----

----

----

| Item                1.     FINANCIAL STATEMENTS                                                          |   |   |        |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
|                                                                                                                              |   |   |        |
| Avitar,                Inc. and Subsidiaries                                                                                      |   |
| Consolidated                Balance Sheet                                                                                         |   |
| June                30, 2007                                                                                            |   |
| (Unaudited)                                                                                                                       |   |
|                                                                                                                              |   |
|                                                                                                                              |   |   |        |
| ASSETS                                                                                                                            |   |
| CURRENT                ASSETS:                                                                                                    |   |   |        |
|      Cash                and cash equivalents                                                            |   | $      | 79,889      |   |
|      Accounts                receivable, net of reserve of $4,000                                        |   |   | 192,090     |   |
|      Inventories                                                                                         |   |   | 226,174     |   |
|      Prepaid                expenses and other current assets                                            |   |   | 66,684      |   |
|      Assets                of discontinued operation (Note 3)                                            |   |   | 11,134      |   |
|           Total                current assets                                   |   |   | 575,971     |   |
|                                                                                                                              |   |   |        |   |
| PROPERTY                AND EQUIPMENT, net                                                                                        |   |   | 230,271     |   |
| OTHER                ASSETS                                                                                                       |   |   | 877,811     |   |
|           Total                Assets                                           |   | $      | 1,684,053   |   |
|                                                                                                                              |   |   |        |   |
| LIABILITIES,                PREFERRED STOCK AND STOCKHOLDERS' DEFICIT                                                             |   |
| CURRENT                LIABILITIES:                                                                                               |   |   |        |   |
|      Notes                payable (Note 5)                                                               |   | $      | 136,738     |   |
|      Convertible                notes payable (Note 5)                                                   |   |   | 650,000     |   |
|      Accounts                payable                                                                     |   |   | 565,647     |   |
|      Accrued                expenses                                                                     |   |   | 1,601,805   |   |
|      Current                portion of long-term capital leases                                          |   |   | 2,823       |   |
|      Current                portion of deferred lessor incentive                                         |   |   | 13,400      |   |
|      Fair                value of warrants (Note 10)                                                     |   |   | 309,592     |   |
|      Fair                value of embedded derivatives (Note 10)                                         |   |   | 363,802     |   |
|      Liabilities                of discontinued operation (Note 3)                                       |   |   | 8,293       |   |
|           Total                current liabilities                              |   |   | 3,652,100   |   |
|                                                                                                                              |   |   |        |   |
| CONVERTIBLE                LONG-TERM NOTES PAYABLE                                                                                |   |   | 4,029,976   |   |
| DEFERRED                LESSOR INCENTIVE, LESS CURRENT PORTION                                                                    |   |   | 26,800      |   |
|           Total                liabilities                                      |   |   | 7,708,876   |   |
|                                                                                                                              |   |   |        |   |
| REDEEMABLE                CONVERTIBLE AND CONVERTIBLE PREFERRED                                                                   |   |   |        |   |
|       STOCK                (Note 6)                                                                 |   |   | 3,207,798   |   |
|                                                                                                                              |   |   |        |   |
| COMMITMENTS                                                                                                                       |   |   |        |   |
|                                                                                                                              |   |   |        |   |
| STOCKHOLDERS'                DEFICIT:                                                                                             |   |   |        |   |
|      Series                B convertible preferred stock, $.01 par value; authorized                     |   |   |        |   |
|           5,000,000                shares; 5,689 shares issued and outstanding  |   |   | 57          |   |
|      Common                Stock, $.01 par value; authorized 100,000,000 shares;                         |   |   |        |   |
|           34,138,770                shares issued and outstanding               |   |   | 341,388     |   |
|      Additional                paid-in capital                                                           |   |   | 49,689,719  |   |
|      Accumulated                deficit                                                                  |   |   | (59,263,785 | ) |
|          Total                stockholders' deficit                                  |   |   | (9,232,621  | ) |
|          Total                Liabilities, Preferred Stock and Stockholders' Deficit |   | $      | 1,684,053   |   |
|                                                                                                                              |   |   |        |   |
|                                                                                                                              |   |   |        |   |
|                                                                                                                              |   |   |        |   |
| See                accompanying notes to consolidated financial statements.                                                       |   |
|                                                                                                                              |   |   |        |   |

----

| Avitar,                Inc. and Subsidiaries                                                                 |   |
|--------------------------------------------------------------------------------------------------------------|--------|
| Consolidated                Statements of Operations                                                         |   |
| (Unaudited)                                                                                                  |   |
|                                                                                                         |   |
|                                                                                                         |   | THREE                MONTHS ENDED JUNE 30, |   |   | NINE                MONTHS ENDED JUNE 30, |   |
|                                                                                                         |   | 2007 |   |   | 2006 |   |   | 2007 |   |   | 2006 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| SALES                                                                                                        |   | $ | 778,716 |   |   | $ | 1,201,519 |   |   | $ | 2,440,324 |   |   | $ | 3,161,884 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING                EXPENSES                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Cost                of sales                                                   |   |   | 561,583 |   |   |   | 875,314 |   |   |   | 1,802,800 |   |   |   | 2,245,043 |   |
|      Selling,                general and administrative expenses                    |   |   | 741,554 |   |   |   | 912,566 |   |   |   | 2,528,088 |   |   |   | 2,860,805 |   |
|      Research                and development expenses                               |   |   | 72,492 |   |   |   | 109,738 |   |   |   | 245,757 |   |   |   | 348,692 |   |
|           Total                operating expenses          |   |   | 1,375,629 |   |   |   | 1,897,618 |   |   |   | 4,576,645 |   |   |   | 5,454,540 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS                FROM OPERATIONS                                                                          |   |   | (596,913 | ) |   |   | (696,099 | ) |   |   | (2,136,321 | ) |   |   | (2,292,656 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER                INCOME (EXPENSE)                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Interest                expense and financing costs                            |   |   | (362,964 | ) |   |   | (825,211 | ) |   |   | (1,009,510 | ) |   |   | (1,214,297 | ) |
|      Other                income (expense), net                                     |   |   | 1,280,571 |   |   |   | 217,962 |   |   |   | 1,660,548 |   |   |   | 210,664 |   |
|           Total                other income (expense), net |   |   | 917,607 |   |   |   | (607,249 | ) |   |   | 651,038 |   |   |   | (1,003,633 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INCOME                (LOSS) FROM CONTINUING OPERATIONS                                                      |   |   | 320,694 |   |   |   | (1,303,348 | ) |   |   | (1,485,283 | ) |   |   | (3,296,289 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DISCONTINUED                OPERATIONS (Note 3)                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Loss                from the operations of BJR                                             |   |   | (20,172 | ) |   |   | (25,690 | ) |   |   | (56,680 | ) |   |   | (79,664 | ) |
|    Income                from disposal of USDTL                                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 120,000 |   |
|    Income                (loss) from discontinued operations                                  |   |   | (20,172 | ) |   |   | (25,690 | ) |   |   | (56,680 | ) |   |   | 40,336 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET                INCOME (LOSS)                                                                             |   | $ | 300,522 |   |   | $ | (1,329,038 | ) |   | $ | (1,541,963 | ) |   | $ | (3,255,953 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                INCOME (LOSS) PER SHARE FROM                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    CONTINUING                OPERATIONS (Note 8)                                              |   | $ | 0.01 |   |   | $ | (0.30 | ) |   | $ | (0.08 | ) |   | $ | (0.79 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                INCOME (LOSS) PER SHARE FROM                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    DISCONTINUED                OPERATIONS (Note 8)                                            |   |   | - |   |   |   | (0.01 | ) |   |   | - |   |   |   | 0.01 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                INCOME (LOSS) PER SHARE (Note 8)                                                        |   | $ | 0.01 |   |   | $ | (0.31 | ) |   | $ | (0.08 | ) |   | $ | (0.78 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED                INCOME (LOSS) PER SHARE FROM                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    CONTINUING                OPERATIONS (Note 8)                                              |   | $ | - |   |   | $ | (0.30 | ) |   | $ | (0.08 | ) |   | $ | (0.79 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED                INCOME (LOSS) PER SHARE FROM                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    DISCONTINUED                OPERATIONS (Note 8)                                            |   |   | - |   |   |   | (0.01 | ) |   |   | - |   |   |   | 0.01 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED                INCOME (LOSS) PER SHARE (Note 8)                                                      |   | $ | - |   |   | $ | (0.31 | ) |   | $ | (0.08 | ) |   | $ | (0.78 | ) |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BASIC                WEIGHTED AVERAGE                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      NUMBER                OF COMMON SHARES OUTSTANDING                             |   |   | 28,025,823 |   |   |   | 4,480,981 |   |   |   | 19,726,267 |   |   |   | 4,301,369 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED                WEIGHTED AVERAGE                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      NUMBER                OF COMMON SHARES OUTSTANDING                             |   |   | 100,000,000 |   |   |   | 4,480,981 |   |   |   | 19,726,267 |   |   |   | 4,301,369 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements.                                  |   |
|                                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Avitar,                Inc. and Subsidiaries                                |   |                           |   |   |
|-----------------------------------------------------------------------------|--------|--------------------------------|--------|--------|
| Consolidated                Statement of Stockholders' Deficit              |   |                           |   |   |
| Nine                Months Ended June 30, 2007                              |   |                           |   |   |
| (Unaudited)                                                                 |   |                           |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   | Preferred                Stock |   |   | Common                Stock |   |   |   |   |   |   |   |   | Total |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   | Additional |   |   | Accumulated |   |   | Stockholders' |   |
|                                                                        |   | Shares                         |   |   | Amount |   |   | Shares |   |   | Amount |   |   | paid-in                capital |   |   | deficit |   |   | Deficit |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at September 30, 2006                                |   |                           | 5,689  |   |   | $ | 57 |   |   |   | 8,505,036 |   |   | $ | 85,051 |   |   | $ | 49,340,197 |   |   | $ | (57,608,867 | ) |   | $ | (8,183,562 | ) |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion                of Series E preferred stock                       |   |                           | -      |   |   |   | - |   |   |   | 7,728,734 |   |   |   | 77,287 |   |   |   | 45,468 |   |   |   | - |   |   |   | 122,755 |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion                of long-term convertible note                     |   |                           | -      |   |   |   | - |   |   |   | 17,605,000 |   |   |   | 176,050 |   |   |   | 203,103 |   |   |   | - |   |   |   | 379,153 |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                based compensation                                     |   |                           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 94,951 |   |   |   | - |   |   |   | 94,951 |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                issued for services                                    |   |                           | -      |   |   |   | - |   |   |   | 300,000 |   |   |   | 3,000 |   |   |   | 6,000 |   |   |   | - |   |   |   | 9,000 |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion                of preferred stock dividends                       |   |                           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (112,955 | ) |   |   | (112,955 | ) |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loss                                                     |   |                           | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,541,963 | ) |   |   | (1,541,963 | ) |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at June 30, 2007                                     |   |                           | 5,689  |   |   | $ | 57 |   |   |   | 34,138,770 |   |   | $ | 341,388 |   |   | $ | 49,689,719 |   |   | $ | (59,263,785 | ) |   | $ | (9,232,621 | ) |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                accompanying notes to consolidated financial statements. |   |                           |   |   |   |

----

| Avitar,                  Inc. and Subsidiaries                                                                                                                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Condensed                  Consolidated Statements of Cash Flows                                                                                                         |   |
| (Unaudited)                                                                                                                                                              |   |
|                                                                                                                                                                     |   | NINE                  MONTHS ENDED JUNE 30, |   |
|                                                                                                                                                                     |   | 2007 |   |   | 2006 |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                                                                                                                   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |
|      Loss                  from continuing operations                                                                                           |   | $ | (1,485,283 | ) |   | $ | (3,296,289 | ) |
|      Loss                  (income) from discontinued operations                                                                                |   |   | (56,680 | ) |   |   | 40,336 |   |
|      Net                  loss                                                                                                                  |   |   | (1,541,963 | ) |   |   | (3,255,953 | ) |
|      Adjustments                  to reconcile net loss to                                                                                      |   |   |   |   |   |   |   |   |
| net                  cash used in operating activities:                                                                                                                  |   |   |   |   |   |
|                Depreciation                  and amortization                                 |   |   | 109,751 |   |   |   | 130,996 |   |
|                Amortization                  of debt discount and deferred financing costs    |   |   | 666,923 |   |   |   | 400,674 |   |
|                Amortization                  of deferred lessor incentive                     |   |   | (10,050 | ) |   |   | (10,050 | ) |
|                Expense                  for stock based compensation                          |   |   | 94,951 |   |   |   | - |   |
|                Common                  stock issued for services                              |   |   | 9,000 |   |   |   | - |   |
| Income                  from changes in value of embedded derivatives                                                                                                    |   |
|   and                  warrants                                                                                                                                |   |   | (1,659,973 | ) |   |   | (215,856 | ) |
|                Interest                  expense from warrant replacement for long-term notes |   |   | - |   |   |   | 605,000 |   |
| Changes                  in operating assets and liabilities:                                                                                                            |   |
|      Accounts                  receivable                                                                                                       |   |   | 369,013 |   |   |   | 35,910 |   |
|      Inventories                                                                                                                                |   |   | 45,624 |   |   |   | 108,083 |   |
|      Prepaid                  expenses and other current assets                                                                                 |   |   | 75,882 |   |   |   | 106,632 |   |
|      Other                  assets                                                                                                              |   |   | - |   |   |   | 9,662 |   |
|      Accounts                  payable and accrued expenses                                                                                     |   |   | 522,268 |   |   |   | 268,792 |   |
|      Deferred                  revenue                                                                                                          |   |   | (4,400 | ) |   |   | (200 | ) |
|      Net                  assets of discontinued operations                                                                                     |   |   | 11,691 |   |   |   | (12,336 | ) |
|           Net                  cash used in operating activities                                                       |   |   | (1,311,283 | ) |   |   | (1,828,646 | ) |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES:                                                                                                                   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|      Purchases                  of property and equipment                                                                                       |   |   | (21,011 | ) |   |   | (90,384 | ) |
|           Net                  cash used in investing activities                                                       |   |   | (21,011 | ) |   |   | (90,384 | ) |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES:                                                                                                                   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|      Repayment                  of notes payable and long-term debt                                                                             |   |   | (61,760 | ) |   |   | (131,211 | ) |
|      Sales                  of redeemable preferred stock, common stock and warrants                                                            |   |   | - |   |   |   | 2,840 |   |
|      Net                  proceeds from issuance of convertible long-term debt                                                                  |   |   | 1,193,400 |   |   |   | 1,840,000 |   |
|      Redemption                  of Series A redeemable convertible preferred stock                                                             |   |   | - |   |   |   | (150,000 | ) |
|      Payment                  of cash dividend on Seires A redeemable convertible preferred                  stock                              |   |   | - |   |   |   | (5,417 | ) |
|            Net                  cash provided by financing activities                                             |   |   | 1,131,640 |   |   |   | 1,556,212 |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| NET                  DECREASE IN CASH AND CASH EQUIVALENTS                                                                                                               |   |   | (200,654 | ) |   |   | (362,818 | ) |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS, beginning of the period                                                                                                      |   |   | 280,543 |   |   |   | 400,363 |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS, end of the period                                                                                                            |   | $ | 79,889 |   |   | $ | 37,545 |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL                  DISCLOSURES OF CASH FLOW INFORMATION                                                                                                       |   |
|      Cash                  paid during period:                                                                                                  |   |   |   |   |   |   |   |   |
|           Income                  taxes                                                                                |   | $ | - |   |   | $ | - |   |
|           Interest                                                                                                     |   | $ | 9,661 |   |   | $ | 25,144 |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL                  SCHEDULE OF NONCASH INVESTING AND                                                                                                          |   |
|     FINANCING                  ACTIVITIES:                                                                                                           |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| During                  the nine months ended June 30, 2007, 120,901 shares                  of                                                                     |   |
|                    Series E redeemable convertible preferred stock were converted                  into                                                             |   |
|                    7,728,734 shares of common stock.                                                                                                                |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| During                  the nine months ended June 30, 2007, convertible long-term                                                                                       |   |
|                    debt of $238,128 was converted into 17,605,000 shares of                                                                                         |   |
|   common                  stock.                                                                                                                               |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| During                  the nine months ended June 30, 2007, 300,000 shares of                                                                                           |   |
|                    common stock were issued for consulting services.                                                                                                |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| During                  the nine months ended June 30, 2006, 270,000 shares                  of                                                                     |   |
|                    Series E redeemable convertible preferred stock were converted                  into                                                             |   |
|                    790,942 shares of common stock.                                                                                                                  |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| During                  the nine months ended June 30, 2006, $34,937 of                                                                                                  |   |
|                    long-term convertible notes were converted into                                                                                                  |   |
|                    215,000 shares of common stock.                                                                                                                  |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| During                  the nine months ended June 30, 2006, 8,333 shares of                                                                                        |   |
|                    Series C convertible preferred stock were converted into                                                                                         |   |
|                    90,910 shares of common stock.                                                                                                                   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
|                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| See                  accompanying notes to consolidated financial statements.                                                                                            |   |

----

| 1. | Basis                of Presentation |
|----|--------------------------------------|

| 2. | Inventories |
|----|-------------|

| *June                30*                     |   | *2007* |   |
|----------------------------------------------|--------|--------|--------|
| Cash                                         |   | $      | 2,919  |   |
| Accounts                receivable           |   |   | 8,215  |   |
| Total                assets                  |   |   | 11,134 |   |
| Accounts                payable and accruals |   |   | 8,293  |   |
| Net                assets                    |   | $      | 2,841  |   |

----

|                                                                                |   | Three                MonthsEnded                June 30, |    |   | Nine                MonthsEnded                June 30, |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------|---------|--------|---------------------------------------------------------|--------|
|                                                                                |   | 2007                                                     |    |   | 2006                                                    |   |   | 2007 |   |   | 2006 |   |
| Sales-BJR                                                                           |   | $                                                        | 33,732  |   |                                                    | $      | 107,056 |   |   | $ | 232,320 |   |   | $ | 351,227 |   |
| Operating                expenses-BJR                                               |   |                                                     | 53,108  |   |                                                    |   | 132,746 |   |   |   | 288,204 |   |   |   | 430,891 |   |
| Other                income (expense)                                               |   |                                                     | (796    | )      |                                                    |   | - |   |   |   | (796 | ) |   |   | 120,000 |   |
| Income                (loss) from  discontinued                operations |   | $                                                        | (20,172 | )      |                                                    | $      | (25,690 | ) |   | $ | (56,680 | ) |   | $ | 40,336 |   |

| 4. | Major                Customers |
|----|--------------------------------|

|                        |   | Three                  Months Ended June 30, |    |   | Nine                  Months Ended June 30, |   |
|-----------------------------|--------|----------------------------------------------|---------|--------|---------------------------------------------|--------|
|                        |   | 2007                                         |    |   | 2006                                        |   |   | 2007 |   |   | 2006 |   |
| Customer                  A |   | $                                            | *       |   |                                        | $      | 212,272 |   |   | $ | * |   |   | $ | 744,858 |   |
| Customer                  B |   |                                         | 150,000 |   |                                        |   | * |   |   |   | 304,540 |   |   |   | * |   |
| Customer                  C |   |                                         | 86,319  |   |                                        |   | * |   |   |   | * |   |   |   | * |   |
| Customer                  D |   |                                         | *       |   |                                        |   | 162,319 |   |   |   | * |   |   |   | * |   |
| Customer                  E |   |                                         | *       |   |                                        |   | 148,132 |   |   |   | * |   |   |   | * |   |

|   | 5.   Notes                Payable and Short and Long-term Convertible Notes                Payable |
|--------|-------------------------------------------------------------------------------------------------------------------|

|              From                April to August 2005, the Company executed convertible notes with                an                individual in the total principal amount of $650,000 with interest                at                10%.  Each note has a maturity date of six months from the date                of the note and is payable in ten monthly installments plus accrued                interest commencing on the maturity date of the note.  The                notes, that were due in variable monthly installments plus accrued                interest from October 1, 2005 and June 30, 2006, were outstanding                at June                30, 2007. Under the terms of the notes, the entire unpaid principal                balance and accrued interest shall become due and payable upon the                occurrence of any default by the Company in the payment of interest                and                principal on the due date thereof and any such default that remains                unremedied for twenty business day following written notice to the                Company                by the holders.  No written notice of default from the holders                of these notes has been received by the Company. The Company issued                warrants to purchase 650,000 shares of common stock at $1.65 to $4.95                per                share for three years in connection with these notes.  In                addition, the entire principal plus accrued interest associated with                these                notes is convertible into the Company’s common stock at a conversion                price of                the lesser of the closing price of the common stock on the date of                the                loan or 85% of the average closing price of the common stock for                the five                trading days preceding the notice of conversion.  In no event                shall the conversion price be lower than 50% of the closing price                of the                common stock on the date of the loan. A discount to debt totaling                $172,930                ($156,800 for the value of the conversion feature of these notes                and                $16,130 for the value of the warrants issued in connection with these                notes) was recorded during Fiscal year 2005 and was fully amortized                over                the term of the notes.  A liability of approximately $173,000                was recorded for the fair value of the warrants issued in connection                with                the $650,000 of notes and the conversion feature, which was reduced                to its                market value of $0 at June 30,                2007. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 6. | Convertible                and Redeemable Convertible Preferred                Stock |
|----|--------------------------------------------------------------------------------------|

|     In                December 2004, the Company sold 1,285 shares of Series A Redeemable                Convertible Preferred Stock and warrants to purchase 12,000 shares                of                common stock for which it received net proceeds of approximately                $1,160,000. The Series A Redeemable Convertible Preferred Stock,                with a                face value of $1,285,000, was convertible into common stock at the                lesser                of $6.00 per share or 85% of the average of the three lowest closing                bid                prices, as reported by Bloomberg, for the ten trading days immediately                prior to the notice of conversion subject to adjustments and floor                prices.  The warrants are exercisable at $6.30 per                share.  The warrants and the conversion feature resulted in a                deemed dividend of $1,058,260 being recorded and included in the                earnings                per share calculation for the year ended September 30, 2005. A liability                of approximately $1,058,260 was recorded for the original fair value                of                the warrants and the conversion feature, which was reduced to its                market                value of $24 at June 30, 2007. As of June 30, 2007, 1,135 shares                of this                preferred stock had been converted into 452,156 shares of common                stock and                the remaining 150 shares of Series A redeemable convertible preferred                stock, with a face value of $150,000, were redeemed by the Company                in                October 2005 for $155,417 which included accrued dividends of                $5,417. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7. | Common                and Series B Convertible Preferred                Stock |
|----|-------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                                                                                                           |   | Three                  MonthsEnded                  June 30,     |        | Nine                  Months Ended                  June 30,     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|-------------|--------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                           |   | 2007                                                                                 |        |                                                                                 | 2006 |   |   | 2007 |   |   | 2006 |   |
| Income                  (loss) from continuing  operations                                                                                                                                                                                                                                                                                           |   | $                                                                                    | 320,694     |                                                                                 |   | $ | (1,303,348 | ) |   | $ | (1,485,283 | ) |   | $ | (3,296,289 | ) |
| Less:                                                                                                                                                                                                                                                                                                                                                          |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|   Preferred                  Stock Dividends                                                                                                                                                                                                                                                                                                         |   |                                                                                 | (37,776     | )                                                                                    |   |   | (40,152 | ) |   |   | (114,285 | ) |   |   | (122,305 | ) |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (loss) attributable to  common stockholders                  from  continuing operations                                                                                                                                                                                                                           |   |                                                                                 | 282,918     |                                                                                 |   |   | (1,343,500 | ) |   |   | (1,599,568 | ) |   |   | (3,418,594 | ) |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Add:                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Income (loss) from discontinued  operations                                                                                                                                                                                                                                                                                  |   |                                                                                 | (20,172     | )                                                                                    |   |   | (25,690 | ) |   |   | (56,680 | ) |   |   | 40,336 |   |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income (loss) attributable to  common stockholders                  used  in basic EPS                                                                                                                                                                                                                                |   | $                                                                                    | 262,746     |                                                                                 |   | $ | (1,369,190 | ) |   | $ | (1,656,248 | ) |   | $ | (3,378,258 | ) |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Add:                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Changes                  in Fair Value of Derivative Securities                  and  Warrants                                                                                                                                                                                                                               |   |                                                                                 | (211,983    | )                                                                               |   |   | - |   |   |   | - |   |   |   | - |   |
|                    Interest on Convertible Debt                                                                                                                                                                                                                                                                                                           |   |                                                                                 | 41,499      |                                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income (loss) attributable to common stockholders used  in                  diluted EPS                                                                                                                                                                                                                                         |   | $                                                                                    | 92,262      |                                                                                 |   | $ | (1,369,190 | ) |   | $ | (1,656,248 | ) |   | $ | (3,378,258 | ) |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of  common shares outstanding  for                  basic EPS                                                                                                                                                                                                                                     |   |                                                                                 | 28,025,823  |                                                                                 |   |   | 4,480,981 |   |   |   | 19,726,267 |   |   |   | 4,301,369 |   |
| Effect                  of dilutive common  equivalent shares:                                                                                                                                                                                                                                                                                       |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                    Warrants                                                                                                                                                                                                                                                                                                                               |   |                                                                                 | 4,243,007   |                                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |
|                    Convertible debt                                                                                                                                                                                                                                                                                                                       |   |                                                                                 | 67,731,170  |                                                                                 |   |   | - |   |   |   | - |   |   |   | - |   |
| Weighted                  average number of  common shares                  outstanding  for diluted                  EPS                                   |   |                                                                                 | 100,000,000 |                                                                                 |   |   | 4,480,981 |   |   |   | 19,726,267 |   |   |   | 4,301,369 |   |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  EPS:                                                                                                                                                                                                                                                                                                                                    |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (loss) per share applicable to common stockholders  before                  discontinued operations                                                                                                                                                                                                                          |   | $                                                                                    | 0.01        |                                                                                 |   | $ | (0.30 | ) |   | $ | (0.08 | ) |   | $ | (0.79 | ) |
| Impact                  of discontinued operations                                                                                                                                                                                                                                                                                                             |   |                                                                                 | -           |                                                                                 |   |   | (0.01 | ) |   |   | - |   |   |   | 0                  .01 |   |
| Basic                  income (loss) per share  applicable to                  common  stockholders                                                                                                                                                                                                                                        |   | $                                                                                    | 0.01        |                                                                                 |   | $ | (0.31 | ) |   | $ | (0.08 | ) |   | $ | (0.78 | ) |
|                                                                                                                                                                                                                                                                                                                                                           |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  EPS:                                                                                                                                                                                                                                                                                                                                  |   |                                                                                 |        |                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  (loss) per share applicable to common stockholders  before                  discontinued                    operations                                                                                                        |   | $                                                                                    | 0.00        |                                                                                 |   | $ | (0.30 | ) |   | $ | (0.08 | ) |   | $ | (0.79 | ) |
| Impact                  of discontinued operations                                                                                                                                                                                                                                                                                                             |   |                                                                                 | -           |                                                                                 |   |   | (0.01 | ) |   |   | (- | ) |   |   | 0.                  01 |   |
| Diluted                  income (loss) per share  applicable to                  common  stockholders                                                                                                                                                                                                                                      |   | $                                                                                    | 0.00        |                                                                                 |   | $ | (0.31 | ) |   | $ | (0.08 | ) |   | $ | (0.78 | ) |

|                                           |   | SharesAvailablefor                  Grant |      |   | NumberOutstanding |   |    | WeightedAverageExercisePrice                  PerShare |   |   | WeightedAverageRemainingContractualTerm(years) |   |   | AggregateIntrinsicValue |   |
|------------------------------------------------|--------|-------------------------------------------|-----------|--------|-------------------|--------|---------|--------------------------------------------------------|--------|--------|------------------------------------------------|--------|--------|-------------------------|--------|
| Balance                  at September 30, 2006 |   |                                      | 1,042,000 |   |              |   | 179,079 |                                                   |   | $      | 19.77                                          |   |   |                    | 4.6    |   |   | $ | 0.00 |   |
| Options                  authorized            |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  granted               |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  exercised             |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  cancelled             |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
|                                           |   |                                      |      |   |              |   |    |                                                   |   |   |                                           |   |   |                    |   |   |   |   |   |   |
| Balance                  at December 31, 2006  |   |                                      | 1,042,000 |   |              |   | 179,079 |                                                   |   | $      | 19.77                                          |   |   |                    | 4.4    |   |   | $ | 0.00 |   |
| Options                  authorized            |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  granted               |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  exercised             |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  cancelled             |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
|                                           |   |                                      |      |   |              |   |    |                                                   |   |   |                                           |   |   |                    |   |   |   |   |   |   |
| Balance                  at March 31, 2007     |   |                                      | 1,042,000 |   |              |   | 179,079 |                                                   |   | $      | 19.77                                          |   |   |                    | 4.0    |   |   | $ | 0.00 |   |
| Options                  authorized            |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  granted               |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    |   |   |   |   |   |   |
| Options                  exercised             |   |                                      | -         |   |              |   | -       |                                                   |   |   | -                                              |   |   |                    | -      |   |   |   |   |   |
| Options                  cancelled             |   |                                      | -         |   |              |   | (19,843 | )                                                      |   |   | 1.37                                           |   |   |                    | (.4    | ) |   |   |   |   |
|                                           |   |                                      |      |   |              |   |    |                                                   |   |   |                                           |   |   |                    |   |   |   |   |   |   |
| Balance                  at June 30, 2007      |   |                                      | 1,042,000 |   |              |   | 159,236 |                                                   |   | $      | 21.14                                          |   |   |                    | 3.6    |   |   | $ | 0.00 |   |
|                                           |   |                                      |      |   |              |   |    |                                                   |   |   |                                           |   |   |                    |   |   |   |   |   |   |
| Exercisable                  at June 30, 2007  |   |                                      |      |   |              |   | 97,719  |                                                   |   | $      | 25.95                                          |   |   |                    | 3.4    |   |   |   |   |   |

|                                                                                                                                                                                                                                                                                       |   | For                  the threeMonths                  Ended June                  30, 2006 |       |   | For                  the nineMonths                  EndedJune                  30, 2006 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|------------|--------|------------------------------------------------------------------------------------------|--------|
| Net                  loss                                                                                                                                                                                                                                                                  |   | $                                                                                               | (1,329,038 | )      |                                                                                     | $      | (3,255,953 | ) |
| Add:                  stock based employee compensation     expense                  included in reported net loss,     net                  of tax                                                                                      |   |                                                                                            | -          |   |                                                                                     |   | - |   |
| Deduct:                  total stock based employee     compensation                  expense determined     under                  the fair value based method for     all                  awards, net of tax |   |                                                                                            | (30,742    | )      |                                                                                     |   | (92,079 | ) |
| Pro                  forma net loss                                                                                                                                                                                                                                                        |   | $                                                                                               | (1,359,780 | )      |                                                                                     | $      | (3,348,032 | ) |
| Loss                  per share:                                                                                                                                                                                                                                                           |   |                                                                                            |       |   |                                                                                     |   |   |   |
| Basic                  and diluted - as reported                                                                                                                                                                                                                                           |   | $                                                                                               | (.30       | )      |                                                                                     | $      | (.76 | ) |
| Basic                  and diluted - pro forma                                                                                                                                                                                                                                             |   | $                                                                                               | (.30       | )      |                                                                                     | $      | (.78 | ) |

*. *

----

----

**Results      of Operations**

*Revenues*

*Operating      Expenses*

*Other      Income and Expense*

*Discontinued      Operations*

*Net      Loss*

**Financial      Condition and Liquidity**

**Recent      Accounting Pronouncements**

*. *

**Forward-Looking      Statements and Associated Risks**

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| (a) | Exhibits: |
|-----|-----------|

| Exhibit                No.                                                                     |                           Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  31.1   31.2   32.1   32.2    |  Rule                13a-14(a)/15d-14(a) Certification , asAdopted                Pursuant to Section 302 of the Sarbanes-OxleyAct                of 2002 Rule                13a-14(a)/15d-14(a) Certification , asAdopted                Pursuant to Section 302 of the Sarbanes-OxleyAct                of 2002 Certification                Pursuant to 18 U.S.C. Section 1350, asAdopted                Pursuant to Section 906 of the Sarbanes-OxleyAct                of 2002 Certification                Pursuant to 18 U.S.C. Section 1350, asAdopted                Pursuant to Section 906 of the Sarbanes-OxleyAct                of 2002  |

----

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| Exhibit                No.                                                                     |                           Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  31.1   31.2   32.1   32.2    |  Rule                13a-14(a)/15d-14(a) Certification, asAdopted                Pursuant to Section 302 of the Sarbanes-OxleyAct                of 2002 Rule                13a-14(a)/15d-14(a) Certification, asAdopted                Pursuant to Section 302 of the Sarbanes-OxleyAct                of 2002 Certification                Pursuant to 18 U.S.C. Section 1350, asAdopted                Pursuant to Section 906 of the Sarbanes-OxleyAct                of 2002 Certification                Pursuant to 18 U.S.C. Section 1350, asAdopted                Pursuant to Section 906 of the Sarbanes-OxleyAct                of 2002  |