----

----

| þ   | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------------------|---------------------------------------------------------------------------------------------------|

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

----

----

|                                                                |   |                                      |
|---------------------------------------------------------------------|--------|-------------------------------------------|
| Idaho                                                               |   | 04-3413196                                |
| (State      or other jurisdiction of incorporation or organization) |   | (I.R.S.      Employer Identification No.) |

----

| Large accelerated      filer  o | Accelerated filer      o              |
|-------------------------------------------|---------------------------------------|
| Non-accelerated      filer o              | Smaller reporting      company þ |

----

----

----

| PART      I.  – FINANCIAL INFORMATION |                                                                                                                                                                                                                                                        |   |
|-------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      1                                           | Financial      Statements                                                                                                                                                                                                                                   |   |   |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  | Balance      Sheets As Of June 30, 2008 And December 31, 2007                                                                                                                                                                                               |   | 3 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  | Statements      Of Operations For The Three Month and Six Month Periods  Ended      June 30, 2008 and June 30, 2007, and for the period commencing February 1,      2003 (the commencement of the development stage) and ended June 30,      2008 |   | 4 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  | Statements  Of      Cash Flows For The Six Month Periods  Ended June 30, 2008 and      June 30, 2007 and for the period commencing February 1, 2003 (the      commencement of the development stage) and ended June 30,    2008         |   | 5 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  | Statement      of Stockholders’ Equity for the Sixth Month Period Ended June 30,      2008                                                                                                                                                            |   | 6 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                       | Notes      to Financial Statements – June 30, 2008                                                                                                                                                                                                    |   | 7 -      14 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      2                                           | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations                                                                                                                                                       |   | 15 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      3                                           | Quantitative      and Qualitative Disclosures About Market Risk                                                                                                                                                                                             |   | 16 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      4                                           | Controls      and Procedures                                                                                                                                                                                                                                |   | 16 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  |                                                                                                                                                                                                                                                        |   |
|                                                  |                                                                                                                                                                                                                                                        |   |
| PART      II.  – OTHER INFORMATION    |                                                                                                                                                                                                                                                        |   |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      1A                                          | Risk      Factors                                                                                                                                                                                                                                           |   | 16 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      2                                           | Unregistered      Sales of Equity Securities and Use of Proceeds                                                                                                                                                                                            |   | 17 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| ITEM      6                                           | Exhibits                                                                                                                                                                                                                                                    |   | 17 |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
|                                                  |                                                                                                                                                                                                                                                        |   |   |
| SIGNATURES                                            |                                                                                                                                                                                                                                                        |   | 18 |

----

----

|                                                                                                                                              |   | June      30, |        |   |              |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                                                                                                                                              |   | 2008          |        |   | December      31, |   |
|                                                                                                                                              |   | (unaudited)   |        |   | 2007              |   |
|                                                                                                                                              |   |          |        |   |              |   |
| ASSETS                                                                                                                                            |   |          |        |   |              |   |
| CURRENT      ASSETS                                                                                                                               |   |          |        |   |              |   |
| Cash                                                                                                                                              |   | $             | 180,853     |   |              | $      | 66,503 |   |
| Accounts      receivable                                                                                                                          |   |          | —     |   |              |   | 27,687 |   |
| Inventory                                                                                                                                         |   |          | 108,384     |   |              |   | 107,922 |   |
| Prepaid      expenses                                                                                                                             |   |          | 68,313      |   |              |   | 43,699 |   |
| Total      Current Assets                                                                                                                         |   |          | 357,550     |   |              |   | 245,811 |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| PROPERTY      AND EQUIPMENT                                                                                                                       |   |          | 2,764,875   |   |              |   | 2,764,875 |   |
| Less:      accumulated depreciation                                                                                                               |   |          | 2,279,070   |   |              |   | 2,010,138 |   |
| Net      property and equipment                                                                                                                   |   |          | 485,805     |   |              |   | 754,737 |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| OTHER      ASSETS                                                                                                                                 |   |          |        |   |              |   |   |   |
| Investment                                                                                                                                        |   |          | 1,680       |   |              |   | 2,390 |   |
| Deposits                                                                                                                                          |   |          | —     |   |              |   |   |   |
| Patents,      net of amortization                                                                                                                 |   |          | 97,092      |   |              |   | 102,123 |   |
| Total      Other Assets                                                                                                                           |   |          | 98,772      |   |              |   | 104,513 |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| TOTAL      ASSETS                                                                                                                                 |   | $             | 942,127     |   |              | $      | 1,105,061 |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                                                                   |   |          |        |   |              |   |   |   |
| CURRENT      LIABILITIES                                                                                                                          |   |          |        |   |              |   |   |   |
| Accounts      payable                                                                                                                             |   | $             | 273,664     |   |              | $      | 155,659 |   |
| Accrued      expenses                                                                                                                             |   |          | 83,833      |   |              |   | 113,482 |   |
| Related      party short-term debt                                                                                                                |   |          |        |   |              |   | — |   |
| Capital      leases payable - current portion                                                                                                     |   |          | —     |   |              |   | — |   |
| Total      Current Liabilities                                                                                                                    |   |          | 357,497     |   |              |   | 269,141 |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| COMMITMENTS      AND CONTINGENCIES                                                                                                                |   |          | —     |   |              |   | — |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| STOCKHOLDERS’      EQUITY                                                                                                                   |   |          |        |   |              |   |   |   |
| Preferred      stock, $0.10 par value, 20,000 sharesauthorized;      no shares issued                                                             |   |          | —     |   |              |   | — |   |
| Common      stock, $0.01 par value, 75,000,000 shares authorized;      47,048,217 and 42,551,795 shares issued      and outstanding, respectively |   |          | 470,482     |   |              |   | 425,518 |   |
| Additional      paid-in capital                                                                                                                   |   |          | 17,883,050  |   |              |   | 17,349,650 |   |
| Other      comprehensive income (loss)                                                                                                            |   |          | (340        | )      |              |   | 370 |   |
| Accumulated      deficit prior to development stage                                                                                               |   |          | (494,624    | )      |              |   | (494,624 | ) |
| Accumulated      deficit during development stage                                                                                                 |   |          | (17,273,938 | )      |              |   | (16,444,994 | ) |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| Total      Stockholders’ Equity                                                                                                             |   |          | 584,630     |   |              |   | 835,920 |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
|                                                                                                                                              |   |          |        |   |              |   |   |   |
| TOTAL      LIABILITIES ANDSTOCKHOLDERS’      EQUITY                                                                                         |   | $             | 942,127     |   |              | $      | 1,105,061 |   |

----

----

|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   | Period      from        |       |
|------------------------------------------------------------|--------|------------------------------|------------|--------|-----------------------|--------|------------|--------------------|--------|--------|--------------------|--------|--------|-------------------------|------------|
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   | February      1, 2003   |       |
|                                                       |   | Three Months      Ended |       |   | Six      Months Ended |   |       | (inception      of |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   | development      stage) |       |
|                                                       |   | June      30, 2008           |       |   | June      30, 2007    |   |       | June      30, 2008 |   |   | June      30, 2007 |   |   | to      June 30, 2008   |       |
|                                                       |   | (unaudited)                  |       |   | (unaudited)           |   |       | (unaudited)        |   |   | (unaudited)        |   |   | (unaudited)             |       |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |
| REVENUES                                                   |   | $                            | —    |   |                  | $      | 8,400      |               |   | $      | —            |   |   | $                       | 8,400      |   |   | $ | 173,399 |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| COST      OF GOODS SOLD                                    |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| Materials      and supplies                                |   |                         | —    |   |                  |   | 7,680      |               |   |   | —            |   |   |                    | 7,680      |   |   |   | 112,614 |   |
| Total      Cost of Goods Sold                              |   |                         | —    |   |                  |   | 7,680      |               |   |   | —            |   |   |                    | 7,680      |   |   |   | 112,614 |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| GROSS      PROFIT                                          |   |                         | —    |   |                  |   | 720        |               |   |   | —            |   |   |                    | 720        |   |   |   | 60,785 |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| GENERAL      AND ADMINISTRATIVE EXPENSES                   |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| Depreciation      and amortization                         |   |                         | 66,376     |   |                  |   | 65,844     |               |   |   | 132,082            |   |   |                    | 131,688    |   |   |   | 1,158,967 |   |
| Research      and development                              |   |                         | 36,290     |   |                  |   | 39,563     |               |   |   | 84,699             |   |   |                    | 94,151     |   |   |   | 1,235,046 |   |
| Marketing                                                  |   |                         | 885        |   |                  |   | 4,696      |               |   |   | 2,910              |   |   |                    | 5,051      |   |   |   | 766,027 |   |
| Legal      and professional fees                           |   |                         | 53,255     |   |                  |   | 93,788     |               |   |   | 60,605             |   |   |                    | 173,363    |   |   |   | 1,496,753 |   |
| Consulting                                                 |   |                         | 26,193     |   |                  |   | —    |               |   |   | 42,224             |   |   |                    | 59,359     |   |   |   | 3,222,334 |   |
| Idle      facility expense                                 |   |                         | 136,045    |   |                  |   | 128,738    |               |   |   | 255,416            |   |   |                    | 269,046    |   |   |   | 2,837,285 |   |
| Occupancy                                                  |   |                         | 23,854     |   |                  |   | 22,468     |               |   |   | 76,269             |   |   |                    | 47,981     |   |   |   | 1,310,498 |   |
| Labor      and benefits                                    |   |                         | 22,222     |   |                  |   | 75,726     |               |   |   | 54,053             |   |   |                    | 98,301     |   |   |   | 1,100,783 |   |
| Share-based      compensation                              |   |                         | —    |   |                  |   | —    |               |   |   | 2,850              |   |   |                    | 2,850      |   |   |   | 1,552,499 |   |
| Office      supplies and expenses                          |   |                         | 8,933      |   |                  |   | 6,182      |               |   |   | 12,992             |   |   |                    | 13,394     |   |   |   | 223,849 |   |
| Travel                                                     |   |                         | 3,165      |   |                  |   | 4,013      |               |   |   | 4,480              |   |   |                    | 4,784      |   |   |   | 192,574 |   |
| Other      general and administrative expenses             |   |                         | 61,049     |   |                  |   | 23,961     |               |   |   | 98,103             |   |   |                    | 57,919     |   |   |   | 803,819 |   |
| Total      General and Administrative Expenses             |   |                         | 438,267    |   |                  |   | 464,979    |               |   |   | 826,683            |   |   |                    | 957,887    |   |   |   | 15,900,434 |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| OPERATING      LOSS                                        |   |                         | (438,267   | )      |                  |   | (464,259   | )                  |   |   | (826,683           | )      |   |                    | (957,167   | ) |   |   | (15,839,649 | ) |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| OTHER      INCOME (EXPENSES)                               |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| Interest      income                                       |   |                         | 2          |   |                  |   | 2          |               |   |   | 4                  |   |   |                    | 3          |   |   |   | 10,068 |   |
| Interest      expense                                      |   |                         | (829       | )      |                  |   | (1,148     | )                  |   |   | (2,265             | )      |   |                    | (3,050     | ) |   |   | (1,443,239 | ) |
| Other      income (expense)                                |   |                         | —    |   |                  |   | —    |               |   |   | —            |   |   |                    | —    |   |   |   | (1,118 | ) |
| Total      Other Expenses                                  |   |                         | (827       | )      |                  |   | (1,146     | )                  |   |   | (2,261             | )      |   |                    | (3,047     | ) |   |   | (1,434,289 | ) |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| LOSS      BEFORE TAXES                                     |   |                         | (439,094   | )      |                  |   | (465,405   | )                  |   |   | (828,944           | )      |   |                    | (960,214   | ) |   |   | (17,273,938 | ) |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| INCOME      TAXES                                          |   |                         | —    |   |                  |   | —    |               |   |   | —            |   |   |                    | —    |   |   |   | — |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| NET      LOSS                                              |   |                         | (439,094   | )      |                  |   | (465,405   | )                  |   |   | (828,944           | )      |   |                    | (960,214   | ) |   |   | (17,273,938 | ) |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| OTHER      COMPREHENSIVE INCOME (LOSS)                     |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
|                                                            |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| Unrealized      gain (loss) in market value of investments |   |                         | (80        | )      |                  |   | —    |               |   |   | (710               | )      |   |                    | —    |   |   |   | 2,060 |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| COMPREHENSIVE      LOSS                                    |   | $                            | (439,174   | )      |                  | $      | (465,405   | )                  |   | $      | (829,654           | )      |   | $                       | (960,214   | ) |   | $ | (17,271,878 | ) |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| NET      INCOME (LOSS) PER COMMON SHARE,                   |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| BASIC      AND DILUTED                                     |   | $                            | (0.01      | )      |                  | $      | (0.01      | )                  |   | $      | (0.02              | )      |   | $                       | (0.02      | ) |   |   |   |   |
|                                                       |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| WEIGHTED      AVERAGE NUMBER OF COMMON                     |   |                         |       |   |                  |   |       |               |   |   |               |   |   |                    |       |   |   |   |   |   |
| SHARES      OUTSTANDING, BASIC AND DILUTED                 |   |                         | 44,467,862 |   |                  |   | 40,235,238 |               |   |   | 43,304,173         |   |   |                    | 40,150,868 |   |   |   |   |   |

----

----

|                                                           |   |               |     |   |               |   |     | Period      from        |   |
|----------------------------------------------------------------|--------|--------------------|----------|--------|--------------------|--------|----------|-------------------------|--------|
|                                                           |   | Six      Month     |     |   | Six      Month     |   |     | February      1, 2003   |   |
|                                                           |   | Period      Ended  |     |   | Period      Ended  |   |     | (inception      of      |   |
|                                                           |   | June      30, 2008 |     |   | June      30, 2007 |   |     | development      stage) |   |
|                                                           |   | (unaudited)        |     |   | (unaudited)        |   |     | to      June 30, 2008   |   |
| CASH      FLOWS FROM OPERATING ACTIVITIES:                     |   |               |     |   |               |   |     |                    |   |
| Net      loss                                                  |   | $                  | (828,944 | )      |               | $      | (960,214 | )                       |   | $ | (17,273,938 | ) |
| Adjustments      to reconcile net loss to net cash             |   |               |     |   |               |   |     |                    |   |   |   |   |
|   used      by operating activities:                 |   |               |     |   |               |   |     |                    |   |   |   |   |
| Depreciation      and amortization                             |   |               | 276,048  |   |               |   | 270,981  |                    |   |   | 2,162,371 |   |
| Loss      on disposition of assets                             |   |               | —  |   |               |   | —  |                    |   |   | 7,024 |   |
| Provision      for bad debt                                    |   |               | 27,687   |   |               |   | —  |                    |   |   | 27,687 |   |
| Stock      and warrants issued as incentive for notes payables |   |               | —  |   |               |   | —  |                    |   |   | 496,389 |   |
| Stock      issued for interest expense                         |   |               | —  |   |               |   | —  |                    |   |   | 149,878 |   |
| Stock      issued for rent expense                             |   |               | 3,952    |   |               |   | 12,912   |                    |   |   | 619,531 |   |
| Stock      issued for services                                 |   |               | 51,562   |   |               |   | 30,864   |                    |   |   | 1,390,230 |   |
| Stock      issued for assets and securities                    |   |               | —  |   |               |   | —  |                    |   |   | 43,739 |   |
| Share-based      compensation and warrants vested              |   |               | 2,850    |   |               |   | 62,209   |                    |   |   | 3,968,408 |   |
| Recognition      of noncash deferred financing expense         |   |               | —  |   |               |   | —  |                    |   |   | 578,699 |   |
| Options      and warrants issued for services and financing    |   |               | —  |   |               |   | —  |                    |   |   | 253,753 |   |
| Other      adjustments                                         |   |               | —  |   |               |   | —  |                    |   |   | (1,850 | ) |
| Changes      in assets and liabilities:                        |   |               |     |   |               |   |     |                    |   |   |   |   |
| Receivables                                                    |   |               | —  |   |               |   | —  |                    |   |   | (11,603 | ) |
| Inventory                                                      |   |               | (462     | )      |               |   | 4,942    |                    |   |   | (108,384 | ) |
| Prepaid      expenses                                          |   |               | (24,614  | )      |               |   | 19,349   |                    |   |   | 72,389 |   |
| Other      assets                                              |   |               | —  |   |               |   | —  |                    |   |   | 13,247 |   |
| Accounts      payable                                          |   |               | 118,005  |   |               |   | (24,537  | )                       |   |   | 175,117 |   |
| Accrued      expenses                                          |   |               | (29,649  | )      |               |   | (11,228  | )                       |   |   | (137,279 | ) |
| Net      cash used by operating activities                     |   |               | (403,565 | )      |               |   | (594,722 | )                       |   |   | (7,574,592 | ) |
|                                                           |   |               |     |   |               |   |     |                    |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES:                     |   |               |     |   |               |   |     |                    |   |   |   |   |
| Purchase      of property and equipment                        |   |               | —  |   |               |   | (16,997  | )                       |   |   | (2,761,533 | ) |
| Patent      costs                                              |   |               | (2,085   | )      |               |   | 1,117    |                    |   |   | (118,830 | ) |
| Leasehold      concessions received                            |   |               | —  |   |               |   | —  |                    |   |   | 185,000 |   |
| Net      cash used by investing activities                     |   |               | (2,085   | )      |               |   | (15,880  | )                       |   |   | (2,695,363 | ) |
|                                                           |   |               |     |   |               |   |     |                    |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES:                     |   |               |     |   |               |   |     |                    |   |   |   |   |
| Sale      of common stock units                                |   |               | 520,000  |   |               |   | 30,154   |                    |   |   | 9,288,140 |   |
| Payments      on capital leases                                |   |               | —  |   |               |   | —  |                    |   |   | (9,563 | ) |
| Payments      of related party loans                           |   |               | —  |   |               |   | (24,061  | )                       |   |   | (56,701 | ) |
| Proceeds      from exercise of options                         |   |               | —  |   |               |   | —  |                    |   |   | 1,080 |   |
| Proceeds      from convertible debt                            |   |               | —  |   |               |   | —  |                    |   |   | 939,900 |   |
| Net      cash provided by financing activities                 |   |               | 520,000  |   |               |   | 6,093    |                    |   |   | 10,162,856 |   |
|                                                           |   |               |     |   |               |   |     |                    |   |   |   |   |
| Net      increase (decrease) in cash                           |   |               | 114,350  |   |               |   | (604,509 | )                       |   |   | (107,099 | ) |
|                                                           |   |               |     |   |               |   |     |                    |   |   |   |   |
| Cash,      beginning of period                                 |   |               | 66,503   |   |               |   | 872,182  |                    |   |   | 287,952 |   |
|                                                           |   |               |     |   |               |   |     |                    |   |   |   |   |
| Cash,      end of period                                       |   | $                  | 180,853  |   |               | $      | 267,673  |                    |   | $ | 180,853 |   |

| SUPPLEMENTAL      CASH FLOW DISCLOSURES:                             |   |   |    |   |   |   |    |   |   |
|----------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Income      taxes paid                                               |   | $      | — |   |   | $      | — |   |   | $ | — |   |
| Interest      paid                                                   |   | $      | — |   |   | $      | — |   |   | $ | 33,196 |   |
| NON-CASH      INVESTING AND FINANCING:                               |   |   |    |   |   |   |    |   |   |   |   |   |
| Stock      options and warrants vested                               |   | $      | 2,850   |   |   | $      | — |   |   | $ | 3,739,965 |   |
| Stock      and warrants issued for convertible debt                  |   | $      | — |   |   | $      | — |   |   | $ | 1,613,076 |   |
| Stock      issued for assets and securities                          |   | $      | — |   |   | $      | — |   |   | $ | 43,739 |   |
| Stock      issued as deferred incentive for notes payables           |   | $      | — |   |   | $      | — |   |   | $ | 519,587 |   |
| Stock      issued for prepaid and deferred rent and rent expense     |   | $      | 3,952   |   |   | $      | — |   |   | $ | 602,716 |   |
| Stock      and warrants issued for services                          |   | $      | 51,562  |   |   | $      | — |   |   | $ | 1,127,651 |   |
| Warrants      and options issued for deferred services and financing |   | $      | — |   |   | $      | — |   |   | $ | 520,102 |   |
| Accounts      payable paid by contributed capital                    |   | $      | — |   |   | $      | — |   |   | $ | 27,767 |   |
| Noncash      recovery of other income                                |   | $      | — |   |   | $      | — |   |   | $ | 1,850 |   |

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|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |
|--------------------------------------------------------------------------------------------------|--------|----------------------|------------|--------|------------|--------|---------|----------------|--------|--------|----------------|--------|--------|-------------------------------------|-----------|--------|------------------------|--------|-----------|------------------------|--------|--------|---------------------------|--------|--------|--------|-------------|
|                                                                                                  |   |                 |            |        |            |   |         | Other          |   |   |           |   |   | Accumulated                         |      |   | Accumulated            |   |      | Accumulated            |   |   |                           |   |
|                                                                                             |   | Common      Stock    |       |   | Additional |   |    | Additional     |   |   |           |   |   | Deficit      Prior to               |      |   | Deficit      During    |   |      | Other                  |   |   |                      |   |
|                                                                                             |   | Numberof      Shares |       |   | Amount     |   |    | Paid-inCapital |   |   | Paid-inCapital |   |   | Stock      Optionsand      Warrants |      |   | Development      Stage |   |      | Development      Stage |   |   | ComprehensiveIncome(Loss) |   |   | Total  |        |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |
| Balance,      December 31, 2007                                                                  |   |                 | 42,551,795 |   |       | $      | 425,518 |           |   | $      | 17,349,650     |   |   | $                                   | 8,421,864 |   |                   | $      | 8,504,429 |                   |   | $      | (494,624                  | )      |   | $      | (16,444,994 | ) |   | $ | 370 |   |   | $ | 835,920 |   |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Common      stock issued at an average of $.15 per share in exchange for legal      services     |   |                 | 81,780     |   |       |   | 818     |           |   |   | 11,244         |   |   |                                |      |   |                   |   | —   |                   |   |   | —                   |   |   |   | —     |   |   |   | — |   |   |   | 12,062 |   |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Common      stock issued at an average price of $.11 per share in exchange for      rent expense |   |                 | 36,942     |   |       |   | 369     |           |   |   | 3,583          |   |   |                                |      |   |                   |   | —   |                   |   |   | —                   |   |   |   | —     |   |   |   | — |   |   |   | 3,952 |   |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Shares      issued to directors for services                                                     |   |                 | 502,700    |   |       |   | 5,027   |           |   |   | 34,473         |   |   |                                |      |   |                   |   |      |                   |   |   | —                   |   |   |   | —     |   |   |   | — |   |   |   | 39,500 |   |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Share-based      compensation                                                                    |   |                 | —    |   |       |   | — |           |   |   | 2,850          |   |   |                                | —   |   |                   |   | 58,076    |                   |   |   | —                   |   |   |   | —     |   |   |   |   |   |   |   | 2,850 |   |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Common      stock and warrants issued in connection with private      placement                  |   |                 | 3,875,000  |   |       |   | 38,750  |           |   |   | 481,250        |   |   |                                |      |   |                   |   |      |                   |   |   | —                   |   |   |   | —     |   |   |   | — |   |   |   | 520,000 |   |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Adjustment      for employee options vested but notexercised                                     |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   | — |   |
| Unrealized      loss on market value of investment                                               |   |                 | —    |   |       |   | — |           |   |   | —        |   |   |                                |      |   |                   |   |      |                   |   |   | —                   |   |   |   | —     |   |   |   | (710 | ) |   |   | (710 | ) |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Other      Adjustments                                                                           |   |                 |       |   |       |   | — |           |   |   |           |   |   |                                | (923      | )      |                   |   |      |                   |   |   |                      |   |   |   | —     |   |   |   |   |   |   |   | — |   |
| Net      loss for the Period ended June 30, 2008                                                 |   |                 | —    |   |       |   | — |           |   |   | —        |   |   |                                | —   |   |                   |   | —   |                   |   |   | —                   |   |   |   | (828,944    | ) |   |   | — |   |   |   | (828,944 | ) |
|                                                                                             |   |                 |       |   |       |   |    |           |   |   |           |   |   |                                |      |   |                   |   |      |                   |   |   |                      |   |   |   |        |   |   |   |   |   |   |   |   |   |
| Balance,      June 30, 2008                                                                      |   |                 | 47,048,217 |   |       | $      | 470,482 |           |   | $      | 17,883,050     |   |   | $                                   | 8,420,941 |   |                   | $      | 8,562,505 |                   |   | $      | (494,624                  | )      |   | $      | (17,273,938 | ) |   | $ | (340 | ) |   | $ | 584,630 |   |

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|   | Level      1- | Unadjusted      quoted prices in active markets that are accessible at the measurement      date for identical unrestricted assets or  liabilities. |
|--------|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      2- | Quoted      prices in markets that are not active, or inputs that are observable,      either directly or indirectly, for substaintially the full term of the      asset or liability. |
|--------|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level      3- | Prices      or valuation techniques that require inputs that are both significant to      fair value measurement and unobservable (supported by little or no market      activity). |
|--------|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                            |   | Number      of Shares |     |   | Exercise      Price Weighted Average |   |    | Weighted      Average Remaining Life |   |
|-----------------------------------------------------------------|--------|-----------------------|----------|--------|--------------------------------------|--------|---------|--------------------------------------|--------|
| Outstanding      at December 31, 2007                           |   |                  | 875,000  |   |                                 | $      | 0.62    |                                 |   |   |   |
| Granted                                                         |   |                  | —  |   |                                 |   | — |                                 |   |   |   |
| Exercised                                                       |   |                  | —  |   |                                 |   | — |                                 |   |   |   |
| Forfeited/Expired                                               |   |                  | (336,112 | )      |                                 |   | 0.62    |                                 |   |   |   |
| Outstanding      at June 30, 2008                               |   |                  | 538,888  |   |                                 | $      | 0.62    |                                 |   |   | 4.64 |   |
|                                                            |   |                  |     |   |                                 |   |    |                                 |   |   |   |   |
| Options      exercisable at June 30, 2008                       |   |                  | 534,088  |   |                                 | $      | 0.62    |                                 |   |   | 3.11 |   |
|  Options      vested and expected to vest at June 30, 2008 |   |                  | 538,888  |   |                                 |   |    |                                 |   |   |   |   |
|                                                            |   |                  |     |   |                                 |   |    |                                 |   |   |   |   |

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| Balance      sheet                                  |   |                |        |   |   |   |    |         |   |
|-----------------------------------------------------|--------|---------------------|-------------|--------|--------|--------|---------|--------------|--------|
|                                                |   | As originally filed |        |   | Change |   |    | As corrected |   |
|                                                |   |                |        |   |   |   |    |         |   |
| Common      stock                                   |   | $                   | 425,051     |   |   | $      | 467     |         |   | $ | 425,518 |   |
| Additional      paid-in capital                     |   |                | 17,283,196  |   |   |   | 66,454  |         |   |   | 17,349,650 |   |
|                                                |   |                |        |   |   |   |    |         |   |   |   |   |
| Statement of      Stockholders’ Equity        |   |                |        |   |   |   |    |         |   |   |   |   |
|                                                |   |                |        |   |   |   |    |         |   |   |   |   |
| Accumulated      deficit prior to development stage |   | $                   | (16,387,718 | )      |   | $      | (57,276 | )            |   | $ | (16,444,994 | ) |

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| ITEM      2. | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations |
|--------------|-------------------------------------------------------------------------------------------------------|

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| ITEM 3. | Quantitative and Qualitative      Disclosures About MarketRisk |
|---------|----------------------------------------------------------------|

| ITEM      4.  | Controls      and Procedures |
|--------------------|------------------------------|

| ITEM      1A.  | Risk      Factors |
|---------------------|-------------------|

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| ITEM      2.  | Unregistered      Sales of Equity Securities and Use ofProceeds |
|--------------------|-----------------------------------------------------------------|

| ITEM      6.  | Exhibits |
|--------------------|----------|

| Number | Description      of Exhibit                                                                                                       |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                              |
| 31.1   | Rule      13a-14(a) or Rule 15d-14(a) Certification of the Chief Executive      Officer                                           |
|   |                                                                                                                              |
| 31.2   | Rule      13a-14(a) or Rule 15d-14(a) Certification of the Chief Financial      Officer                                           |
|   |                                                                                                                              |
| 32     | Certification      pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of      the Sarbanes-Oxley Act of 2002 |

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|                         | Integrated Pharmaceuticals, Inc. |                            |
|------------------------------|----------------------------------|---------------------------------|
|                         |                             |                            |   |
| Date:      November 11, 2008 | By:                              | /s/ Peter      Featherston |   |
|                         |                             | Peter      Featherston          |   |
|                         |                             | CEO                             |   |
|                         |                             |                            |   |

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