estimate includes additional animal pharmacology studies, formulation and
        animal
        safety/toxicity studies. If we receive additional funds, through either
        investment funding or grants, we expect we will increase our research and
        development spending.
 
 *Grants*
 
 From
        time
        to time, we may apply for governmental grants and respond to formal requests
        from the government for additional information, thereby possibly allowing
        us to
        be included as a candidate for potential future grants.
 
 Since
        our
        incorporation in October 2002, we have made submissions for eleven grants
        either
        by submitting Requests For Information (RFI), Requests for Proposal (RFP),
        Broad
        Agency Announcements (BAA), requests for white papers and/or fully executed
        grant applications. To date our applications for grant funding have not been
        accepted. We intend to continue to apply for grants; however, there can be
        no
        assurance that we will ever receive any grants.
 
 Animal
        Efficacy Rule
 
 Using
        traditional efficacy studies in the development of some of our potential
        applications would require healthy human volunteers to be exposed to lethal
        agents and pathogens. This cannot be done. Therefore, we intend to apply
        for
        approval based upon a rule adopted by the FDA in 2002, titled "Approval of
        New
        Drugs When Human Efficacy Studies Are Not Ethical or Feasible" (Code of Federal
        Regulations, Title 21, Part 314, Subpart I), which is also referred to as
        the
        "animal efficacy rule." Pursuant to this rule, in situations where it would
        be
        unethical to conduct traditional Phase III efficacy studies in humans, as
        is the
        case with our applications relating to the treatment of maladies caused by
        exposure to high level gamma radiation and various chemical and biological
        agents, the FDA will review new drugs for approval on the basis of safety
        in
        humans and efficacy in relevant animal models. Under either the animal efficacy
        rule or traditional efficacy rules, we will not have marketable applications
        unless and until our drug candidates complete all required safety studies
        and
        clinical trials and receive FDA approval in the United States or approval
        by
        regulatory agencies outside of the United States.
  Contract
        Research Organizations (CRO) and Collaborators
 
 It
        is
        understood that extensive time and money is spent developing new drug
        applications by the time they are approved by required regulatory agencies
        for
        use on the market. In order to efficiently and expeditiously navigate the
        research, development and regulatory approval process in hopes of bringing
        our
        applications to market, our development program relies on the use of Contract
        Research Organizations (CRO's) and collaborative relationships.
 
 CRO's
        are
        independent laboratories or other facilities that provide contract services
        to
        the pharmaceutical industry. These CRO's offer broad therapeutic expertise,
        advanced technologies and extensive resources for drug discovery and drug
        and
        device development, and in some instances partnering opportunities. In the
        opinion of management, using these outside organizations helps to maximize
        our
        flexibility and minimize our one-time costs in outsourcing very expensive
        programs to those companies that maintain the necessary infrastructure to
        perform these cost-effectively according to internationally recognized
        standards. Further, as product demands change, we believe that this structure
        will allow us to move our resources to more appropriate contract research
        or
        development or formulation or manufacturing facilities without incurring
        loss of
        time or money on outdated projects and programs. As we move our candidate
        products into FDA-compliant animal safety testing, we expect to contract
        with
        specialty groups, organizations or companies that meet regulatory requirements
        and have adequate and appropriate technical capabilities, rather than develop
        and maintain an animal use and care facility ourselves that is compliant
        with
        current Good Laboratory Practices.
 
 In
        addition, we have fostered and managed relationships with other laboratories
        working in related areas of research and government agencies who are interested
        in learning more of our applications, and perhaps helping to bring them to
        commercialization.
 
 10
 Collaborators
        and Contractors who we have already worked with or are implementing a program
        with are described below.
 
 ·
            University
                of Arizona College of Medicine, Tucson, Arizona. We have sponsored
                or
                co-sponsored seven mouse radiation studies and co-sponsored one inhalation
                study at the University of Arizona College of Medicine, Tucson, Arizona
                since January, 2005. In addition, the Air Force Office of Scientific
                Research, AFOSR, has sponsored additional studies at the University
                of
                Arizona College of Medicine utilizing Homspera, Radilex and
                Viprovex.  ·
            Hyperion
                Biotechnology Inc. Hyperion Biotechnology performs research programs
                in
                the areas of probiotics, biomarker discovery, infectious disease
                and human
                performance enhancement. We have contracted a series of anthrax studies
                with Hyperion testing Viprovex as a potential treatment to anthrax
                infection. These studies are conducted by Hyperion at its research
                facility located on the U.S. Air Force School of Aerospace Medicine
                (USAFSAM) campus in Brooks City-Base in San Antonio, Texas. To date
                we
                have completed three studies on anthrax. Hyperion has also conducted
                mechanistic studies in cell culture looking at cellular mechanisms
                impacted by Homspera. These studies are
                ongoing.  ·
            St.
                Joseph's Hospital and Medical Center (Phoenix, Arizona). St. Joseph's
                has
                performed assays on Homspera for us on a sub-contracting
                basis.  ·
            Battelle
                Memorial Institute's Medical Research and Evaluation Facility (MREF)
                (Columbus, Ohio). Battelle has issued a letter of intent to support
                us in
                our testing of Homspera as an Avian Influenza therapeutic in mice.
                Battelle is actively involved in analytical development studies through
                activities at PNNL and studies protocols are in development for avian
                influenza studies that may be initiated at
                Battelle.  ·
            Pacific
                Northwest National Laboratory (Richland, Washington). PNNL has issued
                a
                letter of intent to support us in our testing of Homspera as a Universal
                Protectant therapeutic. In addition to ongoing analytical studies
                at PNNL
                and managed by Battelle, additional studies regarding radiation and
                influenza in both small animals and non-human primates, are under
                discussion and protocols are being
                developed.  ·
            Oak
                Ridge National Laboratory (Oak Ridge, Tennessee). We have contracted
                with
                Oak Ridge to conduct Proof of Concept mouse radiation studies that
                began
                in February, 2006 and to help facilitate additional pre-clinical
                and
                future clinical trials with regard to testing Radilex for potential
                uses
                to treat the effects of acute radiation. To date, we have completed
                three
                studies that have confirmed experimental results obtained previously
                and
                have expanded insight into radioprotection dosing and mechanisms.  ·
            PanFlu
                LLC and Virion Systems, Inc. We have contracted with PanFlu and Virion
                to
                conduct influenza studies to test the efficacy of Viprovex in treating
                the
                avian influenza A/Wuhan/359/95 (H3N2), a model system for studying
                the
                H5N1 avian influenza. To date two completed studies have provided
                evidence
                that we believe suggests viral reduction by Viprovex and provided
                preliminary evidence for potential mechanisms. Planned studies include
                a
                co-treatment study with the neuraminidase inhibitor oseltamivir (Tamiflu®,
                Roche).  ·
            TGen
                (Translational Genomics Research Institute) Drug Development Services
                (TD2
                LLC) (Phoenix, Arizona). We have contracted with TGen to perform
                anti-cancer research designed to assess preclinical safety and efficacy
                (with the ability to expand to Phase 1 and Phase 2a clinical studies
                at
                the associated Mayo Clinic Scottsdale, MD Anderson Cancer Center
                and
                Arizona Cancer Center Tucson). A broad spectrum of Preclinical Studies
                are
                ongoing at TD2, including cancer screening against established cell
                lines
                and chemo-therapeutics, analytical assay development, radioprotection
                studies in small animals and non-GLP safety and pathology
                studies.  ·
            AAIPharma.
                We have contracted with AAIPharma to do analytical development
                work.  ·
            GenPhar,
                Inc. We have contracted with GenPhar to perform adjuvant studies
                in mice
                in conjunction with their vaccine platform
                technology.  ·
            Singapore's
                Defense Medical & Environmental Research Institute, DSO National
                Laboratories. We have contracted with Singapore's Defense Medical
&
                Environmental Research Institute, DSO National Laboratories to perform
                a
                series of studies to investigate the therapeutic effects of Viprovex
                on
                acute melioidosis. The first in the series of studies began in March
                2007.  Advisory
        Boards and Consultants
 
 To
        assist
        us in the research and development of our various applications we make use
        of
        outside consultants and advisory boards.
 
 11
  *Consultants*
 
 We
        currently contract two outside consultants related to the research and
        development, including regulatory affairs, of our potential
        products.
 
 Kelly
        McQueen, MD, MPH, PLLC was engaged in July 2005 to provide comprehensive
        public
        health consulting and act as liaison with United States military services
        to
        pursue collaborative research in the area of infectious diseases and upper
        respiratory illnesses. Dr. McQueen is a practicing anesthesiologist and public
        health consultant in Phoenix, Arizona. She currently works with the United
        States (U.S.) Army and the US Northern Combatant Command on Infectious Disease,
        Disaster Planning and other public health projects. Dr. McQueen also teaches
        infectious disease threat management and treatment for the International
        Committee for the Red Cross (ICRS) course on Health Emergencies in Large
        Populations (HELP). Dr. McQueen's contract with us provides for cash
        compensation on an hourly basis and reimbursement for travel and expenses.
        The
        original term of the agreement was until October 2005 but has been mutually
        agreed to have been extended on the same terms on a month by month
        basis.
 
 Dr.
        Jack
        Caravelli, Ph.D. was contracted in November 2005 to provide advisory services
        in
        support of our initiative to commercialize radiation sickness treatments,
        bio-defense applications and countermeasures. He is presently a senior advisor
        for the Threat Reduction Cooperation with the Office of Policy at the U.S.
        Department of Energy (D.O.E.). Dr. Caravelli's contract provides for cash
        compensation at an hourly rate and reimbursement for any related travel and
        expenses. The original term of the agreement was until January 2006 but has
        been
        mutually agreed to have been extended on the same terms on a month by month
        basis.
 
 *Advisory
        Boards*
 
 We
        currently have two advisory boards - the Scientific Advisory Board and the
        Bioterrorism Preparedness Advisory Board. Advisory board members are appointed
        for one-year terms by our management. For services rendered, members of our
        advisory boards are compensated on a quarterly basis in common stock purchase
        warrants.
 
 The
        Scientific Advisory Board was formed to educate and provide direction with
        regard to the discovery, research and development of applications using Homspera
        in the areas of expertise of the various advisory board members. The following
        individuals comprise our Scientific Advisory Board:
 
 Dr.
        John
        Dann, M.D., D.D.S. Dr. Dann is a graduate of Harvard University Dental School
        and Washington University Medical School. He is a Board Certified maxillofacial
        and cranial facial surgeon.
 
 Dr.
        Jeffery Friedman, M.D. Diplomat, American Board of Cosmetic Surgery, American
        Board of Otolaryngology Head and Neck Surgery, Fellow of the American Academy
        of
        Cosmetic Surgery.
 
 Sarah
        A.
        Kagan, J.D., Ph.D. Sarah Kagan is a partner in the Banner & Witcoff, Ltd.,
        an intellectual property legal firm in Washington, D.C. Dr. Kagan holds a
        Ph.D.
        degree in molecular biology from the University of Wisconsin (1981) and a
        J.D.
        degree from George Washington University (1988). Dr. Kagan’s professional
        memberships include the American Bar Association, Women’s Bar Association of the
        District of Columbia, and the American Intellectual Property Law
        Associations.
 
 Susan
        E.
        Leeman, Ph.D. Dr. Leeman is a Professor in the Department of Pharmacology
        and
        Experimental Therapeutics at the Boston University School of Medicine. Dr.
        Leeman was one of the first scientists to isolate substance P in the central
        nervous and gastrointestinal systems. Dr. Leeman was elected to the National
        Academy of Sciences in 1991.
 
 K.A.
        Kelly McQueen, M.D., MPH. Anesthesiologist and Public Health Consultant;
        Infectious Disease and Disaster Planning for U.S. Army and US Northern Combatant
        Command.
 
 Akihiro
        Shimosaka, Ph.D. Dr. Shimosaka has extensive domestic and international
        experience in consulting early and later stage biotechnology companies in
        research and development, product development and regulatory
        issues.
 
 Dr.
        Hal
        Siegel Ph.D., Dr. Siegel has two decades of experience providing scientific,
        clinical and regulatory assistance to life science client companies across
        the
        medical product spectrum, helping them meet business needs and FDA requirements
        from pre-clinical studies through the regulatory submission process and into
        the
        post-approval marketplace. Dr. Siegel is a member of our Board of Directors
        and
        serves as our Senior Director, Product Development and Regulatory
        Affairs.
 
 12
  The
        Bioterrorism Preparedness Advisory Board was formed at the suggestion of
        the
        U.S. Food and Drug Administration's (FDA) Division of Counterrorism (DCT)
        to
        develop a "response team" that can be rapidly deployed to an incident site
        in
        the event of a biological or radiological attack to help in implementation,
        conduct and data acquisition. As there are several first responder teams
        already
        in place, we opted to concentrate on forming a group to discuss logistics
        and
        coordination between agencies and these first responder groups in the event
        of
        an attack. We have attempted to appoint knowledgeable military and private
        citizens that possess first hand experience in combat casualty and mass trauma
        scenarios, including preparation for a bioterrorist attack and/or medical
        or
        scientific expertise. The following individuals comprise our Bioterrorism
        Preparedness Advisory Board:
 
 Dennis
        E.
        Amundson, D.O., Senior Advisor: Captain, United States Navy, Medical Corps,
        Naval Medical Center, San Diego, Pulmonary Medicine
 
 Jack
        Caravelli, Formerly Senior Advisor to the Department of Energy for Threat
        Reduction Cooperation
 
 Mr.
        Michael Caridi, Senior Advisor: Chairman, MAJIC Development Group, SRC
        Industries Inc. and Protection Plus Security Consultants, Inc.
 
 Paul
        Carlton, M.D., Senior Advisor: Lt. General, USAF, Medical Corps, (Ret.),
        Director, Homeland Security for The Health Science Center The Texas A&M
        University System, Former USAF Surgeon General
 
 Mr.
        Michael Deutsch, Associate Advisor: Homeland Security Liaison, Principal,
        Immediate Solutions, LLC
 
 William
        Hoehn, Ph.D., Associate Advisor: Visiting Professor, Georgia Tech, Sam Nunn
        School of International Affairs, Center for International Strategy, Technology,
        and Policy
 
 The
        Honorable Asa Hutchinson, J.D. Senior Advisor: former Under Secretary for
        Border
        and Transportation Security at the Department of Homeland Security, Partner
        and
        chair of Venable LLP's Homeland Security Group.
 
 Elizabeth
        Ceilley Hyslop, M.D., Associate Advisor: Clinical Practitioner, Durango Cancer
        Center.
 
 John
        Kalns Ph.D.: Vice President and Chief Scientific Officer Hyperion Biotechnology,
        Inc. at Brooks City-Base.
 
 Col.
        Kerrie Lindberg (Ret.), Associate Advisor: Colonel, USAF, Nurse Corps, (Ret.),
        Former Director, Defense Institute for Medical Operations (DIMO), Brooks
        City-Base, Texas
 
 K.A.
        Kelly McQueen, M.D., MPH. Anesthesiologist and Public Health Consultant;
        Infectious Disease and Disaster Planning for U.S. Army and US Northern Combatant
        Command
 
 **MANUFACTURING**
 
 As
        previously discussed, we expect that Radilex and Viprovex will ultimately
        have
        distinct formulations and dosing regimens, however, at this early stage of
        development, the formulations used are identical. We do not have, and do
        not
        intend to establish, manufacturing facilities to produce Homspera, Radilex
        or
        Viprovex or any other potential products, if any, that may be derived from
        Homspera.
 
 We
        have
        used and expect to continue to use third party manufacturers to obtain synthetic
        Homspera or Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P, the active ingredient in experimental formulations of Radilex and Viprovex.
        We believe Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P is readily available at low cost from several life science and technology
        companies that provide biochemical and organic chemical products used in
        scientific and genomic research, biotechnology, pharmaceutical development
        and
        the diagnosis of disease and chemical manufacturing. Further, we believe
        that
        the Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P is readily available from various sources, and several suppliers are capable
        of supplying such in both clinical and initial commercial quality and
        quantities.
 
 Since
        to
        date we are only purchasing research quantities of the drug at this time,
        we
        have not entered into any contracts or agreements with any third party
        manufacturers, other than standard non-disclosure agreements.
 
 The
        manufacture of Radilex, Viprovex or any potential products, if any, derived
        from
        Homspera, whether done by outside contractors, as planned, or internally,
        will
        be subject to rigorous regulations, including the need to comply with the
        FDA's
        current Good Manufacturing Practice (cGMP) standards. As part of obtaining
        FDA
        approval for each product, each of the manufacturing facilities must be
        inspected, approved by and registered with the FDA. In addition to obtaining
        FDA
        approval of the prospective manufacturer's quality control and manufacturing
        procedures, domestic and foreign manufacturing facilities are subject to
        periodic inspection by the FDA and/or foreign regulatory
        authorities.
 
 13
  **PATENTS
        AND PROPRIETARY RIGHTS**
 
 Patents
        and other proprietary rights are essential to our business. We file patent
        applications to protect our technologies, inventions, and improvements to
        our
        inventions that we consider important to the development of our business.
        We
        also rely upon trade secrets, know-how, continuing technological innovations
        and
        licensing opportunities to develop and maintain our competitive
        position.
 
 We
        have
        filed patent applications and provisional patent applications for the use
        of
        Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P, the active ingredient in Homspera, Radilex and Viprovex. The intellectual
        property owned by us, as further described below, is for various potential
        uses
        of Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P. We own four registered patents, comprised of two issued U.S. and two issued
        foreign patents. We also have 35 pending patents relating to the use of
        Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P. These pending patents are comprised of four pending Patent Cooperation
        Treaty
        (PCT) applications, nine pending U.S. provisional patent applications and
        22
        pending foreign provisional patent applications. Additionally, we are in
        the
        process of pursuing several other use patent applications based on the use
        of
        Homspera.
 
 We
        currently hold issued patents in the U.S. for use of Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P, the active ingredient in Homspera, Radilex, and Viprovex for inhibiting
        tumor
        growth and/or metastasis in cancer patients and for stimulating the immune
        system of immunocompromised individuals such as Acute Radiation Syndrome
        victims. Similar patent rights are held in Europe and Australia. In the latter
        two regions, we also have been issued patent rights for use of the active
        ingredient in Homspera, Radilex and Viprovex for stimulating the maturation
        of a
        juvenile immune system, for stimulating an immune response to a viral or
        bacterial infection, and for reducing the risk of cancer.
 
 We
        have
        also filed patent applications in many jurisdictions, inside and outside
        of the
        U.S., for use of the active ingredient in Homspera, Radilex and Viprovex
        for
        treatment of avian influenza in mammals, reducing the risk or severity of
        anthrax infection, treatment of blood cell depletion, ameliorating or preventing
        damage caused by cigarette smoke; for treating patients with SARS (Severe
        Acute
        Respiratory Syndrome) or ARDS (Acute Respiratory Distress Syndrome) or to
        prevent these conditions in those exposed to putative causative agents; for
        inducing new hair growth or retarding hair loss; for reducing certain aging
        effects, such as interrupted sleep patterns, residual muscle pain, short
        term
        memory loss, diminished visual accommodation, decreased muscle strength,
        and
        arthritic pain; for stimulating wound healing in a radiation-exposed mammal;
        for
        treating asthma; for treating skin diseases, in particular, eczema, psoriasis,
        acne, and basal cell carcinoma; for prophylactically treating domestic fowl
        to
        prevent respiratory infections, and for maintaining or inducing hair color.
        Because these applications have not yet been granted, the rights in these
        subject matters remain potential.
 
 The
        following is a list of the registered patents and provisional patent
        applications in our portfolio. All of the inventor rights for all patents
        and
        all patent applications listed have been assigned to us by the inventors.
        Some
        of our research has been funded by the Air Force Office of Scientific Research
        and has been conducted at the University of Arizona. We have received waivers
        of
        rights to the invention from the United States Air Force and the University
        of
        Arizona in regard to patent and patent applications for Substance P Treatment
        for Immunostimulation. We are expecting to receive similar waivers from the
        United States Air Force and the University of Arizona for the remaining patent
        applications in our intellectual property portfolio.
 
 In
        total,
        our patent portfolio consists of four registered patents, two issued U.S.
        and
        two issued foreign patents. We also have 35 pending patents, comprised of
        four
        pending Patent Cooperation Treaty (PCT) applications, nine pending U.S.
        provisional patent applications and 22 pending foreign provisional patent
        applications. The assignment documents are included as Exhibits.
 
 Registered
        Patents:
  **Title**
              
              **Country**
              
              **Registration
                  No.**Substance
                  P Treatment for Immunostimulation
              
              United
                  States of America
              
              5,998,376Substance
                  P Treatment for Immunostimulation
              
              United
                  States of America
              
              5,945,508Substance
                  P Treatment for Immunostimulation
              
              Australia
              
              737201Substance
                  P Treatment for Immunostimulation
              
              Canada
              
              0957930Switzerland
              
              0957930Germany
              
              0957930Spain
              
              0957930France
              
              0957930United
                  Kingdom
              
              0957930Ireland
              
              0957930Italy
              
              0957930Liechtenstein
              
              0957930Monaco
              
              0957930
  Patents
        Pending:
 
 **Title**
              
              **Country**
              
              **Application
                  No**.Method
                  to Promote Wound Healing
              
              Patent
                  Cooperation Treaty
              
              PCT/US05/38646Prevention
                  of Respiratory Infections in Fowl
              
              Patent
                  Cooperation Treaty
              
              PCT/USO5/42601Treatment
                  of Skin Diseases
              
              Patent
                  Cooperation Treaty
              
              PCT/US05/45369Treatment
                  for Asthma
              
              Patent
                  Cooperation Treaty
              
              PCT/US06/11833Amelioration
                  of Effects of Cigarette Smoke
              
              United
                  States of America
              
              10/645839Stimulation
                  of Hair Growth
              
              United
                  States of America
              
              10/539734Acute
                  Respiratory Syndromes
              
              United
                  States of America
              
              10/553232Inducing
                  and Maintaining Hair Color
              
              United
                  States of America
              
              tbaAnti-Aging
                  Effects of Substance P
              
              United
                  States of America
              
              tbaMethod
                  to Reduce the Risk and/or
              
              United
                  States of America
              
              60/828723Severity
                  of Anthrax InfectionMethod
                  to Treat Blood Cell Depletion
              
              United
                  States of America
              
              60/809391Prophylactic
                  and Therapeutic Treatment
              
              United
                  States of America
              
              60/866901of
                  Mammals for Avian Influenza InfectionsUse
                  of Homspera (substance P analog) as an adjuvant
              
              United
                  States of America
              
              60/885562Prevention
                  of Respiratory Infections in Fowl
              
              Singapore
              
              200500467-6Prevention
                  of Respiratory Infections in Fowl
              
              Thailand
              
              97659Prevention
                  of Respiratory Viral Infection in Fowl
              
              Vietnam
              
              1-2005-00599Treatment
                  of Skin Diseases
              
              Singapore
              
              200500466-8Treatment
                  of Skin Diseases
              
              Vietnam
              
              1-2005-00598Treatment
                  of Skin Diseases
              
              Thailand
              
              98080Treatment
                  of Asthma
              
              Singapore
              
              200504104-1Amelioration
                  of Effects of Cigarette Smoke
              
              Singapore
              
              200501072-3Amelioration
                  of Effects of Cigarette Smoke
              
              China
              
              3820184.4Amelioration
                  of Effects of Cigarette Smoke
              
              Japan
              
              2004-532943Amelioration
                  of Effects of Cigarette Smoke
              
              European
                  Patent Office
              
              3791722.6Amelioration
                  of Effects of Cigarette Smoke
              
              Canada
              
              2496447Amelioration
                  of Effects of Cigarette Smoke
              
              Vietnam
              
              1-2005-00215Acute
                  Respiratory Distress Syndrome
              
              Hong
                  Kong
              
              6107144.4Acute
                  Respiratory Syndrome
              
              European
                  Patent Office
              
              4759500.4Acute
                  Respiratory Syndromes
              
              Singapore
              
              200507608-8Medicaments
                  for Treating or Protecting SARS or ARDS
              
              Vietnam
              
              1-2005-01560Anti-Aging
                  Effects of Substance P
              
              Japan
              
              tbaAnti-Aging
                  Effects of Substance P
              
              Canada
              
              PCT/US05/13113Anti-Aging
                  Effects of Substance P
              
              European
                  Patent Office
              
              5755488.3Anti-Aging
                  Effects of Substance P
              
              China
              
              tbaAnti-Aging
                  Effects of Substance P
              
              Australia
              
              2005240026
 
 14
  Our
        rights to the US Patent Nos. 5,945,508 and 5,998,376, Substance P Treatment
        for
        Immunostimulation, have certain limitations with respect to the University
        of
        Arizona and the United States Air Force as described below. If patents are
        issued for any of our pending patent applications, the same limitations would
        most likely apply.
 
 Our
        agreements with the University of Arizona outline very specific rights in
        regard
        to our sponsored-supported projects. In accordance with our sponsored-supported
        project agreements, the University of Arizona retains the right to use data
        developed during these projects for non-commercial purposes, including teaching,
        research and education. ImmuneRegen BioSciences, Inc. retains the rights
        to
        trade secrets, inventions, developments and discoveries as limited by the
        University of Arizona's employment contracts in effect at the time the
        intellectual property was created. Further to this point, the principal
        investigator at the University of Arizona, Dr. Mark Witten, was a consultant
        to
        ImmuneRegen BioSciences, and, under the terms of his consulting agreement,
        ImmuneRegen BioSciences, Inc. retains rights to any developments or discoveries
        that he made in the course of working for us.
 
 As
        a
        result of governmental funding, the U.S. Government has certain rights in
        the
        technology developed with such funds. These rights include a non-exclusive,
        paid-up, worldwide license under such inventions for any governmental purpose.
        In addition, the government has the right to require us to grant an exclusive
        license under any of such inventions to a third party if the government
        determines that: (i) adequate steps have not been taken to commercialize
        such
        inventions, (ii) such action is necessary to meet public health or safety
        needs,
        or (iii) such action is necessary to meet requirements for public use under
        federal regulations.
 
 In
        this
        regard, the United States Air Force has reserved a non-exclusive license
        to the
        patents (US Patent Nos. 5,945,508 and 5,998,376) in connection with Air Force
        grant F49620-94-1-0297 and may, under certain conditions, have commensurate
        or
        additional license rights under the Bayh-Dole Act. Those rights are set forth
        in
        35 USC 202(c)(4) and 37 CFR 401.9 and 14(a).
 
 Under
        the
        federal Bayh Dole Act, a party which acquires an exclusive license for an
        invention that was partially funded by a federal research grant is subject
        to
        the following government rights: (i) products using the invention which are
        sold
        in the U.S. are to be manufactured substantially in the U.S. unless a waiver
        is
        obtained; (ii) the government may force the granting of a license to a third
        party who will make and sell the needed product if the licensee does not
        pursue
        reasonable commercialization of a needed product using the invention; and
        (iii)
        the U.S. Government may use the invention for its own needs.
 
 Moreover,
        besides the rights that have been granted to the U.S. Government, the validity
        and breadth of claims in medical technology patents involve complex legal
        and
        factual questions and, therefore, may be highly uncertain. No assurance can
        be
        given that any patents based on pending patent applications or any future
        patent
        applications by us will be issued, that the scope of any patent protection
        will
        exclude competitors or provide competitive advantages to us, that any of
        the
        patents that have been or may be issued to us will be held valid if subsequently
        challenged or that others will not claim rights in or ownership of the patents
        and other proprietary rights held by us. Furthermore, there can be no assurance
        that others have not developed or will not develop similar products, duplicate
        any of our products or design around any patents that have been or may be
        issued
        to us. Since patent applications in the U.S. are maintained in secrecy until
        shortly before a patent's issuance, we also cannot be certain that others
        did
        not first file applications for inventions covered by our pending patent
        applications, nor can we be certain that we will not infringe any patents
        that
        may be issued to others on such applications.
 
 We
        also
        rely on trade secrets and unpatentable know-how that we seek to protect,
        in
        part, by confidentiality agreements. It is our policy to require our employees,
        consultants, contractors, manufacturers, outside scientific collaborators
        and
        sponsored researchers and other advisors to execute confidentiality agreements
        upon the commencement of employment or consulting relationships with us.
        These
        agreements provide that all confidential information developed or made known
        to
        the individual during the course of the individual's relationship with us
        is to
        be kept confidential and not disclosed to third parties except in specific
        limited circumstances. We also require signed confidentiality or material
        transfer agreements from any company that is to receive our confidential
        information. In the case of employees, consultants and contractors, the
        agreements generally provide that all inventions conceived by the individual
        while rendering services to us shall be assigned to us as our exclusive
        property. There can be no assurance, however, that these agreements will
        not be
        breached, that we would have adequate remedies for any breach, or that our
        trade
        secrets or unpatentable know-how will not otherwise become known or be
        independently developed by competitors.
 
 Our
        potential success will also depend in part on our ability to develop
        commercially viable products without infringing the proprietary rights of
        others. We have not conducted freedom of use patent searches and no assurance
        can be given that patents do not exist or could not be filed which would
        have an
        adverse affect on our ability to market our products or maintain our competitive
        position with respect to our products. If our technology components, devices,
        designs, products, processes or other subject matter are claimed under other
        existing U.S. or foreign patents, or are otherwise protected by third party
        proprietary rights, we may be subject to infringement actions. In such event,
        we
        may challenge the validity of such patents or other proprietary rights or
        we may
        be required to obtain licenses from such companies in order to develop,
        manufacture or market our products. There can be no assurances that we would
        be
        able to obtain such licenses or that such licenses, if available, could be
        obtained on commercially reasonable terms. Furthermore, the failure to either
        develop a commercially viable alternative or obtain such licenses could result
        in delays in marketing our proposed products or the inability to proceed
        with
        the development, manufacture or sale of products requiring such licenses,
        which
        could have a material adverse affect on our business, financial condition
        and
        results of operations. If we are required to defend ourselves against charges
        of
        patent infringement or to protect our proprietary rights against third parties,
        substantial costs will be incurred regardless of whether we are successful.
        Such
        proceedings are typically protracted with no certainty of success. An adverse
        outcome could subject us to significant liabilities to third parties and
        force
        us to curtail or cease our development and sale of our products and
        processes.
 
 We
        may
        collaborate in the future with other entities on research, development and
        commercialization activities. Disputes may arise about inventorship and
        corresponding rights in know-how and inventions resulting from the joint
        creation or use of intellectual property by us and our collaborators, partners,
        licensors and consultants. As a result, we may not be able to maintain our
        proprietary position.
 
 15
  Trademarks
 
 On
        December 9, 2004 we filed for trademarks with US Patent and Trademark Office
        (USPTO) for Homspera, Radilex and Viprovex.
 
 On
        August
        15, 2006, Viprovex became a federally registered trademark (Reg. No. 3,130,407)
        in International Class 5 for pharmaceutical products, namely antidotes for
        the
        treatment of viral, chemical and biological warfare agents.
 
 On
        October 17, 2006, opposition to the Homspera mark was filed by another
        pharmaceutical company that distributes an anti-viral compound under a name
        which they claim has a “similar sound and appearance.” The matter is currently
        being negotiated and we have granted an extension of the opposition
        term.
 
 On
        December 5, 2006, the Trademark Office issued a Notice of Allowance to our
        Intent-to-Use (ITU) trademark application for Radilex as biopharmaceuticals,
        namely products for counteracting exposure to radiation and chemical agents.
        As
        of the date of this report, the time for opposition to the Radilex mark has
        expired.
 
 On
        January 9, 2007, the Trademark Office issued a Notice of Allowance of our
        Intent-to-Use (ITU) trademark application for ImmuneRegen for biotechnology
        pharmaceuticals, namely adjuvants, counteractants and immunostimulant products
        for enhancing the natural and reactive immunity to toxic agents.
 
 **RESEARCH
        AND LICENSE AGREEMENTS**
 
 Our
        patents and continued research on Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P are derived from discoveries made during research studies funded by the
        Air
        Force Office of Scientific Research (AFOSR) in 1994 by our co-founders Drs.
        Mark
        Witten and David Harris. In December 2002 we entered into consulting agreements
        on a month-to-month basis with Dr. Mark Witten and Dr. David Harris. Under
        the
        terms of these agreements, Drs. Witten and Harris agreed to place at the
        disposal of us their judgment and expertise in the area of acute lung injury.
        In
        consideration for these services, we agreed to pay each of Drs. Witten and
        Harris a non-refundable fee of $5,000 per month. We and Dr. Harris agreed
        to
        terminate the consulting agreement for Dr. Harris in March 2005. In January
        2006, the company received correspondence from Dr. Witten stating that he
        would
        terminate his consulting contract if his specific requirements were not met.
        We
        subsequently accepted his termination effective February 1, 2006.
 
 In
        December 2002, we entered into a royalty-free license agreement with Drs.
        Witten
        and Harris. Under the terms of the license agreement, Drs. Harris and Witten
        granted to us an exclusive license to use and sublicense certain patents,
        medical applications, and other technologies developed by them. Our obligations
        under this agreement include (i) reasonable efforts to protect any licensed
        patents or other associated property rights; (ii) reasonable efforts to maintain
        confidentiality of any proprietary information; (iii) upon the granting by
        the
        U. S. Food and Drug Administration to us the right to market a product, we
        will,
        for so long as we sell any product or medical application which incorporates
        or
        utilizes the patents, medical applications, and other technologies developed
        by
        Drs. Witten and Harris, maintain in full force and effect policies of general
        liability insurance (with Broad Form General Liability and Product Liability
        endorsements) with limits of not less than $1,000,000 per occurrence and
        $1,000,000 annual aggregate. The license agreement will terminate ten years
        after the date of the expiration of the last patent issued or issuing with
        respect to the licensed patents, medical applications, and other technologies.
        The resignation of Dr. Harris as a director of our company in December 2004
        and
        as a consultant in March 2005 does not have any impact upon the terms of
        the
        license agreement. The resignation of Dr. Witten as a consultant to our company
        in February 2006 does not have any impact upon the terms of the license
        agreement.
 
 In
        February 2005, Drs. Witten and Harris executed assignment documents in which,
        for good and valuable consideration, patent applications and patents developed
        by them were assigned to ImmuneRegen BioSciences, Inc. The assignment documents
        included all of the patents and patent applications which were included in
        and
        covered by the Licensing Agreement, as amended. Drs. Witten and Harris have
        also
        assigned all proprietary technology developed at ImmuneRegen subsequent to
        the
        execution of the February 2005 assignment documents.
 
 **GOVERNMENTAL
        REGULATION**
 
 Our
        research and development activities and the manufacturing and marketing of
        our
        applications are subject to the laws and regulations of governmental authorities
        in the U.S. and other countries in which our applications may be potentially
        marketed. Specifically, in the U.S., the FDA, among other activities, regulates
        new product approvals to establish safety and efficacy of these applications.
        Governmental authorities in the United States extensively regulate the
        pre-clinical and clinical testing, safety, efficacy, research, development,
        manufacturing, labeling, storage, record-keeping, advertising, promotion,
        export, marketing and distribution, among other things, of pharmaceutical
        products. Governments in other countries have similar requirements for testing
        and marketing. In the U.S., in addition to meeting FDA regulations, we are
        also
        subject to other federal laws as well as certain state laws.
 
 **REGULATORY
        PROCESS IN THE UNITED STATES**
 
 In
        the
        United States, the FDA, under the Federal Food, Drug, and Cosmetic Act (FFDCA),
        the Public Health Service Act and other federal statutes and regulations,
        subject pharmaceutical and biologic products to rigorous review. If we do
        not
        comply with applicable requirements, we may be fined, the government may
        refuse
        to approve our marketing applications or allow us to manufacture or market
        our
        products or product candidates, and we may be criminally prosecuted. The
        FDA
        also has the authority to discontinue or suspend manufacture or distribution,
        require a product withdrawal or recall or revoke previously granted marketing
        authorizations, if we fail to comply with regulatory standards or if we
        encounter problems following initial marketing.
 
 Approval
        of new pharmaceutical (and biological) products is a lengthy procedure leading
        from development of a new product through pre-clinical and clinical testing.
        This process takes a number of years and the expenditure of significant
        resources. There can be no assurance that our product candidates will ultimately
        receive regulatory approval.
 
 Regardless
        of how our product candidates are regulated, the FFDCA and other Federal
        statutes and regulations govern or influence the research, testing, manufacture,
        safety, labeling, storage, record-keeping, approval, distribution, use, product
        reporting, advertising and promotion of such products. Noncompliance with
        applicable requirements can result in civil penalties, recall, injunction
        or
        seizure of products, refusal of the government to approve or clear product
        approval applications or to allow us to enter into government supply contracts,
        withdrawal of previously approved applications and criminal
        prosecution.
 
 16
  **PRODUCT
        APPROVAL IN THE UNITED STATES**
 
 To
        obtain
        approval of a new product from the FDA, we must, among other requirements,
        submit data demonstrating the product's safety and efficacy, as well as,
        detailed information and reports on the manufacture and composition of the
        product candidate. In most cases, this entails extensive laboratory tests,
        pre-clinical and clinical trials. This testing and the preparation of necessary
        applications and processing of those applications by the FDA are expensive
        and
        typically take many years to complete. The FDA may deny our applications
        or may
        not act quickly or favorably in reviewing these applications, and we may
        encounter significant difficulties or costs in our efforts to obtain FDA
        approvals that could delay or preclude us from marketing any products we
        may
        develop. The FDA also may require post-marketing testing and surveillance
        to
        monitor the effects of approved products or place conditions on any approvals
        that could restrict the commercial applications of these products. Regulatory
        authorities may withdraw product approvals if we fail to comply with regulatory
        standards or if we encounter problems following initial marketing. With respect
        to patented products or technologies, delays imposed by the governmental
        approval process may materially reduce the period during which we will have
        the
        exclusive right to exploit the products or technologies.
 
 The
        process required by the FDA before a new drug or biologic may be marketed
        in the
        United States generally involves the following:
  ·  completion
        of pre-clinical laboratory tests or trials and formulation studies;
 
 ·  submission
        to the FDA of an IND for a new drug or biologic, which must become effective
        before human clinical trials may begin;
 
 ·  performance
        of adequate and well-controlled human clinical trials to establish the safety
        and efficacy of the proposed drug or biologic for its intended use;
        and,
 
 ·  submission
        and approval of a New Drug Application, or NDA, for a drug, or a Biologics
        License Application, or BLA, for a biologic.
 
 Pre-clinical
        tests include laboratory evaluation of product chemistry, formulation and
        stability, as well as studies to evaluate toxicity. The results of pre-clinical
        testing, together with manufacturing information and analytical data, are
        submitted to the FDA as part of an IND application. The FDA requires a 30-day
        waiting period after the filing of each IND application before clinical trials
        may begin, in order to ensure that human research subjects will not be exposed
        to unreasonable health risks. At any time during this 30-day period or at
        any
        time thereafter, the FDA may halt proposed or ongoing clinical trials, or
        may
        authorize trials only on specified terms. The IND application process may
        become
        extremely costly and substantially delay development of our products. Moreover,
        positive results of pre-clinical tests will not necessarily indicate positive
        results in clinical trials.
 
 The
        sponsor typically conducts human clinical trials in three sequential phases,
        which may overlap. These phases generally include the following:
 
 Phase
        I:
        The product is usually first introduced into healthy humans or, on occasion,
        into patients, and is tested for safety, dosage tolerance, absorption,
        distribution, excretion and metabolism.
 
 Phase
        II:
        The product is introduced into a limited patient population to:
 
 ·  assess
        its efficacy in specific, targeted indications;
 
 ·  assess
        dosage tolerance and optimal dosage; and,
 
 ·  identify
        possible adverse effects and safety risks.
 
 17
  Phase
        III: These are commonly referred to as pivotal studies. If a product is found
        to
        have an acceptable safety profile and to be potentially effective in Phase
        II
        clinical trials, new clinical trials will be initiated to further demonstrate
        statistically significant clinical efficacy, optimal dosage and safety within
        an
        expanded and diverse patient population at geographically-dispersed clinical
        study sites.
 
 As
        described above, for several of the product opportunities we are pursuing,
        we
        may apply for approval based upon a rule adopted by the FDA in 2002, titled
        "Approval of New Drugs When Human Efficacy Studies Are Not Ethical or Feasible"
        (Code of Federal Regulations, Title 21, Part 314, Subpart I), which is also
        referred to as the "animal efficacy rule." Pursuant to this rule, in situations
        where it would be unethical to conduct traditional Phase III efficacy studies
        in
        humans, as is the case with our applications relating to the treatment of
        maladies caused by exposure to various chemical and biological agents, the
        FDA
        will review new drugs for approval on the basis of safety in humans and efficacy
        in relevant animal models. . Under either the animal efficacy rule or
        traditional efficacy rules, we will not have marketable applications unless
        and
        until our drug candidates complete all required safety studies and clinical
        trials and receive FDA approval in the United States or approval by regulatory
        agencies outside of the United States.
 
 If
        the
        FDA does ultimately approve the product, it may require post-marketing testing,
        including potentially expensive Phase IV studies, to monitor its safety and
        effectiveness.
 
 Clinical
        trials must meet requirements for Institutional Review Board, or IRB, oversight,
        informed consent and the FDA's Good Clinical Practices. Prior to commencement
        of
        each clinical trial, the sponsor must submit to the FDA a clinical plan,
        or
        protocol, accompanied by the approval of the committee responsible for
        overseeing clinical trials at one of the clinical trial sites. The FDA and
        the
        IRB at each institution at which a clinical trial is being performed may
        order
        the temporary or permanent discontinuation of a clinical trial at any time
        if it
        believes that the clinical trial is not being conducted in accordance with
        FDA
        requirements or presents an unacceptable risk to the clinical trial
        patients.
 
 The
        sponsor must submit to the FDA the results of the pre-clinical and clinical
        trials, together with, among other things, detailed information on the
        manufacturing and composition of the product, in the form of an NDA, or,
        in the
        case of a biologic, a BLA. Once the submission has been accepted for filing,
        the
        FDA has 180 days to review the application and respond to the applicant.
        The
        review process is often significantly extended by FDA requests for additional
        information or clarification. The FDA may refer the BLA to an advisory committee
        for review, evaluation and recommendation as to whether the application should
        be approved, but the FDA is not bound by the recommendation of an advisory
        committee.
 
 It
        is
        possible that our product candidates will not successfully proceed through
        this
        approval process or that the FDA will not approve them in any specific period
        of
        time, or at all. The FDA may deny or delay approval of applications that
        do not
        meet applicable regulatory criteria, or if the FDA determines that the clinical
        data do not adequately establish the safety and efficacy of the product.
        Satisfaction of FDA pre-market approval requirements for a new biologic is
        a
        process that may take several years and the actual time required may vary
        substantially based upon the type, complexity and novelty of the product
        or
        disease. The FDA reviews these applications and, when and if it decides that
        adequate data are available to show that the product is both safe and effective
        and that other applicable requirements have been met, approves the drug or
        biologic for marketing. Government regulation may delay or prevent marketing
        of
        potential products for a considerable period of time and impose costly
        procedures upon our activities. Success in early stage clinical trials does
        not
        assure success in later stage clinical trials. Data obtained from clinical
        activities is not always conclusive and may be susceptible to varying
        interpretations that could delay, limit or prevent regulatory approval. Upon
        approval, a product candidate may be marketed only for those indications
        approved in the BLA or NDA and may be subject to labeling and promotional
        requirements or limitations, including warnings, precautions, contraindications
        and use limitations, which could materially impact profitability. Once approved,
        the FDA may withdraw the product approval if compliance with pre- and
        post-market regulatory standards is not maintained or if safety, efficacy
        or
        other problems occur after the product reaches the marketplace.
 
 The
        FDA
        may, during its review of an NDA or BLA, ask for additional test data. If
        the
        FDA does ultimately approve the product, it may require post-marketing testing,
        including potentially expensive Phase IV studies, to monitor the safety and
        effectiveness of the product. In addition, the FDA may, in some circumstances,
        impose restrictions on the use of the product, which may be difficult and
        expensive to administer and may require prior approval of promotional
        materials.
 
 18
 **ONGOING
        FDA REQUIREMENTS**
 
 Before
        approving an NDA or BLA, the FDA will inspect the facilities at which the
        product is manufactured and will not approve the product unless the
        manufacturing facilities are in compliance with the FDA's current Good
        Manufacturing Practices, or cGMP, requirements which govern the manufacture,
        holding and distribution of a product. Manufacturers of biologics also must
        comply with the FDA's general biological product standards. Following approval,
        the FDA periodically inspects drug and biologic manufacturing facilities
        to
        ensure continued compliance with the cGMP requirements. Manufacturers must
        continue to expend time, money and effort in the areas of production, quality
        control, record keeping and reporting to ensure full compliance with those
        requirements. Failure to comply with these requirements subjects the
        manufacturer to possible legal or regulatory action, such as suspension of
        manufacturing, seizure of product, voluntary recall of product, withdrawal
        of
        marketing approval or civil or criminal penalties. Adverse experiences with
        the
        product must be reported to the FDA and could result in the imposition of
        marketing restrictions through labeling changes or market removal. Product
        approvals may be withdrawn if compliance with regulatory requirements is
        not
        maintained or if problems concerning safety or efficacy of the product occur
        following approval.
 
 The
        labeling, advertising, promotion, marketing and distribution of a drug or
        biologic product also must be in compliance with FDA and FTC requirements
        which
        include, among others, standards and regulations for direct-to-consumer
        advertising, industry-sponsored scientific and educational activities, and
        promotional activities involving the internet. The FDA and FTC have very
        broad
        enforcement authority, and failure to abide by these regulations can result
        in
        penalties, including the issuance of a Warning Letter directing the company
        to
        correct deviations from regulatory standards, a requirement that future
        advertising and promotional materials be pre-cleared by the FDA and enforcement
        actions that can include seizures, injunctions and criminal
        prosecution.
 
 Manufacturers
        are also subject to various state and Federal laws and regulations governing
        laboratory practices (specifically, the requirement for certain studies to
        comply with current Good Laboratory Practices), the experimental use of animals
        and the use and disposal of hazardous or potentially hazardous substances
        in
        connection with their research. In each of the above areas, the FDA has broad
        regulatory and enforcement powers, including the ability to levy fines and
        civil
        penalties, suspend or delay issuance of approvals, seize or recall products
        and
        deny or withdraw approvals.
 
 Some
        of
        our drug candidates may need to be administered using specialized drug delivery
        systems. We may rely on drug delivery systems that are already approved to
        deliver drugs like ours to similar physiological sites or, in some instances,
        we
        may need to modify the design or labeling of the legally available device
        for
        delivery of our product candidate. In such an event, the FDA may regulate
        the
        product as a combination product or require additional approvals or clearances
        for the modified device. Further, to the extent the delivery device is owned
        by
        another company, we would need that company's cooperation to implement the
        necessary changes to the device and to obtain any additional approvals or
        clearances. Obtaining such additional approvals or clearances, and cooperation
        of other companies, when necessary, could significantly delay, and increase
        the
        cost of obtaining, marketing approval, which could reduce the commercial
        viability of a drug candidate.
 
 **HIPAA
        REQUIREMENTS**
 
 Other
        federal legislation may affect our ability to obtain certain health information
        in conjunction with our research activities. The Health Insurance Portability
        and Accountability Act of 1996, or HIPAA, mandates, among other things, the
        adoption of standards designed to safeguard the privacy and security of
        individually identifiable health information. In relevant part, the U.S.
        Department of Health and Human Services, or HHS, has released two rules to
        date
        mandating the use of new standards with respect to such health information.
        The
        first rule imposes new standards relating to the privacy of individually
        identifiable health information. These standards restrict the manner and
        circumstances under which covered entities may use and disclose protected
        health
        information so as to protect the privacy of that information. The second
        rule
        released by HHS establishes minimum standards for the security of electronic
        health information. While we do not believe we are directly regulated as
        a
        covered entity under HIPAA, the HIPAA standards impose requirements on covered
        entities conducting research activities regarding the use and disclosure
        of
        individually identifiable health information collected in the course of
        conducting the research. As a result, unless they meet these HIPAA requirements,
        covered entities conducting clinical trials for us may not be able to share
        with
        us any results from clinical trials that include such health
        information.
 
 In
        addition to the statutes and regulations described above, we are also subject
        to
        regulation under the Occupational Safety and Health Act, the Environmental
        Protection Act, the Toxic Substances Control Act, the Resource Conservation
        and
        Recovery Act and other present and potential future federal, state and local
        regulations.
 
 19
  **SECURITIES
        LAWS**
 
 Because
        our common stock is publicly traded, we are subject to a variety of rules
        and
        regulations of federal, state and financial market exchange entities charged
        with the protection of investors and the oversight of companies whose securities
        are publicly traded. These entities, including the Securities and Exchange
        Commission, the Public Company Accounting Oversight Board and the NASD OTC
        Bulletin Board, have recently issued new requirements and regulations and
        are
        currently developing additional regulations and requirements in response
        to
        recent laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002.
        As
        certain rules are not yet finalized, we do not know the level of resources
        we
        will have to commit in order to be in compliance. Our compliance with current
        and proposed rules is likely to require the commitment of significant financial
        and managerial resources. As a result, our management's attention might be
        diverted from other business concerns, which could negatively affect our
        business.
 
 **DISTRIBUTION**
 
 If
        Radilex or Viprovex receives approval from the FDA, we will attempt to
        commercialize these applications. Upon such approval, if Radilex we intend
        to
        use our best efforts to market it as a treatment to the damaging effects
        of
        radiation injury that result after exposure to total body irradiation. If
        Viprovex, we intend to use our best efforts to market it as a medical
        countermeasure to the effects of exposure to various biological agents. We
        intend to offer for sale these applications to various governmental agencies
        at
        the local, state and federal levels, both domestically and potentially outside
        the United States.
 
 **COMPETITIVE
        ENVIRONMENT**
 
 The
        biotechnology and pharmaceutical industries are intensely competitive. We
        have
        numerous competitors in the United States and elsewhere. Because we are pursuing
        potentially large markets, our competitors include major multinational
        pharmaceutical companies, specialized biotechnology firms and universities
        and
        other research institutions. Several of these entities have already successfully
        marketed and commercialized products that will compete with our products,
        assuming that our products gain regulatory approval. Competitors such as
        Amgen
        Inc., Hollis-Eden Pharmaceuticals, Inc. and Cleveland Biolabs, Inc. have
        developed or are developing products for treating aspects of severe acute
        radiation injury. Companies such as VaxGen, Inc., Acambis plc and Emergent
        BioSolutions have developed or are developing vaccines against infectious
        diseases, including anthrax.
 
 Many
        of
        our competitors have greater financial and other resources, larger research
        and
        development staffs and more effective marketing and manufacturing organizations
        than we do. In addition, academic and government institutions have become
        increasingly aware of the commercial value of their research findings. These
        institutions are now more likely to enter into exclusive licensing agreements
        with commercial enterprises, including our competitors, to develop and market
        commercial products.
 
 Our
        competitors may succeed in developing or licensing technologies and drugs
        that
        are more effective or less costly than the potential products we are developing.
        Our competitors may succeed in obtaining FDA or other regulatory approvals
        for
        drug candidates before we do. If competing drug candidates prove to be more
        effective or less costly than our drug candidates, our drug candidates, even
        if
        approved for sale, may not be able to compete successfully with our competitors'
        existing products or new products under development. If we are unable to
        compete
        successfully, we may never be able to sell enough of our potential products
        at a
        price sufficient to permit us to generate profits.
 
 We
        believe that due to the global political environment that time to market
        is
        critical in the discovery of an effective countermeasure to radiation exposure
        and other biological and chemical threats. New developments in areas in which
        we
        are conducting our research and development are expected to continue at a
        rapid
        pace in both industry and academia. It is due to these reasons that we believe
        that competition will be driven by time to market.
 
 If
        our
        proposed product candidates are successfully developed and approved, we will
        face competition based on the safety and effectiveness of our proposed products,
        the timing and scope of regulatory approvals, availability of manufacturing,
        sales, marketing and distribution capabilities, reimbursement coverage, price
        and patent position. There can be no assurance that our competitors will
        not
        develop more effective or more affordable technology or products, or achieve
        earlier patent protection, product development or product commercialization
        than
        us. Accordingly, our competitors may succeed in commercializing products
        more
        rapidly or effectively than us, which could have a material adverse effect
        on
        our business, financial condition and results of operations.
 
 20
  **EMPLOYEES**
 
 From
        our
        inception through the period ended December 31, 2006, we have relied on the
        services of outside consultants for services and currently have six total
        employees; one contract employee, four full-time employees and one part-time
        employee. Our full-time employees are Michael K. Wilhelm, our Chief Executive
        Officer; John N. Fermanis, our Chief Financial Officer; Hal N. Siegel, Ph.D.,
        Senior Director, Product Development and Regulatory Affairs; and, the fourth
        serves in an administrative role. In order for us to attract and retain quality
        personnel, we anticipate we will have to offer competitive salaries to future
        employees. We do not anticipate our employment base will significantly change
        during the next twelve months.
 
 If
        we are
        able to expand our operations, we will incur additional costs for personnel.
        This projected increase in personnel is dependent upon our generating revenues
        and obtaining sources of financing. There is no guarantee that we will be
        successful in raising the funds required or generating revenues sufficient
        to
        fund the projected increase in the number of employees.
 
 Our
        future success depends in large part upon our ability to attract and retain
        highly skilled scientific personnel. The competition in the scientific industry
        for such personnel is intense, and we cannot be sure that we will be successful
        in attracting and retaining such personnel. Most of our consultants and
        employees and several of our executive officers began working for us recently,
        and all employees are subject to "at will" employment. We cannot guarantee
        that
        we will be able to replace any of our scientific personnel in the event their
        services become unavailable.
 
 None
        of
        our employees are covered by collective bargaining agreements, and we believe
        our relations with our employees are favorable.
 
  21
  
 **RISK
        FACTORS**
 
 **IN
        EVALUATING OUR BUSINESS, YOU SHOULD CONSIDER THE FOLLOWING DISCUSSIONS OF
        RISKS,
        IN ADDITION TO OTHER INFORMATION CONTAINED IN THIS REPORT AS WELL AS OUR
        OTHER
        PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY OF THE FOLLOWING
        RISKS COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION,
        RESULTS OF OPERATIONS AND PROSPECTS.**
 
 
 **Risks
        Related To Our Financial Results**
 
 **We
        have limited cash resources, an accumulated deficit, are not currently
        profitable and expect to incur significant expenses in the near
        future.**
 
 As
        of
        December 31, 2006, we had working capital of $2,320,533. This amount consists
        of
        cash of $2,752,103 and prepaid services of $79,399 less accounts payable
        and
        accrued liabilities of $460,969, and notes payable of $50,000. We have incurred
        a net loss of $13,285,180 for the period from our inception in October 2002
        to
        December 31, 2006, and have always experienced negative cash flow. We expect
        to
        continue to experience negative cash flow and operating losses through at
        least
        2010 and possibly thereafter. As a result, we will need to generate significant
        revenues to achieve profitability.
 
 **We
        may fail to ever become and remain profitable or we may be unable to fund
        our
        continuing losses, in which case our business may fail.**
 
 We
        are
        focused on product development and have not generated any revenue to date.
        We do
        not believe we will begin earning revenues from operations until the calendar
        year 2009 as we transition from a development stage company. We have incurred
        operating losses since our inception. Our net loss for the fiscal year ended
        December 31, 2006 and December 31, 2005 was $1,486,046 and $4,591,107
        respectively. As of December 31, 2006, we had an accumulated deficit of
        $13,285,180.
 
 **Our
        independent outside auditors have raised substantial doubt about our ability
        to
        continue as a going concern.**
 
 Our
        independent certified public accountants have stated in their report included
        in
        this Form 10-KSB that we have incurred a net loss and negative cash flows
        from
        operations of $1,486,046 and $2,035,484, respectively, for the year ended
        December 31, 2006. Our expectations to continue to incur net losses and negative
        cash flow from operations and a lack of operational history, among other
        matters, that raise substantial doubt about our ability to continue as a
        going
        concern, which contemplates, among other things, the realization of assets
        and
        satisfaction of liabilities in the normal course of business. The effect
        of this
        going concern would materially and adversely affect our ability to raise
        capital, our relationship with potential suppliers and customers, and have
        other
        unforeseen effects.
 
 **We
        will be required to raise additional capital to fund our operations. If we
        cannot raise needed additional capital in the future, we will be required
        to
        cease operations.**
 
 Based
        on
        our current plans, we believe our existing financial resources, and interest
        earned thereon, will be sufficient to meet our operating expenses and capital
        requirements through January 2008. However, changes in our research and
        development plans or other events affecting our operating expenses may result
        in
        the expenditure of such cash before that time. We estimate that we will require
        an additional $2.5 million over the next 24 months in order to finance our
        research and development efforts, fund operating expenses, pursue regulatory
        clearances and prosecute and defend our intellectual property rights. We
        may
        seek such additional funding through public or private financing or through
        collaborative arrangements with strategic partners.
 
 You
        should be aware that in the future:
 
 ·  we
        may
        not obtain additional financial resources when necessary or on terms favorable
        to us, if at all; and
 
 ·  any
        available additional financing may not be adequate.
 
 If
        we
        cannot raise additional funds when needed, or on acceptable terms, we will
        not
        be able to continue to develop our drug candidates. We require substantial
        working capital to fund our operations. Since we do not expect to generate
        any
        revenues in the foreseeable future, in order to fund operations, we will
        be
        completely dependent on additional debt and equity financing arrangements.
        There
        is no assurance that any financing will be sufficient to fund our capital
        expenditures, working capital and other cash requirements beyond January
        2008.
        No assurance can be given that any such additional funding will be available
        or
        that, if available, can be obtained on terms favorable to us. If we are unable
        to raise needed funds on acceptable terms, we will not be able to develop
        or
        enhance our products, take advantage of any future opportunities or respond
        to
        competitive pressures or unanticipated requirements. A material shortage
        of
        capital will require us to take drastic steps such as reducing our level
        of
        operations, disposing of selected assets or seeking an acquisition partner.
        If
        cash is insufficient, we will not be able to continue operations.
 
 22
  **We
        have deferred, and may continue to defer, payment of some of our obligations,
        which may adversely affect our ability to obtain goods and services in the
        future.**
 
 We
        estimate that we will require approximately $2.5 million to meet our expenses
        for the next 24 months. Until such time, if at all, as we receive adequate
        funding, we intend to defer payment of all of our obligations that are capable
        of being deferred. Such deferment has resulted in the past, and may result
        in
        the future, in some vendors demanding cash payment for their goods and services
        in advance, and other vendors refusing to continue to do business with us,
        which
        may adversely affect our ability to obtain goods and services in the future,
        or
        to do so on favorable terms. There is no guarantee that we will be able to
        defer
        payment of any of our obligations, at which point we will be forced to find
        immediate funding to settle such obligations. If we do not find such funding,
        we
        may not be able obtain the services and goods needed to continue our
        operations.
 
 **We
        will need to conduct significant additional research, preclinical testing
        and
        clinical testing and expect to incur losses as we research, develop and seek
        regulatory approvals for our potential products.**
 
 All
        of
        our research and development efforts are early, pre-clinical stage and Homspera
        has only undergone exploratory studies to evaluate its biological activity
        in
        small animals. We will need to conduct significant additional research,
        pre-clinical testing and clinical testing before we can file applications
        with
        the FDA for approval of our product candidates. To date we have not yet made
        applications with the FDA or any other governmental regulatory agency for
        approval for our drug candidates, nor have we been in a position to seek
        such
        approval. Until such time as we are able to file a New Drug Application (NDA),
        and it is subsequently approved, we will not be able to market or manufacture
        any products.
 
 If
        our
        potential products fail in clinical trials or do not gain regulatory approval,
        or if our products do not achieve market acceptance, we will not be profitable.
        If we fail to become and remain profitable, or if we are unable to fund our
        continuing losses, our business may fail. In addition, to compete effectively,
        any future products must be easy to use, cost-effective and economical to
        manufacture on a commercial scale. We may not achieve any of these
        objectives.
 
 **Our
        operating expenses are unpredictable, which may adversely affect our business,
        operations and financial condition.**
 
 As
        a
        result of our limited operating history and because of the emerging nature
        of
        the markets in which we will compete, our financial data is of limited value
        in
        planning future operating expenses. To the extent our operating expenses
        precede
        or are not rapidly followed by increased revenue, our business, results of
        operations and financial condition may be materially adversely affected.
        Our
        expense levels will be based in part on our expectations concerning future
        revenues. We currently anticipate that a significant portion of any revenue
        would be derived from Radilex and Viprovex; however, the size and extent
        of such
        revenues, if any, are wholly dependent upon the choices and demand of
        individuals, which are difficult to forecast accurately. We may be unable
        to
        adjust our operations in a timely manner to compensate for any unexpected
        shortfall in revenues. Further, business development and marketing expenses
        may
        increase significantly as we further our product development.
 
 **Risks
        Related To Our Business**
 
 **If
        our plan is not successful or management is not effective, the value of our
        Common stock may decline.**
 
 Our
        operating subsidiary, ImmuneRegen BioSciences, Inc., was founded in October
        2002. As a result, we are a development stage company with a limited operating
        history that makes it impossible to reliably predict future growth and operating
        results. Our business and prospects must be considered in light of the risks
        and
        uncertainties frequently encountered by companies in their early stages of
        development. In particular, we have not demonstrated that we can:
 
 ·  ensure
        that any potential drug candidate would function as intended in large animal
        studies or human clinical applications;
 
 ·  obtain
        the regulatory approvals necessary to commercialize products that we may
        develop
        in the future;
 
 ·  manufacture,
        or arrange for third-parties to manufacture, future products in a manner
        that
        will enable us to be profitable;
 
 ·  establish
        many of the business functions necessary to operate, including sales, marketing,
        administrative and financial functions, and establish appropriate financial
        controls;
 
 ·  make,
        use, and sell future products without infringing upon third party intellectual
        property rights; or
 
 ·  respond
        effectively to competitive pressures.
 
 We
        cannot
        be sure that we will be successful in meeting these challenges and addressing
        these risks and uncertainties. If we are unable to do so, our business will
        not
        be successful.
 
 23
  **If
        we do not obtain government regulatory approval for our products, we cannot
        sell
        our products and we will not generate revenues.**
 
 Our
        principal development efforts are currently centered on Radilex and Viprovex,
        which are potential drug candidates derived from Homspera. All drug candidates
        require U.S. Food and Drug Administration ("FDA") and foreign government
        approvals before they can be commercialized. These regulations change from
        time
        to time and new regulations may be adopted. Our research and development
        efforts
        for our drug candidates are at a very early stage; they have not been, and
        may
        not be, approved for commercial sale by the FDA or any other governmental
        regulatory agency. We may incur significant additional operating losses over
        the
        next several years as we fund development, clinical testing and other expenses
        while seeking regulatory approval. To date we have conducted limited
        pre-clinical studies of our potential drug candidates using various small
        animal
        models; significant additional trials are required, and we may not be able
        to
        demonstrate that these drug candidates are safe or effective. If we are unable
        to demonstrate the safety and effectiveness of a particular drug candidate
        to
        the satisfaction of regulatory authorities, the drug candidate will not obtain
        required government approval. If we do not receive FDA or foreign approvals
        for
        our products, we will not be able to sell our potential products and will
        not
        generate revenues. Even if we receive regulatory approval of a potential
        product, such approval may impose limitations on the indicated uses for which
        we
        may market the product, which may limit our ability to generate significant
        revenues.
 
 **All
        our applications are derived from the use of Homspera. If Homspera is found
        to
        be unsafe or ineffective, our business would be materially
        harmed.**
 
 Our
        current potential drug candidates, Radilex and Viprovex, are derived from
        Homspera. In addition, we plan to utilize Homspera in the development of
        any
        future products we market. If these current or future product candidates
        are
        found to be unsafe or ineffective due to the use of Homspera, we may have
        to
        modify or cease production of the products. As all of our applications utilize
        or will utilize Homspera, any findings that Homspera is unsafe or ineffective
        would severely harm our business operations, since all of our primary revenue
        sources would be negatively affected by such findings.
 
 **If
        we fail to successfully develop and commercialize products, we will have
        to
        cease operations.**
 
 Our
        failure to develop and commercialize products successfully will cause us
        to
        cease operations. Our current potential drug candidates, Radilex and Viprovex,
        will require significant additional research and development efforts and
        regulatory approvals prior to potential commercialization in the future.
        We
        cannot guarantee that we will ever obtain any regulatory approvals of Homspera,
        Radilex or Viprovex. We currently are focusing our core competencies on the
        development of Radilex and Viprovex although there may be no assurance that
        we
        will be successful in so doing.
 
 Our
        current potential drug candidates, Radilex, Viprovex and our technologies
        utilizing Homspera are at early stages of development and may not be shown
        to be
        safe or effective and may never receive regulatory approval. Neither Radilex
        nor
        Viprovex nor our technologies utilizing Homspera have yet been tested in
        large
        animals or humans. Regulatory authorities may not permit large animal or
        human
        testing of Radilex, Viprovex or any other potential products derived from
        Homspera. Even if large animal or human testing is permitted, none of Radilex,
        Viprovex or any other potential drug candidate, if any, derived from Homspera
        may be successfully developed or shown to be safe or effective.
 
 The
        results of our pre-clinical studies may not be indicative of future pre-clinical
        or clinical trial results. A commitment of substantial resources to conduct
        time-consuming research, pre-clinical studies and clinical trials will be
        required if we are to develop any products. Delays in planned patient enrollment
        in our clinical trials may result in increased costs, program delays or both.
        None of our potential products or technologies may prove to be safe or effective
        in clinical trials. Approval of the FDA, or other regulatory approvals,
        including export license permissions, may not be obtained and even if
        successfully developed and approved, our potential products may not achieve
        market acceptance. Any potential products resulting from our programs may
        not be
        successfully developed or commercially available for a number of years, if
        at
        all.
 
 Moreover,
        unacceptable toxicity or side effects could occur at any time in the course
        of
        human clinical trials or, if any products are successfully developed and
        approved for marketing, during commercial use of any of our proposed products.
        The appearance of any unacceptable toxicity or side effects could interrupt,
        limit, delay or abort the development of any of our proposed products or,
        if
        previously approved, necessitate their withdrawal from the market.
 
 **The
        market for treating aspects of acute radiation syndrome and exposure to various
        chemical and biological agents is uncertain and if we are unable to successfully
        commercialize Radilex or Viprovex, we will not recognize a significant portion
        of our future revenues, if any.**
 
 We
        do not
        believe any drug has ever been approved and commercialized for the treatment
        of
        severe acute radiation injury. In addition, the incidence of large-scale
        exposure to nuclear, radiological or biological agents has been low.
        Accordingly, even if Radilex, our current drug candidate to treat aspects
        of
        acute radiation syndrome (ARS) and Viprovex, our drug candidate to treat
        exposure to various biological agents, are approved by the FDA, we cannot
        predict with any certainty the size of the markets for them, if any. The
        potential market for Radilex and Viprovex is largely dependent on the size
        of
        stockpiling orders, if any, procured by the U.S. and foreign governments.
        While
        a number of governments have historically stockpiled drugs to treat indications
        such as smallpox, anthrax exposure, plague, tularemia and certain long-term
        effects of radiation exposure, we are unaware of any significant stockpiling
        orders for drugs to treat ARS.
 
 24
  To
        date,
        although we have filed formal responses to governmental grants, Request for
        Information (RFI) and Request for Proposal (RFP) for therapeutics to treat
        ARS
        and exposure to various chemical and biological agents, none have resulted
        in
        funding, stockpiling orders or a commitment to purchase our potential products,
        if any. Additionally, we cannot guarantee that our response to any future
        RFI,
        RFP or other grant application will result in funding, stockpiling orders
        or a
        commitment to purchase our potential products, if any.
 
 Any
        decision by the U.S. Government to enter into a commitment to purchase Radilex
        or Viprovex prior to FDA approval is largely out of our control. Our development
        plans and timelines may vary substantially depending on whether we receive
        such
        a commitment and the size of such commitment, if any. In addition, even if
        Radilex or Viprovex is approved by regulatory authorities, we cannot guarantee
        that we will receive any stockpiling orders for Radilex or Viprovex, that
        any
        such order would be profitable to us or that Radilex or Viprovex will achieve
        market acceptance by the general public.
 
 **The
        lengthy product approval process and uncertainty of government regulatory
        requirements may delay or prevent us from commercializing proposed products,
        and
        therefore adversely affect the timing and level of future revenues, if
        any.**
 
 The
        process of obtaining FDA and other regulatory approvals is time consuming,
        expensive and difficult to design and implement. Our current drug candidates,
        Radilex and Viprovex, will have to undergo clinical trials and the marketing
        and
        manufacturing of these drug candidates, if any, will be subject to rigorous
        testing procedures. Our research and development efforts are at a very early
        stage and Radilex and Viprovex have only undergone pre-clinical testing in
        small
        animals. We may not be able to obtain the necessary approvals for clinical
        trials, manufacturing or marketing of Radilex and Viprovex or any other
        potential products, if any, derived from Homspera. Moreover, any significant
        delays in clinical trials will impede our ability to commercialize our
        applications and generate revenue and could significantly increase our
        development costs. The commencement and completion of clinical trials for
        Radilex, Viprovex or any other potential products, if any, derived from
        Homspera, could be delayed or prevented by a variety of factors,
        including:
 
 ·  delays
        in
        obtaining regulatory approvals to commence a study;
 
 ·  delays
        in
        identifying and reaching agreement on acceptable terms with prospective clinical
        trial sites;
 
 ·  delays
        in
        the enrollment of patients;
 
 ·  lack
        of
        efficacy during clinical trials; or,
 
 ·  unforeseen
        safety issues.
 
 Even
        if
        marketing approval from the FDA is received, the FDA may impose post-marketing
        requirements, such as:
 
 ·  labeling
        and advertising requirements, restrictions or limitations, including the
        inclusion of warnings, precautions, contra-indications or use limitations
        that
        could have a material impact on the future profitability of our
        applications;
 
 ·  testing
        and surveillance to monitor our future products and their continued compliance
        with regulatory requirements;
 
 ·  submitting
        products for inspection and, if any inspection reveals that the product is
        not
        in compliance, prohibiting the sale of all products;
 
 ·  suspending
        manufacturing; or,
 
 ·  withdrawing
        marketing clearance.
 
 Additionally,
        the FDA's policies may change and additional government regulations may be
        enacted which could prevent or delay regulatory approval of our applications.
        We
        cannot predict the likelihood, nature or extent of adverse government regulation
        that may arise from future legislation or administrative action, either in
        the
        United States or abroad. If we are not able to maintain regulatory compliance,
        we might not be permitted to market our potential future products and our
        business could suffer.
 
 Even
        if
        human clinical trials of Radilex, Viprovex or any other potential products,
        if
        any, derived from Homspera are initiated and successfully completed, the
        FDA may
        not approve any of them for commercial sale. We may encounter significant
        delays
        or excessive costs in our efforts to secure necessary approvals. Regulatory
        requirements are evolving and uncertain. Future United States or foreign
        legislative or administrative acts could also prevent or delay regulatory
        approval of our products. We may not be able to obtain the necessary approvals
        for clinical trials, manufacturing or marketing of any of our potential products
        under development. Even if commercial regulatory approvals are obtained,
        they
        may include significant limitations on the indicated uses for which a product
        may be marketed.
 
 25
  The
        FDA
        has not designated expanded access protocols for Radilex or Viprovex as
        "treatment" protocols. The FDA may not determine that Radilex or Viprovex
        meet
        all of the FDA's criteria for use of an investigational drug for treatment
        use.
        Even if Radilex or Viprovex are allowed for treatment use, third party payers
        may not provide reimbursement for the costs of treatment with any of them.
        The
        FDA also may not consider Radilex or Viprovex to be an appropriate candidate
        for
        acceptance as Emergency Use Authorization for Promising Medical Countermeasures
        Under Development, accelerated approval, expedited review or fast track
        designation.
 
 **If
        we fail to obtain approval from foreign regulatory authorities, we will not
        be
        allowed to market or sell our potential products in other countries, which
        would
        adversely affect our levels of future revenues, if any.**
 
 Marketing
        any drug products outside of the United States will subject us to numerous
        and
        varying foreign regulatory requirements governing the design and conduct
        of
        human clinical trials and marketing approval. Additionally, our ability to
        export our potential drug candidates outside the United States on a commercial
        basis will be subject to the receipt from the FDA of export permission, which
        may not be available on a timely basis, if at all.
 
 Approval
        procedures vary among countries and can involve additional testing, and the
        time
        required to obtain approval may differ from that required to obtain FDA
        approval. Foreign regulatory approval processes include all of the risks
        associated with obtaining FDA approval set forth above, and approval by the
        FDA
        does not ensure approval by the health authorities of any other
        country.
 
 **Clinical
        trials may fail to demonstrate the safety and efficacy of our potential drug
        candidates, the effect of which could prevent or significantly delay regulatory
        approval and therefore adversely affect the timing and level of future revenues,
        if any.**
 
 Prior
        to
        receiving approval to commercialize Radilex, Viprovex or any other potential
        products, if any, derived from Homspera, we must demonstrate with substantial
        evidence from well-controlled clinical trials, and to the satisfaction of
        the
        FDA and other regulatory authorities in the United States and abroad, that
        they
        are both safe and effective. We will need to demonstrate such potential
        products' efficacy and monitor their safety throughout the process. If any
        future clinical trials are unsuccessful, our business and reputation would
        be
        harmed and our stock price would be adversely affected.
 
 All
        of
        our applications are prone to the risks of failure inherent in biologic
        development. The results of early-stage clinical trials of our applications
        do
        not necessarily predict the results of later-stage clinical trials. Applications
        in later-stage clinical trials may fail to show desired safety and efficacy
        traits despite having progressed through initial clinical testing. Even if
        we
        believe the data collected from clinical trials of our applications is
        promising, this data may not be sufficient to support approval by the FDA
        or any
        other U.S. or foreign regulatory approval. Pre-clinical and clinical data
        can be
        interpreted in different ways. Accordingly, FDA officials could interpret
        such
        data in different ways than we do which could delay, limit or prevent regulatory
        approval. The FDA, other regulatory authorities, or we may suspend or terminate
        clinical trials at any time. Any failure or significant delay in completing
        clinical trials for our applications, or in receiving regulatory approval
        for
        the sale of any products resulting from our applications, may severely harm
        our
        business and reputation.
 
 **Delays
        in the conduct or completion of our pre-clinical or clinical studies or the
        analysis of the data from our pre-clinical or clinical studies may result
        in
        delays in our planned filings for regulatory approvals or adversely affect
        our
        ability to enter into collaborative arrangements.**
 
 We
        may
        encounter problems with some or all of our completed or ongoing studies that
        may
        cause us or regulatory authorities to delay or suspend our ongoing studies
        or
        delay the analysis of data from our completed or ongoing studies. If the
        results
        of our ongoing and planned studies for our drug candidates are not available
        when we expect or if we encounter any delay in the analysis of the results
        of
        our studies for our drug candidates:
 
 ·  we
        may
        not have the financial resources to continue research and development of
        any of
        our drug candidates; and,
 
 ·  we
        may
        not be able to enter into collaborative arrangements relating to any drug
        candidate subject to delay in regulatory filing.
 
 Any
        of
        the following reasons, among others, could delay or suspend the completion
        of
        our ongoing and future studies:
 
 ·  delays
        in
        enrolling volunteers;
 
 ·  interruptions
        in the manufacturing of our drug candidates or other delays in the delivery
        of
        materials required for the conduct of our studies;
 
 26
  ·  lower
        than anticipated retention rate of volunteers in a trial;
 
 ·  unfavorable
        efficacy results;
 
 ·  serious
        side effects experienced by study participants relating to the drug
        candidate;
 
 ·  new
        communications from regulatory agencies about how to conduct these studies;
        or,
 
 ·  failure
        to raise additional funds.
 
 **Our
        lack of commercial manufacturing, sales, distribution and marketing experience
        may prevent us from successfully commercializing products, which would adversely
        affect our level of future revenues, if any.**
 
 The
        manufacturing process of Radilex, Viprovex or any other potential products,
        if
        any, derived from Homspera is expected to involve a number of steps and requires
        compliance with stringent quality control specifications imposed by us and
        by
        the FDA. We have no experience in the sales, marketing and distribution of
        pharmaceutical or biotechnology products and we have not manufactured any
        of the
        limited quantities of Radilex and Viprovex used in our studies to date. We
        may
        not successfully arrange for contract manufacturing of Radilex, Viprovex
        or any
        other potential products, if any, derived from Homspera in production quantities
        and this could prevent us from commercializing products or limit our
        profitability from any such proposed products.
 
 **We
        rely on third party manufacturers for the manufacture of Radilex, Viprovex
        and
        Homspera. Our inability to manufacture Radilex, Viprovex and Homspera, and
        our
        dependence on such manufacturers, may delay or impair our ability to generate
        revenues, or adversely affect our profitability.**
 
 For
        the
        manufacture of Radilex, Viprovex and Homspera, we obtain synthetic peptides
        from
        third party manufacturers. If any of these proposed manufacturing operations
        prove inadequate, there may be no assurance that any other arrangements may
        be
        established on a timely basis or that we could establish other manufacturing
        capacity on a timely basis. Our dependence on such manufacturers may delay
        or
        impair our ability to generate revenues, or adversely affect our
        profitability.
 
 We
        rely
        on arrangements with contract manufacturing companies in order to meet
        requirements for Radilex, Viprovex and Homspera. By choosing to contract
        for
        manufacturing services, we may encounter costs, delays and/or other difficulties
        in producing, packaging and distributing our clinical trials and finished
        product, if any. Further, contract manufacturers must also operate in compliance
        with the cGMP requirements; failure to do so could result in, among other
        things, the disruption of our proposed product supplies. Our planned dependence
        upon third parties for the manufacture of our proposed products may adversely
        affect our potential profit margins, if any, and our ability to develop and
        deliver proposed products on a timely and competitive basis.
 
 **If
        the manufacturers of our products do not comply with current good manufacturing
        practices regulations, or cannot produce the amount of products we need to
        continue our development, we will fall behind on our business
        objectives.**
 
 The
        manufacture of our product candidates or any future products, whether done
        by
        outside contractors as planned or internally, must comply with current Good
        Manufacturing Practices, or cGMP, regulations enforced by the FDA and foreign
        equivalents. If a manufacturer of our drug candidates does not conform to
        the
        cGMP regulations and cannot be brought up to such a standard, we will be
        required to find alternative manufacturers that do conform. This may be a
        long
        and difficult process, and may delay our ability to receive FDA or foreign
        regulatory approval of our products.
 
 We
        also
        rely on our manufacturers to supply us with a sufficient quantity of our
        drug
        candidates to conduct clinical trials. If we have difficulty in the future
        obtaining our required quantity and quality of such supply, we could experience
        significant delays in our development programs and regulatory
        process.
 
 **Even
        if we are permitted to market our potential products, adverse determinations
        concerning product pricing, reimbursement and related matters could prevent
        us
        from successfully commercializing Radilex, Viprovex and Homspera which would
        adversely affect our level of future revenues, if any.**
 
 Our
        ability to earn any revenue on Radilex, Viprovex or any other potential
        products, if any, derived from Homspera will depend in part on the extent
        to
        which reimbursement for the costs of such products and related treatments
        will
        be available from government health administration authorities, private health
        coverage insurers, managed care organizations and other organizations. Failure
        to obtain appropriate reimbursement may prevent us from successfully
        commercializing Radilex, Viprovex or any other potential products, if any,
        derived from Homspera. Third-party payers are increasingly challenging the
        prices of medical products and services. If purchasers or users of Radilex,
        Viprovex or any such other potential products, if any, derived from Homspera
        are
        not able to obtain adequate reimbursement for the cost of using such products,
        they may forego or reduce their use. Significant uncertainty exists as to
        the
        reimbursement status of newly approved health care products and whether adequate
        third party coverage will be available.
 
 27
 **The
        medical community may not accept and utilize Radilex, Viprovex or any other
        potential product, if any, derived from Homspera, the effect of which would
        prevent us from successfully commercializing any proposed product and adversely
        affect our level of future revenue, if any.**
 
 Our
        ability to market and commercialize Radilex, Viprovex or any other potential
        product, if any, derived from Homspera depends on the acceptance of potential
        drug candidates based on Homspera by the medical community. We will need
        to
        develop commercialization initiatives designed to increase awareness about
        us
        and Homspera among targeted audiences, including public health activists
        and
        community-based outreach groups in addition to the investment community.
        Currently, we have not developed any such initiatives. Without such acceptance
        of potential drug candidates based on Homspera, we may not be able to
        successfully commercialize any proposed products or generate
        revenue.
 
 **Product
        liability exposure may expose us to significant liability or costs which
        would
        adversely impart our future operating results and divert funds from the
        operation of our business.**
 
 We
        face
        an inherent business risk of exposure to product liability and other claims
        and
        lawsuits in the event that the development or use of our technology or
        prospective products is alleged to have resulted in adverse effects. We may
        not
        be able to avoid significant liability exposure. We may not have sufficient
        insurance coverage, and we may not be able to obtain sufficient coverage
        at a
        reasonable cost. An inability to obtain product liability insurance at
        acceptable cost or to otherwise protect against potential product liability
        claims could prevent or inhibit the commercialization of our products. A
        product
        liability claim could hurt our financial performance. Even if we avoid liability
        exposure, significant costs could be incurred that could hurt our financial
        performance.
 
 **We
        may fail to protect adequately our proprietary technology, which would allow
        competitors to take advantage of our research and development efforts, the
        effect of which could adversely affect any competitive advantage we may
        have.**
 
 We
        own
        two issued U.S. and two issued foreign patents. We also have 35 pending patents
        relating to the use of Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P, comprised of four pending Patent Cooperation Treaty (PCT) applications,
        nine
        pending U.S. provisional patent applications and 22 pending foreign provisional
        patent applications.
 
 Our
        success will depend in part on our ability to obtain additional United States
        and foreign patent protection for our drug candidates and processes, preserve
        our trade secrets and operate without infringing the proprietary rights of
        third
        parties. We place considerable importance on obtaining patent protection
        for
        significant new technologies, products and processes.
 
 If
        we
        fail to obtain or maintain these protections, we may not be able to prevent
        third parties from using our proprietary rights. Our currently pending or
        future
        patent applications may not result in issued patents. In the United States,
        patent applications are confidential until patent applications are published
        or
        the patent is issued, and because third parties may have filed patent
        applications for technology covered by our pending patent applications without
        us being aware of those applications, our patent applications may not have
        priority over any patent applications of others. In addition, our issued
        patents
        may not contain claims sufficiently broad to protect us against third parties
        with similar technologies or products or provide us with any competitive
        advantage. If a third party initiates litigation regarding our patents, and
        is
        successful, a court could revoke our patents or limit the scope of coverage
        for
        those patents.
 
 Legal
        standards relating to the validity of patents covering pharmaceutical and
        biotechnology inventions and the scope of claims made under such patents
        are
        still developing. In some of the countries in which we intend to market our
        products, pharmaceuticals are either not patentable or have only recently
        become
        patentable. Past enforcement of intellectual property rights in many of these
        countries has been limited or non-existent. Future enforcement of patents
        and
        proprietary rights in many other countries may be problematic or unpredictable.
        Moreover, the issuance of a patent in one country does not assure the issuance
        of a similar patent in another country. Claim interpretation and infringement
        laws vary by nation, so the extent of any patent protection is uncertain
        and may
        vary in different jurisdictions. The U.S. Patent and Trademark Office, commonly
        referred to as the USPTO, and the courts have not consistently treated the
        breadth of claims allowed in biotechnology patents. If the USPTO or the courts
        begin to allow broader claims, the incidence and cost of patent interference
        proceedings and the risk of infringement litigation will likely increase.
        On the
        other hand, if the USPTO or the courts begin to allow narrower claims, the
        value
        of our proprietary rights may be limited. Any changes in, or unexpected
        interpretations of the patent laws may adversely affect our ability to enforce
        our patent position.
 
 We
        also
        rely upon trade secrets, proprietary know-how and continuing technological
        innovation to remain competitive. We protect this information with reasonable
        security measures, including the use of confidentiality agreements with our
        employees, consultants and corporate collaborators. It is possible that these
        individuals will breach these agreements and that any remedies for a breach
        will
        be insufficient to allow us to recover our costs. Furthermore, our trade
        secrets, know-how and other technology may otherwise become known or be
        independently discovered by our competitors.
 
 28
  **Our
        rights to the US Patent Nos. 5,945,508 and 5,998,376, Substance P Treatment
        for
        Immunostimulation, are limited by the rights of the University of Arizona
        and
        the United States Air Force and as a result, our ability to use of the patent
        in
        our business is also limited. Due to these limitations, we may not be able
        to
        use the patent in the most profitable or efficient manner and, as a result,
        our
        results of operations may suffer.**  **If
        patents are issued for any of our pending patent applications, the same
        limitations would most likely apply.**
 
 Our
        agreements with the University of Arizona outline very specific rights in
        regard
        to our sponsored-supported projects. In accordance with our sponsored-supported
        project agreements, the University of Arizona retains the right to use data
        developed during these projects for non-commercial purposes, including teaching,
        research and education.
 
 Further,
        because our patents are based on research funded by the government, the U.S.
        Government has certain rights in any technology developed. These rights include
        a non-exclusive, paid-up, worldwide license under such inventions for any
        governmental purpose. In addition, under the federal Bayh Dole Act, a party
        which acquires an exclusive license for an invention that was partially funded
        by a federal research grant is subject to the following government rights:
        (i)
        products using the invention which are sold in the U.S. are to be manufactured
        substantially in the U.S. unless a waiver is obtained; (ii) the government
        may
        force the granting of a license to a third party who will make and sell the
        needed product if the licensee does not pursue reasonable commercialization
        of a
        needed product using the invention; and (iii) the U.S. Government may use
        the
        invention for its own needs.
 
 As
        a
        result, our potential future revenues, if any, may be lessened. Additionally,
        our profit margins, if any, may be lessened as our cost of goods may increase
        if
        we are mandated to manufacture our products substantially in the United States.
        Additionally, the U.S. Government may elect to manufacture and use any products
        based on our technology without paying us any revenue.
 
 **Our
        patents and proprietary technology may not be enforceable and the patents
        and
        proprietary technology of others may prevent us from commercializing products,
        which would adversely affect our level of future revenues, if
        any.**
 
 Although
        we believe our proprietary technology to be protected and our patents
        enforceable, the failure to obtain meaningful patent protection for our
        potential products and processes would greatly diminish the value of our
        potential products and processes.
 
 In
        addition, whether or not our applications are issued, or issued with limited
        coverage, others may receive patents that contain claims applicable to our
        potential products. Patents we are not aware of may adversely affect our
        ability
        to develop and commercialize any potential products.
 
 The
        patent positions of biotechnology and pharmaceutical companies are often
        highly
        uncertain and involve complex legal and factual questions. Therefore, the
        breadth of claims allowed in biotechnology and pharmaceutical patents cannot
        be
        predicted. We also rely upon non-patented trade secrets and know how, and
        others
        may independently develop substantially equivalent trade secrets or know
        how. We
        also rely on protecting our proprietary technology in part through
        confidentiality agreements with our current and former corporate collaborators,
        employees, consultants and certain contractors. These agreements may be
        breached, and we may not have adequate remedies for any such breaches.
        Litigation may be necessary to defend against claims of infringement, to
        enforce
        our patents or to protect trade secrets. Litigation could result in substantial
        costs and diversion of management efforts regardless of the results of the
        litigation. An adverse result in litigation could subject us to significant
        liabilities to third parties, require disputed rights to be licensed or require
        us to cease using certain technologies.
 
 Our
        potential products could infringe on the intellectual property rights of
        others,
        which may cause us to engage in costly litigation and, if not successful,
        could
        cause us to pay substantial damages and prohibit us from selling our products.
        Because patent applications in the United States are not publicly disclosed
        until the patent application is published or the patent is issued, applications
        may have been filed which relate to services similar to those offered by
        us. We
        may be subject to legal proceedings and claims from time to time in the ordinary
        course of our business, including claims of alleged infringement of the
        trademarks and other intellectual property rights of third parties.
 
 If
        our
        potential products violate third-party proprietary rights, we cannot assure
        you
        that we would be able to arrange licensing agreements or other satisfactory
        resolutions on commercially reasonable terms, if at all. Any claims made
        against
        us relating to the infringement of third-party proprietary rights could result
        in the expenditure of significant financial and managerial resources and
        injunctions preventing us from providing services. Such claims could severely
        harm our financial condition and ability to compete.
 
 In
        addition, if another party claims the same subject matter or subject matter
        overlapping with the subject matter that we have claimed in a United States
        patent application or patent, we may decide or be required to participate
        in
        interference proceedings in the USPTO in order to determine the priority
        of
        invention. Loss of such an interference proceeding would deprive us of patent
        protection sought or previously obtained and could prevent us from
        commercializing our potential products. Participation in such proceedings
        could
        result in substantial costs, whether or not the eventual outcome is favorable.
        These additional costs could adversely affect our financial
        results.
 
 29
  **Failure
        to comply with environmental laws or regulations could expose us to significant
        liability or costs which would adversely impact our operating results and
        divert
        funds from the operation of our business have a material adverse effect on
        our
        business.**
 
 We
        may be
        required to incur significant costs to comply with current or future
        environmental laws and regulations. Our research and development processes
        involve the controlled storage, use and disposal of hazardous materials,
        biological hazardous materials and radioactive compounds. We are subject
        to
        federal, state and local laws and regulations governing the use, manufacture,
        storage, handling and disposal of these materials and some waste products.
        Although we believe that our safety procedures for handling and disposing
        of
        these materials comply with the standards prescribed by these laws and
        regulations, the risk of contamination or injury from these materials cannot
        be
        completely eliminated. In the event of an incident, IR BioSciences Holdings,
        Inc. or ImmuneRegen BioSciences, Inc. could be held liable for any damages
        that
        result, and any liability could exceed our resources. Current or future
        environmental laws or regulations may have a material adverse effect on our
        operations, business and assets.
 
 **We
        depend on the continued services of our executive officers and the loss of
        a key
        executive could severely impact our operations.**
 
 The
        execution of our present business plan depends on the continued services
        of
        Michael K. Wilhelm, our Chief Executive Officer and President, and Hal Siegel,
        Ph.D., our Senior Director, Product Development and Regulatory Affairs. We
        currently maintain a key-man insurance policy on Mr. Wilhelm and Dr. Siegel
        for
        $1,000,000 and $250,000 respectively, payable to the company, on their lives.
        While we have entered into employment agreements with Mr. Wilhelm and Dr.
        Siegel, the loss of any of their services would be detrimental to us and
        could
        have a material adverse effect on our business, financial condition and results
        of operations.
 
 **A
        limited prior public market and trading market may cause volatility in the
        price
        of our common stock.**
 
 Our
        common stock is currently traded on a limited basis on the OTC Bulletin Board
        (the "OTCBB") under the symbol "IRBO". The OTCBB is an inter-dealer,
        Over-The-Counter market that provides significantly less liquidity than the
        NASDAQ Stock Market. Therefore, prices for securities traded solely on the
        OTCBB
        may be difficult to obtain and holders of common stock may be unable to resell
        their securities at or near their original offering price or at any
        price.
 
 The
        quotation of our common stock on the OTCBB does not assure that a meaningful,
        consistent and liquid trading market currently exists, and in recent years
        such
        market has experienced extreme price and volume fluctuations that have
        particularly affected the market prices of many smaller companies like us.
        Our
        common stock is thus subject to this volatility.
 
 **Sales
        or issuances of additional equity securities may adversely affect the market
        price of our common stock and your rights in us may be
        reduced.**
 
 Certain
        of our stockholders have the right to register securities for resale that
        they
        hold pursuant to registration rights agreements. We agreed to register an
        aggregate of 51,399,375 shares of our common stock and shares of common stock
        underlying purchase warrants that we issued in a private placement that closed
        in December 2006. We must file the registration statement between June 3,
        2007
        and June 13, 2007. In addition, we expect to continue to incur product
        development and selling, general and administrative costs, and in order to
        satisfy our funding requirements, we will need to sell additional equity
        securities, which may be subject to similar registration rights. The sale
        or the
        proposed sale of substantial amounts of our common stock in the public markets
        may adversely affect the market price of our common stock. The registration
        and
        subsequent sales of such shares of common stock will likely have an adverse
        effect on the market price of our common stock.
 
 The
        registration and subsequent sales of shares of our common stock will likely
        have
        an adverse effect on the market price of our common stock. From time to time,
        certain stockholders of our company may be eligible to sell all or some of
        their
        shares of common stock by means of ordinary brokerage transactions in the
        open
        market pursuant to Rule 144, promulgated under the Act ("Rule 144"), subject
        to
        certain limitations. In general, pursuant to Rule 144, a stockholder (or
        stockholders whose shares are aggregated) who has satisfied a one-year holding
        periods may, under certain circumstances, sell within any three-month period
        a
        number of securities which does not exceed the greater of 1% of the then
        outstanding shares of our common stock or the average weekly trading volume
        of
        the class during the four calendar weeks prior to such sale. Rule 144 also
        permits, under certain circumstances, the sale of securities, without any
        limitations, by a non-affiliate of our company who has satisfied a two-year
        holding period. Any substantial sale of our common stock pursuant to Rule
        144 or
        pursuant to any resale prospectus may have an adverse effect on the market
        price
        of our securities.
 
 Our
        stockholders may experience substantial dilution and a reduction in the price
        that they are able to obtain upon sale of their shares. Also, any new equity
        securities issued, including any new series of preferred stock authorized
        by our
        Board of Directors, may have greater rights, preferences or privileges than
        our
        existing common stock. To the extent stock is issued or options and warrants
        are
        exercised, holders of our common stock will experience further dilution.
        In
        addition, as in the case of the warrants, in the event that any future financing
        should be in the form of, be convertible into or exchangeable for, equity
        securities and upon the exercise of options and warrants, security holders
        may
        experience additional dilution.
 
 30
  **The
        liquidity of our securities and our obligations to register securities will
        be
        impacted by the sec’s review of the resale registration statement that we will
        file.**
 
 We
        closed
        a private placement of securities on December 6, 2006 pursuant to which we
        agreed to register 31,399,375 shares of common stock. We intend to file a
        resale
        registration statement on Form SB-2, or some other available form, to register
        for resale such shares of Common Stock. We cannot control this future
        registration process in all respects as some matters are outside our control.
        Even if we are successful in causing the effectiveness of the resale
        registration statement, there can be no assurances that the occurrence of
        subsequent events may not preclude our ability to maintain the effectiveness
        of
        the registration statement. Any of the foregoing items could have adverse
        effects on the liquidity of our shares of Common Stock.
 
 In
        addition, the SEC has recently disclosed that it has developed internal
        guidelines concerning the use of a resale registration statement to register
        the
        securities issued to certain investors in private investment in public equity
        (PIPE) transactions, where the issuer has a market capitalization of less
        than
        $75 million and, in general, does not qualify to file a Registration Statement
        on Form S-3 to register its securities. The SEC has taken the position that
        these smaller issuers may not be able to rely on Rule 415 under the Securities
        Act, which generally permits the offer and sale of securities on a continued
        or
        delayed basis over a period of time, but instead would require that the issuer
        offer and sell such securities in a direct or "primary" public offering,
        at a
        fixed price, if the facts and circumstances are such that the SEC believes
        the
        investors seeking to have their shares registered are underwriters and/or
        affiliates of the issuer. It appears that the SEC in most cases will permit
        a
        registration for resale of up to one third of the total number of shares
        of
        common stock then currently owned by persons who are not affiliates of such
        issuer and, in some cases, a larger percentage depending on the facts and
        circumstances. Staff members also have indicated that an issuer in most cases
        will have to wait until the later of six months after effectiveness of the
        first
        registration or such time as substantially all securities registered in the
        first registration are sold before filing a subsequent registration on behalf
        of
        the same investors. The SEC may require as a condition to the declaration
        of
        effectiveness of a resale registration statement that we reduce or “cut back”
the number of shares of Common Stock to be registered in such registration
        statement. The result of the foregoing is that a stockholder’s liquidity in our
        Common Stock may be adversely affected in the event the SEC requires a cut
        back
        of the securities as a condition to allow the Company to rely on Rule 415
        with
        respect to a resale registration statement, or, if the SEC requires us to
        file a
        primary registration statement.
 
 **Our
        common stock is considered a "penny stock," and is subject to additional
        sale
        and trading regulations that may make it move difficult to
        sell.**
 
 Our
        common stock is considered to be a "penny stock" since it does not qualify
        for
        one of the exemptions from the definition of "penny stock" under Section
        3a51-1
        of the Securities Exchange Act for 1934 as amended (the "Exchange Act").
        Our
        common stock is a "penny stock" because it meets one or more of the following
        conditions (i) the stock trades at a price less than $5.00 per share; (ii)
        it is
        NOT traded on a "recognized" national exchange; (iii) it is NOT quoted on
        the
        Nasdaq Stock Market, or even if so, has a price less than $5.00 per share;
        or
        (iv) is issued by a company that has been in business less than three years
        with
        net tangible assets less than $5 million.
 
 The
        principal result or effect of being designated a "penny stock" is that
        securities broker-dealers participating in sales of our common stock will
        be
        subject to the "penny stock" regulations set forth in Rules 15-2 through
        15g-9
        promulgated under the Exchange Act. For example, Rule 15g-2 requires
        broker-dealers dealing in penny stocks to provide potential investors with
        a
        document disclosing the risks of penny stocks and to obtain a manually signed
        and dated written receipt of the document at least two business days before
        effecting any transaction in a penny stock for the investor's account. Moreover,
        Rule 15g-9 requires broker-dealers in penny stocks to approve the account
        of any
        investor for transactions in such stocks before selling any penny stock to
        that
        investor. This procedure requires the broker-dealer to (i) obtain from the
        investor information concerning his or her financial situation, investment
        experience and investment objectives; (ii) reasonably determine, based on
        that
        information, that transactions in penny stocks are suitable for the investor
        and
        that the investor has sufficient knowledge and experience as to be reasonably
        capable of evaluating the risks of penny stock transactions; (iii) provide
        the
        investor with a written statement setting forth the basis on which the
        broker-dealer made the determination in (ii) above; and (iv) receive a signed
        and dated copy of such statement from the investor, confirming that it
        accurately reflects the investor's financial situation, investment experience
        and investment objectives. Compliance with these requirements may make it
        more
        difficult and time consuming for holders of our common stock to resell their
        shares to third parties or to otherwise dispose of them in the market or
        otherwise.
 
   31
  **ITEM2.
          DESCRIPTION OF PROPERTY**
 
 Our
          corporate headquarters are currently located at 4021 N. 75 th Street,
          Suite 201, Scottsdale, Arizona 85251, where we have leased approximately
          1,800
          square feet of office space through September 30, 2007. Our rent expense
          is
          $2,380 per month. We believe that our facilities are adequate for our current
          needs and suitable additional or substitute space will be available in
          the
          future to replace our existing facilities, if necessary, or accommodate
          expansion of our operations.
   **ITEM3.
        LEGAL PROCEEDINGS**
 
 We
        are
        not currently a party to any material legal proceedings.
   **ITEM4.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY
        HOLDERS**
 
 No
        matters were submitted to a vote of security holders during the fourth quarter
        of 2006.
 
 32
 
 **PART
        II**
 
  
 **ITEM5.
        MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
        STOCKHOLDER MATTERS**
 
 Our
        common stock is approved for quotation on the NASD OTC Bulletin Board under
        the
        symbol "IRBO". The following table sets forth the high and low bid prices
        for
        our common stock for the periods noted, as reported by the National Daily
        Quotation Service and the Over-The-Counter Bulletin Board. Quotations reflect
        inter-dealer prices, without retail mark-up, markdown or commission and may
        not
        represent actual transactions.
 **2007****High**
              
              
              **Low**1st
                  Quarter
              
              $
              0.17
              
              $
              0.122ndQuarter (through April 5, 2007)
              
              
              0.14
              
              
              0.12**2006****High******
              
              
              **Low**1st
                  Quarter
              
              $
              0.35
              
              $
              0.202nd
                  Quarter
              
              
              0.51
              
              
              0.273rd
                  Quarter
              
              
              0.30
              
              
              0.144th
                  Quarter
              
              
              0.29
              
              
              0.13**2005****High**
              
              
              **Low**1st
                  Quarter
              
              $
              1.00
              
              $
              0.332nd
                  Quarter
              
              
              0.52
              
              
              0.263rd
                  Quarter
              
              
              0.48
              
              
              0.284th
                  Quarter
              
              
              0.52
              
              
              0.19
 
 On
        April
        5, 2007, the closing price of our common stock as reported by the OTC Bulletin
        Board was $0.13 per share. There were approximately 1,200 shareholders of
        record
        and beneficial stockholders of our common stock as of April 5, 2007. We have
        not
        paid any dividends on our common stock since inception and do not intend
        to do
        so in the foreseeable future.
 
 33
  **UNREGISTERED
        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**
 
 During
        the three months ended December 31, 2006, we issued warrants to purchase
        43,500
        shares of common stock at prices ranging from $0.20 to $1.00 per share. Pursuant
        to the terms of their respective agreement with us, these warrants were granted
        to current members of the Bioterrorism Advisory Board and Scientific Advisory
        Board for participation during the quarter ended December 31, 2006. The warrants
        will bear a restrictive legend regarding the sale or transfer of such or
        the
        underlying securities. The warrants were issued in reliance upon exemptions
        from
        registration pursuant to Section 4(2) under the Securities Act of 1933, as
        amended, and Rule 506 promulgated thereunder. There were less than 35 investors
        and each investor had such knowledge and experience in financial and business
        matters that the investor was capable of evaluating the merits and risks
        of
        investing in the warrants. No general solicitation or advertising was undertaken
        in connection with the offer and sale of these shares. Each investor was
        also
        provided with access to our Exchange Act reports including our annual report
        on
        Form 10-KSB and our quarterly reports on Form 10-QSB.
 
 In
        December 2006, we completed a private placement, whereby we sold an aggregate
        of
        $5,482,600 worth of units to accredited investors. Each unit was sold for
        $25,000 and consisted of (a) a number of shares of our common stock determined
        by dividing the unit price by $0.16, and (b) a five-year warrant to purchase
        a
        number of shares of our common stock equal to 50% of the number of shares
        included within the unit, at $0.50 per share. We issued in the private placement
        an aggregate of 34,266,250 shares of our common stock and warrants to purchase
        17,133,125 shares of our common stock. In consideration of the investment,
        we
        granted to each investor certain registration rights and anti-dilution rights.
        We agreed that not before 180 days after the closing of the private placement
        and not later than 190 days thereafter, that we will file with the SEC a
        registration statement to register these shares along with the shares underlying
        these warrants. In the event that we fail to comply with the filing deadline,
        there shall be a 1% penalty for each 30 day period (or pro rata portion thereof)
        paid to each investor in cash or additional shares. This penalty amounts
        to an
        aggregate of 342,662 shares and 171,331 warrants per 30 day period until
        a
        registration statement that includes these shares and warrants is filed or
        12
        months. As of December 31, 2006, we are not subject to any penalty. As placement
        agent for the private placement, Joseph Stevens & Co., Inc. and its
        designees received 5,482,600 shares of our common upon the closing of the
        private placement. The shares and warrants issued in the private placement
        and
        to the placement agent were offered and sold to investors in reliance upon
        exemptions from registration pursuant to Section 4(2) under the Securities
        Act
        of 1933, as amended, and Rule 506 promulgated thereunder.
 
 During
        the three months ended September 30, 2006, we issued warrants to purchase
        46,000
        shares of common stock at prices ranging from $0.20 to $1.00 per share. Pursuant
        to the terms of their respective agreement with us, these warrants were granted
        to current members of the Bioterrorism Advisory Board and Scientific Advisory
        Board for participation during the quarter ended September 30, 2006. The
        warrants will bear a restrictive legend regarding the sale or transfer of
        such
        or the underlying securities. The warrants were issued in reliance upon
        exemptions from registration pursuant to Section 4(2) under the Securities
        Act
        of 1933, as amended, and Rule 506 promulgated thereunder. There were less
        than
        35 investors and each investor had such knowledge and experience in financial
        and business matters that the investor was capable of evaluating the merits
        and
        risks of investing in the warrants. No general solicitation or advertising
        was
        undertaken in connection with the offer and sale of these shares. Each investor
        was also provided with access to our Exchange Act reports including our annual
        report on Form 10-KSB and our quarterly reports on Form 10-QSB. The securities
        were issued in reliance upon exemptions from registration pursuant to Section
        4(2) under the Securities Act of 1933, as amended, and Rule 506 promulgated
        thereunder.
 
 In
        August
        2006, pursuant to an agreement with the investors in the private placement
        of
        October 2004, we issued 4,150,800 shares of common stock and warrants to
        purchase an additional 1,634,400 shares as penalty for late registration
        of
        shares and warrants issued in the placement. The agreement limited the number
        of
        shares and warrants which the Company was obligated to issue pursuant to
        the
        penalty calculation to an aggregate of 18% of the number of original number
        of
        shares and warrants issued in the October 2004 private placement. The securities
        were issued in reliance upon exemptions from registration pursuant to Section
        4(2) under the Securities Act of 1933, as amended, and Rule 506 promulgated
        thereunder.
 
 On
        July
        14, 2006, we issued to our Chief Executive Officer, Michael K. Wilhelm, 300,000
        common stock purchase warrants for collateralization of promissory notes
        in
        2004. These warrants have an exercise price of $0.25 and expire five years
        from
        the date of issuance. The securities were issued in reliance upon exemptions
        from registration pursuant to Section 4(2) under the Securities Act of 1933,
        as
        amended, and Rule 506 promulgated thereunder.
 
 On
        July
        14, 2006, pursuant to the term of his employment agreement we issued to our
        Chief Financial Officer, John N. Fermanis, 62,500 common stock purchase
        warrants. The warrants have an exercise price of $0.158 and expire five years
        from the date of issuance. The securities were issued in reliance upon
        exemptions from registration pursuant to Section 4(2) under the Securities
        Act
        of 1933, as amended, and Rule 506 promulgated thereunder.
 
 During
        the three months ended June 30, 2006, we issued warrants to purchase 84,653
        shares of common stock at prices ranging from $0.20 to $1.00 per share. Pursuant
        to the terms of their respective agreement with us, these warrants were granted
        to current members of the Bioterrorism Advisory Board and Scientific Advisory
        Board for participation during the quarter ended June 30, 2006. The warrants
        will bear a restrictive legend regarding the sale or transfer of such or
        the
        underlying securities. The warrants were issued in reliance upon exemptions
        from
        registration pursuant to Section 4(2) under the Securities Act of 1933, as
        amended, and Rule 506 promulgated thereunder. There were less than 35 investors
        and each investor had such knowledge and experience in financial and business
        matters that the investor was capable of evaluating the merits and risks
        of
        investing in the warrants. No general solicitation or advertising was undertaken
        in connection with the offer and sale of these shares. Each investor was
        also
        provided with access to our Exchange Act reports including our annual report
        on
        Form 10-KSB and our quarterly reports on Form 10-QSB.
 
 34
  In
        June
        2006, the Company issued 5,000 shares of common stock at $0.09 per share
        for the
        exercise of warrants by an investor. The securities were issued in reliance
        upon
        exemptions from registration pursuant to Section 4(2) under the Securities
        Act
        of 1933, as amended, and Rule 506 promulgated thereunder.
 
 In
        June
        2006, the Company issued a note payable in the amount of $9,750 in exchange
        for
        consulting services. This note bears interest at the rate of 7% per annum.
        In
        addition to the note payable, the consulting agreement calls for the issuance
        of
        695,000 common stock purchase warrants if certain milestones are met. The
        warrants expire five years from the date of issuance and have an exercise
        price
        of $0.32. The securities were issued in reliance upon exemptions from
        registration pursuant to Section 4(2) under the Securities Act of 1933, as
        amended, and Rule 506 promulgated thereunder.
 
 On
        December 12, 2003, the Company entered into a $20,000 promissory note bearing
        8%
        interest per year to an individual accredited investor. On October 15, 2004
        in
        accordance with the terms of the promissory note, accrued interest of $1,354
        was
        converted into 13,454 shares of our common stock releasing the Company from
        any
        further obligation under the note. From the date of the note's conversion,
        these
        shares were accrued for by the Company and the certificate representing the
        shares was issued in May 2006. No general solicitation or advertising was
        undertaken in connection with the offer and sale of the Note. The investor
        represented to the Company that the investor was purchasing the Note for
        the
        investor's own account and not with a present view towards the distribution
        thereof. In addition, the investor acknowledged and agreed that the Note
        and the
        underlying securities had not been registered under the Securities Act and
        may
        not be offered or sold unless subsequently registered and/or offered, sold
        or
        transferred pursuant to an exemption from the registration requirements.
        Therefore, the Company believes that the securities were offered and sold
        in
        reliance upon exemptions from registration pursuant to Section 4(2) under
        the
        Securities Act of 1933, as amended, and Rule 506 promulgated
        thereunder.
 
 During
        the three months ended March 31, 2006, we issued warrants to purchase 61,500
        shares of common stock at prices ranging from $0.125 to $1.00 per share.
        Pursuant to the terms of their respective agreement with us, these warrants
        were
        granted to current members of the Bioterrorism Advisory Board and Scientific
        Advisory Board for participation during the quarter ended March 31, 2006.
        The
        warrants will bear a restrictive legend regarding the sale or transfer of
        such
        or the underlying securities. The warrants were issued in reliance upon
        exemptions from registration pursuant to Section 4(2) under the Securities
        Act
        of 1933, as amended, and Rule 506 promulgated thereunder. There were less
        than
        35 investors and each investor had such knowledge and experience in financial
        and business matters that the investor was capable of evaluating the merits
        and
        risks of investing in the warrants. No general solicitation or advertising
        was
        undertaken in connection with the offer and sale of these shares. Each investor
        was also provided with access to our Exchange Act reports including our annual
        report on Form 10-KSB and our quarterly reports on Form 10-QSB.
 
 In
        March
        2006, we issued 67,616 shares of our common stock for the conversion of
        principal and accrued interest of an outstanding note payable. The securities
        were issued in reliance upon exemptions from registration pursuant to Section
        4(2) under the Securities Act of 1933, as amended, and Rule 506 promulgated
        thereunder.
 
 **DIVIDENDS
        AND DISTRIBUTIONS**
 
 We
        have
        not paid any cash dividends to date. We intend to retain our future earnings,
        if
        any, and we do not anticipate paying cash dividends on our common stock in
        the
        foreseeable future.
 
 **EQUITY
        COMPENSATION PLANS**
  Refer
        to
        Item 11 below for information with respect to our equity compensation
        plans.
  
 35
 **ITEM6.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
        OPERATION**
 
 **THE
        FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
        AND
        UNCERTAINTIES. SEE "FORWARD-LOOKING STATEMENTS" ABOVE. THIS DISCUSSION AND
        ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
        NOTES
        INCLUDED ELSEWHERE IN THIS REPORT** .
 
 This
        annual report on Form 10-KSB contains forward-looking statements within the
        meaning of Section 27A of the Securities Act of 1933, as amended, and Section
        21E of the Securities Exchange Act of 1934, as amended. Please note that
        the
        safe harbor for forward-looking statements under the Securities Act of 1933
        and
        the Securities Exchange Act do not apply to our company. Our actual results
        could differ materially from those set forth as a result of general economic
        conditions and changes in the assumptions used in making such forward-looking
        statements. The following discussion and analysis of our financial condition
        and
        results of operations should be read together with the audited consolidated
        financial statements and accompanying notes and the other financial information
        appearing else where in this report. The analysis set forth below is provided
        pursuant to applicable Securities and Exchange Commission regulations and
        is not
        intended to serve as a basis for projections of future events.
 
 **EXCEPT
        FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS
        ANNUAL REPORT ARE FORWARD-LOOKING STATEMENTS THAT ARE SUBJECT TO CERTAIN
        RISKS
        AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
        THOSE SET FORTH IN SUCH FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING
        STATEMENTS MAY BE IDENTIFIED BY THE USE OF CERTAIN FORWARD-LOOKING TERMINOLOGY,
        SUCH AS "MAY," "EXPECT," "ANTICIPATE," "INTEND," "ESTIMATE," "BELIEVE," OR
        COMPARABLE TERMINOLOGY THAT INVOLVES RISKS OR UNCERTAINTIES. ACTUAL FUTURE
        RESULTS AND TRENDS MAY DIFFER MATERIALLY FROM HISTORICAL AND ANTICIPATED
        RESULTS, WHICH MAY OCCUR AS A RESULT OF A VARIETY OF FACTORS. SUCH RISKS
        AND
        UNCERTAINTIES INCLUDE, WITHOUT LIMITATION, FACTORS DISCUSSED IN MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        SET
        FORTH BELOW, AS WELL AS IN "RISK FACTORS" SET FORTH HEREIN. EXCEPT FOR OUR
        ONGOING OBLIGATION TO DISCLOSE MATERIAL INFORMATION AS REQUIRED BY FEDERAL
        SECURITIES LAWS, WE DO NOT INTEND TO UPDATE YOU CONCERNING ANY FUTURE REVISIONS
        TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING
        AFTER THE DATE OF THIS ANNUAL REPORT.**
 
 **COMPANY
        HISTORY**
 
 We
        were
        originally incorporated in the State of Delaware in June 1985 under the name
        Vocaltech, Inc. to develop, design, manufacture and market products utilizing
        proprietary speech-generated tactile feedback devices. We completed our initial
        public offering of our securities in October 1987. In January 1992, we effected
        a 1-for-6.3 reverse stock split of our common stock. We changed our name
        to
        InnoTek, Inc. in November 1992. In December 1994, we acquired all of the
        outstanding stock of InnoVisions, Inc., a developer and marketer of skin
        protective products, discontinued our prior operations in their entirety
        and
        changed our name to DermaRx Corporation. In April 2000, we effected a reverse
        merger with a subsidiary of Go Public Network, Inc., which was engaged in
        assisting early-stage development and emerging growth companies with financial
        and business development services. We changed our name to GoPublicNow.com,
        Inc.,
        effected a 1-for-5 reverse stock split and discontinued our prior operations
        in
        their entirety. In November 2000, we changed our name to GPN Network, Inc.
        In
        July 2001, we discontinued the operations of GPN Network, Inc. in their entirety
        and began looking for appropriate merger partners. Our objective became the
        acquisition of an operating company with the potential for growth in exchange
        for our securities. In July 2003, we effected a reverse merger with ImmuneRegen
        BioSciences, Inc., adopted our current business model and thereafter changed
        our
        name to IR BioSciences Holdings, Inc. In July 2003, we effected a 1-for-20
        reverse stock split, and in April 2004, we effected a 2-for-1 stock split.
        In
        June 2006, our shareholders voted to increase the number of authorized shares
        of
        Common Stock to 250,000,000. ImmuneRegen BioSciences, Inc. was incorporated
        in
        October 2002; all information contained herein refers to the operations of
        ImmuneRegen BioSciences, Inc., our wholly-owned operational
        subsidiary.
 
 36
  **RECENT
        EVENTS**
 
 In
        December 2006, we completed a private placement, whereby we sold an aggregate
        of
        $5,482,600 worth of units to accredited investors. Each unit was sold for
        $25,000 and consisted of (a) a number of shares of our common stock determined
        by dividing the unit price by $0.16, and (b) a five-year warrant to purchase
        a
        number of shares of our common stock equal to 50% of the number of shares
        included within the unit, at $0.50 per share. We issued in the private placement
        an aggregate of 34,266,250 shares of our common stock and warrants to purchase
        17,133,125 shares of our common stock. In consideration of the investment,
        we
        granted to each investor certain registration rights and anti-dilution rights.
        We agreed that not before 180 days after the closing of the private placement
        and not later than 190 days thereafter, that we will file with the SEC a
        registration statement to register these shares along with the shares underlying
        these warrants. In the event that we fail to comply with the filing deadline,
        there shall be a 1% penalty for each 30 day period (or pro rata portion thereof)
        paid to each investor in cash or additional shares. This penalty amounts
        to an
        aggregate of 342,662 shares and 171,331 warrants per 30 day period until
        a
        registration statement that includes these shares and warrants is filed or
        12
        months. As of December 31, 2006, we are not subject to any penalty. As placement
        agent for the private placement, Joseph Stevens & Co., Inc. and its
        designees received 5,482,600 shares of our common upon the closing of the
        private placement.
 
 On
        October 23, 2006, we, through our wholly-owned subsidiary ImmuneRegen
        BioSciences, Inc., entered into an employment agreement with Hal Siegel,
        Ph.D.
        making him the Senior Director of Product Development and Regulatory Affairs
        of
        the Company. Dr. Siegel, who is also a member of our Board of Directors,
        also
        entered into a change of control agreement on October 23, 2006. Pursuant
        to
        terms of the employment agreement, Dr. Siegel will be compensated at an annual
        base salary of $200,000 for the first year and $210,000 for the second year.
        Dr.
        Siegel will also be eligible for discretionary bonuses under the Company’s stock
        option plan during his employment. In addition, Dr. Siegel received options
        with
        a term of five years to purchase 200,000 shares of common stock of the Company.
        The options are exercisable at $0.20 per share.
 
 On
        September 13, 2006, our Board of Directors granted a one-time discretionary
        incentive option to purchase 3,500,000 shares of common stock to our President
        and Chief Executive Officer, Michael K. Wilhelm, per his employment agreement.
        The grant consisted of 454,545 statutory options and 3,045,455 non-statutory
        options. The options have a per share exercise price of $0.22, which is 110%
        of
        the closing price on the date of the grant, and a term of five years.
 
 In
        August
        2006, pursuant to an agreement with the investors in the private placement
        of
        October 2004, we issued 4,150,800 shares of common stock and warrants to
        purchase an additional 1,634,400 shares as penalty for late registration
        of
        shares and warrants issued in the placement. The agreement limited the number
        of
        shares and warrants which the Company was obligated to issue pursuant to
        the
        penalty calculation to an aggregate of 18% of the number of original number
        of
        shares and warrants issued in the October 2004 private placement.
 
 On
        August
        1, 2006, the Company converted two cash advances into unsecured senior
        promissory notes, in the respective amounts of $50,000 and $20,000, with
        individual accredited investors, one of whom was a Director. Following the
        payment of fees and expenses, the Company received net proceeds of approximately
        $68,600.
 
 In
        July
        2006, the Company received a cash advance from a Director in the amount of
        $25,000 to be used as an upfront payment for a radiation study. This advance
        bears interest at the rate of 12% per annum. This cash advance was not used,
        as
        no upfront payment was required, and subsequently, principal and interest
        was
        returned on August 30, 2006.
 
 On
        July
        25, 2006, we entered into an unsecured senior promissory note in the amount
        of
        $250,000 with an accredited investor. Following the payment of commissions
        and
        expenses, the Company received net proceeds of approximately $210,000. The
        note
        was repaid in October 2006.
 
 On
        July
        14, 2006, our Board of Directors granted a one-time discretionary incentive
        stock option to purchase 1,896,970 shares of common stock to our President
        and
        Chief Executive Officer, Michael K. Wilhelm, per his employment agreement.
        The
        options have a per share exercise price of $0.231, which is 110% of the closing
        price on the date of the grant, and a term of five years. The options were
        granted in furtherance of a resolution by our Board on August 8, 2005 pursuant
        to which the options were to be granted at such time that the Company's 2003
        Stock Plan is amended to authorize additional shares, which was effected
        by
        approval of our shareholders on June 28, 2006.
 
 37
  On
        July
        14, 2006, we issued to our Chief Executive Officer, Michael K. Wilhelm, 300,000
        common stock purchase warrants for collateralization of promissory notes
        in
        2004. These warrants have an exercise price of $0.25 and expire five years
        from
        the date of issuance.
 
 On
        July
        14, 2006, pursuant to the term of his employment agreement we issued to our
        Chief Financial Officer, John N. Fermanis, 62,500 common stock purchase
        warrants. The warrants have an exercise price of $0.158 and expire five years
        from the date of issuance.
 
 On
        July
        10, 2006, pursuant to Rule 477 of Regulation C of the Securities Act of 1933,
        as
        amended, we applied for an order granting the immediate withdrawal of our
        Registration Statement on Form SB-2. The registration statement was originally
        filed with the Securities and Exchange Commission on November 24, 2004, and
        amended by pre-effective amendments no. 1, 2, 3 and 4 on July 20, 2005, November
        16, 2005, February 22, 2006 and April 7, 2006, respectively.
 
 In
        June
        2006, we issued 5,000 shares of common stock pursuant to the exercise of
        a
        warrant at a price of $0.09 per share.
 
 In
        June
        2006, the Company issued a note payable in the amount of $9,750 in exchange
        for
        consulting services. This note bears interest at the rate of 7% per annum.
        In
        addition to the note payable, the consulting agreement calls for the issuance
        of
        695,000 common stock purchase warrants if certain milestones are met. The
        warrants expire five years from the date of issuance and have an exercise
        price
        of $0.32.
 
 On
        June
        28, 2006, our shareholders voted to (i) approve an amendment to our Certificate
        of Incorporation, as amended, to increase the number of authorized shares
        of
        Common Stock from 100,000,000 to 250,000,000 and (ii) approve an amendment
        to
        our 2003 Stock Option, Deferred Stock and Restricted Stock Plan to increase
        the
        number of shares of our Common Stock reserved and available for issuance
        under
        the Plan from 3,600,000 to 20,000,000.
 
 In
        May
        2006, we issued 34,464 shares of S-8 common stock to a consultant for services
        provided for business development.
 
 In
        May
        2006, we issued 19,288 shares of common stock to an investor for the conversion
        of accrued interest at $0.125 per share.
 
 In
        May
        2006, we issued 16,324 shares of common stock to an investor for the conversion
        of accrued interest at $0.125 per share.
 
 In
        May
        2006, we issued 13,454 shares of common stock at to an investor for the
        conversion of accrued interest at $0.125 per share.
 
 On
        April
        13, 2006, we entered into an unsecured Senior Promissory Note in the amount
        of
        $500,000. Following the payment of commissions and expenses, we received
        net
        proceeds of approximately $439,875
 
 In
        March
        2006, per his employment agreement we issued 100,000 shares of our common
        stock
        to our Chief Financial Officer, John Fermanis.
 
 In
        March
        2006, we issued 67,616 shares of our common stock for the conversion of
        principal and accrued interest of an outstanding note payable.
 
 
 **GENERAL**
 
 IR
        BioSciences Holdings, Inc. is a development stage biotechnology company.
        Through
        our wholly-owned subsidiary ImmuneRegen BioSciences, Inc., we are engaged
        in the
        research and development of potential drug candidates, HomsperaTM and its
        derivatives , RadilexTM
and ViprovexTM. We defined Radilex and Viprovex as derivatives of Homspera due to
        the potential difference in formulations and indications for use of such
        compounds. Our goal is to develop these potential drug candidates to be used
        as possible countermeasures
        for homeland security threats, including radiological, chemical and biological
        agents, such as influenza and anthrax. We hope there may exist not
        only a
        market
        for products related to biodefense through governmental purchasing, but
        there
        also may exist a potential commercial market for treatments of cancer treatment
        side-effects and seasonal influenza.
 
 Our
        patents, patent applications and continued research are derived from discoveries
        made during research studies related to the function of Substance P ,
        which
        is found in the body and has a large number of actions .
        These
        studies were funded by the Air Force Office of Scientific Research (AFOSR)
        in
        the early 1990s and were conducted by research scientists, including our
        co-founders Drs. Mark Witten and David Harris. In the course of research
        on
        Substance P, these scientists created a number of synthetic analogues,
        structural derivatives with slight chemical differences, for study. One of
        these, which we have named Homspera, is the basis for our drug development
        efforts and our intellectual property. All of our research and development
        efforts are early, pre-clinical stage and Homspera has only undergone
        exploratory studies to evaluate its biological activity in small animals.
        There
        can be no assurance that our interpretation of the results of our studies
        will
        prove to be accurate after further testing and our beliefs regarding the
        potential uses of our drug candidates may never materialize.
 
 38
  Our
        current focus is on the development of two potential formulations derived
        from
        Homspera, Radilex and Viprovex.
 
 We
        are
        researching Radilex for use as a potential treatment for acute exposure to
        radiation. To we have sponsored seven studies and co-sponsored three studies
        all
        of which were conducted utilizing rodents. The results of these studies suggest
        Radilex may play a role in increased survival among tested rodents following
        exposure to lethal doses of gamma radiation. We believe that Radilex, if
        developed, may be an acceptable candidate to be marketed to governmental
        agencies for procurement. Further, we believe that a commercial market may
        exist
        for the use of Radilex as it relates to the treatment of radiation-induced
        side
        effects of cancer treatments, either as a stand alone treatment or as a
        co-therapeutic agent to be used with other therapies.
 
 Viprovex
        is being researched by us for use in potential treatments of exposure to
        biological agents, such as infectious disease, which include influenza and
        anthrax. Based on early studies on Homspera and existing literature on Substance
        P, we are researching the efficacy of Viprovex as a potential treatment for
        exposure to chemical agents, such as formalin. Formalin, a highly toxic chemical, is a solution of formaldehyde gas dissolved
        in water and used industrially. To
        date
        we have sponsored three studies related to the treatment of influenza, three
        on
        the exposure to anthrax spores and one on exposure to formalin. We believe
        the
        results of these studies indicated potential efficacy in the use of Viprovex
        as
        both a stand alone treatment and an adjuvant, to be used in conjunction with
        other drugs. If Viprovex can be developed, we believe that potential
        applications may exist for sale to governments for the treatment of exposure
        to
        anthrax and pandemic influenza. In addition, we believe that potential
        commercial opportunities may exist for the treatment of seasonal influenza
        and
        other viral or bacterial infections, either as a stand-along drug or as an
        adjuvant to other existing drugs.
 To
        date
        we have submitted preliminary study data to the U.S. Food and Drug
        Administration (FDA) and have been issued two Pre-Investigational New Drug
        (PIND) numbers, one for the potential use of Radilex in the treatment of
        acute
        radiation syndrome and the other for the potential use of Viprovex in the
        treatment of avian influenza.
 
 We
        have
        filed patent applications and provisional patent applications for the use
        of
        Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P, the active ingredient in Homspera, Radilex and Viprovex. The intellectual
        property owned by us is for various potential uses of Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P. We own two issued U.S. and two issued foreign patents. We also have 35
        pending patents relating to the use of Sar 9 ,
        Met
        (O 2 ) 11 -Substance
        P, comprised of four pending Patent Cooperation Treaty (PCT) applications,
        nine
        pending U.S. provisional patent applications and 22 pending foreign provisional
        patent applications.
 
 Our
        potential drug candidates, Radilex and Viprovex, are at early, pre-clinical
        stages of development and may not be shown to be safe or effective and may
        never
        receive regulatory approval. Neither Radilex nor Viprovex have yet been tested
        in large animals or humans. There is no guarantee that regulatory authorities
        will ever permit human testing of Radilex, Viprovex or any other potential
        products derived from Homspera. Even if such testing is permitted, none of
        Radilex, Viprovex or any other potential drug candidates, if any, derived
        from
        Homspera may be successfully developed or shown to be safe or
        effective.
 
 The
        results of our pre-clinical studies and clinical trials may not be indicative
        of
        future clinical trial results. A commitment of substantial resources to conduct
        time-consuming research, pre-clinical studies and clinical trials will be
        required if we are to develop any commercial applications using Homspera
        or any
        derivatives thereof. Delays in planned patient enrollment in our future clinical
        trials may result in increased costs, program delays or both. None of our
        potential technologies may prove to be safe or effective in clinical trials.
        Approval of the FDA, or other regulatory approvals, including export license
        permissions, may not be obtained and even if successfully developed and
        approved, our potential applications may not achieve market acceptance. Any
        potential applications resulting from our programs may not be successfully
        developed or commercially available for a number of years, if at
        all.
 
 To
        date,
        we have not obtained regulatory approval for or commercialized any applications
        using Homspera or any of its derivatives. We have incurred significant losses
        since our inception and we expect to incur annual losses for at least the
        next
        three years as we continue with our drug research and development
        efforts.
 
 Our
        principal offices are located at 4021 North 75th Street, Suite 201, Scottsdale,
        Arizona 85251 and our telephone number is (480) 922-3926. We are incorporated
        in
        State of Delaware. We maintain a website at www.immuneregen.com. The reference
        to our worldwide web address does not constitute incorporation by reference
        of
        the information contained on our website.
  39
  **PLAN
        OF OPERATIONS**
 
 We
        expect
        to continue to incur increasing operating losses for the foreseeable future,
        primarily due to our continued research and development activities attributable
        to Radilex, Viprovex or any other proposed product, if any, derived from
        Homspera and general and administrative activities.
 
 The
        preliminary results of our pre-clinical studies using Radilex or Viprovex
        may
        not be indicative of results that will be obtained from subsequent studies
        or
        from more extensive trials. Further, our pre-clinical or clinical trials
        may not
        be successful, and we may not be able to obtain the required regulatory
        approvals in a timely fashion, or at all. See "Risk Factors."
 
 **PRODUCT
        RESEARCH AND DEVELOPMENT**
 
 Due
        to
        our liquidity and limited cash available our spending on research and
        development activities in the years ended December 31, 2005 and 2006 was
        limited. We spent approximately $484,029 and $237,005 in 2006 and 2005,
        respectively, in research and development activities related to the development
        of Radilex and Viprovex. From our inception in October 2002, we have spent
        $1,026,597 in research and development activities. These costs only include
        the
        manufacture and delivery of our drug by third party manufacturers and payments
        to contract research organizations for consulting related to our studies
        and
        costs of performing such studies. Significant costs relating to research
        and
        development, such as compensation for Dr. Siegel have been classified in
        officer’s salaries for consistency of financial reporting.
 
 We
        anticipate that during the next 12 months we will increase our research and
        development spending to a total of approximately $700,000 in an effort to
        further develop Radilex and Viprovex. This research and development cost
        estimate includes additional animal pharmacology studies, formulation and
        animal
        safety/toxicity studies. If we receive additional funds, through either
        investment funding or grants, we expect we will increase our research and
        development spending.
 
 We
        believe we will be able to apply to the FDA for approval for the use of Radilex
        for the treatment of acute radiation syndrome and for approval for the use
        of
        Viprovex for the treatment of maladies caused by exposure to biological and
        chemical agents based upon the "animal efficacy rule." Therefore, we intend to apply for approval based upon a rule adopted by the
        FDA
        in 2002, titled "Approval of New Drugs When Human Efficacy Studies Are Not
        Ethical or Feasible" (Code of Federal Regulations, Title 21, Part 314, Subpart
        I), which is also referred to as the "animal efficacy rule." Pursuant to
        this
        rule, in situations where it would be unethical to conduct traditional Phase
        III
        efficacy studies in humans, as is the case with our applications relating
        to the
        treatment of maladies caused by exposure to high level gamma radiation and
        various chemical and biological agents, the FDA will review new drugs for
        approval on the basis of safety in humans and efficacy in relevant animal
        models. Through development under this rule, we believe that we could
        potentially incur less development costs as compared to the more traditional
        drug development model, as Phase III of the FDA required drug approval process
        is not required under the animal efficacy rule; however, there can be no
        assurances that we will be able to benefit from less development costs or
        that
        we will ever qualify for approval under the “animal efficacy rule”.  Under
        either the animal efficacy rule or traditional efficacy rules, we will not
        have
        marketable applications unless and until our drug candidates complete all
        required safety studies and clinical trials and receive FDA approval in the
        United States or approval by regulatory agencies outside of the United
        States.
  If
            we are
            successful in completing our studies and the results are as we anticipate,
            we
            intend to prepare and submit the necessary documentation to the FDA and
            other
            regulatory agencies for approval. If approval for Radilex and/or Viprovex
            is
            granted, we expect to begin efforts to commercialize our product, if
            any,
            immediately thereafter, however, since we are currently in the pre-clinical
            stage of development, it will take an indeterminate amount of time in
            development before we have a marketable drug, if ever.
 We
            believe that initial revenues, if any, will likely be generated through
            partnerships, alliances and/or licensing agreements with pharmaceutical
            or
            biotechnology companies. Our focus during the next 24 months will be
            to identify
            those companies which we believe may have an interest in our proposed
            products
            and attempt to negotiate arrangements for potential partnerships, alliances
            and/or licensing arrangements.. Alliances between pharmaceutical and
            biotechnology companies can take a variety of organizational forms and
            involve
            many different payment structures such as upfront payments, milestone
            payments,
            equity injections and royalty payments. To date, we have not entered
            into
            discussions with and have no agreements or arrangements with any such
            companies.
            Even if we are successful in entering into such a partnership or alliance
            or
            licensing our technology, we anticipate that the earliest we may begin
            to
            generate revenues from operations would be calendar 2009. There is no
            assurance
            that we will ever be successful in reaching such agreements or ever generate
            revenues from operations.
  We
        will
        need to generate significant revenues from product sales and or related
        royalties and license agreements to achieve and maintain profitability. Through
        December 31, 2006, we had no revenues from any product sales, royalties or
        licensing fees, and have not achieved profitability on a quarterly or annual
        basis. Our ability to achieve profitability depends upon, among other things,
        our ability to develop products, obtain regulatory approval for products
        under
        development and enter into agreements for product development, manufacturing
        and
        commercialization. Moreover, we may never achieve significant revenues or
        profitable operations from the sale of any of our potential products or
        technologies.
 
 40
 
 Research
        and Development of Radilex in Radiological Exposure
        Applications
 
 To
        date
        we have sponsored seven radiation studies and co-sponsored three radiation
        studies all of which were conducted utilizing rodents to study dose response
        to
        radiation, the impact on survival and to distinguish survival response using
        different forms of drug delivery. In each of these studies mice were exposed
        to
        varying levels of radiation.
 
 In
        these
        studies we have collected data that we believe suggests that Radilex shows
        efficacy in treating ARS by combating neutropenia and thrombocytopenia, which
        is
        the decrease in populations of blood levels of white blood cells and platelets
        and the major medical conditions associated with acute exposure to radiation.
        Loss of these cells results in increased sensitivity to infection and to
        uncontrolled bleeding, both of which can be potentially life-threatening.
        Further, as treatment for cancer often includes radiation treatment, we believe
        that the potential also exists for Radilex to be used for cancer patients
        as a
        stand alone treatment or a co-therapeutic agent to be used with other drugs
        as
        treatment.
 
 Acute
        total body irradiation exposure studies have been performed at the University
        of
        Arizona Cancer Center and at Oak Ridge National Laboratories (ORNL). We believe
        that data collected in studies performed at the Oak Ridge National Laboratory
        in
        2006 revealed that Radilex not only prolonged survival of animals exposed
        to
        lethal gamma irradiation, but also appeared to reverse the loss of white
        blood
        cells that comprise the immune system, as well as platelets necessary to
        control
        blood clotting, subsequently leading to an increase in survival rates.
 
 Further,
        we believe that our survival data from irradiated mice studies and mechanistic
        studies in cell culture have shown indications of hematopoietic stem cell
        replenishment of circulating leukocytes and platelets, which could be of
        value
        in radiation-treated cancer patients.
  Continuing
          radiation studies are expected to be performed at both the Translational
          Genomics Research Institute (TGen) and TGen Drug Development Services (TD2,
          its
          drug development arm) , Pacific Northwest National Laboratory, and Stem
          Cells
          Technology Inc. to further explore the impact of radiation on the hematopoietic
          system of Radilex-exposed animals. In addition, future studies will be
          designed
          to examine mechanistic indicators at both high levels of radiation where
          Radilex
          has shown protection, as well as at lower levels. If successful, these
          studies
          would demonstrate the ability of Radilex to address both the government
          market,
          as a countermeasure to radiological dispersion devices, such as dirty bombs,
          as
          well as the cancer market, as an adjuvant treatment candidate potentially
          ameliorating the side effects resulting from cancer
          radiotherapy
  We
          are
          also in discussions with LAB Research Inc. to conduct an efficacy study
          in a
          whole body gamma irradiation model in rhesus monkeys utilizing Radilex.
          To date,
          we have discussed protocols and received a price quotation from LAB
          Research.
 We
        believe these animal studies provide support for our continued effort to research
        and develop
        Radilex to treat the effects of exposure to radiation. However,
        there is no
        assurance that our interpretation of the results of the studies will prove
        to be
        accurate after further testing.
 
 Research
        and Development of Viprovex in Biological Exposure Applications
 
 We
        are
        researching the efficacy of Viprovex as a potential treatment, either as
        a stand
        alone application or as co- therapeutic treatment ,
        for
        exposure to various biological agents, such as infectious disease, including
        influenza and anthrax. We believe that results from our animal studies may
        reveal the potential ability of Viprovex to enhance flu therapies, minimize
        the
        respiratory impact of influenza infection and augment the capability of
        vaccination to induce a protective immune response.
 Influenza
 
 In
        October 2003 the AFOSR sponsored preliminary studies with the Hong Kong
        influenza virus (A/Hong Kong/8/68) and Viprovex at the University of Arizona,
        Arizona Health Sciences Center, Lung Injury Laboratory. Subsequently, we
        have
        sponsored three influenza studies at Virion Laboratories, one of which is
        still
        ongoing, utilizing rodents to test the efficacy of Viprovex in treating the
        avian influenza A/Wuhan/359/95 (H3N2), a model system for studying the H5N1
        avian influenza.
 
 We
        believe that the data acquired to date in examining the effect of Viprovex
        on
        influenza infection suggests an anti-viral action occurs in the
        lungs and, more noticeably, in the nose. In conjunction with this
        suggested anti-viral effect,
        we believe Viprovex may play a role in the normalization of animal weight
        and
        temperature. Further, we believe we witnessed differences in peptides signaling
        molecules released by cells of the immune system to mediate inflammation
        and
        immune responses. We believe that such Viprovex-induced changes in immune
        response signals demonstrate the potential efficacy of Viprovex. Based on
        our
        results, we believe that Viprovex may show efficacy as a stand alone drug
        in the
        treatment of influenza. Further, when used in conjunction with other
        pharmacological agents, Viprovex might be an effective adjuvant therapeutic
        on treating or preventing influenza.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 
 41
 Anthrax
  To
        date
        we have sponsored three anthrax studies all of which were conducted utilizing
        rodents to determine if Viprovex will reduce the mortality rate of an active
        infection of pulmonary anthrax. In our opinion, when treated with Viprovex
        prior
        to exposure to anthrax spores, Viprovex elicited protective, prophylactic
        efficacy and
        when
        treated a short time period after exposure to anthrax spores, Viprovex elicited
        therapeutic efficacy.
 
 In
        2006
        we completed a series of studies with Hyperion Biotechnology Inc. at their
        laboratory facilities located at Brooks City-Base in San Antonio, Texas.
        The
        purpose of these studies was to determine if Viprovex could reduce the mortality
        rate of an active infection of pulmonary anthrax. The first of these studies
        was
        initiated in October 2005. This research suggested, we believe, that Viprovex
        offers protection from anthrax exposure in a mouse model. In these studies,
        we
        witnessed mice treated with Viprovex to have a greater survival rate 11 days
        post-exposure to anthrax spores. Additionally, we believe that this research
        suggests Viprovex to elicit a dose-dependent prophylactic protection from
        anthrax in a mouse model.
 
 Further
        research, we believe supports these findings of prophylactic efficacy of
        Viprovex against anthrax and also suggests Viprovex to show efficacy in
        increasing survival rates in mice pretreated with anthrax. Additionally,
        preliminary results, we believe suggest that Viprovex, when used as an adjuvant,
        could play an important role, in conjunction with other therapies, in improving
        treatments of anthrax exposure.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 Other
        Infectious Diseases
 
 In
        March
        2007, we began the first of a series of studies to investigate the therapeutic
        effects of Viprovex on acute melioidosis. These studies are to be performed
        in
        conjunction with Singapore's Defense Medical & Environmental Research
        Institute, DSO National Laboratories ("DSO"). The studies are to be funded
        by
        DSO and are expected to be completed during the third quarter of
        2007.
 
 Research
        and Development of Viprovex in Chemical Exposure Applications
 
 Based
        on
        early studies on Homspera and existing literature on Substance P, we are
        researching the efficacy of Viprovex as a potential treatment for exposure
        to
        chemical agents, such as formalin. Formalin is a solution of formaldehyde
        gas
        dissolved in water, used industrially and toxic typically via crosslinking
        of
        proteins to other nearby proteins. To date, we have only conducted limited
        preclinical studies with regard to the development of Viprovex for indications
        related to treatment of exposure to harmful chemicals.
 
 We
        believe our early AFOSR rodent studies suggests the administration of Substance
        P and Homspera to animals exposed to JP-8 decreased the immune system effects,
        while administration of Substance P antagonists compounded the deleterious
        effects. Further experiments performed using Viprovex examined effectiveness
        in
        preventing lung injury on inhalation of toxic fumes. We believe data collected
        from these studies suggest Viprovex to exhibit anti-inflammatory effects
        in
        animal models.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 Research
        and Development as an Adjuvant Therapeutic
 
 Adjuvants
        are unique among active ingredients
        in drugs
        in
        that they are designed to not stimulate an immune response against themselves,
        but they are required to augment the immune response against other,
        co-administered compounds.
 
 Data
        collected from studies, we believe, suggest that Homspera may have potential
        value as a co-therapeutic agent or vaccine adjuvant. Studies performed in
        animal
        models of influenza and acute radiation syndrome have revealed the potential
        capability of Homspera to enhance the action of approved anti-viral medications as well as to provide adjunctive impact on anti-tumor radiation therapy.
 
 We
        believe that, in conjunction with other influenza therapeutics, Homspera
        might
        be an effective adjuvant therapeutic by decreasing the number of viruses
        at
        which the viral neuraminidase-targeted therapeutic must act. Additionally,
        while
        these results are preliminary, we believe that data suggests Homspera, when
        used
        as an adjuvant, could play an important role, in conjunction with other
        therapies, in improving treatments of anthrax exposure. Further,
        we believe that data also suggests a potential for
        Homspera to be used as a co-therapy for cancer patients, as secondary treatment
        often involves radiation treatments following chemotherapy, in an attempt
        to
        kill more of the cancer cells.
 
 There
        is
        no assurance that our interpretation of the results of the studies will prove
        to
        be accurate after further testing.
 
 42
 
 If
        product development or approval does not occur as scheduled our time to reach
        market will be lengthened and our costs will substantially increase.
        Additionally, we may be requested to expand our findings to gather additional
        data or we may not achieve the desired results. If so, we may have to design
        new
        protocols and conduct additional studies. This will increase our costs and
        delay
        the time to market for Radilex as a possible therapeutic for radiation exposure.
        Any of these occurrences would have a material negative impact on our business
        and our liquidity as it may cause us to seek additional capital sooner than
        expected and allow our competitors to successfully enter the market ahead
        of
        us.
 
 If
        we are
        successful in achieving desirable results for these applications, we intend
        to
        design the protocols and begin further studies for this and other applications,
        when capital is available. As we have only collected preliminary data and
        additional studies are required, we cannot predict when, if ever, a viable
        treatments for these indications can be commercialized. If we do not observe
        significant results or we lack the capital to further the development, we
        may
        abandon such research and development efforts; thereby limiting our future
        potential revenues.
 
 **OFF-BALANCE
        SHEET ARRANGEMENTS**
 
 There
        were no off-balance sheet arrangements made in 2006.
 
 **REVENUES**
 
 We
        have
        not generated any revenues from operations from our inception. We believe
        we
        will begin earning revenues from operations during calendar year 2009 as
        we
        transition from a development stage company.
 
 **COSTS
        AND EXPENSES**
 
 From
        our
        inception through December 31, 2006, we have incurred losses of $13,285,180.
        These expenses were associated principally with equity-based compensation
        to
        employees and consultants, product development costs and professional services,
        and equity based compensation to shareholders for the penalty incurred for
        the
        late registration of shares.
 
 For
        the
        twelve months ending December 31, 2006, Sales, General and Administrative
        expenses (“SG&A”) were $2,445,317, a decrease of $89,100 or approximately 4%
        compared to SG&A expenses of $2,534,417 during the 12 months ended December
        31, 2005. The decrease was primarily due to lower costs for non-cash
        compensation.
 
 For
        the
        twelve months ending December 31, 2006, Interest Expense (net) was $48,508
        , an
        increase of approximately 526% compared to Interest Income (net) of $11,386
        during the 12 months ended December 31, 2005. Interest Expense increased
        because
        the Company entered into notes payable during the twelve months ended December
        31, 2006. We expect Interest Expense to decrease during the coming twelve
        months
        as we have paid off outstanding notes payable with the proceeds of the Private
        Placement.
 
 During
        the twelve months ending December 31, 2006, we recognized a gain of $438,601
        for
        the cost of the penalty for the late registration of shares which was a decrease
        of $3,069,362 or approximately 117% compared to the cost of penalty for late
        registration of shares for the twelve months ended December 31, 2005. The
        reduction of the expense was due to stopping the accrual of penalty shares
        in
        2006 and the reversal of the accrual for penalty shares and warrants which
        had
        been previously accrued in excess of the cap amount agreed to by the
        shareholders.
 
 **NET
        LOSS**
 
 For
        the
        reasons stated above, our net loss for the twelve months ending December
        31,
        2006 was $1,486,046, or $0.02 per share versus a net loss for the twelve
        months
        ending December 31, 2005 of $4,591,107 or $0.07 per share. For the period
        of
        inception (October 30, 2002) through December 31, 2006, our net loss was
        $13,285,180, or $0.28 per share. We expect that losses will continue through
        the
        period ending December 31, 2010.
 
 Our
        independent certified public accountants have stated in their report included
        in
        this Form 10-KSB that we have incurred a net loss and negative cash flows
        from
        operations of $1,486,046 and $2,035,484, respectively, for the year ended
        December 31, 2006. This loss, in addition to a lack of operational history,
        raises substantial doubt about our ability to continue as a going concern.
        We
        currently have sufficient working capital to fund operations through January
        2008. In the absence of significant revenue and profits, and since we do
        not
        expect to generate significant revenues in the foreseeable future, we, in
        order
        to fund future operations, will be completely dependent on additional debt
        and
        equity financing arrangements. There is no assurance that any financing will
        be
        sufficient to fund our capital expenditures, working capital and other cash
        requirements beyond January 2008. No assurance can be given that any such
        additional funding will be available or that, if available, can be obtained
        on
        terms favorable to us. If we are unable to raise needed funds on acceptable
        terms, we will not be able to develop or enhance our products, take advantage
        of
        future opportunities or respond to competitive pressures or unanticipated
        requirements. A material shortage of capital will require us to take drastic
        steps such as reducing our level of operations, disposing of selected assets
        or
        seeking an acquisition partner. If cash is insufficient, we will not be able
        to
        continue operations.
 
 43
  Penalties
        for Late Registration
 
 In
        October 2004, we completed a private placement sale of shares of our common
        stock and warrants to purchase additional shares of common stock. We issued
        in
        the private placement an aggregate of 19,600,000 shares of our common stock
        and
        warrants to purchase 9,800,000 shares of our common stock. We agreed to register
        these shares along with the shares underlying these warrants within ninety
        days
        from the closing date of the transaction, or we would incur a penalty equivalent
        to an additional 2% of the shares and warrants to be registered for every
        30
        days that we failed to complete this registration. This penalty amounts to
        an
        aggregate of 461,200 shares and 181,600 warrants per 30 day period until
        such a
        time as this registration statement is made effective. We were unable to
        register the securities as required.
 
 The
        Company attempted to register the shares and warrants by filing a registration
        statement with the Securities and Exchange Commission on November 24, 2004,
        and
        amended this registration statement with pre-effective amendments no. 1,
        2, 3
        and 4 on July 20, 2005, November 16, 2005, February 22, 2006 and April 7,
        2006,
        respectively. On July 10, 2006 the Company, pursuant to Rule 477 of Regulation
        C
        of the Securities Act of 1933, as amended, applied for an order granting
        the
        immediate withdrawal of its Registration Statement on Form SB-2.
 
 In
        August
        2006, we reached an agreement with the investors in the private placement
        of
        October 2004 which limits the number of warrants and shares which we are
        obligated to issue pursuant to the penalty calculation to an aggregate of
        18% of
        the number of original number of shares and warrants issued in the October
        2004
        private placement. This agreement limits the number of shares and warrants
        issuable pursuant to the penalty calculation to an aggregate of 4,150,798
        shares
        and warrants to purchase an additional 1,634,400 shares, respectively. This
        resulted in a decrease in the number of share issuable 2,475,107 (with a
        fair
        value of $816,785) and a decrease in the number of warrant shares of 974,587
        (with a fair value of $177,789). This resulted in a net realized gain of
        $994,574 during the three months ended June 30, 2006.
 
 In
        August
        2006, we issued 4,150,798 shares and warrants to purchase 1,634,400 shares
        and
        relieved accrued liabilities in the aggregate amount of $1,053,904.
  For
        the
        twelve months ended December 31, 2006 the Company marked to market the value
        of
        the shares and warrants issuable pursuant to the penalty calculation for
        an
        aggregate gain in the amount of approximately $445,673 and $123,505,
        respectively.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 At
        December 31, 2006, we had current assets of $2,831,502 consisting of cash
        of
        $2,752,103 and prepaid services of $79,399. Also, at December 31, 2006, we
        had
        current liabilities of $510,969, consisting of accounts payable and accrued
        liabilities of $460,969 and notes payable of $50,000. This resulted in working
        capital of $2,320,533. During the twelve months ended December 31, 2006,
        we used
        cash in operating activities of $2,035,484. From the date of inception (October
        30, 2002) to December 31, 2006, we had a net loss of $13,285,180 and used
        cash
        of $5,993,942 in operating activities. We met our cash requirements from
        our
        inception through December 31, 2006 via the private placement of $7,877,901
        of
        our common stock and $908,628 from the issuance of notes payable, net of
        repayments.
 
 We
        currently have no revenue. There is no guarantee that our business model
        will be
        successful, or that we will be able to generate sufficient revenue to fund
        future operations. As a result, we expect our operations to continue to use
        net
        cash, and that we will be required to seek additional debt or equity financings
        during the coming quarters. Since inception, we have financed our operations
        through debt and equity financing. While we have raised capital to meet our
        working capital and financing needs in the past, additional financing is
        required in order to meet our current and projected cash flow deficits from
        operations and development of our product line.
 
 In
        December 2006, we completed a private placement, whereby we sold an aggregate
        of
        $5,482,600 worth of units to accredited investors. In consideration of the
        investment, we granted to each investor certain registration rights and
        anti-dilution rights. We have agreed that not before 180 days after the closing
        of the private placement and not later than 190 days thereafter, that we
        shall
        file with the SEC an appropriate registration statement to register these
        shares
        along with the shares underlying these warrants. In the event that we fail
        to
        comply with the filing deadline, there shall be a 1% penalty for each 30
        day
        period (or pro rata portion thereof) paid to each investor in cash or additional
        shares. This penalty amounts to an aggregate of 342,662 shares and 171,331
        warrants per 30 day period until such a time as a registration statement
        that
        includes these shares and warrants is filed or 12 months. As of December
        31,
        2006, we are not subject to any penalty.
 
 On
        August
        1, 2006, we converted two cash advances into unsecured senior promissory
        notes
        bearing interest at the rate of 12% per annum, in the respective amounts
        of
        $50,000 and $20,000. These notes were entered into with individual accredited
        investors, one of whom was a Director. Following the payment of fees and
        expenses, we received net proceeds of approximately $68,600. On October 6,
        2006,
        principal and interest of $733 was returned on the $20,000 note.
 
 In
        July
        2006, we received a cash advance from a Director in the amount of $25,000
        to be
        used as an upfront payment for a radiation study. This advance bears interest
        at
        the rate of 12% per annum. This cash advance was not used, as no upfront
        payment
        was required, and subsequently, principal and interest of $370 was returned
        on
        August 30, 2006.
 
 44
  On
        July
        25, 2006, we entered into an unsecured senior promissory note bearing interest
        at the rate of 12% per annum in the amount of $250,000 with an accredited
        investor. Following the payment of commissions and expenses, the Company
        received net proceeds of approximately $210,000. On October 6, 2006 principal
        and interest of $5,583 was returned.
 
 In
        June
        2006, we issued 5,000 shares of common stock for cash of $450 pursuant to
        the
        exercise of a warrant at $0.09 per share.
 
 In
        June
        2006, we issued a note payable in the amount of $9,750 in exchange for
        consulting services. This note bears interest at the rate of 7% per annum.
        In
        addition to the note payable, the consulting agreement calls for the issuance
        of
        695,000 common stock purchase warrants if certain milestones are met. The
        warrants expire five years from the date of issuance and have an exercise
        price
        of $0.32. On October 11, 2006, principal and interest of $237 was
        returned.
 
 On
        April
        13, 2006, we entered into an unsecured senior promissory note bearing interest
        at the rate of 12% per annum in the amount of $500,000 with an accredited
        investor. Following the payment of commissions and expenses, we received
        net
        proceeds of approximately $439,875 On October 6, 2006 principal and interest
        of
        $28,500 was returned.
 
 On
        July
        25, 2006, we entered into an unsecured senior promissory note in the amount
        of
        $250,000 with an accredited investor. Following the payment of commissions
        and
        expenses, the Company received net proceeds of approximately
        $210,000.
 
 Pursuant
        to our employment agreement with Michael Wilhelm, our President and Chief
        Executive Officer, dated December 16, 2002, we paid a salary of $125,000
        and
        $175,000 to Mr. Wilhelm during the first and second years of his employment,
        respectively. Thereafter we paid through August 10, 2005, an annual salary
        of
        $250,000. On August 10, 2005, we entered into a new employment agreement
        with
        Mr. Wilhelm. The new employment agreement calls for a salary at the rate
        of
        $275,000 per annum and provides for bonus incentives. Mr. Wilhelm's salary
        is
        payable in regular installments in accordance with the customary payroll
        practices of our company.
 
 Pursuant
        to our employment agreement with John Fermanis, our Chief Financial Officer,
        dated February 15, 2005, we paid a salary of $60,000 until the company completed
        a financing of $500,000 or more. This occurred on March 4, 2005 when the
        company
        completed a tender offer for warrants totaling $1,211,000 net of fees. From
        March 4, 2005, until December 31, 2005, we paid an annual salary of $85,000.
        Thereafter, we paid an annual salary of $98,000 for the second year ending
        December 31, 2006 and will pay an annual salary of $112,000 for the third
        year
        ending December 31, 2007. Mr. Fermanis' salary is payable in regular
        installments in accordance with the customary payroll practices of our
        company.
 
 Pursuant
        to our employment agreement with Hal N. Siegel, our Senior Director of Product
        Development and Regulatory Affairs, dated October 23, 2006, we will pay an
        annual base salary of $200,000 for the first year and $210,000 for the second
        year. Mr. Siegel will also be eligible for discretionary bonuses under the
        Company's stock option plan during his employment. In addition, Mr. Siegel
        received options with a term of five years to purchase 200,000 shares of
        common
        stock of the Company. The options are exercisable at $0.20 per share. The
        employment agreement has a term of two years, subject to early termination
        provisions. Upon termination of Mr. Sigel's employment by the Company without
        cause or constructive termination, as defined in the agreement, the Company
        agrees to pay to Mr. Siegel the remainder of his salary for the year or six
        months salary, whichever is greater, and any accrued vacation.
 
 Pursuant
        to the terms of the change of control agreement, the Company agrees to pay
        Mr.
        Siegel his salary for a period of 18 months from the date an involuntary
        termination, payable in accordance with the Company's compensation practice.
        Involuntary termination is defined as the termination of Mr. Siegel's employment
        by Company without cause or due to constructive termination at any time within
        one-year from a change of control event, as defined in the
        agreement.
 
 Since
        our
        inception, we have been seeking additional third-party funding. During such
        time, we have retained a number of different investment banking firms to
        assist
        us in locating available funding; however, we have not yet been successful
        in
        obtaining any of the long-term funding needed to make us into a commercially
        viable entity. During the period from October 2004 to December 2006, we were
        able to obtain financing of $9,097,736 from a series of private placements
        of
        our securities (which resulted in net proceeds to us of $7,877,901). Based
        on
        our current plan of operations all of our current funding is expected to
        be
        depleted by the end of January 2008. If we are not successful in generating
        sufficient liquidity from operations or in raising sufficient capital resources,
        it would have a material adverse effect on our business, results of operations,
        liquidity and financial condition.
 
 While
        we
        have raised capital to meet our working capital and financing needs in the
        past
        through debt and equity financings, additional financing will be required
        in
        order to implement our business plan and to meet our current and projected
        cash
        flow deficits from operations and development. There can be no assurance
        that we
        will be able to consummate future debt or equity financings in a timely manner
        on a basis favorable to us, or at all. If we are unable to raise needed funds,
        we will not be able to develop or enhance our potential products, take advantage
        of future opportunities or respond to competitive pressures or unanticipated
        requirements. A material shortage of capital will require us to take drastic
        steps such as reducing our level of operations, disposing of selected assets
        or
        seeking an acquisition partner.
 
 Until
        such time, if at all, as we receive adequate funding, we intend to continue
        to
        defer payment of all of our obligations which are capable of being deferred,
        which actions have resulted in some vendors demanding cash payment for their
        goods and services in advance, and other vendors refusing to continue to
        do
        business with us. We do not expect to generate a positive cash flow from
        our
        operations for at least several years, if at all, due to anticipated
        expenditures for research and development activities, administrative and
        marketing activities, and working capital requirements and expect to continue
        to
        attempt to raise further capital through one or more further private placements.
        Based on our operating expenses and anticipated research and development
        activities we believe we have sufficient to meet or operating needs through
        January 2008. Thereafter, we believe that we will require an additional $500,000
        to meet our expenses over the next 12 months.
 
 Acquisition
        or Disposition of Plant and Equipment
 
 We
        acquired $32,397 worth of property, plant or equipment for the year ended
        December 31, 2006. We do not anticipate the acquisition or disposition of
        any
        significant property, plant or equipment during the next 12 months.
 
 45
  Number
        of Employees
 
 From
        our
        inception through the period ended December 31, 2006, we have relied on the
        services of outside consultants for services and currently have six total
        employees, one contract employee, four full-time employees and one part-time
        employee. Our full-time employees are Michael K. Wilhelm, our Chief Executive
        Officer; John N. Fermanis, our Chief Financial Officer; Hal N. Siegel, Ph.D.,
        Senior Director, Product Development and Regulatory Affairs; and, the fourth
        serves in an administrative role. In order for us to attract and retain quality
        personnel, we anticipate we will have to offer competitive salaries to future
        employees. We do not anticipate our employment base will significantly change
        during the next twelve months.
 
 **CRITICAL
        ACCOUNTING POLICY**
 
 The
        preparation of our consolidated financial statements in conformity with
        accounting principles generally accepted in the United States requires us
        to
        make estimates and judgments that affect our reported assets, liabilities,
        revenues, and expenses, and the disclosure of contingent assets and
        liabilities.
 
 We
        base
        our estimates and judgments on historical experience and on various other
        assumptions we believe to be reasonable under the circumstances. Future events,
        however, may differ markedly from our current expectations and assumptions.
        While there are a number of significant accounting policies affecting our
        consolidated financial statements; we believe the following critical accounting
        policy involves the most complex, difficult and subjective estimates
        and judgments:
 
 Stock-based
        Compensation
 
 Effective
        January 1, 2006, the Company adopted SFAS No. 123 (revised), "Share-Based
        Payment" (SFAS 123(R)) utilizing the modified prospective approach. Prior
        to the
        adoption of SFAS 123(R) we accounted for stock option grant in accordance
        with
        APB Opinion No. 25, "Accounting for Stock Issued to Employees" (the intrinsic
        value method), and accordingly, recognized compensation expense for stock
        option
        grants.
 
 Under
        the
        modified prospective approach, SFAS 123(R) applies to new awards and to awards
        that were outstanding on January 1, 2006 that are subsequently modified,
        repurchased or cancelled. Under the modified prospective approach, compensation
        cost recognized in the nine months of fiscal 2006 includes compensation cost
        for
        all share-based payments granted prior to, but not yet vested as of January
        1,
        2006, based on the grant-date fair value estimated in accordance with the
        original provisions of SFAS 123, and compensation cost for all share-based
        payments granted subsequent to January 1, 2006 based on the grant-date fair
        value estimated in accordance with the provisions of SFAS 123(R). Prior periods
        were not restated to reflect the impact of adopting the new
        standard.
 
 A
        summary
        of option activity under the Plan as of December 31, 2006, and changes during
        the period ended are presented below:
 **Options**
              
              **Weighted****Average**
                **Exercise
                  Price**Outstanding
                  at December 31, 2005
              
              
              317,242
              
              $
              5.30Issued
              
              
              5,596,970
              
              $
              0.22Exercised
              
              
              --
              
              
              --Forfeited
                  or expired
              
              
              --
              
              
              --Outstanding
                  at December 31, 2006
              
              
              5,914,212
              
              $
              0.50Non-vested
                  at December 31, 2006
              
              
              2,023,952
              
              $
              0.22Exercisable
                  at December 31, 2006
              
              
              3,890,260
              
              $
              0.64
 
 46
  Aggregate
        intrinsic value of options outstanding and exercisable at December 31, 2006
        was
        $0. Aggregate intrinsic value represents the difference between the Company's
        closing stock price on the last trading day of the fiscal period, which was
        $0.15 as of December 29, 2006, and the exercise price multiplied by the number
        of options outstanding. As of December 31, 2006, total unrecognized stock-based
        compensation expense related to stock options was $264,274. During the year
        ended December 31, 2006 the Company charged $296,394 to operations related
        to
        recognized stock-based compensation expense for employee stock options
 
 For
        purposes of pro forma disclosures, the estimated fair value of the options
        is
        amortized over the options' vesting period. The Company's pro forma information
        was as follows:
 **Twelve
                  months ended**
                **December
                  31,****2005**Net
                  loss, as reported
              
              $
              (4,591,107
              )Compensation
                  recognized underAPB 25
              
              
              --Compensation
                  recognized underSFAS
                  123
              
              
              (83,150
              )Pro
                  forma net loss
              
              $
              (4,674,257
              )Pro
                  forma loss per share
              
              $
              (0.07
              )
 
 Recent
        Accounting Pronouncements
 
 In
        February 2006, the FASB issued SFAS No. 155. “ *Accounting
        for certain Hybrid Financial Instruments an amendment of FASB Statements
        No. 133
        and 140,”* or SFAS
        No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial
        instrument that contains an embedded derivative that otherwise would require
        bifurcation, clarifies which interest-only strips and principal-only strips
        are
        not subject to the requirements of Statement No. 133, establishes a requirement
        to evaluate interests in securitized financial assets to identify interests
        that
        are freestanding derivatives or that are hybrid financial instruments that
        contain an embedded derivative requiring bifurcation, clarifies that
        concentrations of credit risk in the form of subordination are not embedded
        derivatives, and amends SFAS No. 140 to eliminate the prohibition on a
        qualifying special purpose entity from holding a derivative financial instrument
        that pertains to a beneficial interest other than another derivative financial
        instrument. SFAS 155 is effective for all financial instruments acquired
        or
        issued after the beginning of an entity’s first fiscal year that begins after
        September 15, 2006. We do not expect the adoption of SFAS 155 to have a material
        impact on our consolidated financial position, results of operations or cash
        flows.
 
 In
        March
        2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
        Financial Assets - an amendment to FASB Statement No. 140. Statement 156
        requires that an entity recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        service contract under certain situations. The new standard is effective
        for
        fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
        did
        not have a material impact on the Company's financial position and results
        of
        operations.
 
 In
        July
        2006, the FASB issued Interpretation No. 48 (FIN 48). “ *Accounting
        for uncertainty in Income Taxes”.* FIN 48
        clarifies the accounting for Income Taxes by prescribing the minimum recognition
        threshold a tax position is required to meet before being recognized in the
        financial statements. It also provides guidance on derecognition, measurement,
        classification, interest and penalties, accounting in interim periods,
        disclosure and transition and clearly scopes income taxes out of SFAS 5,
        “ *Accounting
        for Contingencies”.* FIN
        48 is
        effective for fiscal years beginning after December 15, 2006. The Company
        does
        not expect adoption of this standard will have a material impact on its
        financial position, operations or cash flows.
 
 In
        September 2006 the Financial Account Standards Board (the “FASB”) issued its
        Statement of Financial Accounting Standards 157, Fair Value Measurements.
        This
        Statement defines fair value, establishes a framework for measuring fair
        value
        in generally accepted accounting principles (GAAP), and expands disclosures
        about fair value measurements. This Statement applies under other accounting
        pronouncements that require or permit fair value measurements, the Board
        having
        previously concluded in those accounting pronouncements that fair value is
        the
        relevant measurement attribute. Accordingly, this Statement does not require
        any
        new fair value measurements. However, for some entities, the application
        of this
        Statement will change current practice. FAS 157 effective date is for fiscal
        years beginning after November 15, 2007. The Company does not expect adoption
        of
        this standard will have a material impact on its financial position, operations
        or cash flows.
 
 In
        September 2006 the FASB issued its Statement of Financial Accounting Standards
        158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
        Plans”. This Statement improves financial reporting by requiring an employer to
        recognize the overfunded or underfunded status of a defined benefit
        postretirement plan (other than a multiemployer plan) as an asset or liability
        in its statement of financial position and to recognize changes in that funded
        status in the year in which the changes occur through comprehensive income
        of a
        business entity or changes in unrestricted net assets of a not-for-profit
        organization. This Statement also improves financial reporting by requiring
        an
        employer to measure the funded status of a plan as of the date of its year-end
        statement of financial position, with limited exceptions. The effective date
        for
        an employer with publicly traded equity securities is as of the end of the
        fiscal year ending after December 15, 2006. The Company does not expect adoption
        of this standard will have a material impact on its financial position,
        operations or cash flows
 
 In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
        to measure many financial instruments, and certain other items, at fair value.
        SFAS 159 applies to reporting periods beginning after November 15, 2007.
        The
        adoption of SFAS 159 is not expected to have a material impact on the Company’s
        financial condition or results of operations.
 
 
 47
   **ITEM7.
        FINANCIAL STATEMENTS**
 
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
  **FINANCIAL
        STATEMENTS AND SCHEDULES**
 **DECEMBER
        31, 2006 AND 2005**
 
  **FORMING
        A PART OF ANNUAL REPORT**
 **PURSUANT
        TO THE SECURITIES EXCHANGE ACT OF 1934**
 
 **IR
        BIOSCIENCES HOLDINGS, INC.**
 
   
  **IR
          BioSciences Holdings, Inc.**
 **Index
          to Financial Statements**
 **Page
                  No.**Report
                  of Independent Registered Certified Public Accounting
                  Firm
              F-2Consolidated
                  Balance Sheet at December 31,
                  2006
              F-3Consolidated
                  Statements of Losses for the two years ended
                  December 31, 2006 and 2005 and the period October 30, 2002 (Date
                  of
                  Inception) through December 31, 2006
              F-4Consolidated
                  Statements of Stockholders' Equity (Deficit)
                  For the period October 30, 2002 (Date of Inception) through December
                  31,
                  2006
              F-5Consolidated
                  Statements of Cash Flows for the two years
                  ended December 31, 2006 and 2005 and the period October 30, 2002
                  (Date of
                  Inception) through December 31, 2006
              F-6Notes
                  to Consolidated Financial
                  Statements
              F-7
                  to F-23
 
  
 
 
   **RUSSELLBEDFORD
        STEFANOU MIRCHANDANI LLP**
 **CERTIFIED
        PUBLIC ACCOUNTANTS**
  **REPORT
        OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM**
 
 Board
        of
        Directors
 IR
        BioSciences Holdings, Inc.
 Scottsdale,
        Arizona
 
 
 We
        have
        audited the accompanying consolidated balance sheet of IR BioSciences Holdings,
        Inc. a development stage company as of December 31, 2006 and the related
        consolidated statements of losses, statement of stockholders' equity (deficit),
        and cash flows for each of the two years in the period ended December 31,
        2006
        and the period October 22, 2002 (date of inception) through December 31,
        2006.
        These financial statements are the responsibility of the company's management.
        Our responsibility is to express an opinion on the financial statements based
        upon our audits.
 
 We
        have
        conducted our audits in accordance with auditing standards of the Public
        Company
        Accounting Oversight Board (PCAOB) (United States of America). Those standards
        require that we plan and perform the audit to obtain reasonable assurance
        about
        whether the financial statements are free of material misstatement. An audit
        includes examining on a test basis, evidence supporting the amounts and
        disclosures in the financial statements. An audit also includes assessing
        the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of IR BioSciences Holdings, Inc.
        a
        development stage company at December 31, 2006 and the results of its operations
        and its cash flows for each of the two years in the period ended December
        31,
        2006 and the period October 22, 2002 (date of inception) through December
        31,
        2006 in conformity with accounting principles generally accepted in the United
        States of America.
 
 As
        discussed in Note A to the consolidated financial statements, the Company
        adopted the provisions of Statement of Financial Accounting Standards No.
        123(R), "Share-Based Payment", effective January 1, 2006.
 
 The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern. As discussed in the Note A to the accompanying
        financial statements, the Company is in the development stage and has not
        established a source of revenues. This raises substantial doubt about the
        company’s ability to continue as a going concern. The financial statements do
        not include any adjustments that might result from the outcome of this
        uncertainty.
 
 
 /s/
        RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
 Russell
        Bedford Stefanou Mirchandani LLP
 
 New
        York,
        New York
 March
        23,
        2007
 
 
 F-2
 
 **IR
              BioSciences Holdings, Inc. and Subsidiary**
 **(A
              Development Stage Company)**
 **Consolidated
              Balance Sheet as of December 31, 2006**
 **Assets**Current
                      assetsCash
                      and cash equivalents
                  $
                  2,752,103Prepaid
                      services and other current assets
                  
                  77,899Salary
                      advance
                  
                  1,500Total
                      current assets
                  
                  2,831,502Deposits
                      and other assets
                  
                  2,260Furniture
                      and equipment, net of accumulated depreciation of $12,242 (Note
                      B)
                  
                  28,242Total
                      assets
                  $
                  2,862,004**Liabilities
                      and Stockholders' Equity**Current
                      liabilitiesAccounts
                      payable and accrued liabilities (Note C)
                  
                  460,969Current
                      portion of Notes Payable (Note
                      F)
                  
                  50,000Total
                      current liabilities
                  
                  510,969Commitments
                      and Contingencies  (Note
                      I)
                  
                  -Stockholders'
                      EquityPreferred
                      stock, $0.001 par value:10,000,000
                      shares authorized, no shares issued and outstanding
                  
                  -Common
                      stock, $0.001 par value; 250,000,000
                      shares authorized;108,041,897
                      shares issued and outstanding at December 31, 2006 (Note
                      G)
                  
                  108,042Additional
                      paid-in capital (Notes G, H)
                  
                  15,522,690Common
                      stock subscribed
                  
                  5,483Deficit
                      accumulated during the development stage
                  
                  (13,285,180
                  )Total
                      stockholder's equity
                  
                  2,351,035Total
                      liabilities and stockholders' equity
                  $
                  2,862,004
 The
            accompanying notes are an integral part of these consolidated
            financial statements.
 F-3
  **IR****BioSciences****Holdings,
                  Inc. and
                  Subsidiary**
 **(A
                  Development Stage Company)**
 **Consolidated
                  Statements of Losses**
 **For
                  the years ended December 31, 2006 and 2005,**
 **And
                  for the period of inception**
 **(October
                  30, 2002) to December 31, 2006**
  **For
                          the Year Ended December 31,**
                  
                  **For
                            the Period October 30, 2002
                            to****2006**
                  
                  **2005**
                  
                  **December
                        31,****2006**Revenues
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Operating
                      expenses:Selling,
                      general and administrative expenses
                  
                  $
                  2,445,317
                  
                  $
                  2,534,417
                  
                  $
                  10,569,618Merger
                      fees and costs
                  
                  
                  -
                  
                  
                  -
                  
                  
                  350,000Financing
                      cost
                  
                  
                  -
                  
                  
                  -
                  
                  
                  90,000Impairment
                      of intangible asset costs
                  
                  
                  -
                  
                  
                  6,393
                  
                  
                  6,393Total
                      operating expenses
                  
                  
                  2,445,317
                  
                  
                  2,540,810
                  
                  
                  11,016,011Operating
                      loss
                  
                  
                  (2,445,317
                  )
                  
                  (2,540,810
                  )
                  
                  (11,016,011
                  )Other
                      expense:Cost
                      of penalty for late registration of shares
                  
                  
                  (438,601
                  )
                  
                  2,630,761
                  
                  
                  2,192,160(Gain)
                      loss from marking to market - warrant portionof
                      penalty for late registration of shares
                  
                  
                  (123,505
                  )
                  
                  (254,693
                  )
                  
                  (378,198
                  )(Gain)
                      loss from marketing to market - stock portionof
                      penalty for late registration of shares
                  
                  
                  (445,673
                  )
                  
                  (314,385
                  )
                  
                  (760,058
                  )Interest
                      (income) expense, net
                  
                  
                  48,508
                  
                  
                  (11,386
                  )
                  
                  1,215,265Total
                      other (income) expense
                  
                  
                  (959,271
                  )
                  
                  2,050,297
                  
                  
                  2,269,169Income
                      (loss) before income taxes
                  
                  
                  (1,486,046
                  )
                  
                  (4,591,107
                  )
                  
                  (13,285,180
                  )Provision
                      for income taxes
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Net
                      (loss)
                  
                  $
                  (1,486,046
                  )
                  $
                  (4,591,107
                  )
                  
                  (13,285,180
                  )Net
                      income (loss) per share - basic and diluted
                  
                  $
                  (0.02
                  )
                  $
                  (0.07
                  )
                  $
                  (0.28
                  )Weighted
                      average shares outstanding -basic
                      and diluted
                  
                  
                  73,234,541
                  
                  
                  67,691,598
                  
                  
                  47,154,801
  The
            accompanying notes are an integral part of these consolidated
            financial statements.
 F-4
   **IR
            BiosciencesHolding, Inc. and
            Subsidiary**
 **(A
            Development Stage Company)**
 **Consolidated
            Statement of Stockholders' Equity (Deficit)**
 **From
            date of inception (October 30, 2002) to December 31,
            2006**
  **Additional**
                  
                  
                  
                  
                  
                  **Common****Common
                      Stock**
                  
                  
                  **Paid-In**
                  
                  
                  **Deferred**
                  
                  
                  **Stock**
                  
                  
                  **Accumulated****Shares**
                  
                  
                  **Amount**
                  
                  
                  **Capital**
                  
                  
                  **Compensation**
                  
                  
                  **Subscribed**
                  
                  
                  **Deficit**
                  
                  
                  **Total**Balance
                      at October 30, 2002 (date of inception)
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Shares
                      of common stock issued at $0.0006 per share to foundersfor
                      license of proprietary right in December 2002
                  
                  16,612,276
                  
                  
                  16,612
                  
                  
                  (7,362
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  9,250Shares
                      of common stock issued at $0.0006 per share to foundersfor
                      services rendered in December 2002
                  
                  1,405,310
                  
                  
                  1,405
                  
                  
                  (623
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  782Shares
                      of common stock issued at $0.1671 per share to consultants
                      forservices
                      rendered in December 2002
                  
                  53,878
                  
                  
                  54
                  
                  
                  8,946
                  
                  
                  (9,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Sale
                      of common stock for cash at $0.1671 per share in December
                      2002
                  
                  185,578
                  
                  
                  186
                  
                  
                  30,815
                  
                  
                  
                  
                  
                  -
                  
                  
                  -
                  
                  
                  31,001Net
                      loss for the period from inception (October 30, 2002)to
                      December 31, 2002
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (45,918
                  )
                  
                  (45,918
                  )Balance
                      at December 31, 2002 (reflective of stock splits)
                  
                  18,257,042
                  
                  
                  18,257
                  
                  
                  31,776
                  
                  
                  (9,000
                  )
                  
                  -
                  
                  
                  (45,918
                  )
                  
                  (4,885
                  )Shares
                      granted to consultants at $0.1392 per share for servicesrendered
                      in January 2003
                  
                  98,776
                  
                  
                  99
                  
                  
                  13,651
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  13,750Sale
                      of shares of common stock for cash at $0.1517 per sharein
                      January 2003
                  
                  329,552
                  
                  
                  330
                  
                  
                  49,670
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  50,000Shares
                      granted to consultants at $0.1392 per share for servicesrendered
                      in March 2003
                  
                  154,450
                  
                  
                  154
                  
                  
                  21,346
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  21,500Conversion
                      of notes payable to common stock at $0.1392 per sharein
                      April 2003
                  
                  1,436,736
                  
                  
                  1,437
                  
                  
                  198,563
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  200,000Shares
                      granted to consultants at $0.1413 per share for servicesrendered
                      in April 2003
                  
                  14,368
                  
                  
                  14
                  
                  
                  2,016
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,030Sale
                      of shares of common stock for cash at $0.2784 per sharein
                      May 2003
                  
                  17,960
                  
                  
                  18
                  
                  
                  4,982
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5,000Sales
                      of shares of common stock for cash at $0.2784 per sharein
                      June 2003
                  
                  35,918
                  
                  
                  36
                  
                  
                  9,964
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  10,000Conversion
                      of notes payable to common stock at $0.1392 per sharein
                      June 2003
                  
                  718,368
                  
                  
                  718
                  
                  
                  99,282
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  100,000Beneficial
                      conversion feature associated with notes issued in June
                      2003
                  
                  -
                  
                  
                  -
                  
                  
                  60,560
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  60,560Amortization
                      of deferred compensation
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  9,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  9,000Costs
                      of GPN Merger in July 2003
                  
                  2,368,130
                  
                  
                  2,368
                  
                  
                  (123,168
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (120,799
                  )Value
                      of warrants issued with extended notes payable in October 2003
                  
                  -
                  
                  
                  -
                  
                  
                  189,937
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  189,937-Value
                      of Company warrants issued in conjunction with
                  
                  -
                  
                  
                  -fourth
                      quarter notes payable issued October through December 2003
                  
                  
                  
                  
                  
                  
                  
                  207,457
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  207,457-Value
                      of warrants contributed by founders in conjunction withfourth
                      quarter notes payable issued October through December 2003
                  
                  -
                  
                  
                  -
                  
                  
                  183,543
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  183,543Value
                      of warrants issued for services in October through December
                      2003
                  
                  -
                  
                  
                  -
                  
                  
                  85,861
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  85,861Net
                      loss for the twelve month period ended December 31, 2003
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,856,702
                  )
                  
                  (1,856,702
                  )-Balance
                      at December 31, 2003
                  
                  23,431,300
                  
                  
                  23,431
                  
                  
                  1,035,441
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,902,620
                  )
                  
                  (843,748
                  )Shares
                      granted at $1.00 per share pursuant to the SeniorNote
                      Agreement in January 2004
                  
                  600,000
                  
                  
                  600
                  
                  
                  599,400
                  
                  
                  (600,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      issued at $1.00 per share to a consultant for servicesrendered
                      in January 2004
                  
                  800,000
                  
                  
                  800
                  
                  
                  799,200
                  
                  
                  (800,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      issued to a consultant at $0.62 per share for servicesrendered
                      in February 2004
                  
                  40,000
                  
                  
                  40
                  
                  
                  24,760
                  
                  
                  (24,800
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shars
                      issued to a consultant at $0.40 per share for servicesrendered
                      in March 2004
                  
                  1,051,600
                  
                  
                  1,051
                  
                  
                  419,589
                  
                  
                  (420,640
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      issued to a consultant at $0.50 per share for servicesrendered
                      in March 2004
                  
                  500,000
                  
                  
                  500
                  
                  
                  249,500
                  
                  
                  (250,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      sold for cash at $0.15 per share in March, 2004
                  
                  8,000
                  
                  
                  8
                  
                  
                  1,192
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,200Shares
                      issued at $0.50 per share to consultants for servicesrendered
                      in March 2004
                  
                  20,000
                  
                  
                  20
                  
                  
                  9,980
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  10,000Shares
                      issued to a consultant at $0.40 per share for servicesrendered
                      in March 2004
                  
                  2,000
                  
                  
                  2
                  
                  
                  798
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  800Shares
                      issued to consultants at $0.32 per share for servicesrendered
                      in March 2004
                  
                  91,600
                  
                  
                  92
                  
                  
                  29,220
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  29,312Shares
                      to be issued to consultant at $0.41 per
                      share in April 2004forservices
                      to be rendered through March 2005
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (82,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (82,000
                  )Shares
                      granted pursuant to the New Senior Note Agreementin
                      April 2004
                  
                  600,000
                  
                  
                  600
                  
                  
                  149,400
                  
                  
                  (150,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      issued to officer at $0.32 per share for servicesrendered
                      in April 2004
                  
                  200,000
                  
                  
                  200
                  
                  
                  63,800
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  64,000Conversion
                      of Note Payable to common stock at $0.10 per sharein
                      May 2004
                  
                  350,000
                  
                  
                  350
                  
                  
                  34,650
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  35,000Beneficial
                      Conversion Feature associated with note payable in May
                      2004
                  
                  -
                  
                  
                  -
                  
                  
                  35,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  35,000Issuance
                      of warrants to officers and founder for servicesrendered
                      in May 2004
                  
                  -
                  
                  
                  -
                  
                  
                  269,208
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  269,208Shares
                      to a consultant at $0.20 per share as a due diligence feein
                      May 2004
                  
                  125,000
                  
                  
                  125
                  
                  
                  24,875
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  25,000Shares
                      issued to a consultant at $1.00 per share for services
                  
                  500,000
                  
                  
                  500
                  
                  
                  499,500
                  
                  
                  (500,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -to
                      be rendered over twelve months beginning May 2004Beneficial
                      Conversion Feature associated with notes payable
                  
                  -
                  
                  
                  -issued
                      in June 2004
                  
                  
                  
                  
                  
                  
                  
                  3,000
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  3,000Issuance
                      of warrants to note holders in April, May, and June 2004
                  
                  -
                  
                  
                  -
                  
                  
                  17,915
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  17,915Issuance
                      of warrants to employees and consultants for services
                      renderedin
                      April through June 2004
                  
                  -
                  
                  
                  -
                  
                  
                  8,318
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  8,318Shares
                      issued in July to a consultant at $0.10 for services to berendered
                      through July 2005
                  
                  250,000
                  
                  
                  250
                  
                  
                  24,750
                  
                  
                  (25,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      issued to a consultant in July and September at $0.41 per sharefor
                      services to be rendered through April 2005
                  
                  200,000
                  
                  
                  200
                  
                  
                  81,800
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  82,000Shares
                      issued to a consultant in September at $0.12 to $0.22 for servicesrendered
                      through September 2004
                  
                  127,276
                  
                  
                  127
                  
                  
                  16,782
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  16,909Shares
                      issued in July to September 2004 as interest on note
                      payable
                  
                  300,000
                  
                  
                  300
                  
                  
                  35,700
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  36,000Issuance
                      of warrants with notes payable in July and August 2004
                  
                  -
                  
                  
                  -
                  
                  
                  72,252
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  72,252Accrued
                        deferred compensation in August 2004 to a consultant for
                      100,000
                        shares at $0.10 per share, committed but unissued
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (10,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (10,000
                  )Shares
                      issued in August 2004 at $0.14 to a consultant for services
                      to
                      beperformed
                      through October 2004
                  
                  100,000
                  
                  
                  100
                  
                  
                  13,900
                  
                  
                  (14,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -Shares
                      issued in August 2004 at $0.125 per share for conversion
                      of$30,000
                      demand loan
                  
                  240,000
                  
                  
                  240
                  
                  
                  29,760
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  30,000Shares
                      issued in August 2004 at $0.16 per share to a consultant forservices
                      provided.
                  
                  125,000
                  
                  
                  125
                  
                  
                  19,875
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  20,000Shares
                      issued in October 2004 to employees at $0.16 to $0.25 per
                      share
                  
                  48,804
                  
                  
                  49
                  
                  
                  8,335
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  8,384Commitment
                        to issue 100,000 shares of stock to a consultant at $0.23
                        per share for
                        services to be provided through September 2005
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (23,000
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (23,000
                  )Sale
                      of stock for cash in October at $0.125 per share, net of costs
                      of
                    $298,155
                  
                  18,160,000
                  
                  
                  18,160
                  
                  
                  1,345,763
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,363,923Value
                      of warrants issued with sale of common stock in October, net
                      of
                    costs
                  
                  -
                  
                  
                  -
                  
                  
                  607,922
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  607,922Issuance
                      of warrant to officer in October, 2004
                  
                  -
                  
                  
                  -
                  
                  
                  112,697
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  112,697Issuance
                      of stock to investment bankers in October 2004 for commissions
                      earned
                  
                  4,900,000
                  
                  
                  4,900
                  
                  
                  (4,900
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Conversion
                      of accounts payable to stock in October at $0.125 per
                      share
                  
                  1,257,746
                  
                  
                  1,258
                  
                  
                  107,382
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  108,640Value
                      of warrants issued with accounts payable conversions
                  
                  -
                  
                  
                  -
                  
                  
                  48,579
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  48,579Conversion
                      of demand loan to stock in October at $0.11 per share
                  
                  93,300
                  
                  
                  93
                  
                  
                  10,170
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  10,263Forgiveness
                      of notes payable in October 2004
                  
                  -
                  
                  
                  -
                  
                  
                  36,785
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  36,785Issuance
                      of stock to officer and director at $0.125 per share in Octoberfor
                      conversion of liability
                  
                  1,440,000
                  
                  
                  1,440
                  
                  
                  122,493
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  123,933Value
                      of warrants issued with officer and director conversion of
                      liabilities
                  
                  -
                  
                  
                  -
                  
                  
                  56,067
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  56,067Conversion
                      of debt and accrued interest to common stockat
                      $0.075 to $0.125 per share
                  
                  6,703,151
                  
                  
                  6,703
                  
                  
                  417,514
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  424,217Value
                      of warrants issued with conversion of debt
                  
                  -
                  
                  
                  -
                  
                  
                  191,111
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  191,111Conversion
                        of note payable in October intocommon
                        stock at $0.075 per share
                  
                  67,616
                  
                  
                  68
                  
                  
                  4,932
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5,000Issuance
                      of warrants to note holders in October 2004
                  
                  -
                  
                  
                  -
                  
                  
                  112,562
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  112,562Value
                      of shares issued to CFO as compensation
                  
                  100,000
                  
                  
                  100
                  
                  
                  34,900
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  35,000Value
                      of warrants issued to members of advisory committees inNovember
                      and December
                  
                  -
                  
                  
                  -
                  
                  
                  16,348
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  16,348Beneficial
                      conversion feature associated with notes payable
                  
                  -
                  
                  
                  -
                  
                  
                  124,709
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  124,709Shares
                      issued in error to be cancelled
                  
                  (9,002
                  )
                  
                  (9
                  )
                  
                  9
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Amortization
                      of deferred compensation through December 31, 2004
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,729,454
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,729,454Loss
                      for the twelve months ended December 31, 2004
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (5,305,407
                  )
                  
                  (5,305,407
                  )Balance
                      at December 31, 2004
                  
                  62,423,388
                  
                  
                  62,423
                  
                  
                  7,922,943
                  
                  
                  (169,986
                  )
                  
                  -
                  
                  
                  (7,208,027
                  )
                  
                  607,353Sale
                      of shares of common stock for cash at $0.20 per sharein
                      March 2005 for warrant exercise, net of costs
                  
                  6,600,778
                  
                  
                  6,600
                  
                  
                  1,184,256
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,190,856Value
                      of warrants issued to members of advisory committees in March
                    2005
                  
                  -
                  
                  
                  -
                  
                  
                  137,049
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  137,049Deferred
                        compensation in February 2005 to a consultant for 50,000
                        shares of common
                        stock at $0.65 per share.
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (32,500
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (32,500
                  )Warrants
                      exercised at $0.05 per share in June 2003
                  
                  80,000
                  
                  
                  80
                  
                  
                  3,920
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,000Value
                      of warrants issued to members of advisory committee in June
                      2005
                  
                  -
                  
                  
                  -
                  
                  
                  70,781
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  70,781Value
                      of warrants issued to investors and service providers in June
                      2005
                  
                  -
                  
                  
                  -
                  
                  
                  32,991
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  32,991Issuance
                      of 232,153 shares of common stock in July 2005 for conversion
                      of notes
                      payable
                  
                  232,153
                  
                  
                  232
                  
                  
                  64,771
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  65,003Issuance
                      of 100,000 shares of common stock in August 2005 to a consultant
                      for
                      services provided
                  
                  100,000
                  
                  
                  100
                  
                  
                  9,900
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  10,000Value
                      of warrants issued to advisory committee in September 2005
                      for services
                  
                  -
                  
                  
                  -
                  
                  
                  20,491
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  20,491Amortization
                      of deferred comp for the twelve months ended December,
                      2005
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  199,726
                  
                  
                  -
                  
                  
                  -
                  
                  
                  199,726Value
                      of warrants issued in October and December 2005 to investors
                      and service
                      providers
                  
                  -
                  
                  
                  -
                  
                  
                  18,399
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  18,399Loss
                      for the year ended December 31,2005
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  (4,591,107
                  )
                  
                  (4,591,107
                  )Balance
                    at December 31, 2005
                  
                  69,436,319
                  
                  
                  69,435
                  
                  
                  9,465,501
                  
                  
                  (2,760
                  )
                  
                  -
                  
                  
                  (11,799,134
                  )
                  
                  (2,266,958
                  )Issuance
                      of 100,000 shares to officer, previously accrued
                  
                  100,000
                  
                  
                  100
                  
                  
                  41,316
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  41,416Value
                      of warrants issued to members of advisory committee in March
                      2006
                  
                  -
                  
                  
                  -
                  
                  
                  8,399
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  8,399Amortization
                      of deferred compensation for the three months ended March 31,
                      2006
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,760
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,760Issuance
                      of common stock in May 2006 to a consultant for services
                      provided
                  
                  34,464
                  
                  
                  35
                  
                  
                  16,162
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  16,197Conversion
                      of accrued interest to common stock at $0.125 per share in
                      May,
                      2006
                  
                  19,288
                  
                  
                  19
                  
                  
                  2,392
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,411Conversion
                      of accrued interest to common stock at $0.125 per share in
                      May,
                      2006
                  
                  16,324
                  
                  
                  16
                  
                  
                  2,025
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  2,041Conversion
                      of accrued interest to common stock at $0.10 per share in May,
                      2006
                  
                  13,454
                  
                  
                  14
                  
                  
                  1,341
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,355Common
                      stock issued pursuant to the exercise of warrants at $0.09
                      per share in
                      June 2006
                  
                  5,000
                  
                  
                  5
                  
                  
                  445
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  450Value
                      of warrants issued to members of advisory committee in June
                      2006
                  
                  -
                  
                  
                  -
                  
                  
                  8,820
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  8,820Value
                      of warrants issued to members of advisory committee in September
                      2006
                  
                  -
                  
                  
                  -
                  
                  
                  3,495
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  3,495Value
                      of warrants issued to officers
                  
                  -
                  
                  
                  -
                  
                  
                  50,874
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  50,874Issuance
                      of penalty Common Stock, previously accrued
                  
                  4,150,798
                  
                  
                  4,151
                  
                  
                  867,514
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  871,665Issuance
                      of penalty warrants, previously accrued
                  
                  -
                  
                  
                  -
                  
                  
                  182,239
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  182,239Value
                      of options issued to officer
                  
                  -
                  
                  
                  -
                  
                  
                  78,802
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  78,802Value
                      of warrants issued to members of advisory committee in December
                      2006
                  
                  -
                  
                  
                  -
                  
                  
                  1,974
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,974Issuance
                      of Common Stock for cash
                  
                  34,266,250
                  
                  
                  34,267
                  
                  
                  4,579,282
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,613,549Common
                      stock to be issued as commission for equity fund raising
                  
                  -
                  
                  
                  -
                  
                  
                  (5,483
                  )
                  
                  -
                  
                  
                  5,483
                  
                  
                  -
                  
                  
                  -Value
                      of options issued to officer
                  
                  -
                  
                  
                  -
                  
                  
                  32,120
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  32,120Value
                      of options issued to officer
                  
                  -
                  
                  
                  -
                  
                  
                  185,472
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  185,472Balance
                      at December 31, 2006
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,486,046
                  )
                  
                  (1,486,046
                  )$
                  108,041,897
                  
                  $
                  108,042
                  
                  $
                  15,522,690
                  
                  $
                  -
                  
                  $
                  5,483
                  
                  $
                  (13,285,180
                  )
                  $
                  2,351,035
 The
        accompanying notes are an integral part of these consolidated
        financial statements.
  F-5
   **IR
              BioSciencesHoldings, Inc. and Subsidiary**
 **(A
              Development Stage Company)**
 **Consolidated
              Statements of Cash Flows For the year**
 **ended
              December 31, 2006 and 2005,**
 **and
              for the period of inception (October 30, 2002)**
 **to
              December 31, 2006**
 **For
                          the Year Ended****December
                          31,**
                  
                  For
                            the PeriodOctober
                            30, 2002 to**2006**
                  
                  **2005**
                  
                  **December
                      31, 2006**Cash
                      flows from operating activities:Net
                      loss
                  
                  $
                  (1,486,046
                  )
                  $
                  (4,591,107
                  )
                  $
                  (13,285,180
                  )Adjustments
                      to reconcile net loss to netcash
                      used in operating activities:Non-cash
                      compensation
                  
                  
                  398,663
                  
                  
                  520,853
                  
                  
                  4,319,516Cost
                      of penalty for late registration of shares - stock portion
                  
                  
                  (360,197
                  )
                  
                  1,991,923
                  
                  
                  1,631,726Cost
                      of penalty for late registration of shares - warrant
                      portion
                  
                  
                  (78,404
                  )
                  
                  638,838
                  
                  
                  560,434(Gain)
                      loss from marking to market - stock portion of penaltyfor
                      late registration of shares
                  
                  
                  (445,673
                  )
                  
                  (314,385
                  )
                  
                  (760,058
                  )(Gain)
                      loss from marking to market - warrant portion of penaltyfor
                      late registration of shares
                  
                  
                  (123,505
                  )
                  
                  (254,693
                  )
                  
                  (378,198
                  )Legal
                      fees for note payable
                  
                  
                  20,125
                  
                  
                  -
                  
                  
                  20,125Placement
                      fees for note payable
                  
                  
                  65,000
                  
                  
                  -
                  
                  
                  65,000Impairment
                      of intangible asset
                  
                  
                  -
                  
                  
                  6,393
                  
                  
                  6,393Interest
                      expense
                  
                  
                  -
                  
                  
                  4,007
                  
                  
                  156,407Amortization
                      of discount on notes payable
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,006,935Depreciation
                      and amortization
                  
                  
                  8,381
                  
                  
                  3,201
                  
                  
                  37,599Changes
                      in operating assets and liabilities:Prepaid
                      services and other assets
                  
                  
                  (38,392
                  )
                  
                  9,946
                  
                  
                  (35,158
                  )Accounts
                      payable and accrued expenses
                  
                  
                  6,064
                  
                  
                  100,911
                  
                  
                  662,017Salary
                      advance
                  
                  
                  (1,500
                  )
                  
                  -
                  
                  
                  (1,500
                  )Net
                      cash used in operating activities
                  
                  
                  (2,035,484
                  )
                  
                  (1,884,113
                  )
                  
                  (5,993,942
                  )Cash
                      flows from investing activities:Acquisition
                      of property and equipment
                  
                  
                  (32,397
                  )
                  
                  -
                  
                  
                  (40,484
                  )Net
                      cash used in investing activities
                  
                  
                  (32,397
                  )
                  
                  -
                  
                  
                  (40,484
                  )Cash
                      flows from financing activities:Proceeds
                      from notes payable and cash advances
                  
                  
                  719,875
                  
                  
                  -
                  
                  
                  1,953,375Principal
                      payments on notes payable and demand loans
                  
                  
                  (779,750
                  )
                  
                  (14,997
                  )
                  
                  (1,044,747
                  )Shares
                      of stock sold for cash
                  
                  
                  4,613,549
                  
                  
                  1,190,856
                  
                  
                  7,873,451Proceeds
                      from exercise of warrant
                  
                  
                  450
                  
                  
                  4,000
                  
                  
                  4,450Officer
                      repayment of amounts paid on his behalf
                  
                  
                  -
                  
                  
                  -
                  
                  
                  19,880Cash
                      paid on behalf of officer
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (19,880
                  )Net
                      cash provided by financing activities
                  
                  
                  4,554,124
                  
                  
                  1,179,859
                  
                  
                  8,786,529Net
                      increase (decrease) in cash and cash equivalents
                  
                  
                  2,486,243
                  
                  
                  (704,254
                  )
                  
                  2,752,103Cash
                      and cash equivalents at beginning of period
                  
                  
                  265,860
                  
                  
                  970,114
                  
                  
                  -Cash
                      and cash equivalents at end of period
                  
                  $
                  2,752,103
                  
                  $
                  265,860
                  
                  $
                  2,752,103Supplemental
                      disclosures of cash flow information:Cash
                      paid during the period for:Interest
                  
                  $
                  36,500
                  
                  $
                  1,706
                  
                  $
                  80,053Taxes
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Acquisition
                      and capital restructure:Assets
                      acquired
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Liabilities
                      assumed
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (120,799
                  )Common
                      stock retained
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (2,369
                  )Adjustment
                      to additional paid-in capital
                  
                  
                  -
                  
                  
                  -
                  
                  
                  123,168Organization
                      costs
                  
                  
                  -
                  
                  
                  -
                  
                  
                  350,000Total
                      consideration paid
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  350,000.00Common
                        stock issued in exchange for proprietary rights
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  9,250Common
                        stock issued in exchange for services
                  
                  $
                  16,197
                  
                  $
                  10,000
                  
                  $
                  2,941,483Common
                      stock issued in exchange for previously incurred debt
                      and accrued interest
                  
                  $
                  5,807
                  
                  $
                  65,003
                  
                  $
                  1,066,401Common
                      stock issued in exchange as interest
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  36,000Amortization
                      of beneficial conversion feature
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  223,269Stock
                        options and warrants issued in exchange forservices
                        rendered
                  
                  $
                  347,268
                  
                  $
                  279,949
                  
                  $
                  1,119,649Debt
                        and accrued interest forgiveness from note holders
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  36,785Common
                      stock issued in satisfaction of amounts dueto
                      an Officer and a Director
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  180,000Common
                      stock issued in satisfaction of accounts payable
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  157,219Deferred
                      compensation to a consultant accrued inMarch
                      2005
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  2,630,761Amortization
                      of deferred compensation
                  
                  $
                  2,760
                  
                  $
                  199,726
                  
                  $
                  202,486Fair
                      value of common stock and warrants in payablein
                      connection with late filing of registration statement
                  
                  $
                  1,053,904
                  
                  $
                  2,630,761
                  
                  $
                  3,684,664Gain
                      from marking to market - stock portion of penaltyfor
                      late registration of shares
                  
                  $
                  (805,870
                  )
                  $
                  314,385
                  
                  $
                  (1,124,255
                  )Gain
                      from marking to market - warrant portion of penalty
                  
                  $
                  (201,910
                  )
                  $
                  254,693
                  
                  $
                  (456,603
                  )for
                      late registration of sharesImpairment
                      of intangible asset
                  
                  $
                  -
                  
                  $
                  6,393
                  
                  $
                  6,393Issuance
                      of stock to Officer, previously accrued
                  
                  $
                  41,416
                  
                  $
                  -
                  
                  $
                  41,416Value
                      of warrants issued to members of advisory board
                  
                  $
                  22,688
                  
                  $
                  -
                  
                  $
                  22,688Services
                      for note payable
                  
                  $
                  9,750
                  
                  $
                  -
                  
                  $
                  9,750
  The
          accompanying notes are an integral part of these consolidated
          financial statements
  F-6
  **IR
        BIOSCIENCESHOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **AND
        FOR THE PERIOD FROM OCTOBER 30, 2002**
 **(INCEPTION)
        TO DECEMBER 31, 2006**
 
 **NOTE
        A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 A
        summary
        of the significant accounting policies applied in the preparation of the
        accompanying consolidated financial statements follows.
 
 Nature
        of Business
 
 IR
        BioSciences Holdings, Inc. (the "Company," "we," or "us") formerly GPN Network,
        Inc. ("GPN") is currently a development stage company under the provisions
        of
        Statement of Financial Accounting Standards ("SFAS") No. 7. The Company,
        which
        was incorporated under the laws of the State of Delaware on October 30, 2002,
        is
        a development-stage biopharmaceutical company. Through our wholly owned
        subsidiary, ImmuneRegen BioSciences, Inc., we are engaged in the research
        and
        development of potential drugs. Our goal is to develop therapeutics to be
        used
        for the protection of the body from exposure to harmful agents such as toxic
        chemicals and radiation, as well as, biological agents, including influenza
        and
        anthrax. Our research and development efforts are at a very early stage and
        Radilex and Viprovex have only undergone pre-clinical testing in mice. From
        its
        inception through the date of these financial statements, the Company has
        recognized no revenues and has incurred significant operating
        expenses.
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiary, ImmuneRegen BioSciences, Inc. Significant inter-company
        transactions have been eliminated in consolidation.
 
 Going
        Concern
 
 The
        accompanying consolidated financial statements have been prepared on a going
        concern basis, which contemplates the realization of assets and the satisfaction
        of liabilities in the normal course of business. As shown in the accompanying
        financial statements during the years ended December 31, 2006 and 2005, the
        Company incurred losses from operations of $1,486,046 and $ 4,591,107,
        respectively. This among other factors may indicate that the Company will
        be
        unable to continue as a going concern for a reasonable period of
        time.
 
 In
        order
        to address our capital requirements, we intend to seek to raise additional
        cash
        for working capital purposes through the public or private sales of debt
        or
        equity securities, the procurement of advances on contracts or licenses,
        funding
        from joint-venture or strategic partners, debt financing or short-term loans,
        or
        a combination of the foregoing. We may also seek to satisfy indebtedness
        without
        any cash outlay through the private issuance of debt or equity securities.
        There
        can be no assurance the Company will be successful in its effort to secure
        additional equity financing.
 
 If
        operations and cash flows continue to improve through these efforts, management
        believes that the Company can continue to operate. However, no assurance
        can be
        given that management's actions will result in profitable operations or the
        resolution of its liquidity problems.
 
 The
        accompanying consolidated financial statements do not include any adjustments
        that might result should the Company be unable to continue as a going
        concern.
 
 Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amounts of revenues and expenses
        during the reported periods. Actual results could materially differ from
        those
        estimates.
 
 
 F-7
 
 Cash
        and Cash Equivalents
 
 For
        purposes of the statement of cash flows, cash equivalents include all highly
        liquid debt instruments with original maturities of three months or less
        which
        are not securing any corporate obligations.
 
 Long-lived
        Assets
 
 The
        Company accounts for its long-lived assets under the provision of Statements
        of
        Financial Accounting Standards No. 121, "Accounting for the Impairment of
        Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." The Company's
        long-lived assets are reviewed for impairment whenever events or changes
        in
        circumstances indicate that the carrying amount of such assets may not be
        recoverable. Events relating to recoverability may include significant
        unfavorable changes in business conditions, recurring losses, or a forecasted
        Inability to achieve break-even operating results over an extended period.
        The
        Company evaluates the recoverability of long-lived assets based upon forecasted
        undiscounted cash flows. Should an impairment in value be indicated, the
        carrying value of intangible assets will be adjusted, based on estimates
        of
        future discounted cash flows resulting from the use and ultimate disposition
        of
        the asset.
 
 Income
        Taxes
 
 The
        Company has implemented the provisions on Statement of Financial Accounting
        Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires
        that income tax accounts be computed using the liability method. Deferred
        taxes
        are determined based upon the estimated future tax effects of differences
        between the financial reporting and tax reporting bases of assets and
        liabilities given the provisions of currently enacted tax laws.
 
 Net
        Loss Per Common Share
 
 The
        Company computes earnings per share under Financial Accounting Standard No.
        128,
        "Earnings Per Share" (SFAS 128). Net loss per common share is computed by
        dividing net loss by the weighted average number of shares of common stock
        and
        dilutive common stock equivalents outstanding during the year. Dilutive common
        stock equivalents consist of shares issuable upon conversion of convertible
        notes and the exercise of the Company's stock options and warrants (calculated
        using the treasury stock method). During 2006 2005 and 2004, common stock
        equivalents were not considered in the calculation of the weighted average
        number of common shares outstanding because they would be anti-dilutive,
        thereby
        decreasing the net loss per common share.
 
 Liquidity
 
 As
        shown
        in the accompanying financial statements, the Company has incurred a net
        loss of
        $13,285,180 from its inception through December 31, 2006. The Company incurred
        a
        net loss of $1,486,046 and $ 4,591,107 from operations during the years ended
        December 31, 2006 and 2005, respectively. The Company's has a net working
        capital of $2,320,533 with cash and cash equivalents of $2,752,103 at December
        31, 2006.
 
 Research
        and Development
 
 The
        Company accounts for research and development costs in accordance with the
        Financial Accounting Standards Board's Statement of Financial Accounting
        Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs.
        Under SFAS 2, all research and development costs must be charged to expense
        as
        incurred. Accordingly, internal research and development costs are expensed
        as
        incurred. Third-party research and developments costs are expensed when the
        contracted work has been performed or as milestone results have been achieved.
        Company-sponsored research and development costs related to both present
        and
        future products are expensed in the period incurred. Total expenditures on
        research and product development for the years 2006, 2005, and the period
        from
        October 30, 2002 (date of inception) to December 31, 2006 were $484,029,
        $237,005 and $1,026,597, respectively.
  
 
 F-8
  
 Concentrations
        of Credit Risk
 
 Financial
        instruments and related items, which potentially subject the Company to
        concentrations of credit risk, consist primarily of cash, cash equivalents
        and
        related party receivables. The Company places its cash and temporary cash
        investments with credit quality institutions. At times, such investments
        may be
        in excess of the FDIC insurance limit. The Company periodically reviews its
        trade receivables in determining its allowance for doubtful accounts. There
        is
        no allowance for doubtful accounts established as of December 31,
        2006.
 
 Comprehensive
        Income
 
 Statement
        of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive
        Income," establishes standards for reporting and displaying of comprehensive
        income, its components and accumulated balances. Comprehensive income is
        defined
        to include all changes in equity except those resulting from investments
        by
        owners and distributions to owners. Among other disclosures, SFAS 130 requires
        that all items that are required to be recognized under current accounting
        standards as components of comprehensive income be reported in a financial
        statement that is displayed with the same prominence as other financial
        statements. The Company does not have any items of comprehensive income in
        any
        of the periods presented.
 
 Stock
        Based Compensation
 
 Effective
        January 1, 2006, the Company adopted SFAS No. 123 (revised), "Share-Based
        Payment" (SFAS 123(R)) utilizing the modified prospective approach. Prior
        to the
        adoption of SFAS 123(R) we accounted for stock option grant in accordance
        with
        APB Opinion No. 25, "Accounting for Stock Issued to Employees" (the intrinsic
        value method), and accordingly, recognized compensation expense for stock
        option
        grants.
 
 Under
        the
        modified prospective approach, SFAS 123(R) applies to new awards and to awards
        that were outstanding on January 1, 2006 that are subsequently modified,
        repurchased or cancelled. Under the modified prospective approach, compensation
        cost recognized in the nine months of fiscal 2006 includes compensation cost
        for
        all share-based payments granted prior to, but not yet vested as of January
        1,
        2006, based on the grant-date fair value estimated in accordance with the
        original provisions of SFAS 123, and compensation cost for all share-based
        payments granted subsequent to January 1, 2006 based on the grant-date fair
        value estimated in accordance with the provisions of SFAS 123(R). Prior periods
        were not restated to reflect the impact of adopting the new
        standard.
 
 A
        summary
        of option activity under the Plan as of December 31, 2006, and changes during
        the period ended are presented below:
 **Options**
              
              **Weighted
                  Average**
                **Exercise
                  Price**Outstanding
                  at December 31, 2005
              
              317,242
              
              $
              5.30Issued
              
              5,596,970
              
              $
              0.22Exercised
              
              --
              
              
              --Forfeited
                  or expired
              
              --
              
              
              --Outstanding
                  at December 31, 2006
              
              5,914,212
              
              $
              0.50Non-vested
                  at December 31, 2006
              
              2,023,952
              
              $
              0.22Exercisable
                  at December 31, 2006
              
              3,890,260
              
              $
              0.64
 
 Aggregate
        intrinsic value of options outstanding and exercisable at December 31, 2006
        was
        $0. Aggregate intrinsic value represents the difference between the Company's
        closing stock price on the last trading day of the fiscal period, which was
        $0.15 as of December 29, 2006, and the exercise price multiplied by the number
        of options outstanding. As of December 31, 2006, total unrecognized stock-based
        compensation expense related to stock options was $264,274. During the year
        ended December 31, 2006 the Company charged $296,394 to operations related
        to
        recognized stock-based compensation expense for employee stock
        options.
  
 F-9
   For
        purposes of pro forma disclosures, the estimated fair value of the options
        is
        amortized over the options' vesting period. The Company's pro forma information
        was as follows:
 **Twelve
                  months ended December 31, 2005**Net
                  loss, as reported
              $
              (4,591,107
              )Compensation
                  recognized under under APB 25
              
              --Compensation
                  recognized under SFAS 123
              
              (83,150
              )Pro
                  forma net loss
              $
              (4,674,257
              )Pro
                  forma loss per share
              $
              (0.07
              )
 
 
 Segment
        Information
 
 Statement
        of Financial Accounting Standards No. 131, "Disclosures about Segments of
        an
        Enterprise and Related Information" ("SFAS 131") establishes standards for
        reporting information regarding operating segments in annual financial
        statements and requires selected information for those segments to be presented
        in interim financial reports issued to stockholders. SFAS 131 also establishes
        standards for related disclosures about products and services and geographic
        areas. Operating segments are identified as components of an enterprise about
        which separate discrete financial information is available for evaluation
        by the
        chief operating decision maker, or decision-making group, in making decisions
        how to allocate resources and assess performance. The information disclosed
        herein materially represents all of the financial information related to
        the
        Company's principal operating segment.
 
 Fair
        Value of Financial Instruments
 
 The
        Company measures its financial assets and liabilities in accordance with
        accounting principles generally accepted in the United States of America.
        The
        estimated fair values approximate their carrying value because of the short-term
        maturity of these instruments or the stated interest rates are indicative
        of
        market interest rates.
 
 Prepaid
        services and other current assets
 
 Prepaid
        services and other current assets at December 31, 2006 consist of the
        following:
 
 Prepaid
                  insurance
              
              $
              34,394Prepaid
                  car lease
              
              
              43,505$
              77,899
 
 Salary
        advance
 
 The
        Company has made an advance of salary to one employee in the amount of
        $1,500.
 
 
 Deposits
        and other assets
  Deposits
        and other assets consist of a deposit on leased office space in the amount
        of
        $2,260.
  
 F-10
 
  Furniture
        and Equipment
 
 Furniture
        and equipment are valued at cost. Depreciation and amortization are provided
        over the estimated useful lives up to seven years using the straight-line
        method. The estimated service lives of property and equipment are as
        follows:
 
 Computer
                  equipment
              3
                  yearsLaboratory
                  equipment
              3
                  yearsFurniture
              7
                  years
 
 Advertising
 
 The
        Company follows the policy of charging the costs of advertising to expenses
        incurred. The Company has not incurred any advertising costs during the years
        ended December 31, 2006 or 2005.
 
 Reclassifications
 
 Certain
        reclassifications have been made in prior year's financial statements to
        conform
        to classifications used in the current year.
 
 New
        Accounting Pronouncements
 
 In
        February 2006, the FASB issued SFAS No. 155. “ *Accounting
        for certain Hybrid Financial Instruments an amendment of FASB Statements
        No. 133
        and 140,”* or SFAS
        No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial
        instrument that contains an embedded derivative that otherwise would require
        bifurcation, clarifies which interest-only strips and principal-only strips
        are
        not subject to the requirements of Statement No. 133, establishes a requirement
        to evaluate interests in securitized financial assets to identify interests
        that
        are freestanding derivatives or that are hybrid financial instruments that
        contain an embedded derivative requiring bifurcation, clarifies that
        concentrations of credit risk in the form of subordination are not embedded
        derivatives, and amends SFAS No. 140 to eliminate the prohibition on a
        qualifying special purpose entity from holding a derivative financial instrument
        that pertains to a beneficial interest other than another derivative financial
        instrument. SFAS 155 is effective for all financial instruments acquired
        or
        issued after the beginning of an entity’s first fiscal year that begins after
        September 15, 2006. We do not expect the adoption of SFAS 155 to have a material
        impact on our consolidated financial position, results of operations or cash
        flows.
 
 In
        March
        2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
        Financial Assets - an amendment to FASB Statement No. 140. Statement 156
        requires that an entity recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        service contract under certain situations. The new standard is effective
        for
        fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
        did
        not have a material impact on the Company's financial position and results
        of
        operations.
 
 In
        July
        2006, the FASB issued Interpretation No. 48 (FIN 48). “ *Accounting
        for uncertainty in Income Taxes”.* FIN 48
        clarifies the accounting for Income Taxes by prescribing the minimum recognition
        threshold a tax position is required to meet before being recognized in the
        financial statements. It also provides guidance on derecognition, measurement,
        classification, interest and penalties, accounting in interim periods,
        disclosure and transition and clearly scopes income taxes out of SFAS 5,
        “ *Accounting
        for Contingencies”.* FIN
        48 is
        effective for fiscal years beginning after December 15, 2006. The Company
        does
        not expect adoption of this standard will have a material impact on its
        financial position, operations or cash flows.
 
 In
        September 2006 the Financial Account Standards Board (the “FASB”) issued its
        Statement of Financial Accounting Standards 157, Fair Value Measurements.
        This
        Statement defines fair value, establishes a framework for measuring fair
        value
        in generally accepted accounting principles (GAAP), and expands disclosures
        about fair value measurements. This Statement applies under other accounting
        pronouncements that require or permit fair value measurements, the Board
        having
        previously concluded in those accounting pronouncements that fair value is
        the
        relevant measurement attribute. Accordingly, this Statement does not require
        any
        new fair value measurements. However, for some entities, the application
        of this
        Statement will change current practice. FAS 157 effective date is for fiscal
        years beginning after November 15, 2007. The Company does not expect adoption
        of
        this standard will have a material impact on its financial position, operations
        or cash flows.
 
 In
        September 2006 the FASB issued its Statement of Financial Accounting Standards
        158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
        Plans”. This Statement improves financial reporting by requiring an employer to
        recognize the overfunded or underfunded status of a defined benefit
        postretirement plan (other than a multiemployer plan) as an asset or liability
        in its statement of financial position and to recognize changes in that funded
        status in the year in which the changes occur through comprehensive income
        of a
        business entity or changes in unrestricted net assets of a not-for-profit
        organization. This Statement also improves financial reporting by requiring
        an
        employer to measure the funded status of a plan as of the date of its year-end
        statement of financial position, with limited exceptions. The effective date
        for
        an employer with publicly traded equity securities is as of the end of the
        fiscal year ending after December 15, 2006. The Company does not expect adoption
        of this standard will have a material impact on its financial position,
        operations or cash flows
 
 In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities.” SFAS 159 permits entities to choose
        to measure many financial instruments, and certain other items, at fair value.
        SFAS 159 applies to reporting periods beginning after November 15, 2007.
        The
        adoption of SFAS 159 is not expected to have a material impact on the Company’s
        financial condition or results of operations.
 
 F-11
 
 **NOTE
        B - PROPERTY, PLANT AND EQUIPMENT**
 
 The
        Company's property and equipment at December 31, 2006 consists of the following:
  Office
                  Equipment
              
              $
              34,337Office
                  Fixtures and Furniture
              
              
              6,14740,484Accumulated
                  Depreciation
              
              
              (12,242
              )$
              28,242
 
 Depreciation
        expense included as a charge to income amounted to $2,495, $2,274, and $13,075
        for the years ended December 31, 2006 and 2005 and from inception to December
        31, 2006, respectively.
 
 
 **NOTE
        C - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES**
 
 Accounts
        payable and accrued liabilities at December 31, 2006 are as
        follows:
 Accounts
                  payable and accrued liabilities
              
              $
              395,788Accounts
                  payable - Pre-merger
              
              
              34,926Interest
                  payable
              
              
              5,681Credit
                  cards
              
              
              21,374State
                  income tax payable
              
              
              3,200$
              460,969
 
 In
        addition, $24,814 remains as an amount to be amortized for prepaid insurance
        for
        Directors and Officers and liability insurance.
 
 **NOTE
        D - PENALTY FOR LATE REGISTRATION OF SHARES**
 
 In
        October 2004, we completed a private placement sale of shares of our common
        stock and warrants to purchase additional shares of common stock. We issued
        in
        the private placement an aggregate of 19,600,000 shares of our common stock
        and
        warrants to purchase 9,800,000 shares of our common stock. We agreed to register
        these shares along with the shares underlying these warrants within ninety
        days
        from the closing date of the transaction, or we would incur a penalty equivalent
        to an additional 2% of the shares and warrants to be registered for every
        30
        days that we failed to complete this registration. This penalty amounts to
        an
        aggregate of 461,200 shares and 181,600 warrants per 30 day period until
        such a
        time as this registration statement is made effective. We were unable to
        register the securities as required.
 
 The
        Company attempted to register the shares and warrants by filing a registration
        statement with the Securities and Exchange Commission on November 24, 2004,
        and
        amended this registration statement with pre-effective amendments no. 1,
        2, 3
        and 4 on July 20, 2005, November 16, 2005, February 22, 2006 and April 7,
        2006,
        respectively. On July 10, 2006 the Company, pursuant to Rule 477 of Regulation
        C
        of the Securities Act of 1933, as amended, applied for an order granting
        the
        immediate withdrawal of its Registration Statement on Form SB-2.
 
 In
        August
        2006, we reached an agreement with the investors in the private placement
        of
        October 2004 which limits the number of warrants and shares which we are
        obligated to issue pursuant to the penalty calculation to an aggregate of
        18% of
        the number of original number of shares and warrants issued in the October
        2004
        private placement. This agreement limits the number of shares and warrants
        issuable pursuant to the penalty calculation to an aggregate of 4,150,798
        shares
        and warrants to purchase an additional 1,634,400 shares, respectively. This
        resulted in a decrease in the number of share issuable 2,475,107 (with a
        fair
        value of $816,785) and a decrease in the number of warrant shares of 974,587
        (with a fair value of $177,789). This resulted in a net realized gain of
        $994,574 during the three months ended June 30, 2006.
 
 In
        August
        2006, we issued 4,150,798 shares and warrants to purchase 1,634,400 shares
        and
        relieved accrued liabilities in the aggregate amount of $1,053,904.
  For
        the
        twelve months ended December 31, 2006 the Company marked to market the value
        of
        the shares and warrants issuable pursuant to the penalty calculation for
        an
        aggregate gain in the amount of approximately $445,673 and $123,505,
        respectively.
  F-12
 
 **NOTE
        E - RELATED-PARTY TRANSACTIONS**
 
 Cash
        Advances
  In
        July
        2006, the Company received a cash advance from a director in the amount of
        $25,000. This advance bears interest at the rate of 12% per annum. The Company
        repaid this cash advance on August 30, 2006 plus accrued interest in the
        amount
        of $370.
 
 Credit
        Cards
  The
        Company has a line of credit with Bank of America for $25,000. Our Chief
        Executive Officer Michael Wilhelm co-signs this line of credit. At year end
        December 31, 2006 the Company had an outstanding balance on the credit card
        of
        $21,373.
 
 Employment
        Agreements
 
 **PRESIDENT
        AND CHIEF EXECUTIVE OFFICER:**
 
 On
        August
        10, 2005, the Company entered into a new employment agreement with its President
        and Chief Executive Officer, Michael K. Wilhelm. The employment agreement
        calls
        for a salary at the rate of $275,000 per annum. The salary will be subject
        to
        adjustment of at least 10% per year at the end of each year. The registrant
        also
        agreed to defend and indemnify, to the fullest extent permitted by the
        registrant's certificate of incorporation and bylaws and the Delaware General
        Corporation Law, Mr. Wilhelm and hold him harmless against any liability
        that he
        incurs within the scope of his employment under the agreement. The agreement
        also provides for the following various bonus incentives:
 
 i)
        A
        target incentive bonus in cash and/or stock if the Company consummates a
        transaction with any unaffiliated third party such as an equity or debt
        financing, acquisition, merger , strategic partnership or other similar
        transaction.
 
 ii)
        A one
        time grant of an option to purchase 2,000,000 shares of the Company's common
        stock at an exercise price equal to the fair market value per share on the
        date
        option is granted.
 
 In
        connection with Mr. Wilhelm's new employment agreement, the Company also
        entered
        into a change of control agreement and a severance agreement with him on
        August
        10, 2005.
 
 Under
        the
        change of control agreement, Mr. Wilhelm shall be entitled to a continuation
        of
        his base salary for a period of 18 months following an involuntary termination,
        which means, at any time within that period which is one-year from the change
        of
        control date (including such date), the termination of the employment of
        Mr.
        Wilhelm (i) by the Company without cause or (ii) due to constructive
        termination, as such terms are defined in the change of control agreement.
        Further, in the event of an involuntary termination, the agreement provides
        that
        the registrant shall pay Mr. Wilhelm a lump sum amount in cash, equal to
        the sum
        of (i) any unpaid incentive compensation which has been allocated or awarded
        to
        Mr. Wilhelm for a completed fiscal year or other measuring period preceding
        the
        date of involuntary termination under any annual or long-term incentive plan
        and
        which, as of the date of involuntary termination, is contingent only upon
        the
        continued employment of Mr. Wilhelm to a subsequent date, and (ii) a pro
        rata
        portion to the date of involuntary termination of the aggregate value of
        all
        contingent incentive compensation awards to Mr. Wilhelm for all then uncompleted
        periods under any such plan. Further, 100% of the unvested portion of each
        outstanding stock option granted to Mr. Wilhelm shall be accelerated so that
        they become immediately exercisable upon the date of involuntary
        termination.
 
 Under
        the
        severance agreement, Mr. Wilhelm shall be entitled to a continuation of his
        base
        salary for a period of 18 months following an involuntary termination, which
        means the termination of the employment of Mr. Wilhelm (i) by the Company
        without cause or (ii) due to constructive termination, as such terms are
        defined
        in the severance agreement. Further, in the event of an involuntary termination,
        the agreement provides that the registrant shall pay Mr. Wilhelm an amount
        equal
        to the amount of executive incentive pay (bonus) that he would have received
        for
        the year in which the involuntary termination occurred had he met one hundred
        percent (100%) of the target for such incentive pay. Also, under this agreement,
        100% of the unvested portion of each outstanding stock option granted to
        Mr.
        Wilhelm shall be accelerated so that they become immediately
 exercisable
        upon the date of involuntary termination.
 
 **CHIEF
        FINANCIAL OFFICER:**
 
 Pursuant
        to our employment agreement with John Fermanis, our Chief Financial Officer,
        dated February 15, 2005, we paid a salary of $60,000 until the Company completed
        a financing of $500,000 or more. This occurred on March 4, 2005 when the
        Company
        completed a Tender Offer for warrants totaling $1,190,857 net of fees. From
        March 4, 2005, until December 31, 2005, we will pay an annual salary of $85,000.
        Thereafter, we will pay an annual salary of $98,000 for the second year ending
        December 31, 2006 and an annual salary of $112,000 for the third year ending
        December 31, 2007. Mr. Fermanis' salary is payable in regular installments
        in
        accordance with the customary payroll practices of the Company. Mr. Fermanis
        also receives 100,000 shares of the Company's common stock, which are earned
        at
        the rate of 1/12 or 8,333 per month beginning January 2005. The Company charges
        to operations the market value of these shares as of the first day of each
        month. For the twelve months ended December 31, 2006, the Company charged
        $41,416 to operations for the issuance of 100,000 shares to Mr. Fermanis.
        This
        amount is carried in accrued liabilities at December 31, 2006.
 
 F-13
  **SENIOR
        DIRECTOR OF PRODUCT DEVELOPMENT AND REGULATORY AFFAIRS**
 
 Pursuant
        to our employment agreement with Hal N. Siegel, our Senior Director of Product
        Development and Regulatory Affairs, dated October 23, 2006, we will pay an
        annual base salary of $200,000 for the first year and $210,000 for the second
        year. Mr. Siegel will also be eligible for discretionary bonuses under the
        Company's stock option plan during his employment. In addition, Mr. Siegel
        received options with a term of five years to purchase 200,000 shares of
        common
        stock of the Company. The options are exercisable at $0.20 per share. The
        employment agreement has a term of two years, subject to early termination
        provisions. Upon termination of Mr. Sigel's employment by the Company without
        cause or constructive termination, as defined in the agreement, the Company
        agrees to pay to Mr. Siegel the remainder of his salary for the year or six
        months salary, whichever is greater, and any accrued vacation.
 
 Pursuant
        to the terms of the change of control agreement, the Company agrees to pay
        Mr.
        Siegel his salary for a period of 18 months from the date an involuntary
        termination, payable in accordance with the Company's compensation practice.
        Involuntary termination is defined as the termination of Mr. Siegel's employment
        by Company without cause or due to constructive termination at any time within
        one-year from a change of control event, as defined in the
        agreement.
 
 Office
        Lease
 
 During
        the period from December 1, 2002 through August 31, 2004, the Company leased
        office space from an entity controlled by the Company's Chief Executive Officer
        under a sub-let agreement. The rental cost of $2,734 per month was passed
        through to the Company at the same rental rate charged by the facility's
        primary
        landlord.
 
 In
        July
        2004, the Company leased a new office facility from a third party.
 
 **NOTE
        F - NOTES PAYABLE**
 
 At
        December 31, 2006, the Company has outstanding one note payable in the amount
        of
        $50,000 to a Director. This note bears interest at the rate of 12% per annum.
 
 **NOTE
        G - CAPITAL STOCK**
 
 Common
        stock
 
 The
        Company is authorized to issue 10,000,000 shares of preferred stock, par
        value
        $0.001 per share. No shares of preferred stock have been issued as of December
        31, 2006. The company has authorized 250,000,000 shares of common stock,
        with a
        par value of $.001 per share.
 
 In
        July,
        2003 a one for twenty reverse stock split of the Company's common stock was
        effected . On April 6, 2004, the Company effected a 2 for 1 forward split
        of its
        common stock. Total authorized shares and par value remain unchanged.
        Accordingly, the effect of the reverse and subsequent forward split has been
        presented in the accompanying financial statement and footnote disclosures.
        On
        June 28, 2006, our shareholders voted to approve an amendment to our Certificate
        of Incorporation, as amended, to increase the number of authorized shares
        of
        Common Stock from 100,000,000 to 250,000,000. As of December 31, 2006, the
        Company has 108,041,897 shares of common stock issued and
        outstanding.
 
 F-14
  During
        the year ended December 31, 2002, the Company issued an aggregate of 1,459,188
        shares of common stock to employees and consultants for services in the amount
        of $ 9,782. All valuations of common stock issued for services were based
        upon
        the value of the services rendered, which did not differ materially from
        the
        fair value of the Company's common stock during the period the services were
        rendered. In addition, the Company issued 16,612,276 shares of common stock
        to
        its founders in exchange for a proprietary license charged to operations,
        valued
        at $ 9,250 (see Note C) . The Company also issued an aggregate of 185,578
        shares
        of common stock in exchange for $ 31,001, net of costs and fees.
 
 During
        the year ended December 31, 2003, the Company issued an aggregate of 267,594
        shares of common stock to consultants for services in the amount of $37,280.
        All
        valuations of common stock issued for services were based upon the value
        of the
        services rendered, which did not differ materially from the fair value of
        the
        Company's common stock during the period the services were rendered. In
        addition, the Company issued 2,155,104 shares of common stock in exchange
        for $
        300,000 of previously incurred debt. The Company also issued an aggregate
        of
        383,430 shares of common stock in exchange for $ 65,000 net of costs and
        fees.
        In July, 2003, the Company issued 2,368,130 in connection with the Company's
        acquisition and merger with GPN Network, Inc. (see Note A.)
 
 During
        the year ended December 31, 2004, the Company issued an aggregate of 5,481,280
        shares of common stock to consultants for services in the amount of $2,877,872.
        All valuations of common stock issued for services were based upon the value
        of
        the services rendered, which did not differ materially from the fair value
        of
        the Company's common stock during the period the services were rendered.
        In
        addition, the Company issued 300,000 shares of common stock as with a fair
        value
        of $36,000 as interest on a note payable. In addition, in conjunction with
        a
        private placement of stock (see below), the Company issued 6,855,062 shares
        of
        common stock in exchange for $ 630,591 of previously incurred debt and accrued
        interest. In addition, the Company issued 590,000 shares of common stock
        in
        exchange for $65,000 of previously issued debt. Total debt exchanged for
        stock
        during the year ended December 31, 2004 was $695,591 of debt and interest
        for
        7,745,062 shares of common stock. The Company also sold an aggregate of
        18,160,000 shares of common stock in exchange for $ 1,971,045 cash, net of
        costs
        and fees. The Company also sold 8,000 shares of common stock for $1,200.
        The
        Company also issued an aggregate of 4,900,000 shares of common stock to its
        investment bankers as fees. The Company also issued 1,257,746 shares of common
        stock in settlement of $157,219 of accounts payable. In addition, the Company
        issued an aggregate 1,440,000 shares of common stock to an officer and a
        director in satisfaction $180,000 of liabilities.
 
 During
        the year ended December 31, 2005, the Company issued 100,000 shares of common
        stock to a consultant for services in the amount of $10,000. All valuations
        of
        common stock issued for services were based upon the value of the services
        rendered, which did not differ materially from the fair value of the Company's
        common stock during the period the services were rendered. In addition, the
        Company issued 232,153 shares of common stock as with a fair value of $65,003
        in
        exchange for previously issued debt and accrued interest. In addition, 6,600,778
        shares of common stock were sold for cash of $1,390,856 net of costs pursuant
        to
        a tender offer to certain of the Company’s warrant holders whereby the exercise
        price of the warrants was temporarily reduced. The Company also issued 80,000
        shares of common stock for cash of $4,000 pursuant to the exercise of a warrant
        at a price of $0.05 per share.
 
 Private
        Placement of Common Stock
 
 In
        October 2004, the Company completed a private placement of its common stock
        (the
        "Private Placement") whereby the Company sold an aggregate of $2,450,000
        worth
        of units (each a "Unit" and collectively, the "Units") to accredited investors
        (as defined by Rule 501 under the Securities Act of 1933, as amended) (the
        transaction is referred to herein as the "Private Placement"). The Company
        received proceeds of $1,971,845 after costs of the issuance of
        $298,155.
 
 Included
        in the $2,450,000 sale was conversion of $180,000 of accrued salary and
        consulting fees due to an officer and an director of the Company. The number
        of
        shares of common stock issued pursuant to the Private Placement was 19,600,000,
        along with warrants to purchase an additional 9,080,000 shares, plus warrants
        to
        purchase an additional 720,000 shares issued to the officer and director.
        The
 
 Company
        also issued an additional 4,900,000 shares of common stock to its investment
        banker as commission. The investment bankers did not acquire any warrants
        pursuant to this transaction.
 
 Pursuant
        to the terms of the Private Placement, each Unit was sold for $10,000 (the
        "Unit
        Price") and consisted of the following:
 
 (a)
        a
        number of shares (the "Shares") of common stock of the Registrant, par value
        $0.001 per share (the "Common Stock"), determined by dividing: (i) the Unit
        Price by (ii) $0.125; and
 
 (b)
        a
        warrant (each a "Warrant" and collectively, the "Warrants") to purchase,
        at any
        time prior to the fifth (5th) anniversary following the date of issuance
        of the
        Warrant, a number of shares of Common Stock equal to fifty percent (50%)
        of the
        number of Shares included within the Unit, at a price equal to fifty cents
        ($0.50) per share of Common Stock.
 
 In
        consideration of the investment, the Company granted to each investor certain
        registration rights and anti-dilution rights. The Company is obligated to
        file a
        registration statement for the shares of common stock issued in the private
        placement and shares of common stock underlying the warrants issued in the
        private placement within 30 days of the final closing date of October 26,
        2004,
        or November 25, 2004. The Company is also obligated to effectuate the
        registration statement within 90 days of the final closing date of October
        26,
        2004, or January 24, 2005. Failure to meet either of these deadlines results
        in
        the Company subject to a penalty of a 2% increase in the number of shares
        to be
        registered, or 461,200 shares and warrants to purchase an additional 181,600
        shares, for every 30 day period beyond the deadline date. As of the date
        of the
        financial statements, the registration statement has not been deemed effective
        and as a result, the Company has incurred penalties in the amount of $2,061,683
        representing the obligation to issue an additional 5,242,307 shares of common
        stock and warrants to purchase an additional 2,064,187 shares of common stock
        at
        a price of $0.50 per share. The accrued penalties in connection with the
        issuance of the shares of common stock is included in accounts payable and
        accrued expenses at December 31, 2005.
 
 In
        conjunction with raising capital through the private placement of our common
        stock, the Company issued a warrant that has registration rights for the
        underlying shares. As the contract must be settled by the delivery of registered
        shares and the delivery of the registered shares is not controlled by the
        Company, pursuant to EITF 00-19, "Accounting for Derivative Financial
        Instruments Indexed to, and Potentially Settled in, a Company's Own Stock",
        the
        net value of the 9,800,000 warrants and an additional 2,064,187 penalty warrants
        at their respective dates of issuance has been recorded as a warrant liability
        on the balance sheet ($638,838) and the change in fair value from the date
        of
        issuance to December 31, 2005 has been included in other income (expense).
        The
        assumptions used in the Black Scholes model are as follows: (1) dividend
        yield
        of 0%; (2) expected volatility of 79%, (3) risk-free interest rate of 4.5%,
        and
        (4) expected life of 5 years. Upon the registration statement being declared
        effective, the fair value of the warrant on that date will be reclassified
        to
        equity.
  F-15
 
 For
        the
        year ended December 31, 2006 the fair value of the warrants issued with
        registration rights decreased by approximately $123,505 to $182,236 at August
        21, 2006 and is recognized in other income (expense). On August 21, 2006,
        the
        Company issued the 1,634,400 warrants to purchase shares of common stock
        in
        satisfaction of the penalty due to investors for the late registration of
        shares.
 
 In
        October 2004, the Company converted certain notes payable with an aggregate
        principal amount of $558,500 plus accrued interest of $56,757 for a total
        of
        $630,328 into Units with terms identical to those provided to investors in
        the
        Private Placement. The number of shares of common stock issued via these
        note
        conversions was 6,694,149 along with warrants to purchase an additional
        3,347,076 shares (see Note H).
 
 Also
        in
        October 2004, the Company entered into a settlement agreements with certain
        creditors whereby for full and complete satisfaction of claims totaling an
        aggregate of $157,219 the Company issued Units with terms identical to those
        provided to investors in the Private Placement. The number of shares of common
        stock issued via these creditor conversions was 1,257,746, along with warrants
        to purchase an additional 628,873 shares.
 
 On
        January 24, 2005, the Company made a tender offer to certain of the Company's
        shareholders whereby the exercise price of certain warrants issued in October
        2004 (the "Warrants") would be reduced from $0.50 to $0.20 per share. In
        March
        2005, 6,600,778 shares of common stock were sold pursuant to this offer for
        aggregate proceeds of $1,320,156 less costs of $129,300.
 
 In
        June
        2005, the Company issued 80,000 shares of common stock pursuant to the Exercise
        of a warrant at a price of $0.05 per share.
 
 In
        July
        2005, the Company issued 232,153 shares of common stock at a price of $0.28
        per
        share pursuant to the conversion of a note payable (see Note F.)
 
 In
        August
        2005, the Company issued 100,000 shares of common stock pursuant to an agreement
        with a service provider. The fair value of these shares of $10,000 was amortized
        over the life of the contract, from July 2004 to July 2005.
 
 In
        March
        2006, the Company issued 100,000 shares of common stock to its Chief Financial
        Officer for a total compensation of $41,416 These shares were earned, and
        accrued during the year ended December 31, 2006. share to an investor for
        the
        conversion of accrued interest.
 
 In
        May
        2006, the Company issued 34,464 shares of S-8 common stock at $0.125 per
        share
        to a consultant for services provided for business development.
 
 In
        May
        2006, the Company issued 19,288 shares of common stock at $0.125 per share
        to an
        investor for the conversion of accrued interest.
 
 In
        May
        2006, the Company issued 16,324 shares of common stock at $0.125 per share
        to an
        investor for the conversion of accrued interest.
 
 In
        May
        2006, the Company issued 13,454 shares of common stock at $0.10 per share
        to an
        investor for the conversion of accrued interest.
 
 In
        June
        2006, the Company issued 5,000 shares of common stock at $0.09 per share
        for the
        exercise of warrants by an investor.
 
 In
        August
        2006, the Company issued 4,150,798 shares of common stock for the penalty
        for
        late registration of shares, which were previously accrued.
 
 During
        the fourth quarter of 2006, we completed a private placement, whereby we
        sold an
        aggregate of $5,482,600 worth of units to accredited investors. Each unit
        was
        sold for $25,000 and consisted of (a) a number of shares of our common stock
        determined by dividing the unit price by $0.16, and (b) a five-year warrant
        to
        purchase a number of shares of our common stock equal to 50% of the number
        of
        shares included within the unit, at $0.50 per share. We issued in the private
        placement an aggregate of 34,266,250 shares of our common stock and warrants
        to
        purchase 17,133,125 shares of our common stock. In consideration of the
        investment, we granted to each investor certain registration rights and
        anti-dilution rights. We agreed that not before 180 days after the closing
        of
        the private placement and not later than 190 days thereafter, that we will
        file
        with the SEC a registration statement to register these shares along with
        the
        shares underlying these warrants. In the event that we fail to comply with
        the
        filing deadline, there shall be a 1% penalty for each 30 day period (or pro
        rata
        portion thereof) paid to each investor in cash or additional shares. This
        penalty amounts to an aggregate of 342,662 shares and 171,331 warrants per
        30
        day period until a registration statement that includes these shares and
        warrants is filed or 12 months. As of December 31, 2006, we are not subject
        to
        any penalty. As placement agent for the private placement, Joseph Stevens
&
Co., Inc. and its designees received 5,482,600 shares of our common upon
        the
        closing of the private placement. As of December 31, 2006, the shares to
        be
        issued to Joseph Stevens & Co. were not issued and are included in common
        stock subscribed.
 
 F-16
  The
        Company has evaluated the Registration Rights Agreement related to the December
        2006 private placement, specifically the 1% liquidated damages clause under
        EITF
        Issue No. 00-19 to determine whether the warrants issued with the private
        placement should be classified as a liability versus equity. According to
        EITF
        Issue No. 00-19, paragraph 16 "If a settlement alternative includes a penalty
        that would be avoided by a company under other settlement alternatives, the
        uneconomic settlement alternative should be disregarded in classifying the
        contract. In the case of delivery of unregistered shares, a discount from
        the
        value of the corresponding registered shares that is a reasonable estimate
        of
        the difference in fair values between registered and unregistered shares
        (that
        is, the discount reflects the fair value of the restricted shares determined
        using commercially reasonable means) is not considered a penalty."
  The
        Company concluded that the 12% cap added to the liquidated damages clause,
        represents an economically reasonable difference between registered and
        unregistered shares. As a result, the Company has not classified the fair
        value
        of the warrants issued related to the private placement as a liability.
 
 The
        Company completed the private placement with the following three
        transactions:
 
 On
        October 4, 2006, the Company completed the closing of a private placement
        of its
        common stock whereby the Company sold an aggregate of $2,276,500 worth of units
        to accredited investors (as defined by Rule 501 under the Securities Act
        of
        1933, as amended). The Company received proceeds of $1,841,724 after costs
        of
 $434,776.
        The number of share of common stock issued pursuant to the Private Placement
        was
        14,228,125, along with warrants to purchase an additional 7,114,063
        shares.
 
 On
        October 26, 2006, the Company completed the closing of a private placement
        of
        its common stock whereby the Company sold an aggregate of $2,697,100 worth
        of
        units to accredited investors (as defined by Rule 501 under the Securities
        Act
        of 1933, as amended). The Company received proceeds of $2,344,020 after costs
        of
        $353,080. The number of share of common stock issued pursuant to the Private
        Placement was 16,856,875, along with warrants to purchase an additional
        8,428,438 shares.
 
 On
        December 6, 2006, the Company completed the closing of a private placement
        of
        its common stock whereby the Company sold an aggregate of $509,000 worth
        of
        units to accredited investors (as defined by Rule 501 under the Securities
        Act
        of 1933, as amended). The Company received proceeds of $427,805 after costs
        of
        $81,195. The number of share of common stock issued pursuant to the Private
        Placement was 3,181,250, along with warrants to purchase an additional 1,590,625
        shares.
 
 Shares
        and warrants issued due to late filing of registration
        statement
 
 In
        October 2004, we completed a private placement sale of shares of our common
        stock and warrants to purchase additional shares of common stock. We issued
        in
        the private placement an aggregate of 19,600,000 shares of our common stock
        and
        warrants to purchase 9,800,000 shares of our common stock. We agreed to register
        these shares along with the shares underlying these warrants within ninety
        days
        from the closing date of the transaction, or we would incur a penalty equivalent
        to an additional 2% of the shares and warrants to be registered for every
        30
        days that we failed to complete this registration. This penalty amounts to
        an
        aggregate of 461,200 shares and 181,600 warrants per 30 day period until
        such a
        time as this registration statement is made effective. We were unable to
        register the securities as required.
 
 The
        Company attempted to register the shares and warrants by filing a registration
        statement with the Securities and Exchange Commission on November 24, 2004,
        and
        amended this registration statement with pre-effective amendments no. 1,
        2, 3
        and 4 on July 20, 2005, November 16, 2005, February 22, 2006 and April 7,
        2006,
        respectively. On July 10, 2006 the Company, pursuant to Rule 477 of Regulation
        C
        of the Securities Act of 1933, as amended, applied for an order granting
        the
        immediate withdrawal of its Registration Statement on Form SB-2.
 
 In
        August
        2006, we reached an agreement with the investors in the private placement
        of
        October 2004 which limits the number of warrants and shares which we are
        obligated to issue pursuant to the penalty calculation to an aggregate of
        18% of
        the number of original number of shares and warrants issued in the October
        2004
        private placement. This agreement limits the number of shares and warrants
        issuable pursuant to the penalty calculation to an aggregate of 4,150,798
        shares
        and warrants to purchase an additional 1,634,400 shares,
        respectively. This resulted in a decrease in the number of share issuable
        2,475,107 (with a fair value of $816,785) and a decrease in the number of
        warrant shares of 974,587 (with a fair value of $177,789). This resulted
        in a
        net realized gain of $994,574 during the three months ended June 30,
        2006.
 
 In
        August
        2006, we issued 4,150,798 shares and warrants to purchase 1,634,400 shares
        and
        relieved accrued liabilities in the aggregate amount of $1,053,904.
 
 F-17
 
 For
        the
        twelve months ended December 31, 2006 the Company marked to market the value
        of
        the shares and warrants issuable pursuant to the penalty calculation for
        an
        aggregate gain in the amount of approximately $445,673 and $123,505,
        respectively.
 
 **NOTE
        H - STOCK OPTIONS AND WARRANTS**
 
 Employee
        Stock Options
 
 The
        Company has adopted the 2003 Stock Option, Deferred Stock and Restricted
        Stock
        Plan (the “Plan”) which authorizes the Board of Directors in accordance with the
        terms of the Plan, among other things, to grant incentive stock options as
        defined by Section 422(b) if the Internal Revenue Code, nonstatutory stock
        options (collectively, the “Stock Options”) and awards of restricted stock and
        deferred stock and to sell shares of common stock of the Company (“Common
        Stock”) pursuant to the exercise of such stock options for up to an aggregate of
        6,465,316 shares. The options will have a term not to exceed ten years from
        the
        date of the grant.
 
 On
        June
        28, 2006, our shareholders voted to (i) approve an amendment to our Certificate
        of Incorporation, as amended, to increase the number of authorized shares
        of
        Common Stock from 100,000,000 to 250,000,000 and (ii) approve an amendment
        to
        our 2003 Stock Option, Deferred Stock and Restricted Stock Plan to increase
        the
        number of shares of our Common Stock reserved and available for issuance
        under
        the Plan from 3,600,000 to 20,000,000.
 
 Through
        December 31, 2002, GPN had granted pre-merger stock options to certain employees
        and consultants which are exercisable over various periods through March
        2010.
        These stock options are currently held by the Company outside of this
        Plan.
 
 In
        July
        2006, the Company issued options to purchase 1,893,970 shares of common stock
        to
        our Chief Executive Officer. The options vest 50% after ninety days of continued
        employment and the balance in equal monthly installments for 12 months
        thereafter.
 
 In
        September 2006, the Company issued options to purchase 3,500,000 shares of
        common stock to our Chief Executive Officer. The options vest 50% after thirty
        days of continued employment with the balance in equal monthly installments
        for
        one year thereafter.
 
 In
        October 2006, the Company issued options to purchase 200,000 shares of common
        stock to an employee.
 
 As
        of
        December 31, 2006, total unrecognized stock-based compensation expense related
        to stock options was $264,274. During the year ended December 31, 2000 the
        Company charged $296,394 to operations related to recognized stock-based
        compensation expense for employee stock options.
 
 The
        following table summarizes the changes in options outstanding and the related
        prices for the shares of the Company's common stock issued to employees of
        the
        Company under a non-qualified employee stock option plan.
  **Options
                  Outstanding**
              
              **Options
                  Exercisable****Exercise
                  Prices**
              
              **Number
                  Outstanding**
              
              **Weighted
                  Average Remaining**
                **Contractual
                  Life (years)**
              
              **Weighted
                  Average Exercise Price**
              
              **Number
                  Exercisable**
              
              **Weighted
                  Average Remaining**
                **Contractual
                  Life (years)**$25.00
              
              
              63,212
              
              
              3.25
              
              $
              25.00
              
              
              63,212
              
              
              3.250.231
              
              
              1,896,970
              
              
              4.54
              
              
              0.231
              
              
              1,222,416
              
              
              4.540.20-0.22
              
              
              3,700,000
              
              
              4.71
              
              
              0.20-0.22
              
              
              2,350,602
              
              
              4.710.31
              
              
              1,000
              
              
              4.00
              
              
              0.31
              
              
              1,000
              
              
              4.000.33
              
              
              103,030
              
              
              3.64
              
              
              0.33
              
              
              103,030
              
              
              3.640.44
              
              
              150,000
              
              
              3.50
              
              
              0.44
              
              
              150,000
              
              
              3.505,914,212
              
              
              
              
              
              
              
              
              3,890,260
 
 Options
        not vested are not exercisable. Transactions involving stock options issued
        to
        employees are summarized as follows:
  **Number
                  of Shares**
              
              **Weighted
                  Average****Price
                  Per Share**Outstanding
                  at December 31, 2003
              
              
              63,212
              
              $
              25.00Granted
              
              
              --
              
              
              --Exercised
              
              
              --
              
              
              --Expired
              
              
              --
              
              
              --Outstanding
                  at December 31, 2004
              
              
              63,212
              
              $
              25.00Granted
              
              
              254,030
              
              
              0.39Exercise
              
              
              --
              
              
              --Expired
              
              
              --
              
              
              --Outstanding
                  at December 31, 2005
              
              
              317,242
              
              $
              5.30Granted
              
              
              5,596,970
              
              
              0.22Exercise
              
              
              --
              
              
              --Expired
              
              
              --
              
              
              --Outstanding
                  at December 31, 2006
              
              
              5,914,212
              
              $
              0.50
   F-18
  Warrants
 The
        following table summarizes the changes in warrants outstanding and the related
        prices for the shares of the company’s common stock issued to non-employees of
        the Company. These warrants were granted in lieu of cash for compensation
        for
        services performed of financing expenses and in connection with placement
        of
        convertible debentures.
 
 **Warrants
                  Outstanding**
              
              **Warrants
                  Exercisable****Exercise
                  Prices**
              
              **Number
                  Outstanding**
              
              **Weighted
                  Average Remaining**
                **Contractual
                  Life (years)**
              
              **Weighted
                  Average**
                **Exercise
                  Price**
              
              **Number
                  Exercisable**
              
              **Weighted
                  Average**
                **Remaining
                  Contractual**
                **Life
                  (years)**$
                  .05-.10
              
              
              594,780
              
              
              2.41
              
              $
              .05-.10
              
              
              594,780
              
              
              2.41.125-.22
              
              
              1,014,319
              
              
              2.16
              
              
              .125-.22
              
              
              1,014,319
              
              
              2.16.23-.56
              
              
              28,316,934
              
              
              4.03
              
              
              .23-.56
              
              
              28,316,934
              
              
              4.031.00
              
              
              688,964
              
              
              1.91
              
              
              1.00
              
              
              688,964
              
              
              1.912.00
              
              
              36,550
              
              
              2.32
              
              
              2.00
              
              
              36,550
              
              
              2.3230,651,547
              
              
              3.88
              
              
              
              
              
              30,651,547
              
              
              3.88
 
 
 Transactions
        involving warrants are summarized as follows:
 **Number
                  of Shares**
                **(post-split)**
              
              **Weighted
                  Average**
                **Price
                  Per Share**
                **(post-split)**Outstanding
                  at December 31, 2003
              
              832,510
              
              $
              0.82Granted
              
              16,831,199
              
              
              0.47Exercised
              
              (6,600,778
              )
              
              0.50Cancelled
                  or expired
              
              --
              
              
              --Outstanding
                  at December 31, 2004
              
              11,062,931
              
              $
              0.48Granted
              
              757,464
              
              
              0.44Exercised
              
              (80,000
              )
              
              0.05Canceled
                  or expired
              
              (123,526
              )
              
              2.00Outstanding
                  at December 31, 2005
              
              11,616,869
              
              $
              0.46Granted
              
              19,365,678
              
              
              0.32Exercised
              
              (5,000
              )
              
              0.09Cancelled
                  or expired
              
              (326,000
              )
              
              1.00Outstanding
                  at December 31, 2006
              
              30,651,547
              
              $
              0.37
 
 The
        estimated value of the compensatory warrants granted to non-employees in
        exchange for services and financing expenses was determined using the
        Black-Scholes pricing model and the following assumptions:
 
 **2006**
              
              **2005**Significant
                  assumptions (weighted-average):Risk-free
                  interest rate at grant date
              
              4.5%
                  to 4.75
              %
              3.75
              %Expected
                  stock price volatility
              
              92%
                  to 73
              %
              93%
                  to 179
              %Expected
                  dividend payout
              
              --
              
              --Expected
                  option life-years (a)
              
              3
                  to 5
              
              3
                  to 5
 
 At
        December 31, 2002, the Company had outstanding warrants to purchase 26,939
        shares (post-split) of common stock at $0.835 per share
        (post-split).
 
 F-19
  During
        the twelve months ended December 31, 2003, the Company issued warrants to
        purchase 169,572 shares (post-split) of common stock at prices ranging from
        $0.125 to $1.00 per share (post-split) to eight service providers. The Company
        valued the warrants using the Black-Scholes calculation model, and the warrants
        were deemed to have a combined value of $85,860. This amount was charged
        to
        expense on the Company's financial statements for the twelve months ending
        December 31, 2003.
 
 In
        October 2003, pursuant to the Amended Note agreements, the Company issued
        the
        Amended Note Warrants to purchase 245,000 shares (post-split) of its common
        stock at a price of $1.00 per share (post-split). The Company valued the
        Amended
        Note Warrants using the Black-Scholes calculation model, and the warrants
        were
        deemed to have a combined value of $189,937. This amount was recorded as
        a
        discount to the Amended Notes and an addition to paid-in capital, and was
        charged to expense over the term of the notes, or 180 days. During the twelve
        months ended December 31, 2003, the Company recognized $84,169 of expense
        in
        relation to these warrants. During the twelve months ended December 31, 2004,
        the remaining $105,768 was charged to operations.
 
 In
        October, November, and December 2003, pursuant to the Fourth Quarter Note
        agreements, the Company issued the Fourth Quarter Company Warrants to purchase
        391,000 shares (post-split) of its common stock at a price of $1.00 per share
        (post-split).
 
 As
        an
        additional incentive to investors in the Secured Convertible Promissory Notes,
        the Company provided five-year warrants (the "Secured Note Warrants") to
        purchase that number of shares of common stock equal to one-half the initial
        principal amount of the Secured Convertible Promissory Notes. For example,
        an
        investor who purchased a $10,000 Secured Convertible Promissory Note would
        receive a warrant to purchase 8,979 shares (post-split) of common stock.
        The
        exercise price of the Secured Note Warrants is equal to 60% of the price
        per
        share paid by investors in a future equity financing (the "Reorganization
        Financing"). The Secured Note Warrants are not considered granted until the
        completion of the Reorganization Financing. In accordance with EITF 00-27,
        because the Reorganization Financing had not occurred at December 31, 2003,
        the
        Company ascribed no value to the Secured Note Warrants at December 31, 2003.
        At
        the time of the first closing of the Private Placement in October 2004, warrants
        to purchase a total of 444,490 shares (post-split) of common stock at $0.075
        per
        share (post-split) were issued under the Secured Note Warrants. The value
        of
        these warrants was computed utilizing the Black-Scholes valuation model,
        and the
        total value of these warrants, or $112,562 was charged to operations during
        the
        twelve months ended December 31, 2004.
 
 The
        Company has outstanding warrants to purchase 250,000 shares of common stock
        at
        $0.30 per share which were issued in 2002 by its predecessor company GPN
        Network.
 
 In
        April
        through June 2004, the Company issued warrants to purchase 32,500 shares
        (post-split) at price ranging from $0.25 to $2.00 to consultants for services
        performed. The Company valued these warrants using the Black-Scholes valuation
        model, and charged the amount of $8,318 to operations during the twelve months
        ended December 31, 2004.
 
 In
        May
        2004, the Company issued a warrant to its President and a warrant to a Director,
        each warrant to purchase 500,000 shares (post-split) of common stock at a
        price
        of $0.25 per share (post-split). The warrants were issued as performance
        bonuses. The Company valued these warrants using the Black-Scholes model,
        and
        charged the amount of $134,604 for each warrant, or a total of $269,208,
        to
        operations during the twelve months ended December 31, 2004.
 
 In
        October 2004, the Company issued a warrant to its President to purchase 448,980
        shares (post-split) at a price of $0.125 per share (post-split) as a performance
        bonus for achieving certain objectives. The Company valued this warrant using
        the Black-Scholes valuation model, and charged the amount of $112,697 to
        operations during the twelve months ended December 31, 2004.
 
 In
        November and December 2004, the Company issued a warrant to purchase 50,000
        shares (post-split) of its common stock at a price of $0.125 per share
        (post-split) and a warrant to purchase 10,000 shares (post-split) of its
        common
        stock at a price of $0.075 per share (post-split) to two members of its advisory
        boards. The Company valued these warrants using the Black-Scholes valuation
        model, and charged the aggregate amount of $16,348 to operations during the
        twelve months ended December 31, 2004.
 
 In
        October 2004, the Company issued warrants to purchase 9,080,000 shares
        (post-split) of its common stock at a price of $0.50 per share (post-split)
        to
        the investors in its private placement of equity securities. The Company
        allocated $607,922 of the total proceeds of $1,971,845 to the warrants, and
        charged this amount to additional paid-in capital during the twelve months
        ended
        December 31, 2004.
 
 In
        October 2004, the Company issued warrants to purchase an aggregate of 720,000
        shares (post-split) of its common stock at a price of $0.50 per share
        (post-split) to the an officer and a director for converting a total of $180,000
        of amounts owed to these individuals for accrued salary and accrued consulting
        fees. The Company allocated $56,067 of the total proceeds of $180,000 to
        the
        warrants, and charged this amount to additional paid-in capital during the
        twelve months ended December 31, 2004.
 
 In
        October 2004, the Company issued warrants to purchase 3,347,076 shares
        (post-split) of its common stock at a price of $0.50 per share (post-split)
        to
        the convertible note holders who invested its private placement of equity
        securities via conversion of their notes. The Company allocated $191,111
        of the
        total amount converted of $615,328 to the warrants, and charged this amount
        to
        additional paid-in capital during the twelve months ended December 31,
        2004.
 
 F-20
  In
        October 2004, the Company issued warrants to purchase 628,873 shares
        (post-split) of its common stock at a price of $0.50 per share (post-split)
        to
        the vendors who invested in its private placement of equity securities via
        conversion of amounts owed to them by the Company. The Company allocated
        $48,579
        of the total amount converted of $157,219 to the warrants, and charged this
        amount to additional paid-in capital during the twelve months ended December
        31,
        2004.
 
 In
        April
        through June 2004, the Company issued warrants to purchase 77,500 shares
        (post-split) of its common stock at prices ranging from $0.25 to $2.00 per
        share
        (post-split) to certain investors as additional incentive under notes payable
        agreements. The Company valued these warrants using the Black-Scholes model,
        and
        charged the amount of $17,915 to additional paid-in capital during the twelve
        months ended December 31, 2004.
 
 In
        July
        and August 2004, the Company issued warrants to purchase 744,280 shares
        (post-split) of its common stock at prices ranging from $0.05 to $2.00 per
        share
        (post-split) to certain investors as additional incentive under notes payable
        agreements. The Company valued these warrants using the Black-Scholes model,
        and
        charged the amount of $72,252 to additional paid-in capital during the twelve
        months ended December 31, 2004.
 
 During
        the three months ended March 31, 2005, the Company issued warrants to purchase
        268,033 shares of common stock at prices ranging from $0.125 to $1.00 to
        consultants for services performed. The Company valued these warrants using
        the
        Black-Scholes valuation model, and charged the amount of $137,049 to operations
        during the twelve months ended December 31, 2005.
 
 During
        the three months ended June 30, 2005, the Company issued warrants to purchase
        366,814 shares of common stock at prices ranging from $0.038 to $1.00 per
        share
        to consultants and advisory board members. The Company also cancelled warrants
        to purchase 123,530 shares of common stock at a price of $2.00 per share.
        The
        Company valued these issuance and cancellations using the Black-Scholes
        valuation model, and charged the amount of $103,772 to operations during
        the
        twelve months ended December 31, 2005.
 
 Also
        during the three months ended June 30, 2005, warrants to purchase 80,000
        shares
        of common stock at a price of $0.05 per share were exercised.
 
 During
        the three months ended September 30, 2005, the Company issued warrants to
        purchase 77,250 shares of common stock at prices ranging from $0.125 to $1.00
        per share to consultants and advisory board members. The Company valued these
        warrants using the Black-Scholes valuation model, and charged the amount
        of
        $20,491 to operations during the twelve months ended December 31,
        2005.
 
 In
        October and December 2005, the Company issued warrants to purchase 62,467
        shares
        of common stock at prices ranging from $0.125 to $1.00 to consultants and
        advisory board members for services provided. The Company valued these warrants
        using the Black-Scholes valuation model, and charged the amount of $18,399
        to
        operations during the twelve months ended December 31, 2005.
 
 During
        the three months ended March 31, 2006, the Company issued warrants to purchase
        61,500 shares of common stock at prices ranging from $0.125 to $1.00 to
        consultants for services performed. The Company valued these warrants using
        the
        Black-Scholes valuation model, and charged the amount of $8,399 to operations
        during the three months ended March 31, 2006.
 
 During
        the three months ended June 30, 2006, the Company issued warrants to purchase
        84,653 shares of common stock at prices ranging from $0.20 to $1.00 to
        consultants for services performed. The Company valued these warrants using
        the
        Black-Scholes valuation model, and charged the amount of $8,819 to operations
        during the three months ended June 30, 2006.
 
 Also
        during the three months ended June 30, 2006, an investor exercised a warrant
        to
        purchase 5,000 shares of the Company's common stock at a price of $0.09 per
        share.
 
 During
        the three months ended September 30, 2006, the Company issued warrants to
        purchase 46,000 shares of common stock at prices ranging from $0.20 to $1.00
        to
        consultants for services performed. The Company valued these warrants using
        the
        Black-Scholes valuation model, and charged the amount of $3,495 to operations
        during the three months ended September 30, 2006.
 
 During
        the three months ended September 30, 2006, the Company issued warrants to
        purchase 300,000 shares of common stock at $0.25 to our Chief Executive Officer,
        Michael Wilhelm. The Company valued these warrants using the Black-Scholes
        valuation model, and charged the amount of $41,278 to operations during the
        three months ended September 30, 2006.
 
 Also,
        during the three months ended September 30, 2006, the Company issued warrants
        to
        purchase 62,500 shares of common stock at $0.158 to our Chief Financial Officer,
        John Fermanis per the terms of his employment agreement. The Company valued
        these warrants using the Black-Scholes valuation model, and charged the amount
        of $9,596 to operations during the three months ended September 30,
        2006.
 
 During
        the three months ended September 30, 2006, the Company issued warrants to
        purchase an additional 1,634,400 shares of common stock in satisfaction of
        the
        penalty due to investors for the late registration of shares. The Company
        had
        accrued the value of these warrants using the Black-Scholes valuation model,
        and
        relieved the accrued liability of $258,986.
 
 In
        October 2006, the Company issued warrants to purchase 7,114,063 shares of
        its
        common stock at a price of $0.50 per share to the investors in its first
        closing
        of private placement of equity securities. The Company allocated $804,003
        of the
        total proceeds of $1,057,640 to the warrants, and charged this amount to
        additional paid-in capital during the twelve months ended December 31,
        2006.
 
 In
        October 2006, the Company issued warrants to purchase 8,428,437 shares of
        its
        common stock at a price of $0.50 per share to the investors in its second
        closing of private placement of equity securities. The Company allocated
        $759,384 of the total proceeds of $2,344,020 to the warrants, and charged
        this
        amount to additional paid-in capital during the twelve months ended December
        31,
        2006.
 
 In
        October 2006, the Company issued warrants to purchase 1,590,625 shares of
        its
        common stock at a price of $0.50 per share to the investors in its final
        closing
        of private placement of equity securities. The Company allocated $162,952
        of the
        total proceeds of $427,805 to the warrants, and charged this amount to
        additional paid-in capital during the twelve months ended December 31,
        2006.
 
 During
        the three months ended December 31, 2006, the Company issued warrants to
        purchase 43,500 shares of common stock at prices ranging from $0.20 to $1.00
        to
        consultants for services performed. The Company valued these warrants using
        the
        Black-Scholes valuation model, and charged the amount of $1,974 to operations
        during the three months ended December 31, 2006.
 
 F-21
 
 **NOTE
        I - COMMITMENTS AND CONTINGENCIES**
 
 Office
        Leases
  Our
        corporate headquarters are currently located at 4021 N. 75th Street, Suite
        201,
        Scottsdale, Arizona 85251, where we have leased approximately 1,800 square
        feet
        of office space through September 30, 2007. Our rent expense is $2,320 per
        month
        in year one and will increase to $2,380 in year two. We believe that our
        facilities are adequate for our current needs and suitable additional or
        substitute space will be available in the future to replace our existing
        facilities, if necessary, or accommodate expansion of our
        operations.
 
 Rent
        expense amounted to $28,622 for the years ended December 31, 2006, $27,785
        for
        the year ended December 31, 2005, and $131,561 for the period from October
        30,
        2002 (inception) through December 31, 2006.
 
 Employment
        and Consulting Agreements
 
 The
        Company has employment agreements with the President and Chief Executive
        Officer
        (See Note E). In addition to salary and benefit provisions, the agreements
        include non-disclosure and confidentiality provisions for the protection
        of the
        Company's proprietary information. The Company also has a severance agreement
        and a change of control agreement in place with its President and Chief
        Executive Officer.
 
 The
        Company also has an employment agreement with its Chief Financial Officer
        and
        Senior Director, Product Development and Regulatory Affairs which provide
        salary
        and benefit provisions.
 
 The
        Company has consulting agreements with outside contractors to provide marketing
        and financial and scientific advisory services. The Agreements are generally
        for
        a term of 12 months from inception and renewable automatically from year
        to year
        unless either the Company or Consultant terminates such engagement by written
        notice.
 
 Litigation
 
 The
        Company is subject to other legal proceedings and claims, which arise in
        the
        ordinary course of its business. Although occasional adverse decisions or
        settlements may occur, the Company believes that the final disposition of
        such
        matters should not have a material adverse effect on its financial position,
        results of operations or liquidity.
 
 **NOTE
        J - INCOME TAXES**
 
 The
        Company has adopted Financial Accounting Standard No. 109 which requires
        the
        recognition of deferred tax liabilities and assets for the expected future
        tax
        consequences of events that have been included in the financial statement
        or tax
        returns. Under this method, deferred tax liabilities and assets are determined
        based on the difference between financial statements and tax bases of assets
        and
        liabilities using enacted tax rates in effect for the year in which the
        differences are expected to reverse. Temporary differences between taxable
        income reported for financial reporting purposes and income tax purposes
        are
        insignificant.
 
 For
        income tax reporting purposes, the Company's aggregate unused net operating
        losses approximate $6,100,000 which expire through 2027, subject to limitations
        of Section 382 of the Internal Revenue Code, as amended. The deferred tax
        asset
        related to the carryforward is approximately $2,135,000. The Company has
        provided a valuation reserve against the full amount of the net operating
        loss
        benefit, because in the opinion of management based upon the earning history
        of
        the Company, it is more likely than not that the benefits will not be
        realized.
  Components
        of deferred tax assets as of December 31, 2006 are as follows:
 Non
                  Current:Net
                  operating loss carryforward
              
              $
              2,135,000Valuation
                  allowance
              
              
              (2,135,000
              )Net
                  deferred tax asset
              
              $
              --
  
 **NOTE
        K - SUBSEQUENT EVENTS**
  On
        January 1, 2007 we entered into a three month agreement with an investor
        relations firm. For services provided the consulting firm is to receive a
        monthly cash fee. In addition to the cash fee, we issued to the firm 100,000
        restricted shares of common stock.
 
 On
        January 1, 2007 we entered into a six month agreement with a second investor
        relations firm. For services provided the consulting firm is to receive a
        monthly cash fee. In addition to the cash fee, we issued to the firm 400,000
        restricted shares of common stock.
 
 On
        January 1, 2007 we entered into a two year employment agreement for a Market
        and
        Regulatory Affairs Analyst. In addition to the monthly cash salary the employee
        received statutory options with a term of five years to purchase 100,000
        shares
        of common stock of the Company. The options are exercisable at $0.128 per
        share
        and vest in equal amounts quarterly over the term of the contract. The employee
        also received 298,039 common shares of stock for past services provided between
        June 2006 and December 2006. The amount of $44,706 was accrued at December
        31,
        2006 for this past service.
 
 F-22
  **ITEM8.
        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND** **** **FINANCIAL
        DISCLOSURE**
 
 None.
 
 **ITEM8A.
        CONTROLS AND PROCEDURES**
 
 Evaluation
        of disclosure controls and procedures.
 
 Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed by us in the reports that
        we
        file or submit under the Exchange Act is recorded, processed, summarized
        and
        reported, within the time periods specified in the Securities and Exchange
        Commission's rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed by us in the reports that we file under the Exchange
        Act is accumulated and communicated to our management, including our principal
        executive and financial officers, as appropriate to allow timely decisions
        regarding required disclosure.
 
 As
        of the
        end of the period covered by this Annual Report, we conducted an evaluation,
        under the supervision and with the participation of our Chief Executive Officer
        and Chief Financial Officer, of our disclosure controls and procedures (as
        defined in Rules 13a-15(e) of the Exchange Act). Based on that evaluation,
        our
        Chief Executive Officer and Chief Financial Officer concluded that our
        disclosure controls and procedures are effective in enabling the Company
        to
        record, process, summarize and report information required to be included
        in the
        Company's periodic SEC filings within the required time period.
 
 Changes
        in internal controls
 
 There
        have been no changes in our internal control over financial reporting identified
        in connection with the evaluation required by paragraph (d) of Rule 13a-15
        or
        15d-15 under the Exchange Act that occurred during the quarter ended December
        31, 2006 that has materially affected, or is reasonably likely to materially
        affect, our internal control over financial reporting.
  **ITEM8B.
        OTHER INFORMATION**
 
 None.
  
 F-23
  
 **PART
        III**
 
 
 **ITEM9.
        DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT**
 
 The
        information required by this Item 9 is incorporated by reference from our
        definitive proxy statement on Schedule 14A which will be filed before the
        end of
        the 120-day period immediately following the end of our 2006 fiscal year,
        or, if
        our definitive proxy statement is not filed within that time, the information
        will be filed as part of an amendment to this Annual Report on Form 10-KSB/A,
        not later than the end of the 120-day period.
  **ITEM10.
        EXECUTIVE COMPENSATION**
 
 The
        information required by this Item 10 is incorporated by reference from our
        definitive proxy statement on Schedule 14A which will be filed before the
        end of
        the 120-day period immediately following the end of our 2006 fiscal year,
        or, if
        our definitive proxy statement is not filed within that time, the information
        will be filed as part of an amendment to this Annual Report on Form 10-KSB/A,
        not later than the end of the 120-day period.
  **ITEM11.
        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
        MANAGEMENT**
 
 The
        information required by this Item 11 is incorporated by reference from our
        definitive proxy statement on Schedule 14A which will be filed before the
        end of
        the 120-day period immediately following the end of our 2006 fiscal year,
        or, if
        our definitive proxy statement is not filed within that time, the information
        will be filed as part of an amendment to this Annual Report on Form 10-KSB/A,
        not later than the end of the 120-day period.
  **ITEM12.
        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
        DIRECTOR INDEPENDENCE**
 
 The
        information required by this Item 12 is incorporated by reference from our
        definitive proxy statement on Schedule 14A, or, if our definitive proxy
        statement is not filed within that time, the information will be filed as
        part
        of an amendment to this Annual Report on Form 10-KSB/A, not later than the
        end
        of the 120-day period.
  **ITEM
        13. EXHIBITS**
  **EXHIBITS**
 
 **Exhibit
                  Number**
              
              **Description
                  of Exhibit**2.1
              
              Agreement
                  and Plan of Merger dated July 2, 2003 among the Registrant, GPN
                  Acquisition Corporation and ImmuneRegen BioSciences, Inc. (incorporated
                  by
                  reference to exhibit 2 of the Registrant's current report on Form
                  8-k
                  filed with the Securities and Exchange Commission on July 7,
                  2003).3.1
              
              Certificate
                  of Incorporation filed with the Delaware Secretary of State on
                  June 4,
                  1985 (incorporated by reference to exhibit 3.1 of the Registrant's
                  annual
                  report on Form 10-KSB for the year ended December 31, 2001 filed
                  with the
                  Securities and Exchange Commission on April 16, 2002).3.1(a)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on July
                  16, 1987
                  (incorporated by reference to exhibit 3.1(a) of the Registrant's
                  annual
                  report on Form 10-KSB for the year ended December 31, 2001 filed
                  with the
                  Securities and Exchange Commission on April 16, 2002).3.1(b)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on February
                  3,
                  1992 (incorporated by reference to exhibit 3.1(b) of the Registrant's
                  annual report on Form 10-KSB for the year ended December 31, 2001
                  filed
                  with the Securities and Exchange Commission on April 16,
                  2002).3.1(c)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on November
                  23,
                  1992 (incorporated by reference to exhibit 3.1(c) of the Registrant's
                  annual report on Form 10-KSB for the year ended December 31, 2001
                  filed
                  with the Securities and Exchange Commission on April 16,
                  2002).3.1(d)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on December
                  15,
                  1994 (incorporated by reference to exhibit 3.1(d) of the Registrant's
                  annual report on Form 10-KSB for the year ended December 31, 2001
                  filed
                  with the Securities and Exchange Commission on April 16,
                  2002).3.1(e)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on November
                  7,
                  1995 (incorporated by reference to exhibit 3.1(e) of the Registrant's
                  annual report on Form 10-KSB for the year ended December 31, 2001
                  filed
                  with the Securities and Exchange Commission on April 16,
                  2002).3.1(f)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on December
                  30,
                  1996 (incorporated by reference to exhibit 3.1(f) of the Registrant's
                  annual report on Form 10-KSB for the year ended December 31, 2001
                  filed
                  with the Securities and Exchange Commission on April 16,
                  2002).3.1(g)
              
              Certificate
                  of Amendment filed with the Delaware Secretary of State on November
                  8,
                  2000 (incorporated by reference to exhibit 3.1(h) of the Registrant's
                  annual report on Form 10-KSB for the year ended December 31, 2001
                  filed
                  with the Securities and Exchange Commission on April 16,
                  2002).3.2
              
              Amended
                  and Restated Bylaws of the Registrant dated as of January 1, 2002
                  (incorporated by reference to exhibit 3(b) of the Registrant's
                  annual
                  report on Form 10-KSB for the year ended December 31, 2001 filed
                  with the
                  Securities and Exchange Commission on April 16, 2002).4.1
              
              Specimen
                  Common Stock Certificate (incorporated by reference to exhibit
                  4.1 of the
                  Registrant's registration statement on Form SB-2 (File No. 333-120784)
                  filed with the Securities and Exchange Commission on November 24,
                  2004).
 
  
 48
  
 **Exhibit
                  Number**
              
              **Description
                  of Exhibit**4.2
              
              2003
                  Stock Option, Deferred Stock and Restricted Stock Plan (incorporated
                  by
                  reference to exhibit 4.1 of the Registrant's registration statement
                  on
                  Form S-8 (file no. 333-113511) filed with the Securities and Exchange
                  Commission on March 11, 2004).4.3
              
              Form
                  of Warrant by and between the Registrant and each of the Investors
                  or
                  Creditors, as the case may be, who entered into an Agreement filed
                  as
                  Exhibit 10.6, 10.7, 10.8 or 10.9 herewith (incorporated by reference
                  to
                  exhibit 4.1 of the Registrant's current report on Form 8-K filed
                  with the
                  Securities and Exchange Commission on October 19,
                  2004).4.4
              
              Form
                  of Registration Rights (Annex A to Subscription Agreement) by and
                  between
                  the Registrant and each of the Investors who entered into the Agreements
                  filed as Exhibits 10.6 and 10.8 herewith (incorporated by reference
                  to
                  exhibit 4.2 of the Registrant's current report on Form 8-K filed
                  with the
                  Securities and Exchange Commission on October 19,
                  2004).4.5
              
              Form
                  of Anti-Dilution Rights (Annex B to Subscription Agreement) by
                  and between
                  the Registrant and each of the Investors who entered into the Agreements
                  filed as Exhibits 10.6 and 10.8 herewith (incorporated by reference
                  to
                  exhibit 4.3 of the Registrant's current report on Form 8-K filed
                  with the
                  Securities and Exchange Commission on October 19,
                  2004).4.6
              
              Promissory
                  Note issued from the Registrant to SBM Certificate Company as of
                  April 28,
                  2004 (incorporated by reference to exhibit 4.6 of the Registrant's
                  registration statement on Form SB-2 (File No. 333-120784) filed
                  with the
                  Securities and Exchange Commission on November 24,
                  2004).4.7
              
              Form
                  of Warrant by and between the Registrant and each of the investors
                  who
                  entered into the Subscription Agreements filed as Exhibits 10.18,
                  10.19
                  and 10.20 herewith (incorporated by reference from Exhibit 4.1
                  to the
                  Quarterly Report on Form 10-QSB as filed with the Securities and
                  Exchange
                  Commission on November 14, 2006).10.1
              
              License
                  Agreement dated December 16, 2002 among ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant, David Harris and Mark Witten (incorporated
                  by reference to exhibit 10.4 of the Registrant's registration statement
                  on
                  Form SB-2 (File No. 333-120784) filed with the Securities and Exchange
                  Commission on November 24, 2004).10.1(a)
              
              First
                  Amendment to License Agreement dated December 20, 2002 among ImmuneRegen
                  BioSciences, Inc., a subsidiary of the Registrant, David Harris
                  and Mark
                  Witten (incorporated by reference to exhibit 10.4(a) of the Registrant's
                  registration statement on Form SB-2 (File No. 333-120784) filed
                  with the
                  Securities and Exchange Commission on November 24,
                  2004).10.1(b)
              
              Second
                  Amendment to License Agreement dated June 26, 2003 among ImmuneRegen
                  BioSciences, Inc., a subsidiary of the Registrant, David Harris
                  and Mark
                  Witten (incorporated by reference to exhibit 10.4(b) of the Registrant's
                  registration statement on Form SB-2 (File No. 333-120784) filed
                  with the
                  Securities and Exchange Commission on November 24,
                  2004).10.1(c)
              
              Assignment
                  Agreement dated February 23, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Mark Witten (incorporated by reference
                  to
                  exhibit 10.4(c) of the Registrant's registration statement on Form
                  SB-2
                  (File No. 333-120784) filed with the Securities and Exchange Commission
                  on
                  July 20, 2005).10.1(d)
              
              Assignment
                  Agreement dated February 23, 2005 among ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant, David Harris and Mark Witten (incorporated
                  by reference to exhibit 10.4(d) of the Registrant's registration
                  statement
                  on Form SB-2 (File No. 333-120784) filed with the Securities and
                  Exchange
                  Commission on July 20, 2005).10.1(e)
              
              Assignment
                  Agreement dated November 7, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Mark Witten (incorporated by reference
                  to
                  exhibit 10.4(e) of the Registrant's registration statement on Form
                  SB-2
                  (File No. 333-120784) filed with the Securities and Exchange Commission
                  on
                  November 16, 2005).10.1(f)
              
              Assignment
                  Agreement dated November 7, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Mark Witten (incorporated by reference
                  to
                  exhibit 10.4(f) of the Registrant's registration statement on Form
                  SB-2
                  (File No. 333-120784) filed with the Securities and Exchange Commission
                  on
                  February 22, 2006).10.1(g)
              
              Assignment
                  Agreement dated November 7, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Mark Witten (incorporated by reference
                  to
                  exhibit 10.4(g) of the Registrant's registration statement on Form
                  SB-2
                  (File No. 333-120784) filed with the Securities and Exchange Commission
                  on
                  November 16, 2005).10.1(h)
              
              Assignment
                  Agreement dated November 7, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Mark Witten (incorporated by reference
                  to
                  exhibit 10.4(h) of the Registrant's registration statement on Form
                  SB-2
                  (File No. 333-120784) filed with the Securities and Exchange Commission
                  on
                  November 16, 2005).10.2
              
              Lease
                  Agreement dated July 1, 2004 between ImmuneRegen BioSciences, Inc.,
                  a
                  subsidiary of the Registrant, and The Clayton Companies (incorporated
                  by
                  reference to exhibit 10.5 of the Registrant's registration statement
                  on
                  Form SB-2 (File No. 333-120784) filed with the Securities and Exchange
                  Commission on November 24, 2004).
 
 
 49
 
  **Exhibit
                  Number**
              
              **Description
                  of Exhibit**10.3
              
              Form
                  of Subscription Agreement entered into as of October 13, 2004 between
                  the
                  Registrant and each of the Investors set forth on the Schedule
                  of
                  Investors thereto (incorporated by reference to exhibit 10.1 of
                  the
                  Registrant's current report on Form 8-K filed with the Securities
                  and
                  Exchange Commission on October 19, 2004).10.4
              
              Form
                  of Settlement Agreement entered into as of October 13, 2004 between
                  the
                  Registrant and each of the Creditors set forth on the Schedule
                  of
                  Creditors thereto (incorporated by reference to exhibit 10.2 of
                  the
                  Registrant's current report on Form 8-K filed with the Securities
                  and
                  Exchange Commission on October 19, 2004).10.5
              
              Form
                  of Subscription Agreement entered into as of October 26, 2004 between
                  the
                  Registrant and each of the Investors set forth on the Schedule
                  of
                  Investors thereto (incorporated by reference to exhibit 10.1 of
                  the
                  Registrant's current report on Form 8-K filed with the Securities
                  and
                  Exchange Commission on October 27, 2004).10.6
              
              Form
                  of Settlement Agreement entered into as of October 26, 2004 between
                  the
                  Registrant and each of the Creditors set forth on the Schedule
                  of
                  Creditors thereto (incorporated by reference to exhibit 10.2 of
                  the
                  Registrant's current report on Form 8-K filed with the Securities
                  and
                  Exchange Commission on October 27, 2004).10.7
              
              Employment
                  Agreement dated February 15, 2005 between the Registrant and John
                  N.
                  Fermanis (incorporated by reference to exhibit 10.10 of the Registrant's
                  Amendment No. 1 on Form 10-K/A to its annual report for the year
                  ended
                  December 31, 2004).10.8
              
              Employment
                  Agreement dated August 10, 2005 by and between the Registrant and
                  Michael
                  K. Wilhelm (incorporated by reference to exhibit 10.1 of the Registrant's
                  quarterly report on Form 10-QSB for the three months ended September
                  30,
                  2005).10.9
              
              Change
                  of Control Agreement dated August 10, 2005 by and between the Registrant
                  and Michael K. Wilhelm (incorporated by reference to exhibit 10.2
                  of the
                  Registrant's quarterly report on Form 10-QSB for the three months
                  ended
                  September 30, 2005).10.10
              
              Severance
                  Agreement dated November 7, 2005 by and between the Registrant
                  and Michael
                  K. Wilhelm (incorporated by reference to exhibit 10.3 of the Registrant's
                  quarterly report on Form 10-QSB for the three months ended September
                  30,
                  2005).10.11
              
              Authorization
                  for Regulatory Contact dated November 7, 2005 between ImmuneRegen
                  BioSciences, Inc., a subsidiary of the Registrant, and Synergos,
                  Inc.
                  (incorporated by reference to exhibit 10.14 of the Registrant's
                  registration statement on Form SB-2 (File No. 333-120784) filed
                  with the
                  Securities and Exchange Commission on February 22,
                  2006).10.12
              
              Proforma
                  invoice/quotation dated November 7, 2005 from Sigma-Aldrich, Inc.
                  to
                  ImmuneRegen BioSciences, Inc., a subsidiary of the Registrant
                  (incorporated by reference to exhibit 10.15 of the Registrant's
                  registration statement on Form SB-2 (File No. 333-120784) filed
                  with the
                  Securities and Exchange Commission on November 16,
                  2005).
 
 
 50
 
  **Exhibit
                  Number**
              
              **Description
                  of Exhibit**10.13
              
              Letter
                  of acceptance dated October 2, 2003, from Huntingdon Life Sciences
                  to
                  ImmuneRegen BioSciences, Inc., a subsidiary of the Registrant
                  (incorporated by reference to exhibit 10.16 of the Registrant's
                  registration statement on Form SB-2 (File No. 333-120784) filed
                  with the
                  Securities and Exchange Commission on February 22,
                  2006).10.14
              
              Price
                  Quotation dated June 27, 2003 received by ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant from AppTec Laboratory Services (incorporated
                  by reference to exhibit 10.17 of the Registrant's registration
                  statement
                  on Form SB-2 (File No. 333-120784) filed with the Securities and
                  Exchange
                  Commission on February 22, 2006).10.15
              
              Consulting
                  Agreement dated March 15, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Dr. Hal Siegel, Ph.D. (Siegel
                  Consultancy) (incorporated by reference to exhibit 10.18 of the
                  Registrant's registration statement on Form SB-2 (File No. 333-120784)
                  filed with the Securities and Exchange Commission on February 22,
                  2006).10.16
              
              Consulting
                  Agreement dated November 3, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Dr. Jack Caravelli, Ph.D (incorporated
                  by
                  reference to exhibit 10.19 of the Registrant's registration statement
                  on
                  Form SB-2 (File No. 333-120784) filed with the Securities and Exchange
                  Commission on February 22, 2006).10.17
              
              Consulting
                  Agreement dated July 29, 2005 between ImmuneRegen BioSciences,
                  Inc., a
                  subsidiary of the Registrant and Dr. Kelly McQueen, MD, MPH (incorporated
                  by reference to exhibit 10.20 of the Registrant's registration
                  statement
                  on Form SB-2 (File No. 333-120784) filed with the Securities and
                  Exchange
                  Commission on February 22, 2006).10.18
              
              Form
                  of Subscription Agreement entered into as of December 6, 2006 between
                  the
                  Registrant and each of the Investors set forth on the Schedule
                  of
                  Investors contained therein (incorporated by reference from Exhibit
                  10.1
                  to the Report on Form 8-K as filed with the Securities and Exchange
                  Commission on December 7, 2006).10.19
              
              Form
                  of Subscription Agreement entered into as of October 4, 2006 between
                  the
                  Registrant and each of the Investors set forth on the Schedule
                  of
                  Investors contained therein. (incorporated by reference from Exhibit
                  10.2
                  to the Quarterly Report on Form 10-QSB as filed with the Securities
                  and
                  Exchange Commission on November 14, 2006).10.20
              
              Form
                  of Subscription Agreement entered into as of October 26, 2006 between
                  the
                  Registrant and each of the Investors set forth on the Schedule
                  of
                  Investors contained therein (incorporated by reference from Exhibit
                  10.2
                  to the Quarterly Report on Form 10-QSB as filed with the Securities
                  and
                  Exchange Commission on November 14, 2006).21.1
              
              Subsidiaries
                  of Registrant (incorporated by reference to exhibit 21.1 of the
                  Registrant's registration statement on Form SB-2 (File No. 333-120784)
                  filed with the Securities and Exchange Commission on November 24,
                  2004).23.1
              
              Consent
                  of Russell Bedford Stefanou Mirchandani LLP31.1
              
              Certification
                  of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation
                  S-B,
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.
 
 
 
 51
 
  **Exhibit
                  Number**
              
              **Description
                  of Exhibit**31.2
              
              Certification
                  of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation
                  S-B,
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certifications
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.*32.2
              
              Certifications
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as
                  adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.*------------*
              
              This
                  exhibit shall not be deemed "filed" for purposes of Section 18
                  of the
                  Securities Exchange Act of 1934 or otherwise subject to the liabilities
                  of
                  that section, nor shall it be deemed incorporated by reference
                  in any
                  filing under the Securities Act of 1933 or the Securities Exchange
                  Act of
                  1934, whether made before or after the date hereof and irrespective
                  of any
                  general incorporation language in any
                  filings.
 
 
  
 **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
 
 The
        following table sets forth fees billed to us by our auditors during the fiscal
        years ended December 31, 2006 and December 31, 2005 for: (i) services rendered
        for the audit of our annual financial statements and the review of our quarterly
        financial statements, (ii) services by our auditor that are reasonably related
        to the performance of the audit or review of our financial statements and
        that
        are not reported as Audit Fees, (iii) services rendered in connection with
        tax
        compliance, tax advice and tax planning, and (iv) all other fees for services
        rendered.
 **December
                  31, 2006******
              
              
              **December
                  31, 2005**(i)
                  Audit Fees
              $
              58,856
              
              $
              67,000(ii)
                  Audit Related Fees
              
              --
              
              
              --(iii)
                  Tax Fees
              
              --
              
              
              10,000(iv)
                  All Other Fees
              
              4,795
              
              
              --Total
                  fees
              $
              63,651
              
              $
              77,000
 
 **AUDIT
        FEES.** Consists
        of fees billed for professional services rendered for the audit of the Company's
        consolidated financial statements and review of the interim consolidated
        financial statements included in quarterly reports and services that are
        normally provided by the Company's certifying accountant in connection with
        statutory and regulatory filings or engagements.
 
 **TAX
        FEES.** Consists
        of all services performed by the independent auditor’s tax personnel, except
        those related to the audit of financial statements, and include tax compliance,
        tax consulting, tax planning and non-recurring projects.
 
 **ALL
        OTHER FEES.** Consists
        of fees billed for professional services performed by the independent auditors
        related to the review of and consent to the Company’s SEC Form S-8.
 
 **POLICY
        ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES
        OF
        INDEPENDENT AUDITORS**
 
 We
        currently do not have a designated Audit Committee, and accordingly, the
        our
        Board of Directors' policy is to pre-approve all audit and permissible non-audit
        services provided by the independent auditors. These services may include
        audit
        services, audit-related services, tax services and other services. Pre-approval
        is generally provided for up to one year and any pre-approval is detailed
        as to
        the particular service or category of services and is generally subject to
        a
        specific budget. The independent auditors and management are required to
        periodically report to our Board of Directors regarding the extent of services
        provided by the independent auditors in accordance with this pre-approval,
        and
        the fees for the services performed to date. The Board of Directors may also
        pre-approve particular services on a case-by-case basis. Directors may also pre-approve particular services on a case-by-case
        basis.
 
 
  
 52
  
 
 **SIGNATURES**
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the Registrant has duly caused this report to be signed on its behalf
        by
        the undersigned, thereunto duly authorized, on April 17, 2007.
   **IR
                  BIOSCIENCES HOLDINGS, INC.**Date:
                  April 17, 2007
              By:
              /s/
                  Michael K. WilhelmMichael
                  K. WilhelmPresident
                  and Chief Executive Officer
  In
        accordance with the Securities Exchange Act of 1934, this report has been
        signed
        below by the following persons on behalf of the Registrant and in the capacities
        and on the dates indicated.
   **SIGNATURE**
              
              ******TITLE**
              
              ******DATE**/s/
                  Michael K.
                  Wilhelm
                Michael
                  K. Wilhelm
              
              Chief
                  Executive Officer, President and Director (Principal Executive
                  Officer)
              
              April
                  17,  2007/s/
                  John N.
                  Fermanis
                John
                  N. Fermanis
              
              Chief
                  Financial Officer (Principal Financial and Accounting
                  Officer)
              
              April
                  17, 2007/s/
                  Theodore E. Staahl
                Theodore
                  E. Staahl, M.D.
              
              Director
              
              April
                  17, 2007/s/
                  Hal N. Siegel
                Hal
                  N. Siegel, Ph.D.
              
              Director
              
              April
                  17, 2007
 
 53