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, 2005

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

                For the transition period from _______ to _______

                        Commission file number: 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)          (Zip Code)

                     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)

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. [ ]

<PAGE>

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. $ 18,768 for the fiscal
year ended December 31, 2005.

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 April 4, 2006 is approximately $4,716,144.

         As of March 31, 2006, 22,418,424 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 Center, 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
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.

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<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         StarMedGroup, Inc. is engaged in two businesses: (1) we are developing
a network of StarMed Wellness Centers that will offer preventative, traditional
medical and alternative treatments directed towards achieving "total wellness,"
and (2) we market 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 2005 were from the sale of our products or royalties related to our
products. 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 and we have licensed various formulations of our proprietary
starch blocker product to third parties. We currently market our medicinal
products, directly to consumers, 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 2004 revenues have resulted in a significant
reduction in our product sales. Therefore, during fiscal 2005 our management
made a strategic decision and redirected our efforts to the development and
establishment of a network of StarMed Wellness Centers.

         StarMed Wellness Centers will focus on promoting general wellness by
addressing the underlying causes of a variety of chronic diseases such as
obesity and stress. Our long-term goal is to expand the number of clinics with
which we contract to develop a network of StarMed Wellness Centers each of which
will provide clients a full range of preventative, traditional medical and
alternative treatments directed towards achieving "total wellness." Our StarMed
Wellness Centers 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.
Our management and affiliated physicians have devoted significant time, and
pooled their collective experience, to develop our StarMed Wellness Center
concept.

         It is envisioned that each StarMed Wellness Center will expand the
traditional Western medical treatments, medicines and services provided by an
existing medical clinic to include preventative and alternative healthcare
services. The medical clinic, which will operate as a participant in the StarMed
Wellness Center network, under the supervision of its existing medical director,
will provide services to its existing patient base and to new customers who seek
treatment for existing medical conditions, as well as for some or all of the
expanded services that participants in the StarMed Wellness Center network will
offer.

         While we anticipate that our Wellness Centers will become a recurring
market for our medicinal products in the future, we do not expect that our
marketing of natural medicinal products will consume a significant portion of
our future operating resources, or that medicinal product sales will account for
a substantial portion of our future revenues.

                                       3
<PAGE>

OUR STARMED WELLNESS CENTER BUSINESS MODEL

         General

         Our StarMed Wellness Centers 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 believe that the StarMed Wellness
Center business plan is the first business model that envisions expansion into a
national chain of Wellness Centers to be staffed by medical doctors whose
practices will be complemented by preventative medicine and total wellness
services. 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 through the
treatment of existing illnesses with Western medicines, and the promotion of
overall health and wellness through the incorporation of alternative medical
products and techniques in the treatment of chronic illnesses. 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, who is
also our Executive Vice President and serves as President of our Sierra
Medicinals, Inc. subsidiary. 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 Center 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,
as well as internationally in Europe, China and Australia, since the book's
publishing on over 400 radio, TV talk show and print media interviews as well as
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. Dr. Rodriquez has appeared on Spanish television answering call-in
health questions. The Starch Blocker Diet has been translated into Spanish under
the guidance of Dr. Rodriquez, who presides over our Hispanic market operations.

                                       4
<PAGE>

         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.

         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, who is also a Vice
President of our company, 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 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 is a
practicing physician and specialist in gastroenterology.

         o Dr. Seymour Levine. Dr. Levine 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 Johns Hopkins University. Dr. Levine is 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

         Each StarMed Wellness Center will enhance the operations of an existing
medical clinic through a contractual relationship with our company that enables
the clinic to expand its traditional services to include preventative care and
alternative medical techniques. The medical clinic will continue to operate
under its existing name, "as a participating facility" in the StarMed Wellness
Center network. The medical operations of each Wellness Center will be
supervised by one or more licensed physicians and other qualified personnel,
and, typically, will be open to the public 10 hours per day, six days per week.
It is expected that the StarMed Wellness Center will offer services including:

         o  Dietician review and consultation;
         o  Weight loss and diabetes management services;
         o  Physical exercise consultation;
         o  Physical therapy;
         o  Anti-aging treatments;
         o  Acupuncture treatments;
         o  Doctor prescribed and personalized vitamin, mineral and herbal
            regimens;

                                       5
<PAGE>

         o  Skin rejuvenation and cosmetology services;
         o  Female hormone therapy;
         o  Pain management;
         o  Food allergy diagnosis and treatment; and
         o  Genome testing.

         Relationship with Medical Clinics

         In order to avoid the brick and mortar costs of building StarMed
Wellness Centers, we have determined to form strategic alliances through
contractual arrangements with existing medical clinics that will permit the
medical clinic to expand the array of services it provides to include
preventative and alternative treatments and techniques. The services to be
provided at each StarMed Wellness Center will be negotiated with the medical
clinic prior to entering into an agreement for our services, will vary depending
upon the particular needs of each prospective Wellness Center, and will draw
upon factors including community needs. Depending upon applicable state and
local regulatory requirements and limitations, we anticipate that our services
will be provided under a variety of relationships with medical clinics. In some
instances, we will provide services under a management consulting agreement
and/or an administrative services agreement. In other cases, we may provide
services in conjunction with one or more licensed physicians or physician
practices with whom we contract to provide services to the medical clinic. We
may also utilize a combination of these relationships. Depending upon the
particular structure of the relationship with the medical clinic, we expect to
generate revenues through a variety of means, including management fees,
consulting fees, fees for administrative services and/or arrangements where we
receive a percentage of revenues from the operation of the StarMed Wellness
Center.

         Market

         StarMed Wellness Centers' 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 Centers will be designed to appeal to clients at all income
levels. If and to the extent that the enhanced services to be offered at our
Wellness Centers become reimbursable under third party insurance reimbursement
guidelines increases, we expect that the number of persons who will be attracted
to StarMed Wellness Centers will also increase.

         While our initial focus is in the California and Hawaiian markets, we
believe that the StarMed Wellness Center 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. Informal discussions
indicate that hotels may be interested in offering StarMed's Wellness services
to their guests. Management also believes that international expansion of
Wellness Centers will present attractive opportunities. Although individual
destination-oriented spas are becoming widespread, we are aware of no similar
doctor-managed facilities, focused on preventative medicine and total health.

                                       6
<PAGE>

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 Center business model, coupled with severe competition in the
marketplace for medicinal products, contributed to a significant decrease in
revenues from product sales during the first half of 2005. While we anticipate
that our Wellness Centers will become a recurring market for our medicinal
products in the future, we do not expect that our marketing of natural medicinal
products will consume a significant portion of our future operating resources,
or that medicinal product sales will account for a substantial portion of our
future revenues.

         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 over the Internet. Our natural medicinal
products are intended to address the effects of conditions including arthritis,
aging eyesight, obesity and irritable bowel syndrome. Our product line includes:

      o  Sierra Sight D and Sierra Sight W, blends of natural medicinals
         formulated to help combat the effects of aging eyesight;

      o  SierraMed JT Penetrating Cream, a topical cream that penetrates the
         skin and reaches deep into joints to relieve symptoms associated with
         arthritis;

      o  Sierra Colon IB, a blend of 20 Chinese herbs and minerals designed to
         help reduce symptoms related to irritable bowel syndrome; and

      o  Sierra Slim, a proprietary weight loss supplement based upon a patented
         (owned by Pharmachem Laboratories) starch blocker known as Phase 2TM.

         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 manufacturer, American Supplement
Technologies of Tempe, Arizona, is a full service contract manufacturer of
dietary supplements, maintains product liability insurance on which we are named
as an additional insured. American Supplement Technologies manufactures our
medicinal products on a purchase order basis, and 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" 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, and we do not believe that we are dependent
upon any one source for these materials. Our primary supplier of Phase2 starch
blocker material is Pharmachem Labs in New Jersey.

                                       7
<PAGE>

         We maintain general liability insurance with coverage of $1,000,000. We
do not yet maintain product liability insurance on our own behalf; however, we
are named as an additional insured to the extent of $1,000,000 under the product
liability policy carried by our product manufacturer. We intend to obtain
product liability insurance at such time and with such coverage limits as we are
required to maintain, consistent with our financial condition. However, until
that time, we are subject to product liability claims that, if successful, 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.

         Marketing

         We currently market our alternative medicinal products directly, over
the Internet on our website at www.sierramed.com. For fiscal 2005 and fiscal
2004, sales made from our web site were $12,160 and $40,000, respectively. We
offer customers who purchase products from our web site a 30-day money back
guarantee, less shipping costs.

         On May 8, 2003, we entered into a five-year license agreement with L.
Perrigo Company, a manufacturer and marketer of dietary maintenance and
supplements, under which we granted to L. Perrigo the exclusive rights to all of
our weight loss products promoted for human dietary maintenance in dietary
supplement, for the United States, Canadian and the United Kingdom markets,
including their respective territories, possessions and military installations.
Marketing efforts are limited to authorized distribution channels consisting of
food and drug mass market retailers. We retained the right to market to health
food stores other than GNC, direct to consumer channels such as multi level
marketing, direct mail and Internet outlets that have no consumer retail
outlets. For the years ended December 31, 2005 and 2004, L. Perrigo Company paid
us $24,486 and $104,776, respectively, in royalty fees under the license
agreement. In 2005, L. Perrigo orally notified us that it will cease to
distribute our weight loss products. We are currently in the process of
reviewing our legal rights against L. Perrigo as a result of its decision to
discontinue the distribution of our weight loss products.

         We also entered into an agreement with Natural Health Trends
Corporation under which Natural Health Trends' Lexxus International, Inc.
subsidiary was granted the exclusive right to market a version of our starch
blocker product formulated specifically for Natural Health Trends in network or
multilevel marketing to international sources. For the years ended December 31,
2005 and 2004, Lexxus International paid us $0 and $1,688,373 under the
agreement. We do not expect our agreement with Lexxus International to
materially contribute to our revenues in 2006.

         Future Product Sales

         We intend to offer our products in conjunction with the operation of
our StarMed Wellness Centers. We believe that, as our operations expand, StarMed
Wellness Centers will become a "captive" market for our medicinal products. 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, 2005 and 2004, we expended $0
and $80,629, respectively, for company-sponsored research and development
activities.

                                       8
<PAGE>

COMPETITION

         Our StarMed Wellness Centers 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 Wellness Centers will be the only existing centers
designed to focus on preventative medicine through the incorporation of
physician-directed, traditional Western medical treatments and techniques and
alternative medical practices.

         We believe that the market for natural, alternative medicinal products
is increasing, but we expect to encounter intense competition from other
manufacturers and marketers of vitamins, supplements, neutraceutical 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 Wellness Centers will serve as a "captive" audience for our
         over-the-counter, alternative medicinal products; and

      o  Our Wellness Center 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".

         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,
and 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.

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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.

         Regulations related to the StarMed Wellness Centers

         Our business model for the establishment of a network of branded
StarMed Wellness Centers will be subject to substantial federal, state and local
government health care laws and regulations. The terms of agreements we may
enter into with medical centers joining the StarMed Wellness Center network will
vary from center to center based upon that particular center's needs. We will
strive to ensure that each agreement complies with all applicable state and
federal laws, however we as a result of the complexity of the various rules and
regulations we cannot assure you that we will be successful in every instance.
In addition, laws and regulations are constantly changing and may impose
additional requirements on these operations. These changes could have the effect
of impeding our ability to do business with the medical centers which are
participating in the StarMed Wellness Center network or reduce our ability to
implement our business model.

         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. Under the
terms of our agreements, we may provide management services to the StarMed
Wellness Center in exchange for a service fee. 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.

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         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. We may enter into agreement
with medical centers under which we will be reimbursed by physicians on whose
behalf we may provide management services. The compensation provisions of the
management services agreements we may enter into will be designed to comply with
applicable state laws relating to fee-splitting. 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 may receive fees under agreements with medical centers for
management and administrative services. 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.

                                       11
<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 management 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. If
we perform billing and collection services for the Wellness Center we may be
engaging in one of more of these standard transactions and will be required to
conduct those transactions in compliance with the required standards. The HIPAA

                                       12
<PAGE>

Privacy Rule restricts the use and disclosure of patient information and
requires entities to safeguard that information and to provide certain 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
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.

                                       13
<PAGE>

         We will conduct our business in a manner so that any billing activities
we undertake on behalf of a StarMed Wellness Centers will be in material
compliance with these laws, but there can be no assurance that our activities
will not be challenged or scrutinized by government authorities.

EMPLOYEES

         As of March 31, 2006, we had five full-time employees. None of our
employees are covered by collective bargaining agreements, and 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, and 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.

                                       14
<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 be 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 2005 as
compared to fiscal 2004 and our net loss for fiscal 2005 was $805,910 as
compared to a net loss of $99,877 for fiscal 2004. While at December 31, 2005 we
had approximately $1,000,000 of cash on hand and subsequent to that date we have
raised approximately $400,000 in gross proceeds through the sale of our
securities, we do not presently generate sufficient revenues to fund our ongoing
operations. 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 2006 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 Center 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. Moreover, we are transitioning the
focus of our business away from a product-oriented marketing company to

                                       15
<PAGE>

service-oriented Wellness Centers. 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:

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

      o  Develop a number of Wellness Clinics 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  Remain attractive to our commercial partners; and

      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 CENTERS, BUT THERE HAVE BEEN NO MARKET STUDIES OR OTHER
DETERMINATIONS AS TO THE EFFICACY OF OR CONSUMER DEMAND FOR OUR OPERATIONS.

                                       16
<PAGE>

         Our future profitability will depend upon the success of our existing
and future StarMed Wellness Centers. However, the fusion of traditional Western
medical practice with alternative and preventative medical procedures and
techniques 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
Centers and there is no assurance that the concept will be well received by the
public or that demand for Wellness Center services can sustain our operations.
Lack of demand for our services could cause operating StarMed Wellness Centers
to cease operations.

IF OUR WELLNESS CENTER CONCEPT IS DETERMINED TO CONSTITUTE THE PRACTICE OF
MEDICINE, OUR ABILITY TO PROVIDE OUR SERVICES TO OUR WELLNESS CENTERS MAY BE
JEOPARDIZED.

         We will work with the participating medical centers and regulatory
counsel in an effort to ensure that our agreements with centers 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 A WELLNESS CENTER
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 and we may, under
the terms of those agreements, provide management and administrative services to
the Wellness Centers 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.

                                       17
<PAGE>

         Our business model contemplates that we may receive fees under the
agreements with the medical centers for management and administrative services.
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 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, however, 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, in which event our ability to continue as a going concern would be
in jeopardy.

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

                                       18
<PAGE>

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.

         We expect to grow primarily through the establishment of StarMed
Wellness Centers at existing medical clinics. 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
46.5% 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

                                       19
<PAGE>

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.

         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. Revenues from
this product were $23,775 for fiscal 2005. 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 MANGEMENT. IF WE WERE TO LOSE THE SERVICES OF ONE OR MORE OF THESE
INDIVIDUALS OUR ABILTY 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 and establish and operate Wellness
Centers 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
all, in which event we would 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

                                       20
<PAGE>

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.

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.

                                       21
<PAGE>

         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.

         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, BUT 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.

                                       22
<PAGE>

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, WHICH COULD LEAD TO
WIDE FLUCTUATIONS IN OUR SHARE PRICE. WE MAY HAVE ONLY A SMALL AND THINLY TRADED
PUBLIC FLOAT.

         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.

                                       23
<PAGE>

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

         As of March 31, 2006 we had common stock purchase warrants to purchase
a total of 9,692,000 shares of our common stock outstanding at prices ranging
between $0.25 to $1.00 per share. In addition, we have reserved 5,500,000 shares
of our common stock for possible future issuance to members of our management in
the event certain incentive milestones are reached and 3,650,000 shares of our
common stock reserved for future issuance under our 2004 Equity Compensation
Plan. 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.

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. The lease
provides for annual rental of $68,211, 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 and, 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. 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

April 7, 2005 through June 30, 2005 ............     $ 1.10        $ 0.55
July 1, 2005 through September 30, 2005 ........     $ 0.95        $ 0.35
October 1, 2005 through December 31, 2005 ......     $ 0.51        $ 0.35

Fiscal 2006

January 1, 2006 through March 31, 2006 .........     $ 0.35        $ 0.13

                                       24
<PAGE>

         On April 4, 2006, the last sale price of our common stock as reported
on the OTCBB was $0.30. As of March 30, 2006, there were approximately 935
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.

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 2004 Equity Compensation Plan and any compensation plans not
previously approved by our stockholders as of December 31, 2005.

                              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

2004 Equity Compensation
 Plan(1) .....................  1,050,000         $--            650,000

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.

                                       25
<PAGE>

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, 2005 and 2004 notes
thereto appearing 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 2005 we redirected our resources towards
completion of plans to establish the first of what we envision will be a network
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 Center network. We will provide services 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 dietician
review and consultation; weight loss and diabetes management services; physical
exercise consultation; physical therapy; anti-aging treatments; acupuncture
treatments; doctor prescribed and personalized vitamin, mineral and herbal
regimens; skin rejuvenation and cosmetology services; and female hormone
therapy.

         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, coupled with severe competition in the marketplace for
medicinal products, have contributed to a significant decrease in revenues from
product sales during fiscal 2005. While we anticipate that our Wellness Centers
will become a recurring market for our medicinal products in the future, we
intend to continue to devote our resources to our Wellness Centers, and do not
expect that revenues from product sales will be a significant source of
operating revenues in the future.

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

                                       26
<PAGE>

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
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

                                       27
<PAGE>

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, 2005 AS COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 2004
<TABLE>
<CAPTION>
                                                                         Increase/        Increase/
                            Fiscal year ended    Fiscal Year Ended      (Decrease)        (Decrease)
                            December 31, 2005    December 31, 2004    $ 2005 vs 2004    % 2005 vs 2004
                            -----------------    -----------------    --------------    --------------
<S>                            <C>                  <C>                <C>                  <C>
Sales ......................   $    23,775          $ 1,742,351        $(1,718,576)         (98.6)%
Revenue from royalties .....        24,486              104,776            (80,290)         (76.6)%
                               -----------          -----------        -----------          -------
  Total net revenues .......   $    18,768          $   441,266        $  (422,498)         (95.7)%

  Professional fees ........       185,563               39,131            146,432             374%
  Compensation .............       278,857              240,555             38,302            15.9%
  Rent .....................        68,211               59,417              8,794            14.8%
  Accounting fees ..........        41,724               36,195              5,529            15.3%
  Office ...................        37,762               57,120            (19,358)         (33.9)%
  Insurance ................        23,776               18,028              5,748            31.9%
  Advertising, marketing
   and promotion ...........        11,136               46,212            (35,076)         (75.9)%
  Depreciation .............         9,296                9,297                 (1)            NM
  Travel ...................         3,696                  988              2,708             274%
  Donations ................             0               27,915            (27,915)          (100)%
    Total expenses .........       660,021              534,858            125,163            23.4%

(Loss) from operations .....      (641,253)             (93,592)           547,661             591%
                               -----------          -----------        -----------          -------
Total other income (expense)       (58,807)              (5,385)            53,442             992%
Net (loss) .................   $  (805,910)         $   (99,877)       $   760,033             707%
                               ===========          ===========        ===========          =======
</TABLE>
NM = not meaningful

Total Net Revenues

         We generated revenues in fiscal 2005 and fiscal 2004 from both the
sales of natural, over-the-counter, alternative medicinal products and royalties
from formulas for herbal health products. During fiscal 2005 sales of medicinal
products declined approximately 98.6% to $23,775 from $1,742,351 in fiscal 2004.
The substantial portion of revenues for the year ended December 31, 2004
resulted from product sales of our proprietary starch blocker product to NHTC,
Inc. and revenues from sales of other products were not meaningful.

                                       28
<PAGE>

This substantial decline in sales of medicinal products is primarily the result
of decreased demand for our products from our principal customer during fiscal
2005. 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 2005 as compared to fiscal 2004 is also the result of the diversion of
our limited resources from marketing efforts to the finalization of plans to
open our initial Wellness Center.

         Our cost of sales of our medicinal products was approximately 124% of
sales for fiscal 2005 as compared to approximately 81% for fiscal 2004. 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 $80,290, or approximately 76.6%, for
fiscal 2005 as compared to fiscal 2004. This decline in revenue from royalties
is attributable to a decline in net sales of the products which are licensed to
the third party.

         As described elsewhere herein, we do not presently anticipate that in
fiscal 2006 our sales of alternative medicinal products or revenues from
royalties for formulas of herbal health products will ever reach the levels
reported in prior periods. As we have yet to generate any revenues from our
Wellness Centers, we are unable to predict the amount of such revenues, if any,
during fiscal 2006.

Total Expenses

         Total expenses for fiscal 2005 increased $125,163, or approximately
23.4% from fiscal 2004. The primary component of the increase for fiscal 2005 is
an increase of $146,432, or approximately 374%, in professional fees from fiscal
2004. This increase reflects legal fees related to our capital raising efforts
during the year as well as consulting fees related to the development of our
Wellness Center business model . The increases in total expenses for fiscal 2005
also included an increase of $38,302, or approximately 15.9%, in compensation
expense as well as increases in rent, accounting fees and travel expenses. These
increases were partially offset by a decrease of $19,358, or approximately 33.4%
in office expense and a decrease of $35,076, or approximately 75.9%, in
advertising, marketing and promotional expenses. The decrease in office expense
reflects our efforts to eliminate non-essential costs during the transition of
our business model and the decrease in advertising, marketing and promotional
expenses reflects a focus away from product sales.

         We anticipate that our operating expenses will increase significantly
during fiscal 2006 with the opening of Wellness Centers during fiscal 2006. We
anticipate that these increased operating expenses will be offset by revenues
from these centers; however, if a particular Wellness Center does not generate
sufficient revenue to pay its operating expenses we will be obligated to fund
any deficiency from our working capital. This event could significantly increase
operating expenses without corresponding revenue and adversely affect our
results of operations in future periods.

Total Other Income (Expense)

         Total other expenses increased $53,442, or approximately 992%, for
fiscal 2005 from fiscal 2004. Included in this increase is:

                                       29
<PAGE>

      o  other income of $1,222 which represented interest income, and

      o  a gain of $28,805 on decrease in fair value of stock price guarantee
         obligation which was related to the settlement of a dispute and the
         cancellation of a $467,255 note payable.

         We did not have comparable other income or gains in fiscal 2004. The
increase in total other expenses for fiscal 2005 also included an increase of
$83,449, or approximately 155%, in interest expense. Interest expense in fiscal
2005 included $85,543 of interest related to the 10% senior secured convertible
promissory note with the balance attributable to credit card interest, while
interest expense in fiscal 2004 included credit card interest. The 10% senior
secured convertible note was satisfied in November 2005. We anticipate that
interest expense for fiscal 2006 will be lower than fiscal 2005.

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, 2005 we had cash on hand of $1,019,259 and
working capital of $1,227,347. 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 2005 was $574,592 as
compared to $156,091 for fiscal 2004, and increase of $ 418,501. The increase is
primarily the result of our increased loss, and increases in depreciation and
amortization, a one-time gain related to a stock price guarantee, stock issued
for compensation and accounts payable, which were offset by decreases in
accounts receivable, inventory, deferred tax assets, accrued expenses and income
tax payable.

         Net cash provided by financing activities for fiscal 2005 was
$1,521,143 as compared to net cash used in financing activities of $18,489 for
fiscal 2004. The change for fiscal 2005 reflects proceeds received from our
capital raising transactions, net of repayment of a $500,000 principal amount
secured note and payments related to a capital lease.

         Subsequent to December 31, 2005 we raised an additional $435,000 in
proceeds from the sale of our securities. Our working capital is sufficient to
satisfy our current obligations and fund our ongoing expenses as we continue to
develop and implement our business model. It is likely, however, that as our
operations grow we will need to raise additional working capital. Other than
cash on hand and available borrowings under our corporate credit card that could
provide us up to $21,000 on an unsecured basis, of which approximately $10,000
was outstanding at December 31, 2005, 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.

                                       30
<PAGE>

RECENT CAPITAL RAISING TRANSACTIONS

         10% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

         On June 28, 2005, we sold a 10% senior secured convertible promissory
note in the aggregate principal amount of $500,000 and a common stock purchase
warrant to purchase 250,000 shares of our common stock for an aggregate purchase
price of $490,000. The purchaser was an accredited investor and the transaction
was exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") in reliance on an exemption provided under Section 4(2) of the
act. The warrant entitles the holder to purchase up to 250,000 shares of our
common stock until June 28, 2010 at an exercise price of $.25 per share, subject
to adjustment. In November 2005 this note was satisfied in full utilizing a
portion of the proceeds from the unit offering described below.

         UNIT OFFERING

         Between December 2005 and January 2006, we 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 $.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. We received
gross proceeds of $2,360,500.

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
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

                                       31
<PAGE>

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                    89            President, CEO, Acting Chief
                                                  Financial Officer and director
Dr. Steven L. Rosenblatt            60            Executive Vice President and
                                                  Director
Dr. Hector Rodriguez                62            Vice President and director
Dr. Avner Manzoor-Mandel            59            Vice President and director
Dr. Joel Feinstein                  60            Vice President and director
Dr. Seymour Levine                  63            Director

         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 seven 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.

                                       32
<PAGE>

         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 and
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 of 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, until this year, 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 and 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 and 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
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.

                                       33
<PAGE>

         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 is 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, and 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
and 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  (d) understands internal controls over financial reporting, and

      o  understands audit committee functions.

                                       34
<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 as such unless and until we are able to provide directors' and
officers' liability insurance. However, we are unable to fund the costs of
directors' and officers' liability insurance at this time, as we believe that
all available funds should be used to finance operations. We may, in the future,
implement some or all of the corporate governance measures described above and,
we will be required to do so in the event we list our shares on a national
exchange or The Nasdaq Stock Market in the future.

         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, 2005 and Forms 5 and amendments thereto furnished
to us with respect to the fiscal year ended December 31, 2005, 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, 2005, except
that Dr. Hector Rodriguez and Dr. Seymour Levine failed to timely file their
respective Form 3s to reflect their initial holdings in our common tock and
their respective Form 4s to reflect their acquisition of 10,000 shares each of
our common stock on January 5, 2005.

ITEM 10. EXECUTIVE COMPENSATION

         The following table summarizes all compensation recorded by us in each
of the last three fiscal years for our Chief Executive Officer and each other
executive officers serving as such (the "Named Executive Officers") whose annual
compensation exceeded $100,000.

                                       35
<PAGE>
<TABLE>
<CAPTION>
                          Annual Compensation               Long-Term Compensation
                  ------------------------------------  -------------------------------
                                                                Awards          Payouts
                                                        ----------------------  -------
                                                        Restricted  Securities
Name and                                  Other Annual  Stock       Underlying  LTIP     All Other
Principal         Fiscal  Salary   Bonus  Compensation  Awards      Options     Payouts  Compensation
Position          Year    ($)      ($)    ($)           ($)         (#)         ($)      ($)
------------      ------  -------  -----  ------------  ----------  ----------  -------  ------------
<S>               <C>     <C>      <C>    <C>           <C>         <C>         <C>      <C>
Herman            2005    $89,904  $0     $0            $9,500      -0-         $0       $0
Rappaport(1)      2004    $90,192  $0     $0            $0          -0-         $0       $0
                  2003    $18,000  $0     $0            $5,000      -0-         $0       $0

Steven L.         2005    $82,404  $0     $0            $9,500      -0-         $0       $0
Rosenblatt        2004    $84,378  $0     $0            $0          -0-         $0       $0
                  2003    $18,000  $0     $0            $5,000      -0-         $0       $0
</TABLE>
_________

(1) In fiscal 2003 each of Mr. Rappaport and Dr. Rosenblatt was granted 500,000
shares of our common stock valued at $5,000 as additional compensation. In
fiscal 2005 we issued each of them an aggregate of 950,000 shares of our common
stock valued at $9,500 as additional compensation.

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.
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.

                                       36
<PAGE>

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.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

         The following table sets forth information concerning individual grants
of options made during fiscal 2005 to the Named Executive Officers.
<TABLE>
<CAPTION>
                                                      % OF TOTAL
                            NUMBER OF SHARES          OPTIONS GRANTED        EXERCISE OR
                            UNDERLYING OPTIONS        TO EMPLOYEES IN        BASE PRICE         EXPRIRATION
NAME                        GRANTED (#)               FISCAL YEAR            ($/SH)             DATE
--------------------        ------------------        ---------------        -----------        -----------
<S>                         <C>                       <C>                    <C>                <C>
Herman Rappaport            0                         n/a                    n/a                n/a
Steven L. Rosenblatt        0                         n/a                    n/a                n/a
</TABLE>

               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
                                                NO. OF SECURITIES               VALUE OF UNEXERCISED
                        SHARES                  UNDERLYING UNEXERCISED          IN-THE-MONEY OPTIONS AT
                        ACQUIRED                OPTIONS AT DECEMBER 31, 2005    DECEMBER 31, 2005
                        ON          VALUE       ----------------------------    ----------------------------
NAME                    EXERCISE    REALIZED    EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
--------------------    --------    --------    -----------    -------------    -----------    -------------
<S>                     <C>         <C>         <C>            <C>              <C>            <C>
Herman Rappaport        0           n/a         0              0                n/a            n/a
Steven L. Rosenblatt    0           n/a         0              0                n/a            n/a
</TABLE>

2004 EQUITY COMPENSATION PLAN

         In fiscal 2004 we established our 2004 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.

                                       37
<PAGE>

The Plan provides for the grant to our directors, officers, employees and
consultants of stock based awards and options to purchase up shares of our
common stock. All of our executive officers, directors and employees are be
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 2006). At December 31, 2005 we
have issued no options under the Plan, but we have issued 400,000 shares in
stock awards under the Plan, and 3,650,000 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 and 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.

         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.

                                       38
<PAGE>

         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, 2006 we had 22,418,424 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, 2006 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.

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

Herman Rappaport(1) ...............          7,395,489                36.6%
Dr. Steven L. Rosenblatt(2) .......          1,675,000                 8.3%
Dr. Hector Rodriguez ..............            100,000                    *
Dr. Avner Manzoor-Mandel(3) .......            100,000                    *
Dr. Joel Feinstein(4) .............            100,000                    *
Dr. Seymour Levine ................             20,000                    *
Officers and directors as a
group (six persons)(1)(2)(3)(4) ...          9,390,489                46.5%

Paradigm Media Ventures, Inc.(5) ..          1,625,000                 8.0%
_________

* represents less than 1%

(1) The number of shares beneficially owned by Mr. Rappaport includes 3,110,489
shares of our common stock held by Herman and Rhoda Rappaport Joint Living
Trust, Susan Harris Trustee, 1,000,000 shares of our common stock issuable upon
the exercise of 10 year options granted Mr. Rappaport in February 2006 which are
exercisable at $0.35 per share and 1,625,000 shares of our common stock that are
subject to a voting proxy granted by Paradigm Media Ventures, Inc. in favor of
Mr. Rappaport. See footnote 5 below. The number of shares beneficially owned by
Mr. Rappaport excludes 100,000 shares of our common stock owned by the daughter
of Mr. Rappaport, the beneficial ownership of which is disclaimed by Mr.
Rappaport.

                                       39
<PAGE>

(2) Dr. Rosenblatt's address is 11600 Wilshire Boulevard, Suite 412, Los
Angeles, California 90025.

(3) The number of shares beneficially owned by Dr. Manzoor-Mandell includes
67,547 shares of our common stock held by Carmelina, LLC, a company wholly owned
by Dr. Manzoor-Mandel.

(4) The number of shares beneficially owned by Dr. Feinstein includes 90,000
shares of our common stock held jointly with his spouse.

(5) We issued Paradigm Media Ventures, Inc. 1,625,000 shares of our common stock
in September 2005 as compensation for consulting services to be rendered to us.
Under the terms of the consulting agreement, Paradigm Media Ventures, Inc.
granted a voting proxy over these shares to Mr. Rappaport. Mr. George
Haralampoudis has dispositive control over securities held by Paradigm Media
Ventures, Inc. Paradigm Media Ventures, Inc.'s address is 30 West 26 Street,
12th Floor, New York, New York 10010.

LOCK-UP AGREEMENTS

         Each of our officers and directors have entered into a lock-up
agreements with Joseph Stevens & Company, Inc. who acted as placement agent in
our 2005 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

         We owed Dr. Steven Rosenblatt and Mr. Herman Rappaport, directors,
officers and stockholders of our company, an aggregate of $55,597 and $42,344 in
expense reimbursements as of December 31, 2005 and 2004, respectively. This
balance is included in accrued liabilities on the consolidated balance sheet as
of December 31, 2005 and 2004.

         On January 5, 2005, we issued 1,600,000 shares of our common stock to
the following related parties, as consideration for services rendered, valued at
$.01 per share:

         Herman Rappaport ..............       750,000 shares
         Dr. Steven L. Rosenblatt ......       750,000 shares
         Dr. Hector Rodriguez ..........        10,000 shares
         Dr. Joel Feinstein ............        10,000 shares
         Dr. Avner Manzoor-Mandel ......        10,000 shares
         Dr. Seymour Levine ............        10,000 shares
         Susan Nowak ...................        60,000 shares

         Mr. Rappaport and Drs. Rosenblatt, Rodriguez, Feinstein, Manzoor-Mandel
and Levine are members of our Board of Directors and Ms. Nowak is an employee of
our company.

         On January 31, 2005, we issued 400,000 shares of our common stock to
the following related parties, as consideration for services rendered, valued at
$.01 per share:

         Herman Rappaport ..............       200,000 shares
         Dr. Steven L. Rosenblatt ......       200,000 shares

                                       40
<PAGE>

                                     PART IV

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
4.2      Form of Common Stock Purchase Warrant Issued in Connection with Private
         Offering of Units
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 *
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 *
10.9     Employment Agreement with Steven L. Rosenblatt*
14.1     Code of Business Conduct and Ethics*
21.1     Subsidiaries of the registrant
31.1     Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
31.2     Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002.
32.1     Certification of Chief Executive Officer pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002.
_________

*   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)

                                       41
<PAGE>

(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.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         Mendoza Berger & Company, LLP served as our independent registered
public accounting firm for fiscal 2005 and 2004. 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.

                                             Fiscal 2005         Fiscal 2004
                                             -----------         -----------

Audit Fees .........................           $23,400             $36,195
Audit-Related Fees .................             4,500                   0
Tax Fees ...........................                 0                   0
All Other Fees .....................            10,100                   0
                                               -------             -------
         Total .....................           $38,000             $36,195
                                               =======             =======

         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.

         Our Board of Directors has adopted a procedure for pre-approval of all
fees charged by the 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 2005 were pre-approved by
the entire Board of Directors.

                                       42
<PAGE>

                                   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.

                                        Starmed Group, Inc.

April 26, 2006                          By: /s/ Herman H. Rappaport
                                            ------------------------
                                            Herman H. Rappaport, CEO, President,
                                            Acting Chief Financial Officer,
                                            director, principal executive
                                            officer and principal financial and
                                            accounting officer

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

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

/s/ Herman Rappaport           President, Chief Executive         April 26, 2006
--------------------           Officer, Acting Chief
Herman Rappaport               Financial Officer director,
                               principal executive officer
                               and principal accounting officer


/s/ Steven L. Rosenblatt       Executive Vice President           April 26, 2006
------------------------       and director
Dr. Steven L. Rosenblatt


/s/ Hector Rodriquez           Vice President and director        April 26, 2006
--------------------
Dr. Hector Rodriquez


/s/ Avner Manzoor-Mandel       Vice President and director        April 26, 2006
------------------------
Dr. Avner Manzoor-Mandel


/s/ Joel Feinstein             Vice President and director        April 26, 2006
------------------
Dr. Joel Feinstein


/s/ Seymour Levine             Director                           April 26, 2006
------------------
Dr. Seymour Levine

                                       43
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                        CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                           DECEMBER 31, 2005 AND 2004



                                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, 2005 and 2004, 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Starmed Group, Inc.
and its subsidiary as of December 31, 2005 and 2004, 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.


MENDOZA BERGER & COMPANY, LLP


Irvine, California
February 17, 2006

                                       F-2
<PAGE>
<TABLE>
                               STARMED GROUP, INC. AND SUBSIDIARY
                                   CONSOLIDATED BALANCE SHEETS
                                   DECEMBER 31, 2005 AND 2004
_______________________________________________________________________________________________
<CAPTION>
                                             ASSETS
                                                                      2005              2004
                                                                  -----------       -----------
<S>                                                               <C>               <C>
Current assets:
  Cash .....................................................      $ 1,019,259       $    72,708
  Accounts receivable ......................................            7,489            16,561
  Inventory ................................................           22,110            32,970
  Prepaid expenses .........................................          553,747             2,113
                                                                  -----------       -----------

      Total current assets .................................        1,602,605           124,352

  Equipment and furniture:
    Office furniture and computers .........................           65,063            65,063
    Accumulated depreciation ...............................          (39,734)          (30,438)
                                                                  -----------       -----------

      Total equipment and furniture ........................           25,329            34,625
                                                                  -----------       -----------

  Deferred tax asset .......................................                -           105,000
  Other assets .............................................              700             5,266
                                                                  -----------       -----------

      Total assets .........................................      $ 1,628,634       $   269,243
                                                                  ===========       ===========

                         LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable .........................................      $    44,910       $    21,381
  Accrued expenses .........................................          313,825           334,105
  Income tax payable .......................................            9,359            25,400
  Capital lease obligation - current portion ...............            7,164            15,808
                                                                  -----------       -----------

      Total current liabilities ............................          375,258           396,694

Long term debt:

  Capital lease obligation - less current portion ..........                -             6,875
                                                                  -----------       -----------

      Total long term debt .................................                -             6,875
                                                                  -----------       -----------

      Total liabilities ....................................          375,258           403,569

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

Shareholders' equity:
  Preferred stock (par value $0.01) 25,000,000 shares
    authorized; 0 shares issued and outstanding at
    December 31, 2005 and 2004, respectively ...............                -                 -
  Common stock (par value $0.01) 100,000,000 shares
    authorized; 18,453,424 and 7,056,424 shares issued and
    outstanding at December 31, 2005 and 2004, respectively           184,534            70,564
  Additional paid in capital ...............................        2,189,288           109,646
  Accumulated deficit ......................................       (1,120,446)         (314,536)
                                                                  -----------       -----------

      Total shareholders' equity (deficit) .................        1,253,376          (134,326)
                                                                  -----------       -----------

      Total liabilities and shareholders' equity ...........      $ 1,628,634       $   269,243
                                                                  ===========       ===========

            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, 2005 AND 2004
_______________________________________________________________________________________________
<CAPTION>

                                                                    2005               2004
                                                                ------------       ------------
<S>                                                                     <C>                <C>
Sales ....................................................      $     23,775       $  1,742,351
Cost of sales ............................................           (29,493)        (1,405,861)
                                                                ------------       ------------

Gross (loss) profit ......................................            (5,718)           336,490

Revenue from royalties ...................................            24,486            104,776
                                                                ------------       ------------

     Total net revenues ..................................            18,768            441,266
                                                                ------------       ------------

Professional fees ........................................           185,563             39,131
Compensation .............................................           278,857            240,555
Rent .....................................................            68,211             59,417
Accounting fees ..........................................            41,724             36,195
Office ...................................................            37,762             57,120
Insurance ................................................            23,776             18,028
Advertising, marketing and promotion .....................            11,136             46,212
Depreciation .............................................             9,296              9,297
Travel ...................................................             3,696                988
Donations ................................................                 -             27,915
                                                                ------------       ------------

     Total expenses ......................................           660,021            534,858
                                                                ------------       ------------

Loss from operations .....................................          (641,253)           (93,592)

Other income and (expense)
--------------------------
Other income .............................................             1,222                  -
Gain on decrease in fair value of stock price guarantee
 obligation ..............................................            28,805                  -
Interest expense .........................................           (88,834)            (5,385)
                                                                ------------       ------------
     Total other income (expense) ........................           (58,807)            (5,385)
                                                                ------------       ------------
Loss before income taxes .................................          (700,060)           (98,977)
Provision for income taxes ...............................          (105,850)              (900)
                                                                ------------       ------------

Net loss .................................................      $   (805,910)      $    (99,877)
                                                                ============       ============

Net loss per share - basic ...............................      $      (0.08)      $      (0.01)
                                                                ============       ============

Net loss per share - diluted .............................      $      (0.08)      $      (0.01)
                                                                ============       ============

Weighted average number of shares outstanding - basic ....        10,348,651          7,050,753
                                                                ============       ============

Weighted average number of shares outstanding - diluted ..        10,348,651          7,050,753
                                                                ============       ============

            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, 2005 AND 2004
_______________________________________________________________________________________________________
<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, 2003 .       -  $       -   6,936,424  $  69,364  $    88,924  $  (214,659)  $   (56,371)

Common shares issued
 for services in
 January 2004,
 valued at $0.01
 per share .........       -          -     110,000      1,100            -            -         1,100

Common shares issued
 for cancellation of
 contract in
 exchange for
 accounts payable in
 March 2004, valued
 at $2.08 per share        -          -      10,000        100       20,722            -        20,822

Net loss ...........       -          -           -          -            -      (99,877)      (99,877)
                      ------  ---------  ----------  ---------  -----------  -----------   -----------

Balance at
 December 31, 2004 .       -          -   7,056,424     70,564      109,646     (314,536)     (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 .       -  $       -  18,453,424  $ 184,534  $ 2,189,288  $(1,120,446)  $ 1,253,376
                      ======  =========  ==========  =========  ===========  ===========   ===========

                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, 2005 AND 2004
_______________________________________________________________________________________________
<CAPTION>

                                                                     2005               2004
                                                                 -----------        -----------
<S>                                                              <C>                <C>
Cash flows from operating activities:
   Net loss ..............................................       $  (805,910)       $   (99,877)
Adjustments to reconcile net (loss) to net cash:
   Depreciation and amortization..........................            65,611              9,297
   Shares issued for compensation and services, net.......           517,973              1,100
   Donation of inventory .................................                 -             27,915
   Gain on reduction of stock price guarantee ............            28,805                  -
(Increase) decease in operating assets:
   Accounts receivable ...................................             9,072              3,653
   Inventory .............................................            10,860            (15,392)
   Prepaid expenses ......................................          (497,777)             3,833
   Deferred tax assets ...................................           105,000              1,047
   Other assets ..........................................             4,566                  -
Increase (decrease) in operating liabilities:
   Accounts payable ......................................            23,529            (91,324)
   Accrued expenses ......................................           (20,280)           (21,743)
   Income tax payable ....................................           (16,041)            25,400
                                                                 -----------        -----------

Net cash provided by (used in) operating activities ......          (574,592)          (156,091)
                                                                 -----------        -----------

Cash flows from financing activities:
   Proceeds from note payable and warrants ...............           500,000                  -
   Repayment of note payable .............................          (500,000)                 -
   Capital lease .........................................           (15,519)           (18,489)
   Common stock issued for cash ..........................         1,536,662                  -
                                                                 -----------        -----------

Net cash provided by (used in) financing activities ......         1,521,143            (18,489)
                                                                 -----------        -----------

Net increase (decrease) in cash ..........................           946,551           (174,580)

Cash, beginning of period ................................            72,708            247,288
                                                                 -----------        -----------

Cash, end of period ......................................       $ 1,019,259        $    72,708
                                                                 ===========        ===========

SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
  AND FINANCING ACTIVITIES:

   Stock issued for compensation and services ............       $    20,700        $     1,100
                                                                 ===========        ===========

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

   Warrants issued .......................................       $    67,500        $         -
                                                                 ===========        ===========

SUPPLEMENTAL CASH FLOW INFORMATION:

   Cash paid during the year for:

   Payments of interest ..................................       $     1,392        $     5,385
                                                                 ===========        ===========

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

   Stock issued in exchange for accounts payable .........       $         -        $    20,822
                                                                 ===========        ===========

            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, 2005 AND 2004
________________________________________________________________________________

1.    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.

      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. Therefore, 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.

                                       F-7
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

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 2005 and 2004, the Company had sales of approximately $12,160 and
      $40,000, 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 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.

                                       F-8
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
      ------------------------------------------

      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, 2005 and 2004, the Company disposed of
      expired inventory totaling $0 and $27,915 through donations to a
      not-for-profit organization, respectively.

      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.

      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.

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

      The Company expenses advertising costs as incurred. For the years ended
      December 31, 2005 and 2004, the Company incurred advertising expense of
      $11,136 and $46,212, respectively.

      EARNINGS 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.

                                       F-9
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
      ------------------------------------------

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

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

      During 2005 and 2004, products purchased from a manufacturer accounted for
      approximately 100% and 96% of purchases, 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.

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

      The Company has available up to $21,000 on an unsecured corporate credit
      card. The minimum payment due was $331 as of December 31, 2005. The
      Company had an outstanding balance of $9,946 as of December 31, 2005,
      which is included in accounts payable.

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 $288,050 is included in accrued expenses on the accompanying
      consolidated balance sheet at December 31, 2004.

      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.

                                      F-10
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

4.    DEBT (Continued)
      ----

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

      The Company has a five-year lease on computers. The monthly payment is
      $1,473 per month. The Company will acquire 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
      $7,164 and $22,683 at December 31, 2005 and 2004, respectively.

      The equipment under capital lease is as follows:

                                         DECEMBER 31, 2005     DECEMBER 31, 2004
                                         -----------------     -----------------

      Computers .........................   $  65,063             $  65,063
      Less: accumulated depreciation ....     (39,734)              (30,438)
                                            ---------             ---------

                                            $  25,329             $  34,625
                                            =========             =========

      The Company had depreciation expense of $9,296 and $9,297 for the years
      ending December 31, 2005 and 2004, respectively.

      Minimum future minimum lease payments under the capital lease as of
      December 31, 2005 are as follows:

                   FOR THE YEAR ENDED DECEMBER 31,
                   -------------------------------
                                 2006                             $  7,366
                                                                  --------

            Total minimum lease payments ......................      7,366
            Less: amount representing interest ................        202
                                                                  --------

            Present value of total minimum lease payments .....      7,164
            Less: current portion .............................      7,164
                                                                  --------

            Long term portion .................................   $      -
                                                                  ========

      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

                                      F-11
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

4.    DEBT (Continued)
      ----

      NOTES PAYABLE (Continued)
      -------------

      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
      obligations 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
      -------------

      In June 2002, the Company issued 200,000 warrants with an exercise price
      of $0.10 and 75,000 warrants with an exercise price of $0.01 per share.
      The warrants had a life of 2 years and were scheduled to expire in June
      2004.

      On January 13, 2004, the Company issued 110,000 common shares for services
      rendered valued at $1,100.

                                      F-12
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

5.    CAPITAL STOCK (Continued)
      -------------

      On March 16, 2004, the Company issued 10,000 common shares in exchange for
      accounts payable of $20,822.

      During the nine months ended September 30, 2005, the Company issued
      2,070,000 common shares for services valued at $20,700.

      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.

      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.

      In connection with the December 9, 2005 common stock offering, each unit
      was sold for a purchase price of $.25, and consisted of one share of the
      Company's common stock and one redeemable five year common stock purchase
      warrant, exercisable at $1.00 per share, which resulted in the issuance of
      an aggregate of 3,302,000 shares of common stock and common stock purchase
      warrants to purchase an additional 3,302,000 shares of our common stock.

      As compensation for services the placement agent received a commission
      equal to 10% of the gross proceeds from the offering ($82,500) and a
      non-accountable expense allowance equal to 3% of the gross proceeds
      ($24,765), and the Company agreed to issue common stock for each $1.00 in
      gross proceeds (a total of 165,000 shares of common stock). The Company
      has agreed to file a registration statement with the Securities and
      Exchange Commission covering the shares of common stock, including the
      shares underlying the warrants, issued in this offering to permit their
      resale.

      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 up shares of our
      common stock. All of our executive officers, directors and employees are
      be 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 in February 2006). At December 31,
      2005 no options were issued under the Plan, but 400,000 shares in stock
      awards were issued under the Plan, and 3,650,000 shares remain available
      for issuance under the Plan.

                                      F-13
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

5.    CAPITAL STOCK (Continued)
      -------------

      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.

      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. At February 17, 2006 we had 20,193,424 shares of common
      stock and no shares of preferred stock issued and outstanding.

                                      F-14
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

5.    CAPITAL STOCK (Continued)
      -------------

      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.

      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.

                                      F-15
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

5.    CAPITAL STOCK (Continued)
      -------------

      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.

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

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

                                         DECEMBER 31, 2005     DECEMBER 31, 2004
                                         -----------------     -----------------

      Federal statutory tax .............    (34.00%)               (34.00%)
      State taxes, net of federal tax ...     (5.83%)                (5.83%)
      Valuation allowance ...............     54.32%                 39.83%
                                              ------                 ------

      Effective income tax rate .........     14.49%                     -
                                              ======                 ======

      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 $1,490,000 at December 31, 2005 that may
      be applied against future taxable income.

                                      F-16
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

6.    INCOME TAXES (Continued)
      ------------

      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:

                                                        2005             2004
                                                     ---------        ---------
      Current:

        Federal ..............................       $       -        $       -
        State ................................            (850)            (900)
                                                     ---------        ---------

                                                             -             (900)

      Deferred:

        Federal ..............................         380,500           34,000
        State ................................          68,500            5,000
                                                     ---------        ---------

      Total (provision) benefit before
        valuation allowance ..................         448,150           38,100

      Change in valuation allowance ..........        (554,000)         (39,000)
                                                     ---------        ---------

      Total provision ........................       $(105,850)       $    (900)
                                                     =========        =========

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

                                                        2005             2004
                                                     ---------        ---------

      Deferred income tax assets:
        Net operating loss carryforward ......       $ 593,000        $ 144,000
                                                     ---------        ---------

                                                       593,000          144,000
                                                     ---------        ---------

      Deferred income tax asset, net
        before valuation allowance ...........         593,000          144,000
      Less: valuation allowance ..............        (593,000)         (39,000)
                                                     ---------        ---------
      Deferred income tax asset, net
                                                     $       -        $ 105,000
                                                     =========        =========

                                      F-17
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

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,
      2005 and 2004 was $68,211 and $59,417, respectively. Future minimum rental
      payments under the office lease are $66,314.

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

      The Company owes two shareholders a total of $55,962 and $42,344 in
      expense reimbursements as of December 31, 2005 and 2004, respectively.

      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.

      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:

                                      F-18
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

9.    COMMITMENTS AND CONTINGENCIES (Continued)
      -----------------------------

      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.

      Dr. Minehart, as part of the agreement with Encino Wellness Center, is to
      receive one third of revenues received for medical services performed
      personally by him on Wellness patients. In addition, the Encino Center is
      to receive twenty percent of gross proceeds for all other procedures and
      products received by the Encino Wellness Center. This agreement may be
      terminated by either party under inability to perform.

      The Encino Wellness Center is to receive a minimum of $2,310 per month for
      rent expense. There is no similar minimum contingency for Hawaii.

      Management Incentives - Reservation of Shares
      ---------------------------------------------

      Upon the opening of five new StarMed Wellness Centers, Management shall
      receive two million (2,000,000) shares of common stock; upon the opening
      of ten (10) new StarMed Wellness Centers, management shall receive one
      million (1,000,000) shares of Common Stock; the first fiscal year in which
      the Company does not report a loss on its audited financial statements
      included in its Annual Report Form 10-KSB, management shall receive two
      million five hundred thousand shares of common stock.

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

      On January 17, 2006, the Company sold an aggregate of 1,740,000 units of
      securities. Each unit was sold for a purchase price of $.25, and consisted
      of one share of 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 1,740,000 shares of common stock and
      common stock purchase warrants to purchase an additional 1,740,000 shares
      of our common stock. The gross proceeds received were $435,000.

      Subject to certain conditions, from the date the warrants are 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. For one year following the date of issuance, the
      Company is obligated to 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, the warrants contain customary
      anti-dilution adjustments in the event of stock splits and
      reorganizations, as well as in the event we issue shares of our common
      stock at a price of less than the warrant exercise price.

                                      F-19
<PAGE>

                       STARMED GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
________________________________________________________________________________

10.   SUBSEQUENT EVENTS (Continued)
      -----------------

      The placement agent received as compensation for their services a
      commission equal to 10% of the gross proceeds from the closing ($43,500)
      and a non-accountable expense allowance equal to 3% of the gross proceeds
      of this closing ($13,050). The Company agreed to issue to the placement
      agent two shares of our common stock for each $1.00 in gross proceeds (a
      total of 870,000 shares of our common stock in this closing). The Company
      agreed to file a registration statement with the Securities and Exchange
      Commission covering the shares of common stock, including the shares
      underlying the warrants, issued in this offering so as to permit the
      resale.

      On February 7, 2006, StarMed entered into a Mutual Rescission, Settlement
      and Release Agreement (the "Rescission Agreement") with Citadel Capital
      Management Group, Inc. ("Citadel") and James H. Donell, in his capacity as
      a receiver for Citadel ("Donell"). The purposes of the Rescission
      Agreement are to (a) rescind an Agreement for the Sale of Capital Stock
      dated as of July 23, 2003 and (b) restate the terms of a Cancellation,
      Settlement and Release Agreement dated July 23, 2003 (collectively, the
      "2003 Agreements").

      Under the 2003 Agreements, StarMed, Citadel and Donell settled certain
      disputes that had arisen in connection with a $400,000 loan from Citadel
      to StarMed (the "Indebtedness") by canceling the Indebtedness and issuing
      82,300 shares of StarMed common stock to Citadel (the "Shares"). In the
      event Citadel is unable to resell the Shares for at least $3.50 per share,
      StarMed agreed to pay Citadel the deficiency.

      Under the Rescission Agreement:

      o  The 2003 Agreements were rescinded and cancelled;

      o  StarMed paid Citadel $215,000;

      o  The Indebtedness was cancelled;

      o  Citadel returned the shares to StarMed; and

      o  The parties exchanged general releases.

      On February 16, 2006, the Board of Directors authorized an increase in the
      number of shares covered by the Company's 2004 Equity Compensation Plan
      from 1,050,000 shares to 4,050,000 shares. The other terms and conditions
      of the 2004 Equity Compensation Plan remain unchanged.

                                      F-20