SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                  FORM 10-KSB
(Mark One)

X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
-
                  For the fiscal year ended September 30, 2005

  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                                      1934
           For the transition period from ___________ to _____________

                        Commission file number: 00-32903

                                DERMISONICS, INC.
                 (Name of small business issuer in its charter)

                     Nevada                         98-0233859
                     ------                         ----------
        (State or other jurisdiction of          (I.R.S. Employer
         incorporation or organization)         Identification No.)

Four Tower Bridge, 200 Barr Harbor Drive,
West Conshohocken, Pennsylvania                                  19428-2977
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip code)

Issuer's telephone number, including area code:      610-941-2780

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

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

                    common stock, par value $0.001 per share
                    ----------------------------------------
                                (Title of class)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act during the past 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.   X  Yes      No
                                                                 ---      ---

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

State  the  issuer's  revenues  for  its  most  recent  fiscal  year:       $-0-

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates computed by reference to the price at which the common equity
was  sold,  or  the  average  bid and asked price of such common equity, as of a
specified  date  within  the past 60 days.  (See definition of affiliate in Rule
12b-2  of  the  Exchange  Act.):  $21,310,958  as  of  January  13,  2006.

State the number of shares outstanding of each of the issuer's classes of common
equity,  as  of the latest practicable date:  41,567,256 as of January 13, 2006.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional  Small  Business  Disclosure  Format  (Check  one):     Yes   X  No
                                                                 ---      ---


<PAGE>
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW.

     On July 28, 2004, Dermisonics, Inc. (formerly Second Stage Ventures, Inc.)
entered into an Asset Purchase Agreement (the "Purchase Agreement") with
Encapsulation Systems, Inc. and its wholly owned subsidiary, Echo RX, Inc.
(collectively, "ESI"), pursuant to which we acquired certain intellectual
property encompassing patents pending filed with the United States Patent and
Trademark Office and other proprietary technology and information which cover a
new type of non-invasive drug delivery system more commonly known as a
transdermal patch.

     Also on July 28, 2004, we sold certain assets relating to our
easytrivia.com business to a former director of the Company who developed that
business concept.

ASSET PURCHASE.

     Pursuant to the Purchase Agreement, we acquired from ESI all of its right,
title and interest in and to all intellectual property relating to a device and
process allowing for the non-invasive delivery of large molecule drugs through a
proprietary transdermal patch. These assets comprise patents pending filed with
the United States Patent and Trademark Office and several other jurisdictions,
including the European Community, and other proprietary technology and
information (the "Intellectual Property"). On June 21, 2005, a patent for
substance delivery device (Patent No. US 6,908,448 B2) was issued on one of the
patents pending we acquired from ESI. We paid an aggregate purchase price for
the Intellectual Property of $19,448,594 payable as follows:

     -    $2,500,000 in cash, $500,000 of which was payable during the 2004
          calendar year, $1,000,000 of which was payable in four installments
          during the 2005 calendar year, and $1,000,000 of which is payable in
          four installments during the 2006 calendar year, all evidenced by a
          promissory note in the principal amount of $1,826,734, bearing no
          stated interest but using an imputed interest rate of 6.25%;
     -    assumption of an ESI note payable in the principal amount of $81,860,
          payable with interest at the rate of 16.25% in equal monthly
          installments of $2,714;
     -    the issuance of 12,000,000 shares of our common stock (the "ESI
          Shares") having an aggregate value of $17,040,000 (based upon the
          closing price of our common stock on the Over-the-Counter Bulletin
          Board on the closing date); and
     -    the payment of an annual royalty equal to 2.5% of gross revenues
          derived from the Intellectual Property to be paid for the life of all
          related patents, and any allowable regulatory extensions, or for 20
          years, whichever is longer.

     As of the date of the Purchase Agreement, ESI was an involuntary debtor
under Chapter 7 of the United States Bankruptcy Code, pending in the United
Stales Bankruptcy Court for the Eastern District of Pennsylvania (the
"Bankruptcy Court"). The sale by ESI of the Intellectual Property on the terms
provided in the Purchase Agreement was made upon order of the Bankruptcy Court
issued on July 13, 2004 (the "Order"). Under the Order, we are entitled to all
of the protections provided to a good faith purchaser of assets out of
bankruptcy. Moreover, all non-debtor parties to executory contracts with ESI
which were given adequate notice of the sale are forever precluded from
asserting against us any default under such contracts as of the date of the
Order and objecting to the sale of the Intellectual Property to the Company.


<PAGE>
     Under the Purchase Agreement, we delivered the ESI Shares to a third-party
escrow agent to hold the said shares in escrow and released therefrom as
follows:

          (A)  ESI is entitled to distribute a number of the ESI Shares as may
               be required in order to satisfy claims of non-affiliates of ESI,
               as provided in a plan of reorganization of ESI to be approved by
               the Bankruptcy Court.

          (B)  Commencing after July 28, 2005, one ESI Share shall be released
               to ESI for each dollar of gross revenue derived by the Company
               from the commercial exploitation of the Intellectual Property.

          (C)  On February 28, 2007 any remaining ESI Shares held in escrow
               shall be released to ESI.

     ESI is not entitled to vote the ESI Shares held in escrow on any matters
put to the Company's stockholders, except as to any proposed capital
reorganization or reclassification with respect to the Company's equity
securities, until they are released from escrow as described above. While the
ESI Shares are held in escrow, the holders are entitled to participate in any
dividends or distributions made by the Company to all holders of common stock
and to any payment or distribution upon the liquidation or winding-up of the
Company.

     The promissory note we executed in favor of ESI provides that we pay an
aggregate of $2,000,000 in eight equal installments over two years (the "ESI
Note"). As of the date of this report, we have paid $1,000,000 on the ESI Note.
In the event of a default under the ESI Note, the entire amount then owing will
become due and payable immediately, together with all costs incurred by ESI and
reasonable attorneys' fee. The following constitute events of default under the
Note: (i) if we fail to make any payment due within 30 days after the date on
which we receive notice of such failure, (ii) if we fail to observe and perform
any of the covenants or agreements on its part to be observed or performed under
the ESI Note or the Security Agreement (described below), (iii) if we default
under the terms of the Security Agreement, or (iv) if we take steps that evince
bankruptcy or liquidation.

     In order to fund the initial amount we were required to pay required under
the Purchase Agreement, we borrowed the principal sum of $500,000 from Gary M.
Scott evidenced by a promissory note dated June 30, 2004 bearing interest at the
rate of 10% per annum, payable in full, with interest, on the earlier of the
date on which we closed the acquisition of the Intellectual Property or July 31,
2004. By amendment dated as of July 28, 2004, Mr. Scott agreed to extend the
time in which to repay the note until September 15, 2004, in consideration of a
payment of $50,000. Mr. Scott agreed to further extend the time in which to
repay the amount due under this promissory note through December 17, 2004. In
consideration of granting the extension the Company agreed to pay a total of
$100,000 in extension fees and accrued interest and default interest after
December 1, 2004 of $605 per day until the promissory note is paid in full. On
September 22, 2005, we entered into an Agreement and Mutual Release with Mr.
Scott, paying him $653,880 (the $500,000 outstanding loan principal, $71,175 in
loan extension fees, and $82,705 in accrued interest through September 22,
2005). Pursuant to the Agreement and Mutual Release, we agreed to pay an
additional $60,000 in consulting fees (of which $20,000 was paid in December
2005) and release each other from any legal claims against one another.

     We also executed a Patent Security Agreement in favor of ESI securing our
obligations under the Purchase Agreement and the ESI Note and granting to ESI a
security interest in and to the Intellectual Property (the "Security
Agreement"). Under the Security Agreement, if we commit an act of default under
the ESI Note or if we fail to pay the trailer fee within 30 days after we
receive written notice from


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<PAGE>
ESI of such failure, ESI shall have the right to take back the Intellectual
Property.  ESI's right to take back the technology is evidenced by a Patent
Assignment Agreement dated July 28, 2004.

     As further provided under the Purchase Agreement, we entered into an
employment agreement with Bruce K. Redding, Jr.  Mr. Redding is one of the
inventors of the technologies encompassing the Intellectual Property and the
author or co-author of the various patents pending transferred to the Company
under the Purchase Agreement.  The terms of Mr. Redding's employment agreement
are described under "Item 10.  Executive Compensation -Executive Compensation."

     As an adjunct to the Order and at the direction of the Bankruptcy Court, we
entered into a stipulation with ReactMed, Incorporated and ESI (the
"Stipulation"), which was the result of an objection by ReactMed to the sale of
the Intellectual Property that would affect its rights under an agreement
between ESI and ReactMed.  Pursuant to the Stipulation, the parties agreed that
ESI was in default under a joint development and license agreement with ReactMed
(the "ReactMed Agreement") in which ESI (i) agreed to jointly develop the
Intellectual Property with ReactMed for the purpose of commercializing the
Intellectual Property for certain military and Homeland defense uses, and (ii)
granted a license to ReactMed to sell products based upon the Intellectual
Property within the such area.   In the Stipulation, we agreed to assume some of
ESI's obligations under the ReactMed Agreement, including, providing ReactMed
with technical assistance in connection with its development of the Intellectual
Property as provided in the ReactMed Agreement, providing ReactMed with a sample
of our transducer array and certain other equipment specified under the ReactMed
Agreement for the purpose of testing components of the Intellectual Property,
and extending the term of ReactMed's license to sell the specified products
under such agreement to April 30, 2005.  ESI also agreed to transfer to ReactMed
a number of the shares of our common stock it received under the Purchase
Agreement equal to $150,000 (151,617 shares) and pay ReactMed $25,000.  In
December 2004, we agreed with ESI to pay $8,750 of the cash payment due ReactMed
and to issue 75,807 shares of our common stock to ESI, an amount equal to half
of the shares ESI transferred to ReactMed.  See "Item 5. Market for Common
Equity and Related Stockholder Matters-Recent Sales of Unregistered
Securities-Common Stock."

THE INTELLECTUAL PROPERTY.

Overview of Transdermal Technology.

     Transdermal systems deliver drugs through the skin into the bloodstream.
Medications delivered via skin patches avoid liver metabolism, a necessary
feature for drug molecules to metabolize easily, and allows for lower dosing of
medications. There are two types of transdermal delivery systems: passive and
active. In passive transdermal systems, the drug diffuses through the skin where
it can act locally or penetrate the capillaries for systemic effect. Active
patches require a physical force to facilitate the movement of drug molecules
across the skin. By using an applied force (such as ultrasound or an electrical
current), active transdermal systems are capable of delivering proteins and
other large molecules.

     Existing "passive" patch technologies are subject to numerous obstacles to
the successful transmission of drugs transdermally, including the fact that the
size and shape of the pharmaceutical compound itself prevent it from physically
passing through the pore opening due to size limitations and lack of motivation
(push). Passive patches have achieved commercial success because they provide a
slow, steady release and avoid the blood level peaks and valleys associated with
oral dosing. However, we believe that their applications are limited to drug
compounds comprised of small molecules. Passive drug delivery patches have
applications including smoking cessation (nicotine), birth control and hormone
replacement therapy (estradiol), and angina (nitroglycerine).


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<PAGE>
     By contrast, active transdermal drug delivery systems allow certain drugs
to be delivered through the skin many times faster than passive transdermal
patches. Moreover, this technology may allow for the delivery of a wider variety
of drugs than existing passive transdermal technology and is programmable to
allow a variety of different dosing profiles. For example, active transdermal
delivery can non-invasively duplicate the steady or periodic delivery patterns
of intravenous infusion.

Our Technology.

     Overview.

     The Intellectual Property we acquired encompasses a drug delivery system
incorporating a transdermal patch in combination with microelectronics and
ultrasonic technology. Our technology represents an active transdermal drug
delivery process by which drugs can be transported through the skin by applying
a low-level ultrasonic wave. This process differs significantly from passive
transdermal drug delivery that relies on the slow, steady diffusion of small
molecule drugs through skin. The technology we are developing advances
transdermal drug delivery system technology by allowing for the non-invasive
delivery of macromolecular pharmaceutical formulations, i.e., drugs constituted
from large molecules. We expect devices incorporating our technology to utilize
sub-miniature, high-powered ultrasonic devices, coupled with a modified
transdermal patch.

     We believe that this platform technology can be used to non-invasively
administer approximately 175 existing drugs that cannot presently be effectively
delivered through the pores of the skin using existing passive transdermal
technology due to their large molecular size. We believe the control and
convenience enabled by our technology has the potential to:

          -    improve therapeutic outcomes;
          -    reduce side-effects;
          -    increase patient compliance; and
          -    improve overall cost-effectiveness of drug therapies.

     Our drug delivery technology constitutes a "medical device" as defined by
the United States Food and Drug Administration ("FDA") and is subject to FDA
approval prior to public distribution. As yet the device has not been approved
by the FDA and is subject to significant clinical trials on human beings, a
procedure that could encompass several years and may never result in approval of
the device for use on human beings. To date, we have conducted only limited
laboratory tests of the technology for the purposes of determining the viability
and efficacy of the scientific theories and technologies embodied in the
technology. We also have performed limited testing of the abstract facets of the
technology on humans and animals but do not possess sufficient information to
support an application to the FDA. We have not yet constructed a prototype of
the device utilizing the miniature technology to be incorporated into the
product we hope to offer commercially.

     Management expects initially to focus on and pursue regulatory approval for
the transdermal delivery of insulin for diabetics utilizing our device. In
management's estimation, this field not only represents a potentially large
market for the device but also is an area in which users could obtain relief
from the significant pain and discomfort experienced as they continually monitor
their condition by testing blood samples they must obtain by pricking their skin
several times a day and then injecting themselves with insulin.


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<PAGE>
     What our Technology Does.

     Our technology utilizes a transdermal patch with an attached ultrasonic
device that we expect will overcome the limitations of passive patch technology.
The device is designed to generate ultrasonic transmissions of variable
intensity and frequency that are transmitted through a modified transdermal
patch. In theory, the ultrasound will dilate the skin's pores, which allows for
the delivery of pharmaceutical compounds composed of large molecules and is
expected to increase the absorption of the drug through the skin. The device
will be programmable to deliver a prescribed amount of active pharmaceutical
agents on a programmed drug delivery regimen that can be customized for each
patient. The projected portability of this drug delivery system, in contrast to
other clinical systems employing ultrasound devices that are fixed in place, can
improve the quality of life for many patients with chronic diseases. Moreover,
we have designed the system to be programmable, which will provide more
flexibility and control over an individual patient's dosing needs.

     Our proprietary drug delivery technology offers the potential to expand the
applications for transdermal patches to a broader array of drugs across a wider
variety of therapeutic indications. We believe that our active ultrasonic
transdermal drug delivery system will retain the advantages of passive patches
in that it will be comfortable, non-invasive, easy to use, and convenient. In
addition, our transdermal delivery system is being designed to be precise,
controllable and programmable because the drug will be delivered only when the
device is activated. We believe that these are distinct advantages for the
administration of many drugs where achieving optimal blood levels will greatly
improve therapeutic outcomes as well as reduce or eliminate side effects. These
features also improve overall cost-effectiveness of drug therapies.

     The ultrasonic waves produced by our device will force (push) the drug
either through a user's hair follicles or sweat pores. Ultrasonic waves will be
used to enlarge the skin's pathway and then to drive the drug through the
opening. Mechanically, the drug follows the hair follicles to the bloodstream
(equivalent of a near intravenous injection) or the sweat pores to the fatty
tissue (equivalent of a sub-coetaneous injection).

     We believe that existing conventional ultrasound and other active
transdermal technology therapies are ineffective at pore expansion and can cause
damage to drug formulations and skin irritation, discoloration and damage. Our
limited clinical testing of the technology supports our belief that the
ultrasonic transmission methodology we will incorporate into our device reduces
the thermal effects of ultrasound without damaging the target drug or the skin
of the patient. Volunteers report an inability to sense or hear the sonic
transmission.

Hardware.

     To date, product research has focused on creating the hardware required to
construct a small, wearable, lightweight insulin delivery system that is durable
enough to be worn on a patient's arm on a full-time basis. The inventors of the
technology expect that the application of the technology could extend beyond
insulin and serve as a platform for the delivery of a myriad of existing drugs
that cannot be delivered utilizing current passive transdermal technology.

     We have not yet fabricated a device incorporating the miniaturized
technology that we propose to utilize in the product we expect to submit to the
FDA for approval. Management believes that the miniaturized hardware, circuitry
and power source (battery) we will require to produce a comfortable, wearable,
and effective device as described in our patent applications is commercially
available. Accordingly, once the efficacy of the theories underlying our
technology is proven to our satisfaction, we believe that we will be able to
employ off-the-shelf components in the development of a final product.


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<PAGE>
     The hardware elements we will seek to incorporate into our transdermal drug
delivery device encompass an ultrasonic applicator, a flat transducer, and a
modified patch.

     The ultrasonic applicator will consist of a device that generates
ultrasonic transmissions and a keypad to operate and control the dosage level
and frequency. The dose controller will contain a miniature battery and
circuitry that precisely control the rate, dosage, and pattern of drug delivery
through the skin. The user or his physician will be able to program the unit to
provide for multiple dosage levels so that, for example, in the case of
diabetics, the device could be programmed to deliver additional insulin during
mealtime. A large display will provide a message center that will allow the
wearer to see existing device settings and reprogram the device as necessary and
prescribed by his physician. The patient or his physician will be able to
program the unit manually, but the device will be fitted with a radio frequency
receiver, which will allow for radio signals to be received from a remote sensor
device to automatically adjust the device to the patient's needs in real time,
minimizing patient interaction.

     The ultrasonic applicator unit will record the dose delivered and store the
information in memory for 60 days. It will be capable of downloading, via modem,
a dose report to the physician to enable individualized dose tracking and
individualized dose management. We expect to utilize a mini-transducer to
produce ultrasonic signals with sufficient intensity to transverse the patch
using minimal power.

     A flat transducer will generate the alternating ultrasonic waveform effect
necessary to enlarge the pores of the skin and also drive or push the medication
through the patch into the skin's pores, in what can be referred to as an
"active" transdermal delivery system. Our transducer will emit an ultrasonic
transmission that enlarges the pores of the skin without damaging the
pharmaceutical preparation being delivered, one of the primary deficiencies of
existing ultrasonic patch technology. The modified transducer system is designed
to deliver a prescribed dose of medicine on demand as a result of the ultrasonic
excitation of the patient's skin. The device delivers the drug in an array which
enables sequencing upon the skin and prevents over-exerting one skin transport
site. Alternatively, the transducers in the array can be operated in tandem
increasing the dose quantity through the patient's skin. We expect that our
transducers will be battery powered.

     We expect that our transdermal drug delivery system will employ either a
traditional flexible patch design or a proprietary two-part system called the
Medi-Cap (TM). The Medi-Cap(TM) transdermal drug delivery system has been
designed to use a two-part modified transdermal patch consisting of a patch cap
(into which the medicated patch is placed) and the transducer coupler that
contains the transducer array. The patch cap will store the pharmaceutical
preparation and connect to the transducer coupler to complete the system. It
will be removable and disposable.

     The design of our active transdermal drug delivery systems is intended to
maximize overall delivery system efficiency while addressing commercial
requirements for reproducibility, formulation stability, safety, convenience,
and low cost. To achieve this goal, our delivery system is designed to integrate
proprietary and patent pending technology with commercially available,
off-the-shelf components. We believe our active transdermal approach will offer
a level of portability, convenience, control, and programmability not available
with other methods of drug delivery.

     We believe the controllability and programmability offered by our
technology offer a competitive advantage that will enable our products to
deliver more consistent and predictable results for a broad range of existing
and new drugs. Using this technology, we believe we can create a variety of
cost-effective, wearable, drug delivery systems that are non-invasive, discreet
and easy to use in both a clinical environment as well as for day-to-day
self-medication programs such as insulin administration, high


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cholesterol therapies; gastro-intestinal system treatments; oncology drug
delivery; cardiovascular care; chronic pain control and treatment; fertility
drugs for women; hormone treatment; and pain management.

     We believe the key clinical advantages of our drug delivery technology will
be:

          -    Contro llable Dosing- Enables accurate control over dosage and
               duration of delivery - drugs can be delivered fast or slow, in a
               single d ose or in several doses over time at selected intervals.
          -    Programmable - Electronic controllers can be programmed to handle
               a wide variety of drug delivery dosage profiles with or without
               manual adjustment.
          -    Non-invasive and comfortable - Achieves comparable results to
               injections and intravenous administrations without the pain, and
               therefore the anxiety, associated with those methods. This
               feature is particularly important for children.
          -    Consistent and reliable results- Enables highly controlled
               delivery of intended doses systemically or a specified target
               area, producing predictable results.
          -    Broadly applicable - Potentially useful for delivery of a wide
               range of drugs.
          -    Verifiable - Our systems are capable of automatically capturing
               and storing information regarding the exact time and dosage of
               drug delivered. This information can be used in disease
               management to verify that patients comply with drug therapy
               regimens.

     We believe our active transdermal drug delivery will overcome the
limitations of traditional, passive transdermal delivery systems, such as
patches or creams, that are slow to take effect, difficult to control, and
useful for only a limited number of drugs with small molecular structures.

Spin-Off Applications.

     During 2005, we developed two additional applications based on the
technology we acquired from ESI for which we have filed two provisional patents.
One of the new applications is designed to deliver cosmetic formulations to the
surface of the skin. The other application is designed to deliver antiseptic
solutions to cuts, abrasions, and wounds. We are in the early stages of
developing prototypes for these two applications and developing business plans
for commercializing products that deliver cosmetics and antiseptics via our
transdermal delivery technology.

MARKET ANALYSIS.

     In 2002, the drug delivery market in the United States accounted for
roughly 6% of the pharmaceutical industry revenues, with sales of pharmaceutical
products that utilize advanced drug delivery technology reaching approximately
$38 billion. Some observers project that this market will grow at an average
rate of 28% over the next five years and expect that drug delivery will account
for 39% of all pharmaceutical sales by 2007. The fast growth of this industry
sector can be attributed to the following major developments:

          -    The need for effective delivery of new biopharmaceuticals;
          -    Upcoming patent expirations driving pharmaceutical companies to
               reformulate their products to extend product life cycles;
          -    Manufacturers of generic drugs are also increasingly interested
               in novel drug delivery technologies for making their products
               competitive; and
          -    New technologies can minimize side effects and lead to better
               patient compliance.


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     Other market drivers include expansion of pharmaceutical company pipelines,
product differentiation, and reduction of health care costs. Since the 1970's,
more than 35 drug delivery systems have been marketed, including transdermal
patches, time-release pills, osmotic pumps and depot implants.

     In the United States, the overall market for drug delivery technologies is
expected to increase from $19 billion in 2000 to more than $41 billion by 2007,
with revenues expected to increase at a compound annual growth rate of roughly
11%.

     Over 300 companies are currently known to be involved in drug delivery
research and development. In addition, universities, foundations and small
private companies and laboratories unknown to us are researching new drug
delivery systems.

     We have not completed our market research for the cosmetics and antiseptic
devices that are in early stages of development.

MARKET OPPORTUNITY.

     We believe that there exists a significant market opportunity for a
non-invasive, programmable drug delivery system which is worn by the patient.
Our technology will have application in a variety of healthcare settings and for
a variety of compounds and therapies.

     We believe the market for our technology is driven by the following
factors:

          -    Pharmaceutical companies looking (i) to extend the life cycle of
               existing FDA approved drugs through the utilization of new drug
               delivery systems, and (ii) for ways to effectively deliver new
               biopharmaceuticals and other drugs comprised of macromolecular
               proteins and peptides.
          -    Physicians who are seeking to deliver drugs (i) more effectively,
               without side effects, (ii) more economically, and (iii) by
               minimizing patient interaction in the daily medication process
               which will increase therapeutic compliance and promote proper
               dosing.
          -    Patients, who are demanding pain-free, less complicated delivery
               systems.

     We believe that our active transdermal drug delivery system will be capable
of satisfying each of the participants in the health-care chain.

     The market for our ultrasonic drug delivery system extends to all
pharmaceutical companies that manufacture drugs that otherwise would be subject
to delivery by way of a transdermal patch but which cannot be delivered in such
fashion because the molecules comprising the formulation are too large for
existing transdermal technology. Our technology can provide a means of extending
the life cycle of drugs that cost many millions of dollars to develop, test and
bring to market. It also may provide a means to deliver new biopharmaceuticals
and other drugs comprised of macromolecular proteins and peptides that are not
subject to delivery by passive transdermal technology. Management estimates that
there are approximately 175 existing pharmaceutical compounds that cannot be
effectively delivered through the pores of the skin using conventionally
available transdermal technology due to their large molecular size but which
could be capable of being delivered by our transdermal system, and our research
and business development efforts are geared towards quantifying the
opportunities and moving forward with the most promising of them. We expect this
number to increase as pharmaceutical companies continue to develop new drugs.

     We believe that physicians will be satisfied with the improved therapeutic
outcomes that result from the use of our transdermal technology, the reduced
side-effects which sometimes accompany other


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forms of drug delivery, increased patient compliance with therapeutic regimens,
and the improvement in overall cost-effectiveness of drug therapies. All of
these factors are achieved because our device delivers the precise dosage of a
drug at the proper time without over-medicating a patient.

     We believe that patients will benefit most from our drug delivery system.
Our technology would replace self-administered injections and large content
capsules for many of the therapeutically prescribed pharmaceuticals now used to
battle chronic illnesses. The technology is appealing to patients because it is
designed to be:

          -    non-invasive, needle-free and therefore pain-free;
          -    programmable to meet each patient's individual patient's
               requirements for the specific pharmaceutical therapy prescribed;
               and
          -    wearable and thus offers the patient portability, providing
               freedom from periodic injection or clinic visits.

     An aging yet active United States population demands changes in the drug
delivery regimen and techniques customary in the past.  Traditionally, drug
delivery took the form of tablets, elixirs, inhalants, injections, or
transdermal patches.  However, each of the delivery methods has its
deficiencies, including:

          -    many pharmaceutical formulations are not well suited to oral
               dosage forms (tablets or elixirs) because these formulations may
               be damaged in the gastrointestinal tract of the patient;
          -    the use of encapsulation and special gel-cap forms to provide
               release of a drug after it has by-passed the stomach have proven
               difficult to produce because inaccuracies of dosing and the use
               of materials which may not be approved by the FDA;
          -    inhalants involve placing a drug through the lung lining into the
               bloodstream, however problems with dosing and the fact that a
               patient who simply has a cold could reduce a drug's efficiency
               and limit the potential applications of this approach to drug
               delivery;
          -    injectable drug delivery is invasive and painful; and
          -    transdermal patches offer non-invasive drug delivery but are
               limited to "small molecule" drugs, limiting the number of
               medications which can be administered through conventional
               "passive" patch products.

     We believe that active transdermal patches are the only effective
non-invasive drug delivery method available, offering many key advantages:

          -    the set-it-and-forget-it appeal of transdermal patches has been
               well demonstrated in such applications as motion sickness,
               cardiac drug administration, hormone delivery and nicotine
               patches;
          -    patients prefer the non-invasive nature offered by transdermal
               patches and therefore compliance is generally high with a patch
               regimen as opposed to injectable, oral or even inhaled drug
               delivery techniques, where the patient needs to remember to
               follow a predetermined schedule;
          -    transdermal patches can offer several days of drug delivery with
               little or no maintenance from the patient, in essence offering a
               programmed automatic drug delivery; and
          -    transdermal patches provide consistent dosage delivery to ensure
               the patient is receiving the proper amount of the prescribed
               drug.


                                       10
<PAGE>
BUSINESS STRATEGY.

General

     Management expects that the Company will generate revenues from the
following sources:

          -    a testing program to assess the feasibility of drugs subject to
               delivery by way of our transdermal delivery system; and
          -    license and royalty fees.

     Our objective is to exploit our technology through the development and
commercial introduction of products incorporating existing FDA-approved
compounds into our drug delivery systems. Our business strategy is to (i) define
products that address unmet medical needs, (ii) analyze the market potential of
such defined products, (iii) develop the products with and through an
appropriate clinical stage partner, (iv) collaborate with strategic partners to
complete the development of such products, and (v) launch such products on a
commercial basis through marketing partners.

     We expect to focus our efforts on applying our platform technology in
therapeutic areas where our approach to drug delivery can substantially improve
a drug therapy, offering therapeutic, economic and lifestyle advantages over
existing methods of delivering the same drug. We will seek to partner with
pharmaceutical and other healthcare companies that are market leaders in the
specific therapeutic areas and which can provide immediate market access and
financial support during the later stages of clinical studies. We propose to
focus on existing FDA-approved drugs. We believe this approach reduces clinical
risks and eliminates certain costly and time consuming pre-clinical and clinical
studies, thereby shortening time to approval and materially reducing costs.

     To achieve our objectives, we plan to implement the following business
strategy:

          -    Use our technology to create products that improve therapy,
               thereby improving drug efficacy, while limiting side effects,
               reducing patient discomfort and inconvenience, which will improve
               compliance and lowering healthcare costs.
          -    Focus on applying our technology to a broad range of
               macromolecular pharmaceutical compounds that have not been
               subject to delivery by way of passive transdermal technology.
          -    Select FDA-approved drugs in order to reduce the development risk
               and costs of our products.
          -    Seek to develop and enter collaborative and marketing
               arrangements with leaders in specific therapeutic areas that can
               provide established, significant market access as well as finance
               late stage clinical trials. We will expect our partners to handle
               sales, marketing and distribution.
          -    Focus on areas where we believe the United States market
               potential is large and well established and where we believe we
               can materially increase, or even create, the market. For this
               reason, we have elected to focus on the market for insulin
               delivery to diabetics.

Suitability Testing.

     We expect to establish a laboratory to offer a screening program to
pharmaceutical companies to determine whether existing and newly developed drugs
are candidates for delivery by way of our active transdermal device.  We will
negotiate with manufacturers of successful candidates to enter into long-term
development agreements that may include funding milestones.  A typical structure
could include a technology marketing agreement with research grants and
milestone payments at each major step in the pre-clinical and clinical path.


                                       11
<PAGE>
License and Royalty Fees.

     Management anticipates that the Company will generate the preponderance of
its revenues from licenses and accompanying royalty streams. The Company will
seek to negotiate with drug manufacturers that have the potential to reach the
market quickly and on pharmaceutical preparations that would be favorably
received by physicians and patients. Specifically, we intend to target
pharmaceutical companies which manufacture formulations which not only are
subject to delivery utilizing our transdermal systems but which already are FDA
approved and widely distributed.

     Initially, we will focus on developing an insulin delivery system based
upon the economics of the diabetes industry, domestically and worldwide, and the
need to relieve the physical discomfort experienced by patients associated with
maintaining a treatment regimen. In 2003, more than 95 million people worldwide
suffered from diabetes and received some form of therapeutic care and treatment
from healthcare professionals. In the United States, more than 17 million people
are treated daily for the disease, with 31% receiving insulin or oral delivery
drug therapies (5.4 million) to control the rise and fall of their blood glucose
levels. Of that population, 20% (3.4 million) are insulin-only users, with 2%
(340,000) using insulin pumps as their primary delivery method device. Currently
the direct cost for treating diabetes in the United States exceeds $44 billion
per year.

     Diabetes sufferers represent a potentially large and lucrative market for
our device. We believe that physicians and patients will respond favorably to
and support a non-invasive, needle-free and therefore pain-free painful drug
delivery system.

     Thereafter, we intend to target manufacturers of other well-known, widely
distributed pharmaceutical formulations currently approved by the FDA. We expect
to target the following markets, all of which represent multi-billion dollar
annual industries:

          -    high cholesterol drugs;
          -    gastro-intestinal system treatments;
          -    central nervous system treatments;
          -    oncology drug delivery;
          -    cardiovascular care;
          -    chronic pain control and treatment; and
          -    fertility drugs for women.

     A number of the drugs developed to treat these conditions are subject to
delivery by way of our transdermal ultrasonic drug transport delivery system.
Many of these drugs must be delivered in precise doses at specific times while
other drugs must be modulated to achieve the most efficacious result. Patients
could benefit from many of the anticipated benefits derived from the use of our
technology, including:

          -    in the case of persons seeking to control high cholesterol,
               caregivers can be certain that patients are receiving their
               medication in a consistent and predictable manner which accounts
               for variable factors introduced by the patient during the normal
               course of daily activities such as exercise, food consumption and
               alcohol consumption;
          -    in the case of drugs developed to treat gastro-intestinal
               conditions, certain foods can trigger a negative
               gastro-intestinal reaction that may require an unanticipated dose
               of medicine, which our device is capable of delivering;


                                       12
<PAGE>
          -    people suffering from central nervous system disorders, such as
               epilepsy, Parkinson's disease or other psychiatric disorders, may
               not be capable of remembering multiple daily doses of their
               medicine, our transdermal technology obviates the need to
               remember when and how much of a given formulation to take;
          -    cancer treatments sometimes incorporate complex multi-drug
               regimens that require specific precise dosages of multiple and
               varying drugs at specific times.

     We will seek to license our technology to the companies that manufacture
these drugs and receive a continuing royalty. The terms of any license will be
negotiated after we have received FDA approval of our transdermal ultrasonic
drug transport delivery system. We may seek to enter into collaborative
relationships with pharmaceutical companies prior to the receipt of FDA approval
from which we would receive funds to complete testing of our technology and
pursue FDA approval and for which the pharmaceutical company would be granted.

     We are in the early stages of developing our business plans for the
cosmetic and antiseptic delivery devices; however, it is anticipated that we
will seek to license those technologies also to cosmetics and antiseptic
manufacturers.

RESEARCH AND DEVELOPMENT ACTIVITIES.

     To date, we have focused our research and development activities on
verifying the theories underlying our drug delivery system. We have only
conducted limited laboratory tests of the technology for the purposes of
determining the viability, safety and efficacy of the scientific theories and
technologies embodied in the technology for the delivery of insulin. We also
have performed limited testing of the abstract facets of the technology on
humans and animals. We have not yet constructed a prototype of the device
utilizing the miniature technology to be incorporated into the product we hope
to offer commercially.

     Substantial additional research and development efforts are required to
complete the development of the device prior to submission to the FDA for
approval. These activities will consist of, among other things, conducting
extensive additional animal and human trials and developing a prototype of the
device that we hope to commercialize. We cannot estimate the time required for
completion these activities or when we will submit a device to the FDA to
commence the approval process. We cannot assure that we will ever develop a
product that is approved for commercial distribution.

     We have also increased our research and development activities related to
devices to deliver cosmetics and antiseptics. These products may also require
similar FDA applications and approvals.

GOVERNMENT REGULATION.

     Our proposed drug delivery system constitutes a "medical device" as defined
by the FDA and is subject to extensive regulation by the FDA and other
regulatory bodies. In nearly all cases, medical devices distributed in the
United States require either a 510(k) clearance or pre-market approval ("PMA")
from the FDA. Under the Food, Drug and Cosmetic Act, as amended, medical devices
are classified into one of three classes depending on the degree of risk
imparted to patients by the medical device. Class I devices are those for which
safety and effectiveness can be assured by adherence to General Controls, which
include compliance with Quality System Regulations ("QSRs"), facility and device
registrations and listings, reporting of adverse medical events, and appropriate
truthful and non-misleading labeling, advertising and promotional materials.
Some Class I devices also require pre-market review and clearance by the FDA
through the 510(k) Pre-market Notification process described below. Class II
devices are subject to General Controls, as well as pre-market demonstration of
adherence to certain


                                       13
<PAGE>
performance standards or other special controls as specified by the FDA.
Pre-market review and clearance by the FDA is accomplished through the 510(k)
Pre-market Notification procedure. In the 510(k) Pre-market Notification
procedure, the manufacturer submits appropriate information to the FDA in a
Pre-market Notification submission. If the FDA determines that the device is
"substantially equivalent" to a device that was legally marketed prior to May
28, 1976, the date upon which the Medical Device Amendments of 1976 were
enacted, or to another similar commercially available device subsequently
cleared through the 510(k) Pre-market Notification process, it will grant
clearance to commercially market the device. It generally takes three to six
months from the date of submission to obtain clearance of a 510(k) Pre-market
Notification submission, but the process may take longer. If the FDA determines
that the device, or its "labeled" intended use, is not "substantially
equivalent," the FDA will automatically place the device into Class III.

     A Class III product is a product that has a wholly new intended use or is
based on advances in technology for which the device's safety and effectiveness
cannot be assured solely by the General Controls, performance standards and
special controls applied to Class I and II devices. These devices often require
formal clinical investigation studies to assess their safety and effectiveness.
A Pre-market Approval ("PMA") from the FDA is required before the manufacturer
of a Class III product can proceed in marketing the product. The PMA process is
much more extensive than the 510(k) Pre-market Notification process. In order to
obtain a PMA, Class III devices, or a particular intended use of any such
device, must generally undergo clinical trials pursuant to an application
submitted by the manufacturer for an Investigational Device Exemption ("IDE").
An IDE allows the investigational device to be used in a clinical study in order
to collect safety and effectiveness data required to support a PMA application
or a 510(k) Pre-market Notification submission to the FDA. Only a small
percentage of 510(k) Pre-market Notification submissions require clinical data
to support the application. Investigational use also includes clinical
evaluation of certain modifications or new intended uses of legally marketed
devices. All clinical evaluations of investigational devices, unless exempt,
must have an approved IDE before the study is initiated. An approved IDE permits
a device to be shipped lawfully for the purpose of conducting investigations of
the device without complying with other requirements of the Food, Drug and
Cosmetic Act that would apply to devices in commercial distribution.

     Any devices manufactured or distributed by us pursuant to FDA clearances or
approvals will be subject to extensive and continuing regulation by the FDA and
certain state agencies. We will be subject to inspection by the FDA and state
health inspectors and have to comply with various other regulatory requirements
that usually apply to medical devices marketed in the United States. These
regulatory requirements include, among others, manufacturing and design control
regulations, labeling, Medical Device Reporting regulations which require that a
manufacturer report to the FDA certain types of adverse events involving its
products, and the FDA's prohibitions against promoting approved products for
unapproved, or "off-label," uses. Our failure to comply with applicable
regulatory requirements could result in enforcement action by the FDA, which
could have a material adverse effect on us.

     Unanticipated changes in existing regulatory requirements, failure to
comply with such requirements or adoption of new requirements could have a
material adverse effect on us. We also are subject to numerous federal, state
and local laws relating to such matters as safe working conditions, good
manufacturing practices, environmental protection, fire hazard control and
hazardous material disposal. There can be no assurance we will not incur
significant costs to comply with such laws and regulations in the future or that
such laws or regulations will not have a material adverse effect upon our
business, financial condition and results of operations.

     We cannot assure you that any of our potential drug delivery systems will
be approved by the regulatory bodies or approved on a timely or accelerated
basis, or that any approvals received will not subsequently be revoked or
modified. See also "Risk Factors."


                                       14
<PAGE>
PRODUCT LIABILITY AND INSURANCE.

     The development, manufacture and sale of our drug delivery system will
expose us to an inherent risk of product liability claims. We will seek to
obtain general liability insurance and product liability insurance when it
becomes necessary. Coverage is expensive and difficult to obtain and there can
be no assurance that such coverage will be available to us. Any claims or series
of claims against us, regardless of their merit or eventual outcome, could have
a material adverse effect on our business, financial condition and results of
operations.

COMPETITION.

General

     We face competition from medical product companies, as well as from
universities and other non-profit research organizations in the field of drug
delivery systems and individual industries in which we intend to introduce our
product as a platform for treatment delivery systems. Many emerging medical
product companies have corporate partnership arrangements with large,
established companies to support the research, development, and
commercialization of products that may be competitive with our products. In
addition, a number of large established companies are developing proprietary
technologies or may enhance their capabilities by entering into arrangements
with or acquiring companies with drug delivery technologies. Many of our
existing or potential competitors have substantially greater financial, research
and development, regulatory, marketing, and production resources than we have.
Other companies may develop and introduce products and processes competitive
with or superior to our technology.

     For our proposed products, an important factor in competition is the timing
of market introduction of our products or those of our competitors' products.
Accordingly, the relative speed with which we can develop products, complete the
regulatory clearance processes and supply commercial quantities of the products
to the market is an important competitive factor. We expect that competition
among products cleared for marketing will be based on, among other things,
product efficacy, safety, reliability, availability, price, and patent position.

     Our proposed current product, and any future products which we may develop,
will likely compete with both conventional drug delivery methods and advanced
drug delivery methods.

Conventional Drug Delivery Methods

     Traditionally, the pharmaceutical industry has relied on oral delivery and
injection as the primary methods of administering drugs:

     Conventional Oral Method.

     Conventional, oral drug dosage forms, such as pills and capsules, are the
most common types of drug delivery. Oral drug delivery methods are easy to
administer, but their efficacy can be limited because drugs must first pass
through the digestive system and liver before being absorbed into the
bloodstream. Orally delivered drug dosages must, therefore, be large to overcome
the degradation that occurs in the gastrointestinal tract and liver. As a
result, conventional oral dosage forms often produce higher initial drug levels
than are required to achieve the desired therapeutic effects, thereby increasing
the risk of side effects, some of which can be serious. Also, it is difficult to
maintain therapeutically optimal drug levels using oral drug delivery methods.
Further, oral drug delivery methods can require patients to follow inconvenient
dosing routines, which may diminish patient compliance with self-medication
schedules.


                                       15
<PAGE>
     Injection Methods.

     Injectable drug dosage forms generally provide rapid onset of therapeutic
action and offer many of the same advantages as conventional oral drug dosage
methods. Injectable drug delivery methods use needles, raising the possibility
of needle-stick injuries, as well as the risk of infection to the caregiver and
the patient. The use of needles also increases patient anxiety due to the pain
of injection. Further, patients often find self-injectable therapies unpleasant.
As a result, injected drugs for many diseases meet with varying degrees of
patient acceptance and compliance with the prescribed regimens, which can lead
to increased incidence of medical complications and potentially higher disease
management costs. In addition, some elderly, infirm or pediatric patients cannot
administer their own injections and require assistance, thereby increasing both
the inconvenience to these patients and the cost of therapy.

     Advanced Drug Delivery Technologies

     The limitations of conventional forms of drug delivery, such as oral and
injection methods, have driven demand for advanced drug delivery alternatives
that are safer, more effective and more convenient. Advanced drug delivery
technologies have improved oral and injection methods as well as offering new
means of administering drugs, such as through the skin and the respiratory
system. Advanced drug delivery technologies include;

          -    sustained release pills and injectables,
          -    active and passive transdermal patches.
          -    infusion pumps, and
          -    pulmonary, nasal and transmucosal delivery methods.

In some cases, these technologies offer better control over the release of drugs
into the bloodstream, thereby improving therapeutic efficacy and reducing side
effects and risks. In other cases, advanced drug delivery technologies make
therapies easier to administer and support more complex therapeutic regimens.
Innovative drug delivery technologies can offer many advantages over traditional
methods, including ease of use and administration, greater control of drug
concentration in the blood, improved safety and efficacy, improved patient
compliance, expanded indications for certain therapies, and totally new
therapies using drugs that cannot be delivered otherwise.

PATENTS AND PROPRIETARY RIGHTS.

     We regard the establishment of a strong intellectual property position in
our technology as an integral part of the development process. We attempt to
protect our proprietary technologies through patents and intellectual property
positions. Patent applications covering ten of the key elements of our
technology have been filed in the United States and internationally, including
the European Community and China. In addition, the inventors of the Intellectual
Property claim 57 new inventive concepts that may be subject to patent
protection.

     The patent position of medical device firms, including our company,
generally is highly uncertain and may involve complex legal and factual
questions. Potential competitors may have filed applications for, or may have
been issued patents, or may obtain additional patents and proprietary rights
relating to products or processes in the same area of technology as that used by
our Company. The scope and validity of these patents and applications, the
extent to which we may be required to obtain licenses thereunder or under other
proprietary rights, and the cost and availability of licenses are uncertain. We
cannot assure you that our patent applications will result in additional patents
being issued or that any of our patents will afford protection against
competitors with similar technology; nor can we assure you that


                                       16
<PAGE>
any of our patents will not be designed around by others or that others will not
obtain patents that we would need to license or design around.

     We also rely upon unpatented trade secrets. We cannot assure you that
others will not independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to our trade secrets, or
disclose such technology, or that we can meaningfully protect our rights to our
unpatented trade secrets.

     We require our employees, consultants, advisers, and suppliers to execute a
confidentiality agreement upon the commencement of an employment, consulting or
manufacturing relationship with us. The agreement provides that all confidential
information developed by or made known to the individual during the course of
the relationship will be kept confidential and not disclosed to third parties
except in specified circumstances. In the case of employees, the agreements
provide that all inventions conceived by the individual will be the exclusive
property of our company. We cannot assure you, however, that these agreements
will provide meaningful protection for our trade secrets in the event of an
unauthorized use or disclosure of such information.

     On June 21, 2005, a patent for substance delivery device (Patent No. US
6,908,448 B2) was issued on one of the patents pending we acquired from ESI.

EMPLOYEES.

     Upon the closing of the Purchase Agreement, the officers and directors of
the Company resigned and Bruce H. Haglund was appointed to serve as the sole
director of the Company until funding had been received. No other directors have
been elected as of the date of this report. The Company entered into an
three-year employment agreement with Bruce K. Redding on July 29, 2004. The
terms of Mr. Redding's employment agreement are described under "Item 10.
Executive Compensation-Executive Compensation." As of the date of this report,
the Company has no full-time employees other than Mr. Redding.

     In order to implement our business plan, which includes completing the
development of our technology, obtaining appropriate FDA and other regulatory
approvals and successfully initiating marketing activities, we will require
significant additional staff. Current management expects that we will have to
retain additional experienced personnel in the following areas: research and
development, regulatory affairs, marketing, and financial and administrative
operations. We may be constrained in our ability to engage such personnel both
by financial limitations and competitive nature of the market for qualified
personnel in each of the afore-mentioned areas. We cannot be certain that we
will obtain the capital required to engage the staff required to complete
development of our technology, that we will identify and be able to engage the
qualified staff necessary to commercialize our technology, apply to obtain the
required regulatory approvals or successfully market our technology nor can we
be certain that qualified personnel will be available to us on acceptable terms
or at all.

RISK FACTORS.

     An investment in our common stock is highly speculative, involves a high
degree of risk, and should be made only by investors who can afford a complete
loss. Investors should carefully consider the following risk factors, together
with the other information in this report before you decide to buy our common
stock. Our most significant risks and uncertainties are described below;
however, they are not the only risks we face. If any of the following risks
actually occur, our business, financial condition, or results of operations
could be materially adversely affected, the trading of our common stock could
decline, and you may lose all or part of your investment therein.


                                       17
<PAGE>
WE WILL REQUIRE SIGNIFICANT FINANCING TO FUND OUR OPERATIONS, INCLUDING REPAYING
THE ENTIRE AMOUNT DUE UNDER A CERTAIN PROMISSORY NOTE UNDER WHICH WE NOW OWE IN
EXCESS OF $600,000 UNDER WHICH WE WERE IN DEFAULT ON DECEMBER 17, 2004,
COMPLETING THE DEVELOPMENT OF COMMERCIAL PRODUCTS BASED UPON OUR TECHNOLOGY,
SEEKING FDA APPROVAL FOR OUR DEVICE AND OTHERWISE IMPLEMENTING OUR BUSINESS
PLAN, AND WITHOUT SUCH FINANCING WE WILL NOT BE ABLE TO CONTINUE OPERATIONS.

     We do not currently have sufficient financial resources to fund our
operations. We will require significant capital to fund our future operations.
To date, we have not generated any revenues from operations. The success of our
business depends on our ability to develop products based on our drug delivery
technology, subject such products to potentially rigorous, costly and
time-consuming clinical testing, and obtain regulatory approval for and
manufacture those products. We will require significant additional capital to:

          -    satisfy our payment obligations under the Purchase Agreement;
          -    repay a lender the sum of $600,000, plus interest accrued after
               November 30, 2004 under a promissory note dated June 30, 2004,
               which was due on December 17, 2004;
          -    retain technical and other staff;
          -    complete the development of products that incorporate our drug
               delivery technology;
          -    undertake the clinical trials required to submit our drug
               delivery device to the FDA for clearance (or approval, if the FDA
               does not accept our proposition that our device is subject to
               510(k) clearance);
          -    obtain office and laboratory space necessary to accomplish our
               business plans;
          -    commercialize our technology; and
          -    otherwise fully implement our business, operating, and
               development plans.

     If we are unable to locate funding and default on our financial obligation
under the Purchase Agreement or the Note, we may have to relinquish the
Intellectual Property to the seller.

     The exact amount of our current and future capital requirements will depend
on numerous factors, some of which are not within our control, including the
progress of our research and development efforts, the costs of testing and
manufacturing products, and changes in governmental regulation. We expect to
finance a portion of our product development through collaborations with
pharmaceutical companies. We cannot guarantee that such collaborations will be
successful. Our ability to raise additional financing depends on many factors
beyond our control, including the state of capital markets, the market price of
our common stock and the development or prospects for development of competitive
technology by others. The necessary additional financing may not be available to
us or may be available only on terms that would result in further dilution to
the current owners of our common stock. If we are unable to raise additional
funds when we need them, we may have to curtail or discontinue our operations,
in which case you could lose the entire amount of you investment in the Company.

WE HAVE NOT COMPLETED THE DEVELOPMENT OF ANY PRODUCTS THAT INCORPORATE OUR DRUG
DELIVERY TECHNOLOGY.  IF WE ARE SUCCESSFUL IN DEVELOPING ANY SUCH PRODUCTS, WE
WILL BE REQUIRED TO OBTAIN REGULATORY APPROVAL FROM THE FDA PRIOR TO THEIR
COMMERCIAL USE AND OTHERWISE COMPLY WITH ALL OF THE REGULATORY REQUIREMENTS
APPLICABLE TO OUR BUSINESS.

     Prior to bringing any products to market in the United States, we must
obtain FDA approval. As of the date hereof, we have not completed the
development of any products that incorporate our drug delivery technology and we
cannot assure you that we will ever develop products that will be suitable for
submitting to the FDA for the required approval. The approval process will
require the further


                                       18
<PAGE>
development of our product, significant clinical testing and trials and
potentially lengthy FDA submissions and review, all of which will require
substantial funding. Although we believe that our device is substantially
similar to existing products previously approved by the FDA, which could reduce
the time required to obtain FDA clearance, we cannot be certain that the FDA
will agree with our assessment. Under such circumstances, the time required to
prove the efficacy and safety of our product could be lengthy and costly.

     In addition, our Company and the devices we hope to develop and
commercialize are subject to extensive FDA regulations. Failure to comply with
these and other current and emerging regulatory requirements in the global
markets in which our products are sold could result in, among other things,
warning letters, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, refusal of the government
to grant pre-market clearance for devices, withdrawal of clearances, and
criminal prosecution.

     We cannot be certain that the FDA will approve our product for public use.
If the FDA does not approve our product for public use or if we otherwise fail
to comply with FDA regulations, you could lose the entire amount of your
investment in the Company.

WE ARE A YOUNG COMPANY WITH A LIMITED OPERATING HISTORY AND HAVE NOT GENERATED
ANY REVENUES FROM OPERATIONS.  THEREFORE, IT IS DIFFICULT FOR YOU TO ASSESS OUR
COMPANY.

     To date, our operations have consisted primarily of analyzing and acquiring
the Intellectual Property, conducting an analysis of our industry and developing
our business model. Accordingly, we have only a limited operating history on
which you can base an investment decision in our securities. Since our
inception, we have not generated any revenues from operations. We expect to
incur operating losses for the foreseeable future.

     We cannot assure you that we will be able to execute our business model on
a wide-scale basis or that we ever will achieve profitability. The likelihood of
our success must be considered in light of the problems, expenses and
complications frequently encountered in connection with the development of a new
business and the competitive environment in which we operate.

OUR PRODUCTS MAY NOT ACHIEVE THE BROAD MARKET ACCEPTANCE THEY NEED IN ORDER TO
BE A COMMERCIAL SUCCESS.

     To date, we have not received FDA approval for the use of devices that
incorporate our technology and, consequently, we are not yet distributing any
products. The success of drug delivery devices incorporating our technology will
depend to a large degree on the medical community's acceptance of them as
reliable, safe and cost effective alternatives to existing competitive drug
delivery methods. If products based upon our technology are not accepted by the
medical community and are not widely used, our business and results of
operations would negatively and materially affected.

WE EXPECT TO RELY ON THIRD PARTIES TO MARKET AND DISTRIBUTE PRODUCTS BASED ON
OUR TECHNOLOGY AND THEY MAY NOT BE SUCCESSFUL IN SELLING OUR PRODUCTS.

     We expect to distribute products incorporating our technology through
partners which will be responsible for marketing and distributing these
products. We expect that our partners will assume direct responsibility for
business risks associated with these activities, including, risks related to
credit, currency exchange, foreign tax laws or tariff and trade regulation. We
cannot be certain that our distribution partners will succeed in marketing our
products effectively. If this happens, we may not be able to successfully market
our products, which would decrease our revenues.


                                       19
<PAGE>
WE EXPECT TO RELY ON THIRD PARTIES TO MANUFACTURE OUR PRODUCTS AND OUR BUSINESS
WILL SUFFER IF THEY DO NOT PERFORM.

     We do not anticipate manufacturing products based upon our technology.
Rather, we expect to rely on independent contract manufacturers or business
partners for the manufacture of these drug delivery systems. Our business will
suffer if our contract manufacturers have production delays or quality problems.
Furthermore, medical device manufacturers are subject to the manufacturing
regulations of the FDA, international quality standards, and other regulatory
requirements. If our contractors or business partners do not operate in
accordance with regulatory requirements and quality standards, our business will
suffer.

WE MAY LOSE OUT TO LARGER AND BETTER-ESTABLISHED COMPETITORS.

     The medical device industry is intensely competitive. Most of our
competitors have significantly greater financial, technical, manufacturing,
marketing and distribution resources as well as greater experience in the
medical device industry than we have. The particular medical conditions our
product lines address can also be addressed by other means. Many of these
alternatives are widely accepted by physicians and have a long history of use.
Physicians may use our competitors' products and/or the products we develop may
not be competitive with other technologies. If these things happen, we may never
generate meaningful revenues. In addition, our current and potential competitors
may establish cooperative relationships with large medical equipment companies
to gain access to greater research and development or marketing resources.
Competition may result in price reductions, reduced gross margins and prevent us
from gaining market share.

PRODUCTS WE ARE DEVELOPING THAT INCORPORATE OUR TECHNOLOGY MAY BE DISPLACED BY
NEWER TECHNOLOGY.

     The medical device industry is undergoing rapid and significant
technological change. Third parties may succeed in developing or marketing
technologies and products that are more effective than those we propose to
develop and market, or that would make our technology and products obsolete or
non-competitive. Additionally, researchers could develop new technologies and
medications that replace or reduce the importance of our technology.
Accordingly, our success will depend, in part, on our ability to respond quickly
to medical and technological changes through the development and introduction of
new products. We may not have the resources to do this. If our product becomes
obsolete and our efforts to develop new products do not result in any
commercially successful products, our sales and revenues will decline.

OUR INTELLECTUAL PROPERTY MAY NOT HAVE OR PROVIDE SUFFICIENT LEGAL PROTECTIONS
AGAINST INFRINGEMENT OR LOSS OF TRADE SECRETS.

     Our success depends, in part, on our ability to secure and maintain patent
protection, to preserve our trade secrets, and to operate without infringing on
the patents of third parties. While we seek to protect our proprietary positions
by filing United States and foreign patent applications for our important
inventions and improvements, domestic and foreign patent offices may not issue
these patents. Third parties may challenge, invalidate, or circumvent our patent
applications in the future. Competitors, many of which have significantly more
resources than we have and have made substantial investments in competing
technologies, may apply for and obtain patents that will prevent, limit, or
interfere with our ability to make, use, or sell our products either in the
United States or abroad.

     In the United States, patent applications are secret until patents issue,
and in foreign countries, patent applications are secret for a time after
filing. Publications of discoveries tend to significantly lag the actual
discoveries and the filing of related patent applications. Third parties may
have already filed


                                       20
<PAGE>
applications for patents for products or processes that will make our products
obsolete or will limit our patents or invalidate our patent applications.

     We typically require our employees, consultants, advisers and suppliers to
execute confidentiality and assignment of invention agreements in connection
with their employment, consulting, advisory, or supply relationships with us.
They may breach these agreements and we may not obtain an adequate remedy for
breach. Further, third parties may gain access to our trade secrets or
independently develop or acquire the same or equivalent information.

OUR PRODUCT SALES MAY BE ADVERSELY AFFECTED BY HEALTHCARE PRICING REGULATION AND
REFORM ACTIVITIES.

     The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to increase access to
healthcare for the uninsured, control the escalation of healthcare expenditures
within the economy and use healthcare reimbursement policies to balance the
federal budget.

     We expect that Congress and state legislatures will continue to review and
assess healthcare proposals, and public debate of these issues will likely
continue. We cannot predict which, if any, of such reform proposals will be
adopted and when they might be adopted. Other countries also are considering
healthcare reform. Significant changes in healthcare systems could have a
substantial impact on the manner in which we conduct our business and could
require us to revise our strategies.

WE COULD BE DAMAGED BY PRODUCT LIABILITY CLAIMS.

     Products incorporating our technology are intended to be used by persons
who require a steady and precise dosage of medicine to maintain their health and
life. If any of our proposed products were to malfunction or a physician or
patient were to misuse them and injury results to a patient or operator, the
injured party could assert a product liability claim against our company. We
will seek to obtain product liability insurance in an amount that we believe is
adequate for our current activities. Insurance may not be sufficient to cover
all of the liabilities resulting from a product liability claim, and we might
not have sufficient funds available to pay any claims over the limits of our
insurance. Because personal injury claims based on product liability in a
medical setting may be very large, an underinsured or an uninsured claim could
financially damage our company.

WE MAY HAVE TROUBLE ATTRACTING AND RETAINING QUALIFIED PERSONNEL AND OUR
BUSINESS MAY SUFFER IF WE DO NOT.

     Our business requires additional staff in all areas to successfully bring
our technology to market. Our success depends on our ability to attract and
retain technical and management personnel with expertise and experience in the
medical device business. The competition for qualified personnel in the medical
device industry is intense and we may not be successful in hiring or retaining
the requisite personnel. If we are unable to attract and retain qualified
technical and management personnel, we will suffer diminished chances of future
success.

OUR COMMON STOCK IS TRADED OVER THE COUNTER, WHICH MAY DEPRIVE STOCKHOLDERS OF
THE FULL VALUE OF THEIR SHARES.

     Our common stock is quoted via the National Association of Securities
Dealers' Over-the- Counter Bulletin Board (OTCBB). As such, our common stock may
have fewer market makers, lower trading volumes and larger spreads between bid
and asked prices than securities listed on an exchange


                                       21
<PAGE>
such as the New York Stock Exchange or the Nasdaq Stock Market.  These factors
may result in higher price volatility and less market liquidity for the common
stock.

A LOW MARKET PRICE MAY SEVERELY LIMIT THE POTENTIAL MARKET FOR OUR COMMON STOCK.

     Our common stock is currently trading at a price substantially below $5.00
per share, subjecting trading in the stock to certain SEC rules requiring
additional disclosures by broker-dealers. These rules generally apply to any
non-NASDAQ equity security that has a market price share of less than $5.00 per
share, subject to certain exceptions (a "penny stock"). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and institutional or wealthy investors.
For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. The broker-dealer also
must disclose the commissions payable to the broker-dealer, current bid and
offer quotations for the penny stock and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Such information must be provided to the
customer orally or in writing before or with the written confirmation of trade
sent to the customer. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements could discourage broker-dealers from
effecting transactions in our common stock.

THE PRICE OF OUR COMMON STOCK LIKELY WILL BE HIGHLY VOLATILE.

     The price of our common stock likely will be highly volatile.  Some of the
factors leading to the volatility could include:

          -    price and volume fluctuations in the stock market at large which
               do not relate to our operating performance;
          -    FDA and/or international regulatory actions;
          -    fluctuations in our operating results;
          -    financing arrangements we may enter that require the issuance of
               a significant number of shares in relation to the number of
               shares currently outstanding;
          -    announcements of technological innovations or new products which
               we or our competitors make;
          -    developments with respect to patents or proprietary rights;
          -    public concern as to the safety of products that we or others
               develop; and
          -    fluctuations in market demand for and supply of our products.

BECAUSE WE WILL NOT PAY CASH DIVIDENDS, STOCKHOLDERS WILL ONLY BENEFIT FROM
OWNING COMMON STOCK IF IT APPRECIATES.

     We have never paid cash dividends on our common stock and we do not intend
to do so in the foreseeable future. We intend to retain any future earnings to
finance our growth. Accordingly, any potential investor who anticipates the need
for current dividends from his investment should not purchase our common stock.


                                       22
<PAGE>
              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act.  We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting the financial
condition of our business.  These forward-looking statements are subject to a
number of risks, uncertainties and assumptions, including, among other things:

          -    our ability to obtain financing to support our operations;
          -    the receipt or denial of regulatory approvals;
          -    our expectations and estimates concerning future financial
               performance, financing plans and the impact of competition,
          -    advances in technologies,
          -    our ability to implement our growth strategy,
          -    anticipated trends in our business,
          -    general economic and business conditions, both nationally and in
               our markets; and
          -    other risk factors set forth under the section titled
               "BUSINESS-Risk Factors" in this report.

     In addition, in this report, we use words such as "anticipates,"
"believes," "plans," "expects," "future," "intends," and similar expressions to
identify forward-looking statements.

     We undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this report. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this report may not occur
and actual results could differ materially from those anticipated or implied in
the forward-looking statements.

ITEM  2.  DESCRIPTION  OF  PROPERTY

     We lease office space at Four Tower Bridge, 200 Barr Harbor Drive, West
Conshohocken, Pennsylvania 19428-2977 on an "as needed" basis. We have leased on
a month-to-month basis since October 2004 at monthly rent of $275.  This
temporary arrangement is not adequate for our requirements.

     We have identified facilities that will be sufficient for our needs in the
future; however, we have not entered into a lease for such facilities.  We will
need a facility that includes (i) a chemistry laboratory for the purpose of
conducting experiments to examine the compatibility of therapeutic compounds
with the ultrasonic transdermal delivery system (ii) an electrical engineering
laboratory to undertake the development of ultrasonic drivers, which provide the
low-level power to the miniature transducers which serve as the catalyst for
transdermal delivery of drugs and (iii) a center to complete the design of our
patch technology.  We believe there are several suitable facilities that will
meet our needs in the Philadelphia area where we are currently located.

     We expect that manufacturing of our drug delivery system will be undertaken
by third parties.

ITEM 3.  LEGAL PROCEEDINGS

     None.


                                       23
<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On January 25, 2005, the holders of an aggregate of 26,138,583shares of our
common stock, par value $.01 per share (the "common stock"), of the Company,
representing approximately 67% of the total shares entitled to vote on the
matter as of the record date of January 24, 2005, consented in writing without a
meeting to the amend the Company's Articles of Incorporation to increase the
authorized shares of common stock to 100,000,000 and to reduce the par value to
$.001 per share.

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock commenced trading on the OTC Bulletin Board on October 25,
2003. The stock currently trades under the symbol DMSI.OB. The prices set forth
below reflect the quarterly high and low closing sales prices for shares of
common stock since the Company's stock commenced trading as reported by Yahoo.
The prices set forth in the table have been adjusted to reflect a 2-for-1 stock
dividend on December 31, 2003 and a 3-for-2 stock dividend on January 19, 2005.
These quotations reflect inter-dealer prices, without retail markup, markdown or
commission, and may not represent actual transactions.

<TABLE>
<CAPTION>
-------------------------------------------------
                                     CLOSING BID

                                     HIGH    LOW
-----------------------------------  -----  -----
<S>                                  <C>    <C>
     Fiscal 2005
-----------------------------------  -----  -----
     July 1 - September 30, 2005     1.20    .85
     April 1 - June 30, 2005         1.32    .80
     January 1 - March 31, 2005      1.60    .97
     October 1 - December 31, 2004   1.80   1.47

-----------------------------------  -----  -----
     Fiscal 2004
-----------------------------------  -----  -----
     July 1 - September 30, 2004     1.48    .93
     April 1 - June 30, 2004         1.39    .88
     January 1 - March 31, 2004      1.68    .68
     October 1 - December 31, 2003    .34    .34

-------------------------------------------------
</TABLE>

     As of January 7, 2005, we had approximately 100 record holders of our
common stock. This number of holders of record does not include beneficial
owners of the Company's common stock whose shares are held in the names of
various security holders, dealers, and clearing agencies.

     The Company has not paid any cash dividends on its common stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
intends to retain any earnings to finance the growth of its business. There can
be no assurance that the Company will ever pay cash dividends. See Item 6,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

RECENT SALES OF UNREGISTERED SECURITIES

     During the fiscal year ended September 30, 2005, we made the following
sales of equity securities which were not registered under the Securities Act of
1933, as amended (all share and warrant amounts and all share conversion and
warrant exercise prices have been adjusted to reflect the 3-for-2 stock dividend
on January 19, 2005):


                                       24
<PAGE>
ISSUANCES PURSUANT TO SECTION 4(2) UNDER THE SECURITIES ACT OF 1933.  The
following restricted securities were issued pursuant to the exemption from the
registration provisions of the Securities Act of 1933, as amended, afforded by
Section 4(2) thereof:

Debentures

     We issued one-year Convertible Debentures in the aggregate principal amount
of $232,827 (the "Debentures") to five accredited investors during the period
from November 4, 2004 to March 14, 2005.  The Debentures bear interest at 8% per
annum (payable at maturity) and were originally convertible into shares of
common stock at the lesser of $.90 or 60% of the five-day average trading price
after the daily trading volume exceeded 100,000 shares for 10 consecutive
trading days (the "Conversion Reset Price").  On June 6, 2005, the Conversion
Reset Price was triggered and the Debentures became convertible at $.60 per
share.  In January 2006, we agreed with the five Debenture holders to reduce the
conversion price to $.40 per share in consideration of their agreement to extend
the maturity on their Debentures for six months.  Set forth below, opposite the
name of each Debenture holder, are the principal amount, issue date, and
extended maturity date of the Debentures.

<TABLE>
<CAPTION>
          Debenture Holder       Principal Amount   Issue Date  Maturity Date
          ---------------------  -----------------  ----------  -------------
<S>                              <C>                <C>         <C>
          Victor Fein            $       25,000.00     11/4/04         5/4/06
          Alan Fein              $       32,826.96    11/17/04        5/14/06
          Hyman Fein             $       25,000.00    12/13/04        6/13/06
          Shalom Maidenbaum      $       50,000.00    12/22/04        6/22/06
          Osborn Partners        $      100,000.00     3/14/05        9/14/06
            International, Ltd.
</TABLE>


Warrants

     On October 20, 2004, we issued Current Capital Corp. warrants to purchase
300,752 shares of common stock at an exercise price of $1.33 per share,
exercisable through September 30, 2006 as partial consideration pursuant to a
consulting agreement previously filed with the SEC under which Current Capital
agreed to provide financial and investor public relations services and related
matters in Canada. The warrants are fully vested.

     On December 3, 2004, we issued Gary M. Scott warrants to purchase 3,609,023
shares of common stock at an exercise price of $1.33 per share, exercisable
through December 31, 2007. Of these warrants, 150,376 warrants were issued
pursuant to the terms of an agreement whereby Mr. Scott agreed to extend the due
date of a loan to the Company in the principal amount of $500,000 and 3,458,647
warrants were issued pursuant to the terms of a consulting agreement previously
filed with the SEC. The warrants are fully vested.

     On December 3, 2004, the Company issued Adil Saleh warrants to purchase
225,564 shares of common stock at an exercise price of $1.33 per share,
exercisable through September 30, 2007 pursuant to a consulting agreement
previously filed with the SEC. The warrants are fully vested. See "Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Act-Business Advisory Council."

     On January 17, 2005, the Company issued Georg Hochwimmer warrants to
purchase 225,000 shares of common stock at an exercise price of $1.33 per share,
exercisable through December 31, 2007 pursuant to a consulting agreement
previously filed with the SEC. One hundred fifty thousand of the warrants are
vested as of the date of this report; the remaining 75,000 warrants vest on
January 31, 2006.


                                       25
<PAGE>
See "Item 9.  Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Act-Business Advisory Council."

     On April 13, 2005, we issued Robert L Watson warrants to purchase 225,000
shares of common stock at an exercise price of $1.33 per share, exercisable
through September 30, 2007. The warrants were subject to a vesting schedule;
however, pursuant to a termination agreement with Mr. Watson on June 30, 2005,
we agreed to vest 100,000 of the warrants and cancel the remaining 125,000
warrants. See " - Common Stock" below.

     On October 5, 2005, we issued Trilogy Capital Partners, Inc. ("Trilogy")
warrants to purchase 2,616,806 shares of common stock at an exercise price of
$.72 per share, exercisable through September 30, 2008 as partial consideration
pursuant to a consulting agreement previously filed with the SEC under which
Trilogy agreed to provide marketing, financial, investor public relations, and
related matters. The warrants are fully vested.

Common Stock

     On October 18, 2004, the Company issued to Ananda Capital Partners, Inc.
("Ananda") 150,000 shares of common stock pursuant to a consulting agreement
previously filed with the SEC under which Ananda agreed to provide financial and
investor public relations service and related matters in the United States.

     On October 18, 2004, we issued to DD Investment 600,000 shares of common
stock pursuant to a consulting agreement previously filed with the SEC under
which DD Investment agreed to provide consulting services in connection with
financial and investor public relations and related matters in Germany. A copy
of the agreement previously has been filed with the SEC.

     On December 4, 2004, we agreed to issue to ESI shares of common stock equal
to half of the shares ESI transferred to ReactMed in connection with the Asset
Purchase. Consequently, we issued 75,807 shares of our common stock to ESI on
February 2, 2005, which amount was equal to half of the shares ESI transferred
to ReactMed. See "Item 1. Description of Business-Asset Purchase."

     On March 30, 2005, the Company issued 288,462 shares of our common stock to
Michael Stock, an accredited investor, at a price of $.52 per share for total
consideration of $150,000.

     On April 13, 2005, we issued 150,000 shares of common stock to Robert L.
Watson at a value of $127,500 pursuant to a consulting agreement previously
filed with the SEC under which Mr. Watson agreed to provide management
consulting services. On June 30, 2005, we entered into a termination letter with
Mr. Watson whereby we agreed to pay him $27,500 owed to him pursuant to his
consulting agreement. The $27,500 owed was settled by paying Mr. Watson $10,000
in cash in August 2005 and issuing him 15,487 shares of common stock valued at
$17,500. Pursuant to the termination letter we agreed to vest 100,000 of 225,000
warrants originally issued. See " - Warrants" above.

     On May 2, 2005, we issued common stock at a price of $.52 per share to
Hyman Fein (48,077 shares for total consideration of $25,000)) and Victor Fein
(163,462 shares for total consideration of $85,000), both accredited investors
and Debenture holders.

     On September 7, 2005, we entered into a letter agreement amending the terms
of Mr. Redding's employment agreement. We also agreed to issue 250,000 shares of
common stock as an incentive bonus at such time as the Company received approval
to conduct its second human pilot trial on the Technology


                                       26
<PAGE>
from an investigative review board, which approval was received in November
2005. These shares have been included in our calculation of shares of common
stock outstanding as of the date of this report. See "Executive
Compensation-Employment Agreements with Management." See also " - Issuances
Pursuant to Form S-8 under the Securities Act of 1933" below.

     On September 27, 2005, we issued 11,765 shares of common stock to The van
de Kamp Group at a value of $10,000 ($.85 per share) for consulting services to
the Company.

Common Stock and Warrants

     On October 18, 2004, we issued to BX Inc. ("BX") 1,425,000 shares of common
stock and warrants to purchase 714,286 shares of common stock at an exercise
price of $1.33 per share exercisable through September 30, 2006 pursuant to an
agreement under which it agreed to compensate BX for services rendered with
respect to the acquisition by the Company of the Intellectual Property. A copy
of the agreement previously has been filed with the SEC.

     On October 18, 2004, the Company issued to Integrated Inventions (Canada)
Inc. ("III") 1,090,833 shares of common stock and warrants to purchase 546,784
shares of common stock at an exercise price of $1.33 per share exercisable
through September 30, 2006 pursuant to an agreement under which it agreed to
compensate III for services rendered with respect to the acquisition by the
Company of the Intellectual Property and reimburse it for expenses incurred in
connection with such acquisition. A copy of the agreement previously has been
filed with the SEC.

     On February 2, 2005, we issued 416,667 shares of common stock to Integrated
Inventions (Canada) Inc. ("III") and warrants to purchase 208,333 shares of
common stock at an exercise price of $1.33 per share exercisable through
December 31, 2007 in consideration for the forgiveness of $375,000 of
indebtedness of the Company to III.

Convertible Notes and Warrants

     On November 16, 2004, we issued a convertible promissory note to Kenneth
Hovden, an accredited investor. The note is in the principal amount of $25,000,
bears interest at the rate of 8% per annum, and is convertible into shares of
common stock at $.82 per share. The note matured on September 30, 2005 and
remains unpaid as of the date of this report. In connection with the note, we
issued Mr. Hovden warrants to purchase 15,283 shares of common stock at an
exercise price of $1.33 per share. The warrants expired on October 31, 2005.

     On December 21, 2005, we issued two-year Convertible Notes in the aggregate
principal amount of $130,000 to four persons who are not "U.S. Persons" as that
term is defined in Regulation S under the Securities Act of 1933. These notes
bear interest at 12% per annum (payable on the first anniversary of the notes
and at maturity) and are convertible into shares of common stock at the lesser
of $1.00 or 80% of the 10-day average closing price immediately prior to
conversion. We also issued each of the lenders a warrant exercisable at $1.00
per share and expiring on December 21, 2007. Set forth below, opposite the name
of each lender, are the principal amount of the notes and the number of warrants
issued.

<TABLE>
<CAPTION>
<S>                             <C>                <C>
          Note Holder           Principal Amount   Warrants
          --------------------  -----------------  --------
          James Ladner          $       50,000.00    75,000
          Marguerite Ladner     $       20,000.00    30,000
          John Varghese         $       10,000.00    15,000
          Parmino Finance Ltd.  $       50,000.00    75,000
</TABLE>


                                       27
<PAGE>
     In connection with these notes, the Company also issued James Ladner a
warrant to purchase 12,000 shares at an exercise price of $1.00 per share
expiring on December 21, 2008. All of the warrants issued in connection with
these notes are fully vested upon issuance.

Convertible Notes

     On August 29, 2005, the Company borrowed $784,501 from VEM Aktienbank AG,
an investment bank in Munich, Germany ("VEM"). In consideration of the loan, the
Company issued two convertible promissory notes in favor of VEM. The promissory
notes mature two years from the date of issuance and bear interest at the rate
of 10% per annum (payable at maturity). The notes are convertible into shares of
common stock at a conversion price equal to 80% of the average closing bid price
per share of common stock during the five trading days immediately prior to any
such conversion; provided however, that the Company is not required to issue
more than 1,389,474 shares upon the conversion of the total amount due under
both of the notes.

     On December 8, 2005, the Company borrowed an additional $296,579 from VEM
and issued two additional convertible promissory notes in favor of VEM. The
promissory notes mature two years from the date of issuance and bear interest at
the rate of 10% per annum (payable at maturity). The notes are convertible into
shares of common stock at a conversion price equal to 80% of the average closing
bid price per share of common stock during the five trading days immediately
prior to any such conversion; provided however, that the Company is not required
to issue more than 631,579 shares upon the conversion of the total amount due
under both of these notes.

ISSUANCES PURSUANT TO FORM S-8 UNDER THE SECURITIES ACT OF 1933.  The following
securities were issued pursuant to a registration statement on Form S-8 under
the Securities Act of 1933, as amended:

     On May 26, 2005, we issued shares of common stock at $.83 per share to
Ruffa & Ruffa (213,298 shares of common stock for total consideration of
$177,037.77) and Gibson, Haglund & Paulsen (221,256 shares of common stock for
total consideration of $183,642.42) for legal services rendered by such law
firms. See "Item 12. Certain Relationships and Related Transactions."

     On September 7, 2005, Mr. Redding agreed to accept shares of common stock
to be registered on Form S-8 in forgiveness of unpaid salary due him. As of the
date of this report we have agreed to issue Mr. Redding 152,135 shares of common
stock in forgiveness of $132,292 unpaid salary through December 31, 2005. The
Form S-8 has not been filed, but we have included these shares in calculating
our shares of common stock outstanding as of the date of this report.

     On November 3, 2005, we agreed to issue 20,000 shares of common stock for
additional consulting services by The van de Kamp Goup pursuant to a
registration statement on Form S-8. The Form S-8 has not been filed, but we have
included these shares in calculating our shares of common stock outstanding as
of the date of this report.

     On December 7, 2005, we agreed to issue 275,000 shares of common stock to
Robert Trainor pursuant to a registration statement on Form S-8 in consideration
for consulting services to be rendered in Europe over a 12-month period. The
Form S-8 has not been filed, but we have included these shares in calculating
our shares of common stock outstanding as of the date of this report.

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

     The following discussion should be read together with our Financial
Statements and the Notes related to those statements, as well as the other
financial information included in this Form 10-KSB.


                                       28
<PAGE>
Some of our discussion is forward-looking and involves risks and uncertainties.
For information regarding risk factors that could have a material adverse effect
on our business, refer to Item I of this Form 10-KSB, "Item 1. Description of
Business-Risk Factors" and "Cautionary Notice Regarding Forward Looking
Statements."

PLAN OF OPERATION

     We anticipate generating revenues during the next 12 months from a testing
program to assess the feasibility of drugs subject to delivery by way of our
transdermal delivery system. We also anticipate entering into agreements within
the next 12 months pursuant to which we will receive licensing and royalty fees.
Our objective is to exploit our technology through the development and
commercial introduction of products incorporating existing FDA-approved
compounds into our drug delivery systems. During the next 12 months we plan to
(i) define products that address unmet medical needs, (ii) analyze the market
potential of such defined products, (iii) develop the products with and through
an appropriate clinical stage partner, and (iv) collaborate with strategic
partners to complete the development of such products. See "Item 1. Description
of Business-Business Strategy."

     We believe the Company can generate revenue in the next 12 months by
offering a screening program to pharmaceutical companies to determine whether
existing and newly developed drugs are candidates for delivery by way of our
active transdermal device. See "Item 1. Description of Business-Business
Strategy-Suitability Testing."

     Management anticipates that the Company will generate the preponderance of
its revenues from licenses and accompanying royalty streams. During the next 12
months the Company will seek to negotiate with drug and cosmetic manufacturers
that have the potential to reach the market quickly for pharmaceutical
preparations that would be favorably received by physicians and patients and
cosmetic formulations to be applied using our proprietary applicator under
development. We intend to target pharmaceutical companies that manufacture
formulations which not only are subject to delivery utilizing our transdermal
systems but which already are FDA approved and widely distributed. See "Item 1.
Description of Business -Business Strategy-License and Royalty Fees."

     To achieve our business plans for the next 12 months, we will need to raise
substantial additional capital for our operations through the sale of debt
and/or equity securities. During the year ended September 30, 2005, we raised
limited amounts of capital through the sale of common stock, debentures, and
convertible notes; however, these funds were use primarily to fund payments on
the ESI Note, to repay the promissory note to Gary Scott, pay legal fees, fund
limited research and development, and for other general and administration
costs. See "Item 12. Certain Relationships and Related Transactions." We have
limited cash to fund our operations at this time, so we plan to offer
convertible debt and/or common stock in a private placement during the first
quarter of 2006 to raise minimum proceeds of $2,500,000. We believe the proceeds
from such a private placement, together with revenues from suitability testing,
will enable us to repay existing obligations, meet current contingencies, and
fund expanded operations. Because we have no current assets and are insolvent as
of the date of this report, we will not be able to continue our business without
some combination of additional capital and revenue from suitability testing.

     We have identified facilities that include office and existing laboratory
space that will be sufficient for the next 12 months of our anticipated
operations, without the need for significant expenditures on plant or equipment.
We also anticipate hiring a minimum of five new employees during the next 12
months to enable us to continue research and development of our Intellectual
Property, perform suitability testing for pharmaceutical companies, and pursue
license opportunities with potential strategic partners.


                                       29
<PAGE>
     To date, we have focused our research and development activities on
verifying the theories underlying our drug delivery system. We have only
conducted limited laboratory tests of the technology for the purposes of
determining the viability, safety and efficacy of the scientific theories and
technologies embodied in the technology for the delivery of insulin. We also
have performed limited testing of the abstract facets of the technology on
humans and animals. We have not yet constructed a prototype of the device
utilizing the miniature technology to be incorporated into the product we hope
to offer commercially.

     During the next 12 months we plan to conduct extensive additional animal
and human trials and develop prototypes of the devices we hope to commercialize.
See "Item 1. Description of Business-Research and Development Activities."

RECENTLY  ISSUED  ACCOUNTING  STANDARDS

     SFAS  No.  151,  Inventory  Costs,  is effective for fiscal years beginning
after  June  15, 2005. This statement amends the guidance in Accounting Research
Bulletin  No.  43,  Chapter  4, Inventory Pricing, to clarify the accounting for
abnormal  amounts  of idle facility expense, freight, handling costs, and wasted
material  (spoilage). The adoption of SFAS No. 151 is expected to have no impact
on  the  Company's  financial  statements.

     SFAS  No.  152,  Accounting  for  Real Estate Time-Sharing Transactions, is
effective  for fiscal years beginning after June 15, 2005. This statement amends
SFAS  No.  66,  Accounting  for Sales of Real Estate, to reference the financial
accounting and reporting guidance for real estate time-sharing transactions that
is  provided  in American Institute of Certified Public Accountants Statement of
Position  04-2,  Accounting  for  Real  Estate  Time-Sharing  Transactions.  The
adoption  of  SFAS  No.  152  is  expected  to  have  no impact on the Company's
financial  statements.

     SFAS No. 123(R), Share-Based Payment, replaces SFAS No. 123, Accounting for
Stock-Based  Compensation,  and  supersedes  APB  Opinion No. 25, Accounting for
Stock  Issued  to  Employees. This statement requires that the compensation cost
relating  to share-based payment transactions be recognized at fair value in the
financial  statements.  The  Company  is required to apply this statement in the
first  interim  period  that  begins  after  December  15,  2005. The Company is
currently  analyzing  the  requirements  of  the  adoption  of  SFAS No. 123(R).

     SFAS No. 153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion
No.  29,  is  effective  for  fiscal  years  beginning after June 15, 2005. This
statement  addresses  the  measurement  of  exchange  of  nonmonetary assets and
eliminates  the  exception from fair-value measurement for nonmonetary exchanges
of  similar  productive  assets  in  paragraph  21(b)  of  APB  Opinion  No. 29,
Accounting  for  Nonmonetary Transactions, and replaces it with an exception for
exchanges that do not have commercial substance. The adoption of SFAS No. 153 is
not expected to have a significant impact on the Company's financial statements.

     Financial  Accounting  Standards  Board  Interpretation  ("FIN")  No. 46(R)
revised  FIN  No. 46, Consolidation of Variable Interest Entities, requiring the
consolidation  by  a  business  of variable interest entities in which it is the
primary  beneficiary.  The  adoption of FIN No. 46(R) did not have any impact on
the  Company's  financial  statements.

     The  Emerging  Issues  Task  Force  ("EITF") reached consensus on Issue No.
03-1,  The  Meaning  of  Other-Than-Temporary  Impairment and Its Application to
Certain  Investments,  which provides guidance on determining when an investment
is  considered impaired, whether that impairment is other than temporary and the
measurement  of  an  impairment loss. The FASB issued FSP EITF 03-1-1, Effective
Date  of  Paragraphs  10-20  of  EITF  Issue  No.  03-1,  The  Meaning  of
Other-Than-Temporary  Impairment  and  Its  Application  to Certain Investments,
which  delays  the  effective  date for the measurement and recognition criteria
contained  in EITF 03-1 until final application guidance is issued. The adoption
of  this  consensus  or  FSP  is  expected  to  have  no impact on the Company's
financial  statements.


                                       30
<PAGE>
     The  EITF reached a consensus on Issue No. 04-8, The Effect of Contingently
Convertible  Debt  on  Diluted  Earnings  Per  Share,  which  addresses when the
dilutive  effect of contingently convertible debt instruments should be included
in  diluted  earnings (loss) per share. EITF 04-8 became effective for reporting
periods  ending  after December 15, 2004. The adoption of EITF 04-8 did not have
                       ------------ ----
an  impact  on  diluted  earnings  (loss)  per  share  of  the  Company.

OFF-BALANCE SHEET ARRANGEMENTS.

     None.

ITEM  7.  FINANCIAL  STATEMENTS

     The  Company  submits with this report the financial statements and related
information  listed  in  the Index to Financial Statements on page F-1 following
this  report's  signature  page.

ITEM  8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
FINANCIAL  DISCLOSURE

     None.

ITEM 8A. CONTROLS AND PROCEDURES.

     Under the supervision and with the participation of our management,
including our interim Chief Executive Officer and interim Chief Financial
Officer, we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on that evaluation,
our interim Chief Executive Officer and interim Chief Financial Officer have
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures are adequately designed to ensure that the
information required to be disclosed by us in the reports we file or submit
under the Exchange Act is recorded, possessed, summarized and reported, within
the time periods specified in the applicable rules and forms. During the period
covered by this Annual Report on Form 10-KSB, there was no change in our
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) that materially effected, or is reasonably likely to
materially effect, our internal control over financial reporting.

ITEM 8B. OTHER INFORMATION

     None

                                    PART III

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

DIRECTORS  AND  EXECUTIVE  OFFICERS.

     The following table sets forth certain information about our directors and
executive officers as of January 17, 2006:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
                                                               Year First
                                                          Became a Director or
Name                            Position            Age    Executive Officer
---------------------  ---------------------------  ----  --------------------


                                       31
<PAGE>
<S>                    <C>                          <C>   <C>
Bruce H. Haglund       Chairman and Director        __54                  2004

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

Bruce K. Redding, Jr.  Executive Vice President of  __53                  2004
                       Licensing and Corporate
                       Strategy
------------------------------------------------------------------------------
</TABLE>


     Bruce H. Haglund has served as the Chairman of the Company and its interim
Chief Executive Officer and interim Chief Financial Officer since August 6,
2004. Mr. Haglund has practiced law in Orange County, California since 1980.
From May 2003 to August 2004, Mr. Haglund was employed as Executive Vice
President and General Counsel of Veterinary Pet Services, Inc. In August 2004,
Mr. Haglund returned to the private practice of law with Gibson, Haglund &
Paulsen in Irvine, California. Mr. Haglund will serve as the interim Chief
Executive Officer of the Company until the Company completes its search for a
full-time Chief Executive Officer with pharmaceutical industry experience. See
"Item 12. Certain Relationships and Related Transactions."

     Bruce K. Redding, Jr. joined the Company as Vice President of Licensing and
Corporate Strategy on July 9, 2004. Mr. Redding has been the Chief Executive
Officer of Encapsulation Systems, Inc. ("ESI") since its founding in 1988 and
has been employed by ESI full-time since 1994. See "Item 12. Certain
Relationships and Related Transactions."

BUSINESS ADVISORY COUNCIL

     In December 2004, the Company established a Business Advisory Council (the
"Council") the members of which may be called upon to provide guidance with
respect to the organization and structure of the Company, business strategy,
product development, product distribution, financing and other matters of
importance to the Board of Directors and management. The Company appointed Gary
Scott as the Chairman of the Council in October 2004; however, he resigned from
his position in September 2005. See "Item 12. Certain Relationships and Related
Transactions." Adil Saleh and Georg Hochwimmer serve as members of the Council.
See "Item 5. Market for Common Equity and Related Stockholder Matters-Recent
Sales of Unregistered Securities-Warrants." The Board of Directors will consider
adding members to the Council when a full Board of Directors is seated, at which
time the board expects to consider compensation to be paid to such persons.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

     Section 16(a) of the Securities Act of 1934 requires the Company's officers
and directors, and greater than 10% stockholders, to file reports of ownership
and changes in ownership of its securities with the Securities and Exchange
Commission. Copies of the reports are required by SEC regulation to be furnished
to the Company. Based on management's review of these reports during the fiscal
year ended September 30, 2005, Mr. Haglund was required to file reports under
Section 16(a). Mr. Haglund filed a Form 4 reporting the issuance of 221,256
shares to him in connection with legal services provided to the Company by his
law firm. See "Item 12. Certain Relationships and Related Transactions."

CODE OF CONDUCT AND ETHICS

     As yet, we have not adopted a code of conduct and ethics that would apply
to our directors, officers and employees.  We expect to adopt such a code at
such time as we appoint additional members to our Board of Directors and will
post the code of conduct and ethics on our Web site.


                                       32
<PAGE>
ITEM 10.  EXECUTIVE COMPENSATION

DIRECTORS COMPENSATION.

     We currently have no provision for compensating or reimbursing directors.
We expect to adopt such a policy at such time as we appoint additional members
to our Board of Directors.

EXECUTIVE COMPENSATION.

     The following table sets forth certain information concerning the annual
and long-term compensation of our Chief Executive Officer and our other
executive officer having annual compensation in excess of $100,000 during the
last fiscal year (the Named Executives) for the last three fiscal years.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                           SUMMARY COMPENSATION TABLE
---------------------------------------------------------------------------------------------------------------
                                                                   Long Term Compensation
                                                       -----------------------------------------
                          Annual Compensation                   Awards               Payouts
                     --------------------------------  --------------------------  -------------
                                                       Restricted    Securities
Name and                                Other Annual      Stock      Underlying                     All Other
Principle             Salary    Bonus   Compensation    Award(s)    Options/SARs   LTIP Payouts   Compensation
Position       Year    ($)       ($)         ($)           ($)           (#)            ($)            ($)
-------------  ----  --------  -------  -------------  -----------  -------------  -------------  -------------
<S>            <C>   <C>       <C>      <C>            <C>          <C>            <C>            <C>
Bruce H.
Haglund,       2005       -0-      -0-            -0-          -0-            -0-            -0-            -0-
Chairman
(1)            2004       -0-      -0-            -0-          -0-            -0-            -0-            -0-
-------------  ----  --------  -------  -------------  -----------  -------------  -------------  -------------
Bruce K.
Redding,       2005   129,167      -0-            -0-          -0-            -0-            -0-
Vice                                                                                                        -0-
President (2)  2004    15,625   80,000            -0-          -0-            -0-            -0-
---------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Mr. Haglund joined the Company as its Chairman on August 6, 2004. Mr.
     Haglund receives no compensation for his service as an officer and director
     of the Company; however, Gibson, Haglund & Paulsen, a law firm in which Mr.
     Haglund is a principal, receives compensation for legal services provided
     to the Company. See "Item 12. Certain Relationships and Related
     Transactions."
(2)  Mr. Redding joined the Company as its Executive Vice President of Licensing
     and Corporate Strategy on July 29, 2004. Mr. Redding is employed pursuant
     to the terms of an employment agreement and a subsequent letter agreement
     entered into on September 7, 2005 as described under "Item 10. Executive
     Compensation-Employment Agreements with Management." Although Mr. Redding
     was entitled to $15,625 in salary and $80,000 in bonus payments for the
     year ended September 30, 2004, the Company paid no compensation to him
     during that period. Mr. Redding received payment of the $80,000 bonus in
     September 2005. Although Mr. Redding was entitled to $129,167 in salary for
     the year ended September 30, 2005, the Company paid him $50,000 during that
     period. Pursuant to the terms of the amended Employment Agreement, the
     Company will issue shares of common stock as payment of the balance of
     accrued compensation owed to Mr. Redding equal to the amount owed times
     1.15. As of September 30, 2005, Mr. Redding was owed $94,792. As such, the
     Company issued 109,010 shares of common stock on September 30, 2005 as full
     repayment of the compensation owed to Mr. Redding on that date.


                                       33
<PAGE>
EMPLOYMENT AGREEMENTS WITH MANAGEMENT.

     On July 29, 2004, in accordance with the provisions of the Purchase
Agreement, we entered into an employment agreement with Bruce K. Redding, Jr.
Mr. Redding is one of the inventors of the technologies encompassing the
Intellectual Property and the author or co-author of the various patents pending
transferred to the Company under the Purchase Agreement. Mr. Redding's
employment agreement provides that he will serve as our Vice President of
Licensing and Corporate Strategy for a period of three years at a salary of
$125,000 in the first year, $150,000 in the second year and $175,000 in the
third year. The agreement is renewable for two one-year terms at salaries of
$200,000 and $225,000 unless either party shall give the other 90 days prior
notice of its intent not to renew the agreement. Under the employment agreement,
the Company will pay Mr. Redding a signing bonus of $80,000 in eight equal
installments. The Company also will provide Mr. Redding with (i) the use of a
car during the term of the agreement, (ii) errors and omissions insurance for
the term of his employment, and (iii) a $1,000,000 life insurance policy payable
at Mr. Redding's discretion. Under the agreement, Mr. Redding is obligated to
transfer and assign to the Company all inventions and improvements relating to
the Intellectual Property. Mr. Redding is obligated to maintain all information
relating to the Intellectual Property and the Company in confidence during the
term of the agreement or thereafter. The Company may terminate Mr. Redding's
employment at any time upon notice from the Company either (i) upon the
determination by the Company that his performance is not satisfactory for any
reason (other than justifiable cause, as described below) and the giving of
notice specifies with reasonable particularity how such performance is not
satisfactory, and Mr. Redding has failed to remedy his performance to the
reasonable satisfaction of the Company within 30 days of such notice; or (ii)
upon the determination by the Company that there is justifiable cause, such as
his conviction of any crime involving the Company's money or other property or
which constitutes a felony or the unauthorized disclosure of confidential
information, any attempt to secure improper personal profit in connection with
the business of the Company or his repeated and willful failure to comply with
his duties under the employment agreement. If we terminate Mr. Redding's
employment for reasons other than justifiable cause, disability or death, he
will be entitled to receive severance pay in an amount equal to one-twelfth of
the sum of his then annual salary plus the amount of the last bonus awarded to
him for a period equal to one month for each month that he was employed by the
Company, provided however, that in no event shall such period be less than six
months nor more than 12 months. Mr. Redding may terminate his employment at any
time upon 30 days' prior written notice to the Company.

     On September 7, 2005, we entered into a letter agreement amending the terms
of Mr. Redding's employment agreement. Mr. Redding agreed to accept 152,135
shares of common stock in forgiveness of $132,292 in unpaid salary due him
through December 31, 2005. We also agreed to issue 250,000 shares of common
stock as an incentive bonus at such time as the Company received approval to
conduct its second human pilot trial on the Technology from an investigative
review board, which approval was received in November 2005. We also agreed in
the September 2005 letter agreement to renegotiate Mr. Redding's employment
agreement; however, the Company and Mr. Redding have not discussed the terms
further.

OPTION GRANTS IN THE LAST FISCAL YEAR

     We have not adopted any form of employee stock option or benefit plan.

FISCAL YEAR-END OPTION NUMBERS AND VALUES

     N/A

EQUITY COMPENSATION PLAN INFORMATION

     N/A


                                       34
<PAGE>
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

     The following table sets forth information as of January 17, 2006 with
respect to, unless otherwise noted, the beneficial ownership of our common stock
by each person known by us to be the beneficial owner of more than 5% of the
outstanding common stock, by each of our officers and directors, and by all of
our officers and directors as a group.

     For the purpose of this table, the beneficial ownership of a person
includes shares as to which that person has sole or shared power to vote, or to
direct the voting of, a security, or the sole or shared investment power with
respect to common stock (i.e., the power to dispose of, or to direct the
disposition of, a security) as well as shares that the person has the right to
acquire within 60 days (such as upon conversion of convertible securities or
exercise of warrants or options) as of January 17, 2006. For the purpose of
calculating the ownership percentages for each person listed, we have considered
to be outstanding both the total number shares actually outstanding on January
17, 2006 and the total number of shares that each such person (but not those of
any other person) then had the right to acquire within 60 days.

     The table below includes shares of common stock registered in the name of
Encapsulation Systems, Inc. ("ESI"). Bruce K. Redding, Jr., our Executive Vice
President of Licensing and Corporate Strategy is the president, chief executive
officer, a director, and the owner of approximately 73% of the capital stock of
ESI. These shares are being held by a third party escrow agent subject to
release only as follows:

          (A)  ESI shall be entitled to distribute a number of the ESI Shares as
               may be required in order to satisfy claims of non-affiliates of
               ESI, as provided in a plan of reorganization of ESI to be
               approved by the Bankruptcy Court.

          (B)  Commencing after July 28, 2005, one ESI Share shall be released
               to ESI for each dollar of gross revenue derived by the Company
               from the commercial exploitation of the Intellectual Property.

          (C)  On February 28, 2007 any ESI Shares held in escrow shall be
               released to ESI.

     ESI is not be entitled to vote the ESI Shares held in escrow on any matters
put to the Company's stockholders, except as to any proposed capital
reorganization or reclassification with respect to the Company's equity
securities, until they are release from escrow as described above. While the ESI
Shares are held in escrow, the holders shall be entitled to participate in any
dividends or distributions made by the Company to all holders of common stock
and to any payment or distribution upon the liquidation or winding-up of the
Company.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Name of                             Amount of             Percent of Outstanding
Beneficial Owner(1)                 Beneficial Ownership  Shares of Class Owned (2)
----------------------------------  --------------------  -------------------------
<S>                                 <C>                   <C>
Encapsulation Systems, Inc.(3)                17,265,023                      42.2%
----------------------------------  --------------------  -------------------------
Trilogy Capital Partners, Inc. (4)             2,616,806                       5.9%
----------------------------------  --------------------  -------------------------
Bruce K. Redding, Jr. (5)                        402,135                       1.0%
----------------------------------  --------------------  -------------------------
Bruce H. Haglund                                 221,256                       0.5%
----------------------------------  --------------------  -------------------------
All officers and directors                       623,391                       1.5%
as a group (1 person)
-----------------------------------------------------------------------------------
</TABLE>


                                       35
<PAGE>
(1)  The address for each of the persons identified in the foregoing table is
     care of the Company.
(2)  Based on 41,567,256 shares outstanding on January 17, 2006.
(3)  See the discussion above this chart regarding restrictions on ESI's voting
     on and disposition of its shares being held in escrow.
(4)  Represents shares issuable to Trilogy upon exercise of presently
     exercisable common stock purchase warrants, exercisable at $.72 per share
     and expiring on September 30, 2008.
(5)  Includes shares issuable to Mr. Redding based on an amendment of his
     employment agreement entered into on September 7, 2005. See "Item 10.
     Executive Compensation-Employment Agreements with Management." See the
     discussion above this chart regarding Mr. Redding's beneficial ownership of
     the ESI Shares. We have not included the ESI Shares in Mr. Redding's
     beneficial ownership because of the restrictions on voting and disposition
     of the ESI Shares, which are held in escrow.

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

     Since October 2003, Ms. Zennie Morris, the former president of the Company,
loaned the Company an aggregate of $59,500, of which $50,000 is evidenced by two
promissory  notes  in  the  amounts of $20,000 and $30,000 (the "Morris Notes").
The  Morris  Notes were due on September 30, 2004 and the $9,500 loan was due on
August  31, 2004.  Pursuant to their terms, the Morris Notes are payable without
interest.  As  of  the  date  hereof,  all  $59,500 of such indebtedness remains
payable  to  Ms.  Morris.

     We are party to an employment agreement with Bruce K. Redding, Jr.  Mr.
Redding is one of the inventors of the technologies encompassing the
Intellectual Property and the author or co-author of the various patents pending
transferred to the Company under the Purchase Agreement.  Mr. Redding is the
president, chief executive officer, principal stockholder and a director of ESI,
the entity from which we acquired the Intellectual Property.  The terms of Mr.
Redding's employment agreement are described under "Item 10.  Executive
Compensation-Executive Compensation."

     ESI provides research and development services to the Company on a
month-to-month basis.  During the year ended September 30, 2005, we incurred a
total of approximately $221,800 for such services.  As of September 30, 2005, we
owed ESI $34,728.  Mr. Redding, our Executive Vice President, is ESI's president
and largest shareholder; however he is a full-time employee of the Company.

     Gibson, Haglund & Paulsen, of which our Chairman, interim Chief Executive
Officer, and interim Chief Financial officer is a principal, provides legal
services to the Company.  In the year ended September 30, 2005, Gibson, Haglund
& Paulsen billed us $246,522, and we paid them $22,725 in cash and issued them
221,256 shares of common stock at a value of $183,642 ($.83 per share). As of
September 30, 2005, we owed Gibson, Haglund & Paulsen $69,600.

     On December 3, 2004, we entered into a loan extension agreement with Gary
Scott (the "Extension Agreement"). Pursuant to the Extension Agreement, Mr.
Scott agreed to extend the time in which to repay all sums due under a certain
promissory note originally made by the Company on June 30, 2004 in the principal
amount of $500,000 bearing interest at the rate of 10% per annum and due on the
earlier of the closing date of our acquisition of certain assets from
Encapsulation Systems, Inc. or July 31, 2004 (the "Note"), to no later than
December 17, 2004.  In consideration of the extension of the Note, we agreed:

     -    To pay to Mr. Scott the sum of $600,000, which sum includes (i)
          $500,000 principal amount of the Note, (ii) the previously agreed
          extension fees of $50,000 and $15,000, (iii) an additional $18,287.67
          extension fee for the current extension, and (iv) accrued interest
          through November 30, 2004 of $16,712.33.
     -    To pay Mr. Scott default interest on the Note at the rate of $605.00
          per day from and including December 1, 2004 until the Note is paid in
          full.


                                       36
<PAGE>
     -    To issue to Mr. Scott warrants to purchase up to 156,376 shares of
          common stock at a price of $1.33 per share, expiring on December 31,
          2007, said warrants to be fully vested when issued (the "Extension
          Warrants").
     -    To enter into a consulting agreement with Mr. Scott pursuant to which
          we retain Mr. Scott as an independent contractor to provide consulting
          services with respect to the organization and structure of the
          Company, business strategy, product development, and product
          distribution, and appoints Mr. Scott as the Chairman of our Company's
          Business Advisory Council (the "Consulting Agreement"). In
          consideration for providing such services, we granted to Mr. Scott
          warrants to purchase up to 3,458,647 shares of common stock at a price
          of $1.33 per share, expiring on December 31, 2007 (the "Consulting
          Warrants" and, collectively with the Extension Warrants, the "Scott
          Warrants").
     -    To register the common stock underlying the Scott Warrants (the
          "Warrant Shares") for public resale under the Securities Act of 1933,
          as amended (the "Securities Act") pursuant to the terms of a
          registration rights agreement (the "Registration Rights Agreement").
          Under the Registration Rights Agreement, we are required to cause a
          registration statement registering the Warrant Shares (either by
          including such shares in registration statement it files with the SEC
          for its own benefit or in a separate registration statement). We will
          bear all costs incident to such registration and the parties have
          agreed to indemnify each other from and against any and all losses,
          damages, liabilities, settlements, judgments or costs arising out of
          or relating to any untrue or alleged untrue statement of a material
          fact contained in any registration statement or prospectus which
          includes the Warrant Shares or arising out of or relating to any
          omission or alleged omission of a material fact required to be stated
          in such documents or necessary to make the statements therein not
          misleading, except to the extent that such statements are based on
          information provided by a party.
     -    To obtain directors' and officers' liability insurance on or as soon
          as practicable.

     On September 22, 2005, we entered into an Agreement and Mutual Release with
the Mr. Scott, paying him $653,880 (the $500,000 outstanding loan principal,
$71,175 in loan extension fees, and $82,705 in accrued interest through
September 22, 2005). Pursuant to the Agreement and Mutual Release, we agreed to
pay an additional $60,000 in consulting fees (of which $20,000 was paid in
December 2005) and release each other from any legal claims against one another.


                                       37
<PAGE>
ITEM 13.  EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number  Description                                                              Location Reference
--------------  -----------------------------------------------------------------------  ------------------
<S>             <C>                                                                      <C>

3.1             Articles of Incorporation                                                        1

3.2             Articles of Incorporation, as amended                                            1

3.3             First Amended and Restated Bylaws                                                1

4.1             Form of Subscription Agreement                                                   1

10.1            Promissory Note payable to Ms. Zennie Morris
                issued by Second Stage Ventures, Inc. issued
                October 24, 2000                                                                 1

10.2            Promissory Note payable to Lindlay Equity Fund
                issued by Second Stage Ventures, Inc. on September 15, 2000                      1

10.3            Promissory Note payable to Second Stage Ventures, Inc.
                issued by EasyTrivia.com, Inc. on September 25, 2000                             1

10.4            Share Purchase Agreement dated October 5, 2000 by and
                among Second Stage Ventures, Inc., EasyTrivia.com, Inc.,
                Brad W. Rudover and Brent Snejdar                                                1

10.5            Financing Agreement dated October 5, 2000 by and among
                Second Stage Ventures, Inc., EasyTrivia.com, Inc.,
                Brad W. Rudover and Brent Snejdar                                                1

10.6            Consulting Agreement dated October 5, 2000 by and
                between EasyTrivia.com, Inc., and Brent Snejdar

10.7            Consulting Agreement dated October 5, 2000 by and
                between EasyTrivia.com, Inc. and Brad W. Rudover                                 1

10.8            Assignment and Release Agreement dated October 27,
                2000 by and between Brad W. Rudover and Brent Snejdar.                           1

10.9            Website development contract between EasyTrivia.com, Inc.
                and Niche Enterprises dated July 24, 2000.                                       1

10.10           Promissory Note payable to Ms. Zennie Morris issued by
                Second Stage Ventures, Inc. dated January 12, 2001.                              1

10.11           Modification Agreement dated January 19, 2001 by and
                between Brad W. Rudover, EasyTrivia.com, Inc. and
                Second Stage Ventures Inc.                                                       1

10.12           Modification Agreement dated February 6, 2001 by and


                                       38
<PAGE>
                between Brad W. Rudover, EasyTrivia.com, Inc. and
                Second Stage Ventures Inc.                                                       1

10.13           Penny Web Inc. Terms and Conditions.                                             1

10.14           Click Agents Corp. Banner Placement Rules.                                       1

10.15           Lindlay Equity Fund Letter of March 7, 2001.                                     2

10.16           Memorandum of Engagement by and between
                EasyTrivia.com, Inc. and Sage Internet Solutions Ltd.
                dated July 2, 2001.                                                              2

10.17           Modification Agreement dated September 30, 2001 by
                and between Brad W. Rudover, EasyTrivia.com, Inc. and
                Second Stage Ventures Inc.                                                       2

10.18           Modification Agreement dated June 30, 2002 by and
                between Brad W. Rudover, EasyTrivia.com, Inc. and
                Second Stage Ventures Inc.                                                       3

10.19           Agreement with AdDynamix dated October 29, 2002.                                 3

10.20           Modification Agreement dated June 30, 2003 by and
                between Brad W. Rudover, EasyTrivia.com, Inc., and
                Second Stage Ventures Inc.                                                       4

10.21           Modification Agreement dated September 30, 2003 by and
                between Brad W. Rudover, EasyTrivia.com, Inc. and
                Second Stage Ventures Inc.                                                       5

10.22           Promissory Note dated October 20, 2003 in favor of
                Zennie Morris.                                                                   5

10.23           Letter of Intent dated January 5, 2004, as amended,
                January 29, 2004.                                                                6

10.24           Promissory Note dated March 1, 2004 in favor of
                Ms. Zennie Morris.                                                               7

10.25           Promissory Note dated May 14, 2004 in favor of
                Ms. Zennie Morris.                                                               8

10.26           Asset Purchase Agreement dated June 9, 2004 by and
                among Second Stage Ventures, Inc., Encapsulation Systems,
                Inc. and Echo RX, Inc.                                                           8

10.27           Promissory Note in the principal amount of $500,000 dated
                June 30, 2004 made by Second Stage Ventures, Inc. in favor
                of Gary Scott.                                                                   8


                                       39
<PAGE>
10.28           Amendment to Asset Purchase Agreement dated July 28,
                2004 by and among Second Stage Ventures, Inc.,
                Encapsulation Systems, Inc. and Echo RX, Inc.                                    8

10.29           Promissory Note dated July 28, 2004 made by Second Stage
                Ventures in favor of Encapsulation Systems, Inc.                                 8

10.30           Patent Security Agreement dated July 28, 2004 made
                by Second Stage Ventures, Inc. in favor of
                Encapsulation Systems, Inc.                                                      8

10.31           Employment Agreement date July 28, 2004 between Second
                Stage Ventures, Inc. and Bruce K. Redding, Jr.                                   8

10.32           Amendment dated July 28, 2004, to Promissory Note dated
                June 30, 2004 in the principal amount of $500,000 executed
                in favor of Gary Scott.                                                          9

10.33           Asset Purchase Agreement dated July 23, 2004 between
                Valcor Resources, Inc., a wholly owned subsidiary of the
                registrant, and Valcor S.A. Nicaragua.                                           9

10.34           Share Purchase Agreement dated July 28, 2004 between
                Second Stage Ventures, Inc. and Brad Rudover.                                    9

10.32           Agreement between Dermisonics, Inc. and Integrated
                Inventions (Canada) Inc. dated October 18, 2004.                                10

10.33           Warrant Agreement issued by Dermisonics, Inc. in favor
                of Integrated Inventions (Canada) Inc. dated October 18, 2004.                  10

10.35           Agreement between Dermisonics, Inc. and BX Inc. dated
                October 18, 2004.                                                               10

10.36           Registration Rights Agreement between Dermisonics, Inc.
                and BX Inc. dated October 18, 2004.                                             10

10.37           Warrant Agreement issued by Dermisonics, Inc. in favor of
                BX Inc. dated October 18, 2004.                                                 10

10.38           Agreement between Dermisonics, Inc. and Ananda Capital
                Partners, Inc. dated October 18, 2004.                                          10

10.39           Registration Rights Agreement between Dermisonics, Inc.
                and Ananda Capital Partners, Inc. dated October 18, 2004.                       10

10.40           Agreement between Dermisonics, Inc. and DD Investment
                dated October 18, 2004.                                                         10

10.41           Agreement between Dermisonics, Inc. and Current Capital
                Corp. dated October 18, 2004.                                                   10


                                       40
<PAGE>
10.42           Warrant Agreement issued by Dermisonics, Inc. in favor of
                Current Capital Corp. dated October 18, 2004.                                   10

10.43           Registration Rights Agreement between Dermisonics, Inc.
                and Current Capital Corp. dated October 18, 2004.                               10

10.45           Extension Agreement between Dermisonics, Inc. and
                Gary Scott dated December 3, 2004.                                              11

10.46           Consulting Agreement between Dermisonics, Inc. and
                Gary Scott dated December 3, 2004.                                              11

10.47           Warrant Agreement issued by Dermisonics, Inc. in favor
                of Gary Scott dated December 3, 2004.                                           11

10.48           Registration Rights Agreement between Dermisonics, Inc.
                and Gary Scott dated December 3, 2004.                                          11

10.49           Consulting Agreement between Dermisonics, Inc. and
                Adil Saleh dated December 3, 2004.                                              11

10.50           Warrant Agreement issued by Dermisonics, Inc. in favor
                of Adil Saleh dated December 3, 2004.                                           11

10.51           Registration Rights Agreement between Dermisonics, Inc.
                and Adil Saleh dated December 3, 2004.                                          11

10.52           Agreement for placement of promissory notes between
                Dermisonics, Inc. and VEM Aktienbank  AG dated
                July 1, 2005                                                                    12

10.53           Promissory Note dated August 29, 2005 in favor of
                VEM Aktienbank  AG                                                              14

10.54           Promissory Note dated August 29, 2005 in favor of
                VEM Aktienbank  AG                                                              14

10.55           Promissory Note dated December 8, 2005 in favor of
                VEM Aktienbank  AG                                                              14

10.56           Promissory Note dated December 8, 2005 in favor of
                VEM Aktienbank  AG                                                              14

10.57           Promissory Note dated December 21, 2005 in favor of
                James Ladner                                                                    14

10.58           Promissory Note dated December 21, 2005 in favor of
                Marguertie Ladner                                                               14

10.59           Promissory Note dated December 21, 2005 in favor of


                                       41
<PAGE>
                Parmino Finance, Ltd.                                                           14

10.60           Promissory Note dated December 21, 2005 in favor of
                John Vargheses                                                                  14

10.61           Warrant Agreement dated December 21, 2005 in favor of
                James Ladner                                                                    14

10.62           Warrant Agreement dated December 21, 2005 in favor of
                Marguerite Ladner                                                               14

10.63           Warrant Agreement dated December 21, 2005 in favor of
                Parmino Finance Ltd.                                                            14

10.64           Warrant Agreement dated December 21, 2005 in favor of
                John Varghese                                                                   14

10.65           Warrant Agreement dated December 21, 2005 in favor of
                James Ladner                                                                    14

10.66           Warrant Agreement dated October 4, 2005 in favor of
                Trilogy Capital Partners, Ltd.                                                  13

10.67           Warrant Agreement dated February 2, 2005 in favor of
                Intergrated Inventions (Canada) Inc.                                            14

10.68           Letter Agreement dated September 7, 2005 between
                Derminsonics, Inc. and Bruce  K. Redding Jr. regarding
                Redding Employment Agreement                                                    14

10.69           Consulting Agreement between Robert Trainor and
                Dermisonics, Inc. dated December 7, 2005                                        14

10.70           8% Convertible Debenture dated November 4, 2004 issued
                in favor of Victor Fein                                                         14

10.71           8% Convertible Debenture dated November 17, 2004 issued
                in favor of Alan Fein                                                           14

10.72           8% Convertible Debenture dated December 13, 2004 issued
                in favor of Hyman Fein                                                          14

10.73           8% Convertible Debenture dated December 22, 2004 issued
                in favor of Shalom Maidenbaum                                                   14

10.74           8% Convertible Debenture dated November 4, 2004 issued
                in favor of Osborn Partners Internation, Ltd.                                   14

10.75           Warrant Agreement dated January 17, 2005 in favor of
                Georg Hochwimmer                                                                14


                                       42
<PAGE>
10.76           Letter Agreement dated September 27, 2005 between
                Derminsonics, Inc. and The van de Kamp Group                                    14

10.77           Letter Agreement dated November 3, 2005 between
                Derminsonics, Inc. and The van de Kamp Group

10.78           Agreement and Mutual Release with Gary M. Scott and
                Dermisonics, Inc. dated September 22, 2005                                      14

10.79           Form of Berra Notes                                                             14

21.1            Subsidiaries of the Registrant.                                                  1

31.1            Certification of Acting Principal Executive Officer and
                Acting Principal Financial Officer pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002.                                              12

32.1            Certification of Acting Principal Executive Officer and
                Acting Principal Financial Officer pursuant to Section 906
                of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.                      12
</TABLE>

------------------------------------------------
(1) Previously filed as an exhibit to the registrant's registration statement on
Form SB-2 on March 12, 2001 as amended May 10, 2001.

(2) Previously filed as an exhibit to the registrant's annual report on Form
10-KSB on December 28, 2001.

(3) Previously filed as an exhibit to the registrant's Form 10-QSB for the
period ended June 30, 2002.

(4) Previously filed as an exhibit to the registrant's Form 10-QSB for the
period ended June 30, 2003.

(5) Previously filed as an exhibit to the registrant's Form 10-KSB for the
fiscal year ended September 30, 2003.

(6) Previously filed as an exhibit to the registrant's Form 8-K on January 7,
2004.

(7) Previously filed as an exhibit to the registrant's Form 10-QSB for the
period ended March 31, 2004.

(8)  Previously  filed  as an exhibit to the registrant's Current Report on Form
8-K  as  filed  with  the  Commission  on  August  12,  2004.

(9)  Previously  filed  as  an  exhibit  to the registrant's Form 10-QSB for the
period  ended  June  30,  2004

(10)  Previously  filed as an exhibit to the registrant's Current Report on Form
8-K  as  filed  with  the  Commission  on  October  21,  2004.

(11)  Previously  filed as an exhibit to the registrant's Current Report on Form
8-K  as  filed  with  the  Commission  on  December  9,  2004

(12) Previously filed as an exhibit to the registrant's Form 8-K dated September
20,  2005.

(13)  Previously  filed as an exhibit to the registrant's Form 8-K dated October
12,  2005

(14)  Filed  herewith.


                                       43
<PAGE>
ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

Audit  Fees

The  following table presents for the fiscal years ending September 30, 2005 and
2004  under  the  heading:
     (1)  "Audit  Fees,"  the  aggregate  fees  billed for professional services
          rendered  by  Peterson  Sullivan  PLLC  for  the  audit  of our annual
          financial  statements  and reviews of financial statements included in
          our  Forms  10-QSB  and  for  services  that  are normally provided by
          Peterson Sullivan PLLC in connection with our statutory and regulatory
          filings  or  engagements;

     (2)  "Audit-Related  Fees,"  the  aggregate  fees  billed  or assurance and
          related services by Peterson Sullivan PLLC that are reasonable related
          to the performance of the audit or review of our financial statements;

     (3)  "Tax  Fees,"  the  aggregate  fees  billed  for  professional services
          rendered by Peterson Sullivan PLLC for tax compliance, tax advice, and
          tax  planning.

<TABLE>
<CAPTION>
--------------------------------------------------------------
                          Year Ended           Year Ended
                      September 30, 2005   September 30, 2004
<S>                   <C>                  <C>
Audit Fees 1          $            15,750  $            27,133
--------------------  -------------------  -------------------
Audit Related Fees 2  $             5,229  $                 0
--------------------  -------------------  -------------------
Tax Fees 3            $                 0  $             4,403
--------------------------------------------------------------
</TABLE>

     (1)  Includes  primarily fees relating to the audit of the Company's annual
          financial  statements  and  for  reviews  of  the financial statements
          included  in  the  Company's  reports  on  Form  10-QSB.
     (2)  Includes fees for services related to the Purchase Agreement with ESI.
     (3)  Includes fees related to tax compliance, tax advice, and tax planning.

All  Other  Fees

     None.

Pre-Approval Policies and Procedures.

     The Company does not at this time have an audit committee, therefore, no
policies or procedures other than those required by SEC rules on auditor
independence, have been implemented. The Board of Directors will have to
pre-approve the engagement of the Company's principal independent accountants to
provide non-audit services. No non-audit services, except for the preparation of
corporate tax returns, for which pre-approval has been obtained, were provided
by the Company's principal independent accountants in 2005.


                                       44
<PAGE>
                                   SIGNATURES

     In  accordance  with the Exchange Act, the registrant caused this report to
be  signed  on  its  behalf  by  the  undersigned,  thereunto  duly  authorized.


                                   By:  /s/  Bruce  Haglund
                                        -------------------
                                   Name:  Bruce  Haglund
                                   Title:  Chairman, Principal Executive Officer
                                   and  Principal  Accounting  Officer
                                   Dated:  January  17,  2006


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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Person                                    Capacity                              Date
------------------  ----------------------------------------------------  ----------------
<S>                 <C>                                                   <C>
/s/ Bruce Haglund   Chairman, Acting Principal Executive Officer, Acting  January 17, 2005
------------------  Principal Financial Officer and Acting Principal
Bruce Haglund       Accounting Officer

------------------------------------------------------------------------------------------
</TABLE>


                                       45
<PAGE>
     ITEM 7. FINANCIAL STATEMENTS


                        Dermisonics, Inc. and Subsidiary
                          (A Development Stage Company)


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                      Page
<S>                                                                                   <C>

Report of Independent Registered Public Accounting Firm                                 2

Consolidated Balance Sheet as of September 30, 2005                                     3

Consolidated Statements of Operations for Years Ended September 30, 2005 and 2004
and for the Period from September 1, 2000 (Date of Inception), to September 30, 2005    4

Consolidated Statements of Shareholders' Equity for Years Ended September 30, 2005
and 2004 and for the Period from September 1, 2000 (Date of Inception), to
September 30, 2005                                                                      5

Consolidated Statements of Cash Flows for Years Ended September 30, 2005
and 2004 and for the Period from September 1, 2000 (Date of Inception), to
September 30, 2005                                                                      6

Notes to Consolidated Financial Statements                                              7
</TABLE>


                                        1
<PAGE>
[GRAPHIC OMITTED]
--------------------------------------------------------------------------------
          PETERSON SULLIVAN PLLC
--------------------------------------------------------------------------------

CERTIFIED PUBLIC ACCOUNTANTS                                TEL  206.382.7777
601 UNION STREET, SUITE 2300                                FAX  206.382.7777
SEATTLE, WASHINGTON 98101                                   http://www.pscpa.com


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

To the Board of Directors and Shareholders
Dermisonics, Inc.
West Conshohocken, Pennsylvania

We have audited the accompanying consolidated balance sheet of Dermisonics, Inc.
and  Subsidiary  (a development stage company) as of September 30, 2005, and the
related  consolidated  statements of operations, shareholders' equity (deficit),
and  cash  flows  for  the  years ended September 30, 2005 and 2004, and for the
period  from September 1, 2000 (date of inception) to September 30, 2005.  These
financial  statements  are  the responsibility of the Company's management.  Our
responsibility  is  to express an opinion on these financial statements based on
our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  consolidated  financial  position of
Dermisonics,  Inc.  and Subsidiary (a development stage company) as of September
30,  2005, and the consolidated results of their operations and their cash flows
for  the  years  ended  September  30,  2005  and  2004, and for the period from
September  1, 2000 (date of inception) to September 30, 2005, in conformity with
accounting  principles  generally  accepted  in  the  United  States.

The  accompanying  consolidated financial statements have been prepared assuming
the  Company  will  continue  as a going concern.  As discussed in Note 2 to the
consolidated  financial statements, the Company remains in the development stage
and  as  a  result  of  not yet generating significant revenues, has experienced
recurring losses and has liabilities in excess of liquid assets.  This situation
raises  substantial doubt about its ability to continue as a going concern.  The
financial  statements  do not include any adjustments that might result from the
outcome  of  this  uncertainty.



Peterson  Sullivan  PLLC
Seattle,  Washington
January 16, 2006


<PAGE>
<TABLE>
<CAPTION>
                                DERMISONICS, INC. AND SUBSIDIARY
                                  (A Development Stage Company)
                                   CONSOLIDATED BALANCE SHEET
                                       SEPTEMBER 30, 2005


                                            Assets

Current assets:
<S>                                                                                <C>
  Cash                                                                             $    356,992
  Prepaid expenses                                                                        5,068
                                                                                   -------------

    Total current assets                                                                362,060

Deferred financing fees                                                                  93,977
Intangible assets                                                                    19,458,654
                                                                                   -------------

    Total assets                                                                   $ 19,914,691
                                                                                   =============

                          Liabilities and Shareholders' Equity (Deficit)

Current Liabilities:
  Accounts payable and accrued expenses                                            $    340,772
  Interest payable                                                                       43,046
  Short-term notes payable to stockholder                                                59,500
  Convertible debentures                                                                232,827
  Convertible note payable, net of unamortized discount of $1,652                        23,348
  Current portion of long-term debt, stockholders                                     1,253,855
                                                                                   -------------

    Total current liabilities                                                         1,953,348

Long-term debt, stockholders, less current portion                                    1,540,889
Convertible promissory notes, long-term, net of unamortized discount of $157,511        626,990
Interest payable, long-term                                                              30,405

Commitments, contingencies and subsequent events

Shareholders' equity (deficit):
  Common stock, $0.001 par value.  Authorized 100,000,000
    shares; issued and outstanding 40,870,121 shares                                     40,870
  Common stock issuable; 109,010 shares                                                     109
  Additional paid-in capital                                                         27,126,640
  Deficit accumulated during the development stage                                  (11,404,560)
                                                                                   -------------

    Total shareholders' equity (deficit)                                             15,763,059


                                                                                   -------------
  Total liabilities and shareholders' equity (deficit)                             $ 19,914,691
                                                                                   =============
</TABLE>


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                       DERMISONICS, INC. AND SUBSIDIARY
                                        (A DEVELOPMENT STAGE COMPANY)
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                     FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004, AND FOR THE PERIOD
                       FROM SEPTEMBER 1, 2000 (DATE OF INCEPTION) TO SEPTEMBER 30, 2005


                                                                                           Cumulative During
                                                                                            the Development
                                                                  2005          2004             Stage
                                                              ------------  ------------  -------------------
<S>                                                           <C>           <C>           <C>

Revenue                                                       $         -   $         -   $                -

Operating expenses:
  Professional fees and research and development consulting     5,437,389     3,548,341            9,322,862
  Compensation                                                    133,958       100,833              234,791
  Loan fees                                                       103,833        83,288              187,121
  General and administrative                                      157,760       195,181              369,654
  Loss on debt settlement                                         367,110             -              367,110
                                                              ------------  ------------  -------------------

    Total operating expenses                                    6,200,050     3,927,643           10,481,538
                                                              ------------  ------------  -------------------

Interest expense                                                  758,636        30,999              801,223
                                                              ------------  ------------  -------------------
    Loss from continuing operations                             6,958,686     3,958,642           11,282,761

Discontinued Operations
  Loss from operations of discontinued
    segment, including loss on disposal of $362 in 2004                 -       (34,506)            (121,799)
                                                              ------------  ------------  -------------------

    Net loss                                                  $(6,958,686)  $(3,993,148)  $      (11,404,560)
                                                              ============  ============  ===================

Net loss per share (basic and fully diluted)

  Continuing operations                                       $     (0.17)  $     (0.10)  $            (0.54)
  Discontinued operations                                               -             -                (0.01)
                                                              ------------  ------------  -------------------
    Net loss per share                                        $     (0.17)  $     (0.10)  $            (0.55)
                                                              ============  ============  ===================

Weighted average shares outstanding used to
  calculate basic and fully diluted net loss per share         40,050,925    38,515,840           20,803,037
</TABLE>


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                                 DERMISONICS, INC. AND SUBSIDIARY
                                                   (A Development Stage Company)
                                           STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                                For the Years Ended September 30, 2005 and 2004, and for the Period
                                 from September 1, 2000 (Date of Inception) to September 30, 2005


                                                                                                          Deficit
                                                                       Common Stock                    Accumulated
                                                  Common Stock           Issuable         Additional    During the
                                              -------------------  ---------------------    Paid-in     Development
                                                Shares    Amount     Shares      Amount     Capital        Stage         Total
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
<S>                                           <C>         <C>      <C>          <C>       <C>          <C>            <C>
Issuance of Common Stock for Cash
  September 2000                               3,000,000  $ 3,000           -   $     -   $         -  $          -   $     3,000
Adjustment to paid-in capital to reflect
  reduction in  par value from $.005 to
  $.001 and the stock dividend of one-
  half of one share of common stock
  for all common stock outstanding                                                              7,000                       7,000
Net Loss for 2000                                                                                           (16,588)      (16,588)
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
Balance, September 30, 2000                    3,000,000    3,000           -         -         7,000       (16,588)       (6,588)
Issuance of Common Stock for Cash
  May 2001                                     3,945,000    3,945                             110,460                     114,405
  June 2001                                    7,560,000    7,560                             211,680                     219,240
  July 2001                                      969,000      969                              27,132                      28,101
  August 2001                                  2,526,000    2,526                              70,728                      73,254
Adjustment to paid-in capital to reflect
  reduction in  par value from $.005 to
  $.001 and the stock dividend of one-
  half of one share of common stock
  for all common stock outstanding                                                             35,000                      35,000
Net Loss for 2001                                                                                          (234,141)     (234,141)
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
Balance, September 30, 2001                   18,000,000   18,000           -         -       462,000      (250,729)      229,271
Net Loss for 2002                                                                                          (119,496)     (119,496)
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
Balance, September 30, 2002                   18,000,000   18,000           -         -       462,000      (370,225)      109,775
Net Loss for 2003                                                                                           (82,501)      (82,501)
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
Balance, September 30, 2003                   18,000,000   18,000           -         -       462,000      (452,726)       27,274
Common Stock Issuable for
  services received in April 2004                                   2,515,833     2,516     2,339,725                   2,342,241
Warrants Issuable for
  services received in April 2004                                                             693,196                     693,196
Issuance of Common Stock
  for Purchase of Assets in July 2004         18,000,000   18,000                          16,980,000                  16,998,000
Adjustment to paid-in capital to reflect
  reduction in  par value from $.005 to
  $.001 and the stock dividend of one-
  half of  one share of common stock
  for all common stock outstanding                                                             47,870                      47,870
Net Loss for 2004                                                                                        (3,993,148)   (3,993,148)
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
Balance, September 30, 2004                   36,000,000   36,000   2,515,833     2,516    20,522,791    (4,445,874)   16,115,433

Issuance of Common Stock
  Additional shares of common
    stock issued for fractional shares
    due to stock dividend                              7        -                                                               -
  For settlement of debt                         942,515      942                           1,137,669                   1,138,611
  For services                                 3,427,598    3,428  (2,515,833)   (2,516)    1,336,588                   1,337,500
  For cash in March 2005                         288,462      288                             149,712                     150,000
  For cash in April 2005                         211,539      212                             109,788                     110,000
Common stock issuable for debt settlement                             109,010       109        98,000                      98,109
Issuance of Warrants
  For services                                                                              3,117,180                   3,117,180
  For settlement of debt                                                                       97,125                      97,125
  For convertible note                                                                          5,982                       5,982
Recording beneficial conversion feature
  on convertible debentures                                                                   347,709                     347,709
Recording beneficial conversion feature
  on convertible note                                                                          26,829                      26,829
Recording beneficial conversion feature
  on convertible promissory notes, long-term                                                  177,267                     177,267
Net Loss for 2005                                                                                        (6,958,686)   (6,958,686)
                                              ----------  -------  -----------  --------  -----------  -------------  ------------
Balance, September 30, 2005                   40,870,121  $40,870     109,010   $   109   $27,126,640  $(11,404,560)  $15,763,059
                                              ==========  =======  ===========  ========  ===========  =============  ============
</TABLE>


                                        5
<PAGE>
<TABLE>
<CAPTION>
                                            DERMISONICS, INC. AND SUBSIDIARY
                                             (A DEVELOPMENT STAGE COMPANY)
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                          FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004, AND FOR THE PERIOD
                             FROM SEPTEMBER 2000 (DATE OF INCEPTION), TO SEPTEMBER 30, 2005


                                                                                                     Cumulative During
                                                                                                      the Development
                                                                            2005          2004             Stage
                                                                        ------------  ------------  -------------------
<S>                                                                     <C>           <C>           <C>

Cash flows from operating activities:
  Net loss                                                              $(6,958,686)  $(3,993,148)  $      (11,404,560)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
    Depreciation and amortization                                                 -        11,341               40,546
    Impairment of software development costs                                      -        11,301               11,301
    Impairment of goodwill                                                        -         9,512                9,512
    Loss on sale of subsidiary                                                    -           362                  362
    Issuance of common stock and warrants for services
      and loss on settlement of debt                                      5,413,525     3,035,437            8,448,962
    Accreted discount on convertible note payable and convertible
       promissory notes                                                      24,086             -               24,086
    Beneficial conversion feature recorded as interest expense related
      to the convertible debentures and convertible note payable            374,538             -              374,538
    Amortization of debt issuance costs                                       4,086             -                4,086
    Changes in operating assets and liabilities, net of effects
      from purchase of subsidiary
      Prepaid expenses                                                       (5,068)            -               (5,068)
      Accounts payable and accrued expenses                                (118,296)      456,296              344,624
      Due to shareholder company                                                  -       375,000              375,000
      Interest payable                                                       42,452        30,999               73,451
                                                                        ------------  ------------  -------------------

      Net cash used in operating activities                              (1,223,363)      (62,900)          (1,703,160)

Cash flows from investing activies:
  Purchase of intangible assets                                             (10,060)     (500,000)            (510,060)
  Purchase of subsidiary                                                          -             -                 (200)
  Purchase of furniture and equipment                                             -             -                 (677)
  Web site development costs                                                      -             -              (13,246)
  Cash acquired in purchase of subsidiary                                         -             -               14,420
  Advance to subsidiary                                                           -             -              (60,000)
                                                                        ------------  ------------  -------------------

      Net cash used in investing activities                                 (10,060)     (500,000)            (569,763)

Cash flows from financing activies:
  Proceeds from short-term notes payable to stockholder                           -        59,500               59,500
  Proceeds from short-term note payable                                           -       500,000              500,000
  Proceeds from issuance of convertible debentures                          232,827             -              232,827
  Proceeds from issuance of stockholder loans                             1,289,976             -            1,289,976
  Proceeds from issuance of convertible promissory notes                    784,501             -              784,501
  Proceeds from issuance of common stock                                    260,000             -              740,000
  Allocated proceeds from issuance of convertible note payable               19,018             -               19,018
  Allocated proceeds from issuance of warrants
    attached to convertible note payable                                      5,982             -                5,982
  Repayment of short-term note payable                                     (500,000)            -             (500,000)
  Convertible debt issuance costs                                           (98,063)            -              (98,063)
  Repayment of notes payable to stockholders                               (403,826)            -             (403,826)
                                                                        ------------  ------------  -------------------

      Net cash provided by financing activities                           1,590,415       559,500            2,629,915
                                                                        ------------  ------------  -------------------

      Increase (decrease) in cash                                           356,992        (3,400)             356,992

Cash at beginning of period                                                       -         3,400                    -
                                                                        ------------  ------------  -------------------

Cash at end of period                                                   $   356,992   $         -   $          356,992
                                                                        ============  ============  ===================

Supplemental disclosure of cash flow information:
  Debt discount recorded for beneficial conversion feature              $   183,249   $         -   $          183,249
  Cash paid for interest                                                $   196,368   $         -   $          207,868
  Due to shareholder settled by issuance of warrants                    $   375,000   $         -   $          375,000
</TABLE>


                                        6
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  DESCRIPTION OF BUSINESS

THE COMPANY
-----------

Dermisonics,  Inc.,  (formerly  known  as  Second  Stage  Ventures,  Inc.) ("the
Company"),  a  development stage company, was incorporated under the laws of the
State  of  Nevada  on September 1, 2000.  In October 2000, the Company purchased
100%  of  the  outstanding  shares  of  common  stock of EasyTrivia.com, Inc. (a
development  stage  company)  ("EasyTrivia").  EasyTrivia  developed  an
internet-based  entertainment  website  that features a trivia game show format.
In  July  2004, the director of EasyTrivia repurchased all outstanding shares in
EasyTrivia  for  $200  consistent  with  a  share purchase agreement between the
Company  and  the  director.  At  the  time  of  the decision to sell EasyTriva,
management  had  determined  that  the  value  of  intangible  assets related to
EasyTriva  had been impaired.  An impairment loss was recorded to give effect to
a  write-down of these assts to the net realizable value of the agree-upon sales
price  of  $200  prior  to  the  sale  date.

On  July  28,  2004,  the  Company  entered  into  an  Asset  Purchase Agreement
("Purchase  Agreement")  with  Encapsulation  Systems, Inc. and its wholly-owned
subsidiary,  Echo  RX,  Inc.  (collectively,  "ESI")  and  acquired  certain
intellectual  property  encompassing  a  new  type of non-invasive drug delivery
system  more  commonly  known  as a transdermal patch ("Intellectual Property").
Under  the  Purchase Agreement, the Company paid an aggregate purchase price for
the  Intellectual  Property  of  $19,448,594,  consisting  of  cash of $500,000,
long-term  notes  payable in the total amount of $1,908,594, and the issuance of
common stock valued at $17,040,000 on the effective date of the purchase.  Also,
the  Company  will pay an annual royalty equal to 2.5% of gross revenues derived
from  the  Intellectual Property to be paid for the life of all related patents,
and  any  allowable regulatory extensions, or for 20 years, whichever is longer.

When  the  Company  entered  into the Purchase Agreement, ESI was an involuntary
debtor under Chapter 7 of the United States Bankruptcy Code in the United States
Bankruptcy  Court for the Eastern District of Pennsylvania ("Bankruptcy Court").
ESI's  sale  of  the Intellectual Property on the terms provided in the Purchase
Agreement  was  made  upon  order of the Bankruptcy Court, pursuant to which the
Company is entitled to all of the protections provided to a good faith purchaser
of  assets  out  of  bankruptcy.

Upon  the  closing  of  the  Purchase  Agreement,  the  management  and Board of
Directors of the Company resigned and a new Chairman was appointed and serves as
an  interim  Chief Executive Officer.  The Chairman also serves as the Company's
sole  director.

During  the  year  ended  September  30,  2004,  the Company also founded Valcor
Resources,  Inc.,  a  wholly-owned  subsidiary,  for  the purpose of pursuing an
investment  in  certain timber operations.  During the year, the Company decided
not  to  pursue  this  investment  and  distributed  all  of  its shares in this
subsidiary  to  the  Company's  shareholder.  No gain or loss resulted in any of
these  transactions.

As  indicated  in  the  accompanying  consolidated  financial  statements,  the
Company's  accumulated  deficit during the development stage totaled $11,404,560
for the period from September 1, 2000 (date of inception) to September 30, 2005.
The  Company  has  sold  its only operating subsidiary and has not generated any
revenue from the recently purchased assets.  The Company's successful attainment
of  profitable  operations  is  dependent  on future events, including obtaining
additional  financing  to  sustain  its operations while it pursues its business
plan.

NOTE  2.  GOING  CONCERN

The  Company's  consolidated  financial  statements are prepared consistent with
accounting  principles  generally  accepted in the United States applicable to a
going  concern,  which contemplates the realization of assets and liquidation of
liabilities  in  the  normal  course  of  business.  However,  as  shown  in the
accompanying  consolidated  financial  statements,  the  Company  has  sustained
substantial  losses  as  it  has


                                        7
<PAGE>
remained  in  the development stage since inception and has no current source of
significant  revenue.  Management  is  in  the process of forming a new business
plan  to  develop  the  Intellectual  Property  it  has  acquired.

The consolidated financial statements do not include any adjustments relating to
the  recoverability  and  classification  of  recorded  asset  amounts  and
classification  of  liabilities  that  might  be necessary should the Company be
unable  to  continue  in  existence.

NOTE 3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
---------------------------

The  accompanying  consolidated  financial  statements  include  the accounts of
Dermisonics  and  its  wholly  owned  subsidiary, EasyTrivia (collectively, "the
Company").  As  noted  in  Note  1,  EasyTrivia  was  sold  in  July  2004.  All
inter-company  accounts  and  transactions  have  been  eliminated.

RECLASSIFICATION
----------------

Certain  amounts  in  the  prior year financial statements were reclassified for
purposes  of  comparability  to  the  current  year  presentation.

CASH
----

Cash includes highly liquid investments with original maturities of three months
or  less.  On  occasion,  cash  balances  exceed  the  federally insured limits.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
---------------------------------------

The  Company has the following financial instruments: cash, accounts payable and
accrued  expenses,  and  amounts due under convertible debentures, a convertible
note  payable,  short-term  and  long-term debt to stockholders, and convertible
promissory  notes.  The  carrying  value  of  these  instruments, other than the
convertible  note payable, approximate fair value based on their liquidity.  The
fair  value  of the convertible note payable was determined as the excess of the
proceeds  over  the  fair  value  of  the  warrants.

DEFERRED  FINANCING  FEES
-------------------------

The Company records costs incurred related to debt financings as additional paid
in  capital and amortizes, on a straight-line basis, the costs incurred over the
life of the related debt.  The amortization is recognized as interest expense in
the  consolidated  financial  statements.  Upon  conversion  into  equity  or
extinguishment  of  the  related  debt,  the  Company recognizes any unamortized
portion  of  the  deferred  financing  fees  as  interest  expense at that time.

INTANGIBLE ASSETS
-----------------

Patent  rights  and  trademarks  are  recorded  at cost.  At September 30, 2005,
management  believes  the patent rights and trademarks have indefinite lives and
are therefore not subject to amortization but are tested for impairment at least
annually.

VALUATION  OF  WARRANTS
-----------------------

The  Company estimates the value of warrants using a Black-Scholes pricing model
based  on  management  assumptions  regarding  the  warrant  lives,  expected
volatility,  and  risk  free  interest  rates.


                                        8
<PAGE>
INCOME TAXES
------------

Income  taxes  are accounted for under the asset and liability method.  Deferred
tax  assets  and  liabilities  are  recognized  for  the future tax consequences
attributable  to differences between the financial statement carrying amounts of
existing  assets  and  liabilities  and their respective tax bases and operating
loss  and  tax  credit  carry forwards.  Deferred tax assets and liabilities are
measured  using  enacted  tax  rates  expected to apply to taxable income in the
years  in  which  those  temporary  differences  are expected to be recovered or
settled.  The  effect  on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.  A
valuation  allowance  is recorded for deferred tax assets when it is more likely
than  not  that  such  deferred  tax  assets  will  not  be  realized.

GOODWILL
--------

In connection with the acquisition of EasyTrivia, the Company recorded $9,512 of
goodwill.  As  a  result  of the sale of EasyTrivia, the Company determined that
goodwill  was  impaired  and the entire amount was written off during the fiscal
year ended September 30, 2004.  The goodwill impairment is included in loss from
operations  of  discontinued  segment.

RESEARCH AND DEVELOPMENT COSTS
------------------------------

All of the Company's research and development costs are expensed as incurred.
Through September 30, 2005, all research and development costs were paid to
third parties and are included in professional fees and research and development
consulting expense in these consolidated financial statements.

SOFTWARE AND WEB SITE DEVELOPMENT COSTS
---------------------------------------

The  costs  of  computer software developed or obtained for internal use, during
the  preliminary  project  phase,  as  defined  under Statement of Position 98-1
"Accounting  for  the  Costs  of  Computer  Software  Developed  or Obtained for
Internal  Use,"  are  expensed  as incurred.  The costs of web site development,
during  the planning stage, as defined under Emerging Issues Task Force No. 00-2
"Accounting for Web Site Development Costs," are expensed as incurred.  Computer
software  and  web  site  development  costs incurred during the application and
infrastructure  development  stage, including external direct costs of materials
and services consumed in developing the software, creating graphics and web site
content,  payroll,  and  interest  costs, are capitalized and amortized over the
estimated  useful  life,  beginning when the software is ready for use and after
all  substantial  testing  is  completed  and  the  web  site  is  operational.

As  described  in  Note  1,  in  July  2004,  the Company sold EasyTrivia to its
original  owner  for  $200.  Therefore,  the  unamortized  software  and website
development  costs  of $11,301 had been written down to the selling price during
the  year  ended  September 30, 2004 and included in the loss from operations of
discontinued  segment.

DISCONTINUED  OPERATIONS
------------------------

As  described  in  Note  1, in July 2004, the Company sold all of the issued and
outstanding shares of EasyTriva, Inc. and, accordingly, the operating results of
this  subsidiary  have  been  presented  as  discontinued  operations  in  these
financial  statements.  Operations of this subsidiary have generated no revenues
since  inception.

SEGMENT  REPORTING
------------------

The  Company  operates  in  only  one  segment  since  its  disposal  of  its
internet-based  entertainment  website.

NET  LOSS  PER  SHARE
---------------------

Basic  net  loss  per share is computed by dividing the net loss by the weighted
average number of common shares outstanding in the period.  Diluted net loss per
share  takes  into consideration common shares outstanding (computed under basic
net  loss  per  share)  and  potentially  dilutive  common  shares.  As  the


                                        9
<PAGE>
Company  had  a  net  loss  attributable  to  common shareholders in each of the
periods  presented,  basic  and  diluted  net  loss  per  share  are  the  same.

Excluded  from  the computation of diluted net loss per share for the year ended
September  30, 2005, because their effect would be antidilutive, are warrants to
acquire  5,945,025 shares of common stock with a weighted-average exercise price
of  $1.33  per share. Also excluded from the computation of diluted net loss per
share  for  the year ended September 30, 2005 are 418,533 shares of common stock
that  may  be  issued  if  investors  exercise  their conversion right under the
Convertible  Debentures  and  the  Convertible  Note  as  discussed  in  Note 8,
"Short-Term  Convertible  Debt,"  because  their  effect  would be antidilutive.

Excluded from the computation of diluted net loss per share for the year ended
September 30, 2004, because their effect would be antidilutive, are warrants to
acquire 1,261,070 shares of common stock with a weighted-average exercise price
of $1.33 per share.

During  the  years  ended September 30, 2005 and 2004, services were received by
the  Company  for  common  shares  that were issued subsequent to year-end.  For
purposes  of  net  loss  per share computations, these issuable shares have been
included  as  outstanding  as  of  the  date  the  services were received by the
Company.

In  January  2005,  a  majority of the Company's stockholders voted to amend the
Company's  Articles of Incorporation to increase the number of authorized shares
of  common stock from 50,000,000 shares to 100,000,000 shares and reduce the par
value  from  $0.01  per  share  to  $0.001  per  share.

On  January  4, 2005, the Company declared a stock dividend equal to one-half of
one share of common stock for each share of common stock issued and outstanding.
The  effect of the stock dividend has been recognized in all share and per share
data  in  the  accompanying  financial  statements  and  notes  to the financial
statements  for  periods  presented.

On  December  29,  2003, the Board of Directors declared a stock dividend of one
share  of  common  stock  for  every  one  share  of  common  stock  issued  and
outstanding.  The  effect of the stock dividend has been recognized in all share
and  per  share  data  in the accompanying consolidated financial statements and
notes  to  the  financial  statements.

ESTIMATES
---------

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

COMPREHENSIVE  INCOME
---------------------

The  Company  had  no  elements  of  comprehensive  income  for  the period from
September  1,  2000  to  September  30,  2005.

RECENTLY  ISSUED  ACCOUNTING  STANDARDS
---------------------------------------

SFAS  No.  151,  Inventory  Costs, is effective for fiscal years beginning after
June  15,  2005.  This  statement  amends  the  guidance  in Accounting Research
Bulletin  No.  43,  Chapter  4, Inventory Pricing, to clarify the accounting for
abnormal  amounts  of idle facility expense, freight, handling costs, and wasted
material (spoilage).  The adoption of SFAS No. 151 is expected to have no impact
on  the  Company's  consolidated  financial  statements.

SFAS No. 152, Accounting for Real Estate Time-Sharing Transactions, is effective
for  fiscal years beginning after June 15, 2005.  This statement amends SFAS No.
66,  Accounting  for  Sales  of  Real  Estate,


                                       10
<PAGE>
to  reference  the  financial  accounting and reporting guidance for real estate
time-sharing  transactions  that  is provided in American Institute of Certified
Public  Accountants  Statement  of  Position  04-2,  Accounting  for Real Estate
Time-Sharing  Transactions.  The adoption of SFAS No. 152 is expected to have no
impact  on  the  Company's  consolidated  financial  statements.

SFAS  No.  123(R),  Share-Based  Payment,  replaces SFAS No. 123, Accounting for
Stock-Based  Compensation,  and  supersedes  APB  Opinion No. 25, Accounting for
Stock  Issued  to Employees.  This statement requires that the compensation cost
relating  to share-based payment transactions be recognized at fair value in the
financial  statements.  The  Company  is required to apply this statement in the
first  interim  period  that  begins  after  December  15, 2005.  The Company is
currently  analyzing  the  requirements  of  the  adoption  of  SFAS No. 123(R).

SFAS  No. 153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
29, is effective for fiscal years beginning after June 15, 2005.  This statement
addresses  the  measurement of exchange of nonmonetary assets and eliminates the
exception  from  fair-value  measurement  for  nonmonetary  exchanges of similar
productive  assets  in  paragraph  21(b)  of  APB Opinion No. 29, Accounting for
Nonmonetary  Transactions,  and replaces it with an exception for exchanges that
do  not have commercial substance.  The adoption of SFAS No. 153 is not expected
to have a significant impact on the Company's consolidated financial statements.

Financial  Accounting  Standards  Board Interpretation ("FIN") No. 46(R) revised
FIN  No.  46,  Consolidation  of  Variable  Interest  Entities,  requiring  the
consolidation  by  a  business  of variable interest entities in which it is the
primary  beneficiary.  The  adoption of FIN No. 46(R) did not have any impact on
the  Company's  consolidated  financial  statements.

The Emerging Issues Task Force ("EITF") reached consensus on Issue No. 03-1, The
Meaning  of  Other-Than-Temporary  Impairment  and  Its  Application  to Certain
Investments,  which  provides  guidance  on  determining  when  an investment is
considered  impaired,  whether  that  impairment is other than temporary and the
measurement  of  an  impairment loss. The FASB issued FSP EITF 03-1-1, Effective
Date  of  Paragraphs  10-20  of  EITF  Issue  No.  03-1,  The  Meaning  of
Other-Than-Temporary  Impairment  and  Its  Application  to Certain Investments,
which  delays  the  effective  date for the measurement and recognition criteria
contained  in EITF 03-1 until final application guidance is issued. The adoption
of  this  consensus  or  FSP  is  expected  to  have  no impact on the Company's
consolidated  financial  statements.

The  EITF  reached  a  consensus  on  Issue No. 04-8, The Effect of Contingently
Convertible  Debt  on  Diluted  Earnings  Per  Share,  which  addresses when the
dilutive  effect of contingently convertible debt instruments should be included
in  diluted  earnings (loss) per share. EITF 04-8 became effective for reporting
periods  ending  after December 15, 2004. The adoption of EITF 04-8 did not have
an  impact  on  diluted  earnings  (loss)  per  share  of  the  Company.

NOTE  3.  ACQUISITION  OF  INTELLECTUAL  PROPERTY

As  described in Note 1, the Company purchased Intellectual Property in exchange
for  18,000,000  shares  of  common  stock, notes payable in the total amount of
$1,908,594, and cash of $500,000.  The aggregate purchase price was allocated to
the  value  of  assets  acquired  as  follows:

<TABLE>
<CAPTION>
<S>                                  <C>
          Patent rights              $19,200,000
          Trademarks                     248,594
                                     -----------
                                     $19,448,594
                                     ===========
</TABLE>


NOTE  4.  STOCK  BASED  COMPENSATION

The  Company  accounts  for  stock-based  compensation under the recognition and
measurement  principles  of  APB Opinion No. 25, "Accounting for Stock Issued to
Employees,"  and  related  interpretations.  To  the


                                       11
<PAGE>
extent  options are granted and those options have an exercise price equal to or
greater  than  the  market  value  of the underlying common stock on the date of
grant,  no stock-based employee compensation cost will be recorded. Compensation
cost  for  stock  options  granted  to  non-employees  is  measured  using  the
Black-Scholes  valuation  model at the date of grant multiplied by the number of
options  granted.  Since  the  Company  did not issue stock options to employees
during  the  years  ended  September 30, 2005 or 2004, there is no effect on net
loss  or net  loss  per share had the Company applied the fair value recognition
provisions  of  Statement of Financial Accounting Standards No. 123, "Accounting
for  Stock-Based  Compensation,"  to stock-based employee compensation. When the
Company  issues  shares  of  common stock to employees and others, the shares of
common  stock  are  valued  based  on the market price at the date the shares of
common  stock  are  approved  for  issuance.

NOTE  5.  DUE  TO  SHAREHOLDER  COMPANY

On  April  30,  2004, the Company entered into an oral agreement with Integrated
Inventions  (Canada), Inc. ("III") for services III rendered with respect to the
acquisition  by  the  Company  of the Intellectual Property described in Note 1.
During  the  year  ended September 30, 2004, the Company issued shares of common
stock  in  partial consideration for these services.  The unpaid balance due for
these  services  amounted  to  $375,000.  In  February  2005, the Company issued
416,667  shares of common stock and warrants to purchase up to 208,333 shares of
common  stock  at  an  exercise price of $1.33 per share in consideration of the
settlement of the $375,000 payable.  As a result, during the quarter ended March
31,  2005, the Company recognized a loss of approximately $360,000 in connection
with  the  settlement  of  this  debt.

NOTE  6.  SHORT-TERM  NOTES  PAYABLE  TO  STOCKHOLDER

Since  October  2003,  Ms.  Zennie  Morris, the former president of the Company,
loaned the Company an aggregate of $59,500, of which $50,000 is evidenced by two
promissory  notes  in  the  amounts of $20,000 and $30,000 (the "Morris Notes").
The  Morris  Notes were due on September 30, 2004 and the $9,500 loan was due on
August  31,  2004.  Pursuant  to  their  terms,  the  Morris  Notes  do not bear
interest.  As  of  September  30,  2005  the outstanding combined balance on the
Morris  Notes was $59,500 and all were in default.  There is no default interest
rate.

NOTE  7.  SHORT-TERM  NOTE  PAYABLE

On  June  30, 2004, the Company received a $500,000 loan (the "Promissory Note")
from an unrelated individual in connection with the purchase of the Intellectual
Property  from ESI.  The $500,000 was used for part of the consideration for the
acquisition  of  the  Intellectual  Property.  The  Promissory  Note  was due on
December  17,  2004.  The stated interest rate is 10% but because the Promissory
Note  was  in  default, default interest was accruing at $605 per day.  Interest
expense related to the Promissory Note for the year ended September 30, 2005 was
$187,236.  Since  the  Company  was  in  default  under the Promissory Note, the
Company entered into a loan extension agreement ("the Extension Agreement") that
extended the time in which to repay the Promissory Note.  In accordance with the
terms  of  the  Extension  Agreement, the Company incurred a related loan fee of
$187,121,  $12,113  of  which  was  paid in cash in January 2005 and $103,833 of
which  was  paid  by  issuing  warrants  to  purchase up to 150,376 shares at an
exercise price of $1.33 per share.  The remaining unpaid loan fee of $71,175 was
included  in  accrued  expenses  at  June  30,  2005.

On  September 22, 2005, the Company entered into an Agreement and Mutual Release
agreeing to pay the lender of the Promissory Note $653,880 to settle in full the
$500,000  outstanding  loan  principal  balance  of  the  Promissory  Note , the
remaining  unpaid loan extension fee of $71,175, and $82,705 in accrued interest
through  September  22,  2005, Pursuant to the Agreement and Mutual Release, the
Company  also  agreed  to pay an additional $60,000 in consulting fees (of which
$20,000  was  paid  in  December  2005).


                                       12
<PAGE>
NOTE  8.  SHORT-TERM  CONVERTIBLE  DEBT

In  November  and December 2004, and March 2005, the Company issued one-year, 8%
interest  bearing  debentures  (the  "Convertible Debentures") to five unrelated
individuals  in  the  aggregate  amount of $232,827.  The Convertible Debentures
were  originally  convertible into shares of common stock at the lesser of $0.90
per  share  or 60% of the five-day average trading price after the daily trading
volume  exceeded  100,000  shares  for  10 consecutive trading days ("Conversion
Reset  Price").  On  June  6, 2005, the Conversion Reset Price was triggered and
the  Debentures  became  convertible  at  $0.60  per  share.  The  Convertible
Debentures  originally  matured one-year from the issuance date, in November and
December  2005 and March 2006 (the "Maturity Date"), respectively. Principal and
interest are due in full on the Maturity Date.  In January 2006, the Convertible
Debenture  holders agreed to extend the maturity of their Convertible Debentures
six  months  from  their  original  maturity  dates.  In  consideration  of  the
extension  of  the  maturity dates, the Company reduced the conversion price per
share  of  the  Convertible Debentures to $0.40 per share.  Interest expense for
the  year  ended  September  30,  2005 related to the Convertible Debentures was
$13,158.  At  September  30,  2005,  accrued interest related to the Convertible
Debentures  was  $13,158.

In  November  2004, the Company issued an 8% interest-bearing note payable ("the
Convertible  Note")  in the amount of $25,000, convertible into 30,488 shares of
common  stock  at  $0.82  per share.  The Convertible Note matures September 30,
2005.  Principal  and  interest are due in full upon maturity.  Interest expense
for  the  year  ended  September  30,  2005  related to the Convertible Note was
$1,742.  At September 30, 2005, accrued interest related to the Convertible Note
was $1,742.  Warrants to purchase up to 15,283 common shares were also issued in
connection  with the Convertible Note.  These warrants have an exercise price of
$1.33  and  expire on October 31, 2005.  Proceeds from the Convertible Note were
allocated pro-rata based on the relative fair values of the Convertible Note and
related  warrants.  The  amount  attributable to the warrants of $5,982 has been
recorded as a discount against the carrying amount of the Convertible Note and a
credit  to  additional  paid-in-capital.  The  discount is amortized as interest
expense,  using  the  effective interest method over the term of the Convertible
Note.  Total  interest expense recorded during the year ended September 30, 2005
related  to the accretion of the discount was $4,330.  As of September 30, 2005,
the  carrying value of the Convertible Note was $23,348, net of unamortized debt
discount of $1,652. As of September 30, 2005, the principal and accrued interest
are  due  and  unpaid  on  the  Convertible  Note.

The  holders  of  the  Convertible  Debentures and the Convertible Note have the
option to convert all or part of their notes into shares of the Company's common
stock  effective  as  of  the  date  of  the issuance of the debt.  Due to their
convertible  nature,  the  Company recorded a total charge due to the beneficial
conversion feature of $420,372 ($257,871 in the quarter ended December 31, 2004,
$116,667  in the quarter ended March 31, 2005) in accordance with EITF Issue No.
98-5,  Accounting for Convertible Securities with Beneficial Conversion Features
or  Contingently  Adjustable  Conversion  Ratios,  and  EITF  Issue  No.  00-27,
Application  of  EITF  Issue  No.  98-5 to Certain Convertible Instruments.  The
value  of  the  beneficial  conversion  feature was measured using the intrinsic
value  method and was charged to interest expense with a corresponding credit to
additional  paid-in  capital  at the date of the issuance because the notes were
immediately  convertible.

NOTE  9.  LONG-TERM  DEBT,  STOCKHOLDERS

The  Company  has  two  long-term  notes  payable  to ESI in connection with the
Purchase  Agreement  dated  July  28, 2004. The original principal amount of the
first  note  ("Note 1") was $1,826,734 and is due on December 1, 2006. Quarterly
installment  payments  of $250,000 are payable on Note 1 starting March 1, 2005.
In the event of a default under Note 1, the entire amount then owing will become
due  and  payable  immediately,  together  with  all  costs  incurred by ESI and
reasonable  attorneys' fee. The following constitute events of default under the
Note:  (i) if the Company fails to make any payment due within 30 days after the
date  on  which the Company receives notice of such failure, (ii) if the Company
fails  to  observe and perform any of the covenants or agreements on its part to
be  observed  or  performed under Note 1 or the Security Agreement (as described
below), (iii) if the Company defaults under the terms of the Security Agreement,
or  (iv)  if  the  Company  take  steps  that  evince bankruptcy or liquidation.


                                       13
<PAGE>
The  Company  also executed a Patent Security Agreement in favor of ESI securing
the  Company's  obligations under the Purchase Agreement and Note 1 and granting
to  ESI  a  security interest in and to the Intellectual Property (the "Security
Agreement").  Under  the  Security  Agreement,  if the Company commits an act of
default  under  Note  1 or if the Company fails to pay the trailer fee within 30
days  after  the  Company  receives written notice from ESI of such failure, ESI
shall have the right to take back the Intellectual Property. ESI's right to take
back the technology is evidenced by a Patent Assignment Agreement dated July 28,
2004.

Note  1  has  no  stated  interest  rate but interest has been imputed at 6.25%.
Interest  expense during the year ended September 30, 2005 related to Note 1 was
$127,081.  As  of  September  30,  2005, the outstanding principal balance under
Note  1  is  $1,429,002.  As  of September 30, 2005, accrued interest payable on
Note  1  was  $24,813.  Note  1  is  secured  by  the  Intellectual  Property.

The  original  principal amount of the second note ("Note 2") was $81,860 and is
payable in monthly installments of $2,714. The interest rate is 16.25%. Interest
expense  during the year ended September 30, 2005 related to Note 2 was $12,407.
As  of  September  30,  2005,  the  Company  is  in  default with respect to the
scheduled  monthly  payments.  At  September 30, 2005, the outstanding principal
balance  on Note 2 is $75,766 all of which is included in the current portion of
long-term  debt, stockholders in the consolidated balance sheet. As of September
30,  2005,  accrued  interest payable on Note 2 was $3,333. Note 2 is unsecured.

During  the  three  months ended September 30, 2005, June 30, 2005 and March 31,
2005,  the  Company  entered  into  twelve long-term notes payable (collectively
"2005  Notes")  totaling  $674,976,  $190,000  and  $425,000, respectively, to a
stockholder  company.  The  2005 Notes bear interest at 8% per annum.  Principal
and  interest  related  to  the  2005 Notes entered into during the three months
ended  September  30, 2005 are due in full on September 30, 2007.  Principal and
interest  related  to  the 2005 Notes entered into during the three months ended
June  30, 2005 are due in full on June 30, 2007.  Principal and interest related
to  the 2005 Notes entered into during the three months ended March 31, 2005 are
due  in  full  on March 31, 2007.  Interest expense for the year ended September
30,  2005  related  to  the  2005  Notes was $23,432.  As of September 30, 2005,
accrued  interest  related  to  the  2005 Notes was $23,432.  The 2005 Notes are
unsecured.

The  following  is  a  schedule of the future minimum principal payments for the
years  ending  September  30:

<TABLE>
<CAPTION>
<S>                                     <C>
          2006                          $ 1,253,855
          2007                              250,913
          2008                            1,289,976
                                        ------------
                                          2,794,744
          Less current portion           (1,253,855)
                                        ------------
                                        $ 1,540,889
                                        ============
</TABLE>


NOTE  10.  CONVERTIBLE  PROMISSORY  NOTES,  LONG-TERM

On  August  29,  2005,  the  Company  issued  convertible  promissory notes (the
"Convertible  Promissory  Notes")  totaling $784,501. The Convertible Promissory
Notes  mature on August 29, 2007 ("Maturity Date") at which time the outstanding
principal and all accrued interest is due. The Convertible Promissory Notes bear
interest  at  a  rate  of  10% per annum and are payable upon maturity. Interest
expense  for  the  year  ended  September  30,  2005  related to the Convertible
Promissory  Notes was $6,973. As of September 30, 2005, accrued interest related
to  the  Convertible  Promissory  Notes  was  $6,973.

The Company may prepay, without premium or penalty, the principal amount and all
accrued  interest  related  to the Convertible Promissory Notes at any time upon
ten  days  prior  written  notice  to  the  Convertible  Promissory  Note holder
("Prepayment  Date").  The  Convertible  Promissory  Note  holders  may


                                       14
<PAGE>
convert  on  the  Maturity Date or any Prepayment Date all or any portion of the
outstanding  principal balance of the Convertible Promissory Note and all or any
portion  of  the accrued interest into shares of the Company's common stock at a
conversion  price  equal  to  80%  of the average closing bid price per share of
common  stock  during  the  five  trading  days  immediately  prior  to any such
conversion;  provided  however,  that  the Company is not required to issue more
than  1,389,474  shares  of  common stock upon the conversion of the Convertible
Promissory  Notes.

The  intrinsic value of the Convertible Promissory Notes results in a beneficial
conversion  feature.  In  accordance  with  EITF  Issue No. 98-5, Accounting for
Convertible  Securities  with  Beneficial  Conversion  Features  or Contingently
Adjustable  Conversion  Ratios,  and  EITF  Issue No. 00-27, Application of EITF
Issue  No.  98-5 to Certain Convertible Instruments, the value of the beneficial
conversion  feature  was  recorded  as  a discount on the Convertible Promissory
Notes  with  a corresponding credit to additional paid-in capital at the date of
the  issuance.  Accordingly,  the Company recorded a discount of $177,267 during
the  year  ended September 30, 2005 related to the Convertible Promissory Notes.
The  Company amortizes the discount using the effective interest method over the
two-year  life  of  the  Convertible  Promissory  Notes.

During  the year ended September 30, 2005, the Company recorded interest expense
related  to the accretion of the discount on the Convertible Promissory Notes of
$19,756.  As  of  September  30,  2005,  the  carrying  value of the Convertible
Promissory  Notes  was  $626,990,  net of unamortized debt discount of $157,511.

NOTE  11.  RELATED  PARTIES

The Company's interim Chief Executive Officer/Chairman of the Board of Directors
(the  "Interim  CEO")  provides  legal services to the Company.  During the year
ended September 30, 2005, services provided by the Interim CEO totaled $246,522.
On  May  3,  2005,  the  Company entered into an agreement with the law firm, of
which  the  Interim CEO is a partner, whereby, the Company issued 221,256 shares
of  restricted  common  stock, valued at $183,642, in full payment of legal fees
owed  to  the  law  firm  through April 30, 2005.  As of September 30, 2005, the
Company  owed  the  law  firm $69,600, which is included in accounts payable and
accrued  expenses  in  the  consolidated  financial  statements.

As  of  September  30,  2005, the Company has various loans outstanding with Ms.
Zennie  Morris  (the  "Morris  Notes"),  the  former  president  of  the Company
totaling,  $59,500.  Pursuant  to  their  terms,  the  Morris  Notes do not bear
interest  and  the  Company  is  currently  in  default  with  respect  to their
repayment.  (See  Note  7,  Short-Term  Notes  Payable).

On  July  29, 2004, in accordance with the provisions of the Purchase Agreement,
the  Company entered into an employment agreement with Bruce K. Redding, Jr. Mr.
Redding  is  one  of  the  inventors  of  the  technologies  encompassing  the
Intellectual Property and the author or co-author of the various patents pending
transferred  to  the  Company  under  the  Purchase  Agreement.  Mr.  Redding's
employment agreement provides that he will serve as the Company's Vice President
of  Licensing  and Corporate Strategy for a period of three years at a salary of
$125,000  in  the  first  year,  $150,000 in the second year and $175,000 in the
third  year.  The  agreement  is renewable for two one-year terms at salaries of
$200,000  and  $225,000  unless  either party shall give the other 90 days prior
notice of its intent not to renew the agreement. Under the employment agreement,
the  Company  will  pay  Mr.  Redding  a signing bonus of $80,000 in eight equal
installments.  The  Company  also will provide Mr. Redding with (i) the use of a
car  during  the  term of the agreement, (ii) errors and omissions insurance for
the term of his employment, and (iii) a $1,000,000 life insurance policy payable
at  Mr.  Redding's  discretion. Under the agreement, Mr. Redding is obligated to
transfer  and  assign to the Company all inventions and improvements relating to
the  Intellectual Property. Mr. Redding is obligated to maintain all information
relating  to  the Intellectual Property and the Company in confidence during the
term  of  the  agreement  or thereafter. The Company may terminate Mr. Redding's
employment  at  any  time  upon  notice  from  the  Company  either (i) upon the
determination  by  the  Company that his performance is not satisfactory for any
reason  (other  than  justifiable  cause,  as described below) and the giving of
notice  specifies  with  reasonable  particularity  how  such performance is not
satisfactory,  and  Mr.  Redding  has  failed  to  remedy his performance to the
reasonable  satisfaction  of  the Company within 30 days of such notice; or (ii)
upon  the  determination by the Company that there is justifiable cause, such as
his  conviction  of  any  crime  involving  the  Company's  money  or  other


                                       15
<PAGE>
property  or  which  constitutes  a  felony  or  the  unauthorized disclosure of
confidential  information,  any  attempt  to  secure improper personal profit in
connection  with the business of the Company or his repeated and willful failure
to  comply  with  his  duties  under  the  employment  agreement. If the Company
terminates  Mr.  Redding's  employment for reasons other than justifiable cause,
disability  or  death, he will be entitled to receive severance pay in an amount
equal to one-twelfth of the sum of his then annual salary plus the amount of the
last bonus awarded to him for a period equal to one month for each month that he
was  employed  by  the  Company,  provided  however, that in no event shall such
period  be  less  than  six  months  nor  more  than  12 months. Mr. Redding may
terminate  his  employment at any time upon 30 days' prior written notice to the
Company.

On  September  7,  2005,  Mr. Redding agreed to accept shares of common stock in
forgiveness  of unpaid salary due him. On September 30, 2005, the Company issued
Mr.  Redding  109,010 shares of common stock in forgiveness of $94,792 of unpaid
salary  due  to him as of September 30, 2005. The 109,010 shares of common stock
had  a  fair  market  value of $98,109 on the date of issuance. Accordingly, the
Company  recorded  a  loss  on  debt  settlement  of  $3,317.

ESI  provides  research  and  development  services  to  the  Company  on  a
month-to-month  basis.  During  the  year  ended September 30, 2005, the Company
incurred  a  total  of approximately $221,800 for such services. As of September
30,  2005,  the  Company  owed ESI $34,728. Mr. Redding, the Company's Executive
Vice  President  of  Licensing  and  Corporate  Strategy, is ESI's president and
largest  stockholder.

NOTE  12.  COMMON  STOCK  AND  WARRANTS

WARRANTS

On  October  20,  2004,  the  Company  issued  Current Capital Corp. warrants to
purchase 300,752 shares of common stock at an exercise price of $1.33 per share,
exercisable  through  September  30, 2006 as partial consideration pursuant to a
consulting agreement under which Current Capital agreed to provide financial and
investor  public  relations services and related matters in Canada. The warrants
were  fully  vested upon issuance. During the year ended September 30, 2005, the
Company  recognized  consulting  expense  of $195,700 related to the issuance of
these  warrants.

On  December  3,  2004,  the  Company  issued Gary M. Scott warrants to purchase
3,609,023  shares  of  common  stock  at  an  exercise price of $1.33 per share,
exercisable  through December 31, 2007. Of these warrants, 150,376 warrants were
issued  pursuant to the terms of an agreement whereby Mr. Scott agreed to extend
the  due  date  of a loan to the Company in the principal amount of $500,000 and
3,458,647  warrants were issued pursuant to the terms of a consulting agreement.
The  3,458,647  warrants  were  fully vested upon issuance and had a fair market
value  of  $2,466,563  at  issuance. The Company was amortizing the value of the
warrants  over  the  three-year  term  of  the consulting agreement. However, on
September  22,  2005,  the  Company entered into an Agreement and Mutual Release
with  Mr.  Scott, whereby releasing Mr. Scott from being required to perform any
further  consulting obligations. Accordingly, the Company expensed the remaining
unamortized  amount  of  the warrants. During the year ended September 30, 2005,
the  Company  recorded  the  entire  $2,466,563  related  to  these  warrants as
consulting expense.

On  December 3, 2004, the Company issued Adil Saleh warrants to purchase 225,564
shares  of  common  stock  at  an exercise price of $1.33 per share, exercisable
through September 30, 2007 pursuant to a consulting agreement. The warrants were
fully  vested at issuance. During the year ended September 30, 2005, the Company
recognized  consulting  expense  of  $160,228  related  to  these  warrants.

On  January  17,  2005, the Company issued Georg Hochwimmer warrants to purchase
225,000  shares  of  common  stock  at  an  exercise  price  of $1.33 per share,
exercisable  through  December  31, 2007 pursuant to a consulting agreement. One
hundred  fifty thousand of the warrants are vested as of September 30, 2005; the
remaining  75,000  warrants  vest  on  January  31,  2006.


                                       16
<PAGE>
On  April  13,  2005,  the  Company issued Robert L. Watson warrants to purchase
225,000  shares  of  common  stock  at  an  exercise  price  of $1.33 per share,
exercisable  through  September 30, 2007. The warrants were subject to a vesting
schedule;  however,  pursuant to a termination agreement with Mr. Watson on June
30,  2005,  the  Company  agreed  to vest 100,000 of the warrants and cancel the
remaining  125,000  warrants.  During  the  year  ended  September 30, 2005, the
Company  recognized consulting expense of $74,792 related to these warrants. See
"  -  Common  Stock"  below.

Subsequent  to  year-end, on October 5, 2005, the Company issued Trilogy Capital
Partners, Inc. ("Trilogy") warrants to purchase 2,616,806 shares of common stock
at  an  exercise price of $.72 per share, exercisable through September 30, 2008
as  partial consideration pursuant to a consulting agreement under which Trilogy
agreed  to  provide marketing, financial, investor public relations, and related
matters.  The warrants were fully vested at issuance and had a fair market value
of  $1,236,454  at  issuance. The Company will amortize, straight-line, the fair
value  of  these  warrants  over the one-year consulting agreement as consulting
expense,  beginning  in  October  2005.

The  number of warrants to purchase common stock outstanding as of September 30,
2005,  is  as  follows:

<TABLE>
<CAPTION>
                                                                   Weighted
                                                                   Average
                                                                   Exercise
                                                        Warrants    Price
                                                        ---------  ---------
<S>                                                     <C>        <C>
Outstanding at September 30, 2004                       1,261,070  $    1.33

Issued for services                                     4,460,339       1.33
Issued in connection with the convertible note payable     15,283       1.33
Issued in consideration of settlement of debt             208,333       1.33
                                                        ---------
Outstanding at September 30, 2005                       5,945,025       1.33
                                                        =========
</TABLE>

The  warrants  issued during the year ended September 30, 2005 were valued using
the  Black-Scholes option pricing model with the following assumptions: expected
volatility ranging from 57.77% to 139.67%, risk free interest rates ranging from
3.66%  to  5.0%,  expected  lives ranging from 0.8 to 3 years, and a 0% dividend
yield.

COMMON STOCK

On  October  18,  2004,  the  Company  issued  to  Ananda Capital Partners, Inc.
("Ananda")  150,000  shares  of  common stock pursuant to a consulting agreement
under  which  Ananda  agreed  to provide financial and investor public relations
service  and  related  matters  in  the  United  States.  During  the year ended
September  30,  2005,  the  Company  recognized  consulting  expense of $240,000
related  to  these  shares  of  common  stock.

On  October  18,  2004,  the  Company  issued to DD Investment 600,000 shares of
common stock pursuant to a consulting agreement under which DD Investment agreed
to  provide consulting services in connection with financial and investor public
relations  and  related  matters in Germany. During the year ended September 30,
2005,  the  Company  recognized  consulting expense of $960,000 related to these
shares  of  common  stock.

On  December  4, 2004, the Company agreed to issue to ESI shares of common stock
equal  to  half of the shares ESI transferred to ReactMed in connection with the
Asset  Purchase.  Consequently, the Company issued 75,807 shares of common stock
to  ESI  on  February 2, 2005 to settle liabilities assumed from ESI. The shares
were  valued  at  $118,764  at  date  of  issuance.

On  March 30, 2005, the Company issued 288,462 shares of common stock to Michael
Stock,  an  accredited  investor,  at  a  price  of  $.52  per  share  for total
consideration  of  $150,000.


                                       17
<PAGE>
On  April  13, 2005, the Company issued 150,000 shares of common stock to Robert
L.  Watson at a value of $127,500 pursuant to a consulting agreement under which
Mr.  Watson  agreed to provide management consulting services. On June 30, 2005,
the  Company  entered  into  a  termination  letter  with Mr. Watson whereby the
Company  agreed to pay Mr. Watson $27,500 owed to him pursuant to his consulting
agreement.  The $27,500 owed was settled by paying Mr. Watson $10,000 in cash in
August  2005  and  issuing  him 15,487 shares of common stock valued at $17,500.
Pursuant to the termination letter the Company agreed to vest 100,000 of 225,000
warrants  originally  issued.  See  "  -  Warrants"  above.

On  May 2, 2005, the Company issued common stock at a price of $.52 per share to
Hyman  Fein  (48,077 shares for total consideration of $25,000) and Victor Fein
(163,462  shares  for total consideration of $85,000), both accredited investors
and  Convertible  Debenture  holders.

On  September  7, 2005, the Company entered into a letter agreement amending the
terms of Mr. Redding's employment agreement. The Company agreed to issue 250,000
shares  of  common  stock  as  an  incentive  bonus  at such time as the Company
received approval to conduct its second human pilot trial on the Technology from
an investigative review board, for which approval was received in November 2005.
Accordingly, the 250,000 shares of common stock were issued in November 2005 and
recorded  as compensation expense in the amount of the fair value on the date of
issuance  of  $275,000.

On  September  27, 2005, the Company issued 11,765 shares of common stock to The
van de Kamp Group at a value of $10,000 ($.85 per share) for consulting services
to  the  Company.

COMMON STOCK AND WARRANTS

On  October  18,  2004, the Company issued to BX Inc. ("BX") 1,425,000 shares of
common  stock  and  warrants  to  purchase  714,286 shares of common stock at an
exercise  price  of  $1.33  per  share  exercisable  through  September 30, 2006
pursuant  to  an  agreement  under which it agreed to compensate BX for services
rendered  with  respect  to  the  acquisition by the Company of the Intellectual
Property.

On  October  18, 2004, the Company issued to Integrated Inventions (Canada) Inc.
("III") 1,090,833 shares of common stock and warrants to purchase 546,784 shares
of  common  stock  at  an  exercise price of $1.33 per share exercisable through
September  30, 2006 pursuant to an agreement under which it agreed to compensate
III  for services rendered with respect to the acquisition by the Company of the
Intellectual  Property and reimburse it for expenses incurred in connection with
such  acquisition.

On  February  2,  2005, the Company issued 416,667 shares of common stock to III
valued at $738,792 and warrants to purchase 208,333 shares of common stock at an
exercise  price  of  $1.33  per share exercisable through December 31, 2007. The
fair  value  of  the  warrants  to  purchase  208,333 shares of common stock was
$97,125  at  the  date of issuance. The common stock and warrants were issued in
consideration  for the forgiveness of $375,000 of indebtedness of the Company to
III.  Accordingly,  during  the  year  ended  September  30,  2005,  the Company
recognized a loss on debt settlement of $363,792.

CONVERTIBLE NOTES AND WARRANTS

On  November  16,  2004,  the  Company  issued  a convertible promissory note to
Kenneth  Hovden,  an accredited investor. The note is in the principal amount of
$25,000,  bears  interest  at  the rate of 8% per annum, and is convertible into
shares of common stock at $.82 per share. The note matured on September 30, 2005
and  remains  unpaid as of the date of this report. In connection with the note,
the Company issued Mr. Hovden warrants to purchase 15,283 shares of common stock
at  an  exercise  price  of $1.33 per share. The warrants expired on October 31,
2005.  (See  Note  8,  Short-Term  Convertible  Debt).

CONVERTIBLE NOTES

On  August  29,  2005,  the  Company borrowed $784,501 from VEM Aktienbank AG, a
Munich,  German  investment  bank  ("VEM").  In  consideration  of the loan, the
Company  issued  two  convertible  promissory


                                       18
<PAGE>
notes  in  favor  of VEM. The promissory notes mature two years from the date of
issuance  and  bear interest at the rate of 10% per annum (payable at maturity).
The  notes  are  convertible  into  shares of common stock at a conversion price
equal  to  80% of the average closing bid price per share of common stock during
the  five  trading  days  immediately  prior  to  any  such conversion; provided
however,  that  the  Company is not required to issue more than 1,389,474 shares
upon  the  conversion  of  the  total  amount  due  under  both  of  the  notes.

On  May 26, 2005, the Company issued shares of common stock at $.83 per share to
Ruffa  &  Ruffa  (213,298  shares  of  common  stock  for total consideration of
$177,038)  and  Gibson,  Haglund  &  Paulsen (221,256 shares of common stock for
total  consideration of $183,642) for legal services rendered by such law firms.

On  September  7,  2005,  Mr. Redding agreed to accept shares of common stock in
forgiveness  of unpaid salary due him. On September 30, 2005, the Company issued
Mr.  Redding  109,010 shares of common stock in forgiveness of $94,792 of unpaid
salary  due  to him as of September 30, 2005. The 109,010 shares of common stock
had  a  fair  market  value of $98,109 on the date of issuance. Accordingly, the
Company  recorded  a  loss  on  debt  settlement  of  $3,317.

NOTE  13.  INCOME  TAXES

The Company is liable for income taxes in the United States. As of September 30,
2005,  the  Company  did  not  have  any  income  for  income  tax purposes and,
therefore,  no  income  tax  liability  or  expense  has  been recorded in these
consolidated  financial  statements.

The Company has the following deferred tax assets at September 30:

<TABLE>
<CAPTION>
                                         2005            2004
                                     -------------  --------------
<S>                                  <C>            <C>
Net operating losses carry forwards  $  1,464,531   $     263,818
Stock compensation expense              1,369,719         242,619
Accrued expenses                            5,250          37,042
                                     -------------  --------------
Total deferred tax assets               2,839,500         543,479
Less valuation allowance               (2,839,500)       (543,479)
                                     -------------  --------------
Net deferred tax assets              $          -   $           -
                                     =============  ==============
</TABLE>

The  change  in  the  valuation  allowance  from 2004 to 2005 was an increase of
$2,296,021.  The  change  in  the  valuation  allowance from 2003 to 2004 was an
increase  of  $390,000.  The  Company  has  provided  a full valuation allowance
against  the  deferred  tax assets because the Company believes the use of these
assets cannot be reasonably assured.

The Company has net operating loss carry forwards at September 30, 2005 and 2004
of  approximately  $4,180,000  and  $750,000,  respectively, available to reduce
future  taxable  income.  Due  to  stock  ownership  changes  in prior years the
Company's  ability  to  offset  future  taxable income with these losses will be
limited.  These  carry  forwards  expire  beginning  in  2020.

NOTE  14.  SUBSEQUENT  EVENTS

In  October  2005,  the  Company  entered  into  a one-year consulting agreement
("Consulting  Agreement")  whereby the consultants will provide the Company with
marketing,  financial  and  investor  public  relations  related  services.  As
compensation  for  these  services,  the  Company will incur a $12,500 per month
consulting  fee for the one-year term of the Consulting Agreement, commencing in
October  2005.  Additionally, the Company issued a warrant to purchase 2,616,806
shares  of common stock at an exercise price of $0.72 per share.  The warrant is
fully  vested  upon  grant  and  is  exercisable  until  September  30,


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<PAGE>
2008.  The  fair  value  of the warrant at grant is approximately $1,236,000 and
will  be  amortized  over  the  one-year  term  of  the  Consulting  Agreement.

Subsequent  to September 30, 2005, the Company issued additional 2005 Notes (see
Note  9,  Long-Term  Debt  Stockholders) totaling $224,000.  The 2005 Notes bear
interest  at  8%  per annum.  Principal and interest related to these 2005 Notes
are  due  in  full  on  December  31,  2007.

On November 3, 2005, the Company entered into a consulting agreement whereby the
consultants  will  provide  investor  relations  support.  As  compensation, the
Company  issued 20,000 shares of common stock, which have a fair market value on
the  date  of  grant  of  $23,000.

On  December  7,  2005, the Company entered into a one-year consulting agreement
whereby  the  consultant  will  provide  marketing,  consulting,  and  strategic
planning  advice in connection with the development, maintenance and growth of a
market  in  the  European  Union  for the U-Strip.  As compensation, the Company
issued  275,000  shares  of  common stock, which have a fair market value on the
date of grant of $236,500, which will be amortized over the one-year term of the
consulting  agreement.

On  December 8, 2005, the Company issued additional Convertible Promissory Notes
(see  Note  10,  Convertible Promissory Notes, Long-Term) totaling $296,579. The
Convertible  Promissory  Notes issued on December 8, 2005 mature on December 31,
2007  at  which  time the outstanding principal and all accrued interest is due.
The  Convertible Promissory Note holders may convert on the maturity date or any
prepayment  date  all or any portion of the outstanding principal balance of the
Convertible  Promissory Note and all or any portion of the accrued interest into
shares  of  the Company's common stock at a conversion price equal to 80% of the
average closing bid price per share of common stock during the five trading days
immediately  prior to any such conversion; provided however, that the Company is
not  required to issue more than 631,579 shares upon the conversion of the total
amount  due  under  both  of  these additional Convertible Promissory Notes. The
Convertible  Promissory  Notes  bear  interest at a rate of 10% per annum and is
payable  upon  maturity.

On  December  21,  2005,  the Company issued convertible promissory notes ("2006
Convertible  Notes") to four investors, totaling $130,000.  The 2006 Convertible
Notes  bear  interest at 12% per annum and mature on December 21, 2007.  Accrued
interest  is  payable on the first anniversary of the 2006 Convertible Notes and
at  maturity.  The  Company  may  prepay, with a prepayment penalty equal to two
months'  interest,  the principal amount and all accrued interest related to the
2006  Convertible  Notes at any time upon sixty days prior written notice to the
2006  Convertible Note holder.  The 2006 Convertible Note holders may convert on
the  maturity  date or any prepayment date all or any portion of the outstanding
principal  balance  of  the 2006 Convertible Notes and all or any portion of the
accrued interest into shares of the Company's common stock at a conversion price
equal  to  the lesser of $1.00 or 80% of the average closing bid price per share
of  common  stock  during  the  ten  trading  days immediately prior to any such
conversion.

In  connection with the 2006 Convertible Notes, the Company also issued warrants
to purchase 195,000 shares of the Company's common stock at an exercise price of
$1.00  per  share ("2006 Convertible Note Warrants").  The 2006 Convertible Note
Warrants  are  exercisable  until  December  21,  2007.

In  connection  with the 2006 Convertible Notes, the Company issued a warrant to
purchase  12,000  shares  of  common  stock  to one of the 2006 Convertible Note
holders  as  compensation  for raising the funds.  The warrants have an exercise
price  of  $1.00 per share and expire on December 21, 2008.  All of the warrants
issued  in  connection  with  these  notes  are  fully  vested  upon  issuance.

On  December  31,  2005,  the Company issued Mr. Redding 43,125 shares of common
stock  in  forgiveness of $37,500 of unpaid salary due to him as of December 31,
2005.  The  43,125  shares of common stock had a fair market value of $38,813 on
the  date  of  issuance.  Accordingly,  the  Company  recorded  a  loss  on debt
settlement  of  $1,313.

In  November  2005,  the  Company  issued  250,000 shares of common stock to Mr.
Redding  as  a  bonus  since the Company received approval to conduct its second
human  pilot  trial  on  the  Technology  from  an


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<PAGE>
investigative  review  board.  On  the  date  of issuance, the 250,000 shares of
common  stock  have a fair value of $275,000 and were recognized as compensation
expense  upon  issuance.

In November 2005, December 2005, and March 2006, $57,827, $75,000, and $100,000,
of  the Convertible Debentures (see Note 8, Short-Term Convertible Debt) mature.
In January 2006, the Convertible Debenture holders agreed to extend the maturity
date  of  their  Convertible  Debentures six months from their original maturity
dates.  In  consideration  of  the  extension of the maturity dates, the Company
reduced  the conversion price per share of the Convertible Debentures from $0.60
per  share  to  $0.40  per  share.


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