UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                             ----------------------

                                   FORM 10-KSB

                 Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the fiscal year ended:  December 31, 2004

Commission file number:  33-20582

                      Equity Technologies & Resources, Inc.
                   ------------------------------------------
                (Name of registrant as specified in its charter)

        Delaware                                        75-2276137
--------------------------------                --------------------------------
(State or other                                 (IRS employer
  jurisdiction of incorporation)                           identification no.)

       PO Box 12012
   Lexington, Kentucky 40579                             (859) 321-2466
--------------------------------                --------------------------------
(Address of principal executive offices)         (Registrant's telephone number,
                                                        including area code)

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

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

                                                    Name of each exchange
   Title of each class                               on which registered
--------------------------------                --------------------------------
Class A Common Stock, $.0001 Par Value                      None


--------------
     Check  whether  the issuer (1) 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 |_| No |X|

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. |X|

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

     Issuers revenues for its most recent fiscal year: $30,602

     The  aggregate  market  value of the common  stock  held by  non-affiliates
(i.e.,  does  not  include   directors,   executive   officers  or  ten  percent
stockholders identified in Item 11 hereof) of the issuer as of December 31, 2004
was approximately $2,549,352.

     Shares  outstanding  of the  registrant's  common  stock as of December 31,
2004: 143,993,594


<PAGE>


EQUITY TECHNOLOGIES & RESOURCES, INC.


                       TABLE OF CONTENTS TO ANNUAL REPORT
                                 ON FORM 10-KSB
                          YEAR ENDED DECEMBER 31, 2004


                                     PART I

Item 1.    Description of Business.............................................3

Item 2.    Description of Properties...........................................3

Item 3.    Legal Proceedings...................................................6

Item 4.    Submission of Matters to a Vote of Security Holders.................6


                                     PART II

Item 5     Market for Common Equity and Related Stockholder Matters............7

Item 6.    Management's Discussion and Analysis or Plan of Operation...........8

Item 7.    Financial Statements...............................................11

Item 8.    Changes In and Disagreements With Accountants on Accounting
                 and Financial Disclosure.....................................13

Item 8A.   Controls and Procedures............................................14

Item 8B.   Other Information..................................................14


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
              Compliance With Section 16(a) of the Exchange Act...............15

Item 10.   Executive Compensation.............................................16

Item 11.   Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters................................16

Item 12.   Certain Relationships and Related Transactions.....................17

Item 13.   Exhibits...........................................................18

Item 14.   Principal Accountant Fees and Services.............................20


<PAGE>



                                     PART I


Item 1. Description of Business.

Background

     The Company was organized on March 4, 1988, as a Delaware corporation under
the name Sherry Lyn  Corporation.  The Company was organized as a public company
for the purpose of finding a suitable  combination partner. On December 6, 1988,
the Company changed its name to Equity Gold, Inc. The number of shares of common
stock  authorized to be issued changed from 50,000,000 to 150,000,000 with a par
value of $0.000333 per share of common stock.

     On December 14, 1989, the Company merged with Gold Equity, Inc., a Delaware
corporation.  The  surviving  corporation  was Equity Gold,  Inc. On February 7,
1989,  the Company  changed its name to Equity AU, Inc. On April 14,  1989,  the
Company  changed the number of  authorized  shares of common stock to 99,900,000
with a par value of $.001 per share of common stock.

     On November 7, 1991, the Company  authorized  2,000,000 shares of preferred
stock  with a par  value of $1.00  each.  On  February  19,  1992,  the  Company
authorized 99,900,000 shares of Class A common shares with a par value of $0.001
per share and 100,000  shares of Class B common shares with a par value of $0.01
per share.

     From the  original  inception  of the  Company  on March  4,  1988,  to the
inception of the  development  stage on January 1, 1994, the Company was heavily
involved in mining and  exploration  activities  principally  in  Arkansas.  The
Company  generated an  accumulated  deficit of  $8,390,740  prior to the Company
entering the development stage.

     In January  2000,  the  Company  elected to change its  official  name from
Equity AU, Inc., to Equity Technologies & Resources, Inc.

     On August 2, 2002, the Company amended its Certificate of  Incorporation to
change the  authorized  capital stock of the Company.  The  aggregate  number of
Class A common shares  authorized for issuance is 300,000,000  shares with a par
value of $0.0001;  the aggregate number of Class B common shares  authorized for
issuance is 100,000 with a par value of $0.01;  the aggregate  number of Class A
preferred  shares  authorized  for  issuance  is  2,000,000  with a par value of
$0.001; the aggregate number of Class B preferred shares authorized for issuance
is 300,000 shares with a par value of $0.001;  and the aggregate number of Class
C preferred shares authorized for issuance is 100,000 shares with a par value of
$0.001.

     The Company was originally engaged in research and development of a process
to extract gold and other precious metals on various real properties  located in
Arkansas. Partnerships were formed prior to 1994 by the Company or by affiliates
of the Company to raise working  capital,  to acquire  mineral  claims,  rights,
facilities and equipment,  and to explore for precious metals. In 1994,  general
partners of the partnerships  notified the Company that they were terminated and
dissolved.  The Company has had no significant  operations since August 1993 and
entered the  development  stage on January 1, 1994.  During  September 1996, the
Company resumed  operations and again suspended  operations in December 1996. As
result of the dissolution of the partnerships, the Company ceased its operations
and entered the development stage.

Current Activities

     On  December  15,  2000,  the  Company  acquired  all  of  the  issued  and
outstanding common stock of Verified  Prescription  Safeguards,  Inc. ("VPS") in
exchange for 40,000 shares of the Company's Class B voting  preferred  stock. At
the time the purchase was  consummated,  VPS held no assets or liabilities.  The
consolidated  entity elected to change its business plan toward the  development
and marketing of internet prescription drug technology.


                                       3
<PAGE>


     In May 2001, the Company acquired a newly formed  wholly-owned  subsidiary,
ETCR M&A, Inc.  ("ETCR M&A"), a Florida  corporation,  in exchange for 7,200,000
shares of the Company's common stock.  ETCR M&A held no assets or liabilities at
the time of  purchase.  In November  2001,  these  shares were  canceled and the
Company does not currently hold any interest in ETCR M&A.

     On July 30, 2003, the  Commonwealth of Kentucky,  awarded a contract to VPS
Holding,  LLC ("VPSH") a Kentucky  limited  liability  company  incorporated  on
August 29, 2002,  by the sole member and  manager,  James  Millard,  the current
President and CEO of the Company.  The contract  awarded  allowed VPSH to lead a
pilot project, in Perry and Harlan counties, at medical,  clinical, and pharmacy
facilities.  The project will be conducted  by a consortium  of companies  under
license to VPSH,  that  includes  Envoii,  Inc.,  a San  Francisco,  California,
software developer,  and Computer Information Systems, Inc., a London, Kentucky,
consulting firm and solutions provider for information technology, both of which
are  privately-held  corporations.  In order to  perform  under  the  terms  and
conditions of this state contract,  VPSH will license the technologies from each
corporation for a nominal fee. Any benefits or revenues, derived from the use of
technology  acquired by VPSH, shall pass directly through to the Company,  under
the terms of the Joint Venture Agreement.

     The  license to use and  develop  technology,  intellectual  property,  and
know-how related to prescription  drug monitoring  systems and all other matters
pertaining to the  healthcare  industry was obtained  pursuant to the terms of a
Patent  License  Agreement and Release dated January 5, 2004,  from the Company.
This Patent  License  Agreement and Release was executed with the  understanding
that VPSH would enter into an agreement  with Envoii  Healthcare,  LLC, a Nevada
limited  liability  company,  to undertake  the funding and  development  of the
Verified Prescription  Safeguards  "Veriscrip(TM)"  prescription drug monitoring
system and in  consideration  of payments to be received by the Company.  Envoii
Healthcare,  LLC, owns the exclusive  rights in the healthcare  channel of trade
rights to the "Envoii(TM)" system.

     The Patent License Agreement and Release was executed by the Company,  VPSH
and Envoii Healthcare,  LLC, wherein Envoii Healthcare, LLC, in conjunction with
Envoii, Inc., agreed to undertake the development of the real-time  prescription
drug  monitoring  system and raise the necessary  funding for the project.  This
Agreement and the Patent  License  Agreement and Release were under  negotiation
prior to  submission  of the  response to the  Kentucky  Request for Proposal on
April 9, 2003, but executed  thereafter,  both of which have  subsequently  been
provided and fully disclosed to the Commonwealth of Kentucky.

     Under the terms of the  Patent  License  Agreement  and  Release,  contract
revenues,  if any, other than the grant for the pilot project resulting from the
development,  implementation,  and/or  sale of  real-time  controlled  substance
prescription  monitoring  technology to any third party  including  governmental
entities,  are to be distributed to Envoii  Healthcare,  LLC (75%),  VPSH (25%),
with the Company  receiving  100% of the benefits and  revenues  distributed  to
VPSH.  The contract with the  Commonwealth  of Kentucky  governs the division of
proceeds  from the pilot  project  grant  funding from the U. S.  Department  of
Justice, Bureau of Justice Assistance.  The terms of the contract were completed
in April 2005.

     During January through April 2004, the Veriscrip(TM)  System was programmed
and  beta-tested  at the two  pilot  sites  in  Harlan  and  Perry  counties  in
Southeastern  Kentucky in  preparation  for  implementing  the project under the
terms of the contract.  During this period,  the system was previewed by several
third parties, including a state licensure board president and a key legislator.
On April 28, 2004, the first real-time  electronic  prescription was transmitted
and received using the Veriscrip(TM)  System at a rural clinic in Harlan County,
Kentucky.  The pilot project was also conducted at a medical center practice and
pharmacy in Hazard,  Kentucky,  and was  concluded  on September  23,  2004.  On
October 15, 2004, the first public demonstration of the Veriscrip(TM) System was
conducted  at the  National  Technology  Meeting  for  State  Prescription  Drug
Monitoring Programs in Lexington,  Kentucky,  sponsored by the National Alliance
for Model State Drug Laws.

     In 2005, the Kentucky General Assembly passed Senate Bill 2, which provides
for the preliminary  framework for establishing an e-health information exchange
in Kentucky.


                                       4
<PAGE>


     The  University  of  Louisville  ("U of L")  School  of Public  Health  and
Information  Sciences  initiated the assessment  phase of the project in October
2004,  and the  Assessment  Report was  completed  and delivered to the Kentucky
Office of Technology on May 12, 2005. The Office of Technology released the U of
L  Assessment  Report as a public  document on August 19, 2005.  The  Assessment
Report  recommends,  "there may be  significant  benefits  for the state to move
ahead  now  with  the  proposed  technology,  either  as  an  alternative  or an
enhancement  for  the  existing  KASPER  ("Kentucky  All-Schedule   Prescription
Electronic  Reporting"  system),  or,  potentially,  as  a  plug-in  to  KASPER,
providing a way for  prescriber  data to move in real-time  from  prescriber  to
dispenser  to  the  regulatory  side,"  but  notes,   "[t]he  major  barrier  to
implementation  will be resistance by physicians  because of productivity  costs
and  opportunity  costs in the context of emerging health  information  exchange
technologies." The Assessment Report also includes an appendix in which the U of
L assessment  concludes the  Veriscrip(TM)  System completely meets 18 criteria,
and partially meets another 7 criteria,  of the 60 Recommendations for Comparing
Electronic  Prescribing Systems made by the RAND Electronic Prescribing Advisory
Board.  Seventeen  of the 60  recommendations  are not  expected to be met until
2007. The Veriscrip(TM)  System meets three of those future criteria completely,
and one partially.

     During the next twelve months,  the Company expects to present the findings
of the  University  of  Louisville  Assessment  Report to  interested  state and
federal  regulatory  agencies,  as well as a  related  report  prepared  for the
California  HealthCare  Foundation  in  2004  that  concludes  productivity  and
opportunity  costs are minimal,  if any, and  additional  savings may be accrued
from  "downstream  time savings,  chiefly from electronic data  transmission and
more  thorough  order  entry   (resulting  in  fewer   pharmacy   callbacks  for
clarification  and  revision)."  The  Company  also plans to have a presence  at
national meetings and conferences of law enforcement and regulatory professions,
at which  to  demonstrate  the  Veriscrip(TM)  System.  At the  same  time,  the
Veriscrip(TM)  System is  constantly  being  improved  and  upgraded to meet and
exceed emerging technology improvements.

     The Company currently has no funds to execute its business plans and it has
no agreements or understandings in place that would provide it with the required
funding to execute its business plan.

Government Regulation

     The Company is subject to the laws and  regulations  to which  corporations
generally are subject. The Company is not conducting operations.  In the future,
the  Company may be subject to  additional  laws or  regulations  environmental,
public health and safety, land use, trade, or other governmental regulations and
state or local  taxation.  The Company  cannot predict the nature of such future
laws, regulations,  interpretations or applications,  nor what effect additional
governmental  regulations or  administrative  orders,  when and if  promulgated,
would have on its  business.  They  could,  however,  require  reformulation  of
certain  products to meet new  standards,  recall or  discontinuance  of certain
products not able to be  reformulated,  imposition of additional  record-keeping
requirements,  expanded  documentation  of the  properties of certain  products,
expanded or altered labeling and/or substantiation. Any or all such requirements
could have a material  adverse  effect on the Company's  results of  operations,
liquidity and financial position.

Competition

     If operations  should  commence,  of which there can be no  assurance,  the
Company may be involved in  competition  with other business  entities,  many of
which may have a competitive  edge over the Company by virtue of their  stronger
financial resources and prior experience in business. There is no assurance that
the Company will be successful in competing.

Employees

     The Company is a development  stage company and currently has one full time
employee,  the Company's sole executive officer,  and one part-time employee and
officer.  The  Company's  executive  officer  devotes his full  attention to the
affairs  of the  Company,  and  holds  no  employment  with  any  other  entity.
Management of the Company expects to use consultants, attorneys, and accountants


                                       5
<PAGE>


as necessary,  and does not anticipate a need to engage any full-time  employees
as long as  business  needs are being  identified  and  evaluated.  The need for
employees and their availability will be addressed in connection with a decision
concerning  whether  or not to  acquire or  participate  in a specific  business
venture. Research and Development

     The Company did not spend any funds on research and development  activities
during 2003 or 2004.


Item 2. Description of Properties.

     The  Company's  executive  offices  are  located at Post  Office Box 12012,
Lexington,  Kentucky 40579.  The Company does not own or invest in, nor does the
Company  intend in the future,  to own or invest in real estate or  interests in
real  estate,  real estate  mortgages or  securities  of or interests in persons
primarily engaged in real estate activities.


Item 3. Legal Proceedings.

     The Company is not a party to, nor are its  properties  the subject of, any
pending legal proceedings and no such proceedings are known to the Company to be
threatened or contemplated by or against it.


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

     No matter was  submitted to a vote of the security  holders  during the 4th
quarter of the fiscal year covered by this report.








                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]






                                       6
<PAGE>




                                     PART II


Item 5. Market for Common Equity, Related Stockholder Matters and Small Business
        Issuer Purchases of Equity Securities.


Dividend Policy

     To date,  the  Company  has not paid  dividends  on its common  stock.  The
payment of dividends on the Company's common stock, if any, is at the discretion
of the board and will depend upon its earnings,  if any, the  Company's  capital
requirements and financial  condition,  and other relevant factors.  See Item 6.
"Management's  Discussion and Analysis or Plan of  Operation."  The Company does
not intend to declare  any  dividends  in the  foreseeable  future,  but instead
intend to retain all earnings, if any, for use in its anticipated operations.

Share Price History

     The Company's common stock is traded in the over-the-counter market in what
is commonly referred to as the "Pink Sheets" under the trading symbol "ETCR.PK."
The following table sets forth the high and low bid information of the Company's
common stock for the periods indicated.  The price information  contained in the
table was obtained from Yahoo  Finance.  Note that the  over-the-counter  market
quotations  reflect  inter-dealer  prices,  without retail mark-up,  markdown or
commission,  and  that  the  quotations  may not  necessarily  represent  actual
transactions in the common stock.

Quarter Ended                                     High (1)      Low (1)
-------------                                     -------       -------

2003
March 31..............................             $0.14         $0.01
June 30...............................             $0.10         $0.02
September 30..........................             $0.08         $0.01
December 31...........................             $0.04         $0.01

2004
March 31..............................             $0.01         $0.01
June 30...............................             $0.07         $0.02
September 30..........................             $0.03         $0.02
December 31...........................             $0.02         $0.02

     Of the  total  143,993,594  shares  outstanding  as of  January  11,  2006,
approximately  30,368,141, or 21% were restricted against resale into the public
market.



                                       7
<PAGE>



Holders of Record

     As of January  11, 2006 there were  approximately  661 holders of record of
the Company's  common stock.  The number of holders of record was  calculated by
reference to the Company's stock transfer agent's books.

Issuance of Securities

     No sales of securities  occurred  during the period  covered by this report
that have not been previously reported.


Item 6. Management's Discussion and Analysis or Plan of Operation

     The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's plan of
operation and financial condition.  The discussion should be read in conjunction
with the consolidated financial statements and notes thereto.

Financial Position

     The Company had $220 in cash as of December  31, 2004 and no other  assets.
The Company's  liabilities  were $2,106,877 and it had a working capital deficit
of $2,106,657.  The Company had $30,602 in revenues  during 2004 and no revenues
during 2003, its general and administrative expenses were $218,767 and $579,387,
respectively,  during  these  periods  and  its net  losses  were  $274,654  and
$741,911, respectively, during these periods.

     The Company does not have sufficient  funds to execute its business plan or
pay its current  liabilities.  There is no  assurance  that the Company  will be
successful  in developing  its  electronic  system to provide  solutions for the
prescription drug and healthcare industry or the Veriscrip(TM) System.

Plan of Operation

     Equity  Technologies & Resources,  Inc., is a development stage company and
has no current business operations. In December 2000 the Company acquired all of
the common stock in Verified Prescription  Safeguards,  Inc., with the intention
of  developing an electronic  system to provide  solutions for the  prescription
drug and healthcare  industry.  The Company has a business plan and will seek to
obtain favorable funding from sources outside its principal  shareholders during
the next twelve  months.  There can be no  assurance  that the  Company  will be
successful in obtaining additional funding.

     In 2002,  the  Company  lobbied for House Bill 26 in the  Kentucky  General
Assembly that  directed the Kentucky  Office of Technology to apply for a United
States  Department of Justice  Bureau of Justice  Assistance  grant to conduct a
pilot project of its real-time  prescription drug monitoring system in two rural
Kentucky  counties.  On July 30, 2003, the  Commonwealth of Kentucky,  awarded a
contract to VPS Holding,  LLC,  ("VPSH") a Kentucky  limited  liability  company
incorporated on August 29, 2002, by the sole member and manager,  James Millard,
the current President and CEO of the Company.  The contract awarded allowed VPSH
to lead a pilot project,  in Perry and Harlan  counties,  Kentucky,  at medical,
clinical, and pharmacy facilities. After withstanding a competitive challenge to
the contract,  the planning for implementing  the project  commenced in November
2003.  The project was conducted by a consortium  of companies  under license to
VPSH, that includes Envoii Healthcare,  LLC, a Nevada corporation,  and Computer
Information  Systems,  Inc., a London,  Kentucky,  consulting firm and solutions
provider  for  information   technology,   both  of  which  are   privately-held
corporations.  In order to perform  under the terms and  conditions of the state
contract,  VPSH,  licensed the technologies  from each corporation for a nominal
fee. Any benefits or revenues  derived  from the use of  technology  acquired by
VPSH,  shall pass  directly  through to the Company,  under the terms of a Joint
Venture Agreement.



                                       8
<PAGE>



     The  license to use and  develop  technology,  intellectual  property,  and
know-how related to prescription  drug monitoring  systems and all other matters
pertaining to the  healthcare  industry was obtained  pursuant to the terms of a
Patent  License  Agreement and Release dated January 5, 2004,  from the Company.
This  License and Release was  granted  with the  understanding  that VPSH would
enter into an agreement  with Envoii  Healthcare  to  undertake  the funding and
development of the Verified  Prescription  Safeguards  VeriscripTM  prescription
drug monitoring  system and in  consideration  of payments to be received by the
Company.  Envoii Healthcare owns the exclusive rights in the healthcare  channel
of trade rights to the EnvoiiTM  security system. A Joint Venture  Agreement was
executed by VPSH and Envoii Healthcare, wherein Envoii Healthcare in conjunction
with RxNT,  Inc.,  a Baltimore,  Maryland,  pharmaceutical  software  developer,
agreed  to  undertake  the  development  of  the  real-time   prescription  drug
monitoring  system  and  raise  the  necessary  funding  for the  project.  This
Agreement and the Patent  License  Agreement and Release were under  negotiation
prior to  submission  of the  response to the  Kentucky  Request for Proposal on
April 9, 2003, but executed  thereafter,  both of which have  subsequently  been
provided and fully disclosed to the Commonwealth of Kentucky. Under the terms of
the Joint Venture Agreement, contract revenues, if any, other than the grant for
the pilot project resulting from the development, implementation, and/or sale of
real-time controlled substance  prescription  monitoring technology to any third
party  including   governmental  entities,  are  to  be  distributed  to  Envoii
Healthcare,  LLC (75%),  VPSH  (25%),  with the  Company  receiving  100% of the
benefits and revenues distributed to VPSH. The contract with the Commonwealth of
Kentucky governs the division of proceeds from the pilot project grant funding.

     During  January-April  2004 the  Veriscrip(TM)  System was  programmed  and
beta-tested at the two pilot sites in Harlan and Perry counties in  Southeastern
Kentucky in  preparation  for  implementing  the project  under the terms of the
contract. During this period, the system was previewed by several third parties,
including a state licensure  board president and a key legislator.  On April 28,
2004, the first real-time  electronic  prescription was transmitted and received
using the Veriscrip(TM) System at a rural clinic in Harlan County, Kentucky. The
pilot project was also  conducted at a medical  center  practice and pharmacy in
Hazard,  Kentucky, and was concluded on September 23, 2004. On October 15, 2004,
the first public  demonstration of the Veriscrip(TM) System was conducted at the
National  Technology Meeting for State Prescription Drug Monitoring  Programs in
Lexington, Ky., sponsored by the National Alliance for Model State Drug Laws.

     In December 2004, the Company contracted with a full-time lobbyist, Babbage
Cofounder/InterSouth, Inc., of Lexington, Kentucky, for the duration of the 2005
Kentucky  General  Assembly,  which concluded in April,  and unanimously  passed
Senate Bill 2, which provides for the preliminary  framework for establishing an
e-health information exchange in Kentucky.

     The  University  of  Louisville  School of Public  Health  and  Information
Sciences  initiated the assessment phase of the project in October 2004, and the
Assessment  Report  was  completed  and  delivered  to the  Kentucky  Office  of
Technology  on May 12,  2005.  The  Office  of  Technology  released  the U of L
Assessment Report as a public document on August 19, 2005. The Assessment Report
states,  "there may be significant benefits for the state to move ahead now with
the proposed  technology,  either as an alternative  or an  enhancement  for the
existing  KASPER  ["Kentucky  All-Schedule  Prescription  Electronic  Reporting"
system], or, potentially, as a plug-in to KASPER, providing a way for prescriber
data to move in real-time from prescriber to dispenser to the regulatory  side,"
but  notes,  "[t]he  major  barrier  to  implementation  will be  resistance  by
physicians because of productivity costs and opportunity costs in the context of
emerging health information  exchange  technologies." The Assessment Report also
includes an appendix in which the U of L assessment  concludes the Veriscrip(TM)
System completely meets 18 criteria,  and partially meets another 7 criteria, of
the 60 Recommendations for Comparing Electronic  Prescribing Systems made by the
RAND Electronic  Prescribing Advisory Board. Seventeen of the 60 recommendations
are not expected to be met until 2007. The  Veriscrip(TM)  System meets three of
those future criteria completely, and one partially.

     During the next twelve months,  the Company expects to present the findings
of the  University  of  Louisville  assessment  report to  interested  state and
federal regulatory agencies,  as well as an accompanying report prepared for the
California  HealthCare  Foundation  in  2004  that  concludes  productivity  and
opportunity  costs are minimal,  if any, and  additional  savings may be accrued
from  "downstream  time savings,  chiefly from electronic data  transmission and
more  thorough  order  entry   (resulting  in  fewer   pharmacy   callbacks  for
clarification  and  revision."  The  Company  also plans to have a  presence  at
national meetings and conferences of law enforcement and regulatory professions,
at which  to  demonstrate  the  Veriscrip(TM)  System.  At the  same  time,  the
Veriscrip(TM)  System is  constantly  being  improved  and  upgraded to meet and
exceed  emerging  technology  improvements  under the terms of the Joint Venture
Agreement.

     The Company's working capital  requirements for the foreseeable future will
vary based upon a number of factors, including the cost to finish development of
the Veriscrip(TM)  System, and the costs associated with launching the system if
successfully  developed,  the  acceptance  of the system and market  penetration
along with other factors that may not be  foreseeable  at this time. The Company
has not made any commitments for capital expenditures.  Management believes that
the Company will need at least $2,850,000 in financing to fund  operations,  pay



                                       9
<PAGE>



off existing debt and pay for required  development  work during the next twelve
months.  We currently have debt  obligations in amounts in excess of $1,000,000,
substantially all of which are in default, and we do not have the funds to repay
the amounts  owing.  We have no commitments  to provide  additional  funding and
there can be no assurance that we will be able to obtain  additional  funding on
satisfactory  terms, or at all. If we do not receive the needed funding, we will
not be able to execute our business plan.

Third Party Claims and Contingencies

     In addition  to the  foregoing,  we are  subject to a number of  additional
potential third party claims. These potential claims include the following:

     On December  31,  1997,  the Company  canceled 168 Class A shares of common
stock. These shares had been authorized for issue during prior years. No details
were available as to whom the shares should be issued. Management canceled these
shares, which resulted in contributed capital of $8,393.

     On  December  31,  1997,  the  Company  canceled  98,000  shares of Class A
preferred stock, 272,200 shares of Class B preferred stock, and 10,200 shares of
Class C  preferred  stock.  No  record  of  owners  of  these  shares  could  be
determined.  The results of the  cancellation  of these  shares was  contributed
capital of $380,400. All dividends associated with the canceled shares were also
canceled.  The Company may be liable to the owners of these  shares,  should the
owners of these shares be identified.

     During the year ended December 31, 2002, the Company canceled 50,000 shares
of Class A preferred stock and related dividends  payable of $35,000,  which was
held by an affiliate of the Company.

     At December 31, 1998, a creditor  made a claim for  approximately  $20,000.
Management contends the amount is not owed due to non-performance by the lessor.
The amount has been due since February 1994.

     At December 31, 1998, a creditor  made a claim for  approximately  $19,000.
Management  contends  the  amount  is not  owed  due to  non-performance  by the
creditor. The amount has been due since June 1996.

     Substantially all of the Company's notes payable are currently in default.

     During the third  quarter of 2002, a principal  officer and director of the
Company  resigned  following an indictment for  conspiracy to commit  securities
fraud to which he plead  guilty.  No charges  or claims  were or have since been
made against the Company or their other officers and directors. Management is of
the opinion that this incident will not have any material  adverse impact on the
Company.

     Pursuant to an agreement  with Growth Fund  Partnership,  Inc., the Company
agreed to pay a dividend on the Class B preferred stock on June 1, 2003, in cash
equal  to two  percent  of the  value  of the  Class B  Preferred  Stock,  or in
restricted Class A common stock equal to three percent of the value of the Class
B  Preferred  Stock.  On August  15,  2003,  a demand  was made by  Growth  Fund
Partnership, Inc., for the dividend payment, which the Company did not pay.

     During August 2001,  the Company  entered into an agreement for  consulting
services  and issued  250,000  shares of common  stock as  payment  of  services
rendered.  The  balance  due  under  the  agreement  is  $70,000,  however,  the
consultant has not performed any work and the Company contends the consultant is
in breach of contract due to non-performance.



                                       10
<PAGE>


     On April 21, 2003,  the Company  entered  into an  agreement  with a former
consultant  whereby  the  Company  owes this  consultant  a total of $199,650 as
payment for services  rendered.  Under the terms of this agreement,  this entire
liability may be satisfied by the issuance of 6,655,000  shares of the Company's
common stock. As of October 31, 2005,  these shares have not been issued and the
liability of $199,650 is recorded in the accompanying consolidated balance sheet
in accrued expenses.

     Since   December  31,   2003,   the  Company  has  failed  to  comply  with
substantially all of the obligations  imposed upon it by the Securities Exchange
Act of 1934 Act (the "1934 Act") and was delinquent in filing its annual reports
on Form 10-KSB for the periods  ended  December  31, 2003 and December 31, 2004,
and is  delinquent  in filing  its  quarterly  reports  on Form  10-QSB  for the
quarterly  periods ending in 2003, 2004 and 2005 and required current reports on
Form 8-K . As a result,  the Company and its  officers  and  directors  could be
subject to substantial civil and criminal penalties due to such  non-compliance.
There can be no assurance that substantial civil and criminal penalties will not
be imposed.

Off Balance Sheet Arrangements

     The Company does not have any off-balance  sheet  arrangements that have or
are  reasonably  likely to have a  current  or  future  effect on our  financial
condition,  changes in financial  condition,  revenues or  expenses,  results of
operations,  liquidity,  capital  expenditures  or  capital  resources  that  is
material to investors.

Critical Accounting Policies

     Due to the lack of current operations and limited business activities,  the
Company does not have any  accounting  policies that it believes are critical to
facilitate an investor's  understanding of the Company's financial and operating
status.

Recent Accounting Pronouncements

     The Company has not adopted any new  accounting  policies that would have a
material  impact on the  Company's  financial  condition,  changes in  financial
conditions or results of operations.

Forward-Looking Statements

     When used in this Form  10-KSB or other  filings  by the  Company  with the
Securities  and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized officer of the Company's executive officers, the words
or phrases "would be", "will allow",  "intends to", "will likely  result",  "are
expected to", "will  continue",  "is  anticipated",  "estimate",  "project",  or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.

     The  Company   cautions   readers  not  to  place  undue  reliance  on  any
forward-looking  statements,  which speak only as of the date made,  and advises
readers that forward-looking statements involve various risks and uncertainties.
The Company does not  undertake,  and  specifically  disclaims any obligation to
update any  forward-looking  statements to reflect  occurrences or unanticipated
events or circumstances after the date of such statement.

Rick Factors

     In addition to the risks set forth above,  we are subject to certain  other
risk  factors  due to the  industry  in  which  we  compete  and  our  stage  of
development. These risk factors include the following.

     We may be  subject  to  liability  as a result of our  failure  to file the
required reports with the Securities and Exchange Commission.



                                       11
<PAGE>


     Our common stock is  registered  pursuant to section  12(g) of the 1934 Act
and we are  thereby  obligated  to file  annual  reports on Form 10-K or 10-KSB,
quarterly  reports on Form 10-Q or 10-QSB,  Current  Reports on Form 8-K,  other
reports and  information  as described in the 1934 Act and related  rules and to
otherwise  comply with  various  provisions  of the 1934 Act and related  rules.
Since  December  31,  2003,  we failed to comply with  substantially  all of the
obligations imposed upon it by the 1934 Act and we were delinquent in filing our
annual  reports on Form  10-KSB for the  periods  ended  December  31,  2003 and
December 31, 2004,  and are  delinquent in filing our quarterly  reports on Form
10-QSB for the  quarterly  periods  ending in 2003,  2004 and 2005 and  required
current  reports on Form 8-K.  As a result,  we could be subject to  substantial
civil  and  criminal  penalties  due to  such  non-compliance.  There  can be no
assurance that substantial civil and criminal penalties will not be imposed.

     We have  experienced  negative cash flow and operating losses and may never
become profitable.

     We are in the  early  stages  of  developing  the  Veriscrip(TM)  System to
provide solutions for the prescription drug and healthcare industry. There is no
meaningful historical operating or financial information about its business upon
which to evaluate  future  performance  of the Company or the  viability of this
product.  As of December 31, 2004,  we had  incurred  $14,827,748  in net losses
since its inception in 1994. We have  generated no revenues  during the past two
years. We cannot assure  generation of revenues,  profitability or generation of
positive  cash flow in the  future.  If we cannot do so,  our  business  may not
succeed and our securities would have little or no value.

     We do not have sufficient funds to execute our business plan.

     The  Report of  Independent  Public  Accountants  relating  to our  audited
financial  statements  contains  a "going  concern"  explanatory  paragraph.  We
estimate that we will need at least  $2,850,000 in financing to fund operations,
pay off  existing  debt and pay for  required  development  work during the next
twelve months. We have no firm commitments to obtain additional  financing,  and
there  can be no  assurance  that  additional  financing  will be  available  on
commercially  reasonable  terms,  or at all. Any inability to obtain  additional
financing will have a material adverse effect on the Company, including possibly
requiring us to cease attempts to execute our business plan.

     We do not have sufficient funding to pay our current liabilities or overdue
notes payable which may result in our inability to succeed.

     We have currently  liabilities  in the amount of $2,106,877.  We have notes
payable  in an  amount  in  excess of  $1,000,000,  over  $900,000  of which are
included in current  liabilities.  Substantially all of the notes payable are in
default.  We currently have no ability to repay the amounts owing on these notes
payable.  If any of holders of these obligations were to bring an action against
us to collect the amounts owing it may prevent us from  continuing to attempt to
execute our business plan, including finishing  development of the Veriscrip(TM)
System.

     Our  financial   success   depends  on  the   commercial   acceptance   and
profitability   of  our   Veriscrip(TM)   System  that  we  have  developed  and
field-tested.

     There is no assurance that there would be any demand for the  Veriscrip(TM)
System as there are significant risks associated with:

     o    Our ability to manage growth of infrastructure, facilities, employees,
          customers, strategic alliances and legal concerns.
     o    Our  ability to attract  and  sustain a customer  base  sufficient  to
          achieve profitable operations.
     o    Our ability to attract, train, and retain qualified personnel.
     o    Our ability to predict and respond quickly to market forces.

     As a result, there are significant risks with the commercial success of the
Veriscrip(TM) System.

     Our business model is unproven and may fail.

     Although the  Veriscrip(TM)  System was  developed  and  field-tested,  our
success  depends on the  adoption  of this  system by various  state and federal



                                       12
<PAGE>



government  agencies.  We cannot  guarantee that there will be any acceptance of
this system or that other  competitive  products will not be developed  that are
superior to our product.  As a result,  there may not be sufficient  interest in
the product and our business may fail.

     The  success of our  business  plan is  dependent  on many  factors  beyond
management's control.

     These factors include the following:

     o    The extent of demand for the Veriscrip(TM)System;
     o    Satisfactory price levels for this product;
     o    The regulatory  environment  relating to prescription  drug-monitoring
          systems; o Changes in drug-monitoring technology; and
     o    Changes in general and local economic conditions.

     As a  result,  our  business  could  fail for  reasons  that are  presently
unforeseen by management.

     We depended on others to complete development of the Veriscrip(TM) System.

     We do not have any  employees.  We are  completely  dependent  on others to
provide us with programming and other services necessary to operate and maintain
the  Veriscrip(TM)  System.  As a result,  there is a substantial  risk that our
business will fail because we are unable to  independently  operate and maintain
the Veriscrip(TM) System.

     The  Veriscrip(TM)  System  may  become  obsolete  as  a  result  of  other
technologies or systems.

     While we are unaware of any systems or programs that would  currently  make
our  Veriscrip(TM)  System  obsolete,  there can be no  assurance  of the actual
useful life of the system. If the Veriscrip(TM) System becomes obsolete then our
business will fail because we have no other planned or  anticipated  products or
services from which could generate revenue in the future.

     We currently have no patent or trade secret  protection with respect to the
Veriscrip(TM) System.

     We believe  that the  success of our  Veriscrip(TM)  System  will depend on
proprietary  software and  techniques  to be developed  that  constitute  "trade
secrets." As late as 2003, the Company had filed annual patent  applications  to
maintain a provisional patent with the U.S. Patent Office, although we have made
no determination as to the patentability of these trade secrets. In addition, in
2002 we were  notified that we had abandoned  certain  provisional  applications
filings  because of our failure to pay related  filing fees.  At this time we do
not have sufficient  funding to  independently  pursue patent  protection of the
Veriscrip(TM) System if it is patentable.  All patent protection was transferred
via license under the Joint Venture Agreement of April and August 2003.

     Although  the  Company  is not  aware  of any  claim  that  its  technology
infringes upon the proprietary apparatus,  methodology,  hardware or software of
others,  it is  possible  that  others may have or be granted  patents  claiming
products,  apparatus  or  processes  that are  necessary  for or  useful  to the
deployment  of  the  Veriscrip(TM)   System  and  that  legal  actions  claiming
infringement  could be brought against us. In the event that we are unsuccessful
against such a claim,  we may be required to obtain  licenses to such patents or
to other patents or proprietary  technology in order to develop,  manufacture or
market the Veriscrip(TM)  System.  There can be no assurance,  however,  that we
will be able to obtain such licenses on  commercially  reasonable  terms,  if at
all. If we are required to and do not obtain such licenses,  we would  encounter
delays in the development  and  manufacturing  of our products and  technologies
while we attempt to design  around such patents or other rights and there can be
no assurance  that such  attempts  would be  successful.  Failure to obtain such
licenses or to design  around such  patents or other  rights would result in the
failure of our proposed business.



                                       13
<PAGE>



Item 7. Financial Statements

     Financial statement start on page F-1.


Item 8.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

         The Company is not aware, and has not been advised by its auditors, of
any disagreement on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.

     On July 7,  2005,  the  Company's  board of  directors  elected  to  retain
Pritchett,  Siler & Hardy,  P.C.,  ("PSH") as its independent  registered public
accounting firm and to dismiss Clancy and Co., P.L.L.C. ("C&C"). The decision to
change  independent  registered  public  accounting  firm was recommended by the
Company's board of directors.

     The reports of C&C on the December 31, 2002 and 2001  financial  statements
of the Company, did not contain any adverse opinion or disclaimer of opinion and
were not  qualified  or modified as to  uncertainty,  audit scope or  accounting
principles,  except that the reports  contained an  explanatory  paragraph  that
expressed  that  substantial  doubt existed  regarding the Company's  ability to
continue as a going  concern.  During the Company's two most recent fiscal years
and all subsequent interim periods preceding such change in auditors,  there was
no  disagreement  with C&C on any matter of accounting  principles or practices,
financial statement  disclosure,  or auditing scope or procedure,  which, if not
resolved to the satisfaction of the former  accountant,  would have caused it to
make a reference to the subject matter of the  disagreements  in connection with
its  report;  nor  has  C&C  ever  presented  a  written  report,  or  otherwise
communicated  in writing to the Company or its board of directors  the existence
of any  "disagreement"  or "reportable  event" within the meaning of Item 304 of
Regulation S-B.

     The Company has authorized C&C to respond fully to the inquiries of PSH.


Item 8A. Controls and Procedures

     We have evaluated,  with the  participation of our Chief Executive  Officer
and Chief Financial  Officer,  the  effectiveness of the design and operation of
our  disclosure  controls and  procedures  as of December 31, 2003,  pursuant to
Exchange  Act Rule  13a-15.  Based  upon that  evaluation,  the Chief  Executive
Officer and Chief Financial Officer  concluded that our disclosure  controls and
procedures  are effective.  There have been no changes to our internal  controls
over  financial  reporting  during the period ended  December 31, 2004 that have
materially  affected,  or that is reasonably  likely to materially  affect,  our
internal  controls  over  financial  reporting.   Management  believe  that  the
Company's  failure  to comply  with its SEC  reporting  obligations  is not as a
result of weaknesses in its internal  controls,  but because the Company has not
had the financing to complete the reports.

Item 8B. Other Information

         None.



                                       14
<PAGE>



                                    PART III


Item 9. Directors and Executive Officers of the Registrant

Identify Directors and Executive Officers

     Set forth below is certain information concerning each of the directors and
executive officers of the Company as of December 31, 2004:

                                                                        With
                                                                      Company
         Name             Age     Position                             Since
------------------        ---     ------------------------            --------

James Arch                79      Chairman                             1996

James K. Millard          55      Director, CEO, President & CFO       2000
---------------

     James Arch. Mr. Arch has been a director since 1996 and his term expires as
a director at the next annual meeting of  stockholders.  For the past five years
Mr.  Arch has been  retied.  Mr. Arch does not hold any  directorships  on other
reporting companies.

     James K. Millard.  Mr.  Millard has been a director since 2000 and his term
expires as a director at the next annual meeting of  stockholders.  For the past
five  years Mr.  Millard  has been  principally  employed  as the  president  of
Verified Prescription Safeguards,  Inc. He also served as a partner in Waterwild
Farm, LLC, a family-owned  and operated  business.  He was formerly with e-Corp,
Inc. and WKYT-TV, both located in Lexington, Kentucky. Mr. Millard spends all of
his  business  time  working  for the  Company.  Mr.  Millard  does not hold any
directorships on other reporting companies.

Identify Significant Employees

     The Company has no other significant employees.

Family Relationships

         None

Involvement in Certain Legal Proceedings

     Our directors  and officers  have not been  involved in any material  legal
proceedings  which occurred  within the last five years of any type as described
in Regulation S-B.

Audit Committee

     The Company has only one part-time employee and officer. The Company has no
operations  or funding.  Therefore,  the Company has no audit,  compensation  or
nominating  committee  and, as a result,  the Company  does not have a financial
expert serving on its board of directors.



                                       15
<PAGE>



Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a)  of the  Securities  Exchange  Act  requires  our  executive
officers, directors and persons who beneficially own more than 10% of our common
stock to file initial  reports of ownership  and reports of changes in ownership
with the SEC.  Such persons are required by SEC  regulations  to furnish us with
copies of all Section 16(a) forms filed by such persons.

     Based  solely on our review of forms  furnished  to us and  representations
from reporting persons,  we believe that all filing  requirements  applicable to
our executive  officers,  directors and more than 10% stockholders were complied
with during 2004.

Code of Ethics

     Due to the fact that the Company has no operations and inadequate  funding,
the Company has not adopted a Code of Ethics, but it expects to adopt one in the
future.


Item 10. Executive Compensation

     During the past three  fiscal  years,  the Company has not paid any salary,
wage or other  compensation  to its  officers.  The  Company  had an  employment
agreement  with Mr.  Millard which provided for an annual salary of $120,000 per
year and provides for insurance and other benefits.  The agreement provides that
Mr.  Millard's  employment is at will.  The Company has not been able to pay Mr.
Millard's  salary and the salary  obligation  has been  accruing  at the rate of
$10,000 per month.  At December  31, 2004,  the Company had accrued  $240,000 in
unpaid compensation owed to Mr. Millard.

     During the prior year the  Company  did not  compensate  its  non-executive
director, but the Company did accrue salary as described in the prior paragraph.
There are presently no ongoing pension or other plans or  arrangements  pursuant
to which  remuneration is proposed to be paid in the  non-executive  director of
the Company.

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

         The following table sets forth certain information with respect to the
beneficial ownership of the common stock of the Company as of January 11, 2006,
for: (i) each person who is known by the Company to beneficially own more than
five percent of the Company's common stock, (ii) each of the Company's
directors, (iii) each of the Company's Named Executive Officers, and (iv) all
directors and executive officers as a group. As of January 11, 2006, the Company
had 143,993,594 shares of common stock outstanding.

         Name and Address        Shares           Percentage of
                of              Beneficially        Shares
  Of Beneficial Owner(1)          Owned        Beneficially Owned   Position
-------------------------       ------------   ------------------   ------------
James Arch                       2,300,000           1.6%            Chairman

James K. Millard                 4,500,000           3.1%         Director, CEO,
                                                                  President,
                                                                  and CFO

Directors and Executive          7,350,000           5.1%
Officers as a Group (2 people)

FV Investments, Inc.            15,806,000          11.0%
P.O. Box 2164
Lexington, KY 40588
--------------------------
(1)  Except where otherwise  indicated,  the address of the beneficial  owner is
     deemed to be the same address as the Company.



                                       16
<PAGE>



Securities Authorized for Issuance Under Equity Compensation Plans

         The Company does not have any equity compensation plans.


Item 12. Certain Relationships and Related Transactions

     Arkansas  American  Mining and  Exploration,  Inc.  ("AAME")  was owned and
controlled  by the  founders of the  Company.  In 1988,  AAME  exchanged  mining
claims,  milling  facility,  and a core drilling  rig, for the Company's  common
stock.  In 1994,  Arkansas  Mineral  Partners Ltd., a partnership  owed by James
Arch, a former President of the Company,  loaned the Company $152,000 secured by
the Company's land, buildings, and equipment.  This note, plus interest, was due
in the fourth quarter of 1996.  The Company  defaulted on the note. The property
and  equipment  were  claimed by the note holder and written off by the Company.
All  obligations  of the  Company  related to this  transaction  have been fully
satisfied.

     On December 23, 1998, the Company borrowed $61,000 from Kentrust,  Inc., an
entity whose CEO is Frank G. Dickey, Jr., a former director and President of the
Company. The note carried a 10% interest rate, and was due on December 23, 1999.
In 1999, the Company borrowed an additional $104,500 from Kentrust at 10% during
2000, the entire $165,500  became overdue and began accruing  interest at a rate
of 12% per annum. A $16,550 penalty for late payment was also levied against the
Company.  The note does not have any new repayment date.  During 2001,  Kentrust
loaned the Company an additional $41,400,  which is accruing interest at 10% per
annum,  with repayment due on or before December 31, 2001. The principal balance
on this note is past due and  outstanding  at December 31, 2003,  was  $206,900.
Accrued interest on these notes as of December 31, 2003, was $107,208.  Included
in accrued expenses at December 31, 2000, was $570,000  representing amounts due
to certain officers  pursuant to various  employment  contracts as follows:  the
former President and majority  stockholder,  Frank Dickey, Jr., for his services
provided  during the period  November 1, 1998,  through  December 31,  2000,  as
President ($300,000) and during the period January 1, 1999, through December 31,
2000, as Chief Financial Officer ($120,000);  and Laura G. White, Vice President
for her services  provided during the period January 1, 2000,  through  December
31, 2000  ($90,000) for Vice  President and Investor  Relations,  and during the
period  January 1, 1999,  to December  31,  1999,  for her services as Secretary
($60,000).  The employment  contracts were scheduled to expire in December 2002.
During 2001,  management terminated the contracts due to lack of working capital
and converted the payroll  liabilities to additional  paid-in capital due to the
Company's  lack of  operating  cash flow.  Additionally,  the Company  converted
accrued expenses of $173,837 to additional  paid-in capital,  which  represented
the balance of unpaid expenses incurred for the lease of office space, furniture
and  equipment,  and  vehicle  at $7,637  per month for the period of January 1,
2000, to December 31, 2001, from its former president.  The Company continued to
charge $7,637 per month for these incidental expenses through December 31, 2002,
which are reflected as a charge to the consolidated statement of operations with
an offset to  additional  paid-in  capital  for any  amounts not paid during the
current year.  During 2002, the Company charged net accrued  expenses of $79,638
to additional paid-in capital.

     During the year ended December 31, 2003, the Company  converted two related
party notes payable to Mr. James Arch and FV Investments with principal balances
of  $120,000  and  $139,003  and  accrued   interest  of  $28,899  and  $93,042,
respectively,  at December 31, 2002, into two new notes with principal  balances
of $180,000 and $300,000 at December31,  2003, accruing interest at 10% and 12%,
respectively. The Company also entered into a consulting agreement with Internet
Capital.com,  LLC and an  employment  agreement  with Mr.  Millard both totaling
$192,500  during the year ended December 31, 2003, of which $154,583 is included
in Accounts  Payable - related  party as of December 31, 2003.  Also,  there are
unreimbursed  expenses due to the  Company's  sole officer  totaling  $25,692 at
December 31, 2003.

     On July 30, 2003, the  Commonwealth of Kentucky,  awarded a contract to VPS
Holding,  LLC ("VPSH") a Kentucky  limited  liability  company  incorporated  on
August 29, 2002,  by the sole member and  manager,  James  Millard,  the current
President and CEO of the Company.  The contract  awarded  allowed VPSH to lead a



                                       17
<PAGE>



pilot project, in Perry and Harlan counties, at medical,  clinical, and pharmacy
facilities.  The project will be conducted  by a consortium  of companies  under
license to VPSH,  that  includes  Envoii,  Inc.,  a San  Francisco,  California,
software developer,  and Computer Information Systems, Inc., a London, Kentucky,
consulting firm and solutions provider for information technology, both of which
are  privately-held  corporations.  In order to  perform  under  the  terms  and
conditions of this state contract,  VPSH will license the technologies from each
corporation for a nominal fee. Any benefits or revenues, derived from the use of
technology  acquired by VPSH, shall pass directly through to the Company,  under
the terms of the Joint Venture Agreement.

     The  license to use and  develop  technology,  intellectual  property,  and
know-how related to prescription  drug monitoring  systems and all other matters
pertaining to the  healthcare  industry was obtained  pursuant to the terms of a
Patent  License  Agreement and Release dated January 5, 2004,  from the Company.
This Patent  License  Agreement  and Release was granted with the  understanding
that VPSH would enter into an agreement  with Envoii  Healthcare,  LLC, a Nevada
limited  liability  company,  to undertake  the funding and  development  of the
Verified Prescription  Safeguards  "Veriscrip(TM)"  prescription drug monitoring
system and in  consideration  of payments to be received by the Company.  Envoii
Healthcare,  LLC, owns the exclusive  rights in the healthcare  channel of trade
rights to the "Envoii(TM)" system.

     The Joint Venture  Agreement  was executed by the Company,  VPSH and Envoii
Healthcare,  LLC,  wherein Envoii  Healthcare,  LLC, in conjunction with Envoii,
Inc.,  agreed to undertake the  development of the real-time  prescription  drug
monitoring  system  and  raise  the  necessary  funding  for the  project.  This
Agreement and the Patent  License  Agreement and Release were under  negotiation
prior to  submission  of the  response to the  Kentucky  Request for Proposal on
April 9, 2003, but executed  thereafter,  both of which have  subsequently  been
provided and fully disclosed to the Commonwealth of Kentucky.

     Under the terms of the Joint Venture Agreement,  contract revenues, if any,
other  than the grant  for the pilot  project  resulting  from the  development,
implementation,  and/or  sale of  real-time  controlled  substance  prescription
monitoring technology to any third party including governmental entities, are to
be distributed to Envoii  Healthcare,  LLC (75%),  VPSH (25%),  with the Company
receiving  100% of the benefits and revenues  distributed  to VPSH. The contract
with the  Commonwealth  of Kentucky  governs the  division of proceeds  from the
pilot  project grant  funding from the U. S.  Department  of Justice,  Bureau of
Justice Assistance. The terms of the contract were completed in April 2005.


Item 13. Exhibits and Reports

     a.) Exhibits

Exhibit
Number     Description
-------   -----------------------
3(i).1*        Certificate of Incorporation,  dated March 3, 1988  (Incorporated
               by  reference  to Exhibit  3(i).1 of the  Company's  Form 10-KSB,
               dated December 31, 2003)

3(i).2*        Articles of  Amendment to the  Articles of  Incorporation,  dated
               December 5, 1988  (Incorporated by reference to Exhibit 3(i).2 of
               the Company's Form 10-KSB, dated December 31, 2003)

3(i).3*        Certificate  of Amendment to the  Certificate  of  Incorporation,
               dated  January 20, 1989  (Incorporated  by  reference  to Exhibit
               3(i).3 of the  Company's  Form 10-KSB,  dated  December 31, 2003)

3(i).4*        Certificate  of Amendment to the  Certificate  of  Incorporation,
               dated March 13, 1989 (Incorporated by reference to Exhibit 3(i).4
               of the Company's Form 10-KSB, dated December 31, 2003)



                                       18
<PAGE>


3(i).5*        Certificate  of Amendment to the  Certificate  of  Incorporation,
               dated  September 30, 1991  (Incorporated  by reference to Exhibit
               3(i).5 of the Company's Form 10-KSB, dated December 31, 2003)

3(i).6*        Certificate  of Amendment to the  Certificate  of  Incorporation,
               dated  February  14, 1992  (Incorporated  by reference to Exhibit
               3(i).6 of the Company's Form 10-KSB, dated December 31, 2003)

3(i).7*        Certificate  of Amendment to the  Certificate  of  Incorporation,
               dated  February 2, 2000  (Incorporated  by  reference  to Exhibit
               3(i).7 of the Company's Form 10-KSB, dated December 31, 2003)

3(i).8*        Certificate  of Amendment to the  Certificate  of  Incorporation,
               dated August 1, 2002 (Incorporated by reference to Exhibit 3(i).8
               of the Company's Form 10-KSB, dated December 31, 2003)

3(ii).1*       By-Laws  (Incorporated  by  reference  to Exhibit  3(ii).1 of the
               Company's Form 10-KSB, dated December 31, 2003)

10.1*          Consulting  Agreement  by and  between  the  Company  and  Rusbar
               Financial  Services,  Inc.,  dated  April 2001  (Incorporated  by
               reference to Exhibit  10.1 of the  Company's  Form 10-KSB,  dated
               December 31, 2003)

10.2*          Consulting  Agreement  by and  between  the  Company and Harry M.
               Zachem,  dated May 14,  2001(Incorporated by reference to Exhibit
               10.2 of the Company's Form 10-KSB, dated December 31, 2003)

10.3*          Consulting  Agreement  by  and  between  the  Company,   Verified
               Prescription   Safeguards,   Inc.  and   Fairmund   International
               Services,  Ltd., dated April 21, 2003  (Incorporated by reference
               to Exhibit 10.3 of the Company's Form 10-KSB,  dated December 31,
               2003)

10.4*          Consulting  Agreement  by and between  the  Company and  Internet
               Capital.com,  LLC, dated July 2003  (Incorporated by reference to
               Exhibit 10.4 of the  Company's  Form 10-KSB,  dated  December 31,
               2003)


10.5*          Consulting  Agreement  by and between the Company and  Innovative
               Technologies,  dated October,  2003 (Incorporated by reference to
               Exhibit 10.5 of the  Company's  Form 10-KSB,  dated  December 31,
               2003)


10.6*          Employment  Agreement by and between the Company and James Kemper
               Millard,  dated December 31, 2003  (Incorporated  by reference to
               Exhibit 10.6 of the  Company's  Form 10-KSB,  dated  December 31,
               2003)

10.7*          Patent License  Agreement and Release by and between the Company,
               Verified Prescription Safeguards,  Inc., Envoii Healthcare,  LLC,
               and VPS Holdings,  LLC,  dated January 5, 2004  (Incorporated  by
               reference to Exhibit  10.7 of the  Company's  Form 10-KSB,  dated
               December 31, 2003)

10.8*          Stock Loan Agreement,  by and between the Company and the parties
               referenced therein,  dated May 9, 2005 (Incorporated by reference
               to Exhibit 10.8 of the Company's Form 10-KSB,  dated December 31,
               2003)

10.9*          Promissory  Note payable to Kentrust,  Inc.,  dated  November 14,
               1998  (Incorporated by reference to Exhibit 10.9 of the Company's
               Form 10-KSB, dated December 31, 2003)

10.10*         Promissory  Note payable to Kentrust,  Inc.,  dated  December 23,
               1998 (Incorporated by reference to Exhibit 10.10 of the Company's
               Form 10-KSB, dated December 31, 2003)

10.11*         Promissory Note payable to Kentrust,  Inc., dated January 27,1999
               (Incorporated by reference to Exhibit 10.11 of the Company's Form
               10-KSB, dated December 31, 2003)

10.12*         Promissory  Note  payable  to James  Arch,  dated  August 1, 2000
               (Incorporated by reference to Exhibit 10.12 of the Company's Form
               10-KSB, dated December 31, 2003)

10.13*         Promissory  Note payable to Lee M.  Tillman,  dated  September 7,
               2005 (Incorporated by reference to Exhibit 10.13 of the Company's
               Form 10-KSB, dated December 31, 2003)

10.14*         Promissory  Note payable to FV  Investments,  dated July 31, 2003
               (Incorporated by reference to Exhibit 10.14 of the Company's Form
               10-KSB, dated December 31, 2003)



                                       19
<PAGE>


10.15*         Promissory Note payable to Cora Spence  Carrick,  dated April 27,
               2005 (Incorporated by reference to Exhibit 10.16 of the Company's
               Form 10-KSB, dated December 31, 2003)

10.16*         Promissory Note payable to James Kemper Millard,  dated March 18,
               2005 (Incorporated by reference to Exhibit 10.17 of the Company's
               Form 10-KSB, dated December 31, 2003)

21.1*          Schedule of  Subsidiaries  (Incorporated  by reference to Exhibit
               21.1 of the Company's Form 10-KSB, dated December 31, 2003)

31.1           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002

31.2           Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002

32.1           Certification  pursuant  to 18 U.S.C.  Section  1350,  as adopted
               pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
--------------------------
* Previously Filed.


     b.) Reports on Form 8-K

     No reports on Form 8-K were filed by the Company  during the fourth quarter
ended December 31, 2004.


Item 14. Principal Accountant Fees and Services

Audit Fees

     The  aggregate  fees  billed  for  professional  services  rendered  by our
principal accountant for the audit of our annual financial statements, review of
financial  statements  included in our quarterly reports and other fees that are
normally  provided by the accountant in connection with statutory and regulatory
filings or  engagements  for the fiscal  years ended  December 31, 2004 and 2003
were $0 and $17,700, respectively.

Audit Related Fees

     The  aggregate  fees  billed for  assurance  and  related  services  by our
principal accountant that are reasonably related to the performance of the audit
or review of our financial  statements,  other than those previously reported in
this Item 14, for the fiscal years ended  December 31, 2004 and 2003 were $0 and
$0, respectively.

Tax Fees

     The  aggregate  fees  billed  for  professional  services  rendered  by our
principal  accountant  for tax  compliance,  tax advice and tax planning for the
fiscal years ended December 31, 2004 and 2003 were $0 and $0, respectively.

All Other Fees

     The  aggregate  fees  billed for  products  and  services  provided  by the
principal  accountant,  other  than  those  previously  in this Item 14, for the
fiscal years ended December 31, 2004 and 2003 were $0 and $0, respectively.

Audit Committee

     The Company's Board of Directors  functions as its audit  committee.  It is
the policy of the Company for all work performed by our principal  accountant to
be approved in advance by the Board of Directors.  All of the services described
above in this Item 14 were approved in advance by our Board of Directors.





                                       20
<PAGE>




                                   SIGNATURES

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


                                  EQUITY TECHNOLOGIES & RESOURCES, INC.
                                  (Registrant)



Date: January 12, 2006            By   /s/ James K. Millard
                                     ------------------------------------------
                                        James K. Millard
                                  Director, CEO, President, and CFO


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


 Signature                           Title                         Date
----------------------    ---------------------------------    ----------------


  /s/ James K. Millard
------------------------
James K. Millard          Director, CEO, President, and CFO    January 12, 2006



  /s/ James Arch
------------------------
James Arch                      Chairman                       January 12, 2006






                                       21

<PAGE>



EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
 (Development Stage Companies)

TABLE OF CONTENTS
--------------------------------------------------------------------------- ----

                                                                            Page

Report of Independent Registered Public Accounting Firm                     F- 2

Consolidated  Balance Sheet of Equity  Technologies  & Resources,
     Inc. and Subsidiary as of December 31, 2003, and the Related
     Consolidated  Statements  of  Operations,  of  Stockholders'
     Deficiency,  and of Cash Flows for the Years Ended  December
     31, 2003 and 2002,  and for the Period from Inception of the
     Development  Stage on January 1, 1994,  through December 31,
     2003:

    Balance Sheet                                                           F- 3

    Statements of Operations                                                F- 4

    Statements of Stockholders' Deficiency                                  F- 5

    Statements of Cash Flows                                                F-11

    Notes to Consolidated Financial Statements                              F-12


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





<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors
EQUITY TECHNOLOGIES AND RESOURCES, INC. & SUBSIDIARY
Louisville, KY

We have  audited  the  accompanying  balance  sheet of Equity  Technologies  and
Resources,  Inc. & Subsidiary [a  development  stage company] as of December 31,
2004 and the related  statements of operations,  stockholders'  equity (deficit)
and cash flows for the years ended December 31, 2004 and 2003 and for the period
from  inception of  development  stage on January 1, 1994  through  December 31,
2004.  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 audit. The consolidated  financial  statements of Equity
Technologies  and  Resources,  Inc. & Subsidiary  for the period from January 1,
1994  through  December 31, 2002 were audited by other  auditors  whose  reports
expressed an unqualified opinion on those statements and included an explanatory
paragraph  expressing concern about the Company's ability to continue as a going
concern. The financial statements as of December 31, 2002 reflect an accumulated
deficit  of  $22,295,982.   Our  opinion  on  the  consolidated   statements  of
operations,  stockholders' equity (deficit) and cash flows from inception of the
development  stage on January 1, 1994 through  December 31, 2004,  insofar as it
relates to amounts for prior periods through  December 31, 2002, is based solely
on the reports of other auditors.

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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  based on our audit and the reports of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material respects,  the financial  position of Equity  Technologies & Resources,
Inc. and  Subsidiary [a  development  stage company] as of December 31, 2004 and
the  results  of their  operations  and their  cash  flows  for the years  ended
December  31, 2004 and 2003 and for the period  from  inception  of  development
stage on January 1, 1994 through December 31, 2004 in conformity with accounting
principles generally accepted in the United States.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements,  the Company is a  development  stage  company  with no revenues and
recurring losses since inception of development stage.  Further, the Company has
current liabilities in excess of current assets. These factors raise substantial
doubt  about  the  ability  of the  Company  to  continue  as a  going  concern.
Management's plans in regards to these matters are also described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



/s/ Pritchett, Siler & Hardy, P.C.

PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
September 7, 2005




                                      F-2
<PAGE>


<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
 (Development Stage Companies)


CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2004
----------------------------------------------------------------------------------------------

                                                                                     2004
                     ASSETS
<S>                                                                             <C>
CURRENT ASSETS:
Cash                                                                            $          220
Total current assets                                                                       220
                                                                                --------------

TOTAL ASSETS                                                                    $          220
                                                                                --------------

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Accounts payable                                                                $      169,437
Accounts payable - related parties                                                     226,323
Dividends payable                                                                       26,750
Accrued salaries                                                                       240,000
Accrued expenses                                                                       234,150
Accrued interest                                                                       244,833
Notes payable                                                                           28,400
Notes payable - bank                                                                     7,146
Notes payable, current portion - related parties                                       929,838
Total current liabilities                                                            2,106,877

NOTES PAYABLE, LONG-TERM PORTION - RELATED PARTY                                         9,633
                                                                                --------------

Total liabilities                                                                    2,116,510
                                                                                --------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY:
Preferred stock, class A - $0.001 par value, 2,000,000 shares authorized,                    0
   none issued and outstanding
Preferred stock, class B - $0.001 par value, 300,000 shares authorized,
   70,000 issued and outstanding                                                            70
Preferred stock, class C - $0.001 par value, 100,000 shares authorized,
   none issued and outstanding                                                               0
Common stock, class A - $0.0001 par value, 300,000,000 shares authorized,
   143,893,594 issued and outstanding                                                   14,389
Common stock, class B - $0.01 par value, 100,000 shares authorized,
   100,000 issued and outstanding                                                        1,000
Additional paid-in capital                                                          21,180,798
Accumulated deficit prior to the development stage                                  (8,390,740)
Deficit accumulated during the development stage                                   (14,921,807)
Total stockholders' deficiency                                                      (2,116,290)
                                                                                --------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                  $          220
                                                                                ==============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>


<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003, AND FOR THE
PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE ON JANUARY 1, 1994, THROUGH
DECEMBER 31, 2004
---------------------------------------------------------------------------------------------------------------------

                                                                                                       Accumulated
                                                                                                        During the
                                                                                                       Development
                                                                    2004               2003               Stage
                                                              ----------------  ----------------   ------------------
<S>                                                           <C>                <C>                <C>
REVENUES                                                      $         30,602  $              0   $           30,602

GENERAL AND ADMINISTRATIVE EXPENESES                                   218,767           579,387           10,424,074
                                                              ----------------  ----------------   ------------------

LOSS FROM CONTINUING OPERATIONS                                       (188,165)         (579,387)         (10,393,472)

OTHER (EXPENSES) INCOME:
Interest expense                                                       (86,489)         (162,524)            (596,348)
Interest income                                                              0                 0                   59
                                                              ----------------  ----------------   ------------------
Total other expenses - net                                             (86,489)         (162,524)            (596,289)
                                                              ----------------  ----------------   ------------------

NET LOSS FROM CONTINUING OPERATIONS                                   (274,654)         (741,911)         (10,989,761)

NET LOSS FROM DISCONTINUED OPERATIONS                                        0                 0           (3,837,987)
                                                              ----------------  ----------------   ------------------

NET LOSS                                                      $       (274,654) $       (741,911)  $      (14,827,748)
                                                              ================  ================   ==================

DIVIDENDS ON PREFERRED STOCK                                  $              0  $              0   $           32,517
                                                              ================  ================   ==================

Basic and diluted loss per share of common stock:
   Loss from continuing operations                            $          (0.00) $          (0.01)  $            (0.28)
   Loss from discontinued operations                                      0.00              0.00                (0.10)
                                                              ----------------  ----------------   ------------------

   Net loss                                                   $          (0.00) $          (0.01)  $            (0.38)
                                                              ================  ================   ==================

Weighted average number of common shares outstanding
   basic and diluted                                               143,893,594       143,893,594           38,736,871
                                                              ================  ================   ==================
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       F-4
<PAGE>


<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2003
------------------------------------------------------------------------------------------------

                                                      Preferred     Preferred   Preferred     Preferred   Preferred     Preferred
                                                        Stock         Stock       Stock         Stock       Stock         Stock
                                                       Class A       Class A     Class B       Class B     Class C       Class C
                                                        Shares        Amount      Shares        Amount      Shares        Amount
                                                      ----------  ------------  ----------  ------------  ----------  ------------
<S>                                                   <C>         <C>           <C>         <C>           <C>         <C>
BALANCES, JANUARY 1, 1994                                148,000  $        148      78,500  $         78

Preferred stock issued for cash at $1.00 per share                                 203,500           204       6,000  $          6
Preferred stock issued for services at $1.00 per share                               6,200             6       4,200             4
                                                      ----------  ------------  ----------  ------------  ----------  ------------

BALANCES, DECEMBER 31, 1994, 1995, AND 1996              148,000           148     288,200           288      10,200            10

Shares converted to Class A common stock                                            (5,000)           (5)
Shares converted to Class A common stock                                           (11,000)          (11)
Canceled shares                                          (98,000)          (98)   (272,200)         (272)    (10,200)          (10)
                                                      ----------  ------------  ----------  ------------  ----------  ------------

BALANCES, DECEMBER 31, 1997, 1998, AND 1999               50,000            50           0             0           0             0

Shares issued as consideration for purchase of
subsidiary, December 15, 2000                                                       40,000            40
                                                      ----------  ------------  ----------  ------------  ----------  ------------

BALANCES, DECEMBER 31, 2000                               50,000            50      40,000            40           0             0

Preferred stock dividend, July 16, 2001                   13,169            13

Shares issued in exchange for 300,000 shares of
Growth Fund Partnership, Inc., June 2001                                            30,000            30
                                                      ----------  ------------  ----------  ------------  ----------  ------------

BALANCES, DECEMBER 31, 2001                               63,169            63      70,000            70           0             0

Cancellation of Series A Preferred                       (50,000)          (50)
Additional preferred stock dividend                        4,069             4
Cancellation of preferred shares deemed
        ineligible - held by affiliates                     (186)
Preferred stock converted to Class A common stock        (10,197)          (10)
Preferred stock forfeitures                               (6,855)           (7)
                                                      ----------  ------------  ----------  ------------  ----------  ------------

BALANCES, DECEMBER 31, 2002 AND 2003                           0  $          0      70,000  $         70           0  $          0
                                                      ==========  ============  ==========  ============  ==========  ============
</TABLE>

                         (continued on following page)

                                      F-5

<PAGE>



<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2003 (CONTINUED)
------------------------------------------------------------------------------------------------
                                                    Common      Common    Common        Common
                                                    Stock       Stock      Stock         Stock     Additional
                                                    Class A     Class A    Class B       Class B      Paid-in    Accumulated
                                                    Shares      Amount     Shares        Amount       Capital     Deficit
                                                  ----------  ---------- -----------  ------------  -----------  ------------
<S>                                               <C>         <C>        <C>          <C>           <C>          <C>

BALANCES, JANUARY 1, 1994                             11,425  $ 1            100,000  $      1,000  $11,217,203  $ (8,390,740)

Common stock issued for services at
   $135.87 per share                                     700                                             95,106
Common stock issued for services at
   $499.70 per share                                      92                                             45,979
Common stock issued for services at
   $553.66 per share                                      32                                             17,717
Net loss for the year ended
   December 31, 1994                                                                                               (3,563,526)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 1994                           12,249           1     100,000         1,000   11,376,005   (11,954,266)

Common stock issued for cash at $34.02
   per share                                           5,416           1                                184,299
Common stock issued for services at $52.50
   per share                                             500                                             26,250
Common stock issued for dividends at
   $553.66 per share                                      32                                             17,717       (17,717)
Common stock issued for dividends at
   $548.15 per share                                      27                                             14,800       (14,800)
Net loss for the year ended December 31, 1995                                                                        (212,633)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 1995                           18,224           2     100,000         1,000   11,619,071   (12,199,416)

Net loss for the year ended December 31, 1996                                                                         (61,828)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 1996                           18,224            2    100,000        1,000    11,619,071   (12,261,244)

Common stock issued in exchange for preferred
    series B stock at $312.50 per share                   16                                              5,000
Fractional shares issued                                   6                                                  1
Common stock issued for services at $3.00
   per share                                           4,000                                             12,000
Common stock issued for debt at $10.00
   per share                                           5,150            1                                51,499
Common stock issued for services at $4.95
   per share                                          20,590            2                               101,998
Common stock issued for services at $3.00
   per share                                             400                                              1,200
Common stock issued in exchange for preferred
   series B stock at $343.75 per share                    32                                             11,000
Capital contribution-cancellation of shares             (168)                                           388,793
Net loss for the year ended December 31, 1997                                                                        (115,504)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 1997                           48,250           5     100,000         1,000   12,190,562   (12,376,748)
</TABLE>

                         (continued on following page)

                                      F-6

<PAGE>


<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2003 (CONTINUED)
------------------------------------------------------------------------------------------------
                                                    Common      Common    Common        Common
                                                    Stock       Stock      Stock         Stock     Additional
                                                    Class A     Class A    Class B       Class B      Paid-in    Accumulated
                                                    Shares      Amount     Shares        Amount       Capital     Deficit
                                                  ----------  ---------- -----------  ------------  -----------  ------------
<S>                                               <C>         <C>        <C>          <C>           <C>          <C>

Reversal of cancellation of common A shares            4,280
Common stock issued at $3.15 per share to
     repay note payable                                1,737                                              5,470
Common stock issued to officer at $3.15 per
     share for consulting services                       137                                                431
Common stock issued to officer at $3.15 per
     share for consulting services                    22,480           2                                 71,152
Common stock issued to officer at $3.15 per
     share for consulting services                     2,563                                              8,083
Common stock issued to officer to payoff note
     payable for consulting services                 120,000          12                                 58,446
Net loss for the year ended December 31, 1998                                                                        (150,873)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 1998                          199,447          19     100,000         1,000   12,334,144   (12,527,621)

Net loss for the year ended December 31, 1999                                                                        (178,877)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 1999                          199,447          19     100,000         1,000   12,334,144   (12,706,498)

Common stock issued at $7.00 per share for
     services rendered, June 2000                    166,628          17                              1,166,381
Common stock issued at $0.14 per share for
     services rendered, August 2000                1,350,000         135                                188,865
Common stock issued at $0.14 per share for
     services rendered, August 7, 2000             6,000,000         600                                839,400
Common stock canceled, August 2000                  (120,000)        (12)                               (58,446)      (61,542)
Fractional shares issued                                 832
Common stock canceled                               (100,000)        (10)                                    10
Preferred shares issued as consideration for
     purchase of subsidiary                                                                                 (40)
Common stock issued for cash at $0.25 per
     share, November 2000                             90,000           9                                 22,491
</TABLE>

                          (continued on following page)

                                      F-7

<PAGE>

<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2003 (CONTINUED)
------------------------------------------------------------------------------------------------

                                                    Common      Common    Common        Common
                                                    Stock       Stock      Stock         Stock     Additional
                                                    Class A     Class A    Class B       Class B      Paid-in    Accumulated
                                                    Shares      Amount     Shares        Amount       Capital     Deficit
                                                  ----------  ---------- -----------  ------------  -----------  ------------
<S>                                               <C>         <C>        <C>          <C>           <C>          <C>

Common stock issued for services at $0.29
    per share, December 2000                         275,000          28                                 79,722
Common stock issued for services at $0.375
    per share, December 2000                         100,000          10                                 37,489
Common stock issued for services at
   $0.375 per share, December 2000                   160,000          16                                 59,984
Net loss for the year ended
    December 31, 2000                                                                                             (3,280,425)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 2000                        8,121,907         812     100,000         1,000   14,670,000   (16,048,465)

Common stock issued for services at
    $0.20 per share, January 4, 2001                 600,000          60                                119,940
Common stock issued for cash at $0.25 per
    share, January 5, 2001                            45,000           4                                 11,246
Common stock issued for cash at $0.20 per
    share, February 23, 2001                           2,500                                                500
Common stock issued for services at $0.28
    per share, March 6, 2001                         200,000          20                                 55,980
Common stock issued for services at $0.06
    per share, March 23, 2001                        200,000          20                                 11,980
Common stock canceled, March 28, 2001               (100,000)        (10)                                    10
Correction in common stock issued at $0.20
    per share, April 2, 2001                        (100,000)        (10)                               (19,990)
Common stock issued for services at $0.05
    per share, April 5, 2001                          50,000           5                                  2,495
Common stock issued for services at $0.10
    per share, April 10, 2001                        350,000          35                                 34,965
Common stock issued for services at $0.05
    per share, April 30, 2001                        100,000          10                                  4,990
Common stock issued for 100% ownership
    of newly formed subsidiary, May 9, 2001        7,200,000         720                                   (720)
Common stock issued for services at $0.04
    per share, May 11, 2001                          400,000          40                                 15,960
Common stock issued for services at $0.11
    per share, May 15, 2001                          600,000          60                                 65,940
Common stock issued for services at $0.09
    per share, May 21, 2001                          400,000          40                                 35,960
Common stock issued for services at $0.16
    per share, May 31, 2001                          550,000          55                                 87,945
Common stock issued for services at $0.17
    per share, June 5, 2001                          200,000          20                                 33,980
</TABLE>

                          (continued on following page)

                                      F-8

<PAGE>

<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2003 (CONTINUED)
------------------------------------------------------------------------------------------------
                                                    Common      Common    Common        Common
                                                    Stock       Stock      Stock         Stock     Additional
                                                    Class A     Class A    Class B       Class B      Paid-in    Accumulated
                                                    Shares      Amount     Shares        Amount       Capital     Deficit
                                                  ----------  ---------- -----------  ------------  -----------  ------------
<S>                                               <C>         <C>        <C>          <C>           <C>          <C>

Common stock issued for services at $0.16
    per share, June 18, 2001                         500,000          50                                 79,950
Common stock issued for services at
    $0.15 per share, June 20, 2001                 2,150,000         215                                322,285
Common stock issued for cash at $0.001 per
    share, July 12, 2001                              10,000           1                                    999
Common stock issued for services at $0.24
    per share, July 12, 2001                       4,379,500         438                              1,050,642
Common stock issued for services at $0.20
    per share, July 24, 2001                       6,450,000         645                              1,289,355
Common stock issued for services at $0.20
    per share, July 24, 2001                         800,000          80                                159,920
Common stock issued for collateral for
    loans, August 4, 2001                          5,927,713         593                                   (593)
Common stock issued for services at $0.14
    per share, August 15, 2001                       700,000          70                                 97,930
Common stock issued for services at $0.09
    per share, August 31, 2001                       150,000          15                                 13,485
Common stock issued for services at $0.08
    per share, September 4, 2001                     500,000          50                                 39,950
Common stock issued for services at $0.06
    per share, September 6, 2001                     500,000          50                                 29,950
Common stock issued for services at $0.03
    per share, September 24, 2001                    500,000          50                                 14,950
Common stock canceled                             (7,200,000)       (720)                                   720
Common stock canceled                               (500,000)        (50)                                    50
</TABLE>


                          (continued on following page)

                                      F-9

<PAGE>

<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2003 (CONTINUED)
------------------------------------------------------------------------------------------------

                                                    Common      Common    Common        Common
                                                    Stock       Stock      Stock         Stock     Additional
                                                    Class A     Class A    Class B       Class B      Paid-in    Accumulated
                                                    Shares      Amount     Shares        Amount       Capital     Deficit
                                                  ----------  ---------- -----------  ------------  -----------  ------------
<S>                                               <C>         <C>        <C>          <C>           <C>          <C>

Shares issued in exchange for 300,000 shares
   of Growth Fund Partnership, Inc., June 2001                                                              (30)
Common stock issued for insurance guarantee
   at $0.03 per share, October 17, 2001            2,500,000         250                                 74,750
Common stock issued for services at $0.07 per
   share, October 19, 2001                           130,000          13                                  9,087
Common stock issued for collateral on loan
   at $0.07 per share, October 19, 2001            4,800,000         480                                335,520
Common stock issued for services rendered
   at $0.07 per share, October 25, 2001              750,000          75                                 52,425
Common stock issued for collateral on loans
   at $0.05 per share, November 6, 2001            2,000,000         200                                 99,800
Common stock issued for collateral on loan
   at $0.03 per share, November 12, 2001           1,200,000         120                                 35,880
Common stock issued for services rendered
   at $0.03 per share, November 12, 2001           1,500,000         150                                 44,850
Common stock issued for insurance guarantee
   at $0.03 per share, November 12, 2001             500,000          50                                 14,950
Common stock issued for services at $0.06 per
   share, November 19, 2001                          200,000          20                                 11,980
Common stock issued for services at $0.04 per
   share, December 12, 2001                          600,000          60                                 23,940
Common stock issued for services at $0.04 per
   share, December 19, 2001                          200,000          20                                  7,980
Common stock issued for services at $0.05 per
   share, December 31, 2001                          500,000          50                                 24,950
Preferred stock dividend                                                                                    (13)
Accounts payable and accrued expenses
   converted to capital                                                                                 743,837
Net loss for the year ended December 31, 2001                                                                      (4,526,911)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 2001                       48,566,620       4,856     100,000         1,000   19,710,680   (20,575,376)

Additional preferred stock dividend
Common stock issued for consulting services                                                                  (4)
   at $0.04 per share, January 2, 2002              500,000           50                                 19,950
Common stock issued for financial consulting
   services rendered at $0.03 per share,
   February 24, 2002                                200,000           20                                  5,980
Common stock issued for collateral on loans
   at $0.08 per share, June 21, 2002             14,000,000        1,400                              1,118,600
Cancellation of previously issued common stock
   in 2001 for collateral on loans,
   June 27, 2002                                 (2,000,000)        (200)                              (99,800)
Common stock issued for consulting services
   rendered at $0.03 per share,
   August 3, 2002                                 7,300,000          730                               218,270
Preferred stock conversion in September 2002,
   for holders of record, July 16, 2001          72,826,974        7,283                               (7,273)
Common stock issued for collateral on loans
   at $0.02 per share, November 4, 2002           2,500,000          250                                49,750
Cancellation of Series A preferred shares and
   related dividends payable                                                                            85,000
Preferred stock forfeitures                                                                                  7
Accrued expenses converted to capital                                                                   79,638
Net loss for the year ended December 31, 2002                                                                      (1,720,606)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 2002                      143,893,594      14,389     100,000         1,000   21,180,798   (22,295,982)

Net loss for the year ended December 31, 2003                                                                       (741,911)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 2003                      143,893,594  $   14,389     100,000  $      1,000  $21,180,798   (23,037,893)
                                                ============  ========== ===========  ============  ===========  ============

Net loss for the year ended December 31, 2004                                                                        (274,654)
                                                  ----------  ---------- -----------  ------------  -----------  ------------

BALANCES, DECEMBER 31, 2004                      143,893,594  $   14,389     100,000  $      1,000  $21,180,798   (23,312,547)
                                                ============  ========== ===========  ============  ===========  ============

Accumulated deficit:
   Prior to development stage                                                                                      (8,390,740)
                                                                                                               --------------
   During development stage                                                                                    $  (14,921,807)
                                                                                                               ==============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-10

<PAGE>



<TABLE>
<CAPTION>
EQUITY TECHNOLOGIES & RESOURCES, INC. AND SUBSIDIARY
(Development Stage Companies)

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2004
--------------------------------------------------------------------------------------------------------------------

                                                                                                           Accumulated
                                                                                                            During the
                                                                                                           Development
                                                                       2003              2002                 Stage
                                                                ----------------  ---------------      -----------------
<S>                                                             <C>               <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                        $       (274,654) $      (741,911)     $   (14,827,748)
Adjustments to reconcile net loss to net cash used
   in operating activities:
   Common stock issued for services or collateral on loans                                                   8,166,584
   Write-off of federal tax lien and related accrued expenses                                                  (68,836)
   Preferred stock issued for services                                                                          10,400
   Depreciation and amortization                                                                                70,532
   Bad debt expense                                                                                            140,299
   Loss on disposal of assets and partnership interests                                                      2,364,508
   Loss on foreign currency transaction                                      999                                   999
   Discontinued operations                                                                                     456,078
   Changes in assets and liabilities:
     Decrease in accounts receivable - trade                                                                    20,921
     Increase in accounts payable                                         44,767         212,420             1,236,277
     Increase in accrued expenses                                        224,888         507,238             1,098,960
Net cash used in operating activities                                    (4,000)         (22,253)           (1,331,026)
                                                                  --------------  --------------       ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable                                                                                    (11,059)
Sale of land                                                                                                    (3,201)
Other                                                                                                           64,000
                                                                  --------------  --------------       ---------------
Net cash provided by investing activities                                      0               0                49,740
                                                                  --------------  --------------       ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock for cash                                                                                  323,050
Sale of preferred stock for cash                                                                               209,500
Proceeds from notes payable                                                8,634          21,900               818,491
Principal payments on notes payable                                       (4,533)                              (69,535)
                                                                  --------------  --------------       ---------------
Net cash provided by financing activities                                  4,101          21,900             1,281,506
                                                                  --------------  --------------       ---------------
NET INCREASE (DECREASE) IN CASH                                              101            (353)                  220

CASH, beginning of period                                                    119             472                      0
                                                                  --------------  --------------       ---------------

CASH, end of period                                               $          220  $          119       $           220
                                                                  ==============  ==============       ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:

Cash paid during period for interest                              $          601  $            0       $       107,357
                                                                  ==============  ==============       ===============

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:

Accrued expenses converted to notes payable                       $            0  $      220,997       $        220,997
                                                                  ==============  ==============       ================
Accounts payable and accrued expenses converted to capital        $            0  $            0       $        823,475
                                                                  ==============  ==============       ================
Common stock issued for services or collateral on loans           $            0  $            0       $      8,166,584
                                                                  ==============  ==============       ================
Preferred stock issued for services                               $            0  $            0       $         10,400
                                                                  ==============  ==============       ================
Common stock issued for dividends                                 $            0  $            0       $         50,234
                                                                  ==============  ==============       ================
Paid-in capital through cancellation of preferred stock and
   related dividends payable                                      $            0  $            0       $        465,400
                                                                  ==============  ==============       ================
Common stock issued for debt                                      $            0  $            0       $        115,428
                                                                  ==============  ==============       ================
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-11
<PAGE>


Equity Technologies & Resources, Inc. and Subsidiary
(Development stage companies)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED December 31, 2004 AND 2003,
AND FOR THE PERIOD FROM INCEPTION OF THE DEVELOPMENT STAGE
ON JANUARY 1, 1994, THROUGH DECEMBER 31, 2004


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements presented are those of Equity Technologies
& Resources,  Inc. (the  "Company") and its  wholly-owned  subsidiary,  Verified
Prescription Safeguards,  Inc. Collectively,  they are referred to herein as the
"Companies".

Organization and Nature of Operations.

Organization  - The  Company  was  organized  on March 4,  1988,  as a  Delaware
corporation under the name Sherry Lyn Corporation.  The Company was organized as
a public company for the purpose of finding a suitable combination partner.

On December 6, 1988,  the Company  changed  its name to Equity  Gold,  Inc.  The
number of shares of common stock authorized to be issued changed from 50,000,000
to 150,000,000 with a par value of $0.001 per share of common stock.

On December 14,  1989,  the Company  merged with Gold  Equity,  Inc., a Delaware
corporation. The surviving corporation was Equity Gold, Inc.

On February 7, 1989, the Company changed its name to Equity AU, Inc.

On April 14, 1989, the Company changed the number of authorized shares of common
stock to 99,900,000.

On November 7, 1991, the Company authorized 2,000,000 shares of preferred stock
with a par value of $1.00 each.

On February 19, 1992, the Company authorized 99,900,000 shares of Class A common
shares with a par value of $0.001 per share and 100,000 shares of Class B common
shares with a par value of $0.01 per share.

From the original inception of the Company on March 4, 1988, to the inception of
the development stage on January 1, 1994, the Company was heavily involved in
mining and exploration activities principally in Arkansas. The Company generated
an accumulated deficit of $8,390,740 prior to the Company entering the
development stage.

In January 2000, the Company elected to change its official name from Equity AU,
Inc., to Equity Technologies & Resources, Inc.

On August 2, 2002, the Company amended its articles of  incorporation  to change
the  authorized  capital stock of the Company.  The aggregate  number of Class A
common shares authorized for issuance is 300,000,000  shares with a par value of
$0.0001;  the aggregate number of Class B common shares  authorized for issuance
is 100,000 with a par value of $0.01;  the aggregate number of Class A preferred
shares  authorized  for  issuance is 2,000,000  with a par value of $0.001;  the
aggregate number of Class B preferred shares  authorized for issuance is 300,000
shares with a par value of $0.001; and the aggregate number of Class C preferred
shares authorized for issuance is 100,000 shares with a par value of $0.001.

The amendment was recorded by the State of Delaware on January 23, 2003. All per
share and share  information  has been  retroactively  restated  to reflect  the
changes in par value.

                                      F-12
<PAGE>


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Nature of  Operations  - The Company  was  originally  engaged in  research  and
development  of a process to extract gold and other  precious  metals on various
real properties  located in Arkansas.  Partnerships were formed prior to 1994 by
the Company or by affiliates of the Company to raise working capital, to acquire
mineral claims,  rights,  facilities and equipment,  and to explore for precious
metals. In 1994, general partners of the partnerships  notified the Company that
they  were  terminated  and  dissolved.  The  Company  has  had  no  significant
operations  since  August 1993 and entered the  development  stage on January 1,
1994. During September 1996, the Company resumed  operations and again suspended
operations in December 1996. As a result of the dissolution of the partnerships,
the Company  ceased its  operations  and entered  the  development  stage as per
Statement of Financial Accounting Standards ("SFAS") No. 7 (see Note 2).

On December 15,  2000,  the Company  acquired all of the issued and  outstanding
common stock of Verified Prescription  Safeguards,  Inc. ("VPS") in exchange for
40,000 shares of the Company's Class B voting  preferred stock (see Note 5). The
acquisition  of VPS was  accounted for as a purchase per  Accounting  Principles
Board No.  ("APB") 16. At the time the  purchase  was  consummated,  VPS held no
assets or liabilities.  The  consolidated  entity elected to change its business
plan  toward  the  development  and  marketing  of  internet  prescription  drug
technology  (see Notes 10 and 11).  Management  intends to use the  majority  of
funds  obtained  toward this  development.  The  purchase  price of the acquired
subsidiary  was  determined  among the  parties  to be 40,000  shares of Class B
preferred stock redeemable at $500 per share ($20,000,000). The preferred shares
issued are  redeemable  for cash only at $500 per share  payable from 50% of net
revenues of the subsidiary for the next seven years.  The conversion  feature of
the issued preferred  shares allows them to be converted into cash,  pursuant to
future  revenues,  but does not allow them to be converted  into common stock at
any time.

In May 2001, the Company acquired a newly formed wholly-owned  subsidiary,  ETCR
M&A, Inc. ("ETCR M&A"), a Florida corporation,  in exchange for 7,200,000 shares
of the Company's  common stock.  ETCR M&A held no assets or  liabilities  at the
time of purchase and thus, the acquisition was recorded at $0 value. In November
2001,  these shares were  canceled and the Company does not  currently  hold any
interest in ETCR M&A.

The Companies are currently engaged in the development and marketing of internet
prescription drug technology (see Notes 10 and 11).

Summary of Significant Accounting Policies.

Accounting  Method  -  The  Companies'  consolidated  financial  statements  are
prepared  using the accrual  method of  accounting.  The Companies  have elected
December 31 year-ends.

Principles of Consolidation - The accompanying consolidated financial statements
include those of Equity  Technologies & Resources,  Inc.,  and its  wholly-owned
subsidiary,  Verified  Prescription  Safeguards,  Inc. ("VPS"). All intercompany
accounts and transactions have been eliminated.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally  accepted  accounting  principles  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses  during the reporting  period.  Management  makes its best


                                      F-13
<PAGE>


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

estimate of the ultimate outcome for these items based on historical  trends and
other information available when the financial statements are prepared.  Changes
in estimates  are  recognized in accordance  with the  accounting  rules for the
estimate,  which  is  typically  in the  period  when  new  information  becomes
available to management. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Companies consider all highly liquid investments
with a maturity  of three  months or less from the date of  purchase  to be cash
equivalents.  As of  December  31,  2004 and  2003,  the  Companies  had no cash
equivalents.

Concentration of Credit Risk - The Companies maintain cash balances at financial
institutions that are insured by the FDIC up to $100,000.

Revenue Recognition - The Companies revenues result from contractual  agreements
among the Companies and VPS Holding,  LLC (see Note 10). Revenues are recognized
upon completion of the various phases of the contractual agreements.

Income Taxes - The  Companies  account for income taxes under the  provisions of
Statement of Financial  Accounting  Standards  ("SFAS") No. 109  "Accounting for
Income Taxes." Under SFAS No. 109,  deferred  income tax assets and  liabilities
are computed for differences  between the financial  statements and tax bases of
assets and liabilities that will result in taxable or deductible  amounts in the
future,  based on enacted tax laws and rates  applicable to the periods in which
the differences are expected to affect taxable income.  Valuation allowances are
established  when necessary,  to reduce deferred income tax assets to the amount
expected to be  realized.  No  deferred  tax asset has been  recognized  for the
operating loss  carryforward as it is more likely than not that all or a portion
of the net operating loss will not be realized and any valuation allowance would
reduce the benefit to zero.

Functional  Currency - The  functional  currency of the  Companies  is the U. S.
dollar.  When a transaction is executed in a foreign currency,  it is remeasured
into U. S. dollars based on appropriate  rates of exchange in effect at the time
of the  transaction.  At each balance  sheet date,  recorded  balances  that are
denominated in a currency  other than the  functional  currency of the Companies
are  adjusted  to reflect the  current  exchange  rate.  The  resulting  foreign
currency  transactions gains (losses) are included in general and administrative
expenses in the accompanying consolidated statements of operations.

Long-lived  Assets - The Companies record impairment losses on long-lived assets
used in operation when indicators of impairment are present and the undiscounted
cash flows  estimated  to be generated by those assets are less than the assets'
carrying amount.

Earnings  Per Share - Basic  earnings or loss per share is based on the weighted
average number of common shares outstanding.  Diluted earnings or loss per share
is based on the  weighted  average  number  of  common  shares  outstanding  and
dilutive common stock equivalents.  Basic earnings/loss per share is computed by
dividing  income/loss  (numerator)  applicable  to  common  stockholders  by the
weighted  average  number of common  shares  outstanding  (denominator)  for the
period.  All earnings or loss per share  amounts in the  consolidated  financial
statements  are basic  earnings  or loss per share,  as defined by SFAS No. 128,
"Earnings  Per  Share."  Diluted  earnings  or loss per  share  does not  differ
materially  from basic  earnings  or loss per share for all  periods  presented.
Convertible  securities that could  potentially  dilute basic loss per share are
not included in the computation of diluted loss per share because to do so would
be  antidilutive.   All  per  share  and  per  share  information  are  adjusted
retroactively to reflect stock splits and changes in par value.

                                      F-14
<PAGE>


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive   Income  -  The  Companies   include   material  items  of  other
comprehensive  income,  if any,  by their  nature  in a  consolidated  financial
statement and displays the  accumulated  balance of other  comprehensive  income
separately from retained  earnings and additional  paid-in capital in the equity
section of the consolidated  balance sheet. No material  accumulated  balance of
other comprehensive income existed at December 31, 2004.

Capital Structure - The Companies disclose their capital structure in accordance
with SFAS No. 129,  "Disclosure of Information  about Capital  Structure," which
establishes  standards  for  disclosing  information  about an entity's  capital
structure.

Recent  Accounting  Pronouncements  - The Financial  Accounting  Standards Board
("FASB") has recently  issued the  following  pronouncements,  none of which are
expected to have a significant affect on the consolidated financial statements:

January 2003 - FASB issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51." FIN 46 requires
certain variable interest entities to be consolidated by the primary beneficiary
of  the  entity  if  the  equity  investors  in  the  entity  do  not  have  the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties.  FIN 46 is effective for all
new variable  interest  entities created or acquired after January 31, 2003. For
variable  interest  entities  created or acquired prior to February 1, 2003, the
provisions  of FIN 46 must be applied  for the first  interim  or annual  period
beginning after June 15, 2003.

April  2003 - SFAS No.  149,  "Accounting  for  Amendment  of  Statement  133 on
Derivative  Instruments  and Hedging  Activities,"  which  amends and  clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging  activities
under FASB Statement No. 133, Accounting for Derivative  Instruments and Hedging
Activities.  This Statement is generally effective for contracts entered into or
modified   after  June  30,  2003,   and  all   provisions   should  be  applied
prospectively. This statement does not affect the Companies.

May 2003 - SFAS No. 150,  "Accounting  for Certain  Financial  Instruments  with
Characteristics of both Liabilities and Equity," which establishes standards for
how an  issuer  classifies  and  measures  certain  financial  instruments  with
characteristics  of both  liabilities  and equity.  It  requires  that an issuer
classify a financial  instrument  that is within its scope as a liability (or an
asset  in  some  circumstances).  This  Statement  is  effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. It is to be implemented by reporting the cumulative  effect of a change in
an accounting  principle for financial  instruments  created before the issuance
date of the Statement and still  existing at the beginning of the interim period
of adoption.  Restatement is not  permitted.  This statement does not affect the
Companies.

Most Recently Enacted Accounting  Standards - Statement of Financial  Accounting
Standards  ("SFAS")  No. 151,  "Inventory  Costs - an  amendment  of ARB No. 43,
Chapter 4"; SFAS No. 152, "Accounting for Real Estate Time-Sharing  Transactions
- an amendment of FASB  Statements  No. 66 and 67"; SFAS No. 153,  "Exchanges of
Nonmonetary  Assets - an amendment of APB Opinion No. 29"; SFAS No. 123 (revised

                                      F-15
<PAGE>


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

2004),  "Share-Based  Payment";  and SFAS No. 154, "Accounting Changes and Error
Corrections  - a  replacement  of APB Opinion No. 20 and FASB  Statement No. 3",
were recently issued.  SFAS Nos. 151, 152, 153, 123 (revised 2004), and 154 have
no current  applicability  to the Companies or their effect on the  consolidated
financial statements would not have been significant.

Pending  Accounting  Pronouncements  - It is  anticipated  that current  pending
accounting  pronouncements  will not have an adverse impact on the  consolidated
financial statements of the Companies.


NOTE 2 - GOING CONCERN

During their  development  stage, the Companies have had limited  operations and
have not been able to develop an ongoing, reliable source of revenue to fund its
existence.  The  Company's  day-to-day  expenses  have been  covered by proceeds
obtained  and  services  paid by the  issuance of stock and notes  payable.  The
adverse effect on the Companies' results of operation due to its lack of capital
resources can be expected to continue  until such time as the Companies are able
to generate  additional  capital  from other  sources.  These  conditions  raise
substantial doubt about the Companies' ability to continue as going concerns.

Management has implemented, or developed plans to implement, a number of actions
to address these conditions  including the acquisition of VPS and development of
VPS's projects,  which management believes will provide opportunities for growth
within the prescription drug and healthcare industry. Management's plans include
obtaining working capital funds by seeking additional funding from shareholders,
debt  financing,  and/or  private  placements  of its common  stock to meet such
needs.  Without  realization of additional capital, it would be unlikely for the
Companies to continue as a going concern.  The Companies  anticipate  that their
major shareholders will contribute sufficient funds to satisfy the cash needs of
the  Companies  for  the  next  twenty-four  months.  However,  there  can be no
assurances to that effect,  as the  Companies  expect  minimal  revenues and the
Companies'  need for  additional  funding will be necessary  for the  Companies'
development plans and projects.  If the Companies cannot obtain needed funds, it
may be forced to curtail or cease its  activities.  Therefore,  for at least the
next twenty-four  months management  believes the Companies have viable plans to
continue as going concerns.  There can be no assurance that  additional  funding
will be available when needed or, if available, that the terms of such financing
will not adversely  affect the Companies'  results from operations (see Notes 11
and 12 for subsequent events).

The consolidated  financial statements do not include any adjustments to reflect
the possible future effects on the  recoverability  and classification of assets
or the  amounts  and  classification  of  liabilities  that may result  from the
outcome of this uncertainty. The continuation of the Companies as going concerns
is dependent upon the success of the Companies in obtaining  additional  funding
and the success of their future  operations.  The Companies'  ability to achieve
these   objectives   cannot  be  determined  at  this  time.  The   accompanying
consolidated  financial  statements should not be regarded as typical for normal
operating periods.


NOTE 3 - NOTES PAYABLE - BANK

Notes payable - bank at December 31, 2004, totaling $7,146 represents a note due
to First  Security Bank of Lexington,  Kentucky,  bearing  interest at 5.75% per
annum,  maturing on February  13,  2004,  with  principal  and  interest  due at
maturity. As of April 11, 2005, this note was paid in full.


                                      F-16
<PAGE>



NOTE 4 - NOTES PAYABLE

Notes payable of the Companies are as follows at December 31, 2004:

Note payable to a related party dated July 2003,  secured by
Class A  common  stock  and  interest  in  related  entries,
bearing  interest at 12% per annum  through July 2005,  with
principal due on that date, with  additional  interest of 5%
per annum  until  paid,  personally  guaranteed  by a former
officer of the Company (see Note 7)                                 $   300,000

Unsecured notes payable to a related party,  $165,500,  past
due,  bearing interest at 12%, with a late fee of 10% of the
principal due, $41,400 due in one year, bearing 10% interest,
past due                                                                206,900

Unsecured  notes payable to a related party dated  September
2003, bearing interest at 10% per annum,  matures October 1,
2004, past due (see Note 7)                                              180,000

Unsecured,  non-interest  bearing  notes  payable to various
related parties, due on demand                                          168,638

Non-interest  bearing notes  payable to various  related and
third parties, secured by guarantees of common stock, due on
demand                                                                   30,500

Unsecured notes payable to various related parties,  bearing
interest ranging from 10% to 12%, past due                               24,300

Unsecured non-interest bearing notes payable, due on demand              21,900

Unsecured  notes payable to a related  party dated  December
1999, past due,  bearing  interest at 12% per annum (default
rate  of 18%  per  annum),  with  a  late  fee of 10% of the
principal due                                                            20,000

Unsecured  notes  payable to a related  party dated June 28,
2004,   bearing  interest  at  10%  per  annum,   refinanced
September 15, 2005, matures March 31, 2006                                 9,633

Unsecured   promissory  note  to  a  related  party  bearing
interest  at 10%,  past due,  interest  payable  annually in
either stock or cash, or both                                             6,000
                                                                    -----------

Total                                                                   967,871
Less current portion of related party amounts
                                                                       (929,838)
Less long-term portion of related party amount                           (9,633)
                                                                    -----------
Total notes payable                                                $     28,400
                                                                   ============

Substantially  all of the Companies'  notes are in default.  Accrued interest on
the above notes at December 31, 2004, was $243,751.


                                      F-17
<PAGE>



NOTE 5 - CAPITAL STOCK

Preferred Stock - Class A

The Company is authorized  to issue  2,000,000  shares of  non-voting  preferred
shares,  at a par value of $0.001 per share.  These shares accrue a 10% dividend
annually.  These preferred shares are convertible into Class A common stock at a
conversion rate of 5.5 common shares for each preferred share.  During 2002, the
Company  canceled 50,000 shares of issued and  outstanding  common stock held by
affiliates  of the  Company,  and the related  cumulative  dividends  payable of
$35,000.  The amounts were credited to additional  paid-in  capital for $85,000.
Dividends paid during 1995 amounted to $17,717 for 1993 and $14,800 for 1994. No
dividends have been paid since 1995.

On June 28, 2001,  the Board of  Directors  of the Company  approved a preferred
stock dividend for the benefit of the Company's common  stockholders.  One share
of Class A, non-voting,  convertible  preferred stock, with a face value of $500
was  issued for every 500 shares of common  stock to  shareholders  of record on
July 16,  2001.  The fair  market  value of the  preferred  stock  dividend  was
determined to be zero because the Company is a development stage company with no
significant  assets, no cash flows from operating  activities,  recurring losses
since inception, and net stockholders'  deficiency.  Accordingly,  the preferred
stock dividend was accounted for by transferring $17, representing the par value
of the Class A preferred stock, to additional paid-in capital.

The  preferred  stock was  convertible  into common stock during the  thirty-day
period immediately  following the one-year  anniversary of the record date, July
16, 2002. Each share of preferred stock was convertible into common stock with a
total value of $500 at the conversion  rate of 90% of the average of the closing
bid and asking price for the common stock of the Company  during the twenty days
immediately  preceding the specific date the preferred  shareholder gives notice
to convert.  No  officers,  directors,  or holders of fewer than 500 shares,  or
fraction thereof, were eligible for the preferred stock dividend or conversion.

During the year ended  December 31,  2001,  there were  originally  13,169 total
preferred shares issued in connection therewith. Subsequent thereto, the Company
issued an additional  4,069 preferred shares that erroneously did not get issued
to  shareholders  of record on July 16, 2001, and canceled 186 preferred  shares
that were deemed ineligible to be issued by the Company because the holders were
either officers, directors or affiliates of the Company.

Total  preferred  shares  converted  to common  stock were 10,197 or  72,826,974
shares of common stock (see Note 5 caption "Common Stock - Class A"). Each share
of preferred  stock was  convertible  into 7,142 shares of common stock based on
the computed  conversion  ratio of 90% of the  Company's  average  20-day market
price  beginning 20 trading days prior to the conversion  date of July 16, 2002.
The  Company's  average  market price within this period was $0.08 and therefore
the conversion  ratio was $0.07.  All preferred  shareholders had thirty days to
convert to common stock and if not  converted,  the preferred  shares expired on
August 16, 2002. The holding period was deemed to begin on July 16, 2001.  Total
forfeited preferred shares were 6,855.

Preferred Stock - Class B

The Company is authorized to issue 300,000 shares of voting preferred shares, at
a par value of $0.001 per share and as of December 31,  2004,  there were 70,000
shares outstanding that were issued as follows:

(1)  In December  2000,  the Company  issued  40,000  shares of voting,  Class B
     preferred stock in exchange for all of the  outstanding  shares of Verified
     Prescription Safeguards,  Inc. (see Note 1). These preferred shares are not
     convertible into shares of common stock. These shares accrue a 10% dividend
     payable annually on June 30 of each year. The cumulative amount of dividend
     was $16,000 at December 31, 2004.


                                      F-18
<PAGE>



NOTE 5 - CAPITAL STOCK (Continued)

Preferred Stock - Class B (continued)

(2)  In June 2001, the Company issued 30,000 shares of voting, Class B preferred
     stock in exchange  for  300,000  shares of Growth  Fund  Partnership,  Inc.
     ("Growth  Fund") common stock.  The Company agreed to pay a dividend on the
     Class B  preferred  stock on June 1, 2003,  in cash equal to two percent of
     the value of the Class B Preferred  Stock, or in restricted  Class A common
     stock equal to three  percent of the value of the Class B Preferred  Stock.
     Additionally, in the event the Company uses the common stock of Growth Fund
     to anchor or establish a credit  facility in its favor,  the Company agrees
     to pay Growth Fund one-half of the cash dividend  referred to above, or one
     percent  of the  value of the Class B  Preferred  Stock at  closing  of the
     credit  facility,  notice of which  shall be given by the Company to Growth
     Fund at least ten days prior thereto.  The  acquisition was recorded at $0.
     The cumulative amount of dividends was $10,750 at December 31, 2004. During
     2003, a demand was made by Growth Fund  through the circuit  courts for the
     dividend payment,  which the Companies had not paid. On March 10, 2005, the
     circuit  court  dismissed   without  prejudice  this  action  for  lack  of
     prosecution by Growth Fund.

Preferred Stock - Class C

The Company is authorized to issue 100,000 shares of non-voting preferred shares
at a par value of $0.001 per share.  These preferred shares are convertible into
Class A common stock at a conversion rate of 12 common shares for each preferred
share and accrue a 10% dividend  annually.  Management  canceled all outstanding
shares and related  dividends  payable in 1997 and there remain no shares issued
and outstanding as of December 31, 2004.

Common Stock - Class A (see Note 7)

The Company is authorized to issue  300,000,000  Class A common shares, at a par
value of $0.0001 per share. These shares have full voting rights.

In October 1997,  the Company issued 1,830  post-split  shares of Class A common
stock  for  cash  and  mining   rights.   These  shares  were  canceled  due  to
non-performance  of the terms of the agreements.  297 shares were used to settle
debt of the Company.  1,503 shares were  returned in June 1998.  At December 31,
1999, 25 remained outstanding.

In September 1997, the Company authorized a reverse stock split of 100-for-1 and
current  shares  outstanding  have been  retroactively  restated  to reflect the
split.

The  Company  issued  32 and 27 shares  as  dividends  in 1995 for 1993 and 1994
dividends accrued.

In May 1995,  the Company  issued in error 1,923 shares to a related  party that
were  returned  to  the  Company  and  canceled   during  1996.   There  was  no
consideration exchanged in the issuance or cancellation of these shares.

In June 2000,  the Company issued 166,628 shares of its series A common stock to
related parties at $7.00 per share as consideration for services  rendered.  The
shares were valued at the fair market value at the time of the issuance.

In July 2000, the Company elected to reverse-split its series A common shares on
a 1:50 basis, leaving 366,900 shares issued and outstanding after the split. All
previously  issued shares have been  retroactively  restated in the accompanying
statement of stockholders' deficiency to reflect this stock split.

In August  2000,  the Company  issued  1,350,000  post-split  shares of Series A
common stock for services  rendered.  The shares were valued at $0.14 per share,
which was the fair market value of the shares at the date of the issuance.

                                      F-19
<PAGE>



NOTE 5 - CAPITAL STOCK (Continued)

Common Stock - Class A (see Note 7) (continued)

On August 7, 2000, the Company issued  6,000,000  shares of Class A common stock
(par  value  $0.001) to the  former  President  of the  Company  for  consulting
services  rendered,  valued at the fair market  value on the date of issuance of
$0.14 per share. The shares were exempt from  registration  pursuant to Sections
4(2) or 3(b) under the Securities Act. No underwriting or other commissions were
paid in connection with the issuance of these shares.

In August 2000, the Company  reacquired  6,000,000 shares of common stock from a
director in exchange for a promissory note for $120,000 payable to the director.
The promissory note for $120,000 is included in notes  payable-related party and
is classified as a current liability.  The 6,000,000 (120,000 post-split) shares
were subsequently canceled.

In October 2000,  the Company  elected to cancel  100,000 shares of its Series A
common stock.

In November  2000,  the Company  issued  90,000  shares of its common  stock for
$22,500 in cash.

In December  2000,  the Company  issued  535,000 shares in exchange for services
rendered. The shares were valued at $0.29-$0.375 per share based upon the market
value of the stock at the issuance dates.

On January 4, 2001,  the Company  issued 600,000 shares of common stock at $0.20
per share for services rendered.

On January 5, 2001,  the Company  issued  45,000 shares of common stock at $0.25
per share for cash.  The shares  were valued at the fair market rate on the date
of issuance.

On February 23, 2001,  the Company  issued 2,500 shares of common stock at $0.20
per share for cash.  The shares were valued at the fair market value on the date
of issuance.

On March 6, 2001, the Company issued 200,000 shares of common stock for services
rendered $0.28 per share. The shares were valued at the fair market value on the
date of issuance.

On March 23,  2001,  the  Company  issued  200,000  shares  of common  stock for
services  rendered at $0.06 per share. The shares were valued at the fair market
value on the date of issuance.

On March 28, 2001, the Company canceled 100,000 shares of common stock.

On April 2, 2001, the Company canceled 100,000 shares of common stock previously
issued for services rendered.

On April 5, 2001,  the Company issued 50,000 shares of common stock at $0.05 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On April 10, 2001,  the Company  issued  350,000 shares of common stock at $0.10
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On April 30, 2001,  the Company  issued  100,000 shares of common stock at $0.05
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

                                      F-20
<PAGE>



NOTE 5 - CAPITAL STOCK (Continued)

Common Stock - Class A (see Note 7) (continued)

On May 9, 2001,  the Company issued  7,200,000  shares of common stock at $0 for
100% acquisition of ETCR M&A, Inc., a newly formed  subsidiary with no assets or
liabilities.  These shares were  canceled in November  2001 and the Company does
not currently hold any interest in ETCR.

On May 11, 2001,  the Company issued 400,000 shares of common stock at $0.04 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On May 15, 2001,  the Company issued 600,000 shares of common stock at $0.11 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On May 21, 2001,  the Company issued 400,000 shares of common stock at $0.09 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On May 31, 2001,  the Company issued 550,000 shares of common stock at $0.16 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On June 5, 2001,  the Company issued 200,000 shares of common stock at $0.17 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On June 18, 2001, the Company issued 500,000 shares of common stock at $0.16 per
share for services rendered.  The shares were valued at the fair market value on
the date of issuance.

On June 20, 2001, the Company issued  2,150,000  shares of common stock at $0.15
per share for  services  rendered,  of which  500,000  shares were issued to the
current  President of the  Companies.  The shares were valued at the fair market
value on the date of issuance.

On July 12, 2001,  the Company issued 10,000 shares of common stock at $.001 per
share for cash of $1,000.

On July 12, 2001, the Company issued  4,379,500  shares of common stock at $0.24
per share for services  rendered,  of which 3,829,500  shares were issued to the
former  President  of the  Companies.  The shares were valued at the fair market
value on the date of issuance.

On July 24, 2001, the Company issued  6,450,000  shares of common stock at $0.20
per share for  services  rendered,  of which  2,950,000  shares  were  issued to
related parties as follows:  (1,450,000 shares to the former President;  500,000
shares to the  current  President;  and  1,000,000  shares to a director  of the
Company).  The  shares  were  valued  at the  fair  market  value on the date of
issuance.

On July 24, 2001, the Company issued 800,000 shares of common stock at $0.20 per
share for services rendered. The shares were valued at the fair market value on
the date of issuance.

On August 15, 2001,  the Company  issued 700,000 shares of common stock at $0.14
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.


                                      F-21
<PAGE>



NOTE 5 - CAPITAL STOCK (Continued)

Common Stock - Class A (see Note 7) (continued)

In August 2001,  5,927,713 additional shares were issued to an entity controlled
by the former  President of the Companies  representing  post-split  shares from
August 2000 that never got issued as collateral for loans.

On August 31, 2001,  the Company  issued 150,000 shares of common stock at $0.09
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On September 4, 2001, the Company issued 500,000 shares of common stock at $0.08
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On September 6, 2001, the Company issued 500,000 shares of common stock at $0.06
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On September  24, 2001,  the Company  issued  500,000  shares of common stock at
$0.03 per share for services rendered. The shares were valued at the fair market
value on the date of issuance.

On October 17,  2001,  the Company  issued  2,500,000  shares of common stock at
$0.03 per share for an insurance  guarantee on a policy.  The shares were valued
at the fair market value on the date of issuance.

On October 19,  2001,  the Company  issued  4,930,000  shares of common stock at
$0.07 per share for services  rendered  (130,000  shares) and as collateral on a
related party loan (4,800,000 shares). The shares were valued at the fair market
value on the date of issuance.

On October 25, 2001,  the Company issued 750,000 shares of common stock at $0.07
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On November 6, 2001,  the Company  issued  2,000,000  shares of common  stock at
$0.05 per share for  collateral  on loans.  The shares  were  valued at the fair
market value on the date of issuance.

On November 12, 2001,  the Company  issued  3,200,000  shares of common stock at
$0.03  per share for  services  rendered  (1,500,000  shares),  collateral  on a
related  party loan  (1,200,000  shares),  and an insurance  guarantee  (500,000
shares).  The  shares  were  valued  at the  fair  market  value  on the date of
issuance.

On November 19, 2001, the Company issued 200,000 shares of common stock at $0.06
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On December 12, 2001, the Company issued 600,000 shares of common stock at $0.04
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On December 19, 2001, the Company issued 200,000 shares of common stock at $0.04
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

On December 31, 2001, the Company issued 500,000 shares of common stock at $0.05
per share for services rendered. The shares were valued at the fair market value
on the date of issuance.

                                      F-22
<PAGE>



NOTE 5 - CAPITAL STOCK (Continued)

Common Stock - Class A (see Note 7) (continued)

On January 2, 2002,  the Company  issued 500,000 shares of common stock at $0.04
per  share  for  consulting   services  rendered  in  connection  with  its  VPS
subsidiary.  The  shares  were  valued at the fair  market  value on the date of
issuance.

On February 24, 2002, the Company issued 200,000 shares of common stock at $0.03
per share for financial consulting services rendered.  The shares were valued at
the fair market value on the date of issuance.

On June 21, 2002, the Company issued  14,000,000 shares of common stock at $0.08
per  share as  collateral  for past due  loans,  7,500,000  of which  were for a
related  party.  The shares were valued at the fair market  value on the date of
issuance.

On June 27, 2002, the Company canceled 2,000,000 shares of common stock that had
been  previously  issued on  November 6, 2001.  The shares were  canceled at the
original valuation amount.

On August 2, 2002, the Company issued  7,300,000 shares of common stock at $0.03
per share for  services  rendered as follows:  1,500,000  issued to an unrelated
party for international  consulting  services rendered;  4,000,000 issued to the
current President and director for consulting  services rendered;  and 1,800,000
to the current Chairman and director of the Companies for services rendered. The
shares were valued at the fair market value on the date of issuance.

During September 2002, the Company issued  72,826,974 shares of common stock for
the  conversion  of  10,197  shares  of  preferred  stock  (see  Note 5  caption
"Preferred Stock - Class A").

On November 4, 2002,  the Company  issued  2,500,000  shares of common  stock at
$0.02 per share as collateral for loans  outstanding.  The shares were valued at
the fair market value on the date of issuance.

Common Stock - Class B

The Company is authorized  to issue 100,000  shares of its Class B common shares
at a par value of $0.01 per share.  The Class B shares have the right to elect a
majority of the Board of Directors of the  Companies.  There were 100,000 shares
issued and  outstanding  as of December 31, 2004,  which are held by the current
Chairman and director of the Companies.


NOTE 6 - CONTINGENCIES AND COMMITMENTS

(a) Federal Payroll Taxes - During 2005, the Company,  based on discussions with
and tax notices  from the  Internal  Revenue  Service,  became  aware of certain
potential unpaid payroll taxes and related  penalties and interest from 1993 and
1995 totaling $10,500.  These liabilities have been recorded as accounts payable
and  general and  administrative  expenses at  December  31,  2003,  but will be
subject to further  research of the Company's  historical tax records and of the
statutes of limitations  related to such  liabilities,  and to negotiations with
the Internal Revenue Service.

(b) Cancellation of Stock
     (1)  On  December  31,  1997,  the Company  canceled  168 Class A shares of
          common stock.  These shares had been authorized for issue during prior
          years.  No details  were  available  as to whom the  shares  should be
          issued.   Management   canceled   these  shares,   which  resulted  in
          contributed capital of $8,393.
     (2)  On December 31, 1997,  the Company  canceled  98,000 shares of Class A
          preferred stock, 272,200 shares of Class B preferred stock, and 10,200
          shares of Class C preferred stock. No record of owners of these shares

                                      F-23
<PAGE>


NOTE 6 - CONTINGENCIES AND COMMITMENTS (Continued)

          could be determined.  The results of the  cancellation of these shares
          was contributed capital of $380,400. All dividends associated with the
          canceled shares were also canceled. The Companies may be liable to the
          owners  of  these  shares,  should  the  owners  of  these  shares  be
          identified.
     (3)  During the year ended December 31, 2002, the Company  canceled  50,000
          shares of Class A  preferred  stock and related  dividends  payable of
          $35,000, which was held by an affiliate of the Companies.

(c)  Claims from Creditors
     (1)  At  December  31,  1998,  a  creditor  made a claim for  approximately
          $20,000.   Management   contends   the  amount  is  not  owed  due  to
          non-performance  by the lessor. The amount has been due since February
          1994.
     (2)  At  December  31,  1998,  a  creditor  made a claim for  approximately
          $19,000.   Management   contends   the  amount  is  not  owed  due  to
          non-performance  by the  creditor.  The amount has been due since June
          1996.

(d)  Notes  Payable -  Substantially  all of the  Companies  notes  payable  are
currently in default status (see Note 4).

(e) Resignation of Principal  Officer and Director - During the third quarter of
2002, a principal  officer and director of the Companies  resigned  following an
indictment for conspiracy to commit securities fraud to which he pled guilty. No
charges or claims were or have since been made  against the  Companies  or their
other  officers  and  directors.  The  Companies  are of the  opinion  that this
incident will not have any material adverse impact on the Companies.

(f) Class B  Preferred  Stock  Dividend - Pursuant to an  agreement  with Growth
Fund,  the Company  agreed to pay a dividend  on the Class B preferred  stock on
June 1, 2003, in cash equal to two percent of the value of the Class B Preferred
Stock, or in restricted Class A common stock equal to three percent of the value
of the Class B Preferred  Stock.  During  2003, a demand was made by Growth Fund
through the circuit courts for the dividend payment, which the Companies had not
paid. On March 10, 2005,  the circuit court  dismissed  without  prejudice  this
action for lack of prosecution by Growth Fund (see Note 5).

(g) Purchase  Commitment  Cancellation  - On July 19, 2001, the Company signed a
purchase order to purchase 1,000  MEDTURFTM  appliances  over the next 24 months
from MB Software  Corporation  at $450 per unit. The Companies paid $7,250 to MB
Software,  Inc., pursuant to the purchase order and the letter of intent between
Medeway,  Inc.  ("Medeway") and the Companies (also dated July 19, 2001),  which
represented  one-half  of  the  total  amount  payable  for  10  appliances  and
programming work to be performed, with the balance of $7,250 to be paid upon the
delivery of said  appliances.  The  MEDTURFTM  appliance is a  combination  of a
computer  appliance  and point of sale  device,  and is designed  for  physician
practices,  pharmacies,  and home use. The MEDTURFTM appliance has a proprietary
'touchscreen'  application  installed.  Medeway is the owner of the intellectual
property,  which is being  used by over 4,500  physicians  under  contract  with
Medeway   and/or  its   affiliates.   The  Companies   planned  to  install  the
patent-pending system of VPS, the Company's  wholly-owned  subsidiary,  which is
developing  a system for  electronically  transmitting  prescriptions  using the
Internet.  The  purchase  order  and  letter of intent  have  subsequently  been
canceled and there is no future purchase commitment due.


                                      F-24
<PAGE>


NOTE 6 - CONTINGENCIES AND COMMITMENTS (Continued)


(h)  Consulting Agreements

     (1)  On August  1,  2001,  the  Companies  entered  into an  agreement  for
          consulting services with HEB, LLC, a Nevada limited liability company,
          based on a one-year term and a fee of $100,000,  payable upon services
          rendered  and  presentation  of an invoice.  The  consulting  services
          included   organizing   and  assisting  the  Company,   including  any
          subsidiaries or affiliates,  in areas  including,  but not limited to,
          identifying  and  implementing   appropriate  incentive  participation
          programs  for  prescribing  physicians,   pharmacies,   pharmaceutical
          companies,  HMO's and insurers. As of December 31, 2004, no amount has
          been  provided for in these  consolidated  financial  statements as no
          services have been rendered.
     (2)  During  August 2001,  the  Companies  entered  into an  agreement  for
          consulting  services  and  issued  250,000  shares of common  stock as
          payment of services  rendered.  The balance due under the agreement is
          $70,000,  however,  the  consultant has not performed any work and the
          Companies  contend  the  consultant  is in breach of  contract  due to
          non-performance.   No  accrual   has  been   provided   for  in  these
          consolidated financial statements.
     (3)  On April 21, 2003,  the  Companies  entered  into an agreement  with a
          former consultant  whereby the Company owes this consultant a total of
          $199,650 as payment  for  services  rendered.  Under the terms of this
          agreement,  this entire  liability may be satisfied by the issuance of
          6,655,000  shares of the Companies'  common stock.  As of November 11,
          2005,  these shares have not been issued and the liability of $199,650
          is recorded in the accompanying  consolidated balance sheet in accrued
          expenses.
     (4)  During the year ended December 31, 2003, the Companies renegotiated an
          existing  consulting  agreement  with a related  party for  consulting
          services,  defined by the agreement,  totaling  $125,000 through March
          31, 2004,  which is included in Accounts Payable - related party as of
          December 31, 2004. Also,  during the year ended December 31, 2003, the
          Companies  entered  into two new  consulting  agreements  with related
          parties for consulting services,  defined by the agreements,  totaling
          $67,500 through completion of the projects,  or earlier termination by
          agreement  of the  parties,  which is included  in Accounts  Payable -
          related  party as of December  31, 2004 (see Note 7 for related  party
          transactions). All three of these agreements provide for payment to be
          made in cash or, in lieu of cash,  Securities and Exchange  Commission
          Rule  S-8  stock  of the  Companies.  The two new  agreements  contain
          incentive clauses that could result in the issuance of up to 2,000,000
          shares of the  Companies'  common stock.  As of November 11, 2005, the
          Companies  have not issued any shares of common stock related to these
          agreements.

(i)  Securities  and Exchange Act of 1934 Filings - Since December 31, 2003, the
Companies  have  failed  to comply  with  substantially  all of the  obligations
imposed upon them by the  Securities  Exchange Act of 1934.  The Companies  were
late in filing  their annual  report on Form 10-KSB for the year ended  December
31, 2003,  and are  delinquent in filing their annual reports on Form 10-KSB for
the year ended December 31, 2004, and their quarterly reports on Form 10-QSB for
the quarterly periods ended in 2003, 2004 and 2005, and required current reports
on Form 8-K. As a result,  the Companies and their officers and directors  could
be  subject  to   substantial   civil  and  criminal   penalties   due  to  such
non-compliance.  There can be no assurance that  substantial  civil and criminal
penalties will not be imposed. The management and legal counsel of the Companies
are currently in contact with the Securities and Exchange  Commission and are in
the process of completing such forms for filing.

                                      F-25
<PAGE>


NOTE 7 - RELATED PARTY TRANSACTIONS

Arkansas American Mining and Exploration, Inc. ("AAME") was owned and controlled
by the founders of the Company.  In 1988, AAME exchanged mining claims,  milling
facility,  and a core  drilling rig, for the  Company's  common stock.  In 1994,
Arkansas  Mineral  Partners  Ltd.,  a  partnership  owed by James Arch, a former
President of the Company,  loaned the Company  $152,000 secured by the Company's
land, buildings, and equipment.  This note, plus interest, was due in the fourth
quarter of 1996.  The Company  defaulted on the note. The property and equipment
were claimed by the note holder and written off by the Company.  All obligations
of the Company related to this transaction have been fully satisfied.

During 1995, the Company paid $25,000 for services  rendered by Stephen Guarino,
former Director,  President and CEO of the Company, and issued 2,500,000 (before
reverse  splits in September  1997 and July 2000,  see Note 5) shares of Class A
common stock for additional services valued at $26,250.

During 1997,  the Company  issued  1,029,500  (before the reverse  split in July
2000,  see  Note 5)  shares  of Class A common  stock  to James  Arch,  a former
President and current  director of the Company for services  valued at $102,000.
An agreement was made with this former officer for continued consulting services
which agreement is no longer in effect.

On December 23, 1998,  the Company  borrowed  $61,000 from  Kentrust,  Inc.,  an
entity whose CEO is Frank G. Dickey, Jr., a former director and President of the
Company. The note carried a 10% interest rate, and was due on December 23, 1999.
In 1999,  the Company  borrowed an  additional  $104,500  from  Kentrust at 10%.
During 2000, the entire $165,500 became overdue and began accruing interest at a
rate of 12% per  annum.  A $16,550  penalty  for late  payment  was also  levied
against the Company. The note does not have any new repayment date. During 2001,
Kentrust loaned the Company an additional $41,400, which is accruing interest at
10% per annum,  with repayment due on or before December 31, 2001. The principal
balance on this note is past due and  outstanding  at  December  31,  2004,  was
$206,900. Accrued interest on these notes as of December 31, 2004, was $131,208.
Included in accrued  expenses at December  31, 2000,  was $570,000  representing
amounts due to certain  officers  pursuant to various  employment  contracts  as
follows: the former President and majority  stockholder,  Frank Dickey, Jr., for
his services  provided during the period November 1, 1998,  through December 31,
2000, as President  ($300,000)  and during the period  January 1, 1999,  through
December 31, 2000, as Chief Financial  Officer  ($120,000);  and Laura G. White,
Vice  President  for her services  provided  during the period  January 1, 2000,
through  December 31, 2000 ($90,000) for Vice President and Investor  Relations,
and during the period January 1, 1999, to December 31, 1999, for her services as
Secretary  ($60,000).  The  employment  contracts  were  scheduled  to expire in
December 2002. During 2001,  management  terminated the contracts due to lack of
working  capital and converted  the payroll  liabilities  to additional  paid-in
capital due to the  Companies'  lack of operating cash flow.  Additionally,  the
Companies  converted accrued expenses of $173,837 to additional paid-in capital,
which  represented  the  balance of unpaid  expenses  incurred  for the lease of
office space,  furniture and equipment,  and vehicle at $7,637 per month for the
period of January 1, 2000, to December 31, 2001, from its former president.  The
Companies  continued to charge  $7,637 per month for these  incidental  expenses
through  December 31, 2002,  which were reflected as charges to the consolidated
statement of  operations  with an offset to additional  paid-in  capital for any
amounts not paid during the  respective  current year.  During 2002, the Company
charged net accrued expenses of $79,638 to additional paid-in capital.

During the year ended  December 31, 2003,  the  Companies  converted two related
party notes payable with principal balances of $120,000 and $139,003 and accrued
interest of $28,899 and $93,042,  respectively,  at December 31, 2002,  into two
new notes with principal balances of $180,000 and $300,000 at December 31, 2003,


                                      F-26
<PAGE>


NOTE 7 - RELATED PARTY TRANSACTIONS (Continued)

accruing interest at 10% and 12%, respectively.  The Companies also renegotiated
and entered into consulting  agreements with related parties  totaling  $192,500
during the year ended December 31, 2003, which is included in Accounts Payable -
related party as of December 31, 2004 (see Note 6). Also, there are unreimbursed
expenses due to officers totaling $14,516 at December 31, 2004.

As more fully described in Note 5 - Capital Stock,  several equity  transactions
occurred between the Company and related parties.


NOTE 8 - INCOME TAXES

There is no  current  or  deferred  income  tax  expense  due to the  Companies'
consolidated  loss  position and the deferred tax benefits of prior years timing
differences have not been previously recorded.  The deferred tax consequences of
temporary  differences in reporting items for financial statement and income tax
purposes are recognized, as appropriate.  Realization of the future tax benefits
related to the deferred tax assets is dependent on many  factors,  including the
Companies'  ability to generate  taxable  income within the net  operating  loss
carryforward  period.  Management has  considered  these factors in reaching its
conclusion as to the valuation  allowance for financial  reporting  purposes and
has recorded a 100% valuation allowance against the deferred tax asset.

Reconciliations  of the expected  federal  income tax benefit  based on the U.S.
corporate  income tax rate of 34% to actual benefit for the years ended December
31, 2004 and 2003, are as follows:

                                                                     Accumulated
                                                                        During
                                                                     Development
                                             2004          2003         Stage
                                          ----------    ----------  ------------
   Expected federal income tax benefit    $   93,000    $  252,000  $ 4,112,000
   Increase in valuation allowance           (93,000)     (252,000)  (4,112,000)
   Income tax expense (benefit)           $        0    $        0  $         0

At  December  31,  2004,  the  potential   non-current  deferred  tax  asset  of
approximately  $5,571,000  results from the deferred tax benefit of applying the
U. S. corporate  income tax rate of 34% to the net operating loss  carryforwards
of  approximately  $16,385,000,  which have a 100% valuation  allowance,  as the
ability of the Companies to generate  sufficient taxable income in the future is
uncertain. There are no other significant deferred tax assets or liabilities.

As of December 31, 2004, the Companies  have  potential  available net operating
loss carryforwards for federal income tax purposes of approximately $16,385,000,
which  expire  through  2024.  Pursuant  to the Tax Reform  Act of 1986,  annual
utilization of the Companies' net operating loss carryforwards may be limited if
a cumulative  change in ownership of more than 50% is deemed to occur within any
three-year period.  The Companies have not determined,  at this time, if the net
operating loss carryforwards will be limited for such changes in ownership.

As of November 11, 2005,  the Companies  have filed their  corporate  income tax
returns  through 1999.  The  Companies  2000 through 2004  corporate  income tax
returns are expected to be  completed  and filed by January  2006.  There are no
significant tax, interest, or penalty liabilities due to the recurring losses.


                                      F-27
<PAGE>



NOTE 9 - DISCONTINUED OPERATIONS

In  June  1995,  the  Company  suspended  its  mining  research  activities  and
development  work in  Arkansas.  The  following  is a  summary  of the loss from
discontinued  operations  resulting from the suspended  operations of its mining
operations located in Arkansas.  The consolidated financial statements have been
retroactively  restated to reflect this event.  There was no activity since that
date.

Loss  from  discontinued  operations  for  the  period  from  inception  of  the
development stage on January 1, 1994, through December 31, 2004, is as follows:

   SALES                                                $            0

   COST OF SALES                                                33,817
                                                        --------------

   GROSS MARGIN                                                (33,817)

   OPERATING EXPENSES                                        1,399,405
                                                        --------------

   LOSS FROM OPERATIONS                                     (1,433,222)
                                                        --------------

OTHER INCOME (EXPENSES):
   Other income                                                     41
   Interest expense                                            (40,953)
   Other expense                                               (30,185)
   Gain on sale of land                                         30,840
   Loss on disposal of assets                                  (75,667)
   Loss on partnership interests                            (2,288,841)
                                                        --------------
   Total Other Income (Expenses)                            (2,404,765)
                                                        --------------

   LOSS BEFORE INCOME TAX BENEFIT                           (3,837,987)

   INCOME TAX BENEFIT                                                0
                                                        --------------

   LOSS FROM DISCONTINUED OPERATIONS                    $   (3,837,987)
                                                        ==============


   DIVIDENDS ON PREFERRED STOCK                         $      (32,517)
                                                        ==============


NOTE 10 - JOINT VENTURE AGREEMENT

On July 30,  2003,  the  Commonwealth  of  Kentucky,  awarded a contract  to VPS
Holding,  LLC ("VPSH") a Kentucky  limited  liability  company  incorporated  on
August 29, 2002,  by the sole member and  manager,  James  Millard,  the current
President and CEO of the Companies.  The contract awarded allowed VPSH to lead a
pilot project, in Perry and Harlan counties, at medical,  clinical, and pharmacy
facilities.  The project will be conducted  by a consortium  of companies  under
license to VPSH,  that  includes  Envoii,  Inc.,  a San  Francisco,  California,
software developer,  and Computer Information Systems, Inc., a London, Kentucky,
consulting firm and solutions provider for information technology, both of which
are  privately-held  corporations.  In order to  perform  under  the  terms  and
conditions of this state contract,  VPSH will license the technologies from each
corporation for a nominal fee. Any benefits or revenues, derived from the use of
technology acquired by VPSH, shall pass directly through to the Companies, under
the terms of the Joint Venture Agreement.

                                      F-28
<PAGE>


NOTE 10 - JOINT VENTURE AGREEMENT (Continued)

The license to use and develop technology,  intellectual  property, and know-how
related to prescription drug monitoring systems and all other matters pertaining
to the  healthcare  industry  was  obtained  pursuant  to the  terms of a Patent
License  Agreement and Release dated January 5, 2004,  from the Companies.  This
Patent  License  Agreement and Release was granted with the  understanding  that
VPSH would enter into an agreement with Envoii Healthcare, LLC, a Nevada limited
liability  company,  to undertake  the funding and  development  of the Verified
Prescription Safeguards "Veriscrip (TM)" prescription drug monitoring system and
in consideration of payments to be received by the Companies. Envoii Healthcare,
LLC, owns the exclusive rights in the healthcare  channel of trade rights to the
"Envoii (TM)" system.

The Patent License  Agreement and Release was executed by the  Companies,  VPSH,
and Envoii Healthcare,  LLC, wherein Envoii Healthcare, LLC, in conjunction with
Envoii, Inc., agreed to undertake the development of the real-time  prescription
drug  monitoring  system and raise the  necessary  funding for the project.  The
Joint Venture  Agreement and the Patent License Agreement and Release were under
negotiation  prior to  submission  of the response to the  Kentucky  Request for
Proposal  on  April  9,  2003,  but  executed  thereafter,  both of  which  have
subsequently been provided and fully disclosed to the Commonwealth of Kentucky.

Under the terms of the Patent License Agreement and Release,  contract revenues,
if any,  other  than  the  grant  for  the  pilot  project  resulting  from  the
development,  implementation,  and/or  sale of  real-time  controlled  substance
prescription  monitoring  technology to any third party  including  governmental
entities,  are to be distributed to Envoii  Healthcare,  LLC (75%),  VPSH (25%),
with the Companies  receiving  100% of the benefits and revenues  distributed to
VPSH.  The contract with the  Commonwealth  of Kentucky  governs the division of
proceeds  from the pilot  project  grant  funding from the U. S.  Department  of
Justice, Bureau of Justice Assistance.  The terms of the contract were completed
in April 2005.


NOTE 11 - VERISCRIP (TM) SYSTEM

During January  through April 2004, the Veriscrip (TM) System was programmed and
beta-tested at the two pilot sites in Harlan and Perry counties in  Southeastern
Kentucky in  preparation  for  implementing  the project  under the terms of the
contract. During this period, the system was previewed by several third parties,
including a state licensure  board president and a key legislator.  On April 28,
2004, the first real-time  electronic  prescription was transmitted and received
using the Veriscrip  (TM) System at a rural clinic in Harlan  County,  Kentucky.
The pilot project was also conducted at a medical  center  practice and pharmacy
in Hazard,  Kentucky,  and was  concluded on September  23, 2004. On October 15,
2004, the first public  demonstration of the Veriscrip (TM) System was conducted
at the  National  Technology  Meeting  for State  Prescription  Drug  Monitoring
Programs in Lexington,  Kentucky,  sponsored by the National  Alliance for Model
State Drug Laws.

In December 2004, the Companies  contracted with a full-time  lobbyist,  Babbage
Cofounder/InterSouth, Inc., of Lexington, Kentucky, for the duration of the 2005
Kentucky General Assembly, which concluded in April 2005, and unanimously passed
Senate Bill 2, which provides for the preliminary  framework for establishing an
e-health information exchange in Kentucky.

The University of Louisville ("U of L") School of Public Health and  Information
Sciences  initiated the assessment phase of the project in October 2004, and the
Assessment  Report  was  completed  and  delivered  to the  Kentucky  Office  of
Technology  on May 12,  2005.  The  Office  of  Technology  released  the U of L
Assessment Report as a public document on August 19, 2005. The Assessment Report
recommends,  "there may be significant  benefits for the state to move ahead now
with the proposed technology, either as an alternative or an enhancement for the
existing  KASPER  ("Kentucky  All-Schedule  Prescription  Electronic  Reporting"

                                      F-29
<PAGE>


NOTE 11 - VERISCRIP (TM) SYSTEM (Continued)

system), or, potentially, as a plug-in to KASPER, providing a way for prescriber
data to move in real-time from prescriber to dispenser to the regulatory  side,"
but notes, "The major barrier to implementation will be resistance by physicians
because of productivity  costs and opportunity  costs in the context of emerging
health information  exchange  technologies." The Assessment Report also includes
an appendix in which the U of L assessment  concludes the Veriscrip  (TM) System
completely meets 18 criteria,  and partially meets another 7 criteria, of the 60
Recommendations  for Comparing  Electronic  Prescribing Systems made by the RAND
Electronic  Prescribing Advisory Board.  Seventeen of the 60 recommendations are
not expected to be met until 2007. The Verscrip (TM) System meets three of those
future criteria completely, and one partially.

During the next twelve months,  the Companies  expect to present the findings of
the University of Louisville  Assessment  Report to interested state and federal
regulatory  agencies,  as  well  as an  accompanying  report  prepared  for  the
California  HealthCare  Foundation  in  2004  that  concludes  productivity  and
opportunity  costs are minimal,  if any, and  additional  savings may be accrued
from  "downstream  time savings,  chiefly from electronic data  transmission and
more  thorough  order  entry   (resulting  in  fewer   pharmacy   callbacks  for
clarification  and  revision)."  The  Companies  also plan to have a presence at
national meetings and conferences of law enforcement and regulatory professions,
at which to  demonstrate  the  Veriscrip  (TM)  System.  At the same  time,  the
Veriscrip  (TM) System is  constantly  being  improved  and upgraded to meet and
exceed emerging technology improvements.

The Companies' working capital requirements for the foreseeable future will vary
based upon a number of factors,  including the cost to finish development of the
Veriscrip  (TM) System,  and the costs  associated  with launching the system if
successfully  developed,  the  acceptance  of the system and market  penetration
along with other factors that may not be foreseeable at this time. The Companies
have not made any commitments for capital expenditures. Management believes that
the Companies will need at least $2,850,000 in financing to fund operations, pay
off existing liabilities,  and pay for required development work during the next
twelve months. The Companies  currently have liabilities in amounts in excess of
$2,000,000,  substantially all of which are in default, and the Companies do not
have the funds to repay the amounts owing.  The Companies have no commitments to
provide additional funding and there can be no assurance that the Companies will
be able to obtain  additional  funding on satisfactory  terms, or at all. If the
Companies  do not receive the needed  funding,  they will not be able to execute
their business plan.


NOTE 12 - SUBSEQUENT EVENTS

During 2005, the Companies  entered into three separate  unsecured notes payable
agreements with related  parties  totaling  $24,000.  All notes bear interest at
10%,  are  payable  and due in 2006,  and may be  converted  into  shares of the
Companies'  Class A common  stock at the option of the lender  based on the fair
market value of the stock upon conversion.


Also during 2005,  the Companies  entered into written  agreements  with certain
current and former  officers of the  Companies  to document  various  contingent
understandings  and  obligations  among the parties  relating  to  services  and
expenses.  These  contingent  obligations  are payable or convertible to capital
stock  upon the  Companies  generating  certain  specified  levels of revenue in
future  years  with the total  principal  amounts  not to  exceed  approximately
$4,000,000. Thus, in accordance with accounting principles generally accepted in
the United States of America, these contingent obligations and payments will not
be  recognized  until it is probable  that a liability has been incurred and the
amount of the liability can be reasonably estimated.



                                      F-30