SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    ---------
                                   FORM 10-KSB
  (Mark One)
   [X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
         OF 1934:

         For the fiscal year ended December 31, 2005

   [ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934:

            For the transition period from __________ to __________

                         Commission file number 0-27848

                                 BIOFIELD CORP.
                 (Name of small business issuer in its charter)


                       Delaware                           13-3703450
          (State or other jurisdiction of           (I.R.S. employer
           Incorporation or organization)             Identification No.)


             1615 Walnut Street, Third Floor, Philadelphia, PA      19103
                  (Address of principal executive offices)       (Zip Code)

                    Issuer's telephone number: (215) 972-1717

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

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

                     Common Stock, par value $.001 per share
                                (Title of class)

         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 Exchange Act during the  preceding 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes  X    No     .
         ----     ----

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B 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  registration  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes ___ No X

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

         State the aggregate  market value of the voting and  non-voting  common
equity held by  non-affiliates  computed by  reference to the price at which the
common  equity  was sold,  or the  average  bid and asked  price of such  common
equity, as of a specified date within the past 60 days:


         Approximately  $1,604,464  based on the closing  sale price  ($0.05) on
         April 13, 2006, as reported by The Nasdaq Stock Market,  Inc. InfoQuote
         service furnished by Financial Insight Systems, Inc.

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  As of April 13, 2006 - 40,836,805
shares of Common Stock.


Documents Incorporated by Reference: None.

Transitional Small Business Disclosure Format (check one) Yes __ No X




<PAGE>


                                     PART I

ITEM 1.           DESCRIPTION OF BUSINESS.

GENERAL

         We are a medical  technology  company  that has  developed  a device to
assist in detecting breast cancer in a non-invasive procedure.

         Our technology is based on the principle that epithelial cancers,  such
as cancer of the breast, ovaries, skin, prostate and colon, are characterized by
small changes in the electrical  charge of the affected  tissue.  These changes,
when they occur,  result in a depolarization of the charge distribution found in
normal epithelial  tissue which lines many solid organs,  including the stomach,
colon, prostate,  endometrium,  lung and breast.  Moreover,  this depolarization
appears to be progressive as cell transformation and carcinogensis occur, and is
measurable at the skin surface.

         Our  breast  cancer  diagnostic  device,  which  we call  the  Biofield
Diagnostic  System,   employs  single-use  sensors  of  our  own  design  and  a
measurement device to detect and analyze changes associated with the development
of epithelial  cancers,  such as breast cancer.  The Biofield  Diagnostic System
takes multiple  readings from an array of test points on the skin surface of the
symptomatic breast and asymptomatic  breast to measure  differentials  which may
exist between test points. We believe that the analysis of these  differentials,
using a pre-programmed  algorithm,  provides useful diagnostic information.  The
device is intended to be used by  physicians or by trained  medical  technicians
under the supervision of a physician.

         The Biofield  Diagnostic System is intended to be used as an adjunct to
physical  examination or relevant imaging  modalities to provide  physicians and
patients with immediate and objective  information  about the probability that a
previously identified lesion is malignant or benign, without regard to the size,
weight or volume of the lesion.  The device  currently  is intended for palpable
breast  lesions in women  under 55 years of age.  We believe  that the  Biofield
Diagnostic  System,  together with other available clinical  information,  could
reduce diagnostic  uncertainty and decrease the number of diagnostic procedures,
including surgical biopsies, performed on suspicious breast lesions. In clinical
studies,  the Biofield Diagnostic System performed  statistically  better in the
clinically  difficult  subgroup of women 55 years of age and  younger,  for whom
certain diagnostic imaging modalities,  such as mammography and ultrasound,  are
generally considered less effective.

         The Biofield  Diagnostic  System has not been approved by the U.S. Food
and Drug Administration ("FDA") and, therefore,  is not available for commercial
distribution  in the United  States.  We have  obtained a CE mark  Certification
administered by the European regulatory authorities,  which permits us to market
the model of our  device  which has been  certified  in  European  Union  member
countries.  At the present  time,  our marketing  activities  have been severely
curtailed,  as our limited cash resources are being utilized  almost entirely in
connection  with the  activities  necessary to seek FDA approval and to maintain
our essential operations.  Although we have entered into marketing  distribution
agreements for Brazil, Italy, the Philippines, Southern Africa and certain South
East Asian countries, our sales have been negligible.

           At December 31,  2005,  we had a working capital  deficiency  of $7.8
million  which  amount has  increased  since such date.  We require an immediate
infusion of additional  financial resources in order to continue our operations.
On March 30, 2006, The MacKay Group, Inc. entered into agreements with Dr. David
Long and  certain of his  affiliates  to  acquire  controlling  interest  in the
Company.  The MacKay  Group,  Inc.  intends to  aggressively  market our device,
including,  but not limited to, Asia, and intends to inject adequate  capital in
the business for this purpose.

COMPANY HISTORY

         We were originally  organized as a New York corporation in October 1987
and,  in 1992,  re-incorporated  in Delaware  by merging  into our  wholly-owned
Delaware subsidiary.

         In March 1996,  we completed our initial  public  offering of 1,819,000
shares  of our  common  stock at a  purchase  price of  $11.00  per  share,  for
aggregate  proceeds of  approximately  $18 million  (net of related  expenses of
approximately $2 million).


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<PAGE>


         In December  1997,  we received  net  proceeds  of  approximately  $8.4
million from the sale of an additional 2,867,670 shares of our common stock in a
private placement.  In connection with the private placement,  we also issued an
aggregate  of 643,639  shares of our common  stock in  exchange  for  previously
issued  warrants.  These proceeds,  along with other funds  previously  received
during the four years ended December 31, 1998,  were utilized for research,  and
development activities and operating expenses.


         In November  1998, we curtailed  most of our  operations due to lack of
adequate  financial  resources and thereafter,  as we failed to raise additional
capital,  we shut down all of our remaining  operations.  In December  1998, our
common stock was  de-listed  from trading on The Nasdaq Stock Market  ("NASDAQ")
for lack of compliance  with the  requirement to maintain at least $4 million of
tangible  net worth and to maintain a bid price of our common stock in excess of
$1.00 per share.  In March 1999, we terminated our reporting  obligations  under
the Securities  Exchange Act of 1934, since we had less than 300 stockholders of
record of our common stock.

         In December 1999, we sold 14 million  unregistered shares of our common
stock in a private  placement for $700,000 to David M. Long,  Jr., M.D.,  Ph.D.,
his son, Raymond A. Long, M.D., and their affiliated  entities.  The sales price
of $0.05  per  share  was the  result of  arms-length  negotiation  between  the
parties.  Although the price of our common stock in the over-the-counter  market
during the period from  January 1, 1999 through the date of the sale ranged from
$0.375 per share to $0.032  per  share,  no public  information  concerning  our
company had been released since we terminated  our SEC reporting  obligations in
March 1999,  and our Board of Directors  did not believe that the public  market
sales prices accurately  reflected the fair value of our company.  Approximately
$600,000 of the proceeds  from this private  placement  were used for  operating
expenses and for payments to  consultants  for  regulatory  activities,  and the
balance of approximately $100,000 was used for marketing the Biofield Diagnostic
System.

         Simultaneously  with the December 1999 private placement,  our Board of
Directors  was  reconstituted.  Dr. David Long was appointed as our Chairman and
Chief  Executive  Officer  and a director,  and all of our other then  remaining
directors and executive  officers  resigned.  Thereafter,  we  concentrated  our
efforts primarily on activities which we believed to be appropriate to assist us
in  obtaining  FDA  approval,  CE mark  Certification  to market  our  device in
European Union countries,  and related marketing and regulatory  activities.  In
2000,  we engaged  outside  consultants  for our  marketing  and FDA  regulatory
activities.  In May 2000, we were successful in obtaining CE mark  Certification
for  the  then  current  model  of our  Biofield  Diagnostic  System,  and  were
re-certified by ISO-9001 Quality Systems. The CE mark Certification allows us to
market the model of our device which has been certified in certain  European and
other  countries that recognize the CE mark.  Marketing of our device within the
United States is dependent on our obtaining FDA approval,  which we have not yet
received.

         In December,  2000,  we sold three million  unregistered  shares of our
common stock in a private  placement for $0.50 per share and raised  $1,500,000.
Dr. David Long  participated in the placement and bought 482,000 of such shares.
The  closing  price of our common  stock,  as  reported  by  NASDAQ's  InfoQuote
service,  was $0.57 per share. The proceeds from the placement were used to fund
our operations in 2001.

         During 2002, our operating  activities were funded almost entirely with
$1,750,000 of borrowings  obtained  from, or with the  assistance  of, Dr. David
Long and certain of his affiliates.  During the first eleven months of 2003, our
operating  activities were funded entirely with $680,000 of borrowings  obtained
from, or with the assistance of, Dr. David Long and certain of his affiliates.

         In  December  2003,  we  sold  an  aggregate  of  $637,500  of our  12%
promissory notes due December 31, 2004 and 3,187,500  unregistered shares of our
common stock for an aggregate of $637,500 in the first two tranches of a private
placement.  This placement was completed by the sale of an additional  aggregate
of $362,500 of such 12% promissory  notes and 1,812,500  unregistered  shares of
our common stock for an aggregate of $362,500 in two  additional  tranches,  one
each in January and February 2004. In connection with this placement,  we issued
five-year  warrants  to purchase an  aggregate  of 500,000  shares of our common
stock at a  purchase  price of  $0.20  per  share  to the  placement  agent.  As
stipulated in the private placement,  we registered,  at our expense, the shares
of common stock issued and issuable in the placement.  At the time of the sales,
the  closing  price of our common  stock,  as  reported  by  NASDAQ's  InfoQuote
service,  ranged  from $0.25 to $0.50 per share.  We received  an  aggregate  of
$564,570 of net proceeds from the placement.


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<PAGE>


         In the period from June 2004 to August  2004,  we sold an  aggregate of
$329,000 of our 12% promissory notes due May 31, 2005 and 1,645,000 unregistered
shares of our common stock for an aggregate of $329,000 in the three tranches of
a second private  placement.  In connection  with this placement also, we issued
five-year  warrants  to purchase an  aggregate  of 164,500  shares of our common
stock at a purchase  price of $0.20 per share to the  placement  agent.  We also
registered,  at our  expense,  the shares of common stock issued and issuable in
the placement.  At the time of the sales, the closing price of our common stock,
as reported by NASDAQ's InfoQuote service, ranged from $0.16 to $0.31 per share.
We received an aggregate of $293,100 of net proceeds from the second  placement.
The  private  placement  was  supplemented  by a sale  of  $50,000  of  our  12%
promissory note to our placement agent on the terms and condition applicable for
the notes issued pursuant to the second placement.

         In October  2004,  we engaged an  investment  broker and  consultant to
obtain  financing for our operations  while waiting for FDA approval by offering
our shares of Common Stock offshore to non-U.S.  citizens in accordance with the
provisions  of  Regulation  S at a cost of 50% of the  amount  of gross  capital
raised as fees.  Under  the  agreement,  the  broker  bears  all the  associated
marketing  and operating  costs,  and is required to offer the shares at a price
per share of not less than $0.10.  Under this arrangement, we received aggregate
gross proceeds of $123,400  against  aggregate  issuance of 1,224,000  shares of
Common Stock,  at an aggregate  discount of $38,425 over the market price on the
date of the sale during the period from  October 29, 2004 to December  31, 2004.
Additionally,  from  January 1, 2005 to April 30,  2005,  we received  aggregate
gross  proceeds of $295,250  against  aggregate  issuance of  approximately  3.2
million  shares of Common  Stock at an average  price of $0.10 per share and 50%
agent's fees of $147,625.

         On August 1, 2005,  the Company  signed a  partnership  agreement  with
Bridgetech  Holdings  International,  Inc., a company  focused on maximizing the
potential  of emerging  healthcare  products  and services in the U.S. and Asian
markets.  The agreement requires  Bridgetech to begin clinical testing to obtain
regulatory  approvals  to  market  and  distribute  the  Biofield  Device in the
People's  Republic of China (the "PRC"),  the Hong Kong  Special  Administrative
Region of the PRC, the Republic of China ("Taiwan"),  Vietnam and Singapore. The
agreement,  which was subject to certain minimum purchase and other requirements
which were not met, has since been terminated.

         On March 30,  2006,  Dr.  David  Long ("Dr.  Long") and  certain of his
affiliates  (the "Long  Group")  entered into three  agreements  with The MacKay
Group, Inc. ("MKG"). The agreements provide, among other things, that:

         o        MKG will acquire all the shares of Common Stock of the Company
                  presently issued to the Long Group (comprising an aggregate of
                  8,747,528 shares).

         o        Certain  members of the Long  Group will  assign $2 million of
                  the total debt owed them by the Company.

         o        For a three year term,  MKG will give the Long Group a royalty
                  equal  to 1% of  net  sales  of  the  Company's  products  MKG
                  generates worldwide;

         o        Pursuant to the terms of the Consulting Agreement, Dr. Long or
                  his nominee will remain as a  consultant  to the Company for a
                  term of three years and  receive an annual  payment of $60,000
                  upon each anniversary of the Consulting Agreement; and

         o        MKG shall exercise  voting rights of any and all shares of the
                  Company's stock in favor of Dr. Long or his nominee  remaining
                  on the Board of the  Company  and all stock  options and other
                  benefits to which other Board members are entitled.

         Specifically, at the March 31, 2006 closing, the Long Group transferred
all of its  shares  of common  stock  presently  issued  to them in the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  20.6% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long had intended to remain on the Board so long as his health  permitted but he
died on April 8, 2006 and his  assignee  has not been  nominated.  The other two
Board  members  (Dr.  Raymond  Long  and John  Stephens)  have  resigned,  their
vacancies  being filled by James  MacKay (the  Chairman of the Board of MKG) and
his designee,  Michael Yom, thereby giving MKG control of the Company's Board of
Directors.  Further,  as of March 31,  2006,  certain  members of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the "Assigned Debt").

         Pursuant to the agreements,  MKG has undertaken to make reasonable best



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<PAGE>

efforts to cause the Company to convert all of the Assigned  Debt into shares of
Common Stock of the Company at $0.05 per share (the "Converted Shares").  In the
event of the  conversion of all of the Assigned Debt into shares of Common Stock
of the Company,  MKG will retain 51% of the Converted  Shares plus an additional
portion of the Converted  Shares so that,  together with the shares MKG acquired
on March 30, 2006 from the Long Group, MKG would then hold 51% of all the shares
of Common Stock issued and outstanding (on a fully-diluted basis) of the Company
existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the Assigned Debt to the Long Group. In addition, pursuant to the agreements, to
the  extent  that any  other  debt  owed to the Long  Group  by the  Company  is
converted into shares of Common Stock,  the Long Group agreed to transfer 51% of
such shares to MKG. In return for the foregoing restructuring, MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring Company's products to Asia and other markets as quickly as feasible.

         MKG is making these  purchases and is being  assigned the debt (as well
as possibly  converting the latter into Company's  Common Stock)  potentially to
gain  control of the  Company.  MKG is not a member of a group  relating  to the
Company.


BREAST CANCER

Background


         Breast  cancer  is one of the most  common  cancers  among  women  and,
notwithstanding  the currently available  detection  modalities,  is the leading
cause of death  among  women aged 35 to 54.  According  to the  American  Cancer
Society,  approximately  one in nine women in the  United  States  will  develop
breast  cancer  during  her  lifetime.  In 1999,  the  American  Cancer  Society
estimated  that  during  each year  approximately  175,000 new cases of invasive
breast  cancer  among women will be  diagnosed  in the United  States,  and that
approximately 43,300 women will die as a result of the disease.  Early detection
of breast cancer is critical.  There is widespread  agreement that screening for
breast cancer, when combined with appropriate  follow-up,  will reduce mortality
from the disease.

         The American  Cancer Society  recommends that all women over the age of
40 should undergo breast cancer screening in the form of physical examination or
mammography  screening as a routine part of preventative  healthcare.  For these
women,  the American  Cancer Society has published  guidelines for breast cancer
screening,  including: (i) monthly breast self-examinations,  and (ii) an annual
mammogram for women age 40 and older.  As a result of family  medical  histories
and other  factors,  certain women are at high-risk of developing  breast cancer
during  their  lifetimes.  For these women,  physicians  often  recommend  close
monitoring,  particularly  if a  potentially  pre-cancerous  condition  has been
detected.

         Each  year  approximately  eight  million  women in the  United  States
require diagnostic testing for breast cancer because of a physical symptom, such
as a palpable  lesion,  pain or nipple  discharge,  discovered  through  self or
physician  examination  (approximately  seven million) or a non-palpable  lesion
detected by screening  x-ray  mammography  (approximately  one million).  Once a
physician has identified a suspicious lesion in a woman's breast,  the physician
may recommend further diagnostic procedures,  including diagnostic  mammography,
ultrasound or fine needle  aspiration.  In each case, the potential  benefits of
additional diagnostic testing must be balanced against the costs, risks, anxiety
and  discomfort  to  the  patient  associated  with  undergoing  the  additional
procedures.  Each of the currently available non-surgical  modalities for breast
cancer detection has various clinical limitations.

Screening and Diagnostic Modalities

         Physical examinations conducted by a physician or by a woman performing
breast  self-examination can only detect relatively large lesions,  which may be
advanced  cancers.  Furthermore,  physical  examination  of the breast  does not
reliably  distinguish  between malignant and benign tissue.  As a result,  other
techniques are used to detect breast cancer.

         Mammography is an x-ray modality  commonly used for both routine breast


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<PAGE>

cancer screening and as a diagnostic tool. A mammogram  produces an image of the
internal structure of the breast, which is intended to display lesions as blurry
white spots against normal tissue. In a screening  mammogram,  radiologists seek
to detect the presence of suspicious  lesions,  while in a diagnostic  mammogram
radiologists  seek  to  characterize  suspicious  lesions.   Mammograms  require
subjective  interpretation by a radiologist and are often  uncomfortable for the
patient.  Because  x-ray  mammography  exposes  the  patient to  radiation,  the
American  Cancer Society  recommends that mammograms be limited to one per year.
In addition,  x-ray  mammography  is considered  to be less  effective for women
under the age of 50 who generally have dense breast tissue.  The average cost of
a diagnostic mammogram is approximately $120 to $160 per procedure, and requires
the use of equipment ranging in cost from approximately $75,000 to $225,000. Due
to the high costs  associated  with  mammography  equipment and the  specialized
training  necessary  to  operate  the  equipment  and to read the x-ray  images,
mammography is usually available only at specialty clinics or hospitals.

         Ultrasound  uses high frequency  sound waves to create an image of soft
tissues in the body. Like a mammogram,  this image requires  interpretation by a
physician.  Ultrasound's  principal role in breast cancer  diagnosis has been to
assist the physician in determining  whether a palpable lesion is likely to be a
cyst (usually benign) or a solid mass (potentially cancerous).  The average cost
of an ultrasound of the breast is approximately  $75 to $200 per procedure,  and
requires  the use of  equipment  ranging in cost from  approximately  $60,000 to
$200,000. Like mammography,  ultrasound is generally available only at specialty
clinics or hospitals.

         Other currently available surgical  diagnostic  techniques include fine
needle  aspiration,  core needle biopsy and stereo tactic needle biopsy. In each
of these procedures,  a physician seeks to obtain cell samples from a suspicious
lesion through a needle for analysis by a cytopathologist.  These procedures are
invasive,  require follow-up and range in cost from  approximately  $300 to $600
per procedure, and inadequate sampling often renders these procedures invalid.

         Due in part to the limitations of the currently available modalities to
identify  malignant  lesions,  many patients with suspicious lesions proceeds to
additional  diagnostic  procedures,  including  surgical  biopsy,  which  is  an
invasive and expensive  procedure.  Approximately  750,000 surgical biopsies are
performed each year in the United States, of which approximately  500,000 result
in the surgical removal of benign breast tissue.  The average cost of a surgical
biopsy ranges from  approximately  $1,000 to $5,000 per procedure.  In addition,
surgical  biopsy  can  result in pain,  scarring  and  anxiety  to the  patient.
Patients  who are  referred  to biopsy  usually are  required  to  schedule  the
procedure in advance,  and generally  have to wait several days to receive their
biopsy results.

THE BIOFIELD DIAGNOSTIC SYSTEM

         The Biofield  Diagnostic  System is intended to provide  physicians and
patients with immediate and objective  information  concerning  the  probability
that  the  lesion  is  proliferative  or  non-proliferative.   Based  upon  such
information, a physician can recommend whether or not a lesion should be removed
by biopsy or whether  other action should be taken.  Only a biopsy,  followed by
microscopic examination,  can determine whether a lesion is benign or malignant.
A breast  examination  utilizing our device is a  non-invasive  test, and can be
performed in a physician's office by a physician or a medical technician in less
than 20  minutes.  Single-use  sensors of our design  are  arranged  on the skin
surface in and around the quadrant of the breast  where a suspicious  lesion has
been identified and in  corresponding  locations on the  asymptomatic  breast. A
suspicious  lesion is  generally  detected  through  physical  examination  or a
mammogram.  Sensor  readings are measured  and analyzed  using a  pre-programmed
algorithm.  Our device  generally  is intended  only to be used as an adjunct to
physical  examination or relevant imaging modalities in women 55 years of age or
younger who have palpable breast lesions.

     The higher  the  Biofield  Diagnostic  System's  output,  the  greater  the
probability  that the  patient has  proliferative  disease or cancer in the area
examined. The physician can use this information,  together with other available
clinical information,  to determine the appropriate course of action. We believe
that our device will offer several advantages  compared with currently available
modalities, including the following:

     o    It provides  immediate,  objective  test results that  characterize  a
          lesion,  and indicate  the  probability  that a  suspicious  lesion is
          highly proliferative, proliferative or non-proliferative.
     o    It is  non-invasive,  since all  measurements  are taken from  sensors
          placed on the skin surface.
     o    Unlike x-ray mammography,  there is no exposure to radiation or breast
          compression,  which  will  allow the test to be  repeated  as often as



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          needed,  especially  important  for women at high risk for  developing
          breast cancer and patients requiring follow-up examination.

     o    In limited  clinical  studies to date, it has performed  better in the
          clinically  difficult  subgroup of younger  women for whom  diagnostic
          imaging modalities are generally considered less effective.

     o    A physician or medical technician can perform the test in less than 20
          minutes in a physician's office.

     o    The estimated cost of the device is expected to be significantly  less
          than  the  cost  of  purchasing   and  installing   diagnostic   x-ray
          mammography or other diagnostic imaging equipment.

     o    It is likely to be  preferred  by third  party  payers of health  care
          costs,  since it has the potential of reducing the number of expensive
          diagnostic tests, including surgical biopsies.

CLINICAL STUDIES

         We  have  used  the  Biofield  Diagnostic  System  to test  over  3,000
participants  in the  United  States,  Europe and  Japan,  involving  women with
suspicious breast lesions,  detected either by x-ray mammography  screening or a
physical  examination  (self or by  physician).  Women who  participated  in our
clinical trials had undergone diagnostic work-ups, which often included a series
of tests,  before  proceeding  to biopsy.  In each of our  studies,  the results
obtained were then compared to the biopsy results. Based on our clinical studies
to date, and although our device cannot  determine the presence of breast cancer
in all  cases,  we  believe  that our  device,  together  with  other  available
information,  could  reduce  diagnostic  uncertainty  and decrease the number of
diagnostic  procedures,  including  surgical  biopsies  performed on  suspicious
lesions.

     Our  test  is  conducted  under  the  supervision  of  a  licensed  medical
practitioner.  Both the  technician  performing  the  test  and the  supervising
physician  must have undergone  appropriate  training on the use of the Biofield
Diagnostic  System.  Our test does not replace the usual  screening  methods for
detecting  breast  lesions by mammography  or palpation,  nor  evaluation  using
biopsy  when  appropriate.  Moreover,  efficacy of our device has not been fully
evaluated by our research in the following types of patients:

     o    Patients with a history of breast cancer or breast augmentation;
     o    Patients  who have had recent fine needle  aspiration  of a suspicious
          lesion; and
     o    Patients who have undergone  chemotherapy or radiation  therapy within
          the past three years.

     Furthermore,  women with  certain  conditions  are believed to confound the
results of the test. These conditions include:

     o    Women who have undergone active tamoxifen or raloxifene therapy within
          the past three months,
     o    Women with clinically diagnosed active mastitis;
     o    Women  with  visible  or  known  dermatological  conditions  or  other
          physical abnormality that precludes the application of sensors;
     o    Women  with a  known  allergy  to  adhesives  or ECMs  used  to  apply
          electrocardiogram or electroencephalogram sensors;
     o    Women  with only a single  breast;
     o    Women with active electrically powered implanted devices;
     o    Women with breast tattoos and nipple jewelry; and
     o    Pregnant women.


OTHER POSSIBLE PRODUCT

         Based on our clinical  experience with the Biofield  Diagnostic  System
for testing  women that have  symptoms of breast  cancer  (often  referred to as
symptomatic women) and our belief that the electrophysiological  characteristics
of  cancer  are  similar  for  both  lesions  that  can be  felt  in a  physical
examination  (palpable)  and those  lesion  that  cannot  be felt in a  physical
examination  (non-palpable),  we believe that our technology should be adaptable
for breast cancer  screening in women who have not  demonstrated any symptoms of
breast cancer (often referred to as asymptomatic  women).  Based on this belief,
we have  contemplated a prototype  design of an enhanced  version of our device,
which may be of use as a screening  system.  The enhanced  version of our device
would contain additional data channels to allow for more sensors to surround the
breast  or other  area  where a lesion is  present  and an  algorithm  to better
analyze the data  received.  However,  we have not yet  completed a final sensor



                                       6
<PAGE>

configuration  for the  proposed  device,  nor have we  commenced  any  clinical
testing  for the  proposed  device,  since we believe  that the  protocol  for a
full-scale clinical trial would involve significant  financial  resources.  As a
result,  we cannot assure you when, if ever, any further efforts will be made to
complete the development of the proposed device.

         We believe  that the need  exists  for  products  to provide  early and
accurate detection of types of cancers found in the epithelial tissue other than
breast  cancer.  Our previous  preclinical  research had been designed to obtain
additional  scientific  knowledge  of  the  fundamentals   underlying  our  core
technology  and to identify new  applications  based on our  technology  for the
detection of other cancers,  including cancer of the ovaries, skin, prostate and
colon.  However,  due to the cost of this  research  and our  limited  financial
resources, we have not made any efforts in this regard since 1996, and we cannot
assure you when, if ever, any further steps will be undertaken.

GOVERNMENT REGULATION

         The  manufacture  and sale of medical  devices  intended for commercial
distribution are subject to extensive governmental regulation both in the United
States and abroad.

United States Regulations

         The FDA regulates the research, testing, manufacture, safety, labeling,
storage,  record keeping,  advertising,  distribution  and production of medical
devices in the United States under the Food, Drug and Cosmetic Act.

FDA's Pre-market Clearance and Approval Requirements.

         Unless an exemption  applies,  no medical device can be marketed in the
United States without  receiving  either a 510(k) clearance or a PMA approval in
advance from the FDA. The FDA's 510(k) clearance process usually takes from four
to twelve months,  but it can take longer. The process of obtaining PMA approval
is much more costly, lengthy and uncertain.

         The FDA  decides  whether  a device  must  undergo  either  the  510(k)
clearance  or  pre-market  application  ("PMA")  approval  process,  based  upon
statutory  criteria.  These  criteria  include  the  level of risk  that the FDA
perceives is associated with the device,  and a determination  as to whether the
device is within a type that is already legally marketed. Devices deemed to pose
relatively  less risk are placed in either class I or II,  which  classification
requires  that the  manufacturer  submit a  pre-market  notification  requesting
510(k) clearance.  The pre-market  notification must demonstrate that the device
is  substantially  equivalent in intended  use,  safety and  effectiveness  to a
legally marketed "predicate device" that is either in class I or class II, or is
a "preamendment" class III device (i.e., one that was in commercial distribution
before  the May 28,  1976  amendment)  for  which  the FDA has not  changed  the
classification requiring PMA approval process.

         Devices   deemed  by  the  FDA  to  pose  the   greatest   risk  (e.g.,
life-sustaining,   life-supporting   or  implantable   devices)  or  deemed  not
substantially  equivalent to a legally  marketed  predicate device are placed in
class III.  Such devices are required to undergo the PMA  approval  process,  in
which the manufacturer must prove the safety and effectiveness of the device. An
application  for PMA approval must provide  extensive  preclinical  and clinical
trial data, and also information  about the device and its components  including
its manufacturing, labeling and promotion. After approval of a PMA, a new PMA or
PMA supplement is required in the event of any  modification to the device,  its
labeling or its manufacturing  process.  As part of the PMA review, the FDA will
typically  inspect the  manufacturer's  facilities for  compliance  with Quality
System  Regulation,   requirements  that  impose  elaborate  testing,   control,
documentation and other quality assurance procedures.

         Upon submission, the FDA determines if the application for PMA approval
is  sufficiently  complete  to permit a  substantive  review,  and,  if so,  the
application is accepted for filing. The FDA then commences an in-depth review of
the application,  which typically takes one to three years, but may take longer.
The  review  time  is  often  significantly  extended  as a  result  of the  FDA
requesting more information or clarification  of information  already  provided.
The  FDA  also  may  respond  with a "not  approvable"  determination  based  on
deficiencies in the application, and require additional clinical trials that are
often expensive, time consuming and can delay approval for months or even years.



                                       7
<PAGE>

During  the review  period,  an FDA  advisory  committee,  typically  a panel of
clinicians,  usually will be convened to review the application and recommend to
the FDA whether,  or upon what  conditions,  PMA approval  should be considered.
Although  the FDA is not  bound by the  advisory  panel  decision,  the  panel's
recommendation is important to the FDA's overall decision-making process.

         If the  FDA's  evaluation  of the  application  is  favorable,  the FDA
typically issues an "approvable letter," requiring the applicant's  agreement to
specific   conditions  (e.g.,   changes  in  labeling)  or  specific  additional
information  (e.g.,  submission  of final  labeling)  in order to  secure  final
approval of the  application.  Once the  conditions in an approvable  letter are
satisfied,  the FDA will approve the device for the approved indications,  which
can be more limited than those originally  sought by the  manufacturer.  The PMA
can include  post-approval  conditions  that the FDA believes  are  necessary to
ensure the safety and effectiveness of the device including, among other things,
restrictions on labeling,  promotion,  sale and distribution.  Failure to comply
with the  conditions of approval can result in significant  adverse  enforcement
action, including the loss or withdrawal of the approval. The PMA process can be
expensive and lengthy,  and there is no assurance that any  application  for PMA
approval will ever be approved for marketing a device.  Even after approval,  if
any,  of a PMA,  a new PMA or PMA  supplement  is  required  in the  event  of a
modification to the device, its labeling or its manufacturing process.

         A clinical  trial may be required in support of a 510(k)  submission or
an   application   for  PMA   approval.   Such  trials   generally   require  an
Investigational  Device Exemption ("IDE") application approved in advance by the
FDA  for  a  limited  number  of  patients,  unless  the  product  is  deemed  a
non-significant risk device eligible for more abbreviated IDE requirements.  The
IDE  application  must be  supported  by  appropriate  data,  such as animal and
laboratory testing results.  Clinical trials may begin if the IDE application is
approved by the FDA and by the  appropriate  institutional  review boards at the
clinical trial sites.

         In December 1996, we submitted our  application for PMA approval of the
Biofield  Diagnostic  System.  Our  application was based  principally  upon the
results  of  clinical  trials on over  1,200  women  tested at six U.S.  medical
institutions  under the  direction  of  physicians  involved  in  breast  cancer
diagnosis  and  treatment.  In  February  1997,  the FDA  informed  us that  our
application had not been accepted for filing, and requested us to respond to the
following deficiency:

         "The design of the clinical trial is not valid. You have tested several
         algorithms  on the PMA data set and selected the one that gave the most
         desired results.  This is not an accepted procedure for definitive data
         sets. You will need to select a final algorithm.  Then you must test it
         with an independent  data set for  sensitivity,  specificity,  etc. The
         design of the  clinical  trial  must  provide  data that  supports  the
         indications  for use,  which  should  include  the  impact  on  patient
         management."

         Commencing in September 2001, we had discussions with the FDA about our
data  analysis,  the CE mark  Certification  for our device,  its  comprehensive
algorithm and clinical efficacy,  and also discussed our then proposed course of
action in support of the re-submission of our PMA application,  including timing
of on-going data  analysis and patient  management  categories.  In 2002, we had
further  discussions  with the FDA about the  science  related  to our  device's
measurements,  reviewed  clinical  study  databases  to be used for training and
testing,  regulatory course of action related to a PMA application,  statistical
methodology  and  clinical  goals,   and  advised  the  FDA  that  a  Pre-Market
Surveillance  (PMS)  Study was in progress  in Europe.  In March  2002,  the FDA
orally  informed  us  that  it  anticipated  that  our  PMA  application,   upon
submission, would be reviewed under its expedited review policy. We subsequently
met with the FDA to outline the content of our proposed PMA  application  and to
introduce  our next  generation  device and  discuss  necessary  testing of such
device to demonstrate equivalency with our original device. In December 2002, we
submitted our detailed  statistical analysis plan to the FDA and the application
thereof to a portion  of the  results  of our  testing,  in an effort to receive
approval of such plan prior to proceeding with our PMA  submission,  and advised
the FDA that a portion of our test data had not yet been analyzed, and was being
maintained by a third party for  subsequent  analysis and  algorithm  validation
under an  FDA-reviewed  statistical  analysis plan.  During the first quarter of
2003, we had several telephone conferences with the FDA, in which the FDA raised
additional   questions  concerning  our  statistical  analysis  plan  (which  we
responded in a series of written  communications) and the FDA indicated that our
training set data results appeared to be statistically significant.

         In the last quarter of 2003, we determined to pursue an application for



                                       8
<PAGE>

510(k) clearance of our device (instead of resubmitting a PMA application) after
an internal determination that the performance data from our device demonstrates
substantial  equivalency  to a  predicate  category  of devices  ("Thermographic
Systems"), which process is less costly and would allow us to commence marketing
our device sooner than under a PMA approval process.

         In March,  2004, we submitted our application  for 510(k)  clearance to
the notified body, KEMA Registered Quality,  Inc. ("KEMA"),  for review prior to
formal submission to the FDA. KEMA subsequently  recommended to the FDA that our
diagnostic  device is  "substantially  equivalent  to devices  marketed  in U.S.
interstate  commerce  prior to May 26, 1976,  the enactment  date of the Medical
Device Amendments,  or to devices that have been reclassified in accordance with
the provision of the Federal Food,  Drug, and Cosmetic Act." In November,  2004,
we submitted  our  application  for formal  submission to the FDA to approve our
device.  In  December,  2004,  we  received  the FDA's  response  to our  510(k)
submission,  which  reclassified by statute the Biofield  Diagnostic System into
class III (Premarket  Approval)  pursuant to Section 513(f) of the Federal Food,
Drug  and  Cosmetic  Act  (the  "Cosmetic  Act").  As  a  result  of  the  FDA's
reclassification,  we must  obtain  an  approved  PMA with the FDA,  absent  any
subsequent  reclassification,  prior to legally  marketing or  distributing  our
device. The basis of the FDA's decision was its determination that the device is
not "substantially  equivalent to devices marketed in U.S.  interstate  commerce
prior to May 26, 1976, the enactment date of the Medical Device  Amendments,  or
to any devices which have been reclassified  into class I (General  Controls) or
class II  (Special  Controls)  or to another  device  found to be  substantially
equivalent  through the 510(k) process." The FDA indicated that its decision was
also based on our device having "new  technological  characteristics  that could
affect safety and effectiveness. In addition, the FDA raised new types of safety
and effectiveness questions. For example:

          1) Do rapidly  proliferating  cells  produce a  measurable  electrical
          potential that is different from that of normal cells?
          2) If there is a measurable  electrical  potential  difference,  is it
          specific for malignant cells?
          3) Can the  measurement  be used to  differentiate  between normal and
          malignant breast cancers in the human?"

         In its December  letter,  the FDA also  advised us that a  manufacturer
whose device is found to be not  substantially  equivalent to a predicate device
can request the FDA to make a risk-based classification for its device. However,
the letter also  included a statement  that the FDA believes  that "based on the
review of your device, general controls would be inadequate and special controls
difficult to develop, to provide reasonable assurance of the device's safety and
effectiveness."

         In January,  2005, in accordance  with  recommended  FDA procedure,  we
submitted a Request for Evaluation of Automatic  Class III  Designation  for the
Biofield(R) Breast Proliferation Rate Detection System under ss.513(f)(2) of the
Cosmetic  Act.  In this  request,  we also  addressed  the  FDA's  technological
concerns based on information we had previously provided to the FDA. On March 4,
2005  we  were  notified  by the  FDA  that it had  reviewed  our  petition  for
reclassification  and concluded  that we have not  demonstrated  that the device
meets the criteria under section 513(a)(1) of the Federal Food Drug and Cosmetic
act (21 U.S.C.  360c(a)(1) for classification  into class I or II. Therefore the
device is  automatically  classified in class III requiring  approval  through a
premarket  approval (PMA) process.  In the event that the FDA clears our device,
and if we are  successful  in  obtaining  sufficient  additional  financing,  we
anticipate  commencing our marketing efforts for the device in the United States
shortly thereafter.  However,  due to our very limited financial  resources,  we
will need to obtain  substantial  additional  funding in order to  complete  our
application to the FDA, as well as to sustain our operations during the time our
application  is being  considered by the FDA. In the event that we are unable to
secure such funding, we may be compelled to cease operations.

         On July 25,  2005,  the FDA sent the  Company  a  response  to a recent
meeting at FDA's  offices at which the  Company  had  reviewed  with the FDA the
Biofield data contained in the Company's  previously submitted 510K application.
The FDA  informed the Company  that the data  contained in the 510K  application
would be insufficient  for several  reasons and requested more clinical  testing
for the Company's pre-market approval application.

Pervasive and Continuing FDA Regulation.

         A host of regulatory requirements apply to marketed devices,  including
labeling   regulations,   the  Quality   System   Regulation,   which   requires
manufacturers to follow elaborate design,  testing,  control,  documentation and
other quality  assurance  procedures.  The Medical Device  Reporting  regulation
requires  that  manufacturers  report  to the FDA  deaths  or  serious  injuries



                                       9
<PAGE>

associated with regulated products and product  malfunctions  likely to cause or
contribute to death or serious injury. The FDA generally  prohibits promotion of
products for  unapproved  or  `off-label'  uses.  Class II devices also can have
special controls (e.g., performance standards, post-market surveillance, patient
registries and FDA guidelines) that do not apply to Class I devices. There is no
assurance that unanticipated changes in existing regulatory  requirements or the
adoption of new requirements would not have a significant  adverse effect on our
business and financial condition.

         Upon  commencing  commercial  distribution,   we  will  be  subject  to
inspection by the FDA to determine compliance with regulatory  requirements.  If
the FDA  finds  that we have  failed  to comply  with the  requirements,  it can
institute a wide variety of  enforcement  actions.  The FDA  sometimes  issues a
public warning  letter,  but also may pursue more severe remedies such as fines,
injunctions and civil penalties against us; recalls or seizures of our products;
operating restrictions,  partial suspension or total shutdown of our production;
refusing  our requests  for 510(k)  clearance  or PMA approval of new  products;
withdrawal of product  approvals  already granted;  and commencement of criminal
prosecution.  Any FDA enforcement action could have a significant adverse effect
on our business and financial condition.

Other U.S. Regulation

         We must comply with numerous federal,  state and local laws relating to
such matters as safe working conditions,  manufacturing practices, environmental
protection,  fire hazard control and hazardous substance disposal,  and we could
incur significant costs to comply with such laws and regulations.

         Unapproved  products  subject  to  the  FDA's  pre-market   application
requirements  must receive prior FDA export  approval to be marketed  outside of
the United  States,  unless they are approved for use by a member country of the
European Union or certain other countries including Australia,  Canada,  Israel,
Japan,  New Zealand,  Switzerland  and South  Africa,  in which case they can be
exported  to  any  country   provided  that  certain  limited  FDA  notification
requirements are met.

Foreign Regulations

         Sales of  medical  devices  outside  the United  States are  subject to
foreign  regulatory  requirements that vary widely from country to country.  The
time required to obtain approvals in foreign  countries may be longer or shorter
than that required for FDA approval,  and  requirements for licensing may differ
from the FDA requirements.

         Medical  devices which are sold within the European  Union are required
to achieve  compliance with the  requirements  of the Medical Devices  Directive
issued by the European Union and obtain a "CE" marking for the device. To obtain
a CE marking, the medical device is required to meet the Essential  Requirements
as  defined  under the  Directive,  relating  to safety and  performance  of the
device,  and  the  supplier  must  successfully   undergo  verification  of  its
regulatory  compliance  (known as a "conformity  assessment")  by an appropriate
approved standards agency or "notified body". It also is required to comply with
additional national requirements that are beyond the scope of the Directive.

         We have not request audit by KEMA and renew CE mark  certification  for
2005 due to lack of funds. For 2004 and prior years, we had received approval by
KEMA to market a version of the Biofield Diagnostic System and our sensors under
the CE mark Certification, and this notified body has granted certified ISO-9001
Quality System status for design, production management,  sales and distribution
of such  version of the  Biofield  Diagnostic  System.  In order to obtain  such
approvals, KEMA personnel conducted a detailed review of our technical files and
records, and reviewed certain of our medical research files;  however,  KEMA did
not  conduct  any  confirming  research  and did  not  comment  on our  clinical
research.  At the  conclusion of the review,  KEMA issued to us a Certificate of
Conformity for the product category "electropotentials systems for the diagnosis
of epithelial  cancers".  KEMA did not offer any  endorsement of the efficacy of
the  Biofield   Diagnostic   System.  We  will  be  required  to  apply  for  CE
recertification  for our newly  redesigned  device,  which we intend to do at an
appropriate time when adequate long-term funding is obtained.

         The CE mark Certification and the ISO-9001 Quality System status, which
status is subject to  semi-annual  audit by KEMA,  permit us to sell an approved
device in Europe  and other  countries  that  recognize  CE mark  Certification,


                                       10
<PAGE>

without  obtaining  any  further  regulatory   approval.   Failure  to  maintain
compliance with the appropriate  Medical Devices  Directive and other applicable
requirements  could  have a  significant  adverse  effect  on our  business  and
financial condition.

MANUFACTURING

         We are a development  and marketing  company and do not manufacture any
of our products or  prototypes.  We have used  contract  manufacturers  who meet
current quality system regulations and good manufacturing practices requirements
imposed  by the  FDA to  produce  the  initial  quantities  of  our  device  and
disposable  sensors,  and intend to continue to use  contract  manufacturers  to
satisfy our future needs.  Electronic  components  and raw materials used in our
device and our sensors are available from numerous  suppliers.  Some  components
are stock  items,  while  others  have been  designed  and  manufactured  to our
specifications. The specifications for our device and our sensors are treated as
a trade secret.  We own certain  moulds and other  equipment used to manufacture
our components.

         SeaMED  Corporation  was the  contract  manufacturer  for the  previous
version of our device,  pursuant to an  agreement,  which  expired May 15, 2001.
TriVirix International Limited has redesigned our device to reduce manufacturing
costs and make product platform improvements,  a major portion of which work has
been completed.  However, until we obtain additional financing, we are unable to
complete the payments under our redesign contract and finish the redesign of the
new version of our device. We have arranged with Ludlow Technical  Products Inc.
to contract  manufacture  our  sensors,  which in turn has  contracted  with Dow
Pharmaceutical Sciences, Inc. to supply the gel, which is used with our sensors.

MARKETING AND SALES

General


         As a result  of the  large  number of  diagnostic  procedures  that are
performed on suspicious  breast tissue in the United States,  we intend to focus
our marketing efforts on the clinical ability of our device to reduce diagnostic
uncertainty  and  decrease  the number of  diagnostic  tests  performed on these
suspicious  lesions.  We believe that the  potential  market for our device will
include  physicians  involved in the detection and  management of breast cancer,
including  radiologists,  gynecologists,  general surgeons,  breast surgeons and
general practitioners,  as well as hospitals and clinics. We anticipate that, if
the FDA  approves  our device,  we will  market our device in the United  States
through one or more  distribution  partners.  We have not commenced  discussions
with any potential  distribution  partner and cannot assure that any discussions
that we may have will result in any strategic or other relationship.

         Based on obtaining CE mark  Certification  for our device, we have been
able to market the  previous  version of our  device in the  European  Union and
certain other  countries  that  recognize the CE marking.  In December  2001, we
signed an exclusive three-year distribution agreement with Trilogy Critical Care
(Pty) Ltd. of Johannesburg,  South Africa, a health care distributor in southern
Africa, to market and sell our device in South Africa and certain other southern
African  countries,  conditioned on achieving  annual minimum sales. In 2002, we
signed similar distribution  agreements for Italy, South Korea,  Republic of the
Philippines and Brazil; in 2003, we signed a similar distribution  agreement for
certain countries in the Middle East and, in 2004, we signed a similar agreement
for Malaysia. On August 1, 2005, the company signed a partnership agreement with
Bridgetech  Holdings  International,  Inc., a company  focused on maximizing the
potential  of emerging  healthcare  products  and services in the U.S. and Asian
markets, particularly to distribute the Biofield Device in the People's Republic
of China (the "PRC"),  the Hong Kong Special  Administrative  Region of the PRC,
the  Republic  of  China  ("Taiwan"),   Vietnam  and  Singapore.   Each  of  our
distribution  agreements permit us to terminate the distribution  arrangement if
minimum  annual  purchases  are not made.  Except for the initial  purchases  of
demonstration  units made under these agreements,  no subsequent  purchases have
been made.  Thus, none of the required  minimum annual  purchases have been made
under any of these  distribution  agreements,  thereby entitling us to terminate
the   agreements.   For  instance,   our  agreement  with   Bridgetech   Holding
International, Inc. has since been terminated.

         We believe that the cost for use of our device will be competitive with
the current procedure costs of diagnostic  mammography and ultrasound.  Although
we have not sold the device in the United States, at such time, if at all, as we
receive FDA approval,  we currently expect to price our device at under $20,000,
which  will be  substantially  less  than  the  cost of  diagnostic  mammography
equipment or ultrasound systems, which range in price from approximately $60,000



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<PAGE>

to  $225,000.  We also  currently  expect to price  our  single-use  sensors  at
approximately $60 a set.

         Due to our current lack of cash resources, our marketing staff consists
of only one part-time independent  marketing consultant,  who has worked with us
for several years and is familiar with our device.  Our  marketing  efforts,  to
date, have achieved very limited  success.  The redesign of a new version of our
device is mostly  complete,  but we will not be able to commence  marketing  our
redesigned device until such time, if at all, as we secure additional  financing
to enable us to complete the payments under our redesign contract, at which time
we would resume our marketing activities.

Effect of Third Party Reimbursement

         In the United  States,  suppliers of health care  products and services
are greatly  affected  by  Medicare,  Medicaid  and other  government  insurance
programs, as well as by private insurance  reimbursement  programs.  Third party
payers   (i.e.,   Medicare,   Medicaid,   private   health   insurance,   health
administration  authorities in foreign  countries and other  organizations)  may
affect the pricing or relative  attractiveness of our products by regulating the
maximum amount of reimbursement provided to the physicians and clinics utilizing
our products,  or by taking the position that reimbursement is not available for
procedures utilizing our device.

         We believe that the availability and level of third party reimbursement
will impact the decisions of  physicians,  clinics and hospitals to purchase and
use our products and, thereby, affect the pricing of our products. In the United
States,  many  patients  are  reimbursed  for  mammograms,  in amounts that vary
considerably  by the location in which the procedure is performed.  Our intended
marketing  strategy is to obtain  approval of payers for payments to  physicians
using our products,  while  working with  professional  organizations  to foster
awareness.  We also  intend to seek  support  for our  products,  and enlist the
assistance  of  opinion   leaders  in  making   presentations   to  health  care
administrators to inform them of the benefits of our device.

         Several states and the federal  government are  investigating a variety
of  alternatives  to reform the health  care  delivery  system and to reduce and
control health care spending.  These reform efforts  include  proposals to limit
spending on health care items and services, to limit coverage for new technology
and to limit or control the price of products and services. The scope and timing
of these reforms  cannot be  predicted,  but if adopted and  implemented,  these
reforms  could have a significant  adverse  effect on our business and financial
condition.

         In  international  markets,  reimbursement  for  use of our  device  in
international  markets will vary and will be determined on a  country-by-country
basis.  Although we intend to pursue our efforts to obtain  reimbursement status
in major European  markets,  we do not yet have a schedule for commencing  these
efforts,  there is no assurance of success, once such efforts are commenced,  if
at all, and our ability to achieve any significant market penetration may depend
upon the availability of third party governmental  reimbursement.  Initially, we
expect that the patient will be responsible for the cost of the procedure.

PATENTS AND PROPRIETARY INFORMATION

         We have a number of issued U.S.  and foreign  patents,  the earliest of
which  expires in 2007,  relating  to our  products  and  technology.  Since the
technology applicable to our products is rapidly developing,  any patent rights,
which we have, or may obtain, may not provide us with any competitive advantage.
A number of  companies  may have filed  applications  for, or have been  issued,
patents  relating  to  technology  that is  similar  to  some of the  technology
developed or used by us.

         We also seek to protect  our  intellectual  property  rights  through a
combination of trade secret,  non-disclosure and other contractual arrangements.
We  generally  enter  into   confidentiality   agreements  with  our  employees,
consultants,  vendors and clinical investigators, and attempt to limit access to
and distribution of our proprietary information.

         We may be required to obtain  licenses to patents or other  proprietary
rights from third parties. We cannot assure you that any licenses required under
any patents or  proprietary  rights would be made  available to us on acceptable
terms,  if at all.  If we are  unable  to  obtain  required  licenses,  we could
encounter   delays  in  product   development  or  find  that  the  development,
manufacture or sale of products requiring these licenses could be foreclosed.



                                       12
<PAGE>


         From time to time, we may support and collaborate in research conducted
by universities and governmental research  organizations to obtain rights to use
the resulting technical information and any inventions.  In these circumstances,
it is not unusual for the university or research  organization to retain certain
rights, which then could be licensed to others.

LICENSES AND OTHER AGREEMENTS

         We are a party to several licensing and royalty  arrangements  relating
to the Biofield Diagnostic System, as well as to prior versions of this product.

         We have a 1992  royalty  agreement  with Abel  Laboratories,  Inc.,  an
affiliate of our former  Chairman and Chief Executive  Officer,  Dr. David Long.
Under this agreement, Abel assigned to us all of its rights and interests in all
inventions,  and  technology  conceived or developed  by it in  connection  with
laboratory  services  performed  by it  for  us  which  relate  to  the  use  of
bioelectronics in the diagnosis,  screening or management of disease, infection,
ovulation or other bioelectric events. This agreement also provides that Abel is
entitled to royalties of 5% of net sales of products  incorporating any of these
inventions or  technology  which are embodied in any patent issued to us, during
the life of the patent,  up to a maximum of $2 million per patent,  as well as a
portion of the  proceeds  we may receive  from the  license of these  patents to
others.  One patent has been issued to us that is covered by this agreement.  On
March 30, 2006, this agreement was superceded by three  agreements  entered into
by Dr. Long and certain of his affiliates and The MacKay Group, Inc.

         In October 2000, we entered into a non-exclusive license agreement with
Cardio Dynamics  International  Corporation,  a manufacturer of medical devices,
for use of our interconnect  design patent on cables to be manufactured by them.
The agreement was due to expire on December 31, 2003 and was renewable by Cardio
Dynamics  for an  additional  two years based on a mutual  agreement  of minimum
royalties. We received the contractual minimum royalties of $19,770 for 2001 and
$46,890 for 2002.  The  agreement was amended in December 2002 to reset the then
remaining  royalty from $98,465 to $54,606.  In consideration  for prepayment of
such royalty in 2003,  the agreement  was extended  (for no additional  royalty)
until December 31, 2004. The agreement  expired on December 31, 2004 and was not
renewed.

        On March 30, 2006,  the Long Group entered into three  agreements  with
MKG. The  agreements  provide,  among other things,  that MKG will give the Long
Group a royalty equal to 1% of net sales of the Company's products MKG generates
worldwide for a period of three years;


RESEARCH AND DEVELOPMENT

         All of our research and development activities have been related to our
core technology and our attempt to commercialize  this technology.  Since we are
still in the development  stage,  our research and  development  activities have
been substantial, although they have decreased significantly since 1998. Most of
our research has been completed and we did not incur any expense for research in
2005.

COMPETITION

         The medical device industry  generally,  and the cancer  diagnostic and
screening  segments  in  particular,   are  characterized  by  rapidly  evolving
technology and intense competition. Existing breast cancer diagnostic tools will
compete  with  our  device,  including  imaging  equipment  such as MRI  systems
manufactured   by  Hitachi  Medical   Corporation  of  America,   Royal  Philips
Electronics,  Siemens AG,  Toshiba  America  Medical  Systems and others;  x-ray
mammography  equipment  manufactured by General Electric Company,  Royal Philips
Electronics,  Siemens  AG,  Picker  International  division  of Marconi  plc and
others;  ultrasound or high frequency ultrasound systems manufactured by Aligent
Technologies  Inc.,  Siemens AG, Toshiba America Medical Systems,  Royal Philips
Electronics and others; stereotactic needle biopsy devices manufactured by Royal
Philips  Electronics,  Johnson  and  Johnson  Company,  Siemens  AG and  others;
thermograph   devices   manufactured   by  Scanted  Medical  Inc.  and  Lifeline
BioTechnologies  Inc.;  devices for blood and/or genetic tests  manufactured  by
Bayer Corporation,  Hoffman-La Roche Ltd., Eli Lilly and Company and others; and
electrical  impedance and  transilluminational  devices manufactured by TranScan
Research & Development  Co. Ltd. Other emerging  cancer  diagnostic  devices and
technologies   which  might   compete  with  our  device   include   OmniCorder,
manufactured by BioScan Screening Systems, Inc., which looks at changes in blood
flow  surrounding  cancer,  using  thermographs  for viewing and recording  heat


                                       13
<PAGE>

patterns and R2 Technology,  Inc.'s ImageChecker(R),  a computer-aided detection
device for  mammography.  In addition,  other  companies  which produce  devices
utilizing these tools,  as well as other  companies which may be developing,  or
could in the future  attempt to develop,  additional  products  which  assist in
diagnosing  cancers,  including  non-invasive  products,  could compete with the
Biofield Diagnostic System.

         Substantially  all  of  these  companies  have  significantly   greater
resources and name recognition than we do, and  substantially  greater expertise
than us in research and development.  Since all of these companies have existing
products,  they each possess  substantially greater experience in manufacturing,
marketing and obtaining regulatory approvals.

         Our competitors may succeed in developing or marketing technologies and
products that are more effective than those  developed or marketed by us or that
would  render  our   technology   and  products   obsolete  or   noncompetitive.
Additionally,  we cannot assure you that we will be able to successfully compete
against these  competitors and potential  competitors.  Although we believe that
our  products  may offer  certain  advantages  over our  competitors'  products,
earlier  entrants in the market for a  diagnostic  application  often obtain and
maintain significant market share relative to later entrants, such as us.

         Physicians  using  currently  existing  imaging  equipment,   or  other
diagnostic  techniques,  may determine not to use the Biofield Diagnostic System
or any other  products that we may develop.  Currently,  mammography is employed
widely and sales,  if any, of our device  will,  in part,  be  dependent  on our
ability  to  demonstrate  its  additional  clinical  utility  as an  adjunct  to
mammography and/or physical examination, and its advantages over other available
diagnostic tests and products.

EMPLOYEES


         On March 30, 2006, as part of the  agreements  signed  between the Long
Group and MKG, the  management of the Company was  transferred to MKG. Mr. James
MacKay  was  appointed  as the  Chairman  of the Board and Mr.  Michael  Yom was
appointed as a director and the President of the Company. Previously, we had two
full-time  employees,  our  chief  executive  officer  and our  chief  operating
officer.  Both  employees  were  involved  in all  aspects of our  business  and
operations,  including data management,  supervision of research and development
activities,  management,  manufacturing  supervision,  product  development  and
financial and administrative  functions.  In addition,  when needed, we used the
services of our past employees and an independent marketing consultant,  and two
other  consultants  who  assisted  us  with  regulatory  work.  Due to a lack of
financial resources during 2003, we deferred  compensation due our employees for
six  months  (and  agreed  to  pay a  100%  percent  premium  on  such  deferred
compensation)  and we reduced  our  employee  compensation  for four months (and
issued  options  under our 1996 Stock  Option  Plan in an attempt to make up for
such shortfall). In 2004, we were able to pay the employees' 2003 salary arrears
but we still have to pay them the premium for back pay. As at December 31, 2005,
we owed $217,245 to the employees.

         Due to the specialized scientific nature of our business, we are highly
dependent  upon our ability to timely attract and retain  qualified  scientific,
technical  and  managerial  personnel.  The  loss of the  services  of  existing
personnel,  as well as our  failure to recruit  key  scientific,  technical  and
managerial  personnel in a timely manner would be  detrimental  to our business.
From time to time, we seek services of  consultants  who specialize in different
aspects of regulatory work.  Although we do not have the financial  resources or
any  plan to  hire  new  employees  in the  immediate  future,  competition  for
qualified personnel is intense and there is no assurance that we will be able to
timely  attract and retain  qualified  personnel  who may be  necessary  for the
development of our business.


         On March 30, 2006,  MKG took over the  management  of the Company.  Jim
MacKay, Chairman of the Board of MKG replaced the now-deceased David Long as the
Chairman  of our  Company and Michael  Yom was  appointed  as  President  of our
Company.  John Stephens and Raymond Long resigned as directors of our Company on
the same day.

RISK FACTORS

The FDA has  Rejected  Our Most Recent  Submission  for Approval of the Biofield
Diagnostic Device and Reclassified Our Device


                                       14
<PAGE>

         In March,  2004,  we submitted  our  application  for  clearance of our
device, pursuant to the FDA's 510(k) clearance procedure to KEMAfor review prior
to formal submission to the FDA. KEMA  subsequently  recommended to the FDA that
our  diagnostic  device  be  approved.  In  November,  2004,  we  submitted  our
application for formal submission to the FDA to approve our device.

         In  December,  2004,  the FDA notified us that it had  reclassified  by
statute  the  Biofield  Diagnostic  System into class III  (Premarket  Approval)
pursuant to Section  513(f) of the Federal  Food,  Drug and  Cosmetic  Act. As a
result  of  the  FDA's   reclassification,   we  must,   absent  any  subsequent
reclassification, obtain PMA approval prior to legally marketing or distributing
our  device.  The basis of the FDA's  decision  was its  determination  that the
device is not "substantially  equivalent to devices marketed in U.S.  interstate
commerce...." The FDA also informed us that although a manufacturer whose device
is found to be not  substantially  equivalent to a predicate  device can request
the FDA to make a  risk-based  classification  for its device,  the FDA believes
that "based on the review of your device,  general  controls would be inadequate
and special controls difficult to develop,  to provide  reasonable  assurance of
the device's safety and effectiveness."

         Had the FDA accepted our submission  for clearance,  we would have been
able to commence sales and marketing efforts  immediately.  However, on March 4,
2005  we  were  notified  by the  FDA  that it had  reviewed  our  petition  for
reclassification  and concluded  that we have not  demonstrated  that the device
meets the criteria under section 513(a)(1) of the Federal Food Drug and Cosmetic
act (21 U.S.C.  360c(a)(1) for classification  into class I or II. Therefore the
device is  automatically  classified in class III requiring  approval  through a
premarket  approval.  Consequently,  there can be no assurance that we will ever
obtain FDA clearance for the Biofield  Diagnostic Device. At a minimum,  we will
likely  experience  significant  additional  expense and time in order to obtain
clearance for our device from the FDA. In the event that we are unable to obtain
such approval, we will likely be compelled to cease operations.

We Need to Obtain Financing in Order to Continue Our Operations or We will Cease
Operations.

         At March 22, 2006, we virtually  have no cash.  Since December 2004, we
have survived on some funding we obtained  from  issuance of notes,  sale of our
shares  abroad and  advances  made by Dr. Long and his  affiliates.  Our line of
credit of $1.2 million,  which is secured by personal  guarantees  from Dr. Long
and his  affiliates,  expired on May 2, 2005 and was repaid by Dr.  Long and his
affiliates.  Furthermore,  we  were  unable  to  repay  the  $1  million  of 12%
promissory  notes which we issued in a private  placement  in December  2003 and
January and February 2004, when it became due on December 31, 2004. The $329,000
private placement notes and the $50,000 note to our placement agent, both due on
May 31, 2005, also remain unpaid.  All the notes will bear interest (until paid)
at 1.5% per month after the due dates. We have been seeking long-term  financing
through  investment  banking channels for over four years, but have not yet been
successful in obtaining adequate financing.  Unless such resources timely become
available, we will be compelled to cease operations.

We  Anticipate  Significant  Dilution of Our Current  Stockholders  in Obtaining
Necessary Funding

         Our $1 million and $329,000 private  placements and our $50,000 note to
our  placement  agent  required  us to issue (in  addition  to $1.4  million  of
short-term notes) an aggregate of approximately 6.9 million shares of our common
stock.  We also issued 2.5  million  shares to the holders of the notes under $1
million  private  placement  for not repaying the notes on December 31, 2004 and
897,500 shares when we defaulted in payment of $329,000 and $50,000 notes on May
31, 2005.  Additionally,  from October 2004 to April 2005, we sold approximately
4.5 million shares at an average price of $0.10 per shares to investors  outside
United States. Due to our weak financial position, lack of operating history and
inherent risk attached with start-up projects, the cost of obtaining new finance
will continue to be very high, and if arrangements  involve  issuance of shares,
the future dilutions could be significant.

We Have a Limited Operating History

         We have had a limited  history of  operations.  Since our  inception in
October  1987, we have engaged  principally  in the  development  of our device,
which has not been approved for sale in the United States. Consequently, we have
little experience in manufacturing, marketing and selling our products.



                                       15
<PAGE>


We Expect to Continue to Incur Significant  Operating Losses Which Endangers our
Viability as a Going-Concern

         We currently have no established  source of operating  revenue and have
incurred net operating losses since our inception.  At December 31, 2005, we had
an accumulated deficit of approximately $72 million.  These losses have resulted
principally  from costs incurred in research and development and clinical trials
and from general and  administrative  costs  associated with our operations.  We
expect  operating  losses to continue,  mainly due to the  anticipated  expenses
associated with the pre-market  approval process and proposed  commercialization
of  our  device,   research  and  development   and  marketing   activities  and
administration   costs.  Our  continuing  losses  have  caused  our  independent
accountants to qualify their audit report  regarding our use of "going  concern"
basis  of  accounting  in  preparation  of  our  2005   consolidated   financial
statements.

Our Business May Never Become Profitable

         Our ability to achieve  profitability will depend, in substantial part,
on our ability to obtain regulatory approvals for our device, and to develop the
capacity to  successfully  manufacture and market our device within a reasonable
time.  We cannot  assure you when,  or if, we will receive  required  regulatory
approvals  to  manufacture  and market our  device.  Accordingly,  the extent of
future  losses  and the time  required  to  achieve  profitability,  are  highly
uncertain.

Our Cash Flow  Problems  Have Caused Us to Be  Delinquent in Payments to Vendors
and Other Creditors

         Since  1998,  our lack of  financial  resources  has caused us to delay
payment of our  obligations  as they  became due in the  ordinary  course of our
business.  Such  delays  have  damaged  some  of  our  vendor  and  professional
relationships, and have caused us to incur additional expenses in the payment of
late charges and  penalties.  As of December 31, 2005, we had a working  capital
deficiency of $7.8 million and accounts payable,  primarily to service providers
and vendors, aggregating approximately $1.3 million,  substantially all of which
are past due. These amounts have increased  since December 31, 2005. At December
31, 2005, we also owed our employees approximately $217,245.

We Will Require Significant  Additional Capital to Continue Operations Which May
Not Be Available

         We expect that we will need significant  additional funding to complete
all the steps necessary to receive approval from the FDA, for operating expenses
and for our  marketing  program.  Moreover,  our  fixed  commitments,  including
salaries and fees for current  employees and consultants,  rent,  payments under
license agreements and other contractual  commitments,  including commitments to
previous  service  providers and others which are contingent upon improvement in
our cash position and have been extended until some indefinite  future time, are
substantial  and are likely to increase.  We do not expect to generate  positive
cash flow for at least several  years,  if at all, as revenues,  initially,  are
unlikely to cover funds required for operating expenses,  including the expected
cost of  commercializing  our  device.  We  cannot  assure  you that  additional
financing will be available  when needed or, if available,  will be available on
acceptable  terms.  Since  2001,  insufficient  funds  have  prevented  us  from
implementing our business strategy and have required us to delay,  scale back or
eliminate certain activities.

We May Never Be Able to Bring our  Device to Market or Sustain  Its Sales  After
Regulatory Approval

         Our device faces a high degree of uncertainty, including the following:

     o    we may  not be able  to  obtain  United  States  regulatory  approval.
          Obtaining  regulatory  approval may take  significantly  more time and
          cost significantly more money than anticipated.  Lack of United States
          regulatory approval has significantly affected our ability to sell our
          device outside of the United States.
     o    we may not be able to produce our device in  commercial  quantities at
          reasonable cost.
     o    we may  not be able  to  successfully  market  our  device  or find an
          appropriate  corporate  partner,  if  necessary,  to  assist us in the
          marketing of our device.
     o    our device may not gain satisfactory market acceptance.
     o    our device may be superceded by another product commercialized for the
          same use or may infringe patents issued to others, which would prevent
          us from marketing and selling our device.
     o    after approval, our device may be recalled or withdrawn at any time as
          a result of regulatory  issues,  including those concerning safety and



                                       16
<PAGE>

          efficacy.

         If we are unable to  successfully  market  our  device or  sustain  its
sales,  our business,  financial  condition  and results of  operations  will be
significantly and adversely affected.

We  Are  Currently  Dependent  on a  Single  Product  Which  Has  Not  Yet  Been
Commercialized

         Although we intend to develop  additional  applications for our device,
based on its core technology,  none of these  applications is expected to result
in a commercial  product for at least several  years,  if at all.  Consequently,
until  such  time,  if  at  all,  as  our  device  is  approved  for  commercial
distribution in the United States,  limited  distribution of our device overseas
will account for substantially all of our revenues, if any.

Our Contract Manufacturers May Be Unable to Produce Commercial Quantities of Our
Products

         Our current contract  manufacturer for our device has not yet completed
the  redesign of a new version of our device due to our delay in payment for its
redesign  services and has not yet manufactured our device. We cannot assure you
that it will complete its redesign services or be able to manufacture in volume,
when or if the need may arise. If this situation  occurs,  our business could be
significantly and adversely affected.

If Our Single Source Suppliers Are Unable to Deliver, Our Business Would Suffer

         For  certain  services  and  components,  we  currently  rely on single
suppliers. If we encounter delays or difficulties with our third-party suppliers
in producing,  packaging or distributing  our device and its components,  market
introduction and subsequent sales would be significantly  adversely affected. If
we are required to rely on alternative  sources of supply,  we cannot assure you
that  we  will  be  able  to  enter  into  alternative  supply  arrangements  at
commercially  acceptable  rates, if at all. If we are unable to obtain or retain
qualified suppliers and contract manufacturers on commercially acceptable terms,
we will not be able to commercialize our device as planned.  Our dependence upon
third parties for the  manufacture  and supply of our device and  components may
significantly  and adversely affect our ability to attain  profitability and our
ability to manufacture and deliver our device on a timely and competitive basis.

We May Not Be Able to Apply Our Technology to Other Uses and Products

         We cannot assure you that our technology  will be approved and accepted
for breast cancer screening or for the detection of other cancers.  Furthermore,
we also cannot  assure you,  even if we can develop any new products or uses for
our current  device,  that such products or uses would be approved by the FDA or
by any comparable foreign regulatory bodies, or would be commercially viable.


We May Not Be Able to Obtain Government  Regulatory  Approval to Market and Sell
Our Products

         Regulation by  governmental  authorities in the United States will be a
significant factor in the manufacture and marketing of our products,  as well as
our research and  development  activities.  All of our  proposed  products  will
require regulatory  approval by governmental  agencies before  commercialization
and our products  must undergo  rigorous  preclinical  and clinical  testing and
other pre-market approval procedures prescribed by the FDA. Various federal and,
in some cases,  state  statutes and  regulations  also govern or  influence  the
manufacturing,  safety,  labeling,  storage,  record  keeping and  marketing  of
medical  devices.  The  lengthy  process of  seeking  these  approvals,  and the
subsequent compliance with applicable statutes and regulations,  will require us
to  expend  substantial  resources.  If we  fail  to  obtain  or  are  otherwise
substantially  delayed in  obtaining  regulatory  approvals,  our  business  and
operations  could be  significantly  and adversely  affected.  The regulation of
medical  devices,  particularly  in Europe,  continues  to develop and we cannot
assure that,  as new laws and  regulations  are adopted,  these actions will not
have an adverse effect on us.

Our Device Will Be Subject to Continuing Review by the FDA Which Could Impact On
Our Ability to Sell It in the Future

         Changes  to our  device or the  manner in which it is used  after it is


                                       17
<PAGE>

approved  will  require  additional  approval by the FDA. Our failure to receive
approval of such a change on a timely basis, or at all, would have a significant
adverse effect on our business.

A Failure of Our Contract  Manufacturers  to Comply with FDA  Regulations  Would
Impact On Our Ability to Sell Our Device

         We cannot assure that our manufacturers  will be in compliance with the
FDA's quality system regulations and good manufacturing practices,  when the FDA
inspects them, or that they will continue to maintain this compliance. A failure
to maintain  compliance  could  significantly  delay  approval of our pre-market
application  to the FDA for our  device or prevent  us from  marketing  it if we
obtain  this  approval,  and  would  have a  significant  adverse  effect on our
business.

If Foreign Regulatory Approvals Are Withdrawn, Our Business Will Suffer

         We cannot assure you that the foreign regulatory approvals that we have
received,  which  allow us to sell the prior  version  of our  device in certain
foreign  countries,  will not be withdrawn or that our redesigned  device,  when
completed, will receive regulatory approval. Our failure to continue to maintain
these  approvals  or to obtain any  additional  foreign  approvals  could have a
significant adverse effect on our business.

Changes to Health Care  Reimbursement  Regulations and Practices Could Adversely
Affect Us

         Our ability to successfully  commercialize our products will depend, in
part,  on the extent to which  reimbursement  for the cost of our  products  and
related  treatment  will be  available  from  government  health  administration
authorities, private health insurers and other organizations.  These third-party
payers are increasingly  challenging the price of medical products and services.
Several proposals have been made that may lead to a government-directed national
health  care  system.  Adoption  of this  type of  system  could  further  limit
reimbursement  for  medical  products,  and we cannot  assure you that  adequate
third-party  coverage  will be  available  to enable us to  establish,  and then
maintain, price levels sufficient to generate reasonable profit. In addition, we
also cannot assure you that the U.S.  government or foreign governments will not
implement a system of price  controls.  Any change in the existing  system might
significantly affect our ability to market our products profitably.

Health Care Insurers May Not Reimburse For the Use of Our Products

         Governmental  health  authorities,  private  health  insurers and other
organizations  may  not  approve  the  cost  for  the  use of our  device  as an
authorized  medical  expenditure  under their  programs,  which  would  severely
restrict the marketability of our device.

Certain Foreign Governments May Not Give Reimbursement Code for Our Device

         Government health  authorities,  especially in the countries where most
of the reimbursements flow through government agencies,  may not provide us with
a reimbursement code, which is required for claiming the cost for the use of our
device from government  agencies.  If we are unable to obtain such reimbursement
codes in major markets, marketability of our device may be severely restricted.

We Expect to Encounter  Difficulty in Hiring Required  Personnel and the Loss of
any Key Personnel Could Adversely Affect our Operations

         As a small medical  technology  company,  we are heavily dependent upon
the  talents of key  personnel.  Due to lack of  funding,  we are unable to hire
permanent employees.  We use services of some of the ex-employees as consultants
when we have  the  cash  and if they  are  available  to  perform  the  required
services.  Competition  for  qualified  personnel  in  the  medical  device  and
biotechnology  industries is intense and we do not know if we will be successful
in our  recruitment  efforts.  If we are  unable to  attract,  and then  retain,
qualified personnel, our operations will be significantly adversely affected.

Our Limited  Marketing  and Sales  Experience  and  Capability  Could Impact Our
Ability to Successfully Sell Our Device



                                       18
<PAGE>


         We currently have not set up a full marketing or sales  organization to
market our device.  If we are unable to build,  and then  maintain,  a marketing
organization  and a sales force,  either directly or through third parties,  our
financial  condition and operating  results could be significantly and adversely
affected.

Our Results of  Operations  May Suffer if Foreign Trade is Restricted or Foreign
Regulations are Modified

         When funds become available,  we intend to commence commercial sales of
our device  outside of the United States before we commence this activity in the
United States,  where sales cannot occur unless and until we receive  pre-market
approval from the FDA.  Thus,  until we receive  approval from the FDA to market
our device in the United  States,  our  revenues,  if any,  will be derived from
international  sales. A significant portion of our revenues,  therefore,  may be
subject to the risks  associated with  international  sales,  including  foreign
regulatory  requirements,  economic or political  instability,  shipping delays,
fluctuations in foreign currency exchange rates and various trade  restrictions,
all of which could have a significant  impact on our ability to deliver products
on a  competitive  and  timely  basis  and our  ability  to  achieve  profitable
operations.  Future  impositions  of, or significant  increases in the level of,
customs  duties,  export  quotas  or  other  trade  restrictions  could  have  a
significant adverse effect on our business.

We Face Substantial  Competition in the Medical  Technology Field and May Not Be
Able to Successfully Compete

         The medical technology industry is highly competitive,  particularly in
the area of cancer screening and diagnostic products. We are likely to encounter
significant  competition  with  respect  to our  device,  as well  as any  other
products  that we may  develop.  A number of  companies  are engaged in the same
field as us, and many of these companies have  significantly  greater financial,
technical and marketing resources than us. In addition,  many of these companies
may have more  established  positions in the industry and may be better equipped
than  us to  develop,  refine  and  market  their  products.  Our  inability  to
successfully  compete in the industry would have a significant adverse effect on
our business.

Our Device May Be Rendered Obsolete By Rapid Technological Changes

         Methods for the detection of cancer are subject to rapid  technological
innovation and we cannot assure you that  technological  changes will not render
our device obsolete.  Likewise, we cannot assure you that the development of new
types of diagnostic  medical equipment or technology will not have a significant
adverse effect on the  marketability of our device.  Commercial  availability of
any new product could render our device obsolete, which would have a significant
adverse effect on our business.

Product  Liability  Claims  in  Excess  of the  Amount  of Our  Insurance  Could
Significantly Affect Our Financial Condition

         Our business exposes us to potential product liability risks, which are
inherent  in the  testing,  manufacturing  and  marketing  of  cancer  detection
products. Significant litigation, none of which has involved us, has occurred in
the past based on allegations of false negative  diagnoses of cancer.  While our
device does not purport to diagnose  any patient,  we cannot  assure you that we
will not be subjected to future claims and potential liability. We cannot assure
you  that  claims  against  us  arising  with  respect  to our  device  will  be
successfully  defended  or  that  any  insurance  which  we then  carry  will be
sufficient to cover  liabilities  arising from these claims.  A successful claim
against us in excess of any insurance  coverage,  which we may have,  would,  in
most instances,  deplete our assets and have a significant adverse effect on our
business.  Furthermore,  we cannot  assure  that we will be able to  obtain,  or
maintain, liability insurance on acceptable terms.

Our Contract Manufacturers Use Potentially Hazardous Materials,  the Replacement
of Which Could Affect Our Costs

         Although we do not manufacture any of our products,  we understand that
various cleaning solvents,  used in connection with the contract  manufacture of
our products,  may contain  potentially  hazardous  materials.  As a result, our
contract  manufacturers,  in the  future,  could  become  subject  to  stringent
federal,  state and local laws,  rules,  regulations and policies  governing the
use,  generation,   manufacture,  storage,  air  emission,  effluent  discharge,
handling and disposal of these materials.  We cannot assure you that we will not
incur significant  future price increases imposed by our contract  manufacturers
to comply with environmental laws, rules,  regulations and policies, or that our
business will not be significantly  and adversely  affected by current or future
environmental  laws,  rules,  regulations  and  policies  or by any  releases or
discharges of hazardous materials.



                                       19
<PAGE>


If We Are Unable to Protect Our Intellectual  Property Rights, We Could Lose Our
Competitive Advantage

         Our commercial  success will be dependent upon proprietary  rights that
we own or  license.  We cannot  assure you that any of our  patents  will not be
invalidated  or that our patents will provide us protection  that has commercial
significance. Litigation may be necessary to protect our patent positions, which
could be costly and time  consuming.  If any of our key  patents  that we own or
license is invalidated, our business may be significantly adversely affected. In
addition,  other companies may have trade secrets or may  independently  develop
know-how  or  obtain  access  to our  trade  secrets,  know-how  or  proprietary
technology, which could significantly and adversely affect our business.

We Do Not  Have  the  Financial  Resources  to  Enforce  and  Defend  All of Our
Intellectual Property Rights

         The actions,  which we may take to protect our  intellectual  property,
may not be adequate to deter  misappropriation of this property. We currently do
not have adequate financial  resources required to enforce,  through litigation,
our  intellectual  property  rights.  In addition,  litigation could result in a
substantial  diversion of managerial  time and resources,  which could adversely
affect our business.

Our Device May Infringe Third Party Intellectual Property Rights

         Other  companies  may  have  obtained  other   proprietary   rights  to
technology  that may be  potentially  useful to us. It is possible  that a third
party could successfully claim that our device or its components infringe on its
intellectual  property  rights.  If this were to  occur,  we may be  subject  to
substantial  damages, and we may not be able to obtain appropriate licenses at a
cost that we could afford and we may not have the ability to timely redesign our
device. If we are required to pay material damages or are unable to obtain these
rights or are unable to successfully  redesign our device at a reasonable  cost,
our business could be significantly and adversely affected.

Our Stock Price Has Been Volatile

         The price of our common stock has  fluctuated  substantially  since our
initial  public  offering in 1996.  The market price for our common stock,  like
that of the common stock of many other medical  device  companies,  is likely to
continue to be highly volatile.

Our Principal  Stockholder  Can Control Most Matters  Requiring  Approval by Our
Stockholders

         On March 30, 2006,  the Long Group entered into three  agreements  with
MKG.  The  agreements  provide,  among  other  things,  that  MKG  will  hold  a
controlling interest in the Company. As a result, MKG has significant  influence
on the nomination and election of our directors, our policies and the outcome of
all  important  matters that are subject to the vote of our  stockholders.  This
concentration of ownership, among other things, also may increase our difficulty
in raising necessary financing.

We Lack Independent Directors

         We cannot assure you that our Board of Directors will have  independent
directors.  Our previous  independent  directors  resigned in December 2002 due,
among other  things,  to our  potential  inability  to maintain  directors'  and
officers'  liability  insurance  and to our  financial  inability to continue to
assure that we will operate as a going concern.  In the absence of a majority of
independent  directors,  our  current  three-member  Board  of  Directors  could
establish policies and enter into transactions  without independent review. This
could  present  the  potential  for a conflict  of  interest  between us and our
stockholders,  and increases our difficulty in raising necessary  financing.  In
addition,  we cannot  establish  an audit  committee or  compensation  committee
without independent  directors,  which could prohibit us from listing our shares
of common stock for trading on a recognized  national  securities exchange or on
any electronic exchange regulated by NASDAQ.




                                       20
<PAGE>


Our former Chairman passed away

         Dr. Long, our former Chairman,  had agreed to continue as a director of
the Company after the change of control on March 30, 2006.  Unfortunately he did
not serve long in his new position as he died on April 8, 2006.


We May Issue Preferred Stock

         Our Board of  Directors  has the  authority  to issue up to  12,300,000
shares of  preferred  stock and to  determine  the price,  rights,  preferences,
conversion and other privileges and  restrictions,  including voting rights,  of
those shares without any vote or action by our common  stockholders.  The rights
of the holders of the common  stock will be subject to, and could be  materially
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the  future.  The  issuance of  preferred  stock,  while  providing
flexibility  in connection  with  corporate  purposes,  could have the effect of
delaying,  deferring  or  preventing  a change in control,  discouraging  tender
offers for the common  stock,  and  materially  adversely  affecting  the voting
rights and market price of the common stock.

Our Stockholders  Could Be Adversely  Affected by the  Anti-Takeover  Effects of
Delaware Law

         We are  subject  to  the  provisions  of  Section  203  of the  General
Corporation  Law of the State of Delaware.  In general,  Section 203 prohibits a
publicly held  Delaware  corporation  from engaging in a "business  combination"
with an "interested  stockholder"  for a period of three years after the date of
the  transaction in which the person becomes an interested  stockholder,  unless
the  business  combination  is  approved  in a  prescribed  manner or unless the
interested  stockholder  acquires at least 85% of the corporation's voting stock
(excluding shares held by certain designated stockholders) in the transaction in
which it becomes an interested  stockholder.  A "business  combination" includes
mergers,  asset sales and other transactions resulting in a financial benefit to
the  interested  stockholder.  Subject to  certain  exceptions,  an  "interested
stockholder" is a person who, together with affiliates and associates,  owns, or
within the previous three years did own, 15% or more of the corporation's voting
stock.  This provision of the Delaware law could delay and make more difficult a
business  combination,  even if the business  combination would be beneficial to
the  interests  of our  stockholders,  and also  could  limit the price  certain
investors might be willing to pay for shares of our common stock.

We Do Not Expect That We Will Pay Dividends

         We have never  declared or paid any cash dividends on our capital stock
and do not intend to pay any cash dividends in the foreseeable future.

Our  Obligation to Maintain the  Registration  of Shares of our Common Stock for
Two Years Will be Costly and May Lower the Market Price of Our Common Stock.

         We are  required  to maintain  the  effectiveness  of the  registration
statement of the shares issued in our $1 million and $329,000 private placements
for two  years  from the date of  effectiveness.  The cost of  maintaining  such
effectiveness will affect the availability of funds for our business operations.
Furthermore,  sales of these  registered  shares of common  stock in the  public
market,  or the perception that these sales could occur,  could adversely affect
the  trading  price of our common  stock and could  impair our  ability to raise
funding through an offering of our equity securities.



IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS,  WE COULD BE REMOVED
FROM THE OTC BULLETIN  BOARD,  WE COULD BE  INVESTIGATED  BY THE SEC OR WE COULD
INCUR LIABILITY TO OUR SHAREHOLDERS.

      Companies trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports  under  Section 13, in order to maintain  price
quotation  privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements,  we could be removed from the OTC Bulletin Board. As
a result,  the market liquidity for our securities  could be severely  adversely
affected by limiting the ability of  broker-dealers  to sell our  securities and
the ability of  stockholders to sell their  securities in the secondary  market.
Failure to remain current in our reporting  obligations might also subject us to
SEC investigation or private rights of action by our shareholders.


OUR  COMMON  STOCK IS SUBJECT  TO THE  "PENNY  STOCK"  RULES OFF THE SEC AND THE
TRADING MARKET IN OUR  SECURITIES IS LIMITED,  WHICH MAKES  TRANSACTIONS  IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

      The  Securities  and  Exchange  Commission  has  adopted  Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes  relevant to us,
as any equity  security  that has a market price of less than $5.00 per share or
with an  exercise  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  For any  transaction  involving a penny stock,  unless exempt,  the
rules require:

     o    that a broker or dealer approve a person's account for transactions in
          penny stocks; and
     o    the broker or dealer receive from the investor a written  agreement to
          the transaction,  setting forth the identity and quantity of the penny
          stock to be purchased.
     In order to approve a person's  account for  transactions  in penny stocks,
the  broker  or dealer  must:
     o    obtain financial  information and investment  experience objectives of
          the person; and
     o    make a reasonable  determination that the transactions in penny stocks
          are suitable for that person and the person has  sufficient  knowledge
          and  experience in financial  matters to be capable of evaluating  the
          risks of transactions in penny stocks.
      The broker or dealer  must also  deliver,  prior to any  transaction  in a
penny stock, a disclosure  schedule prescribed by the Commission relating to the
penny stock market, which, in highlight form:
     o    sets  forth  the  basis  on  which  the  broker  or  dealer  made  the
          suitability determination; and
     o    that the broker or dealer  received a signed,  written  agreement from
          the investor prior to the transaction.

      Generally,  brokers  may  be  less  willing  to  execute  transactions  in
securities  subject to the "penny stock" rules.  This may make it more difficult
for  investors  to dispose of our common stock and cause a decline in the market
value of our stock.

      Disclosure  also has to be made  about  the  risks of  investing  in penny
stocks  in  both  public  offerings  and in  secondary  trading  and  about  the
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.

Special Note Regarding Forward-looking Statements

     We have made  statements  in this  Annual  Report on Form  10-KSB  that are
"forward-looking  statements"  within the meaning of the  Securities Act of 1933
and the Securities  Exchange Act of 1934.  Sometimes  these  statements  contain
words like 'may,' 'believe,'  'expect,'  'continue,'  'intend,'  'anticipate' or
other similar  words.  These  statements  could involve known and unknown risks,
uncertainties  and other  factors  that  might  significantly  alter the  actual
results  suggested by the statements.  In other words, our performance  might be
quite different from what the  forward-looking  statements  imply. The following
factors, as well as those discussed above in Item 1 - "Description of Business",
could cause our performance to differ from the implied results:

     o    inability  to  obtain   capital  for  continued   operations  and  the
          development and commercialization of our products.



                                       21
<PAGE>


     o    inability to obtain FDA approval for our products in a timely  manner,
          if at all.
     o    failure to obtain expected results in any future clinical trials.
     o    technological obsolescence of our products.
     o    changes in governmental regulations in our principal markets.
     o    inability to generate significant market acceptance of our products.
     o    failure to obtain customers for our products.
     o    inability to manage our growth.
     o    loss of our key employees.
     o    changes in general economic and business conditions.
     o    inability to obtain third party reimbursement for use of our products.

     We have no  obligation  to release  publicly the result of any revisions to
any of our "forward-looking  statements" to reflect events or circumstances that
occur  after  the date of this  Report or to  reflect  the  occurrence  of other
unanticipated events.

ITEM 2.  DESCRIPTION OF PROPERTY.

          As of December 31, 2005, all of our operations were conducted from our
offices located at Units M and K, 1025 Nine North Drive, Alpharetta, Georgia. We
leased our office  space  comprised  of  approximately  4,000  square  feet on a
month-to-month basis for an aggregate monthly payment of $1,100.

         Prior to MKG's acquisition of controlling  interest in our company,  we
had intended to move our  operations  to Spring  Valley,  California if and when
cash resources become available. We hade subleased from Abel Laboratories, Inc.,
an affiliate of Dr. David Long, our former Chairman and Chief Executive  Officer
and  principal  stockholder,  approximately  5,000 square feet of furnished  and
laboratory  equipped space at 2737 Via Orange Way,  Spring  Valley,  California.
Under  the  sublease  arrangement,  we were to pay Abel the same  amount of rent
charged to Abel by the landlord of the premises,  without any  adjustment.  Abel
signed a new two-year  lease with effect from April 1, 2005,  and Abel's monthly
rent for the first year is $5,056.  The rent  increased  to $5,268 in the second
year.  In 2005,  we incurred  rent expense of $60,062  under the Abel  sublease,
including  late charges  imposed by the landlord.  We believe that the terms and
conditions of this sublease are no less favorable to us than those that would be
available from an unaffiliated  third party.  Although we had moved a portion of
our records relating to research and development activities to California, prior
to MKG's acquisition of controlling  interest in our company, our administrative
and  Regulatory  and Quality  Assurance  functions were still carried out in our
Alpharetta, Georgia office.

         In  connection  with its  acquisition  of  controlling  interest in our
company,   MKG  agreed  to  move  the  Company's   operations  to  Philadelphia,
Pennsylvania.  Our current office is located at 1615 Walnut  Street,  3rd Floor,
Philadelphia, PA 19103.

ITEM 3.  LEGAL PROCEEDINGS.

         We are not a party to any pending legal proceeding which is not routine
litigation  incidental  to our  business  or which  involves a claim for damages
exceeding  10%  of our  current  assets,  nor  are we  aware  of any  proceeding
concerning us that a governmental authority may be contemplating.

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

         No matter was submitted to a vote of our securities  holders during the
fiscal quarter ended December 31, 2005.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION




                                       22
<PAGE>


         Our common stock, par value $.001 per share,  traded, until February 9,
1999, on The Nasdaq National  Market,  at which time it was delisted as a result
of our continued failure to comply with certain listing requirements. Since that
date,  and until July 21, 2000,  our common stock was quoted on the OTC Bulletin
Board.  Commencing  July 24, 2000, our common stock has been listed in the "Pink
Sheets" published by Financial Insight Systems, Inc.

         The following table sets forth the high and low per share daily closing
sales prices for our common stock as reported by NASDAQ's  InfoQuote service for
the periods indicated.

YEAR ENDED DECEMBER 31, 2004                                 High         Low

First Quarter                                               $0.67        $0.24
Second Quarter                                               0.50         0.16
Third Quarter                                                0.28         0.20
Fourth Quarter                                               0.22         0.08

YEAR ENDED DECEMBER 31, 2005
First Quarter                                                0.185        0.06
Second Quarter                                               0.063        0.02
Third Quarter                                                0.12         0.028
Fourth Quarter                                               0.06         0.03

YEAR ENDING DECEMBER 31, 2006

First Quarter (through March 31, 2006)                       0.55         0.022

     On March 31,  2006,  the closing sale price for our common stock was $0.033
per share, as reported by NASDAQ's InfoQuote service.

HOLDERS

     As of April 13, 2006, there were 307 holders of record of our common stock,
including Cede & Co., who held  14,141,397  shares for an undisclosed  number of
beneficial holders.

DIVIDENDS

         We have not declared or paid any dividends since our inception,  and do
not intend to pay any cash dividends in the foreseeable future, although we have
not entered into any agreement which restricts our ability to pay dividends.  We
currently  anticipate  that we will retain all earnings,  if any, for use in the
operation and expansion of our business.

RECENT SALE OF UNREGISTERED SECURITIES

         Set forth below is certain information  concerning all sales made by us
of our  securities  since  January 1, 2005 which were not  registered  under the
Securities Act of 1933 and were not previously  disclosed by us in our Quarterly
Reports on Form 10-QSB.

         In October,  2004,  we engaged an investment  broker and  consultant to
obtain  financing  its  operations  while  waiting for FDA  approval by offering
shares of Common  Stock  offshore to non-U.S.  citizens in  accordance  with the
provisions  of  Regulation  S at a cost of 50% of the  amount  of gross  capital
raised as fees.  Under  the  agreement,  the  broker  bears  all the  associated
marketing  and operating  costs,  and is required to offer the shares at a price
per share of not less than $0.10. Under this arrangement,  we received aggregate
gross proceeds of $295,250  against  aggregate  issuance of 3,240,333  shares of
Common Stock,  at an aggregate  discount of $90,167 over the market price on the
date of the sale during the period from January 1, 2005 to April 4, 2005.




                                       23
<PAGE>

REPURCHASES OF SECURITIES

         We did not  engage in any  repurchases  of our  securities  during  the
fiscal quarter ended December 31, 2005.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

         The following  discussion  and analysis  should be read in  conjunction
with our  Financial  Statements  and Notes thereto  appearing  elsewhere in this
document.

OVERVIEW

         As a  development  stage  company,  we have  incurred  net losses since
inception  through December 31, 2005 of approximately  $72 million.  Our current
liabilities  exceeded our current assets by approximately $7.8 million,  and our
total liabilities  exceeded our total assets also by approximately $7.8 million.
These  factors  raise  substantial  doubt  about our  ability  to  continue  our
operations without obtaining immediate funding.

         From  January 1, 2005 to April 30,  2005,  we have  received  aggregate
gross  proceeds of $295,250  against  aggregate  issuance of  approximately  3.2
million  shares of Common  Stock at an average  price of $0.09 per share and 50%
agent's fees of $147,625.

         On August 1, 2005, we signed a partnership  agreement  with  Bridgetech
Holdings  International,  Inc., a company focused on maximizing the potential of
emerging  healthcare  products and services in the U.S. and Asian  markets.  The
agreement  requires  Bridgetech to begin clinical  testing to obtain  regulatory
approvals to market and distribute our device in the People's  Republic of China
(the  "PRC"),  the Hong  Kong  Special  Administrative  Region  of the PRC,  the
Republic of China ("Taiwan"),  Vietnam and Singapore.  The agreement,  which was
subject to minimum purchase and other  requirements which have not been met, has
since been terminated.

         On March 30, 2006,  the Long Group entered into three  agreements  with
MKG. The agreements provide, among other things, that:


          o    MKG will  acquire  all the shares of Common  Stock of the Company
               presently  issued to the Long Group  (comprising  an aggregate of
               8,747,528 shares).

          o    Certain  members of the Long Group will  assign $2 million of the
               total debt owed them by the Company.

          o    For a three  year  term,  MKG will give the Long  Group a royalty
               equal to 1% of net sales of the Company's  products MKG generates
               worldwide;

          o    Pursuant to the terms of the  Consulting  Agreement,  Dr. Long or
               his nominee will remain as a consultant to the Company for a term
               of three years and receive an annual payment of $60,000 upon each
               anniversary of the Consulting Agreement; and

          o    MKG shall  exercise  voting  rights of any and all  shares of the
               Company's stock in favor of Dr. Long or his nominee  remaining on
               the Company's  Board and all stock options and other  benefits to
               which other Board members are entitled.

         Specifically, at the March 31, 2006 closing, the Long Group transferred
all of its  shares  of common  stock  presently  issued  to them in the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  20.6% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long  intended to remain on the Board so long as his health  permits but he died
on April 8, 2006 and his  assignee has not been  nominated;  the other two Board
members (Dr.  Raymond Long and John  Stephens) have  resigned,  their  vacancies
being  filled  by  James  MacKay  (the  Chairman  of the  Board  of MKG) and his
designee,  Michael Yom,  thereby  giving MKG control of the  Company's  Board of
Directors.  Further,  as of March 31,  2006,  certain  members of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the "Assigned Debt").



                                       24
<PAGE>

         Pursuant to the agreements,  MKG has undertaken to make reasonable best
efforts to cause the Company to convert all of the Assigned  Debt into shares of
Common Stock of the Company at $0.05 per share (the "Converted Shares").  In the
event of the  conversion of all of the Assigned Debt into shares of Common Stock
of the Company,  MKG will retain 51% of the Converted  Shares plus an additional
portion of the Converted  Shares so that,  together with the shares MKG acquired
on March 30, 2006 from the Long Group, MKG would then hold 51% of all the shares
of Common Stock issued and outstanding (on a fully-diluted basis) of the Company
existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the Assigned Debt to the Long Group. In addition, pursuant to the agreements, to
the  extent  that any  other  debt  owed to the Long  Group  by the  Company  is
converted into shares of Common Stock,  the Long Group agreed to transfer 51% of
such shares to MKG. In return for the foregoing restructuring, MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring Company's products to Asia and other markets as quickly as feasible.


         MKG is making these  purchases and is being  assigned the debt (as well
as possibly  converting the latter into Company's  Common Stock)  potentially to
gain  control of the  Company.  MKG is not a member of a group  relating  to the
Company.

         The  restructuring  of the  Company  as  described  above and  possible
injection of badly needed capital by MKG may allow us the opportunity to address
our  over  due  liabilities  and  provide  essential  capital  for  creating  an
infrastructure  to  internationally  market the Company's device. If the planned
restructure is successful and required capital is injected,  then the threats to
the survival of the Company may be significantly reduced.

LIQUIDITY AND CAPITAL RESOURCES

         We have financed our operations  since inception almost entirely by the
issuance of our securities, interest income on the then unutilized proceeds from
these issuances and with loans made directly,  or guaranteed and collateralized,
by Dr. David Long and certain of his affiliates.

         At  December  31,  2005,  we  had  a  working  capital   deficiency  of
$7,812,403  an increase of $1,398,635 from December 31, 2004. Our cash and cash
equivalents were $2,794 at December 31, 2005, as compared to $33,142 at December
31, 2004.

         At December  31, 2005 and  December  31,  2004,  we had no value on the
balance sheet for the inventory as we decided to make full provision for all the
items in our inventory.

         During 2005, our operating activities utilized $861,959 of net cash and
our financing  activities provided $831,611 of net cash,  representing  advances
aggregating  $1,736,361 from Dr. David Long and certain of his  affiliates,  and
$295,250 from sale of shares of our common stock, and repayment of the liability
of $1.2 million  liability  under the line of credit from the advances  received
from Dr. Long and his affiliates. During 2004, our operating activities utilized
$1,304,073 of net cash, our investing  activities  used $5,284 and our financing
activities  provided $973,167 of net cash, $654,563 (net of $86,937 of expenses)
of which  represented net cash proceeds from the $1 million and $329,000 private
placements, advances aggregating $253,698 from Dr. David Long and certain of his
affiliates, and $64,906 (net of commission and discount of $96,919) representing
the net cash proceeds received from sale of shares of our common stock.

         In June  2000,  we  obtained  a  $500,000  line of credit  from a bank,
repayment of which has been guaranteed and collateralized by an affiliate of Dr.
David Long.  The line of credit was increased in November  2001 to $750,000,  in
January 2002 to $1 million,  and in December 2003 to $1.2  million.  The line of
credit has been fully drawn-down and was repaid by advances made by Dr. Long and
his affiliates in May 2005.


         Since 2001, we have been seeking additional third-party funding. During
such time,  we have retained a number of different  investment  banking firms to
assist  us in  locating  available  funding;  however,  we  have  not  yet  been
successful in obtaining any of the  long-term  funding  needed to make us into a



                                       25
<PAGE>

commercially  viable entity.  During such period,  Dr. David Long and certain of
his affiliates have made funding available to us to permit us to sustain certain
minimum  operations;  however,  in 2003 Dr.  Long  advised us that we should not
expect that he or his  affiliates  will make any further funds  available to us.
During the period from  December  2003 to February  2004, we were able to obtain
short-term  financing of $1 million from a private  placement (which resulted in
net  proceeds to us of  $811,778,  prior to any  allocation  for the cost of our
required registration of the shares of common stock issued in the placement). On
May 3, 2004, we signed an agreement  with our  placement  agent to secure bridge
financing up to  $800,000,  and we secured  $329,000  under this  placement.  On
September  8,  2004,  we  signed a note in favor of our  private  placement  for
$50,000 under the same terms and conditions as the $329,000  private  placement.
Most of the  proceeds  from this note are set aside to pay for  interest  due on
notes issued under the $1 million and $329,000 private placements.

         As  detailed  above  in  the  Overview  Section,   the  change  in  the
controlling  interest in the  Company and  possible  injection  of badly  needed
capital by MKG may allow us the  opportunity to address our over due liabilities
and provide essential capital for creating an infrastructure to  internationally
market the  Company's  device.  If the planned  restructure  is  successful  and
required  capital is  injected,  then the threats to the survival of the Company
may be significantly reduced.

RESULTS OF OPERATIONS

Comparison of the Year Ended  December 31, 2005 with the Year Ended December 31,
2004

         In 2005, as we did not sell any products,  we did not incur any cost of
sales;  in 2004,  we sold one device and sensors to a  distributor  overseas for
$10,550.

         In 2005,  we did not have any cost of sales as full  provision was made
for the items sold. In 2004, we wrote down in full our then remaining  inventory
by making an additional provision of $81,480.

         We did incur any research and development expenses in 2005 or 2004.

         Selling,  general and administrative expenses decreased by $325,683, or
26%, to $943,634  in 2005 from  $1,269,317  in 2004.  The  decrease  was largely
attributable to costs related to personnel  (employees and  consultants),  which
were lower by approximately $169,000, professional fees pertaining to regulatory
audits and patent legal fees were reduced by $93,000.

         We had net interest  expense of $576,887 in 2005,  compared to $365,373
in 2004,  an increase of $211,514,  or 58%, due to increase in advances from Dr.
Long and his affiliates in 2005.

         Amortization of finance costs were reduced by $1,545,373 in 2005 mainly
because the  amortization  for the $ 1 million  placement was fully amortized in
2004 (maturity date December 31, 2004); and, in 2005, only the remaining cost of
the $329,000  placement  and the $50,000 note with maturity date of May 31, 2005
was  amortized,  as  detailed  in the table  below along with the cost of shares
issued under  Regulation S and the  expensing of the fair value of shares issued
for the default of  repayment of the notes due under the $1 million and $329,000
placements during the two years:



<TABLE>



                                                                         2005          2004          VARIANCE
                                                                         ----          ----          --------
<S>                                                                             <C>    <C>           <C>


Amortization of value of shares issued as incentive for notes            $311,073     $1,502,907      $ 1,191,834
Amortization of Finance Expenses relating to private placements            19,002        191,070          172,068
Commission and discount on sale of shares under S Registration            247,498         96,919         (150,579)
Fair value shares due as penalty for payment default on notes              17,950        350,000          332,050
                                                                     ---------------------------------------------
Total cost relating to issuance of financial instruments                 $595,523     $2,140,896       $1,545,373
                                                                     =============================================
</TABLE>


         In 2005,  we received a settlement of $15,000 for a breach of a royalty


                                       26
<PAGE>

agreement and $70,000 from a new distributor to train and prepare  clinical data
for  regulator  bodies in certain  southeast  Asian  countries;  we had no other
income in 2004.

         As a result of the  foregoing,  we incurred a net loss of $2,225,312 in
2005, compared to a net loss of $3,846,517 in 2004, a decrease of $1,621,205, or
42%.

Comparison of the Year Ended  December 31, 2004 with the Year Ended December 31,
2003

         We did one device and sensors to a distributor overseas for $10,550; we
did not  sell any of our  products  in  2003.  In  2003,  as we did not sell any
products, we did not incur any cost of sales.

         In 2004,  we did not have any cost of sales as full  provision was made
for the items  sold.  Also,  in 2004,  we wrote down in full our then  remaining
inventory by making an additional  provision of $81,480;  no similar  write-down
occurred in 2003.

         Research and  development  expenses  include the costs of  engineering,
manufacturing  and related  activities  conducted in connection  with  obtaining
required governmental and regulatory approvals for our device,  expenses related
to the adoption of new  technology  and costs  incurred in  connection  with the
redesign of our device.  We did not incur any research and development  expenses
in 2004; in 2003, we spent  $41,425 for research and  development.  Our redesign
project was completed and no new research was started due to lack of funds.

         Selling,  general and administrative expenses decreased by $452,751, or
26%, to $1,269,317 in 2004 from  $1,722,068 in 2003. The major savings were made
in the costs related to personnel  (employees and consultants)  which were lower
by  approximately  $146,000,  professional  fees were reduced by  $169,000,  and
payments to investment advisors was down by $112,000 in 2004 compared to 2003.

           We had net interest expense of $365,373 in 2004, compared to $455,822
in 2003, a decrease of $90,449,  or 20%,  due to accrual of interest  ($192,243)
payable to employees  on deferred  remuneration  due in 2003,  partly off set by
additional interest on increased borrowings in 2004.

The increased amortization of shares issued and other finance costs were largely
attributable to the following cost related to issuance of financial  instruments
to secure new funding:

<TABLE>

                                                                           2004       2003           Variance
                                                                           ----       ----           --------
<S>                                                                             <C>                  <C>

Amortization of value of shares issued as incentive for notes           $1,502,907   $23,470      $ (1,479,437)
Amortization of Finance Expenses relating to private placements            191,070         -          (191,070)
Commission and discount on sale of shares under S Registration              96,919         -           (96,919)
Fair value of shares due as penalty for payment default on notes           350,000         -          (350,000)
                                                                     ------------------------------------------
Total cost relating to issuance of financial instruments                $2,140,896   $23,470       ($2,117,426)
                                                                     ==========================================

</TABLE>




         We did not earn any  royalty  income in 2004 as the  royalty  agreement
expired in 2004; in 2003, royalty income was $54,617.

         As a result of the  foregoing,  we incurred a net loss of $3,846,517 in
2004,  compared to a net loss of $2,164,698 in 2003, an increase of  $1,681,819,
or 78%.

While we have raised capital to meet our working  capital and financing needs in
the past,  additional  financing  is  required  in order to meet our current and
projected  cash flow deficits from  operations and  development.  We are seeking
financing  in the form of  equity  in order to  provide  the  necessary  working
capital.  We currently have no commitments for financing.  There is no guarantee
that we will be successful in raising the funds required.

By adjusting its operations and  development  to the level of  capitalization  ,
management  believes it has suffucient  capital resources to meet projected cash
flow deficits  through the next twelve months . However,  if thereafter,  we are
not successful in generating  sufficient liquidity from operations or in raising
sufficient  capital  resources,  on terms  acceptable  to us,  this could have a
material  adverse effect on our business,  results of operations,  liquidity and
financial condition.

The independent  auditors  report on our December 31, 2005 financial  statements
states that our recurring losses raise  substantial  doubts about our ability to
continue as a going concern.

PRODUCT RESEARCH AND DEVELOPMENT

We do not anticipate  incurring  material research and development  expenditures
during the next 12 months.

ACQUISITION OR DISPOSITION OF PLANT AND EQUIPMENT

We do not anticipate the sale of any  significant  property,  plant or equipment
during the 12 months.  We do not anticipate the  acquisition of any  significant
property, plant or equipment during the next 12 months.


NUMBER OF EMPLOYEES

From our inception through the period ended December 31, 2005, we have relied on
the services of outside consultants for services and currently have two (2) full
time  employees.  In order for us to attract and retain  quality  personnel,  we
anticipate we will have to offer competitive salaries to future employees. We do
not anticipate our employment base will significantly  change during the next 12
months.  As we continue to expand,  we will incur additional cost for personnel.
This projected  increase in personnel is dependent upon our generating  revenues
and  obtaining  sources  of  financing.  There is no  guarantee  that we will be
successful in raising the funds  required or generating  revenues  sufficient to
fund the projected increase in the number of employees.


OFF-BALANCE SHEET ARRANGEMENTS

The  Company  does  not  maintain  off-balance  sheet  arrangements  nor does it
participate in non-exchange  traded  contracts  requiring fair value  accounting
treatment.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Impairment of long-lived assets

         At December 31, 2005, we had impaired in full the  unamortized value of

                                       27
<PAGE>

patents and  disclosed  separately  in the Income  Statement  as  impairment  of
intangible  assets.  In December 2005, during the Company's annual review of the
carrying values of patents and trademarks,  the management  determined that, due
to increased  uncertainty  about  obtaining FDA's approval to sell the Company's
device in the  United  States,  the  recoverability  of the  carrying  values of
Patents and Trade Marks is in doubt.  The  management is unable to determine and
project future undiscounted cash flows for these assets with reasonable accuracy
due to these  uncertainties.  Consequently,  the  Company  recorded  a charge of
$194,268 to provide in full for these  assets,  and this amount is recorded as a
component of operating expenses in the Income Statement as a separate line item.


Valuation of deferred tax assets

         In  assessing  the  realizability  of  deferred  tax  assets,  we  have
considered  whether it is more  likely  than not that some  portion,  or all, of
deferred tax assets will be realized.  The ultimate  realization of deferred tax
assets is dependent  upon the  generation  of future  taxable  income during the
periods in which those temporary differences become deductible.  At December 31,
2005 and 2004,  we made full  provision  for our  deferred tax assets due to our
continued  operating losses and inability to assess the likelihood of generating
sufficient future taxable income to realize such benefits.  Substantially all of
our net operating  loss  carryforwards  are subject to limitation and may expire
unutilized.

INVENTORY VALUATION RESERVES

         We provide for inventory obsolescence based upon assumptions concerning
future demand,  market conditions and anticipated  timing of the release of next
generation  products.  If actual  market  conditions  or future  demand are less
favorable than those projected by management, or if next generation products are
released  earlier than  anticipated,  additional  inventory  write-downs  may be
required.  Due to our decision to introduce a new device with updated technology
and major design modifications in 2003 (which is now projected to occur in 2005,
subject to receipt of adequate  financing to enable us to complete the project),
we created a reserve for our  inventory of old devices  amounting to $179,916 in
2001 and increased this reserve by $352,154 in 2002 to fully provide for the old
units and all the sensors for these units.  In 2004, we increased the reserve by
$81,480 to fully provide for all the inventory items. Additionally, we wrote off
obsolete and scrapped inventory totaling $41,364 in 2002.

Stock-Based Compensation

         We apply the intrinsic  value-based method of accounting  prescribed by
Accounting  Principles  Board  Opinion  25,  "Accounting  for  Stock  Issued  to
Employees",  and related  interpretations,  in  accounting  for our stock option
plans.  As such,  compensation  expense is  recorded  on the date of grant of an
employee  stock option only if the then current  market price of the  underlying
stock exceeds the exercise price.  Statement of Financial  Accounting  Standards
(SFAS)  No.  123,   "Accounting  for  Stock-Based   Compensation",   established
accounting  and  disclosure  requirements  using a fair  value-based  method  of
accounting  for  stock-based  employee  compensation  plans.  As allowed by SFAS
No.123, we have elected to continue to apply the intrinsic value-based method of
accounting described above, and have adopted the disclosure requirements of SFAS
No. 123. We also have adopted the annual disclosure  provisions of SFAS No. 148,
"Accounting  for  Stock-Based  Compensation  -  Transition  and  Disclosure - an
Amendment of SFAS 123" in our financial  reports for the year ended December 31,
2003 and for the subsequent periods.

AUDIT COMMITTEE AND FINANCIAL EXPERT

         Our  Board  of  Directors  has not had an  Audit  Committee  since  the
resignation of our two  independent  directors in December 2002, and we have not
had the available  financial  resources to obtain any  replacement.  None of our
current directors would be considered to have the experience to be considered to
be an audit committee financial expert.

NON-GAAP FINANCIAL MEASURES

         The financial statements appearing in this annual report on Form 10-KSB
do not contain any financial measures which are not in accordance with generally
accepted accounting procedures.




                                       28
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

         In December  2004,  the FASB issued SFAS No. 123  (revised)  ("SFAS No.
123R"),  "Share-Based  Payment." SFAS No. 123R  eliminates  the intrinsic  value
method  under  APB  25,  "Accounting  for  Stock  Issued  to  Employees"  as  an
alternative  method of accounting  for  stock-based  awards.  SFAS No. 123R also
revises  the fair  value-based  method of  accounting  for  share-based  payment
liabilities,  forfeitures and modifications of stock-based  awards and clarifies
SFAS No.  123's  guidance  in several  areas,  including  measuring  fair value,
classifying  an award as equity or as a liability and  attributing  compensation
cost to  reporting  periods.  In  addition,  SFAS No.  123R  amends SFAS No. 95,
"Statement  of Cash Flows," to require that excess tax benefits be reported as a
financing  cash  inflow  rather  than as a  reduction  of taxes  paid,  which is
included within operating cash flows. We are required to adopt SFAS No. 123R for
the  interim  period  beginning  July  1,  2005  using  a  modified  version  of
prospective   application   or  may  elect  to  apply  a  modified   version  of
retrospective application. We currently account for stock-based awards under the
intrinsic  value approach in accordance with APB Opinion No. 25 and disclose the
effect of  stock-based  awards as  required  by SFAS No.  148,  "Accounting  for
Stock-Based Compensation -- Transition and Disclosure".  The adoption of the new
standard  would  require  our  Company to  recognize  compensation  expense  for
equity-based awards. This will have the effect of reducing our net income by the
fair value of the options in future  years,  beginning in 2006.  We are not in a
position to know the effects of adoption of the new standard at this time.

ITEM 7.  FINANCIAL STATEMENTS.

Table of Contents                                                         Page

Independent Auditors' Report                                               30

Consolidated Balance Sheets                                                31

Consolidated Statements of Operations                                      32

Consolidated Statements of Stockholders' Equity (Deficit)                  33-36

Consolidated Statements of Cash Flows                                      37-39

Notes to Consolidated Financial Statements                                 40-64








                                       29
<PAGE>


                    RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                          CERTIFIED PUBLIC ACCOUNTANTS

        REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Biofield Corp.
Alpharetta, Georgia

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
Biofield Corp. (a development  stage company) (the "Company") as of December 31,
2005 and 2004 and the related consolidated  statements of losses,  deficiency in
stockholders'  equity,  and cash flows for the 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.  The  financial  statements  of the  Company,  as of the year ended
December  31,  2002 and for the period  October  16,  1987  (date of  inception)
through  December 31, 2002,  were audited by other  auditors  whose report dated
March 28, 2003,  expressed an  unqualified  opinion on those  statements,  which
included an explanatory  paragraph that described the uncertainty  regarding the
Company's ability to continue as a going concern.

         We have  conducted  our audit in  accordance  with the standards of the
Public  Accounting  Oversight Board (United States of America).  Those standards
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.


         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material  respects,  the consolidated  financial  position of the
Company  at  December  31,  2005 and 2004 and the  consolidated  results  of its
operations  and its cash flows for the two years then ended in  conformity  with
accounting  principles  generally  accepted in the United States of America.  We
express no opinion on the cumulative  period from inception through December 31,
2002.

         The accompanying  consolidated  financial  statements for the two years
ended  December 31, 2005 and 2004 have been  prepared  assuming that the Company
will  continue as a going  concern.  As shown in the financial  statements,  the
Company has  incurred net losses since its  inception.  This raises  substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans in regard to this matter are described in Note 1. The financial statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.

                                   /s/ RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
                                   --------------------------------------------
                                       Russell Bedford Stefanou Mirchandani LLP
                                       Certified Public Accountants

New York, New York
April  17,  2006







                                       30
<PAGE>



<TABLE>

<CAPTION>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
=========================================================================================

                                                            December 31,   December 31,
                                                           ------------------------------
ASSETS                                                          2005           2004
<S>                                                         <C>             <C>


CURRENT ASSETS:
  Cash and cash equivalents                                 $      2,794    $     33,142
  Other current assets                                              --           330,075
                                                            ------------    ------------
      Total current assets                                         2,794         363,217

PROPERTY AND EQUIPMENT - Net                                       1,967           5,676
OTHER ASSETS                                                        --            22,753
PATENT AND PATENT APPLICATION - Net                                 --           211,108
                                                            ------------    ------------
      TOTAL                                                 $      4,761    $    602,754
                                                            ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
  Accounts payable                                          $  1,321,634    $  1,082,335
  Accrued expenses                                               690,677         485,313
  Due to affiliate                                               329,687         272,499
  Bank line of credit                                               --         1,200,000
  Short-term notes payable                                     1,379,000       1,379,000
  Long-term debt from stockholder - short-term portion           607,350         552,136
  Advances from stockholder                                    3,488,816       1,807,669
                                                            ------------    ------------
      Total current liabilities                                7,817,164       6,778,952

STOCKHOLDERS' EQUITY (DEFICIT):
  Preferred Stock, $.001 par value; authorized
   12,300,000 undesignated shares;
   no shares issued or outstanding
  Common Stock, $.001 par value; authorized 60,000,000
   shares; issued 43,142,936 and 36,505,103 shares at
    December 31, 2005 and December 31, 2004, respectively         43,143          36,506
  Treasury stock - 2,306,131 shares                               (3,100)         (3,100)
  Additional paid-in capital                                  64,462,001      63,879,532
  Accumulated deficit during development stage               (72,314,448)    (70,089,136)
                                                            ------------    ------------
      Total stockholders' equity (deficit)                    (7,812,403)     (6,176,198)
                                                            ------------    ------------
  TOTAL                                                     $      4,761    $    602,754
                                                            ============    ============
</TABLE>


See notes to consolidated financial statements.


                                       31
<PAGE>


<TABLE>

<CAPTION>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
==================================================================================================

                                                                               Period October 16,
                                                        Year Ended               1987 (Date of
                                                        December 31,            Inception) Through
                                                -----------------------------
                                                       2005          2004        December 31, 2005
                                                                               -------------------
<S>                                             <C>             <C>               <C>


REVENUE                                         $       --      $     10,550      $    135,132
COST OF SALES
  Cost of goods sold                                    --            75,447            75,447
  Loss on write down of inventory                       --            81,480           693,500
                                                ------------    ------------      ------------
GROSS PROFIT                                            --           (70,930)         (633,815)

OPERATING EXPENSES:
  Research and development                              --              --          40,481,889
  Selling, general, and administrative               943,634       1,269,317        29,018,196
  Impairment of intangible assets                    194,268            --             194,268
  Gain on disposition of fixed assets                   --              --              (8,084)
                                                ------------    ------------      ------------
      Total operating expenses                     1,137,902       1,269,317        69,686,269


OTHER INCOME (EXPENSE):
  Interest income                                       --              --           2,476,723
  Interest expense and other finance costs:
     Interest expense                               (576,887)       (365,373)       (1,929,763)
     Amortization of shares issued to lenders
        and other finance costs                     (595,523)     (2,140,897)       (2,736,419)
  Royalty income and other                            85,000            --             214,845
                                                ------------    ------------      ------------
      Net (expense) other income                  (1,087,410)     (2,506,270)       (1,974,614)
                                                ------------    ------------      ------------
LOSS BEFORE INCOME TAXES                          (2,225,312)     (3,846,517)      (72,294,699)
PROVISION FOR INCOME TAXES                          (19,749)                           (19,749)
                                                                                  ------------
NET LOSS                                        $ (2,225,312)   $ (3,846,517)     $(72,314,448)
                                                ============    ============      ============

NET LOSS PER SHARE:
     Basic and Diluted                          $      (0.06)   $      (0.12)
                                                ============    ============

WEIGHTED-AVERAGE SHARES
     Basic and Diluted                            38,235,027      31,808,052
                                                ============    ============
</TABLE>

See notes to consolidated financial statements.

                                       32

<PAGE>


<TABLE>

<CAPTION>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                Series A          Series B          Series C
                                                            Preferred Stock   Preferred Stock   Preferred Stock     Common Stock
                                                            ----------------  ----------------  ---------------  ------------------
                                                             Shares  Amount   Shares   Amount    Shares  Amount   Shares    Amount
<S>                                                         <C>     <C>       <C>     <C>       <C>     <C>       <C>       <C>
Sale of Common Stock, October 16, 1987
  (date of inception) ($.16 per share, net)                                                                        549,020  $    55
Issuance of Common Stock in connection with
  patent acquisition ($.001 per share)                                                                             235,294       24
Net loss, October 16, 1987 to March 31, 1988
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1988                                         -        -        -        -        -       -    784,314       79
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1989                                         -        -        -        -        -       -    784,314       79
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1990                                         -        -        -        -        -       -    784,314       79
Acquisition of 235,294 shares of Common Stock
  ($.001 per share)
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1991                                         -        -        -        -        -       -    784,314       79
Retirement of Common Stock held in treasury                                                                       (235,294)     (24)
Issuance of Common Stock in exchange for notes
  and debt (with accrued interest) ($2.90 per share, net)                                                          431,372       43
Sale of Common Stock ($.82 per share, net)                                                                          24,510        2
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1992                                         -        -        -        -        -       -  1,004,902      100
Sale of Common Stock ($7.67 per share, net)                                                                        557,475       55
Exercise of Common Stock options                                                                                     2,451        1
Amortization of deferred compensation
Change in par value of common stock
  from $.0001 to $.001                                                                                                        1,408
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1993                                         -        -        -        -        -       -  1,564,828  $ 1,564
  (carried forward)                                       =========  =======  =======  =======  =======  ======  =========  =======
</TABLE>

<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                   Deficit
                                                                                 Accumulated    Foreign
                                                           Additional               During      Currency                 Total
                                                            Paid-In    Treasury  Development  Translation            Comprehensive
                                                            Capital     Stock       Stage      Adjustment    Total       Loss
                                                          -----------  -------- ------------- ----------- ----------- -------------
<S>                                                       <C>          <C>      <C>           <C>         <C>          <C>
Sale of Common Stock, October 16, 1987
  (date of inception) ($.16 per share, net)               $    91,898                                     $   91,953
Issuance of Common Stock in connection with patent
  acquisition ($.001 per share)                                   276                                            300
Net loss, October 16, 1987 to March 31, 1988                                   $   (159,359)                (159,359)
Total comprehensive income (loss)                                                                                      $  (159,359)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1988                                      92,174       -      (159,359)          -      (67,106)
Net loss                                                                           (495,520)                (495,520)
Total comprehensive income (loss)                                                                                      $  (495,520)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1989                                      92,174       -      (654,879)          -     (562,626)
Net loss                                                                           (233,347)                (233,347)
Total comprehensive income (loss)                                                                                      $  (233,347)
                                                          ----------   ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1990                                      92,174       -      (888,226)          -     (795,973)
Acquisition of 235,294 shares of Common Stock
  ($.001 per share)                                                    $ (300)                                  (300)
Net loss                                                                           (285,179)                (285,179)
Total comprehensive income (loss)                                                                                      $  (285,179)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1991                                      92,174    (300)   (1,173,405)          -   (1,081,452)
Retirement of Common Stock held in treasury                      (276)    300
Issuance of Common Stock in exchange for notes
  and debt (with accrued interest) ($2.90 per share, net)   1,248,638                                      1,248,681
Sale of Common Stock ($.82 per share, net)                     19,998                                         20,000
Amortization of deferred compensation                         136,880                                        136,880
Net loss                                                                           (461,061)                (461,061)
Total comprehensive income (loss)                                                                                      $  (461,061)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1992                                   1,497,414       -    (1,634,466)          -     (136,952)
Sale of Common Stock  ($7.67 per share, net)                4,275,223                                      4,275,278
Exercise of Common Stock options                                  624                                            625
Amortization of deferred compensation                         477,453                                        477,453
Change in par value of common stock
  from $.0001 to $.001                                         (1,408)
Net loss                                                                         (3,099,637)              (3,099,637)
Total comprehensive income (loss)                                                                                      $(3,099,637)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1993                                 $ 6,249,306       -    (4,734,103)          -    1,516,767
  (carried forward)                                       ===========  ======   ===========    ========   ==========
</TABLE>
See notes to consolidated financial statements.                      (Continued)

                                      33
<PAGE>
<TABLE>
<CAPTION>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                           Series A            Series B         Series C
                                                       Preferred Stock     Preferred Stock   Preferred Stock     Common Stock
                                                       ------------------  ----------------  ---------------  ------------------
                                                        Shares  Amount      Shares   Amount   Shares  Amount   Shares    Amount
<S>                                                    <C>     <C>          <C>     <C>       <C>     <C>       <C>       <C>

BALANCE AT MARCH 31, 1993                                       -       -         -      -          -        -   1,564,828 $ 1,564
  (brought forward)
Exercise of Common Stock options                                                                                       735       1
Sale of Series A Preferred Stock
  ($3.97 per share, net)                                2,119,896 $ 2,120
Issuance of Series A Preferred Stock in
  exchange for notes ($4.50 per share)                    222,222     222
Issuance of Common Stock warrants
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------

BALANCE AT MARCH 31, 1994                               2,342,118   2,342         -      -           -       -   1,565,563   1,565
Sale of Series B Preferred Stock
  ($4.04 per share, net)                                                    481,644    482
Issuance of Common Stock warrants
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1994                            2,342,118   2,342   481,644    482           -       -   1,565,563   1,565
Sale of Series C Preferred Stock
  ($4.11 per share, net)                                                                     2,914,771   2,915
Issuance of Common Stock warrants
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1995                            2,342,118   2,342   481,644    482   2,914,771   2,915   1,565,563   1,565
Sale of Common Stock  ($9.91/share)                                                                              1,819,000   1,819
Conversion of Series A, B, and C
  Preferred Stock to Common Stock                      (2,342,118) (2,342) (481,644)  (482) (2,914,771) (2,915)  3,046,474   3,047
Exercise of Common Stock warrants                                                                                    2,058       2
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1996                                    -       -         -      -           -       -   6,433,095   6,433
  (carried forward)                                    ==========  ======  ========  =====  ==========  ======  ========== =======
</TABLE>

<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                 Deficit
                                                                               Accumulated    Foreign
                                                         Additional               During      Currency                 Total
                                                          Paid-In    Treasury  Development  Translation            Comprehensive
                                                          Capital     Stock       Stage      Adjustment    Total       Loss
                                                        -----------  --------  ------------   --------  ----------- -------------
<S>                                                     <C>          <C>      <C>           <C>         <C>          <C>
BALANCE AT MARCH 31, 1993                               $ 6,249,306         -    (4,734,103)         -     1,516,767
  (brought forward)
Exercise of Common Stock options                                187                                              188
Sale of Series A Preferred Stock
  ($3.97 per share, net)                                  8,411,370                                        8,413,490
Issuance of Series A Preferred Stock in
  exchange for notes ($4.50 per share)                      999,778                                        1,000,000
Issuance of Common Stock warrants                             2,119                                            2,119
Amortization of deferred compensation                     1,580,320                                        1,580,320
Net loss                                                                         (6,899,515)              (6,899,515)
Total comprehensive income (loss)                                                                                      $(6,899,515)
                                                        -----------   -------  ------------   --------    ----------   ===========
BALANCE AT MARCH 31, 1994                                17,243,080         -   (11,633,618)         -    5,613,369
Sale of Series B Preferred Stock
  ($4.04 per share, net)                                  1,947,149                                       1,947,631
Issuance of Common Stock warrants                                 6                                               6
Amortization of deferred compensation                        14,859                                          14,859
Net loss                                                                         (4,959,312)             (4,959,312)
Total comprehensive income (loss)                                                                                    $ (4,959,312)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1994                             19,205,094         -   (16,592,930)         -    2,616,553
Sale of Series C Preferred Stock
  ($4.11 per share, net)                                 11,977,856                                      11,980,771
Issuance of Common Stock warrants                               161                                             161
Amortization of deferred compensation                       195,874                                         195,874
Net loss                                                                         (8,739,858)             (8,739,858)
Total comprehensive income (loss)                                                                                    $ (8,739,858)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1995                             31,378,985         -   (25,332,788)         -    6,053,501
Sale of Common Stock  ($9.91/share)                      18,026,419                                      18,028,238
Conversion of Series A, B, and C
  Preferred Stock to Common Stock                             2,692
Exercise of Common Stock warrants                            20,145                                          20,147
Amortization of deferred compensation                        26,093                                          26,093
Net loss                                                                        (10,036,090)            (10,036,090)
Total comprehensive income (loss)                                                                                    $(10,036,090)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1996                             49,454,334         -   (35,368,878)         -   14,091,889
  (carried forward)                                    ============   =======  ============   ========  ===========
</TABLE>
                                                                     (Continued)
                                       34
<PAGE>
<TABLE>
<CAPTION>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                             Series A          Series B          Series C
                                                         Preferred Stock   Preferred Stock   Preferred Stock       Common Stock
                                                       ------------------  ---------------- ------------------  ------------------
                                                          Shares  Amount   Shares   Amount    Shares  Amount     Shares    Amount
<S>                                                      <C>     <C>       <C>     <C>       <C>     <C>       <C>       <C>
BALANCE AT DECEMBER 31, 1996                                    -       -         -      -           -       -   6,433,095   6,433
  (brought forward)
Sale of Common Stock ($2.92 per share, net)                                                                      2,867,670   2,868
Warrants exchanged for Common Stock                                                                                643,639     644
Exercise of Common Stock options                                                                                    50,674      50
Exercise of Common Stock warrants                                                                                    9,531      10
Issuance of Common Stock for consulting                                                                             25,000      25
  services ($4.00 per share, net)
Amortization of deferred compensation
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1997                                    -       -         -      -           -       -  10,029,609  10,030
Repurchase of Common Stock
 for treasury (2,246,131 shares)
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1998                                    -       -         -      -           -       -  10,029,609  10,030
Sale of Common Stock ($.05 per share, net)                                                                      14,000,000  14,000
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1999                                    -       -         -      -           -       -  24,029,609  24,030
Issuance of right to purchase Common Stock
  in lieu of compensation ($0.45 per share)
Sale of common stock ($0.05 per share)                                                                             500,000     500
Sale of common stock ($0.50 per share)                                                                           3,000,000   3,000
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Repurchase of Common Stock
 for treasury (60,000 shares)
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 2000                                    -       -         -      -           -       -  27,529,609 $27,530
  (carried forward)                                    ==========  ======  ========  =====  ==========  ======  ========== =======
</TABLE>

<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- -------------
<S>                                                    <C>          <C>        <C>           <C>        <C>         <C>
BALANCE AT DECEMBER 31, 1996                             49,454,334         -   (35,368,878)         -   14,091,889
  (brought forward)
Sale of Common Stock ($2.92 per share, net)               8,377,583                                       8,380,451
Warrants exchanged for Common Stock                            (644)
Exercise of Common Stock options                            168,541                                         168,591
Exercise of Common Stock warrants                            93,299                                          93,309
Issuance of Common Stock for consulting                      99,975                                         100,000
  services ($4.00 per share, net)                            62,579                                          62,579
Amortization of deferred compensation
Net loss                                                                        (10,151,041)            (10,151,041)
Foreign currency translation adjustment                                                       $  1,333        1,333
Total comprehensive income (loss)                                                                                    $(10,149,708)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1997                             58,255,667         -   (45,519,919)     1,333   12,747,111
Repurchase of Common Stock
  for treasury (2,246,131 shares)                                        (100)                                 (100)
Net loss                                                                        (10,654,597)            (10,654,597)
Foreign currency translation adjustment                                                         55,891       55,891
Total comprehensive income (loss)                                                                                    $(10,598,706)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1998                             58,255,667      (100)  (56,174,516)    57,224    2,148,305
Sale of Common Stock ($.05 per share, net)                  686,000                                         700,000
Net loss                                                                         (1,253,696)             (1,253,696)
Foreign currency translation adjustment                                                        (43,020)     (43,020)
Total comprehensive income (loss)                                                                                    $ (1,296,716)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1999                             58,941,667      (100)  (57,428,212)    14,204    1,551,589
Issuance of right to purchase Common Stock
  in lieu of compensation ($0.45 per share)                 198,000                                         198,000
Sale of common stock ($0.05 per share)                       24,500                                          25,000
Sale of common stock ($0.50 per share)                    1,497,000                                       1,500,000
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Repurchase of common stock
  for treasury (60,000 shares)                                         (3,000)                               (3,000)
Net loss                                                                         (1,522,233)             (1,522,233)
Foreign currency translation adjustment                                                        (14,204)     (14,204)
Total comprehensive income (loss)                                                                                    $ (1,522,233)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2000                           $ 60,761,167   $(3,100) $(58,950,445)  $     --  $ 1,835,152
  (carried forward)                                    ============   =======  ============   ========  ===========

</TABLE>

See notes to consolidated financial statements.                      (Continued)

                                      35
<PAGE>
<TABLE>
<CAPTION>
BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                            Series A           Series B          Series C
                                                        Preferred Stock    Preferred Stock    Preferred Stock      Common Stock
                                                       ------------------- ----------------- ----------------- --------------------
                                                        Shares    Amount    Shares  Amount    Shares   Amount    Shares  Amount
<S>                                                    <C>         <C>     <C>       <C>    <C>         <C>     <C>        <C>
BALANCE AT DECEMBER 31, 2000                                    -       -         -      -           -       -  27,529,609 $ 27,530
  (brought forward)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2001                                    -       -         -      -           -       -  27,529,609 $ 27,530
Exercise of Common Stock options                                                                                    62,745       63
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2002                                    -       -         -      -           -       -  27,592,354 $ 27,593
                                                       ==========  ======  ========  =====  ==========  ======  ========== ========
Issuance of Common Stock for consulting
  services ($0.30 per share, net)                               -       -         -      -           -       -      50,000       50
Issuance of Common Stock for consulting
  services ($0.32 per share, net)                                                                                  468,749      468
Issuance of Common Stock for consulting
  services ($0.11 per share, net)                                                                                  275,000      275
Issuance of Common Stock as incentive for
  funding by issue of notes ($0.25 per share net)                                                                3,187,500    3,188
Common Stock (410,358 shares) to be issued
  for interest accrued on stockholder's advances
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2003                                    -       -         -      -           -       -  31,573,603 $ 31,574
                                                       ==========  ======  ========  =====  ==========  ======  ========== ========
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)                                                                 1,812,500    1,813
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.31 per share net)                                                                 1,895,000    1,895
Sale of Common Stock ($0.10 per share)                                                                           1,224,000    1,224
Common Stock (286,421 shares) to be issued
  for interest accrued on stockholder's advances
Accrual of 2,500,000 shares of Common Stock
  due on payment default on notes payable
Memorandum entry to record as expense for
   honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2004                                    -       -         -      -           -       -  36,505,103 $ 36,506
                                                       ==========  ======  ========  =====  ==========  ======  ========== ========

Sale of Common Stock ($0.05 to $0.10 per share)                                                                  3,240,333    3,240
Common Stock (2,310,300) to be issued
  for interest accrued on stockholder's advances
Issue of shares of Common Stock due on payment
  default on notes payable                                                                                         897,500      897
Issue of shares of Common Stock due on payment
  default on notes payable previously credited to APIC                                                           2,500,000    2,500
Memorandum entry to record as expense for
   honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
BALANCE AT DECEMBER 31, 2005                                    -       -         -      -           -       -  43,142,936 $ 43,143
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------


</TABLE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- -------------
<S>                                                    <C>          <C>        <C>           <C>        <C>         <C>
BALANCE AT DECEMBER 31, 2000                             60,761,167    (3,100) $(58,950,445)         -    1,835,152
  (brought forward)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,238,687)             (2,238,687)
Total comprehensive income (loss)                                                                                    $ (2,238,687)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2001                             60,861,167    (3,100)  (61,189,132)         -     (303,535)
Exercise of Common Stock options                             15,623                                          15,686
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,888,789)             (2,888,789)
Total comprehensive income (loss)                                                                                    $ (2,888,789)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2002                           $ 60,976,790   $(3,100) $(64,077,921)  $      -  $(3,076,638)
                                                       ============   =======  ============   ========  ===========

Issuance of Common Stock for consulting
  services ($0.30 per share, net)                            14,950                                          15,000
Issuance of Common Stock for consulting
  services ($0.32 per share, net)                           149,532                                         150,000
Issuance of Common Stock for consulting
  services ($0.11 per share, net)                            29,975                                          30,250
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)            793,687                                         796,875
Common Stock (410,358 shares) to be issued
  for interest accrued on stockholder's advances            102,386                                         102,386
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,164,698)             (2,164,698)
Total comprehensive income (loss)                                                                                    $ (2,164,698)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2003                           $ 62,167,320  $ (3,100) $(66,242,619)  $      -  $(4,046,825)
                                                       ============   =======  ============   ========  ===========
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)            451,312                                         453,125
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.31 per share net)            585,555                                         587,450
Sale of Common Stock ($0.10 per share)                      160,601                                         161,825
Common Stock (286,421 shares) to be issued
  for interest accrued on stockholder's advances             64,743                                          64,743
Accrual of 2,500,000 shares of Common Stock
  due on payment default on notes payable                   350,000                                         350,000
Memorandum entry to record as expense for
   honorary services rendered by a shareholder              100,000                                         100,000
Net loss                                                                         (3,846,517)             (3,846,517)
Total comprehensive income (loss)                                                                                    $ (3,846,517)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2004                           $ 63,879,532  $ (3,100) $(70,089,136)  $      -  $(6,176,198)
                                                       ============   =======  ============   ========  ===========


Sale of Common Stock ($0.05 to $0.10 per share)             382,177                                         385,417
Common Stock (2,310,300) to be issued
  for interest accrued on stockholder's advances             85,740                                          85,740
Issue of shares of Common Stock due on payment
  default on notes payable                                   17,052                                          17,950
Issue of shares of Common Stock due on payment
  default on notes payable previously credited to APIC       (2,500)                                              -
Memorandum entry to record as expense for
   honorary services rendered by a shareholder              100,000                                         100,000
Net loss                                                                        (2,225,312)              (2,225,312)
Total comprehensive income (loss)                                                                                 -  $ (2,225,312)
                                                                                                                     ============
BALANCE AT DECEMBER 31, 2005                           $ 64,462,001  $ (3,100) $(72,314,448)  $      -  $(7,812,403
                                                       ============   =======  ============   ========  ===========



See notes to consolidated financial statements.                                                                        (Concluded)

</TABLE>

                                       36
<PAGE>

<TABLE>

<CAPTION>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
==============================================================================================================================
                                                                                                          Period October 16,
                                                                                  Twelve months ended         1987 (Date of
                                                                                       December 31,        Inception) Through
                                                                             -----------------------------
OPERATING ACTIVITIES                                                             2005          2004         December 31, 2005
                                                                                                            ------------------
<S>                                                                          <C>             <C>            <C>

  Net loss                                                                   $ (2,225,312)   $ (3,846,517)   $(72,314,448)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
    Depreciation and amortization                                                  41,302          45,332       2,759,708
    Amortization of premiums on short-term investments                                                            156,692
    Amortization of deferred financing costs                                      438,192       2,140,897       2,609,231
    Loss on disposal of property and equipment                                                                    194,102
    Loss on license and settlement agreements                                                                      49,026
    Loss on abandonment of patent applications                                                                    303,234
    Loss on inventory write-down                                                                   81,480         693,500
    Impairment of intangible assets                                               194,268                         194,268
    Vendor settlements                                                                                            (77,257)
    Noncash compensation                                                          100,000         100,000       3,508,451
    Gain from disposition of fixed assets                                                                        (159,473)
    Interest paid in Common Stock                                                  85,740          64,743         550,017
    Consultancy fees paid in Common Stock                                                                         195,250
    Changes in assets and liabilities:
       Inventories                                                                                               (693,500)
      Other assets                                                                  2,000                        (132,582)
      Due to affiliate                                                             57,188          74,218         329,687
      Accounts payable and accrued expenses                                       444,662          35,774       2,069,394
                                                                             ------------    ------------    ------------
          Net cash used in operating activities                                  (861,960)     (1,304,073)    (59,764,700)
                                                                             ------------    ------------    ------------
INVESTING ACTIVITIES
  Acquisitions of property and equipment                                                           (5,284)     (2,610,691)
  Costs incurred for patents and patent applications                                                             (782,527)
  Proceeds from sale of property and equipment                                                                    294,748
  Purchases of short-term investments                                                                         (26,476,638)
  Proceeds from sale and maturity of short-term investments                          --              --        26,406,378
                                                                             ------------    ------------    ------------
          Net cash used in investing activities                                      --            (5,284)     (3,168,730)
                                                                             ------------    ------------    ------------
FINANCING ACTIVITIES
  Repayments of capitalized lease obligations                                                                     (82,234)
  Proceeds from issuance of Preferred Stock - net                                                              22,341,892
  Proceeds from issuance of Common Stock and Common Stock warrants                295,250          64,906      33,383,362
  Proceeds from exercise of Common Stock options and Common Stock warrants                                        298,546
  Proceeds from issuance of notes payable                                                         741,500       1,379,000
  Notes financing costs                                                                           (86,937)       (216,744)
  Net bank borrowings (repayments) under a line of credit                      (1,200,000)                           --
  Advances from stockholder and related party                                   1,736,361         253,698       3,545,465
  Repayments of advances from stockholder                                                                        (145,000)
  Repurchases of Common Stock held in treasury                                                                     (3,100)
  Proceeds from notes payable issued to stockholder and related party                --              --         2,546,533
                                                                             ------------    ------------    ------------
          Net cash provided by financing activities                               831,611         973,167      63,047,720
                                                                             ------------    ------------    ------------
    NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                          (30,349)       (336,190)        114,290
    EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                                                 (111,497)

  CASH AND CASH EQUIVALENTS:
    BEGINNING OF PERIOD                                                            33,142         369,332
                                                                             ------------    ------------    ------------
    END OF PERIOD                                                            $      2,794    $     33,142    $      2,794
                                                                             ============    ============    ============


See notes to consolidated financial statements                                                                     (continued)

</TABLE>



                                       37
<PAGE>

<TABLE>

<CAPTION>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
====================================================================================================================================
                                                                                                                 Period October 16,
                                                                                                                   1987 (Date of
                                                                                                December 31,     Inception) Through
                                                                                            -------------------
                                                                                                 2005     2004     December 31, 2005
                                                                                                                     ---------------
<S>                                                                                        <C>         <C>             <C>

SUPPLEMENTAL DISCLOSURES OF CASH
  FLOW INFORMATION:
  Cash paid during the period for interest                                                 $  92,507  $  186,492       $   857,003
                                                                                           ---------  ----------       -----------

SUPPLEMENTAL SCHEDULE FOR NONCASH
  INVESTING AND FINANCING ACTIVITIES:

  Acquisition of property and equipment under capital lease transactions                                               $    82,234
--------------------------------------------------------------------------------------------                           -----------

  During the fiscal year ended March 31, 1994, the Company issued 222,222 shares of
    Series A Preferred Stock in exchange for an aggregate of $1 million in notes
    payable to principal stockholder and a former Director:
    Notes payable                                                                                                      $ 1,000,000
                                                                                                                       -----------
    Issuance of Series A Preferred Stock                                                                               $ 1,000,000
--------------------------------------------------------------------------------------------                           -----------

  At inception, the Company acquired the rights to a patent and assumed certain
    liabilities in exchange for 235,294 shares of Common Stock, as follows:
    Fair value of patent acquired                                                                                      $   112,732
                                                                                                                       -----------
    Liabilities assumed                                                                                                    112,432
                                                                                                                       -----------
    Issuance of Common Stock                                                                                           $       300
                                                                                                                       -----------
--------------------------------------------------------------------------------------------

  Pursuant to a license and settlement agreement with respect to an acquired patent
    (see above) the Company reacquired during the year ended March 31, 1991 its 235,294
    shares of Common Stock issued in connection with the acquired patent, which was
    retired during the year end March 31, 1992:
    Remaining carrying value of patent on date of
      license and settlement agreement                                                                                 $    49,326
                                                                                                                       -----------
    Common Stock returned to the Company                                                                                       300
                                                                                                                       -----------
    Loss on Settlement                                                                                                 $    49,026
                                                                                                                       -----------
--------------------------------------------------------------------------------------------

  During the fiscal year ended March 31, 1992, the Company exchanged 431,372 shares of
    Common Stock for notes, debt and accrued interest payable to a principal stockholder:
    Notes payable                                                                                                      $    96,660
                                                                                                                       -----------
    Debt                                                                                                                   854,873
                                                                                                                       -----------
    Accrued interest                                                                                                       297,148
                                                                                                                       -----------
    Issuance of Common Stock                                                                                           $ 1,248,681
--------------------------------------------------------------------------------------------

  During the fiscal year ending December 31, 2003, the Company exchanged 793,749 shares
    of Common Stock for services rendered by consultants:
    Fair value of services rendered                                                                                    $   195,250
                                                                                                                       -----------
    Issuance of Common Stock                                                                                           $   195,250
                                                                                                                       -----------
--------------------------------------------------------------------------------------------

  During the fiscal year ending December 31, 2003, the Company transferred accrued interest
    on advances from a stockholder to be exchanged for 410,358 shares of Common Stock:
    of Common Stock:
    Accrued interest                                                                                                   $   102,386
                                                                                                                       -----------
    Issuance of Common Stock                                                                                           $   102,386
                                                                                                                       -----------
--------------------------------------------------------------------------------------------

  During the fiscal year ending December 31, 2003, the Company issued 3,187,500 shares
    as incentive for notes payable secured under a private placement funding:
    Fair value of Finance costs                                                                                        $  796,875
                                                                                                                       -----------
    Issuance of Common Stock                                                                                           $  796,875
                                                                                                                       -----------
--------------------------------------------------------------------------------------------

See notes to consolidated financial statements                                                                           (Continued)

</TABLE>


                                       38
<PAGE>

<TABLE>

<CAPTION>



BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
====================================================================================================================================
                                                                                                               Period October 16,
                                                                                                                 1987 (Date of
                                                                                          December 31,         Inception) Through
                                                                                        ---------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                      2005         2004      December 31, 2005
                                                                                                              ---------------------
<S>                                                                                     <C>        <C>        <C>

  During the fiscal year ended December 31, 2004, 3,707,500 (March 31, 2004,
   1,812,500) shares of Common Stock were issued as incentive for funds secured
   against notes payable under a private
    placement funding:
    Fair value of Finance costs                                                                   $1,040,575      $ 1,040,575
                                                                                                  -----------     -----------
    Issuance of Common Stock                                                                      $1,040,575      $ 1,040,575
                                                                                                  -----------     -----------
-------------------------------------------------------------------------------------
  During the fiscal year ended December 31, 2004, the Company transferred
   accrued interest on advances from a principal stockholder to Additional
   Paid-In Capital
    account to be exchanged for 286,421 shares (March 31, 2004, 29636) of Common
Stock:
    Accrued interest                                                                                $ 31,414         $ 31,414
                                                                                                    ---------        --------
    Issuance of Common Stock                                                                        $ 31,414         $ 31,414
                                                                                                    =========        ========
-------------------------------------------------------------------------------------

  During the fiscal year ended December 31, 2004, 2,500,000 shares of Common
    Stock due as penalty for non-payment of notes payable on maturity were
    accrued, and subsequently issued in August, 2005:
    Fair value of Finance costs                                                                    $ 350,000        $ 350,000
                                                                                                   ----------       ---------
    Issuance of Common Stock                                                                       $ 350,000        $ 350,000
                                                                                                   ==========       =========
-------------------------------------------------------------------------------------

  During the fiscal year ended December 31, 2005, the Company transferred
   accrued interest on advances from a principal stockholder to Additional
   Paid-In Capital
    account to be exchanged for 2,310,300 shares of Common Stock:
    Accrued interest                                                                    $ 85,740                     $ 85,740
                                                                                        ---------                    --------
    Issuance of Common Stock                                                            $ 85,740                     $ 85,740
                                                                                        =========                    ========
-------------------------------------------------------------------------------------

  During the fiscal year ended December 31, 2005, 897,500 shares of Common Stock
   due as penalty for non-payment of notes payable on maturity were accrued, and
   subsequently issued in August, 2005:
    Fair value of Finance costs                                                         $ 17,950                     $ 17,950
                                                                                        ---------                    --------
    Issuance of Common Stock                                                            $ 17,950                     $ 17,950
                                                                                        =========                    ========
-------------------------------------------------------------------------------------

  During the fiscal year ended December 31, 2005, a principal shareholder and
   his associates repaid the Company's line of credit and the debt is reflected
   in the financial statements as
    advances from stockholder:
    Value of non-cash transfer of the Company's debt                                 $ 1,200,000                  $ 1,200,000
                                                                                     ============                 ===========
-------------------------------------------------------------------------------------


See notes to unaudited consolidated financial statements
(Conluded)
</TABLE>



                                       39
<PAGE>


BIOFIELD CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


1.    GOING CONCERN BASIS OF ACCOUNTING

         As shown in the accompanying financial statements,  Biofield Corp. (the
"Company")  continues to incur significant  losses. As of December 31, 2005, the
Company  had total  assets  worth  less than  $5,000  and its total  liabilities
exceeded its assets by $7.8 million. These factors raise substantial doubt about
the Company's ability to continue as a going concern.

         During 2002, the Company  financed its operations  almost entirely with
$1,750,000 of borrowings  obtained from, or with the assistance of, Dr. David M.
Long, Jr., M.D.,  Ph.D.,  its Chairman,  Chief  Executive  Officer and principal
stockholder ("Dr. Long"), and certain of his affiliates.

         In the first quarter of 2003,  the Company  instituted a cost reduction
program that included  lowering  salaries of its six then current  employees and
some of its consultants,  minimizing use of outside consultants,  arranging with
its employees and a consultant to accept options to acquire the Company's Common
Stock for a portion of their services, and limiting its marketing activities. In
January 2003, Dr. Long advanced  $475,000 to enable the Company to meet its then
projected minimum financial requirements. As of December 31, 2005, the aggregate
amount due to Dr. Long and his  affiliates,  including  advances  made by him in
2003,  2004 and 2005,  liability for a three-year  promissory  note amounting to
$450,000 and interest accrued on all the debts due to him, is $4,425,853, and is
also  entitled to receive  3,007,078  shares of the  Company's  Common Stock for
interest due up to December 31, 2004 on an advance of $1,050,000  made by him in
2003.

         During the seven  months  commencing  April 16,  2003,  the Company was
unable to meet its payroll commitments.  Five of its six employees agreed to the
deferment of the payment of the salary due to them,  payable with 100%  interest
thereon,  until the receipt of the proceeds  from new funding.  The Company also
granted  options to acquire 514,227 shares of Common Stock to these employees at
an exercise  price of $0.33 per share,  the closing  market  price of the Common
Stock  on the  date  of  the  grant,  in  consideration  for  the  reduction  in
remuneration accepted by them during the first four months of 2003.

         In June  2003,  the  Company's  bank line of credit  was  increased  by
$200,000 to $1.2 million upon the furnishing of additional  collateral  provided
to the bank by Dr. Long and certain of his  affiliates.  The line expired in May
2005 and was repaid by Dr. Long and his affiliates.  The loan is included in the
advances from stockholder in the accompanying Balance Sheet.

         In October 2003, the Company entered into an agreement with a placement
agent for assistance in obtaining short-term bridge financing agreement of up to
$700,000 (subsequently increased to $1 million) in a private placement on a best
effort basis. In December 2003, the Company  received gross proceeds of $637,500
against  issuance of $637,500  principal  amount of notes  payable and 3,187,500
shares of Common Stock, at a cost of $796,875 which was amortized over 365 days.
Additionally,  the Company made cash  payments of $129,807 for  financing  costs
that was also amortized over the same period.

         During January and February 2004,  the Company  received  further gross
proceeds  of $362,500  and issued an  additional  $362,500 of notes  payable and
1,812,500 shares of Common Stock, at a cost of $453,125 which was amortized over
the  remaining 365 days since the initial sale in December  2004.  Additionally,
the Company  made cash  payments of $46,038  for  financing  costs that was also
amortized over the same period.

         On May 3, 2004,  the Company  signed a similar  agreement with the same
placement agent to secure further short-term bridging finance of up to $800,000.
Under the new agreement,  the Company sold $329,000 of its  securities,  and the
offering was closed on August 30, 2004.  The Company  received gross proceeds of
$100,000,  $154,000 and $75,000 against aggregate issuance of $329,000 principal


                                       40
<PAGE>

amount of notes  payable  and  1,645,000  shares of Common  Stock,  at a cost of
$509,950 on June 1, 2004, July, 2004 and August, 2004,  respectively.  The value
of Common Stock was  amortized  over the period of the notes all of which expire
on May 31, 2005.  Additionally,  the Company  made cash  payments of $35,900 for
financing costs that was also amortized over the same period.

         On September 8, 2004,  the Company signed an agreement for $50,000 with
the placement agent on the same terms and conditions as the agreement  signed on
May 3, 2004,  and  received  gross  proceeds  of  $15,644  and  $34,356  against
aggregate  issuance  of $50,000  principal  amount of notes  payable and 250,000
shares of Common  Stock,  at a cost of $77,500 on September 8, 2004 and November
12, 2004, respectively.

         On October 13,  2004,  the  Company  engaged an  investment  broker and
consultant to obtain  financing its operations while waiting for FDA approval by
offering  the  Company  shares of Common  Stock to  non-U.S.  citizens  overseas
investors  in  accordance  with  the  provisions  of  Rule  903 or  Rule  904 of
Regulation S or pursuant to registration of the securities  under the Securities
Act of 1933 at a cost of 50% of the  amount  of gross  capital  raised  as fees.
Under the agreement, the broker bears all the associated marketing and operating
costs, and is required to offer the shares at a price per share of not less than
$0.10. Under this arrangement,  the Company received aggregate gross proceeds of
$123,400 against  aggregate  issuance of 1,224,000 shares of Common Stock, at an
aggregate  discount  of $38,425  over the  market  price on the date of the sale
during the period from October 29, 2004 to December 31, 2004.  Additionally,  in
2005,  the  Company  received  aggregate  gross  proceeds  of  $295,250  against
aggregate  issuance of  approximately  3.2 million  shares of Common Stock at an
average rate of $0.09 per share and agent's fees of $118,906.

         The Company used the proceeds from the two placements and from the sale
of its shares  under the  exemption  provided  by  Regulation  S to finance  the
expense  to  complete  its FDA  application  to obtain  approval  to market  the
Biofield  Diagnostic  System in the United  States,  marketing of the  Company's
device in certain  European  countries and to keep the Company  operational.  On
January 5, 2005, in  accordance  with  recommended  FDA  procedure,  the Company
submitted a Request for Evaluation of Automatic  Class III  Designation  for the
Biofield(R) Breast Proliferation Rate Detection System under ss.513(f)(2) of the
Cosmetic  Act.  Simultaneously,  the Company is  attempting  to raise  long-term
capital of  approximately $5 million to $7 million to enable it to commercialize
its device (assuming FDA approval is obtained) and maintain its operations.  The
infusion of  long-term  capital is  essential  for the  Company to continue  its
operations. There is no assurance the Company will be successful in securing the
long-term capital or any the short-term funding.

         The notified body, KEMA Registered  Quality,  Inc.,  submitted a formal
510(k)  application to the FDA on November 16, 2004. FDA informed the Company on
December  3,  2004  that  a  manufacturer  whose  device  is  found  to  be  not
substantially  equivalent  to a  predicate  device can request the FDA to make a
risk-based  classification for its device.  However,  the letter also included a
statement  that the FDA  believes  that  "based on the  review  of your  device,
general controls would be inadequate and special controls  difficult to develop,
to provide  reasonable  assurance of the device's safety and  effectiveness." On
January 5, 2005, in  accordance  with  recommended  FDA  procedure,  the Company
submitted a Request for Evaluation of Automatic  Class III  Designation  for the
Biofield(R) Breast Proliferation Rate Detection System under ss.513(f)(2) of the
Cosmetic Act. On July 25, 2005,  the FDA sent the Company a response to a recent
meeting at FDA's  offices at which the  Company  had  reviewed  with the FDA the
Biofield data contained in the Company's  previously submitted 510K application.
The FDA  informed the Company  that the data  contained in the 510K  application
would be insufficient  for several  reasons and requested more clinical  testing
for the  Company's  pre-market  approval  application.  The Company is unable to
proceed  with the  clinical  testing as it has not been  successful  in sourcing
additional capital.

         On August 1, 2005,  the company  signed a  partnership  agreement  with
Bridgetech Holdings  International,  Inc.  ("Bridgetech"),  a company focused on
maximizing  the  potential of emerging  healthcare  products and services in the
U.S. and Asian markets.  Bridgetech paid $50,000 upfront for distributorship and
five  Biofield  devices.  Bridgetech  also paid  $20,000 to be used for clinical
testing to obtain  regulatory  approvals to market and  distribute  the Biofield
Device in the  People's  Republic of China (the  "PRC"),  the Hong Kong  Special
Administrative Region of the PRC, the Republic of China ("Taiwan"),  Vietnam and
Singapore.  The  agreement,  which was  subject  to minimum  purchase  and other
requirements which have not been met, has since been terminated.


                                       41
<PAGE>


         On March 30, 2006, Dr. David Long and his affiliates (the "Long Group")
entered  into  three  agreements  with  The  MacKay  Group,  Inc.  ("MKG").  The
agreements provide, among other things, that:

          o    MKG will  acquire  all the shares of Common  Stock of the Company
               presently issued to the Long Group and his affiliates (comprising
               an aggregate of 8,747,528 shares).

          o    Certain  members of the Long Group will  assign $2 million of the
               total debt owed them by the Company.

          o    For a three  year  term,  MKG will give the Long  Group a royalty
               equal to 1% of net sales of the Company's  products MKG generates
               worldwide;

          o    Pursuant to the terms of the  Consulting  Agreement,  Dr. Long or
               his nominee will remain as a consultant to the Company for a term
               of three years and receive an annual payment of $60,000 upon each
               anniversary of the Consulting Agreement; and

          o    MKG shall  exercise  voting  rights of any and all  shares of the
               Company's stock in favor of Dr. Long or his nominee  remaining on
               the Board of the Company and all stock options and other benefits
               to which other Board members are entitled.

         Specifically, at the March 31, 2006 closing, the Long Group transferred
all of its  shares  of common  stock  presently  issued  to them in the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  20.6% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long intended to remain on the Board so long as his health permitted but he died
on April 8, 2006 and his  assignee has not been  nominated.  The other two Board
members (Dr.  Raymond Long and John  Stephens) have  resigned,  their  vacancies
being  filled  by  James  MacKay  (the  Chairman  of the  Board  of MKG) and his
designee,  Michael Yom,  thereby  giving MKG control of the  Company's  Board of
Directors.  Further,  as of March 31,  2006,  certain  members of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the "Assigned Debt").

         Pursuant to the agreements,  MKG has undertaken to make reasonable best
efforts to cause the Company to convert all of the Assigned  Debt into shares of
Common Stock of the Company at $0.05 per share (the "Converted Shares").  In the
event of the  conversion of all of the Assigned Debt into shares of Common Stock
of the Company,  MKG will retain 51% of the Converted  Shares plus an additional
portion of the Converted  Shares so that,  together with the shares MKG acquired
on March 30, 2006 from the Long Group, MKG would then hold 51% of all the shares
of Common Stock issued and outstanding (on a fully-diluted basis) of the Company
existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the debt to the Long Group.  In  addition,  pursuant to the  agreements,  to the
extent  that any other debt owed to the Long Group by the  Company is  converted
into  shares of Common  Stock,  the Long Group  agreed to  transfer  51% of such
shares to MKG.  In return  for the  foregoing  restructuring,  MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring Company's products to Asia and other markets as quickly as feasible.

         MKG is making these  purchases and is being  assigned the debt (as well
as possibly  converting the latter into Company's  Common Stock)  potentially to
gain control of the Company.
 MKG is not a member of a group relating to the Company.

         The Company has depleted all its cash  resources and the Company had to
let go all its employees, except the Chief Operating Officer and Chief Executive



                                       42
<PAGE>

Officer,  who does not  receive any  remuneration  for his  services.  Since the
employees' departure in November 2004, the Company has relied on past employees'
services on a consultancy  basis when funds are available as it is unable to pay
their  salaries on a regular  basis.  As at December 31, 2005,  the Company owes
$217,245 in back pay and accrued interest to the past employees.

         The  Company's  existence is  dependent  upon  management's  ability to
secure immediately cash to resolve its current liquidity  problems.  However, no
assurance  can be given that  management's  actions  will  result in  profitable
operations  or  the  resolution  of  the  Company's  liquidity   problems.   The
accompanying consolidated financial statements do not include any adjustments to
the amounts  and  classification  of assets and  liabilities  that might  result
should the Company be unable to continue as a going concern.

2.       THE COMPANY

         Biofield  Corp.  is a  development  stage  company that has developed a
system to assist in detecting breast cancer using a non-invasive procedure.  The
Company's  breast cancer  diagnostic  device,  the Biofield  Diagnostic  System,
employs single-use sensors to measure and analyze changes in cellular electrical
charge distributions associated with the development of epithelial cancers, such
as breast  cancer.  Principal  activities to date include  product  development,
conducting   clinical  trials,   seeking   permission  from  various  regulatory
authorities to market the device and raising  capital.  The Company  operates in
one market segment, the biomedical device segment.

         In March 1996,  the Company  completed its initial  public  offering of
1,819,000  shares of Common Stock, at a purchase price of $11.00 per share,  for
net proceeds of approximately $18 million.

         During  the  first  half of 1997,  the  Company  formed a wholly  owned
Delaware corporation,  Biofield International,  Inc., which established a branch
in Switzerland. The Subsidiary closed the branch in March 1999.

         In December  1997, the Company  received net proceeds of  approximately
$8.4  million  from the sale of  2,867,670  shares of Common  Stock in a private
placement.  Simultaneously, the Company issued 643,639 shares of Common Stock in
exchange for previously  issued warrants to purchase  1,574,930 shares of Common
Stock.

         In November 1998, the Company decided to eliminate  certain  operations
due to lack of adequate financial resources.  In December 1998, the Common Stock
was  delisted  from  trading on The Nasdaq  Stock  Market due  primarily  to the
Company's  inability to meet certain financial  criteria and, in March 1999, the
Company's  reporting  obligations under the Securities Exchange Act of 1934 were
terminated.  At such time,  the  Company  announced  that its  efforts  would be
directed to selling its existing  technology if it was  unsuccessful  in raising
additional capital.

         In December  1999,  the Company sold 14 million  shares of Common Stock
for $700,000 to Dr. Long and a related  investor and certain of their affiliated
entities. Simultaneously, the Company's Board of Directors was reconstituted and
Dr.  Long was  appointed  as the  Chairman  and Chief  Executive  Officer of the
Company.

         In 2000,  the Company's  then existing  device and sensors  received CE
mark certification and were granted ISO-9001 quality system status, which allows
the Company to market such device and sensors within the European community.

         In 2001  and  2002,  the  Company's  major  efforts  had  been  focused
primarily on activities  to seek FDA approval to market the Company's  device in
the  United  States,  marketing  the  device in  certain  overseas  markets  and
attempting to obtain funds for the operating and capital needs of the Company.

         Since 2003,  the Company has had to severely  curtail its activities as
its cash  resources  depleted and Dr. Long and his affiliates  extended  limited
funding for  operations  beyond March 31, 2003.  In 2004,  the Company  received
short-term  funding of $741,500,  from the two private  placements and a $50,000
note  payable  and  $253,698  from Dr. Long and his  affiliates,  and $161825 in
permanent  capital from the sale of shares of Common Stock under  Regulation  S.
See Notes 1 and 9. This  funding has enabled the Company to complete  and submit



                                       43
<PAGE>

an application to the FDA for its device and to continue operations in 2004.

          In 2005,  the Company  continued to curtail its activities due to lack
of funds. Dr. Long and his affiliates advanced money to pay off the $1.2 million
bank  line of credit  and  advanced  additional  $536,361  for  other  essential
expenses.  The Company  also  received  $295,250  from the sale of shares  under
Regulation S.

          As detailed in Note 1, MKG bought over all the shares held by the Long
Group.  MKG intends to aggressively market the Company's device  internationally
and plans on securing the necessary capital to achieve this objective.

         The  consolidated  financial  statements  include  the  accounts of the
Company and its wholly-owned subsidiary, Biofield International, Inc.

3.    SIGNIFICANT ACCOUNTING POLICIES

         Cash and Cash Equivalents

         The Company  considers cash on hand,  deposits in banks, and short-term
investments  purchased with an original maturity date of three months or less to
be cash and cash  equivalents.  The  carrying  amounts  reflected in the balance
sheets for cash and cash  equivalents  approximate  the fair values due to short
maturities of these instruments.

         Accounts Receivable

         The Company  provides an allowance for doubtful  accounts  equal to the
estimated  uncollectible  amounts. At December 31, 2005 and December 31, 2004, a
provision of $71,000 was made for bad and  doubtful  accounts,  representing  an
allowance of 100% for the outstanding accounts receivable.

         Inventory and Inventory Valuation Reserve

         Inventories  are stated at the lower of cost or market,  determined  by
the first-in,  first-out (FIFO) method,  including  provisions for obsolescence.
Obsolescence  is  based  upon  assumptions   concerning  future  demand,  market
conditions and anticipated timing of the release of next generation products. If
actual  market  conditions  or  future  demand  are less  favorable  than  those
projected by management,  or if next  generation  products are released  earlier
than anticipated, additional inventory write-downs may be required.

         Property and Equipment

         Property  and   equipment   are  stated  at  cost,   less   accumulated
depreciation and amortization.  Depreciation and amortization are computed using
straight-line methods over the estimated useful lives of the assets, principally
three to five  years,  or the  term of the  lease,  if  shorter,  for  leasehold
improvements.

         Patents and other intangible assets

         The costs of patents are amortized on a straight-line  basis over their
estimated  economic life, but not exceeding 17 years.  In December 2005,  during
the Company's  annual review of the carrying  values of patents and  trademarks,
the management  determined  that, due to increased  uncertainty  about obtaining
FDA's  approval  to  sell  the  Company's  device  in  the  United  States,  the
recoverability  of the  carrying  values of Patents and Trade Marks is in doubt.
The management is unable to determine and project future undiscounted cash flows
for  these  assets  with  reasonable   accuracy  due  to  these   uncertainties.
Consequently,  the Company  recorded a charge of $194,268 to provide in full for
these assets,  and this amount is recorded as a component of operating  expenses
in the Income Statement as a separate line item.


                                       44
<PAGE>


         Revenue recognition and deferred revenue

         The Company  recognizes revenue in accordance with SEC Staff Accounting
Bulletin ("SAB") No. 104, "Revenue Recognition".  SAB No. 104 requires that four
basic  criteria must be met before  revenue can be  recognized:  (1)  persuasive
evidence of an arrangement  exists;  (2) delivery has occurred;  (3) the selling
price is fixed and determinable;  and (4) collectibility is reasonably  assured.
Determination  of  criteria  (3) and (4) are  based  on  management's  judgments
regarding the fixed nature of the selling  prices of the products  delivered and
the  collectibility  of those  amounts.  Provisions for discounts and rebates to
customers,  estimated returns and allowances, and other adjustments are provided
for in the same period that the related sales are recorded. Royalty revenues are
recognized  in the period  they are earned.  The Company  defers any revenue for
which the product has not been delivered or is subject to refund until such time
that the Company and the customer  jointly  determine  that the product has been
delivered or no refund will be required.

         Income Taxes

         Income taxes are provided  based on the liability  method for financial
reporting  purposes in accordance with the provisions of Statements of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under this
method,  deferred tax assets and  liabilities  are recognized for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing  assets and liabilities are measured using enacted
tax rates  expected  to apply to  taxable  income  in the  years in which  those
temporary  differences  are  expected  to be removed or  settled.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
the statement of operations in the period that includes the enactment date.

         Impairment of Long-Lived Assets

         The Company has adopted SFAS No. 144,  which  requires that  long-lived
assets and  certain  identifiable  intangibles  held and used by the  Company be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that the carrying amount of an asset may not be recoverable.  Events relating to
recoverability  may  include   significant   unfavorable   changes  in  business
conditions,  recurring losses, or a forecasted  inability to achieve  break-even
operating   results  over  an  extended  period.   The  Company   evaluates  the
recoverability  of long-lived  assets based upon  forecasted  undiscounted  cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be  adjusted,  based on estimates  of future  discounted  cash flows
resulting from the use and ultimate  disposition of the asset. SFAS No. 144 also
requires  that assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell.

         Stock-Based Compensation

         The Company  applies the  intrinsic  value-based  method of  accounting
prescribed by Accounting  Principles  Board  Opinion 25,  "Accounting  for Stock
Issued to Employees",  and related interpretations,  in accounting for its stock
option  plans.  As such,  compensation  expense would be recorded on the date of
grant only if the current  market  price of the  underlying  stock  exceeded the
exercise  price.  SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation",
established  accounting and  disclosure  requirements  using a fair  value-based
method of accounting for stock-based employee  compensation plans. As allowed by
SFAS No.  123,  the  Company  has  elected to  continue  to apply the  intrinsic
value-based method of accounting described above, and has adopted the disclosure
requirements of SFAS No. 123 which are included in Note 17. The Company has also
adopted  the annual  disclosure  provisions  of SFAS No.  148,  "Accounting  for
Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS 123"
in its  financial  reports  for the year  ended  December  31,  2003 and for the
subsequent periods.

         In accordance with Financial Accounting Standards Board Emerging Issues
Task Force  ("EITF")  96-18,  the  measurement  date to determine fair value for
shares issued to consultants  was the date at which a commitment for performance
by the consultant to earn the equity instrument was reached.  The Company valued
the shares issued for consulting services at the rate which the Company believes
represents  the fair  value  of the  services  received,  which  did not  differ



                                       45
<PAGE>

materially from the value of the Common Stock issued.

         Research and Development

         The Company  accounts for research and development  costs in accordance
with the SFAS No. 2, "Accounting for Research and Development Costs". Under SFAS
No. 2, all  research  and  development  costs  must be  charged  to  expense  as
incurred.  Accordingly,  internal research and development costs are expensed as
incurred.  Third-party  research and  developments  costs are expensed  when the
contracted  work has been performed or as milestone  results have been achieved.
Company-sponsored  research and  development  costs  related to both present and
future  products  are expensed in the period  incurred.  Total  expenditures  on
research  and product  development  incurred for and the period from October 16,
1987 (date of inception) to December 31, 2005 were $40,481,889.

         Basic and Diluted Loss per Share

         The  basic  loss per  share is  computed  by  dividing  loss to  common
stockholders  by  the  weighted   average  number  of  shares  of  Common  Stock
outstanding  for the  period.  Diluted  loss per share  reflects  the  potential
dilution that could occur if the Company's  dilutive  outstanding  stock options
were exercised.  Common equivalent shares totaling  6,349,025 as at December 31,
2005  (2,217,931  as at  December  31,  2004) are not  included in the per share
calculations  of  diluted  loss per share,  since the effect of their  inclusion
would be antidilutive.

         Use of Estimates

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

         Reclassification

         Certain prior period figures have been  reclassified  to conform to the
current year's presentation.  Significantly, as recommended by the SEC, a charge
of  $2,140,897  relating  amortization  of shares  issued to  lenders  and other
finance costs for 2004 have been  reclassified in the Consolidated  Statement of
Operations  as a separate  line item under  `Interest  expense and other finance
costs' with a corresponding reduction in the selling, general and administrative
expenses to conform with the current year's presentation.

         Comprehensive Income

         SFAS No. 130, "Reporting  Comprehensive Income",  establishes standards
for reporting  and  displaying  of  comprehensive  income,  its  components  and
accumulated balances.  Comprehensive income is defined to include all changes in
equity,  except those resulting from investments by owners and  distributions to
owners.  Among other disclosures,  SFAS No. 130 requires that all items that are
required to be recognized  under current  accounting  standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company does not have any
items of comprehensive income in any of the periods presented.

         New Accounting Pronouncements

         In December  2004,  the FASB issued SFAS No. 123  (revised)  ("SFAS No.
123R"),  "Share-Based  Payment." SFAS No. 123R  eliminates  the intrinsic  value
method  under  APB  25,  "Accounting  for  Stock  Issued  to  Employees"  as  an
alternative  method of accounting  for  stock-based  awards.  SFAS No. 123R also
revises  the fair  value-based  method of  accounting  for  share-based  payment
liabilities,  forfeitures and modifications of stock-based  awards and clarifies
SFAS No.  123's  guidance  in several  areas,  including  measuring  fair value,
classifying  an award as equity or as a liability and  attributing  compensation



                                       46
<PAGE>

cost to  reporting  periods.  In  addition,  SFAS No.  123R  amends SFAS No. 95,
"Statement  of Cash Flows," to require that excess tax benefits be reported as a
financing  cash  inflow  rather  than as a  reduction  of taxes  paid,  which is
included  within  operating cash flows.  Public  companies are required to apply
SFAS No. 123R in the first annual  period  beginning  after June 15,  2005.  The
Company currently  accounts for its stock-based awards under the intrinsic value
approach  in  accordance  with APB Opinion  No. 25 and  discloses  the effect of
stock-based  awards as  required by SFAS No. 148,  "Accounting  for  Stock-Based
Compensation  --  Transition  and  Disclosure"  (see  Note  1 and  Note 2 to the
consolidated  financial  statements).  The  adoption of the new  standard  would
require the Company to recognize  compensation  expense for equity-based awards.
This will have the effect of reducing the Company's net income by the fair value
of the options in future  years,  beginning in 2006. We are not in a position to
know the effects of adoption of the new standard at this time.

4.   INVENTORIES
         Inventories at December 31, 2005 and 2004 consisted of the following:


                                            2005           2004
                                         ------------   ------------

Components and supplies                     $ 37,749       $ 37,749
Finished goods                               481,669        564,559
                                            --------       --------
                                             519,418        602,308
Less: Reserve for potential losses           519,418        602,308
                                            --------       --------
                                            $      -       $      -
                                            ========       ========

         Due to a 2001 Company  decision to  introduce an enhanced  model of its
device with updated  technology  and design  modifications  by 2003, the Company
created a reserve for the inventory of the old device. By December 31, 2002, the
Company had set aside $532,070 to fully provide for the old units and all of the
sensors for these units.  In 2004,  the Company fully provided for the remaining
inventory  amounting to $81,480.  In 2003, the Company replaced  inventory worth
$1,958 held by a distributor at no charge. This amount is disclosed as a part of
"Selling,   general  and   administrative"  in  the  accompanying   Consolidated
Statements of Operations.

5.       DEFERRED FINANCING COST

Deferred  financing  costs  at  December  31,  2005 and  2004  consisted  of the
following:


                                             2005           2004
                                         ----------       ---------

Deferred financing costs                          -         311,073
Private placement expenses                        -          19,002
                                         ----------       ---------
                                         $        -       $ 330,075
                                         ==========       =========


         The Company did not incur any deferred finance cost in 2005.  Financing
expenses (deferred financing costs and private placement expenses) pertaining to
the bridge financing  incurred in 2004, as discussed in Note 9, were $1,127,513.
The financing  expenses for 2004 included private placement costs and legal fees
of $86,938 and the fair market  values of $1,040,575  for the  3,707,500  shares
issued.  Costs relating to the bridge  financing are  capitalized  and amortized
over  the  term  of  the  debt,  using  the  straight-line  method.  Accumulated
amortization  at  December  31,  2005  and  2004 was  2,054,195  and  $1,724,120
respectively,  and deferred  financing  costs  charged to operations in 2005 and
2004 were  $330,075 and  $1,693,977  respectively.  Unamortized  portions of the
deferred finance cost are reflected in Other Current Assets in the Balance


                                       47
<PAGE>

Sheet.  All finance  expenses had been fully  amortized as at December 31, 2005.
See Note 9.


6.       PROPERTY AND EQUIPMENT, PATENT AND PATENT APPLICATION COSTS

         Property and  equipment at December 31, 2005 and 2004  consisted of the
following:


                                         2005           2004
                                       ------------------------
Furniture and office equipment         $  54,738     $   54,738
Plant and production equipment           144,308        144,308
                                       ---------     ----------
                                         199,046        199,046
Less accumulated depreciation            197,079        193,370
                                       ---------     ----------
                                       $   1,967     $    5,676
                                       =========     ==========



         Depreciation expense in 2005, 2004 and for the period from inception
through December 31, 2004, were $3,710, $7,739, and $2,390,411, respectively.

         The Company entered into a 15-year agreement dated December 22, 1992
with a consultant and inventor for the assignment of certain rights relating to
performance under a laboratory service agreement. The Company paid $100,000 for
such assignment and agreed to pay royalties of 5% of the Net Sales Price of
Covered Inventions (as defined), if any, subject to a limit of $2.5 million. No
royalties have been paid or accrued as of December 31, 2005.

         The Company has a patent royalty agreement with Dr. Long and his
affiliated corporation which assigns all rights to the Company for patented
inventions, if any, resulting from performance under a laboratory service
agreement (see Note 16). The Company has been issued a United States patent in
which Dr. Long is a named co-inventor. No royalties have been paid or accrued as
of December 31, 2005.

         In December 2005, during the Company's annual review the carrying
values of patents and trademarks, the management determined that, due to
increased uncertainty about obtaining FDA's approval to sell the Company's
device in the United States, the recoverability of the carrying values of
Patents and Trade Marks is in doubt. The management is unable to determine and
project future undiscounted cash flows for these assets with reasonable accuracy
due to these uncertainties. Consequently, the Company recorded a charge of
$194,268 to provide in full for these assets, and which is recorded as a
component of operating expenses in the Income Statement as a separate line item.

         Accumulated amortization for patents was $466,106 and $254,998 at
December 31, 2005 and 2004, respectively. Besides the impairment charge of
$194,268 in 2005, patent amortization expense for 2005, 2004, and for the period
from inception through December 31, 2005, were $37,594, $37,594 and $369,302,
respectively.










                                       48
<PAGE>



7.        ACCRUED EXPENSES

         Accrued expenses at December 31, 2005 and 2004 consisted of the
following:



                                                    2005           2004
                                                --------------------------

Professional fees                              $    258,350   $    283,369
Due to ex-employees                                 217,245        179,566
Interest accrued on short-term notes payable        200,830         13,290
Other                                                14,253          9,088
                                               ------------   ------------
                                               $    690,678   $    485,313
                                               ============   ============

         Due to severe cash flow constraints experienced by the Company in 2003,
its  employees  were not paid  salaries from April 16, 2003 to October 31, 2003.
Five of its six  employees  then agreed to the  deferment  of the payment of the
salary due to them, payable with 100% interest thereon, until the receipt of the
proceeds from new funding.  The Company also granted  options to acquire 514,227
shares of Common  Stock to these  employees  at an  exercise  price of $0.33 per
share,  the closing market price of the Company's  shares of Common Stock on the
date of the grant in consideration for the reduction in remuneration accepted by
them during the first four months of 2003.  As at December 31, 2005,  the unpaid
salary and interest  thereon,  together with unpaid  remuneration for subsequent
periods,  amounting  to  $217,245  is  recorded  as  accrued  expenses  in these
financial statements.

8.       BANK LINE OF CREDIT

         The Company had a revolving  line of credit with a commercial  bank for
$1.2 million. The line was secured by personal guarantees from and collateral of
Dr.  Long and  certain of his  affiliates.  The line of credit was repaid by Dr.
Long in June 2005,  and the amount is reflected as Advances from  Shareholder in
the accompanying  Balance Sheet. The line of credit bore interest at the greater
of 0.5% above the bank's prime rate (5.5% at December 31, 2004) or 5%.

9.       SHORT-TERM NOTES PAYABLE

         Private Placement ($1 million, December 2003)

         During  December 2003, the Company  received gross proceeds of $637,500
from the sale of 12.75  Units  (each Unit  consisting  of (a) a  non-negotiable,
non-transferable, unsecured promissory note (the "Note") in the principal amount
of $50,000,  bearing interest at 12% per annum, payable monthly, and (b) 250,000
shares of Common Stock) in a $700,000 private  placement.  The fair value of the
shares issued was  determined as $796,875,  based on the market price ($0.25 per
share) at the time of first issuance. The amount raised in the private placement
was  subsequently  increased from $700,000 to $1 million.  In January,  2004 and
February,  2004, the Company received  $250,000 and $125,500 from the sale under
this private  placement of the  remaining 5 Units and 2.25 Units,  respectively.
The fair values of the shares issued in January,  2004 and  February,  2004 were
determined  as $312,500 and  $140,625,  respectively,  based on the market price
($0.25 per share) at the time of first issuance.

         All  financing  expenses   pertaining  to  this  placement  were  fully
amortized in 2003 and 2004. In 2004 and 2003,  financing expenses  pertaining to
this private  placement  amounted to $499,163 and  $926,682,  respectively.  The
financing  expenses for 2004 and 2003 the placement  included private  placement
costs and legal fees of $46,038 and $129,807,  respectively, and the fair market
values of the shares  issued,  at December 31, 2004 and  December  31, 2003,  of
$453,125 and $796,875 for the 1,812,500 and 3,187,000 shares, respectively.  The
finance expenses were capitalized, and set forth as deferred financing costs and
these  costs  were  fully  amortized  over the term of the Note,  which  matured
December 31, 2004, using the straight-line method.  Accumulated  amortization at



                                       49
<PAGE>

December  31,  2004  and  December  31,  2003  were   $1,693,977   and  $30,142,
respectively,  and deferred  financing  costs  charged to operations in 2004 and
2003 were $1,663,835 and $30,142,  respectively. In addition to receiving 10% of
gross  proceeds as commission in cash,  the placement  agent  received five year
cashless warrants, exercisable at $0.20 per share, to purchase 10% of the number
of shares of Common  Stock issued to the holders of the Units.  A finder's  fees
equal to 2.7% of the gross proceeds was paid to an unaffiliated third party.

         The Notes  were due and  payable  on the  earlier  of the date that the
Company  received  gross  proceeds of at least $2.5 million from the sale of its
debt and equity securities (for which purpose, all such sales within a six month
period would be  aggregated)  or December  31, 2004.  The Notes were not paid by
December 31, 2004, and the Company issued an additional 125,000 shares of Common
Stock for each $50,000  principal  amount of unpaid Notes and the Notes would be
reset to bear interest at 1.5% per month. The Company issued 2.5 million shares,
and has recorded a charge in these financial statements of $350,000,  calculated
using the closing market price of $0.14 per share on December 31, 2004, the date
the notes were due.

         Under and subject to the terms and  conditions of the Notes,  a copy of
which was  attached  to the  Company's  prior SEC  filings,  until the Notes are
repaid,  the  note  holders  have  the  right  to  participate,   under  certain
circumstances and at certain discounts,  in, inter alia, the consummation of the
sale of debt or equity  securities  of the Company in an aggregate  amount of at
least $3,500,000.

         The Company has fulfilled its undertaking to register all  unregistered
shares of Common Stock issued as part of the private placement,  at its expense,
and to file a registration  statement  with the SEC to effect the  registration.
The Company has also complied with the  requirement of submitting an application
with FDA to market the Company's device in the United States.

         The annual effective rate of interest on the note was 90%.

         Private Placement ($329,000, May 2004)

         On May 3,  2004,  the  Company  signed an  agreement  similar to the $1
million  private  placement  agreement with the same  placement  agent to secure
further short-term bridging finance of up to $800,000.  Under the new agreement,
the Company sold $329,000 of its  securities  before it was closed on August 30,
2004.  The Company  received  gross  proceeds of $100,000,  $154,000 and $75,000
against  aggregate  issuance of $329,000  principal  amount of notes payable and
1,645,000  shares of Common Stock, at a cost of $509,950 on June 1, 2004,  July,
2004 and August, 2004, respectively.

         The value of Common  Stock  amounting  to  $509,950  and other  finance
expenses of $35,900 for financing costs that were amortized over the term of the
notes which became due on May 31, 2005. The  amortization  charges for the notes
issued under the $329,000 private  placement for 2005 and 2004 were $269,495 and
$276,355, respectively.

         In addition to receiving  10% of gross  proceeds as commission in cash,
the placement agent received five year cashless  warrants,  exercisable at $0.20
per share, to purchase 10% of the number of shares of Common Stock issued to the
holders of the Units.  A finder's  fees equal to 2.7% of the gross  proceeds  is
payable to an unaffiliated third party.

         The Notes  were due and  payable  on the  earlier  of the date that the
Company  receives  gross  proceeds of at least $2.5 million from the sale of its
debt and equity securities (for which purpose, all such sales within a six month
period would be  aggregated) or May 31, 2005. The Notes were not paid by May 31,
2005,  and the Company  issued an additional  125,000 shares of Common Stock for
each $50,000  principal amount of unpaid Notes and started accruing  interest at
1.5% per month. The Company issued 822,500 shares,  and has recorded a charge in
these financial statements of $16,450, calculated using the closing market price
of $0.02 per share on May 31, 2005, the date the notes were due.

         Under and subject to the terms and  conditions of the Notes,  a copy of
which was  attached  to the  Company's  prior SEC  filings,  until the Notes are
repaid,  the  note  holders  have  the  right  to  participate,   under  certain
circumstances and at certain discounts,  in, inter alia, the consummation of the
sale of debt or equity  securities  of the Company in an aggregate  amount of at
least $3,500,000.


                                       50
<PAGE>


         The Company has fulfilled its undertaking to register all  unregistered
shares of Common Stock issued as part of the private placement,  at its expense,
and to file a registration  statement  with the SEC to effect the  registration.
The Company has also complied with the  requirement of submitting an application
with FDA to market the Company's device in the United States.

         The annual effective rate of interest on the note was 132%.

$50,000 notes payable issued in 2004

         On September 8, 2004,  the Company signed an agreement for $50,000 with
the  placement  agent on the same  terms and  conditions  as those for the notes
issued under the $329,000 private  placement,  and received on September 8, 2004
and November 12, 2004, gross proceeds of $15,644 and $34,356 against issuance of
notes  payable of $15,644 and  $34,356 and shares of Common  Stock of 78,220 and
171,780, respectively.

         The  value of Common  Stock  amounting  to  $77,500  and other  finance
expenses of $5,000 for financing  costs that were amortized over the term of the
notes which became due on May 31, 2005.  The  amortization  charges for the note
for 2005 and 2004 were $60,227 and $22,273, respectively.

         The Notes  were not paid by May 31,  2005,  and the  Company  issued an
additional  75,000 shares of Common Stock and started accruing  interest at 1.5%
per  month.  The  Company  recorded,  for the 75,000  shares,  a charge in these
financial  statements of $1,500,  calculated  using the closing  market price of
$0.02 per share on May 31, 2005, the date the notes were due.

         The effective rate of interest on the note was 168%.

         In 2004,  the  Company has  capitalized  a total of  $1,127,513  (2003,
$926,682)  of finance  costs,  representing  the value of Common Stock issued of
$1,040,575 (2003, $796,875) and finance expenses of $86,938 (2003, $129,807), of
which  $797,438  (2003,  $30,143) is  amortized,  leaving an  aggregate  cost of
$330,075  unamortized.  In 2005,  the Company did not incur or defer any finance
costs or expenses,  and amortized the remaining $330,075 of unamortized deferred
costs on the three set of notes indicated above.

10.      ADVANCES FROM STOCKHOLDERS

         Advances from stockholders  included  payments  amounting to $1,050,000
received from Dr. Long and his  affiliates  during 2002 to finance the Company's
working capital needs.  The debt is unsecured and became payable on demand after
December 31, 2002.  The debt bears interest of 2% above the prime rate (7.25% at
December 31,  2005).  The interest is  calculated  quarterly,  and is payable in
unregistered shares of Common Stock, unless Dr. Long requests payment in cash at
the start of the applicable  quarter.  The number of shares to be issued for the
interest accrued during any quarter is determined using the closing price of the
Common  Stock on the last  business day of the  quarter.  In 2005 and 2004,  the
interest amounted to $85,740 and $64,743, respectively. At December 31, 2005 and
2004,  since no cash  payment was  requested  for any  quarter,  an aggregate of
3,007,078  shares and 696,778  shares of Common Stock were reserved for issuance
in payment of the  interest.  As at December  31, 2005 and 2004,  total  accrued
interest  of  $317,613  and  $167,129,   respectively,  have  been  credited  to
Additional Paid-In Capital.

         Advances from  stockholders  also included  payments  received from Dr.
Long and his affiliates in 2005, 2004 and 2003 amounting to $1,605,381, $162,897
and $670,539,  respectively.  In June 2005, Dr. Long and his affiliates paid off
$1.2  million due on the bank line of credit.  This  amount was  credited to the
2005 advance account.  The advances bear interest of 10% per annum. The interest
for 2005 and 2004 amounted to $155,886 and $56,472,  respectively,  and has been
accrued and added to the debt.

11.      LONG-TERM DEBT - RELATED PARTY



                                       51
<PAGE>


         On November 8, 2002, the Company  issued its 10% three-year  promissory
convertible   note  in  the  principal   amount  of  $450,000  to  Dr.  Long  in
consideration  for his  loan to the  Company  in such  amount.  The  note  (with
accrued,  unpaid  interest  thereon)  is  convertible  at the end of three years
(November 8, 2005),  at the option of the holder,  into  unregistered  shares of
Common  Stock at the rate of $0.40 per share,  the  closing  price of the Common
Stock on November 5, 2002.  Interest  for 2005 and 2004  amounted to $55,214 and
$50,194, respectively, and has been added to the note amount and is disclosed as
short-term portion of the long-term debt in these financial statements.

12.      INCOME TAXES

         Due to the Company's operating losses,  there was no provision for U.S.
income taxes in 2005 and 2004.

At December 31, 2005,  the Company had Federal net operating loss carry forwards
of approximately $64 million,  which expire in years 2006 through 2025. However,
substantially  all of the net operating loss carry forwards are not  utilizable,
as a result of the  limitations  imposed by Section 382 of the Internal  Revenue
Code, due to ownership  changes in 1992, 1995, 1997 and 1999. To the extent that
these losses are  utilizable,  they may be offset  against  future U.S.  taxable
income, if any, during the carry forward period.

         The tax effects of temporary differences that give rise to deferred tax
assets at December 31, 2005 and 2004 are as follows:



                                                     2005              2004
--------------------------------------------------------------------------------

Deferred tax assets:
    Net operating loss carryforwards             $ 24,393,597      $ 24,797,058
    Research and development credits                  510,609           510,609
    Other                                                --                --
                                                 ------------      ------------
Total gross deferred tax assets                    24,904,206        25,307,667
Deferred tax liabilities:
    Depreciation and amortization                    (108,468)          (40,763)
                                                 ------------      ------------
Net deferred tax assets                            24,795,738        25,266,904
Less valuation allowance                          (24,795,738)      (25,266,904)
                                                 ------------      ------------
Net deferred tax assets                          $       --        $       --
                                                 ============      ============


         The valuation  allowances  are equal to the deferred tax assets because
of the uncertainty of the future realization of the assets.

13. COMMITMENTS AND CONTINGENCIES

Lease Commitments

         Total rental expense relating to operating expenses for the years 2005,
2004 and for the period  from  inception  to December  31,  2005,  was  $82,813,
$84,593 and $1,573,846, respectively.

         In 1999, the Company canceled or terminated  various office leases that
were being rented for  approximately  $17,000 per month.  Beginning in 1999, the
Company  rented an office at an annual  rental of $12,000.  As of  December  31,
2005, the Company occupied an aggregate of approximately  2,000 square feet near
Atlanta, Georgia under month-to-month leases, for an annual rental of $14,400.

         Prior to MKG's acquisition of the controlling  interest of the Company,
the Company  intended to move its operations to San Diego,  California when cash
resources  become  available.  It had  subleased  from Abel  Laboratories,  Inc.
("Abel"), an affiliate of Dr. Long, approximately 5,000 square feet of furnished



                                       52
<PAGE>

and laboratory  equipped space.  Under the  arrangement,  the Company was to pay
Abel  the  same  amount  of  rent  paid by Abel  to the  landlord,  without  any
adjustment.  Abel's rent is $60,672,  with an automatic annual  adjustment based
upon any increase  that may occur in the Consumer  Price Index.  Abel waived the
rental charge during three months of 2002. Abel's lease expires April 1, 2007.

        Employee Agreements

         The  Company  has no  current  employment  agreements.  Pursuant  to an
agreement with a former  officer,  the Company was obligated to pay royalties of
2% and 1%,  respectively,  on two  inventions  for  which  the  officer  was the
inventor or co-inventor  through December 31, 2005 or until such royalties reach
$8 million, whichever occurs first. No royalties had been paid or accrued to the
officer as of December 31, 2005.

        Vendor Commitments

         As part of its ongoing efforts to conserve cash resources, the Company,
in 1999, negotiated agreements and settlements with certain vendors.  During the
period ended December 31, 1999, certain  vendor-payable amounts were settled for
about  $77,000  less  than the  invoiced  amounts.  In  addition,  approximately
$101,000 of the current  accounts payable balances at December 31, 2005 and 2004
has been  deferred by  agreement  with  vendors  until the Company has  adequate
financial resources.

        Bank Line of Credit

         The  Company  had  a  revolving  line  of  credit  arrangement  with  a
commercial bank to borrow up to $1.2 million with interest at the greater of the
bank's prime rate plus 0.5%. The borrowing limit under the line of credit, which
originally was $500,000,  was increased in November 2001 to $750,000, in January
2002 to $1 million and in June 2003 to $1.2 million.  The line of credit expired
on May 2, 2005,  and Dr. Long and certain of his  affiliates  who had guaranteed
the repayment of all  borrowings,  which also are secured with certain assets of
the guarantors,  paid off the debt. As of December 31, 2005, the amount paid off
by Dr. Long and his  affiliates  is shown as Advances  from  Stockholder  in the
accompanying Balance Sheet.

        Redesign Agreement

         In October  2001,  the  Company  entered  into a $364,000  contract  to
redesign the Biofield  Diagnostic  System.  As of December 31, 2005, the Company
had paid $237,504 and owed $152,195 under the contract,  including cost relating
to contract amendments.

        Distribution Agreements

         In  December  2001,   the  Company   signed  an  exclusive   three-year
distribution  agreement to market and to sell the Biofield  Diagnostic System in
southern  Africa,  subject to the distributor  achieving  specified annual sales
targets.  The Company signed similar  distribution  agreements in 2002 for South
Korea,  Brazil,  Italy  and  Philippines,  in 2003 for  certain  Middle  Eastern
countries  and in 2005  for  certain  Far East  countries.  Except  for  initial
purchases of demonstration  devices, no subsequent  purchases have been made and
each of the agreements may be terminated by the Company.

        Notes Payable

        In connection  with the issuance of its Notes and shares of Common Stock
in the $329,000 private placement (see Notes 9 and 19), the Company is obligated
to issue an  additional  125,000  shares of its  Common  Stock for each  $50,000
principal  amount of unpaid Notes on May 31, 2005,  the date of maturity and the
Notes would be reset to bear  interest at 1.5% per month.  On December 31, 2004,
the Company  defaulted in repaying  the notes  issued  under $1 million  private
placement and issued 2.5 million  shares which were required to be issued to the
investors  under  the  terms  of the  agreement.  On May 31,  2005,  the date of
maturity for  $329,000 and $50,000  placements,  the Company  defaulted  and the
Company issued 897,500 shares in accordance with the terms of the agreement.



                                       53
<PAGE>


         The Notes  were due and  payable  on the  earlier  of the date that the
Company  receives  gross  proceeds of at least $2.5 million from the sale of its
debt and equity securities (for which purpose, all such sales within a six month
period would be aggregated) or May 31, 2005.  Under and subject to the terms and
conditions of the Notes, a copy of which was attached to the Company's prior SEC
filings,  until  the  Notes  are  repaid,  the note  holders  have the  right to
participate,  under certain  circumstances and at certain  discounts,  in, inter
alia, the  consummation of the sale of debt or equity  securities of the Company
in an aggregate amount of at least $3,500,000.

         In addition, the placement agent was issued five year cashless warrants
to acquire 1,029,250 shares,  exercisable at $0.20 per share, to purchase 10% of
the  number  of shares of Common  Stock  issued to the  holders  of the Units in
accordance  with the terms of the agreement.  Of the warrants  issued to acquire
1,029,250 shares, warrants to acquire 339,750 shares were as penalty for default
to repay notes on maturity.

Royalty fees payable to Dr. Long and his affiliates

         Pursuant the change of control  agreements dated March 30, 2006, signed
between MKG and the Long Group, the Company is required to pay to the Long Group
a 1% royalty  with  respect  to net sales of the  Company's  products  generated
worldwide.  The precise method in which the royalties will be determined,  paid,
and verified shall subsequently be agreed to by MKG and the Long Group.

Consultancy fees payable to Dr. Long

         Pursuant the change of control  agreements dated March 30, 2006, signed
between MKG and the Long Group, the Company is required to pay $60,000 per annum
as consultancy fees to Dr. Long or his assignee for three years.

14. ROYALTY AGREEMENT

         In October  2000,  the Company  entered  into a  non-exclusive  license
agreement with a manufacturer of medical  devices to use the Company's  patented
cable designs. The agreement,  which was due to expire on December 31, 2003, was
extended to December 31, 2004 in consideration for the acceleration of the final
royalty  payment,  which was paid in 2003.  The  agreement  was not  renewed  on
expiration on December 31, 2004.

15. STOCKHOLDERS' EQUITY

         Private Placements in 1993, 1994 and 1995

         In  December  1993,  the  Company  completed  a  private  placement  of
2,342,118  shares of its Series A Preferred Stock for $9,413,490 (net of related
expenses of  $1,126,041).  $1 million of the net  proceeds  were used to pay off
related party loans (see Note 16).

         In September 1994, the Company completed a private placement of 481,644
shares of its Series B Preferred Stock for $1,947,631  (net of related  expenses
of $219,761), and issued, for no additional consideration,  warrants to purchase
2,843 shares of Common  Stock.  The warrants  expired  unexercised  in September
1999.





                                       54
<PAGE>


         During  1995,  the Company  completed a private  placement of 2,914,771
units of its securities for $11,980,771 (net of related expenses of $1,135,699).
Each unit consisted of (a) a share of Series C Preferred  Stock, (b) one-half of
a warrant to purchase a share of Series D Preferred Stock at $6.00 per share or,
upon the occurrence of certain events (which subsequently  occurred), a share of
Series C Preferred  Stock at $4.50 per share,  and (c)  one-half of a warrant to
purchase a share of Series D Preferred  Stock at $6.00 per share.  In  addition,
the purchasers of the units (the "Unit Purchasers") were granted the right, upon
the occurrence of certain events, to receive warrants to purchase 357,192 shares
of Common Stock at an exercise  price of $9.18 per share.  The warrants  expired
unexercised in March 2000.

         Initial Public Offering (IPO) in 1996

                  In March 1996,  the  Company  completed  its IPO of  1,819,000
shares of Common Stock at a purchase  price of $11.00 per share for  $18,028,238
(net of related  expenses of  $1,980,762).  Upon  completion of the IPO (a) each
outstanding share of Series A Preferred Stock was converted into .5729 shares of
Common  Stock,  (b) each  outstanding  share of  Series B  Preferred  Stock  was
converted  into .5729  shares of Common  Stock,  (c) each  outstanding  share of
Series C Preferred  Stock was converted  into .4902 shares of Common Stock,  (d)
each outstanding  warrant to purchase a share of Series C Preferred Stock became
exercisable for .4902 shares of Common Stock, and (e) each  outstanding  warrant
to purchase a share of Series D Preferred  Stock  became  exercisable  for .4902
shares of Common Stock.  The Series C warrants  entitled the holders to purchase
an aggregate of 78,976 shares,  84,425 shares, and 84,425 shares of Common Stock
at an exercise  price of $9.18,  $12.24 and $9.18 per share,  respectively.  The
Series C warrants  expired  unexercised  in June 2000. In June 1996, the Company
issued to the Unit  Purchasers  warrants  to purchase  357,192  shares of Common
Stock  at  an  exercise  price  of  $9.18  per  share.  These  warrants  expired
unexercised in March 2000.

         Private Placements in 1997, 1999 and 2000

                  In December 1997, the Company completed a private placement of
2,867,670  shares of Common  Stock for  $8,380,451  (net of related  expenses of
$652,710).  The Company also issued to the Unit Purchasers  participating in the
placement 643,639 shares of Common Stock in exchange for their previously issued
warrants to purchase 1,574,930 shares of Common Stock.

         In December  1999,  the Company  completed  a private  placement  of 14
million shares of Common Stock for $700,000 (see Note 16).

         In December  2000,  the  Company  completed  a private  placement  of 3
million shares of Common Stock for $1.5 million.

         Share Issues to Directors and Officers in 2000

         In January 2000, the Board of Directors  authorized the sale of 100,000
shares of Common Stock to each of its two  nonaffiliated  directors and three of
its then principal executive  officers,  at a price of $0.05 per share, the same
price at which the  Company  sold shares of Common  Stock in December  1999 in a
private  placement.  The sale to the  directors  was  based  on their  foregoing
compensation  for their services to the Company during 2000, and the sale to the
executive  officers was based on their  agreements to accept a maximum salary of
$100,000 in 2000. The Company  recognized  $198,000 as  compensation  expense in
2000 for the issuance of these shares.

         Voluntary services rendered by Dr. David Long since 2000

         During 2000 and every year thereafter,  Dr. Long had provided  services
to the  Company  without  compensation.  The  value  of his  services  has  been
estimated  at $100,000  for each year,  which  amount was recorded as a non-cash
expense with a corresponding increase in the additional paid-in capital.

         Changes to Authorized Share Capital in 2000

         In October 2000, the Company amended its articles of  incorporation  to
increase the number of authorized  shares of Common Stock from 25 million shares



                                       55
<PAGE>

to 40 million shares, and to reclassify all authorized shares of Preferred Stock
as "undesignated preferred".

         Convertible note in favor of Dr. Long in 2002

         In November  2002,  the Company  issued its 10%  three-year  promissory
convertible   note  in  the  principal   amount  of  $450,000  to  Dr.  Long  in
consideration  for his  loan to the  Company  in such  amount.  The  note  (with
accrued,  unpaid interest  thereon) is convertible at the end of three years, at
the option of the holder,  into unregistered  shares of Common Stock at the rate
of $0.40 per share,  the closing  price of the Common Stock on November 5, 2002.
The note and interest  thereon was not repaid on the due date in November  2005.
At December 31, 2005,  the  principal and unpaid  interest  amounted to $607,350
(December 31, 2003 - $552,136).

         Shares due for interest accrued on 2002 advances by Dr. Long

         Interest on advances  amounting to $1,050,000 from Dr. Long during 2002
is payable in  unregistered  shares of Common  Stock,  unless Dr. Long  requests
payment in cash for a quarter  before the beginning of that quarter.  The number
of shares to be issued for the interest accrued during any quarter is determined
using the  closing  price of the Common  Stock on the last  business  day of the
quarter.  At December 31, 2005,  an aggregate of 3,007,078  (December 31, 2004 -
696,778)  unregistered shares of Common Stock have been reserved for issuance in
payment of the then accrued  interest.  At December 31, 2005,  the total accrued
interest  of  $317,613  had been to  additional  paid-in  capital,  pending  the
issuance of 3,007,078 shares of Common Stock.

         Treasury Stock

         In December 1998, the Company  repurchased  2,246,131  shares of Common
Stock for $100. In June 2000,  the Company  repurchased  60,000 shares of Common
Stock for $3,000 from an executive who resigned.  The Company holds all of these
shares in its treasury.

         Shares issued to consultants for service rendered in 2003

         In January  2003,  the Company  issued  50,000  unregistered  shares of
Common Stock as  consideration  for advising the Company in attempting to obtain
additional capital, which services were valued by the Company at $15,000.

         In April 2003, the Company issued 468,750 unregistered shares of Common
Stock as consideration  for business and financial  advisory  services valued by
the Company at $150,000.

         In August  2003,  the Company  issued  225,000  unregistered  shares of
Common  Stock as  consideration  for  public  relations  and  corporate  imaging
services  valued by the Company at $24,750,  and 50,000  unregistered  shares of
Common Stock as  consideration  for financial  advisory  services  valued by the
Company at $5,500.

Private Placement of $1 million in 2003

         In December 2003, the Company issued 3,187,500  unregistered  shares of
its Common Stock to the purchasers in a private  placement of 12.75 Units of its
securities  for  $507,693  (net of  related  expenses  of  $129,807).  Each Unit
consisted of (i) a non-negotiable,  non-transferable,  unsecured promissory Note
in the  principal  amount of $50,000,  due and payable on December  31, 2004 and
bearing interest at 12% per annum,  payable monthly,  and (ii) 250,000 shares of
Common Stock. See Note 9.

         The  purchasers of the Units are to receive (i) an  additional  125,000
shares of Common Stock for each $50,000  principal amount of Notes which are not
repaid by December 31, 2004,  (ii) an  additional  25,000 shares of Common Stock
per Unit at the  start of each 30 days of delay if the  Company  has not made an
FDA filing within 180 days of December 4, 2003,  and (iii) an additional  25,000
shares  of  Common  Stock  per Unit at the start of each 30 days of delay if the
shares of Common  Stock  issued as a result  of the  private  placement  are not
effectively registered with the SEC before July 20, 2004. See Note 13.

         In  addition,  the  placement  agent is to receive  five year  cashless



                                       56
<PAGE>

warrants,  exercisable  at $0.20 per  share,  to  purchase  10% of the shares of
Common Stock received by the purchasers of the Units.

         The  Notes  are due and  payable  on the  earlier  of the date that the
Company  receives  gross  proceeds of at least $2.5 million from the sale of its
debt and equity securities (for which purpose, all such sales within a six month
period would be  aggregated)  or December  31, 2004.  The Notes were not paid by
December 31, 2004,  and the Company is obligated to issue an additional  125,000
shares of Common Stock for each $50,000 principal amount of unpaid Notes and the
Notes would be reset to bear interest at 1.5% per month.  The Company issued 2.5
million  shares,  and has  recorded a charge in these  financial  statements  of
$350,000,  calculated  using  the  closing  market  price of $0.14  per share on
December 31, 2004,  the date the notes were due.  Under and subject to the terms
and conditions of the Notes, a copy of which was attached to the Company's prior
SEC  filings,  until the Notes are repaid,  the note  holders  have the right to
participate,  under certain  circumstances and at certain  discounts,  in, inter
alia, the  consummation of the sale of debt or equity  securities of the Company
in an aggregate  amount of at least  $3,500,000.  The Company has  fulfilled its
undertaking to register all  unregistered  shares of Common Stock issued as part
of the private placement,  at its expense, and to file a registration  statement
with the SEC to effect the registration.  The Company has also complied with the
requirement of submitting an application with FDA to market the Company's device
in the United States.

Private Placement of $329,000 in 2004

         On May 3,  2004,  the  Company  signed an  agreement  similar to the $1
million  private  placement  agreement with the same  placement  agent to secure
further short-term bridging finance of up to $800,000.  Under the new agreement,
the Company sold $329,000 of its  securities  before it was closed on August 30,
2004.  The Company  received  gross  proceeds of $100,000,  $154,000 and $75,000
against  aggregate  issuance of $329,000  principal  amount of notes payable and
1,645,000  shares of Common Stock, at a cost of $509,950 on June 1, 2004,  July,
2004 and August, 2004, respectively.

         The  purchasers of the Units are to receive (i) an  additional  125,000
shares of Common Stock for each $50,000  principal amount of Notes which are not
repaid by May,  2005.  The Company  issued  822,500  shares,  and has recorded a
charge in these financial  statements of $16,450,  calculated  using the closing
market  price of $0.02 per share on May 31,  2005,  the date the notes were due.
See Note 13.

         In  addition,  the  placement  agent is to receive  five year  cashless
warrants,  exercisable  at $0.20 per  share,  to  purchase  10% of the shares of
Common Stock received by the purchasers of the Units.

$50,000 notes payable issued in 2004

         On September 8, 2004,  the Company signed an agreement for $50,000 with
the  placement  agent on the same  terms and  conditions  as those for the notes
issued under the $329,000 private  placement,  and received on September 8, 2004
and November 12, 2004, gross proceeds of $15,644 and $34,356 against issuance of
notes  payable of $15,644 and  $34,356 and shares of Common  Stock of 78,220 and
171,780,  respectively.  The Company  issued 75,000  shares,  and has recorded a
charge in these  financial  statements of $1,500,  calculated  using the closing
market price of $0.02 per share on May 31, 2005, the date the notes were due.

Sale of shares under Regulation S in 2004

         On October 13,  2004,  the  Company  engaged an  investment  broker and
consultant to obtain  financing its operations while waiting for FDA approval by
offering  the  Company  shares of Common  Stock to  non-U.S.  citizens  overseas
investors  in  accordance  with  the  provisions  of  Rule  903 or  Rule  904 of
Regulation S or pursuant to registration of the securities  under the Securities
Act of 1933 at a cost of 50% of the  amount  of gross  capital  raised  as fees.
Under the agreement, the broker bears all the associated marketing and operating
costs, and is required to offer the shares at a price per share of not less than
$0.10. Under this arrangement,  the Company received aggregate gross proceeds of
$123,400 against  aggregate  issuance of 1,224,000 shares of Common Stock, at an
aggregate  discount  of $38,425  over the  market  price on the date of the sale
during the period  from  October 29, 2004 to December  31,  2004.  In 2005,  the
Company  received  aggregate  gross  proceeds  of $295,250  against  issuance of
3,240,333  shares of Common Stock at an  aggregate  discount of $90,167 over the
market price on the date of the sale.



                                       57
<PAGE>


Increase in authorized capital to 60 million in 2005

         In  March  2005,  the  Board  of  Directors  and  the  majority  of the
stockholders  of the  Company  approved  to increase  the  Company's  authorized
capital of Common Stock from 40 million shares to 60 million shares.

16. RELATED PARTY TRANSACTIONS

The Laboratory Agreement

         In June 1992, the Company  entered into a series of agreements with Dr.
Long, then a director of the Company, and Abel Laboratories, Inc. ("Abel") which
is owned by Dr. Long. One of the agreements (the "Laboratory Agreement") engaged
Abel  to  provide  specified  preclinical  research.   Although  the  Laboratory
Agreement  expired in  December  1993,  the  parties  agreed  that any  research
conducted  thereafter by Abel for the Company would be pursuant to substantially
the same  terms as the  Laboratory  Agreement.  Abel has  conducted  preclinical
research for the Company since such time,  but none during the three years ended
December  31,  2005.  Amounts  owed to Abel at  December  31,  2005 and 2004 are
recorded as "Due to affiliate" in the accompanying financial statements.

         In connection with the Laboratory  Agreement,  the Company granted Abel
an option  to  purchase  61,275  shares  of  Common  Stock at $8.16  per  share.
Following completion of the Company's Series A Preferred Stock private placement
in  December  1993,  the  exercise  price of the option was reduced to $2.04 per
share  based on the market  capitalization  of the  Company at such time.  These
options expired unexercised in June 2002.

        During  1995,  the Company  granted Dr. Long  options to acquire  24,510
shares of Common Stock at $10.20 per share, exercisable when services were to be
rendered in future. These options expired unexercised in March 2000.

         The Company,  in January 1994,  entered into a patent royalty agreement
with Dr.  Long and  Abel,  which  assigned  all  rights to the  Company  for any
patented inventions  resulting from performance under the Laboratory  Agreement.
In return,  the  Company  agreed to pay  royalties,  ranging  from 5% to 20 % of
revenue generated from such patented  inventions,  up to a maximum of $2 million
per  invention.  As of December 31, 2005, the Company has been issued one United
States patent in which Dr. Long is a named co-inventor,  but the Company had not
paid or accrued any royalties to Dr. Long under the agreement.

The Long Transaction

         Dr.  Long  resigned  as a director  of the  Company in April  1993.  In
December  1999, Dr. Long and his son,  Raymond Long,  M.D., and certain of their
affiliated  entities,  purchased  14  million  shares of Common  Stock  from the
Company (the "Long  Transaction")  for  $700,000.  Simultaneously,  Dr. Long was
appointed  a  director  of the  Company,  and the  remaining  directors  and the
executive  officers  resigned.  Dr. Long reconstituted the Board of Directors of
the Company.  Dr.  Raymond Long was appointed a director,  and the Board elected
Dr. Long as Chairman and Chief Executive Officer.

         In connection with the Long Transaction,  D. Carl Long ("Mr.  Long"), a
son of Dr. Long, received a payment of $60,000 from the Company in consideration
for a  release  of all  obligations  owed to him by the  Company  under his then
employment agreement and consulting arrangement, as well as for a release of all
then  outstanding  options to purchase Common Stock.  The employment  agreement,
dated July 7, 1997,  was for a term  through  July 7, 2000 and  provided for Mr.
Long's employment,  as President and Chief Executive Officer of the Company,  at
an initial  base  compensation  of  $250,000  annually,  plus a bonus of $70,000
subject to realization of certain milestones, and an automatic 5% cost-of-living
increase.  Mr. Long also had been issued  options to  purchase an  aggregate  of
338,238  shares of Common Stock at prices ranging from $1.02 to $9.18 per share.
The  consulting  arrangement  had been  entered  into as of April 15, 1999 for a
monthly fee of $15,000. Although Mr. Long received no compensation for the three
years  ended  December  31,  2005,  he  received  $702,467  for the period  from
inception  to December  31, 2005.  In  addition,  although Mr. Long  received no
reimbursements  for any expenses during the three years ended December 31, 2005,



                                       58
<PAGE>

he received  reimbursement of $313,425 for the period from inception to December
31, 2005.

         An entity  controlled by C. Leonard Gordon,  who had been the Chairman,
President and Chief  Executive  Officer of the Company until his  resignation in
1999 (in  connection  with the Long  Transaction),  had been  receiving a fee of
$80,000  annually  for Mr.  Gordon's  services.  During  the three  years  ended
December 31, 2005, Mr. Gordon and his affiliated  entities  received no payments
from the Company.  In connection with the Long  Transaction,  Mr. Gordon and his
wife sold to Dr. Long 1,068,034 shares of Common Stock for $53,700.

         Harvey Horowitz, who resigned as a director in connection with the Long
Transaction,  had  performed  legal  services  for  the  Company  prior  to  his
resignation.  During the three years ended December 31, 2005,  Mr.  Horowitz and
his  affiliated  law firm  received no payments,  but received  $109,095 for the
period from inception to December 31, 2005.

Share Issues to Directors and Officers in 2000

         In January 2000, the Board of Directors  authorized the sale of 100,000
shares of Common Stock to each of its then two nonaffiliated directors and three
of its then principal  executive  officers,  at a price of $0.05 per share,  the
same  price at which  the  Company  sold  shares  of  Common  Stock in a private
placement in December 1999. See Note 15.

Voluntary services rendered by Dr. Long Since 2000

        From 2000 to 2005, Dr. Long provided services to the Company without any
compensation  or benefit  realized by Dr.  Long.  The value of his  services was
estimated at $100,000 for each year, and was recorded as a non-cash expense with
a corresponding increase in the additional paid-in capital.

Sub-Lease from Abel Laboratories, Inc.

         In January 2001, the Company entered into an oral arrangement with Abel
for the sublease of approximately  5,000 square feet of furnished and laboratory
equipped space in San Diego, California. See Note 13.

Stock options to Dr. Long for line of credit guarantee in 2001

         In 2001, the Company granted Dr. Long options to acquire 350,000 shares
of Common Stock at $0.62 per share,  the market price of the Common Stock on the
date of the grant, as compensation for his guaranty and collateralization of the
Company's line of credit from a bank during 2001.  The options were  exercisable
upon issuance and expire on November 28, 2006.

Advances and Long-Term Loan received from Dr. Long in 2002, 2003 and 2004

         From March 2002 to December 2005, Dr. Long and his affiliates  extended
financial support to the Company  aggregating $3.5 million,  including  $450,000
note and accrued  interest of $157,350  thereon  which was repayable in November
2005. All the balances now are repayable on demand. See Notes 10 and 11.

17.      Stock Options


      At December  31,  2005,  the Company has three stock  option plans (the
"Plans"), which are described below.

The 1992 Employee Stock Incentive Plan (the "1992 Plan")

         The  1992  Plan  provides  for  the  grant  of  stock  options,   stock
appreciation  rights  ("Rights") and stock bonus awards  ("Awards") to acquire a
maximum of 147,060 shares of Common Stock. The 1992 Plan permits the granting of
incentive stock options ("ISOs") and nonqualified  stock options  ("NSOs").  The



                                       59
<PAGE>

1992 plan provides  that the exercise  price for ISOs and Rights may not be less
than the fair market value per share at the date of grant.  The price of NSOs is
determined at the time of grant.  ISOs and Rights must expire within 10 years of
the date of grant. However, if ISOs are granted to persons owning more than 10 %
of the voting stock of the Company,  the exercise price may not be less than 110
% of the fair  market  value per share at the date of grant and the term of such
ISOs may not exceed five years.  Vesting of options  granted under the 1992 Plan
is determined  at the time of grant and has  generally  been set at two or three
years. No further options may be granted under the 1992 Plan.

The Biofield Corp. 1996 Option Plan (the "1996 Plan")

         The 1996 Plan, as amended, provides for the grant of options to acquire
a maximum of 1.5  million  shares of Common  Stock.  The 1996 Plan  permits  the
granting of ISOs and NSOs.  ISOs may be granted to individuals  who, at the time
of grant, are employees of the Company or its affiliates. NSOs may be granted to
directors,  employees,  consultants  and  other  agents  of the  Company  or its
affiliates.  The 1996 Plan provides that the exercise  price for ISOs may not be
less than the fair  market  value per share of the  Common  Stock at the date of
grant  and the  exercise  price  for NSOs may not be less  than 85% of such fair
market  value.  Each  ISO must  expire  within  10  years of the date of  grant.
However,  if ISOs are  granted  to persons  owning  more than 10 % of the voting
stock of the Company,  the exercise price may not be less than 110 % of the fair
market  value  per  share at the date of grant and the term of such ISOs may not
exceed  five years.  Unless  otherwise  provided  at the time of grant,  options
granted  under the 1996  Plan  vest at a rate of 25 % per year over a  four-year
period.

The Biofield  Corp.  1996 Stock  Options Plan for  Non-Employee  Directors  (the
"Directors' Plan")

         The  Directors'  Plan  provides  for  the  automatic  grant  of NSOs to
non-employee directors. Options under the Directors' Plan may be granted only to
directors  of the  Company  who are not  employees  of the  Company.  Under  the
Directors' Plan,  150,000 shares of Common Stock have been reserved for issuance
upon  exercise of the options.  Each eligible  director  serving on the Board of
Directors on the effective date of the Directors' Plan automatically received an
option to purchase  10,000 shares of Common  Stock,  subject to vesting in three
equal  annual  installments.  Subsequently,  whenever a new  director  joins the
Board, such director automatically receives options,  unless waived, to purchase
10,000  shares of Common  Stock on the date of his or her election to the Board,
subject to vesting in three equal annual installments.  In each year, other than
the year in which a director receives an initial grant of options, such director
automatically  receives,  unless  waived,  options to purchase  2,500  shares of
Common Stock.  The term of each option granted under the  Directors'  Plan is 10
years. The exercise price of each option under the Directors' Plan must be equal
to the fair market value of the Common Stock on the grant date.

         All options  granted under the Plans have an exercise price equal to or
in excess of the fair market price of the Common Stock on the grant date.

         In 2003,  the Company  granted NSOs under the 1996 Stock Option Plan to
purchase an aggregate of 514,227 shares of Common Stock at $0.33 per share,  the
closing  market price of the Common  Stock on the date of the grant,  to five of
its employees in connection with the reduction in their remuneration  during the
first four months of 2003.

         A summary of the status of the Plans as of December 31, 2005, 2004, and
2003, and the changes  during the years ended December 31, 2005,  2004, and 2003
is presented below:









                                       60
<PAGE>

<TABLE>

                                               2005                      2004                           2003
                                     --------------------------    -------------------------    ------------------------
                                                    AVERAGE                       AVERAGE                    AVERAGE
                                       OPTIONS   EXERCISE PRICE    OPTIONS    EXERCISE PRICE    OPTIONS   EXERCISE PRICE
<S>                                                                           <C>               <C>       <C>


Outstanding at beginning of period     473,831   $      0.46       829,227    $   0.44           450,000    $   0.83
Granted                                   --                          --                         514,227        0.33
Exercised
Canceled                                  --                      (355,396)       0.41          (135,000)       1.32
                                     ---------   -----------     ---------       -----          --------       -----

Outstanding at end of year             473,831          0.46       473,831        0.46           829,227        0.44
                                     ---------   -----------     ---------       -----          --------       -----
Options exercisable at year end        373,831          0.42       366,331        0.41           614,227        0.38
                                     ---------   -----------     ---------       -----          --------       -----
Options available for future grant   1,210,496
                                     ---------

Weighted-average fair value of options
  granted during the period                 N/A                       N/A                      $   0.33
                                          -----                      ----                      --------



         The Company, through 1998, granted NSOs outside of the Plans to certain
officers and directors of, and consultants to, the Company which are exercisable
over  various  periods  through  November  28,  2006.  Certain of these NSOs are
performance-based  options and become exercisable solely upon the achievement of
certain milestones as described in the option agreements and certain NSOs become
exercisable immediately in the event of a merger or sale of all or substantially
all of the assets of the Company.

         In 2001, NSOs were granted to Dr. Long as compensation for his guaranty
and  collateralization  of the Company's line of credit from a bank during 2001.
The options were  exercisable upon issuance and expire on November 28, 2006. See
Note 16.

         A summary of the status of the Company's NSOs granted outside the Plans
as of December 31, 2005,  2004, and 2003 and the changes during 2005,  2004, and
2003 are presented below:


                                             2005                      2004                           2003
                                     --------------------------    -------------------------    ------------------------
                                                    AVERAGE                       AVERAGE                    AVERAGE
                                       OPTIONS   EXERCISE PRICE    OPTIONS    EXERCISE PRICE    OPTIONS   EXERCISE PRICE


Outstanding at beginning of period     350,000          0.62       368,382       0.74           386,764    $   1.06
Granted                                   --                          --                           --
Exercised                                 --           --             --          --               --
Canceled                                  --           --          (18,382)      3.00          (18,382)        7.48
                                     ---------   -----------     ---------      -----          --------       -----

Outstanding at end of year             350,000          0.62       350,000       0.62           368,382    $   0.74
                                     ---------   -----------     ---------      -----          --------       -----
Options exercisable at year end        350,000          0.62       350,000       0.62           368,382    $   0.74
                                     ---------   -----------     ---------      -----          --------       -----

Weighted-average fair value of options
  granted during the period                 N/A                       N/A                         N/A
                                          -----                      ----                        -----

</TABLE>

         The  following  table  summarizes   information   about  stock  options
outstanding at December 31, 2005:






                                       61
<PAGE>


                   Number                          Number
                 Outstanding      Weighted-       Exercisable      Weighted-
Range               at            Average            at             Average
of Exercise      December 31,     Remaining       December 31,     Exercise
Prices              2005           Life (Yrs.)       2005            Price
================================================================================

$   0.33         258,831            2.08          258,831          $   0.33
    0.44           5,000            0.75            5,000              1.75
    0.62         560,000            0.92          560,000              0.62
                 -------                          -------
                 823,831                          823,831
                 =======                          =======



         As provided by SFAS 148, the fair value of each option  granted  before
the IPO in 1996 is  estimated  on the  date of grant  using  the  minimum  value
method,  and the fair value of each option  grant after the IPO is  estimated on
the date of grant using the  Black-Scholes  option pricing model.  The following
weighted-average  assumptions  were used for option  grants  during 2003 with an
expected life of five years: (a) dividend yield of 0.0%; (b) expected volatility
of  98.76%;  and (c)  risk-free  interest  rate of 3.98%.  There were no options
granted in 2005 or 2004.

         On February 23, 2006, the Company granted options to purchase 1,000,000
and 100,000 shares of the Company's Common Stock to John Stephens, the Company's
Senior Vice President and Cri Hilmer, Vice President of Sales, respectively,  at
an exercise  price of $0.04.  On March 1, 2006, the Company  granted  options to
purchase  100,000  shares  of the  Company's  common  stock to Piyush  Desai,  a
financial consultant for services rendered. All the options vest on the dates of
the grants and expire on February  23, 2011.  The market price of the  Company's
share on the dates of all the grants of options was 0.027.

         Had  compensation  cost for the Plans been determined based on the fair
value at the grant dates  consistent  with the method of SFAS 123, the Company's
net loss and net loss per common and common equivalent share for the years ended
December  31,  2005,  2004 and 2003 would have been  increased  to the pro forma
amounts indicated below:

                                      2005             2004            2003
                                 ---------------------------------------------
Net loss, as reported            $  (2,225,312)   $  (3,846,517)   $(2,164,698)
Add: Total stock-based
 employee compensation
 expense determined under
 fair value based method for
 all awards, net of related tax
 effects                                     -           (5,659)      (133,961)
                                 -------------    -------------   ------------
Pro forma net loss               $  (2,225,312)   $  (3,852,176)  $ (2,298,659)



Earnings per share:
Basic and diluted loss per share:
 as reported                     $       (0.06)   $       (0.12)  $      (0.08)
 pro forma                       $       (0.06)   $       (0.12)  $      (0.09)
                                 =============    =============   ============



         In  addition  to the  options  indicated  above,  the  Company  granted
five-year  cashless  warrants  with an  exercise  price  of $0.20  per  share as
compensation  to the  placement  agent under the 1 million and $379,000  private
placements  in 2003 and 2004.  A summary  of the  status of the  warrants  as of
December  31,  2005,  2004,  and 2003,  and the  changes  during the years ended
December 31, 2005, 2004, and 2003 is presented below:



                                       62
<PAGE>

<TABLE>


                                                  2005                           2004                           2003
                                      -------------------------------   --------------------------   ------------------------------
                                                         Average                      Average                            Average
                                        WARRANTS       EXERCISE PRICE   WARRANTS    EXERCISE PRICE    WARRANTS        EXERCISE PRICE
<S>                                                                           <C>   <C>               <C>             <C>


Outstanding at beginning of period          689,500       $0.20           318,750      $0.20                  -         $0.00
Granted                                     339,750        0.20           370,750       0.20            318,750          0.20
Exercised
Canceled                                         -         0.00                -        0.00                  -          0.00
                                         ----------       -----          --------      -----           --------          ----
Outstanding at end of year               1,029,250         0.20          689,500        0.20            318,750          0.20
                                         ----------       -----          --------      -----           --------          ----
Warrants exercisable at year end         1,029,250         0.53          689,500        0.20            318,750          0.20
                                         ----------       -----          --------      -----           --------          ----

</TABLE>



18.       DEVELOPMENT STAGE COMPANY

         The Company is in the development stage, and its operations are subject
to the risks  inherent in the  establishment  of a new business with  previously
untested  technology.  The  Company  has  generated  nominal  revenues  and  has
accumulated  losses of more  than $72  million  for the  period  from  inception
through  December  31,  2005.  Since  inception,  the Company has  financed  its
operations  primarily by the issuance of equity  securities,  interest income on
the then unutilized proceeds from these issuances and short-term borrowings.

         During 2005, the Company financed its operations with (a) $1,736,361 of
advances  from Dr. Long and his  affiliates,  and (b) $295,250  from issuance of
shares of Common Stock. See Notes 8, 9 and 10.

         The Company  requires the  immediate  infusion of long-term  capital to
continue it operations. See Note 1.

19.       SUBSEQUENT EVENT

Issue of options for services rendered

         On February 23, 2006, the Company granted options to purchase 1,000,000
and 100,000 shares of the Company's Common Stock to John Stephens, the Company's
Senior Vice President and Cri Hilmer, Vice President of Sales, respectively,  at
an exercise  price of $0.04.  On March 1, 2006, the Company  granted  options to
purchase  100,000  shares  of the  Company's  common  stock to Piyush  Desai,  a
financial  consultant for services rendered.  All the options vested immediately
and expire on February 23, 2011. The market price of the Company's  share on the
dates of grant of options was 0.027.

Change in ownership control

        On March 30, 2006,  the Long Group entered into three  agreements  with
MKG. The agreements provide, among other things, that:

          o    MKG will  acquire  all the shares of Common  Stock of the Company
               presently  issued to the Long Group  (comprising  an aggregate of
               8,747,528 shares).

          o    Certain  members of the Long Group will  assign $2 million of the
               total debt owed them by the Company.

          o    For a three  year  term,  MKG will give the Long  Group a royalty
               equal to 1% of net sales of the Company's  products MKG generates
               worldwide;




                                       63
<PAGE>


          o    Pursuant to the terms of the  Consulting  Agreement,  Dr. Long or
               his nominee will remain as a consultant to the Company for a term
               of three years and receive an annual payment of $60,000 upon each
               anniversary of the Consulting Agreement; and

          o    MKG shall  exercise  voting  rights of any and all  shares of the
               Company's stock in favor of Dr. Long or his nominee  remaining on
               the Board of the Company and all stock options and other benefits
               to which other Board members are entitled.

         Specifically, at the March 31, 2006 closing, the Long Group transferred
all of its  shares  of common  stock  presently  issued  to them in the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  20.6% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long  intended to remain on the Board so long as his health  permits but he died
on April 8, 2006 and his  assignee has not been  nominated;  the other two Board
members (Dr.  Raymond Long and John  Stephens) have  resigned,  their  vacancies
being  filled  by  James  MacKay  (the  Chairman  of the  Board  of MKG) and his
designee,  Michael Yom,  thereby  giving MKG control of the  Company's  Board of
Directors.  Further,  as of March 31,  2006,  certain  members of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the "Assigned Debt").

         Pursuant to the agreements,  MKG has undertaken to make reasonable best
efforts to cause the Company to convert all of the assigned  debt into shares of
Common Stock of the Company at $0.05 per share (the "Converted Shares").  In the
event of the  conversion of all of the Assigned Debt into shares of Common Stock
of the Company,  MKG will retain 51% of the Converted  Shares plus an additional
portion of the Converted  Shares so that,  together with the shares MKG acquired
on March 30, 2006 from the Long Group, MKG would then hold 51% of all the shares
of Common Stock issued and outstanding (on a fully-diluted basis) of the Company
existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the debt to the Long Group.  In  addition,  pursuant to the  agreements,  to the
extent  that any other debt owed to the Long Group by the  Company is  converted
into  shares of Common  Stock,  the Long Group  agreed to  transfer  51% of such
shares to MKG.  In return  for the  foregoing  restructuring,  MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring Company's products to Asia and other markets as quickly as feasible.


         MKG is making these  purchases and is being  assigned the debt (as well
as possibly  converting the latter into Company's  Common Stock)  potentially to
gain  control of the  Company.  MKG is not a member of a group  relating  to the
Company.

Royalty fees payable to Dr. Long and his affiliates

         Pursuant the change of control  agreements dated March 30, 2006, signed
between MKG and the Long Group, the Company is required to pay to the Long Group
1%  royalty  with  respect  to net  sales of the  Company's  products  generated
worldwide.  The precise method in which the royalties will be determined,  paid,
and verified shall subsequently be agreed to by MKG and the Long Group.

Consultancy fees payable to Dr. Long

         Pursuant the change of control  agreements dated March 30, 2006, signed
between MKG and the Long Group, the Company is required to pay $60,000 per annum
as consultancy fees to Dr. Long or his assignee for three years.



                                       64
<PAGE>



ITEM 8A. CONTROLS AND PROCEDURES.





Based on his evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure  controls and procedures need improvement and were
not adequately effective as of December 31, 2005 to ensure timely reporting with
the  Securities  and Exchange  Commission.  Our  management is in the process of
identifying  deficiencies with respect to our disclosure controls and procedures
and implementing  corrective  measures,  which includes the establishment of new
internal policies related to financial reporting.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING


As  required by Rule  13a-15(d),  the  Company's  Chairman  and Chief  Financial
Officer,  also  conducted an  evaluation of  Biofield's  internal  controls over
financial  reporting to determine whether any changes occurred during the fourth
fiscal  quarter  that have  materially  affected,  or are  reasonably  likely to
materially  affect,  the Company's  internal  control over financial  reporting.
During the preparation of the Company's  financial  statements as of and for the
year ended  December 31, 2005, the Company has concluded that the current system
of disclosure  controls and procedures was not effective because of the internal
control weaknesses identified below. As a result of this conclusion, the Company
has  initiated the changes in internal  control,  to the extent  possible  given
limitations in financial and manpower resources, also described below. It should
be noted that any system of controls,  however well designed and  operated,  can
provide only reasonable, and not absolute,  assurance that the objectives of the
system will be met. In  addition,  the design of any control  system is based in
part upon certain assumptions about the likelihood of future events.



LACK OF ADEQUATE ACCOUNTING STAFF

The  Company  was aware of its  staffing  needs and took  steps to  address  its
understaffed Finance and Accounting team to correct this material weakness.  The
Company engaged an independent  contractor with extensive  CFO-level  management
and SEC  reporting  experience  in public  companies.  The  Company  feel's this
addition to the Company's  Finance and Accounting  team will improve the quality
of future period financial reporting.

TIMELY CLOSING OF THE BOOKS

Management  identified  a  material  weakness  based on the  Company's  delay in
closing its books.

To correct this  material  weakness,  checklists  will be developed  delineating
tasks,  preparation  responsibilities,  and  review  responsibilities  targeting
specific  completion  dates. The checklist will provide  evidentiary  support of
work  performed  and  reviewed.   Specific   checklist  will  be  developed  for
non-quarter  end  months,  quarter  end  months,  and the  annual  close.  These
checklists  have been  developed and will be implemented in the 2nd quarter 2005
close  process and  utilized  in the  preparation  of the 2nd quarter  2005 Form
10-QSB and subsequent period ends.

ITEM 8B.    OTHER INFORMATION

            None.

                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Our directors and executive officers are:

Name                                 Age      Positions and Offices
James MacKay                         47       Chairman of the Board
Michael Yom                          39       Director

         Each of our current  directors  was appointed to serve as a director by
the then existing Board of Directors. Each director serves until the next annual
meeting of  stockholders  and until his  respective  successor  is  elected  and
qualified,  or until his earlier resignation or removal.  Our executive officers
are appointed by, and serve at the  discretion  of, our Board of Directors for a
term ending at the first meeting of our Board of Directors after the next annual
meeting of stockholders, or until his earlier resignation.

         Dr.  David Long  resigned  as the  Chairmen  and Mr.  James  MacKay was
appointed  our  Chairman and a director as of March 30,  2006.  Mr.  MacKay is a
global entrepreneur and venture capitalist respected by governments, financiers,
businesses and other organizations  throughout the world He has been involved in
a number of  significant  international  projects  with  other  associates.  His
contacts extend to leading government and industry  representatives from France,
the United Kingdom,  China, Japan,  Korea,  Thailand,  Singapore,  India and the
Philippines,  among other countries.  During his career,  he has helped fund and
operate  and/or been  otherwise  involved  in  significant  ventures  worldwide,
including,  but not limited,  to ventures  associated  with  individuals  in the
musical and entertainment  industry;  leading hotels and resorts in Europe,  the
Caribbean, and/or Asia; individuals in the aviation industry; leading technology
related to global tracking,  homeland/global  security, and anti-counterfeiting;
port development and initiatives  between Asia and the United States;  passenger
and cargo air traffic  servicing parts of Asia and beyond;  leading  healthcare/
medical  technology,  especially  those servicing the Philippines and China; and
mining and oil in Asia.

         Within the last five years,  Mr. MacKay has served and currently serves
as the  chairman  of  several  public  companies  providing  leading  technology
throughout the world,  including China,  Europe, and North America.  Since April
2004,  he has  served  and  continues  to serve as the  chairman  of Sure  Trace
Security   Corporation   (OTC:   SSTY),   which  provides   leading   integrated
anti-counterfeiting  technology,  software,  and solutions throughout the world.
Previously, Mr. MacKay served the following capacities, among others:


November 2002-April 2004:  CYOB Systems Ltd.              Director

June 2002-November 2004:   World Gaming Corp.             Interim CEO

May 2001-June 2002         Self-Employed Entrepreneur     Consultant

Mr.  MacKay is also the  chairman of Globe Staff  Consulting  Corporation  (OTC:
GFSC), a leading provider of geotracking and security  technology and solutions.
Sure Trace owns a controlling  interest in Globe Staff. Mr. MacKay helped secure
arrangements for Globe Staff to provide  sophisticated global tracking and other
security-related  solutions for the French Ministry of Interior.  After 8 months
research and development the delivery of Globe Staff's newest tracking prototype
to the  French  police  has passed  all their  initial  tests.  Based in part on
MacKay;s  contacts,  Globe  Staff  has  announced  that  it  intends  to  expand
operations to other parts of Europe and Asia, including China.

Mr.  MacKay is also the  chairman of Globe Staff  Consulting  Corporation  (OTC:
GFSC), a leading provider of geotracking and security  technology and solutions.
Sure Trace owns a controlling  interest in Globe Staff. Mr. MacKay helped secure
arrangements for Globe Staff to provide  sophisticated global tracking and other
security-related  solutions for the French Ministry of Interior.  After 8 months
research and development the delivery of Globe Staff's newest tracking prototype
to the  French  police  has passed  all their  initial  tests.  Based in part on
MacKay;s  contacts,  Globe  Staff  has  announced  that  it  intends  to  expand
operations   to   other   parts   of   Europe   and   Asia,   including   China.

         Mr. MacKay is also the chairman of True Product ID, Inc.  (OTC:  TPDI),
which is the  operational  arm of Sure Trace and Globe Staff.  To create a world
standard for Sure Trace's leading anti-counterfeiting and geotracking solutions,
Mr. MacKay hired one of Philadelphia's  leading  technology and  knowledge-based
executives,  Richard A. Bendis,  as TPID's  president and CEO. Mr. Bendis,  most
recently  president  and  CEO  of  Innovation   Philadelphia  (IP),  a  regional
technology-based  economic development  organization,  brings to TPID a long and
distinguished career as entrepreneur,  corporate executive,  venture capitalist,
investment banker,  and consultant in the technology and healthcare  industries.
He is also an  international  business  consultant  and featured  speaker to the
United Nations, NATO, the European Commission, MITI, and global technology-based
enterprises and countries. Mr. MacKay further hired global technology leader and
innovator,  John. G. Voeller, as TPID's Chief Technology Officer. Mr. Voeller is
currently  Senior Vice President,  Chief Knowledge  Officer and Chief Technology
Officer  for Black & Veatch,  a  multi-billion  dollar  global  engineering  and
construction  company.  He has consulted for the Department of Homeland Security
and has been bestowed with the American  Society of Mechanical  Engineers (ASME)
Fellowship  in the Office of Science  and  Technology  Policy for the  Executive
Office of the President of the United States.

         Mr.  MacKay is the  chairman  of the MacKay  Group,  Inc.  ("MKG").  In
addition  to  Biofield,  MKG is the joint  venture  partner  of First  Versatile
Smartcard Solutions Corporation with regard to the Manila Central Clearing House
Project The Project  will  provide and develop one of the leading  smartcard  (a
debit-like  card  for  low-value   transaction)   systems  in  the  Philippines,
including,  but not limited to, in connection with the public  transport  market
and leading  service  providers in Manila such as department  stores,  fast food
outlets,  telecommunications companies and petrol/service stations. Based on its
contacts in Asia, MKG hopes that the system can be replicated  throughout  Asia,
including China. MKG also uses its significant  contacts in Asia, Europe,  North
America and elsewhere to pursue  international  ventures relating to healthcare,
biotechnology, and pharmaceutics;  advanced technology and software development;
aviation  (passenger/cargo);   mining;  oil;  hotel,  resort,  and  real  estate
development; entertainment; and port development, among others.

         Dr.  Raymond Long and Mr. John  Stephens  resigned as directors and Mr.
Michael Yom was  appointed as a director and  President of the Company.  Mr. Yom
has a  distinguished  background  spanning  over 15 years in  international  and
domestic  business.  He has extensive  experience  in the medical  device field,
particularly  in  the  areas  of  business   development,   strategic  planning,
management and mergers and  acquisitions.  Prior to Biofield,  from June 2005 to
March 30,  2006,  Mr. Yom  served as a senior  operational  consultant  for Sure
Trace,  where he  helped  oversee  investor  relations,  fund  raising,  and due
diligence activities on acquisition  targets.  Prior to Sure Trace, from 2000 to
June 2005, Mr. Yom was the executive vice  president,  corporate  strategy,  for
Encapsulation  Systems,  Inc. where he was employed since 2000. There, he helped
oversee aspects relating to presenting and negotiating  financing  opportunities
with venture capital firm, angel investors,  and reverse acquisition targets. He
helped oversee R&D, regulatory,  clinical trial, vendor,  funding, and licensing
aspects for a number of  significant  projects,  including  those related to the
Transdermal Drug Delivery System and Encapsulated Bicarbonate.


         On April 8, 2006,  Dr. David Long died.  He had continued to serve as a

director after the change in the control of ownership on March 30, 2006.

                                       65
<PAGE>


         No family  relationship  exists among any of our directors or executive
officers.

         As none of our directors would be considered to be  independent,  we do
not have an Audit Committee.  Our most recent independent  directors resigned in
December 2002, and we have not had the available  financial  resources to obtain
any replacements.  Furthermore,  none of our directors would have the experience
to be considered an audit committee financial expert.

         Our Board of Directors does not have a separate  nominating  committee,
and has no formal  procedures  relating  to  consideration  of  nominees  by its
stockholders of persons proposed to be elected to its Board of Directors.

         None of our  directors or executive  officers has been  involved in any
legal  proceedings  during  the past five years  that  would be  material  to an
evaluation of his ability or integrity to act as such.

         Our Board of Directors  has adopted a Code of Ethics  which  applies to
our  principal  executive  officer,   principal  financial  officer,   principal
accounting officer or controller and persons  performing  similar  functions.  A
copy of our Code of Ethics will be furnished, without charge, to any person upon
written request to Michael Yom, President at our principal executive offices.

OTHER SIGNIFICANT EMPLOYEES

         Due to lack of  resources,  we have  not been  able to hire  any  other
employees on a permanent  basis. We rely on some of our past employees for vital
and critical  services,  if available,  as consultants or seek required services
from other outside professionals.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section  16(a) of the Exchange Act  requires the  Company's  directors,
executive officers and persons who beneficially own more than ten percent of the
Company's  Common Stock,  to file initial  reports of  beneficial  ownership and
reports of changes in beneficial  ownership  with the SEC.  Executive  officers,
directors and greater than ten percent beneficial owners are required by the SEC
to furnish the Company with copies of all Section 16(a) forms they file.

         Based  upon a review  of the  copies  of such  forms  furnished  to the
Company and written  representations  from the Company's  executive officers and
directors,  the Company believes that during fiscal year ended December 31, 2005
all Section 16(a) filing  requirements  applicable  to its  executive  officers,
directors and greater than ten percent beneficial owners were complied with on a
timely  basis,  except for each of Dr. David M. Long,  Jr.,  President and Chief
Executive  Officer,  and Long  Family  Partners  II LP,  an owner of ten-  (10%)
percent or more of the Company's Common Stock,  each of whom failed to file on a
timely  basis a report  required by Section  16(a).  Each  transaction  has been
subsequently reported.

ITEM 10.    EXECUTIVE COMPENSATION.

SUMMARY OF EXECUTIVE COMPENSATION

         The following table sets forth information concerning  compensation for
services in all capacities awarded or paid to, or earned by, our chief executive
officer and our other executive officer who received,  on an accrual basis, cash
compensation  from us  aggregating  at least  $100,000  during  the  year  ended
December 31, 2005.






                                       66
<PAGE>


<TABLE>



                                                      SUMMARY COMPENSATION TABLE
                                                                                         Long-Term
                                                                                        Compensation
                                                      Annual Compensation                  Awards
Name                                                                                No. of Securities     All Other
and Principal Positions              Year        Salary       Bonus       Other     Underlying Options    Compensation
<S>                                                                                 <C>                   <C>

David M Long, Jr., M.D.,Ph.D.         2005         -            -           -                -                   -
  Former Chairman and Chief
  Executive Officer
                                      2004         -            -           -                -                   -
                                      2003         -            -           -                -                   -

John D. Stephens                      2005    $112,333          -           -                -                   -
 Former Senior Vice President and
Chief Operating Officer

                                      2004    $133,907(1)       -       10,615(2)            -                   -

                                      2003     $60,843(3)    $ 2,000        -         101,538 shares(4)          -


</TABLE>


-------------------------------

     (1) Includes  $33,574  salary for 2003 paid to him in 2004;  excludes  2004
     salary of $9,667 not paid in 2004.
     (2) Represents part of agreed premium on 2003 unpaid salary paid in 2004.
     (3) Excludes  $33,574 salary due to him for 2003, but not paid. This unpaid
     salary,  and an  agreed  premium  thereon  (and for late  paid  salary)  of
     $48,583,  aggregating  $82,157,  is being  deferred until we determine that
     adequate funds are available.
     (4)  Represents  stock  options  granted on February 4, 2003 under our 1996
     Stock  Option  Plan at an  exercise  price of $0.33 per share,  the closing
     price of our common stock on the date of grant. These options currently are
     immediately exercisable. The options were issued in lieu of salary for four
     months in 2003.

STOCK OPTIONS GRANTED

         We did not grant any stock options or stock appreciation rights in 2005
to our Executive Officers.

AGGREGATED OPTIONS EXERCISED AND YEAR-END VALUES

         The  following  table sets forth the total  number of  exercisable  and
unexercisable  stock options held by each of our executive officers named in the
above Summary  Compensation  Table who held any stock options as of December 31,
2005.  No options to  purchase  our common  stock were  exercised  by any of our
executive  officers  during  the  year  ended  December  31,  2005  and no stock
appreciation rights were outstanding at December, 2005.

<TABLE>

                                  AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
                                    Number of Securities Underlying         Value of Unexercised
                                          Unexercised Options               In-the-Money Options
                                         at December 31, 2005               at December 31, 2005
<S>                                                                     <C>

Name                               Exercisable       Unexercisable      Exercisable    Unexercisable

David M. Long, Jr.                 350,000 shares         -0-               -0-              -0-

John D. Stephens                   186,538 shares         -0-               -0-              -0-

</TABLE>


COMPENSATION OF DIRECTORS

         No cash  compensation  was paid to our directors  during the year ended
December  31,  2005,  and we have no  standard  arrangements  pursuant  to which



                                       67
<PAGE>

directors are compensated for any services provided as such.

         Our 1996 Stock Option Plan for Non-Employee  Directors provides for the
automatic grant of nonqualified stock options to non-employee  directors.  Under
the Plan,  150,000  shares of our common  stock have been  reserved for issuance
upon exercise of options to  non-employee  directors.  The Plan provides for the
automatic grant of options to eligible directors. Each non-employee director who
joins the Board will automatically  receive,  unless waived, an initial grant of
options to purchase 10,000 shares of our common stock at an exercise price equal
to the fair market  value per share at the date of grant,  subject to vesting in
three equal annual  installments.  In each year,  other than the year in which a
director receives an initial grant of options,  that director will automatically
receive,  unless waived, options to purchase 2,500 shares of our common stock on
the date of the Annual  Meeting of  Stockholders,  which vest  immediately  upon
being granted.  No options have been granted under the Plan during the last five
years.  If any options  granted  under the Plan,  for any reason,  expire or are
canceled or otherwise  terminated  without  having been  exercised in full,  the
shares  allocable  to the  unexercised  portion of these  options  again  become
available for grants under the Plan.  The term of each option  granted under the
Plan is ten years.  Options granted under the Plan must be exercised  before the
earlier of (a) the scheduled expiration date, or (b) one year following the date
of  termination  of service.  The  exercise  price of an option is payable  upon
exercise in cash. As of March 22, 2005, options for 150,000 shares of our common
stock are available for future grant under the Plan. Unless sooner terminated by
the Board, the Plan expires in January 2006.

EMPLOYMENT CONTRACTS

         We  do  not  have  any   employment   contracts  or   change-in-control
arrangements with any of our executive officers.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

         The  following  table sets forth,  as of March 31, 2006,  the number of
shares of our common stock beneficially owned by (a) each person or group who is
known to us to be the beneficial owner of more than 5% of our outstanding common
stock, (b) each of our current  directors,  (c) each of the persons named in the
Summary Compensation Table appearing under Item 10. - "Executive  Compensation",
and (d) all our directors and executive  officers,  as a group (three  persons).
Except as indicated in the footnotes to this table,  we believe that the persons
named in this table have sole voting and  investment  power with  respect to the
shares of our common stock indicated.  As of such date, we had 40,836,805 shares
of Common Stock outstanding and no shares of Preferred Stock outstanding.

Name (1)                      Shares Beneficially Owned (2)     Percent of Class

The MacKay Group, Inc.        8,747,531                          21.4%


-----------------------------------
     (1) The address for each person or entity,  except as otherwise  indicated,
         is c/o 1615 Walnut Street, 3rd Floor, Philadelphia, PA 19103.

     (2) All shares are held of record, unless otherwise stated.

CHANGE OF CONTROL

         On March 30, 2006,  the Long Group entered into three  agreements  with
The MacKay Group,  Inc.  ("MKG").  The agreements  provide,  among other things,
that:


          o    MKG will  acquire  all the shares of Common  Stock of the Company
               presently  issued to  The Long Group (comprising an aggregate  of
               8,747,528 shares).

          o    Certain  members of the Long Group will  assign $2 million of the
               total debt owed them by the Company.




                                       68
<PAGE>


          o    For a three  year  term,  MKG will give the Long  Group a royalty
               equal to 1% of net sales of the Company's  products MKG generates
               worldwide;


          o    Pursuant to the terms of the  Consulting  Agreement,  Dr. Long or
               his nominee will remain as a consultant to the Company for a term
               of three years and receive an annual payment of $60,000 upon each
               anniversary of the Consulting Agreement; and

          o    MKG shall  exercise  voting  rights of any and all  shares of the
               Company's stock in favor of Dr. Long or his nominee  remaining on
               the Board of the Company and all stock options and other benefits
               to which other Board members are entitled.

         Specifically, at the March 31, 2006 closing, the Long Group transferred
all of its  shares  of common  stock  presently  issued  to them in the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  21.4% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long had intended to remain on the Board so long as his health  permitted but he
died on April 8, 2006 and his  assignee  has not been  nominated;  the other two
Board  members  (Dr.  Raymond  Long  and John  Stephens)  have  resigned,  their
vacancies  being filled by James  MacKay (the  Chairman of the Board of MKG) and
his designee,  Michael Yom, thereby giving MKG control of the Company's Board of
Directors.  Further,  as of March 31,  2006,  certain  members of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the "Assigned Debt").

         Pursuant to the agreements,  MKG has undertaken to make reasonable best
efforts to cause the Company to convert all of the Assigned  Debt into shares of
Common Stock of the Company at $0.05 per share (the "Converted Shares").  In the
event of the  conversion of all of the Assigned Debt into shares of Common Stock
of the Company,  MKG will retain 51% of the Converted  Shares plus an additional
portion of the Converted  Shares so that,  together with the shares MKG acquired
on March 30, 2006 from the Long Group, MKG would then hold 51% of all the shares
of Common Stock issued and outstanding (on a fully-diluted basis) of the Company
existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the debt to the Long Group.  In  addition,  pursuant to the  agreements,  to the
extent  that any other debt owed to the Long Group by the  Company is  converted
into  shares of Common  Stock,  the Long Group  agreed to  transfer  51% of such
shares to MKG.  In return  for the  foregoing  restructuring,  MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring Company's products to Asia and other markets as quickly as feasible.

         MKG is making these  purchases and is being  assigned the debt (as well
as possibly  converting the latter into Company's  Common Stock)  potentially to
gain  control of the  Company.  MKG is not a member of a group  relating  to the
Company.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

         The following  table sets forth, as of December 31, 2005 (a) the number
of our securities  issuable upon the exercise of outstanding  options,  warrants
and rights, (b) the weighted-average exercise price of such outstanding options,
warrants and rights,  and (c) the number of our securities  remaining  available
for future issuance,  with respect to each of our compensation  plans (including
individual compensation arrangements).





                                       69
<PAGE>


<TABLE>

<CAPTION>

                                                 EQUITY COMPENSATION PLAN INFORMATION
<S>                                                                           <C>              <C>

                                                                                                        (c)
                                                                                                Number of securities
                                        (a)                                                    remaining available for
                               Number of securities to be              (b)                      future issuances under
                                issued upon exercise of     Weighted-average exercise          equity compensation plans
                                 outstanding options,       price of outstanding options,        (excluding securities
Plan category                      warrants and rights           warrants and rights           reflected in column (a))
Equity compensation
  plans approved by
  security holders                     823,831                       $0.53                        1,210,496
Equity compensation
  plans not approved by
  security holders                    1,029,250                        0.20                            -0-
      Total                           1,853,081                      $0.35                        1,210,496

</TABLE>


         From time to time, we have entered into  agreements  with third parties
who have agreed to render  investment  banking,  public  relations and financial
advisory  services  to us.  We  agreed  to issue to CGF  Securities,  Inc.,  the
placement  agent for our $1 million and $329,000  private  placement and $50,000
note,  which  commenced in December 2003 and was completed in November  2004, as
partial  compensation  for its services in the  placement,  warrants to purchase
689,500  shares,  being 10% of the shares of our common stock which we issued to
the investors in the placements. The warrants are exercisable during a five year
period  at $0.20  per  share.  The  equity  compensation  plan not  approved  by
shareholders  that is referred to in the above table  represents  our  agreement
with CGF  Securities,  and assumes that as stipulated in the agreement  with CGF
Securities,  we will be required to issue warrants to purchase  339,750 warrants
for defaulting to repay the notes on December 31, 2004.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In  June  1992,   we  entered   into  several   agreements   with  Abel
Laboratories,  Inc., an affiliate of Dr. David Long, our former Chairman. One of
these agreements,  a laboratory services  agreement,  which expired December 31,
1993,  engaged Abel to provide specified  preclinical  research to be managed by
Dr. Long.  Effective January 1, 1994,  pursuant to a master laboratory  services
agreement,  Abel agreed that any research  thereafter  conducted  for us by Abel
would be on substantially  the same terms as the laboratory  services  agreement
and would be on the basis of a budget approved by us. Although from time to time
Abel has conducted additional  preclinical research for us, no research had been
preformed by Abel since 1998.

         In June 1992,  we entered into a patent  royalty  agreement  with Abel,
which assigned to us all of Abel's rights and interests in all inventions and/or
technology  conceived  and/or  developed by Abel or Dr. David Long in connection
with  laboratory  services  performed  by Abel for us which relate to the use of
bioelectronics in the diagnosis,  screening or management of disease, infection,
ovulation or other bioelectric events. Under the agreement,  Abel is entitled to
royalties  of 5% of the  net  sales  of  products  incorporating  any  of  these
inventions or  technology  which are embodied in any patent issued to us, during
the life of the patent,  as well as 20% of the net  proceeds we may receive from
the license of the patent to others, up to a maximum of $2 million.  As of March
22,  2005,  one patent has been  issued to us that is covered by the  agreement,
although we have not obtained any revenues therefrom.

         In January 2001, we entered into an oral  arrangement with Abel for the
sublease of approximately 5,000 square feet of furnished and laboratory equipped
space. Under the arrangement,  we pay Abel the same amount of rent charged Abel,
Abel's  current  monthly rent is $5,056.  The lease  currently  expires April 1,
2007, and the rent increases to $5,268 with effect from April 1, 2006. We intend



                                       70
<PAGE>

to move all of our  operations to this leased space when, and if, cash resources
become  available.  We have  moved a portion  of our  research  and  development
records  to  this  leased  space,  although  the  Company's  administrative  and
regulatory  and quality  assurance  functions  are still carried out in, and our
full-time  employees are still located at, our Alpharetta,  Georgia  office.  We
paid monthly rent to Abel until  September  30, 2002,  at which time Abel waived
the rental charges from the three months ended December 31, 2002. For additional
information,  see Item 2. "Description of Property." As of December 31, 2004, we
owed an aggregate of $272,499  for rent and other  expenses  paid by Abel on our
behalf, including $55,516 for services rendered prior to 1998.

         In June 2000,  we obtained a $500,000  line of credit  from  California
Bank & Trust,  repayment of which had been  personally  guaranteed  by Dr. David
Long and certain of his affiliates and secured by their collateral. The line was
increased in November  2001 to  $750,000,  in January 2002 to $1 million and, in
June  2003,  to $1.2  million.  As of  December  31,  2004,  the line was  fully
utilized.  In December  2001,  we granted Dr. Long an option to acquire  350,000
shares of our common stock at $0.62 per share (the  closing  price of our common
stock  on  the  date  of  grant)  as   compensation   for  such   guaranty   and
collateralization  with respect to the 2001 year;  we have not  compensated  Dr.
Long  or  any  of  his   affiliates   with   respect   to  their   guaranty   or
collateralization  since such time, nor do we have any written  obligation to do
so.

         In March 2002,  Dr. David Long issued his written  commitment  to us to
provide  all  of  our  financing  needs  to  enable  us to  meet  our  operating
requirements  through the end of 2002. Dr. Long then advanced  $1,050,000 to us.
The advances,  which bear interest at 2% above the prime rate, are unsecured and
currently payable on demand.  Interest on the advances is calculated  quarterly,
and is  payable  in  unregistered  shares of our common  stock  unless Dr.  Long
requests  payment in cash for the calendar  quarter before the beginning of that
quarter.  The number of shares to be issued for quarterly interest is determined
using the  closing  price of our common  stock on the last  business  day of the
calendar  quarter.  During 2004 and 2003,  interest on the advances  amounted to
$64,743 and $65,432,  respectively  and, since Dr. Long did not request any cash
payment,  an  aggregate  of 286,421 and 298,646  shares of our common stock were
reserved for issuance in payment of such accrued  interest  with respect to 2004
and 2003, respectively.  At March 22, 2005, none of such 696,778 reserved shares
of our common stock have been issued.

         On November 5, 2002,  an  affiliate  of Dr. David Long lent us $450,000
for our operating  requirements against a three-year  convertible note. The note
bears  interest  of 10% per annum,  payable on  maturity  of the note.  The note
contains an option, at maturity,  to convert all amounts due,  including accrued
interest, thereunder into unregistered shares of our common stock at the rate of
$0.40 per share,  the closing  price on November 5, 2002.  Interest for 2004 and
2003 under the note amounted to $50,194 and $39,320, respectively.

         In order to meet our operating requirements,  an affiliate of Dr. David
Long  lent us  $505,406,  $147,032  and  $1,525,261  in  2003,  2004  and  2005,
respectively.  These  advances,  which were  outstanding on March 31, 2006, bear
interest at 10% per annum and are due on demand. At December 31, 2005,  December
31, 2004,  and December  31,  2003,  interest of $247,263,  $42,618 and $48,759,
respectively, was accrued for these loans.

         During  2003,  we were  unable  to pay our  employees,  including  John
Stephens,  our Senior Vice President and Chief Operating Officer, all previously
agreed  compensation.  We agreed with Mr.  Stephens to defer $33,574 of his 2003
compensation  until such time,  if at all, as we have the  financial  ability to
make such payment and agreed that, at the time of such payment, we would pay him
an  additional  $48,583.  In addition,  during 2003,  in  consideration  for Mr.
Stephens'  voluntary  agreement to temporarily reduce his compensation  during a
four month  period,  we issued him  non-qualified  options  under our 1996 Stock
Option Plan to acquire an aggregate  of 101,538  shares of our common stock at a
price of $0.33 per share,  the closing  price of our common stock on the date of
grant.  Such  options  became  fully  exercisable  on August 4, 2003 and  expire
February 4, 2008. As at December 2005, $85,465 was due to him for salary and for
the interest on the 2003 deferred salary.




                                       71
<PAGE>


ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.

    2. Plan of  purchase,  sale,  reorganization,  arrangement,  liquidation  or
succession. - None

    3.(i) Articles of incorporation.

       3.1    Fifth  Amended  and  Restated   Certificate  of  Incorporation  of
              Biofield  Corp., as filed with the Secretary of State of the State
              of Delaware on October 6, 2000. (1)

       (ii) By-laws.

       3.2    By-laws of Biofield Corp. (2)

    4.  Instruments   defining  the  rights  of  security   holders,   including
indentures.

       4.1    Form of Promissory Note, due December 31, 2004, issued by Biofield
              Corp. in 2003 private placement. (8)

       4.2    Form  of  Subscription   Agreement   between  Biofield  Corp.  and
              investors who participated in 2003 private placement. (8)

    9. Voting trust agreement and amendment. - None

    10. Material contracts.

       10.01  Registration  Rights Agreement  between Biofield Corp. and John D.
              Stephens dated as of April 22, 1993. (3)

       10.02  Form of Stock Purchase Option Agreement between Biofield Corp. and
              Abel Laboratories, Inc., dated as of June 1, 1992. (3)

       10.03  Patent  Royalty   Agreement   between   Biofield  Corp.  and  Abel
              Laboratories, Inc., dated as of June 1, 1992. (3)

       10.04  Master  Laboratory  Services  Agreement between Biofield Corp. and
              Abel Laboratories, Inc., dated as of January 1, 1994. (3)

       10.05  Biofield Corp. 1992 Stock Incentive Plan. (3)

       10.6   Biofield Corp. 1996 Stock Option Plan, as amended. (4)

       10.7   Biofield Corp. 1996 Stock Option Plan for Non-Employee  Directors.
              (3)

       10.8   Escrow  Agreement  among C. Leonard  Gordon,  Biofield  Corp.  and
              Warshaw  Burstein  Cohen  Schlesinger & Kuh, LLP, as escrow agent,
              dated December 28, 1999. (1)

       10.9   License  Agreement  between  Biofield  Corp.  and Cardio  Dynamics
              International Corporation dated October 16, 2000. (1)

       10.10  Share  Option  Agreement,  dated as of  March  16,  1995,  between
              Biofield Corp. and David M. Long, Jr., M.D. (1)



                                       72
<PAGE>


       10.11  Form of Share Option Agreement  between Biofield Corp. and Raymond
              A. Long, M.D., dated September 5, 2001. (5)

       10.12  Share Option Agreement,  dated as of November 29, 2001, with David
              M. Long, Jr., M.D. (5)

       10.13  Share Option  Agreement,  dated as of November 29, 2001, with John
              D. Stephens. (5)

       10.14  Form of Share Option  Agreement,  dated  November  29, 2001,  with
              Steven Preiss. (5)

       10.15  Form of Share Option  Agreement,  dated  November  29, 2001,  with
              various Biofield Corp. employees. (5)

       10.16  10%  Convertible  Promissory  Note,  dated  November  8,  2002  by
              Biofield Corp. in favor of David M. Long, Jr. (6)

       10.17  Demand  Promissory  Note, dated January 3, 2003, by Biofield Corp.
              in favor of David M. Long Separate Property Trust. (7)

       10.18  Investment  Banking  Services  Agreement,  dated  March  5,  2003,
              between Biofield Corp. and iCapital Finance, Inc. (7)

       10.19  Consulting Agreement,  dated March 5, 2003, between Biofield Corp.
              and Randall Letcavage and Rosemary Nguyen. (7)

       10.20  Redesign Agreement, dated October 15, 2001, between Biofield Corp.
              and TriVirix International Limited. (7)

       10.21  Form of Share  Option  Agreement,  dated  February  4, 2003,  with
              various Biofield Corp. employees. (10)

       10.22  Service Agreement,  dated July 8, 2003, between Biofield Corp. and
              MRB Investor Relations, LLC. (10)

       10.23  Agreement for  Financial  Advisor,  Investment  Banker & Placement
              Agent,  dated  April 25,  2003  between  Biofield  Corp and Brooks
              Houghton & Company,  Inc. and Brooks,  Houghton  Securities,  Inc.
              (10)

       10.24  Agreement,  dated February 9, 2004, between Biofield Corp. and ROI
              Group Associates, Inc. (10)

       10.25  Agreement,  dated October 16, 2003 between  Biofield Corp, and CGF
              Securities, LLC. (10)

       10.26  Change  in Terms  Agreement,  dated  December  11,  2003,  between
              Biofield Corp. and California Bank & Trust. (10)

       10.27  Agreement,  dated June 11, 2003, as amended  December 11, 2003, by
              Biofield Corp. to John Stephens. (10)

       10.28  Consulting  agreement between The Mackay Group, Inc. and Dr. David
              Long dated March 30, 2006. (11)

       10.29  Stock  Acquisition and Voting Agreement  between The Mackay Group,
              Inc. and Dr. David Long,  Jr.,  Donna R Long,  Dr. Raymond A Long,
              the Long  Family  Trust and the Long  Family  Partners II LP dated
              March 30, 2006. (11)



                                       73
<PAGE>


       13.    Annual report to security  holders for the last fiscal year,  Form
              10-Q or 10-QSB or  quarterly  report to  security  holders.  - Not
              applicable.

       14.    Code of ethics

              14.1   Code of Ethics adopted on February 16, 2004. (10)

       16.    Letter on change in certifying accountant

              16.1   Letter  from  Deloitte  &  Touche,  LLP,  Certified  Public
                     Accountants to the Commission, dated November 24, 2003. (9)

       18.    Letter on change in accounting principles - Not applicable.

       20.    Other  documents or  statements  to security  holders or any other
              document incorporated by reference. - None

       21.    Subsidiaries of the small business issuer

                  Biofield International, Inc.   -   Incorporated in Delaware

       22.    Published report regarding  matters  submitted to vote of security
              holders - Not applicable.

       23.    Consent of experts and counsel - None

       24.    Power of attorney - Not applicable.

       27.    Financial Data Schedule - Not applicable.

       31.    Rule 13a-14(a)/15d-14(a) Certifications

              *31.1  Certification of James MacKay, Chairman and Chief Executive
                     Officer

              *31.2  Certification of Michael Yom, Director and Chief Accounting
                     Officer

       32.    Section 1350 Certifications

              *32.1  Certification of James MacKay, Chairman and Chief Executive
                     Officer

              *32.2  Certification of Michael Yom, Director and Chief Accounting
                     Officer

       99.    Additional Exhibits - None

-----------------------

       (*) Filed herewith.

       (1) Filed with the  Securities  and Exchange  Commission as an exhibit to
       Biofield's   Registration  Statement  on  Form  10-SB  (Registration  No.
       0-27848) which became effective on October 18, 2000.

       (2)  Incorporated  by reference to Biofield's  Annual Report on Form 10-K
       for the fiscal year ended December 31, 1996.

       (3)  Incorporated  by reference to Biofield's  Registration  Statement on
       Form S-1  (Registration No.  333-00796)  declared  effective on March 19,
       1996.




                                       74
<PAGE>

       (4)  Incorporated  by reference to Biofield's  Annual Report on Form 10-K
       for the fiscal year ended December 31, 1997.

       (5) Incorporated by reference to Biofield's  Annual Report on Form 10-KSB
       for the fiscal year ended December 31, 2001.

       (6)  Incorporated  by reference to  Biofield's  Quarterly  Report on Form
       10-QSB for the fiscal quarter ended September 30, 2002.

       (7) Incorporated by reference to Biofield's  Annual Report on Form 10-KSB
       for the fiscal year ended December 31, 2002.

       (8) Incorporated by reference to Biofield's  Annual Report on Form 10-KSB
       for the fiscal year ended December 31, 2004.

       (9)  Incorporated  by reference to Biofield's  Current Report on Form 8-K
       filed on April 6, 2006.

   (b) Reports on Form 8-K

       None

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         The  following  table sets forth fees  billed to us by our  independent
accountants  during the fiscal  years ended  December  31, 2005 and December 31,
2004 for: (i) services rendered for the audit of our annual financial statements
and the review of our quarterly  financial  statements,  (ii) services  rendered
that are  reasonably  related to the  performance  of the audit or review of our
financial  statements  and that are not reported as Audit Fees,  (iii)  services
rendered in connection  with tax  compliance,  tax advice and tax planning,  and
(iv) all other fees for services  rendered.  "Audit  Related Fees"  consisted of
consulting fees regarding  accounting issues. "All Other Fees" consisted of fees
related to the issuance of consents  for our SB-2  Registration  Statements  and
this Annual  Report.  Since we have no audit  committee,  none of these services
were approved by an audit  committee,  and we have no  pre-approval  policies or
procedures.



                                     Year ended December 31,

                                     2005           2004
                                     ----           ----

       Audit Fees(1)                 $83,037        $71,568

       Audit Related Fees(2)         -0-            -0-

       Tax Fees(3)                   -0-            -0-

       All Other Fees(4)             -0-            16,025

       Total                         $83,037        $87,593
---------------------

       (1) The  aggregate  fees  billed  for the audit of our  annual  financial
       statements and review of our financial  statements which were included in
       our Forms 10-QSB.

       (2) The aggregate fees billed for assurance and related services that are
       reasonably  related to the  performance of the audit or the review of our
       financial statements and not included as "Audit Fees".

       (3) The aggregate fees billed for professional  services rendered for tax
       compliance, tax advice and tax planning.



                                       75
<PAGE>

       (4) The aggregate fees billed for products and services  provided,  other
       than Audit Fees, Audit-Related Fees or Tax Fees.


Policy  on Audit  Committee  Pre-Approval  of Audit  and  Permissible  Non-Audit
Services of Independent Auditors

      The Company  currently  does not have a designated  Audit  Committee,  and
accordingly,  the Company's  Board of Directors'  policy is to  pre-approve  all
audit and permissible  non-audit services provided by the independent  auditors.
These services may include audit services,  audit-related services, tax services
and other services.  Pre-approval  is generally  provided for up to one year and
any  pre-approval  is  detailed  as to the  particular  service or  category  of
services and is generally subject to a specific budget. The independent auditors
and management  are required to  periodically  report to the Company's  Board of
Directors regarding the extent of services provided by the independent  auditors
in accordance with this pre-approval, and the fees for the services performed to
date.  The Board of  Directors  may also  pre-approve  particular  services on a
case-by-case basis.

                                   SIGNATURES

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

Dated:  May 30, 2006
                              BIOFIELD CORP.

                              By: /s/ James MacKay
                                  ----------------------------------------------
                                      James MacKay
                                      Chairman


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

Dated:  May 30, 2006          /s/ James MacKay
                                ------------------------------------------------
                                    James MacKay
                                    Chairman and Director


Dated: May 30, 2006           /s/ Michael Yom
                                ------------------------------------------------
                                    Michael Yom
                                   (President, Director and Principal
                                    Executive, Financial and Accounting Officer)















                                       76
<PAGE>


                                                                    Exhibit 31.1
                                                                    ------------

I, James MacKay, certify that:

1. I have reviewed this annual report on Form 10-KSB of Biofield  Corp.  for the
year ended December 31, 2005;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
small  business  issuer as of, and for,  the  periods  presented  in this annual
report;

4. The small business  issuer's other  certifying  officer and I are responsible
for establishing and maintaining  disclosure controls and procedures (as defined
in Exchange  Act Rules  13a-15 (e) and 15d-15  (e)) and  internal  control  over
financial  reporting (as defined in Exchange Act Rules  13a-15(f) and 15d-15(f))
for the small business issuer and have:

     a)  Designed  such  disclosure  controls  and  procedures,  or caused  such
     disclosure controls and procedures to be designed under our supervision, to
     ensure that material  information  relating to the small  business  issuer,
     including its consolidated subsidiary, is made known to us by others within
     those entities,  particularly during the period in which this annual report
     is being prepared;

     b) Designed such internal control over financial reporting,  or caused such
     internal  control  over  financial  reporting  to  be  designed  under  our
     supervision,  to provide reasonable  assurance regarding the reliability of
     financial  reporting  and  the  preparation  of  financial  statements  for
     external  purposes  in  accordance  with  generally   accepted   accounting
     principles;

     c) Evaluated the  effectiveness of the small business  issuer's  disclosure
     controls and procedures, and presented in this report our conclusions about
     the effectiveness of the disclosure controls and procedures,  as of the end
     of the period covered by this annual report based on such evaluation; and

     d)  Disclosed  in this  annual  report  any  change in the  small  business
     issuer's internal control over financial reporting that occurred during the
     small business issuer's fourth quarter that has materially affected,  or is
     reasonably  likely  to  materially  affect,  the  small  business  issuer's
     internal control over the financial reporting; and

5. The small business  issuer's other  certifying  officer and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the small business  issuer's  auditors and the audit committee of
the small  business  issuer's  board of  directors  (or persons  performing  the
equivalent functions):

     a) All significant  deficiencies  and material  weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely  affect the small business  issuer's ability to record,
     process, summarize and report financial information; and
<PAGE>

     b) Any fraud,  whether or not material,  that involves  management or other
     employees  who  have a  significant  role in the  small  business  issuer's
     internal control over financial reporting.


Date: May 30, 2006                  By: /s/ James MacKay
                                           -------------------------------------
                                           James MacKay
                                           Chairman




<PAGE>


                                                                    Exhibit 31.2
                                                                    ------------

I, Michael Yom, certify that:

1. I have reviewed this annual report on Form 10-KSB of Biofield  Corp.  for the
year ended December 31, 2005;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
small  business  issuer as of, and for,  the  periods  presented  in this annual
report;

4. The small business  issuer's other  certifying  officer and I are responsible
for establishing and maintaining  disclosure controls and procedures (as defined
in Exchange  Act Rules  13a-15 (e) and 15d-15  (e)) and  internal  control  over
financial  reporting (as defined in Exchange Act Rules  13a-15(f) and 15d-15(f))
for the small business issuer and have:

     a)  Designed  such  disclosure  controls  and  procedures,  or caused  such
     disclosure controls and procedures to be designed under our supervision, to
     ensure that material  information  relating to the small  business  issuer,
     including its consolidated subsidiary, is made known to us by others within
     those entities,  particularly during the period in which this annual report
     is being prepared;

     b) Designed such internal control over financial reporting,  or caused such
     internal  control  over  financial  reporting  to  be  designed  under  our
     supervision,  to provide reasonable  assurance regarding the reliability of
     financial  reporting  and  the  preparation  of  financial  statements  for
     external  purposes  in  accordance  with  generally   accepted   accounting
     principles;

     c) Evaluated the  effectiveness of the small business  issuer's  disclosure
     controls and procedures and presented in this report our conclusions  about
     the effectiveness of the disclosure controls and procedures,  as of the end
     of the period covered by this annual report based on such evaluation; and

     d)  Disclosed  in this  annual  report  any  change in the  small  business
     issuer's internal control over financial reporting that occurred during the
     small business issuer's fourth quarter that has materially affected,  or is
     reasonably  likely  to  materially  affect,  the  small  business  issuer's
     internal control over the financial reporting; and

5. The small business  issuer's other  certifying  officer and I have disclosed,
based  on  our  most  recent  evaluation  of  internal  control  over  financial
reporting,  to the small business  issuer's  auditors and the audit committee of
the small  business  issuer's  board of  directors  (or persons  performing  the
equivalent functions):

     a) All significant  deficiencies  and material  weaknesses in the design or
     operation of internal control over financial reporting which are reasonably
     likely to adversely  affect the small business  issuer's ability to record,
     process, summarize and report financial information; and
<PAGE>

     b) Any fraud,  whether or not material,  that involves  management or other
     employees  who  have a  significant  role in the  small  business  issuer's
     internal control over financial reporting.


Date: May 30, 2006          By: /s/ Michael Yom
                                   -------------------------------------------
                                    Michael Yom
                                    President, Director and Principal Executive,
                                    Financial and Accounting Officer)


<PAGE>


                                                                    Exhibit 32.1

                      CERTIFICATION PURSUANT TO SECTION 906
                                       OF
                         THE SARBANES-OXLEY ACT OF 2002

In  connection  with the annual  report on Form  10-KSB of Biofield  Corp.  (the
"Company")  for the year ended  December 31, 2005, as filed with the  Securities
and Exchange  Commission  on the date hereof (the  "Covered  Report"),  I, James
MacKay,  Chairman of the Company,  pursuant to 18 U.S.C.  ss.  1350,  as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that:

The Covered  Report fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Covered Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

IN WITNESS  WHEREOF,  I have  executed this  certificate  as of this 30th day of
May 2006.

/s/ James MacKay
----------------------------------------
James MacKay
Chairman


<PAGE>


                                                                    Exhibit 32.2

                      CERTIFICATION PURSUANT TO SECTION 906
                                       OF
                         THE SARBANES-OXLEY ACT OF 2002

In  connection  with the annual  report on Form  10-KSB of Biofield  Corp.  (the
"Company")  for the year ended  December 31, 2005, as filed with the  Securities
and Exchange  Commission on the date hereof (the "Covered  Report"),  I, Michael
Yom President and Principal  Executive,  Financial and Accounting Officer of the
Company,  pursuant to 18 U.S.C.  ss. 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, hereby certify that:

The Covered  Report fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Covered Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.

IN WITNESS  WHEREOF,  I have  executed this  certificate  as of this 30th day of
May 2006.

/s/ Michael Yom
------------------------------
Michael Yom
President, Director and
Principal Executive, Financial and
Accounting Officer