UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)

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

                   For the fiscal year ended December 31, 2006

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

                For the transition period from _______ to _______


                        Commission file number: 000-33153


                               StarMed Group, Inc.
                               -------------------
                 (Name of small business issuer in its charter)


                    Nevada                                 52-2220728
                    ------                                 ----------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)


                       2029 Century Park East, Suite 1112
                              Los Angeles, CA 90067
                       ----------------------------------
                    (Address of principal executive offices)


                     Issuer's telephone number: 310-226-2555


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

     Title of each class          Name of each exchange on which Registered

            None                                 not applicable
            ----                                 --------------
    (Title of each class)


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

                     common stock, par value $0.01 per share
                     ---------------------------------------
                                (Title of class)
<PAGE>

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [ ]

Check whether the issuer (1) 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. Yes [X] No [ ]

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

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

State issuer's revenues for its most recent fiscal year. $102,260 for the fiscal
year ended December 31, 2006.

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 prices of such common equity, as of a
specified date within the past 60 days. The aggregate market value of the common
equity held by non-affiliates computed at the closing price of the registrant's
common stock on March 31, 2007 is approximately $416,697.

         As of December 31, 2006, 23,274,456 shares of common stock are issued
and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) of the Securities Act of 1933 ("Securities Act"). Not
Applicable.

     Transitional Small Business Disclosure Form (check one): Yes___   No_X_

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

         Certain statements in this annual report contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors include, but are not limited to, our ability to implement our business
plan, our ability to raise sufficient capital as needed, the market acceptance
of our Wellness products, economic, political and market conditions and
fluctuations, government and industry regulation, interest rate risk, U.S. and
global competition, and other factors. Most of these factors are difficult to

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<PAGE>

predict accurately and are generally beyond our control. You should consider the
areas of risk described in connection with any forward-looking statements that
may be made herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this annual
report in its entirety, including the risks described in "Risk Factors." Except
for our ongoing obligations to disclose material information under the Federal
securities laws, we undertake no obligation to release publicly any revisions to
any forward-looking statements, to report events or to report the occurrence of
unanticipated events. These forward-looking statements speak only as of the date
of this annual report, and you should not rely on these statements without also
considering the risks and uncertainties associated with these statements and our
business.

         When used in this annual report, the terms "StarMed Group," "StarMed,"
the "Company," " we," "our," and "us" refers to StarMed Group, Inc., a Nevada
corporation, and our subsidiaries. The information which appears on our web site
is not part of this annual report.

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         StarMedGroup, Inc. is engaged in the marketing of a line of
over-the-counter, alternative medicinal products.

         Historically our operations were devoted to formulating and marketing a
line of over-the-counter, alternative medicinal products. All of our revenues
for fiscal 2006 were from the sale of our products or royalties and services
related to our StarMed Wellness Centers. Our natural medicinal products are
intended to address the effects of conditions including arthritis, aging
eyesight, obesity and irritable bowel syndrome. We also market a proprietary
starch blocker designed for weight loss and maintenance. We currently market our
medicinal products, directly to consumers and over the Internet.

         However, severe competition in the medicinal product market and the
loss of a significant distribution outlet whose revenues accounted for a
substantial portion of our 2005 revenues have resulted in a significant
reduction in our product sales. Therefore, during fiscal 2006, our management
made a strategic decision and redirected our efforts to the development and
establishment of a network of StarMed Wellness Centers. This effort ended in the
4th quarter 2006.

         StarMed Wellness Centers has focused on promoting general wellness by
addressing the underlying causes of a variety of chronic diseases such as
obesity and stress. Our long-term goal was to expand the number of clinics with
which we contracted to develop a network of StarMed Wellness Centers each of
which would provide clients a full range of preventative, traditional medical
and alternative treatments directed towards achieving "total wellness". Our
StarMed Wellness Centers concept was founded on our belief that traditional
Western medicines and treatments may be enhanced by complementing their use with
preventative medicine techniques and the use of alternative medicines to address
the underlying causes of certain illnesses. In our opinion, addressing these
underlying causes is necessary for good health maintenance and longevity. Our
management and affiliated physicians have devoted significant time, and pooled
their collective experience, to develop our StarMed Wellness concept.

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OUR STARMED WELLNESS BUSINESS MODEL

                                     General

         Our StarMed Wellness concept is founded on our belief that traditional
Western medicines and treatments may be enhanced by complementing their use with
preventative medicine techniques and the use of alternative medicinals to
address the underlying causes of certain illnesses. In our opinion, addressing
these underlying causes is necessary for good health maintenance and longevity.

         Over the course of the last few years, our management has evaluated
those proactive and reactive traditional and alternative medical treatments and
procedures, medical equipment and devices, and medicinal products that we
believe would be most appropriate in a clinical setting offering both
traditional and alternative practices. We are convinced that the incidence and
severity of certain medical conditions, such as diabetes and heart disease,
could be reduced by addressing underlying circumstances that contribute to those
conditions, such as stress and obesity. These conditions are recognized by the
StarMed Wellness program as among those in need of preventative care. Whereas
most traditional medical practices do not devote the time or have the
understanding to address these and other underlying causes of poor health.

         We have assembled a Board of Directors which includes physicians who
share our vision of integrating preventative and Western medicines, and the
promotion of overall health and wellness. Each of these affiliated physicians is
trained in Western medicine and is or was on the medical or teaching staffs of
Cedars-Sinai Medical Center, UCLA Medical School or other similarly-statured
institution. These members of our Board of Directors, some of whom are also
officers of our company, include:

         o Dr. Steven Rosenblatt. Dr. Rosenblatt, a practicing physician is also
our Executive Vice President. Dr. Rosenblatt's initial efforts on our behalf
were directed to the research and formulation of medicinal supplements for the
growing aging population. Dr. Rosenblatt is responsible for developing and
internally proving the efficacy of the StarMed Wellness concept. Recognizing the
increasing danger to American health of obesity, Dr. Rosenblatt co-authored the
Harper Collins book, The Starch Blocker Diet, for weight loss, with well-known
science writer Cameron Stauth, presently in its sixth printing, with a paperback
edition printed in February 2005. He has appeared nationwide and internationally
in Europe, Asia, China and Australia. In addition, since the book's publishing,
he has appeared on over 400 radio, TV talk show and print media interviews as
well as lecturing at product conventions as a medical authority on weight loss
and wellness.

         o Dr. Hector Rodriquez. Dr. Rodriguez, who is also a Vice President of
our company, is a Clinical Professor of Medicine at UCLA and practicing medical
specialist. The Starch Blocker Diet has been translated into Spanish under the
guidance of Dr. Rodriquez, who presides over our Hispanic market operation.
Plans to print and distribute this Spanish edition are in progress.

         o Dr. August Reader. Dr. Reader, who also serves as a per diem
consultant to us, is a neuro-ophthalmologist and, as our former medical
director, originated our product for aging eyesight. He is a well-known medical
authority and lecturer in the United States, Japan and elsewhere on integrated
medicine.

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<PAGE>

         o Dr. Manzoor-Mandel. Dr. Manzoor-Mandel, who is also a Vice President
of our company, holds medical degrees from Pahlavi University and the University
of Maryland. He is a member of the American College of Cosmetic Surgery and the
College of Obstetrics and Gynecology. For the past 20 years he has been in
private practice in Los Angeles.

         o Dr. Joel Feinstein, F.A.C.S. Dr. Feinstein is also a Vice President
of our company. He holds a M.S. in Physiology from Penn State University and
M.D. from Downstate Medical Center, Brooklyn, N.Y. Dr. Feinstein is
gastroenterologist consultant to Cedars-Sinai Medical Center and a consultant on
Colon Cancer, as well as Associate Clinical Professor of Medicine at UCLA, and a
member of the Education Committee, American Cancer Society of Los Angeles. Dr.
Feinstein has appeared as a medical authority on numerous conferences including
that of moderator at the World Congress of Gastroenterology. Dr. Feinstein is a
practicing physician and specialist in gastroenterology.

         o Dr. Seymour Levine. Dr. Levine is a director and advisor to us on
rheumatology. Dr. Levine is in private practice of rheumatology and is the
Clinical Chief of Rheumatology at Cedars-Sinai Medical Center. Dr. Levine
graduated from and completed his residency at the Johns Hopkins University. Dr.
Levine was a member of the President's Task Force on Health Care Reform,
founding member and past president of Managed Care Providers at Cedars-Sinai
Care in Los Angeles. His professional affiliations include Diplomate American
Board of Internal Medicines, American Board of Rheumatology and American Medical
Association.

         We believe that their unique experience and ties to these institutions
will enable them to guide us in understanding new directions in conventional and
alternative methods and how we can incorporate those methods into our products
and services.

                             Operations and Services

         StarMed Wellness programs are expected to enhance the operations of an
existing medical clinic that enable the clinic to expand its traditional
services to include preventative care and alternative medical techniques. It is
expected that affiliated StarMed Wellness physicians will offer services
including:

         o  Weight loss and diabetes management services;
         o  Physical exercise consultation;
         o  Anti-aging treatments;
         o  Doctor prescribed and personalized vitamin, mineral and herbal
            regimens;
         o  Female hormone therapy; and
         o  Pain management.

                                     Market

         StarMed Wellness' primary market is today's aging baby boomers and
others seeking to look and feel better, as well as slow their aging process. We
believe that wellness has universal appeal. Everyone wants to live longer, and
in good health. People today are better educated and are demanding more
effective medicine that is affordable and safe, without dangerous side effects.
StarMed Wellness programs are designed to appeal to clients at all income
levels.

                                       5
<PAGE>

         While our initial focus is in the California, we believe that the
StarMed Wellness concept is amenable to national expansion, with services priced
to be affordable to all income levels. We believe the business model is flexible
to permit expansion to serve the needs of more affluent clients or changed to
serve regional needs.

                             Our Medicinal Products

         The diversion of our limited financial and management resources away
from product sales and marketing activities, and towards the development of our
Wellness Centers, coupled with severe competition in the marketplace for
medicinal products, contributed to a significant decrease in revenues from
product sales during 2006. We anticipate that our program will offer a recurring
market for our medicinal products in the future.

         Products:

         We engage in the development, formulation and marketing of natural,
over-the-counter, alternative medicinal products, and other aspects of the
natural alternative medicinal market. Our line of over-the-counter medicinal
products is currently marketed by us via the Internet. Our natural medicinal
products are intended to address the effects of conditions including arthritis,
aging eyesight, obesity, stress, glucose management and irritable bowel
syndrome. Our websites are www.starmedgroup.com, www.sierramed.com and
www.sierraslim.com.

                                  Manufacturing

         Our medicinal products are formulated on our behalf by Herman Rappaport
and Dr. Steven Rosenblatt, based upon research published in authoritative
journals. Our products are manufactured to our formulated specifications by a
third party manufacturer. Our current manufacturers, American Supplement
Technologies of Tempe, Arizona, and ProThera of Reno, Nevada are full service
contract manufacturers of dietary supplements and maintain product liability
insurance on which we are named as an additional insured. They both manufacture
our medicinal products on a purchase order basis. We have no long-term
commitments with any manufacturer, although we believe that there are numerous
sources of production for our products and we do not believe we are dependent
upon this or any other manufacturer. During the production process, private
labels containing the "Sierra" and "StarMed" brand name are affixed to our
medicinal products by the manufacturer.

         Raw materials contained in our medicinal products include vitamins,
minerals and herbal supplements. Raw materials are available from a variety of
sources, on a purchase order basis. We do not believe that we are dependent upon
any one source for these materials. Our primary supplier of Phase 2 starch
blocker material is Pharmachem Labs in New Jersey.

         We maintain general liability insurance with coverage of $1,000,000. We
maintain product liability insurance on our own behalf. In addition, we are
named as an additional insured to the extent of $1,000,000 under the product
liability policy carried by our product manufacturers. In the event that
excessive product liability claims are made and proven successful, this could
result in a substantial judgment being rendered against us. The public
perception surrounding a product liability claim, even if unsuccessful, could
materially and adversely affect our reputation and sales.

                                       6
<PAGE>

                                    Marketing

         During 2006, we marketed our products via the internet and through our
StarMed Wellness Centers. We currently market our alternative medicinal products
over the Internet on our website at www.sierramed.com, www.sierraslim.com and
www.starmedgroup.com. For fiscal 2006 and fiscal 2005, sales made from our web
site were approximately $1,725 and $12,160, respectively. We offer customers who
purchase products from our web site a 30-day money back guarantee, less shipping
costs.

                              Future Product Sales

         We intend to offer our products in conjunction with the operation of
existing medical clinics and through direct sales to consumers. We also believe
that there is a large market for our products in Latin-speaking markets, and we
intend to pursue that market under the direction of Dr. Hector Rodriguez, our
Vice President and a director.

                            RESEARCH AND DEVELOPMENT

         For the fiscal years ended December 31, 2006 and 2005, we expended $0
and $0, respectively, for company-sponsored research and development activities.

                                   COMPETITION

         Our StarMed Wellness programs will experience competition from
individual and group medical practitioners and others schooled in alternative
medicinal products and techniques, including Western medical doctors,
herbalists, acupuncturists and others. Many of these individuals and groups have
significantly greater operating histories and resources than we do. However, we
believe that until such time as others are able to research and develop a
similar business model, our focus on preventative medicine is unique.

         We believe that the market for natural, alternative medicinal products
is increasing. However, we expect to encounter intense competition from other
manufacturers and marketers of vitamins, supplements, nutraceutical products and
over-the-counter medicinal products. Many of our competitors have significantly
greater financial resources and substantially longer operating histories than we
do. We may never become a competitive factor in the market for medicinal
products. Among our competitors in the medicinal product market are Thorne
Research, Douglas Labs, Jarrow Formulas, Twinlab, KAL, Herbalife, Allergy
Research Group and Weider Nutrition International, Inc.

         We believe that we will distinguish ourselves from our competitors in
the medicinal products marketplace because:

         o Our products have been developed and are supported by the expertise
of our affiliated physicians;

         o Our associated physicians will identify and prescribe a regimen of
medicinal products tailored to the needs of the individual client.

                              INTELLECTUAL PROPERTY

         We own the registered trademarks "Products that work from Doctors who
care" and "StarMed Wellness Centers".

                                       7
<PAGE>

         It is our experience that patents for medicinal supplements are of
limited value because nominal changes in ingredients and/or in formulation will
often invalidate the patent. Therefore, we have not patented or otherwise filed
for protection of the formulae for our medicinal products. We rely upon
confidentiality agreements and common law trade secret protections in order to
prevent others from improperly using our proprietary information. However, our
medicinal products consist of natural ingredients that are readily available.
There is no assurance that others will not independently develop their own
products using similar formulations to those comprising our products, or that
others will not develop more effective formulations to address the conditions
that our products are meant to treat.

                              GOVERNMENT REGULATION

                       Regulations related to our products

         The manufacturing, processing, formulating, packaging, labeling and
advertising of our products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration, or FDA, the
Federal Trade Commission, or FTC, the Consumer Product Safety Commission, or
CPSC, the United States Department of Agriculture, or USDA and the Environmental
Protection Agency, or EPA. Our activities are also regulated by various agencies
of the states, localities and foreign countries to which our products may be
distributed and in which our products may be sold.

         The composition and labeling of dietary supplements, which comprise a
significant majority of our medicinal products, is most actively regulated by
the FDA under the provisions of the Federal Food, Drug, and Cosmetic Act, or
FFDC Act. The FFDC Act, the Nutrition Labeling and Education Act of 1990, or
NLEA, and the Dietary Supplement Health and Education Act of 1994, or DSHEA, may
all impact our products.

         To our knowledge, the manufacture and sale of our natural medicinal
products do not require filings with or approvals, licenses or permits from any
regulatory authority. However, product claims are regulated by the Federal Food
and Drug Administration and we are required to state on our product labels that:
"These statements have not been evaluated by the Food and Drug Administration.
This product is not intended to diagnose, treat, cure or prevent any disease."
We believe that all advertising and marketing of medicinal products in the
United States is being performed in strict compliance with applicable U.S.
government regulations. We are not marketing or manufacturing any of our
products in any foreign country at present, and therefore, we are not required
to comply with any foreign regulations.

                         Corporate Practice of Medicine
                         ------------------------------

         California and certain other states in which we may do business have
corporate practice of medicine laws which prohibit non-physicians from
exercising control over the medical judgments or decisions of physicians. These
laws and their interpretations vary from state to state and are enforced by
state courts and regulatory authorities, each with broad discretion. We intend
to structure our relationships with the medical centers in a manner that we
believe prevents us from engaging in the corporate practice of medicine or
exercising control over the medical judgments or decisions of the practices or
the physicians. Nevertheless, state regulatory authorities or other parties
could assert that our agreements violate these laws.

                                       8
<PAGE>

                                  Fee-Splitting
                                  -------------

         Many states prohibit a physician from splitting with a referral source
the fees generated from physician services. Other states have a broader
prohibition against any splitting of a physician's fees, regardless of whether
the other party is a referral source. In most states, it is not considered to be
fee-splitting when the payment made to the physician is reasonable reimbursement
for services rendered on the physician's behalf. There can be no certainty,
however, that if challenged, we will be found to be in compliance with each
state's fee-splitting laws. A determination in any state that we are engaged in
any unlawful fee-splitting arrangement could render any management agreement
between us and a medical center located in such state unenforceable or subject
to modification in a manner adverse to our interests.

                              Anti-Kickback Statute
                              ---------------------

         The anti-kickback provisions of the Social Security Act (the
"Anti-Kickback Statute") prohibit anyone from knowingly and willfully soliciting
or receiving any remuneration in return for referrals for items and services
reimbursable under most federal health care programs or offering or paying any
remuneration to induce a person to make referrals for items and services
reimbursable under most federal health care programs. The prohibited
remuneration may be paid directly or indirectly, overtly or covertly, in cash or
in kind.

         Violation of the Anti-Kickback Statute is a felony and criminal
conviction results in a fine of not more than $25,000, imprisonment for not more
than five years, or both. Further, the Secretary of the Department of Health and
Human Services has the authority to exclude violators from all federal health
care programs and/or impose civil monetary penalties of $50,000 for each
violation and assess damages of not more than three times the total amount of
remuneration offered, paid, solicited or received.

         As the result of a congressional mandate, the Office of the Inspector
General of the Department of Health & Human Services promulgated regulations
specifying certain payment practices which the Office of Inspector General
determined to be at minimal risk for abuse. The Office of Inspector General
named these payment practices "safe harbors." If a payment arrangement fits
within a safe harbor, it will be deemed not to violate the Anti-Kickback
Statute. Merely because a payment arrangement does not comply with all of the
elements of any safe harbor, however, does not mean that the parties to the
payment arrangement are violating the Anti-Kickback Statute.

         We do not believe we will be in a position to make or influence
referrals of patients or services reimbursed under Medicare, Medicaid or other
governmental programs. Because the provisions of the Anti-Kickback Statute are
broadly worded and have been broadly interpreted by federal courts, however, it
is possible that the government could take the position that we, as a result of
our relationships with the medical center will be subject, directly and
indirectly, to the Anti-Kickback Statute. We will seek to enter into agreements
with the medical centers which are structured in a manner that will not violate
the Anti-Kickback Statute. Nevertheless, we cannot guarantee that a regulator
would not conclude that the compensation to us under the management agreements
constitutes prohibited remuneration.

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<PAGE>

         Many states have laws that prohibit payment of kickbacks in return for
the referral of patients. Some of these laws apply only to services reimbursable
under state Medicaid programs. However, a number of these laws apply to all
health care services in the state, regardless of the source of payment for the
service. Based on court and administrative interpretation of federal
anti-kickback laws, we believe that these laws prohibit payments to referral
sources where a purpose for payment is for the referral. However, the laws in
most states regarding kickbacks have been subjected to limited judicial and
regulatory interpretation. Therefore, no assurances can be given that our
activities will be found to be in compliance.

                                    Stark Law
                                    ---------

         Section 1877 of Title 18 of the Social Security Act, commonly referred
to as the "Stark Law," prohibits a physician from making a referral to an entity
for the furnishing of Medicare-covered "designated health services" if the
physician or an immediate family member of the physician has a "financial
relationship" with that entity. Sanctions for prohibited referrals include
denial of Medicare payment, and civil money penalties of up to $15,000 for each
service ordered. Designated health services furnished pursuant to a referral
that is prohibited by the Stark Law are not covered by Medicare and payments
improperly collected must be promptly refunded. At least some of the states in
which we may do business also have prohibitions on physician self-referrals that
are similar to the Stark Law. These laws and interpretations vary from state to
state and are enforced by state courts and regulatory authorities, each with
broad discretion. Although we will attempt to structure our agreements with the
medical centers in a manner that avoids violating these laws, or in a manner
that we believe does not trigger the law, state regulatory authorities or other
parties could assert that our agreement with a medical centers violate these
laws which could subject us to civil penalties and require us to terminate the
particular agreement.

                                      HIPAA
                                      -----

         Numerous state, federal and international laws and regulations govern
the collection, dissemination, use and confidentiality of patient-identifiable
health information, including the federal Health Insurance Portability and
Accountability Act of 1996 and related rules, or HIPAA. The scope of services we
may perform for a particular medical center may include the collection, use,
maintenance and transmission of patient information in ways that may or will be
subject to many of these laws and regulations. HIPAA applies to covered
entities, which include most healthcare providers and health plans. HIPAA also
requires covered entities to bind contractors to compliance with certain
burdensome HIPAA requirements. Other federal and state laws restricting the use
and protecting the privacy of patient information may also apply to us, either
directly or indirectly.

         The three rules that were promulgated pursuant to HIPAA that could most
significantly affect our business are the Standards for Electronic Transactions,
or Transactions Rule; the Standards for Privacy of Individually Identifiable
Health Information, or Privacy Rule; and the Health Insurance Reform Security
Standards, or Security Rule. The HIPAA Transactions Rule establishes format and
data content standards for eight of the most common healthcare transactions. The
HIPAA Privacy Rule restricts the use and disclosure of patient information and
requires entities to safeguard that information and to provide certain

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<PAGE>

rights to individuals with respect to that information. The HIPAA Security Rule
establishes elaborate requirements for safeguarding patient information
transmitted or stored electronically. We may be required to make costly system
purchases and modifications to comply with the HIPAA requirements that will be
imposed on us.

         Federal and state consumer protection laws are being applied
increasingly by the Federal Trade Commission, and state attorneys general to
regulate the collection, use and disclosure of personal or patient information,
through websites or otherwise, and to regulate the presentation of website
content. Courts may also adopt the standards for fair information practices
promulgated by the Federal Trade Commission, which concern consumer notice,
choice, security and access.

         Numerous other federal and state laws protect the confidentiality of
private information. These laws in many cases are not preempted by HIPAA and may
be subject to varying interpretations by courts and government agencies,
creating complex compliance issues for us and potentially exposing us to
additional expenses, adverse publicity and liability.

         New health information standards, whether implemented pursuant to
HIPAA, congressional action or otherwise, could have a significant effect on the
manner in which we will be required to handle health care related data, and the
cost of complying with these standards could be significant. If we do not
properly comply with existing or new laws and regulations related to patient
health information we could be subject to criminal or civil sanctions.

                         False and Other Improper Claims
                         -------------------------------

         The federal government is authorized to impose criminal, civil and
administrative penalties and/or exclusions on any health care provider and its
officers, directors, and in certain limited circumstances, its owners that files
a false claim or a pattern of claims based on a code that the provider has
reason to know will result in greater payments than appropriate, claims for
items or services not medically necessary, or for the offer, solicitation,
payment or receipt of anything of value (direct or indirect, overt or covert, in
cash or in kind), that is intended to induce the referral of federal health care
program patients or the ordering of items or services reimbursable under those
programs or the recommendation of, or the arranging for, the provision of items
or services reimbursable under Medicare and Medicaid. Civil monetary penalties
can also be imposed if a person "arranges or contracts" with a person excluded
from a federally funded health care program, if they knew or should have known
such person was excluded from reimbursement from Medicare or Medicaid. Criminal
penalties are also available in the case of claims filed with private insurers
if the government can show that the claims constitute mail fraud, wire fraud,
health care fraud, theft or embezzlement in connection with health care or false
statements relating to health care matters. While the criminal statutes are
generally reserved for instances evincing an obviously fraudulent intent, the
criminal and administrative penalty statutes are being applied by the government
in an increasingly broad range of circumstances. The government has taken the
position, for example, that a pattern of claiming reimbursement for unnecessary
services violates these statutes if the claimant should have known that the
services were unnecessary. The government has also taken the position that
claiming reimbursement for services that are substandard is a violation of these
statutes if the claimant should have known that the care was substandard. The
government, in cases of suspected fraud, can freeze the assets of a health care

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<PAGE>

provider and in the case of a federal health care offense can order the
forfeiture of assets that constitute or are derived from proceeds traceable to
the offense.

                                    EMPLOYEES

         As of December 31, 2006, we had 4 full-time employees. None of our
employees are covered by collective bargaining agreements. We believe our
relationships with our employees to be good.

                                   OUR HISTORY

         We were incorporated in Nevada on August 13, 1981, under the name Port
Star Industries, Inc. We were organized to succeed to the properties, rights and
obligations of Port Star Industries, Inc., a publicly-held North Carolina
corporation formed on November 3, 1961 under the name of Riverside Homes, Inc.
("Port Star North Carolina").

         At the time of our formation, Port Star North Carolina had no assets,
liabilities or operations. In order to change the domicile of Port Star North
Carolina to Nevada:

         o Port Star North Carolina caused our formation under the laws of
Nevada, with an authorized capitalization that "mirrored" the authorized
capitalization of Port Star North Carolina, and

         o issued to each stockholder of Port Star North Carolina a number of
shares of our common stock equal to such stockholder's share ownership of Port
Star North Carolina.

         At the time of the reincorporation, Herman Rappaport, our founder,
president and chief executive officer was the principal stockholder of Port Star
North Carolina. Port Star North Carolina conducted no operations subsequent to
the reincorporation and was administratively dissolved in 1988.

         We remained inactive until March 20, 1984, when our stockholders voted
to acquire Energy Dynamics, Inc., and changed our name to Energy Dynamics, Inc.
However, on March 20, 1985, the acquisition was rescinded due to non-performance
by Energy Dynamics. At this time, we changed our name to Heathercliff Group Inc.
and from 1984 to 1985, engaged in real estate development. Real estate
operations ceased in 1985, and, in 1985, Nevada revoked our charter for failing
to file required reports.

         On January 10, 2000, we revived our Nevada charter and, in connection
therewith, we changed our name to StarMed Group, Inc. At the time of the revival
of our charter, we had no assets or liabilities. Mr. Rappaport was our majority
stockholder either directly or through his family trust.

         On July 27, 2001, we acquired Sierra Medicinals, Inc., an Arizona
corporation incorporated in March 2000, in a share exchange whereby we issued a
total of 469,792 shares of common stock for all of the issued and outstanding
shares of Sierra Medicinals, Inc. Mr. Rappaport, either directly or through his
family trust, was a majority stockholder of Sierra Medicinals, Inc. We now
operate Sierra Medicinals, Inc. as our wholly owned subsidiary.

                                       12
<PAGE>

         On September 10, 2003, we formed Vet Medicinals, Inc. as a wholly owned
subsidiary under the laws of the State of Nevada. Vet Medicinals, Inc. is
currently inactive.

             CONSULTING AGREEMENT WITH PARADIGM MEDIA VENTURES, INC.

         On September 8, 2005, we entered into a two-year consulting agreement
with Paradigm Media Ventures, Inc. Under the agreement, Paradigm has agreed to
provide such business consulting services to us as we may reasonably request,
including developing a business plan, developing a strategy for attracting
bridge funding, potential lenders and investors in general, and identifying
merger and acquisitions candidates, joint venture candidates and corporate
partners. As consideration for its services, we have paid Paradigm a consulting
fee of $49,000 and have issued Paradigm 1,625,000 shares of our common stock. We
also agreed to include the shares we issued to Paradigm in the registration
statement to be filed with the SEC. Under the terms of the agreement Paradigm
agreed that it will not sell more than 406,250 of such shares per quarter. The
shares issuable to Paradigm are also being subject to a voting proxy in favor of
Herman Rappaport.

                                  RISK FACTORS

         An investment in our common stock involves a significant degree of
risk. You should not invest in our common stock unless you can afford to lose
your entire investment. You should consider carefully the following risk factors
and other information in this annual report before deciding to invest in our
common stock.

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT. WE ANTICIPATE CONTINUING
LOSSES MAY RESULT IN SIGNIFICANT LIQUIDITY AND CASH FLOW PROBLEMS.

         Our total net revenues declined substantially in fiscal 2006 as
compared to fiscal 2005 and our net loss for fiscal 2006 was $2,751.367 as
compared to a net loss of $805,910 for fiscal 2005. While at December 31, 2006
we had approximately $60,965 of cash on hand. As a result our continued
existence is dependent upon, among other things, our ability to raise capital
and to market and sell our services successfully. Depending on our ongoing
evaluation of cash needs, we may need to raise additional debt or equity capital
within the next 12 months to provide funding for ongoing and future operations.
No assurances can be given that we will be successful in obtaining additional
capital, or that such capital will be available on terms acceptable to us. If we
are not able to significantly increase our revenues during fiscal 2007 to a
level which funds our ongoing operations, or to continue to raise working
capital as needed, we may be unable to continue to implement our Wellness
business model or operate our company as presently planned. Any liquidity or
cash flow problems which could arise in those events would force us to curtail
some or all of our operations.

WE ARE TRANSITIONING OUR BUSINESS MODEL AND HAVE A LIMITED OPERATING HISTORY
UPON WHICH YOU CAN EVALUATE OUR COMPANY.

         Although our company has existed since December 1962, we have only a
limited operating history in alternative medicine on which you can base an
evaluation of our business and prospects. We are still relatively early in our
development and we face substantial risks, uncertainties, expenses and
difficulties. To address these risks and uncertainties, we must do the
following:

                                       13
<PAGE>

         o Establish our initial StarMed Wellness affiliates and confirm its
efficacy in a commercial setting;

         o Develop a number of Wellness programs and expand our reactive medical
services.

         o Expand into new areas;

         o Establish and enhance our name recognition;

         o Continue to expand our products to meet the changing requirements of
our customers;

         o Provide superior customer service;

         o Respond to competitive developments; attract, integrate, retain and
motivate qualified personnel.

         We may be unable to accomplish one or more of these goals, which could
cause our business to suffer. In addition, accomplishing one or more of these
goals might be very expensive, which could harm our financial results.

WE WILL NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON
ACCEPTABLE TERMS. IF WE ARE UNABLE TO RAISE ADDITIONAL CAPITAL AS NEEDED, OUR
CONTINUED OPERATIONS WILL BE ADVERSELY AFFECTED AND THE FUTURE GROWTH OF OUR
BUSINESS AND OPERATIONS WILL BE SEVERELY LIMITED.

         Historically, our operations have been financed primarily through the
issuance of equity and debt. Because we have a history of losses and have never
generated sufficient revenue to fund our ongoing operations, we are dependent on
our continued ability to raise working capital through the issuance of equity or
debt to fund our present operations. Because we do not know if our revenues will
grow at a pace sufficient to fund our current operations, the continuation of
our operations and any future growth will depend upon our ability to raise
additional capital, possibly through the issuance of long-term or short-term
indebtedness or the issuance of our equity securities in private or public
transactions. The actual amount of our future capital requirements, however,
depends on a number of factors, including our ability to grow our revenues and
manage our business.

         If we raise additional capital through the issuance of debt, this will
result in increased interest expense. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of
our company held by existing stockholders will be reduced and those stockholders
may experience significant dilution. In addition, new securities may contain
certain rights, preferences or privileges that are senior to those of our common
stock. There can be no assurance that acceptable financing can be obtained on
suitable terms, if at all. If we are unable to raise additional working capital
as needed, our ability to continue our current business will be adversely
affected and we may be forced to curtail some or all of our operations.

OUR FUTURE PROFITABILITY WILL DEPEND UPON THE SUCCESS OF OUR EXISTING AND FUTURE
STARMED WELLNESS PROGRAMS, BUT THERE HAVE BEEN NO MARKET STUDIES OR OTHER
DETERMINATIONS AS TO THE EFFICACY OF OR CONSUMER DEMAND FOR OUR OPERATIONS.

                                       14
<PAGE>

         Our future profitability will depend upon the success of our fusion of
traditional Western medical practice with alternative and preventative medical
procedures and techniques. This is a relatively new concept that has not as yet
been tested. We have performed no market studies to determine the demand for our
proposed Wellness programs and there is no assurance that the concept will be
well received by the public or that demand for Wellness products and services
can sustain our operations. Lack of demand could cause operating StarMed
Wellness Group, Inc. to cease operations.

IF OUR WELLNESS AFFILIATION CONCEPT IS DETERMINED TO CONSTITUTE THE PRACTICE OF
MEDICINE, OUR ABILITY TO PROVIDE OUR SERVICES TO EXISTING MEDICAL CLINICS COULD
BE JEOPARDIZED.

         We will work with participating medical centers and regulatory counsel
in an effort to ensure that our agreements are in compliance with applicable
state laws and that the services we will provide to medical clinics will not
constitute the practice of medicine. If however, it is determined that our
services do constitute the practice of medicine, we will be unable to continue
to provide those services and we may be forced to cease operations. If we were
required to abandon our business model, our ability to continue as a going
concern would be in jeopardy and our investors would likely lose their entire
investment in StarMed.

REGULATORY AUTHORITIES COULD ASSERT THAT OUR PARTICIPATION IN THE WELLNESS
BUSINESS MODEL FAILS TO COMPLY WITH STATE LAWS WHICH ARE ANALOGOUS TO THE STARK
LAW. IN SUCH EVENT, WE COULD BE SUBJECT TO CIVIL PENALTIES AND COULD BE REQUIRED
TO RESTRUCTURE OR TERMINATE THE CONTRACTUAL ARRANGEMENTS.

         Some of the states in which we may do business have prohibitions on
physician self-referrals that are similar to the Stark Law. These laws and
interpretations vary from state to state and are enforced by state courts and
regulatory authorities, each with broad discretion. As indicated elsewhere, we
will enter into agreements with the existing medical centers. We may, under the
terms of those agreements, provide products to affiliated clinics in exchange
for compensation. Although we will use our best efforts to attempt to structure
our relationships with the medical centers in a manner that we believe will keep
us from violating these laws, or in a manner that we believe does not trigger
the law, state regulatory authorities or other parties could assert that our
agreements with the medical centers violate these laws. Any such conclusion
could subject us to significant financial penalties which would reduce the
amount of working capital available to for our ongoing operations. We may also
be required to abandon our current business model which could result in our
inability to continue as a going concern.

REGULATORY AUTHORITIES COULD ASSERT THAT OUR RELATIONSHIPS WITH THE MEDICAL
CENTERS FAIL TO COMPLY WITH THE ANTI-KICKBACK LAWS. IF SUCH A CLAIM WERE
SUCCESSFULLY ASSERTED, WE COULD BE SUBJECT TO CIVIL AND CRIMINAL PENALTIES AND
COULD BE REQUIRED TO RESTRUCTURE OR TERMINATE THE APPLICABLE CONTRACTUAL
ARRANGEMENTS. IF WE WERE SUBJECT TO PENALTIES OR ARE UNABLE TO SUCCESSFULLY
RESTRUCTURE THE RELATIONSHIPS TO COMPLY WITH THE ANTI-KICKBACK STATUTE IT WOULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

         Our business model contemplates that we may receive fees under the
agreements with the medical centers. While we do not anticipate that we will
ever be in a position to make or influence referrals of patients or services
reimbursed under Medicare, Medicaid or other governmental programs, we could

                                       15
<PAGE>

become subject to compliance with the anti-kickback provisions of the Social
Security Act (the "Anti-Kickback Statute") which prohibits anyone from knowingly
and willfully soliciting or receiving any remuneration in return for referrals
for items and services reimbursable under most federal health care programs or
offering or paying any remuneration to induce a person to make referrals for
items and services reimbursable under most federal health care programs. Because
the provisions of the Anti-Kickback Statute are broadly worded and have been
broadly interpreted by federal courts, it is possible that the government could
take the position that, as a result of our relationships with the medical
centers, we will be subject, directly and indirectly, to the Anti-Kickback
Statute. Any such finding would make our current business model unfeasible and
we could be forced to cease all of our operations.

STATE REGULATORY AUTHORITIES MAY ASSERT THAT WE ARE ENGAGED IN THE CORPORATE
PRACTICE OF MEDICINE. IF SUCH A CLAIM WERE SUCCESSFULLY ASSERTED, WE COULD BE
SUBJECT TO CIVIL, AND PERHAPS CRIMINAL, PENALTIES AND COULD BE REQUIRED TO
RESTRUCTURE OR TERMINATE THE APPLICABLE CONTRACTUAL ARRANGEMENTS. OUR INABILITY
TO SUCCESSFULLY RESTRUCTURE OUR RELATIONSHIPS TO COMPLY WITH THESE STATUTES
COULD JEOPARDIZE OUR BUSINESS AND RESULTS OF OPERATIONS.

         California and many other states in which we may do business have
corporate practice of medicine laws which prohibit corporations or other
artificial entities from exercising control over the medical judgments or
decisions of physicians. These laws and their interpretations vary from state to
state and are enforced by state courts and regulatory authorities, each with
broad discretion. We intend to structure our agreements with the medical centers
in a manner that we believe will keep us from engaging in the corporate practice
of medicine or exercising control over the medical judgments or decisions of the
medical centers or the physicians. Nevertheless, state regulatory authorities or
other parties could assert that our agreements violate these laws. We could then
be subject to regulatory actions and be forced to curtail some or all of our
operations. This could result in our inability to continue as a going concern.

REGULATORY AUTHORITIES MAY ASSERT THAT OUR AGREEMENTS WITH THE MEDICAL CENTERS
VIOLATE STATE FEE SPLITTING LAWS. OUR INABILITY TO SUCCESSFULLY RESTRUCTURE OUR
RELATIONSHIPS TO COMPLY WITH THESE STATUTES COULD JEOPARDIZE OUR BUSINESS AND
RESULTS OF OPERATIONS.

         The laws of many states prohibit physicians from splitting fees with
non-physicians. These laws vary from state to state and are enforced by the
courts and by regulatory authorities with broad discretion. The relationships we
may have with a medical center may raise issues in some states with
fee-splitting prohibitions. Although we will attempt to structure our agreements
with the medical centers in a manner that keeps us from violating prohibitions
on fee-splitting, state regulatory authorities or other parties may assert that
the terms of the agreement constitute fee-splitting, which could make the
management agreements with the medical centers unenforceable. In addition, if
such a claim were successfully asserted, we could be subject to civil or
criminal penalties, and could be required to restructure or terminate the
applicable contractual arrangements. In such an event, our ability to generate
revenues and continue as a going concern could be in jeopardy.

IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, OUR FINANCIAL PERFORMANCE COULD BE
HARMED.

                                       16
<PAGE>

         Our growth is expected to place certain pressures on our management,
administrative, operational and financial infrastructure. As we continue to grow
our business, such growth could require capital, systems development and human
resources beyond current capacities. The increase in the size of our operations
may make it more difficult for us to ensure that we execute our present
businesses and future strategies. The failure to manage our growth effectively
could have a material adverse effect on our financial condition and results of
operations.

OUR MANAGEMENT GROUP OWNS OR CONTROLS A SIGNIFICANT NUMBER OF THE OUTSTANDING
SHARES OF OUR COMMON STOCK AND WILL CONTINUE TO HAVE SIGNIFICANT OWNERSHIP OF
OUR VOTING SECURITIES FOR THE FORESEEABLE FUTURE.

         Our management currently beneficially owns or controls approximately
29.5% of our issued and outstanding shares of common stock. As a result, these
persons will have the ability, acting as a group, to effectively control our
affairs and business, including the election of directors and subject to certain
limitations, approval or preclusion of fundamental corporate transactions. This
concentration of ownership of our common stock may:

         o delay or prevent a change in the control;

         o impede a merger, consolidation, takeover, or other transaction
involving our company; or

         o discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of our company.

OUR MEDICINAL PRODUCTS ARE AND WILL CONTINUE TO BE SUBJECT TO GOVERNMENT
REGULATION.

         The manufacturing, processing, formulating, packaging, labeling and
advertising of our products are subject to regulation by one or more federal
agencies, including the United States Food and Drug Administration, or FDA, the
Federal Trade Commission, or FTC, the Consumer Product Safety Commission, or
CPSC, the United States Department of Agriculture, or USDA and the Environmental
Protection Agency, or EPA. Our activities are also regulated by various agencies
of the states, localities and foreign countries to which our products may be
distributed and in which our products may be sold.

         The composition and labeling of dietary supplements, which comprise a
significant majority of our products, is most actively regulated by the FDA
under the provisions of the Federal Food, Drug, and Cosmetic Act, or FFDC Act.
The FFDC Act, the Nutrition Labeling and Education Act of 1990, or NLEA, and the
Dietary Supplement Health and Education Act of 1994, or DSHEA, may all impact
our products. We may not be able to comply with these and similar laws, rules
and regulations, and there can be no assurance that we will not, in the future,
be subject to additional laws or regulations administered by various regulatory
authorities. In addition, there can be no assurance that existing laws and
regulations will not be repealed or be subject to more stringent or unfavorable
interpretation by applicable regulatory authorities.

WE ARE DEPENDENT ON A THIRD-PARTY SUPPLIER FOR ONE OF OUR MEDICINAL PRODUCTS AND
IF WE ARE REQUIRED TO FIND ALTERNATIVE MANUFACTURERS FOR OUR OTHER PRODUCTS, OUR
BUSINESS MAY BE ADVERSELY AFFECTED.

                                       17
<PAGE>

         We are dependent upon one company to supply us with starch blocker
material. In the event we are unable to procure starch blocker from this
supplier, we may be unable to market our starch blocker product at a cost
effective price. Revenues from this product were $4,762 for fiscal 2006.
Although we believe that most of the key components required for the production
of our other products are currently available in sufficient production
quantities from multiple sources, they may not remain so readily available. It
is possible that other components required in the future may necessitate custom
fabrication in accordance with specifications developed or to be developed by
us. Also, in the event that we, or our contract manufacturer, is unable to
develop or acquire components in a timely fashion, we may encounter delays in
fulfilling our product delivery requirements and in the event we are required to
engage one or more new manufacturers, we may experience additional delays that
could adversely affect our production yields, revenues and net income.

WE ARE DEPENDENT UPON THE CONTINUED SERVICES OF OUR CHIEF EXECUTIVE OFFICER AND
OTHER SENIOR MANAGEMENT. IF WE WERE TO LOSE THE SERVICES OF ONE OR MORE OF THESE
INDIVIDUALS OUR ABILITY TO IMPLEMENT OUR BUSINESS MODEL WOULD BE ADVERSELY
AFFECTED.

         The operations and future success of our company is dependent upon the
continued efforts and services of Mr. Herman Rappaport, our CEO, as well as
other members of our management. While we are a party to an employment agreement
with Mr. Rappaport, if for any reason he should be unable to continue to be
primarily responsible for our day to day business operations, our ability to
effectively implement our business model would be materially adversely effected.
We cannot assure you that we would be able to replace Mr. Rappaport's services
on a timely fashion, if at al. We would then be unable to continue our
operations as presently conducted nor would we be able to effectively implement
our business model.

THE EXERCISE OF OUR OUTSTANDING WARRANTS WILL BE DILUTIVE TO OUR EXISTING
STOCKHOLDERS.

         As of March 31, 2006 we had outstanding common stock purchase warrants
to purchase a total of 9,692,000 shares of our common stock at prices ranging
between $0.25 to $1.00 per share. The exercise of these warrants may materially
adversely affect the market price of our common stock and will have a dilutive
effect on our existing stockholders.

CERTAIN OF OUR OUTSTANDING WARRANTS CONTAIN CASHLESS EXERCISE PROVISIONS WHICH
MEANS WE WILL NOT RECEIVE ANY CASH PROCEEDS UPON THEIR EXERCISE.

         In December 2005, we issued five year common stock purchase warrants to
purchase an aggregate of 250,000 shares of our common stock with an exercise
price of $0.40 per share in connection with the sale of a 10% senior secured
convertible promissory note. The exercise price of these warrants was
subsequently reduced to $0.25 per share according to their terms following our
unit offering between December 2005 and January 2006. These warrants are
exercisable on a cashless basis which means that the holders, rather than paying
the exercise price in cash, may surrender a number of warrants equal to the
exercise price of the warrants being exercised. The utilization of this cashless
exercise feature will deprive us of additional capital that might otherwise be
obtained if the warrants did not contain a cashless feature.

                                       18
<PAGE>

WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN
THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST
INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS.

         Recent Federal legislation, including the Sarbanes-Oxley Act of 2002,
has resulted in the adoption of various corporate governance measures designed
to promote the integrity of the corporate management and the securities markets.
Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of
national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges and NASDAQ are
those that address board of directors' independence, audit committee oversight,
and the adoption of a code of ethics. Although we have adopted a Code of
Business Conduct and Ethics, we have not yet adopted any of these other
corporate governance measures and, since our securities are not yet listed on a
national securities exchange or NASDAQ, we are not required to do so. We have
not adopted corporate governance measures such as an audit or other independent
committees of our board of directors as we presently only have one independent
director. If we expand our board membership in future periods to include
additional independent directors, we may seek to establish an audit and other
committees of our board of directors. It is possible that if we were to adopt
some or all of these corporate governance measures, stockholders would benefit
from somewhat greater assurances that internal corporate decisions were being
made by disinterested directors and that policies had been implemented to define
responsible conduct. For example, in the absence of audit, nominating and
compensation committees comprised of at least a majority of independent
directors, decisions concerning matters such as compensation packages to our
senior officers and recommendations for director nominees may be made by a
majority of directors who have an interest in the outcome of the matters being
decided. Prospective investors should bear in mind our current lack of corporate
governance measures in formulating their investment decisions.

PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A
TAKEOVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS.

         Provisions of our certificate of incorporation and bylaws may be deemed
to have anti-takeover effects, which include when and by whom special meetings
of our stockholders may be called, and may delay, defer or prevent a takeover
attempt. In addition, certain provisions of Nevada law also may be deemed to
have certain anti-takeover effects which include that control of shares acquired
in excess of certain specified thresholds will not possess any voting rights
unless these voting rights are approved by a majority of a corporation's
disinterested stockholders.

         In addition, our articles of incorporation authorize the issuance of up
to 25,000,000 shares of preferred stock with such rights and preferences as may
be determined by our board of directors. Our board of directors may, without
stockholder approval, issue preferred stock with dividends, liquidation,
conversion or voting rights that could adversely affect the voting power or
other rights of our common stockholders.

THE ADJUSTMENT PROVISIONS IN AGREEMENTS COVERING 19,134,000 SHARES OF OUR COMMON
STOCK COULD REQUIRE US TO ISSUE ADDITIONAL SHARES IN THE EVENT WE SELL STOCK AT
LESS THAN $0.25 PER SHARE.

                                       19
<PAGE>

         In connection with the sale of 10% senior secured convertible
promissory notes in June 2005 we issued five year common stock purchase warrants
to purchase an aggregate of 250,000 shares of our common stock which initially
had an exercise price of $0.40 per share. These warrants contain a provision
which requires an adjustment to the exercise price in the event we issue shares
of our common stock or securities convertible into common stock at a price less
than the prevailing exercise price. As a result of the subsequent unit offering
of our securities, the exercise price of these warrants has been reduced to
$0.25 per share. Additionally, under the terms of our unit offering of
securities in December 2005 and January 2006 in which we issued an aggregate of
9,442,000 shares of our common stock and five year common stock purchase
warrants for an additional 9,442,000 shares of common stock with an exercise
price of $1.00 per share, we agreed that for one year following the date of
issuance we will issue additional shares of our common stock to purchasers of
the units to protect them against dilution in the event that we issue shares of
our common stock during such one-year period at less than $.25 per share. In
addition, for a one year period following the date of issuance and continuing
until the warrants expire, the exercise price is subject to "weighted-average"
anti-dilution protection for subsequent issuances of common stock or securities
convertible into common stock at less than the then current warrant exercise
price, excluding certain issuances unrelated to capital raising transactions.
These terms could require us to issue a significant, but presently
undeterminable, number of additional shares of our common stock if we issue
additional securities below an effective price of $0.25 per share. Any
additional issuances will be dilutive to our shareholders.

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTCBB. HOWEVER, TRADING IN OUR STOCK
IS LIMITED. BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS
QUOTED ON THE OTC BULLETIN BOARD, OUR STOCK IS CONSIDERED A "PENNY STOCK" WHICH
CAN ADVERSELY EFFECT ITS LIQUIDITY.

         The market for our common stock is extremely limited and there are no
assurances an active market for our common stock will ever develop. Accordingly,
purchasers of our common stock cannot be assured any liquidity in their
investment. In addition, the trading price of our common stock is currently
below $5.00 per share and we do not anticipate that it will be above $5.00 per
share in the foreseeable future. Because the trading price of our common stock
is less than $5.00 per share, our common stock is considered a "penny stock,"
and trading in our common stock is subject to the requirements of Rule 15g-9
under the Securities Exchange Act of 1934 (the "Securities Exchange Act"). Under
this rule, broker/dealers who recommend low-priced securities to persons other
than established customers and accredited investors must satisfy special sales
practice requirements. SEC regulations also require additional disclosure in
connection with any trades involving a "penny stock," including the delivery,
prior to any penny stock transaction, of a disclosure schedule explaining the
penny stock market and its associated risks. These requirements severely limit
the liquidity of our securities in the secondary market because few broker or
dealers are likely to undertake these compliance activities.

ASSUMING AN ESTABLISHED MARKET FOR OUR SECURITIES DEVELOPS, IT MAY BE
PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A
LIMITED OPERATING HISTORY AND LACK OF REVENUES AND PROFITS, THIS COULD LEAD TO
WIDE FLUCTUATIONS IN OUR SHARE PRICE. WE MAY HAVE ONLY A SMALL AND THINLY TRADED
PUBLIC FLOAT.

                                       20
<PAGE>

         The market for our common stock is highly sporadic. Assuming an
established market for our securities develops, that market may be characterized
by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer
for the indefinite future. The volatility in our share price may be attributable
to a number of factors. First, we may have relatively few common shares
outstanding in the "public float" as compared to our overall capitalization. In
addition, there is currently only a limited market for our securities, and if an
established market develops, the common stock may be sporadically or thinly
traded. As a consequence of this lack of liquidity, the trading of relatively
small quantities of shares by our shareholders may disproportionately influence
the price of those shares in either direction. The price for our shares could,
for example, decline precipitously in the event that a large number of our
securities are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price. Secondly, we are a speculative or "risky" investment due to our
limited operating history and lack of profits to date, lack of capital to
execute our business plan, and uncertainty of future market acceptance for our
products. As a consequence of this enhanced risk, more risk-adverse investors
may, under the fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their shares on the
market more quickly and at greater discounts than would be the case with the
stock of a seasoned issuer.

         The following factors may add to the volatility in the price of our
securities: actual or anticipated variations in our quarterly or annual
operating results;

         o acceptance of our products; announcements of changes in our
operations, distribution or development programs;

         o our capital commitments; and

         o additions or departures of our key personnel.

         Many of these factors are beyond our control and may decrease the
market price of our securities, regardless of our operating performance. We
cannot make any predictions or projections as to what the prevailing market
price for our securities will be at any time, including as to whether our
securities will sustain the price you may purchase our securities, or as to what
effect that the sale of shares or the availability of securities for sale at any
time will have on the prevailing market price.

         Further, in the past, plaintiffs have often initiated securities class
action litigation against a company following periods of volatility in the
market price of its securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and
liabilities and could divert management's attention and resources.

SHARES AVAILABLE FOR FUTURE ISSUANCE COULD CAUSE THE MARKET PRICE OF OUR SHARES
TO FALL.

         As of December 31, 2006 we had common stock purchase warrants to
purchase a total of 3,302,000 shares of our common stock outstanding at prices
ranging between $0.25 to $1.00 per share. In addition, we have reserved
4,050,000 shares of our common stock reserved for future issuance under our 2004
Equity Compensation Plan. At December 31, 2006, 420,000 shares have been issued.
The exercise of these warrants and the possible future issuance of these
additional shares may materially adversely affect the market price of our common
stock and will have a dilutive effect on our existing stockholders.

                                       21
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

         Our corporate offices are presently located in leased office space at
2029 Century Park East, Suite 1112, Los Angeles, California 90067. Effective
January 1, 2006, we entered into a three year lease for office space. This lease
has a yearly escalation clause of 3%. The lease rental is currently $5501.13
plus annual Building Direct Expenses, payable monthly, to the unaffiliated
landlord. We believe that such space is currently sufficient for our needs.

ITEM 3.  LEGAL PROCEEDINGS

         We are not a party to any pending legal proceedings. To our knowledge,
none of our officers, directors or principal stockholders are party to any legal
proceeding in which they have an interest adverse to us.

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

         None.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since April 7, 2005 our common stock is quoted on the OTCBB under the
symbol SMEG.OB. The reported high and low sales prices for the common stock as
reported on the OTCBB are shown below for the periods indicated. The quotations
reflect inter-dealer prices, without retail mark-up, markdown or commission, and
may not represent actual transactions.

                                                    High          Low
Fiscal 2005

January 1, 2006 through March 31, 2006 .......     $ 0.35        $ 0.13
April 7, 2006 through June 30, 2006 ..........     $ 0.30        $ 0.30
July 1, 2006 through September 30, 2006 ......     $ 0.37        $ 0.10
October 1, 2006 through December 31, 2006 ....     $ 0.20        $ 0.03

Fiscal 2006

January 1, 2007 through March 31, 2007 .......     $ 0.05        $ 0.02

         On April 11, 2007, the last sale price of our common stock as reported
on the OTCBB was $0.02. As of December 31, 2006, there were approximately 959
record owners of our common stock.

DIVIDEND POLICY

         We have never paid cash dividends on our common stock. We currently
expect to retain future earnings, if any, to finance the growth and development
of our business. Under Nevada law, we are prohibited from paying dividends if
the distribution would result in our company not being able to pay its debts as
they become due in the usual course of business or if our total assets would be
less than the sum of our total liabilities plus the amount that would be needed,
were we to be dissolved at the time of distribution, to satisfy the preferential
rights upon dissolution of stockholders whose preferential rights are superior
to those receiving the distribution.

                                       22
<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

         None.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

         The following table sets forth securities authorized for issuance under
equity compensation plans, including individual compensation arrangements, by us
under our 2005 Equity Compensation Plan and any compensation plans not
previously approved by our stockholders as of December 31, 2006.

                              Number of       Weighted     Number of
                              securities to   average      securities remaining
                              be issued upon  exercise     available for future
                              exercise of     price of     issuance under equity
                              outstanding     outstanding  compensation plans
                              options,        options,     (excluding securities
                              warrants        warrants     reflected
                              and rights      and rights   in column (a))
                              (a)             (b)          (c)
                              --------------  -----------  ---------------------
Plan category

2005 Equity Compensation
 Plan(1) ...................     3,552,000        $--              498,000

Equity compensation plans not
 approved by stockholders ....           0        n/a                  n/a

(1) In February 2006 our board of directors and the holder of a majority of our
outstanding common stock approved an increase of 3,000,000 shares which are
available for issuance under our 2004 Equity Compensation Plan bringing the
total available under the plan to 4,050,000 shares.

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

         The following analysis of our results of operations and financial
condition should be read in conjunction with the accompanying consolidated
financial statements for the years ended December 31, 2006 and 2005. These notes
thereto appear elsewhere in this annual report.

OVERVIEW

         Historically we generated revenues from the sale of our products that
include a starch blocker, as well as revenues from royalties for formulas of
herbal health products. During fiscal 2006 we redirected our resources towards
completion of plans to establish the first of what we envision will be a number
of StarMed Wellness Centers.

         Our business model anticipates entering into agreements with existing
medical centers with the intention of developing a network of participants in
the StarMed Wellness program. We will provide products to the participating
medical clinics that will enable the clinics to expand the traditional Western
medical treatments, medicines and services they provide to include preventative
and alternative healthcare services such as weight loss and diabetes management
services; anti-aging treatments; vitamin, mineral and herbal regimens; and
female hormone therapy.

                                       23
<PAGE>

         The diversion of our limited financial and management resources away
from product sales and marketing activities, and towards the opening of our
planned Wellness Centers contributed to a significant decrease in revenues from
product sales during fiscal 2006.

CRITICAL ACCOUNTING POLICIES

         A summary of significant accounting policies is included in Note 2 to
the audited consolidated financial statements included elsewhere in this annual
report. We believe that the application of these policies on a consistent basis
enables our company to provide useful and reliable financial information about
the company's operating results and financial condition.

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

         We account for stock options issued to employees in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation cost is measured on the date of grant as the excess of the current
market price of the underlying stock over the exercise price. Such compensation
amounts, if any, are amortized over the respective vesting periods of the option
grant. We adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure", which permits entities to provide pro forma net
income (loss) and pro forma earnings (loss) per share disclosures for employee
stock option grants as if the fair-valued based method defined in SFAS No. 123
had been applied. We account for stock options and stock issued to non-employees
for goods or services in accordance with the fair value method of SFAS 123.

RECENT ACCOUNTING PRONOUNCEMENTS

         In November 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4" ("SFAS 151"), which is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. SFAS
151 requires that abnormal amounts of idle facility expense, freight, handling
costs and wasted material be recognized as current period charges. The Statement
also requires that the allocation of fixed production overhead be based on the
normal capacity of the production facilities. The effect of this Statement on
our financial position or results of operations has been determined to have no
impact.

         In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123R, "Share-Based Payment
("SFAS 123R"), which is effective as of the beginning of the first interim or
annual period beginning after December 31, 2005. SFAS 123R requires all
share-based payments to employees to be expensed over the requisite service
period based on the grant-date fair value of the awards. The Statement allows

                                       24
<PAGE>

for either prospective or retrospective adoption and requires that the unvested
portion of all outstanding awards upon adoption be recognized using the same
fair value and attribution methodologies previously determined under Statement
No 123, "Accounting for Stock-Based Compensation." We are currently evaluating
transition alternatives and valuation methodologies for future grants. The
effect of this Statement on our financial position or results of operations has
been determined to have no impact.

         In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 153, "Exchange of Nonmonetary
Assets, an amendment of APB Opinion No. 29" ("SFAS 153"). The guidance in APB
Opinion No. 29, "Accounting for Nonmonetary Transactions" is based on the
principle that exchanges of nonmonetary assets should be measured based on the
fair value of the assets exchanged. The guidance in that Opinion, however,
included certain exceptions to that principle. SFAS 153 amends Opinion 29 to
eliminate the exception for nonmonetary assets that do not have commercial
substance. A nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the
exchange. The provisions of SFAS 153 shall be effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The effect
of this Statement on our financial position or results of operations has been
determined to have no impact.

         In April 2005, the FASB issued Interpretation No. 47, Accounting for
Conditional Asset Retirement Obligations", which clarifies that an entity is
required to recognize a liability for the fair value of a conditional asset
retirement obligation when incurred if the liability's fair value can be
reasonably estimated. The fair value of a liability for the conditional asset
retirement obligation should be recognized when incurred, which is generally
upon acquisition, construction, or development and (or) through the normal
operation of the asset. Uncertainty about the timing and (or) method of
settlement of a conditional asset retirement obligation should be factored into
the measurement of the liability when sufficient information exists.
Interpretation No. 47 is effective no later than the end of fiscal years
beginning after December 15, 2005. The effect of this Statement on our financial
position or results of operations has been determined to have no impact.

         In May 2005, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 154, "Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3"
(SFAS154). This Statement replaces APB Opinion No. 20, "Accounting Changes," and
FASB Statement No. 3, "Reporting Accounting Changes in Interim Financial
Statements," and changes the requirements for the accounting for and reporting
of a change in accounting principle. This Statement requires retrospective
application to financial statements of prior periods for changes in accounting
principle. This Statement is effective January 1, 2006. The effect of this
Statement on our financial position or results of operations has been determined
to have no impact.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 31, 2006 AS COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 2005

                                       25
<PAGE>
<TABLE>
                               STARMED GROUP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF OPERATIONS
                         FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
_______________________________________________________________________________________________
<CAPTION>
                                                                      2006             2005
                                                                  ------------     ------------
<S>                                                              <C>              <C>
Sales ........................................................    $     14,423     $     22,372
Cost of sales ................................................         (18,061)         (29,354)
                                                                  ------------     ------------

Gross (loss) profit ..........................................          (3,638)          (6,982)

Revenue from royalties .......................................           3,189           24,486
                                                                  ------------     ------------

     Total net revenues ......................................            (449)          17,504

Professional fees ............................................         841,807          185,563
Compensation .................................................       1,125,249          273,113
Rent .........................................................          67,879           61,049
Accounting fees ..............................................          73,249           41,724
Office .......................................................          54,454           34,686
Insurance ....................................................          47,453           23,776
Advertising, marketing and promotion .........................          47,258            9,261
Depreciation .................................................           9,407            9,296
Travel .......................................................          13,100            3,696
Penalty Shares Expense .......................................         434,624                -
                                                                  ------------     ------------

     Total expenses ..........................................       2,714,480          642,164
                                                                  ------------     ------------

Operating loss ...............................................      (2,714,929)        (624,660)

Other income and (expense)
--------------------------
Other income .................................................               -            1,161
Gain on decrease in fair value of stock price guarantee
 obligation ..................................................               -           28,805
Gain on forgiveness of debt ..................................          44,245                -
Interest expense .............................................               -          (88,834)
Interest income ..............................................          20,604                -
                                                                  ------------     ------------
     Total other income (expense) ............................          64,849          (58,868)
                                                                  ------------     ------------
Loss from continuing operations before income taxes ..........      (2,650,808)        (683,528)
Provision for income taxes ...................................         (1,6600)        (105,850)
                                                                  ------------     ------------
Loss from continuing operations ..............................      (2,651,680)        (789,378)

Loss from discontinued operations ............................         (99,687)         (16,532)
                                                                  ------------     ------------

Net loss .....................................................    $ (2,751,367)    $   (805,910)
                                                                  ============     ============

Loss from continuing operations per share - basic and diluted     $      (0.10)    $      (0.08)
                                                                  ============     ============

Loss from discontinued operations per share basic and diluted     $      (0.01)    $      (0.01)
                                                                  ============     ============

Net loss per share basic and diluted .........................    $      (0.11)    $      (0.09)
                                                                  ============     ============

Weighted average number of shares outstanding - basic ........      25,390,706       10,348,651
                                                                  ============     ============

Weighted average number of shares outstanding - diluted ......      25,390,706       10,348,651
                                                                  ============     ============
</TABLE>
                                       26
<PAGE>

Total Net Revenues

         We generated revenues in fiscal 2006 and fiscal 2005 from both the
sales of natural, over-the-counter, alternative medicinal products and royalties
from formulas for herbal health products as well as products and services from
StarMed Wellness Centers. During fiscal 2006 sales of medicinal products
declined approximately 26% to $17,519 from $23,775 in fiscal 2005. The
substantial portion of revenues for the year ended December 31, 2006 resulted
from product and service sales at our existing StarMed Wellness Centers. This
substantial decline in sales of medicinal products is primarily the result of
decreased demand for our products from our principal customer during fiscal
2006. This customer has advised us that it has changed its internal strategy and
it is unknown when, if ever, that it will resume purchasing product from our
company at historical levels. The decrease in sales of our medicinal products in
fiscal 2006 as compared to fiscal 2005 is also the result of the diversion of
our limited resources from marketing efforts to the finalization of plans to
open our initial Wellness Centers.

         Our cost of sales of our products was approximately 125% of sales for
fiscal 2006 as compared to approximately 131% for fiscal 2005. This increase in
cost of sales as a percentage of sales is attributable to a decrease in sales of
our proprietary starch blocker product to NHTC which carried higher margins.

         Revenue from royalties declined $21,297, or approximately 87%, for
fiscal 2006 as compared to fiscal 2005. This decline in revenue from royalties
is attributable to a decline in net sales of the products which are licensed to
the third party.

Total Expenses

         Total expenses for fiscal 2006 increased $2,072,316, or approximately
322% from fiscal 2005. The primary component of the increase for fiscal 2006 is
an increase of $852,136, or approximately 312%, in compensation from fiscal
2005. This increase reflects the hiring and staffing for the three Wellness
Centers, as well as adding to the corporate staff. The increases in total
expenses for fiscal 2006 also included an increase of $656,244, or approximately
354%, in professional fees, not including accounting fees, related to our
capital raising efforts during the year. In addition, there was increase in
advertising, marketing and promotional expenses. This was an increase of $37,997
or 410%. StarMed purchased advertising in trade magazines and hosted a one hour
radio show on StarMed Wellness. There was an expense incurred of $434,000 in
Penalty Shares expense related to recording the value of the warrants issued in
2006.

Total Other Income (Expense)

         Total other expenses increased $698,807, or approximately 301%, for
fiscal 2006 from fiscal 2005. Included in this increase is:

         o  accounting fees of $31,525,

         o  office expense of $19,768, and

         o  insurance expenses of $23,776.

                                       27
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity is the ability of a company to generate funds to support its
current and future operations, satisfy its obligations and otherwise operate on
an ongoing basis. At December 31, 2006 we had cash on hand of $60,956 and
working capital of $70,230. The increase in working capital is primarily
attributable to an increase in cash which was provided by capital raising
activities in December 2005 which are described below.

         Net cash used in operating activities for fiscal 2006 was $1,168,134 as
compared to $574,592 for fiscal 2005, an increase of $593,542. The increase is
primarily the result of our increased loss, and amortization, stock and stock
options issued for compensation, penalty shares and warrants issued and prepaid
expenses.

         Net cash provided by financing activities for fiscal 2006 was $212,826
as compared to net cash used in financing activities of $1,521,143 for fiscal
2005.

         Subsequent to December 31, 2006 we raised an additional $435,000 in
proceeds from the sale of our securities. Other than cash on hand and available
borrowings under our corporate credit card that could provide us up to $20,000
on an unsecured basis, of which approximately $648 was outstanding at December
31, 2006, we do not have any external sources of working capital.

         To raise additional working capital we anticipate that we will seek to
sell additional equity or debt securities. We have no commitments from any third
party to purchase any equity or debt securities we may offer. If we are unable
to secure additional working capital as needed, our ability to grow revenues,
meet operating and financing obligations as they become due, and continue
business and operations, could be in jeopardy.

RECENT CAPITAL RAISING TRANSACTIONS

         None.

ITEM 7.  FINANCIAL STATEMENTS

         Our financial statements are contained in pages F-1 through F-20, which
appear at the end of this annual report.

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

         None.

ITEM 8A. CONTROLS AND PROCEDURES

         Our management has concluded its evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this annual report. Disclosure controls and procedures are
controls and procedures designed to reasonably assure that information required
to be disclosed in our reports filed under the Securities Exchange Act, such as

                                       28
<PAGE>

this annual report, is recorded, processed, summarized and reported within the
time periods described by SEC rules and regulations, and to reasonably assure
that such information is accumulated and communicated to our management,
including the Chief Executive Officer and acting Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.

         Our management, including the Chief Executive Officer and acting Chief
Financial Officer, does not expect that our disclosure controls and procedures
will prevent all error and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that
the control system's objectives will be met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. The design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.

         As of the evaluation date, our Chief Executive Officer and its acting
Chief Financial Officer concluded that we maintain disclosure controls and
procedures that are effective in providing reasonable assurance that information
required to be disclosed in our reports under the Securities Exchange Act is
recorded, processed, summarized and reported within the time periods prescribed
by SEC rules and regulations, and that such information is accumulated and
communicated to our management, including its Chief Executive Officer and its
acting Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.

         There was no change in our internal control over financial reporting
identified in connection with the evaluation that occurred during its last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, 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

         NAME                  AGE                 POSITIONS

Herman Rappaport               90        President, CEO, Acting Chief
                                         Financial Officer and director
Dr. Steven L. Rosenblatt       61        Executive Vice President and Director
Dr. Hector Rodriguez           63        Vice President and director
Dr. Avner Manzoor-Mandel       60        Vice President and director
Dr. Joel Feinstein             61        Vice President and director
Dr. Seymour Levine             64        Director

                                       29
<PAGE>

         Herman H. Rappaport, B.Ch.E. Mr. Rappaport has served as our President,
CEO and member of our Board of Director since inception. Mr. Rappaport also
serves as our Acting Chief Financial Officer. Mr. Rappaport received his degree
from the University of the City of New York in 1939. During the last nine years
Mr. Rappaport has studied medical systems and products in Russia, China as well
as in the United States including two winters in St. Petersburg and Moscow as
well as trips to Beijing and Shanghai to study natural medicine. Mr. Rappaport
was, at one time, the largest national builder of McDonald drive-ins,
coast-to-coast.

         Mr. Rappaport served as a member of two Advisory Boards on Foreign
Trade for the United States Department of Commerce from 1983 to 1996 and prior
to that time, served as a member for two terms on the Mass Transportation
Commission of the United States Department of Transportation. Mr. Rappaport was
the founder and President of the public, non-profit, Press, Education,
Government Foundation for improved communications between the media and
government. In addition, he hosted conferences at the Annenberg School of
Communications, University of Southern California on alternative energy, air
rights and others. He also served on the Economic Development Board for the City
of Los Angeles. Mr. Rappaport was with the Manhattan Project, at Columbia
University, as a consultant to General Electric and director of the Mass
Spectrometer Physics Laboratory at Oak Ridge, Tennessee.

         Dr. Steven L. Rosenblatt, M.D., Ph.D., L.Ac. Dr. Rosenblatt has served
as our Executive Vice President and a member of our Board of Directors since
February 2000. Dr. Rosenblatt holds a Ph.D, from the University of California at
Los Angeles, an M.D. from the School of Medicine, St. George University. He is a
founder and past president of the California Acupuncture College, founder and
director of the UCLA Acupuncture Clinic of UCLA School of Medicine. Dr.
Rosenblatt is a former director of the Complementary Medicine Program of
Cedars-Sinai Medical Center and was a member of the National Accreditation
Commission for Oriental Medicine under the U.S. Department of Education. Dr.
Rosenblatt has conducted and been a participant of numerous medical conferences
of the subject of herbal medicines. He has been in private practice in Los
Angeles for 10 years and one of the leaders in the field of acupuncture and
oriental medicine for over 30 years.

         Dr. Hector Rodriguez, M.D., Ph.D. Dr. Rodriguez has served as a Vice
President and member of our Board of Directors since February 2000. Dr.
Rodriguez received an M.D. from the Universidad Nacional of Bogota, Colombia and
a Ph.D. from University of California at San Francisco with post graduate work
at Washington University School of Medicine, St. Louis, Missouri. His
certifications include The American Board of Internal Medicine, Nephrology
Subspecialty. He is licensed in Illinois, Missouri, and California where he has
practiced for the past 23 years.

         Dr. Avner Manzoor-Mandel, M.D. Dr. Manzoor-Mandel has served as a Vice
President and member of our Board of Directors since February 2000. Dr.
Manzoor-Mandel holds medical degrees from Pahlavi University and the University
of Maryland. He is a member of the American College of Cosmetic Surgery and the
College of Obstetrics and Gynecology. For the past 20 years he has been in
private practice in Los Angeles.

         Dr. Joel Feinstein, M.D., F.A.C.S. Dr. Feinstein has served as a Vice
President and member of our Board of Directors since February 2000. Dr.
Feinstein holds degrees from Penn State University, M.S. in Physiology, and M.D.
from Downstate Medical Center, Brooklyn, N.Y. Dr. Feinstein is
Gastroenterologist Consultant to Cedars-Sinai Medical Center and a Consultant on

                                       30
<PAGE>

Colon Cancer as well as Associate Clinical Professor of Medicine at UCLA. and a
member of the Education Committee, American Cancer Society, Los Angeles. Dr.
Feinstein has appeared as a medical authority on numerous conferences including
that of moderator at the World Congress of Gastroenterology. Dr. Feinstein has
been a consultant to us since our inception and a director since our formal
organization. Dr. Feinstein is a practicing physician and specialist in
gastroenterology.

         Dr. Seymour Levine. Dr. Levine has been a member of our Board of
Directors since June 2002 and is an advisor to us on rheumatology. Dr. Levine is
in private practice of Rheumatology and is the Clinical Chief of Rheumatology at
Cedars-Sinai Medical Center. Dr. Levine graduated from and completed his
residency at the John Hopkins University. Dr. Levine was a member of the
President's Task Force on Health Care Reform, founding member and past president
of Managed Care Providers at Cedars-Sinai Care in Los Angeles. His professional
affiliations include Diplomate American Board of Internal Medicines, American
Board of Rheumatology and American Medical Association.

         There are no family relationships between any of the executive officers
and directors. Each director is elected at our annual meeting of stockholders
and holds office until the next annual meeting of stockholders, or until his
successor is elected and qualified.

COMMITTEES OF THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS

         Committees of the Board. The board of directors has not yet established
an audit committee, nominating committee or compensation committee. The
functions of these committees are currently performed by the entire board of
directors. We are not currently subject to any law, rule or regulation requiring
that we establish or maintain committees of the board of directors. We may
establish an audit, nominating and/or compensation committee in the future if
the board determines it to be advisable or we are otherwise required to do so by
applicable law, rule or regulation.

         Board of Directors Independence. Our board of directors consists of six
members. None of the members of our board of directors is "independent" within
the meaning of rules and regulations of the SEC or any self-regulatory
organization. We are not currently subject to any law, rule or regulation
requiring that all or any portion of our board of directors include
"independent" directors.

         Audit Committee Financial Expert. We do not yet have an audit
committee. No member of our board of directors is an "audit committee financial
expert" within the meaning of Item 401(e) of Regulation S-B. In general, an
"audit committee financial expert" is an individual member of the audit
committee (board of directors) who:

         o understands generally accepted accounting principles and financial
statements,

         o is able to assess the general application of such principles in
connection with accounting for estimates, accruals and reserves,

         o has experience preparing, auditing, analyzing or evaluating financial
statements comparable to the breadth and complexity to our financial statements,

         o understands internal controls over financial reporting, and

         o understands audit committee functions.

                                       31
<PAGE>

         At this stage of our development, we have elected not to expend our
limited financial resources to implement these corporate governance measures. We
believe that neither independent (within the meaning of regulatory definitions)
directors, committee persons nor an "audit committee financial expert," will
agree to serve until the company is further along in its development. We may, in
the future, implement some or all of the corporate governance measures described
above.

         Code of Ethics. In December 2004 we adopted a Code of Business Conduct
and Ethics applicable to our Chief Executive Officer, principal financial and
accounting officers and persons performing similar functions. A code of ethics
is a written standard designed to deter wrongdoing and to promote

         o honest and ethical conduct,

         o full, fair, accurate, timely and understandable disclosure in
regulatory filings and public statements,

         o compliance with applicable laws, rules and regulations,

         o the prompt reporting violation of the code, and

         o accountability for adherence to the code.

         A copy of our Code of Business Conduct and Ethics has been filed with
the Securities and Exchange Commission as an exhibit to this annual report. We
will provide a copy, without charge, to any person desiring a copy of the Code
of Business Conduct and Ethics, by written request to us at 2029 Century Park
East, Suite 1112, Los Angeles, California 90067.

DIRECTOR COMPENSATION

         Members of our Board of Directors do not receive cash compensation for
their services as directors but are reimbursed for their reasonable expenses for
attending board and board committee meetings.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to us under Rule 16a-3(d) of the Securities Exchange Act during the
fiscal year ended December 31, 2006 and Forms 5 and amendments thereto furnished
to us with respect to the fiscal year ended December 31, 2006, as well as any
written representation from a reporting person that no Form 5 is required, we
are not aware that the above Board members failed to file on a timely basis, as
disclosed in the aforementioned Forms, reports required by Section 16(a) of the
Securities Exchange Act during the fiscal year ended December 31, 2006.

ITEM 10. EXECUTIVE COMPENSATION

         We have no Executive Officer serving now or during the 2006 year whose
annual compensation exceeded $100,000.

EMPLOYMENT AGREEMENTS

         In June 2005 we entered into a three-year employment agreement with
Herman Rappaport under which Mr. Rappaport serves as our President, Chief
Executive Officer and Acting Chief Financial Officer. Under the terms of the
agreement we pay Mr. Rappaport a base salary at the rate of $90,000 per annum.

                                       32
<PAGE>

He is also entitled to receive stock in an amount to be determined by the Board
of Directors prior to June 2007. Mr. Rappaport is entitled to two weeks annual
vacation, reimbursement for business expenses and participation in executive
employment benefit plans. The agreement also contains customary confidentiality
and indemnification provisions. We may terminate the agreement upon his death or
disability, or for "cause" which includes a material breach of any material
provision of the agreement, any act by him in violation of the Business
Practices Policy and Employees Outside Business Interests Policy, fraud or
conviction of a felony.

         In June 2005 we also entered into a two-year employment agreement with
Dr. Steven Rosenblatt under which Dr. Rosenblatt serves as our Executive Vice
President. Under the terms of the agreement we pay Dr. Rosenblatt a base salary
at the rate of $90,000 per annum, as well as $1,000 per day for training of
providers and staff when he is not acting as a medical provider. Dr. Rosenblatt
is also entitled to bonuses at our discretion. The agreement provides that we
are entitled to receive 6% of all book advances earned by Dr. Rosenblatt. He is
entitled to two weeks annual vacation, reimbursement for business expenses and
participation in executive employment benefit plans. The agreement also contains
customary confidentiality and indemnification provisions. We may terminate the
agreement upon his death or disability, or for "cause" which includes a material
breach of any material provision of the agreement, any act by him in violation
of the Business Practices Policy and Employees Outside Business Interests
Policy, fraud or conviction of a felony.

MANAGEMENT INCENTIVES

         In the future we may issue up to 5,500,000 shares of our common stock
to members of our management upon the attainment of specified milestones as
follows:

         o 2,000,000 shares upon opening of five new StarMed Wellness Centers
prior to the expiration of two years from February 2006,

         o 1,000,000 shares upon opening of 10 new StarMed Wellness Centers
prior to the expiration of four years from February 2006, and

         o 2,500,000 shares following the first fiscal year in which we do not
report a loss in our audited financial statements as may be included in our
Annual Report on Form 10-KSB.

         If any of these milestones are met, at the time of issuance of
securities, we will recognize compensation expense equal to the fair market
value of our common stock on the date of issuance.

STOCK OPTION INFORMATION

         The following table sets forth certain information with respect to
stock options granted in fiscal 2005 to the Named Executive Officers.

Executive Officer         Shares          Option Price         Date Issued
Herman Rappaport          850,000         $0.15                October 10, 2006

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

         There were no individual SAR grants of options made during fiscal 2006
to any Named Executive Officer.

                                       33
<PAGE>

2004 EQUITY COMPENSATION PLAN

         In fiscal 2005 we established our 2005 Equity Compensation Plan. The
purpose of the Plan is to enable us to attract and retain top-quality employees,
officers, directors and consultants and to provide such employees, officers,
directors and consultants with an incentive to enhance stockholder returns. The
Plan provides for the grant to our directors, officers, employees and
consultants of stock based awards and options to purchase shares of our common
stock. All of our executive officers, directors and employees are eligible to
participate in the Plan. We have funded the Plan with 4,050,000 shares of our
common stock (including an increase of 3,000,000 shares authorized by our board
of directors and Mr. Rappaport as the holder of a majority of our issued and
outstanding common stock in February 2007). At December 31, 2006 we have issued
options to Herman Rappaport of 850,000 at $0.15 on October 10, 2006 and Martha
Snook, 50,000 at $0.15 on October 10, 2006. We have issued 420,000 shares in
stock awards under the Plan, and 2,730,000 shares remain available for issuance
under the Plan.

         The Plan is administered by our Board of Directors, which may delegate
its duties in whole or in part to any subcommittee solely consisting of at least
two individuals who are non-employee directors within the meaning of Rule 16b-3
under the Securities Exchange Act and outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 (the "IRS Code"). The Board
has the authority to interpret our stock incentive plan, to establish, amend and
rescind any rules and regulations relating to our Plan and to make any other
determinations that it deems necessary or desirable for the administration of
our Plan. Any decision of the Board or a compensation committee of the Board in
the interpretation and administration of our Plan lies within its sole and
absolute discretion. It is final, conclusive and binding on all parties
concerned, including participants in our Plan and their beneficiaries or
successors.

         Stock options granted under our Plan may be non-qualified or incentive
stock options for federal income tax purposes. The Board will set option
exercise prices and terms and will determine the time at which stock options
will be exercisable. However, the term of a stock option may not exceed 10
years.

         The Board may also grant options that are intended to be incentive
stock options, which comply with Section 422 of the IRS Code. Fair market value
is defined as the closing price of the shares as reported on the grant date as
quoted on the OTC Bulletin Board. The Board also has the authority to grant
stock-based awards, which may consist of awards of common stock, restricted
stock and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of common stock. Stock-based
awards may be granted on a stand-alone basis or in addition to any other awards
granted under our Plan. The Board determines the form of stock-based awards and
the conditions on which they may be dependent. The conditions may include the
right to receive one or more shares of common stock or the equivalent value in
cash upon the completion of a specified period of service or the occurrence of
an event or the attainment of performance objectives. The Board also determines
the participants to whom stock-based awards may be made, the timing of those
awards, the number of shares to be awarded, whether those other stock-based
awards will be settled in cash, stock or a combination of cash and stock and all
other terms of those awards.

                                       34
<PAGE>

         Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. In the event of any stock
dividend or split, reorganization, recapitalization, merger, consolidation,
spin-off, combination or exchange of stock or other corporate exchange or any
distribution to stockholders other than regular cash dividends, the Board may,
in its sole discretion, make a substitution or adjustment to the number or kind
of stock issued or reserved for issuance under our Plan under outstanding awards
and the term, including option price, of those awards.

         Except as otherwise provided in a stock award agreement, in the event
of our change in control or a change of control of our company, the Board may,
in its sole discretion, accelerate a stock award, cause us to make a cash
payment in exchange for a stock award or require the issuance of a substitute
stock award

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

         At March 31, 2007 we had 28,823,389 shares of our common stock issued
and outstanding. The following table sets forth information regarding the
beneficial ownership of our common stock as of March 31, 2007 by:

         o  each person known by us to be the beneficial owner of more
            than 5% of our common stock;
         o  each of our directors;
         o  each of our executive officers; and
         o  our executive officers, directors and director nominees as a group.

         Unless otherwise indicated, the business address of each person listed
is in care of 2029 Century Park West, Suite 1112, Los Angeles, California 90067.
The percentages in the table have been calculated on the basis of treating as
outstanding for a particular person, all shares of our common stock outstanding
on that date and all shares of our common stock issuable to that holder in the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by that person at that date which are exercisable within 60
days of that date. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all shares of our common stock
owned by them, except to the extent that power may be shared with a spouse. As
of March 31, 2007, there were 28,823,389 shares outstanding.

                                    AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER            BENEFICIAL OWNERSHIP       PERCENT OF CLASS

Herman Rappaport                         7,986,522                  27.7
Steven Rosenblatt, M.D.                  3,367,000                  11.7
Avner Mangoors Mandell, M.D.               100,000                  .035
Joel Feinstein, M.D.                       100,000                  .035
Hector Rodriquez, M.D.                     100,000                  .035
Seymour Levine, M.D.                       100,000                  .035

                                       35
<PAGE>

LOCK-UP AGREEMENTS

         Each of our officers and directors have entered into a lock-up
agreement with Joseph Stevens & Company, Inc. who acted as placement agent in
our 2006 Unit Offering agreeing not to sell any of our securities owned or
thereafter acquired by them, through the exercise of options or otherwise, for a
period of 12 months from the effective date of the registration statement
covering those securities. These lock-up agreement automatically terminate if,
commencing 180-days after the date of that registration statement, the 20-day
average closing bid price of our common stock exceeds $.50 per share.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Herman Rappaport was owed $46,731 in unpaid compensation from 2006 and
2007. In addition, Mr. Rappaport loaned StarMed $25,000 for operations. He was
issued 2,391,033 shares at $0.03 for repayment on these debts AS A SUBSEQUENT
TRANSACTION.

ITEM 13. EXHIBITS

         The following documents are filed as a part of this report or are
incorporated by reference to previous filings, if so indicated:

EXHIBIT NO.                         DESCRIPTION

2.1      Certificate of Merger of StarMed Group, Inc. (1)
3.1      Articles of Incorporation of Port Star Industries, Inc. (1)
3.2      Amendment to the Articles of Incorporation of Port Star, Industries,
         Inc.(1)
3.3      Amendment to the Articles of Incorporation of Energy Dynamics, Inc. (1)
3.4      Amendment to the Articles of Incorporation of StarMed, Inc.
         (Arizona) (1)
3.5      Certificate of Revival of StarMed Group, Inc. (Nevada) (1)
3.6      Certificate of Reinstatement of Heathercliff Group, Inc. (1)
3.7      Certificate of Amendment to Articles of Incorporation (2)
3.8      Bylaws (1)
4.1      Common Stock Purchase Warrant Issued to Romajo Partners LP (8)
4.2      Form of Common Stock Purchase Warrant Issued in Connection with Private
         Offering of Units (8)
10.1     Memorandum of Understanding with Natural Health Trends Corporation (3)
10.2     License Agreement with L. Perrigo Company (4)
10.3     Lease for principal executive offices (8)
10.4     Consultant Agreement with Paradigm Media Ventures, Inc. (5)
10.5     Agreement with Encino Wellness Center (6)
10.6     Agreement with Kohala Clinic (7)
10.7     2004 Equity Compensation Plan (2)
10.8     Employment Agreement with Herman Rappaport, together with Amendment
         No. 1 to the Employment Agreement (8)
10.9     Employment Agreement with Steven L. Rosenblatt (8)
14.1     Code of Business Conduct and Ethics (8)
21.1     Subsidiaries of the registrant (8)
31.1     Certification of Principal Executive Officer pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.*
31.2     Certification of Principal Financial and Accounting Officer pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1     Certification of Principal Executive Officer Officer and Principal
         Financial and Accounting Officer pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.*

                                       36
<PAGE>

_________

*    filed herewith
(1)  Incorporated by reference to the corresponding exhibits as filed in the
     Form 10-SB, as amended, as initially filed with the SEC on September 11,
     2001.
(2)  Incorporated by reference to the Definitive Information Statement on
     Schedule 14C as filed on December 15, 2004.
(3)  Incorporated by reference to Exhibit 10.2 as filed with the Annual Report
     on Form 10-KSB for the year ended December 31, 2003. (2)
(4)  Incorporated by reference to Exhibit 10.3 as filed with the Annual Report
     on Form 10-KSB for the year ended December 31, 2004.
(5)  Incorporated by reference to Exhibit 10.1 as filed with the Quarterly
     Report on Form 10-QSB for the period ended September 30, 2005.
(6)  Incorporated by reference to Exhibit 10.2 as filed with the Quarterly
     Report on Form 10-QSB for the period ended September 30, 2005.
(7)  Incorporated by reference to Exhibit 10.3 as filed with the Quarterly
     Report on Form 10-QSB for the period ended September 30, 2005.
(8)  Incorporated by reference to exhibit of same number as filed with Amendment
     No. 1 to Annual Report on Form 10-KSB for the year ended December 31, 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         Mendoza Berger & Company, LLP served as our independent registered
public accounting firm for fiscal 2006 and 2005. The following table shows the
fees that were billed for the audit and other services provided by that firm for
the 2005 and 2005 fiscal years.

         Accounting Fees charged
         -----------------------
         2005            $80,888
         2006            $66,099

         Audit Fees -- This category includes the audit of our annual financial
statements, review of financial statements included in our Form 10-QSB Quarterly
Reports and services that are normally provided by the independent auditors in
connection with engagements for those fiscal years. This category also includes
advice on audit and accounting matters that arose during, or as a result of, the
audit or the review of interim financial statements.

         Audit-Related Fees -- This category consists of assurance and related
services by the independent auditors that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported above under "Audit Fees." The services for the fees disclosed under
this category include consultation regarding our correspondence with the SEC and
other accounting consulting.

         Tax Fees -- This category consists of professional services rendered by
our independent auditors for tax compliance and tax advice. The services for the
fees disclosed under this category include tax return preparation and technical
tax advice.

         All Other Fees -- This category consists of fees for other
miscellaneous items.

                                       37
<PAGE>

         Our Board of Directors has adopted a procedure for pre-approval of all
fees charged by our independent auditors. Under the procedure, the Board
approves the engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Board, or, in the period between
meetings, by a designated member of Board. Any such approval by the designated
member is disclosed to the entire Board at the next meeting. The audit and tax
fees paid to the auditors with respect to fiscal year 2006 were pre-approved by
the entire Board of Directors.


                                   SIGNATURES

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


                                       April 19, 2007

                                       StarMed Group, Inc.

                                       By: /s/ Herman H. Rappaport
                                           -----------------------
                                           Herman H. Rappaport,
                                           Chief Executive Officer, President,
                                           Acting Chief Financial Officer,
                                           director, principal executive officer
                                           and principal financial and
                                           accounting officer

                                       38
<PAGE>

                                TABLE OF CONTENTS



Report of Independent Registered Public Accounting Firm .....................F-2


Consolidated Balance Sheets..................................................F-3


Consolidated Statements of Operations........................................F-4


Consolidated Statement of Shareholders' Equity (Deficit).....................F-5


Consolidated Statements of Cash Flows........................................F-6


Notes to Consolidated Financial Statements...................................F-7


                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
StarMed Group, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of StarMed Group,
Inc. and its subsidiary, as of December 31, 2006 and 2005, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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, revised
as described in Note 1, present fairly, in all material respects, the financial
position of StarMed Group, Inc. and its subsidiary as of December 31, 2006 and
2005, and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company's viability is
dependent upon its ability to obtain future financing and the success of its
future operations. These factors raise substantial doubt as to the Company's
ability to continue as a going concern. Management's plan in regard to these
matters is also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.

MENDOZA BERGER & COMPANY, LLP


Irvine, California
April 13, 2007

                                       F-2
<PAGE>
<TABLE>
                               STARMED GROUP, INC. AND SUBSIDIARY
                                   CONSOLIDATED BALANCE SHEETS
                                   DECEMBER 31, 2006 AND 2005
_______________________________________________________________________________________________
<CAPTION>
                                             ASSETS
                                                                      2006              2005
                                                                  -----------       -----------
<S>                                                               <C>               <C>
Current assets:
  Cash .....................................................      $    60,965       $ 1,019,259
  Accounts receivable ......................................               39             7,489
  Inventory ................................................            9,226            22,110
  Prepaid expenses .........................................            4,933           548,730
  Deferred financing costs..................................                -             5,017
                                                                  -----------       -----------

      Total current assets .................................           75,163         1,602,605

  Equipment and furniture:
    Office furniture and computers .........................           68,059            65,063
    Accumulated depreciation ...............................          (49,351)          (39,734)
                                                                  -----------       -----------

      Total equipment and furniture ........................           18,708            25,329
                                                                  -----------       -----------

  Deposits .................................................            7,316               700
                                                                  -----------       -----------

      Total assets .........................................      $   101,187       $ 1,628,634
                                                                  ===========       ===========

                         LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable .........................................      $    15,544       $    44,910
  Accrued expenses - related party..........................           44,858            54,580
  Taxes payable ............................................           10,239             9,359
  Note payable .............................................                -           259,245
  Capital lease obligation - current portion ...............                -             7,164
                                                                  -----------       -----------

      Total current liabilities ............................           70,642           375,258
                                                                  -----------       -----------

      Total liabilities ....................................           70,641           375,258

Commitments and Contingencies ..............................                -                 -

Shareholders' equity:
  Preferred stock (par value $0.01) 25,000,000 shares
    authorized; 0 shares issued and outstanding at
    December 31, 2006 and 2005, respectively ...............                -                 -
  Common stock (par value $0.01) 100,000,000 shares
    authorized; 23,274,456 and 18,453,424 shares issued and
    outstanding at December 31, 2006 and 2005, respectively           232,744           184,534
  Additional paid in capital ...............................        3,648,893         2,168,566
  Accumulated deficit ......................................       (3,851,091)       (1,099,724)
                                                                  -----------       -----------

      Total shareholders' equity (deficit) .................           30,546         1,253,376
                                                                  -----------       -----------

      Total liabilities and shareholders' equity ...........      $   101,187       $ 1,628,634
                                                                  ===========       ===========

            The accompanying notes are an integral part of these financial statements

                                               F-3
</TABLE>
<PAGE>
<TABLE>
                               STARMED GROUP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF OPERATIONS
                         FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
_______________________________________________________________________________________________
<CAPTION>
                                                                      2006             2005
                                                                  ------------     ------------
<S>                                                               <C>              <C>
Sales ........................................................    $     14,423     $     22,372
Cost of sales ................................................         (18,061)         (29,354)
                                                                  ------------     ------------

Gross (loss) profit ..........................................          (3,638)          (6,982)

Revenue from royalties .......................................           3,189           24,486
                                                                  ------------     ------------

     Total net revenues ......................................            (449)          17,504
                                                                  ------------     ------------

Professional fees ............................................         841,807          185,563
Compensation .................................................       1,125,249          273,113
Rent .........................................................          67,879           61,049
Accounting fees ..............................................          73,249           41,724
Office .......................................................          54,454           34,686
Insurance ....................................................          47,453           23,776
Advertising, marketing and promotion .........................          47,258            9,261
Depreciation .................................................           9,407            9,296
Travel .......................................................          13,100            3,696
Penalty Shares Expense .......................................         434,624                -
                                                                  ------------     ------------

     Total expenses ..........................................       2,714,480          642,164
                                                                  ------------     ------------

Operating loss ...............................................      (2,714,929)        (624,660)

Other income and (expense)
--------------------------
Other income .................................................               -            1,161
Gain on decrease in fair value of stock price guarantee
 obligation ..................................................               -           28,805
Gain on forgiveness of debt ..................................          44,245                -
Interest expense .............................................               -          (88,834)
Interest income ..............................................          20,604                -
                                                                  ------------     ------------
     Total other income (expense) ............................          64,849          (58,868)
                                                                  ------------     ------------
Loss from continuing operations before income taxes ..........      (2,650,080)        (683,528)
Provision for income taxes ...................................          (1,600)        (105,850)
                                                                  ------------     ------------
Loss from continuing operations ..............................      (2,651,680)        (789,378)

Loss from discontinued operations ............................         (99,687)         (16,532)
                                                                  ------------     ------------

Net loss .....................................................    $ (2,751,367)    $   (805,910)
                                                                  ============     ============

Loss from continuing operations per share - basic and diluted     $      (0.10)    $      (0.08)
                                                                  ============     ============

Loss from discontinued operations per share basic and diluted     $      (0.01)    $      (0.01)
                                                                  ============     ============

Net loss per share basic and diluted .........................    $      (0.11)    $      (0.09)
                                                                  ============     ============

Weighted average number of shares outstanding - basic ........      25,390,706       10,348,651
                                                                  ============     ============

Weighted average number of shares outstanding - diluted ......      25,390,706       10,348,651
                                                                  ============     ============

            The accompanying notes are an integral part of these financial statements

                                               F-4
</TABLE>
<PAGE>
<TABLE>
                                  STARMED GROUP, INC. AND SUBSIDIARY
                       CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
                            FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
______________________________________________________________________________________________________
<CAPTION>
                       PREFERRED STOCK       COMMON STOCK
                      -----------------  ---------------------
                      NUMBER  PAR VALUE    NUMBER    PAR VALUE
                        OF    $0.01 PER      OF      $0.01 PER    PAID IN    ACCUMULATED
                      SHARES    SHARE      SHARES      SHARE      CAPITAL      DEFICIT        TOTAL
                      ------  ---------  ----------  ---------  -----------  -----------   -----------
<S>                   <C>     <C>        <C>         <C>        <C>          <C>           <C>
Balance at
 December 31, 2004
(restated) .........       -  $       -   7,056,424  $  70,564  $    88,924  $  (293,814)  $  (134,326)

Common shares issued
 for services during
 2005 ..............       -          -   2,070,000     20,700            -            -        20,700

Issuance of warrants       -          -           -          -       67,500            -        67,500

Common shares issued
 for services to be
 provided ..........       -          -   1,625,000     16,250      552,500            -       568,750

Common shares issued
 for cash ..........       -          -   7,702,000     77,020    1,459,642            -     1,536,662

Net loss ...........       -          -           -          -            -     (805,910)     (805,910)
                      ------  ---------  ----------  ---------  -----------  -----------   -----------

Balance at
 December 31, 2005
 (restated).........       -  $       -  18,453,424  $ 184,534  $ 2,168,566  $(1,099,724)  $ 1,253,376

Common shares
 issued for cash ...       -          -   1,740,000     17,400      417,600            -       435,000

Common shares issued
 For services
 provided ..........       -          -   2,225,000     22,250      378,250            -       400,500

Common shares issued
 For Penalty common
 shares  ...........       -          -     856,032      8,560      108,820            -       117,380

Penalty Warrants
 issued ............       -          -           -          -      317,244            -       317,244

Stock options issued
 as compensation ...       -          -           -          -      258,413            -       258,413

Net Loss ...........       -          -           -          -            -   (2,751,367)   (2,751,367)
                      ------  ---------  ----------  ---------  -----------  -----------   -----------

Balance at
 December 31, 2006 .       -  $       -  23,274,456  $ 232,744  $ 3,648,993  $(3,851,091)  $    30,546
                      ======  =========  ==========  =========  ===========  ===========   ===========

               The accompanying notes are an integral part of these financial statements

                                                  F-5
</TABLE>
<PAGE>
<TABLE>
                               STARMED GROUP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                         FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
_______________________________________________________________________________________________
<CAPTION>
                                                                     2006               2005
                                                                                     (Restated)
                                                                  -----------       -----------
<S>                                                               <C>               <C>
Cash flows from operating activities:
   Net loss ................................................      $(2,751,367)      $  (805,910)
Adjustments to reconcile net (loss) to net cash:
   Depreciation and amortization ...........................            9,617            65,611
   Shares issued for compensation and services, net ........          400,500           517,973
   Stock options for compensation ..........................          258,413                 -
   Penalty shares and warrants .............................          434,624                 -
   Gain on reduction of stock price guarantee ..............                -            28,805
   Gain on forgiveness of debt .............................          (44,245)                -
(Increase) decease in operating assets:
   Accounts receivable .....................................            7,450             9,072
   Inventory ...............................................           12,884            10,860
   Prepaid expenses ........................................          543,797          (497,777)
   Deferred tax assets .....................................                -           105,000
   Other assets ............................................           (1,600)            4,566
Increase (decrease) in operating liabilities:
   Accounts payable ........................................          (29,164)          (23,529)
   Accrued expenses ........................................           (9,722)          (20,280)
   Income tax payable ......................................             (880)          (16,041)
                                                                  -----------       -----------

Net cash provided by (used in) operating activities ........       (1,168,134)         (574,592)
                                                                  -----------       -----------

Cash flows from financing activities:
   Proceeds from note payable and warrants .................                -           500,000
   Repayment of note payable ...............................         (215,000)         (500,000)
   Capital lease ...........................................           (7,164)          (15,519)
   Common stock issued for cash ............................          435,000         1,536,662
                                                                  -----------       -----------

Net cash provided by (used in) financing activities ........          212,836         1,521,143
                                                                  -----------       -----------

Cash flows from investing activities:
   Equipment ...............................................           (2,996)                -
                                                                  -----------       -----------

Net cash provided by (used in) investing activities ........           (2,996)                -
                                                                  -----------       -----------
Net increase (decrease) in cash ............................         (958,294)          946,551

Cash, beginning of period ..................................        1,019,259            72,708
                                                                  -----------       -----------

Cash, end of period ........................................      $    60,965       $ 1,019,259
                                                                  ===========       ===========

SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
  AND FINANCING ACTIVITIES:

   Stock issued for services ...............................      $   400,500       $    20,700
                                                                  ===========       ===========

   Stock issued for future services ........................      $         -       $   568,750
                                                                  ===========       ===========

   Penalty Stock and Warrants issued .......................      $   434,624       $    67,500
                                                                  ===========       ===========

   Stock options issued for compensation ...................      $   258,413       $         -
                                                                  ===========       ===========

SUPPLEMENTAL CASH FLOW INFORMATION:

   Cash paid during the year for:

   Payments of interest ....................................      $         -       $     1,392
                                                                  ===========       ===========

   Income taxes ............................................      $         -       $    16,481
                                                                  ===========       ===========

            The accompanying notes are an integral part of these financial statements

                                               F-6
</TABLE>
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
________________________________________________________________________________

1.    HISTORY AND ORGANIZATION OF THE COMPANY
      RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS;
      -------------------------------------------------

      HISTORY AND ORGANIZATION OF THE COMPANY
      ---------------------------------------

      The Company was incorporated in Nevada on August 13, 1981, under the name
Port Star Industries, Inc. and was organized to succeed to the properties,
rights and obligations of Port Star Industries, Inc., a publicly-held North
Carolina corporation formed on November 3, 1961 under the name of Riverside
Homes, Inc. ("Port Star North Carolina").

      At the time of our formation, Port Star North Carolina had no assets,
liabilities or operations. In order to change the domicile of Port Star North
Carolina to Nevada:

      o Port Star North Carolina caused the Company's formation under the laws
of Nevada, with an authorized capitalization that "mirrored" the authorized
capitalization of Port Star North Carolina, and

      o Issued to each stockholder of Port Star North Carolina a number of
shares of our common stock equal to such stockholder's share ownership of Port
Star North Carolina.

      At the time of the reincorporation, Herman Rappaport, the founder,
president and chief executive officer was the principal stockholder of Port Star
North Carolina. Port Star North Carolina conducted no operations subsequent to
the reincorporation, and was administratively dissolved in 1988.

      The Company remained inactive until March 20, 1984, when the stockholders
voted to acquire Energy Dynamics, Inc., and changed its name to Energy Dynamics,
Inc. However, on March 20, 1985, the acquisition was rescinded due to
non-performance by Energy Dynamics. At this time, the Company changed its name
to Heathercliff Group Inc., and from 1984 to 1985, engaged in real estate
development. Real estate operations ceased in 1985, and, later that year, Nevada
revoked the charter for failing to file required reports.

      On January 10, 2000, the Company revived its Nevada charter and changed
its name to StarMed Group, Inc. At the time of the revival, the Company had no
assets or liabilities, and Mr. Rappaport continued as our majority stockholder,
either directly or through his family trust.

      On July 27, 2001, the Company acquired Sierra Medicinals, Inc., an Arizona
corporation incorporated in March 2000, in a share exchange whereby the Company
issued a total of 469,792 shares of common stock for all of the issued and
outstanding shares of Sierra Medicinals, Inc. Mr. Rappaport, either directly or
through his family trust, was a majority stockholder of Sierra Medicinals, Inc.
and now operates Sierra Medicinals, Inc. as a wholly owned subsidiary.

                                      F-7
<PAGE>

      On September 10, 2003, the Company formed Vet Medicinals, Inc. as a wholly
owned subsidiary under the laws of the State of Nevada. Vet Medicinals, Inc. is
currently inactive. The Company is engaged in two businesses: (1) it is
developing a network of StarMed Wellness Centers that will offer preventative,
traditional medical and alternative treatments directed towards achieving "total
wellness," and (2) it markets a line of over-the-counter, alternative medicinal
products. Historically, the Company's operations were devoted to formulating and
marketing a line of over-the-counter, alternative medicinal products. Severe
competition in the medicinal product market and the loss of a significant
distribution outlet whose revenues accounted for a substantial portion of the
Company's 2004 revenues have resulted in a significant reduction in the
Company's product sales.

      During fiscal 2005 the Company's management made a strategic decision and
redirected its efforts to the development and establishment of a network of
StarMed Wellness Centers. During the year ended December 31, 2006, the Company
closed all of its Wellness Centers.

      RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
      ------------------------------------------------

      In connection with the preparation of audit of the December 31, 2005 audit
of the Company's consolidated financial statements and letters of comment
received from the Securities Exchange Commission, we determined that there were
errors in the accounting treatment and reported amounts in our previously filed
consolidated financial statements. As a result, we determined to restate our
consolidated financial statements for the years ended December 31, 2005.

      In connection with the restatement, we are designing internal procedures
and controls for purposes of the preparation and certification of our
consolidated financial statements going forward. In this process, we identified
certain errors in accounting determinations and judgments, which have been
reflected in the restated consolidated financial statements.

      These restated consolidated financial statements include adjustments
related to the following:

      Common Stock issued for Cancellation of Contract in Exchange for Accounts
Payable: During the year ended December 31, 2004, the Company issued 10,000
shares of common stock to a vendor in settlement of accounts payable. At the
time of the transaction, the shares of common stock were valued at $2.08 per
share. Management has since decided that the best fair value on the date of
issuance of the shares of common stock was $0.01. In addition the Company will
recognize $20,722 Gain on forgiveness of debt during the year ended December 31,
2004. The December 31, 2005, consolidated financial statements, have been
restated to reflect these adjustments.

      The above adjustment did not affect previously reported cash balances as
of December 31, 2005.

                                      F-8
<PAGE>

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      ------------------------------------------

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

      The consolidated financial statements include the financial statements of
the Company and its wholly-owned subsidiary, Sierra Medicinals, Inc. All
significant intercompany balances and transactions have been eliminated in
consolidation.

      REVENUE RECOGNITION
      -------------------

      The Company has adopted SEC Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" (SAB 101) and accordingly recognizes
revenue upon shipment of the product to customers, upon fulfillment of
acceptance terms, if any, when no significant contractual obligations remain and
collection of the related receivable is reasonably assured. During 2006 and
2005, the Company had sales of approximately $1,725 and $16,038 and
respectively, to customers through the Company's website. These sales allow
customers a 30-day money back guarantee, less shipping costs, for unused
products. The Company has adopted SFAS 48 "Revenue Recognition When Right of
Return Exists" for the website sales and records revenue net of a provision for
estimated product returns.

      USE OF ESTIMATES
      ----------------

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

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

      Financial instruments consist principally of cash, payables and accrued
expenses. The estimated fair value of these instruments approximate their
carrying value.

      INVENTORY
      ---------

      The Company contracts a third party to process and package its formulated
herbal products. The Company accounts for its inventory of finished goods on a
first-in, first-out basis or market, if it should be lower.

      During the years ended December 31, 2006 and 2005, the Company disposed of
expired inventory totaling $13,120 and $14,070, respectively.

                                      F-9
<PAGE>

      EQUIPMENT AND FURNITURE
      -----------------------

      Equipment and furniture is stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets, which is
seven years. The Company has acquired its computers under a capital lease.

      STOCK BASED COMPENSATION
      ------------------------

      On January 1, 2006, the Company adopted the fair value recognition
provisions of SFAS No. 123(R), Share-Based Payment. Prior to January 1, 2006,
the Company accounted for share-based payments under the recognition and
measurement provisions of APB Opinion NO. 25, Accounting for Stock Issued to
Employees, and related Interpretations, as permitted by FASB Statement No. 123,
Accounting for Stock Based Compensation. In accordance with APB 25, no
compensation cost was required to be recognized for options granted that had an
exercise price equal to the market value of the underlying common stock on the
date of grant.

      The Company adopted FAS 123R using the modified prospective transition
method. Under this method, compensation cost recognized in the year ended
December 31, 2006 includes: a) compensation cost for all share-based payments
granted prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of FAS 123,
and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with
the provisions of FAS 123R. Since no stock options were granted to employees
prior to December 31, 2005, the results for prior periods have not been
restated.

      As disclosed in Note 5, the Company issued 1,850,000 stock options to
employees of the Company in February and October 2006. The stock options were
valued on the date of grant. The weighted average fair value of each option was
$0.22 and $0.04. The fair value of the options were measured using the Black
Scholes option pricing model. The model used the following assumptions: exercise
price of $0.35 and $0.15, weighted average life of options of five years, risk
free interest rate of 4.50% and $.65%, and average dividend yield of 0.00%. The
Company charged approximately $258,000 to compensation expense during the year
ended December 31 2006.

      INCOME TAXES
      ------------

      Deferred income taxes are reported using the liability method. Deferred
tax assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases.

      Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

                                      F-10
<PAGE>

      ADVERTISING COSTS
      -----------------

      The Company expenses advertising costs as incurred. For the years ended
December 31, 2006 and 2005, the Company incurred advertising expense of $54,753
and $11,136, respectively.

      Loss PER SHARE
      ------------------

      In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128 "Earnings Per Share" which requires the Company to present basic
and diluted earnings per share, for all periods presented. The computation of
loss per common share (basic and diluted) is based on the weighted average
number of shares actually outstanding during the period.

      CONCENTRATIONS
      --------------

      During 2006 internet customers accounted for 9% of sales, in 2005,
internet customers accounted for 51% of sales and in 2004, a single customer
accounted for 97% of sales.

      During 2006 and 2005, products purchased from manufacturers accounted for
approximately 100% and 96%, respectively.

      RECLASSIFICATIONS
      -----------------

      Certain amounts in the prior period presented have been reclassified to
conform to the current period financial statement presentation. These
reclassifications have no effect on previously reported accumulated deficit.

      GOING CONCERN AND MANAGEMENT'S PLANS
      ------------------------------------

      The accompanying consolidated financial statements, which have been
prepared in conformity with accounting principles generally accepted in the
United States of America, contemplates the continuation of the Company as a
going concern. Continuation of the Company as a going concern is contingent upon
establishing and achieving profitable operations. Such operations will require
management to secure additional financing for the Company in the form of debt or
equity. Management is currently in the process of securing additional financing
for the Company.

3.    CORPORATE CREDIT CARD
      ---------------------

      The Company has available up to $20,000 on an unsecured corporate credit
card. The minimum payment due was $30 as of December 31, 2006. The Company had
an outstanding balance of $648 as of December 31, 2006, which is included in
accounts payable.

                                      F-11
<PAGE>

4.    DEBT
      ----

      On July 23, 2003, the Company entered into an agreement for the
cancellation of the note payable in the amount of $467,255 including accrued
interest through July 23, 2003, in exchange for the issuance 82,300 restricted
shares of common stock. The agreement includes a guarantee and option whereby
the Company guarantees a market price of $3.50 per share in the event of the
future sale of the shares by the related shareholder in the form of either cash
or additional shares of common stock valued at the bid price on the date of
payment. Currently there is no public market for the Company's common stock. The
Company's liability associated with the guarantee and option clause of the
agreement of $259,245 is included in accrued expenses on the accompanying
consolidated balance sheet at December 31, 2005.

      The Company adopted accounting provisions of EITF 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock. Based on this pronouncement, in 2005 the Company reduced
the $288,050 liability included in accrued expenses to $259,245 which resulted
in a gain of $28,805. This gain resulted from the reduction in the guarantee
obligation based on the stock price changing from 1 to 35 cents at December 31,
2005.

      On February 7, 2006, the Company entered into a settlement agreement with
the creditor pursuant to which the 2003 agreement was rescinded and cancelled,
the Company paid the creditor $215,000, and the indebtedness was cancelled. The
remaining balance of notes payable was included in Gain on forgiveness of debt
of $44,245.

      CAPITAL LEASE
      -------------

      The Company had a five-year lease on computers. The monthly payment was
$1,473 per month. The Company acquired the computers for $1 at the end of the
lease. The Company has calculated the present value of the computers assuming a
12% interest rate as $62,575 and has capitalized that value for depreciation.
The balance of the capital lease obligation was paid in full at December 31,
2006 and $7,164 at December 31, 2005, respectively.

      The equipment under capital lease is as follows:

                                         DECEMBER 31, 2006     DECEMBER 31, 2005
                                         -----------------     -----------------

      Office furniture and computers ....    $ 68,059              $  65,063
      Less: accumulated depreciation ....     (49,351)               (39,734)
                                             --------              ---------

                                             $ 18,708              $  25,329
                                             ========              =========

      The Company had depreciation expense of $9,617 and $9,296 for the years
ending December 31, 2006 and 2005, respectively.

      Capital lease was paid in full as of December 31, 2006.

                                      F-12
<PAGE>

      NOTES PAYABLE
      -------------

      On June 28, 2005, the Company issued a $500,000 10% senior secured
convertible promissory note and a stock purchase warrant for a total of $490,000
as part of a private offering. Principal and interest are convertible at the
holder's option upon an event of default into shares of the Company's common
stock at a price per share that is equal to seventy percent (70%) of the lower
of: (i) the ten (10) day average of the closing bid price of the Company's
common stock on the day prior to the date of conversion of this note or (ii) the
closing bid price of the Company's common stock on the day prior to the date of
conversion. Principal and interest are due upon the earlier of: (a) June 28,
2006 or (b) the date upon which the Company sells any of its equity or debt
securities in a financing transaction, or a series of financings, with gross
proceeds equal to one million dollars ($1,000,000) or more. The note has certain
financial and restrictive covenants. The Company is also required to reserve a
sufficient number of shares of common stock to be issuable upon conversion of
this note and exercise of the warrants.

      The stock purchase warrant entitles the holder to purchase, at an exercise
price per share equal to $.40 per share, up to 250,000 shares of the Company's
common stock. The exercise price is subject to an adjustment related to any
dividends, subdivisions, combinations, or issuances of shares at a discounted
price.

      The fair value of the stock purchase warrants was approximately $67,500 or
$0.27 per warrant and was determined using the Black Scholes pricing model. The
factors used were the warrant exercise price of $0.25 per share, the 5 year life
of the warrants, volatility measure of 135.8%, a dividend rate of 0% and a risk
free interest rate of 3.76%. The warrant can be exercised in whole or in part
and expires on June 28, 2010. No warrants were exercised as of September 30,
2005. The Company's obligation to the note holder is collateralized by a
security interest in all of the Company's assets. A placement fee totaling
$40,000 was deducted from the proceeds of the offering. The Company is expensing
this fee over the life of the note.

      In accordance with APB No. 14, "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants", the Company has allocated the proceeds
received in the private offering to the warrant and the note based on their
relative fair market values at the time of issuance. The proceeds allocated to
the warrant, $67,500, were accounted for as additional paid-in capital. This
resulted in the note being discounted by $77,500. The discount consists of
$67,500 related to the warrants and the discount of $10,000 related to the
promissory note. The Company is expensing this discount over the life of the
note and charged the remaining discount in December 2005 to interest expense.

      In mid December 2005, the debt was paid off from the proceeds of a
3,302,000 share common stock offering in December 9, 2005, which raised $825,000
in cash.

5.    CAPITAL STOCK
      -------------

      During the year ended December 31, 2005, the Company issued 2,070,000
common shares for services valued at $20,700.

                                      F-13
<PAGE>

      The Company issued 1,625,000 shares effective October 5, 2005 for services
to be provided over a two-year period. The transaction was accounted for in
accordance with Statement of Financial Accounting Standards Board 123R as
applied to Accounting for Transactions with Other Than Employees. That
pronouncement requires the transactions be valued at the fair value of the
equity instrument received. The value on October 5, 2005 was thirty five cents a
share for which the excess of thirty four cents per share over the one cent a
share par value was accounted for as both a prepaid asset to be amortized over
the life of the agreement and a credit to the Paid in Capital. During the year
ended December 31, 2006, the Company charged the remaining amount of the prepaid
expense to expense.

      On November 12, 2005, the Company issued 4,400,000 common shares for cash.

      On December 9, 2005, the Company issued 3,302,000 common shares for cash.

      Between November 2005 and January 2006, the Company sold an aggregate of
9,442,000 units of our securities to 99 accredited investors in an offering
exempt from registration under the Securities Act in reliance on exemptions
provided by Section 4(2) and Rule 506 of Regulation D of the Securities Act.
Each unit was sold for a purchase price of $0.25, and consisted of one share of
our common stock and one redeemable five year common stock purchase warrant,
exercisable at $1.00 per share, which resulted in the issuance by us of an
aggregate of 9,442,000 shares of common stock and common stock purchase warrants
to purchase an additional 9,442,000 shares of our common stock. Gross proceeds
were $2,360,500. Included in the total of 9,442,000 units are 1,740,000 units of
securities sold on January 17, 2006, which resulted in gross proceeds of
$435,000.

      We agreed to file a registration statement with the SEC on or before March
20, 2006 covering the shares of common stock, including the shares underlying
the warrants, issued in this offering so as to permit the resale thereof. We
also agreed to use our best efforts to ensure that the registration statement be
declared effective by the SEC by June 3, 2006. The registration statement was
not filed with the SEC until June 19, 2006, and it did not become effective
until August 4, 2006. As a result, under the terms of the offering, we were
required to issue an additional 856,032 shares of our common stock and common
stock purchase warrants to purchase an additional 856,117 shares as of August 4,
2006, of which: 856,032 shares and 856,117 warrants were reflected in our
consolidated balance sheets and consolidated statement of shareholders' equity
during the year ended December 31, 2006. The shares of common stock were valued
at $117,880 and the warrants were valued at $317,244. The penalty shares of
common stock, including the common stock underlying the additional warrants,
were included in the registration statement.

      Subject to certain conditions, from the date the warrants were issued
until 30 days prior to the expiration date of the warrants, the Company may
require warrant holders to exercise or forfeit their warrants, provided that (i)
the closing price for our common stock is at least $1.50 per share for 20
consecutive trading days and (ii) trading volume in our common stock exceeds
150,000 shares per day for each trading day during such twenty day period.

                                      F-14
<PAGE>

      For one year following the date of issuance, the Company is obligated to
issue additional shares of Company common stock to purchasers of the units to
protect them against dilution in the event that we issue shares of our common
stock during such one-year period at less than $.25 per share. In addition, for
a one year period following the date of issuance and continuing until the
warrants expire, the exercise price is subject to "weighted-average"
anti-dilution protection for subsequent issuances of common stock or securities
convertible into common stock at less than the then current warrant exercise
price, excluding certain issuances unrelated to capital raising transactions.
The warrants also contain customary anti-dilution adjustments in the event of
stock splits, reorganizations and similar corporate events.

      Joseph Stevens & Company, Inc. acted as placement agent for us in the
offering. As compensation for their services we paid Joseph Stevens & Company,
Inc. commissions equal to 10% of the gross proceeds of the offering ($236,500)
and a non-accountable expense allowance equal to 3% of the gross proceeds
($70,815), and issued Joseph Stevens & Company, Inc. or its designees an
aggregate of 2,225,000 shares of our common stock. (The shares of common stock
were valued at $400,500.)

      2004 EQUITY COMPENSATION PLAN

      In fiscal 2004 the Company established our 2004 Equity Compensation Plan.
The original Plan was approved by our board of directors and a majority of our
shareholders. The purpose of the Plan is to enable the Company to attract and
retain top-quality employees, officers, directors and consultants and to provide
such employees, officers, directors and consultants with an incentive to enhance
stockholder returns. The Plan provides for the grant to Company directors,
officers, employees and consultants of stock based awards and options to
purchase shares of our common stock. All of our executive officers, directors
and employees are eligible to participate in the Plan. The plan is funded with
4,050,000 shares of Company common stock (including an increase of 3,000,000
shares authorized by the board of directors and a majority of our shareholders
in February 2006). In February and October, 2006, our Board of Directors granted
Company employees options to purchase 1,850,000 common shares at an exercise
price of $0.35 and $0.15. In addition, of the 2,070,000 shares issued for
Services in 2005, 400,000 shares in stock awards have been issued under the
Plan, and 2,650,000 shares remained available for issuance.

      The Plan is administered by the Board of Directors, which may delegate its
duties in whole or in part to any subcommittee solely consisting of at least two
individuals who are non-employee directors within the meaning of Rule 16b-3
under the Securities Exchange Act and outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 (the "IRS Code"). The Board
has the authority to interpret the stock incentive plan, to establish, amend and
rescind any rules and regulations relating to our Plan and to make any other
determinations that it deems necessary or desirable for the administration of
our Plan. Any decision of the Board or a compensation committee of the Board in
the interpretation and administration of the Plan lies within its sole and
absolute discretion and is final, conclusive and binding on all parties
concerned, including plan participants and their beneficiaries or successors.

      Stock options granted under the Plan may be non-qualified or incentive
stock options for federal income tax purposes. The Board will set option
exercise prices and terms and will determine the time at which stock options
will be exercisable. However, the term of a stock option may not exceed ten
years.

                                      F-15
<PAGE>

      The Board may also grant options that are intended to be incentive stock
options, which comply with Section 422 of the IRS Code. Fair market value is
defined as the closing price of the shares as reported on the grant date as
quoted on the OTC Bulletin Board. The Board also has the authority to grant
stock-based awards, which may consist of awards of common stock, restricted
stock and awards that are valued in whole or in part by reference to, or are
otherwise based on the fair market value of, shares of common stock. Stock-based
awards may be granted on a stand-alone basis or in addition to any other awards
granted under our Plan. The Board determines the form of stock-based awards and
the conditions on which they may be dependent. The conditions may include the
right to receive one or more shares of common stock or the equivalent value in
cash upon the completion of a specified period of service or the occurrence of
an event or the attainment of performance objectives. The Board also determines
the participants to whom stock-based awards may be made, the timing of those
awards, the number of shares to be awarded, whether those other stock-based
awards will be settled in cash, stock or a combination of cash and stock and all
other terms of those awards.

      Stock options and restricted stock awards are not transferable or
assignable, except for estate planning purposes. In the event of any stock
dividend or split, reorganization, recapitalization, merger, consolidation,
spin-off, combination or exchange of stock or other corporate exchange or any
distribution to stockholders other than regular cash dividends, the Board may,
in its sole discretion, make a substitution or adjustment to the number or kind
of stock issued or reserved for issuance under our Plan under outstanding awards
and the term, including option price, of those awards.

      Except as otherwise provided in a stock award agreement, in the event of
our change in control or a change of control of our company, the Board may, in
its sole discretion, accelerate a stock award, cause us to make a cash payment
in exchange for a stock award or require the issuance of a substitute stock
award.

      Description of Securities
      -------------------------

      The Company is authorized to issue 100,000,000 shares of common stock, par
value $.01 per share, and 25,000,000 shares of preferred stock, par value $.01
per share.

      Common Stock
      ------------

      The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, including the election of
directors. There is no right to cumulate votes in the election of directors. The
holders of common stock are entitled to any dividends that may be declared by
the board of directors out of funds legally available for payment of dividends
subject to the prior rights of holders of preferred stock and any contractual
restrictions we have against the payment of dividends on common stock. In the
event of our liquidation or dissolution, holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities and the
liquidation preferences of any outstanding shares of preferred stock. Holders of
common stock have no preemptive rights and have no right to convert their common
stock into any other securities.

                                      F-16
<PAGE>

      Preferred Stock
      ---------------

      The Company is also authorized to issue 25,000,000 shares of $.01 par
value preferred stock in one or more series with such designations, voting
powers, if any, preferences and relative, participating, optional or other
special rights, and such qualifications, limitations and restrictions, as are
determined by resolution of our board of directors. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of our company without further action by stockholders and could
adversely affect the rights and powers, including voting rights, of the holders
of common stock. In certain circumstances, the issuance of preferred stock could
depress the market price of the common stock.

      Common Stock Purchase Warrants
      ------------------------------

      At January 31, 2006 the Company had common stock purchase warrants
outstanding to purchase an aggregate of 9,692,000 shares of our common stock, of
which:

      o warrants to purchase 250,000 shares, exercisable until September 2010,
at a price of $.25 per share, subject to adjustment, were issued to the
purchaser of $500,000 principal amount 10% senior secured convertible promissory
note; and

      o five year common stock purchase warrants to purchase 9,442,000 shares,
exercisable at a price of $1.00 per share, subject to adjustment, were issued to
purchasers of our units from December 2005 to January 2006.

      Between December 2005 and January 2006, the Company sold an aggregate of
9,442,000 units of our securities to 99 accredited investors in an offering
exempt from registration under the Securities Act in reliance on exemptions
provided by Section 4(2) and Rule 506 of Regulation D of the Securities Act.
Each unit was sold for a purchase price of $0.25, and consisted of one share of
our common stock and one redeemable five year common stock purchase warrant,
exercisable at $1.00 per share, which resulted in the issuance by us of an
aggregate of 9,442,000 shares of common stock and common stock purchase warrants
to purchase an additional 9,442,000 shares of our common stock. Gross proceeds
were received of $2,360,500.

      Subject to certain conditions, the Company may require warrant holders to
exercise or forfeit their warrants, provided that the closing price for our
common stock is at least $1.50 per share for 20 consecutive trading days and
trading volume in our common stock exceeds 150,000 shares per day for each
trading day during such 20 day period.

      For one year following the date of issuance, the Company is obligated to
issue additional shares of Company common stock to purchasers of the units to
protect them against dilution in the event that we issue shares of our common
stock during such one-year period at less than $.25 per share. In addition, for
a one year period following the date of issuance and continuing until the
warrants expire, the exercise price is subject to "weighted-average"
anti-dilution protection for subsequent issuances of common stock or securities
convertible into common stock at less than the then current warrant exercise
price, excluding certain issuances unrelated to capital raising transactions.

                                      F-17
<PAGE>

6.    INCOME TAXES
      ------------

      Reconciliation of the differences between the statutory tax and the
effective income tax are as follows:

                                         DECEMBER 31, 2006     DECEMBER 31, 2005
                                         -----------------     -----------------

      Federal statutory tax .............     (34.00%)              (34.00%)
      State taxes, net of federal tax ...      (5.83%)               (5.83%)
      Valuation allowance ...............      39.83%                39.83%
                                              -------               -------

      Effective income tax rate .........          -                     -
                                              =======               =======

      The effective income tax rate differs from the federal statutory rate
primarily due to permanent timing differences and net operating loss carry
forwards.

      The Company had available unused federal and state operating loss
carry-forwards of approximately $4,238,000 and $1,490,000 at December 31, 2006
and 2005 respectively that may be applied against future taxable income.

      SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. As of December 31, 2005 the Company has determined that the net
operating losses likely will not be utilized. Accordingly, the Company has
increased the valuation allowance to 100% of all deferred tax assets.

      The (provision) benefit for income taxes consists of the following as of
December 31:

                                                  2006            2005
                                              -----------     -----------
      Current:

        Federal ..........................      $       -       $       -
        State ............................         (1,600)           (900)
                                              -----------     -----------

                                                   (1,600)           (900)

      Deferred:

        Federal ..........................        935,000          34,000
        State ............................        160,000           5,000
                                              -----------     -----------

      Total (provision) benefit before
        valuation allowance ..............      1,095,000          38,100

      Change in valuation allowance ......     (1,093,400)        (39,000)
                                              -----------     -----------

      Total provision ....................    $     (,600)    $      (900)
                                              ===========     ===========

                                      F-18
<PAGE>

      The components of the net deferred income tax asset are as follows as of
      December 31:

                                                  2006            2005
                                              -----------     -----------

      Deferred income tax assets:
        Net operating loss carry forward .    $ 1,688,000     $   593,000
                                              -----------     -----------

                                                1,688,000         593,000
                                              -----------     -----------

      Deferred income tax asset, net
        before valuation allowance .......      1,688,000         593,000
      Less: valuation allowance ..........     (1,688,000)       (593,000)
                                              -----------     -----------
      Deferred income tax asset, net
                                              $         -     $         -
                                              ===========     ===========

7.    OFFICE LEASE
      ------------

      The Company entered into a twelve month lease for office space commencing
November 1, 2003 that expired in October 31, 2004 and was extended for an
additional year until December 31, 2005. The Company extended the lease for
office space for three years commencing January 1, 2006 and expiring December
31, 2008. Rent expenses incurred for the years ended December 31, 2006, 2005 and
2004 were $67,879, $68,211 and $59,417, respectively. Future minimum rental
payments under the office lease are $69,943.

8.    RELATED PARTY TRANSACTIONS
      --------------------------

      The Company owes two shareholders a total of $44,858 and $54,580 in
expense reimbursements as of December 31, 2006 and 2005 respectively. These
amounts are reflected in accrued expenses, related party.

      Employment Agreements
      ---------------------

      In June 2005 the Company entered into a three-year employment agreement
with Herman Rappaport under which Mr. Rappaport serves as our President, Chief
Executive Officer and Acting Chief Financial Officer. Under the terms of the
agreement Mr. Rappaport is paid a base salary at the rate of $90,000 a year.
Because of the Company's need for capital to help develop its expansion program
and because of the Executive's confidence in the future of the Company, he has
agreed to receive a salary which is substantially less than appropriate for such
President and Chief Executive services. "In lieu of additional cash, the
Executive shall receive stock in amount to be determined by the Board of
Directors within Two (2) years from the date of this agreement.

                                      F-19
<PAGE>

      In June 2005 the Company also entered into a two-year employment agreement
with Dr. Steven Rosenblatt under which Dr. Rosenblatt serves as Executive Vice
President. Under the terms of the agreement Dr. Rosenblatt is paid a base salary
at the rate of $90,000 per year, as well as $1,000 per day for training of
providers and staff when he is not acting as a medical provider. Also, Dr.
Rosenblatt is to receive one third (1/3) of all revenue resulting from medical
services performed by him at the Wellness Centers. Dr. Rosenblatt is continuing
his private medical practice. However, if requested by Mr. Rappaport, Dr.
Rosenblatt is prepared to reduce that time spent in his personal practice and is
to receive additional remuneration if such additional time is required by
StarMed. The agreement provides that we are entitled to receive 6% of all book
advances earned by Dr. Rosenblatt.

      Both Mr. Rappaport and Dr. Rosenblatt are entitled to two weeks annual
vacation, reimbursement for business expenses and participation in executive
employment benefit plans. The agreement also contains customary confidentiality
and indemnification provisions. The Company may terminate the agreement upon
death or disability, or for "cause" which includes a material breach of any
material provision of the agreement, any act in violation of our Code of
Business Conduct and Ethics, fraud or conviction of a felony.

9.    COMMITMENTS AND CONTINGENCIES
      -----------------------------

      Management Incentives
      ---------------------

      The Company has reserved up to 5,500,000 shares of common stock to members
of management upon the attainment of specified milestones as follows:

      o 2,000,000 shares upon opening of five new StarMed Wellness Centers prior
to the expiration of two years from February 2006,

      o 1,000,000 shares upon opening of 10 new StarMed Wellness Centers prior
to the expiration of four years from February 2006, and

      o 2,500,000 shares following the first fiscal year in which the Company
does not report a loss in the audited financial statements as may be reflected
in the Annual Report on Form 10-KSB.

      If any of these milestones are met, at the time of issuance of securities
the Company will recognize compensation expense equal to the fair market value
of its common stock on the date of issuance.

10.   SUBSEQUENT EVENTS
      -----------------

      In January through April 2007, the Company issued 9,120,600 shares of
common stock for repayment of debt and performance of services.

                                      F-20