SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM
10-KSB



| |     |                                                                                    
| | --- | -----------------------------------------------------------------------------------
| | [x] | ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF
1934

FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2007



| |     |                                                                                        
| | --- | ---------------------------------------------------------------------------------------
| | [ ] | TRANSITION REPORT PURSUANT TO SECTION
13OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934



COMMISSION FILE NUMBER 0-27848



BIOFIELD CORP.

(Exact
name of registrant as specified in its charter)



| |                                                                        |                                                 |  |  | 
| | ---------------------------------------------------------------------- | ----------------------------------------------- |  |  | 
| | Delaware
(State or other jurisdictionof incorporation or organization) | 13-3703450
(I.R.S. Employer Identification No.)



King of Prussia Business Center, Suite C,

1019 West Ninth Avenue

King of Prussia, PA
         19406

(Address
of principal executive offices)     (Zip Code)



Registrant's telephone number, including area code:
 215-972-1717



Securities registered pursuant to Section 12(b) of the Act:
 None

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



Common Stock, $0.001 par value

(Title
of Class)



Check
whether the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act Yes  No
X



Check
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  [  X  ]



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



State issuer's
revenues for its most recent fiscal year:  $ 109,390.



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
$6,783,195 based on the closing sale price ($0.125) on



April
11, 2008, as reported by the Pink Sheet Electronic OTC Markets.



i





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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 11, 2008,54,265,561 shares of
Common Stock and 12,300,000 shares of Preferred Stock, all of which were Series
A Preferred Shares.



Documents
Incorporated by Reference: None.



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



ii





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TABLE OF
CONTENTS



|           |                                                                                                                              |  |     
|---------- | ---------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |                                                                                                                              |  | Page
|           |                                                                                                                              |  |     
|PART I     |                                                                                                                              |  |     
|           |                                                                                                                              |  |     
|ITEM 1.    | Description of Business                                                                                                      |  | 1   
|           |                                                                                                                              |  |     
|ITEM 2.    | Description of Property                                                                                                      |  | 17  
|           |                                                                                                                              |  |     
|ITEM 3.    | Legal Proceedings                                                                                                            |  | 18  
|           |                                                                                                                              |  |     
|ITEM 4.    | Submission of Matters to a Vote
of Security Holders                                                                          |  | 18  
|           |                                                                                                                              |  |     
|PART II    |                                                                                                                              |  |     
|           |                                                                                                                              |  |     
|ITEM 5.    | Market for Registrants Common
Equity, Related Stockholders Matters and Small Business Issuer Purchases
of Equity Securities |  | 18  
|           |                                                                                                                              |  |     
|ITEM 6.    | Managements Discussion and
Analysis or Plan of Operation                                                                    |  | 19  
|           |                                                                                                                              |  |     
|ITEM 7.    | Financials Statements                                                                                                        |  | 33  
|           |                                                                                                                              |  |     
|ITEM 8A.   | Controls and Procedures                                                                                                      |  | 34  
|           |                                                                                                                              |  |     
|ITEM 8B.   | Other Information                                                                                                            |  | 35  
|           |                                                                                                                              |  |     
|PART III   |                                                                                                                              |  |     
|           |                                                                                                                              |  |     
|ITEM 9.    | Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(A) of the
Exchange Act.             |  | 35  
|           |                                                                                                                              |  |     
|ITEM 10.   | Executive Compensation.                                                                                                      |  | 36  
|           |                                                                                                                              |  |     
|ITEM 11.   | Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters                               |  | 37  
|           |                                                                                                                              |  |     
|ITEM 12.   | Principal Accounting Fees and
Services                                                                                       |  | 38  
|           |                                                                                                                              |  |     
|           |                                                                                                                              |  |     
|SIGNATURES |                                                                                                                              |  | 40  







iii





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PART I



ITEM 1.
          BUSINESS



Biofield Corp. is a
development-stage medical technology company which has developed an advanced
medical device and associated diagnostic system (the Biofield Diagnostic System
or BDS) to assist in detecting breast cancer.



Based on clinical
trial results to date involving over 3,000 patients, the BDS has demonstrated
the following benefits:



·

It
is noninvasive;

·

It
is radiation-free;

·

It
is compression-free;

·

It
produces objective results within 20 minutes without the need for interpretation
by a radiologist;

·

The
device is portable and can be transported via mobile van units;

·

The
BDS test can be performed in a physicians office or other similar location by a
medical technician with a few days training;

·

It
has performed better in certain respects than other existing breast cancer
detection technologies. Clinical trials to date have demonstrated advantages of
the BDS in (1) detecting more malignant tumors, especially smaller cancers
missed by other detection technologies; (2) reducing the number of equivocal
decisions; (3) reducing the number of false positives; and (4) reducing the
number of certain expensive follow-up diagnostic tests, such as surgical
biopsies, ultrasounds and diagnostic mammograms; and

·

The
estimated cost of the BDS is expected to be significantly less than the cost of
purchasing, installing, operating and interpreting the results from diagnostic
x-ray mammography or other diagnostic imaging equipment.



A final complete
product, the current version of the BDS first received CE mark Certification in
2000 while the Companys facilities were based in Alpharetta, Georgia.  CE
mark certification is administered by the European regulatory authorities and
permits medical device companies to market the device in European Union member
countries.  The Company relocated to King of Prussia, Pennsylvania in June
2007 and is working on the steps needed for CE mark certification.  The
Company is considering other facilities which have already secured CE mark
certification.



On March 30, 2006,
MacKay Group Limited (MKG) took over control of the Company and its
management, operations, and controlling interest.  Prior management was
focused on securing approval of the BDS from the U.S. Food and Drug
Administration (U.S. FDA) to distribute in the U.S.; their efforts, however,
were not successful and the Company under prior management generated little or
no sales and incurred significant losses. Under MKG, the Company has proceeded
to penetrate foreign markets with significant populations of women, where MKG
has significant industry and government relationships, where the need for the
BDS appears compelling, and where the regulatory hurdles are not as burdensome.
 Included among the foreign markets are China (including Hong Kong and
Macau), India, the Philippines, Indonesia, Malaysia, and other parts of Asia,
Mexico, Latin America, the Caribbean, Africa, Europe, and the Middle East.
 Under MKG, the Company is continuing its efforts and is currently working
with regulatory, clinical, legal, and other experts, to secure U.S. FDA
approval. The Company believes that the government and industry relationships,
the possible significant clinical data and research and development (including
as it may pertain to screening and other cancers), and revenues it secures
abroad will facilitate its efforts to secure U.S. FDA approval.



In May 2007, the
Company moved its facilities, inventory and operations from Alpharetta, Georgia
to King of Prussia, Pennsylvania and transferred and reorganized voluminous
amounts of clinical and technological data and financial records.  With the
transfer of vital financial and regulatory records, the



1





---

Company
diligently proceeded to bring all of its Securities and Exchange (SEC) filings
current.  During the transition, MKG successfully reduced approximately $2
million of the Companys debt by converting it to stock, and continues to work
towards further debt reduction.  Also, during 2007, the Company focused on
several foreign market initiatives which are discussed in further detail in Item
6.



Most of 2006 was
consumed in connection with the series of transactions which resulted in MKGs
taking over the Company, the transition to new management and facilities, and
MKGs reduction of $2 million of the Companys debt.  Unless indicated
otherwise below, any material events in 2006 related to events, which predated
2006 and the MKG acquisition, and which were reported in detail in the Companys
prior SECs filings including its Form 10-KSB for fiscal year ending December
31, 2005 available at:

http://www.sec.gov/Archives/edgar/data/1007018/000112178106000104/biofield10ksb123105r.txt.
 The reader is urged to read this document in its entirety.



The
BDS Technology



At a simplistic
level, the BDS detects and analyzes electrical potential cell changes associated
with the development of epithelial cancers, such as breast cancer, using a
non-invasive and objective test taking less than 20 minutes, which helps a
physician determine the probability that a previously identified lesion is
malignant or benign and whether the lesion should be removed by biopsy or
whether other action should be taken.  Epithelial cancers are related to
the outside layer of cells that cover all the free, open surfaces of the body
including the skin, and mucous membranes that communicate with the outside of
the body, and include cancer of the breast, ovaries, skin, prostate and
colon.



Epithelial cancers
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.
 This depolarization appears to be progressive as cell transformation and
carcinogensis occur, and is measurable at the skin surface.



The BDS employs
single-use sensors of our own design, which 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.
 Sensor readings are taken and analyzed using a pre-programmed algorithm to
measure differentials which may exist between test points. The higher the BDS'
output, the greater the probability that the patient has cancer in the area
examined. The physician can use this information, together with other available
clinical information, to determine the appropriate course of action.



The current version
of the BDS 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 BDS, 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 BDS 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.



We previously
conducted clinical trials involving leading medical institutions and breast
cancer specialists and over 3,000 participants in the United States, Europe and
Asia.  The participants were 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



2





---

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.



Based on our clinical
experience with the BDS 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 lesions 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, current management is working
with leading experts, institutions, and/or agencies in China and other parts of
Asia and the U.S. on the development, including the possibility of joint
U.S.-Asian clinical trials, of 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.  Current management is also working on
developing new sensors and sensor configuration for the proposed screening
device.



We believe that the
need exists for products to provide early and accurate detection of types of
epithelial cancers 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.  Current management is proceeding to
work with leading experts, institutions, and/or agencies in China and other
parts of Asia and the U.S. on the development, including joint clinical trials,
of the BDS for cancers other than breast cancer.



For more information,
see the Companys prior SEC filings, published studies, and website, including
the more detailed discussion on the BDS and its history, development, clinical
trials, and limitations in the Companys Form 10-KSB for FY 2005 available at
http://www.sec.gov/Archives/edgar/data/ 1007018/000112178106000104/biofield10ksb123105r.txt. The reader
is urged to read this document in its entirety.



The
State of Breast Cancer Globally Today



The description about
breast cancer and current detection technologies contained in the Companys Form
10-KSB for 2005 (available at
http://www.sec.gov/Archives/edgar/data/1007018/000112178106000104/
biofield10ksb123105r.txt.) has not changed materially.  The reader is urged
to read this document in its entirety. As reported in, among other publications,
the October 15, 2007 edition of Time Magazine, breast cancer is the most common
and lethal form of cancer for women in the world.  According to the World
Health Organization, more than 1.2 million cases are identified worldwide each
year, and about 500,000 new and existing patients will die from the disease. In
the U.S., breast cancer will be diagnosed in 1 in 8 women.  A womans
chance of developing breast cancer during her lifetime is about 1 out of 7 or
13.4 percent.  According to studies, the chance that breast cancer will be
the cause for a womans death is 1 in 33 or three percent.



Once considered a
malady, which was perceived to have mostly afflicted white, affluent women in
the industrialized hubs of North America and Western Europe, today breast cancer
is spreading around the world. Asia, Africa, Eastern Europe, and Latin America
have all seen their caseload spike.  By 2020, 70% of all breast cancer
cases worldwide will be in developing countries. As reported in the Time
article, below are the incidence rate in 2002 of breast cancer cases per 100,000
people in countries other than the U.S. and Western Europe:



|        |                                    |                 
|------- | ---------------------------------- | ----------------
|Country | Incidence Rate per 100,000 people1 | Total Population
|China   | 18.7                               | 1,321,222,000   
|India   | 19.1                               | 1,169,016,000   



3





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|                |      |            
|--------------- | ---- | -----------
|Indonesia       | 26.1 | 231,627,000
|Mexico          | 26.4 | 106,535,000
|The
Philippines | 46.6 | 88,706,300 
|Japan           | 32.7 | 127,750,000
|South
Africa    | 35.0 | 48,577,000 
|Malaysia        | 30.8 | 27,329,000 



1Source:
Time Magazine, October 15, 2007, Special Report-Global Breast Cancer, A Disease
Breaks Free, pp. 38-39, available at
http://www.time.com/time/2007/breast_cancer/ (citing International Agency for
Research on Cancer, Danish Cancer Society, National Cancer Institute, and other
sources).



Under MKG and its
strategic relationships overseas, the Company has refocused its energies towards
penetrating the markets in the above countries, among others, while bringing on
the personnel and other resources to reinitiate efforts before the U.S. FDA.
 The populations of China, India, Indonesia, Mexico, the Philippines, and
Malaysia account for over one-half of the worlds total population.



However, as the reach
of the disease is expanding, the reach of detection and treatment is not.
 For a women battling breast cancer in the industrialized West, new
diagnosis and treatment options are more available, accessible, and affordable.
 This is not so elsewhere.  In the U.S., an estimated $8.1 billion is
spent to diagnose and treat breast cancer each year, and the ubiquity of
mammography machines, clinics and specialists show what that money can buy.
 Other parts of the world are not as fortunate.



Sources suggest
several factors why women outside the U.S. and Western Europe are not benefiting
from early detection.  Some women in other parts of the world just do not
know much about breast cancer, much less options such as mammography.  If
they know, there are cultural perceptions about motherhood or femininity in
certain parts of the world, which discourage women to seek medical help.
 The specter of surgical biopsies or other invasive or painful modalities
and the likelihood of false positives are other factors which may discourage
women from seeking medical help. Of course, money is a problem as is
availability and accessibility to facilities with mammography or other detection
modalities.  Mammography and other current detection modalities are
expensive to purchase, operate, and interpret.  In certain instances, they
require specialized facilities and personnel.  In many areas, mammograms
are limited to major medical centers, many of which are simply not available or
accessible to women outside the United States and Western Europe.  Whatever
the factors, the unfortunate consequence is that the percentage of cancers
caught at an early stage in certain countries overseas is too low.  Thus,
early awareness and detection are even more compelling in areas of the world
outside North America and Western Europe.  The Company under MKG is working
with government representatives in China, the Philippines, and elsewhere on
broad-based early awareness and detection initiatives and campaigns.



Recent studies have
also raised concerns about the effectiveness in certain circumstances of
mammography, which ever since the 1980s has long been considered the gold
standard for detecting breast tumors. A 2007 study in the New England Journal of
Medicine (NEJM) concluded that a highly promoted and widely used computerized
system for examining mammograms is leading to less accuracy, not more.
 According to the study, this type of mammography not only failed to detect
more cancers, it led to more false alarms that resulted in additional testing
and biopsies for spots on mammograms that turned out to be harmless.  See
April 5, 2007 New York Times article, Study to Detect Breast Cancer, available
at
http://www.nytimes.com/2007/04/05/health/05breast.html?r=1&n=Top/Reference/
Times%20Topics/Organizations/N/New%20England%20Journal%20of%20Medicine&oref=slogin.
 The NEJM study sparked heated debates about options in addition to
mammography.  Much of the debate centered about magnetic resonance imaging
(MRI).  While MRIs can produce a more detailed picture of breast tissue,
they are expensive and tend to produce more false positives than mammograms. The
New York Times article reported that MRIs would cost healthcare insurers and
providers an additional $1 billion per year.





4





---

For
more information, see the Companys prior SEC filings, published studies, and
website, including the more detailed discussion on breast cancer and current
detection modalities in the Companys Form 10-KSB for FY 2005 available at
http://www.sec.gov/Archives/edgar/data/ 1007018/
000112178106000104/biofield10ksb123105r.txt.  The reader is urged to read
this document in its entirety.





Company History



In May 2007, the
Company moved its facilities, inventory and operations from Alpharetta, Georgia
to King of Prussia, Pennsylvania and transferred and reorganized voluminous
amounts of clinical and technological data and financial records.  With the
transfer of vital financial and regulatory records, the Company diligently
proceeded to bring all of its Securities and Exchange (SEC) filings current.
 During the transition, MKG successfully reduced approximately $2 million
of the Companys debt by converting it to stock, and continues to work towards
further debt reduction.  Also, during 2007, the Company focused on several
foreign market initiatives which are discussed in further detail in Item 6.



Most of 2006 was
consumed in connection with the series of transactions which resulted in MKGs
taking over the Company, the transition to new management and facilities, and
MKGs reduction of $2 million of the Companys debt.  Other than the MKG
Acquisition, the transition to new management and facilities, and MKGs
reduction of $2 million of the Companys debt, material events in 2006 primarily
related to events which predated 2006 and the MKG acquisition, and which were
reported in detail in the Companys prior SECs filings including its Form
10-KSB for fiscal year ending December 31, 2005 available at:
http://www.sec.gov/Archives/edgar/data/1007018/000112178106000104/biofield10ksb
123105r.txt.  The reader is urged to read this document in its
entirety.



The March 30, 2006
MKG Acquisition



On March 30, 2006,
MKG took control of the Companys management and operations as a result of a
series of agreements detailed in and attached to the Companys April 6, 2006
Form 8-K, available online at
http://www.sec.gov/Archives/edgar/data/1007018/000112178106000066/biofield8k4606t.htm.
 The reader is urged to read this document in its entirety.  The
explicit objective of the agreements was to give MKG control of the Companys
management, board, operations, and 51% of the Companys common shares on a fully
diluted basis, to allow MKG to penetrate significant foreign markets.  The
change of control was effectuated by way of, among other things, stock
acquisitions, debt conversion, and board changes. All of the agreements were
reviewed and approved by the Companys then board and by the Companys then
securities counsel.  As of the MKG Acquisition, all of the Companys prior
royalty, distribution, employment, research and development, and consulting
agreements had been or were terminated.



MKG acquired all of
the Companys common shares owned by the Companys former chairman and chief
executive officer, Dr. David Long and his family and affiliates, pursuant to a
Stock Acquisition and Voting Agreement between MKG and Dr. David Long, Mrs.
Donna Long, Dr. Raymond Long, the Long Family Trust, and the Long Family
Partners II, LP (the Long Agreement) and a Stock Acquisition Agreement between
MKG and the David and Donna Long Family Foundation (the Long Foundation
Agreement).  In total, MKG acquired approximately 17.49% of all common
shares 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.  As reported in the Form 3/A filed January 22, 2008, 5,898,495 of
those shares acquired by MKG were subsequently assigned to James MacKay as MKGs
designee in accordance with the Long Agreement and Long Foundation
Agreement.





In accordance with
the stock acquisition agreements and the Companys prior boards approval
thereof, board members, John Stephens and Dr. Raymond Long, resigned and were
replaced by James MacKay



5





---

and
Michael Yom.   MacKay became chairman and Yom president.  Dr.
David Long remained a board member until his death in April 2006.  His
board seat was subsequently filled by Michael Antonoplos, the Companys current
chief executive officer, chief accounting officer and secretary.  In 2007,
Yoms title transitioned from president to chief operating officer.  In
January 2008, Yom resigned as chief operating officer.



Under the Long
Agreement, MKG agreed to take control of the Companys management and
operations, fund the Company, help restructure the Companys debt, and use its
government and industry contacts and relationships in Asia, Europe, and
elsewhere to distribute, manufacture, and develop the BDS in foreign markets.



Under the Long
Agreement, MKG agreed to give the Longs a royalty equal to 1% of the Companys
net sales worldwide for three years commencing as of March 31, 2006.  MKG
also entered into a three-year, $60,000 per year consulting agreement with Dr.
David Long or his nominee.



The Debt
Conversion



The Long Agreement
also provided for the reduction of $2 million of the Companys debt owed to Dr.
David Long and his family and affiliates by way of an assignment of this debt to
MKG and the subsequent conversion of the debt into stock.  The assignment
and debt conversion (including conversion rate) were reviewed and approved by
the Companys prior management, board, and securities counsel.



Under the Long
Agreement, the Longs and their affiliates (LFCG) assigned approximately $2
million (comprising principal and accrued interest) of the total debt (over $4.3
million) owed them by the Company to MKG.  MKG was entitled to designate
which portion of the total LFCG debt to assign.  The assigned debt was to
be converted into stock of the Company at $0.05 per share (the Converted
Shares). Upon conversion, MKG retained a portion of the Converted Shares so
that, together with the shares MKG acquired from LFCG and the David and Donna
Long Family Foundation, MKG would then hold 51% of all the shares of Common
Stock issued and outstanding on a fully-diluted basis.  Any shares
remaining of the Converted Shares not retained by MKG was to be transferred to
LFCG, provided that LFCG agrees to deliver a proxy with respect to all voting
rights associated with those remaining shares.  In addition, pursuant to
the Long Agreement, to the extent that any other debt owed to LFCG by the
Company is converted into shares of Common Stock, LFCG agreed to transfer 51% of
such shares to MKG.



On April 3, 2006 MKG
made a demand on the Company to effectuate the debt conversion, designating
certain portions of the total LFCG debt.  In accordance with the Long
Agreement, the Companys current board ratified the prior boards approval of
the debt conversion and authorized the conversion as of MKGs demand of $499,728
of the assigned debt into 9,994,550 common shares and $1,230,000 of the assigned
debt into 12,300,000 shares of the Preferred Series A stock of the Company, with
such shares to be issued to James MacKay as MKGs designee.   Mr.
MacKay is the principal of MKG and is Chairman of the Board of the Company.
 All remaining portions of the assigned debt not converted (e.g., $270,273)
were retained by MKG and are entitled to be converted at a later time.



On January 17, 2008,
the Corporation issued 9,994,550 shares of common stock and 12,300,000 shares of
voting preferred stock of the Corporation to Mr. MacKay to consummate the
conversion of the Converted Debt.  Each share of voting preferred stock
entitles the holder thereto to two (2) votes.  For more details, see the
Companys Form 8-K filed January 23, 2008 available at
http://www.sec.gov/Archives/edgar/
data/1007018/000112178108000030/0001121781-08-000030-index.htm.



As a result of the
issuance of common stock and voting preferred stock pursuant to the conversion
of Converted Debt, Mr. MacKay became the holder of shares of the Corporations
capital stock entitling him to approximately 51.96% of all of the votes entitled
to be cast by stockholders of the Corporation on a fully-diluted basis (i.e.,
counting all outstanding options and warrants on an as-exercised basis).
 See Form SC 13D filed January 28, 2008, available at
http://www.sec.gov/Archives/edgar/data/1007018/



6





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000112178108000037/
0001121781-08-000037-index.htm, and Form 4 filed January 22, 2008 available at
http://www.sec.gov/Archives/edgar/data/1007018/000112178108000020/xslF345X02/
primary_doc.xml



Government
Regulation, Manufacturing, Marketing and Sales, Patents and Proprietary
Information, Licenses and Other Agreements, Research & Development,
Competition, and Employees



Unless indicated
otherwise below, there were no material events or developments in 2007 related
to government regulation, manufacturing, marketing and sales, patents and
proprietary information, licenses and other agreements, research &
development, competition, employees, and risk factors from the sections relating
to those subjects in the Company prior SECs filings including its Form 10-KSB
for fiscal year ending December 31, 2006.  The reader is urged to read that
document in its entirety.



While the Company,
under MKG, has refocused its energies to distributing the BDS in foreign
markets, since 2007 it is working with medical, regulatory, legal, and other
experts, agencies, and institutions in the U.S. and China to reinitiate efforts
before the U.S. FDA. The Company believes that the government and industry
relationships, the possible significant clinical data and research and
development, and revenues it secures abroad will facilitate its efforts to
secure U.S. FDA approval.  The Company is also working with experts on the
steps needed for CE mark certification and is considering other facilities which
have already secured CE mark certification.



Under prior
management, the BDS device and sensors were manufactured in the U.S.  The
company which prior management engaged to design the prototype of the BDS device
has manufacturing facilities in Ireland. In addition to these options, the
Company under MKG s working with technical, manufacturing, and regulatory
experts to manufacture the new prototype device and the sensors overseas,
including China and Mexico.  The Company is also considering other
FDA-certified manufacturing facilities in the U.S., which manufacture similar
non-invasive technology.



As of March 30, 2006,
the date of the MKG Acquisition, all licensing, royalty, distribution, and
employment agreements had been terminated or were terminated.  This was a
condition precedent to the MKG Acquisition.  Under the Long Agreement, MKG
agreed to give the Longs a royalty equal to 1% of the Companys net sales
worldwide for three years commencing as of March 31, 2006.  MKG also
entered into a three-year, $60,000 per year consulting agreement with Dr. David
Long or his nominee.



The Company did not
memorialize any employment or consulting arrangements into written agreements in
2007 or 2006, except for Michael Antonoplos, the Companys Interim Chief
Executive Officer, Chief Accounting Officer and Secretary, which is discussed in
further detail in Item 10.



RISK
FACTORS



The U.S. FDA Has
Rejected Our Most Recent Submission for Approval of the Biofield Diagnostic
Device and Reclassified Our Device



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



In December 2004, the
U.S. FDA notified us that it had reclassified by statute the BDS into class III
(Pre-market Approval) pursuant to Section 513(f) of the Federal Food, Drug and
Cosmetic Act. As a result of the U.S. FDA's reclassification, we must, absent
any subsequent reclassification, obtain PMA approval prior to legally marketing
or distributing our device.  The basis of the U.S. FDA's decision was its
determination that the device is not "substantially equivalent to devices
marketed in U.S. interstate



7





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commerce...."
The U.S. FDA also informed us that although a manufacturer whose device is found
to be not substantially equivalent to a predicate device can request the U.S.
FDA to make a risk-based classification for its device, the U.S. 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 in the U.S. immediately.  However, on March 4, 2005, we
were notified by the U.S.  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 pre-market approval.  Consequently, there can be no assurance
that we will ever obtain FDA clearance for the BDS. At a minimum, we will likely
experience significant additional expense and time in order to obtain clearance
for our device from the FDA.



As stated above, at
the same time it is proceeding to distribute and manufacture the BDS in foreign
countries, which are subject to different regulatory requirements than those of
the U.S. FDA, the Company under MKG is concurrently working with regulatory,
medical, clinical, legal and technical experts to reinitiate the Companys
efforts before the U.S. FDA. The Company under MKG is prepared, and is working
with regulatory, medical, and clinical experts in the U.S. and abroad, to
proceed ahead to obtain PMA approval.  It is still assessing however its
options to reclassify its device. Given the interest it has generated with
government and medical representatives overseas, the prospect of joint Asia-U.S.
clinical trials and the number of potential clinical subjects in heavily
populated countries in Asia, the Company believes that its initiatives overseas
will help it when it resubmits before the U.S. FDA.  There can be no
reasonable assurance that the Companys efforts to secure U.S. FDA approval will
be successful.



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



Prior to the March
30, 2006 MKG Acquisition, we virtually had no cash.  From December 2004 to
March 30, 2006, we survived on some funding we obtained from issuance of notes,
sale of our shares abroad and advances made by Dr. Long and his affiliates.
 As of March 30, 2006, the Company owed Dr. Long and his affiliates
approximately $4.3 million.  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. Prior to the MKG Acquisition, we
had been seeking long-term financing through investment banking channels for
over four years, but have not yet been successful in obtaining adequate
financing.  We stated in our 2005 Form 10-KSB that unless such resources
timely become available, we will be compelled to cease operations.



The situation did not
materially change in 2007 nor 2006, as the Company, under MKG, was focused on,
among other things, the transition to new management and facilities.  In
2007, the Company worked with several of its major creditors on further debt
reduction after reducing the Companys debt by $2 million in 2006.  In
2007, the Company, under MKG, has begun to make arrangements overseas, including
China, India, the Philippines, Indonesia, and Mexico, which should generate
significant sales revenues, and which also has generated interest from certain
significant investors in the U.S. and abroad.  In 2006, the Company, under
MKG, relied on funding in the form of advances by MKG and the issuance of
certain notes.  There can be no reasonable assurances that the Companys
funding/ sales efforts will be successful.



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





8





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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.
 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.  From our inception in October 1987 to the MKG
Acquisition, 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.
 Since the MKG Acquisition, the Company has utilized MKGs foreign
government, manufacturing, distribution, and industry relationships to proceed
to distribute the BDS overseas.  Moreover, the Company under MKG is working
with regulatory, medical, clinical and manufacturing experts in the U.S. and
abroad to distribute, manufacture and further develop the BDS.  There can
be no reasonable assurances, however, that such efforts will be successful.



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



Prior to the MKG
Acquisition, we had no established source of operating revenue and had 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.  Prior to the MKG Acquisition, we expected 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
2006 consolidated financial statements.  The Company, under MKG, is now
focused on distributing the BDS overseas based on MKGs foreign government,
industry, and distribution relationships, which MKG believes will not only
generate significant revenues and potentially bring in investment, but will also
work with MKG and the Company to further develop the BDS, including with respect
to clinical trials and research and development. There can be no reasonable
assurances, however, that such efforts will be successful.



Our Business May
Never Become Profitable



Prior to the MKG
Acquisition, our ability to achieve profitability will depend, in substantial
part, on our ability to obtain regulatory approvals in the U.S. for our device,
and to develop the capacity to successfully manufacture and market our device
within a reasonable time.  Prior to the MKG Acquisition, we could not
assure you when, or if, we will receive required regulatory approvals to
manufacture and market our device.  Accordingly, prior to the MKG
Acquisition, the extent of future losses and the time required to achieve
profitability, were highly uncertain.  The Company, under MKG, is
proceeding to distribute the BDS overseas and is working with government
representatives and regulatory, clinical and medical experts in the U.S. and
Asia to timely secure the appropriate regulatory approvals for the applicable
countries.  There can be no reasonable assurances that such efforts will be
successful.



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



9





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professional
relationships, and have caused us to incur additional expenses in the payment of
late charges and penalties.  As of December 31, 2007, we had a working
capital deficiency of $7.6 million and accounts payable, primarily to service
providers and vendors, aggregating approximately $1.4 million, substantially all
of which are past due. These amounts have increased since December 31, 2006. At
December 31, 2007, we also owed our former employees approximately $117,245,
after issuance of 1,000,000 shares of our Common Stock to reduce the debt. While
it was consumed for most of 2006 in the transition to new management and
facilities, the Company, under MKG, worked to reduce its debt with several of
the major creditors and in 2007 the accounts payable increased slightly, by
approximately $92,000.  There can be no reasonable assurances that its
efforts to further resolve debt will be successful.



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



Prior to the MKG
Acquisition, we expected that we would 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.  Prior to the MKG
Acquisition, we did 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.  Prior to the MKG Acquisition. we could not assure you that
additional financing would be available when needed or, if available,
 would be available on acceptable  terms.  Since 2001 to the MKG
Acquisition, insufficient funds have prevented us from implementing our business
strategy and have required us to delay, scale back or eliminate certain
activities.  Since the MKG Acquisition, the Company under MKG has garnered
significant interest overseas for the BDS and is proceeding to generate sales
overseas and to secure funding here and abroad.  There can be no reasonable
assurances that such efforts will be successful.



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:



·

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.



·

we
may not be able to produce our device in  commercial  quantities at
reasonable cost.



·

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.



·

our
device may not gain satisfactory market acceptance.



·

our
device may be superseded 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.



·

after
approval, our device may be recalled or withdrawn at any time as a result of
regulatory  issues, including those concerning safety and 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.





10





---

The
Company, under MKG, is proceeding to distribute the BDS overseas and has
cultivated significant foreign government, medical, distribution, regulatory,
and manufacturing relationship, which it believes will help reinitiate its
efforts before the U.S. FDA.  Among its foreign initiatives, MKG is working
with significant government, medical, distribution and industry entities
overseas to market, distribute, and promote the BDS.  The interest
generated so far overseas has been significant.  The Company, under MKG, is
also working with regulatory, manufacturing, clinical and technical experts in
the U.S. and overseas to manufacture the BDS in the U.S., China, and Mexico,
among other countries, at comparable manufacturing costs and at the appropriate
quality assurance levels.  There can be no reasonable assurances that such
efforts will be successful.



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



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.  The Company, under MKG, is proceeding to distribute the
BDS overseas and is working with foreign government, medical, and other experts
to develop the BDS for additional applications such as screening and diagnosis
of other cancers.  Moreover, the Company, under MKG, is working to acquire
the rights to other medical technologies.  There can be no reasonable
assurances that such efforts will be successful.



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.  Given the interest generated overseas, the Company,
under MKG, is considering many options with regard to manufacture, both in the
U.S. and overseas, including China, India, and Mexico.  There can be no
reasonable assurances that such efforts will be successful.



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





11





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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 pre-clinical 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



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





12





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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 were 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.
 Given the interest MKG has generated overseas, the Company, under MKG, is
working with experts in the U.S. and overseas on distributing, manufacturing and
further developing the BDS (clinically and technically).  There can be no
reasonable assurances that such efforts will be successful.



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



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.





13





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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.



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.



14





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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 or its designee will hold a controlling
interest in the Company. As a result, MKG and/or MKGs designee 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.  The Company, under MKG, intends to
restructure its board to bring in independent directors as to preserve or
prepare for future potential listing opportunities.  There can be no
reasonable assurances that such efforts will be successful.



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.  On January 17, 2008, the Corporation issued 12,300,000
shares of voting preferred stock of the Corporation to Mr. MacKay to consummate
the conversion of the Converted Debt.  Each share of voting preferred stock
entitles the holder thereto to two (2) votes. See the Companys Form 8-K filed
January 23, 2008.



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



15





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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:



·

that
a broker or dealer approve a person's account for transactions in penny stocks;

·

and
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:



·

obtain
financial  information and investment  experience objectives of the
person; and

·

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.



16





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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:



·

sets
 forth  the  basis  on  which  the  broker
 or  dealer  made  the suitability determination; and

·

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.



Stock Issued By
The Company Is Subject to Rule 144 of the Securities Act of 1933



Stock issued by the
Company is subject to Rule 144 of the Securities Act of 1933 and the
restrictions therein.



In addition to the
above risk factors set forth in the Companys Form 10-KSB for fiscal year ending
December 31, 2007, additional risk factors may arise as a result of new
managements focus on distributing and manufacturing the BDS overseas,
especially in China.  These include risks associated with the political and
economic environment, foreign currency exchange and the legal system in foreign
countries. The economy of China and other foreign countries differs
significantly from the economies of the western industrialized nations in such
respects as structure, level of development, growth rate, capital
  reinvestment, repatriation, resource allocation, self-sufficiency,
rate of inflation and balance of payment positions, among others. While certain
foreign governments such as China have enacted laws encouraging foreign
investment, it remains to be seen how uniformly they will be enforced and
interpreted.



As to China, a major
focus of the Company, under MKG, the Chinese economy has experienced significant
growth in the past several years, but such growth has been uneven among various
sectors of the economy and geographic regions.  Such development and growth
may present risks to entities operating in China.  Because of the
challenges created by such growth, the Chinese government has indicated and
taken certain steps to control such growth and address such challenges. Actions
by Chinese government to control inflation, for example, have restrained
economic expansion in the recent past across several industrial sectors.
 Similar and continued actions by the Chinese government in the future
could have a significant adverse effect on domestic economic condition in China.
There can be no reasonable assurances that there will not be any changes
respecting Chinese government, economy, laws, and regulation which may adversely
affect the Company.



ITEM 2.
 PROPERTY.



As of April 1, 2006,
the Company moved its corporate headquarters from Alpharetta, Georgia to 1615
Walnut Street, 3rd and 4th Floors, Philadelphia,
Pennsylvania.  For 2006, the rent was approximately $4,000.  Until
June 2007, the Company subleased space at the Alpharetta facility, and was
paying month to month rent, to maintain inventory and clinical, device and other
files.  In June 2007, pursuant of a 3-year lease, the Company relocated all
of its operations to a new office in King of Prussia, Pennsylvania.  The
monthly rent for the King of Prussia office is approximately $4,000 including
utilities.  The



17





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Company,
which defaulted on the King of Prussia office lease in March 2008, is currently
in discussions with a medical device manufacturing facility in the United States
with the requisite regulatory certifications to consolidate Company equipment
and regulatory and technical files at that facility and to help manage Company
operations.



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 current proceeding concerning us that a
governmental authority may be contemplating.



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



None.



PART
II



ITEM
5.

MARKET
FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND
SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.



MARKET
INFORMATION



Our common stock, par
value $.001 per share, was quoted on the Pink Sheets Electronic Market, Inc.
Currently, our common stock is 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 the Pink Sheets Electronic Market, Inc for the periods
indicated.



YEAR ENDING DECEMBER
31, 2007
                         HIGH
      LOW



First
Quarter

0.20
        0.02

Second
Quarter

0.10
        0.06

Third
Quarter

0.38
        0.07

Fourth
Quarter

0.28
        0.11



YEAR ENDING DECEMBER
31, 2006
                        HIGH
      LOW



First
Quarter

0.055
      0.021

Second
Quarter

0.13
        0.035

Third
Quarter

0.06
        0.035

Fourth
Quarter

0.04
        0.021



On April 11, 2008,
the closing sale price for our common stock was $0.125 per share, as reported by
the Pink Sheets Electronic Market, Inc.



HOLDERS



As of April 11, 2008,
there were 262 holders of record of our common stock, including Cede & Co.,
who held 20,207,465 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



18





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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.



TRANSACTIONS
INVOLVING UNREGISTERED SECURITIES



As discussed in
more detail in the above debt conversion section and in the Companys Form 8-K
filed January 23, 2008 and the Form SC 13D filed
January 28, 200,in accordance with the Long Agreement on January 17,
2008, the Corporation issued 9,994,550 shares of common stock and 12,300,000
shares of voting preferred stock of the Corporation to James MacKay to
consummate the conversion of the Converted Debt.  Each share of voting
preferred stock entitles the holder thereto to two (2) votes.



On September 11,
2007, the Company agreed to issue 1,000,000 shares of common stock to John
Stephens, its former chief operating officer, as payment for services rendered.
 The share price at the close of the market on September 11, 2007 was
$0.10.



REPURCHASES OF
SECURITIES



None.



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.



Certain statements
contained in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and elsewhere in this report are forward-looking
statements that involve risks and uncertainties.  These statements relate
to future events or our future financial performance.  In some cases,
forward-looking statements can be identified by terminology such as "may,"
"will", "should",  "expect", "anticipate", "intend", "plan", "believe",
"estimate", "potential", or "continue", the negative of these terms or other
comparable terminology.   These statements involve a number of risks
and uncertainties.   Actual events or results may differ materially
from any forward-looking statement as a result of various factors, including
those described above and in the Companys last Form 10-KSB for 2006 and 2005
under "Risk Factors".  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.

.



THE COMPANYS
FOCUS ON FOREIGN MARKETS UNDER MKG



Prior managements
focus was on securing U.S. FDA approval to distribute the BDS in the U.S. Under
MKG, the Company has reoriented its energies towards generating sales in foreign
markets with significant populations of women, where MKG has significant
industry and government relationships, where the need for the BDS appears
compelling, and where the regulatory hurdles are not as burdensome.
 Included among the foreign markets are China (including Hong Kong, Taiwan
and Macau), India, the Philippines, Indonesia, Malaysia, Singapore, Vietnam, and
other parts of Asia, Mexico, Latin America, the Caribbean, Africa, Europe, and
the Middle East.  The initial countries MKG is focusing on account for
approximately one half of the worlds female population.  As articulated in
the recent October 15, 2007 Time article, MKG recognized from the outset that
breast cancer is no longer an affliction which only concerns certain segments of
women in the U.S. and Western Europe but is tragically a global challenge.
 Given the nature of the BDS, the Company believes that the BDS can play a
role to help save lives in foreign countries, which for a variety of reasons may
not have the detection technologies present in the U.S. and Western Europe.





19





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Since
2007, MKG has been working with leading government, medical, distribution, and
manufacturing representatives, agencies, and institutions in China, India, the
Philippines and other parts of Asia to incorporate the BDS as part of early
detection and awareness initiatives. Since 2007, MKG has also been working with
those representatives, agencies, and institutions to manufacture the BDS device
and sensors overseas; to conduct clinical trials, including joint U.S.-Asian
trials; to further develop the BDS device and sensors for screening purposes;
and to further develop the BDS device and sensors for cancers other than breast
cancer.



Under MKG, the
Company is continuing its efforts to secure U.S. FDA approval and in 2007 worked
with regulatory, clinical, medical, legal and other experts towards that end.
The Company believes that the government and industry relationships, the
possible significant clinical data and research and development (including as it
may pertain to screening and other cancers), and revenues it secures abroad will
facilitate its efforts to secure U.S. FDA approval.



MKG Initiatives in
Foreign Markets



In 2007, MKG
continued to meet with significant government, healthcare, distribution, and
manufacturing contacts to distribute, manufacture, and develop the BDS in
foreign markets. MKG strategy is to form strategic alliances, in the form of a
joint venture or sublicense, with entities with significant funding, government
relationships and distribution networks, especially those associated with
hospital systems, regulatory expertise, and manufacturing capabilities. The
joint venture assumes all responsibilities and expenses within the designated
territory to distribute the BDS, secure regulatory approval for the BDS, conduct
clinical trials and development, and in some cases to manufacture the BDS.



China



In 2007, MKG had
discussions with representatives of Chinese government, including those
associated with Chinas state and military hospitals, about potential orders of
the BDS and sensors.  Chinese representatives expressed significant
interest in the BDS and discussed, among other things, potential orders for
Chinese hospitals; designating top Chinese medical institutions and doctors to
work with the Company on additional clinical trials and R&D including joint
U.S.-Chinese trials and including on screening and cancers other than breast
cancer; incorporating the BDS into Chinese early detection initiatives and a
cancer fund established for the indigent.



From the middle of
2007 to the first part of 2008, significant discussions occurred in Shanghai,
Beijing, Hong Kong, Guangdong Province, Tianjin, Guangxi Province, Taiwan and
Macau with leading Chinese healthcare bureaus, officials, medical institutions,
and physicians.  Successful demonstrations were conducted in Shanghai,
Beijing, and Hong Kong.  Several Chinese government and hospital
representatives also attended the Companys well received breast cancer
symposium in Manila in the fall of 2007. The Company believes that orders for
the BDS device and sensors will be placed in Shanghai, Beijing, Hong Kong,
Guangdong Province, Guangxi Province, Taiwan and Macau commencing the fall of
2008 and is working with facilities in the United States and China to
manufacture the BDS device and sensors.  The Company is also working with
leading Chinese representatives to secure the governmental authorization to
distribute and possibly manufacture the BDS device and sensors in China.



In February 2008, MKG
entered into a memorandum of understanding with Happy Crown Holdings Limited
(HCHL) to distribute the BDS device and sensors in the Peoples Republic of
China.  HCHL has worked closely with leading Chinese healthcare bureaus,
officials, and institutions, including key testing centers, on a variety of
healthcare initiatives including certain vaccines and cancer detection.
 HCHL worked closely with MKG and the Company to arrange and conduct the
demonstrations in Shanghai before Chinese government including leading Chinese
physicians involved with the government bureau which manages all government
hospitals in Shanghai, with a leading breast cancer hospital in Shanghai, the
leading testing centers in Shanghai, and with leading medical publications in
China.



20





---



According to the
U.N., there are over 172 million women in mainland China, Hong Kong, and Macau
ages 40-70 years old.  According to the International Agency for Research
on Cancer, the breast cancer incidence rate in China is 18.7 per 100,000.



India



Since
2007, MKG has had discussions with hospital, medical and distribution
representatives from India, including those associated with certain national,
regional and municipal government entities and leading hospital systems and
distribution networks in India, about the distribution of the BDS in India.
Following the successful demonstration of the BDS at the October 24, 2007 major
breast cancer detection symposium in Manila, which was attended by leading
Indian representatives, there was significant interest from Indian
representatives about potential significant orders and about distributing and
securing regulatory approval for the BDS in India and other countries in the
Indian subcontinent including Nepal and Bangladesh. The Company expects to
conclude a distribution arrangement in India in or about the middle of 2008 and
to generate purchase orders for 2008.

According
to the U.N., there are over 103 million women in India ages 40-70 years old.
According to the International Agency for Research on Cancer, the breast cancer
incidence rate in India is 19.1 per 100,000.



The
Philippines, Indonesia and Malaysia



In 2007, MKG had
repeated meetings with, and have conducted demonstrations for, significant
government, church, healthcare, and distribution representatives in the
Philippines. On March 8, 2007, MKG delivered a BDS device and three cases of
sensors to a hospital in the Philippines.  The hospital has started to take
the unit to the provinces as part of their mobile health systems services.
 MKG believes that the Filipino Government and the Catholic Church in the
Philippines will publicly endorse the BDS as part of national initiatives
promoting early detection of breast cancer.  In 2007 certain bills were
introduced before the Filipino Congress (S.B. No. 78, The Breast Cancer
Detection Act of 2007, and S.B. 1815, an Act Creating a Center for Breast Cancer
Control and Prevention), which would require local government units to conduct a
quarterly breast cancer detection program and would establish the Center for
Breast Cancer Control and Prevention.



In October 2007, MKG
formed a joint venture with Eastern Petroleum Corporation, one of the leading
business and petroleum companies in the Philippines.  The joint venture is
called the MacKay Eastern Medical Group (MacKay Eastern) and will bear the
exclusive responsibility and expense to distribute, market, gain regulatory
approval for, and further develop the BDS and related technologies in the
Philippines, Indonesia and Malaysia.  In October 2007, an initial order of
10 devices and 20 cases of sensors was sold and delivered to the joint venture.



On October 24, 2007,
the joint venture presented the BDS at a major breast cancer detection symposium
in Manila attended by approximately 200 guests, including representatives from
100 of the top hospitals and medical institutions in the Philippines and
government and industry representatives from the Philippines, China and India.
 Following the successful demonstration of the BDS at the October 24, 2007
major breast cancer detection symposium in Manila, discussions are taking place
about potential significant orders to be delivered in 2008.



In late 2007 through
the middle of 2008, MacKay Eastern began launching and conducting demonstrations
and testing of the BDS device and sensors in parts of the Philippines.  In
December 2007, MacKay Eastern launched the BDS device and sensors in General
Santos City.  In 2007, it also began working with certain hospitals and
clinics in the Philippines.  In 2007, it also began setting up centers in



21





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shopping
malls where there was significant consumer traffic.  The ideal for these
centers was that Filipinos could readily receive the 20 minute Biofield Breast
Examination while they attended to their routine purchases. Since late 2007,
MacKay Eastern has worked closely with leading national and city representatives
regarding government initiatives to provide breast cancer detection for
government employees.



The Company
anticipates receiving purchase orders for the BDS devices and sensors in 2008,
including from representatives associated with national, city, and municipal
Filipino government.



According to the
U.N., there are over 22.45, 8.5, and 3 million women ages 40-70 years old in
Indonesia, the Philippines and Malaysia respectively. According to the
International Agency for Research on Cancer, the breast cancer incidence rate in
Indonesia, the Philippines, and Malaysia



Mexico



In January 2007, on
behalf of the Company, certain representatives successfully conducted patient
demonstrations and seminars of the BDS in Mexico City before more than 50 OB/GYN
and other physicians, nurses, officials, and representatives from leading
hospitals, clinics, laboratories, pharmaceutical companies, and other health
providers based in Mexico and other countries in Latin America. The
demonstrations and seminars were conducted by a noted physician in Mexico City
on female patients with pre-confirmed malignant and benign tumors. Biofields
device tested successfully in the patient demonstrations, generating substantial
interest among Mexican OBY/GYN and healthcare communities. The purpose of the
demonstrations and seminars was to introduce Biofields technology to leading
opinion makers in the Mexican healthcare community and to seek to secure
purchase orders for the device and sensors. Subsequent meetings and discussions
have taken place with leading hospitals, clinics, physicians, and other opinion
leaders in Mexico, many of which also have clinics, stores, or other facilities
in other Latin American countries. Presentations of Biofields technology were
also made on Mexican TV.   See Companys press release dated February
23, 2007, a copy of which is posted on the Companys website
www.biofield.com.



Continued discussions
have taken place with the Mexican representatives who conducted the Mexico City
demonstration (as well as with other representatives).  Discussions have
taken place about sublicensing the BDS for Mexico and Spanish-speaking countries
in Latin America, purchase orders for the BDS devices and sensors and securing
regulatory approval and establishing manufacturing facilities for the BDS in
Mexico.  Significant interest has been generated from Mexico.  MKG has
been discussing  sublicense arrangements with certain Mexican
representatives who were proceeding to secure the necessary funding to conduct
manufacturing, distribution and regulatory approval in Mexico.



According to the
U.N., there are over 11.6 million women ages 40-70 years old in Mexico.
According to the International Agency for Research on Cancer, the breast cancer
incidence rate in Mexico is 26.4 per 100,000 respectively.



The Singapore
Sale



On February 28, 2007,
Biofield sold a BDS device and three cases of sensors to leading distributor in
Singapore. The gross proceeds totaled $24,950.  The distributor is an
industry leader in Singapore in biomedical engineering, which serves all the
major medical centers and hospitals in Singapore.  The end user is a
nationally and internationally acclaimed institution in Singapore, which is
recognized as an innovator for cutting edge technologies, including those in the
biomedical science industry and medical device field, and for its commitment to
public and community service. The sale was the result of a tender which was
awarded to the Company.  In addition to using the BDS for diagnostic
purposes, the end user is conducting significant research which may impact the
use of the BDS for screening purposes.  The distributor believes its
clients may be interested in buying the BDS devices and sensors. (See Company



22





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press
release dated February 28, 2007 available online at www.biofield.com and com/biospace?GUID=1276816&Page=MediaViewer&Ticker=BZET.)



According to the
U.N., there are over 645,000 women ages 40-70 years old in Singapore.



Other Foreign
Markets



Since 2007, MKG has
had discussions with representatives in other foreign countries concerning South
Africa, Japan, and other countries in the Middle East and Africa.  The
Company under prior management presented the BDS to leading government,
hospital, and medical representatives from South Africa, including First Lady
Mbeki.  During the same trip, the Company met with leading government
representatives from Botswana.  Significant interest was received including
interest about transporting the BDS through mobile van units.  There are
currently several BDS devices in South Africa.  The Company has also
conducted demonstrations for leading Japanese representatives. One of the
Companys prior clinical trials took place in Japan.  Discussions have also
taken place about distributing the BDS in Middle Eastern countries such as Iraq,
Saudi Arabia, United Arab Emirates, Kuwait, Jordan, and Lebanon.



According to the
U.N., there are over 5.1 and 25 million women ages 40-70 years old in South
Africa and Japan respectively. According to the International Agency for
Research on Cancer, the breast cancer incidence rate in South Africa and Japan
is 35 and 32.7 per 100,000 respectively.



The MKG Master
License



As reported in and
attached to its Form 8-K filed July 31, 2007 available online at
http://www.sec.gov/
Archives/edgar/data/1007018/000112178107000222/0001121781-07-000222-index.htm,
which the reader is urged to read in its entirety, on July 27, 2007, the Company
signed a master license agreement (the Agreement) with MKG. Pursuant to the
Agreement, the Company granted to MKG an exclusive (even to the Company), sub
licensable, royalty-bearing, worldwide license to make, have made, use, import,
offer for sale, and sell devices, sensors and other products or services
incorporating the Companys patented and unpatented breast cancer detection
technology, including, but not limited to, the BDS, the Biofield Breast Cancer
Proliferation Detection System, the Breast Cancer Diagnostic Device, and the
Biofield Breast Examination or BBESM (collectively, the
Technology).  The Company also granted MKG, on a worldwide basis, the
Exclusive Distribution, Manufacturing, Development, Clinical, and R&D Rights
(as those terms are defined in the Agreement) with regard to the Technology.
Under the Agreement, MKG assumes from the Company the sole responsibility and
expense to market, manufacture, further develop (clinically and technically),
and otherwise commercialize the Technology. MKG further assumes from the Company
the sole responsibility and expense to secure additional regulatory approvals
and to conduct additional clinical trials as well as research and development.
 MKG will also make commercially reasonable efforts to, among other things,
further develop the Technology for screening, as opposed to purely diagnostic,
purposes and for cancers other than breast cancer.



In return for the
exclusive worldwide license, MKG will pay the Company royalties based on gross
receipts received by MKG and its affiliates in connection with the Technology.
MKG must pay minimum royalties. In addition to royalties, MKG will pay the
Company licensing fees based upon certain milestones. The term of the Agreement
is 10 years with automatic renewals for additional 10-year terms unless
terminated by one of the parties pursuant to the terms of the Agreement.



Developments in
the U.S.



In 2007, the Company
continued to transition its operations, facilities, inventory, and clinical,
technical, and financial records from its former offices in Alpharetta, Georgia
and California to the Companys new office in King of Prussia.  In July 19,
2007 the Company moved its principal executive office from 1615 Walnut Street,
3rd Floor, Philadelphia, PA 19103 and the contents of its former
Alpharetta, Georgia



23





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facility
to King of Prussia Business Center, Suite C, 1019 West Ninth Avenue, King of
Prussia, PA 19406.



In 2007 and 2008
Michael Antonoplos was appointed as a Company director and as the Companys
interim chief executive officer and secretary.  Kenny Lau, who helped
spearhead the initiatives in the PRC, Hong Kong and Macau was also appointed
Company director.  In 2007 Michael Yoms position changed from president to
chief operating officer. See the Companys Form 8-K filed July 19, 2007. In 2007
Mr. Yom resigned as chief operating officer.



The Company continues
to meet and have discussions with representatives with significant financial and
medical expertise to bolster the Companys management, board, and advisory
board.  In 2007, the Company had continuing efforts associated with (1)
manufacturing the new prototype of the BDS device (in the U.S., China, Mexico
and elsewhere) and (2) reinitiating additional clinical trials in the U.S. which
would help facilitate securing U.S. FDA approval.  The Company has had
repeated discussions with former representatives of the Company and physicians
involved in developing the BDS, clinical trials and development, and the use of
the BDS for screening purposes. Those discussions are in addition to the
discussions MKG has had and continues to have with leading representatives in
China, India, the Philippines and other foreign countries. Several of the
representatives and physicians are proceeding to obtain U.S. FDA approval for
other technology.  Further, the Company has had discussions and meetings
with healthcare organizations in the U.S. about additional clinical trials, the
use of the BDS in womens health centers, and possible joint clinical trials
with leading medical institutions in Asia and Europe introduced by MKG.
 Given the availability of patients for clinical trials in Asia and MKGs
relationship with leading Asian medical institutions, one of MKGs goals is to
conduct clinical trials in Asia with leading Asian and Western medical
institutions, which would facilitate efforts to secure U.S. FDA approval.
Finally, the Company has met with engineering and design experts in the U.S. and
China to manufacture the new prototype of the BDS device and further develop the
devise and sensors for screening.  Device schematics are now being reviewed
by experts in China to manufacture the new prototype in China.  The Company
is also considering facilities in the U.S. which have been certified by the U.S.
FDA with regard to non-invasive cancer detection technology.



In October 2007, the
Company and MKG entered into a collaboration agreement with SpectRx, Inc.
 See SpectRxs press release dated November 27, 2007 available at
http://www.guidedtherapeutics.com/News/Bio%20manufacture%20agreement%20November%2027%202007.pdf.
 The chief executive officer of SpectRx, Dr. Mark Faupel, was one of the
original inventors of the BDS and has developed similar non-invasive cervical
cancer technology. Dr. Faupel and fellow SpectRx board member and international
healthcare policy expert, Dr. Ronald Hart, helped presented the BDS at the
October 24, 2007 Manila Breast Cancer Detection Symposium. SpectRx has certified
manufacturing facilities in the U.S. and will help the Company manufacture the
BDS device for potential purchase orders from Asia and elsewhere.  Upon
reestablishing manufacturing from the U.S. to fulfill more immediate purchase
order, discussions are occurring with SpectRx to manufacture the BDS in Asia.
SpectRx has CE Mark certification and will work with the Company to
expeditiously secure CE Mark certification from SpectRxs facilities in Atlanta.
 SpectRx also has substantial experience before the U.S. FDA and will work
with the Company to reinitiate its efforts before the U.S. FDA.  From his
time at the Company, Dr. Faupel also has extensive knowledge about the screening
application for the BDS and will work with the Company to further develop the
BDS device, sensors, and sensor configurations for screening purposes. SpectRx
will also work with the Company and MKG to conduct clinical trials, including
joint U.S.-Asia trials, which may help the Companys efforts before the U.S. FDA
and which relate to the application of the BDS for screening and cancers other
than breast cancer.  In turn, using its significant relationships in Asia,
MKG and the Company will help market and distribute SpectRxs cervical cancer
technology in Asia.  Subsequent discussions have occurred with SpectRx
related to helping manage the Companys operations.



In 2007, the Company
has met with and is working with a leading sensor manufacturer to manufacture
the necessary quantities of BDS sensors.  The manufacturer produced the
sensors for the Companys



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Singapore
and Filipino orders and for demonstrations in China and Manila.  The
manufacturer and its affiliates have manufacturing facilities in the U.S.,
Eastern Europe, China, and India.  In fall of 2007, the Company visited the
manufacturers facilities in Shanghai.  The Company has also discussed with
the manufacturer about further developing the sensor for screening purposes.



After previously
reducing its debt by $2 million in 2006, in 2007 the Company continues to work
towards further debt reduction.



LONG-TERM STRATEGY
AND GOALS



The long term
strategy and goal of the Company under MKG is to become a leading provider of
state-of-the-art medical and healthcare-related technology throughout the world.
 The Companys immediate goal is the distribution and manufacture of the
BDS in foreign markets and subsequently in the U.S. upon securing U.S. FDA
approval.  The Company under MKG, however, is working with medical experts
in the U.S., Asia, the Middle East, and Europe on advanced medical and
healthcare-related technologies other than the BDS, which MKG can use its
government and industry relationships in Asia and elsewhere to distribute,
manufacture and further develop.  While many of these other technologies
relate to womens health and non-invasive technologies, other technologies
relate to fields such as hospital and data management, emergency or triage
management, diabetes, obesity, and childhood diseases and care.



On the BDS, the
Companys goal is to use MKGs government, medical, distribution, manufacturing
and other relationships overseas to develop the BDS as a leading breast cancer
detection modality outside the U.S.  The initial focus is on China, India,
the Philippines, Indonesia, Malaysia, and Mexico.  The Company under MKG
will then extend to other parts of Asia, Latin America, the Caribbean, Africa,
Europe, and the Middle East.  MKG is currently working with representatives
from some of those areas. With sales, acceptance and support from leading
government, medical, and industry representatives, clinical trial results, and
further research and development from those countries, the Company under MKG
will reinitiate efforts before the U.S. FDA to distribute the improved version
of the BDS in the U.S.



The Company, under
MKG, seeks to gain acceptance of the BDS overseas at many levels. The first
level is at the government level. Since 2007, MKG has been working with
significant government healthcare, hospital and other representatives in China,
the Philippines and elsewhere to incorporate the BDS at a national level as part
of national initiatives relating to womens health and early awareness and
detection and to cancer programs and funds for the indigent.  Discussions
to date have generated interest from government not only in potential purchase
orders but also with respect to coordinating the Companys clinical and R&D
efforts with leading doctors, hospitals, and agencies; conducting joint
U.S.-Asia clinical trials including on screening and other cancers; securing the
appropriate regulatory approvals; and manufacturing the BDS overseas.



Second, MKG has been
working with leading foreign hospital and medical institutions, which are
considered to be influential opinion leaders in the country.  Discussions
to date have generated interest relating to potential purchase orders and to
potential joint clinical trials and development as to the BDS with leading
institutions and experts in the U.S. and Europe, including on screening and
other cancers.



The third level
relates to distribution.  MKG has been working with entities which are
considered among the leading businesses in the country and which have
established reputations, distribution networks, and manufacturing, logistics,
funding and other resources.  Some of these entities own, manage, and/or
operate hospital and medical networks.  Some are just leading businesses in
the country with established distribution networks and a history and vision of
helping the citizens of its country.



The fourth level
relates to manufacturing.  Since MKG has been working with manufacturers in
China and Mexico which are reviewing the schematics and other materials relating
to the prototype device.   MKG has also been working with a sensor
manufacturer with manufacturing facilities in China, India, Eastern Europe, and
the U.S.  MKG recognizes the importance of properly reestablishing
manufacturing



25





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given
regulatory requirements here and overseas.  Its intent is to first
reestablish manufacturing of the prototype device in the U.S. and then
supplement and/or transfer manufacturing to certified manufacturing facilities
in China, India, Mexico and elsewhere.  It is working with technical and
regulatory experts in the U.S. and Asia to properly reestablish manufacturing.
 Its ultimate goal is develop its own certified manufacturing facilities,
whether in the U.S., Asia or elsewhere, which would obviate outsourcing and
which allow manufacture of other possible medical technology.



Ultimately, the
Company, under MKG, will reinitiate efforts before the U.S. FDA.  To
properly prepare for those efforts, MKG is working with regulatory, medical, and
legal experts in the U.S., some of which were involved in the Companys previous
efforts, and which have substantial experience with the U.S. FDA approval
process.  MKG believes that by gaining potential acceptance of the BDS
(government, medical opinion makers and distribution) in significant and heavily
populated countries such as China, India, the Philippines, Indonesia, and Mexico
and by supplementing the Companys prior clinical trials and R&D with
possible joint U.S.-Asia clinical trials in countries which population size
presents an ideal base for clinical trials, these efforts will help the
Companys future efforts before the U.S. FDA.  China, India, the
Philippines, Indonesia and Mexico represent a significant percentage of the
worlds female population.



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 (until the MKG Acquisition) and by MKG (after the MKG
Acquisition).



At December 31, 2007,
we had a working capital deficiency of $7,578,469 an increase of $1,083,008 from
December 31, 2006. Our cash and cash equivalents were $13,328 at December 31,
2007, as compared to $2,361 at December 31, 2006.



At December 31, 2007
and December 31, 2006, we had no value on the balance sheet for the inventory,
as a full reserve has been recorded.



During 2007, our
operating activities utilized $345,502 of net cash, our investing activities
utilized $6,948 and our financing activities provided $363,417 of net cash,
representing proceeds of issuance of notes payable of $66,808, Proceed of
issuance of common stock of $100,000 and advances aggregating $196,609 from
certain of his affiliates and MKG respectively.  During 2006, our operating
activities utilized $378,174 of net cash and our financing activities provided
$377,741 of net cash, representing $110,000 from proceeds from issuance of notes
payable and $267,741 in note financing costs.



Since 2001, we have
been seeking additional third-party funding. From 2001 to March 30, 2006, we
retained a number of different investment banking firms to assist us in locating
available funding; however, we were not successful in obtaining any of the
long-term funding needed to make us into a commercially viable entity.
 From 2001 to March 30, 2006, Dr. David Long and certain of his affiliates
have made funding available to us to permit us to sustain certain minimum
operations.  Since March 30, 2006, funding has primarily come from MKG.
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.  In
2006, the Company under MKG entered into two notes with two individuals for a
total of $110,000 regarding expenses incurred in connection with the Companys
2005 Form 10-KSB.



26





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RESULTS OF
OPERATIONS



Comparison of the
Year Ended December 31, 2007 with the Year Ended December 31, 2006



In 2007 we had
revenue of $109,390, mostly from sales of sensors and BDS devices with
associated cost of sales of $19,664 and in 2006, we did not sell any products
and did not incur any cost of sales.



We did not incur any
research and development expenses in 2007 nor 2006.



Selling, general and
administrative expenses increased by $594,495 or 262%, to $821,375 in 2007 from
226,880 in 2006.  The increase was largely attributable to consulting
expenses of new management and facilities; consultants and professional
expenses, as well as expenses related to travel.



We had net interest
expense of $545,223 in 2007 compared to $582,233 in 2006, a decrease of $37,010,
or 6.4%. This decrease was the result of the debt conversion which was recorded
at the end of 2006.



As a result of the
foregoing, we incurred a net loss of $1,276,873 in 2007, compared to $809,091 in
2006, an increase of $467,782, or 57.8%.



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 sufficient 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, 2007 financial statements states that our
recurring losses raise substantial doubts about our ability to continue as a
going concern.



PRODUCT RESEARCH
AND DEVELOPMENT



Material research and
development expenditures are expected during the next 12 months, as MKG as the
Companys master licensee and MKGs sublicensees proceed to distribute and
manufacture the BDS overseas, further develop the BDS, and reinitiate efforts
before the U.S. FDA.  Much of the expenses, with the exception of the
efforts before the U.S. FDA, will be borne on MKG as the master licensee or
MKGs sublicensees.



ACQUISITION OR
DISPOSITION OF PLANT AND EQUIPMENT



Overseas sales of the
current version of the BDS devices and sensors are expected to occur during the
next 12 months.  We had minimal orders during 2007.  We are also
working to manufacture more devices and sensors for prospective orders.
 The acquisition of significant property, plant or equipment is also
expected during the next 12 months as MKG and its sublicensee proceed to
distribute and manufacture the BDS overseas.  Much of the expenses will be
borne on MKG as the master licensee or MKGs sublicensees.





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NUMBER
OF EMPLOYEES



From our inception
through the MKG Acquisition on March 30, 2006, we relied on the services of
outside consultants and had two full time employees.  From the MKG
Acquisition to December 31, 2007, we relied on the services of MKG
representatives and outside consultants.



OFF-BALANCE SHEET
ARRANGEMENTS



None.



SUBSEQUENT
EVENTS



On January 23, 2008
the Company filed a Form 8-K reporting that on January 17, 2008, the Corporation
issued 9,994,550 shares of common stock and 12,300,000 shares of voting
preferred stock of the Corporation to Mr. MacKay to consummate the debt
conversion in accordance with the Long Agreement as approved by the Companys
prior board and as re-ratified by the Companys current board. Each share of
voting preferred stock entitles the holder thereto to two (2) votes. The debt
conversion occurred as follows:



|                         |                                                                                               |                           
|------------------------ | --------------------------------------------------------------------------------------------- | --------------------------
|Amount of Converted Debt | Shares of Capital Stock of the Corporation to be Issued
upon the Conversion (class of shares) | Conversion Price per Share
|$499,727.50              | 9,994,550 shares of common stock, par value
$0.001/share                                      | $0.05/share               
|$1,230,000.00            | 12,300,000 shares of Voting Preferred Stock, par value
$0.001/share                           | $0.10/share               

As
a result of the issuance of common stock and voting preferred stock pursuant to
the debt conversion, the transfer of stock by LFCG to MKG pursuant to the Long
Agreement, and MKGs assignment to Mr. MacKay (including 5,898,495 shares), Mr.
MacKay became the holder of shares of the Corporation's capital stock entitling
him to approximately 51.96% of all of the votes entitled to be cast by
stockholders of the Corporation on a fully-diluted basis.

As
reported in the January 23, 2008 Form 8-K, effective January 16, 2008, the
Corporation's Board of Directors appointed the Companys interim chief executive
officer, chief accounting officer, and director, Michael Antonoplos, as the
Corporation's Secretary.  Michael Yom also resigned as the Company's Chief
Operating Officer, effective January 21, 2008.

As also reported in
the January 23, 2008 Form 8-K, on January 17, 2008, the Corporation filed a
Certificate of Designation which designated all 12,300,000 authorized but
undesignated shares of the Corporation's preferred stock as a series of voting
preferred stock, par value $0.001 per share. The Certificate of Designation, the
filing of which constitutes an amendment to the Corporation's Fifth Amended and
Restated Certificate of Incorporation, is attached as an exhibit to the
Companys January 23, 2008 Form 8-K.



In late November 2007
Joseph Repko agreed to step down as the Corporations interim chief financial
officer (CFO) effective upon the Corporations securing an outside certified
public accountant (CPA), who would help prepare its financial reports.
 After another CPA disengaged to become the chief financial officer for
another company, the Corporation engaged its current CPA on March 17, 2008.
 The Corporations board of directors thereafter formalized Mr. Repkos
resignation as the Corporation



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interim
CFO effective March 17, 2008 and appointed Michael Antonoplos the Corporations
chief accounting officer.



On April 2, 2008, the
Company filed a Form Pre 14C preliminary information statement, reporting that
on March 28, 2008, the Board of Directors of the Company  and thereafter on
March 31, 2008 the stockholders of the Company holding over a majority of the
total voting rights for all outstanding and issued shares of common and
preferred stock of the Company authorized, by way of written consents, the Board
to amend the Certificate of Incorporation of the Company to effect, on or before
March 31, 2009, a one (1) for ten (10) reverse stock split, whereby, as of the
record date, for every ten shares of common stock of the Corporation then owned,
each stockholder shall receive one share of common stock.





SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES



Principals of
Consolidation



The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiaries. All material inter-company transactions and balances have been
eliminated in consolidation.



Use of
Estimates



The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses during the
reporting period. Estimates that are critical to the accompanying financial
statements arise from the determination of the fair value of the Companys
investment. Because such determination involves subjective judgment, it is at
least reasonably possible that the Companys estimates could change in the near
term with respect to this matter.



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.



Fair Value of
Financial Instruments



Cash and cash
equivalents, prepaid expenses and other current assets, accounts payable and
accrued expenses, as reflected in the consolidated financial statements,
approximate fair value because of the short-term maturity of these instruments.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.



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, 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 was doubtful. Due to the uncertainties management was
unable to determine and



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project
future undiscounted cash flows for these assets with reasonable accuracy.
Consequently, the Company recorded an impairment 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.



Revenue
Recognition



The Company has
adopted and follows the guidance provided in the SECs Staff Accounting Bulletin
(SAB) No. 104, which provides guidance on the recognition, presentation and
disclosure of revenue in the financial statements.



Derivative
Financial Instruments



The Company does not
use derivative instruments to hedge exposures to cash flow, market, or foreign
currency risks.



The Company reviews
the terms of convertible debt and equity instruments that are issued to
determine whether there are embedded derivative instruments, including the
embedded conversion option, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. When the risks and rewards of
any embedded derivative instrument are not clearly and closely related to the
risks and rewards of the host instrument, the embedded derivative instrument is
generally required to be bifurcated and accounted for separately.



During 2007 and 2006
none of the above mentioned convertible debt and equity instruments were
considered to be derivative instruments.



Warrants



The Company issues
warrants to purchase the Companys common stock in conjunction with debt and
certain preferred stock issues. Warrants are accounted for in accordance with
the provisions of Accounting Principles Bulletin (APB) No. 14, Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants(APB
No.14) and Emerging Issues Task Force (EITF) No. 00-19, Accounting for
Derivative Financial Instruments Accounting for Derivative Financial Instruments
Indexed to or Potentially Settled in Indexed to or Potentially Settled in a
Companys Own Stock(EITF 00-19). The fair value of warrants granted in
conjunction with debt and equity issuances is estimated on the grant date using
the Black-Scholes option pricing model. The value of warrants is separated from
the total consideration of each issue and included as an element of additional
paid-in capital.



Reclassification



Certain amounts in
the prior year consolidated financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year
consolidated financial statements.



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.



30





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Research and
Development



The Company accounts
for research and development costs in accordance with the SFAS No. 2,
Accounting for Research and Development Costs. 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 the period from October 16, 1987 (date of inception) to
December 31, 2005 were $40,481,889.  In 2007 and 2006 there were no
additional expenditures on research and product development.



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.



Share-Based
Payment



In December 2004,
FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123(R))
which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123). SFAS No. 123(R) supersedes Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees, (APB No. 25). SFAS No.
123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their
fair values. Pro forma disclosure is no longer an alternative. Additionally,
SFAS No. 123(R) amends the presentation of the statement of cash flows and
requires additional annual disclosures. SFAS No. 123(R) is effective for public
companies beginning with the first interim period that begins after June 15,
2005. In April 2005, the Securities and Exchange Commission adopted a new rule
that postponed the effective date for SFAS No. 123(R) to the fiscal year
beginning after June 15, 2005. The Company adopted SFAS No. 123(R) on January 1,
2006, but as the Company does not have an option plan, there was no effect upon
implementation.





RECENT ACCOUNTING
PRONOUNCEMENTS



In
December, 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141 (revised 2007), Business
Combinations (hereinafter SFAS No. 141 (revised 2007)). This statement
establishes principles and requirements for how an acquirer a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in the acquiree, b)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase and c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. The scope of SFAS No. 141 (revised 2007) is
broader than the scope of SFAS No. 141, which it replaces. The effective date of
SFAS No. 141 (revised 2007) is for all acquisitions in which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. The adoption of this statement has no immediate
material effect on the Companys financial condition or results of operations.



In
December, 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51 (hereinafter
SFAS No. 160). This statement establishes



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accounting and reporting standards that require a) the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled and presented in the consolidated statement of financial
position with equity, but separate from the parents equity, b) the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income, c) changes in a parents ownership interest while the
parent retains its controlling financial interest in its subsidiary be accounted
for consistently, d) when a subsidiary is deconsolidated, any retained
noncontrolling  equity investment in the former subsidiary be initially
measured at fair value and e) entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. The effective date of this standard is
for fiscal years and interim periods beginning on or after December 15, 2008.
The adoption of this statement had no immediate material effect on the Companys
financial condition or results of operations.



In February 2007, the
FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS
No.159"). SFAS No. 159 allows companies to choose to measure many financial
instruments and certain other items at fair value. SFAS No. 159 will become
effective for the Company beginning in fiscal 2009. The Company is currently
evaluating what effects the adoption of SFAS No. 159 will have on the Company's
future results of operations and financial condition.



In
September 2006, the SEC issued SAB No. 108, Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements(SAB No. 108). SAB No. 108 provides guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of determining whether the current years
financial statements are materially misstated. SAB No. 108 is effective for the
Company beginning October 1, 2007. The adoption of SAB No. 108 is not
expected to have a material impact on the Companys consolidated financial
statements.



In
September 2006, the FASB issued SFAS No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB
Statements No. 87, 88, 106, and 132(R)(SFAS No. 158). SFAS No. 158
requires an employer to recognize the funded status of a benefit plan, measured
as the difference between plan assets at fair value and the projected benefit
obligation, in its statement of financial position. SFAS No. 158 also requires
an employer to measure defined benefit plan assets and obligations as of the
date of the employers fiscal year-end. SFAS No. 158 is effective for the
Company for its fiscal year ended September 30, 2007. The Company is
currently evaluating the impact of SFAS No. 158 on its consolidated financial
statements.



In
September 2006, the Financial Accounting Standards Board (FASB) issued
SFAS No. 157, Fair Value Measurements(SFAS No. 157). SFAS No. 157
provides guidance for using fair value to measure assets and liabilities and
requires additional disclosure about the use of fair value measures, the
information used to measure fair value, and the effect fair-value measurements
have on earnings. The primary areas in which the Company utilizes fair value
measures are valuing pension plan assets and liabilities, valuing hedge-related
derivative financial instruments, allocating purchase price to the assets and
liabilities of acquired companies, and evaluating long-term assets for potential
impairment. SFAS No. 157 does not require any new fair value measurements. SFAS
No. 157 is effective for the Company beginning October 1, 2008. The Company
is currently evaluating the impact of SFAS No. 157 on its consolidated financial
statements.



In July 2006,
the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxesan Interpretation of FASB Statement 109(FIN 48), which
prescribes a comprehensive model for how a company should recognize, measure,
present and disclose in its financial statements uncertain tax positions that
the company has taken or expects to take on a tax return, including a decision
whether or not to file a return in a particular jurisdiction. Under this new
guidance, the financial statements will reflect expected future tax consequences
of such positions presuming the taxing authorities full



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knowledge
of the position and all relevant facts, but without considering time values.
This guidance also revises disclosure requirements and introduces a
prescriptive, annual, tabular roll-forward of unrecognized tax benefits. FIN 48
is effective for annual periods beginning after December 15, 2006. The
Company is in the process of evaluating the impact of adoption of FIN 48 on its
consolidated financial statements.



In June 2006,
the FASB ratified the consensus reached by the EITF in Issue No. 06-3, How
Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is, Gross versus Net
Presentation)(EITF 06-3). The scope of this issue includes any tax
assessed by a governmental authority that is directly imposed on a
revenue-producing activity between a seller and a customer and may include, but
is not limited to, sales, use, value-added, and some excise taxes. EITF 06-3
requires the disclosure of the method of accounting for the applicable assessed
taxes and the amount of assessed taxes that are included in revenues if they are
accounted for under the gross method and are significant. EITF 06-3 is effective
for interim and annual reporting periods beginning after December 15, 2006.
The Company does not expect the adoption of EITF 06-3 in 2007 to have an impact
on its consolidated financial statements.



In
March, 2006, the FASB issued SFAS 156, Accounting for Services of Financial
Assets  an Amendment of FASB Statement No. 140 (hereinafter SFAS No. 156).
This statement amends FASB Statement No. 140 Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, with respect
to the accounting for separately recognized servicing assets and servicing
liabilities. This statement requires an entity to recognize a servicing asset or
servicing liability each time it undertakes an obligation to service a financial
asset by entering into a servicing contract that results from a transfer,
acquisition or assumption of financial assets or liabilities. This statement
also requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable. This
statement permits an entity to choose among two subsequent measurement methods
for each class of separately recognized servicing assets and servicing
liabilities. This statement also permits at its initial adoption a one time
reclassification of available for sale securities to trading securities by
entities with recognized servicing rights. Finally, this statement requires
separate presentation of servicing assets and servicing liabilities subsequently
measured at fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and servicing
liabilities. The adoption of this statement had no immediate material effect on
the Companys financial condition or results of operations.



In
February, 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid
Financial Instruments  an Amendment of FASB Statements No. 133 and 140
(hereinafter SFAS No. 155). This statement amends FASB Statements No. 133,
Accounting for Derivative Instruments and Hedging Activities and No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. This statement resolves issues addressed in Statement No. 133
Implementation Issue No. D1, Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets. This statement permits fair value
measurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation. This statement clarifies
which interest-only strips and principal-only strips are not subject to the
requirement of Statement No. 133. This statement establishes a requirement to
evaluate interests in securitized financial assets to identify interests that
are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation. This statement clarifies
that concentration of credit risk in the form of subordination are not embedded
derivatives. Finally, this statement amends Statement No. 140 to eliminate
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. The adoption of this statement had no material
effect on the Companys financial condition or results of operations.



ITEM 7.
 FINANCIAL STATEMENTS.





33





---

Our
consolidated financial statements and the report of Jewett, Schwartz, Wolfe
& Associates are attached to this Annual Report on Form 10-KSB beginning on
page F-1 and are incorporated herein by reference.



ITEM 8A.
CONTROLS AND PROCEDURES.



Disclosure Controls
and Procedures An evaluation was carried out under the supervision
and with the participation of the Companys management, including its Chief
Executive Officer and its Chief Financial Officer, of the effectiveness of the
Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this report.  Based upon this review, management concluded that
our disclosure controls and procedures are effective. There have
been no significant changes in internal control over financial reporting (as
defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934)
that occurred during the fiscal period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.Managements Annual
Report on Internal Control Over Financial ReportingOur management is
responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-5(f) under the
Securities Exchange Act of 1934).  Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2007.  In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control-Integrated Framework.  Our management has concluded that,
as of December 31, 2007, our internal control over financial reporting is
effective based on these criteria.This annual report does not include an
attestation report of the Companys registered public accounting firm regarding
internal control over financial reporting.  Managements report was not
subject to attestation by the Companys independent registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only managements report in this annual
report.Limitations of Disclosure Controls and ProceduresOur
management, including our Chief Executive Officer and Chief Accounting Officer,
does not expect that our disclosure controls or internal control over financial
reporting will prevent all errors or all instances of fraud.  A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control systems objectives will be met. 
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our Company have been detected. 
These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake.  Controls can also be circumvented by the individual acts
of some persons, by collusion of two or more people, or by management override
of the controls.  The design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and any design
may not succeed in achieving its stated goals under all potential future
conditions.  Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with policies or
procedures.  Because of the inherent limitation of a cost-effective control
system, misstatements due to error or fraud may occur and not be detected..





34





---

CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING



As required by Rule
13a-15(d), the Company's Chairman and Chief Accounting 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,
2007, the Company concluded that the then current system of disclosure controls
and procedures needed improvement, partly due to the transition to new
management, facilities, and auditors. As a result of this conclusion, the
Company initiated changes in internal control. 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.



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



As of April 14, 2008,
our directors and executive officers are:



Name

Age

Positions
and Offices

James
MacKay

48

Chairman
of the Board

Michael
Antonoplos



56

Director,
Interim Chief Executive Officer, Chief Accounting

Officer
and Secretary

Kenny
Lau

47

Director

Michael
Yom

40

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 chairman 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.  Mr. MacKays qualifications and history
were set forth in the Companys Form 10-KSB for 2005 available at:  http://www.sec.gov/Archives/edgar/data/1007018/000112178106000104/
biofield10ksb123105r.txt.



35





---



As of March 30, 2006,
Dr. Raymond Long and Mr. John Stephens resigned as directors and Mr. Michael Yom
was appointed as a director and President of the Company.  As reported in
the Companys Form 8-K filed July 19, 2007, Mr. Yom subsequently transitioned to
the position of chief operating officer.  Mr. Yoms qualifications and
history were set forth in the Companys Form 10-KSB for 2005 available at

http://www.sec.gov/Archives/edgar/data/1007018/000112178106000104/biofield10ksb123105r.txt.
 As reported in the Companys Form 8-K filed January 23, 2008, Mr. Yom
resigned as chief operating officer effective January 21, 2008.



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.  As reported in our Form 8-K
filed on July 19, 2007, our current chief executive officer, chief accounting
officer and secretary, Michael Antonoplos, was appointed to the Board to fill
the vacancy caused by Dr. Longs death.  In July 2007, Mr. Kenny Lau was
also appointed to the Board.  Mr. Antonoplos and Mr. Laus qualifications
are set forth in our July 19, 2007 Form 8-K, available at: http://www.sec.gov/
Archives/edgar/data/1007018/000112178107000218/ biofielda8k71907.htm.  As
reported in the Companys Form 8-K filed January 23, 2008, Mr. Antonoplos was
appointed the Companys secretary effective January 16, 2008.



No family
relationship exists among any of our directors or executive officers. None of
our directors would be considered to be independent.  We do not have an
Audit Committee. Our prior Board of Directors 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 Antonoplos, the Companys interim
chief executive officer, chief accounting officer and secretary our principal
executive offices.



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, 2007 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.  Each transaction
has been subsequently reported.



As set forth below in
Item 11, there is only one beneficiary owner, James MacKay, the Companys
chairman of the board of directors, who holds 15,893,045 shares of common stock
or 29.29% of the Companys total outstanding common stock, 12,300,000 shares of
preferred stock, and approximately 51.96% of all of the votes entitled to be
cast by stockholders of the Corporation on a fully-diluted basis (i.e., counting
all outstanding options and warrants on an as-exercised basis).  None of
the other directors or officers hold any stock.



ITEM 10.
   EXECUTIVE AND OTHER COMPENSATION.



As of March 30, 2006,
the date of the MKG Acquisition, the Company did not have formal employment
agreements in 2006.  The Company did not have any employees in 2007.



On March 31, 2007,
the Company entered into a consulting arrangement with Michael Antonoplos, who
later became the Companys interim chief executive officer, chief accounting
officer, and secretary as



36





---

well
as a director.  Pursuant to the consulting arrangement, Mr. Antonoplos
would receive the following monthly consulting fees:



|                      |        
|--------------------- | -------
|April
2007            | $15,000
|May 2007              | $13,000
|June
2007             | $12,000
|July to
December 2007 | $10,000





STOCK OPTIONS
GRANTED



As
reported in its Forms 8-K dated February 27, 2006 and March 2, 2006, the Company
issued to its former Chief Operating Officer, John Stephens, former Chief Sales
Officer, Cri Hilmer, and outside consultant Piyush Desai, 1.2 million options
based upon the fair value of service render at $47,512 for consulting fees
recognized in operating results for the year ended December 31, 2006.
 These options have an exercise price of $0.04 per share and expire on
February 23, 2011.



COMPENSATION OF
DIRECTORS



No cash compensation
was paid to our directors during the years ended December 31, 2007 and 2006, and
we have no standard arrangements pursuant to which directors are compensated for
any services provided as such.



EMPLOYMENT
CONTRACTS



As of March 15, 2007,
we did not have any employment contracts or change-in-control arrangements with
any of our executive officers in 2007.



ITEM
11.

SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.



The following table
sets forth, as of April 11, 2008, 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.



|                                                                                                              |  |               |  |          
|------------------------------------------------------------------------------------------------------------- |  | ------------- |  | ---------
|NAME                                                                                                          |  |               |  |          
|James MacKay,
Chairman (1)                                                                                    |  | 15,893,045(5) |  | 29.29%(6)
|Michael J.
Antonoplos, Director, interim chief executive officer, chief accounting
officer, and secretary (2) |  | -             |  | -        
|Kenny Lau,
Director (3)                                                                                       |  | -             |  | -        
|Michael Yom,
Director (4)                                                                                     |  | -             |  | -        

(1)

Address
is Chateau de Mont, 64300 Mont, France.

(2)

Address
is 345 Strathmore Drive, Rosemont, PA 19010.

(3)

Address
is 41G, Block 5, Seaview Crescent, Tung Chung, Lantau Island, Hong Kong

(4)

Address
is 2801 Stanbridge Street, Aspen 413, East Norriton, PA 19401

(5)

The
Companys Board has also authorized the issuance to James MacKay of 12,300,000
shares of Preferred Shares, Series A.  Each of the Series A Preferred
Shares shall have two vote per share and each Preferred Share shall be
convertible into two shares of the Companys common stock.



37





---

(6)

Mr.
MacKays shares of the Corporations common and preferred stock entitles him to
approximately 51.96% of all of the votes entitled to be cast by stockholders of
the Corporation on a fully-diluted basis (i.e., counting all outstanding options
and warrants on an as-exercised basis).



CHANGE OF
CONTROL



As set forth above,
on March 30, 2006, MKG took control of the Company and its management, board,
operations, and controlling interest.



As a result of the
debt conversion described above and in the Companys Form 8-K filed January 23,
2008, James MacKay became the holder of shares of the Corporations capital
stock entitling him to approximately 51.96% of all of the votes entitled to be
cast by stockholders of the Corporation on a fully-diluted basis (i.e., counting
all outstanding options and warrants on an as-exercised basis).



ITEM 12.
 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, 2007 and December 31, 2006 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,



| |                     |         |  |     
| | ------------------- | ------- |  | ----
| |                     | 2007    |  | 2006
| |                     |         |  |     
| | Audit
Fees1         | $54,000 |  | -   
| |                     |         |  |     
| | Audit Related
Fees2 | -       |  | -   
| |                     | -       |  | -   
| | Tax
Fees3           |         |  |     
| |                     |         |  |     
| | All Other
Fees4     | -       |  | -   



| |       |         |  |  
| | ----- | ------- |  | -
| | Total | $54,000 |  | -

_____________________



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.











38





---



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.







39





---

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.



BIOFIELD
CORP.



By:
/s/ Michael J. Antonoplos



Michael
J. Antonoplos

Interim
Chief Executive Officer and

Chief
Accounting Officer



Dated:  April
14, 2008











40





---

Report of Independent Registered Public Accounting Firm







To The Shareholders
and Board of Directors of Biofield Corp.



We have audited the accompanying
balance sheet of Biofield Corp. (a Development Stage Company) as of December 31,
2007 and 2006 and the related statements of operations, changes in stockholders
deficit and cash flows for the years ended December 31, 2007 and 2006 and the
period from October 16, 1987 (inception) through December 31, 2007.  These
financial statements are the responsibility of the Companys management.
 Our responsibility is to express an opinion on these financial statements
based on our audits.



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



In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Biofield Corp. as of December 31, 2007 and 2006, and the
results of its operations and its cash flows for the years ended December 31,
2007 and 2006 and the period from October 16, 1987 (inception) through December
31, 2007 in conformity with accounting principles generally accepted in the
United States.



The accompanying financial
statements referred to above have been prepared assuming that the Company will
continue as a going concern.  As more fully described in Note 1, the
Companys need to seek new sources or methods of financing or revenue to pursue
its business strategy, raise substantial doubt about the Companys ability to
continue as a going concern.  Managements plans as to these matters are
also described in Note 1.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.





Jewett, Schwartz,
Wolfe & Associates



/s/Jewett,
Schwartz, Wolfe & Associates

Hollywood, Florida

April 14, 2008





41





---



|                                                         |                   |  |                  
|-------------------------------------------------------- | ----------------- |  | -----------------
|BIOFIELD
CORP.                                           |                   |  |                  
|(A Development Stage
Company)                            |                   |  |                  
|CONSOLIDATED BALANCE
SHEETS                              |                   |  |                  
|                                                         |                   |  |                  
|                                                         | December
31,      |  | December
31,     
|ASSETS                                                   | 2007              |  | 2006             
|                                                         |                   |  |                  
|CURRENT ASSETS:                                          |                   |  |                  
|Cash and
cash equivalents                                | $
         13,328 |  | $
          2,361
|Prepaids                                                 | 9,000             |  | 8,234            
|Notes
receivable                                         | 11,004            |  | -                
|Total
current assets                                     | 33,332            |  | 10,595           
|                                                         |                   |  |                  
|PROPERTY AND EQUIPMENT -
Net                             | 6,601             |  | 469              
|TOTAL
ASSETS                                             | $
         39,933 |  | $
        11,064 
|                                                         |                   |  |                  
|LIABILITIES AND
STOCKHOLDERS DEFICIT                    |                   |  |                  
|                                                         |                   |  |                  
|                                                         |                   |  |                  
|CURRENT
LIABILITIES:                                     |                   |  |                  
|Accounts
payable                                         | $
    1,402,513   |  | $
   1,352,641   
|Accrued
interest                                         | 720,334           |  | 438,529          
|Accrued
expenses                                         | 430,489           |  | 253,786          
|Due to
affiliate                                         | 329,686           |  | 337,921          
|Advances
from stockholder                                | 2,162,703         |  | 1,966,094        
|Notes
payable                                            | 2,223,893         |  | 2,157,085        
|Line of
credit                                           | 342,180           |  | -                
|                                                         |                   |  |                  
|Total
current liabilities                                | 7,611,798         |  | 6,506,056        
|                                                         |                   |  |                  
|Commitments and
contigencies                             |                   |  |                  
|                                                         |                   |  |                  
|STOCKHOLDERS
DEFICIT:                                   |                   |  |                  
|Preferred
stock, $.001 par value;  authorized 12,300,000 |                   |  |                  
|shares;
issued 12,00,300 and 0 shares at                 |                   |  |                  
|December
31, 2007 and December 31, 2006, respectively    | 12,300            |  | 12,300           
|Common
stock, $.001 par value; authorized 60,000,000     |                   |  |                  
|shares;
45,142,936 shares issued and 9,994,550 shares    |                   |  |                  
|issuable
at December 31, 2007, and 43,142,936 shares     |                   |  |                  
|issued
and 9,994,550 shares issuable at December 31,     |                   |  |                  
|2006,
respectively                                       | 55,138            |  | 53,138           
|Treasury
stock - 2,306,311 shares                        | (3,100)           |  | (3,100)          
|Stock
subscriptions                                      | 3,849             |  | 3,849            
|Additional
paid-in capital                               | 66,461,340        |  | 66,263,340       
|Accumulated
deficit during development stage             | (74,101,392)      |  | (72,824,519)     
|Total
stockholders deficit                              | (7,571,865)       |  | (6,494,992)      
|TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT              | $
         39,933 |  | $
        11,064 
|                                                         |                   |  |                  
|See notes
to consolidated financial statements.         
|                                                         |                   |  |                  



42





---



|                                         |                         |  |                       |  |                               |  | 
|---------------------------------------- | ----------------------- |  | --------------------- |  | ----------------------------- |  | 
|                                         |                         |  |                       |  |                              
|BIOFIELD
CORP.                           |                         |  |                       |  |                              
|(A
Development Stage Company)            |                         |  |                       |  |                              
|CONSOLIDATED
STATEMENTS OF OPERATIONS    |                         |  |                       | 
|                                         |                         |  |                       |  | Period October 16,           
|                                         | Year Ended              |  | 1987 (Date of        
|                                         | December 31,            |  | Inception) Through   
|                                         | 2007                    |  | 2006                  |  | December 31, 2007            
|                                         |                         |  |                       |  |                              
|                                         |                         |  |                       |  |                              
|REVENUE                                  | $
             109,390  |  | $
              -     |  | $
                    244,522
|COST
OF SALES                            |                         |  |                       |  |                              
|Cost
of goods sold                       | 19,664                  |  | -                     |  | 95,111                       
|Loss
on write down of inventory          | -                       |  | -                     |  | 693,500                      
|GROSS
PROFIT                             | 89,726                  |  | -                     |  | (544,089)                    
|                                         |                         |  |                       |  |                              
|OPERATING
EXPENSES:                      |                         |  |                       |  |                              
|Research
and development                 | -                       |  | -                     |  | 40,481,889                   
|Selling,
general, and administrative     | 821,375                 |  | 226,880               |  | 32,111,699                   
|Impairment
of intangible assets          | -                       |  | -                     |  | 194,268                      
|Gain
on disposition of fixed assets      | -                       |  | -                     |  | (8,084)                      
|Total
operating expenses                 | 821,375                 |  | 226,880               |  | 72,779,772                   
|                                         |                         |  |                       |  |                              
|                                         |                         |  |                       |  |                              
|OTHER
INCOME (EXPENSE):                  |                         |  |                       |  |                              
|Interest
income                          | -                       |  | -                     |  | 2,476,723                    
|Interest
expense                         | (545,224)               |  | (582,233)             |  | (3,043,849)                  
|Amortization
of shares issued to lenders |                         |  |                       |  |                              
|and
other finance costs                  | -                       |  | -                     |  | (405,523)                    
|Royalty
income and other                 | -                       |  | 22                    |  | 214,867                      
|Net
other expense                        | (545,224)               |  | (582,211)             |  | (757,782)                    
|                                         |                         |  |                       |  |                              
|LOSS
BEFORE INCOME TAXES                 | (1,276,873)             |  | (809,091)             |  | (74,081,643)                 
|                                         |                         |  |                       |  |                              
|PROVISION
FOR INCOME TAXES               | -                       |  | -                     |  | (19,749)                     
|                                         |                         |  |                       |  |                              
|NET
LOSS                                 | $
      (1,276,873)     |  | $
       (809,091)    |  | $
           (74,101,392)    
|                                         |                         |  |                       |  |                              
|NET
LOSS PER SHARE:                      |                         |  |                       |  |                              
|Basic
and Diluted                        | $
               (0.02) |  | $
             (0.02) |  |                              
|                                         |                         |  |                       |  |                              
|WEIGHTED-AVERAGE
SHARES                  |                         |  |                       |  |                              
|Basic
and Diluted                        | 53,704,609              |  | 48,140,211            |  |                              
|                                         |                         |  |                       |  |                              

See notes to
consolidated financial statements.







43





---





|**BIOFIELD CORP.**                                        | ****                | ****       | ****                | ****       | ****                | ****       | ****             | ****       | ****         | ****              | ****           | ****                      | ****                 | ****         | ****             
|--------------------------------------------------------- | ------------------- | ---------- | ------------------- | ---------- | ------------------- | ---------- | ---------------- | ---------- | ------------ | ----------------- | -------------- | ------------------------- | -------------------- | ------------ | -----------------
|**(A Development Stage
Company)**                         | ****                | ****       | ****                | ****       | ****                | ****       | ****             | ****       | ****         | ****              | ****           | ****                      | ****                 | ****         | ****             
|**CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
DEFICIT**      |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|                                                          |                     |            |                     |            |                     |            |                  |            |              |                   | **Additional** | **Def fered Accumulated** | **Foreign Currency** |              | **Total**        
|                                                          | **Series A**        |            | **Series B**        |            | **Series C**        |            | ****             | ****       | **Treasury** | **Stock**         | **Paid In**    | **Deficit Development**   | **Translation**      |              | **Comprehensive**
|                                                          | **Preffered Stock** | **Amount** | **Preffered Stock** | **Amount** | **Preffered Stock** | **Amount** | **Common Stock** | **Amount** | **Stock**    | **Subscriptions** | **Capital**    | **Stage**                 | **Adjustment**       | **Total**    | **Loss**         
|                                                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|Sale of Common Stock, October 16, 1987                    |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|(date
of inception) (.16 per share, net)                  | -                   | $-         | -                   | $-         | -                   | $-         | 549,020          | $55        | $-           | $-                | $91,898        | $-                        | $-                   | $91,953      |                  
|Issuance of Common Stock in connection
with               |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|patent acquisition (.001 per share)                       | -                   | -          | -                   | -          | -                   | -          | 235,294          | 24         | -            | -                 | 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**                             | -                   | $-         | -                   | $-         | -                   | $-         | 784,314          | $79        | $-           | $-                | $92,174        | $(159,359)                | $-                   | $(67,106)    |                  
|Net loss                                                  | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | -              | (495,520)                 | -                    | (495,520)    |                  
|**Total comprehensive income
(loss)**                     |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              | $(495,520)       
|                                                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|**BALANCE AT MARCH 31,
1989**                             | -                   | $-         | -                   | $-         | -                   | $-         | 784,314          | $79        | $-           | $-                | $92,174        | $(654,879)                | $-                   | $(562,626)   |                  
|Net loss                                                  | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | -              | (233,347)                 | -                    | (233,347)    |                  
|**Total comprehensive income
(loss)**                     |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              | $(233,347)       
|                                                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|**BALANCE AT MARCH 31,
1990**                             | -                   | $-         | -                   | $-         | -                   | $-         | 784,314          | $79        | $-           | $-                | $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**                             | -                   | $-         | -                   | $-         | -                   | $-         | 784,314          | $79        | $(300)       | $-                | $92,174        | $(1,173,405)              | $-                   | $(1,081,452) |                  
|Retirement of Common Stock held in
treasury               | -                   | -          | -                   | -          | -                   | -          | (235,294)        | (24)       | 300          | -                 | (276)          | -                         | -                    | -            |                  
|Issuance of Common Stock in exchange for
notes            |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|and
debt with accrued interest (2.90 per share, net)      | -                   | -          | -                   | -          | -                   | -          | 431,372          | 43         | -            | -                 | 1,248,638      | -                         | -                    | 1,248,681    |                  
|Sale of Common Stock (.82 per share, net)                 | -                   | -          | -                   | -          | -                   | -          | 24,510           | 2          | -            | -                 | 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**                             | -                   | $-         | -                   | $-         | -                   | $-         | 1,004,902        | $100       | $-           | $-                | $1,497,414     | $(1,634,466)              | $-                   | $(136,952)   |                  
|Sale of Common Stock (7.67 per share,
net)                | -                   | -          | -                   | -          | -                   | -          | 557,475          | 55         | -            | -                 | 4,275,223      | -                         | -                    | 4,275,278    |                  
|Exercise of Common Stock options                          | -                   | -          | -                   | -          | -                   | -          | 2,451            | 1          | -            | -                 | 624            | -                         | -                    | 625          |                  
|Amortization of deferred compensation                     | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | 477,453        | -                         | -                    | 477,453      |                  
|Change in par value of common stock                       |                     |            |                     |            |                     |            |                  |            | 2,306,131    |                   |                |                           |                      |              |                  
|from
..0001 to .001                                       | -                   | -          | -                   | -          | -                   | -          | -                | 1,408      | -            | -                 | (1,408)        | -                         | -                    | -            |                  
|Net loss                                                  | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | -              | (3,099,637)               | -                    | (3,099,637)  |                  
|**Total comprehensive income
(loss)**                     |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              | $(3,099,637)     
|                                                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|**BALANCE AT MARCH 31,
1993**                             | -                   | $-         | -                   | $-         | -                   | $-         | 1,564,828        | $1,564     | $-           | $-                | $6,249,306     | $(4,734,103)              | $-                   | $1,516,767   |                  
|(brought forward)                                         |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|Exercise of Common Stock options                          | -                   | -          | -                   | -          | -                   | -          | 735              | 1          | -            | -                 | 187            | -                         | -                    | 188          |                  
|Sale of Series A Preferred Stock                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|(3.97
per share, net)                                     | 2,119,896           | 2,120      | -                   | -          | -                   | -          | -                | -          | -            | -                 | 8,411,370      | -                         | -                    | 8,413,490    |                  
|Issuance of Series A Preferred Stock in                   |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|exchange for notes (4.50 per share)                       | 222,222             | 222        | -                   | -          | -                   | -          | -                | -          | -            | -                 | 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**                             | 2,342,118           | $2,342     | -                   | $-         | -                   | $-         | 1,565,563        | $1,565     | $-           | $-                | $17,243,080    | $(11,633,618)             | $-                   | $5,613,369   |                  
|Sale of Series B Preferred Stock                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|(4.04
per share, net)                                     | -                   | -          | 481,644             | 482        | -                   | -          | -                | -          | -            | -                 | 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**                          | 2,342,118           | $2,342     | 481,644             | $482       | -                   | $-         | 1,565,563        | $1,565     | $-           | $-                | $19,205,094    | $(16,592,930)             | $-                   | $2,616,553   |                  
|Sale of Series C Preferred Stock                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|(4.11
per share, net)                                     | -                   | -          | -                   | -          | 2,914,771           | 2,915      | -                | -          | -            | -                 | 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**                          | 2,342,118           | $2,342     | 481,644             | $482       | 2,914,771           | $2,915     | 1,565,563        | $1,565     | $-           | $-                | $31,378,985    | $(25,332,788)             | $-                   | $6,053,501   |                  
|Sale of Common Stock                                      | -                   | -          | -                   | -          | -                   | -          | 1,819,000        | 1,819      | -            | -                 | 18,026,419     | -                         | -                    | 18,028,238   |                  
|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      | -            | -                 | 2,692          | -                         | -                    | -            |                  
|Exercise of Common Stock warrants                         | -                   | -          | -                   | -          | -                   | -          | 2,058            | 2          | -            | -                 | 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**                          |                     | $-         | -                   | $-         | -                   | $-         | 6,433,095        | $6,433     | $-           | $-                | $49,454,334    | $(35,368,878)             | $-                   | $14,091,889  |                  
|Sale of Common Stock (2.92 per share,
net)                | -                   | -          | -                   | -          | -                   | -          | 2,867,670        | 2,868      | -            | -                 | 8,377,583      | -                         | -                    | 8,380,451    |                  
|Warrants exchanged for Common Stock                       | -                   | -          | -                   | -          | -                   | -          | 643,639          | 644        | -            | -                 | (644)          | -                         | -                    | -            |                  
|Exercise of Common Stock options                          | -                   | -          | -                   | -          | -                   | -          | 50,674           | 50         | -            | -                 | 168,541        | -                         | -                    | 168,591      |                  
|Exercise of Common Stock warrants                         | -                   | -          | -                   | -          | -                   | -          | 9,531            | 10         | -            | -                 | 93,299         | -                         | -                    | 93,309       |                  
|Issuance of Common Stock for consulting                   | -                   | -          | -                   | -          | -                   | -          | 25,000           | 25         | -            | -                 | 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**                          | -                   | $-         | -                   | $-         |                     | $-         | 10,029,609       | $10,030    | $-           | $-                | $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**                          | -                   | $-         | -                   | $-         |                     | $-         | 10,029,609       | $10,030    | $(100)       | $-                | $58,255,667    | $(56,174,516)             | $57,224              | $2,148,305   |                  
|Sale of Common Stock (.05 per share, net)                 | -                   | -          | -                   | -          | -                   | -          | 14,000,000       | 14,000     | -            | -                 | 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**                          | -                   | $-         | -                   | $-         |                     | $-         | 24,029,609       | $24,030    | $(100)       | $-                | $58,941,667    | $(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)                     | -                   | -          | -                   | -          | -                   | -          | 500,000          | 500        | -            | -                 | 24,500         | -                         |                      | 25,000       |                  
|Sale of common stock (0.50 per share)                     | -                   | -          | -                   | -          | -                   | -          | 3,000,000        | 3,000      | -            | -                 | 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**                          | -                   | $-         | -                   | $-         |                     | $-         | 27,529,609       | $27,530    | $(3,100)     | $-                | $60,761,167    | $(58,950,445)             |                      | $1,835,152   |                  
|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**                          | -                   | $-         | -                   | $-         | -                   | $-         | 27,529,609       | $27,530    | $(3,100)     | $-                | $60,861,167    | $(61,189,132)             | $-                   | $(303,535)   |                  
|Exercise of Common Stock options                          | -                   | -          | -                   | -          | -                   | -          | 62,745           | 63         | -            | -                 | 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**                          | -                   | $-         | -                   | $-         | -                   | $-         | 27,592,354       | $27,593    | $(3,100)     | $-                | $60,976,790    | $(64,077,921)             | $-                   | $(3,076,638) |                  
|Issuance of Common Stock for consulting                   |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|services (0.30 per share, net)                            | -                   | -          | -                   | -          | -                   | -          | 50,000           | 50         | -            |                   | 14,950         | -                         | -                    | 15,000       |                  
|Issuance of Common Stock for consulting                   |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|services (0.32 per share, net)                            | -                   | -          | -                   | -          | -                   | -          | 468,749          | 468        | -            | -                 | 149,532        | -                         | -                    | 150,000      |                  
|Issuance of Common Stock for consulting                   |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|services (0.11 per share, net)                            | -                   | -          | -                   | -          | -                   | -          | 275,000          | 275        | -            | -                 | 29,975         | -                         | -                    | 30,250       |                  
|Issuance of Common Stock as incentive for                 |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|funding by issue of notes (0.25 per share net)            | -                   | -          | -                   | -          | -                   | -          | 3,187,500        | 3,188      | -            | -                 | 793,687        | -                         | -                    | 796,875      |                  
|Common Stock (410,358 shares) to be
issued                |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|for
interest accrued on stockholder's advances            | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | 410               | 101,976        | -                         | -                    | 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**                          | -                   | $-         | -                   | $-         | -                   | $-         | 31,573,603       | $31,574    | $(3,100)     | $410              | $62,166,910    | $(66,242,619)             | $-                   | $(4,046,825) |                  
|Issuance of Common Stock as incentive for                 |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|funding by issue of notes (0.25 per
share net)            | -                   | -          | -                   | -          | -                   | -          | 1,812,500        | 1,813      | -            | -                 | 451,312        | -                         | -                    | 453,125      |                  
|Issuance of Common Stock as incentive for                 |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|funding by issue of notes (0.31 per
share net)            | -                   | -          | -                   | -          | -                   | -          | 1,895,000        | 1,895      | -            | -                 | 585,555        | -                         | -                    | 587,450      |                  
|Sale of Common Stock (0.10 per share)                     | -                   | -          | -                   | -          | -                   | -          | 1,224,000        | 1,224      | -            | -                 | 160,601        | -                         | -                    | 161,825      |                  
|Common Stock (286,421 shares) to be
issued                |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|for
interest accrued on stockholder's advances            | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | 287               | 64,456         | -                         | -                    | 64,743       |                  
|Common Stock (2,500,000 shares) to be
issued              |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|for payment penalty on notes payable                      | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | 2,500             | 347,500        | -                         | -                    | 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**                          | -                   | $-         | -                   | $-         | -                   | $-         | 36,505,103       | $36,506    | $(3,100)     | $3,197            | $63,876,334    | $(70,089,136)             | $-                   | $(6,176,199) |                  
|Sale of Common Stock ( for not less than $0.10 per
share) | -                   | -          | -                   | -          | -                   | -          | 3,240,333        | 3,240      | -            | -                 | 382,178        | -                         | -                    | 385,418      |                  
|Common Stock (2,310,300 shares) to be
issued              |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|for
interest accrued on stockholder's advances            |                     | -          | -                   | -          | -                   | -          | -                | -          | -            | 2,310             | 83,430         | -                         | -                    | 85,740       |                  
|Issue of shares of Common Stock for
payment               |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|penalty on notes payable                                  | -                   | -          | -                   | -          | -                   | -          | 897,500          | 897        | -            | -                 | 17,052         | -                         | -                    | 17,949       |                  
|Issue of shares of Common Stock for
payment               |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|penalty on notes payable                                  | -                   | -          | -                   | -          | -                   | -          | 2,500,000        | 2,500      | -            | (2,500)           | -              | -                         | -                    | -            |                  
|Memorandum entry to record as expense for                 |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|honorary services rendered by a shareholder               | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | 100,000        | -                         | -                    | 100,000      |                  
|Net loss                                                  | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | -              | (1,926,292)               | -                    | (1,926,292)  |                  
|**Total comprehensive income
(loss)**                     |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              | $(1,926,292)     
|****                                                      | ****                | ****       | ****                | ****       | ****                | ****       | ****             | ****       |              |                   |                |                           |                      |              |                  
|**BALANCE AT DECEMBER 31,
2005**                          | -                   | $-         | -                   | $-         | -                   | $-         | 43,142,936       | $43,143    | $(3,100)     | $3,007            | $64,458,994    | $(72,015,428)             | $-                   | $(7,513,384) |                  
|Common Stock (841,438 shares) to be
issued                |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|for
interest accrued on stockholder's advances            | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | 842               | 24,401         | -                         | -                    | 25,243       |                  
|Options issued for consulting services                    | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | 47,512         | -                         | -                    | 47,512       |                  
|Memorandum entry to record as expense for                 |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  
|honorary services rendered by a shareholder               | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | 25,000         | -                         | -                    | 25,000       |                  
|Debt converted to stock                                   | 12,300,000          | 12,300     | -                   | -          | -                   | -          | 9,994,550        | 9,995      | -            | -                 | 1,707,433      | -                         | -                    | 1,729,728    |                  
|Net loss                                                  | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | -              | (809,091)                 | -                    | (809,091)    |                  
|**Total comprehensive income
(loss)**                     |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              | $(809,091)       
|****                                                      | ****                | ****       | ****                | ****       | ****                | ****       | ****             | ****       |              |                   |                |                           |                      |              |                  
|**BALANCE AT DECEMBER 31,
2006**                          | 12,300,000          | $12,300    | -                   | $-         | -                   | $-         | 53,137,486       | $53,138    | $(3,100)     | $3,849            | $66,263,340    | $(72,824,519)             | $-                   | $(6,494,992) |                  
|Issuance of Common Stock for cash                         |                     |            |                     |            |                     |            | 1,000,000        | 1,000      |              |                   | 99,000         |                           |                      | 100,000      |                  
|Issuance of Common Stock for conversion of
debt           | -                   | -          | -                   | -          | -                   | -          | 1,000,000        | 1,000      | -            | -                 | 99,000         | -                         | -                    | 100,000      |                  
|Net loss                                                  | -                   | -          | -                   | -          | -                   | -          | -                | -          | -            | -                 | -              | (1,276,873)               | -                    | (1,276,873)  |                  
|**Total comprehensive income
(loss)**                     |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              | $(1,276,873)     
|****                                                      | ****                | ****       | ****                | ****       | ****                | ****       | ****             | ****       |              |                   |                |                           |                      |              |                  
|**BALANCE AT DECEMBER 31,
2007**                          | 12,300,000          | $12,300    | -                   | $-         | -                   | $-         | 55,137,486       | $55,138    | $(3,100)     | $3,849            | $66,461,340    | $(74,101,392)             | $-                   | $(7,571,865) |                  
|                                                          |                     |            |                     |            |                     |            |                  |            |              |                   |                |                           |                      |              |                  

See notes to condensed financial statements







44





---





|                                                                            |              |  |                    |  |                        
|--------------------------------------------------------------------------- | ------------ |  | ------------------ |  | -----------------------
|BIOFIELD
CORP. ( A DEVELOPMENT STAGE COMPANY)                               |              |  |                    |  |                        
|CONDENSED
STATEMENTS OF CASH FLOWS                                          |              |  |                    |  |                        
|                                                                            |              |  |                    |  |                        
|                                                                            |              |  |                    |  | Period October 16,     
|                                                                            |              |  |                    |  | 1987 (Date of          
|                                                                            | Year Ended   |  | Inception) Through
|                                                                            | December 31, |  | December 31,      
|                                                                            | 2007         |  | 2006               |  | 2007                   
|                                                                            |              |  |                    |  |                        
|CASH
FLOWS FROM OPERATING ACTIVITIES:                                       |              |  |                    |  |                        
|Net
loss                                                                    | $(1,276,873) |  | $
(809,091)        |  | $
         (74,101,392)
|Adjustments
to reconcile net loss to net cash used in operating activities: |              |  |                    |  |                        
|Depreciation
and amortization                                               | 816          |  | 1,498              |  | 2,762,022              
|Amortization
of premiums on short-term investments                          | -            |  | -                  |  | 156,692                
|Amortization
of deferred financing costs                                    | -            |  | -                  |  | 2,129,643              
|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                                                | -            |  | -                  |  | 693,500                
|Impairment
of intangible assets                                             | -            |  | -                  |  | 194,268                
|Vendor
settlements                                                          | -            |  | -                  |  | (77,257)               
|Noncash
compensation                                                        | -            |  | 25,000             |  | 3,533,451              
|Gain
from disposition of fixed assets                                       | -            |  | -                  |  | (159,473)              
|Interest
paid in common stock                                               | -            |  | 25,243             |  | 575,260                
|Commisions
and discounts on sale of common stock                            | -            |  | -                  |  | 96,919                 
|Loan
repayment default payable in shares of common stock                    | -            |  | -                  |  | 350,000                
|Consultancy
fees paid in options                                            | -            |  | 47,512             |  | 242,762                
|Changes
in assets and liabilities:                                          |              |  |                    |  |                        
|Notes
receivable                                                            | (11,004)     |  | -                  |  | (11,004)               
|Inventories                                                                 | -            |  | -                  |  | (693,500)              
|Prepaids                                                                    | (766)        |  | (8,234)            |  | (141,582)              
|Due
to affiliate                                                            | (8,234)      |  | 8,234              |  | 329,687                
|Accounts
payable and accrued liabilities                                    | 326,574      |  | 331,664            |  | 2,428,613              
|Net
cash used in operating activities                                       | (969,487)    |  | (378,174)          |  | (61,145,029)           
|CASH
FLOWS FROM INVESTING ACTIVITIES:                                       |              |  |                    |  |                        
|Acquisitions
of property and equipment                                      | (6,948)      |  | -                  |  | (2,617,639)            
|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                                       | (6,948)      |  | -                  |  | (3,175,678)            
|CASH
FLOWS FROM 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 - net      | -            |  | 1,729,728          |  | 35,203,258             
|Proceeds
from issuance of common stock                                      | 100,000      |  | -                  |  | 398,546                



45





---



|                                                                    |                  |  |                |  |                            
|------------------------------------------------------------------- | ---------------- |  | -------------- |  | ---------------------------
|Proceeds
from issuance of notes payable                             | 66,808           |  | 110,000        |  | 1,555,808                  
|Proceeds
from borrowings on line of credit                          | 342,180          |  | -              |  | 342,180                    
|Notes
financing costs                                               | 281,805          |  | 267,741        |  | 543,882                    
|Advances
from stockholder and related party                         | 196,609          |  | -              |  | 3,473,495                  
|Repayments
of advances from stockholder                             | -                |  | (1,729,728)    |  | (1,874,728)                
|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                           | 987,402          |  | 377,741        |  | 64,445,532                 
|NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                | 10,967           |  | (433)          |  | 124,825                    
|EFFECT
OF EXCHANGE RATE CHANGES                                     | -                |  | -              |  | (111,497)                  
|BEGINNING
OF PERIOD                                                 | 2,361            |  | 2,794          |  | -                          
|END
OF PERIOD                                                       | $
     13,328    |  | $
     2,361   |  | $
                13,328   
|                                                                    |                  |  |                |  |                            
|Supplementary
disclosure of cash flow information:                  |                  |  |                |  |                            
|Cash
paid for interest                                              | $
             - |  | $
           - |  | $
                        -
|Cash
paid for taxes                                                 | $
             - |  | $
           - |  | $
                        -
|                                                                    |                  |  |                |  |                            
|                                                                    |                  |  |                |  |                            
|See notes to condensed financial statements                        
|                                                                    |                  |  |                |  |                            





46





---



|                                                                                                  |              |                    |                   |  |                          
|------------------------------------------------------------------------------------------------- | ------------ | ------------------ | ----------------- |  | -------------------------
|BIOFIELD
CORP.                                                                                    |              |                    |                   |  |                          
|(A
Development Stage Company)                                                                     |              |                    |                   |  |                          
|CONSOLIDATED
STATEMENTS OF CASH FLOWS (continued)                                                 |              |                    |                   |  |                          
|                                                                                                  |              |                    |                   |  |                          
|                                                                                                  |              |                    |                   |  | Period October 16,       
|                                                                                                  |              |                    | 1987 (Date of    
|                                                                                                  | December 31, | Inception) Through
|                                                                                                  | 2007         | 2006               | December 31, 2007
|SUPPLEMENTAL
DISCLOSURES OF CASH                                                                  |              |                    |                   |  |                          
|FLOW
INFORMATION:                                                                                 |              |                    |                   |  |                          
|Cash
paid for interest                                                                            | $
       -   |                    | $
 -              |  | $
              857,003  
|Cash
paid for taxes                                                                               | $
       -   |                    | $
 -              |  | $
                      -
|                                                                                                  |              |                    |                   |  |                          
|SUPPLEMENTAL
SCHEDULE FOR NONCASH                                                                 |              |                    |                   |  |                          
|INVESTING
AND FINANCING ACTIVITIES:                                                               |              |                    |                   |  |                          
|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 issued:                               | $
       -   |                    | $
 -              |  | $
                17,949 
|                                                                                                  |              |                    |                   |  |                          
|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:                                                                        | $
       -   |                    | $
 -              |  | $
            1,200,000  
|                                                                                                  |              |                    |                   |  |                          
|During
the fiscal year ended December 31, 2007, 1,000,000 shares of Common Stock                  |              |                    |                   |  |                          
|issued
to former employee, in lieu of accrued liabilities                                         | $100,000     |                    | $
 -              |  | $
              100,000  
|                                                                                                  |              |                    |                   |  |                          





See notes to condensed financial statements



47





---





BIOFIELD CORP.
(A Development Stage Company)



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 
ORGANIZATION



Organization



Biofield Corp. (the
Company) is a development stage company that has developed a highly
proprietary system to assist in detecting breast cancer. The procedure is
non-invasive and radiation- and compression-free. The procedure produces
objective results within 20 minutes without the need for interpretation by a
radiologist.  The Companys breast cancer diagnostic device, the Biofield
Diagnostic System (BDS), 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.  The new
prototype of the device is portable and the size of a laptop computer.  The
sensors are similar in size to an EEG/ EKG sensor. The current system is a final
complete product and has received CE mark Certification from the European
regulatory authorities. The CE mark certification, which
permits companies to market in European Union member
countries, was received in connection with our former facility in
Alpharetta, Georgia.  The Company is considering other facilities which
have already secured CE Mark certification.  The Company currently operates
in the biomedical device market segment.  The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries.



Through March 31,
2006, the Companys focus and resources were primarily directed towards securing
approval of the BDS from the U.S. Food and Drug Administration (U.S. FDA) to
distribute in the U.S.  The Company continued to incur significant losses
associated with these activities and generated little or no sales.
 Subsequent to March 31, 2006, The MacKay Group (MKG) took control of the
Companys management and operations (the MKG Acquisition). Post-MKG
Acquisition, the Company changed its primary focus towards penetrating foreign
markets with significant populations of women, where MKG had significant
industry and government contacts and relationships, where the need for the BDS
appeared compelling, and where the regulatory hurdles were not as burdensome.
The Company has secured or is working to secure significant government,
distribution, research and development and manufacture networks in the Peoples
Republic of China, India, the Philippines and other parts of Asia, Mexico, Latin
America, the Caribbean, Africa, Europe, and the Middle East.  The Company
will continue its efforts to secure U.S. FDA approval. The Company believes that
the government and industry relationships, the possible significant clinical
data and research and development (especially as it may pertain to screening and
other cancers), and revenues it secures abroad will facilitate its efforts to
secure U.S. FDA approval.



From April 1, 2006 to
December 31, 2006, the Companys time, energies, and resources were focused
towards transitioning the Company from prior management to MKG.  This
included the tasks of moving the Companys facilities, inventory, and operations
from Alpharetta, Georgia to Philadelphia, Pennsylvania and transferring and
reorganizing voluminous amounts of clinical and technological data, and
financial records.  The Company has since completed the move to a facility
in King of Prussia, Pennsylvania.  With the transfer of vital financial and
regulatory records, the Company diligently proceeded during 2007 to bring all of
its Security and Exchange Commission (SEC) filings current. During the
transition, MKG successfully reduced approximately $2 million of the Companys
debt by converting it to stock, and continues to work toward further debt
reduction.













---





The financial
statements are presented on the basis that the Company is a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.  The Company has incurred operating losses since its
inception. This condition raises substantial doubt as to the Companys ability
to continue as a going concern as such continuance is dependent upon the
Companys ability to raise sufficient capital. Managements plans regarding
these matters, with the objective of improving liquidity and sustaining
profitability in future years encompass the following:



·

Move
from a development stage entity to an operating entity;

·

Settling
legacy outstanding obligations;

·

Continued
review of all expenditures in order to minimize costs;

·

Raise
additional working capital as necessary; and

·

Generate
revenue from foreign markets such as China and India where MKG has significant
government and industrial relationships.



In the absence of
additional financing the Company may be unable to satisfy past due obligations.
Management believes that the actions presently being taken provide the
opportunity to improve liquidity and sustain profitability. However, there are
no assurances that managements plans will be achieved. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Ultimately, the Company must
achieve profitable operations if it is to be a viable entity.



The Company has never
declared or paid any cash dividends on capital stock and do not intend to pay
any cash dividends in the foreseeable future.



NOTE 2 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES



Principals of
Consolidation



The consolidated
financial statements include the accounts of the Company and its wholly owned
subsidiaries. All material inter-company transactions and balances have been
eliminated in consolidation.



Use of
Estimates



The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses during the
reporting period. Estimates that are critical to the accompanying financial
statements arise from the determination of the fair value of the Companys
investment. Because such determination involves subjective judgment, it is at
least reasonably possible that the Companys estimates could change in the near
term with respect to this matter.



Cash and Cash
Equivalents



The
Company considers all highly liquid debt securities purchased with original or
remaining maturities of three months or less to be cash equivalents. The
carrying value of cash equivalents approximates fair value.













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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.



Fair Value of
Financial Instruments



Cash and cash
equivalents, prepaid expenses and other current assets, accounts payable and
accrued expenses, as reflected in the consolidated financial statements,
approximate fair value because of the short-term maturity of these instruments.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.



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.  Repairs
and maintenance are expensed as incurred.



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, 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 was doubtful. Due to the uncertainties management was
unable to determine and project future undiscounted cash flows for these assets
with reasonable accuracy. Consequently, the Company recorded an impairment
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.



Revenue
Recognition



The Company has
adopted and follows the guidance provided in the SECs Staff Accounting Bulletin
(SAB) No. 104, which provides guidance on the recognition, presentation and
disclosure of revenue in the financial statements.



Income
Taxes



The Company accounts
for income taxes under Statement of Financial Account Standards (SFAS)
No. 109, Accounting for Income Taxes (SFAS No. 109). Deferred income tax
assets and liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Due to the net loss incurred in all periods, there is no
provision for income taxes provided as a full valuation allowance has been
established.











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Derivative
Financial Instruments



The Company does not
use derivative instruments to hedge exposures to cash flow, market, or foreign
currency risks.



The Company reviews
the terms of convertible debt and equity instruments that are issued to
determine whether there are embedded derivative instruments, including the
embedded conversion option, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. When the risks and rewards of
any embedded derivative instrument are not clearly and closely related to the
risks and rewards of the host instrument, the embedded derivative instrument is
generally required to be bifurcated and accounted for separately.



The conversion option
has the risks and rewards associated with an equity instrument, not a debt
instrument, because its value is related to the value of our common stock.
Nonetheless, if the host instrument is considered to be conventional
convertible debt (or conventional convertible preferred stock), bifurcation
of the embedded conversion option is generally not required. However, if the
instrument is not considered to be conventional convertible debt (or
conventional convertible preferred stock), bifurcation of the embedded
conversion option may be required in certain circumstances. Generally, where the
ability to physical or net-share settle the conversion option is deemed to be
not within the control of the Company, the embedded conversion option is
required to be bifurcated and accounted for as a derivative financial instrument
liability. The Company currently does not have any such instruments requiring
classification as a liability.



In connection with
the sale of convertible debt and equity instruments, the Company may also issue
freestanding options or warrants. Additionally, the Company may issue options or
warrants to non-employees in connection with consulting or other services they
provide. Although the terms of the options and warrants may not provide for
net-cash settlement, in certain circumstances, physical or net-share settlement
may be deemed to not be within the control of the Company and, accordingly, the
Company may be required to account for these freestanding options and warrants
as derivative financial instrument liabilities, rather than as equity. The
Company currently does not have any such instruments requiring classification as
a liability.



Derivative financial
instruments are required to be initially measured at their fair value. For
derivative financial instruments that shall be accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income.



If the embedded
derivative instrument is to be bifurcated and accounted for as a liability, the
total proceeds received will be first allocated to the fair value of the
bifurcated derivative instrument. If freestanding options or warrants were also
issued and are to be accounted for as derivative instrument liabilities (rather
than as equity), the proceeds are next allocated to the fair value of those
instruments. The remaining proceeds, if any, are then allocated to the
convertible instrument itself, usually resulting in that instrument being
recorded at a discount from its face amount. In circumstances where a
freestanding derivative instrument is to be accounted for as an equity
instrument, the proceeds are allocated between the convertible instrument and
the derivative equity instrument, based on their relative fair values.



During 2007 and 2006
none of the above mentioned convertible debt and equity instruments were
considered to be derivative instruments.













---





Warrants



The Company issues
warrants to purchase the Companys common stock in conjunction with debt and
certain preferred stock issues. Warrants are accounted for in accordance with
the provisions of Accounting Principles Bulletin (APB) No. 14, Accounting
for Convertible Debt and Debt Issued with Stock Purchase Warrants(APB
No.14) and Emerging Issues Task Force (EITF) No. 00-19, Accounting for
Derivative Financial Instruments Accounting for Derivative Financial Instruments
Indexed to or Potentially Settled in Indexed to or Potentially Settled in a
Companys Own Stock(EITF 00-19). The fair value of warrants granted in
conjunction with debt and equity issuances is estimated on the grant date using
the Black-Scholes option pricing model. The value of warrants is separated from
the total consideration of each issue and included as an element of additional
paid-in capital.



Net Loss Per
Share



Basic
and diluted net losses per common share are presented in accordance with SFAS
No.128, Earning Per Share, for all periods presented. Stock subscriptions,
options and warrants have been excluded from the calculation of the diluted loss
per share for the years ended December 31, 2007 and 2006, because all such
securities were anti-dilutive. The net loss per share is calculated by dividing
the net loss by the weighted average number of shares outstanding during the
periods.



Reclassification



Certain amounts in
the prior year consolidated financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year
consolidated financial statements.



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.



Research and
Development



The Company accounts
for research and development costs in accordance with the SFAS No. 2,
Accounting for Research and Development Costs. 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 the period from October 16, 1987 (date of inception) to
December 31, 2005 were $40,481,889.  In 2007 and 2006 there were no
additional expenditures on research and product development.













---





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.



NOTE 3  RECENT
ACCOUNTING PRONOUNCEMENTS



In
December, 2007, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141 (revised 2007), Business
Combinations (hereinafter SFAS No. 141 (revised 2007)). This statement
establishes principles and requirements for how an acquirer a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in the acquiree, b)
recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase and c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. The scope of SFAS No. 141 (revised 2007) is
broader than the scope of SFAS No. 141, which it replaces. The effective date of
SFAS No. 141 (revised 2007) is for all acquisitions in which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. The adoption of this statement has no immediate
material effect on the Companys financial condition or results of operations.



In
December, 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51 (hereinafter
SFAS No. 160). This statement establishes accounting and reporting standards
that require a) the ownership interests in subsidiaries held by parties other
than the parent be clearly identified, labeled and presented in the consolidated
statement of financial position with equity, but separate from the parents
equity, b) the amount of consolidated net income attributable to the parent and
to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income, c) changes in a parents ownership
interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently, d) when a subsidiary is
deconsolidated, any retained noncontrolling  equity investment in the
former subsidiary be initially measured at fair value and e) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. The
effective date of this standard is for fiscal years and interim periods
beginning on or after December 15, 2008. The adoption of this statement had no
immediate material effect on the Companys financial condition or results of
operations.



In February 2007, the
FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS
No.159"). SFAS No. 159 allows companies to choose to measure many financial
instruments and certain other items at fair value. SFAS No. 159 will become
effective for the Company beginning in fiscal 2009. The Company is currently
evaluating what effects the adoption of SFAS No. 159 will have on the Company's
future results of operations and financial condition.



In
September 2006, the SEC issued SAB No. 108, Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements(SAB No. 108). SAB No. 108 provides guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of determining whether the current years











---





financial statements
are materially misstated. SAB No. 108 is effective for the Company beginning
October 1, 2007. The adoption of SAB No. 108 is not expected to have a
material impact on the Companys consolidated financial statements.



In
September 2006, the FASB issued SFAS No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB
Statements No. 87, 88, 106, and 132(R)(SFAS No. 158). SFAS No. 158
requires an employer to recognize the funded status of a benefit plan, measured
as the difference between plan assets at fair value and the projected benefit
obligation, in its statement of financial position. SFAS No. 158 also requires
an employer to measure defined benefit plan assets and obligations as of the
date of the employers fiscal year-end. SFAS No. 158 is effective for the
Company for its fiscal year ended September 30, 2007. The Company is
currently evaluating the impact of SFAS No. 158 on its consolidated financial
statements.



In
September 2006, the Financial Accounting Standards Board (FASB) issued
SFAS No. 157, Fair Value Measurements(SFAS No. 157). SFAS No. 157
provides guidance for using fair value to measure assets and liabilities and
requires additional disclosure about the use of fair value measures, the
information used to measure fair value, and the effect fair-value measurements
have on earnings. The primary areas in which the Company utilizes fair value
measures are valuing pension plan assets and liabilities, valuing hedge-related
derivative financial instruments, allocating purchase price to the assets and
liabilities of acquired companies, and evaluating long-term assets for potential
impairment. SFAS No. 157 does not require any new fair value measurements. SFAS
No. 157 is effective for the Company beginning October 1, 2008. The Company
is currently evaluating the impact of SFAS No. 157 on its consolidated financial
statements.



In July 2006,
the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxesan Interpretation of FASB Statement 109(FIN 48), which
prescribes a comprehensive model for how a company should recognize, measure,
present and disclose in its financial statements uncertain tax positions that
the company has taken or expects to take on a tax return, including a decision
whether or not to file a return in a particular jurisdiction. Under this new
guidance, the financial statements will reflect expected future tax consequences
of such positions presuming the taxing authorities full knowledge of the
position and all relevant facts, but without considering time values. This
guidance also revises disclosure requirements and introduces a prescriptive,
annual, tabular roll-forward of unrecognized tax benefits. FIN 48 is effective
for annual periods beginning after December 15, 2006. The adoption of this
statement had no immediate material effect on the Companys financial condition
or results of operations.



In June 2006,
the FASB ratified the consensus reached by the EITF in Issue No. 06-3, How
Taxes Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement (That Is, Gross versus Net
Presentation)(EITF 06-3). The scope of this issue includes any tax
assessed by a governmental authority that is directly imposed on a
revenue-producing activity between a seller and a customer and may include, but
is not limited to, sales, use, value-added, and some excise taxes. EITF 06-3
requires the disclosure of the method of accounting for the applicable assessed
taxes and the amount of assessed taxes that are included in revenues if they are
accounted for under the gross method and are significant. EITF 06-3 is effective
for interim and annual reporting periods beginning after December 15, 2006.
The adoption of this statement had no immediate material effect on the Companys
financial condition or results of operations.



In
March, 2006, the FASB issued SFAS 156, Accounting for Services of Financial
Assets  an Amendment of FASB Statement No. 140 (hereinafter SFAS No. 156).
This statement amends FASB Statement No. 140 Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, with respect
to the accounting for separately recognized servicing











---





assets
and servicing liabilities. This statement requires an entity to recognize a
servicing asset or servicing liability each time it undertakes an obligation to
service a financial asset by entering into a servicing contract that results
from a transfer, acquisition or assumption of financial assets or liabilities.
This statement also requires all separately recognized servicing assets and
servicing liabilities to be initially measured at fair value, if practicable.
This statement permits an entity to choose among two subsequent measurement
methods for each class of separately recognized servicing assets and servicing
liabilities. This statement also permits at its initial adoption a one time
reclassification of available for sale securities to trading securities by
entities with recognized servicing rights. Finally, this statement requires
separate presentation of servicing assets and servicing liabilities subsequently
measured at fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and servicing
liabilities. The adoption of this statement had no immediate material effect on
the Companys financial condition or results of operations.



In
February, 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid
Financial Instruments  an Amendment of FASB Statements No. 133 and 140
(hereinafter SFAS No. 155). This statement amends FASB Statements No. 133,
Accounting for Derivative Instruments and Hedging Activities and No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. This statement resolves issues addressed in Statement No. 133
Implementation Issue No. D1, Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets. This statement permits fair value
measurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation. This statement clarifies
which interest-only strips and principal-only strips are not subject to the
requirement of Statement No. 133. This statement establishes a requirement to
evaluate interests in securitized financial assets to identify interests that
are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation. This statement clarifies
that concentration of credit risk in the form of subordination are not embedded
derivatives. Finally, this statement amends Statement No. 140 to eliminate
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. The adoption of this statement had no material
effect on the Companys financial condition or results of operations.



NOTE 4  MATERIAL
DEVELOPMENTS



The March 30, 2006
MKG Acquisition



On March 30, 2006,
MKG took control of the Companys management and operations as a result of a
series of agreements detailed in and attached to the Companys April 6, 2006
Form 8-K.  The explicit objective of the agreements was to give MKG control
of the Companys management, board, operations, and 51% of the Companys common
shares on a fully diluted basis.  The change of control was effectuated by
way of, among other things, stock acquisitions, debt conversion, and board
changes. All of the agreements were reviewed and approved by the Companys then
board (Dr. David Long, Dr. Raymond Long, and John Stephens) and by the Companys
then securities counsel.  As of the MKG Acquisition, all of the Companys
prior royalty, distribution, employment, research and development, and
consulting agreements had been or were terminated.



MKG acquired all of
the Companys common shares (8,747,528 shares) owned by the Companys former
chairman and chief executive officer, Dr. David Long and his family and
affiliates, pursuant to a Stock Acquisition and Voting Agreement between MKG and
Dr. David Long, Mrs. Donna Long, Dr. Raymond Long, the Long Family Trust, and
the Long Family Partners II, LP (the Long Agreement) and a Stock Acquisition
Agreement between MKG and the David and Donna Long











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Family Foundation
(the Long Foundation Agreement).  In total, MKG acquired approximately
17.49% of all common shares 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.  As reported in the Form 3/A filed January
22, 2008, 5,898,495 of those shares acquired by MKG were subsequently assigned
to James MacKay as MKGs designee in accordance with the Long Agreement and Long
Foundation Agreement.



In accordance with
the stock acquisition agreements and the Companys prior boards approval
thereof, board members, John Stephens and Dr. Raymond Long, resigned and were
replaced by James MacKay and Michael Yom.   MacKay became chairman and
Yom became president.  In 2007 Yom became chief operating officer and in
2008 resigned as chief operating officer.  Dr. David Long remained a board
member until his death in April 2006.  His board seat was subsequently
filled by Michael Antonoplos, the Companys current interim chief executive
officer, secretary and chief accounting officer.



Under the Long
Agreement, MKG agreed to take control of the Companys management and
operations, fund the Company, help restructure the Companys debt, and use its
government and industry contacts and relationships in Asia, Europe, and
elsewhere to distribute, manufacture, and develop the BDS in foreign markets.



Under the Long
Agreement, MKG agreed to give the Longs a royalty equal to 1% of the Companys
net sales worldwide for three years commencing as of March 31, 2006.  MKG
also entered into a three-year, $60,000 per year consulting agreement with Dr.
David Long or his nominee.



The Debt
Conversion



The Long Agreement
also provided for the reduction of $2 million of the Companys debt owed to Dr.
David Long and his family and affiliates by way of an assignment of this debt to
MKG and the subsequent conversion of the debt into stock.  The assignment
and debt conversion (including conversion rate) were reviewed and approved by
the Companys prior management, board, and securities counsel.



Under the Long
Agreement, the Longs and their affiliates (LFCG) assigned approximately $2
million (comprising principal and accrued interest) of the total debt (over $4.3
million) owed them by the Company to MKG.  MKG was entitled to designate
which portion of the total LFCG debt to assign.  The assigned debt was to
be converted into stock of the Company at $0.05 per share (the Converted
Shares).  Upon conversion, MKG retained a portion of the Converted Shares
so that, together with the shares MKG acquired from LFCG and the David and Donna
Long Family Foundation, MKG would then hold 51% of all the shares of Common
Stock issued and outstanding on a fully-diluted basis.  Any shares
remaining of the Converted Shares not retained by MKG were to be transferred to
LFCG, provided that LFCG agreed to deliver a proxy with respect to all voting
rights associated with those remaining shares.  In addition, pursuant to
the Long Agreement, to the extent that any other debt owed to LFCG by the
Company is converted into shares of Common Stock, LFCG agreed to transfer 51% of
such shares to MKG.



On April 3, 2006 MKG
made a demand on the Company to effectuate the debt conversion, designating
certain portions of the total LFCG debt.  In accordance with the Long
Agreement, the Companys current board ratified the prior boards approval of
the debt conversion and authorized the conversion as of MKGs demand of $499,728
of the assigned debt into 9,994,550 common shares and $1,230,000 of the assigned
debt into 12,300,000 shares of the Preferred Series A stock of the Company, with
such shares to be issued to James MacKay as MKGs designee.  Mr. MacKay is
the











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principal of MKG and
is Chairman of the Board of the Company.  All remaining portions of the
assigned debt not converted (e.g., $270,273) were retained by MKG and are
entitled to be converted at a later time.



On January 17, 2008,
the Corporation issued 9,994,550 shares of common stock and 12,300,000 shares of
voting preferred stock of the Corporation to Mr. MacKay to consummate the
conversion of the Converted Debt.  Each share of voting preferred stock
entitles the holder thereto to two (2) votes.



As a result of the
issuance of common stock and voting preferred stock pursuant to the conversion
of Converted Debt, Mr. MacKay became the holder of shares of the Corporations
capital stock entitling him to approximately 51.96% of all of the votes entitled
to be cast by stockholders of the Corporation on a fully-diluted basis (i.e.,
counting all outstanding options and warrants on an as-exercised basis).



The MKG Master
License



On July 27, 2007, the
Company signed a master license agreement (the Agreement) with MKG. Pursuant
to the Agreement, the Company granted to MKG an exclusive (even to the Company),
sub licensable, royalty-bearing, worldwide license to make, have made, use,
import, offer for sale, and sell devices, sensors and other products or services
incorporating the Companys patented and unpatented breast cancer detection
technology, including, but not limited to, the BDS device, the Biofield Breast
Cancer Proliferation Detection System, the Breast Cancer Diagnostic Device, and
the Biofield Breast Examination or BBESM (collectively, the
Technology).  The Company also granted MKG, on a worldwide basis, the
Exclusive Distribution, Manufacturing, Development, Clinical, and research and
development rights (as those terms are defined in the Agreement) with regard to
the Technology. Under the Agreement, MKG assumes from the Company the sole
responsibility and expense to market, manufacture, further develop (clinically
and technically), and otherwise commercialize the Technology. MKG further
assumes from the Company the sole responsibility and expense to secure
additional regulatory approvals and to conduct additional clinical trials and
R&D.  MKG will also make commercially reasonable efforts to, among
other things, further develop the Technology for screening, as opposed to purely
diagnostic, purposes and for cancers other than breast cancer.



In return for the
exclusive worldwide license, MKG will pay the Company royalties based on gross
receipts received by MKG and its affiliates in connection with the Technology.
MKG must pay minimum royalties. In addition to royalties, MKG will pay the
Company licensing fees based upon certain milestones. The term of the Agreement
is 10 years with automatic renewals for additional 10-year terms unless
terminated by one of the parties pursuant to the terms of the Agreement.





































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NOTE 5 -
INVENTORIES



Inventories at
December 31, 2007 and 2006 consisted of the following:



|                              |   |           |   |           | 
|----------------------------- | - | --------- | - | --------- | 
|                              |   | 2007      |   | 2006      | 
|                              |   |           |   |           | 
|Components and
supplies       | $ | 37,749    | $ | 37,749    | 
|Finished
goods                |   | 437,669   |   | 481,669   | 
|                              |   | 475,418   |   | 519,418   | 
|Less
accumulated depreciation |   | (475,418) |   | (519,418) | 
|                              | $ | -         | $ | -         | 



During 2007 eleven
devices, which had been fully reserved, were sold.





NOTE 6  PROPERTY,
PLANT AND EQUIPMENT



Property, plant and
equipment at December 31, 2007 and 2006 consisted of the following:



|                               |   |         |   |         | 
|------------------------------ | - | ------- | - | ------- | 
|                               |   | 2007    |   | 2006    | 
|                               |   |         |   |         | 
|Furniture and
office equipment | $ | 61,686  | $ | 54,738  | 
|Plant and
production equipment |   | 144,308 |   | 144,308 | 
|                               |   | 205,994 |   | 199,046 | 
|Less
accumulated depreciation  |   | 199,393 |   | 198,577 | 
|                               | $ | 6,601   | $ | 469     | 





Depreciation expenses
in 2007, 2006 and for the period from inception through December 31, 2007, were
$816, $1,498, and $2,295,961, respectively.



NOTE 7 - PATENT
AND PATENT APPLICATION COSTS



In December 2005,
during the Companys annual review of the carrying values of patents and
trademarks, management determined that, due to increased uncertainty in
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 was in doubt.
Management was unable to determine and project future undiscounted cash flows
for these assets with reasonable accuracy due to the uncertainties.
Consequently, the Company recorded an impairment charge of $194,268 for the full
carrying value of these assets as a component of operating expenses in the
statement of operations as a separate line item.



Accumulated
amortization for patents was $486,860 at December 31, 2007.  There were no
amortization expenses for the year ended December 1, 2007. Amortization expenses
for 2006 and for the period from inception through December 31, 2007, were
$37,592 and $486,860 respectively.



NOTE 8 -
ACCRUED  EXPENSES



Accrued expenses
at December 31, 2007 and 2006 consisted of the following:













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|                    |  |               |  |              
|------------------- |  | ------------- |  | -------------
|                    |  | 2007          |  | 2008         
|Professional
fees   |  | $
    132,573 |  | $
     35,750
|Due to
ex-employees |  | 117,245       |  | 217,245      
|                    |  |               |  |              
|Other               |  | 180,671       |  | 791          
|                    |  | $     430,489 |  | $    253,786 



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.  On September 11, 2007, the Company agreed
to issue its former chief operating officer, John Stephens, 1,000,000 shares of
common stock for services rendered.  The share price at the close of the
market on September 11, 2007 was $0.10.  As of December 31, 2007, the
unpaid salary and interest thereon, together with unpaid remuneration for
subsequent periods, amounting to $117,245 and is recorded as accrued expenses in
the financial statements.



NOTE 9  DUE TO
AFFILIATE



As of December 31,
2007 and 2006 the Company had recorded $329,687 and $337,921, respectively, for
amounts due to affiliates.



The Company, over
time, has recorded amounts due to Abel Laboratories, which was an affiliate of
the Companys former Chairman, CEO and principal shareholder, Dr. David Long.
The amount due to Abel Laboratories is related to various laboratory expenses
and, as of December 31, 2007 and 2006, remained constant at $329,687.
 Interest does not accrue on the amount due, there is no maturity date and
the amount is due on demand and does not have any convertible features.



During 2006, the
Company recorded amounts due to MKG totaling $8,234, related to outside
consulting fees and travel expenses associated with demonstrating the BDS in
Mexico. MKG controls the Companys management, board and operations.
 Interest does not accrue on the amount due, there is no maturity date and
the amount is due on demand and does not have any convertible features.



On
January 5, 2007 MKG agreed to advance additional funds to the Company under a
line of credit.  Under the line of credit, monies advanced by MKG would
bear 12% simple annual interest.  There was no maturity date.  MKG had
the option to convert the principal and accrued interest into stock at a share
price equal to the lesser of: (a) the 70% of the share price at the close of the
market as of receipt of funds; or (b) the terms extended by the Company to a
funder making a total equity investment of at least US$1 million or in
connection with a merger/acquisition or change in control. In 2007, MKG advanced
the Company approximately $382,000.  The interest accrued for MKG advances
in 2007 was $19,185.



NOTE 10  ADVANCES
FROM STOCKHOLDER



As of December 31,
2007 and 2006, the Company had recorded $2,162,703 and $1,966,094, respectively,
for advances from stockholder.













---





The Companys
operations from 2002 to the March 30, 2006 MKG Acquisition were primarily funded
through advances, among other funding vehicles, by its then majority
shareholder, chairman, and chief executive officer, Dr. David Long, and his
family and affiliates LFCG.  As of December 31, 2005, the Companys overall
debt to LFCG was approximately $4,425,853, of which $3,488,816 was recorded as
advances from stockholder.



On March 30, 2006, to
induce MKG to take control of the Company and to effectuate the transfer to MKG
of 51% of the Companys stock on a fully diluted basis, LFCG agreed to assign
MKG approximately $2 million of the total debt owed to it by the Company (the
Assigned Debt). Under the MKG-LFCG Agreement, the Assigned Debt was to be
converted into stock of the Company at a conversion rate commensurate to $0.05
per common share. The Conversion Rate was established and approved by the
Companys then board, management, and securities counsel upon review of the
Companys share price during the preceding months. On March 30, 2006, the
closing price was $0.03 per share. During the preceding three months, the
closing price fluctuated primarily between $0.02 and $0.04. Under MKG-LFCG
Agreement, MKG had the right to designate which portions of the overall debt
owed by the Company to LFCG for assignment and conversion.



On April 3, 2006, MKG
made a demand on the Company to effectuate the debt conversion. In accordance
with the Long Agreement and MKGs demand, the Companys current board ratified
the prior boards approval of the debt conversion and authorized the conversion
as follows:



|                                         |                                                   |                                   
|---------------------------------------- | ------------------------------------------------- | ----------------------------------
|Portion of Assigned Debt to be Converted | Shares to be Issued Upon Conversion               | Conversion Rate                   
|$499,728                                 | 9,994,550
Common Stock                            | $0.05 per
Common Share            
|$1,230,000                               | 12,300,000
shares of the Preferred Series A Stock | $0.10 per
Preferred Series A Share



The advances bear
interest at 10% per annum. In 2007 and 2006, the Company accrued $263,418 and
$207,006, respectfully, of interest for this account and has record this amount
in advances from stockholder.  All interest accruing on the advances from
stockholder are payable to LFCG.  There is no maturity date for the
advances from stockholder and only $270,273, which is retained by MKG, is
entitled to be converted to stock at a later time.  The remaining amount
outstanding is still assigned to LFCG.



NOTE 11  NOTES
PAYABLE



Notes
Payable



During 2006, the
Company issued notes totaling $110,000 for past due obligations.  These
notes bear interest at 18% through the maximum amount allowed by law. For the
year ended December 31, 2007 and 2006, respectively, $19,800 and $3,700 of
interest was recorded in accrued interest.  These notes were due at various
dates during 2006 and 2007 and are in default.   The Company continues
to work with the holders of these notes to resolve the defaults.



Notes Payable to
Stockholder



As of December 31,
2007 and 2006, the Company had recorded $801,702 and $668,085, respectively, for
notes payable to stockholder. In 2002, the Company issued a 10% promissory
convertible note in











---





the principal amount
of $450,000 to a stockholder. The note, with accrued unpaid interest, has no
maturity date and is convertible at the option of the holder into subscriptions
of common stock at a rate of $0.40 per share.  Interest for 2007 and 2006,
totaled $66,808 and $60,735, respectively, and have been added to the note
amount.



Notes Payable for
Private Placements



Over the course of
time, the Company sold various private placements in various increments of units
of debt and common stock. These notes payable as of December 31, 2007 and 2006,
totaled $1,379,000.  Interest accrues at either 12% or 18%, depending upon
the date of placement of note, and for 2007 and 2006 totaled $239,220 and
$247,370, respectively, and has been recorded in accrued interest.  The
notes for these private placements were due on various dates and the Company is
currently in default. Until the notes issued under the private placements are
repaid, the holders of the notes have the right to participate in any offering
by the Company of its equity securities (including convertible debt) by using
the notes (and accrued interest thereon) to acquire such equity securities at a
25% discount from the offering price (and if the offering is of convertible debt
to acquire such debt at face with a conversion feature at a 25% discount).



NOTE 12 
STOCKHOLDERS EQUITY



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.
 There are no changes as of December 31, 2007.



Debt Conversion to
Preferred and Common Stock



In
April 2006, the Company elected to convert $1,729,728 of the Long debt to
preferred and common stock (see debt conversion note).

Voluntary
Services Rendered by Dr. David Long



During
2006, Dr. Long has provided services to the Company without compensation.
 The value of his services has been estimated at $25,000 for the years
ended December 31, 2006, , which amounts were recorded as a non-cash expense
with a corresponding increase in the additional paid-in capital.



Options Issued for Consulting Fees



The Company issued 1.2 million options based upon the fair value
of service render at $47,512 for consulting fees recognized in operating results
for the year ended December 31, 2006. These options have an exercise price of
$0.04 per share and expire on February 23, 2011. During 2007 there were no
options issued.



Shares Due for Interest Accrued on Advances From
Stockholder



Interest
on certain advances from stockholder are payable in stock subscriptions of
common stock. At December 31, 2006, stock subscriptions of common stock have
been reserved for











---





issuance
in payment of the then accrued interest. 2006, the total accrued interest of
$25,243 had been added to additional paid-in capital and stock subscriptions,
pending the issuance of 841,438 shares of common stock.



NOTE 13 - INCOME
TAXES



The
benefit for income taxes from continued operations for the years ended December
31, 2007 and 2006, consist of the
following:



|                                |   |              |   |          
|------------------------------- | - | ------------ | - | ---------
|                                |   | December 31,
|                                |   | 2007         |   | 2006     
|                                |   |              |   |          
|Current:                        |   |              |   |          
|Federal and state               | $ | -            | $ | -        
|Deferred:                       |   |              |   |          
|Federal and state               |   | 393,439      |   | 370,332  
|                                |   | 393,439      |   | 370,332  
|Increase in valuation allowance |   | (393,439)    |   | (370,332)
|Benefit for income taxes, net   | $ | -            | $ | -        



The
above benefits for 2007 and 2006 were calculated using a federal and state tax
estimated rate as noted below:



|                                            |       |         
|------------------------------------------- | ----- | --------
|Statutory federal and state income tax rate |       | 34.00%  
|Valuation allowance                         |       | (34.00%)
|                                            |       |         
|Effective tax rate                          | 0.00%



The net
deferred tax assets and liabilities are comprised of the following:



|                                                                   |   |              |   |             
|------------------------------------------------------------------ | - | ------------ | - | ------------
|                                                                   |   | 2007         |   | 2006        
|Deferred tax assets:                                               |   |              |   |             
|Current                                                            | $ | -            | $ | -           
|Net operating loss carry
forward
Research  and development credits |   | 22,201,778   |   | 22,458,273  
|                                                                   |   | 510,609      |   | 510,609     
|Total deferred tax assets                                          |   | 22,712,387   |   | 22,968,882  
|                                                                   |   |              |   |             
|Less valuation allowance                                           |   | (22,712,387) |   | (22,968,882)
|Net deferred income tax asset                                      | $ | -            | $ | -           



At December 31, 2007,
the Company had federal net operating loss carry-forwards totaling approximately
$67 million which will begin expiring in years 2008 through 2027. 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,
1999 and 2006.  To the extent that these losses and general business
credits are utilizable, they may be offset against future U.S. taxable income,
if any, during the carry forward period.



NOTE 14 -
COMMITMENTS AND CONTINGENCIES



As of April 1, 2006,
the Company moved its corporate headquarters from Alpharetta, Georgia to 1615
Walnut Street, 3rd and 4th Floors, Philadelphia,
Pennsylvania.  In June 2007, pursuant of a 3-year lease, the Company
relocated all of its operations to a new office in King of Prussia,
Pennsylvania.  The monthly rent for the King of Prussia office is
approximately $4,000, including utilities.



|      |  |         
|----- |  | --------
|      |  | Rent    
|2008  |  | 41,523  
|2009  |  | 42,572  
|2010  |  | 17,920  
|Total |  | $102,015



In light of the
Company's arrangements with a certified medical device manufacturing facility to
help co-manage the Company's U.S. operations, the Company is working to
terminate the King of Prussia office lease with the landlord, which sent a
default notice on March 10, 2008, and which after applying the security deposit
is effectively owed a balance for the Company's occupancy during April 2008.



Pursuant the Long
Agreement, the Company is required to pay LFCG collectively a 1% royalty with
respect to net sales of the Companys products worldwide for three years
commencing March 30, 2006.



Pursuant to the March
30, 2006 Consulting Agreement, the Company is required to pay Dr. David Long or
his nominees $60,000 per annum in consulting fees for three years commencing
March 30, 2006.



As a result of the
MKG Acquisition, all of the Companys employment, consulting, royalty, and
distribution agreements existing as of March 30, 2006, were terminated.



The Company is 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 current proceeding concerning us that a
governmental authority may be contemplating.



The Company had a
revolving line of credit arrangement with a commercial bank which expired on May
2, 2005, and as of December 31, 2007, the amount paid off by Dr. Long and his
affiliates is shown as Advances from Stockholder in the accompanying Balance
Sheet.



NOTE 15 - ROYALTY
AGREEMENT



As a condition
precedent to MKGs agreement to take control of the Company and as was agreed
upon and represented by the Companys prior management and board, all royalty
agreements existing as of March 30, 2006, had either expired or had been
terminated or were since terminated.













---





As part of the Long
Agreement, LFCG was given a royalty of 1% of the net sales of the Companys
products worldwide for a three-year period commencing as of March 30, 2006.



The Company entered into a master
license agreement with MKG giving MKG an exclusive (even to the Company), sub
licensable, royalty-bearing license to make, have made, use, import, offer for
sale, and sell devices, sensors, and other products or services incorporating
the Companys technology.  In return, MKG agreed to pay the Company
royalties based upon a gross receipts step scale. MKG was further subject to a
minimum royalty payment requirement. MKG also agreed to pay the Company a
licensing fee in accordance with certain milestone requirements. The term of the
Master License Agreement is 10 years, with automatic renewals for additional
10-year terms, unless properly terminated in accordance with the terms and
conditions of the Agreement.



NOTE 16 - RELATED
PARTY TRANSACTIONS



On March 30, 2006,
the Companys then largest shareholder (over 5%), chairman, and chief executive
officer, Dr. David Long, his family and affiliates entered into a Stock
Acquisition and Voting Rights Agreement with MKG. On the same date, the David
and Donna Long Family Foundation (the Long Foundation) entered into a similar
Stock Acquisition Agreement with MKG (the Long Foundation-MKG Agreement).
 The Long Foundation is a Delaware nonstock, non-profit corporation, of
which Dr. David Long is the founder, and with respect to which Dr. David Long
does not have the ability to sell its assets and vote any of its securities and
of which securities Dr. David Long disclaims beneficial ownership.



·

MKG
acquired all of the Companys shares held by LFCG and the Long Foundation, which
represented approximately 17.49% of all shares of common stock of the Issuer on
a fully diluted basis or approximately 20.6% of all shares of common shares of
the Issuer issued as of December 31, 2005;

·

LFCG
assigned $2 million of the total debt owed to LFCG by the Company (the Assigned
Debt);

·

The
Assigned Debt was to be converted into Company stock at a conversion rate of
$0.05 per common share, with a portion of the converted shares going to MKG in a
manner which would result in MKGs ownership of 51% of all of the Companys
common shares issued and outstanding on a fully-diluted basis, and with
remainder going to LFCG;

·

MKG
agreed to take control of the Company and its management, operations, and board
as of March 30, 2006 and to use its relationships overseas to generate sales of
the Companys technology and products; and

·

LFCG
was given a royalty in the amount of 1% of the net sales of the Companys
products worldwide for a 3-year period commencing as of March 30, 2006.



On March 30, 2006,
MKG entered into a 3-year consulting agreement with Dr. David Long, commencing
as of March 30, 2006, in which he or his nominee would be paid an annual
consulting fee of $60,000.



NOTE 17 -
SUBSEQUENT EVENTS



On January 23, 2008
the Company filed a Form 8-K reporting that on January 17, 2008, the Corporation
issued 9,994,550 shares of common stock and 12,300,000 shares of voting
preferred stock of the Corporation to Mr. MacKay to consummate the debt
conversion in accordance with the Long Agreement as approved by the Companys
prior board and as re-ratified by the Companys











---





current board. Each
share of voting preferred stock entitles the holder thereto to two (2) votes.
The debt conversion occurred as follows:



|                         |  |                                                                                               |                                   
|------------------------ |  | --------------------------------------------------------------------------------------------- | ----------------------------------
|Amount of Converted Debt |  | Shares of Capital Stock of the Corporation to be Issued
upon the Conversion (class of shares) | Conversion
Price per Share        
|$499,728                 |  | 9,994,550
Common Stock                                                                        | $0.05
per Common Share            
|$1,230,000               |  | 12,300,000
shares of
Preferred
Series A Stock                                                 | $0.10
per Preferred Series A Share

As
a result of the issuance of common stock and voting preferred stock pursuant to
the debt conversion, the transfer of stock by LFCG to MKG pursuant to the Long
Agreement, and MKGs assignment to Mr. MacKay (including 5,898,495 shares), Mr.
MacKay became the holder of shares of the Corporation's capital stock entitling
him to approximately 51.96% of all of the votes entitled to be cast by
stockholders of the Corporation on a fully-diluted basis (i.e., counting all
outstanding options and warrants on an as-exercised basis).

As
reported in the January 23, 2008 Form 8-K, effective January 16, 2008, the
Corporation's Board of Directors appointed the Companys interim chief executive
officer, chief accounting officer, and director, Michael Antonoplos, as the
Corporation's Secretary.  Michael Yom also resigned as the Company's Chief
Operating Officer, effective January 21, 2008.

As also reported in
the January 23, 2008 Form 8-K, on January 17, 2008, the Corporation filed a
Certificate of Designation which designated all 12,300,000 authorized but
undesignated shares of the Corporation's preferred stock as a series of voting
preferred stock, par value $0.001 per share. The Certificate of Designation, the
filing of which constitutes an amendment to the Corporation's Fifth Amended and
Restated Certificate of Incorporation, is attached as an exhibit to the
Companys January 23, 2008 Form 8-K.



Joseph Repko resigned
as the Companys interim chief financial officer, effective March 17, 2008.
 In November 2007, Mr. Repko agreed to step down as interim chief financial
officer upon the Companys securing an outside accounting consultant, who, among
other things, would help prepare the Companys financial reports.  The
Company retained the outside accountant consultant on March 17, 2008.



On April 2, 2008, the
Company filed a Form Pre 14C preliminary information statement, reporting that
on March 28, 2008, the Board of Directors of the Company  and thereafter on
March 31, 2008 the stockholders of the Company holding over a majority of the
total voting rights for all outstanding and issued shares of common and
preferred stock of the Company authorized, by way of written consents, the Board
to amend the Certificate of Incorporation of the Company to effect, on or before
March 31, 2009, a one (1) for ten (10) reverse stock split, whereby, as of the
record date, for every ten shares of common stock of the Corporation then owned,
each stockholder shall receive one share of common stock.