UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-KSB/A

(Amendment No. 1)







|x | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------

for the fiscal year ended March 31, 2008



| ̈ | Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

for the transition period from _______ to _______

Commission file number 000-51925





ALCiS HEALTH, INC.

A DELAWARE CORPORATION





IRS EMPLOYER IDENTIFICATION
NO. 72-1235451

2001 Gateway Place, Suite 520W

San Jose, CA 95110

408-437-1060

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



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on Which Registered
|None                |  | None                                     

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

Common Stock, $0.001 par value per share





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

Check whether the issuer
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the
best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  x

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

The issuers revenues for the fiscal year
ended March 31, 2008 were $1,571,469.

The aggregate market value of common stock held by non-affiliates at May 31, 2008 was $6,005,438 (see
Note A)

As of June 15, 2008, there were 9,021,902 outstanding shares of common stock, par value $.001 per share.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format:    Yes   ̈    No  x

Note A: Based upon the $2.00 price in the most
recent transaction involving the sale of the Companys common stock as there is no active trading market for our stock.









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EXPLANATORY NOTE

ALCiS Health, Inc. is filing this Amendment No. 1 (the Amended Report) to its Annual Report on Form 10-KSB for the fiscal year ended March 31, 2008, filed with the Securities and Exchange Commission (the
SEC) on June 27, 2008 (the Original Report) in order to add certain information required by the following items of Form 10-KSB:



Item

DescriptionItem 9

Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange ActItem 10

Executive CompensationItem 11

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 12

Certain Relationships and Related Transactions, and Director IndependenceItem 13

ExhibitsItem 14

Principal Accountant Fees and Services


The Amended Report amends the Original Report and is being filed solely to amend Items 9,
10, 11, 12, 13 and 14 of Part III of the Original Report by deleting the text of such Items 9, 10, 11, 12, 13 and 14 in their entirety and replacing them with the information provided below under the respective headings.

The Amended Report contains the complete text of the Original Report except as noted in the immediately preceding sentence, with the additional
information appearing in Items 9, 10, 11, 12, 13 and 14 of Part III.

Except as otherwise expressly stated for the items amended in this
Amended Report, this Amended Report continues to speak as of the date of the Original Report and we have not updated the disclosure contained herein to reflect events that have occurred since the filing of the Original Report. Accordingly, this
Amended Report should be read in conjunction with our Original Report and our other filings made with the SEC subsequent to the filing of the Original Report.



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PART I



|Item 1. | Description of Business
|------- | -----------------------

Forward-looking
Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical
facts and are based on current expectations, estimates, and projections about our industry; our beliefs and assumptions; and our goals and objectives. Words such as anticipates, expects, intends,
plans, believes, seeks, and estimates, and variations of these words and similar expressions are intended to identify forward-looking statements. Examples of the kinds of forward-looking statements in
this report include statements regarding the following: (1) our sales and marketing goals and objective and strategies and plans including that we expect that during fiscal 2009,our sales mix will change to where the majority of our revenue is
coming from retail outlets., (2) expectations as to the number of employees we will have, (3) our future plans as to facilities and research and development activities, (4) the growth rate of the worldwide analgesic market,
(5) our new product plans, (6) our expectation that our products are poised to be the first real innovative treatment alternative in the OTC topical analgesic market and will achieve strong success, (7) the Companys anticipated
product development and advertising and promotion expenses during some or all of fiscal 2009, (8) the belief that the Company through its contract manufacturer has ample production capacity in place to handle any projected increase in business
for fiscal 2009, (9) the anticipation that the available funds and expected cash usage from operations will be sufficient to meet the liquidity and capital requirements for the next three months to five months, (10) our plans to raise debt
and equity financing, and (11) our contingency plan if we dont raise financing in the next two to three months to then reduce expenses so that we can stretch our cash for another two months . These statements are only predictions, are not
guarantees of future performance, and are subject to risks, uncertainties, and other factors, some of which are beyond our control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in
the forward-looking statements. These risks and uncertainties include, but are not limited to, whether we are able to recruit key personnel, whether we generate enough cash from product sales or financing to conduct the marketing activities we
desire, whether customers like our products and perceive that they receive benefits from their usage, whether BioZone continues to make our product in a quality and timely manner, whether we are able to obtain retail shelf space, whether larger
companies decide to compete head-on with our products, no material adverse changes in the demand for the Companys products, competition to supply OTC products in the markets in which the Company competes does not increase and cause price
erosion, that there are no unexpected manufacturing issues as production ramps up, the demand for the Companys products is such that it would be unwise not to decrease research and development; our not having unanticipated cash requirements;
our not having difficulty raising financing on attractive or any terms; and our ability to effectively reduce cash expenses quickly as a contingency as well as risk and other factors detailed in this report, especially under the caption Risk
Factors at the end of this Item 1. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Overview

ALCiS-CA was formed (under the name ALCiS
Health, Inc.) as a California corporation on April 13, 2004. On March 31, 2006, ALCIS-CA entered into a reverse triangular merger (the Merger) with Registrant Emerging Delta Corporation and a newly-created wholly-owned
subsidiary of Registrant, Delta Acquisition Sub, Inc. (Sub). In the Merger, (1) Sub merged into ALCiS-CA, with ALCiS-CA being the surviving corporation and becoming a wholly-owned subsidiary of Registrant, and (2) ALCiS-CA
shareholders and holders of other equity interests received shares and other equity in Registrant in lieu of their ALCiS-CA shares and equity such that after the Merger they would own in excess of 96% of Registrants outstanding stock.
Registrant, a Delaware shell company with no prior operations, changed its name as part of the Merger to ALCiS Health, Inc. Below, references to we, us, our the Company or ALCiS shall refer
to the combined company and its subsidiary unless the context otherwise requires a different interpretation. In general, references to past actions and events of ALCiS prior to March 31, 2006 refer to ALCiS-CA, and references to current (i.e.
April 1, 2006 and later) and future matters related to ALCiS refer to the combined Emerging Delta Corporation/ALCiS-CA Company, which is the reporting company pursuant to this Form 10-KSB. In addition, in this Form 10-KSB, our fiscal years
ended March 31, 2006 and March 31, 2007 are referred to as fiscal 2006 and fiscal 2007, respectively, and our fiscal year ending on March 31, 2008 is referred to as fiscal 2008.

ALCiS principal business is researching, developing, marketing and distributing body therapy solutions, including but not limited to the area of
pain management products such as topical analgesics. Since formation, ALCiS principal activities have consisted of securing rights to proprietary technologies for its topical analgesic pain relief products, product and market research and
development resulting in the granting of several trademarks, the development of five products and related proprietary formulations, research into the markets for ALCiS products and the best channels through which to sell them,



1



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providing samples and selling to end customers and resellers to develop these channels, business planning and raising the capital necessary to fund these
activities. ALCiS began shipping product in fiscal 2006 and through March 31, 2008, had revenues of approximately $4.5 million and a net loss of approximately $12.7 million during the same period.

ALCiS principal product, ALCiS®
Daily Relief Pain Relief Cream, is based on the benefits and effectiveness of patented technology for topically applied pain relief in the form of a cream or lotion. The pain relief ingredients are delivered via a liposomal delivery system which
allows for penetration of active ingredients to the site of pain. ALCiS pain relief products are designed to be convenient, effective and available without a prescription.

ALCiS Proprietary Technology

ALCiS has exclusively licensed certain technology from BioZone
Laboratories, Inc. (BioZone) for its primary target market of topical analgesic pain relief products. We will refer to this technology as LDS (liposome delivery system). Certain aspects of the proprietary technology are
covered by recently awarded U.S. patents.

ALCiS flagship product, ALCiS® Daily Relief Pain Relief Cream, incorporates the patented LDS, which improves delivery of active ingredients to the lower layers of the skin, increasing the concentration of those active
ingredients, and providing a prolonged treatment that can last four to six hours. Utilizing the LDS technology increases the effectiveness of the ALCiS products. ALCiS promotes its Science of Relief® marketing strategy primarily in connection with the LDS technology. ALCiS goal is to create a new niche in the pain relief market  stylish, scientific, effective, topical products without medicinal
scents  capable of penetrating the well-established category of topical analgesics.

Daily use of ALCiS® Daily Relief Pain Relief Cream can cost less than $20 per month. In comparison, prescription oral drugs may cost about $80 per month while their generic over
the counter (OTC) counterparts cost approximately $15 per month. Thus, ALCiS is available at a cost that is comparable with OTC solutions, but ALCiS products have the significant benefit of providing pain relief without the risk of side
effects. ALCiS is priced comparably with a number of other products  some are more expensive, some less expensive. However, ALCiS offers a high level of efficacy in a product that is simple to use, without the safety concerns of other
solutions.

Products

ALCiS core
product is its Daily Relief Pain Relief Cream. In addition, ALCiS has launched a family of four complementary therapeutic products that perform a number of functions, i.e. cleansing, moisturizing, soothing, relaxing, scenting, etc. Importantly,
because the incorporated scientific technology is both flexible and odorless, a large array of additional products is available for future development.

The following are the most distinguishing characteristics of ALCiS products:



| |  |  | ALCiS products can provide recognizable relief from aches and pains.
| | - |  | --------------------------------------------------------------------



| |  |  | The patented and proprietary LDS delivers the active ingredients more quickly than traditional topical analgesics.
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | ALCiS products are more in the style of cosmetics  they do not have the odor, look, feel or marketing of the traditional style pain relief products. ALCiS
products are scientific, stylish, sophisticated and unique. ALCiS pain relief products can be bundled with other ALCiS skin therapy solutions such as bath soaks and foot rubs to increase the continuity of purchases.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In certain cases, ALCiS products may serve as a substitute for oral analgesic products, which have been known to have negative side effects for certain patients,
including gastro-intestinal bleeding, nausea, as well as cardiac events. Further, since ALCiS products are applied to the point of injury, the customer can treat the problem area without distribution of active ingredients throughout the entire body.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Core and Complementary Products

ALCiS has formulated and launched its core product and a family of four complementary companion products designed to provide a quick, convenient pain relief and/or therapeutic relief for consumers while providing a
potentially continuing and profitable revenue stream.



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| |  |  | ALCiS® Daily Relief Pain Relief Cream (Core Product)
| | - |  | ----------------------------------------------------



| |  |  | Therapeutic Body Soak (Complementary Product Extension)
| | - |  | -------------------------------------------------------



| |  |  | Therapeutic Body Scrub (Complementary Product Extension)
| | - |  | --------------------------------------------------------



| |  |  | Therapeutic Body Lotion (Complementary Product Extension)
| | - |  | ---------------------------------------------------------



| |  |  | Therapeutic Foot Rub (Complementary Product Extension)
| | - |  | ------------------------------------------------------

The full line of ALCiS products will include a unique set of total body therapy products which are used in a preventative regimen, i.e., products that have the benefit of relieving pain while also performing a number
of other functions, i.e., cleansing, moisturizing, soothing, relaxing, scenting, etc. The four new therapeutic products were test marketed throughout fiscal 2008 as an additional offering to our direct response television commercials. As they were
received favorably, the Company is currently formulating its marketing plan on how best to sell these products into the drug, grocery, specialty and mass retailers.

Other Additional Future Products

While ALCiS LDS technology forms a cornerstone to ALCiS
product development, not all ALCiS products will require the integration of licensed technology. Additional products targeted for potential future development include the following, some of which fall within the pain relief category, others within a
spa products category, and all of which are included within the concept of a total body therapy solution:



| |  |  | Massage Lotions, Massage Oils
| | - |  | -----------------------------



| |  |  | Foot Soaks & Rubs
| | - |  | -----------------



| |  |  | After Shave Balms
| | - |  | -----------------



| |  |  | Eczema Relief Creams
| | - |  | --------------------



| |  |  | Daily Exfoliating Cleansers
| | - |  | ---------------------------



| |  |  | Dermal Renewing Lotions
| | - |  | -----------------------



| |  |  | All-Day Moisturizing Creams
| | - |  | ---------------------------



| |  |  | Hydrating Creams
| | - |  | ----------------



| |  |  | Acne Creams & Eliminators
| | - |  | -------------------------



| |  |  | Shave Creams and Lotions
| | - |  | ------------------------



| |  |  | Sunburn Treatments
| | - |  | ------------------



| |  |  | ALCiS Dermatological Line (For Pre and Post Cosmetic Procedures)
| | - |  | ----------------------------------------------------------------

Markets

ALCiS addresses the growing needs of
the baby boomer market. Our products enable this unique customer segment, born between the years 1946 to 1964, to live more active and productive lives. ALCiS products incorporate advanced patented technology that provides a strong competitive
advantage. ALCiS® Daily Relief Pain Relief Cream, our flagship product, has earned the respect of the medical community and is endorsed by thousands of members of key medical specialties.

The boomer population is comprised of 78 million people and makes up 46 million households in the USA alone. These households
experience higher incomes and have a propensity to spend higher dollars per capita as they begin to focus more buying power on themselves. They are very active and do not want to purchase or even be affiliated with products or services that label
them as special or old.

The Boomer market segment has a desire for retaining its youthfulness and comfort.
Todays baby boomer is more active than any previous generation. Exercise and staying healthy are a major concern and focus. Many boomers believe they will live longer and be happier if they continue to be active. The typical boomer exercises
at least once a week and plans to increase the amount of exercise as a plan to maintain health and retain their youth, strength and general sense of well being in their later years.

The American Academy of Orthopedic Surgeons reports that older athletes are more susceptible to chronic and overuse injuries and Americans with
musculoskeletal problems will reach an all time-time high over the next several years.

The worldwide analgesic market has been estimated
at $50 billion for 2005, and growing by $25 billion every 5 years through 2015. Prescription products, such as opioids and nonsteroidal anti-inflammatory drugs (NSAIDs) such as COX-2 inhibitors constitute most of the market. Use of OTC
products in the United States is estimated at $3 billion, and topical analgesics are estimated at $500 -$700 million.



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The market opportunity for ALCiS body therapy and pain relief products is substantial. Some market
statistics are as follows:



| |  |  | With the aging of the U.S. population, the prevalence of doctor-diagnosed arthritis is expected to increase. By the year 2030, an estimated 67 million (25% of
the projected total adult population) will have doctor-diagnosed arthritis, compared with the 42.7 million adults in 2002 (Center for Disease Control).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Over 70 million people in the United States alone suffer from arthritis, tendonitis and bursitis, and virtually every adult suffers from occasional backaches,
strains, and sprains (The Arthritis Foundation).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately two-thirds of arthritis sufferers are women and it affects all age groups including nearly 300,000 children.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | The baby boomer generation is now a prime risk group, with more than two-thirds of arthritis sufferers being under the age of 65.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Arthritis is the number one cause of disability, and lower back pain is the leading cause of disability for sufferers under the age of 45.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A Gallup Poll (2002) shows that 4 out of 10 (42%) American adults say they experience pain daily, with nearly all Americans (89%) saying they
experience pain each month.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Arthritis causes $125 billion in expense per year to the US economy (Center for Disease Control).
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | At any given time, 1% of the US population is temporarily disabled by back pain.
| | - |  | --------------------------------------------------------------------------------

ALCiS is targeting purchasers of oral medications for its Daily Relief cream as they are currently users of medications and may wish to avoid the
potential risks and side effects of such oral medications, including:



| |  |  | Gastrointestinal bleeding & stroke; and
| | - |  | ---------------------------------------



| |  |  | Potential drug interactions.
| | - |  | ----------------------------

Marketing and Sales
Strategy and Key Customers

ALCiS launched its family of topical pain relief and therapeutic products in the United States to a broad
base of customers during fiscal 2006 via a nationwide campaign of direct response (including print and television), physician oriented sampling programs and a public relations campaign. It is through the awareness achieved from these strategies that
the Company has been able to migrate it sales model to distribution through retail channels. Throughout fiscal 2008, the Company garnered distribution in approximately 8,000 chain drug and specialty retail stores. ALCiS Daily Relief Pain
Relief Cream can be found in regional drug stores such as Longs Drugs and Duane Reade and nationally at Walgreens. Subsequent to year end, the Company secured shelf placement at all 5,200 Rite Aid stores. ALCiS will continue to penetrate the United
States throughout fiscal 2009 and then plans to expand its marketing and distribution internationally. During fiscal 2008, no ALCiS customer represented more than 10% of its sales; in fiscal 2009, the Company expects its success to be dependent on
its key national accounts such as Walgreens and Rite Aid as well as its penetration of regional accounts and regional distributors.

ALCiS current direct marketing activities include a national public relations campaign, 30 & 15 second television spots, print advertising and Internet-based advertising. ALCiS plan is designed to educate prospective
customers while creating widespread awareness of its topical pain relief products. Additionally, the Company has received the endorsement of the pain management community who see ALCiS as an excellent first line of defense. Management believes that
boomers will look to their doctors and therapists for advice on pain management. ALCiS Daily Relief is also being recommended by leading market specialists including rheumatologists, family practitioners, orthopedic surgeons and physicians
assistants. Currently, the Company is working with leading consumer advocacy groups  Arthritis Foundation, American Chronic Pain Association, National Fibromyalgia Association  to create continued professional and consumer awareness and
support.

In addition to baby boomers, and individuals 65 years and older, a large potential market exists with endurance athletes. Young
endurance athletes can experience the same type of chronic and overuse injuries that are common among their older counterparts. For similar reasons, ALCiS is an ideal solution for this market as well. The low impact of the Companys products is
a strong selling point as compared to the drastic hot and cold sensations applied to areas of pain by existing topical analgesics and patches.

The Company is currently accessing the athlete community through distribution at specialty retail stores and athletic sponsorship. The ALCiS Triathlon Team is currently the Companys main sponsorship vehicle. The Company intends to try
to expand distribution through the association with key influencers within a defined sports field. It currently is seeding its product among influential professional triathletes and sampling programs, and has experienced considerable publicity as a
result of the efficacy of ALCiS Daily Relief.



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Competition

There are three major niches that represent competition for the ALCiS family of products in the major markets; prescription ingestibles, OTC ingestibles, and OTC topical analgesics. This overview discusses the top leaders in each of the
following markets:



| |  |  | Prescription Ingestibles
| | - |  | ------------------------

The Prescription market saw an increase of several billion dollars of annual worldwide revenues
growth with the introduction of Mercks Vioxx® and Pfizers Celebrex®, highly selective COX-2 inhibitors that became
popular due to the thought that these drugs caused fewer side effects than traditional OTC NSAIDs (Non-Steroidal Anti-Inflammatory Drugs). Vioxx has been withdrawn from the market for reasons related to its safety and efficacy, while Celebrex is
still marketed but with a warning mandated by the Food and Drug Administration (FDA).



| |  |  | OTC Ingestibles
| | - |  | ---------------

The NSAID market is
a well established market exceeding $2 billion in sales, with many players competing for the same dollars. Due to the fact that many of the patents providing marketing exclusivities have long expired, everyone that has the capability to produce an
OTC NSAID via approved ingredients can create their own brand, hence the wide number of store brand generics. This over-saturation of the market has therefore driven prices down, thus making OTC NSAIDs widely available to a large spectrum of
consumers on many income levels. This is one of the single biggest strengths of this market. When considering treatment alternatives in terms of dollar cost, without regard to potential side effects, the OTC NSAID market is by far the cheapest
solution / option for pain management.

Over the last several years, there has been a tremendous amount of information circulating that
indicates the overuse of such drugs is prevalent, and the side effects that come along with such over use are manifesting themselves over a wider scale and affecting a wider spectrum of consumers.

OTC NSAIDs have a large number of potential short term and long term side effects. These side effects range from nausea, diarrhea, dizziness, vomiting,
GI bleeding, and ulcers to even death. According to federal health officials, each year an estimated 160,000 Americans end up in hospital emergency rooms and about 16,000 die from complications related to the use of OTC painkillers. Some health
officials say that the actual number of injuries and deaths is considerably higher, because many cases go unrecognized and unreported, especially among the elderly, many of whom take multiple medications.

A survey conducted by the National Consumers League in February 2003 found that 44% of nearly 4,300 adults surveyed said they had knowingly exceeded the
recommended dose of OTC pain relievers; of which only 16% said they had read the label completely. Further, a survey conducted by the National Council on Patient Information and Education found that 30% of people who use OTC pain-killers took the
drugs for longer than the label recommended, while 25% had trouble reading and understanding the label. These statistics alarm health officials, who note that most of the 175 million Americans who take OTC NSAIDs every year are unaware of their
potential hazards.



| |  |  | OTC Topical Analgesics
| | - |  | ----------------------

The external
analgesics category (analgesics being defined as medications or agents that relieve or reduce pain) has grown as a new generation of products (such as patches and sleeves) delivers convenient alternatives with greatly reduced side effects compared
to traditional ingestible pain management solutions. The market is also seeing growth due to the fact that consumers are now searching for safe, natural and novel solutions for everyday pain relief. The external analgesic market is estimated to be
between $500-700 million annually. There are several trends that have enhanced the appeal of such OTC external analgesic solutions, including consumer demand for pain relievers that help to alleviate discomfort from muscle and joint pain, and
ongoing concerns among health conscious Americans about the introduction of internal analgesics into their bodies.

BENGAY® and Icy Hot® have established themselves as the external analgesics of choice for active
people around the world, along with other imported external analgesics such as Tiger Balm® that find some niche popularity in US markets. These brands have been in locker rooms, gyms,
clinics, and the family medicine cabinet. They have been widely available, some for the last 50 years, and have become the top of mind brands in terms of muscle and joint pain.

The external analgesic category has been around for decades and has changed very little with regard to the technology utilized to provide pain
relief. The majority of external analgesics utilize a counterirritant approach as a solution to pain. This approach can only be considered a short term solution to pain, as these counterirritants merely mask the pain by confusing
the nervous system and sending an alternative sensory feeling from the same area. While this may cause a feeling of temporary relief, this course of action has not treated the injury, but has merely ignored it via distraction to the brain.



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The wide array of consumer options all fall into the same set of characteristics. These characteristics
are: (i) the products often have a strong and unpleasant medicinal smell, (ii) these products often come with a severe burning or cooling sensation, (iii) these products are often greasy and leave a residue on the consumers
skin. Along with these undesirable characteristics, the products sometimes will also cause discoloration of the skin, severe irritations of the skin and skin rashes, because they are by their very nature an irritant.

The OTC topical analgesic market has seen some recent excitement with the introduction of new ways
of using and applying the same old medicine. New to the topical analgesic market, the patch and sleeve methods of delivering these counterirritants have sparked a renewed interest with consumers. These two methods of applying OTC topical treatments
are not a new treatment, just a new way of delivering an old treatment. Procter & Gambles ThermaCare® saw sales over $100 million in its first year on the market, while
IcyHot has spent millions in marketing and endorsements on their IcyHot Sleeve. These new treatment options are not economical. A box of 3 single use ThermaCare pads costs nearly $2 per application (the manufacturer claims that a single application
can produce results that last 8 hours). Seeing that these two large and established brands are making such moves with decent success indicates that consumers are seeking innovative products in the topical space, and are ready for a new treatment
that truly works. The topical market has stayed relatively consistent, and flat, for the last several years. ALCiS is poised to be the first real innovative treatment alternative in this mature market and expects strong success in this category.

Manufacturing

ALCiS has a signed
manufacturing agreement with BioZone under which BioZone has a right of first refusal to manufacture ALCiS products containing the LDS technology that ALCiS licensed from BioZone. BioZone is an FDA certified manufacturing facility that is able
to provide ALCiS with all manufacturing requirements over the next several years. BioZone is a leading custom private-label manufacturer. BioZone provides cost-effective quality products with on-time delivery to its customers. BioZone manufactures
millions of units per year for customers, and has adequate plant capacity for ALCiS products over at least the next few years. BioZones flexible manufacturing can handle both short-run and high-volume capacity for skin care, body care, hair
care, OTC drug preparations, and liquid dietary supplements. BioZone formulates high-quality custom, as well as stock, formulas that are customized for each customer. BioZone is a cGMP (Current Good Manufacturing Practices) facility and is
registered with the FDA as a drug manufacturer. The flexibility of BioZones compounding and filling facilities allows for a vast range of batch and fill sizes. BioZones facilities include a full range of high speed to moderate speed
custom filling and packaging equipment for jars, tubes, and bottles. BioZone is currently the Companys sole provider of ALCiS products. As we do not own our own manufacturing facility, we are able to invest more in sales and marketing and be
more nimble as we do not need a manufacturing infrastructure other than internal resources to supervise and work with BioZone.

Distribution

ALCiS has engaged two separate fulfillment providers to handle shipments to both our wholesale and direct to consumer customers. Drug
store, mass and specialty retailers are serviced by Logistics Master, LLC for distribution in North America. Logistics Master is based in Tulsa, Oklahoma and specializes not only in the unique aspects of fulfillment to large retailers but also is
able to handle the Companys technology platform to manage inventory and communications to our customers via Electronic Data Interchange (EDI). Logistics Master also fulfills product orders for the Companys professional sampling program.

Direct to consumer sales are serviced by Moulton Logistics Management in Van Nuys, CA. Moulton provides pick and pack
fulfillment services for ALCiS and numerous other clients in B2B and B2C marketing, including DRTV (Direct Response Television), catalogs, online shopping, continuity programs, literature fulfillment and Customer Relationship Management (CRM)
services. Moulton operates from a 200,000 sq. ft. facility in Van Nuys, CA and provides ALCiS with customer service support including order tracking, returns and other after sale service issues.

Intellectual Property

ALCiS has entered into a license and manufacturing agreement with BioZone for the LDS used in ALCiS® Daily Relief Pain Relief Cream. The agreement grants
ALCiS an exclusive, world-wide license for the commercialization of the LDS for topical analgesic pain relief applications and body soak preparations and a non-exclusive, world-wide license for the commercialization of the LDS for similar
preparations such as body lotions, soap and other dermatological applications.

Under the agreement, ALCiS pays a percentage based royalty,
with a minimum royalty of at least $25,000 per month until December 31, 2008, when the minimum monthly royalty increases to $50,000. Additionally, ALCiS has paid BioZone non-refundable, prepaid royalties of $400,000 over the last three fiscal
years. ALCiS has also granted BioZone 560,000 warrants to purchase shares of its common stock at $2.00 per share. During fiscal 2008, ALCiS decided to let lapse its purchase option with BioZone to acquire broader technology rights as the parties
could not reach terms ALCiS deemed advantageous.



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Although we license our technology from BioZone, and the licensed technology includes patents, our
revenue is not dependent on any particular patent. We do not believe the expiration or loss of any particular patent would materially harm our business. We do not know if BioZones patents will be challenged, invalidated, narrowed in scope, or
declared unenforceable.

Our success also depends on our other rights in proprietary technology. We rely on a combination of copyright,
trade secret, trademark and contractual protection to establish and protect our proprietary rights that are not protected by patents, and we also typically enter into confidentiality agreements with our employees and consultants. Despite our efforts
to protect our proprietary rights through confidentiality and license agreements, unauthorized parties may attempt to copy or otherwise obtain and use our technology. It is difficult to monitor unauthorized use of technology, particularly in foreign
countries where the laws may not protect our proprietary rights as fully as laws in the United States. In addition, our competitors may independently develop technology similar to ours. Our precautions may not prevent misappropriation or
infringement of our intellectual property.

Third parties could infringe or misappropriate our patents, copyrights, trademarks and other
proprietary rights. In addition, other parties may assert infringement claims against us or our customers. Although we do not believe our products infringe any patents, our products may be found to infringe one or more issued patents. In addition,
because many pending patent applications in the United States are not publicly disclosed by the United States Patent and Trademark Office until the application is published, there may be applications that relate to our products of which we have no
knowledge. We may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties. We may also be required to
resort to litigation to enforce our intellectual property rights and in these regards would require the assistance of BioZone, which may or may not be readily provided. Intellectual property litigation is expensive and time-consuming and could
divert managements attention away from running our business. This litigation could also require us to pay substantial damages to the party claiming infringement, stop selling products or using technology that contains the allegedly infringing
intellectual property, develop non-infringing technology or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of
infringement. Our failure or inability to develop non-infringing technology or license the proprietary rights on a timely basis would harm our business.

ALCiS currently has registered U.S. trademarks for THE SCIENCE OF RELIEF and ALCIS in International Classes 003 and 005. The Company also has a registered U.S. trademark for ENGINEERED
THERAPY FOR MUSCLES AND JOINTS in International Class 005.

Each of ALCiS employees, independent contractors and consultants
has executed assignment of application agreements and nondisclosure agreements. The assignment of application agreements grant to ALCiS the right to own inventions and related patents which may be granted in the United States. The nondisclosure
agreements generally provide that these people will not disclose ALCiS confidential information to any other person without its prior written consent.

Product Development

During the fiscal years ending March 31, 2006, 2007 and 2008, the Company spent approximately
$465,620, $1,251,573 and $320,744, respectively, on product development activities. All of these expenditures were made to BioZone as we do not have a research and development staff and consist of the value of warrants we granted to BioZone in
connection with our license and monthly license fees paid in accordance with the license and manufacturing agreement.

Governmental Regulation and
Certification

Although there are currently many laws or regulations that specifically regulate health products, none currently require
that the Company obtain government approval of the Companys current products. Additional laws and regulations may be adopted in the future that address issues such as user allowable product claims, pricing and taxation, content, copyrights,
distribution, antitrust matters and the characteristics and quality of products and services. For example, the FDA currently has a tentative final monograph for external analgesics, and the finalization of this monograph may impact the permitted
active ingredients and the claims which can be made based upon such actives. Any new or additional laws or regulations could adversely affect ALCiS business. Further, ALCiS has secured certain rights relating to patented
technology, certain uses of which may or may not be approved by the FDA. Any such action by the FDA could adversely affect ALCiS business. In addition, because ALCiS products will be available in multiple states and foreign countries,
these jurisdictions may require ALCiS to qualify to do business as a foreign corporation in each of these states or foreign countries, which could subject it to taxes and other regulations. ALCiS is unable to predict the impact, if any, that
future legislation, legal decisions or



7



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regulations may have on its business, financial condition or results of operations. Because ALCiS does not conduct its own manufacturing, the cost and
effects of compliance with environmental laws is not material.

Personnel

ALCiS works with a number of organizations serving as outsourced service providers, including media buying, manufacturing, call centers, fulfillment and
warehousing, contract sales representatives, legal and accounting. As such, ALCiS has been able to minimize personnel, and currently has only ten (10) employees, nine (9) of whom are full-time. ALCiS expects to increase the number of
personnel considerably, and to have between 20 to 25 employees by the end of fiscal 2009, with most of the increase in marketing and sales personnel.

Additional Information

Our internet website address is www.alcis.com.

RISK FACTORS

The business, financial condition
and operating results of ALCiS could be adversely affected by any of the following factors, in which event the value of the equity securities of ALCiS could decline, and investors could lose part or all of their investment. The risks and
uncertainties described below are not the only ones that the combined company faces. Additional risks and uncertainties not presently known to management, or that management currently thinks are immaterial, may also impair future business
operations.

Because ALCiS has a limited operating history, ALCiS may not be able to successfully manage its business or achieve profitability.

ALCiS has a limited operating history upon which you can base your evaluation of its prospects and the potential value of its common stock.
The likelihood of success of ALCiS must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new business and the competitive environment in which ALCiS will
operate. ALCiS has little market penetration and successes to date, and may never reach profitability. No additional relevant operating history exists upon which an evaluation of its performance can be made. ALCiS performance must be
considered in light of the risks, expenses and difficulties frequently encountered in establishing new products and markets in the evolving, highly competitive consumer health products space. If ALCiS cannot successfully manage its business, ALCiS
may not be able to generate future profits and may not be able to support its operations.

ALCiS is in the early stages of its development, has incurred
substantial losses since inception and may never achieve profitability.

Since ALCiS commenced its operations in 2004, ALCiS has
incurred substantial operating losses. For fiscal years 2007 and 2008, ALCiS had net losses of $5,411,162 and $3,904,354, respectively. ALCiS losses from operations have resulted in an accumulated deficit of $14,025,224 at March 31, 2008.
ALCiS expects that its operating expenses will outpace revenues for the near future and result in continued losses. ALCiS long-term viability, profitability and growth will depend upon successful commercialization of initial products and the
development and commercialization of new products relative to its business plan. You should consider the costs and difficulties frequently encountered by companies in their early stages of launching a product and establishing a market presence.
There is no assurance that ALCiS will ever obtain profitability which may lead to the loss of your entire investment.

We face significant competition
in the OTC health care and toiletries markets.

The OTC health care and toiletries markets are highly competitive and are characterized
by the frequent introduction of new products, including the migration of prescription drugs to the OTC market, often accompanied by major advertising and promotional support. These introductions may adversely affect our business especially because
we compete in categories in which product sales are highly influenced by advertising and promotions. Our competitors include large pharmaceutical companies such as Merck, Pfizer, Johnson & Johnson, and Wyeth, and consumer products companies
such as Chattem and Haw Par Healthcare, Ltd, many of which have considerably greater financial and other resources than we do. These competitors are thus better positioned to spend more on research and development, employ more aggressive pricing
strategies, utilize greater purchasing power, build stronger vendor relationships and develop broader distribution channels than us. In addition, our competitors have often been willing to use aggressive spending on trade promotions and advertising
as a strategy for building market share at the expense of their competitors including us. If we are unable to continue to introduce new and innovative products that are attractive to consumers or are unable to allocate sufficient resources to
effectively advertise and promote our products so that they achieve wide spread market acceptance, we may not be able to compete effectively, and our operating results and financial condition may be adversely affected.



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Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demands.

Our success depends on our products appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are
subject to change. If our current products do not meet consumer demands, our sales may decline. In addition, our growth depends upon our ability to develop new products through product line extensions and product modifications, which involve
numerous risks. We may not be able to accurately identify consumer preferences and translate our knowledge into customer-accepted products or successfully integrate these products with our existing product platform or operations. We may also
experience increased expenses incurred in connection with product development, marketing and advertising that are not subsequently supported by a sufficient level of sales, which would negatively affect our margins. Furthermore, product development
may divert managements attention from other business concerns, which could cause sales of our existing products to suffer. We cannot assure you that newly developed products will contribute favorably to our operating results.

If ALCiS products fail to perform properly, its business could suffer with increased costs and reduced income.

Although ALCiS has been testing its products with users and has engaged in sales over the last three years, its products may fail to meet consumer
expectations. ALCiS has had little experience in retail distribution and may encounter margins that are less favorable than expected due to unexpected returns, credits and charge-backs. ALCiS will be required to replace products or refund the
purchase price to consumers in cases of dissatisfaction. Failure of ALCiS products to meet expectations could:



| |  |  | damage its reputation,
| | - |  | ----------------------



| |  |  | decrease sales,
| | - |  | ---------------



| |  |  | incur costs related to returns,
| | - |  | -------------------------------



| |  |  | delay market acceptance of its products,
| | - |  | ----------------------------------------



| |  |  | result in unpaid accounts receivable, and
| | - |  | -----------------------------------------



| |  |  | divert its resources to reformulation or alternative products.
| | - |  | --------------------------------------------------------------

ALCiS needs additional capital to fund its growth.

ALCiS believes that its existing cash, cash
equivalents and short-term investments, and investment received subsequent to year end will be sufficient to meet liquidity and capital requirements only for the next approximately three to five months assuming our promotion and advertising
expenditures continue to yield an increasing level of revenue from our drug store customers. We are therefore currently actively attempting to raise both debt and equity financing which will dilute your stock ownership in ALCiS as the debt financing
would likely have an equity component. There can be no assurance that we will be successful in our financing efforts, or that any financing raised will be on terms we find to be attractive. If ALCiS cannot obtain additional financing on reasonable
terms, ALCiS may not have sufficient capital to operate its business as planned and would have to modify its business plan or curtail some or all of its operations. For example, we would reduce our discretionary spending, particularly our
advertising and promotion expenses, in order to enable our existing cash to meet our requirements for a longer time period.

There is no assurance that
ALCiS will be successful in maintaining its technology licenses.

ALCiS has entered into a perpetual, worldwide exclusive license for
use of certain technology in topical analgesic pain relief products and a nonexclusive license on a number of other products. For the license, ALCiS agreed to pay warrants to purchase 400,000 shares of ALCiS Common Stock, $400,000 in advance royalty
payments which has been paid and to a royalty rate based on sales with a minimum payment of $25,000 per month ($50,000 after December 31, 2008) to continue its exclusive license agreement. In the event that ALCiS fails to pay such minimum
monthly amounts, ALCiS may lose all licensed rights relating to these technologies. While ALCiS has successfully negotiated contract modifications in the past, there is no assurance ALCiS will continue to be successful in such negotiations.

ALCiS has committed to have its products manufactured only by BioZone so long as BioZone desires to manufacture such products. If BioZone does not
supply us with quality products in a timely manner, our revenues will decline.

In our technology license with BioZone, we have granted
BioZone a right of first refusal to manufacture products licensed from BioZone, which includes all of our current products. This right of first refusal terminates if BioZone is unable to deliver such products or the committed pricing. If BioZone
does not supply us with quality products in a timely manner, or desires to charge us higher prices than those committed, we would have to attempt to work with BioZone to mitigate the adverse impacts or else terminate our commitment to BioZone and
attempt to locate another contract manufacturer. There can be no assurance we will be able to locate another contract manufacturer in a timely and cost-effective manner. Any such



9



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switch could take significant time and could be contested by BioZone, and as a result our supply of product may be interrupted and our revenues may decline.
In addition, the price which we pay for product could increase, thereby reducing our gross margin.

ALCiS intellectual property and proprietary
rights give it only limited protection and can be expensive to defend.

Our trademarks are of material importance to our business and,
together with our license agreement with BioZone, are among our most important assets. In fiscal 2008, substantially all of ALCiS total revenues were from licensed products. ALCiS ability to produce and sell pain management products
depends in part on maintaining various trademarks and protecting its operational trade secrets and to a lesser extent on securing patent protection for its products. To protect its proprietary technology, ALCiS will rely upon a combination of
proprietary technology and know-how, patents, trademarks, copyrights, confidentiality agreements and/or other contractual covenants to establish and protect its intellectual property rights. There can be no assurance that steps taken by ALCiS to
protect its intellectual property will be adequate to prevent infringement or misappropriation of that intellectual property, or that ALCiS competitors will not independently develop products substantially equivalent or superior to ALCiS
products. Any infringement or misappropriation could have a material adverse effect on ALCiS future financial results. ALCiS believes its business does not infringe upon the valid proprietary rights of others, but there can be no assurance
that third parties will not assert infringement claims against ALCiS and that, in the event of an unfavorable ruling on any such claim, a license or similar agreement to utilize the intellectual property rights in question relied upon by ALCiS in
the conduct of its business will be available to ALCiS on reasonable terms, if at all. In addition, the laws of some foreign countries do not protect proprietary rights in brand names to the same extent as do the laws of the United States. We cannot
assure you that we will be able to successfully protect our trademarks from infringement or otherwise. The loss or infringement of our trademarks could impair the goodwill associated with our brands, harm our reputation and materially adversely
affect our financial results. The loss of such rights (or the failure by ALCiS to obtain similar licenses or agreements) could have a material adverse effect on ALCiS business, financial condition and results of operations. In addition, it is
believed that, from time to time, ALCiS may become involved in intellectual property disputes with third parties, which may not result in a favorable outcome for ALCiS. ALCiS also could incur substantial costs to assert its intellectual property or
proprietary rights against others.

We license additional intellectual property from third parties that is used in certain of our products,
and we cannot assure you that these third parties can successfully maintain their intellectual property rights. In addition, the sale of these products relies on our ability to maintain and extend our licensing agreements with third parties, and we
cannot assure you that we will be successful in maintaining these licensing agreements. Any significant impairment of the intellectual property covered by these licenses, or in our rights to use this intellectual property, may cause our sales to
decline.

ALCiS might not be able to hire and retain personnel with the appropriate experience and talent to build its sales and marketing capability
which will negatively affect future revenue.

ALCiS future success depends to a significant extent on the continued services of
senior management and other key personnel. ALCiS does not maintain key person life insurance for any of its executives. The loss of such key personnel would likely have a significantly detrimental effect on the business. ALCiS may also
be unable to retain key employees or attract, assimilate or retain other highly qualified employees in the future. ALCiS may experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications as a result of rapid
growth and expansion, and there can be no assurance ALCiS will be able to attract and retain the qualified personnel necessary for the development of its business. The failure to recruit qualified technical, managerial or marketing personnel could
have a material adverse effect on ALCiS business, financial condition and results of operations.

ALCiS future depends on the financial
success of its products. Since ALCiS is introducing entirely new products without comparable sales history, ALCiS does not know if its products will generate wide acceptance by consumers.

ALCiS is introducing its pain management products as new products to consumer markets unfamiliar with their use and benefits. ALCiS does not know whether
its products will generate widespread acceptance. If consumers do not purchase its products, ALCiS will not be profitable and you may lose all of your investment. ALCiS only recently began selling its products into drug and specialty stores and thus
has a limited history on how well these products will be received in this new channel. Because ALCiS has shifted its revenue mix away from direct to consumer sales, we have become increasingly more dependent on retail distribution. Our retail
customers could cut back demand for a variety of reasons such as competitive pressures or failure to have adequate sell-through. You must consider ALCiS prospects in light of the risks, expenses and challenges of attempting to introduce new
products with unknown consumer acceptance.



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ALCiS marketing strategies may not be successful, which would adversely affect its future revenues and
profitability.

ALCiS revenues and future depend on the successful marketing of pain management and body therapy products. ALCiS
cannot assure you that consumers will be interested in purchasing its products. ALCiS currently uses direct marketing to sell its products via television commercials, infomercials, magazine and newspaper advertising and the Internet. Its
infomercials and commercials may not generate sufficient income to continue to air the commercials. ALCiS expects that the awareness attained from the direct marketing will support its current launch into retail stores. ALCiS also has initiated a
public relations campaign and distributes samples through its professional sampling program. ALCiS may find less success in the selling process than expected. ALCiS expects that the majority of its future revenue will come from wholesale sales to
drug, chain mass and specialty stores; less than forecasted sales in this channel will significantly impact projections. The Company has sought to mitigate this risk by engaging InterQuantum, who specializes in assisting companies to make the
transition from direct to consumer to wholesale sales. InterQuantum has helped the Company set up its broker network and migrate its television commercials to support sales at drug and specialty stores. ALCiS expects the incorporation of this
strategic relationship will reduce the risk of underperformance. ALCiSs strategy is to use direct response advertising to promote its products for sale at retail stores and combine this with public relations and professional sampling. ALCiS
has a limited history in selling to drug store chains, pharmacies, specialty stores and mass retailers. ALCiS may encounter terms dictated by these potential customers that are not acceptable or at a level that is not profitable. If ALCiS
sales and marketing strategies fail to attract customers, its product sales will not produce future revenues sufficient to meet its operating expenses or fund its future operations. If this occurs, ALCiS business may fail and you may lose your
entire investment

ALCiS current or future manufacturers could fail to fulfill ALCiS orders for products which would disrupt its business,
increase its costs and could potentially cause it to lose its market.

ALCiS currently depends on one contract manufacturer in
California to produce its pain management products. To date ALCiS has received only limited quantities of finished products and does not yet have an operating history that demonstrates that this manufacturer can produce its pain management products
in a timely manner or in sufficient volumes. In order to reduce the risk of undersupply, ALCiS will participate in all procurement of longer lead-time materials, stock such materials for ready availability and, initially, stock more inventory than
otherwise required under a just-in-time inventory program. The manufacturer may also fail to produce the products to ALCiS specifications or deliver them on a timely basis. This manufacturer is located in California and could be subject to
risk of natural disasters such as an earthquake resulting in disruption of supply. Any change in manufacturers or location could disrupt its business due to delays in finding a new manufacturer, providing specifications and testing initial
production. ALCiS has identified a back-up manufacturer on the East coast and we expect to complete the qualification process of this vendor during FY 2009. There can be no assurance that we will be successful with this potential manufacturer. The
loss of a contract manufacturer may force us to shift production to in-house facilities and possibly cause manufacturing delays, disrupt our ability to fill orders or require us to suspend production until we find another third party manufacturer.
We are not able to control the manufacturing efforts of these third party manufacturers as closely as we control our business. Should any of these manufacturers fail to meet our standards, we may face regulatory sanctions, additional product
liability claims or customer complaints, any of which could harm our reputation and our business. Any interruption or significant delay in the supply of these active ingredients would impede our ability to manufacture these products, which would
cause our sales to decline.

ALCiS may not be able to manage expanding operations.

If ALCiS is successful in achieving market acceptance of its products, it will be required to expand its operations quickly, requiring the establishment
of technical operations, system administration, and sales and marketing in each target market. This may result in new and increased responsibilities for management and place significant strain on ALCiS management, operating and financial
systems and other resources. To accommodate such growth and compete effectively, ALCiS will be required to implement and improve information systems, procedures and controls, and to train, motivate and manage its work force. ALCiS future
success will depend to a significant extent on the ability of its future management personnel to operate effectively. There can be no assurance ALCiS personnel, systems, procedures and controls will be adequate to support ALCiS future
operations.

An active trading market for ALCiS common stock may not develop or be sustained.

There can be no assurance as to when and if the shares of common stock will become quoted on any stock exchange and, even if the shares of common stock
are quoted, there can be no assurance that an active trading market will develop for such shares. If an active public trading market does not develop or continue, you may have limited liquidity and may be forced to hold your shares of ALCiS
common stock for an indefinite period of time. Further, the prices and volume of trading in ALCiS common stock may be adversely affected if its securities are not listed or quoted.



11



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If an exemption from registration on which ALCiS has relied on for any of its past offerings of common stock or
warrants were later challenged legally, its principals may have to expend time defending claims and ALCiS would then risk paying expenses for defense, rescission and/or regulatory sanctions.

To raise working capital, ALCiS offered common stock and warrants in private transactions that ALCiS believed to be exempt from registration under the
Securities Act of 1933, as amended, and state securities laws. In the event that one or more investors seeks rescission, with resulting return of investment funds and interest at a market rate, or that state or federal regulators seeks sanctions
against ALCiS or its principals, ALCiS would spend time and financial resources to pay expenses for defense, rescission awards or regulatory sanctions. The use of funds would reduce the capital available to implement its full plan of operation.

There may be substantial sales of ALCiS common stock by existing stockholders which could cause the price of ALCiS stock to fall.

Future sales of substantial amounts of ALCiS common stock in the public market, if one develops, or the perception that such
sales might occur, could cause the market price of its common stock to decline and could impair the value of your investment in ALCiS common stock and its ability to raise equity capital in the future. As of June 15, 2008, ALCiS had
9,021,902 shares of common stock outstanding, all of which may be sold immediately without restriction in the public market, if one develops. The sales of ALCiS common stock by stockholders having registered stock or even the appearance that such
holders may make such sales may depress any trading market that develops before shareholders are able to sell the common stock they received in the Companys common stock offerings.

ALCiS outstanding warrants and options, and additional future obligations to issue ALCiS securities to various parties, may dilute the value of your investment and may adversely affect ALCiS ability to
raise additional capital.

As of March 31, 2008, ALCiS had warrants and options outstanding that can be exercised for 4,018,746
shares of its common stock at exercise prices ranging from $0.10 to $4.75 per share. ALCiS has historically issued shares of its common stock or granted stock options to employees, consultants and vendors as a means to conserve cash, and ALCiS will
continue to grant additional shares of stock and issue stock options in the future. ALCiS can issue 1,300,000 shares of common stock under its 2004 Plan, and as of March 31, 2008, had 687,575 outstanding options under the 2004 Plan of which
436,847 were exercisable, leaving 612,425 options available for future grant under the 2004 Plan.

During the year ending March 31,
2008 and subsequently, ALCiS raised capital by selling convertible promissory notes with warrants. The warrants are issued upon conversion of the notes at a future date at a price which is determined by a qualified equity financing of at least $4
million. Because the conversion details are unknown, the exact number of warrants which will be issued cannot be calculated.

For the
length of time these warrants and options are outstanding, the holders will have an opportunity to profit from a rise in the market price of ALCiS common stock without assuming the risks of ownership. This may adversely affect the terms upon
which ALCiS can obtain additional capital. The holders of such derivative securities would likely exercise or convert them at a time when ALCiS would be able to obtain equity capital on terms more favorable than the exercise or conversion prices
provided by the notes, warrants or options.

If ALCiS common stock is traded, ALCiS expects to be subject to the penny stock rules for
the foreseeable future.

ALCiS is subject now and expects in the future to be subject to the SECs penny stock rules if
its common stock sells below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customers account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be
given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customers confirmation.

In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for ALCiS
common stock. As long as ALCiS common stock is subject to the penny stock rules, the holders of its shares may find it more difficult to sell their securities.



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ALCiS certificate of incorporation authorizes the issuance of shares of preferred stock, the rights,
preferences, designations and limitations of which may be set by the board of directors.

ALCiS certificate of incorporation
authorizes issuance of up to 500,000 shares of preferred stock (Preferred Stock) at the discretion of its board of directors. Any undesignated shares of Preferred Stock may be issued by ALCiS board of directors; no further
shareholder action is required. If issued, the rights, preferences, designations and limitations of such Preferred Stock would be set by the board of directors and could operate to the disadvantage of the outstanding common stock. Such terms could
include, among others, preferences as to dividends and distributions on liquidation, or could be used to prevent possible corporate takeovers.

Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions.

The Companys directors, executives and principal shareholders beneficially own approximately 86% of total outstanding shares, as calculated on a
fully diluted basis. Even where these amounts do not constitute a majority, if such persons act in concert, they will have significant power to elect the Companys directors and, subject to certain limitations, effect or preclude fundamental
corporate transactions involving the Company. See Principal Shareholders and Description of Capital Shares.

Government
regulations and legal uncertainties could cause product sales or introductions to be delayed or canceled as a result of regulatory processes, which could cause our sales or profitability to decline.

There are currently laws or regulations that specifically regulate health products. Additional laws and regulations may be adopted in the future that
address issues such as user allowable product claims, pricing and taxation, content, copyrights, distribution, antitrust matters and the characteristics and quality of products and services. For example, the FDA currently has a tentative final
monograph for external analgesics, and the finalization of this monograph may impact the permitted active ingredients and the claims which can be made based upon such actives. Any new or additional laws or regulations could adversely
affect ALCiS business. Further, the Company has secured certain rights relating to patented technology, certain uses of which may or may not be approved by the FDA. Any such action by the FDA could adversely affect ALCiS business. In
addition, because ALCiS products will be available in multiple states and foreign countries, these jurisdictions may require ALCiS to qualify to do business as a foreign corporation in each of these states or foreign countries, which
could subject it to taxes and other regulations. ALCiS is unable to predict the impact, if any, that future legislation, legal decisions or regulations may have on its business, financial condition or results of operations.

If we become subject to product liability claims and our product liability insurance coverage is inadequate or inapplicable, we may be required to engage in costly
litigation or pay significant damages and our business may be harmed.

Product users may sue ALCiS if any of the products that it may
sell are defective, fail to perform properly or injure the user. ALCiS has limited experience in the sale of products and the development of relationships with manufacturers or suppliers of such products. Although, when practical, agreements are
expected to contain provisions intended to limit its exposure to liability claims, these limitations may not prevent all potential claims. ALCiS may be exposed to liability claims in connection with the products it provides. Liability claims could
require ALCiS to spend significant time and money in litigation and to pay significant damages. As a result, these claims, whether or not successful, could seriously damage ALCiS reputation and business. The Company currently has product
liability insurance; in the event such insurance is inadequate or contested, the Company may not have sufficient coverage for liability claims.



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|Item 2. | Description of Property
|------- | -----------------------

The Company is headquartered in San
Jose, California. The Companys main headquarters at 2001 Gateway Place, Suite 520W, San Jose, California 95110 comprises approximately 5,900 square feet. The Company rents these headquarters, which are in good condition and can accommodate the
executive, accounting, sales and marketing, and administrative staffs.



|Item 3. | Legal Proceedings
|------- | -----------------

ALCiS is not a party in any bankruptcy,
receivership or other legal proceeding, and to the best of ALCiS knowledge, no such proceedings by or against ALCiS have been threatened.



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

None



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Part II



|Item 5. | Market for the Common Equity, Related Shareholder Matters and Small Business Issuer Purchases of Equity Securities.
|------- | -------------------------------------------------------------------------------------------------------------------

Market Information

There is currently no public trading market
for ALCiS common stock.

Holders

As of
March 31, 2008, there were approximately 375 holders of record of our common stock. The number of record holders does not include beneficial owners whose shares are held in the names of banks, brokers, nominees or other fiduciaries.

Dividends

ALCiS has not declared or paid any cash
dividends on its common stock. It intends to retain any future earnings to finance the growth and development of its business, and therefore it does not anticipate paying any cash dividends on its common stock in the future. The board of directors
will determine any future payment of cash dividends depending on the financial condition, results of operations, capital requirements, general business condition and other relevant factors. If the Company issues preferred shares, although not
currently anticipated, no dividends may be paid on the outstanding common stock until all dividends then due on the outstanding preferred stock will have been paid.

Registrant Recent Sales of Unregistered Securities

During the fourth quarter of fiscal 2008, the Company
issued warrants to purchase 120,000 shares of its common stock to four current accredited investors for their guarantee on the Companys operating line of credit. The warrants are exercisable at a price of $2.00 per share and expire 5 years
from the date of grant. As part of this transaction 30,000 of the total warrants were issued to a member of the board of directors. The Company relied on Rule 506 promulgated under Regulation D as an exemption from the registration requirements of
the Securities Act of 1933, as amended, for the sale of these warrants and for the shares issuable upon exercise of these warrants.

Registrant Share
Purchases

There were no purchases made by or on behalf of Registrant or any affiliated purchaser (as defined in Exchange Act Rule
10b-18(a)(3)) of shares of Registrants $0.001 par value common stock during the fourth quarter of fiscal 2008.



|Item 6. | Managements Discussion and Analysis or Plan of Operation
|------- | ---------------------------------------------------------

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of a number
of factors, including, but not limited to, those described in our filings with the Securities and Exchange Commission.

The following discussion and
analysis should be read in conjunction with the Consolidated Financial Statements and related Notes thereto contained in Item 7 of this Annual Report. The information contained in this annual report on Form 10-KSB is not a complete description
of our business or the risks associated with an investment in our common stock. You are urged to carefully review and consider the various disclosures we made in this Report and in other reports filed with the SEC.



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Cautionary Statement Regarding Forward Looking Statements

This Managements Discussion and Analysis includes forward-looking statements. These forward-looking statements are not historical facts, and are based on current
expectations, estimates, and projections about the Companys industry, its beliefs, its assumptions, and its goals and objectives. Words such as anticipates, expects, intends, plans,
believes, seeks, forecasts, and estimates, and variations of these words and similar expressions, are intended to identify forward-looking statements. Examples of such forward-looking statements in
this are the Companys growth strategy; the Companys anticipated product development and advertising and promotion expenses during some or all of fiscal 2009; the belief that the Company through its contract manufacturer has ample
production capacity in place to handle any projected increase in business for this fiscal year; the anticipation that the available funds and expected cash usage from operations will be sufficient to meet the liquidity and capital requirements for
the next three to five months; our plans to raise debt and equity financing; our contingency plan if we dont raise financing in the next two to three months to then reduce expenses so that we can stretch our cash for another two months. These
statements are only predictions, not a guaranty of future performance, and are subject to risks, uncertainties, and other factors, some of which are beyond the Companys control and are difficult to predict, and could cause actual results to
differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include no material adverse changes in the demand for the Companys products; competition to supply OTC products in the
markets in which the Company competes does not increase and cause price erosion; that there are no unexpected manufacturing issues as production ramps up; the demand for the Companys products is such that it would be unwise not to decrease
research and development; our not having unanticipated cash requirements; our not having difficulty raising financing on attractive or any terms; our ability to effectively reduce cash expenses quickly as a contingency as well as other risks and
factors set forth in this Form 10-KSB, including in Item 1 under Risk Factors . The information included in this Form 10-KSB is provided as of the filing date with the SEC and future events or circumstances could differ
significantly from the forward-looking statements included herein. Accordingly, the readers are cautioned not to place undue reliance on such statements. Except as required by law, the Company undertakes no obligation to update any forward-looking
statement, as a result of new information, future events, or otherwise.

Critical Accounting Policies

Revenue recognition

Net sales consist primarily of
products sold directly to consumers via a telephone call center and the internet, shipping revenue, net of estimated returns and promotional discounts (referred to as retail sales).

The Company requires payment at the point of sale for all retail sales. Amounts received prior to delivery of goods to customers are not recorded as
revenue. Delivery is considered to occur when title to the products has passed to the customer, which typically occurs at physical delivery of the products from the Companys fulfillment center to a common carrier. The Company offers a return
policy of generally 30 days and provides an allowance for sales returns during the period in which the sales are made. At March 31, 2008, the reserve for sales returns was $23,000 and was recorded as an accrued liability. The Company generally
does not extend credit to customers for retail sales, except through third party credit cards. The majority of the retail sales are through credit cards, and accounts receivable are composed primarily of amounts due from financial institutions
related to credit card sales.

The Company generally recognizes revenue on wholesale accounts, primarily drug and specialty retail stores
at the time of shipment. The Company recognizes revenue when all of the following have occurred: persuasive evidence of an agreement with the customer exists, products are shipped and the customer takes delivery and assumes the risk of loss; the
selling price is fixed or determinable and collectibility of the selling price is reasonably assured. In certain cases, when the above conditions are not met, the Company defers the revenue until such time that it is appropriate. The Company
established an allowance for doubtful accounts for a small number of questionable wholesale specialty accounts. At March 31, 2008, the allowance for doubtful accounts was $1,300 and was recorded as a reduction of accounts receivable. Under
certain payment terms with wholesale customers, the Company delays the recognition of revenue until products are actually sold to the consumer. Revenue is recognized after confirmation is received from the customer of the total number of units sold
to end users during each period.

The Company periodically provides advertising allowances, coupons, rebates and other incentive offers to
its wholesale customers to encourage purchase by consumers at the store level. The Company reviews each promotion and determines the appropriate deduction from gross revenue. In the case of rebates and coupons, the Company estimates the redemption
based on historical rates and provides a reserve as of the balance sheet date.

Prepaid royalties

Under the license and manufacturing agreement with the patent owner of the liposomal delivery
system used in ALCiS® Daily Relief Pain Relief Cream, prepaid royalties consists of the difference between the actual royalties owed and the minimum monthly payment due, when the minimum
monthly payment exceeds the actual royalties owed. In addition,



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certain up-front payments are characterized as prepaid royalties. Prepaid royalties are available to offset future royalties when actual royalties owed
exceed the minimum monthly payment due. At that time, the prepaid royalties can be applied to the actual royalties owed and reduce the actual payment to the minimum amount due. The prepaid royalties expire upon the termination of the license and
manufacturing agreement.

The Company charges to expense the prepaid royalties, that is the excess of the amounts paid over the royalties
due on the current period sales. The Company does not record an asset for prepaid royalties available for future sales. The total amount of prepaid royalties available for future sales is approximately $1,295,000.

Stock based compensation

The Company accounts for
its stock based compensation plans under Statement of Financial Accounting Standards (SFAS) No. 123 (R), Share Based Payments, whereby the cost of share based payments to employees, including grants of employee
stock options, are measured based on the grant date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award, the requisite service period. No compensation
cost is recognized for equity instruments for which employees do not render the requisite service. The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes model adjusted for the unique
characteristics of those instruments.

The Company from time to time issues common stock, stock options or common stock warrants to acquire
services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the date required by Emerging Issues Task
Force (EITF) Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

In accordance with EITF 96-18, the stock options or common stock warrants are fair valued using the Black-Scholes model on the basis of the market price
of the underlying common stock on the valuation date, which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting
date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the
expense is computed under the Black-Scholes option-pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock through the
valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

Income taxes

An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences
between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a
deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

Advertising expenses

The cost of advertising is
expensed in the fiscal year in which the related advertising takes place. Production and communication costs are expensed in the period in which the related advertising begins running. Costs for direct-response advertising are capitalized and
amortized over the estimated useful life of the advertisement.

Managements estimates and assumptions

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from such estimates. The Company reviews all
significant estimates affecting the financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance.

Overview

ALCiS principal business is researching, developing, marketing and distributing body therapy solutions, including but not
limited to the area of pain management products such as topical analgesics. In order to reduce its capital requirements and increase its flexibility, ALCiS uses a contract manufacturer to manufacture its products. The products are then shipped to a
fulfillment center to await shipment to customers. ALCiS licenses certain patented technology exclusively in its field of use from its contract manufacturer.



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Since formation, ALCiS principal activities have consisted of securing rights to proprietary technologies for its
topical analgesic pain relief products, product and market research and development resulting in the filing of five trademark applications, the development of five proprietary products, research into the markets for ALCiS products and the best
channels through which to sell them, providing samples and selling to end customers and resellers to develop these channels, business planning and raising the capital necessary to fund these activities.

ALCiS began selling its products in May 2005, and has realized annual revenue of approximately $0.8 million, $2.3 million and $1.6 million during fiscal 2006, 2007 and
2008, respectively.

Results of Operations

Net
Sales

Net sales for the twelve months ended March 31, 2008 were $1,571,469, compared to $2,278,134 for the same period of fiscal 2007. The
year-over-year decrease in net sales is due to the Companys planned and recently-begun migration from a direct to consumer sales model to a wholesale plan where the majority of the revenue will come from sales to drug, specialty and mass
retail stores. During the first quarter of fiscal 2008, the Company began selling products to regional drug and specialty stores. During this time, the Company began to focus on the direct to consumer channel as a means to promote sales in retail
stores by creating awareness instead of primarily revenue generation and revenues from direct to consumer accordingly decreased. The Company had found that although it had been successful at finding profitable direct to consumer avenues, it was not
able to ramp media and corresponding revenue to significant levels while maintaining profit. Because of this, the Company consciously reduced its media spending, focusing on awareness, until national distribution could be attained at the retail
stores. The Company still uses direct to consumer advertising as it is more efficient and less costly than running regular advertising without mention of an 800 number or website.

Since the Company did not begin selling into Walgreens, its first major retail account, until the fourth quarter of fiscal 2008, the majority of all sales were the result of direct-to-consumer sales activities, and a
small amount of wholesale private label sales. There was no material price erosion for our product offerings.

Our current growth strategy relies on
increased penetration in the drug, specialty and mass retail stores, continued use of direct to consumer media to create awareness, and our ability to continuously and successfully introduce and market new products and technologies that meet our
customers requirements.

Our principal market is the United States, which accounts for 99% of all sales. The Company has made a small amount of sales
to a distributor in India, but the amount is immaterial.

Our assets are all located in the United States.

Gross Profit

Gross profit represents net revenue less cost of sales.
Cost of sales includes the cost of purchasing product, cost associated with packaging, testing, and quality assurance, the charges of the fulfillment contractor, the cost of personnel, facilities, and equipment associated with manufacturing support
and charges for excess inventory. For the twelve months ended March 31, 2008, gross profit was $928,669 compared to $1,418,524, or a 35% decrease. This decrease was primarily due to the lower sales volume.



|              |  |                      |           |   |      |   |           |  
|------------- |  | -------------------- | --------- | - | ---- | - | --------- | -
|              |  | Year Ended March 31, |          
|              |  | 2008                 |           |   | 2007 |  
|Net Revenue   |  | $                    | 1,571,469 |   |      | $ | 2,278,134 |  
|Cost of Sales |  |                      | 642,800   |   |      |   | 859,610   |  
|              |  |                      |           |   |      |   |           |  
|Gross Profit  |  | $                    | 928,669   |   |      | $ | 1,418,524 |  
|              |  |                      |           |   |      |   |           |  
|Gross Margin  |  |                      | 59        | % |      |   | 62        | %
|              |  |                      |           |   |      |   |           |  

Gross margin, which is gross profit as a percent of net revenue, for the twelve months ended March 31, 2008,
was 59% versus 62% during fiscal 2007. The decline is primarily due to decreases in the volume of product we purchased and the absorption of certain fixed costs from our new fulfillment center which we contracted in fiscal 2008 to handle product
deliveries to our new wholesale customers.



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Product Development Expenses

Product development expenses are primarily comprised of consulting payments to the manufacturer and formulator of our products. Product development expenses during the twelve months ended March 31, 2008 were $320,744 compared to
$1,251,573 in the previous twelve months, or a 74% decrease. Of the $1,251,573 in fiscal 2007, $942,713 was due to stock-based compensation charges from warrants issued to the manufacturer for the exclusive license of the technologies and $308,860
was due to the monthly royalty payments in accordance with our technology contracts. The expense related to the warrants was calculated using the Black-Scholes option-pricing model and thus does not represent any cash payments to the manufacturer.
The current year expense is primarily due to the royalty payments in accordance with our technology contracts.

We plan to increase product development
activities to enhance our product offerings in order to meet current and future requirements of our customers and markets. As such, product development expenses in absolute dollars are likely to increase for fiscal 2008. However, product development
expenses as a percentage of net sales may fluctuate.

Advertising and Promotion Expenses

Advertising and promotion expenses consist primarily of television and print media, outside sales commissions, call center expenses, public relations, costs relating to
our doctor sampling program and employee related expenses.

Advertising and promotion expenses for the twelve months ended March 31, 2008 were
$2,614,551. This represents a decrease of $736,325 or 22%, from the fiscal 2007 total of $3,350,876. The decrease is primarily attributed to the Companys strategy to shift from a direct to consumer sales model to selling ALCiS products in
drug, specialty and chain mass stores. As the Company pursued this strategy it consciously decreased the media spending until such time when ALCiS Daily Relief was available nationally. By focusing on this course, ALCiS garnered distribution in
approximately 8,000 retail stores including the Companys first national account, Walgreens. Subsequent to year end, the Company also secured shelf space at all 5,200 Rite Aid stores and several additional regional drug stores such as Bartell
Drugs in Washington, Snyders Drug Stores in the Midwest and USA Drug in Arkansas and four surrounding states. The year over year decrease can be attributed to lower expenditures to support our direct to consumer sales in the areas of TV media,
print media, call center commissions and production costs of approximately $530,000, $241,000, $240,000 and $173,000 respectively. This is primarily offset by increases in headcount related expenses, product samples and public relations of
approximately $210,000, $132,000 and $90,000 respectively. The increased spending was all focused on supporting the Companys wholesale sales to drug and specialty retail stores.

Advertising and Promotion expenses for the first quarter of fiscal 2009 are expected to increase in absolute dollars as we continue to expand our sales and marketing presence in retail; however, advertising and
promotion expenses as a percentage of net sales may fluctuate.

Selling, General and Administrative (SG&A) Expenses

SG&A expenses consist primarily of employee-related expenses, stock based compensation, insurance, occupancy expenses, and outside services such as legal, auditing,
and tax services.

SG&A expenses for the twelve months ended March 31, 2008 were $1,822,614. This represents a decrease of $455,239 or 20% from
the fiscal 2007 total of $2,277,853. The majority of this decrease can be attributed to stock based compensation charges related to certain warrants and options issued to employees, directors and Company advisors. We incurred employee stock based
compensation charges under FASB No. 123R for the first time during fiscal 2007, previously having incurred such charges only for directors and consultants. During fiscal 2008, the Company had fewer initial employee stock option grants, and
added fewer consultants, advisors and directors. Other significant decreases include legal fees and headcount related expenses of approximately $35,000 and $50,000 respectively. These were offset by increases in insurance of approximately $42,000
and office rent of $58,000.

Total Other Income (Expense), Net

Total Other Income (Expense), Net decreased $125,730 to an expense of $75,114 in fiscal 2008 versus income of $50,616 in fiscal 2007 primarily due to Interest Income (Expense), Net declining $122,894 to an expense of $69,664 in fiscal 2008
versus income of $53,230 in fiscal 2007. ALCiS earned $16,052 and $53,230 of interest income during the years ended March 31, 2008 and 2007 respectively, with the decline primarily due to a lower average outstanding balance of funds invested.
During fiscal 2008, the Company incurred $49,323 of interest expense on the operating line of credit and notes payable and $30,268 in finance charges related to guarantees provided by certain current investors. Warrants to purchase the



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Companys common stock were issued as consideration for the personal guarantees of the Companys line of credit. The expense related to the
warrants was calculated using the Black-Scholes warrant-pricing model and amortized over the term of the agreements. During fiscal 2007, the Company did not incur any interest charges.

Provision for Income Taxes

Provision for income taxes represents federal and state taxes. There was no provision for
income taxes for the years ended March 31, 2008 and 2007. The Company has generated net operating losses since inception which may be available to reduce future taxable income. There is currently a full valuation allowance against our deferred
tax asset.

Financial Condition

Overview

We ended fiscal 2008 with $83,801 in cash, cash equivalents, and short-term investments. This represents a decrease of $1,688,188 when compared with
the amount of $1,771,989 on hand at on March 31, 2007. As of March 31, 2008, working capital, current assets less current liabilities, was a negative $1,112,521, which represents a decrease of $2,613,895 from $1,501,374 as of
March 31, 2007. The decrease in working capital was mostly the result of cash usage from the Companys operating loss. Our operating activities used cash of $3,707,734 for the twelve months ended March 31, 2008, and we expect our
cash usage to increase as we grow our revenues and increase our operating expenses. As a result, we are currently seeking debt and equity financing in the next three to six months. There can be no assurance that we will be successful in raising
financing or that any financing we obtain will be on terms we find attractive.

Liquidity and Capital Resources

Our cash and cash equivalents decreased $1,688,188 during the twelve months ended March 31, 2008 to $83,801 from $1,771,989 at March 31, 2007. The decrease in
cash and cash equivalents during the twelve months ended March 31, 2008 is mainly due to negative cash flows from operating activities of $3,707,734 which were only partially offset by our positive cash flows from financing of
$2,025,000.

Our operating activities used cash of $3,707,734 for the twelve months ended March 31, 2008, compared to cash usage of $3,738,487 for the
same period in the prior fiscal year. The negative cash flows from operating activities were primarily attributable to the increased infrastructure, inventory and sales and marketing expenses required to launch our products into the wholesale
channel. Working capital sources of cash included a decrease in prepaid expenses and other current assets of $69,256. Working capital uses of cash included an increase in inventory of $118,203 and accounts receivable of $23,323 and a decrease of
accounts payable and accrued liabilities of $92,333.

In the comparable period in fiscal 2007, the negative cash flows from operating activities were
primarily attributable to the increased infrastructure, inventory and sales and marketing expenses required to drive our direct to consumer sales. Working capital sources of cash included an increase in accounts payable and accrued expenses of
$137,607. Working capital uses of cash included an increase in inventory of $115,811 and prepaid expenses of $55,217, primarily from prepaid television media for the Companys commercial.

The Company used cash in investing activities by purchasing property and equipment totaling $5,454 and $53,131 in the years ending March 31, 2008 and 2007,
respectively.

Net cash provided from financing activities during the twelve months ended March 31, 2008, was $2,025,000 which consisted of net
proceeds from the Companys operating line of credit, issuance of common stock and convertible notes payable of $1,140,000, $185,000 and $700,000 respectively. Net cash provided from financing activities during the twelve months ended
March 31, 2007, was $3,558,982, which consisted of proceeds from the sale of common stock net of offering costs.

We believe that our manufacturing
provider has substantial production capacity in place to handle any projected increase in business for the next fiscal year. We also believe our existing cash, cash equivalents and short-term investments, together with cash flow from operations, and
proceeds from our convertible debt offering, we have received subsequent to year end will be sufficient to meet liquidity and capital requirements only for the next approximately three to five months as the cash usage from our operating activities
increases as we increase revenues, and therefore have to build inventory in advance of payment for product, and as we increase our expenditures, especially in sales and marketing. We are therefore attempting to raise both debt and equity financing.
Should we not be successful in raising monies in the next two to three months, we plan to reduce our expenditures in order to attempt to stretch our cash to last us for an additional two months. There can be no assurance that we will be successful
in our financing efforts, or that any financing raised will be on terms we find to be attractive, or that we will be able to operate so that our cash lasts us as long as five months.



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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are likely to have, a current or future material effect on the financial condition, revenues, expenses, results of operations, liquidity, capital
expenditures, or capital resources.

Contractual Obligations

ALCiS has entered into a perpetual, worldwide exclusive license for use of certain technology in topical analgesic pain relief products, a nonexclusive license on a number of other products, and an option to purchase broader rights to
several technologies in the future. For the license, ALCiS has agreed to pay a royalty rate based on sales with a minimum payment of $25,000 per month ($50,000 after December 31, 2008) to continue its exclusive license agreement. ALCiS leases
its office space under a non-cancelable operating lease which expires in August 2008. Future rental payments are approximately $58,000 for fiscal 2009.

Recently issued accounting standards

Effective April 1, 2007, we adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 , or FIN 48. FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of
uncertain income tax positions recognized in the financial statements in accordance with SFAS No. 109. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the
adoption of FIN 48 and in subsequent periods. Upon review and analysis by the Company, we have concluded that no FIN 48 effects are present as of March 31, 2008 and our tax position has not materially changed since March 31,
2007. For the year ended March 31, 2008, we did not identify and record any liabilities related to unrecognized income tax benefits. Therefore the adoption of FIN 48 does not impact our financial statements for the year ended
March 31, 2008.

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value
Measurements (SFAS No. 157), which provides guidance on how to measure assets and liabilities that use fair value. SFAS No. 157 will apply whenever another U.S. GAAP standard requires (or permits) assets or liabilities to be
measured at fair value but does not expand the use of fair value to any new circumstances. This standard also will require additional disclosures in both annual and quarterly reports. SFAS No. 157 will be effective for the first
quarter of fiscal 2009. We are currently evaluating the potential impact this standard may have on our financial position and results of operations.

In
December 2007, the FASB issued proposed FASB Staff Position (FSP) 157-b, Effective Date of FASB Statement No. 157, that would permit a one-year deferral in applying the measurement provisions of SFAS No. 157
to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entitys financial statements on a recurring basis (at least annually). Therefore, if the change in fair value
of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of SFAS No. 157 to that item is deferred until fiscal years beginning
after November 15, 2008 and interim periods within those fiscal years. This deferral does not apply, however, to an entity that applies SFAS No. 157 in interim or annual financial statements before proposed FSP 157-b is finalized. We are
currently evaluating the impact, if any, that the adoption of FSP 157-b will have on our operating income or net earnings.

On April 1, 2007, the
Company adopted Staff Accounting Bulletin (SAB) No. 108. This Bulletin was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB No. 108, the
SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of the misstatements on each of the companys financial statements and the related financial statement disclosures. At
March 31, 2008, the Company did not have any financial statement misstatements that required quantification or disclosure.

On February 15, 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). Under this Standard, we may elect to report financial instruments and certain other items at fair value
on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities
that were previously required to use a different accounting method than the related hedging contracts when the complex provisions of SFAS No. 133 hedge accounting are not met. SFAS No. 159 is effective for years beginning after
November 15, 2007 and it is not expected to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued
Statement No. 141(Revised 2007), Business Combinations (SFAS No. 141(R)) and Statement No. 160, Accounting and Reporting of Non-controlling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51 (SFAS No. 160). These statements will significantly change the financial accounting and reporting of business combination transactions and non-controlling (or minority) interests in consolidated financial
statements. SFAS No. 141(R) requires companies to: (i) recognize, with certain exceptions, 100% of the fair values of assets acquired, liabilities assumed, and non-controlling interests in acquisitions of less than a 100% controlling
interest when the acquisition constitutes a change in control of the acquired entity; (ii) measure acquirer shares issued in consideration for a



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business combination at fair value on the acquisition date; (iii) recognize contingent consideration arrangements at their acquisition-date fair values,
with subsequent changes in fair value generally reflected in earnings; (iv) with certain exceptions, recognize pre-acquisition loss and gain contingencies at their acquisition-date fair values; (v) capitalize in-process research and
development (IPR&D) assets acquired; (vi) expense, as incurred, acquisition-related transaction costs; (vii) capitalize acquisition-related restructuring costs only if the criteria in SFAS 146,Accounting for Costs Associated
with Exit or Disposal Activities , are met as of the acquisition date; and (viii) recognize changes that result from a business combination transaction in an acquirers existing income tax valuation allowances and tax uncertainty
accruals as adjustments to income tax expense. SFAS No.141(R) is required to be adopted concurrently with SFAS No. 160 and is effective for business combination transactions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008 (our fiscal 2009). Early adoption of these statements is prohibited. We believe the adoption of these statements will have a material impact on significant acquisitions
completed after March 31, 2009.

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 (SAB
110). SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff regarding the use of the
simplified method in developing an estimate of the expected term of plain vanilla share options and allows usage of that method for option grants prior to December 31, 2007. SAB 110 allows public companies which do not
have sufficient historical experience to provide a reasonable estimate to continue the use of this method for estimating the expected term of plain vanilla share option grants after December 31, 2007. The adoption of this
pronouncement by us in fiscal 2008 has not had an effect on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities -an amendment of SFAS 133, ( SFAS No. 161). SFAS No. 161 seeks to improve financial reporting for derivative instruments and hedging activities by requiring
enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, SFAS No. 161 requires: (1) the disclosure of the fair value of derivative instruments and gains
and losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related; and (3) cross-referencing within the footnotes. This standard shall be effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 and early application is encouraged. We are in the process of evaluating the new disclosure requirements under SFAS No. 161 and do not expect the adoption to have a material impact on our
consolidated financial statements.

Available Information

We file electronically with the SEC our annual reports on Form 10-KSB, quarterly reports on Form 10-QSB, current reports on Form 8-K, and amendments, if any, to those reports pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding ALCiS Health, Inc. and Emerging Delta Corporation (the name of the Registrant
prior to the Merger).



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|Item 7. | Financial Statements
|------- | --------------------

REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

ALCiS Health, Inc.

San Jose, California

We have audited the accompanying consolidated balance sheets of ALCiS Health, Inc. (the Company) as of March 31, 2008 and 2007 and the related
consolidated statements of operations, shareholders equity and cash flows for each of the two years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes
of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of ALCiS Health, Inc. at March 31, 2008 and 2007, and the results of its operations and its cash flows for each of the two years then ended in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company has incurred significant operating losses to date, has a working capital deficit and a total stockholders deficit of $1,112,521 and $1,677,029, respectively at March 31, 2008. These conditions raise
substantial doubt about its ability to continue as a going concern. Managements plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might arise from the outcome of this
uncertainty.



|                                       
|---------------------------------------
|/s/ Pannell Kerr Forster of Texas, P.C.
|                                       
|Houston, Texas June 27,
2008           



23



---

ALCiS Health, Inc.

Consolidated Balance Sheets



|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                             |  | As of March 31, |            
|                                                                                                                                                             |  | 2008            |             |   | 2007 |  
|Assets                                                                                                                                                       |  |                 |             |   |      |   |             |  
|Current                                                                                                                                                      |  |                 |             |   |      |   |             |  
|Cash and cash equivalents                                                                                                                                    |  | $               | 83,801      |   |      | $ | 1,771,989   |  
|Inventory                                                                                                                                                    |  |                 | 340,051     |   |      |   | 221,848     |  
|Accounts receivable, net allowance for doubtful accounts of $1,300 and $0 at March 31, 2008 and 2007, respectively                                           |  |                 | 32,836      |   |      |   | 9,513       |  
|Prepaid expenses and other current assets                                                                                                                    |  |                 | 105,515     |   |      |   | 135,918     |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Total current assets                                                                                                                                         |  |                 | 562,203     |   |      |   | 2,139,268   |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Property and equipment, net of accumulated depreciation of $43,653 and $20,503 at March 31, 2008 and 2007, respectively                                      |  |                 | 26,262      |   |      |   | 43,958      |  
|Deferred loan costs                                                                                                                                          |  |                 | 68,000      |   |      |   |            |  
|Other assets                                                                                                                                                 |  |                 | 41,230      |   |      |   | 41,541      |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Total assets                                                                                                                                                 |  | $               | 697,695     |   |      | $ | 2,224,767   |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|                                                                                                                                                             |  |                
|Liabilities and Shareholders Equity (Deficit)                                                                                                               |  |                 |             |   |      |   |             |  
|Current liabilities                                                                                                                                          |  |                 |             |   |      |   |             |  
|Accounts payable and accrued liabilities                                                                                                                     |  | $               | 531,583     |   |      | $ | 623,916     |  
|Deferred revenue                                                                                                                                             |  |                 | 3,141       |   |      |   | 13,978      |  
|Line of credit                                                                                                                                               |  |                 | 1,140,000   |   |      |   |            |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Total current liabilities                                                                                                                                    |  |                 | 1,674,724   |   |      |   | 637,894     |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Convertible notes payable                                                                                                                                    |  |                 | 700,000     |   |      |   |            |  
|Commitments and contingencies                                                                                                                                |  |                 |            |   |      |   |            |  
|                                                                                                                                                             |  |                
|Shareholders equity (deficit)                                                                                                                               |  |                 |             |   |      |   |             |  
|Preferred stock                                                                                                                                              |  |                 |            |   |      |   |            |  
|Common stock; $0.001 par value, 20,000,000 shares authorized, 9,021,902 and 8,936,902 shares issued and outstanding at March 31, 2008 and
2007, respectively |  |                 | 9,022       |   |      |   | 8,937       |  
|Additional paid-in capital                                                                                                                                   |  |                 | 12,339,173  |   |      |   | 11,698,806  |  
|Accumulated deficit                                                                                                                                          |  |                 | (14,025,224 | ) |      |   | (10,120,870 | )
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Total shareholders equity (deficit)                                                                                                                         |  |                 | (1,677,029  | ) |      |   | 1,586,873   |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  
|Total liabilities and shareholders equity (deficit)                                                                                                         |  | $               | 697,695     |   |      | $ | 2,224,767   |  
|                                                                                                                                                             |  |                 |             |   |      |   |             |  

See accompanying notes to consolidated financial statements.



24



---

ALCiS Health, Inc.

Consolidated Statements of Operations



|                                                                    |  |                      |            |   |      |   |            |  
|------------------------------------------------------------------- |  | -------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                    |  | Year Ended March 31, |           
|                                                                    |  | 2008                 |            |   | 2007 |  
|Revenue                                                             |  | $                    | 1,571,469  |   |      | $ | 2,278,134  |  
|                                                                    |  |                      |            |   |      |   |            |  
|Operating expenses                                                  |  |                      |            |   |      |   |            |  
|Cost of sales                                                       |  |                      | 642,800    |   |      |   | 859,610    |  
|Advertising and promotion                                           |  |                      | 2,614,551  |   |      |   | 3,350,876  |  
|Selling, general and administrative                                 |  |                      | 1,822,614  |   |      |   | 2,277,853  |  
|Product development                                                 |  |                      | 320,744    |   |      |   | 1,251,573  |  
|                                                                    |  |                      |            |   |      |   |            |  
|Total operating expenses                                            |  |                      | 5,400,709  |   |      |   | 7,739,912  |  
|                                                                    |  |                      |            |   |      |   |            |  
|Operating loss                                                      |  |                      | (3,829,240 | ) |      |   | (5,461,778 | )
|Interest income (expense), net                                      |  |                      | (69,664    | ) |      |   | 53,230     |  
|Other expense, net                                                  |  |                      | (5,450     | ) |      |   | (2,614     | )
|                                                                    |  |                      |            |   |      |   |            |  
|Total other income (expense), net                                   |  |                      | (75,114    | ) |      |   | 50,616     |  
|                                                                    |  |                      |            |   |      |   |            |  
|Net loss available to common shareholders                           |  | $                    | (3,904,354 | ) |      | $ | (5,411,162 | )
|                                                                    |  |                      |            |   |      |   |            |  
|Net loss per common share:                                          |  |                      |            |   |      |   |            |  
|Basic and fully diluted                                             |  | $                    | (0.43      | ) |      | $ | (0.68      | )
|                                                                    |  |                      |            |   |      |   |            |  
|Number of common shares:                                            |  |                      |            |   |      |   |            |  
|Weighted average common shares outstanding, basic and fully diluted |  |                      | 9,006,135  |   |      |   | 7,911,894  |  
|                                                                    |  |                      |            |   |      |   |            |  

See accompanying notes to consolidated financial statements.



25



---

ALCiS Health, Inc.

Consolidated Statements of Shareholders Equity (Deficit)

For the Years ending March 31, 2008 and
2007



|                                                                                                                |  |                 |  |              |   |                          |           |                        |   |       |                    |   |           |                                     |   |          |   |  |   |            |   |  |   |            |  
|--------------------------------------------------------------------------------------------------------------- |  | --------------- |  | ------------ | - | ------------------------ | --------- | ---------------------- | - | ----- | ------------------ | - | --------- | ----------------------------------- | - | -------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                |  | Preferred Stock |  | Common Stock |   | AdditionalPaid-InCapital |           | Common StockSubscribed |   |       | AccumulatedDeficit |   |           | Total ShareholdersEquity (Deficit) |  
|                                                                                                                |  | Number ofShares |  | Amount       |   | Number ofShares          |           | Amount                 |   |       |                    |  
|Balance, March 31, 2006                                                                                         |  |                |  | $            |  |                          | 7,148,902 |                        | $ | 7,149 |                    | $ | 6,639,576 |                                     | $ | (190,000 | ) |  | $ | (4,709,708 | ) |  | $ | 1,747,017  |  
|Cash received from Common Stock subscribed as of March 31, 2006                                                 |  |                |  |              |  |                          |          |                        |   |      |                    |   |          |                                     |   | 190,000  |   |  |   |           |   |  |   | 190,000    |  
|Issuance of Common Stock for cash in April 2006                                                                 |  |                |  |              |  |                          | 42,500    |                        |   | 43    |                    |   | 84,957    |                                     |   |         |   |  |   |           |   |  |   | 85,000     |  
|Consultant option expense for the quarter ended June 30, 2006                                                   |  |                |  |              |  |                          |          |                        |   |      |                    |   | 78,515    |                                     |   |         |   |  |   |           |   |  |   | 78,515     |  
|Technology warrant expense for the quarter ended June 30, 2006                                                  |  |                |  |              |  |                          |          |                        |   |      |                    |   | 942,713   |                                     |   |         |   |  |   |           |   |  |   | 942,713    |  
|Issuance of Common Stock for cash in September 2006                                                             |  |                |  |              |  |                          | 88,000    |                        |   | 88    |                    |   | 175,912   |                                     |   |         |   |  |   |           |   |  |   | 176,000    |  
|Consultant option expense for the quarter ended September 30, 2006                                              |  |                |  |              |  |                          |          |                        |   |      |                    |   | 338,468   |                                     |   |         |   |  |   |           |   |  |   | 338,468    |  
|Issuance of Common Stock for cash during the quarter ended December 31, 2006, net of offering costs of $207,000 |  |                |  |              |  |                          | 1,620,000 |                        |   | 1,620 |                    |   | 3,031,362 |                                     |   |         |   |  |   |           |   |  |   | 3,032,982  |  
|Consultant option expense for the quarter ended December 31, 2006                                               |  |                |  |              |  |                          |          |                        |   |      |                    |   | 216,544   |                                     |   |         |   |  |   |           |   |  |   | 216,544    |  
|Issuance of Common Stock for cash during the quarter ended March 31, 2007                                       |  |                |  |              |  |                          | 37,500    |                        |   | 37    |                    |   | 74,963    |                                     |   |         |   |  |   |           |   |  |   | 75,000     |  
|Consultant option expense for the quarter ended March 31, 2007                                                  |  |                |  |              |  |                          |          |                        |   |      |                    |   | 115,796   |                                     |   |         |   |  |   |           |   |  |   | 115,796    |  
|Net loss for the year ended March 31, 2007                                                                      |  |                |  |              |  |                          |          |                        |   |      |                    |   |          |                                     |   |         |   |  |   | (5,411,162 | ) |  |   | (5,411,162 | )
|                                                                                                                |  |                 |  |              |   |                          |           |                        |   |       |                    |   |           |                                     |   |          |   |  |   |            |   |  |   |            |  

See accompanying notes to consolidated financial statements.



26



---

ALCiS Health, Inc.

Consolidated Statements of Shareholders Equity (Deficit)

For the Years ending March 31, 2008 and
2007



|                                                                                |  |                 |  |              |   |                           |           |                        |   |                     |  |   |                                    |  |   |   |  |   |             |   |  |   |            |  
|------------------------------------------------------------------------------- |  | --------------- |  | ------------ | - | ------------------------- | --------- | ---------------------- | - | ------------------- |  | - | ---------------------------------- |  | - | - |  | - | ----------- | - |  | - | ---------- | -
|                                                                                |  | Preferred Stock |  | Common Stock |   | Additional Paid-InCapital |           | Common StockSubscribed |   | Accumulated Deficit |  |   | Total ShareholdersEquity(Deficit) | 
|                                                                                |  | Number ofShares |  | Amount       |   | Number ofShares           |           | Amount                 |   |                     |  |  
|Balance, March 31, 2007                                                         |  |                |  | $            |  |                           | 8,936,902 |                        | $ | 8,937               |  | $ | 11,698,806                         |  | $ |  |  | $ | (10,120,870 | ) |  | $ | 1,586,873  |  
|Issuance of Common Stock for cash in April 2007                                 |  |                |  |              |  |                           | 25,000    |                        |   | 25                  |  |   | 49,975                             |  |   |  |  |   |            |   |  |   | 50,000     |  
|Exercise of Common Stock warrants for cash in June 2007                         |  |                |  |              |  |                           | 60,000    |                        |   | 60                  |  |   | 134,940                            |  |   |  |  |   |            |   |  |   | 135,000    |  
|Consultant option expense for the quarter ended June 30, 2007                   |  |                |  |              |  |                           |          |                        |   |                    |  |   | 97,123                             |  |   |  |  |   |            |   |  |   | 97,123     |  
|Consultant option expense for the quarter ended September 30, 2007              |  |                |  |              |  |                           |          |                        |   |                    |  |   | 78,631                             |  |   |  |  |   |            |   |  |   | 78,631     |  
|Warrant expense for loan issue costs during the quarter ended December 31, 2007 |  |                |  |              |  |                           |          |                        |   |                    |  |   | 82,216                             |  |   |  |  |   |            |   |  |   | 82,216     |  
|Consultant option expense for the quarter ended December 31, 2007               |  |                |  |              |  |                           |          |                        |   |                    |  |   | 84,858                             |  |   |  |  |   |            |   |  |   | 84,858     |  
|Warrant expense for loan issue costs during the quarter ended March 31, 2008    |  |                |  |              |  |                           |          |                        |   |                    |  |   | 54,905                             |  |   |  |  |   |            |   |  |   | 54,905     |  
|Consultant option expense for the quarter ended March 31, 2007                  |  |                |  |              |  |                           |          |                        |   |                    |  |   | 57,719                             |  |   |  |  |   |            |   |  |   | 57,719     |  
|Net loss for the year ended March 31, 2008                                      |  |                |  |              |  |                           |          |                        |   |                    |  |   |                                   |  |   |  |  |   | (3,904,354  | ) |  |   | (3,904,354 | )
|                                                                                |  |                 |  |              |   |                           |           |                        |   |                     |  |   |                                    |  |   |   |  |   |             |   |  |   |            |  
|Balance, March 31, 2008                                                         |  |                |  | $            |  |                           | 9,021,902 |                        | $ | 9,002               |  | $ | 12,339,173                         |  | $ |  |  | $ | (14,025,224 | ) |  | $ | (1,677,029 | )
|                                                                                |  |                 |  |              |   |                           |           |                        |   |                     |  |   |                                    |  |   |   |  |   |             |   |  |   |            |  

See accompanying notes to consolidated financial statements.



27



---

ALCiS Health, Inc.

Consolidated Statements of Cash Flows



|                                                                            |  |                      |            |   |      |   |            |  
|--------------------------------------------------------------------------- |  | -------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                            |  | Year Ended March 31, |           
|                                                                            |  | 2008                 |            |   | 2007 |  
|Cash flows from operating activities:                                       |  |                      |            |   |      |   |            |  
|Net loss                                                                    |  | $                    | (3,904,354 | ) |      | $ | (5,411,162 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                      |            |   |      |   |            |  
|Consultant, director and product development option and warrant expense     |  |                      | 318,331    |   |      |   | 1,692,037  |  
|Amortization of deferred loan costs                                         |  |                      | 30,268     |   |      |   |           |  
|Depreciation                                                                |  |                      | 23,150     |   |      |   | 16,935     |  
|Changes in operating assets and liabilities:                                |  |                      |            |   |      |   |            |  
|Inventory                                                                   |  |                      | (118,203   | ) |      |   | (115,811   | )
|Accounts receivable, net                                                    |  |                      | (23,323    | ) |      |   | 10,705     |  
|Prepaid expenses and other current assets                                   |  |                      | 69,256     |   |      |   | (55,217    | )
|Other assets                                                                |  |                      | 311        |   |      |   | (12,036    | )
|Accounts payable and accrued liabilities                                    |  |                      | (92,333    | ) |      |   | 137,607    |  
|Deferred revenue                                                            |  |                      | (10,837    | ) |      |   | (1,545     | )
|                                                                            |  |                      |            |   |      |   |            |  
|Net cash used in operating activities                                       |  |                      | (3,707,734 | ) |      |   | (3,738,487 | )
|                                                                            |  |                      |            |   |      |   |            |  
|Cash flows from investing activities:                                       |  |                      |            |   |      |   |            |  
|Purchase of property and equipment                                          |  |                      | (5,454     | ) |      |   | (53,131    | )
|                                                                            |  |                      |            |   |      |   |            |  
|Net cash used in investing activities                                       |  |                      | (5,454     | ) |      |   | (53,131    | )
|                                                                            |  |                      |            |   |      |   |            |  
|Cash flows from financing activities:                                       |  |                      |            |   |      |   |            |  
|Proceeds from line of credit                                                |  |                      | 1,225,000  |   |      |   |           |  
|Payments on line of credit                                                  |  |                      | (85,000    | ) |      |   |           |  
|Proceeds from issuance of common stock, net of offering costs               |  |                      | 185,000    |   |      |   | 3,558,982  |  
|Proceeds from convertible notes payable                                     |  |                      | 700,000    |   |      |   |           |  
|                                                                            |  |                      |            |   |      |   |            |  
|Net cash provided by financing activities                                   |  |                      | 2,025,000  |   |      |   | 3,558,982  |  
|                                                                            |  |                      |            |   |      |   |            |  
|Net decrease in cash and cash equivalents                                   |  |                      | (1,688,188 | ) |      |   | (232,636   | )
|Cash and cash equivalents at beginning of period                            |  |                      | 1,771,989  |   |      |   | 2,004,625  |  
|                                                                            |  |                      |            |   |      |   |            |  
|Cash and cash equivalents at end of period                                  |  | $                    | 83,801     |   |      | $ | 1,771,989  |  
|                                                                            |  |                      |            |   |      |   |            |  
|Supplemental disclosure of cash flow information:                           |  |                      |            |   |      |   |            |  
|Cash paid for interest                                                      |  | $                    | 14,126     |   |      | $ |           |  
|                                                                            |  |                      |            |   |      |   |            |  
|Non-cash financing activities:                                              |  |                      |            |   |      |   |            |  
|Warrants issued to line of credit guarantors                                |  | $                    | 137,121    |   |      | $ |           |  
|                                                                            |  |                      |            |   |      |   |            |  

See accompanying notes to consolidated financial statements.



28



---

ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 1 - Organization and Business



On March 30, 2006, ALCiS Health, Inc. (ALCiS-CA), a California corporation
incorporated on April 13, 2004, entered into a Plan of Merger and Merger Agreement (the Merger) with Emerging Delta Corporation (Delta), a Delaware corporation incorporated on February 10, 1993, pursuant to which
Delta acquired ALCiS-CA in a reverse merger transaction with ALCiS-CA being the accounting acquirer and surviving corporation. Prior to the Merger, Delta was a public shell company with minimal assets and operations.

On March 30, 2006, ALCiS-CA completed the sale of 1,012,500 shares of its common stock for gross proceeds of $2,025,000 in a private placement
transaction (the Offering). As additional consideration, the purchasers received 202,500 warrants to purchase common stock with an exercise price of $2.00 per share, 202,500 warrants to purchase common stock with an exercise price of
$3.75 per share and 100,000 warrants to purchase common stock with an exercise price of $4.75 per share. The warrants are exercisable immediately and expire 10 years from the date of issuance. The Offering and Merger were conditional upon each
other.

On March 31, 2006, the Merger was consummated and all of ALCiS-CAs Preferred Stock was converted into 2,414,006 shares
of its common stock, resulting in 6,876,506 shares of common stock issued and outstanding. In the Merger, each share of ALCiS-CAs stock was exchanged for 0.16 shares of Deltas common stock, resulting in the issuance of 1,100,241 shares
of Deltas common stock to ALCiS-CAs shareholders and a total of 1,143,841 shares of Deltas common stock being issued and outstanding after the Merger. Also, ALCiS-CAs options to purchase 200,000 shares of common stock and
warrants to purchase 1,056,400 shares of common stock were converted into options to purchase 32,000 shares of Deltas common stock and warrants to purchase 169,024 shares of Deltas common stock with identical terms.

Following the Merger, Delta amended its Certificate of Incorporation to change its name to ALCiS Health, Inc., to reduce the par value of its common
stock from $1.00 per share to $0.001 per share, and to increase its authorized shares of common stock from 2,000,000 to 20,000,000 shares. The authorized preferred stock remained at 500,000 shares with a par value of $.001. In addition, ALCiS-CA
changed its name to ALCiS, Inc. The accompanying consolidated financial statements include the accounts of ALCiS Health, Inc. and its wholly-owned subsidiary, ALCiS, Inc. (hereinafter referred to ALCiS or the Company). All
intercompany accounts and transaction have been eliminated.

The Merger for accounting and financial reporting purposes is accounted for as
an acquisition of Delta by ALCiS-CA. As such ALCiS-CA was the accounting acquirer in the Merger, and the historical financial statements of ALCiS-CA are the financial statements for ALCiS following the Merger.

Following and under the terms of the Merger, ALCiS granted a stock dividend of 5.25 shares to each of its common shareholders which has the effect of a
6.25 for 1 stock split, resulting in 7,148,902 shares of common stock issued and outstanding. In addition, 200,000 warrants to purchase the ALCiSs common stock were granted to two former directors of Delta for consulting services. These
warrants have an exercise price of $2.00 per share, a term of 10 years with 50% vesting upon issuance and the remaining 50% vesting after one year. An additional 18,750 warrants were issued to two other former directors of Delta as a replacement for
warrants previously issued by Delta. These warrants have an exercise price of $2.00 per share and vest immediately upon grant. Finally, the Company assumed 26,875 options with an exercise price of $2.40 per share and 12,500 options with an exercise
price of $1.91 per share from Delta. These options are fully vested and expire in March 2008. These options were not exercised and thus have expired.

ALCiS estimated the fair value of these options using the Black-Scholes option-pricing model and recorded the related expense in the current period for vested awards and recorded expense related to unvested awards
over the vesting period.

ALCiS markets and distributes over-the-counter health care
products, including ALCiS® Daily Relief Pain Relief Cream and related products. The majority of the Companys revenue to date has been through direct-response advertising and web
commerce. During the current fiscal year, however, the Company introduced ALCiS® Daily Relief Pain Relief Cream into drug and specialty stores such as Longs Drugs in California and
Walgreens nationally. As of March 31, 2008, ALCiS Daily Relief Pain Relief Cream could be found at approximately 8,000 retail stores nationwide.



29



---

ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 1 - Organization and Business (Continued)



The Company has incurred significant operating losses to date and has a working capital deficit and a
total stockholders deficit of $1,112,521 and $1,677,029, respectively at March 31, 2008. While the Company has been successful in implementing its wholesale marketing and sales strategy evidenced by garnering distribution in approximately
13,000 chain drug and specialty retail stores as of June 26, 2008, its existing cash, cash equivalents and short-term investments, received subsequent to year end will be sufficient to meet its liquidity and capital requirements for only the
next approximately three to five months assuming promotion and advertising expenditures continue to yield an increasing level of revenue from drug store customers. Therefore, the Company is currently actively attempting to raise both debt and equity
financing. However, there can be no assurance that the financing efforts will be successful or that any financing raised will be on commercially attractive terms. If the Company cannot obtain additional financing on reasonable terms, there may not
be sufficient capital to operate the business as planned and the Company would have to modify its business plan or curtail some or all of its operations. For example, discretionary spending, particularly advertising and promotion expenses, would be
reduced in order to enable existing cash to meet capital requirements for a longer period of time.

Note 2 - Summary of Significant Accounting Policies

Cash and cash equivalents

For the purposes of the consolidated statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Inventory

Inventory consists of ALCiS® Daily Relief Pain Relief Cream and related products available for sale to consumers and packing materials. Inventory is valued
at the lower of first-in, first-out cost or market. Under certain payment terms with wholesale customers, the Company delays the recognition of revenue until products are actually sold to the consumer. When this is required, the Company accounts for
the inventory at the customers facility on consignment. At March 31, 2008, the Company had $72,094 of inventory at customer locations on consignment, included in inventory.

Property and equipment

Property and
equipment, consisting primarily of computer equipment, is carried at cost, less accumulated depreciation. Depreciation is provided by the straight-line method over estimated useful lives of three to five years. Expenditures for maintenance and
repairs are charged to expense as incurred.

Revenue recognition

Net sales consist primarily of products sold directly to consumers via a telephone call center and the internet, shipping revenue, net of estimated
returns and promotional discounts (referred to as retail sales).

The Company requires payment at the point of sale for all retail sales.
Amounts received prior to delivery of goods to customers are not recorded as revenue. Delivery is considered to occur when title to the products has passed to the customer, which typically occurs at physical delivery of the products from the
Companys fulfillment center to a common carrier. The Company offers a return policy of generally 30 days and provides an allowance for sales returns during the period in which the sales are made. At March 31, 2008, the reserve for sales
returns was $23,000 and was recorded as an accrued liability. The Company generally does not extend credit to customers for retail sales, except through third party credit cards. The majority of the retail sales are through credit cards, and
accounts receivable are composed primarily of amounts due from financial institutions related to credit card sales.

The Company generally
recognizes revenue on wholesale accounts, primarily drug and specialty stores, at the time of shipment. The Company recognizes revenue when all of the following have occurred: persuasive evidence of an agreement with the customer exists, products
are shipped and the customer takes delivery and assumes the risk of loss; the selling price is fixed or determinable and collectibility of the selling price is reasonably assured. In certain cases, when the above conditions are not met, the Company
defers the revenue until such time that it is appropriate. The Company established an allowance for doubtful accounts for a small number of questionable wholesale specialty



30



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 2 - Summary of Significant Accounting Policies (Continued)

Revenue recognition (Continued)



accounts. At March 31, 2008, the allowance for doubtful accounts was $1,300 and was recorded as a reduction of accounts receivable. Under certain
payment terms with wholesale customers, the Company delays the recognition of revenue until products are actually sold to the consumer. Revenue is recognized after confirmation is received from the customer of the total number of units sold to end
users during each period.

The Company periodically provides advertising allowances, coupons, rebates and other incentive offers to its
wholesale customers to encourage purchase by consumers at the store level. The Company reviews each promotion and determines the appropriate deduction from gross revenue. In the case of rebates and coupons, the Company estimates the redemption based
on historical rates and provides a reserve as of the balance sheet date.

Prepaid royalties

Under the license and manufacturing agreement with the patent owner of the liposomal delivery
system used in ALCiS® Daily Relief Pain Relief Cream, prepaid royalties consists of the difference between the actual royalties owed and the minimum monthly payment due, when the minimum
monthly payment exceeds the actual royalties owed. In addition, certain up-front payments are characterized as prepaid royalties. Prepaid royalties are available to offset future royalties when actual royalties owed exceed the minimum monthly
payment due. At that time, the prepaid royalties can be applied to the actual royalties owed and reduce the actual payment to the minimum amount due. The prepaid royalties expire upon the termination of the license and manufacturing agreement.

The Company charges to expense the prepaid royalties, that is the excess of the amounts paid over the royalties due on the current period
sales. The Company does not record an asset for prepaid royalties available for future sales (see Note 7 for further discussion). The total amount of prepaid royalties available for future sales is approximately $1,295,000.

Deferred loan costs

The Company has
issued warrants to certain investors for their guarantee of the line of credit facility with a regional bank. The warrants were valued using the Black-Scholes option-pricing model and the corresponding cost is amortized over the term of the
guarantee. The total amount of deferred loan costs at March 31, 2008 was $106,853 of which, $38,853 is recorded as prepaid expense.

Advertising expenses

The cost of advertising is expensed in the fiscal year in which the related advertising takes place.
Production and communication costs are expensed in the period in which the related advertising begins running. Costs for direct-response advertising are capitalized and amortized over the estimated useful life of the advertisement.

Product development

Product development costs relate to costs incurred in the development of its product, ALCiS® Daily Relief Pain Relief Cream, and are expensed as incurred.

Shipping and
handling costs

Shipping and handling costs are included in cost of sales as incurred in the consolidated statement of operations.

Stock based compensation

The Company accounts for its stock based compensation plans under Statement of Financial Accounting Standards (SFAS) No. 123R, Share Based Payments, whereby the cost of share based payments to employees,
including grants of employee stock options, are measured based on the grant date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award, the requisite
service period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant date fair value of employee share options and similar instruments will be estimated using the Black-Scholes
option-pricing model adjusted for the unique characteristics of those instruments.



31



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 2 - Summary of Significant Accounting Policies (Continued)

Stock based compensation (Continued)



The Company from time to time issues common stock, stock options or common stock warrants to acquire
services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the date required by Emerging Issues Task
Force (EITF) Issue 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.

In accordance with EITF 96-18, the stock options or common stock warrants are valued using the Black-Scholes option-pricing model on the basis of the
market price of the underlying common stock on the valuation date, which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the
vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date,
the expense is computed under the Black-Scholes option-pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock through the
valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing earnings (loss) available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings (loss) per share include the effects of the potential dilution of outstanding options, warrants, and convertible debt on the Companys common stock, determined using the treasury stock
method.

Earnings (loss) per share is as follows:



|                                                    |  |                      |            |   |      |   |            |  
|--------------------------------------------------- |  | -------------------- | ---------- | - | ---- | - | ---------- | -
|                                                    |  | Year ended March 31, |           
|                                                    |  | 2008                 |            |   | 2007 |  
|Basic and Diluted:                                  |  |                      |            |   |      |   |            |  
|Net loss available to common shareholders           |  | $                    | (3,904,354 | ) |      | $ | (5,411,162 | )
|                                                    |  |                      |            |   |      |   |            |  
|Net loss per share available to common shareholders |  | $                    | (0.43      | ) |      | $ | (0.68      | )
|                                                    |  |                      |            |   |      |   |            |  
|Weighted average common shares outstanding          |  |                      | 9,006,135  |   |      |   | 7,911,894  |  
|                                                    |  |                      |            |   |      |   |            |  

For the years ended March 31, 2008 and 2007, potential dilutive common shares under the
warrant agreements and stock option plan of 4,393,225 and 4,302,600, respectively, were not included in the calculation of diluted loss per share as they were antidilutive.

Income taxes

An asset and liability
approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different
periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is recognized.

Managements estimates and assumptions

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ from such estimates. The Company
reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance.



32



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 2 - Summary of Significant Accounting Policies (Continued)



Reclassifications

Certain reclassifications have been made to the 2007 financial statements to conform to the 2008 presentation. These reclassifications had no effect on
total assets, net income or total shareholders equity (deficit).

Recently issued unimplemented accounting standards

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value
Measurements (SFAS No. 157), which provides guidance on how to measure assets and liabilities that use fair value. SFAS No. 157 will apply whenever another U.S. GAAP standard requires (or permits) assets or liabilities to be
measured at fair value but does not expand the use of fair value to any new circumstances. This standard also will require additional disclosures in both annual and quarterly reports. SFAS No. 157 will be effective for the first
quarter of fiscal 2009. We are currently evaluating the potential impact this standard may have on our financial position and results of operations.

In December 2007, the FASB issued proposed FASB Staff Position (FSP) 157-b, Effective Date of FASB Statement No. 157, that would permit a one-year deferral in applying the
measurement provisions of SFAS No. 157 to non-financial assets and non-financial liabilities (non-financial items) that are not recognized or disclosed at fair value in an entitys financial statements on a recurring basis (at least
annually). Therefore, if the change in fair value of a non-financial item is not required to be recognized or disclosed in the financial statements on an annual basis or more frequently, the effective date of application of SFAS No. 157 to that
item is deferred until fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. This deferral does not apply, however, to an entity that applies SFAS No. 157 in interim or annual financial statements
before proposed FSP 157-b is finalized. The Company is currently evaluating the impact, if any, that the adoption of FSP 157-b will have on its operating income or net earnings.

On April 1, 2007, the Company adopted Staff Accounting Bulletin (SAB) No. 108. This Bulletin was issued in order to eliminate the
diversity of practice surrounding how public companies quantify financial statement misstatements. In SAB No. 108, the SEC staff established an approach that requires quantification of financial statement misstatements based on the effects of
the misstatements on each of the companys financial statements and the related financial statement disclosures. At March 31, 2008, the Company did not have any financial statement misstatements that required quantification or disclosure.

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159). Under this Standard, we may elect to report financial instruments and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is
irrevocable. SFAS No. 159 provides an opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets and liabilities that were previously required to use a different accounting method than the related hedging
contracts when the complex provisions of SFAS No. 133 hedge accounting are not met. SFAS No. 159 is effective for years beginning after November 15, 2007 and it is not expected to have a material impact on our consolidated financial
statements.

In December 2007, the FASB issued Statement No. 141(Revised 2007), Business Combinations (SFAS
No. 141(R)) and Statement No. 160, Accounting and Reporting of Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). These statements will significantly
change the financial accounting and reporting of business combination transactions and non-controlling (or minority) interests in consolidated financial statements. SFAS No. 141(R) requires companies to: (i) recognize, with certain
exceptions, 100% of the fair values of assets acquired, liabilities assumed, and non-controlling interests in acquisitions of less than a 100% controlling interest when the acquisition constitutes a change in control of the acquired entity;
(ii) measure acquirer shares issued in consideration for a business combination at fair value on the acquisition date; (iii) recognize contingent consideration arrangements at their acquisition-date fair values, with subsequent changes in
fair value generally reflected in earnings; (iv) with certain exceptions, recognize pre-acquisition loss and gain contingencies at their acquisition-date fair values; (v) capitalize in-process research and development (IPR&D)
assets acquired; (vi) expense, as incurred, acquisition-related transaction costs; (vii) capitalize acquisition-related restructuring costs only if the criteria in SFAS 146,Accounting for Costs Associated with Exit or Disposal
Activities , are met as of the



33



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 2 - Summary of Significant Accounting Policies (Continued)

Recently issued unimplemented accounting standards (Continued)



acquisition date; and (viii) recognize changes that result from a business combination transaction in an acquirers existing income tax valuation
allowances and tax uncertainty accruals as adjustments to income tax expense. SFAS No.141(R) is required to be adopted concurrently with SFAS No. 160 and is effective for business combination transactions for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after December 15, 2008 (our fiscal 2009). Early adoption of these statements is prohibited. We believe the adoption of these statements will have a material impact on
significant acquisitions completed after March 31, 2009.

In December 2007, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 110 (SAB 110). SAB 110 amends and replaces Question 6 of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the views of the
staff regarding the use of the simplified method in developing an estimate of the expected term of plain vanilla share options and allows usage of that method for option grants prior to December 31, 2007. SAB 110 allows
public companies which do not have sufficient historical experience to provide a reasonable estimate to continue the use of this method for estimating the expected term of plain vanilla share option grants after December 31, 2007.
The adoption of this pronouncement by us in fiscal 2008 has not had an effect on our consolidated financial statements.

In March 2008, the
FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities -an amendment of SFAS 133, ( SFAS No. 161). SFAS No. 161 seeks to improve financial reporting for derivative instruments and
hedging activities by requiring enhanced disclosures regarding the impact on financial position, financial performance, and cash flows. To achieve this increased transparency, SFAS No. 161 requires: (1) the disclosure of the fair value of
derivative instruments and gains and losses in a tabular format; (2) the disclosure of derivative features that are credit risk-related; and (3) cross-referencing within the footnotes. This standard shall be effective for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008 and early application is encouraged. We are in the process of evaluating the new disclosure requirements under SFAS No. 161 and do not expect the
adoption to have a material impact on our consolidated financial statements.

Note 3 - Line of Credit

On October 1, 2007, the Company entered into a revolving line of credit with a local business bank . The original borrowing base under the agreement
was established at $500,000. The line is secured by the Companys assets and matures on October 1, 2008, subject to renewal or conversion to a term loan at the banks discretion. The line bears interest at the banks prime rate plus
1.5% and was guaranteed by a current investor who was provided 75,000 five-year warrants to purchase the Companys common stock with an exercise price of $2.00 per share as consideration for the guarantee on the initial $500,000 line. The
warrants vest immediately and are exercisable for a term of five years. The fair value of the warrants was estimated to be $82,216 using the Black-Scholes option-pricing model and will be recorded as interest expense over the life of the loan
guarantee.

During January 2008, the Company obtained an $800,000 increase to its revolving line of credit with the bank, increasing the
line to $1,300,000. The additional line is guaranteed by four current investors who were provided a total of 120,000 five-year warrants to purchase the Companys common stock with an exercise price of $2.00 per share as consideration for the
guarantee. The warrants vest immediately and are exercisable for a term of five years. The fair value of the warrants was estimated to be $54,905 using the Black-Scholes option-pricing model and will be recorded as interest expense over the life of
the loan guarantee.

During the fiscal year ending March 31, 2008, $14,126 was recorded as interest expense in the statement of
operations relating to the line of credit. Interest only payments are due on the note each month. At March 31, 2008 the interest rate was 6.75% and the borrowings were $1,140,000. Also during the fiscal year, $30,268 was recorded as interest
expense in the statement of operations for the amortization of the fair value of the warrants with $106,853 remaining as deferred loan costs as of March 31, 2008.



34



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 4 - Convertible Notes Payable



During the third quarter of fiscal 2008, the Company received $600,000 in cash from the placement of
unsecured convertible promissory notes which bear interest at 8%. Of the total, $75,000 was received from two directors. The notes and accrued interest automatically convert into debt or equity upon a Qualified Financing which is defined
as any debt or equity offering by which the Company secures gross proceeds of $4 million or more (whether as equity, debt or other consideration), including the amounts received under these convertible notes. If a Qualified Financing does not occur,
the notes and any accrued interest are due and payable on demand, which may be made at any time after March 31, 2009, provided that the Company may extend the note maturity date to December 31, 2009, in which case the interest rate would
increase to 10%. Each note holder also received five-year warrants to purchase that number of Company common shares equal to 25% of the note principal divided by the price per share of the stock sold in the Qualified Financing or the price per share
at which the equity underlying or associated with the debt is issuable.

During March 2008, the Company received $100,000 in cash from the
placement of unsecured convertible promissory notes which bear interest at 10% and are due on demand at any time after September 30, 2009. The notes and accrued interest automatically convert into equity upon a Qualified Financing
which is defined as any equity offering by which the Company secures gross proceeds of $4 million or more. The notes will convert into equity at a 40% discount to the shares issued in the financing. If a Qualified Financing does not occur, the notes
and any accrued interest are due and payable on demand, which may be made at any time after September 30, 2009. Each note holder also received five-year warrants to purchase that number of Company common shares equal to 50% of the note
principal divided by the price per share of the stock sold in the Qualified Financing.

The Companys board of directors approved the
terms of the convertible notes in March 2008, just prior to the first investment of $100,000. At this time, the board also approved that the new terms should be offered to the investors from the original convertible note investment received during
the third quarter. In anticipation of each investor accepting these new terms, the Company accrued the additional interest in its financial statements. The value of the warrants was not calculated as the number and price of the warrants will not be
determined until conversion.

Note 5 - Income Taxes

The Company files a U.S. Federal income tax return. The components of the Companys deferred tax assets are as follows:



|                           |  |           |            |   |      |   |            |  
|-------------------------- |  | --------- | ---------- | - | ---- | - | ---------- | -
|                           |  | March 31, |           
|                           |  | 2008      |            |   | 2007 |  
|Loss carryforwards         |  | $         | 3,548,714  |   |      | $ | 2,291,484  |  
|Stock options and warrants |  |           | 1,012,047  |   |      |   | 903,815    |  
|Intangible assets          |  |           | 181,668    |   |      |   | 218,214    |  
|Returns reserve            |  |           | 7,820      |   |      |   | 10,921     |  
|Deferred revenue           |  |           | 1,068      |   |      |   | 4,753      |  
|                           |  |           |            |   |      |   |            |  
|                           |  |           | 4,751,317  |   |      |   | 3,429,187  |  
|Less: valuation allowance  |  |           | (4,751,317 | ) |      |   | (3,429,187 | )
|                           |  |           |            |   |      |   |            |  
|                           |  | $         |           |   |      | $ |           |  
|                           |  |           |            |   |      |   |            |  

As of March 31, 2008, the Company had generated U.S. net operating loss carryforwards of
approximately $10,664,012 which expire beginning in 2025. These net operating loss carryforwards are available to reduce future taxable income. However, a change in ownership, as defined by federal income tax regulations, could significantly limit
the Companys ability to utilize its loss carryforwards. Additionally, because Federal tax laws limit the time during which the loss carryforwards may be applied against future taxes, if the Company fails to generate sufficient taxable income
prior to the expiration date, it may not be able to utilize the loss carryforwards. As the Company is not yet profitable and there is no assurance of future taxable income, a valuation allowance has been recorded to fully offset the deferred tax
assets at March 31, 2008 and 2007. For the year ended March 31, 2008, the valuation allowance increased by $1,322,130.



35



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 5 - Income Taxes (Continued)



Income tax expense (benefit) for the years ended March 31, is as follows:



|                |  |      |   |      |   |  
|--------------- |  | ---- | - | ---- | - | -
|                |  | 2008 |   | 2007
|Current:        |  |      |   |      |   |  
|Federal         |  | $    |  |      | $ | 
|State and local |  |      |  |      |   | 
|                |  |      |   |      |   |  
|                |  |      |  |      |   | 
|                |  |      |   |      |   |  
|Deferred:       |  |      |   |      |   |  
|Federal         |  | $    |  |      | $ | 
|State and local |  |      |  |      |   | 
|                |  |      |   |      |   |  
|                |  | $    |  |      | $ | 
|                |  |      |   |      |   |  

Actual income tax expense (benefit) differs from the amount computed using the federal statutory
rate of 34% for the years ended March 31, as follows:



|                                                 |  |      |            |   |      |   |            |  
|------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                 |  | 2008 |            |   | 2007 |  
|Computed expected income tax expense (benefit) |  | $    | (1,327,480 | ) |      | $ | (1,839,795 | )
|State income taxes, net of federal tax effect    |  |      |           |   |      |   |           |  
|Changes in deferred tax valuation allowance      |  |      | 1,322,130  |   |      |   | 1,834,810  |  
|Other, net                                       |  |      | 5,350      |   |      |   | 4,985      |  
|                                                 |  |      |            |   |      |   |            |  
|Actual income tax expense (benefit)              |  | $    |           |   |      | $ |           |  
|                                                 |  |      |            |   |      |   |            |  

On April 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109. (SFAS 109). As a result of the implementation of FIN 48, management assessed its various income tax positions and this assessment resulted in
no adjustment to the tax asset or liability. The preparation of our various tax returns requires the use of estimates for federal and state incomes tax purposes. These estimates may be subjected to review by the respective taxing authorities. A
revision, if any, to an estimate may result in an assessment of additional taxes, penalties and interest. At this time, a range in which managements estimates may change is not quantifiable and a change, if any, is not expected to be material.
The Company will account for interest and penalties relating to uncertain tax provisions in the current period income statement, as necessary. The 2005, 2006, and 2007 tax years remain subject to examination by various federal and state tax
jurisdictions.

Note 6 - Equity

Common stock

During the fiscal year 2007, the Company issued 1,788,000 shares of its common stock at $2.00 per share for
cash proceeds of $3,576,000, recorded as approximately $3,369,000 net of the direct costs of the offering totaling approximately $207,000. As additional consideration, the Company issued the investors 1,325,000 warrants to purchase common stock with
an initial exercise price of $2.30. The warrants are exercisable immediately, expire on December 31, 2011 and escalate in price every six months as follows:



|                      |  |               |     
|--------------------- |  | ------------- | ----
|Months After Issuance |  | Warrant Price
|1  6                 |  | $             | 2.30
|7  12                |  | $             | 3.00
|13  18               |  | $             | 4.00
|19  Term             |  | $             | 5.00



36



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 6 - Equity (Continued)

Common stock
(Continued)



The Company also granted the placement agent warrants to purchase 103,500 shares of its common stock
expiring on December 31, 2011, with an exercise price of $2.30 per share. Using the Black-Scholes option-pricing model, the fair value of the warrants issued to the placement agent totaled $120,505. This was calculated using an expected life of
2.5 years, a risk-free interest rate of 4.3% and a volatility rate of 104%. Because the value of these warrants is a non-cash item, there is no effect on the net amount of proceeds received and recorded as common stock.

During the first quarter of fiscal year 2008, the Company issued 25,000 shares of its common stock at $2.00 per share for cash proceeds of $50,000. Also,
the Company issued 50,000 shares of its common stock at $2.30 per share for warrants exercised for cash proceeds of $115,000. Lastly, the Company issued 10,000 shares of its common stock at $2.00 per share for warrants exercised for total cash
proceeds of $20,000.

Preferred Stock

The Company is authorized to issue 500,000 shares of preferred stock at a par value of $.001. At March 31, 2008, there are no shares of preferred stock issued or outstanding.

2004 Stock Plan

Effective
September 28, 2004, the Companys Board of Directors approved the ALCiS Health, Inc. 2004 Stock Plan (the Stock Plan). The Stock Plan, as amended on March 31, 2006 in conjunction with the Merger, is discretionary and
allows for an aggregate of up to 1,300,000 shares of the Companys common stock to be awarded through incentive and non-qualified stock options and stock purchase rights. The Stock Plan is administered by the Board of Directors which has
exclusive discretion to select participants who will receive the awards and determine the type, size and terms of each award granted.

Options and warrants issued to non-employees

In May 2006, the Company issued warrants to purchase 25,000 shares of its
common stock to an advisory board member. The warrants are exercisable at a price of $2.00 per share, vest quarterly over three years and expire 10 years from the date of grant.

In January 2007, the Company issued warrants to purchase 10,000 shares of its common stock to a consultant. The warrants are exercisable at a price of
$2.00 per share and expire 10 years from the date of grant. The warrants vest over a two year period where 5,000 shares vest after one year and the remaining 5,000 shares vest monthly in the second year.

In October 2007, the Company issued warrants to purchase 10,000 shares of its common stock to a consultant. The warrants are exercisable at a price of
$2.00 per share and expire 10 years from the date of grant. The warrants vest quarterly over three years.

In November 2007, the Company
issued warrants to purchase 25,000 shares of its common stock to an advisory board member. The warrants are exercisable at a price of $2.00 per share and expire 10 years from the date of grant. The warrants vest quarterly over three years.

Expense relating to the options and warrants granted to non-employees was $10,814 and $240,320 for the years ended March 31, 2008 and
2007, respectively, and was calculated using the Black-Scholes option-pricing model.

Options and warrants issued to employees and
directors

In July 2006, the Company issued to three members of its Board of Directors warrants to purchase a total of 130,000 shares of
its common stock at an exercise price of $2.00 per share. The options have a term of 10 years and vest quarterly. The Company also issued to two Officers options to purchase a total of 336,570 shares of its common stock at an exercise price of $2.00
per share. The options have a term of 10 years and 86,570 shares were immediately vested. The remaining 250,000 shares vest monthly over four years.

During the years ending March 31, 2008 and 2007, the Company issued to employees options to purchase a total of 65,000 and 161,005 shares respectively of its common stock at an exercise price of $2.00 per share.
The options have a term of 10 years and vest monthly over a four year period.



37



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ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 6 - Equity (Continued)

Options and warrants
issued to employees and directors (Continued)



Expense relating to the options granted to employees was $120,264 and $247,270 for the years ended
March 31, 2008 and 2007, respectively, and was calculated using the Black-Scholes option-pricing model.

The Company uses the
Black-Scholes option-pricing model to compute the fair value of stock options which requires the Company to make the following assumptions:



|                        |  |                      |   |  |      |  
|----------------------- |  | -------------------- | - |  | ---- | -
|                        |  | Year Ended March 31, |  
|                        |  | 2008                 |   |  | 2007 |  
|Expected life (years)   |  | 5.57                 |   |  | 5.70 |  
|Risk-free interest rate |  | 2.5                  | % |  | 5.0  | %
|Dividend yield          |  |                     |   |  |     |  
|Volatility              |  | 58                   | % |  | 97   | %



| |  |  | The term of grants is based on the simplified method as described in Staff Accounting Bulletin No. 107.
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | The risk free rate is based on the five year Treasury bond at the date of grant.
| | - |  | --------------------------------------------------------------------------------



| |  |  | The dividend yield on the Companys common stock is assumed to be zero since the Company does not pay dividends and has no current plans to do so in the
future.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The market price volatility of the Companys common stock is based on the Companys recent stock activity and the volatility of other companies at a
similar stage of development.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Expense relating to the options and warrants granted to directors was $187,253 and $261,733
for the years ended March 31, 2008 and 2007, respectively, and there is $200,961 associated with nonvested awards that will be expensed in the future over a weighted average period of .77 years.

Summary stock option information

Information regarding the options and warrants granted is as follows:



|                               |  |                      |   |          |         |  |           |   |  |          
|------------------------------ |  | -------------------- | - | -------- | ------- |  | --------- | - |  | ---------
|                               |  | Year Ended March 31,
|                               |  | Options              |   | Warrants
|                               |  | 2008                 |   |          | 2007    |  | 2008      |   |  | 2007     
|Outstanding, beginning of year |  | 697,575              |   |          | 200,000 |  | 3,605,025 |   |  | 1,434,525
|Granted                        |  | 65,000               |   |          | 497,575 |  | 230,000   |   |  | 2,170,500
|Exercised                      |  |                     |   |          |        |  | (60,000   | ) |  |         
|Forfeited or cancelled         |  | (75,000              | ) |          |        |  | (69,375   | ) |  |         
|                               |  |                      |   |          |         |  |           |   |  |          
|Outstanding, end of year       |  | 687,575              |   |          | 697,575 |  | 3,705,650 |   |  | 3,605,025
|                               |  |                      |   |          |         |  |           |   |  |          
|Exercisable, end of year       |  | 436,847              |   |          | 308,044 |  | 3,581,899 |   |  | 3,399,192
|                               |  |                      |   |          |         |  |           |   |  |          
|Available for grant            |  | 612,425              |   |          | 602,425 |  |           |   |  |          
|                               |  |                      |   |          |         |  |           |   |  |          

At March 31, 2008, the aggregate intrinsic value of stock options outstanding is $122,553 with
a weighted average remaining contractual term of 5.53 years and the aggregate intrinsic value of stock options exercisable is $77,863 with a weighted average remaining contractual life of 5.60 years.



38



---

ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 6 - Equity (Continued)

Summary stock option
information (Continued)



Information regarding the weighted average exercise prices of options and warrants outstanding is as
follows:



|                                                            |  |                      |      |          |   |      |  |      |      |  |   |     
|----------------------------------------------------------- |  | -------------------- | ---- | -------- | - | ---- |  | ---- | ---- |  | - | ----
|                                                            |  | Year Ended March 31,
|                                                            |  | Options              |      | Warrants
|                                                            |  | 2008                 |      | 2007     |   | 2008 |  | 2007
|Outstanding, beginning of year                              |  | $                    | 1.67 |          | $ | 0.90 |  | $    | 2.58 |  | $ | 2.76
|Granted                                                     |  |                      | 2.00 |          |   | 2.00 |  |      | 2.00 |  |   | 2.00
|Exercised                                                   |  |                      |     |          |   |     |  |      | 2.25 |  |   |    
|Forfeited or cancelled                                      |  |                      | 2.00 |          |   |     |  |      | 2.24 |  |   |    
|                                                            |  |                      |      |          |   |      |  |      |      |  |   |     
|Outstanding, end of year                                    |  | $                    | 1.67 |          | $ | 1.67 |  | $    | 3.00 |  | $ | 2.58
|                                                            |  |                      |      |          |   |      |  |      |      |  |   |     
|Exercisable, end of year                                    |  | $                    | 1.57 |          | $ | 1.55 |  | $    | 3.04 |  | $ | 2.46
|                                                            |  |                      |      |          |   |      |  |      |      |  |   |     
|Weighted average fair value of options and warrants granted |  | $                    | .86  |          | $ | 1.69 |  | $    | .86  |  | $ | 1.65
|                                                            |  |                      |      |          |   |      |  |      |      |  |   |     

The following table summarizes significant information about stock options and warrants outstanding
at March 31, 2008.



|              |  |                    |  |                     |  |             |  |                              |      |                                     |     
|------------- |  | ------------------ |  | ------------------- |  | ----------- |  | ---------------------------- | ---- | ----------------------------------- | ----
|Grant Date    |  | OptionsOutstanding |  | WarrantsOutstanding |  | Exercisable |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingLife(Years)
|October 2004  |  | 100,000            |  |                    |  | 84,063      |  | $                            | 0.10 |                                     | 6.5 
|March 2005    |  | 40,000             |  |                    |  | 30,000      |  | $                            | 1.00 |                                     | 2   
|Dec 2005      |  |                   |  | 141,000             |  | 141,000     |  | $                            | 2.88 |                                     | 7.75
|Jan 2006      |  | 60,000             |  |                    |  | 45,000      |  | $                            | 2.00 |                                     | 7.83
|Jan 2006      |  |                   |  | 410,400             |  | 410,400     |  | $                            | 2.88 |                                     | 7.83
|March 2006    |  |                   |  | 495,000             |  | 495,000     |  | $                            | 3.25 |                                     | 8   
|March 2006    |  |                   |  | 308,750             |  | 288,750     |  | $                            | 2.00 |                                     | 8   
|April 2006    |  |                   |  | 17,000              |  | 17,000      |  | $                            | 2.88 |                                     | 8   
|May 2006      |  |                   |  | 585,000             |  | 574,583     |  | $                            | 2.00 |                                     | 8.08
|July 2006     |  | 365,075            |  | 130,000             |  | 315,908     |  | $                            | 2.00 |                                     | 8.25
|December 2006 |  |                   |  | 1,378,500           |  | 1,378,500   |  | $                            | 3.88 |                                     | 3.75
|March 2007    |  | 57,500             |  | 10,000              |  | 30,781      |  | $                            | 2.00 |                                     | 9   
|July 2007     |  | 27,500             |  |                    |  | 5,469       |  | $                            | 2.00 |                                     | 9.25
|October 2007  |  | 22,500             |  | 85,000              |  | 78,646      |  | $                            | 2.00 |                                     | 9.5 
|November 2007 |  | 10,000             |  | 25,000              |  | 3,333       |  | $                            | 2.00 |                                     | 9.58
|January 2007  |  | 5,000              |  | 120,000             |  | 120,313     |  | $                            | 2.00 |                                     | 5.2 

Note 7 - Commitments and Contingencies

License and manufacturing agreement

The Company has entered into a license and manufacturing agreement with the patent owner (the
Manufacturer) of the liposomal delivery system used in ALCiS® Daily Relief Pain Relief Cream. The agreement grants the Company an exclusive, world-wide license for the
commercialization of the liposomal delivery system for topical analgesic pain relief applications and body soak preparations and a non-exclusive, world-wide license for the commercialization of the liposomal delivery system for similar preparations
such as body lotions and soap.



39



---

ALCiS Health, Inc.

Notes to Consolidated Financial Statements

March 31, 2008

Note 7 - Commitments and Contingencies (Continued)

License and manufacturing agreement (Continued)



Under the agreement, the Company pays a royalty on monthly net sales or $25,000 per month, if
greater. After December 31, 2008, the minimum monthly royalty of $25,000 increases to $50,000. To the extent that the actual royalties owed based on net monthly sales is less than the minimum monthly payment, the difference is available to
offset future royalties, however, these royalties are not capitalized in the Companys balance sheet. Per the agreement with the Manufacturer, these excess payments are available to offset future royalties when the monthly royalty owed based on
net monthly sales exceeds the monthly payment. At that time, the prepaid royalties can be applied to the royalty owed based on net monthly sales to the Manufacturer and reduce the actual payment to the monthly minimum.

Additionally, the Company has paid the Manufacturer a non-refundable prepaid royalty totaling $400,000 under the terms of the agreement over the last
three fiscal years.

During April 2006, the Company also granted the Manufacturer warrants to purchase 560,000 shares of the Companys
common stock. The warrants have an exercise price of $2.00 per share, are exercisable immediately and expire 10 years from the date of issue. Expense related to these warrants totaling $942,713 was calculated using the Black-Scholes option-pricing
model and recorded as product development costs in the consolidated statement of operations for the year ended March 31, 2008.

In general, the agreement terminates upon the expiration of the Manufacturers patents used
in ALCiS® Daily Relief Pain Relief Cream. The Manufacturer is currently the Companys sole provider of ALCiS® Daily Relief
Pain Relief Cream.

Operating Lease

The Company leases its office space under a non-cancelable operating lease which expires in August 2008. Future rental payments are approximately $58,000 for fiscal 2009. Rent under this lease was $128,939 for the
year ended March 31, 2008.

Note 8 - Related Party Transactions

In January 2006, the Company entered into an agreement with a law firm owned by a former director, officer, and employee who is also a holder of 750,000 shares of its common stock. Under the agreement, the Company
receives a discount off of regular billing rates in exchange for a monthly commitment of time. The agreement terminated on October 31, 2006 but ALCiS still uses the law firms services from time to time for various corporate law issues.
For the year ended March 31, 2008 and 2007, the Company made payments totaling $9,746 and $86,268, respectively, to this law firm.

Note 9 -
Subsequent Events

During the period April 1, 2008 through June 27, 2008, the Company received $1,335,000 in cash from the
placement of unsecured convertible promissory notes which bear interest at 10% and are due on demand at any time after September 30, 2009. The notes and accrued interest automatically convert into equity upon a Qualified Financing
which is defined as any equity offering by which the Company secures gross proceeds of $4 million or more. The notes will convert into equity at a 40% discount to the shares issued in the financing. If a Qualified Financing does not occur, the notes
and any accrued interest are due and payable on demand, which may be made at any time after September 30, 2009. Each note holder also received five-year warrants to purchase that number of Company common shares equal to 50% of the note
principal divided by the price per share of the stock sold in the Qualified Financing.



40



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|Item 8. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.

Item 8A(T).     Controls and Procedures

(a) Disclosure Controls and Procedures.

Disclosure Controls and
Procedures.Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the Companys reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported
within the time periods specified in the SECs rules and forms, including, without limitation, that such information is accumulated and communicated to Company management, including our principal executive and financial officers, as appropriate
to allow timely decisions regarding required disclosures.

Limitations on the Effectiveness of Disclosure Controls.In designing and evaluating our
disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and
procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design
of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions.

Evaluation of Disclosure Controls and Procedures.Our principal executive and financial officers have evaluated the effectiveness of
the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-14(c) as of March 31, 2008, and have determined that they are reasonably effective, taking into account the totality of the circumstances,
including the limitations described above.

(b) Internal Control over Financial Reporting.

Internal Control over Financial Reporting.Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as
defined in Rules 13a-15(f) and 15d-15f under the Exchange Act, which is designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that
receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the financial statements.

Management Assessment.Our management, with the
participation of our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of March 31, 2008. In making this assessment we used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal ControlIntegrated Framework.Based on the assessment using those criteria, management concluded that, as of March 31, 2008, our internal control
over financial reporting is effective.

No Accountant Attestation.This annual report does not include an attestation report of our
registered public accounting firm regarding internal control over financial reporting. Our internal controls were not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities Exchange Commission
that permit us to provide only managements report on internal control over financial reporting in this annual report.

No Fourth Quarter Changes.There were no significant changes in the Companys internal control over financial reporting that occurred during the Companys fiscal 2008 fourth quarter ended March 31, 2008, that have materially affected, or are reasonably
likely to materially affect, such control.



41



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(c) Inherent Limitations on Effectiveness of Controls.

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control
over financial reporting will prevent or detect all errors and all fraud. The design of a control system must reflect the fact that there are resource constraints and competing use of resources, and the benefits of controls must be considered
relative to their costs in light of competing demands on limited resources. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with
policies or procedures.



|Item 8B. | Other Information
|-------- | -----------------

None



42



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PART III



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

Directors and Executive Officers of the Registrant

The following table sets forth certain information concerning the Companys current directors and executive officers, including age, position (if any) at ALCiS, business experience during the past five years and directorships of other
publicly-owned corporations, as of July 25, 2008.



|                |  |     |  |                                                
|--------------- |  | --- |  | -----------------------------------------------
|Name            |  | Age |  | Position                                       
|Brian Berchtold |  | 43  |  | Chief Executive Officer, President and Director
|Mark Lemma      |  | 43  |  | Chief Financial Officer, Corporate Secretary   
|Doug Glader     |  | 64  |  | Director                                       
|David Booth     |  | 65  |  | Director                                       
|Ravinder Sajwan |  | 46  |  | Director                                       
|David Scoffone  |  | 52  |  | Director                                       
|Jerry Jarrell   |  | 66  |  | Director                                       

Brian Berchtold joined ALCiS in April 2004, and has served as CEO, President and Director
since February 2006. Mr. Berchtold brings over 15 years of international medical device and consumer health products sales experience to ALCiS. Prior to joining ALCiS, Mr. Berchtold founded and served as President of Rouge House LLC, a company which
retails and distributes luxury products, from September 2003 to March 2004. Mr. Berchtold served as Vice President of Sales for Alliance Medical Corporation from November 2000 to August 2003. Mr. Berchtold holds a B.S. in Commerce  Finance
from Santa Clara University.

Mark Lemma has served as Chief Financial Officer and Corporate Secretary since November 2004. Prior to
joining ALCiS, Mr. Lemma served as Chief Financial Officer and Corporate Controller of Thales Navigation, Inc., a multi-national manufacturer in the Global Positioning System (GPS) industry from October 2001 to November 2004. Mr. Lemma holds a B.S.
in Commerce  Accounting from Santa Clara University and is licensed as a Certified Public Accountant (inactive) in California.

David Booth has been a director since October, 2004. Mr. Booth is a former senior executive with Pfizer Inc. from which he retired in 1998 after 28 years. His most recent positions were as President and CEO of Schneider Americas,
American Medical Systems and Valley Labs. These three companies were components of the Pfizer Medical Technology Group. Since retiring from Pfizer, Mr. Booth has worked as a consultant in the healthcare arena and has served as a director on several
boards of directors. He currently serves on the Board of Directors of CryoCath Technologies Inc. (TSX:CYT), a Canadian public healthcare company, as well as several privately held companies in the healthcare field. Mr. Booth received an M.B.A.
degree from Columbia University in Marketing and Operations Research. Previously, he graduated from McMaster University in Hamilton Canada with a B.S. degree.

Doug Glader has been a director since April 2004. Mr. Glader recently retired as Chairman, President and CEO of Procera Networks, Inc. (AMEX: PKT), a publicly traded company that he founded in May 2002, which
develops integrated hardware and software solutions for the networking industry. From 1994 to 2002, Mr. Glader worked for Digi International, including serving as Chief Operating Officer from February 1999 to May 2002. Mr. Glader serves on several
boards of directors of privately held companies and on several advisory teams of charitable organizations in the Bay Area. Mr. Glader has a B.S. in Business Administration from Northern State College (South Dakota).

Jerry Jarrell has been a director since the inception of Emerging Delta Corporation (Delta), our predecessor, in February 1993. Mr. Jarrell served
as Chief Financial Officer and Treasurer of Delta from its inception in February 1993 until our merger with Delta in March 2006. Mr. Jarrell has served as Chief Financial Officer and Director of Starship Dining since 1999 and as Chief Financial
Officer and Director of EMDSI-Hunt Power since 2005. Mr. Jarrell also served as Chief Financial Officer and Director of Compressco, Inc. from October 1999 until its sale in July 2004. He holds a B.S. in Accounting from Louisiana Tech University.



43



---

Ravinder Ravi Sajwan has been a director since April 2004. Mr. Sajwan is a serial
entrepreneur and has founded multiple high technology companies, including Ample Communications, Acclaim Communications (Intel) Network Synthesis (PMC-Sierra). Mr. Sajwan graduated with honors and holds an M.S.E.E. from Polytechnic Institute of
Brooklyn (New York).

David Scoffone has been a director since January 2006. Mr. Scoffone has served as the Chief Executive Officer
and President of ATS, a California based transportation company, since April 1982. Mr. Scoffone was a founder and advisory board member of Heritage Bank from April 1994 through November 2003. In June 2006 he founded Pinnacle Bank (PBNK.OB), which
has branches in Morgan Hill, Salinas and Gilroy, California, and currently serves on its Board of Directors.

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

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys directors, executive officers, and beneficial owners of
more than 10% of our Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of the Companys Common Stock and other equity securities. The Company typically assists in the filing of these reports on
behalf of its directors and executive officers, based on information provided by them. The Company believes, based on its review of Forms 3, 4 and 5, if any, and periodic written representations from reporting persons, that all officers, directors,
and holders of more than 10% of its Common Stock complied with all Section 16(a) filing requirements for fiscal year 2008.

Code of Ethics

The Company has adopted a code of business conduct and ethics that applies to its directors, officers and employees, including its
principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions. The Company has posted the text of such code of ethics on its website at www.alcis.com/investors. Information
on the Companys website is not part of this report.

Corporate Governance

The Board of Directors has appointed an Audit Committee, comprised of Mr. Jerry Jarrell, as Chairman, Mr. Ravinder Sajwan and Mr. David Scoffone. The
Board of Directors has determined that Mr. Jarrell qualifies as an audit committee financial expert under the definition outlined by the Securities and Exchange Commission. In addition, each of Messrs. Jarrell, Sajwan and Scoffone qualify as an
independent director under the current rules of the NASDAQ Global Market and Securities and Exchange Commission rules and regulations.



|Item 10. | Executive Compensation
|-------- | ----------------------

Executive Compensation

Fiscal 2008 Summary Compensation Table

The following Summary Compensation Table sets forth certain information regarding the compensation of the Companys chief executive officer and chief financial officer, who comprise our named executive officers as they are its only two
executive officers, for services rendered in all capacities to ALCiS during the fiscal year ended March 31, 2008.



|                                                     |      |      |   |            |         |                     |         |                               |   |           |        |   |         |        
|---------------------------------------------------- | ---- | ---- | - | ---------- | ------- | ------------------- | ------- | ----------------------------- | - | --------- | ------ | - | ------- | -------
|Name and Principal Position                          |      | Year |   | Salary ($) |         | OptionAwards($) (1) |         | All OtherCompensation.($) (2) |   | Total ($)
|Brian BerchtoldChief Executive Officer and President |      | 2008 |   | $          | 175,000 |                     | $       | 21,720                        |   | $         | 24,437 |   | $       | 204,385
|                                                     | 2007 |      | $ | 175,000    |         | $                   | 96,930  |                               | $ | 6,474     |        | $ | 278,404
|                                                     |      |      |   |            |        
|Mark LemmaChief Financial Officer                    |      | 2008 |   | $          | 175,000 |                     | $       | 86,876                        |   | $         | 1,764  |   | $       | 263,640
|                                                     | 2007 |      | $ | 175,000    |         | $                   | 162,087 |                               | $ | 5,886     |        | $ | 342,973



|(1) | Represents the amount of the total fair value of option awards granted in fiscal year 2008 and prior years recognized as stock-based compensation expense for
financial statement reporting purposes for the fiscal year ended March 31, 2008, in accordance with SFAS No. 123(R), Share-Based Payments. Please see a discussion of all assumptions used
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



---

| | in the valuation of these awards in Note 6 to our audited financial statements which are included in Part II, Item 7 of this report.
| | ------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consists of medical premiums paid by us and $16,772 in moving expenses paid during the year ending March 31, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------

Outstanding Equity Awards at Fiscal 2008 Year End Table

The following table sets forth information concerning the outstanding equity awards held by the named executive officers at March 31, 2008.



|                |  |                                                       |  |               |                             |  |                       |  |              
|--------------- |  | ----------------------------------------------------- |  | ------------- | --------------------------- |  | --------------------- |  | -------------
|                |  | Number of Securities UnderlyingUnexercisedOptions (#) |  |               | Option ExercisePrice ($/Sh) |  | Option ExpirationDate
|Name            |  | Exercisable                                           |  | Unexercisable |                             |  |                       |  |              
|Brian Berchtold |  | 43,285                                                |  |               |                             |  | 2.00                  |  | July 20, 2016
|                |  | 25,000                                                |  | 25,000        | (1)                         |  | 2.00                  |  | July 20, 2016
|                |  |                                                       |  |               |                             |  |                       |  |              
|Mark Lemma      |  | 43,285                                                |  |               |                             |  | 2.00                  |  | July 20, 2016
|                |  | 100,000                                               |  | 100,000       | (1)                         |  | 2.00                  |  | July 20, 2016
|                |  |                                                       |  |               |                             |  |                       |  |              



|(1) | The unexercisable options vest monthly over a four year period.
|--- | ---------------------------------------------------------------

Employment Contracts, and Termination of Employment and Change-in-Control Arrangements

The Company does not have employment
agreements with its named executive officers or any other compensatory arrangement in the event of their resignation, retirement, or employment termination or in connection with a change-in-control. The Company does not plan on providing for
retirement benefits for its named executive officers.

Director Compensation

The Companys non-employee directors receive no annual fee or meeting fees for attending meetings of the Board of Directors or any committees of the
Board. Upon initial election to the Board, non-employee directors receive a warrant to purchase 60,000 shares of the Companys Common Stock. The warrants have a ten year term and vest quarterly over a three year period.

The following Director Compensation Table sets forth the compensation earned or paid to the Companys non-employee directors for services rendered
to ALCiS during the fiscal year ended March 31, 2008:

Director Compensation Table for Fiscal Year 2008



|                |  |                           |        |                        |   |       
|--------------- |  | ------------------------- | ------ | ---------------------- | - | ------
|Name            |  | Warrant Awards ($)(1) (2) |        | Total Compensation ($)
|Doug Glader     |  | $                         | 34,752 |                        | $ | 34,752
|David Booth     |  | $                         | 6,755  |                        | $ | 6,755 
|Ravinder Sajwan |  | $                         | 34,752 |                        | $ | 34,752
|David Scoffone  |  | $                         | 35,709 |                        | $ | 35,709
|Jerry Jarrell   |  | $                         | 35,709 |                        | $ | 35,709



|(1) | Represents the amount of the total fair value of warrant awards granted in fiscal year 2008 and prior years recognized as stock-based compensation expense for financial statement
reporting purposes for the fiscal year ended March 31, 2008, in accordance with SFAS No. 123(R) Share-Based Payments. Please see a discussion of all assumptions used in the valuation of these awards in Note 2 and Note 6 of the Companys
financial statements that are included in Part II, Item 7 of this report.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



---

|(2) | The number of shares subject to warrant awards held at fiscal year end for their service as directors are as follows: Mr. Booth  60,000; Mr. Glader  60,000; Mr. Jarrell
 60,000; Mr. Sajwan  60,000; Mr. Scoffone  60,000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the Company reimburses the directors for
their travel expenses incurred in attending meetings of the Board or its committees, as well as for fees and expenses incurred in attending director education seminars and conferences. The directors do not receive any other compensation or personal
benefits.



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

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of July 25, 2008 regarding shares of the Companys common stock beneficially owned by: (i) each stockholder known to be the beneficial owner of 5% or more of the outstanding common
stock, (ii) each of the Companys named executive officers, (iii) each of the Companys directors, and (iv) all executive officers and directors as a group. The percentage of common stock beneficially owned is based on 9,021,902 shares
outstanding as of July 25, 2008. Unless otherwise stated below, the address of each beneficial owner listed on the table is c/o ALCiS Health, Inc., 2001 Gateway Place, Suite 520W, San Jose, California 95110.



|                                                                 |  |                               |  |                                |  
|---------------------------------------------------------------- |  | ----------------------------- |  | ------------------------------ | -
|                                                                 |  | Amount of BeneficialOwnership |  | Percent BeneficialOwnership(1) |  
|Name of Beneficial Owner                                         |  |                               |  |                                |  
|5% Stockholders:                                                 |  |                               |  |                                |  
|                                                                 |  |                              
|Banyan Investors, LP (2)                                         |  | 2,000,000                     |  | 20.0                           | %
|Ample Ventures (3)                                               |  | 877,601                       |  | 9.6                            | %
|Eric Glader (4) (13)                                             |  | 828,505                       |  | 9.2                            | %
|Al Gonsoulin (5)                                                 |  | 801,562                       |  | 8.6                            | %
|Jay Landrum                                                      |  | 750,000                       |  | 8.3                            | %
|                                                                 |  |                              
|Named Executive Officers and Directors                           |  |                               |  |                                |  
|Brian Berchtold (6)                                              |  | 773,493                       |  | 8.5                            | %
|Mark Lemma (7)                                                   |  | 664,118                       |  | 7.2                            | %
|David Booth (8)                                                  |  | 113,542                       |  | 1.3                            | %
|Doug Glader (9) (13)                                             |  | 526,167                       |  | 5.8                            | %
|Jerry Jarrell (10)                                               |  | 181,353                       |  | 2.0                            | %
|Ravinder Sajwan (11)                                             |  | 340,000                       |  | 3.8                            | %
|David Scoffone (12)                                              |  | 175,000                       |  | 1.9                            | %
|                                                                 |  |                              
|All Executive Officers and Directors as a Group (7 Persons) (14) |  | 2,773,673                     |  | 28.8                           | %



|(1) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (SEC), which include holding voting and investment power with respect to
the securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days of July 25, 2008, are deemed outstanding for computing the percentage of the total number of shares beneficially owned by the
designated person, but are not deemed outstanding for computing the percentage for any other person.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 1,000,000 shares subject to warrants exercisable within 60 days of July 25, 2008.
|--- | ------------------------------------------------------------------------------------------

|(3) | Includes 600,000 shares issued upon conversion of ALCiS-CA Series A Preferred and 195,101 shares issued upon conversion of $375,000 in ALCiS-CA convertible notes. Also includes
75,000 shares subject to warrants exercisable within 60 days of July 25, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes 28,505 shares subject to options exercisable within 60 days of July 25, 2008.
|--- | --------------------------------------------------------------------------------------

|(5) | Includes 300,000 shares subject to warrants exercisable within 60 days of July 25, 2008.
|--- | ----------------------------------------------------------------------------------------

|(6) | Includes 73,493 shares subject to options exercisable within 60 days of July 25, 2008.
|--- | --------------------------------------------------------------------------------------

|(7) | Includes 164,118 shares subject to options exercisable within 60 days of July 25, 2008.
|--- | ---------------------------------------------------------------------------------------

|(8) | Includes 50,000 shares issued upon conversion of ALCiS-CA Series A Preferred and 51,042 shares subject to options exercisable within 60 days of July 25, 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



46



---

|(9) | Includes 125,000 shares issued upon conversion of ALCiS-CA Series A Preferred and 26,167 shares issued upon conversion of $50,000 in ALCiS-CA convertible notes. Also includes 50,000
shares subject to warrants exercisable within 60 days of July 25, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Includes 25,572 shares issued upon conversion of $50,000 in ALCiS-CA convertible notes and 130,000 shares subject to warrants exercisable within 60 days of July 25, 2008. Excludes
50,000 shares of common stock and warrants to purchase 20,000 shares held by The J.W. Jarrell Childrens Trust, a trust funded by Mr. Jarrell. Mr. Jarrell is not a trustee and does not have or exercise any control over these securities,
and he disclaims beneficial ownership of these securities.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Includes 40,000 shares subject to warrants exercisable within 60 days of July 25, 2008. Excludes 802,601 shares and warrants to purchase 75,000 shares currently owned by Ample
Ventures LLC, of which Mr. Sajwan is a managing member and as to which Mr. Sajwan disclaims beneficial ownership except as to his pecuniary interest.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Includes 50,000 shares issued upon conversion of ALCiS-CA Series B Preferred and 25,000 shares held by the Scoffone Family Trust for which he is a trustee. Also includes 50,000
shares subject to warrants exercisable within 60 days of July 25, 2008 and 50,000 shares subject to options exercisable within 60 days of July 25, 2008.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Doug Glader is Eric Gladers father. Each disclaims beneficial ownership of the shares owned by the other.
|---- | ----------------------------------------------------------------------------------------------------------

|(14) | Includes 331,986 shares and 276,667 shares subject to options and warrants, respectively, that are exercisable within 60 days of July 25, 2008.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------

Equity Compensation Plan Information

As of March 31,
2008, the table below provides the indicated information with respect to compensation plans.



|                                                           |  |                                                                                          |     |  |                                                                           |      |                                                                                                                                        |        
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | --- |  | ------------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------------------------------------------------- | -------
|Plan Category                                              |  | (a)Number ofsecurities to beissued uponexercise
ofoutstandingoptions, warrantsand rights |     |  | (b)Weightedaverage exerciseprice
ofoutstandingoptions, warrantsand rights |      | (c)Number ofsecurities remainingavailable
forfuture issuanceunder equitycompensationplans (excludingsecurities reflectedin column (a))
|Equity compensation plans approved by security holders     |  | 687,575                                                                                  | (1) |  | $                                                                         | 1.67 |                                                                                                                                        | 631,175
|Equity compensation plans not approved by security holders |  | 508,750                                                                                  | (2) |  | $                                                                         | 2.00 |                                                                                                                                        |       
|                                                           |  |                                                                                          |     |  |                                                                           |      |                                                                                                                                        |        
|Total                                                      |  | 1,196,325                                                                                |     |  | $                                                                         | 1.81 |                                                                                                                                        | 631,175



|(1) | Includes 18,750 options granted under our option plan prior to our merger with Emerging Delta Corporation, which we assumed in the merger, and 1,300,000 options granted under our
2004 Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consists of warrants issued to outside consultants for legal, advisory and merger related services during fiscal year 2008, and prior.
|--- | --------------------------------------------------------------------------------------------------------------------------------------



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

Certain Relationships and Related Transactions

During the year ended March 31, 2008, there were no
transactions between the Company and its directors, executive officers and any holder of five percent or more of the Companys common stock that are required to be disclosed pursuant to Item 404 of Regulation SB promulgated under the Securities
Exchange Act of 1934, as amended.

All material transactions relating to related party transactions must be approved by the Companys
Audit Committee, which is composed of disinterested members of the Board of Directors.

Independence of Directors

The Board of Directors has determined that, except for Mr. Berchtold, each individual who currently serves as a member of the Board is, and each
individual who served as a member of the Board in fiscal year 2008 was, an independent director within the meaning of Nasdaq Marketplace Rule 4200(a)(15). Mr. Berchtold is not independent because he is employed by us. All of the nominees
are members of the board standing for re-election as directors.



47



---

|Item 13. | Exhibits
|-------- | --------

The following exhibits are either
incorporated by reference from prior filings or included with this filing as indicated below.



|     |  |                                                                                                                                                               
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|3.1  |  | Amended and Restated Certificate of Incorporation of the Registrant*                                                                                          
|     | 
|3.2  |  | Certificate of Amendment to Certificate of Incorporation dated February 22, 2006, and filed on February 24, 2006*                                             
|     | 
|3.3  |  | Certificate of Amendment to Certificate of Incorporation dated April 3, 2006, and filed on April 5, 2006*                                                     
|     | 
|3.4  |  | Bylaws of the Registrant*                                                                                                                                     
|     | 
|4.1  |  | Form of Certificate of Common Stock of Registrant**                                                                                                           
|     | 
|4.2  |  | Form of Warrant*                                                                                                                                              
|     | 
|4.3  |  | Amended 2004 Stock Plan*                                                                                                                                      
|     | 
|4.4  |  | Form of Stock Option Agreement relating to the 2004 Stock Plan*                                                                                               
|     | 
|4.5  |  | Form of Lock-up Agreement for certain investors*                                                                                                              
|     | 
|10.1 |  | Agreement and Plan of Merger among Registrant, Delta Acquisition Sub, Inc., and ALCiS Health, Inc., a California corporation, dated March 30, 2006.***        
|     | 
|10.2 |  | License Agreement between ALCiS and BioZone Laboratories, Inc. dated August 17, 2005, as amended on September 28, 2005, and December 27, 2005*+               
|     | 
|10.3 |  | Purchase Option between ALCiS and BioZone Laboratories, Inc. dated November 4, 2005*                                                                          
|     | 
|10.4 |  | Form of Statement of Confidentiality, Non-Disclosure and Non-Compete Agreement between ALCiS and our employees, consultants and other third-party contractors*
|     | 
|10.5 |  | Form of Subscription Agreement relating to Offering consummated March 31, 2006 for the sale of common stock and warrants*                                     
|     | 
|10.6 |  | Engagement Agreement between Landrum & Company, Inc. and ALCiS effective February 1, 2006*                                                                    
|     | 
|10.7 |  | Form of Indemnification Agreement*                                                                                                                            
|     | 
|10.8 |  | 1stAmendment to Purchase Option between ALCiS and BioZone Laboratories, Inc. Dated
April 13, 2006****                                                         
|     | 
|10.9 |  | 3rdAmendment to License Agreement between ALCiS and BioZone Laboratories, inc. dated
April 13, 2006****                                                       
|     | 
|21.0 |  | List of Subsidiaries*                                                                                                                                         
|     | 
|24.0 |  | Power of attorney*****                                                                                                                                        
|     | 
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Brian J. Berchtold, principal executive officer; filed herewith                                                     
|     | 
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Mark E. Lemma, principal financial officer; filed herewith                                                          
|     | 
|32.1 |  | Section 1350 Certification of Brian J. Berchtold, chief executive officer and president; filed herewith                                                       
|     | 
|32.2 |  | Section 1350 Certification of Mark E. Lemma, chief financial officer; filed herewith                                                                          



|* | Incorporated by reference as exhibit of the same number from Current Report on Form 8-K dated March 31, 2006, and filed with the SEC on April 6, 2006.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Incorporated by reference as Exhibit 4.1 from Registration Statement on Form 10-SB filed with the SEC on April 21, 2006.
|-- | ------------------------------------------------------------------------------------------------------------------------

|*** | Incorporated by reference as Exhibit 10.1 from Current Report on Form 8-K filed by Registrant dated March 30, 2006, and filed with the SEC on April 5, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|**** | Incorporated by reference as exhibit of the same number from Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2007, and filed with the SEC on August 14,
2007.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|***** | Previously filed.
|----- | -----------------

|+ | Confidential treatment has been requested for portions of this exhibit.
|- | -----------------------------------------------------------------------



48



---

|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

Principal
Accounting Fees and Services

Aggregate fees for professional services rendered by Pannell Kerr Forster of Texas, P.C. for fiscal years
ended March 31, 2008 and March 31, 2007 were as follows:



|                   |  |      |        |      |   |       
|------------------ |  | ---- | ------ | ---- | - | ------
|Type of Fees       |  | 2007 |        | 2008
|Audit Fees         |  | $    | 76,914 |      | $ | 81,632
|Audit-Related Fees |  |      |       |      |   |      
|Tax Fees           |  |      |       |      |   |      
|All Other Fees     |  |      |       |      |   |      
|                   |  |      |        |      |   |       
|Total              |  | $    | 76,914 |      | $ | 81,632

Audit fees consist of the aggregate fees billed for the audit of our annual financial statements,
including amounts related to the review of the financial statements included in our quarterly reports of Form 10-QSB. Audit-related fees are fees billed for assurance and related services reasonably related to the performance of the audit or review
of the financial statements but which are not included as audit fees. Tax fees are fees billed for tax compliance, tax advice, and tax planning.

Pre-Approval Policies and Procedures

The Audit Committee has implemented pre-approval policies and procedures related to
the provision of audit and non-audit services. Under these procedures, the Audit Committee pre-approves both the type of services to be provided by Pannell Kerr Foster and the estimated fees related to these services.

During the approval process, the Audit Committee considers the impact of the types of services and the related fees on the independence of the auditor.
The services and fees must be deemed compatible with the maintenance of the auditors independence, including compliance with SEC rules and regulations.

Throughout the year, the Audit Committee will review any revisions to the estimates of audit and non-audit fees initially approved.



49



---

SIGNATURES

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



| |  |                      |  |                    |  |     |  |                                      
| |  | -------------------- |  | ------------------ |  | --- |  | -------------------------------------
| |  |                      |  | ALCiS HEALTH, INC.
| |  |                      |  |                   
| |  | Dated: July 28, 2008 |  |                    |  | By: |  | /s/ Brian J. Berchtold               
| |  |                      |  |                    |  |     |  | Brian J. Berchtold                   
| |  |                      |  |                    |  |     |  | President and Chief Executive Officer
| |  |                      |  |                   
| |  |                      |  |                    |  | By: |  | /s/ Mark E. Lemma                    
| |  |                      |  |                    |  |     |  | Mark E. Lemma                        
| |  |                      |  |                    |  |     |  | Chief Financial Officer              

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:



|                                          |  |                                              |  |              
|----------------------------------------- |  | -------------------------------------------- |  | -------------
|Signature                                 |  | Title                                        |  | Date         
|                                          |  |                                             
|/s/ Brian J. Berchtold Brian J. Berchtold |  | Director, Chief Executive Officer, President |  | July 28, 2008
|                                          |  |                                             
|/s/ Mark E. Lemma Mark
E. Lemma           |  | Chief Financial Officer                      |  | July 28, 2008
|                                          |  |                                             
|/s/ Douglas Glader* Douglas Glader        |  | Chairman of the Board, Director              |  | July 28, 2008
|                                          |  |                                             
|/s/ David Booth* David
Booth              |  | Director                                     |  | July 28, 2008
|                                          |  |                                             
|/s/ Jerry Jarrell* Jerry
Jarrell          |  | Director                                     |  | July 28, 2008
|                                          |  |                                             
|/s/ Ravinder Sajwan* Ravinder Sajwan      |  | Director                                     |  | July 28, 2008
|                                          |  |                                             
|/s/ David Scoffone* David Scoffone        |  | Director                                     |  | July 28, 2008
|                                          |  |                                             
|*By:  /s/ Mark E. Lemma Mark E. Lemma     |  | Attorney-in-fact                             |  | July 28, 2008



50



---

ALCiS HEALTH, INC.

EXHIBIT INDEX



|     |  |                                                                                                                                                               
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated Certificate of Incorporation of the Registrant*                                                                                          
|3.2  |  | Certificate of Amendment to Certificate of Incorporation dated February 22, 2006, and filed on February 24, 2006*                                             
|3.3  |  | Certificate of Amendment to Certificate of Incorporation dated April 3, 2006, and filed on April 5, 2006*                                                     
|3.4  |  | Bylaws of the Registrant*                                                                                                                                     
|4.1  |  | Form of Certificate of Common Stock of Registrant**                                                                                                           
|4.2  |  | Form of Warrant*                                                                                                                                              
|4.3  |  | Amended 2004 Stock Plan*                                                                                                                                      
|4.4  |  | Form of Stock Option Agreement relating to the 2004 Stock Plan*                                                                                               
|4.5  |  | Form of Lock-up Agreement for certain investors*                                                                                                              
|10.1 |  | Agreement and Plan of Merger among Registrant, Delta Acquisition Sub, Inc., and ALCiS Health, Inc., a California corporation, dated March 30, 2006.***        
|10.2 |  | License Agreement between ALCiS and BioZone Laboratories, Inc. dated August 17, 2005, as amended on September 28, 2005, and December 27, 2005*+               
|10.3 |  | Purchase Option between ALCiS and BioZone Laboratories, Inc. dated November 4, 2005*                                                                          
|10.4 |  | Form of Statement of Confidentiality, Non-Disclosure and Non-Compete Agreement between ALCiS and our employees, consultants and other third-party contractors*
|10.5 |  | Form of Subscription Agreement relating to Offering consummated March 31, 2006 for the sale of common stock and warrants*                                     
|10.6 |  | Engagement Agreement between Landrum & Company, Inc. and ALCiS effective February 1, 2006*                                                                    
|10.7 |  | Form of Indemnification Agreement*                                                                                                                            
|10.8 |  | 1stAmendment to Purchase Option between ALCiS and BioZone Laboratories, Inc. Dated April
13, 2006****                                                         
|10.9 |  | 3rdAmendment to License Agreement between ALCiS and BioZone Laboratories, inc. dated
April 13, 2006****                                                       
|21.0 |  | List of Subsidiaries*                                                                                                                                         
|24.0 |  | Power of attorney*****                                                                                                                                        
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Brian J. Berchtold, principal executive officer; filed herewith                                                     
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Mark E. Lemma, principal financial officer; filed herewith                                                          
|32.1 |  | Section 1350 Certification of Brian J. Berchtold, chief executive officer and president; filed herewith                                                       
|32.2 |  | Section 1350 Certification of Mark E. Lemma, chief financial officer; filed herewith                                                                          



|* | Incorporated by reference as exhibit of the same number from Current Report on Form 8-K dated March 31, 2006, and filed with the SEC on April 6, 2006.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Incorporated by reference as Exhibit 4.1 from Registration Statement on Form 10-SB filed with the SEC on April 21, 2006.
|-- | ------------------------------------------------------------------------------------------------------------------------

|*** | Incorporated by reference as Exhibit 10.1 from Current Report on Form 8-K filed by Registrant dated March 30, 2006, and filed with the SEC on April 5, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|**** | Incorporated by reference as exhibit of the same number from Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2007, and filed with the SEC on August 14,
2007.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|***** | Previously filed.
|----- | -----------------

|+ | Confidential treatment has been requested for portions of this exhibit.
|- | -----------------------------------------------------------------------



51