**UnitedStatesSecurities and Exchange CommissionWashington, D.C. 20549**

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**AMENDMENTNO. 1TO**

**FORM10-KSB/A**

**(Mark One)**
| **x**                                            | ** ** | **ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                          |
|--------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                       | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| **For the  fiscal year ended December 31, 2005** |
| ** **                                       | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| **OR**                                           |
| ** **                                       | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| **o**                                            | ** ** | **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                                                                      |
| ** **                                       | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                   |
| ** **                                       |       | **For the transition period from                             to                             ** |

**Commission file number 00-32019**

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**TASKER CAPITAL CORP.**

(Name of small business issuer in its charter)

| **Nevada**                                                       |   | **88-0426048**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  Incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**39 OldRidgebury Road, Danbury, CT 06810**(Address of principal executive offices) (Zip Code)

**203-730-4350**

(Issuer’stelephone number)

Securitiesregistered under Section 12(b) of the Exchange Act: **None**

## Securities registered under Section 12(g) ofthe Exchange Act:

**Common Stock**

**300,000,000 Common Shares Par$0.001 Per Share**

(Title of each class)

Check whether the issueris not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct o

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. xYes o No

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB. o

Indicate by checkmarkwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act.) o Yes xNo

State issuer’s revenuesfor its most recent fiscal year: $705,467

The aggregate marketvalue of the voting and non-voting common equity held by non-affiliates of theregistrant, based on the last sale of the registrant’s common stock at theclose of March 17, 2006, was approximately $61.8 million (reference is made to Part II, Item 5 hereinfor a statement of assumptions upon which this calculation is based). Theregistrant has no non-voting stock.

The number of sharesoutstanding of issuer’s common stock at March 17, 2006 was approximately 104.8million.

Transitional SmallBusiness Disclosure Format (check one): oYes x No

**DOCUMENTSINCORPORATED BY REFERENCE**

Items10, 11, 12, 13 and 14 of Part III have been omitted from this report, as weexpect to file with the Securities and Exchange Commission, not later than 120days after the close of our fiscal year ended December 31, 2005, a definitiveproxy statement for our annual meeting of stockholders. The informationrequired by Items 10, 11, 12, 13 and 14 of Part III of this report, which willappear in our definitive proxy statement, is incorporated by reference intothis report.

 

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**EXPLANATORYNOTE**

**TaskerCapital Corp. hereby amends its Annual Report on Form 10-KSB for thefiscal year ended December 31, 2005, filed on March 31, 2006, as setforth in this Annual Report on Form 10-KSB/A (Amendment No. 1),in response to comments from the Securities and Exchange Commission related toour Registration Statement on Form S-1, as amended, filed on April 26, 2006 .**

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**INDEX**
|            | ** ** | **PART I**                                                                                           | ** ** | ** ** |
|------------|------------|------------------------------------------------------------------------------------------------------|------------|------------|
| ** ** | ** ** | ** **                                                                                           | ** ** | ** ** |
| Item 1.    |       | Description of  Business                                                                             |       |       |
|       |       |                                                                                                 |       |       |
| Item 2.    |       | Description of  Property                                                                             |       |       |
|       |       |                                                                                                 |       |       |
| Item 3.    |       | Legal Proceedings                                                                                    |       |       |
|       |       |                                                                                                 |       |       |
| Item 4.    |       | Submission of  Matters to a Vote of Security Holders                                                 |       |       |
|       |       |                                                                                                 |       |       |
| ** ** | ** ** | **PART II**                                                                                          | ** ** | ** ** |
| ** ** | ** ** | ** **                                                                                           | ** ** | ** ** |
| Item 5.    |       | Market for  Common Equity and Related Stockholder Matters and Issuer Purchases of Equity  Securities |       |       |
|       |       |                                                                                                 |       |       |
| Item 6.    |       | Selected Financial  Data                                                                             |       |       |
|       |       |                                                                                                 |       |       |
| Item 7A.   |       | Quantitative  and Qualitative Disclosures About Market Risk                                          |       |       |
|       |       |                                                                                                 |       |       |
| Item 8.    |       | Financial  Statements and Supplementary Data                                                         |       |       |
|       |       |                                                                                                 |       |       |
| Item 9.    |       | Changes In and  Disagreements With Accountants on Accounting and Financial Disclosure                |       |       |
|       |       |                                                                                                 |       |       |
| Item 9A.   |       | Controls and  Procedures                                                                             |       |       |
|       |       |                                                                                                 |       |       |
| Item 9B.   |       | Other information                                                                                    |       |       |
|       |       |                                                                                                 |       |       |
| ** ** | ** ** | **PART III**                                                                                         | ** ** | ** ** |
| ** ** | ** ** | ** **                                                                                           | ** ** | ** ** |
| Item 10.   |       | Directors and  Executive Officers of the Registrant                                                  |       |       |
|       |       |                                                                                                 |       |       |
| Item 11.   |       | Executive  Compensation                                                                              |       |       |
|       |       |                                                                                                 |       |       |
| Item 12.   |       | Security  Ownership of Certain Beneficial Owners and Management                                      |       |       |
|       |       |                                                                                                 |       |       |
| Item 13.   |       | Certain  Relationships and Related Transactions                                                      |       |       |
|       |       |                                                                                                 |       |       |
| Item 14.   |       | Principal  Accountant Fees and Services                                                              |       |       |
|       |       |                                                                                                 |       |       |
| ** ** | ** ** | **PART IV**                                                                                          | ** ** | ** ** |
| ** ** | ** ** | ** **                                                                                           | ** ** | ** ** |
| Item 15.   |       | Exhibits and  Financial Statement Schedules                                                          |       |       |
|       |       |                                                                                                 |       |       |
|       |       | Signatures                                                                                           |       |       |

 

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**Forward-Looking Statements**

Because we want to provide you with meaningful and useful information,this annual report contains certain forward-looking statements that reflect ourcurrent expectations regarding our future results of operations, performance andachievements. We have tried, wherever possible, to identify theseforward-looking statements by using words such as “anticipate,” “believe,” “estimate,”“expect,” “plan,” “intend” and similar expressions. These statements reflectour current beliefs and are based on information currently available to us.Accordingly, these statements are subject to certain risks, uncertainties andcontingencies, including the factors set forth under “Risk Factors,” whichcould cause our actual results, performance or achievements to differmaterially from those expressed in, or implied by, any of these statements. Youshould not place undue reliance on any forward-looking statements. Except asotherwise required by federal securities laws, we undertake no obligation to releasepublicly the results of any revisions to any such forward-looking statementsthat may be made to reflect events or circumstances after March 31, 2006 or toreflect the occurrence of unanticipated events.

The Tasker name and logo and the names of products offered by us aretrademarks, registered trademarks, service marks or registered service marks ofTasker. All other trademarks and service marks appearing in this prospectus arethe property of their respective holders.

As used herein,Close CallTM, Unifresh®, Tasker Pacific BlueTM, andBreath RephreshTM are trademarks of Tasker Products Corp.

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**PART I**

As used in this annual report on Form 10-KSB, “we,” “us,” “our,” “Tasker”and “our company” refer to Tasker Capital Corp. and our subsidiaries, unlessthe context otherwise requires.

**ITEM 1.**                             DESCRIPTION OFBUSINESS

**BUSINESS OF OUR COMPANY**

**Overview**

We manufacture, distribute and market a variety of products using aprocess we refer to as “pHarlo technology.” These products are covered by oneor more patents, or base patents, and manufactured using the pHarlo technology,which is covered by those patents. The pHarlo technology utilizes a safesolution, which we call the pHarlo concentrate, and is a solution whosecomponents have been accepted as Generally Recognized as Safe by the U.S. Foodand Drug Administration, or FDA. This safe solution enables copper sulfate, acompound with bacteriostatic properties, to remain active throughout a widerange of pH values, or measurements of acidity or alkalinity in a solution. AGenerally Recognized as Safe designation for our solution allows it to be addedto food and is considered to be safe for human consumption by experts and,therefore, exempt from the usual Federal Food, Drug and Cosmetic Act foodadditive tolerance requirements.

We currently market:

·                   Close Call, an oral hygiene breath drink; and

·                   Unifresh Footbath, a grooming aid for dairycows.

As a result of our acquisition of certain assets of pHarlo CitrusTechnologies, Indian River Labs, LLC, pHarlo Citrus Properties Partnership,LLLP, and Coast to Coast Laboratories, LLC, we now own the utility patent applicationsand provisional patent applications associated with the pHarlo technology inour field of use, and have entered into a new sub-license agreement for thebase patents associated with the pHarlo technology.

We have begun the in-plant testing process for USDA approval to use thepHarlo technology in the scalder process of poultry processing, which is amethod of loosening feathers so that they can be picked and removedmechanically. Poultry processing at high-volume plants includes washing the chickenstwo times, once in a hot water bath, or scalder, and once post-evisceration andplacing the chickens in a chiller, or freezer, thereby killing bacteria andreducing spoilage. When our anti-microbial solution is used in the poultryprocessing, it can be added to the water in the scalder to reduce thecross-contamination that tends to occur in these communal baths. Futureapplications of this product may include treatment of the water in thepost-evisceration washing and in the chiller.

We are also in the process of conducting tests ofthe pHarlo technology in other pre-harvest, or on-farm, and post-harvest, orfood processing, applications, including seafood and poultry farming, as wellas in water treatment uses. We are also in various stages of developing futureproduct lines using the pHarlo technology in the skin care and pet productsindustries.

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**Corporate History**

We were organized as a Nevada corporation on February 2, 1999 toexplore for and, if possible, develop mineral properties primarily in theProvince of British Columbia, Canada, through our wholly owned subsidiary,Tanuta Ventures Corp. (“Tanuta”). Tanuta was incorporated under the laws of theProvince of British Columbia, Canada, on May 13, 1996. This initialbusiness endeavor ceased in 2002.

In late 2002, we entered into an exclusive license agreement with aprivately held development company, pHarlo Citrus Technologies, Inc., to sell,develop, market and distribute consumer deodorant breath products, animalbreath products and soft drink products using pHarlo Citrus Technologies’patented pHarlo technology. In 2004, we cancelled the 2002 license agreementand entered into two Exclusive License Agreements, one covering the productscovered by the 2002 license agreement, and the other covering the sale,marketing and distribution of post-harvesting processing aids, or chemicalsthat assist with microbial reduction and shelf life extension without changingfood characteristics, to the poultry industry. In July 2005, we acquiredcertain assets of pHarlo Citrus Technologies, Indian River Labs, LLC, pHarloCitrus Properties Partnership, LLLP, and Coast to Coast Laboratories, LLC, andnow own the utility patent applications and provisional patent applicationsassociated with the pHarlo technology in our fields of use. In this prospectus,we refer to these four entities as the “Selling Entities” and to thisacquisition as the “2005 Acquisition.” In connection with the 2005 Acquisition,we also entered into a new sub-license agreement for the base patentsassociated with the pHarlo technology.

**ManagementChanges**

On November 22, 2005, the Board of Directors of our company (the “Board”)terminated Robert P. Appleby as our Chief Executive Officer and President. OnDecember 23, 2005, Mr. Appleby resigned from the Board. Effective January 26,2006, the Board appointed Richard D. Falcone, Chairman of the Board’s AuditCommittee since August 2005, as the new President and Chief Executive Officerof our company. In connection with his appointment as President and ChiefExecutive Officer, Mr. Falcone resigned from service on the Audit Committee andCompensation Committee. Effective February 3, 2006, we appointed Mr. Albert A.Canosa to fill a vacancy on the Board. Mr. Canosa serves as the new Chairman ofthe Audit Committee and also serves on the Compensation Committee.

On February 8, 2006, we appointed Mr. Stathis Kouninis to serve as ourChief Financial Officer replacing Mr. Robert Jenkins, who resigned effectiveFebruary 8, 2006.

**Financings**

To fund our operations, we completed three financings in 2004. In April2004, we sold $800,000 of 7% debentures, convertible into common shares at$0.05 per share; warrants to purchase 8,000,000 shares at $0.10 per share(subsequently modified to $0.05 per share in September 2004 and $0.01 per sharein May 2005), which expire five years from the date of issuance and warrants topurchase 8,000,0000 shares of common stock at $0.20 per share (subsequentlymodified to $0.05 per share in September 2004 and $0.01 per share in May 2005).In July 2004, we completed a private placement of $1,647,674 of convertibledebentures with an original discount of 16%, which were convertible into8,238,370 common shares at $0.20 per share, and warrants to purchase 3,461,500of its common shares at $0.25 per share (subsequently the exercise price of thewarrant was modified to $0.05 per share in September 2004 and $0.01 per sharein May 2005), which expire five years from the date of issuance. In December2004, we completed the private placement of 9,406,250 shares of our commonstock with several

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accreditedinvestors for an aggregate purchase price of $15,050,000. Emerging GrowthEquities Ltd. served as placement agent and received a cash payment of 6% ofthe funds raised in the offering and a warrant to purchase 562,500 of ourcommon shares exercisable at $2.00 per common share, which expires in threeyears.

In September 2005, we raised an additional $6,484,599 through the saleof 2,947,545 shares of our common stock, to a group of accredited investors, ata purchase price of $2.20 per share. As part of this placement the investorsalso received warrants exercisable for 1,473,679 of our common stock at anexercise price of $3.00 per share (subsequently the exercise price of thewarrant was modified to $1.00 per share in January 2006). The warrants expirefive years from the date of issuance.

In January 2006, we sold13,335,925 units consisting of one share of common stock and a warrant topurchase one share of common stock at an exercise price of $1.00 per share for$0.70 per unit. The gross proceeds to us at the closing of this privateplacement, exclusive of the exercise price of the warrants, were $9,335,148.The warrants expire five years from the date of issuance. Emerging GrowthEquities, Ltd. served as placement agent for the transaction. As compensationfor serving as placement agent, Emerging Growth Equities, Ltd. received a cashpayment equal to 6% of the gross proceeds from the private placement, and alsoreceived a warrant exercisable for shares of our common stock in an amountequal to 6% of the gross proceeds from the sale of the shares and warrantsdivided by $0.70. The warrant to Emerging Growth Equities has an exercise priceof $1.00 and is exercisable immediately for a term of five years.

**Current and Projected Markets**

On November 21, 2005, we announced that we plannedto refocus our operations, reduce costs, strengthen management and streamlineoperations. As part of this refocusing effort, we reviewed our various productlines, and announced our intention to concentrate our resources on thedevelopment of our poultry processing products, our seafood processing productsand our Unifresh Footbath and Unifresh Pen Spray products.

**Products**

### *Unifresh Footbath*

We currently market Unifresh Footbath concentrate, a grooming aid thathelps clean and disinfect the hooves of dairy cows. Because of thebacteriostatic properties of the pHarlo technology, this product helps controlbacteria that infect the hooves of cows and cause interdigital dermatitis, or abacterial infection of the skin on a cow’s hoof, and interdigitalpapillomatosis, or a disease that affects a cow’s hoof that may cause severelameness, decreased milk yield, body weight loss, decreased reproductiveperformance and increased veterinary expenses. Unifresh Footbath concentratewas launched during the third quarter of 2005. In the fourth quarter of 2005,we discovered that our Unifresh Footbath product’s effectiveness was diminishedin water that had abnormally high alkaline content. We reformulated ourUnifresh Footbath concentrate with the addition of a compound that neutralizesalkali, or a type of base that has a pH greater than 7, which can increase thepH of water or soil. In the first quarter of 2006, we introduced our enhanced formulationto the market. It is currently being sold to dairy farms throughout the U.S.through our sales force, independent brokers and farm product distributors. Wecurrently market the product as a grooming aid. No federal agency approvals arerequired for marketing this product.

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*CloseCall*

Our oral hygiene drink, Close Call, is marketed as an oral hygienebreath drink that eliminates odors from tobacco, garlic, onion and alcohol. TheFDA requires companies making structure or function claims relating to adietary supplement product, such as Close Call, to “certify that the firm hassubstantiation that the claim is truthful and not misleading.” While the FDAdoes not require any presentation of this support, it does require a notice ofdietary supplement ingredients and claims. This is currently being prepared. Wecurrently market the product as a beverage, but there can be no assurance thatthe FDA will agree with this characterization or the product claims, whichcould result in additional regulatory requirements and potentially subject usto a variety of enforcement actions.

We believe that our Close Call product could be marketed moreefficiently by a company either already established in the industry or withmore commercial resources. Therefore, we plan to seek to license and/or sellthe Close Call brand or derivative applications.

### *Poultry ProcessingProducts*

In August 2005, we began the in-plant commercial verification processfor USDA approval to use the pHarlo technology in the scalder process of poultryprocessing. The first in-plant commercial verification test was completed inOctober 2005, and submitted to the USDA shortly thereafter. On February 6,2006, we received a Letter of No Objections from the Food Safety and InspectionService of the USDA for the continuation of in-plant trials at the facility inAthens, Georgia, as well as two additional poultry processors. The trialinvolves the application of the pHarlo technology as an antimicrobial in thescalder and post-feather picker processes. The feather picker process is amethod used in chicken processing that receives chickens immediately after thescalder and mechanically removes feathers. Upon the successful completion ofthese trials, which began in March 2006 and are scheduled to be completedlate in the second quarter of 2006, a summary of the results will be submittedto the Food Safety and Inspection Service for review and, upon the receipt of aLetter of No Objections from the Food Safety and Inspection Service, we willbegin the commercialization phase for the specific applications. While weexpect the product to be approved for this use, there can be no assurance ofthis result.

In February 2005, we announced that we were working with Groupe Doux toprocure European Union regulatory approval for use of the pHarlo technology inthe scalder and chill processes of poultry processing. Upon receiving approvalfrom the European Union, Groupe Doux has indicated to us that it anticipatesutilizing the pHarlo technology in its European poultry processing plants.There can be no assurance that the European Union will approve the use of thepHarlo technology for use in poultry processing and, if such approval isachieved, there can be no assurance that we will enter into a commercialcontract with Groupe Doux or, if we do, that such a commercial contract will beprofitable.

In addition to the testing of our pHarlo technology for use in poultryprocessing and in poultry pens by Groupe Doux in France, we have a number ofinitiatives for use of the technology underway in several internationalmarkets. We have begun product registrations and regulatory approvals inCanada, Mexico, Chile, China, New Zealand and Australia. Commercial sitetesting will begin upon receipt of all necessary government approvals.

### *Seafood ProcessingProducts*

We recently began marketing the pHarlo technology for use in pathogenreduction, or a process by which certain bacteria that cause disease or illnessare reduced in number or

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eliminated,and shelf life extension in seafood processing. Our product, Tasker PacificBlue Seafood Wash, has been tested at the North Carolina State Center forMarine Science & Technology, Virginia Tech University and Mississippi StateUniversity on shrimp, mahi mahi, salmon, flounder, scallops and catfish. Theresults of these studies indicated that the pHarlo technology could possiblydouble the shelf life on catfish filets and significantly increase the shelflife of scallops. No federal agency approvals are required for the marketing ofthis product.

Testing methodologies have been developed for the testing of a numberof different fish species in commercial installations. The objectives have beento determine the efficacy of the Tasker Pacific Blue Seafood Wash as ananti-microbial, shelf life extender, and odor remover. Tests are conductedusing different contact times of sprays or dips to administer the product tothe surface of whole fish, headed and gutted fish, and fish fillets, as well asshrimp and scallops. After treatment the products were stored on ice andsamples taken to measure the quality improvements in terms of lower bacteriacounts and/or the improvements in appearance, odor and flavor (known asorganoleptic quality attributes).

In the processing of fish and seafood species, water is used in theprocess at many points after harvesting. Therefore, the use of dip tanks andsprays of chilled water are normal and common. The addition of the TaskerPacific Blue Seafood Wash to these wash waters is an easy adaptation ofexisting process equipment. Commercial scale run tests began inDecember 2005.

### *Unifresh Pen Spray*

In 2005, Groupe Doux, one of Europe’s premier poultry processors, beganconducting in-house tests on Tasker’s Unifresh Pen Spray, a product that isstill in development in the United States. These initial tests were designed toverify the appropriate delivery mechanism for Unifresh Pen Spray in pens withhigh concentrations of poultry and to test the efficacy of the product. Thetesting process in Europe and the United States for the poultry Unifresh PenSpray was based on data obtained from small scale testing by universities inthe United States. A protocol was established that determined:

·                  the concentration and volume per area of theproduct to be sprayed in the chicken pen (house);

·                  the mode of application (spray method);

·                  the exact times in the chicken growth cyclewhen the product was to be sprayed; and

·                  when the air inside the chicken house was tobe sampled for ammonia levels.

Unifresh Pen Spray is a product designed to reduce or neutralize theammonia byproduct in poultry pens. High ammonia levels can have adverse effectson poultry health, including impacting weight and mortality rates. Unifresh PenSpray, which is in development and is expected to begin testing in the UnitedStates this year, is a product designed to reduce or neutralize the ammoniabyproduct in poultry pens. On February 9, 2006, we announced that Groupe Douxhad begun the second phase of testing of Unifresh Pen Spray. This phase oftesting will be conducted at several of Groupe Doux’s poultry farms in Franceover a fifteen week period, and is expected to achieve a suitable statisticalrepresentation that will provide more reliable results. We also expect to begintesting Unifresh Pen Spray in the United States in 2006. No federal agencyapprovals are required for the marketing of this product.

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**Government Approvals andRegulations**

All of the ingredients used to produce the pHarlo concentrate areacknowledged as Generally Recognized as Safe by the FDA. Therefore, we believethat our current line of products that utilize the pHarlo concentrate,including the intended uses of these products, do not require further approvalby the FDA. These ingredients are already in wide use in the food industry andare readily available. The unique combination of these ingredients and thepreparation process of the pHarlo formula are protected under two U.S. patentsand are covered in several pending patent applications in the U.S. andelsewhere. The use of the pHarlo technology in food processing, with theexception of meat and poultry, has been approved by the FDA in lettersaddressed to us, dated February 18, 2004 and March 24, 2005.

The use of the pHarlo technology in meat and poultry food processingapplications requires the approval of the USDA. In August 2005, we began thein-plant commercial verification process for USDA approval to use the pHarlotechnology in the scalder process of poultry processing. The Food Safety andInspection Services agency of the USDA, or FSIS, shares the responsibility forreviewing antimicrobials for use on meat, poultry and egg products. FSIS hasthe authority to determine that new substances and uses of previously approvedsubstances are suitable for use. In February of 2005, we submitted reports andlaboratory data to the FSIS, requesting approval as an anti-microbialprocessing aide for poultry scalders. The FSIS directed us to prepare a properprotocol and conduct an in-plant trial to prove the safety and effectiveness ofthe anti-microbial. The first in-plant commercial verification test wascompleted in October 2005. In January 2006, the FSIS indicated that the datafrom the in-plant trial was sufficient to support additional trials. While weexpect the product to be approved for this use, there can be no assurance ofthis result.

We also may resume efforts to introduce thepHarlo technology in skin care and pet care products. If marketed in the UnitedStates, each of these product lines could potentially be subject to a varietyof federal, state and regulatory authorities, which could require additionaltesting, registration, pre-market approval, labeling, manufacturing, safety,recordkeeping and other obligations. There can be no assurance that we willultimately market these products, that the products will obtain the necessaryapprovals, or, if granted, that the approvals will not include significantlimitations on the indicated use for which the products may be marketed orother restrictions or requirements that may reduce the value of the products.

**Manufacturing**

We currently manufacture the concentrate used for all of the productswe currently market, including Close Call and Unifresh Footbath, in ourfacility located in Conroe, Texas. We believe our facility procedures andmanufacturing process assures the finished products meet specifications andcomply with applicable regulatory requirements, but there can be no assurancethat the pertinent regulatory authorities will agree with this conclusion,which could result in a variety of enforcement actions. It is possible thatadditional manufacturing facilities or controls will be necessary to market theproduct lines currently under development.

All of the raw materials required for the productionof our concentrate are widely available in ample quantities form variousqualified outside vendors. Accordingly, we do not anticipate that there will besupply interruption of these materials or that price increases will have amaterial adverse effect on us.

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**Strategic Relationships**

In 2004, we entered into an Exclusive Field of Use License Agreementand Product Sale Agreement with Wynn Starr Special Products, LLC, or WynnStarr. Under the terms of this agreement and its subsequent amendments, we havegranted Wynn Starr the exclusive, worldwide right to market and distributeproducts used as post-harvesting processing aids for the poultry industry basedon the pHarlo technology. Wynn Starr is also responsible for taking the pHarloconcentrate provided by us and blending it with liquids to create the finishedproduct that it ultimately distributes. In return for this license, Wynn Starrhas agreed to pay us a royalty of $70.00 per gallon on all net sales (asdefined in the Exclusive Field of Use License Agreement and Product SaleAgreement) sold by Wynn Starr for which payment is received from customers. Weare currently renegotiating this royalty arrangement to align its terms to thecurrent market demand for the product. Steven B. Zavagli, a member of our boardof directors, is the founder, Chairman and the Chief Executive Officer of WynnStarr and Wynn Starr’s ultimate parent company, Wynn Starr Flavors, Inc.

Due to the 2005 Acquisition, we now own the tangibleassets used in the manufacturing process for the pHarlo concentrate. The pHarloconcentrate is based upon both the patent applications that we purchased in theacquisition, as well as on the base patents associated with the pHarlotechnology. We have entered into an exclusive worldwide license, theSub-License Agreement, with pHarlo IP, LLC, the exclusive licensee of the basepatents, to exploit the base patents in our fields of use. Pursuant to theSub-License Agreement, we also granted pHarlo IP an exclusive (even to us)royalty-free worldwide right and license to import, export, make, manufacture,use and sell any inventions outside of our fields of use that were disclosedand claimed in the patent applications that we purchased in the acquisition.The terms of the Sub-License Agreement are more fully discussed under thecaption “Intellectual Property Rights.”

**DistributionChannels**

We expect to sell ourproducts through distributors, strategic intermediaries (such as Wynn Starr)and directly to commercial end-users. The choice of distribution channel willvary by product and will be decided by our management according to ourstrategic objectives.

**Competition**

The industries in which we will be marketing our products arecharacterized by intense competition. Our business plan includes developing andmarketing the pHarlo technology in seafood processing and a wider range ofpoultry processing markets. Through our acquisition of Coast to CoastLaboratories Corp. in the 2005 Acquisition, we are currently marketing UnifreshFootbath concentrate, a grooming aid for dairy cows. Competitors in this productmarket usually contain Formaldehyde or other chemicals, which are harmful tothe environment. Additionally, our license with pHarlo IP entitles us todevelop and market uses of the pHarlo technology in pre-harvest andpost-harvest food processing, skin care, oral care, including hangover remedyand alcohol abatement, water purification and pet care industries. There issignificant competition in these markets, but we believe that the pHarlotechnology will provide us with a competitive advantage.

### *Unifresh Footbath*

Our Unifresh Footbath treats a highly infectious disease known asdigital dermatitis that causes lameness, swelling and fever in dairy cows,resulting in a drastic decrease in milk production. Forms of treatment includeantibiotic bandaging and topical sprays using TerramycinÒ (oxytetracycline – an antibiotic) andfootbaths using Formalin (a saturated solution

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offormaldehyde), copper sulfate, Tetracycline (a broad-spectrum antibiotic) orPeracetic Acid (a disinfectant and sanitizer). Unifresh Footbath’s underlyingtechnology, pHarlo, uses a highly acidified form of copper sulfate that helpscontrol the bacteria that cause digital dermatitis, as compared to competingcopper sulfate products that are non-ionized. Some competing products usingcopper sulfate include QuickHit, Healthy Foot and HoofPro+ by SSI Corporation;Double-ActionÔ Hoof Treatment by West Agro, Inc.; andHoofcare Supercharger manufactured by Marabo.

### *Close Call*

Although our oral hygiene product, Close Call, is swallowed rather thanemitted like mouthwash, our product may compete within the mouthwash industrygenerally. The mouthwash industry is a mature industry with several massproducts such as Listerine®, Scope®, Act®, Peroxyl® and Cepacol® from participants, many of which are divisionsof large corporations, such as Pfizer, Procter & Gamble, Johnson &Johnson, Colgate and Combe. These are well-established companies with vastlygreater resources than we have. However, we believe Close Call has a majoradvantage over these competitors because of our use of pHarlo concentrate as akey ingredient and its effective elimination of bad breath odors resulting fromeating, smoking and drinking.

### *Poultry Processing*

Currently, there is little competition for bacterial inhibitors in thescalding process of poultry processors. We believe that the introduction of thepHarlo technology to this specific process will be considered a breakthroughbecause it seeks to reduce pathogenic bacteria in poultry products.Additionally, we intend to expand the use of the pHarlo technology into theremaining operations of poultry processing, specifically the area for on-linereprocessing, or an approved process that allows chicken with fecal material onthe skin to be sprayed with a chemical disinfectant so that all such materialis disinfected and/or removed prior to entry into the chilling process, orfreezing process. However, we believe we will encounter competition in thechill process from manufacturers of sodium hydrochloride or sodiumhypochlorite, chemical compound solutions frequently used as disinfectants andbleaching agents. We believe that our product presents a healthier, yet moreeffective, alternative to the use of sodium hydrochloride and sodiumhypochlorite. We further believe that, because the poultry processing industryis a very large industry, our presence in that market will attract otherproducts designed to reduce or eliminate bacteria. We believe that theeffectiveness of the pHarlo technology and its competitive pricing will enableus to successfully compete against existing and future competitive products inthe poultry processing industry.

### *Pacific Blue**Ô**Seafood Application*

Our seafood application, Pacific BlueÔ, an antibacterial treatment that eliminatesodors and extends the shelf life of seafood products, is targeted for theretail industry. The natural spoilers of seafood quality, bacteria, enzymes,dehydration, oxidation and contamination, Bacteria and enzymes (proteins thataid in digestion) are present in all fish and shellfish, but their activityincreases at higher temperatures. These spoilers break down the flesh ofseafood, turning firm, resilient tissue soft and mushy. This process affectstaste, appearance and texture and develops a strong “fishy” smell. Retailersdisplaying unpackaged fresh seafood generally maintain the seafood attemperatures between 29°-34° Fahrenheit to preserve freshness. Seafood exposedto air will dehydrate causing a loss of fluids, which decreases the net productweight and damages texture and color. To prevent dehydration, retailersfrequently mist fresh fish on display with water. Currently, our Pacific BlueÔ is the treatment in the market thateliminates odors on

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seafoodby reducing the bacteria that causes spoilage. When and if the market for PacificBlueÔ develops, additional products created bycompetitors may enter the market and compete.

### *Poultry Pen Spray*

Ammonia is an ever-present element of the atmosphere in poultry houses.The ammonia is created by the decomposition of excess proteins and uric acidexcreted by chickens. Under conditions of heat and high humidity, ambientammonia can reach levels that are dangerous, if not fatal, to chickens. Adverseeffects on poultry may include the ability or desire to feed, thus reducing themaximum weight gain that may be expected during the growth cycle. Thedetrimental effects of ammonia in poultry farming are widely known and severalproducts focused on litter treatment are available in the market using sodiumbisulfate and aluminum sulfate (Alum) that convert litter ammonium to ammoniumsulfate, emitting a significantly lower ammonia level. Yucca schidigera extractis also used as an enzyme treatment in the poultry diet to reduce ammoniaevolving from poultry manure. Some products currently available in the marketinclude PLTÒ (Poultry Litter Treatment), Ultra LitterTreatmentÔ and Poultry GuardÔ, which are granulated products, BZTÒ and Premium Bio-Treat Poultry Blend.

**Dependenceon Certain Customers**

For the year ended December31, 2005 there was no single customer that accounted for 10% or more of ourconsolidated revenue.

**Intellectual Property Rights**

### *Patents*

Pursuant to the 2005 Acquisition, we acquired the rights to thefollowing utility patent applications, which applications include both UnitedStates applications and PCT applications, or patent applications filed underthe Patent Cooperation Treaty, which allows us at a future date to file patentapplications in a number of foreign countries or national phase filings. Weplan to undertake certain national phase filings, and include two United StatesProvisional Applications not yet subject to any international application (the “TransferredPatents”):

·                  Antimicrobial Composition for Pre-Harvest andPost-Harvest Treatment of Plants and Animals (filed on August 20, 2004);

·                  Skin Care Composition for DermatologicalDisorders including burn and wrinkle creams (United States ProvisionalApplication);

·                  Oral Health Care Drink and Method forReducing Malodors (filed on December 21, 2004);

·                  Antimicrobial Food Additive and Treatment forCooked Food, Water and Wastewater (filed on February 24, 2005);

·                  Antimicrobial Processing Aid and FoodAdditive (United States Provisional Application); and

·                  Hangover Remedy and Alcohol AbatementComposition (filed on February 24, 2005).

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In addition to the utility patentapplications and provisional patent applications described above, we alsorecently filed a new provisional patent application covering aspects of ourtechnology. According to United States patent law, the term of the issuedpatents are 20 years from the date on which the corresponding application wasfiled in the United States Patent and Trademark Office. We also entered intothe Sub-License Agreement with pHarlo IP, LLC. Pursuant to the Sub-LicenseAgreement, pHarlo IP has granted us an exclusive worldwide license to exploitthe base patents (as defined below) in the following fields of use (the “Fieldsof Use”):

·                  Pre-harvest food processing and safetyapplications, including treatment for plants and animals;

·                  Post-harvest food processing and safetyapplications, including treatment for plants and animals, including thefollowing:

·                  antimicrobial processing aide and foodadditive including specific seafood applications, and

·                  antimicrobial for airborne contaminants oncooked food;

·                  Breath and mouthwash applications;

·                  Hangover and alcohol abatement applications;

·                  Topical palliative for dermatologicaldisorders, including skin moisturizing applications, anti-wrinkle applicationsand burn treatment applications;

·                  Pet product applications; and

·                  Antimicrobial water treatment applications.

Pursuant to the Sub-License Agreement, we granted to pHarlo IP aroyalty-free, worldwide, exclusive right and license to import, export, make,have made, manufacture, use, offer for sale and sell any inventions outside theField of Use that are disclosed and claimed in the Transferred Patents. Inaddition, pHarlo IP has the right to sublicense and assign to third parties allof the rights and licenses granted by us with respect to the TransferredPatents. The term of the Sub-License Agreement is until the expiration of thelast to expire of the base patents.

To the extent that pHarlo IP expresses an intent to enter into atransaction with an unaffiliated third party pursuant to which the third partywould acquire rights related to the base patents outside the Fields of Use, wehave the right of first refusal to enter into the transaction with pHarlo IPfor the same consideration and on the same terms offered to the third party (“Rightof First Refusal”).

Subject to certain conditions, we will have a 10% equity ownershipinterest in Phitex Ltd. LLLP, the direct one hundred percent owner of pHarloIP, the sole and exclusive licensee of the base patents. In the event we electnot to exercise this Right of First Refusal for rights to the base patentsoutside the Fields of Use, as an equity owner we would share in the monetarybenefits derived by Phitex from any transaction between pHarlo IP and anunaffiliated third party pursuant to which that third party acquires rights toexploit the base patents outside the Fields of Use. Prior to the issuance ofthe Phitex equity interests, (i) the prospectus that forms part of theregistration statement covering the resale of the shares acquired by theSelling Entities in the 2005 Acquisition must be amended or supplemented sothat the Selling Entities can sell such shares for a period of 60 consecutivedays; (ii) we must be in compliance with all of our

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obligationsunder the Asset Purchase Agreement forming part of the transaction documentsfor the 2005 Acquisition (subject to certain exceptions) and (iii) we mustenter into a lock-up and repurchase right agreement relating to its Phitexequity interests. Under the lock-up and repurchase right agreement, Phitex willretain the right to repurchase our equity interests for a nominal amount upon achange of control of our company.

The technology that forms the basis of the pHarlo technology is derivedfrom U.S. Patent No. 5,989,595 (filed on March 8, 1996), U.S. PatentNo. 6,242,011(filed on August 5, 1999) and U.S. Patent Application SerialNo. 10/453,805, the base patents. pHarlo IP is the sole and exclusivelicensee of the base patents pursuant to a certain License Agreement by andbetween Mr. Barry Cummins and pHarlo IP, dated July 15, 2005, andeffective as of March 18, 2005 (the “Base License”). Pursuant to the BaseLicense, pHarlo IP is required to pay to Mr. Cummins royalties (“BaseLicense Royalty Payments”). Pursuant to the Sub-License Agreement, in the eventthat pHarlo IP defaults in its obligations to make the Base License RoyaltyPayments to Mr. Cummins, pHarlo IP is required to assign that portion ofthe Base License representing all of the rights sublicensed to us under theSub-License Agreement to us, and we will assume pHarlo IP’s obligation to paythe Base License Royalty Payments.

Prior to the 2005 Acquisition, on December 7, 2004, we enteredinto a Settlement Agreement and General Release pursuant to which weeffectively purchased the exclusive rights of first refusal to applications ofthe pHarlo technology from Richard J. Kirby, a developer who had previouslypurchased the rights on July 19, 2002. Under the terms of the settlementagreement, Mr. Kirby assigned and granted all his rights, titles andinterests in his license agreements with pHarlo Citrus Technologies to us forwhich we agreed to pay Mr. Kirby one half of one percent (0.5%) of netrevenues generated from products using the pHarlo technology, in an amount notto exceed $400,000 in any one calendar year. The agreement continues until thetermination of or expiration of pHarlo Citrus Technologies’ patent to thelicensed technology.

On January 26, 2006, we entered into a letter agreement with theSelling Entities and pHarlo IP that amended certain terms of the transactiondocuments related to the 2005 Acquisition, including the Sub-License Agreement.The Sub-License Agreement was amended, in part, to restructure the fees payableto pHarlo IP. Prior to the amendment, pHarlo IP had agreed to provide to ustechnical assistance necessary to implement, refine and exploit the basepatents for the pHarlo technology in the Fields of Use. In consideration forthe technical assistance, we had agreed to pay to pHarlo IP, in advance, priorto the calendar quarter for which they are payable, certain research anddevelopment fees (“R&D Fees”). The R&D Fees were originally set at afixed amount and although subject to recovery in certain circumstances, werenot dependant on sales of our products until certain thresholds had been met.

The amendment restructures the R&D Fees so that they are(i) payable on a quarterly basis within 30 days after the end of eachcalendar quarter and (ii) are based on gross sales of our company (or ouraffiliates) of products using the pHarlo technology. For fiscal year 2006, theR&D Fees must not be less than $150,000 and are capped at $500,000. Thereare no other minimum R&D Fees payable after 2006, although R&D Fees forall subsequent years are capped at specified rates.

### *Trademarks*

In addition to our patent filings, we have also protected ourintellectual property through trademark use and the filing of trademark applicationsin the United States and in certain foreign countries. The names under which wemarket our products are valuable assets to us and we have undertaken a programto protect these assets through appropriate trademark protection and our use ofthe names as trademarks.

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We currently market a grooming aid that helps clean and disinfect thehooves of dairy cows, under the trademark *Unifresh*. Wehave filed trademark applications for the mark *Unifresh*in the United States and in Argentina, Australia, Brazil, Canada, China,France, Mexico and New Zealand. On February 14, 2006, the United States Patentand Trademark Office issued us trademark registration Serial No. 3,058,912for our trademark *Unifresh* in the United States.

We also recently began marketing a product for pathogen reduction,extending the shelf life of certain seafood products and reducing odors underthe trademark *Tasker Pacific Blue*. We havefiled a trademark application for the mark *Tasker Pacific Blue*in the United States Patent and Trademark Office.

Our oral hygiene breath drink that eliminates odors from tobacco,garlic, onion and alcohol is currently being marketed under the trademark *Close Call*. We have filed trademark applications for themark *Close Call* in the United States and inCanada, China and Mexico. We have also filed a number of applications in theUnited States, China and Mexico to register the mark *Close Call*for use in conjunction with the marketing of other types of products. Three ofour trademark applications in Mexico for the mark *Close Call*issued as registrations on December 9, 2005.

We have also filed trademark applications in the United States for anumber of other trademarks that we intend to use in conjunction with themarketing of future products. These trademark applications were filed as intentto use, or ITU, applications. Two of these applications were allowed by theUnited States Patent and Trademark Office and the others are pending.

Pursuant to the 2005 Acquisition we acquired trademark registrationSerial No. 2,936,272, which was registered on March 29, 2005, for the mark*pHB0020*.

According to United States trademark law, these trademark registrationswill remain in force for a period of ten years from the date of registration tothe extent that the trademarks remain in continuous use during that time. Thesetrademark registrations may be renewed for additional periods of ten yearseach, at the end of each successive ten year period following the date ofregistration.

## **Product Development**

Research and development of new products using the pHarlo technology,as well as other products, are continually under development. Our efforts inthis area are focused on the product applications to which we currently haverights of use. It is our intention to develop and market commercially viableapplications for this technology within its product ranges. We spentapproximately $3,356,000, $1,375,000, and $89,000 on product development costsfor the years ended December 31, 2005, 2004 and 2003, respectively.

## **Employees**

Inconnection with the refocusing effort announced in November 2005, we have alsoreduced monthly expenses. Specifically, we have reduced the number of full timeemployees by approximately 41%, including a reduction in our corporate staff ofapproximately 39%, and a reduction in our Conroe, TX manufacturing facilitystaff of approximately 47%. We have also hired a new management team. Webelieve that our reduced staff can provide sufficient product and perform thenecessary duties to forward our objectives for the foreseeable future. AtMarch 17, 2006, we had 33 full-time employees, ten of whom are in sales& marketing, eight of whom are in research and development, eight of whomare in warehousing and production and seven of whom are in finance andadministration. None of our employees are represented by a labor union. We havenot experienced any work stoppages and believe that employee relationships aregood. Our future success will depend in part on our ability to attract, retainand motivate highly qualified technical and managerial personnel.

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**RISK FACTORS**

*You should carefully consider the following factors.This document contains forward-looking statements that involve risks anduncertainties, and actual results may differ materially from the results wediscuss in the forward-looking statements. If any of the following risksactually occur, they could have a severe negative impact on our financialresults and stock price.*

## **Risks Related to Our Business**

##### ***We have lost money in each fiscal quarter since we changed our businessmodel to the development of products in the oral care, food processing, skincare, water purification and pet industries******.******We expectfuture losses and we may never become profitable.***

We have incurred losses in our operations in each quarter since wechanged our business direction in late 2002. Net loss for the years endedDecember 31, 2005, December 31, 2004, December 31, 2003 andDecember 31, 2002 were approximately $18.3 million, $6.1 million, $607,000and $761,000, respectively. We expect to continue to incur losses in the shortterm. We expect operating expense to increase as we work to build our brands,expand our customer base and develop new products. To become profitable, wemust increase revenue substantially and achieve and maintain positive grossmargins. We may not be able to increase revenue and gross margins sufficientlyto achieve profitability. If we are not able to achieve profitability, ourresults of operations and financial condition will be materially and adverselyaffected.

##### ***We have a limited operating history in our present market andprospective investors have a limited historical basis on which to judge ourability to be successful.***

We were originally organized for the purpose of engaging in theacquisition and exploration of mineral properties, primarily in the Province ofBritish Columbia, Canada. During 2001, we allowed the option on our mineralproperty to lapse and began to investigate other business opportunities. Inlate 2002, we entered into an exclusive license to sell, develop, market anddistribute consumer deodorant breath products, animal deodorant breath productsand soft drink products using the pHarlo technology. Since late 2002, we havepursued this business plan and have expanded it to include the use of the pHarlotechnology in the pre- and post-harvest food processing, skin care, pet care,hangover remedy, alcohol abatement and water purification industries.Additionally, we are investigating the applicability of the pHarlo technologyto other aspects of the seafood industry.

Since inception, we have suffered recurring losses and net cashoutflows from operations. We expect to continue to incur substantial losses tocomplete the development of our business. In addition, we only recently beganshipping our first product, Close Call®,in February of 2005. We thus have a limited operating history upon whichinvestors may evaluate our likely future performance.

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***We recently completed a significant acquisition of certain assets ofpHarlo Citrus Technologies, Inc. and other related entities. We cannotguarantee that we will be able to manage these new assets profitably.***

On July 15, 2005, we purchased certain assets of pHarlo CitrusTechnologies, Inc., Indian River Labs, LLC, pHarlo Citrus PropertiesPartnership, LLLP and Coast to Coast Laboratories, LLC, which four entities arereferred to in this prospectus as the “Selling Entities.” This acquisition, orour 2005 Acquisition, represented a highly significant event for our company.Prior to the acquisition, we licensed the use of certain patent applicationscovering various uses for the pHarlo technology and improvements from theSelling Entities and also purchased the pHarlo concentrate, a concentrate madeusing the pHarlo technology from Indian River Labs. As a result of the 2005Acquisition and the purchase of all of the working assets of Indian River Labs,we now control various uses of pHarlo technology in the manufacturing processfor the pHarlo concentrate. Our business, financial condition and results ofoperations could suffer materially if we fail to successfully manage theseassets and the manufacturing process.

##### ***Recent restatements and amendments to our interim financial statementsand quarterly reports, as well as deficiencies in our disclosure controls andprocedures and internal control over financial reporting, may present a risk offuture restatements and disclosure compliance errors which could lead to legalexposure.***

We have recently restated and amended our interim financial statementsfor the periods ended June 30, 2004, September 30, 2004 andSeptember 30, 2005 and have recently filed amendments to our quarterlyreports on Form 10-QSB for each of those periods reflecting theserestatements. While in the process of amending our quarterly reports onForm 10-QSB to restate these financial statements, we became awareof certain required information that had been omitted and other informationthat needed to be changed or corrected. As a result of the foregoing, werevised these quarterly reports to correct this information and to state, amongother things, that our disclosure controls and procedures were not effective asof June 30, 2004, September 30, 2004 and September 30, 2005.

As of December 31, 2005, our management concluded that ourdisclosure controls and procedures were not effective. We are taking what webelieve to be reasonable and appropriate steps to correct these deficiencies.We will also continue to assess the adequacy and appropriateness of theseactions and adjust our remediation plan as needed or to reflect changes in ourbusiness. However, we cannot be certain when these deficiencies will ultimatelybe remediated and we expect that we will need a period of time over which todemonstrate that our disclosure controls are functioning appropriately toconclude that we have adequately remediated the deficiencies. Any failure toimplement and maintain improvements in our disclosure and internal controls maypresent a risk of future restatements and disclosure compliance errors andcould in turn lead to legal exposure. Any failure to improve these controls toaddress the identified deficiencies, or any other unidentified deficiencies,could also cause investors to lose confidence in our reported financialinformation, which could have a negative impact on the trading price of ourcommon stock. This could have a material adverse effect on our business andfinancial results.

##### ***We have limited experience in the marketing of our products and may notbe able to market them successfully.***

We currently market Unifresh® Footbath, a grooming aid that helps cleanand disinfect the hooves of dairy cows, Close Call, an oral hygiene breathdrink, Tasker Pacific BlueTM Seafood Wash, a product used in commercial andretail seafood processing to extend shelf life.

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Shelflife extension is the act of increasing the length of the time a product canspend during processing, distribution and retail before becoming unacceptablefor consumption. We also began the commercialization phase of the pHarlotechnology as an antimicrobial processing aid in poultry scalders.

These are diverse markets and we may not be aware of all the customsand practices and may not be able to successfully compete in these industries.We believe that we will need to hire appropriate consultants and staff to reachall of these markets successfully. The consultants that we may retain may nothave sufficient experience to enable us to completely understand thecharacteristics of these diverse industries. There can be no assurance that wewill properly ascertain or assess any and all risks inherent in our proposedmarkets or that we will successfully enter into new markets or grow in ourexisting markets.

##### ***Our ability to reach some of the markets currently set forth in ourbusiness plan will require regulatory approval. In addition, new products thatwe may develop or acquire may also require regulatory approval.***

The ingredients that we use to produce the pHarlo concentrate areapproved as Generally Recognized as Safe by the FDA. Therefore, we believe thatour current line of products that utilize the pHarlo concentrate, including theintended uses of these products, do not require further approval by the FDA.However, we may develop or acquire future products that use ingredients thatwill need to be approved by the FDA, or we may alter the intended uses of ourcurrent product, such that those products require additional FDA approval(s).There can be no assurance that FDA approval, if necessary, will be obtained.

The use of our pHarlo technology in the meat and poultry foodprocessing applications requires the approval of the USDA. On February 6, 2006we received a Letter of No Objections from the Food Safety and InspectionServices agency of the USDA, or FSIS, for the continuation of in-plant trialsat the facility in Athens, Georgia, as well as two additional poultryprocessors. Upon the successful completion of these trials, which are scheduledto begin during the second quarter 2006 and expected to be completed during thesummer of 2006, a summary of the results will be submitted to the FSIS forreview and, upon the receipt of a “No Objections” letter from the FSIS, we willbegin the commercialization phase of this application of the pHarlo technology.There can be no assurance that we will successfully complete the commercialverification process. If we do not successfully complete the commercialverification process, this may have a material adverse effect on our businessplan.

In addition to the poultry processing industry, we also intend tomarket the pHarlo technology for use in seafood processing, and may resumeefforts to introduce the pHarlo technology in skin care and pet care products.If marketed in the United States or internationally, each of these productlines could potentially be subject to a variety of federal, state, andinternational regulatory authorities that could require additional testing,registration, pre-market approval, labeling, manufacturing, safety,recordkeeping and other obligations. There can be no assurance that theproducts will obtain the necessary approvals, or, if granted, that theapprovals will not include significant limitations on the indicated uses forwhich the products may be marketed or other restrictions or requirements thatmay reduce the value of the products.

##### ***A key component of our business strategy is the proprietary nature ofthe pHarlo concentrate, and, therefore, our inability to protect ourintellectual property rights could materially harm our business****.*

The pHarloconcentrate that we produce is based upon both the patent applications that wepurchased in the 2005 Acquisition, as well as on certain base patents and basepatent

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applications,or patents and applications that we license. We have entered into an exclusiveworldwide royalty free sub-license with pHarlo IP, the exclusive licensee ofthe base patents and base patent applications, to exploit these base patentsand applications in certain fields of use. Protecting this intellectualproperty, in addition to protecting the patent applications that we purchasedin the 2005 Acquisition, is a key component to the success of our business.Although we have retained the right to enforce our rights as a sub-licensorunder the base patents and base patent applications, if an infringement occurswithin the field of use specified in our sub-license agreement, there can be noassurance that we would be successful in any action to protect our rights underthe patent applications that we have purchased. In addition, there can be noassurance that the base patent applications or the patent applications that wehave purchased will ultimately be protected by an issued patent.

##### ***Intense competitioncould harm our financial performance and the value of your investment.***

Some of the industries in which we are or will be marketing ourproducts are characterized by intense competition.

Our Unifresh Footbath treats a highly infectious disease known asdigital dermatitis that causes lameness, swelling and fever in dairy cows,resulting in a drastic decrease in milk production. Forms of treatment includeantibiotic bandaging and topical sprays using TerramycinÒ (oxytetracycline – an antibiotic) and footbathsusing Formalin (a saturated solution of formaldehyde), copper sulfate,Tetracycline (a broad-spectrum antibiotic) or Peracetic Acid (a disinfectantand sanitizer). Unifresh Footbath’s underlying technology, pHarlo technology,uses a highly acidified form of copper sulfate that helps control the bacteriathat cause digital dermatitis. Some competing products using copper sulfateinclude QuickHit, Healthy Foot and HoofPro+ by SSI Corporation; Double-ActionÔ Hoof Treatment by West Agro, Inc.; andHoofcare Supercharger manufactured by Marabo.

Although our oral hygiene product for humans, Close Call, is swallowedrather than expelled like mouthwash, our product may compete within themouthwash industry generally. The mouthwash industry is a mature industry withseveral mass products such as Listerine®,Scope®, Act®,Peroxyl® andCepacol® fromparticipants, many of which are divisions of large corporations, such asPfizer, Procter & Gamble, Johnson & Johnson, Colgate and Combe. Theseare well-established companies with vastly greater resources than we have.

Currently, there is little competition for bacterial inhibitors in thescalding process of poultry processors. We intend to expand the use of thepHarlo technology into the remaining operations of poultry processing,specifically the on-line reprocessing area, or an approved process that allowschicken with fecal material on the skin to be sprayed with a chemicaldisinfectant so that all such material is disinfected and/or removed prior toentry into the chilling process, or freezing process. However, we believe wewill encounter competition in the chill process from manufacturers of sodiumhydrochloride or sodium hypochlorite, chemical compound solutions frequentlyused as disinfectants and bleaching agents. The chill process is cold water orair that is used in poultry processing to reduce the temperature of the carcassto 40 degrees Fahrenheit in order to maintain food safety.

Currently, our seafood application product, Pacific BlueÔ, is the treatment in the market thateliminates odors on seafood by reducing the bacteria that causes spoilage. Whenand if the market for Pacific BlueÔ develops, additional products created bycompetitors may enter the market and compete.

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In addition, ammonia is an ever-present element of the atmosphere inpoultry houses. The detrimental effects of ammonia in poultry farming arewidely known and several products focused on litter treatment are available inthe market using sodium bisulfate and aluminum sulfate (Alum) that convertlitter ammonium to ammonium sulfate, emitting a significantly lower ammonialevel. Yucca schidigera extract is also used as an enzyme treatment in thepoultry diet to reduce ammonia evolving from poultry manure. Some productscurrently available in the market include PLTÒ (Poultry Litter Treatment), Ultra LitterTreatmentÔ and Poultry GuardÔ, which are granulated products, BZTÒ and Premium Bio-Treat Poultry Blend.

There may be a number of companies, universities and researchorganizations actively engaged in research and development of technology thatcould be similar to our processes and ultimately become our competitors. Wecannot assure you that we will be able to successfully compete with current orfuture competitors who may have substantially greater assets, technical staff,established market share and greater financial and operating resources than wehave. If we are unable to successfully compete with these industry competitors,it may have a material adverse effect on our business plan.

##### ***Some provisionsof our amended and restated articles of incorporation, bylaws, and Nevada lawmay inhibit potential acquisition bids that may be considered favorable to ourstockholders.***

Our corporate documents contain provisions that may enable our board ofdirectors to resist a change in control of our company even if a change incontrol were to be considered favorable by our stockholders. These provisionsinclude:

·                  limitations on persons authorized to call aspecial meeting of stockholders;

·                  the ability of a majority of the directorsthen in office to fill vacancies in directorships; and

·                  no cumulative voting.

These and other provisions contained in our amended and restatedarticles of incorporation and bylaws could delay or discourage transactionsinvolving an actual or potential change in control of us or our management,including transactions in which our stockholders might otherwise receive apremium for their shares over then current prices, and may limit the ability ofstockholders to remove our current management or approve transactions that ourstockholders may deem to be in their best interests and, therefore, couldadversely affect the price of our common stock.

In addition, we are subject to control share acquisitions provisionsand affiliated transaction provisions of the Nevada General Corporation Law,the applications of which may have the effect of delaying or preventing amerger, takeover or other change of control of us and therefore coulddiscourage attempts to acquire our company.

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**RISKSRELATED TO OUR COMMON STOCK**

##### ***If we are unableto comply with the terms of registration************rightsagreements to which we are a party, we may be obligated to pay liquidated************damages tosome of our security holders.***

In connection with our April 2004, July 2004, December 2004, September2005 and January 2006 private placements, we entered into registration rightsagreements with certain of our security holders in which we agreed to prepareand file with the SEC registration statements to register certain shares ofcommon stock, which registration statements must be maintained effective forcertain specified periods. If we are unable to comply with these provisions ofthese registration rights agreements, we may be obligated to pay liquidateddamages to the holders of the securities covered by such registration rightsagreements. If we are required to pay such liquidated damages or other amounts to these holders, ourbusiness, financial condition, operating results and cash flows would bematerially adversely affected.

Registration statements with respect to the April 2004, July 2004 andDecember 2004 private placements were filed and declared effective in a timelymanner. Our obligation to accrue liquidated damages under these registrationrights agreements will cease in April 30 and July 22, 2006, respectively.Through March 31, 2006, we have accrued approximately $373,000in liquidated damages related to theseagreements.

In connection with the January 2006 private placement, we obtainedwaivers of all claims for liquidated damages relating to our inability to havesuch registration statement declared effective by the specified deadline. Underthe waiver, the date by which the registration statement covering resale of thesecurities purchased in the September 2005 private placement was required to bedeclared effective was extended to May 23, 2006. If we fail to meet certainconditions of the January 2006 registration rights agreement, we will berequired to issue to each holder in our January 2006 private placement, sharesand warrants equal to one percent, or 266,718 of the respective number ofshares and warrants purchased by each holder, for each 30 days of failure tomeet any one of these conditions. We may be required to issue a maximumaggregate of 4 million shares and warrants.

##### ***Future sales ofour common stock may cause our stock price to decline.***

Since our inception, we have funded operations through common stockissuances in order to meet our strategic objectives. We have completed sixprivate sales of common stock and securities convertible into common stock. Wemay, in the future, issue more shares of common stock in sales that may or maynot be registered under the Securities Act of 1933, or the Securities Act. Ourstock price may decline due to future sales of our shares or even theperception that such sales may occur.

##### ***Our stock pricecan be extremely volatile.***

Our common stock is traded on the OTC Bulletin Board. There can be noassurance that an active public market will continue for the common stock, orthat the market price for the common stock will not decline below its currentprice. The price of our common stock may be influenced by many factors,including, but not limited to, investor perception of us and our industry andgeneral economic and market conditions. The trading price of our common stockcould be subject to wide fluctuations in response to announcements of ourbusiness developments or our competitors, quarterly variations in operatingresults and other events or factors. In addition, stock markets haveexperienced extreme price volatility in recent years. This volatility has had asubstantial effect on the market prices of companies, at times for reasons

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unrelatedto their operating performance. Such broad market fluctuations may adverselyaffect the price of our common stock.

##### ***The large numberof shares available for future sale could adversely affect the price of ourcommon stock.***

As of March 31, 2006, approximately 16 million shares of commonstock were issuable upon exercise of outstanding stock options with a weightedaverage exercise price of $0.86 per share, and approximately 21.5 millionshares of common stock were issuable upon exercise of outstanding warrants withan exercise price of between $0.01 to $2.00 per share. In addition, theregistration rights agreement for the January 2006 private placement requiresus to pay any liquidated damages in additional common stock and warrants. As ofMarch 31, 2006, no shares were issuable as liquidated damages under the termsof the January 2006 registration rights agreement. However, if we fail to meetcertain conditions of the January 2006 registration rights agreement, we willbe required to issue to each holder in our January 2006 private placement,shares and warrants equal to one percent, or 266,718 of the respective numberof shares and warrants purchased by each holder, for each 30 days of failure tomeet any one of these conditions. We may be required to issue a maximumaggregate of 4 million shares and warrants. Substantially all of the sharesunderlying these options and warrants have been or would be registered forresale, and none of them are subject to any contractual restrictions on resale.Future sales of any of these shares, or the anticipation of such sales, couldadversely affect the market price of our common stock and could materiallyimpair our future ability to raise capital through an offering of equitysecurities. Further, any issuance of a substantial number of these shares woulddilute the ownership interest of existing stockholders and could result inincreased volatility in the price of our common stock.

##### ***Our common stock,which is quoted on the OTC Bulletin Board, has several disadvantages from thosesecurities traded on The Nasdaq Stock Market.***

Our common stock, which is quoted on the OTC Bulletin Board, hasseveral disadvantages from those securities traded on The Nasdaq Stock Market.These disadvantages include the following:

·                  The SEC’s order handling rules, which applyto Nasdaq-listed securities, do not apply to securities quoted on the OTCBulletin Board.

·                  Although The Nasdaq Stock Market has rigorouslisting standards to ensure the high quality of its issuers, and can delistissuers for not meeting those standards, the OTC Bulletin Board has no listingstandards. Rather, it is the market maker who chooses to quote a security onthe system by filing an application with the NASD. The NASD cannot deny anapplication by a market maker to quote the stock of a company. The onlyrequirement for inclusion in the OTC Bulletin Board is that the issuer becurrent in its reporting requirements with the SEC.

·                  Trading activity on the OTC Bulletin Board ingeneral is not conducted as efficiently and effectively as with Nasdaq-listedsecurities. Investors must contact a broker-dealer to trade OTC Bulletin Boardsecurities. Investors do not have direct access to the bulletin board service.For bulletin board securities, there only has to be one market maker.

·                  Bulletin board transactions are conductedalmost entirely manually. Because there are no automated systems fornegotiating trades on the bulletin board, they are conducted via telephone. Intimes of heavy market volume, the limitations of this

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process may result in asignificant increase in the time it takes to execute investor orders.Therefore, when investors place an order to buy or sell a specific number ofshares at the current market price, it is possible for the price of a stock togo up or down significantly during the lapse of time between placing a marketorder and getting execution.

·                  Shares traded on the OTC Bulletin Boardgenerally are quoted with greater spreads between bid and ask and may be moreexpensive to buy or sell.

·                  Because bulletin board stocks are usually notfollowed by analysts, there may be lower trading volume than for Nasdaq-listedsecurities.

##### ***If we fail toremain current on our reporting requirements, we could be removed from the OTCBulletin Board, which would limit the ability of broker-dealers to sell oursecurities and the ability of stockholders to sell their securities in thesecondary market.***

Companies like us that trade on the OTC Bulletin Board must bereporting issuers under Section 12 of the Exchange Act of 1934, and mustbe current in their reports under Section 13, in order to maintain pricequotation privileges on the OTC Bulletin Board. If we fail to remain current onour reporting requirements, we could be removed from the OTC Bulletin Board. Insuch event, the market liquidity for our securities could be severely adverselyaffected by limiting the ability of broker-dealers to sell our securities andthe ability of stockholders to sell their securities in the secondary market.

##### **Since our common stock is subjectto the SEC’s penny stock rules, broker-dealers may experience difficulty incompleting customer transactions and trading activity in our securities may beadversely affected.**

A public company’s common stock is subject to the penny stock rulespromulgated under the Securities Exchange Act of 1934, or Exchange Act, unlessits net tangible assets are greater than $2,000,000 or its common stock has amarket price per share greater than $5.00. Under these rules, broker-dealerswho recommend such securities to persons other than institutional accreditedinvestors must:

·                  make a special written suitabilitydetermination for the purchaser;

·                  receive the purchaser’s written agreement toa transaction prior to sale;

·                  provide the purchaser with risk disclosuredocuments that identify certain risks associated with investing in “pennystocks” and that describe the market for these “penny stocks,” as well as apurchaser’s legal remedies; and

·                  obtain a signed and dated acknowledgment fromthe purchaser demonstrating that the purchaser has actually received therequired risk disclosure document before a transaction in “penny stock” can becompleted.

Since our common stock is subject to these rules, broker-dealers mayfind it difficult to effect customer transactions and trading activity in oursecurities may be adversely affected. As a result, the market price of oursecurities may be depressed, and you may find it more difficult to sell oursecurities.

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**AVAILABLE INFORMATION**

We file annual, quarterly, and current reports, proxy statements, and other information with the Securities and Exchange Commission. The public may read and copy any documents we file at the Commission’s Public Reference Room at 100 First Street, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. SEC filings are also available to the public from the SEC’s Internet website at http://www.sec.gov.

We make available free of charge on or through our Internet website at www.taskerproducts.com our annual reports on Form 10-KSB, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Commission. In March 2005 we implemented our Code of Business Conduct and Ethics, which is available on our Internet site at www.taskerproducts.com. The Code of Business Conduct and Ethics may be obtained, free of charge, by writing to the Secretary, Tasker Capital Corp., 39 Old Ridgebury Road, Danbury, CT 06810.

**ITEM 2.**                             DESCRIPTION OFPROPERTY

We currently leaseapproximately 9,000 square feet of office space at our corporate headquartersin Danbury, Connecticut under a lease that expires in 2010. We also occupyapproximately 27,000 square feet of manufacturing, warehouse and office spaceunder a lease in Conroe, Texas that expires in September 2009.

**ITEM 3.**                             LEGAL PROCEEDINGS

On October 26, 2005, a civil action captioned The BOC Group, Inc. v.Tasker Capital Corp., Randy Cable, and Shaun Porter was filed in the UnitedStates District Court for the District of Connecticut. In the complaint, TheBOC Group alleges that Mr. Porter and Mr. Cable, employees of our company, havebreached certain restrictive covenants contained in their employment agreementswith The BOC Group, and that we tortuously interfered with The BOC Group’sagreements with Mr. Porter and Mr. Cable. The BOC Group also claims that we,Mr. Porter and Mr. Cable violated Connecticut’s statutes governing tradesecrets and unfair trade practices. The BOC Group seeks unspecified monetarydamages. We believe that the complaint is without merit and plan to vigorouslydefend our company against such action.

On January 5, 2006, a civil action captioned RobertL. Mandell, D.M.D., and Anthony M. Broschetti, D.M.D v. Tasker CapitalCorporation, Arthur P. Bergeron and Richard J. Kirby was filed in theMiddlesex Superior Court in Massachusetts. In the complaint, the plaintiffsallege that we, our former President, Mr. Bergeron, and our alleged formeragent, Mr. Kirby, breached an agreement to pay for a study regarding our BreathRephreshTM product, a mouthwash predecessor to Close Call. The plaintiffs seekrecovery of $100,000 in connection with the breach of contract claim. Webelieve that the complaint is without merit and plan to vigorously defend ourcompany against such action.

On January 17, 2006, we received correspondence fromProvco Ventures I, LP (“Provco”), an investor in our September 2005 privateplacement (the “September 2005 Private Placement”). Provco alleges potentialsecurities law claims in connection with the September 2005 Private Placement.As of March 27, 2006, no legal proceeding has been commenced by Provco or anyother party regarding the September 2005 Private Placement. We believe that the

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allegationscontained in the letter are without merit and plan to vigorously defend ourcompany against any such action.

On January 18, 2006, a civil action captioned DallasXXIX Corporate Square, L.P., v. Coast to Coast Laboratories and Tasker CapitalCorp. was filed in the Circuit Court of Pinellas County, Florida. Theplaintiff alleges that Coast to Coast Laboratories Corp., a wholly ownedsubsidiary of our company, has breached a lease agreement and that we havebreached a guaranty. The plaintiff seeks recovery of monetary damages ofapproximately $55,000. We intend to vigorously defend our company against suchaction.

**ITEM 4.**                             SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS

There was no mattersubmitted during the fourth quarter of the fiscal year covered by this reportto a vote of security holders, through the solicitation of proxies orotherwise.

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**PART II**

**ITEM 5.**                             MARKET FOR COMMONEQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES

**Market for Common Stock**

Ourcommon stock is currently quoted on the OTC Bulletin Board under the symbol “TKER.”

Thefollowing table sets forth, for the periods indicated, the high and low bidsfor our common stock-based on inter-dealer prices, without retail mark-up,mark-down or commission and may not represent actual transactions.
|                        | ** ** | **Price Range of Common Stock** | ** ** |
|------------------------|------------|-----------------------------------------------------|------------|
| **Quarter Ended** | ** ** | **High**                                            | ** ** | **Low** | ** ** |
| **Fiscal  2004**       |       |                                                |       |   |   |
| First Quarter          |       | $                                                   | 0.29       |   | $ | 0.09 |   |
| Second Quarter         |       | $                                                   | 0.51       |   | $ | 0.09 |   |
| Third Quarter          |       | $                                                   | 0.54       |   | $ | 0.22 |   |
| Fourth Quarter         |       | $                                                   | 2.89       |   | $ | 0.39 |   |
|                   |       |                                                |       |   |   |
| **Fiscal  2005**       |       |                                                |       |   |   |
| First Quarter          |       | $                                                   | 5.15       |   | $ | 2.31 |   |
| Second Quarter         |       | $                                                   | 4.14       |   | $ | 2.21 |   |
| Third Quarter          |       | $                                                   | 3.90       |   | $ | 2.21 |   |
| Fourth Quarter         |       | $                                                   | 2.79       |   | $ | 0.58 |   |

 

As of March 17, 2006, we hadapproximately 104.8 million shares of common stock outstanding andapproximately 138 stockholders of record.

The closing price for ourcommon stock on March 17, 2006 was $0.59. For purposes of calculating theaggregate market value of the shares of our common stock held bynon-affiliates, as shown on the cover page of this report, it has been assumedthat all the outstanding shares were held by non-affiliates except for theshares beneficially held by our directors and executive officers andstockholder beneficially holding 10% or more of our outstanding common stock,as reflected in filings such persons are required to make with the Securitiesand Exchange Commission under Sections 13(d) or 13(g) of the Exchange Act.However, there may be other persons who may be deemed to be affiliates of ours.

We have never paid dividendson our common stock. We intend to retain our earnings for use in our businessand, therefore, do not anticipate paying any cash dividends on our common stockfor the foreseeable future.

**RecentUnregistered Sales of Securities**

There have been nounregistered sales of equity securities by us during the fiscal year 2005 thathave not been previously reported in a Quarterly Report on Form 10-QSB or aCurrent Report on Form 8-K.

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**Purchasesof Equity Securities**

There were no purchases madeby or on behalf of us or any affiliated purchaser of equity securities of usduring the fourth quarter of 2005.

**ITEM 6.**                             SELECTED FINANCIALDATA

The following table sets forth our selected historical consolidatedfinancial data as of and for each of the five years ended December 31,2005.

The selected consolidated financial data for the years endedDecember 31, 2005, 2004 and 2003 and as of December 31, 2005 and 2004have been derived from the financial statements of Tasker Capital Corp.,included in this annual report, which have been audited by either Rothstein,Kass & Company, P.C. or Morgan and Company, each an independent registeredpublic accounting firm. The selected historical consolidated financial data asof and for the years ended December 31, 2002 and 2001 have been derivedfrom our consolidated financial statements not included in this annual report,which have been audited by Morgan and Company. As a result of the 2005 Acquisition,financial data for periods prior to the 2005 Acquisition may not be comparablewith financial data for periods following the 2005 Acquisition.

The following financial data should be read in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” andour historical consolidated financial statements and the notes thereto includedelsewhere in this prospectus. Until December 31, 2005, we were in a developmentstage.

**Statementof Operations Data (in thousands except per share data):**
| ** **                                    | ** ** | **Year Ended December 31,** | ** ** |
|-----------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                    | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| Revenues                                      |       | $                                          | 705        |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Impairment of  goodwill and intangible assets |       | —                                     |       | — |   | — |   | — |   | — |   |
| Loss from  operations                         |       | (16,964                                    | )          | (3,367 | ) | (501 | ) | (745 | ) | (59 | ) |
| Other income  (expense)                       |       | (1,305                                     | )          | (2,704 | ) | (106 | ) | (17 | ) | 7 |   |
| Net loss                                      |       | (18,269                                    | )          | (6,072 | ) | (607 | ) | (761 | ) | (52 | ) |
| Net loss per  common share, basic and diluted |       | $                                          | (0.25      | ) | $ | (0.26 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.01 | ) |
| Weighted average common  shares outstanding   |       | 73,549                                     |       | 23,597 |   | 13,003 |   | 11,305 |   | 11,262 |   |

 

**Balance Sheet Data (inthousands):**
| ** **                                      | ** ** | **As of December 31,** | ** ** |
|-------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                      | ** ** | **2005**                              | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| Working capital  (deficit)                      |       | $                                     | (603       | ) | $ | 14,334 |   | $ | 34 |   | $ | (50 | ) | $ | (148 | ) |
| Total assets                                    |       | 68,854                                |       | 16,767 |   | 548 |   | 422 |   | — |   |
| Long-term  liabilities                          |       | 1,574                                 |       | 1,389 |   | 386 |   | 308 |   | — |   |
| Stockholders’  equity (deficit)            |       | 63,288                                |       | 14,244 |   | 21 |   | (90 | ) | (148 | ) |
| Number of shares  out-standing at end of period |       | 89,167                                |       | 48,864 |   | 14,511 |   | 11,787 |   | 11,262 |   |
|                                                 |            |                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**ITEM 7.  MANAGEMENT’S DISCUSSIONAND ANALYSIS OR PLAN OF OPERATIONS**

The following discussion and analysis of our financial condition andresults of operations should be read in conjunction with the “SelectedConsolidated Financial Data” and the consolidated financial statements andnotes thereto appearing elsewhere in this Annual Report on Form 10-KSB. This discussioncontains forward-looking statements that involve risks and uncertainties. See “Forward-LookingStatements” and “Risk Factors” for a description of the important factors thatcould cause actual results to differ materially from those contained in theseforward-looking statements.

**Overview**

We are amanufacturer, distributor and marketer of products using a patented process,which we refer to as the “pHarlo technology,” that utilizes a highly chargedand acidified, yet stable and safe, solution that enables copper sulfate, acompound with bacteriostatic properties, to remain active throughout a widerange of pH values. We own the utility patent applications and provisionalpatent applications associated with the pHarlo technology and have entered intoa sub-license agreement for the base patents associated with the pHarlotechnology, in the following fields of use:

·                  Antimicrobial Composition for Pre-Harvest andPost-Harvest Treatment of Plants and Animals

·                  Antimicrobial Food Additive and Treatment forCooked Food, Water and Wastewater

·                  Antimicrobial Processing Aid and FoodAdditive (US Provisional Application)

·                  Oral Health Care Drink and Method forReducing Malodors

·                  Skin Care Composition for DermatologicalDisorders including burn and wrinkle creams (US Provisional Application),Hangover Remedy and Alcohol Abatement Composition

We currently market:

·                  Unifresh ® Footbath, a grooming aid fordairy cows; and

·                  Close CallTM, an oral hygiene breath drink.

In December 2005 we decidedto concentrate our efforts on the development and commercialization of ourpoultry processing products, seafood processing applications, and Unifresh®Footbath and Unifresh® Pen Spray products. We also decided to seek to licenseand/or sell the Close CallTM brand and derivative applications.

### *Unifresh® Footbath*

We currently market Unifresh® Footbath concentrate, a groomingaid that helps clean and disinfect the hooves of dairy cows. Because of thebacteriostatic properties of the pHarlo technology, this product helps controlbacteria that infect the hooves of cows and cause interdigital dermatitis, or abacterial infection of the skin on a cow’s hoof, and interdigitalpapillomatosis, or a disease that affects a cow’s hoof that may cause severelameness, decreased

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milkyield, body weight loss, decreased reproductive performance and increasedveterinary expenses. Unifresh ® Footbath concentrate was launched during thethird quarter of 2005. In the fourth quarter of 2005, we discovered that ourUnifresh ® Footbath product’s effectiveness was diminished in water that hadabnormally high alkaline content, a term commonly used to refer to a substancethat has a pH level greater than 7. We reformulated our Unifresh ® Footbathconcentrate with the addition of a compound that neutralizes alkali, or a typeof base that has a pH greater than 7, which can increase the pH of water orsoil. In the first quarter of 2006, we introduced our enhanced formulation tothe market. It is currently being sold to dairy farms throughout the U.S.through our sales force, independent brokers and farm product distributors. Wecurrently market the product as a grooming aid. No federal agency approvals arerequired for marketing this product.

### *Close CallTM*

Our oral hygiene drink, Close CallTM, is marketed as an oral hygienebreath drink that eliminates odors from tobacco, garlic, onion and alcohol. TheFDA requires companies making structure or function claims relating to adietary supplement product, such as Close CallTM, to “certify that the firm hassubstantiation that the claim is truthful and not misleading.” While the FDAdoes not require any presentation of this support, it does require a notice ofdietary supplement ingredients and claims. This is currently being prepared. Wecurrently market the product as a beverage, but there can be no assurance thatthe FDA will agree with this characterization or the product claims, whichcould result in additional regulatory requirements and potentially subject usto a variety of enforcement actions.

We believe that our Close CallTM product could be marketed moreefficiently by a company either already established in the industry or withmore commercial resources. Therefore, we plan to seek to license and/or sellthe Close CallTM brand or derivative applications.

### *Poultry Processing*

In August 2005, webegan the in-plant commercial verification process for USDA approval to use thepHarlo technology in the scalder process of poultry processing. In January2006, we received initial consent from the USDA to continue in-plant testing intwo additional plants

### *Seafood Processing Products*

We recently began marketing the pHarlo technology for use in pathogenreduction, or a process by which certain bacteria that cause disease or illnessare reduced in number or eliminated, and shelf life extension in seafoodprocessing. Our product, Tasker Pacific Blue Seafood Wash, has been tested atthe North Carolina State Center for Marine Science & Technology, VirginiaTech University and Mississippi State University on shrimp, mahi mahi, salmon,flounder, scallops and catfish. The results of these studies indicated that thepHarlo technology could possibly double the shelf life on catfish filets andsignificantly increase the shelf life of scallops.

## **RelatedParty Transactions**

In 2004, we entered into an Exclusive Field of Use License Agreementand Product Sale Agreement with Wynn Starr Special Products, LLC. Under theterms of this agreement and its subsequent amendments, we granted Wynn Starrthe exclusive, worldwide right to market and distribute products used aspost-harvesting processing aids, or chemicals that assist with

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microbialreduction and shelf life extension without changing food characteristics forthe poultry industry based on the pHarlo technology. Wynn Starr is alsoresponsible for taking the pHarlo concentrate provided by us and blending itwith liquids to create the finished product that is ultimately distributed byWynn Starr. In return for this license, Wynn Starr has agreed to pay us aroyalty of $70.00 per gallon on all net sales (as defined in the ExclusiveField of Use License Agreement and Product Sale Agreement) sold by Wynn Starrfor which payment is received from customers. As of March 31, 2006 noroyalties were due and none had been paid to us under this royalty arrangement.We are currently renegotiating this royalty arrangement to align its terms tothe current market demand for the product. Steven B. Zavagli, a member of ourboard of directors, is the founder, Chairman and the Chief Executive Officer ofWynn Starr and Wynn Starr’s ultimate parent company, Wynn Starr Flavors, Inc.

## **RestructuringCharges**

During the fourth quarter of fiscal year 2005, we recorded and paidapproximately $29,000 of severance to one executive and five staff members aspart of our efforts to reduce operating costs. Seven more staff members wereterminated but no severance was paid to them. No liability remained at the endof fiscal year 2005 related to this personnel reduction action. We expect toexperience cost reductions of approximately $200,000 per quarter starting inthe first quarter of 2006 related to this action.

## **CriticalAccounting Policies and Estimates**

We believe that several accounting policies are important tounderstanding our historical and future performance. We refer to such policiesas “critical” because these specific areas generally require us to makejudgments and estimates about matters that are uncertain at the time we makethe estimate, and different estimates—which also would have been reasonable—couldhave been used. These critical accounting policies and estimates relate toderivative liabilities, valuation of goodwill, intangible assets and inventory.These critical policies, and our procedures related to these policies, arediscussed below. In addition, refer to Note 2 to the accompanying consolidatedfinancial statements for a discussion of all of our significant accountingpolicies.

### *Derivative Instruments*

To date, we have entered into several debt and equity transactions tofund our operations. A number of these transactions involved the issuance ofconvertible debt and warrants. These transactions also included registrationrights agreements that impose significant penalties on us if certain conditionsare not met. As a result of these registration rights agreements we face anumber of unique and complex accounting issues such as the ones discussedbelow.

We have issued andoutstanding several financial instruments with embedded derivative features,consisting of convertible debt and warrants. We analyze these financialinstruments in accordance with Statement of Financial Accounting Standards, orSFAS”, No. 133 and Emerging Issues Task Force, or EITF Issue Nos. 00-19and 05-02 to determine if these hybrid contracts have embeddedderivatives that must be bifurcated. In addition, free standing warrants areaccounted for as either equity or liabilities in accordance with the provisionsof EITF Issue No. 00-19.

EITF Issue No.05-4 “The Effect of a Liquidated Damages Clause on a Freestanding FinancialInstrument Subject to EITF Issue No. 00-19, ‘Accounting for DerivativeFinancial Instruments Indexed to, and Potentially Settled in, a Company’s OwnStock’” addresses financial instruments, such as convertible notes and stockpurchase warrants, which are accounted for under EITF 00-19, that areissued with a corresponding right to have these securities registered

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pursuant to aregistration rights agreement that includes a liquidated damages clause.Alternative accounting treatments of registration rights are discussed in EITFIssue No. 05-4. One alternative treatment discussed in EITF Issue No. 05-4could require the warrants, the convertible debt and the registration rightsagreement to be treated as a single financial instrument. If the EITF implementsthis approach, the convertible debt and the warrants we have issued would needto be recorded as a liability at fair value and changes in the fair value ofthe liability would need to be recorded in the statement of operations eachperiod. Implementation of this approach may have a material non-cash impact toour financial statement. Since no consensus on EITF Issue No. 054 has beenreached, we have adopted View C as described in the EITF Issue No. 05-4 IssueSummary No. 1. Under View C, registration rights agreements and the associatedfinancial instruments are accounted for as separate instruments. Accordingly,we have given only prospective application to this guidance. Further impact onour consolidated financial statements of adopting the standard, if any, willfollow the transition guidance when released.

In April and July 2004, we entered into private placement agreements, andregistration rights agreements for convertible debentures and warrants (see Note 6to the consolidated financial statements). Based on the interpretive guidancein EITF Issue No. 05-4 due to an uncapped liquidated damages provision inthe registration rights agreements, we determined that the registration rightsare derivative liabilities that should be bifurcated from the related financialinstruments. Accordingly, the estimated fair value of the registration rightsderivative of $244,000 was recorded as a liability as of October 1, 2005, thebeginning of the first fiscal period after September 15, 2005, the date thatEITF postponed further deliberations.

In connection with our December 2004 and January 2006 privateplacements, our estimated fair value of the related registration rightsderivative was immaterial at the inception and at each reporting date since andwe have not recorded a liability. At each reporting period, we calculate theestimated fair value of the registration rights derivatives. If the underlyingassumptions of the calculation change such that the estimated fair value is notimmaterial, we will record a liability at that time. In connection with ourSeptember 2005 private placement, our estimated fair value of the relatedregistration rights derivative at its inception was immaterial and we did notrecord a liability. Subsequently, in connection with the January 2006 privateplacement, we amended our September 2005 agreement with the rights holder towaive the liquidated damages relating to our inability to have suchregistration statement declared effective by May 23, 2006. If we fail to meetcertain conditions of the January 2006 registration rights agreement, we willbe required to issue to each holder in our January 2006 private placement,shares and warrants equal to one percent, or 266,718 of the respective numberof shares and warrants purchased by each holder, for each 30 days of failure tomeet any one of these conditions. We may be required to issue a maximumaggregate of 4 million shares and warrants.

Changes in theestimated fair value of the registration rights derivative liability arerecorded in the consolidated statement of operations. In the fourth quarter of2005, we recorded a gain on the reduction of the derivative liability ofapproximately $9,000.

In connection with our examination of past transactions for applicationof EITF Issue No. 05-4, we noted that for the period from entering into theApril 2004 Securities Purchase Agreement until we increased our authorizedshares in August 2004, we had insufficient shares to meet all potentialobligations to issue shares under our convertible notes and exercisablewarrants and options. Under EITF Issue No. 00-19, a liability should berecognized for those financial instruments for that period, with any changes inthe fair value of such liabilities recognized in our consolidated statement ofoperations. Based on our analysis of such liabilities, we determined the effectof any such amounts to be immaterial.

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At December 31,2005, our derivative liability balance, related to the April 2004 and July 2004registration rights agreements, was approximately $235,000. Additionally,included in the other accrued liabilities at December 31, 2006 is approximately$119,000 of interest and late fees and approximately $286,000 of incurredliquidated damages associated with the April 2004 and the July 2004 convertibledebentures. We have not incurred any liquidated damages liabilities related toany of our other registration rights agreements.

### *Goodwill and Intangible Assets*

The discussions under the captions “Goodwill” and “Intangible Assets”below, describe the valuation methods we used to estimate the fair values. Wehave made assumptions in our valuation methods that we will achieve certainlevels of revenue and funding of cash requirements, which are dependent uponcertain factors outside of our control. If we do not meet our projections, wemay be required to record impairment charges. To the extent that futureimpairment charges occur, they will likely have a material impact on ourfinancial results. We have a limited history on which to base ourprojections and on which to determine the accuracy of our projections.

*Goodwill*

Since the adoption of SFAS No. 142 “Goodwill and Other IntangibleAssets,” we are required to test our goodwill at least annually for impairmentand for fiscal year 2005 we performed this review during our fourth quarter,which, going forward, will be the timing of our annual goodwill impairmentreview. Based on this review, we concluded that there was no goodwillimpairment. Our analysis was performed at the company level which representsthe “reporting unit” level. Our analysis of goodwill impairment required anestimate of the fair value for the reporting unit, which is an inherentlysubjective process. Based on the results of our impairment review we concludedthat the fair value of the reporting unit was not impaired*.*There can be no assurance that there will not be impairment charges insubsequent periods as a result of our future periodic impairment reviews. Tothe extent that future impairment charges occur, they will likely have amaterial impact on our financial results. At December 31, 2005, the carryingvalue of goodwill was approximately $41.7 million. The carrying value of thereporting unit was $65.5 million and our estimate of its fair value was $80.5million. Our market capitalization, based upon the outstanding common stock andthe closing price on December 31, 2005, was $65 million. The estimated fairvalue exceeded the market capitalization and the carrying value by $15.0million. Over an extended period, we would not expect market value to differsignificantly from the estimated fair value. However, at a point in time, suchas when we are evaluating for impairment, factors which may affect the marketvalue, and which are used in the valuation estimate, may not be known to themarket, and therefore may lead to a result that the two may not be comparable.Additionally, a value determined by reference to market prices could differ,perhaps materially, from our estimated fair value based on market perception ofdiscounts related to liquidity or lack of control.

The fair value of the reporting unit was based on the income approachusing a discounted cash flow model. Cash flow projections were based on ourrevenue projections for our products. We projected revenue growth rates of 290%in 2007, as compared to a relatively low revenue base in 2006; a growth rate of30% per year in 2008 through 2010; a growth rate of 20% per year in 2011through 2013; a growth rate of 10% per year in 2014 through 2016; and aterminal growth rate of 5% for all subsequent years. The revenue growth ismainly attributable to the projected sales of the poultry pen spray product inFrance and other European countries. The projected demand for this product wasdue to European Union (EU) regulations requiring improvement in the livingconditions of poultry birds expected to be implemented in 2006. The

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poultrypen spray product improves these conditions by reducing the ammonia levels inthe poultry pens.

The discount rate used was 25% and was based on venture capital ratesfor start-up companies in similar industries.

The table below presents a sensitivity analysis for 5% change perprojected year in earnings before taxes and 1% changes in the discount rate:
| Earnings Before Taxes | ** ** | **24%  Discount  Rate** | ** ** | **25%  Discount  Rate** | ** ** | **26%  Discount  Rate** | ** ** |
|---------------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                      | ** ** | ** **              | ** ** | **(in millions)**  | ** ** | ** **              | ** ** |
| -5%                             |       | $                       | 80.3       |                    | $          | 75.5                    |       | $ | 71.1 |   |
| As projected                    |       | $                       | 85.6       |                    | $          | 80.5                    |       | $ | 75.7 |   |
| +5%                             |       | $                       | 90.8       |                    | $          | 85.4                    |       | $ | 80.4 |   |

 

The table belowpresents the 1% sensitivity analysis (including tax amortization benefit) forrevenue terminal growth rate and discount rate:
|                                    | ** ** | **24%  Discount  Rate** | ** ** | **25%  Discount  Rate** | ** ** | **26%  Discount  Rate** | ** ** |
|------------------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| **Terminal Growth Rate** | ** ** | ** **              | ** ** | **(in millions)**  | ** ** | ** **              | ** ** |
| 4%                                 |       | $                       | 82.9       |                    | $          | 78.0                    |       | $ | 73.4 |   |
| 5%                                 |       | $                       | 85.6       |                    | $          | 80.5                    |       | $ | 75.7 |   |
| 6%                                 |       | $                       | 88.6       |                    | $          | 83.3                    |       | $ | 78.4 |   |

 

*IntangibleAssets*

In addition to ourannual goodwill review, we will also perform periodic reviews of the carryingvalue of our other intangible assets. These intangible assets consist ofutility patent applications. We specifically consider whether any indicators ofimpairment are present, including:

·                  whether therehas been a significant decrease in the market price of an asset; 

·                  whether therehas been a significant adverse change in the extent or manner in which an assetis used; and

·                  whether there isan expectation that the asset will be sold or disposed of before the end of itsoriginally estimated useful life.

If indicators of impairment are present, an estimate of the undiscountedcash flows that the specific asset is expected to generate is made to ensurethat the carrying value of the asset can be recovered. These estimates involvesignificant subjectivity. At December 31, 2005, the carrying value of ourintangible assets, excluding goodwill, was approximately $21.6 million. None ofthese assets were deemed to be impaired as of December 31, 2005.

### *Valuation of Acquired Intangible Assets*

In connection with the 2005 Acquisition, we recordedother intangible assets relating to acquired utility patent applications. Thevaluation process used to calculate the value assigned to the acquiredintangible assets is complex and involves significantly

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subjectivefinancial projection estimates. The principal component of the valuation is thedetermination of discounted future cash flows expected to be derived from theuse of these intangible assets. In addition, there are a number of othervariables that we considered for purposes of projecting these future cashflows, including those listed below.

There is inherent uncertainty involved with this estimation of cashflows from intangible assets, and, while our estimates are consistent with ourinternal planning assumptions, the ultimate accuracy of these estimates is onlyverifiable over time. Further, the projections required for the valuationprocess normally utilize a ten-year forecast, which exceeds our normal internalplanning and forecasting timeline. The particularly sensitive components ofthese estimates include, but are not limited to:

·                  the selection ofan appropriate discount rate; 

·                  the requiredreturn on all assets employed by the valued asset to generate future incomestreams; 

·                  our projectedoverall revenue growth; 

·                  our gross marginestimates;

·                  our patenttechnology and its useful life;

·                  our plannedlevel of operating expenses; and 

·      our effective tax rate. 

At December 31,2005, the fair value of the identified intangible asset was determined using adiscounted cash flow model utilizing the relief from royalty valuation method.

Cash flow projections were based on management’s forecast relating tothe intellectual properties and life was based on the remainder of theunderlying patent life. Under the relief from royalty valuation method, weevaluate what the royalty we would have to pay would be, if we did not own therights to the patent. The assumptions underlying the method include aprojection of sales related to the utilization of the patents and what theroyalty rate we would expect to pay resulting in a total royalty amount,adjusted for an appropriate discount rate and amortization benefit.

Our projection of revenues, the same as used in our reporting unit cashflow projections for purposes of evaluating any impairment of goodwill, assumedgrowth rates of 290% in 2007, as compared to a relatively low revenue base in2006, a growth rate of 30% per year in 2008 through 2010, a growth rate of 20%per year in 2011 through 2013 and a growth rate of 10% per year in 2014 through2016. The revenue growth is mainly attributable to the projected sale of thepoultry pen spray product in France and other European countries. The projecteddemand for this product is due to EU regulations requiring improvement in theliving conditions of poultry birds expected to be implemented in 2006. Thepoultry pen spray product improves these conditions by reducing the ammonialevels in the poultry pens.

The discount rate used was 15% and was based on a cost of equityanalyses based on industry rates of returns, by applying the Capital AssetPricing Model (CAPM). The royalty rate was 5% which was based primarily on theroyalty rate we paid to pHarlo IP LLC prior to the acquisition of the patents,as well as economic factors.

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The table below presents the sensitivity analysis for a 5% revenueincrease or decrease per projected year (including tax amortization benefit)and a 1% increase or decrease in the discount rate:
| Revenue Change for  Each Year | ** ** | **14%  Discount  Rate** | ** ** | **15%  Discount  Rate** | ** ** | **16%  Discount  Rate** | ** ** |
|----------------------------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                   | ** ** | **(in millions)**  | ** ** |
| -5%                                          |       | $                       | 22.6       |                    | $          | 21.3                    |       | $ | 20.1 |   |
| As Projected                                 |       | $                       | 24.0       |                    | $          | 22.5                    |       | $ | 21.3 |   |
| +5%                                          |       | $                       | 25.3       |                    | $          | 23.8                    |       | $ | 22.4 |   |

 

The table below presents the sensitivity analysis for 1% increase or decreasein the royalty rate and in the discount rate:
| Royalty Rate | ** ** | **14%  Discount  Rate** | ** ** | **15%  Discount  Rate** | ** ** | **16%  Discount  Rate** | ** ** |
|-------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **        | ** ** | **(in millions)**  | ** ** |
| 4%                |       | $                       | 18.7       |                    | $          | 17.6                    |       | $ | 16.5 |   |
| 5%                |       | $                       | 24.0       |                    | $          | 22.5                    |       | $ | 21.3 |   |
| 6%                |       | $                       | 29.2       |                    | $          | 27.5                    |       | $ | 25.9 |   |

 

### ***Inventory Valuation and Classification***

Our inventory is valued at the lower of cost or market on an averagecost basis. We regularly review inventory balances to determine whether awrite-down is necessary. We consider various factors in making this determination,including recent sales history and predicted trends, industry marketconditions, general economic conditions, the age of our inventory and recentquality control data. Changes in the factors above or other factors couldresult in significant additional inventory cost reductions and write-offs.

## **RecentAccounting Pronouncements**

In December 2004, the Financial Accounting Standards Board (“FASB”)issued SFAS No. 123(R) “Accounting for Stock-Based Compensation (Revised)”.Under SFAS 123(R), companies will be required to recognize as an expense theestimated fair value of all share-based payments to employees, including thefair value of employee stock options. Pro forma disclosure of the estimatedexpense impact of such awards is no longer an alternative to expenserecognition within the financial statements. SFAS No. 123(R) is effective forpublic companies in the first annual reporting period beginning after June 15,2005. Accordingly, we will adopt the provisions of SFAS No. 123(R) effectiveJanuary 1, 2006, the first quarter of our 2006 calendar year.

There are two transition alternatives for public companies adopting thestatement: the modified prospective method and the modified retrospectivemethod. Under the modified prospective method, companies are required torecognize compensation cost for share-based payments to employees, based on thegrant date estimate of fair value, from the beginning of the fiscal period inwhich the recognition provisions of SFAS No. 123(R) are first applied. Priorperiod financial information would not be restated under this method. Under themodified retrospective method, companies would restate prior periods to includethe recognition of compensation cost based on amounts previously reported inthe pro forma disclosures relating to stock **-**basedcompensation under the existing requirements of SFAS No. 123, “Accounting for

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Stock-BasedCompensation”, such as is presented in Note 2 to our audited consolidatedfinancial statements. We expect to elect the modified prospective method, uponadoption.

We expect the adoption of SFAS No. 123(R) to have a material effect onour financial statements, in the form of additional compensation expense, on aquarterly and annual basis. We are still in the process of evaluating theimpact of SFAS No. 123(R), and have not yet quantified the expense impact ofthis accounting pronouncement on future financial periods.

In December 2004,the FASB issued SFAS No. 151, “Inventory Costs-an amendment of ARB No. 43,Chapter 44.” SFAS No. 151 has been issued to clarify the accounting forabnormal amounts of idle facility expense, freight, handling costs, and wastedmaterial (spoilage), which requires that those items be recognized ascurrent-period charges regardless of whether they meet the criterion of “soabnormal.” In addition, SFAS No. 151 requires our company to allocate fixedproduction overheads to the costs of conversion based on the normal capacity ofthe production facilities. Our management does not believe the effects of SFASNo. 151 will have a material impact on the consolidated financial statements,as we have not incurred any inventory costs that meet the definition of “soabnormal.”

In May 2005, theFASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” whichreplaces APB Opinion No. 20, “Accounting Changes,” and supersedes FASBStatement No. 3, “Reporting Accounting Changes in Interim FinancialStatements—an amendment of APB Opinion No. 28.” SFAS No. 154 requiresretrospective application to prior period financial statements of changes inaccounting principle, unless it is impracticable to determine either theperiod-specific effects or the cumulative effect of the change. When it isimpracticable to determine the period-specific effects of an accounting changeon one or more individual prior periods presented, SFAS No. 154 requires thatthe new accounting principle be applied to the balances of assets andliabilities as of the beginning of the earliest period for which retrospectiveapplication is practicable and that a corresponding adjustment be made to theopening balance of retained earnings for that period rather than being reportedin an income statement. When it is impracticable to determine the cumulativeeffect of applying a change in accounting principle to all prior periods, SFASNo. 154 requires that the new accounting principle be applied as if it wereadopted prospectively from the earliest date practicable. SFAS No. 154 iseffective for accounting changes and corrections of errors made in fiscal yearsbeginning after December 15, 2005. We have adopted the provisions of SFAS No.154 as of December 31, 2005 and do not believe that its adoption has a materialimpact on our consolidated results of operations or financial condition.

## **Reclassifications**

Certain prior year amounts have been reclassified to conform to thecurrent year presentation in our consolidated financial statements.

**Resultsof Operations**

### *Overview*

During thecalendar year 2005, we substantially completed the integration of the assetsacquired in the 2005 Acquisition. The audited financial statements as of andfor the period ending December 31, 2005 contained herein reflect our operationson a consolidated basis, which includes the assets acquired. As the 2005Acquisition was completed during the fiscal year ended December 31, 2005, theassets acquired are included in the financial statements for the period endingDecember 31, 2005 but are not included in prior periods contained in this annualreport. In 2005, we also began selling Close CallTM. As a result of these changes, ouroperating results

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for the year endedDecember 31, 2005 include several material changes as compared to the sameperiods in 2004 and 2003. Below is a brief summary of these material changes.

### *Year Ended December 31, 2005 Compared to Year Ended December 31, 2004*

#### ***Revenues***

Revenues for theyear ended December 31, 2005 were approximately $705,000, compared with norevenue for the corresponding period in 2004. This increase in revenue was dueprimarily to revenue associated with sales of Close CallTM, which contributedapproximately $503,000 for the year ended December 31, 2005 and the sales ofUnifresh® Footbath, a product we acquired in the 2005 Acquisition, whichcontributed approximately $202,000 in revenue for the year ended December 31,2005, net of approximately $890,000 of credit memos. These credit memos wereissued to customers to whom we promised to take back the Unifresh® Footbaththat was not as effective due to abnormally high alkaline content, or pH level,in the customers’ water sources. We have now reformulated this product byadding a compound that neutralizes alkali, or a type of base that has a pHgreater than seven. We expect that our revenue will increase in fiscal year2006 upon the successful marketing of existing products and the securing ofregulatory approvals for certain applications that intend to market. Whilewaiting for regulatory approvals, we are aggressively marketing our existingproducts, building our network of distributors and identifying prospective customers.

#### ***Gross Margin***

During the yearended December 31, 2005, we wrote-off approximately $741,000 of Close CallTM finished goods inventory that we estimatedwould not be sold prior to its shelf expiration date. This write-off resultedin negative gross margin of approximately $(603,000) for the year endedDecember 31, 2005, compared to zero gross margin for the year ended December31, 2004. As a result of anticipated increased sales in fiscal year 2006, grossmargin, in absolute dollars and as percentage of revenue, is expected toincrease.

#### ***Product Development***

Productdevelopment consists primarily of personnel costs to support productdevelopment and clinical trials, which continued to be the focus of our companyduring 2005. Product development and research costs for the year ended December31, 2005 increased by approximately $2.0 million or 143% to $3.4 million from$1.4 million for the year ended December 31, 2004. This increase was primarilydue to an increase in salary expense of approximately $740,000 from $170,000for the year ended December 31, 2004, to $910,000 for the year ended December31, 2005, and an increase in consulting costs of approximately $600,000 from$900,000 for the year ended December 31, 2004 to $1.5 million for the yearended December 31, 2005. The increase in consulting costs was due to researchand development in the areas of food processing and the Unifresh® Footbathproduct. Production supply expense increased by approximately $100,000 from$200,000 for the year ended December 31, 2004 to approximately $300,000 for theyear ended December 31, 2005. Also, the expense of clinical trials increasedapproximately $520,000 from $105,000 in 2004 to $625,000 in2005 due toincreased testing and development of new product lines. We anticipate thatproduct development will decrease, as a percentage of revenues, in fiscal year2006.

#### ***Selling, General and Administrative***

Selling, General,and Administrative (“SGA”)  expenses areprimarily comprised of sales and marketing costs, compensation, professionalfees, and general administrative costs. SGA

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costs for the year endedDecember 31, 2005 increased by approximately $9.9 million from $2.0 million forthe year ended December 31, 2004, to $11.9 million for the year ended December31, 2005. We anticipate that SGA costs will decrease, as a percentage ofrevenues, in fiscal year 2006.

Sales andmarketing expenses consist mainly of salaries and other related costs for salesand marketing personnel, sales commissions, promotional expenses, advertising,public relations and trade shows. Sales and marketing costs increased byapproximately $820,000 from $160,000 for the year ended December 31, 2004 toapproximately $980,000 for the year ended December 31, 2005. This increase isdue to marketing research, branding and promotion for our Close CallTM and Unifresh® Footbath product line roll-outs.

Compensationexpense consists primarily of salaries and other related costs for ourexecutives, senior management, finance and administrative employees.Compensation expense increased by approximately $4.2 million from approximately$700,000 for the year ended December 31, 2004, to approximately $4.9 millionfor the year ended December 31, 2005. This increase is primarily due to theaddition of executive and other management to oversee the development of ouroral care, food processing, skin care, pet care and, to a lesser extent, due tosalaries for personnel added in the 2005 Acquisition. During the fourth quarterof fiscal year 2005, we recorded and paid approximately $29,000 of severance toone executive and five staff members. Seven more staff members were terminatedbut no severance was paid to them during this time period. We expect toexperience cost reductions of approximately $200,000 per quarter starting in thefirst quarter of 2006 related to this personnel reduction action.

Professional feesconsist primarily of legal, accounting, and investor relation fees.Professional fees for the year ended December 31, 2005 increased by $3.5million, from $600,000 in 2004 to $4.1 million in 2005, primarily due tonon-cash charges of approximately $2.8 million for stock options issued to aninvestor relations consultant for services rendered. The remaining increase in2005 over 2004 of $700,000 is mainly due to increased legal and accounting feesnecessary to complete our various SEC filings during 2005.

General andadministrative expenses consist primarily of rent, insurance, stock -basedcompensation and travel and entertainment expenses. General administrativecosts for the year ended December 31, 2005 increased by $1.4 million from$500,000 in 2004 to $1.9 million in 2005. This increase is attributable to anincrease in travel expenses of approximately $500,000, due to the increasedsales efforts to promote our products, increased insurance costs ofapproximately $327,000, an increase in rent expense of approximately $283,000,an increase in utility and equipment charges of approximately $200,000 and anincrease of approximately $111,000 in stock -based compensation as a result of“in the money” stock options issued to employees during the year ended December31, 2005. In 2006, we expect a significant increase in stock compensationexpense based on our adoption of SFAS 123(R) on January 1, 2006.

#### ***Depreciation and Amortization Expense***

Depreciation andamortization expense, which includes the amortization of identifiableintangible assets, increased by approximately $1.1 million from approximately$29,000 in the year ended December 31, 2004, to approximately $1.1 million forthe year ended December 31, 2005, due in large part to the 2005 Acquisitionwhereby we acquired fixed assets and intellectual property. The intellectualproperty, which consist of utility patent applications, has a current estimatedvalue of approximately $21.5 million and is being amortized over 11.5 years.See Note 12 to the consolidated financial statements.

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***InterestExpense, Net***

Interest expense,net decreased by approximately $2.6 million from $2.7 million for the yearended December 31, 2004 to approximately $85,000 for the year ended December31, 2005. This decrease is principally due to the one-time write off inSeptember 2004 of approximately $1.7 million of debt discount caused by ourdefault of certain covenants in the July 2004 convertible debentures privateplacement and the one-time write off in June 2004 of approximately $800,000 ofdebt discount caused by our default of certain covenants in the April 2004convertible debentures private placement. Interest income increased byapproximately $112,000, from $23,000 for the year ended December 31, 2004 toapproximately $135,000 for the year ended December 31, 2005, primarily due toan increased average cash balance throughout 2005.

#### ***Other***

We incurred otherexpenses of approximately $1.2 million for the year ended December 31, 2005,related primarily to a reserve recorded for certain notes receivable in theamount of $890,000, and an additional accrued expense for potential liquidatingdamages in the amount of $286,000.

#### ***Net Loss***

As a result of theabove, we had a net loss of $18.3 million for the year ended December 31, 2005,as compared to a net loss of $6.1 million for the year ended December 31, 2004.

### *Year Ended December 31, 2004 Compared to Year Ended December 31, 2003*

#### ***Product development***

Product developmentand research costs for the year ended December 31, 2004 increased byapproximately $1.3 million from approximately $89,000 for the year endedDecember 31, 2003, primarily due to consultant fees associated with gainingregulatory approval for our poultry processing product, and additionaldevelopment costs associated with Close CallTM.

#### ***Selling, General and Administrative***

SGA expenses areprimarily comprised of sales and marketing costs, compensation, professionalfees, and general administrative costs. SGA costs increased by approximately$1.6 million from approximately $398,000 for the year ended December 31, 2003to approximately $2.0 million for the year ended December 31, 2004.

Sales andmarketing costs increased by approximately $141,000 for the year ended December31, 2004  from $0 for the year endedDecember 31, 2003. This increase is primarily attributable to an increase inadvertising and marketing expenses, as well as increased compensation foradditional sales employees.

Compensationexpense increased by approximately $620,000, from $50,000 in the year endedDecember 31, 2003 to approximately $670,000 for the year ended December 31,2004. This increase reflects the addition of executive and senior management,as well as management to oversee the development of our products such as oralcare, food processing, skin care, and pet care.

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Professional feesfor the year ended December 31, 2004 increased by approximately $500,000 from$100,000 in 2003 to $600,000 in 2004, primarily due to legal fees forintellectual property reviews and due diligence support in our effort toconsummate the 2005 Acquisition.

General andadministrative costs for the year ended December 31, 2004 increased byapproximately $290,000, from $260,000 for the year ended December 31, 2003 to$550,000 for the year ended December 31, 2004. This increase is primarily dueto an expense of $373,000 for stock -based compensation as a result of “in themoney” stock options issued to employees during the year ended December 31,2004, as compared to no stock -based compensation expense for the year endedDecember 31, 2003, and a decrease of approximately $100,000 in miscellaneousfees associated with filing and stock transfer fees.

#### ***Interest Expense, net***

Our interestexpenses increased by a net amount of approximately $2.6 million, from $113,000for the year ended December 31, 2003 to approximately $2.7 million for the yearended December 31, 2004, primarily as a result of the amortization of loandiscounts from the convertible debentures issued by us during 2004 and fromnotes payable.

#### ***Net Loss***

As a result of theabove, we had a net loss of $6.1 million for the year ended December 31, 2004,as compared to a net loss of $607,000 for the year ended December 31, 2003.

**Liquidity and Capital Resources**

### *Overview*

Since ourinception, we have funded operations and investing activities through the saleof common stock, warrants and convertible debt under several privateplacements. Requirements for liquidated damages under some of these privateplacements may have an impact on our future liquidity. To date we havesatisfied and/or received waivers for the provisions of a majority of theagreements that would have otherwise required us to pay liquidateddamages.However, we have not received waivers and from time to time we havebeen in default to some of the provisions of the registration rights agreementsfor the April 2004 and July 2004 convertible debt. As of December 31, 2005, weaccrued a $286,000 liability associated with these defaults. Our obligation toaccrue liquidated damages under these registration rights agreements will ceaseon April 30 and July 22, 2006, respectively.

### *Operating Activities*

Our cash, cashequivalents and marketable securities balances were approximately $1.0 millionand $14.2 million at December 31, 2005 and December 31, 2004, respectively.

Net cash used in operating activities for the year ended December 31,2005 was approximately $11.8 million, compared to approximately $2.4 million in2004 and approximately $471,000 in 2003.

Our accountsreceivable, less allowance for doubtful accounts, at December 31, 2005 andDecember 31, 2004 were approximately $155,000 and $0, respectively.

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We have fullyreserved our note receivable of $890,000 from the Biofilm shareholders as thereis no assurance that it is collectible. Also see discussion under “Off-BalanceSheet Arrangements”.

We havesignificantly increased our inventory level to approximately $1.4 million forthe year ended December 31, 2005, from approximately $100,000 for the yearended December 31, 2004, in anticipation of future sales.

### *Investing Activities*

Net cash used ininvesting activities for the year ended December 31, 2005 was approximately$7.7 million, and was approximately $530,000 and $133,000 for the years endedDecember 31, 2004 and 2003, respectively.

As a result of the2005 Acquisition, we recorded $2.6 million in cash payments to the SellingEntities, representing approximately $1.4 million in cash consideration andapproximately $1.2 million in acquisition costs.

Net cash used forthe purchase of property and equipment for the year ended December 31, 2005 wasapproximately $824,000. A major portion of this expense was directly related tothe 2005 Acquisition in which we added a production facility and warehouse tofacilitate our anticipated growth and revenue stream.

During the yearended December 31, 2005, pursuant to a series of promissory notes, we loanedapproximately $2.6 million (including $136,000 paid to a vendor on behalf ofpHarlo Citrus Technologies) to the Selling Entities and principals of pHarloCitrus Technologies, Inc. and Indian River Labs, LLC. All of the loans grantedto the Selling Entities and the principals of pHarlo Citrus Technologies, Inc.and Indian River Labs, LLC during the year ended December 31, 2005 werecancelled on July 15, 2005 upon the completion of the 2005 Acquisition, withthe exception of a loan granted on March 28, 2005 to David Creasey, a principalof pHarlo Citrus Technologies and Indian River Labs, in the amount of $625,000.This loan is evidenced by a promissory note and secured by options and stockthat Mr. Creasey holds in our company.

In April 2005, wepurchased 359,000 common shares of Biofilm Strategies Corporation from ElectricAquagenies Unlimited, Inc., representing 27% of Biofilm’s outstanding commonstock, for cash consideration of $718,000. Further, we advanced a total of$890,000 to the owners of the remaining 73% of Biofilm’s common stock.Biofilm’s proprietary technology is designed to eradicate biofilms, a protectivecoating that forms on listeria and other pathogens making them resistant totraditional remedies of eradicating bacteria. We understand that Biofilm is inthe process of obtaining certain regulatory approvals for the use of itsproduct in specified applications. After several months of unsuccessfulnegotiations, we have decided that we will not seek to acquire the remaining73% of Biofilm’s common stock. We originally anticipated that if theacquisition did not close, we would seek repayment of the funds advanced. Weare now negotiating an alternative arrangement with Biofilm, whereby Biofilmwould license its technology to us, and the $890,000 advanced would be used asa credit against royalty fees due under the license agreement. There can be no assurancethat the license agreement will be entered into, or if entered into, thatBiofilm would agree to credit the $890,000 advanced toward the royalty fees ofsuch license. We believe that recovery of these advances is uncertain, and haveset up an allowance for uncollectible accounts for the entire $890,000.

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*FinancingActivities*

As partialconsideration for the purchase of the pHarlo assets in the July 2005acquisition, we issued a promissory note in the amount of $1,931,973 to IndianRiver Labs, L.L.C. The promissory note bears interest of 3.4% per annum and ispayable in equal bi-weekly principal installments of $37,153, plus interest,through July 2007. During 2005 we paid approximately $409,000 under the IndianRiver Labs promissory note.

The net cashprovided by our financing activities during the year ended December 31, 2005was approximately $6.3 million, as compared to approximately $17.1 million and$545,000 for the years ended 2004 and 2003, respectively.

The net cashprovided by financing activities for the year ended December 31, 2005 is mainlyderived from proceeds from the sale of common stock and warrants. In September2005, we completed a private placement in which we raised gross proceeds of$6,435,000 through the sale of 2,947,545 shares of our common stock at apurchase price of $2.20 per share, which were sold together with warrants topurchase an additional 1,473,769 shares of our common stock at an exerciseprice of $3.00 per share. In conjunction with the January 2006 private placementdiscussed below the exercise price of the warrants was reduced from $3.00 to$1.00. We also recorded payment for the Indian River Labs promissory note ofapproximately $409,000.

As of December 31,2005, we had approximately $1.0 million in cash and cash equivalents.

During the yearended December 31, 2005, we continued to be in violation of certainrepresentations of its and covenants contained in our convertible debenturesissued on April 30, 2004 and July 22, 2004. This violation related to the factthat our disclosure controls and procedures were not effective because ofmaterial weaknesses in our internal controls over financial reporting whichresulted in the restatement of our financial statements filed with the SEC forthe quarters ended June 2004, September 2004 and September 2005. The violationalso related to the fact that we did not make timely quarterly payments to thebondholders. As a result of this violation, principal and accrued interest onoutstanding debentures became immediately due and payable at the option ofholders and, as a result, as of December 31, 2005, we have classified theentire remaining principal balance in the amount of approximately $194,000 andinterest of approximately $119,000 as a current liability and has amortized thedebt discount associated with the remaining principal balance. In addition,during the year ended December 31, 2005, we were in default of certain of ourobligations under two separate registration rights agreements. As a result ofthese violations, contractual payments became immediately due and payable tocertain holders of our common stock. As of December 31, 2005, we accrued a$286,000 liability associated with these defaults

## **RegistrationRights Agreements**

In connection withthe January 2006 private placement, we obtained waivers of all claims forliquidated damages relating to our inability to have the registration statementregistering resale of securities purchased in the September 2005 privateplacement declared effective by the deadline specified in the applicableregistration rights agreement. We received these waivers from shareholdersrepresenting more than a majority of all outstanding securities issued inconnection with the September 2005 private placement. In consideration forobtaining the waiver, we repriced the warrants issued to shareholders providingthe waiver such that the exercise price of the warrants issued in connectionwith the September 2005 private placement was reduced from $3.00 to $1.00.Under the waiver, the date by which the registration statement covering resaleof the securities purchased in the September 2005 private placement wasrequired to be declared effective was extended to May 23, 2006. If we fail tomeet certain conditions of the January 2006 registration rights agreement, wewill be required to issue to each holder in our

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January 2006 privateplacement, shares and warrants equal to one percent, or 266,718 of therespective number of shares and warrants purchased by each holder, for each 30days of failure to meet any one of these conditions. We may be required toissue a maximum aggregate of 4 million shares and warrants.

## **Off-Balance Sheet Arrangements**

In April 2005, wepurchased 359,000 common shares of Biofilm Strategies Corporation from ElectricAquagenies Unlimited, Inc., representing 27% of Biofilm’s outstanding commonstock, for cash consideration of $718,000. We believe that our 27% equityinterest in Biofilm is a significant variable interest, as defined by FIN 46(R)“Consolidation of Variable Interest Entities”, however we believe that we arecurrently not the primary beneficiary of Biofilm and thus we would not berequired to consolidate the accounts of Biofilm. We believe that our maximumexposure to loss as a result of our involvement with Biofilm is limited to ourinitial investment of $718,000.

## **ContractualObligations and Commitments**

We had the following commitments as of December 31,2005, which are comprised primarily of a research and development fee contract,consulting and employment contracts, a vendor agreement, notes payable, as wellas numerous operating leases: 
| ** **                                                 | ** ** | **Total** | ** ** | **Less than  one year** | ** ** | **1-3  years** | ** ** | **3-5  Years** | ** ** | **More than  5 years** | ** ** |
|------------------------------------------------------------|------------|-----------|------------|-----------------------------------|------------|----------------|------------|----------------|------------|----------------------------------|------------|
| Research &  Development (“R&D”) fees (1) |       | $         | —     |                              | $          | —         |       | $              | —     |                             | $          | — |   | $ | — |   |
| Consulting  agreements                                     |       | 24,000    |       | 24,000                            |       | —         |       | —         |       | —                           |       |
| Employment  agreements (2)                                 |       | 1,995,000 |       | 990,000                           |       | 1,005,000      |       | —         |       | —                           |       |
| Notes Payable  Shareholders                                |       | 475,000   |       | —                            |       | 475,000        |       | —         |       | —                           |       |
| Note Payable –  IRL                                   |       | 1,523,000 |       | 966,000                           |       | 557,000        |       | —         |       | —                           |       |
| Vendor  agreements                                         |       | 300,000   |       | 300,000                           |       | -              |       | —         |       | —                           |       |
| Operating leases                                           |       | 1,437,000 |       | 387,000                           |       | 988,000        |       | 62,000         |       | —                           |       |
| Convertible  Debentures                                    |       | 194,000   |       | —                            |       | 194,000        |       | —         |       | —                           |       |
| Other                                                      |       | 53,000    |       | 11,000                            |       | 34,000         |       | 8,000          |       | —                           |       |
|                                                       |       |      |       |                              |       |           |       |           |       |                             |       |
| Total                                                      |       | $         | 6,001,000  |                              | $          | 2,678,000      |       | $              | 3,253,000  |                             | $          | 70,000 |   | $ | — |   |

 

----

(1)      OnJanuary 26, 2006, R&D fees payable under a Patent and Sub-License Agreementwith pHarlo IP were amended so that these fees are (i) payable on a quarterlybasis within 30 days after the end of each calendar quarter and (ii) are basedon gross sales of us (or our affiliates) of products using the pHarlo technology.For fiscal year 2006, the R&D Fees must not be less than $150,000 and arecapped at $500,000. The R&D Fees have no minimum amounts payable after2006; however, they are capped at $2,000,000 for 2007, $4,000,000 for 2008,$8,000,000 for 2009 and $10,000,000 for 2010 and beyond.

(2)      Inthe first quarter of fiscal 2006, we terminated several of its existingemployment agreements with some of its senior management and entered into newemployment agreements with its current executive management. The revisedestimated future minimum annual compensation under these employment agreements,including the new and terminated agreements for 2006, 2007, 2008 and 2009, isapproximately $1,346,000, $1,128,000, $718,000 and $59,000, respectively.

40

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**ITEM 7A.****                                            QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**Interest Rate Risk**

Our exposure to market risk,including changes in interest rates, relates primarily to cash and cashequivalents. These investments bear interest at a variable interest rate, whichis subject to market changes. We have not entered into any interest rate swapagreements, or other instruments to minimize our exposure to interest ratefluctuations. We have not had any derivative instruments in the past and do notpresently plan to in the future. Our investment portfolio consists of demanddeposits and money market mutual funds. Due to the highly liquid nature of ourinvestment, a sudden sharp change in interest rates would not have a materialadverse effect on the value of the portfolio.

**ITEM 8.**                             FINANCIAL STATEMENTSAND SUPPLEMENTARY DATA

Index to the ConsolidatedFinancial Statements, Financial Statements and Supplementary Data appear onpages F-1 to F-38 of this Annual Report on Form 10-KSB.

**ITEM 9.**                             CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

**ITEM 9A.**                    CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934(the “Exchange Act”), we carried out an evaluation of the effectiveness of thedesign and operation of our disclosure controls and procedures as of the end ofthe period covered by this report. This evaluation was carried out under thesupervision and with the participation of our newly appointed Chief ExecutiveOfficer, Richard Falcone and newly appointed Chief Financial Officer, StathisKouninis.

Disclosure controls and procedures are controls and other proceduresthat are designed to ensure that information required to be disclosed in ourreports filed or submitted under the Exchange Act is recorded, processed,summarized and reported, within the time periods specified in the Securitiesand Exchange Commission’s rules and forms. Disclosure controls and proceduresinclude, without limitation, controls and procedures designed to ensure thatinformation required to be disclosed in our reports filed under the ExchangeAct is accumulated and communicated to management, including our ChiefExecutive Officer and Chief Financial Officer, to allow timely decisionsregarding required disclosure.

Basedupon that evaluation, our Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures as of the end of theperiod covered by this report were not effective. As described in our QuarterlyReports throughout 2005, we have already instituted and are continuing toimplement the corrective actions described below with respect to thedeficiencies in our disclosure controls and procedures.

Inconnection with the audit of our consolidated financial statements for the yearended December 31, 2005, our independent registered public accounting firmadvised the Board of Directors and management that it had two independentmaterial weaknesses in its internal control over financial reporting. The firstmaterial weakness related to limitations in the capacity of our accountingresources to identify and react in a timely manner to non-routine and complex

41

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business transactions. Thiswas the same material weakness identified by our independent registered publicaccounting firm during the audit of our financial statements for the year endedDecember 31, 2004. Despite hiring additional accounting resources in 2005 tosupplement the internal accounting staff, we were unable to remediate thismaterial weakness. We have attempted to remediate this material weakness by thehiring, in the first quarter of 2006, of a new financial management team,including a new Chief Financial Officer and a new Controller.

The second material weakness identified related to an overall lack ofinternal control over sales and revenue recognition as well as inventorycalculations and expenditures. This material weakness led directly to ourannounced internal investigation into the financial statements filed with theSEC for the quarter ended September 30, 2005 (see Note 18 to the ConsolidatedFinancial Statements). Our management implemented several new internal controlsin response to its internal investigation, including the following:

·                  Our management has had several trainingsessions with the sales force of its subsidiary, Coast to Coast.

·                  Our finance department has disseminatedwritten procedures and policies to all of our salespersons, includingprocedures that require, in certain circumstances, that sales made by Coast toCoast salespersons be reconfirmed by our Director of Logistics.

·                  Our finance department has instituted apolicy regarding the provision of samples to our customers.

Although we have instituted and are continuing to implement correctiveactions with respect to the deficiencies in our disclosure controls andprocedures, such corrective actions were not sufficient to detect an error inour Excel spreadsheet for the calculation of certain line items in the columncaptioned “May 13, 1996 (inception) to December 31, 2005” in our ConsolidatedStatements of Operations for the three years ended December 31, 2005 (the “InceptionColumn”). As a result of this error, we reported incorrect values in theInception Column as follows:

·                  Although the amount of “Total Expenses” wascorrect, the components of Total Expenses (i.e., selling, general &administrative; product development; and depreciation and amortization) wereincorrect.

·                  Although the amount of “Total other expense,net” was correct, two of the components of Total other expense, net (i.e.,interest expense, net and liquidated damages) were incorrect.

Such error was caused by the lack of an automated financial reportingsystem and a small accounting staff that does not allow for a thorough reviewprocess. We have engaged a consultant to design financial reports so that we donot rely on spreadsheets and we will add additional accounting staff when ourfinancial condition allows us to do so.

Asnoted above, there were changes to our internal control over financialreporting that occurred during the our last fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, our internal controlsover financial reporting.

Whileevery effort will be made to ensure the financial reporting system will adhereto our internal controls, we cannot be certain that additional materialweaknesses will not be identified prior to the filing of management’s annualreport on internal control over financial reporting.

42

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**ITEM9B.**                    OTHER INFORMATION

InDecember 2005, Robert Appleby and our company entered into a SeparationAgreement and General Release in connection with Mr. Appleby’s resignation asour Chief Executive Officer. Pursuant to the Separation Agreement and GeneralRelease, we have agreed to pay Mr. Appleby a severance package of approximately$50,000. In addition, we agreed that the exercise period for Mr. Appleby’svested options to purchase 1,611,111 shares of our common stock would bereduced from 10 years from the grant date to 5 years from the grant date.

43

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**PART III**

**ITEM 10.**                      DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT

The information required byItem 401 and 405 of Regulation S-K is incorporated herein by reference to theinformation contained under the captions “Proposal I—Election of Class IDirectors”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Boardand Committee Meetings” and “Corporate Governance” of the Proxy Statement. Wewill furnish to the Securities and Exchange Commission a definitive ProxyStatement (the Proxy Statement) not later than 120 days after the close of thefiscal year ended December 31, 2005.

Effective March 2005 weadopted a Code of Business Conduct and Ethics that applies to our principalexecutive officer, principal financial officer, principal accounting officer orcontroller, or persons performing similar functions. The text of our Code ofBusiness Conduct and Ethics is posted in the “Corporate Governance” section ofour website, ww.taskerproducts.com. We intend to disclose on our website anyamendments to, or waivers from, our Code of Business Conduct and Ethics thatare required to be disclosed pursuant to the disclosure requirements of Item5.05 of Form 8-K.

**ITEM 11.**                      EXECUTIVECOMPENSATION

The information required bythis item is incorporated herein by reference to the information that will becontained under the captions “Executive Compensation,” “Director Compensation,”“Compensation Committee Interlocks and Insider Participation” and “Employmentand Other Agreements” of the Proxy Statement.

**ITEM 12.**                      SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item isincorporated herein by reference to the information contained under thecaptions “Security Ownership of Certain Beneficial Owners and Management” and “EquityCompensation Plan Information” of the Proxy Statement.

**ITEM 13.**                      CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS

The information required by this item isincorporated herein by reference to the information that will be containedunder the captions “Employment and Other Agreements” and “Certain Relationshipsand Related Transactions” of the Proxy Statement.

**ITEM 14.**                      PRINCIPAL ACCOUNTANTFEES AND SERVICES

Theinformation required to be disclosed by this item is incorporated herein byreference to the information that will be contained under the caption “PrincipalAccountant Fees and Services” of the Proxy Statement.

44

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**PART IV**

**ITEM 15.**                      EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES

  (a) *Financial Statements, Financial Statement Scheduleand Exhibits*
| (1)                                                                                         |   | Financial  Statement Schedule for the Years Ended December 31, 2005, 2004   |   |   |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|
|  and 2003: Schedule II – Valuation and  Qualifying Accounts                       |   |                                                                        |
|                                                                                        |   |                                                                        |   |   |
| Financial statement schedules not included have been  omitted because of the                |   |                                                                        |
| absence of conditions under which they are required  or because the required                |   |                                                                        |
| information, where material, is shown in the  financial statements or notes.                |   |                                                                        |
|                                                                                        |   |                                                                        |   |   |
| (2)                                                                                         |   | Financial  Statements – see “Index to Financial Statements”  |   |   |
|                                                                                        |   |                                                                        |   |   |
| (3)                                                                                         |   | Exhibits  submitted with the Annual Report on Form 10-KSB as filed with the |   |   |
| U.S.  Securities and Exchange Commission and those incorporated by reference to             |   |                                                                        |
| Other  filings are listed on the Exhibit Index, which is incorporated herein by  reference. |   |                                                                        |

 

45

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** **

**SCHEDULE II—VALUATION AND QUALIFYINGACCOUNTS**

**ALLOWANCEFOR DOUBTFUL ACCOUNTS AND RETURNS**

**YearsEnded, 2005, 2004 and 2003**
| ** **          | ** ** | ** **                                   | ** ** |
|---------------------|------------|----------------------------------------------|------------|
| ** **          | ** ** | ** **                                   | ** ** | **Additions** | ** ** | ** ** | ** ** |
| **Year Ended** | ** ** | **Balance at  Beginning  of Year** | ** ** | **(Charged to  Costs and  Expenses)** | ** ** | **Recoveries** | ** ** | **Deductions** | ** ** | **Balance at  End of  Year** | ** ** |
| ** **          | ** ** | **(in thousands)**                      | ** ** |
| December 31, 2005   |       | $                                            | —     |   | 80 |   | — |   | — |   | $ | 80 |   |
| December 31, 2004   |       | $                                            | —     |   | — |   | — |   | — |   | $ | — |   |
| December  31, 2003  |       | $                                            | —     |   | — |   | — |   | — |   | $ | — |   |

** **

** **

F-1

----

** **

**INDEX TO FINANCIAL STATEMENTS**
|                                                                                                                                                                                    |   | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| Report of Independent  Registered Public Accounting Firm (Rothstein, Kass & Company, P.C.)                                                                                     |   | F-3    |
|                                                                                                                                                                               |   |   |
| Report of Independent  Registered Public Accounting Firm (Morgan and Company)                                                                                                      |   | F-4    |
|                                                                                                                                                                               |   |   |
| Consolidated Balance  Sheets as of December 31, 2005 and 2004                                                                                                                      |   | F-5    |
|                                                                                                                                                                               |   |   |
| Consolidated  Statements of Operations for the years ended December 31, 2005, 2004 and 2003  and the period from inception, May 13, 1996 to December 31, 2005                 |   | F-6    |
|                                                                                                                                                                               |   |   |
| Consolidated  Statements of Stockholders’ Equity for the years ended December 31, 2005,  2004 and 2003 and the period from inception, May 13, 1996 to  December 31, 2005 |   | F-7    |
|                                                                                                                                                                               |   |   |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003  and the period from inception, May 13, 1996 to December 31, 2005                 |   | F-9    |
|                                                                                                                                                                               |   |   |
| Notes to  Consolidated Financial Statements                                                                                                                                        |   |   |

 

F-2

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

To the Board of Directorsand Stockholders of****Tasker Capital Corp. and Subsidiaries

We have audited the accompanying consolidated balancesheets of Tasker Capital Corp. and Subsidiaries (a development stage company)as of December 31, 2005 and 2004, and the related consolidated statements ofoperations, stockholders’ equity, and cash flows for each of the years thenended. These consolidated financial statements are the responsibility of theCompany’s management.  Our responsibilityis to express an opinion on these consolidated financial statements based onour audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Ouraudits included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of Tasker Capital Corp. and Subsidiaries (a development stage company)as of December 31, 2005 and 2004, and the results of their operations and theircash flows for each of the years then ended, in conformity with accountingprinciples generally accepted in the United States of America.
|        |                                     |
|--------|------------------------------------------|
|   | /s/ Rothstein,  Kass & Company, P.C. |

 

Roseland, New Jersey****March 9, 2006 except for Note 1A,as to which the date is May 31, 2006

F-3

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Stockholders andDirectors of****Tasker CapitalCorp.(A Development Stage Company)

We have audited the accompanying consolidated balancesheet of Tasker Capital Corp. (a development stage company) as atDecember 31, 2003 and the related consolidated statements of operations,stockholders’ equity, and cash flows for the year then ended, and for theperiod from inception, May 13, 1996, to December 31, 2003. These consolidatedfinancial statements are the responsibility of the Company**’**smanagement.  Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudit.

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform an audit to obtain reasonable assurance whether theconsolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the consolidated financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our auditprovides a reasonable basis for our opinion.

In our opinion, these consolidated financialstatements present fairly, in all material respects, the financial position ofthe Company as at December 31, 2003 and the results of its operations andits cash flows for the year ended December 31, 2003 and for the period frominception, May 13, 1996, to December 31, 2003, in conformity with United Statesgenerally accepted accounting principles.

The accompanying consolidated financial statementshave been prepared assuming that the Company will continue as a goingconcern.  As discussed in Note 1 to theconsolidated financial statements, the Company has suffered recurring lossesand net cash outflows from operations since inception.  These factors raise substantial doubt aboutthe Company’s ability to continue as a going concern. Management’s plans inregard to these matters are also discussed in Note 1.  These consolidated financial statements donot include any adjustments that might result from the outcome of thisuncertainty.
|                   | /s/ Morgan and Company |   |
|-------------------|------------------------|--------|
|              |                   |
|              |                   |
| Vancouver, Canada |
| March 24, 2004    |

 

F-4

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**TASKER PRODUCTS CORP. AND SUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATED BALANCE SHEETS**
| ** **                                                                                                                                                              | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                              | ** ** | **2005**              | ** ** | **2004** | ** ** |
| ASSETS                                                                                                                                                                  |       |                  |       |   |   |
| Current assets:                                                                                                                                                         |       |                  |       |   |   |
| Cash and cash  equivalents                                                                                                                                              |       | $                     | 1,037,250  |   | $ | 14,225,305 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $79,500 and $0 as of  December 31, 2005 and 2004, respectively                                |       | 155,189               |       | — |   |
| Notes receivable                                                                                                                                                        |       | 653,958               |       | 575,961 |   |
| Inventories, net  of reserve of $74,675 and $0 as of December 31, 2005 and 2004, respectively                                                                           |       | 1,350,963             |       | 99,798 |   |
| Prepaid expenses                                                                                                                                                        |       | 27,377                |       | 442,332 |   |
| Prepaid  commissions                                                                                                                                                    |       | 163,850               |       | 125,000 |   |
| Total current  assets                                                                                                                                                   |       | 3,388,587             |       | 15,468,396 |   |
| Property and equipment,  net                                                                                                                                            |       | 1,525,142             |       | 101,377 |   |
| Prepaid royalties and  license costs                                                                                                                                    |       | —                |       | 1,179,862 |   |
| Investment in equity  investee                                                                                                                                          |       | 664,737               |       | — |   |
| Intangible assets, net                                                                                                                                                  |       | 21,562,292            |       | — |   |
| Goodwill                                                                                                                                                                |       | 41,677,180            |       | — |   |
| Deposit, net                                                                                                                                                            |       | 36,081                |       | 17,232 |   |
| Total assets                                                                                                                                                            |       | $                     | 68,854,019 |   | $ | 16,766,867 |   |
|                                                                                                                                                                    |       |                  |       |   |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                              |       |                  |       |   |   |
| Current liabilities:                                                                                                                                                    |       |                  |       |   |   |
| Convertible  debentures                                                                                                                                                 |       | $                     | 194,000    |   | $ | 436,980 |   |
| Accounts payable                                                                                                                                                        |       | 1,740,245             |       | 148,651 |   |
| Notes payable -  acquisition of IRL                                                                                                                                     |       | 445,840               |       | — |   |
| Other accrued  liabilities                                                                                                                                              |       | 1,377,007             |       | 548,946 |   |
| Other current  liabilities                                                                                                                                              |       | 234,580               |       | — |   |
| Total current  liabilities                                                                                                                                              |       | 3,991,672             |       | 1,134,577 |   |
| Long-term liabilities:                                                                                                                                                  |       |                  |       |   |   |
| Notes payable -  shareholders                                                                                                                                           |       | 443,790               |       | 458,652 |   |
| Notes payable -  acquisition of IRL                                                                                                                                     |       | 1,077,447             |       | — |   |
| Other long-term  liabilities                                                                                                                                            |       | 52,686                |       | — |   |
| Accrued  royalties                                                                                                                                                      |       | —                |       | 930,000 |   |
| Total long-term  liabilities                                                                                                                                            |       | 1,573,923             |       | 1,388,652 |   |
| Stockholders’ equity:                                                                                                                                              |       |                  |       |   |   |
| Common stock,  $0.001 par value; 300,000,000 shares authorized; 89,167,095 and 48,863,740  shares issued and outstanding as of December 31, 2005 and 2004, respectively |       | 89,167                |       | 48,864 |   |
| Additional  paid-in capital                                                                                                                                             |       | 89,265,154            |       | 8,115,298 |   |
| Common stock  subscribed                                                                                                                                                |       |                  |       | 13,876,745 |   |
| Deficit  accumulated during the development stage                                                                                                                       |       | (26,065,897           | )          | (7,797,269 | ) |
| Total  stockholders’ equity                                                                                                                                        |       | 63,288,424            |       | 14,243,638 |   |
| Total liabilities and  stockholders’ equity                                                                                                                        |       | $                     | 68,854,019 |   | $ | 16,766,867 |   |

**The accompanying notes are anintegral part of these consolidated financial statements.**

F-5

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**TASKER PRODUCTS CORP. ANDSUBSIDIARIES**

**(ADEVELOPMENT STAGE COMPANY)**

**CONSOLIDATED STATEMENTS OF OPERATIONS**
| ** **                                                     | ** ** | **December 31,** | ** **  | **“Restated” May  13, 1996  (inception) to  December 31,** | ** ** |
|----------------------------------------------------------------|------------|-----------------------|-------------|------------------------------------------------------------------------------------------|------------|
| ** **                                                     | ** ** | **2005**              | ** **  | **2004**                                                                                 | ** ** | **2003** | ** ** | **2005** | ** ** |
| Revenues                                                       |       | $                     | 705,467     |                                                                                     | $          | — |   | $ | — |   | $ | 705,467 |   |
| Cost of goods  sold                                            |       | 1,308,111             |        | —                                                                                   |       | — |   | 1,308,111 |   |
| Gross margin                                                   |       | (602,644              | )           | —                                                                                   |       | — |   | (602,644 | ) |
| Expenses                                                       |       |                  |        |                                                                                     |       |   |   |   |   |
| Selling, general & administrative                          |       | 11,905,205            |        | 1,963,867                                                                                |       | 397,954 |   | 15,368,970 |   |
| Product development                                            |       | 3,356,113             |        | 1,374,780                                                                                |       | 89,124 |   | 4,820,017 |   |
| Depreciation and amortization                                  |       | 1,099,859             |        | 28,848                                                                                   |       | 13,638 |   | 1,142,345 |   |
| Total Expenses                                                 |       | 16,361,177            |        | 3,367,495                                                                                |       | 500,716 |   | 21,331,332 |   |
| Loss From  Operations                                          |       | (16,963,821           | )           | (3,367,495                                                                               | )          | (500,716 | ) | (21,933,976 | ) |
| Other income  (expense):                                       |       |                  |        |                                                                                     |       |   |   |   |   |
| Interest expense, net                                          |       | (85,333               | )           | (2,729,890                                                                               | )          | (113,252 | ) | (2,950,824 | ) |
| Loss on equity investee                                        |       | (53,263               | )           | —                                                                                   |       | — |   | (53,263 | ) |
| Liquidated damages                                             |       | (285,706              | )           | —                                                                                   |       | — |   | (285,706 | ) |
| Other                                                          |       | (880,505              | )           | 25,770                                                                                   |       | 6,888 |   | (842,128 | ) |
| Total other  expense, net                                      |       | (1,304,807            | )           | (2,704,120                                                                               | )          | (106,364 | ) | (4,131,921 | ) |
| Net loss                                                       |       | $                     | (18,268,628 | )                                                                                        | $          | (6,071,615 | ) | $ | (607,080 | ) | $ | (26,065,897 | ) |
| Net loss per  common share, basic and diluted                  |       | $                     | (0.25       | )                                                                                        | $          | (0.26 | ) | $ | (0.05 | ) | $ | (1.42 | ) |
| Weighted average common  shares outstanding, basic and diluted |       | 73,549,000            |        | 23,597,000                                                                               |       | 13,003,000 |   | 18,329,000 |   |

**The accompanying notes are anintegral part of these consolidated financial statements.**

F-6

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**TASKER PRODUCTS CORP. ANDSUBSIDIARIES**

**(ADEVELOPMENT STAGE COMPANY)**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(DEFICIT)**
| ** **                                                          | ** ** | **COMMON STOCK** | ** ** | **ACCUMULATED  OTHER** | ** ** | ** **     | ** ** | **DEFICIT  ACCUMULATED** | ** ** | ** **            | ** ** |
|---------------------------------------------------------------------|------------|-----------------------|------------|------------------------|------------|----------------|------------|--------------------------|------------|-----------------------|------------|
| ** **                                                          | ** ** | ** **            | ** ** | ** **             | ** ** | **ADDITIONAL** | ** ** | **COMPREHENSIVE**        | ** ** | ** **            | ** ** | **DURING THE** | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | **NUMBER OF**    | ** ** | ** **             | ** ** | **PAID-IN**    | ** ** | **INCOME**               | ** ** | **COMMON STOCK** | ** ** | **DEVELOPMENT** | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | **SHARES**            | ** ** | **AMOUNT**             | ** ** | **CAPITAL**    | ** ** | **(LOSS)**               | ** ** | **SUBSCRIBED**        | ** ** | **STAGE** | ** ** | **TOTAL** | ** ** |
| Issuance of common stock                                            |       | 10                    |       | —                 |       | $              | 1          |                     | $          | —                |       | $ | — |   | $ | — |   | $ | 1 |   |
| Net loss                                                            |       |                  |       |                   |       |           |       |                     |       |                  |       | (14,237 | ) | (14,237 | ) |
| Balance, December 31,  1996                                         |       | 10                    |       |                   |       | 1              |       |                     |       |                  |       | (14,237 | ) | (14,236 | ) |
| Issuance of common stock                                            |       | 17,500,000            |       | 17,500                 |       | 168,407        |       |                     |       |                  |       |   |   | 185,907 |   |
| Translation adjustment                                              |       |                  |       |                   |       |           |       | (743                     | )          |                  |       |   |   | (743 | ) |
| Net loss                                                            |       |                  |       |                   |       |           |       |                     |       |                  |       | (143,437 | ) | (143,437 | ) |
| Balance, December 31,  1997                                         |       | 17,500,010            |       | 17,500                 |       | 168,408        |       | (743                     | )          |                  |       | (157,674 | ) | 27,491 |   |
| Cancellation of common  stock                                       |       | (7,500,000            | )          | (7,500                 | )          | 7,500          |       |                     |       |                  |       |   |   | — |   |
| Translation adjustment                                              |       |                  |       |                   |       |           |       | (579                     | )          |                  |       |   |   | (579 | ) |
| Net loss                                                            |       |                  |       |                   |       |           |       |                     |       |                  |       | (45,387 | ) | (45,387 | ) |
| Balance, December 31,  1998                                         |       | 10,000,010            |       | 10,000                 |       | 175,908        |       | (1,322                   | )          |                  |       | (203,061 | ) | (18,475 | ) |
| Issuance of common stock                                            |       | 1,000,000             |       | 1,000                  |       | 15,844         |       |                     |       |                  |       |   |   | 16,844 |   |
| Reverse merger  transaction                                         |       | 262,000               |       | 262                    |       | (262           | )          |                     |       |                  |       | (295 | ) | (295 | ) |
| Translation adjustment                                              |       |                  |       |                   |       |           |       | (1,116                   | )          |                  |       |   |   | (1,116 | ) |
| Net loss                                                            |       |                  |       |                   |       |           |       |                     |       |                  |       | (34,518 | ) | (34,518 | ) |
| Balance, December 31,  1999                                         |       | 11,262,010            |       | 11,262                 |       | 191,490        |       | (2,438                   | )          |                  |       | (237,874 | ) | (37,560 | ) |
| Translation adjustment                                              |       |                  |       |                   |       |           |       | 2,230                    |       |                  |       |   |   | 2,230 |   |
| Net loss                                                            |       |                  |       |                   |       |           |       |                     |       |                  |       | (60,388 | ) | (60,388 | ) |
| Balance, December 31,  2000                                         |       | 11,262,010            |       | 11,262                 |       | 191,490        |       | (208                     | )          |                  |       | (298,262 | ) | (95,718 | ) |
| Translation adjustment                                              |       |                  |       |                   |       |           |       | 7,236                    |       |                  |       |   |   | 7,236 |   |
| Net loss                                                            |       |                  |       |                   |       |           |       |                     |       |                  |       | (59,060 | ) | (59,060 | ) |
| Balance, December 31,  2001                                         |       | 11,262,010            |       | 11,262                 |       | 191,490        |       | 7,028                    |       |                  |       | (357,322 | ) | (147,542 | ) |
| Issuance of common stock                                            |       | 524,850               |       | 525                    |       | 210,193        |       |                     |       |                  |       |   |   | 210,718 |   |
| Warrants issued for  license                                        |       | —                |       |                   |       | 42,344         |       |                     |       |                  |       |   |   | 42,344 |   |
| Warrants issued for  services                                       |       | —                |       |                   |       | 558,935        |       |                     |       |                  |       |   |   | 558,935 |   |
| Warrants issued                                                     |       | —                |       |                   |       | 13,956         |       |                     |       |                  |       |   |   | 13,956 |   |
| Translation adjustment                                              |       | —                |       |                   |       |           |       | (7,028                   | )          |                  |       |   |   | (7,028 | ) |
| Net loss                                                            |       | —                |       |                   |       |           |       |                     |       |                  |       | (761,252 | ) | (761,252 | ) |
| Balance, December 31,  2002                                         |       | 11,786,860            |       | 11,787                 |       | 1,016,918      |       |                     |       |                  |       | (1,118,574 | ) | (89,869 | ) |
| Issuance of common stock                                            |       | 660,000               |       | 660                    |       | 164,340        |       |                     |       |                  |       |   |   | 165,000 |   |
| Issuance of common stock                                            |       | 1,408,940             |       | 1,409                  |       | 350,826        |       |                     |       |                  |       |   |   | 352,235 |   |
| Shares issued for debt                                              |       | 655,000               |       | 655                    |       | 171,931        |       |                     |       |                  |       |   |   | 172,586 |   |
| Share subscriptions                                                 |       | —                |       | —                 |       | —         |       |                     |       | 27,980                |       |   |   | 27,980 |   |
| Net loss                                                            |       | —                |       | —                 |       | —         |       |                     |       |                  |       | (607,080 | ) | (607,080 | ) |
| Balance, December 31,  2003                                         |       | 14,510,800            |       | 14,511                 |       | 1,704,015      |       |                     |       | 27,980                |       | (1,725,654 | ) | 20,852 |   |
| Private placement, net  of costs                                    |       | —                |       | —                 |       |           |       |                     |       | 13,867,370            |       |   |   | 13,867,370 |   |
| Warrants and embedded  conversion option associated with debentures |       | —                |       | —                 |       | 2,184,600      |       |                     |       |                  |       |   |   | 2,184,600 |   |
|                                                                     |            |                       |            |                        |            |                |            |                          |            |                       |            |  |  |  |  |  |  |  |  |  |

 

F-7

----

 
| ** **                                                   | ** ** | **COMMON STOCK** | ** ** | **ACCUMULATED** | ** ** | ** **     | ** ** | **DEFICIT  ACCUMULATED** | ** ** | ** **            | ** ** |
|--------------------------------------------------------------|------------|-----------------------|------------|-----------------|------------|----------------|------------|--------------------------|------------|-----------------------|------------|
| ** **                                                   | ** ** | ** **            | ** ** | ** **      | ** ** | **ADDITIONAL** | ** ** | **OTHER**                | ** ** | ** **            | ** ** | **DURING THE** | ** ** | ** ** | ** ** |
| ** **                                                   | ** ** | **NUMBER OF**    | ** ** | ** **      | ** ** | **PAID-IN**    | ** ** | **COMPREHENSIVE**        | ** ** | **COMMON STOCK** | ** ** | **DEVELOPMENT** | ** ** | ** ** | ** ** |
| ** **                                                   | ** ** | **SHARES**            | ** ** | **AMOUNT**      | ** ** | **CAPITAL**    | ** ** | **INCOME (LOSS)**        | ** ** | **SUBSCRIBED**        | ** ** | **STAGE** | ** ** | **TOTAL** | ** ** |
| Debentures and accrued  interest converted to common stock   |       | 18,161,937            |       | 18,162          |       | 1,998,205      |       |                     |       |                  |       |   |   | 2,016,367 |   |
| Exercise of warrants                                         |       | 14,491,003            |       | 14,491          |       | 1,153,059      |       |                     |       |                  |       |   |   | 1,167,550 |   |
| Stock-based compensation                                     |       | —                |       | —          |       | 373,000        |       |                     |       |                  |       |   |   | 373,000 |   |
| Common stock, warrants  and options issued for services      |       | 1,700,000             |       | 1,700           |       | 702,419        |       |                     |       | (18,605               | )          |   |   | 685,514 |   |
| Net loss                                                     |       |                  |       |            |       |           |       |                     |       |                  |       | (6,071,615 | ) | (6,071,615 | ) |
|                                                         |       |                  |       |            |       |           |       |                     |       |                  |       |   |   |   |   |
| Balance, December 31,  2004                                  |       | 48,863,740            |       | 48,864          |       | 8,115,298      |       | —                   |       | 13,876,745            |       | (7,797,269 | ) | 14,243,638 |   |
|                                                         |       |                  |       |            |       |           |       |                     |       |                  |       |   |   |   |   |
| Shares issued for prior  year private placement              |       | 9,406,250             |       | 9,406           |       | 13,918,113     |       |                     |       | (13,876,745           | )          |   |   | 50,774 |   |
| Private placement, net  of costs                             |       | 2,947,545             |       | 2,948           |       | 6,431,652      |       |                     |       |                  |       |   |   | 6,434,600 |   |
| Debentures and accrued  interest converted to common stock   |       | 4,089,900             |       | 4,090           |       | 238,890        |       |                     |       |                  |       |   |   | 242,980 |   |
| Note payable and accrued  interest converted to common stock |       | 32,272                |       | 32              |       | 32,240         |       |                     |       |                  |       |   |   | 32,272 |   |
| Exercise of warrants and  stock options                      |       | 4,835,000             |       | 4,835           |       | 229,915        |       |                     |       |                  |       |   |   | 234,750 |   |
| Stock-based compensation                                     |       | —                |       | —          |       | 484,000        |       |                     |       |                  |       |   |   | 484,000 |   |
| Common stock, warrants  and options issued for services      |       | —                |       |            |       | 3,100,950      |       |                     |       |                  |       |   |   | 3,100,950 |   |
| Shares issued as part  consideration for assets acquired     |       | 18,992,388            |       | 18,992          |       | 56,958,171     |       |                     |       |                  |       |   |   | 56,977,163 |   |
| Registration rights  derivative liability                    |       | —                |       | —          |       | (244,075       | )          |                     |       |                  |       |   |   | (244,075 | ) |
| Net loss                                                     |       | —                |       | —          |       | —         |       |                     |       |                  |       | (18,268,628 | ) | (18,268,628 | ) |
|                                                         |       |                  |       |            |       |           |       |                     |       |                  |       |   |   |   |   |
| Balance, December 31, 2005                                   |       | 89,167,095            |       | $               | 89,167     |           | $          | 89,265,154               |       | $                     | —     |   | $ | — |   | $ | (26,065,897 | ) | $ | 63,288,424 |   |
|                                                              |            |                       |            |                 |            |                |            |                          |            |                       |            |  |  |  |  |  |  |  |  |  |  |

**The accompanying notes are anintegral part of these consolidated financial statements.**

F-8

----

**TASKER PRODUCTS CORP. ANDSUBSIDIARIES**

**(A DEVELOPMENT STAGE COMPANY)**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**
| ** **                                                                      | ** ** | **December 31,** | ** **  | **May 13, 1996  (inception) to ** | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------|-------------|-------------------------------------------------------|------------|
| **Cash flows from operating activities:**                   | ** ** | **2005**              | ** **  | **2004**                                              | ** ** | **2003** | ** ** | **December 31, 2005** | ** ** |
| Net loss                                                                        |       | $                     | (18,268,628 | )                                                     | $          | (6,071,615 | ) | $ | (607,080 | ) | $ | (26,065,897 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:    |       |                  |        |                                                  |       |   |   |   |   |
| Depreciation and  amortization                                                  |       | 1,099,859             |        | 28,848                                                |       | 13,638 |   | 1,142,345 |   |
| Noncash interest                                                                |       | 84,987                |        | 2,661,210                                             |       | 78,636 |   | 2,832,182 |   |
| Stock-based  compensation                                                       |       | 484,000               |        | 373,000                                               |       |   |   | 1,415,935 |   |
| Allowance for  uncollectible accounts receivable                                |       | 80,000                |        |                                                  |       |   |   | 80,000 |   |
| Allowance for  uncollectible note receivable                                    |       | 890,000               |        |                                                  |       |   |   | 890,000 |   |
| Loss on equity  investee                                                        |       | 53,263                |        |                                                  |       |   |   | 53,263 |   |
| Fair value  adjustment for registration rights derivative liability             |       | (9,495                | )           |                                                  |       |   |   | (9,495 | ) |
| Common stock,  warrants and options for services                                |       | 3,079,973             |        | 685,514                                               |       |   |   | 3,765,487 |   |
| Changes in  operating assets and liabilities:                                   |       |                  |        |                                                  |       |   |   |   |   |
| Accounts receivable                                                             |       | (227,211              | )           |                                                  |       |   |   | (227,211 | ) |
| Inventories                                                                     |       | (1,210,119            | )           | (99,798                                               | )          |   |   | (1,309,917 | ) |
| Prepaid expenses                                                                |       | (236,763              | )           | (382,191                                              | )          | (60,140 | ) | (679,095 | ) |
| Prepaid commissions                                                             |       | (38,850               | )           | (125,000                                              | )          |   |   | (163,850 | ) |
| Prepaid royalties                                                               |       | —                |        | 65,000                                                |       | (5,000 | ) | — |   |
| Accounts payable                                                                |       | 1,591,594             |        | 62,755                                                |       | 54,223 |   | 1,863,667 |   |
| Accrued royalties                                                               |       |                  |        | (70,000                                               | )          |   |   | (70,000 | ) |
| Other accrued liabilities                                                       |       | 781,461               |        | 493,945                                               |       | 55,000 |   | 1,330,407 |   |
| Net cash used in  operating activities                                          |       | (11,845,929           | )           | (2,378,332                                            | )          | (470,723 | ) | (15,152,179 | ) |
| Cash flows from  investing activities:                                          |       |                  |        |                                                  |       |   |   |   |   |
| Cash payments  made as part consideration for assets acquired                   |       | (2,581,808            | )           |                                                  |       |   |   | (2,581,808 | ) |
| Purchases of  property and equipment                                            |       | (824,278              | )           | (112,074                                              | )          | (2,819 | ) | (939,171 | ) |
| Advances pursuant  to notes                                                     |       | (3,510,628            | )           | (400,000                                              | )          | (127,265 | ) | (4,102,893 | ) |
| Purchase of  license                                                            |       | —                |        | —                                                |       | — |   | (160,000 | ) |
| Investment in  equity investee                                                  |       | (718,000              | )           |                                                  |       |   |   | (718,000 | ) |
| Payments for  deposits and other                                                |       | (18,849               | )           | (18,220                                               | )          | (2,750 | ) | (42,569 | ) |
| Net cash used in  investing activities                                          |       | (7,653,563            | )           | (530,294                                              | )          | (132,834 | ) | (8,544,441 | ) |
| Cash flows from  financing activities:                                          |       |                  |        |                                                  |       |   |   |   |   |
| Proceeds from  private placements, net                                          |       | 6,434,599             |        | 13,867,370                                            |       | 545,215 |   | 21,049,936 |   |
| Proceeds from  convertible debentures, net                                      |       | —                |        | 2,065,532                                             |       |   |   | 2,065,532 |   |
| Proceeds from  other notes payable, net                                         |       |                  |        |                                                  |       |   |   | 524,850 |   |
| Exercise of  warrants/options                                                   |       | 285,750               |        | 1,167,550                                             |       |   |   | 1,453,300 |   |
| Repayments on  note payable - IRL                                               |       | (408,686              | )           |                                                  |       |   |   | (408,686 | ) |
| Other                                                                           |       | (226                  | )           |                                                  |       |   |   | 48,938 |   |
| Net cash provided  by financing activities                                      |       | 6,311,437             |        | 17,100,452                                            |       | 545,215 |   | 24,733,870 |   |
| Net increase  (decrease) in cash and cash equivalents                           |       | (13,188,055           | )           | 14,191,826                                            |       | (58,342 | ) | 1,037,250 |   |
| Cash and cash  equivalents, beginning of period                                 |       | 14,225,305            |        | 33,479                                                |       | 91,821 |   |   |   |
| Cash and cash  equivalents, end of period                                       |       | $                     | 1,037,250   |                                                  | $          | 14,225,305 |   | $ | 33,479 |   | $ | 1,037,250 |   |
| Supplemental  disclosures of cash flow information:                             |       |                  |        |                                                  |       |   |   |   |   |
| Interest paid                                                                   |       | $                     | 185,783     |                                                  | $          | 27,242 |   | $ | — |   | $ | 185,783 |   |
| Supplemental  disclosures of noncash investing and financing activities:        |       |                  |        |                                                  |       |   |   |   |   |
| Conversion of  debt and accrued interest into common stock                      |       | $                     | 291,930     |                                                  | $          | 2,016,367 |   | $ | 172,586 |   | $ | 2,480,883 |   |
| Warrants issued  and embedded conversion feature associated with debt financing |       | $                     | —      |                                                  | $          | 2,184,600 |   | $ | — |   | $ | 2,184,600 |   |
| Vehicle purchased  via note payable                                             |       | $                     | 56,916      |                                                  | $          | — |   | $ | — |   | $ | 56,916 |   |
| Warrants issued for  license                                                    |       | $                     | —      |                                                  | $          | — |   | $ | — |   | $ | 42,344 |   |

** **

F-9

----

**Thefollowing schedule summarizes the acquisition of the certain assets of theSelling Entities included in the condensed consolidated statement of cash flowsas cash paid for acquisition of the assets of the Selling Entities:**
| Fair value of assets  acquired |   | $           | 64,929,000 |   |
|--------------------------------|--------|-------------|------------|--------|
| Cash paid                      |   | (1,428,000  | )          |
| Common stock  issued           |   | (56,977,164 | )          |
| Note issued                    |   | (1,931,973  | )          |
| Notes cancelled                |   | (2,542,631  | )          |
| Acquisition  costs             |   | (1,420,840  | )          |
| Liabilities assumed            |   | $           | 628,392    |   |

The accompanying notesare an integral part of these consolidated financial statements.

F-10

----

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

# **1.             NATURE OF OPERATIONS**

Tasker CapitalCorp. and its subsidiaries (collectively, “the Company” or “Tasker”)manufactures, distributes and markets products using pHarlo technology, theprocess by which it manufactures, distributes and markets a variety of productsthat utilize a solution that enables copper sulfate, a compound withbacteriostatic properties, to remain active throughout a wide range of pHvalues.  The Company currently marketsClose CallTM, an oral hygiene breath drink, Unifresh® Footbath, a grooming aidfor dairy cows, and Tasker Pacific BlueTM Seafood Wash, a product used incommercial and retail seafood processing to extend shelf life and removeodors.  The Company has begun thein-plant commercial verification process for United States Department ofAgriculture (the “USDA”) approval to use the pHarlo technology in the scalderprocess of poultry processing.  TheCompany is in the process of conducting tests of the pHarlo technology in otherpre- and post-harvest food processing applications including seafood andpoultry farming. The Company is also in various stages of developing futureproduct lines using the pHarlo technology in the skin care and pet productindustries.  On December 7, 2005 theCompany announced that it intended to concentrate its efforts on thedevelopment of its poultry processing products, its seafood processing productsand its Unifresh® Footbath and Unifresh® Pen Spray products.  The Company also announced that it intendedto seek to license and/or sell the Close CallÔbrand and derivative applications.  As aresult of this refocusing effort, the Company has suspended its developmentefforts in other areas.

As a result ofthe acquisition (the “2005 Acquisition”) by the Company of certain assets ofpHarlo Citrus Technologies, Inc. (“PCTI”), Indian River Labs, LLC (“IRL”),pHarlo Citrus Properties Partnership, LLLP (“PCPP”), and Coast to CoastLaboratories, LLC (“C2C,**”** and togetherwith PCTI, PCPP and IRL, the “Selling Entities”) in July 2005 (see Note 12),the Company now owns the utility patent applications and provisional patentapplications associated with the pHarlo technology in the Company’s field ofuse, and has entered into a new sub-license agreement for the base patentsassociated with the pHarlo technology.

The Company isin the development stage; therefore, recovery of its assets is dependent uponfuture events, the outcome of which is indeterminable at this time.

**1A.**     RESTATEMENT

The Companyhas restated its consolidated financial statements, as previously reported inits Form 10-KSB filed on March 31, 2006, for the error described below. In May 2006,management discovered a mathematical error within the selling, general andadministrative, product development, depreciation and amortization, interestexpense, net and liquidated damages classifications reported in the Inceptionto Date column of the consolidated financial statements. The mathematical errordid not affect the years ended December 31, 2005, 2004, or 2003, nor did affectthe subtotals and totals of the Inception to Date column. Specifically, totalexpenses, loss from operations, net loss and net loss per share data aspreviously reported in the Inception column were not affected by the mathematicalerror.

Following is areconciliation of selling, general and administrative, product development,depreciation and amortization, interest expense, net and liquidated damagesaccounts as previously reported in the Company’s Form 10-KSB for the year endedDecember 31, 2005, filed on March 31, 2006, to selling, general andadministrative, product development, depreciation and amortization, interestexpense, net and liquidated damages accounts as reported in the accompanying consolidatedstatement of operations:

F-11

----

 
| ** **                                                     | ** ** | **“As Reported”  May 13, 1996  (inception) to  December 31,   2005** | ** **  | **Adjustments** | ** ** | **“Restated”  May 13, 1996  (inception) to  December 31,  2005** | ** ** |
|----------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|-------------|-----------------|------------|------------------------------------------------------------------------------------------------|------------|
| Revenues                                                       |       | $                                                                                                            | 705,467     |            | $          | —                                                                                         |       | $ | 705,467 |   |
| Cost of goods  sold                                            |       | 1,308,111                                                                                                    |        | —          |       | 1,308,111                                                                                      |       |
| Gross margin                                                   |       | (602,644                                                                                                     | )           | —          |       | (602,644                                                                                       | )          |
| Expenses                                                       |       |                                                                                                         |        |            |       |                                                                                           |       |
| Selling, general  & administrative                         |       | 12,104,870                                                                                                   |        | 3,264,100       |       | 15,368,970                                                                                     |       |
| Product  development                                           |       | 3,685,662                                                                                                    |        | 1,134,355       |       | 4,820,017                                                                                      |       |
| Depreciation and  amortization                                 |       | 1,366,066                                                                                                    |        | (223,721        | )          | 1,142,345                                                                                      |       |
| Total Expenses                                                 |       | 21,331,332                                                                                                   |        | —          |       | 21,331,332                                                                                     |       |
| Loss From  Operations                                          |       | (21,933,976                                                                                                  | )           | —          |       | (21,933,976                                                                                    | )          |
| Other income  (expense):                                       |       |                                                                                                         |        |            |       |                                                                                           |       |
| Interest  expense, net                                         |       | (85,333                                                                                                      | )           | (2,865,491      | )          | (2,950,824                                                                                     | )          |
| Loss on equity  investee                                       |       | (53,263                                                                                                      | )           | —          |       | (53,263                                                                                        | )          |
| Liquidated  damages                                            |       | (3,151,197                                                                                                   | )           | 2,865,491       |       | (285,706                                                                                       | )          |
| Other                                                          |       | (842,128                                                                                                     | )           | —          |       | (842,128                                                                                       | )          |
| Total other  expense, net                                      |       | (4,131,921                                                                                                   | )           | —          |       | (4,131,921                                                                                     | )          |
| Net loss                                                       |       | $                                                                                                            | (26,065,897 | )               | —     |                                                                                           | $          | (26,065,897 | ) |
| Net loss per  common share, basic and diluted                  |       | $                                                                                                            | (1.42       | )               | —     |                                                                                           | $          | (1.42 | ) |
| Weighted average common  shares outstanding, basic and diluted |       | 18,329,000                                                                                                   |        | —          |       | 18,329,000                                                                                     |       |
|                                                                |            |                                                                                                              |             |                 |            |                                                                                                |            |  |  |  |

 

# **2.             SIGNIFICANT ACCOUNTING POLICIES**

**Basisof Presentation:**

In March 1999,Tasker, organized as a Nevada corporation in February 1999, and Tanuta VenturesCorp. (“Tanuta”), incorporated under the laws of the Province of BritishColumbia, Canada in May 1996, entered into a share exchange agreement wherebyTasker agreed to purchase all of the 11,000,010 outstanding common shares ofTanuta in exchange for 11,000,010 common shares of Tasker.  Since the former shareholders of Tanutacontrolled Tasker after the transaction, the merger was accounted for asreverse acquisition under which, for accounting purposes, Tanuta was deemed theaccounting acquirer and Tasker was deemed to be the acquired entity.  Under these accounting principles, thepost-merger company financial statements represented Tanuta on a historicalbasis consolidated with the results of operations of Tasker from the March 1999effective date of the merger.

**Principlesof Consolidation:**

The consolidatedfinancial statements include the accounts of Tanuta from May 13, 1996 (date ofTanuta’s inception) to December 31, 2005. The consolidated financial statements also include the accounts ofTasker from March 31, 1999 (the effective date of the reverse merger) toDecember 31, 2005.  All significantintercompany balances and transactions have been eliminated in consolidation.

**DevelopmentStage Company:**

The Company isa development stage company as defined in the Statements of FinancialAccounting Standards (“SFAS”) No. 7. The Company is devoting substantially allof its present efforts to establish a new business and with the exceptions ofits brands Close CallTM, and Unifresh® Footbath, none of its planned principaloperations had commenced as of December 31, 2005.  All losses accumulated until that time wereconsidered as part of the Company’s development stage activities.

F-12

----

**Use ofEstimates:**

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements as well as the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.

**FairValue of Financial instruments:**

The fairvalues of the Company’s asset and liabilities that qualify as financialinstruments under SFAS No. 107, “Disclosures about Fair Value of FinancialInstruments,**”** approximate their carryingamounts presented in the accompanying consolidated balance sheet atDecember 31, 2005.

**Cashand Cash Equivalents:**

The Companyconsiders all highly liquid investments with an original maturity of threemonths or less to be cash equivalents. The Company maintains its cash primarily in one financial institutionwhich, at times, exceeds Federal Deposit Insurance Corporation (“FDIC”) insuredlimits.  The Company has not incurred anylosses in such accounts and believes it is not exposed to any significantcredit risk on cash. As of December 31, 2005 and 2004, the Company hadapproximately $1.0 million and $14.2 million in cash and cash equivalents,respectively.

**Liquidity:**

The Companyhas continued to sustain losses from operations and for the years endedDecember 31, 2005, 2004 and 2003 it has incurred losses of approximately$18,269,000, $6,072,000 and $607,000, respectively. In addition, the Companyhas not generated positive cash flows from operations for the years endedDecember 31, 2005, 2004 and 2003.

Based uponmanagement’s current twelve month forecast of future revenues from its productlines in conjunction with the January 2006 Private Placement, in which theCompany received proceeds of $8.7 million, net of placement agent fees, asdescribed in Note 21(b), the Company believes that cash on hand, cash expectedto be generated from operations and the currently ongoing reductions inadministrative costs will provide adequate flexibility for funding the Company’sworking capital over the next twelve months. As with all business forecasts, management’s current assessment offuture revenues is based upon its assumptions and expectations.  Future market trends for its products may notdevelop as management has predicted. Regulatory approvals required to marketproducts as the Company currently plans may not be obtained. In the future, theCompany may find that its cash on hand and cash from operations is notsufficient to fund existing operations. New opportunities may presentthemselves over the course of the next twelve months, in which case the Companymay find that its cash on hand and cash from operations is not sufficient. Suchchanges may, or may not, require it to seek additional outside funding and, ifrequired, there can be no assurance that suitable outside financing will beavailable to the Company.

**AccountsReceivable:**

Accountsreceivable represent payments due to the Company for previously recognized netsales, reduced by an allowance for doubtful accounts for balances, which areestimated to be uncollectible at December 31, 2005 and 2004. The Companygrants credit terms in the normal course of business to its customers. Tradecredit is extended based upon periodically updated evaluations of each customer**’**s ability to perform its obligations. The Company does notnormally require collateral or other security to support credit sales. Theallowance for doubtful accounts is determined based on historical experienceand ongoing evaluations of the Company**’**s receivablesand evaluations of the risks of payment. Accounts receivable balances arerecorded against the allowance for doubtful accounts when they are deemeduncollectible. The Company’s allowance for doubtful accounts atDecember 31, 2005 and 2004 was $79,500 and $0, respectively.

F-13

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**Inventories:**

Inventoriesare stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

**Propertyand Equipment and Other Assets:**

Property and equipmenthas been recorded at cost, net of accumulated depreciation. Improvements arecapitalized and maintenance, repairs and minor replacements are expensed asincurred. Depreciation is determined using the straight-line method overestimated lives of such assets as follows:  machinery & equipment, 3 to 10 years;office furniture and fixtures and capitalized software, 5 to 7 years; vehicles,5 years; and intangible assets, 11.5 years.

**Goodwilland Other Intangible Assets**:

The Companyaccounts for goodwill and other intangible assets at their estimated fairvalues in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,”which the Company adopted effective July 1, 2002. In connection with priorbusiness and asset acquisitions, the Company recorded goodwill based on theexcess of the purchase price over the identifiable tangible and intangibleassets acquired and liabilities assumed. Upon adoption of SFAS No. 142,the Company ceased recognizing recurring amortization of goodwill, and goodwillis now tested at least annually for impairment.

The Company’sspecifically identifiable intangible assets, which consist of utility patentapplications, are reported at cost, net of accumulated amortization. Theseintangible assets are being amortized over their estimated useful lives, whichis 11.5 years, at amortization rates that are proportional to each asset’sestimated economic benefit to the Company. The carrying value of theseintangible assets is reviewed annually by the Company, or more frequently whenindicators of impairment are present, in accordance with the provisions of SFASNo. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets**,**” which requires impairment losses to be recorded onlong-lived assets used in operations when indicators of impairment are presentand undiscounted cash flows estimated to be generated by these assets are lessthan the assets’ carrying amount.

Theapproximate net carrying value of the goodwill and other intangible assets atDecember 31, 2005 are as follows:
| ** **                 | ** ** | **December 31, 2005**     | ** ** |
|----------------------------|------------|-------------------------------------|------------|
| ** **                 | ** ** | **Gross carrying amount** | ** ** | **Accumulated  amortization** | ** ** | **Net carrying value** | ** ** |
| Amortized  utility patents |       | $                                   | 22,500,000 |   | $ | 938,000 |   | $ | 21,562,000 |   |
| Unamortized  goodwill      |       | $                                   | 41,700,000 |   | $ | — |   | $ | 41,700,000 |   |
| Total intangible assets    |       | $                                   | 64,200,000 |   | $ | 938,000 |   | $ | 63,200,000 |   |

 

Estimatedamortization expense for the subsequent fiscal years, is as follows:

| 2006                |   | $         | 2,046,000  |   |
|---------------------|--------|-----------|------------|--------|
| 2007                |   | 2,046,000 |       |
| 2008                |   | 2,046,000 |       |
| 2009                |   | 2,046,000 |       |
| 2010                |   | 2,046,000 |       |
| 2011 and thereafter |   | $         | 11,332,000 |   |

 

In performingits review of the recoverability of goodwill and other intangible assets, theCompany considers several factors. These factors include the expected cashflows that an asset is expected to generate over its estimated economic life.The Company also considers whether there have been significant changes in legalfactors or the overall business climate that could affect the underlying valueof an asset or whether there is an expectation that the asset will be sold ordisposed of before the end of its originally estimated useful life. In the caseof goodwill, the Company must also consider, and estimate, the fair value ofthe reporting unit to which the goodwill is assigned. If, as a result ofexamining any of these factors, the Company concludes that the carrying valueof its goodwill or other intangible assets exceeds its estimated fair value,the Company will record an impairment charge and reduce the carrying value ofthe asset to its estimated fair value.

F-14

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**IncomeTaxes:**

The Company complieswith SFAS No. 109 **“**Accounting forIncome Taxes.**”** This standard requires the useof an asset and liability approach for financial accounting and reporting onincome taxes.  Deferred income tax assetsand liabilities are computed for differences between the financial statementand tax bases of assets and liabilities that will result in future taxable ordeductible amounts, based on enacted tax laws and rates applicable to theperiods in which the differences are expected to affect taxable income.  If it is more likely than not that someportion or all of a deferred tax asset will not be realized, a valuationallowance is recognized.

**Stock** based Compensation:

As allowed bySFAS No. 123 “Accounting for Stock-Based Compensation” (amended by SFAS No.148), the Company has elected to measure stock-based compensation expense usingthe intrinsic value method prescribed by Accounting Principles Board (“APB”)No. 25 and provide disclosure-only provisions of SFAS No. 123.  Accordingly, compensation expense for stockoptions is measured as the excess, if any, of the quoted market price of theCompany’s common stock at the date of the grant over the exercise price anemployee or director must pay to acquire stock. If the Company had determined compensation expense based on the fairvalue using the Black-Scholes option pricing model at the grant datesconsistent with SFAS Nos. 123 and 148, the pro forma effect on the Company’snet loss and net loss per common share would have been the following for theyears ended December 31, 2005, 2004 and 2003 and the period of inception, May13, 1996 to December 31, 2005:
| ** **                                                                      | ** ** | **2005**   | ** **  | **2004**   | ** ** | **2003**   | ** ** | **Since Inception** | ** ** |
|---------------------------------------------------------------------------------|------------|------------|-------------|------------|------------|------------|------------|--------------------------|------------|
| Net loss, as  reported                                                          |       | $          | (18,268,628 | )          | $          | (6,071,615 | )          | $                        | (607,080   | ) | $ | (26,065,897 | ) |
| Add: Stock  -based compensation included in net loss, as reported               |       | 484,000    |        | 373,000    |       | —     |       | 1,415,935                |       |
| Less: Stock  -based compensation expense determined under the fair value method |       | (6,252,300 | )           | (2,670,799 | )          | (115,702   | )          | (9,154,050               | )          |
| Net loss,  pro-forma                                                            |       | $          | (24,036,928 | )          | $          | (8,369,414 | )          | $                        | (722,782   | ) | $ | (33,804,012 | ) |
| Basic and  diluted loss per share, as reported                                  |       | $          | (0.25       | )          | $          | (0.26      | )          | $                        | (0.05      | ) | $ | (1.42 | ) |
| Basic and diluted loss  per share, pro-forma                                    |       | $          | (0.33       | )          | $          | (0.35      | )          | $                        | (0.06      | ) | $ | (1.84 | ) |

 

The followingassumptions were applied in determining stock**-**basedcompensation expense under the fair value method:

|                           | ** ** | **2005**      | ** ** | **2004**      | ** ** | **2003**      | ** ** |
|---------------------------|------------|---------------|------------|---------------|------------|---------------|------------|
| Risk-free interest rate   |       | 2.10 - 3.80   | %          | 2.10 - 3.18   | %          | 3.25          | %          |
| Expected option term      |       | 2.5 - 5 years |       | 2.5 - 3 years |       | 2.5 - 3 years |       |
| Expected price volatility |       | 140           | %          | 197           | %          | 122           | %          |
| Dividend yield            |       | —        |       | —        |       | —        |       |

 

**DerivativeInstruments**:

The Company isa development stage company without significant revenues.  To date, the Company has entered into severaldebt and equity transactions to fund its operations. A number of thesetransactions involved the issuance of convertible debt and warrants.  These transactions also included registrationrights agreements that impose significant penalties on the Company if certainconditions are not met. As a result of these registration rights 

F-15

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agreements,the Company faces a number of unique and complex accounting issues, such as theones discussed below.

The Companyhas issued and outstanding several financial instruments with embeddedderivative features, consisting of convertible debt and warrants. The Companyanalyzes these financial instruments in accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 133 and Emerging Issues task Force (“EITF”)Issue Nos. 00-19 and 05-02 to determine if these hybrid contractshave embedded derivatives that must be bifurcated. In addition, free standingwarrants are accounted for as either equity or liabilities in accordance withthe provisions of EITF Issue No. 00-19.

EITF Issue No.05-4 “The Effect of a Liquidated Damages Clause on a FreestandingFinancial Instrument Subject to EITF Issue No. 00-19, ‘Accounting forDerivative Financial Instruments Indexed to, and Potentially Settled in, aCompany’s Own Stock’” addresses financial instruments, such as convertiblenotes and stock purchase warrants, which are accounted for under EITF00-19, that are issued with a corresponding right to have thesesecurities registered pursuant to a registration rights agreement that includesa liquidated damages clause.  Alternativeaccounting treatments of registration rights are discussed in EITF Issue No.05-4.  One alternative treatmentdiscussed in EITF Issue No. 05-4 could require the warrants, the convertibledebt and the registration rights agreement to be treated as a single financial instrument.If the EITF implements this approach, the convertible debt and the warrants theCompany has issued would need to be recorded as a liability at fair value andchanges in the fair value of the liability would need to be recorded in thestatement of operations each period. Implementation of this approach may have amaterial non-cash impact to the Company’s consolidated financial statement.Since no consensus on EITF Issue No. 05-4 has been reached, the Companyhas adopted View C as described in the EITF Issue No. 05-4 Issue SummaryNo. 1. Under View C, registration rights agreements and the associatedfinancial instruments are accounted for as separate instruments. Accordingly,the Company has given only prospective application to this guidance.  Further impact on its consolidated financialstatements of adopting the standard, if any, will follow the transitionguidance when released.

In April andJuly 2004, the Company entered into private placement agreements forconvertible debentures, registration rights agreements and warrants (see Note6).  Based on the interpretive guidancein EITF Issue No. 05-4 due to an uncapped liquidated damages provision inthe registration rights agreements, the Company determined that the registrationrights are derivative liabilities that should be bifurcated from the relatedfinancial instruments.  Accordingly, theestimated fair value of the registration rights derivative of approximately$244,000 was recorded as a liability as of October 1, 2005, the beginning ofthe first fiscal period after September 15, 2005, the date that EITF postponedfurther deliberations.

In connectionwith the Company’s December 2004 and January 2006 private placements, theCompany’s estimated fair value of the related registration rights derivativewas immaterial at the inception and at each reporting date since and theCompany has not recorded a liability. At each reporting period, the Companycalculates the estimated fair value of the registration rights derivatives. Ifthe underlying assumptions of the calculation change such that the estimatedfair value is not immaterial, the Company will record a liability at that time.In connection with the Company’s September 2005 private placement, the Company’sestimated fair value of the related registration rights derivative at itsinception was immaterial and the Company did not record a liability.Subsequently, in connection with the January 2006 private placement, theCompany amended its September 2005 agreement with the rights holder to waivethe liquidated damages relating to its inability to have such registrationstatement declared effective by May 23, 2006. If the Company fails to meetcertain conditions of the January 2006 registration rights agreement, it willbe required to issue to each holder in the January 2006 private placement,shares and warrants equal to one percent, or 266,718 of the respective numberof shares and warrants purchased by each holder, for each 30 days of failure tomeet any one of these conditions. The Company may be required to issue amaximum aggregate of 4 million shares and warrants.

Changes in theestimated fair value of the registration rights derivative liability arerecorded in the consolidated statement of operations.  In the fourth quarter of 2005 the Companyrecorded a gain on the reduction of the derivative liability of approximately$9,000.

In connectionwith the Company’s examination of past transactions for application of EITFIssue No. 05-4, the Company noted that for the period from entering into theApril 2004 Securities Purchase Agreement until the

F-16

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Companyincreased its authorized shares in August 2004, the Company had insufficientshares to meet all potential obligations to issue shares under its convertiblenotes and exercisable warrants and options. Under EITF Issue No. 00-19, a liability should be recognized for thosefinancial instruments for that period, with any changes in the fair value ofsuch liabilities recognized in its consolidated statement of operations.  Based on the Company’s analysis of suchliabilities, it determined the effect of any such amounts to be immaterial.

**RevenueRecognition:**

The Companyrecognizes revenues from the sale of its products based on the provisions ofSecurities and Exchange Commission, or SEC, Staff Accounting Bulletin No. 104, “RevenueRecognition”. The Company recognizes revenue when all of the followingconditions are met:

·                  thereis persuasive evidence of an arrangement;

·                  therisk of loss and title to the product transfers to the customer;

·                  thecollection of the fees is reasonably assured and

·                  theamount of fees to be paid by the customer is fixed or determinable.

The Company’sarrangements do not contain general rights of return. However, in the fourthquarter of 2005, the Company issued approximately $890,000 in credit memos**.** These credit memos were issued to customers for which theCompany promised to take back the Unifresh® Footbath that was not as effectivedue to abnormally high alkaline content in the customers’ water sources. TheCompany has now reformulated its Unifresh® Footbath product with the additionof a compound that neutralizes alkali.

**“**Costof sales**”** includes all of the costs tomanufacture the Company**’**s products**,** including raw materials and supplies, direct labor andfactory overhead. Cost of sales also includes the write-off of obsoleteinventory and inventory that is not expected to be sold before its shelfexpiration date. Additionally, cost of sales reflects the costs associated withfree sample products. These costs are recognized on the date on which theCompany ships the free sample product.

**AdvertisingCosts:**

Advertisingcosts are charged to operations as incurred and were $177,000 for the yearended December 31, 2005 and $0 for the years ended December 31, 2004 and 2003.

**Researchand Development:**

Research anddevelopment expenditures are expensed as incurred. The amounts charged againstearnings in 2005, 2004 and 2003 for research and development expenditures were$3.4 million, $1.4 million and $89,000, respectively.

**Basicand Diluted Loss Per Common Share:**

The Companycomplies with SFAS No. 128, “Earnings Per Share,**”**which states that basic loss per common share is computed by dividing net lossavailable to common stockholders by the weighted average number of commonshares outstanding.  Diluted loss percommon share is computed similar to basic loss per common share**,** except that the denominator is increased to include commonstock equivalents.  The Company’s commonstock equivalents currently include stock options, convertible debentures andwarrants.  Unexercised stock options andwarrants to purchase common stock and debentures convertible into common stockas of December 31, 2005, 2004 and 2003 are as follows:
|                        | ** ** | **December 31,** | ** ** |
|------------------------|------------|------------------|------------|
| ** **             | ** ** | **2005**         | ** ** | **2004** | ** ** | **2003** | ** ** |
| Options                |       | 16,540,777       |       | 15,650,000 |   | 2,400,000 |   |
| Warrants               |       | 7,361,120        |       | 10,242,350 |   | 4,284,850 |   |
| Convertible Debentures |       | 2,095,000        |       | 6,189,900 |   | — |   |
|                   |       | 25,996,897       |       | 32,082,250 |   | 6,684,850 |   |

 

F-17

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The foregoingcommon stock equivalents were excluded from the calculation of net loss percommon share since the inclusion of any additional shares would beantidilutive.

**IntangibleAssets Related to Businesses Acquired:**

Identifiableintangible assets, which consist of utility patent applications, are beingamortized over the remaining useful life of the patents of approximately 11.5years. For the year ended December 31, 2005, the Company has amortizedapproximately $938,000 related to the utility patent applications.  Estimated amortization expense for each ofthe succeeding five years is approximately $2.0 million per annum.

In connectionwith the 2005 Acquisition, the Company recognized goodwill in the amount of$41.7 million, which represents the excess purchase price over the fair valueof assets acquired.  The Company accountsfor its goodwill and intangible assets in accordance with SFAS No. 142, “Goodwilland Other Intangible Assets,” and does not amortize its goodwill.  However, goodwill will be amortized over 15years for tax purposes. The total amount is expected to be deductible. TheCompany reviews its goodwill for impairment at least annually, or wheneverevents or changes in circumstances would indicate possible impairment. TheCompany performs its annual impairment test of goodwill as of December 31 ofeach year. In the annual test as of December 31, 2005, it concluded that noimpairment existed. The Company operates in one reportable segment, which isalso the only reporting unit for purposes of SFAS No. 142. Since the Companycurrently only has one reporting unit, all of the goodwill has been assigned tothe enterprise as a whole. The Company compared its estimated fair value asmeasured by, among other factors, its projected discounted cash flow to its netbook value and since the fair value was substantially greater than the bookvalue, the Company concluded that, as of December 31, 2005, there was noimpairment of goodwill.

In accordancewith SFAS No. 142, the Company’s intangible assets with finite useful lives areamortized over their respective estimated useful lives to their estimated residualvalues, and reviewed for impairment whenever events or changes in circumstanceswould indicate possible impairment in accordance with SFAS No. 144, **“**Accounting for the Impairment or Disposal of Long-LivedAssets.**”**

**Reclassifications:**

Certain priorperiod amounts have been reclassified to conform to the 2005 presentation.

**RecentAccounting Pronouncements:**

In May 2005,the FASB issued SFAS No. 154, **“**AccountingChanges and Error Corrections.**”** SFAS No. 154requires retroactive application of a voluntary change in accounting principleto prior period financial statements unless it is impracticable. SFAS No. 154also requires that a change in method of depreciation, amortization ordepletion for long-lived, non-financial assets be accounted for as a change inaccounting estimate that is affected by a change in accounting principle. SFASNo. 154 replaces APB Opinion No. 20, **“**AccountingChanges**”** and SFAS No. 3, **“**ReportingAccounting Changes in Interim Financial Statements.**”**SFAS No. 154 is effective for fiscal years beginning after December 15, 2005.The Company has adopted the provisions of SFAS No. 154 as of December 31, 2005and does not believe that its adoption had a material impact on itsconsolidated results of operations or financial condition (See Note 1A).

In December2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R),“Accounting for Stock-Based Compensation (Revised).”  SFAS No. 123(R) supersedes APB No. 25 and itsrelated implementation guidance.  SFASNo. 123(R) establishes standards for the accounting for transactions in whichan entity exchanges its equity instruments for goods or services.  It also addresses transactions in which anentity incurs liabilities in exchange for goods or services that are based onthe fair value of the entity’s equity instruments or that may be settled by theissuance of those equity instruments. SFAS No. 123(R) focuses primarily on accounting for transactions inwhich an entity obtains employee services in share-based paymenttransactions.  SFAS No. 123(R) requires apublic entity to measure the cost of employee services received in exchange foran award of equity instruments based on the grant-date fair value of the award(with limited exceptions).  That costwill be recognized over the period during which an employee is required toprovide service (usually the vesting period). No

F-18

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compensationcosts are recognized for equity instruments for which employees do not renderthe requisite service.  The grant-datefair value of employee share options and similar instruments will be estimatedusing option-pricing models adjusted for the unique characteristics of thoseinstruments (unless observable market prices for the same or similarinstruments are available).  If an equityaward is modified after the grant date, incremental compensation cost will berecognized in an amount equal to the excess of the fair value of the modifiedaward over the fair value of the original award immediately before themodification.

 The Company currently utilizes the Black-Scholesoption pricing model to measure the fair value of stock options granted toemployees. While SFAS No. 123(R) permits entities to continue to use such amodel, it also permits the use of a “lattice” model. The Company expects tocontinue using the Black-Scholes option pricing model upon adoption of SFAS No.123(R) to measure the fair value of stock options.

The adoptionof this statement will have the effect of reducing net income and income pershare as compared to what would be reported under the current requirements.These future amounts cannot be precisely estimated because they depend on,among other things, the number of options issued in the future, andaccordingly, the Company has not determined the impact of adoption of thisstatement on its results of operations. However, the Company believes that theadoption of SFAS No. 123(R) will have a material effect on the Company’sconsolidated financial statements, in the form of additional compensationexpense.

In December2004, the FASB issued SFAS No. 151, “Inventory Costs-an amendment of ARB No.43, Chapter 4.”.   SFAS No. 151 has beenissued to clarify the accounting for abnormal amounts of idle facility expense,freight, handling costs and wasted material (spoilage), which requires that thoseitems be recognized as current-period charges regardless of whether they meetthe criterion of “so abnormal.”  In addition, SFAS No.151 requires the Company to allocate fixed production overheads to the costs ofconversion based on the normal capacity of the production facilities.  Management of the Company does not believethe effects of SFAS No. 151 will have a material impact on the consolidatedfinancial statements, as the Company has not incurred any inventory costs thatmeet the definition of “so abnormal.”

# **3.             INVENTORIES**

|                        | ** ** | **December 31,** | ** ** |
|------------------------|------------|------------------|------------|
| ** **             | ** ** | **2005**         | ** ** | **2004** | ** ** |
| Raw Materials          |       | $                | 955,701    |   | $ | 99,798 |   |
| Finished Goods         |       | 469,936          |       | — |   |
|                   |       | 1,425,637        |       | 99,798 |   |
| Less Inventory Reserve |       | (74,675          | )          | — |   |
|                   |       | $                | 1,350,963  |   | $ | 99,798 |   |

# **4.             PROPERTYAND EQUIPMENT, NET**

|                                                      | ** ** | **December 31,** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Machinery and  Equipment                             |       | $                     | 1,062,065  |   | $ | — |   |
| Office  furniture, fixtures and capitalized software |       | 466,137               |       | 38,664 |   |
| Vehicles                                             |       | 164,688               |       | 73,410 |   |
|                                                 |       | 1,692,890             |       | 112,074 |   |
| Less Accumulated  Depreciation                       |       | (167,748              | )          | (10,697 | ) |
|                                                 |       | $                     | 1,525,142  |   | $ | 101,377 |   |

 

Depreciationexpense for the years ended December 31, 2005, 2004 and 2003 was approximately$157,000, $29,000 and $14,000, respectively.

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**5.             OTHER ACCRUED LIABILITIES**
|                                    | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Accrued wages                      |       | $                     | 161,758    |   | $ | 151,752 |   |
| Accrued interest                   |       | 119,147               |       | 73,685 |   |
| Liquidated  damages                |       | 285,706               |       | — |   |
| Accrued legal  and accounting fees |       | 322,391               |       | 172,118 |   |
| Accrued  consulting                |       | 172,500               |       | 51,102 |   |
| Other                              |       | 315,505               |       | 100,289 |   |
|                               |       | $                     | 1,377,007  |   | $ | 548,946 |   |

 

# **6.             STOCKHOLDERS’ EQUITY (DEFICIT):**

**Reversemerger transaction and prior:**

Theconsolidated statements of stockholders’ equity have been presented to reflectthe number of shares received by the stockholders of Tanuta in the businesscombination (see Note 2 **-** Basis ofPresentation).  The 262,000 shares issuedin connection with the reverse merger transaction represent the outstandingshares of Tasker prior to the effectuation of the reverse merger transaction.

The historicalstockholders’ equity of Tanuta (the accounting acquirer) consisted ofapproximately 10 common shares (after giving effect to a 10 for 1 stock split)of no par value common stock issued to incorporators.  Prior to the March 1999 reverse mergertransaction, Tanuta issued 11 million common shares (after giving effect to a10 for 1 stock split), net of cancellations, in private placements that raisedapproximately $203,000.

**Postreverse merger transaction through December 31, 2005:**

In November2002, the Company closed a private equity financing in which it raisedapproximately $525,000 from several investors. In connection with the privateplacement, the Company issued 524,850 shares of the Company**’**scommon stock and conditional secured promissory notes.  Additionally, the Company issued warrants topurchase 524,850 shares of the Company**’**s common stockat a price of $2.00 per share up to November 2007.  The fair value attributed to the common stockand warrants was approximately $211,000 and $14,000, respectively.

Also duringthe year ended December 31, 2002, the Company issued warrants (i) to purchase300,000 shares of the Company’s common stock for a license and (ii) to purchase3,460,000 shares of the Company’s common stock for services.  The values ascribed to these warrants wereapproximately $42,000 and $559,000, respectively.

In June 2003,the Company closed a private equity financing in which it raised an aggregateof $165,000 from several investors in exchange for 660,000 shares of theCompany’s common stock.

In July 2003,the Company closed a private equity financing in which it raised an aggregateof $352,235 from several investors in exchange for 1,408,940 shares of theCompany’s common stock.

During theyear ended December 31, 2003, the Company issued 655,000 shares of the it’scommon stock in full satisfaction of certain debts totaling $172,586.

In December2004, the Company completed the private placement of 9,406,250 shares of itscommon stock with several accredited investors for an aggregate purchase priceof $15,050,000 or $1.60 per share. Emerging Growth Equities Ltd. acted as placement agent and received acash payment of 6% and a warrant to purchase 562,500 shares exercisable at$2.00 per common share, exercisable for three years.

In connectionwith this private placement, the Company also entered into a RegistrationRights Agreement under which it is obligated to file a registration statementwith the SEC to register for resale, within a specified time

F-20

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period, theshares and the shares underlying the placement agent warrants. The terms of theRegistration Rights Agreement provide that, in the event that the registrationstatement is not filed within 30 days of entering into the private placement,the Company is required to pay to the investors, as partial liquidated damages,1% additional shares per month until the registration statement is filed basedon the number acquired in the private placement. The registration statement wasfiled within the specified time period.

Since thecommon shares related to this private placement were not issued until 2005, theCompany has classified the proceeds of this offering of approximately $13.9million, net of amounts paid to the placement agent and other closing costsaggregating approximately $1.1 million, as common stock subscribed.

During theyear ended December 31, 2004, stockholders**’** equity wasalso increased as a primary result of (i) the allocation of value to theapproximate 19.5 million warrants and embedded conversion features associatedwith the issuance of convertible debentures , (ii) the conversion ofapproximately $2 million of debentures into approximately 18.2 million sharesof common stock**,** (iii) the exercise ofapproximately 14.5 million warrants generating cash proceeds of approximately$1.2 million, (iv) stock **-**based compensation of approximately $373,000 and (v) theissuance of common stock, warrants and options for services of approximately$685,000 (See Note 11).

In February2005, a secured promissory note holder exchanged his note in the amount of$49,950, plus interest and services rendered over the past two years**,** for 32,272 restricted common shares at $1.65, or $2.30less than the market value of the stock on the date of the exchange.  In connection with the exchange, the Companyrecognized approximately $74,000 of consulting fees during the year endedDecember 31, 2005.

In July 2005,the Company executed an Asset Purchase Agreement whereby the Company issued18,992,388 shares of its common stock valued at $56,977,164 (see Note 12).

In September2005, the Company completed the private placement of 2,947,545 shares of itscommon stock with several accredited investors for an aggregate purchase priceof approximately $6,485,000 or $2.20 per share. As part of the private placement, the Company also (i) issued 1,473,769warrants to purchase the Company’s common stock at $3.00 per share and (ii)entered into a Registration Rights Agreement under which it is obligated tofile, and make effective, a registration statement with the SEC to register forresale, within a specified time period, the shares and the shares underlyingthe warrants. The terms of the Registration Rights Agreement provide that, inthe event that the registration statement is not declared effective within 120days of entering into the private placement, and if the Company is found to nothave used its “best efforts,” the Company is required to pay to the investors,as partial liquidated damages, 1% of the cash value of the shares andunderlying shares per month for as long as such requirements are not met.  The registration statement was not declaredeffective within the specified time periods. In January 2006 the investorsagreed to waive any liquidated damages under this agreement related to thefailure to have the first registration statement declared effective within 120days. The waiver set a new effectiveness deadline at 245 days after the entryinto the private placement. In exchange for this waiver the exercise price ofthe warrants was reduced to $1.00 per share (see Note 21(b)).

During theyear ended December 31, 2005, stockholders**’** equity wasalso increased as a result of (i) the issuance of options for vendor servicesof approximately $3.1 million, (ii) employee stock-based compensation ofapproximately $484,000, (iii) the conversion of approximately $243,000 ofconvertible debentures and accrued interest into approximately 4,090,000 sharesof common stock and (iv) the exercise of approximately 4.8 million options andwarrants generating cash proceeds of approximately $285,000.

# **7.             WARRANTS AND STOCK OPTIONS**

**Warrants:**

During theyear ended December 31, 2002, the Company issued (i) 524,850 warrants inconnection with notes payable, (ii) 300,000 warrants to pHarlo in connectionwith its license agreement (see Note 9) and (iii) 3,460,000 warrants toconsultants for services rendered.

During theyear ended December 31, 2004, the Company issued (i) 19,461,500 warrants inconnection with the Convertible Debentures, of which 16,000,000 and 3,461,500warrants were issued in connection with the April 2004

F-21

----

and July 2004Private Placements, respectively, (ii) 562,500 warrants to the placement agentin connection with the Company’s December 2004 private placement and (iii)400,000 warrants issued to a consultant for services rendered.  Of the 19,461,500 warrants issued inconnection with the Convertible Debentures, 3,995,000 and 14,491,003 warrantswere exercised during 2005 and 2004, respectively, generating proceeds ofapproximately $200,000 and $1.2 million, respectively**,**to the Company.

During theyear ended December 31, 2005, the Company issued 1,473,769 warrants inconnection with the Company’s September 2005 Private Placement. The warrantshad an exercise price of $3.00 per share.

The followingtable summarizes the Company’s warrant activity:
| ** **                      | ** ** | **Number of shares** | ** ** | **Exercise Price per  share** | ** ** | **Weighted average  exercise Price per  share** | ** ** |
|---------------------------------|------------|--------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------|------------|
| Outstanding,  January 1, 2002   |       | -0-                            |       | $—                                 |       | $                                                              | -0-        |   |
| Granted                         |       | 4,284,850                      |       | $0.25 - $2.00                           |       | $                                                              | 0.46       |   |
| Outstanding,  December 31, 2002 |       | 4,284,850                      |       | $0.25 - $2.00                           |       |                                                           |       |
| Granted                         |       | -0-                            |       | $-0-                                    |       | $                                                              | -0-        |   |
| Outstanding,  December 31, 2003 |       | 4,284,850                      |       | $0.25 - $2.00                           |       | $                                                              | 0.46       |   |
| Granted                         |       | 20,424,000                     |       | $0.10 - $2.00                           |       | $                                                              | 0.22       |   |
| Exercised                       |       | (14,466,500                    | )          | $0.05 - $0.25                           |       | $                                                              | 0.08       |   |
| Outstanding,  December 31, 2004 |       | 10,242,350                     |       | $0.05 - $2.00                           |       | $                                                              | 0.37       |   |
| Granted                         |       | 1,473,770                      |       | $1.00                                   |       | $                                                              | 1.00       |   |
| Exercised                       |       | (4,355,000                     | )          | $0.05 - $0.25                           |       | $                                                              | 0.07       |   |
| Outstanding, December  31, 2005 |       | 7,361,120                      |       | $0.05 - $2.00                           |       | $                                                              | 0.63       |   |

 

The Warrantsgranted pursuant to the April 2004 Private Placement originally had exerciseprices of $0.10 and $0.20.  However, theexercise price of all warrants issued in this placement were modified to $0.05per share in September 2004 and further modified to $0.01 per share in May2005.

The Warrantsgranted pursuant to the July 2004 Private Placement originally had an exerciseprice of $0.25.  However, the exerciseprice of all warrants issued in this placement were modified to $0.05 per sharein September 2004 and further modified to $0.01 per share in May 2005.

The Warrantsgranted pursuant to the September 2005 Private Placement originally had anexercise price of $3.00.  In January2006, the exercise price of the warrants was reduced from $3.00 to $1.00 pershare.

As of December31, 2005, the weighted average contractual life of warrants is approximately2.9 years.

F-22

----

**StockOptions:**

Stock optionsissued are as follows:
| ** **                                     | ** ** | **Number of shares** | ** ** | **Exercise Price per  share** | ** ** | **Weighted average  exercise Price per  share** | ** ** |
|------------------------------------------------|------------|--------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------------------|------------|
| Outstanding,  January 1, 2002                  |       | -0-                            |       | $—                                 |       | $                                                              | —     |   |
| Granted                                        |       | 1,500,000                      |       | $0.25                                   |       | $                                                              | 0.25       |   |
| Outstanding,  December 31, 2002                |       | 1,500,000                      |       | $0.25                                   |       | $                                                              | 0.25       |   |
| Granted                                        |       | 900,000                        |       | $0.25                                   |       | $                                                              | 0.25       |   |
| Outstanding,  December 31, 2003                |       | 2,400,000                      |       | $0.25                                   |       | $                                                              | 0.25       |   |
| Granted                                        |       | 13,250,000                     |       | $0.25 - $2.05                           |       | $                                                              | 0.58       |   |
| Outstanding,  December 31, 2004                |       | 15,650,000                     |       | $0.25 - $2.05                           |       | $                                                              | 0.53       |   |
| Granted                                        |       | 4,084,999                      |       | $1.50 - $4.70                           |       | $                                                              | 2.30       |   |
| Exercised                                      |       | (480,000                       | )          | $0.25                                   |       | $                                                              | 0.25       |   |
| Cancelled                                      |       | (2,714,222                     | )          | $0.25 - $4.00                           |       | $                                                              | 0.97       |   |
| Outstanding,  December 31, 2005                |       | 16,540,777                     |       | $0.25 - $4.70                           |       | $                                                              | 0.91       |   |
| Options  exercisable at December 31, 2003 |       | 2,400,000                      |       | $0.25                                   |       | $                                                              | 0.25       |   |
| Options  exercisable at December 31, 2004 |       | 9,244,438                      |       | $0.25 - $2.05                           |       | $                                                              | 0.37       |   |
| Options exercisable at  December 31, 2005 |       | 13,774,886                     |       | $0.25 - $4.70                           |       | $                                                              | 0.82       |   |

 

The followingtable summarizes additional information about stock options outstanding at December 31,2005:
|               | ** ** | **Number Outstanding  at December 31, 2005** | ** ** | **Weighted-Average  Remaining  Contractual Life** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
|---------------|------------|---------------------------------------------------|------------|---------------------------------------------------|------------|--------------------------------------|------------|
| $0.25         |       | 9,497,778                                         |       | 8.25                                              |       | $                                    | 0.25       |   |
| $0.67         |       | 1,000,000                                         |       | 8.84                                              |       | $                                    | 0.67       |   |
| $1.45 - $1.75 |       | 3,533,333                                         |       | 9.07                                              |       | $                                    | 1.52       |   |
| $2.01 - $2.47 |       | 1,316,666                                         |       | 9.15                                              |       | $                                    | 2.26       |   |
| $2.70 - $3.14 |       | 1,115,000                                         |       | 9.38                                              |       | $                                    | 2.97       |   |
| $3.32 - $4.70 |       | 78,000                                            |       | 9.22                                              |       | $                                    | 3.96       |   |
|          |       | 16,540,777                                        |       |                                              |       |                                 |       |

 
|                          | ** ** | **Options Exercisable**                                     | ** ** |
|--------------------------|------------|------------------------------------------------------------------|------------|
| **Exercise Prices** | ** ** | **Number Exercisable at  December 31, 2005** | ** ** | **Weighted-Average Exercise Price** | ** ** |
| $0.25                    |       | 8,442,220                                                        |       | $ | 0.25 |   |
| $0.67                    |       | 666,667                                                          |       | $ | 0.67 |   |
| $1.45 - $1.75            |       | 3,133,333                                                        |       | $ | 1.52 |   |
| $2.01 - $2.47            |       | 949,999                                                          |       | $ | 2.26 |   |
| $2.70 - $3.14            |       | 504,667                                                          |       | $ | 2.97 |   |
| $3.32 - $4.70            |       | 78,000                                                           |       | $ | 3.96 |   |
|                     |       | 13,774,886                                                       |       |   |   |

#  

F-23

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# **8.             INVESTMENT IN EQUITY INVESTEE**

In April 2005,the Company purchased 359,000 common shares of Biofilm Strategies Corporationfrom Electric Aquagenics Unlimited, Inc., representing 27% of Biofilm’soutstanding common stock, for cash consideration of $718,000.  Further, the Company advanced a total of$890,000 to the owners of the remaining 73% of Biofilm’s common stock. Biofilm’sproprietary technology is designed to eradicate biofilm, a protective coatingthat forms on listeria and other pathogens making them resistant to traditionalremedies of eradicating bacteria. The Company understands that Biofilm is inthe process of obtaining certain regulatory approvals for the use of itsproduct in specified applications.  Afterseveral months of unsuccessful negotiations, the Company has decided that itwill not seek to acquire the remaining 73% of Biofilm’s common stock.  The Company originally anticipated that ifthe acquisition did not close, the Company would seek repayment of the fundsadvanced.  The Company is now negotiatingan alternative arrangement with Biofilm, whereby Biofilm would license itstechnology to the Company, and the $890,000 advanced would be used as a creditagainst royalty fees due under the license agreement.  There can be no assurance that the licenseagreement will be entered into, or if entered into, that Biofilm would agree tocredit the $890,000 advanced toward the royalty fees of such license.  The Company believes that recovery of theseadvances is uncertain, and has set up an allowance for uncollectible accountsfor the entire $890,000.

Taskerbelieves that its 27% equity interest in Biofilm is a significant variableinterest, as defined by FIN 46(R) “Consolidation of Variable Interest Entities**,**” however Tasker believes that it is currently not theprimary beneficiary of Biofilm and thus would not be required to consolidatethe accounts of Biofilm. Tasker’s management believes that Tasker’s maximumexposure to loss as a result of its involvement with Biofilm is limited to itsinitial investment of $718,000.

# **9.             LICENSE**

In late 2002,the Company entered into an exclusive license agreement with PCTI to sell, develop, market anddistribute consumer deodorant breath products, animal breath products and softdrink products using the patented pHarlo technology.  In conjunction with this license agreement,the Company entered into a production agreement with IRL, a privately heldmanufacturing company affiliated with PCTI, to manufacture and sell to theCompany the concentrate for the products licensed by PCTI.  Pursuant to the license agreements, theCompany agreed to make royalty payments based on 1.5% of product sales andissued warrants to purchase up to 300,000 common shares.  Under the terms of the license agreement, theCompany is required to prepay $1,000,000 in royalty payments. In September2004, the Company cancelled the previous license agreement and entered into twoseparate Exclusive Field of Use License Agreements with PCTI.  One of these new license agreements grantedthe Company the right to use, sell, develop, market and distribute productsusing the pHarlo technology for consumer deodorant breath product, animalbreath products and soft drink products. The second of these new license agreements granted the Company the rightto use, sell, develop, market and distribute products using the pHarlotechnology as a post-harvesting processing aid in the poultry industry in theUnited States and Canada.

The financialterms of the exclusive license covering consumer deodorant products, animalbreath products and soft drink products were the same as the 2002 licenseagreement, with the addition of minimum annual payments of $300,000 beginningin 2006 (adjusted annually).  CommencingJuly 1, 2003, an interest payment of 7% per annum on the unpaid balance of theprepaid royalty balance was due.  Theterm of the agreement extends to the life of the patent.

Under theterms of the license covering post-harvesting poultry processing aids, theCompany agreed to pay a 5.0% royalty on net sales.  In addition, beginning in 2006, a minimumannual payment of $3,750,000 (adjusted annually) was due.  PCTI was also granted a right to profitshare.  The term of the agreement extendsto the life of the patent.

Costs tosecure the license covering consumer deodorant breath product, animal breathproducts and soft drink products totaling approximately $202,000 are beingamortized over the eighteen year term of the license on a straight-linebasis.  At December 31, 2004, thecarrying amount of the license was approximately $180,000, net of approximately$22,000 of accumulated amortization. Amortization expense for the years ended December 31, 2005, 2004 and2003 and the period of inception, May 13, 1996, to December 31, 2005 was approximately$6,000, $11,000, $11,000 and $28,000, respectively.

F-24

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As part of the2005 Acquisition of the Pharlo assets (see Note 12), both license agreementsmentioned above were acquired by Tasker and cancelled.  Accordingly, all costs to secure the licensesas well as the prepaid and accrued royalties balances were included ascomponents to the purchase price.

# **10.          NOTES RECEIVABLE**

**Advancesto PCTI, PCTI-related entities**

During 2002,the Company agreed to loan to PCTI and PCTI-related entities, pursuant to aloan agreement and note**s**, up to$200,000 to finance a production facility to produce the products licensedpursuant to the 2002 license agreement with PCTI (See Note 9).  The notes bore an interest rate at 7% perannum, with principal and interest to be repaid in equal monthly installmentscommencing July 1, 2003, with the last payment due October 1, 2012.

During 2004,pursuant to a series of additional promissory notes, the Company loaned anadditional $200,000 to PCTI and $200,000 to PCPP. These notes bore an interestrate at 7% per annum (0% until June 1, 2005) and had terms of 1 year.

During theyear ended December 31, 2005, pursuant to a series of promissory notes, theCompany loaned an additional $2,600,703 (including $136,000 paid to a vendor onbehalf of PCTI) to the Selling Entities and principals of the Selling Entities.The loans bore an interest rate at 7% per annum (0% for approximately the firstsix months) and had terms of one year, unless otherwise noted.  Certain of these loans represented cashadvances against bonus payments to the principals of the Selling Entities (seeNote 12). The notes issued by principals of the Selling Entities are asfollows: January 10, 2005 Note From Barry Cummins-$250,000 (6% interest forentire term); January 3, 2005 Note From David Creasey-$100,000 (interest duefor entire term); March 1, 2005 Note From David Creasey-$150,000; January 10,2005 Note From David Dickinson-$100,000 (interest not due for seven months);March 4, 2005 Note From David Dickinson-$150,000; and March 28, 2005 Note FromDavid Creasey-$625,000.  Certain of theseloans represented working capital to the PCPP to build out and fund the SellingEntities’ manufacturing facilities.  Thenotes issued by PCPP, each of which has an interest rate of 0% for the firstthree months, unless otherwise indicated, are as follows:  January 20, 2005-$100,000; February 15,2005-$75,000; March 7, 2005-$100,000; March 31, 2005-$100,000; April 20,2005-$100,000; May 19, 2005-$50,000; June 14, 2005-$50,000 (0% interest forfirst two months); and July 6, 2005-$12,500 (0% interest for first two months).Certain of these loans represented working capital to C2C.  The notes issued by C2C are as follows: March3, 2005-$100,000; May 25, 2005-$25,000; June 29, 2005-$15,000.  Certain of these loans represented workingcapital to PCTI.  The notes issued by PCTIare as follows: May 11, 2005-$62,113; May 27, 2005-$100,000; June 2, 2005-$20,000;June 14, 2005-$52,816; June 27, 2005-$52,006; and July 12, 2005-$55,269.  The Company also advanced $20,000 to IRL forworking capital and received a promissory note dated June 29, 2005.  All of the above loans issued during 2005were cancelled on July 15, 2005 upon the completion of the 2005 Acquisition,with the exception of the March 28, 2005 note with David Creasey in the amountof $625,000, which remains due and bears interest at 6% per annum.

# **11.          CONVERTIBLE DEBENTURES AND NOTES PAYABLE**

**ConvertibleDebentures:**

In April 2004,the Company entered into a Securities Purchase Agreement with several investorsby which the Company issued and sold (i) $800,000 of convertible debentures(the “April 2004 Debentures”); (ii) warrants to purchase 8,000,000 shares ofcommon stock at $0.10 per share and (iii) warrants to purchase 8,000,000 sharesof common stock at $0.20 per share. The warrants expire in five years from thedate of issuance.  In September 2004, asa result of the Company not meeting certain conditions prescribed in theagreement, the exercise price of all the warrants issued in connection with theApril 2004 Debentures was modified to $0.05 per share.  On April 30, 2005, as a result of **a**failure to properly maintain the registration statement coveringthese shares, the exercise price of all these warrants was further reduced to$0.01 per share.  As of December 31,2005, 15,250,000 of these warrants were exercised.  The April 2004 Debentures are due on thethird anniversary of the issuance, bear interest at 7% per annum and areconvertible into shares of common stock at a price of $0.05 per share,including interest, for an aggregate of at least 16,000,000 common shares.

F-25

----

In connectionwith the April 2004 Securities Purchase Agreement, the Company also enteredinto a Registration Rights Agreement under which the Company is obligated tofile, and make effective, a registration statement with the SEC to register forresale, within specified time periods, the shares underlying the Warrants andthe shares issuable on conversion of the Convertible Notes, to keep theregistration for such shares effective, and to****properlymaintain such registration statement, until such shares have been issued to,and sold by, the investors. The terms of the Registration Rights Agreementprovide that, in the event that the registration statement is not filed within45 days, does not become effective within 150 days of entering into theSecurities Purchase Agreement, or is not properly maintained, the Company isrequired to pay to the investors, as partial liquidated damages, an amountequal to 1% of the principal amount of the April 2004 Debentures, then 1.5% permonth of the principal amount for as long as such requirements are not met (seeNote 2, Derivative Instruments). The registration statement was filed anddeclared effective within the specified time periods, but the Company did notproperly maintain the registration statement, thus triggering liquidateddamages.

In July 2004,the Company entered into another Securities Purchase Agreement with severalinvestors under which the Company issued and sold in a private placement (i)$1,647,674 of convertible debentures, at a discount of $263,074, for a netamount of $1,384,600 (the “July 2004 Debentures”) and (ii) warrants to purchase3,461,500 shares of common stock at a price of $0.20 per share.  In September 2004, as a result of the Companynot meeting certain conditions prescribed in the agreement, the exercise priceof all the warrants issued in connection with the July 2004 Debentures wasmodified to $0.05 per share.  On April30, 2005, as a result of a failure to properly maintain the registrationstatement covering these shares, the exercise price of all these warrants wasfurther reduced to $0.01 per share.  Asof December 31, 2005, 3,211,500 of these warrants were exercised.  The July 2004 Debentures are due on the secondanniversary of the issue date and are convertible into shares of common stockat a price of $0.20 per share for an aggregate of 8,238,370 common shares.

In connectionwith the July 2004 Securities Purchase Agreement, the Company also entered intoa Registration Rights Agreement under which the Company is obligated to file,and make effective, a registration statement with the SEC to register forresale, within specified time periods, the shares underlying the Warrants andthe shares issuable on conversion of the Convertible Notes, to keep theregistration for such shares effective, and properly maintain such registrationstatement, until such shares have been issued to, and sold by, the investors.The terms of the Registration Rights Agreement provide that, in the event thatthe registration statement is not filed within 5 days, or does not becomeeffective within 90 days of entering into the Securities Purchase Agreement,the Company is required to pay to the investors, as partial liquidated damages,an amount equal to 1% of the principal amount of the July 2004 Debentures, then1.5% per month of the principal amount for as long as such requirements are notmet (see Note 2, Derivative Instruments). The registration statement was filedand declared effective within the specified time periods, but the Company didnot properly maintain the registration statement, thus triggering liquidateddamages.

Included inthe other accrued liabilities at December 31, 2005 is approximately$119,000 of interest and fees and approximately $286,000 of incurred liquidateddamages associated with the April 2004 and the July 2004 Debentures.Additionally, at December 31, 2005, the Company recorded a derivativeliability related to the April 2004 and July 2004 registration rights ofapproximately $235,000.

The followingtables summarize 2005 and 2004 conversion activity and principal outstanding atDecember 31, 2005 (all of which is classified in current liabilities as aresult of the Company being in violation of certain covenants):
| ** **                                                  | ** ** | **April 2004  Debentures** | ** ** | **July 2004  Debentures** | ** ** | **Total**  | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|--------------------------------|------------|------------|------------|
| Principal amount                                            |       | $                               | 800,000    |                           | $          | 1,647,674  |       | $ | 2,447,674 |   |
| 2004 Conversion  (excludes accrued interest of $5,673)      |       | (533,000                        | )          | (1,477,6794                    | )          | (2,010,694 | )          |
| Principal  outstanding at December 31, 2004            |       | 267,000                         |       | 169,980                        |       | 436,980    |       |
|                                                        |       |                            |       |                           |       |       |       |
| 2005 Conversions                                            |       | (192,000                        | )          | (50,980                        | )          | (242,980   | )          |
| Principal  outstanding at December 31, 2005            |       | $                               | 75,000     |                           | $          | 119,000    |       | $ | 194,000 |   |
|                                                        |       |                            |       |                           |       |       |       |
| Total common  shares resulting from conversion of principal |       | 14,500,000                      |       | 7,643,370                      |       | 22,143,370 |       |
| Total common  shares resulting from conversion of principal |       | 113,467                         |       | —                         |       | 113,467    |       |
|                                                        |       | 14,613,467                      |       | 7,643,370                      |       | 22,256,837 |       |

F-26

----

The Company determined the initial carrying value ofthe April 2004 Debentures and the July 2004 Debentures (together, the “ConvertibleDebentures”) by a two-step allocation process: first to the associated warrantsand second, to an embedded conversion option. First, the Company allocated the proceeds from the sale of the of theConvertible Debentures between the Convertible Debentures and the warrantsbased upon their relative fair values, which resulted in recording a discounton the Convertible Debentures. The value of the warrants was computed using theBlack-Scholes option pricing model. Second, in accordance with Emerging Issues Task Force No. 00-27, “Applicationof Issue 98**-**5 to Certain ConvertibleInstruments**,**” after allocating theConvertible Debenture proceeds as described above, the Company calculated theembedded conversion price and used it to measure the intrinsic value of theembedded conversion option.  Since the conversionprices were less than the fair value of the Company’s stock at the closingdates, an embedded conversion option was recorded as additional paid incapital.

As a result ofthe Company’s allocations above, the entire principal amounts of theConvertible Debentures have allocated to the warrants and embedded conversionoptions.  This amount was to be amortizedas additional (non cash) interest expense with a corresponding increase to theConvertible Debentures over the life of the respective notes using theeffective interest method until such notes are repaid or converted to commonstock.  However, as a result of being inviolation of certain covenants of the Convertible Debentures, the entire amountwas amortized during the year ended December 31, 2004.

On April 30,2005, the prospectuses relating to resale of the Company’s stock by holders ofsecurities who purchased in the April and July 2004 private placements becamestale.  As a result, certain stockholderscould not sell their shares pursuant to these registration statements.  This caused the Company to be in default ofits obligations under the Registration Rights Agreements entered into as partof the April and July 2004 private placements. This default caused contractual payments to become immediately due andpayable to certain stockholders.  As ofDecember 31, 2005, the Company accrued a $286,000 liability associated withthis event.  The Company filed anamendment to these registration statements during the third quarter of2005.  The SEC declared the RegistrationStatements effective on November 2, 2005. However, as a result of a voluntary internal investigation performed bythe Company with respect to its quarterly financial statements filed for theperiod ended September 30, 2005, the Company suspended the use of theseregistration statements.  Upon completionof the investigation, the Company lifted the suspension of use and stockholderswere advised that they could sell pursuant to the registration statements onMarch 10, 2006.

**NotesPayable to Shareholders:**

During theyear ended December 31, 2002, the Company completed a private placementoffering for cash proceeds of $524,850. The Company issued 524,850 shares ofcommon stock, issued share purchase warrants to purchase 524,850 shares ofcommon stock at a price of $2.00 per share up to November 26, 2007, and issued5% promissory notes, with a face value of $524,325, to the investors.  The principal amount and interest on thenotes is due no later than November 26, 2007.

F-27

----

 
|                                                     | ** ** | **December 31,** | ** ** |
|-----------------------------------------------------|------------|-----------------------|------------|
| ** **                                          | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Notes payable,  with interest at 5%, fair value     |       | $                     | 524,325    |   | $ | 524,325 |   |
| Less: Discount  to record note at fair value        |       | (224,149              | )          | (224,149 | ) |
|                                                |       | 300,176               |       | 300,176 |   |
|                                                |       |                  |       |   |   |
| Less: Note  converted into equity                   |       | (49,950               | )          | — |   |
| Amortization of  discount to December 31, 2005 |       | 193,564               |       | 158,476 |   |
|                                                |       | $                     | 443,790    |   | $ | 458,652 |   |

The fair value attributed to the notes is based upon the fair value ofthe underlying financial instruments.

The discountresulting from recording the notes at fair value will be amortized at theinterest rate method over a term of five years.

**NotePayable IRL:**

As partialconsideration for the purchase of the pHarlo assets (see Note 12), Taskerissued a promissory note in the amount of $1,931,973 to IRL.  The promissory note bears interest of 3.4%per annum and is payable in equal bi-weekly principal installments of $37,153,plus interest, through July 2007.  Thefollowing schedule outlines the activity for this note during 2005 and 2004:
|                                                                | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                     | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Notes payable,  with interest at 3.4%, fair value              |       | $                     | 1,931,973  |   | $ | — |   |
| Less: Discount  to record note at fair value                   |       | (408,686              | )          | — |   |
|                                                           |       | 1,523,287             |       | — |   |
|                                                           |       |                  |       |   |   |
| Current portion—Note  payable—Acquisition of IRC     |       | 445,840               |       | — |   |
| Non current  portion—Note payable—Acquisition of IRC |       | 1,077,447             |       | — |   |
|                                                           |       | $                     | 1,523,287  |   | $ | — |   |

# **12.          ACQUISITIONOF PHARLO ASSETS**

On July 15,2005, the Company executed an Asset Purchase Agreement with the SellingEntities (the “Asset Purchase Agreement”) whereby the Company purchased all ofthe assets of the Selling Entities that relate to the Company’s productapplications and fields of use, including, but not limited to, utility patentapplications, equipment, inventories and existing contracts. The purchase priceof approximately $64.3 million includes (i) 18,992,388 shares of the Company’scommon stock valued at approximately $56.98 million (or approximately $3.00 pershare, which is based upon the average closing market price of the Company’scommon stock for the seven day period following the announcement of thecompleted acquisition), (ii) a promissory note in the amount of $1,931,973(bearing interest at 3.4% and payable in equal bi-weekly principal installmentsof $37,153, plus interest, through July 2007), (iii) cash of $1,428,000, (iv)estimated acquisition costs of $1,420,840 and (v) cancelled promissory notestotaling $2,542,631 issued to the Company by the Selling Entities and bycertain equity holders of the Selling Entities.

In addition tothe sale of the acquired assets, and subject to certain conditions, the SellingEntities also agreed to cause Phitex Ltd. LLLP (“Phitex”) (the direct onehundred percent owner of the sole and exclusive licensee of the base patents)to issue to the Company 19.9% of the then total outstanding equity interests ofPhitex on a fully diluted basis.  Thiswould allow the Company to share in the monetary benefits derived by Phitexfrom any transaction between the sole and exclusive licensee of the basepatents and an unaffiliated third party pursuant to which that third partyacquires rights to exploit the base patents outside the Company’s fields ofuse.  On November 22, 2005 the Boardapproved the termination of Robert P. Appleby as the Company’s Chief ExecutiveOfficer and President.

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Upon thetermination of Mr. Appleby, the Company also became ineligible to receive the19.9% interest in Phitex, as described above. In the first quarter of 2006, the Company negotiated an amendment withthe Selling Entities such that, subject to the satisfaction of certainconditions, the Company will be eligible to receive a 10% interest inPhitex.  No effect, if any, related tothis potential acquisition has been included in the allocation of the purchaseprice.

The 2005Acquisition was accounted for as a business combination in accordance with SFASNo. 141 “Business Combinations” and accordingly, the tangible and intangibleassets acquired have been recorded at their estimated fair values as of the dateof the acquisition.  As a result of theacquisition, the Company owns the utility patent applications and provisionalpatent applications associated with the pHarlo technology in the Company’sfield of use. In addition to the acquisition of these patent applications, theCompany received the right of first refusal to purchase any other utilitypatent applications that may be developed by Phitex based on the pHarlotechnology. Before the acquisition, the Company only had the sublicense tomarket and sell these products worldwide. The acquisition of these patents willallow the Company to manufacture the products at a lower cost than it wouldhave paid to Phitex under the sublicense agreement and will also allow theCompany to market and sell these products applications without the restrictionsof the sublicense agreement. All of these factors contributed to a purchaseprice in excess of the fair value of the net tangible and intangible assetsacquired from Phitex and, as a result, the Company has recorded goodwill inconnection with this transaction. Goodwill has been recorded to the extent thepurchase price, including certain acquisition and closing costs, exceeds theallocation of fair value of the net identifiable tangible and intangible assetsacquired at the date of the acquisition. The final allocation of the purchaseprice, including the value and classification of intangible assets and theirrespective amortization periods, is based upon a retrospective valuation of theassets acquired. This valuation resulted in the adjustment to the fair value ofthe intangible asset and goodwill that was initially recorded at approximately$57,636,000 and $6,404,000, respectively.

Components ofthe purchase price and the estimated allocation thereof are approximately asfollows:

| Property and equipment                   |   | $          | 703,000    |   |
|------------------------------------------|--------|------------|------------|--------|
| Other assets                             |   | 49,000     |       |
| Other  liabilities                       |   | (629,000   | )          |
|                                     |   |       |       |
| Net assets  acquired                     |   | 123,000    |       |
| Identifiable  intangible assets acquired |   | 22,500,000 |       |
| Goodwill                                 |   | 41,677,000 |       |
| Total cost of  acquisition               |   | $          | 64,300,000 |   |

The results of operations of the Selling Entities have been included inthe Company’s Consolidated Statements of Operations since July 15, 2005, theacquisition date.

The followingunaudited proforma information gives effect to the acquisition as if it hadoccurred on the first day of each of the periods ended:
|                                    | ** ** | **December 31,** | ** ** |
|------------------------------------|------------|-----------------------|------------|
| ** **                         | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Total revenues                     |       | $                     | 705,467    |   | $ | — |   |
| Net loss                           |       | (20,033,116           | )          | (7,713,589 | ) |
| Loss per share, basic  and diluted |       | $                     | (0.24      | ) | $ | (0.33 | ) |

# **13.          INCOMETAXES**

Areconciliation of income tax expense to the benefit computed at the statutoryrate of 34% for the years ended December 31, 2005, 2004 and 2003 isapproximately as follows:

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| ** **                                  | ** ** | **2005**  | ** ** | **2004**  | ** ** | **2003**   | ** ** |
|---------------------------------------------|------------|-----------|------------|-----------|------------|------------|------------|
| Benefit at  statutory rate                  |       | $         | (6,211,000 | )         | $          | (2,064,000 | )          | $ | (206,000 | ) |
| Noncash interest  on Convertible Debentures |       | —    |       | 832,000   |       |       |       |
| Stock-based  compensation                   |       | 165,000   |       | 188,000   |       |       |       |
| Other                                       |       | 36,000    |       | (100,000  | )          |       |       |
| Losses for which  no benefit is recorded    |       | 6,010,000 |       | 1,144,000 |       | 206,000    |       |
|                                        |       | $         | —     |      | $          | —     |       | $ | — |   |

Significant components of the Company’s deferred income tax assets andliabilities at December 31, 2005 and 2004 are approximately as follows:
| ** **                       | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|----------------------------------|------------|------------|------------|------------|------------|
| Deferred tax  assets:            |       |       |       |       |       |
| Net operating  losses            |       | $          | 7,215,000  |       | $          | 1,674,000 |   |
|                             |       |       |       |       |       |
| Stock -based  compensation       |       | 1,464,000  |       | 188,000    |       |
| Reserves                         |       | 553,000    |       | —     |       |
| Valuation  allowance             |       | (8,637,000 | )          | (1,862,000 | )          |
|                             |       |       |       |       |       |
| Net deferred tax  assets         |       | $          | 595,000    |       | $          | — |   |
| Deferred tax  liabilities:       |       |       |       |       |       |
| Depreciation  & Amortization |       | (595,000   | )          |       |       |
| Total deferred  tax liabilities  |       | (595,000   | )          |       |       |
|                             |       |       |       |       |       |
| Net deferred tax assets          |       | $          | —     |       | $          | — |   |

As of December 31, 2005, the Company has a U.S. Federal net operatingloss carry forward of approximately $17.8 million, which will expire commencing2019 through 2025, if not utilized. Under Internal Revenue Code Section 382, the amounts of and benefitsfrom net operating loss carryforwards may be impaired or limited in certaincircumstances.  Events that causelimitations in the amount of net operating losses that the Company may utilizein any one year include, but are not limited to, a cumulative ownership changeof more than 50%, as defined over a three year period.  The amount of such limitation, if any, hasnot been determined.

Management ofthe Company has decided to fully reserve for its deferred tax asset, as it ismore likely than not that the Company will not be able to utilize thesedeferred tax assets against future income, coupled with the possiblelimitations of the net operating losses due to various changes in ownershipover the past year.

# **14.          COMMITMENTS AND CONTINGENCIES**

In connectionwith the 2005 Acquisition, the Company entered into a Patent and TechnologySub-License Agreement dated as of July 15, 2005 (the “Sub-License Agreement”)with pHarlo IP, LLC (“pHarlo IP”), in which pHarlo IP has agreed to provide tothe Company technical assistance necessary to implement, refine and exploit thebase patents to the pHarlo technology in the Company’s fields of use. pHarlo IPis the sole and exclusive licensee of the base patents to the pHarlotechnology.  In consideration for thetechnical assistance, the Company agreed to pay to pHarlo IP certain researchand development fees (**“**R&D Fees**”**). The R&D Fees may be subject to recovery by theCompany in certain circumstances described below.

On January 26,2006, the Company entered into a letter agreement with pHarlo IP that amended(i) the Sub-License Agreement and (ii) the Asset Purchase Agreement.

TheSub-License Agreement was amended to restructure the R&D Fees payable topHarlo IP. Prior to the amendment, the Company had agreed to pay to pHarlo IPthe R&D Fees in advance, prior to the calendar quarter for

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which theywere earned.   The R&D Fees wereoriginally set at a fixed amount, and although subject to recovery in certaincircumstances, were not dependant on sales of the Company’s products untilcertain thresholds had been met.

The amendmentrestructured the R&D Fees so that they are (i) payable on a quarterly basiswithin 30 days after the end of each calendar quarter and (ii) based on grosssales of the Company (or its affiliates) of products using the pHarlotechnology. For fiscal year 2006, the R&D Fees must not be less than$150,000 and are capped at $500,000. There are no other minimum R&D Feespayable after 2006, although R&D Fees for all subsequent years are cappedat specified rates.

The Company,Wynn Starr Special Products, LLC (“Wynn Starr”), PCTI, IRL and pHarlo IP areparties to an Exclusive Field of Use License Agreement and Product SaleAgreement made effective as of September 15, 2004, as amended (the “Wynn StarrAgreement”).  Under the terms of thisagreement, including amendments, the Company has granted Wynn Starr theexclusive, worldwide right to market and distribute products used aspost-harvesting processing aids for the poultry industry based on the pHarlotechnology.  Wynn Starr is alsoresponsible for taking the pHarlo concentrate provided by the Company andblending it with liquids to create the finished product that is ultimatelydistributed by Wynn Starr.  In return forthis license, Wynn Starr has agreed to pay the Company a royalty of $70.00 pergallon on all net sales (as defined in the Wynn Starr Agreement) sold by WynnStarr for which payment is received from customers.  The Company is currently renegotiating theroyalty payments associated with the Wynn Starr Agreement.  Under the Wynn Starr Agreement, if the pricefor the pHarlo concentrate exceeds a certain threshold amount per gallon, thenWynn Starr obligated to make certain royalty payments to pHarlo IP.  Steven B. Zavagli,  of the Company’s board of directors, is thefounder, Chairman and the Chief Executive Officer of Wynn Starr and Wynn Starr’sultimate parent company, Wynn Starr Flavors, Inc.

Pursuant tothe Sub-License Agreement, commencing within thirty days after December 31,2005 and within thirty days of each calendar quarter thereafter, pHarlo IP hasagreed to pay to the Company that amount of any royalties that are actuallyreceived by pHarlo IP from Wynn Starr during the preceding calendar quarter inan amount up to and not to exceed the amount of any R&D Fees actually paidby the Company to pHarlo IP during the same preceding calendar quarter.

Additionally,to the extent that the amount of any royalties actually paid to pHarlo IP byWynn Starr under the Wynn Starr Agreement exceeds the R&D Fees paid by theCompany to pHarlo IP, pHarlo IP has agreed to pay the Company one-third of theamount by which such royalties exceed the R&D Fees.  In the event that pHarlo IP ceases to receiveroyalty payments in respect of sales by Wynn Starr of certain products based ontechnology licensed by pHarlo IP to the Company, the Company is obligated tomake cash payments to pHarlo IP equal to the royalties pHarlo IP is entitled toreceive under the Wynn Starr Agreement with respect to such sales that are notsubject to repayment to the Company.

On December 7,2004, the Company entered into an agreement to purchase exclusive rights offirst refusal to applications of the pHarlo technology from Richard J. Kirby, adeveloper who had previous purchased the rights on July 19, 2002.  Under the terms of the consulting agreement,Mr. Kirby assigned and granted all his rights, titles and interests in hislicense agreements with pHarlo to Tasker for which Tasker agree to pay Mr.Kirby one half of one percent (0.5%) of net revenues generated from productsusing the pHarlo technology, in an amount not to exceed $400,000 in any onecalendar year.  The agreement continuesuntil the termination of or expiration of pHarlo Citrus’ patent to the licensedtechnology.  The Company recorded prepaidexpenses towards this agreement in the amounts of $45,000 for each of 2005 and2004, respectively.

In January2005, the Company entered into a three year employment agreement with Mr.Appleby to serve as its Chief Executive Officer. Under the terms of thisagreement, as amended in May and August of 2005, Mr. Appleby (a) will earn abase salary of $25,000 per month, modified annually, and increased to $27,083per month after certain Company growth objectives are met, (b) at thediscretion of the Board, upon the recommendation of the Compensation Committee,will be awarded an annual bonus, (c) was granted, in August 2004, anon-qualified stock option to purchase up to 1,000,000 shares of the Company’scommon stock at an exercise price of $0.25 per share, subject to certainvesting provisions and (d) receives other benefits.

In December2005, Robert Appleby and the Company entered into a Separation Agreement andGeneral Release in connection with Mr. Appleby’s resignation as the Company’sChief Executive Officer. Pursuant to the Separation

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Agreement andGeneral Release, the Company has agreed to pay Mr. Appleby a severance packageof approximately $50,000. In addition, the Company agreed that the exerciseperiod for Mr. Appleby’s vested options to purchase 1,611,111 shares of theCompany’s common stock would be reduced from 10 years from the grant date to 5years from the grant date.

In January2005, the Company entered into a three year employment agreement with Mr. Burnsto serve as the Company’s Chief Operating Officer and Executive Vice President.Under the terms of this agreement, as amended in May and August of 2005, Mr.Burns (a) will earn a base salary of $25,000 per month, modified annually, andincreased to $27,083 per month after certain Company growth objectives are met,(b) at the discretion of the Board, upon the recommendation of the CompensationCommittee, will be awarded an annual bonus, (c) was granted, in August 2004, anon-qualified stock option to purchase up to 1,000,000 shares of the Company’scommon stock at an exercise price of $0.25 per share, subject to certainvesting provisions and (d) receives other benefits. On December 19, 2005, Mr.Burns and the Company agreed to reduce his base annual salary from $325,000 peryear (as provided for in his employment agreement) to $200,000 per year.  Mr. Burns’s title has also changed from ChiefOperating Officer to Executive Vice President—Business Development. He remainsa member of the Company’s Board of Directors.

On November14, 2004, the Company entered into a three year employment agreement withRobert D. Jenkins to serve as the Company’s Chief Financial Officer. Under theterms of this agreement, as amended in May 2005, Mr. Jenkins (a) is paid amonthly salary of $16,667, modified annually and increased to $20,833 per monthafter the Company achieves a certain level of annual sales, (b) is eligible toparticipate in the Company’s Management Incentive Program, (c) was granted anon-qualified stock option to purchase up to 1,000,000 shares of the Company’scommon stock at an exercise price of $1.45 per share, subject to certainvesting provisions and (d) receives other benefits.

On February 8,2006, Mr. Jenkins and the Company entered into a Separation Agreement andGeneral Release in connection with Mr. Jenkins’s resignation as the Company’sChief Financial Officer. Pursuant to the Separation Agreement and GeneralRelease, the Company has agreed to continue to pay Mr. Jenkins at his currentannual base salary rate of $200,000 through June 28, 2006. Mr. Jenkins willalso continue to be eligible to participate in the Company’s medical and dentalplans until August 31, 2006, with the Company continuing to pay eighty percent(80%) of the premium for such coverage. In addition, the Company agreed thatthe exercise period for Mr. Jenkins’s options to purchase 1,000,000 shares ofthe Company’s common stock would be reduced from 10 years from the grant dateto 5 years from the grant date.

On October 26,2005, a civil action captioned The BOC Group, Inc. v. Tasker Capital Corp.,Randy Cable, and Shaun Porter was filed in the United States District Court forthe District of Connecticut.  In thecomplaint, The BOC Group alleges that Mr. Porter and Mr. Cable, employees ofthe Company, have breached certain restrictive covenants contained in theiremployment agreements with The BOC Group, and that the Company tortuouslyinterfered with The BOC Group’s agreements with Mr. Porter and Mr. Cable.  The BOC Group also claims that the Company,Mr. Porter and Mr. Cable violated Connecticut’s statutes governing tradesecrets and unfair trade practices.  TheBOC Group seeks unspecified monetary damages. The Company believes that thecomplaint is without merit and plans to vigorously defend itself against suchaction.  In the opinion of the Company’smanagement, based, in part, upon advice from its counsel handling thelitigation and proceedings, adverse outcomes, if any, will not have a materialeffect on the Company’s consolidated financial condition or results ofoperations.

On January 5,2006, a civil action captioned Robert L. Mandell, D.M.D., and Anthony M.Broschetti, D.M.D. v. Tasker Capital Corporation., Arthur P. Bergeron andRichard J. Kirby was filed in the Middlesex Superior Court inMassachusetts.  In the complaint, theplaintiffs allege that the Company, its former President, Mr. Bergeron, and itsalleged former agent, Mr. Kirby, breached an agreement to pay for a studyregarding the Company’s Breath Rephresh product.  The plaintiffs seek recovery of $100,000 inconnection with the breach of contract claim. The Company believes that the complaint is without merit and plans tovigorously defend itself against such action. In the opinion of the Company’s management, based, in part, upon advicefrom its counsel handling the litigation and proceedings, adverse outcomes, ifany, will not have a material effect on the Company’s consolidated financialcondition or results of operations.

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On January 17,2006, the Company received correspondence from Provco Ventures I, LP (“Provco”),an investor in the Company’s September 2005 private placement (the “September2005 Private Placement”). Provco alleges potential securities law claims inconnection with the September 2005 Private Placement. As of March 27, 2006, nolegal proceeding has been commenced by Provco or any other party regarding theSeptember 2005 Private Placement.  TheCompany believes that the allegations contained in the letter are without meritand plans to vigorously defend itself against any such action.  In the opinion of the Company’s management,based, in part, upon advice from its counsel handling this matter, adverseoutcomes, if any, will not have a material effect on the Company’s consolidatedfinancial condition or results of operations.

On January 18,2006, a civil action captioned Dallas XXIX Corporate Square, L.P., v. Coast toCoast Laboratories and Tasker Capital Corp. was filed in the  Circuit Court of Pinellas County, Florida.  The plaintiff alleges that Coast to CoastLaboratories Corp., a wholly owned subsidiary of the Company, has breached alease agreement and that the Company has breached a guaranty.  The plaintiff seeks recovery of monetarydamages of approximately $55,000.  TheCompany intends to vigorously defend itself against such action.  In the opinion of the Company’s management,based, in part, upon advice from its counsel handling the litigation andproceedings, adverse outcomes, if any, will not have a material effect on theCompany’s consolidated financial condition or results of operations.

# **15.          EMPLOYMENT AGREEMENTS**

The Companyhas entered into employment agreements with certain of its executives, whichprovide for annual compensation plus, in most cases, stock options,participation in future benefit programs and other benefits.  As of December 31, 2005, approximate futureminimum annual compensation under these employment agreements, is as follows:

| 2006 |   | $       | 990,000 |   |
|------|--------|---------|---------|--------|
| 2007 |   | 882,500 |    |
| 2008 |   | 112,500 |    |

Subsequent to December 31, 2005, the Company terminated employmentagreements with some of its executives and entered into new employmentagreements with its current executive management (Note 21(a)).  The revised approximate future minimum annualcompensation under these employment agreements, including the new andterminated agreements for 2006, 2007, 2008 and 2009 is $1,346,000, $1,128,000,$718,000 and $59,000, respectively.

# **16.          OPERATING LEASE**

On April 19,2005, the Company entered into a five -year lease effective May 1, 2005, forexecutive office space at Corporate Center, 39 Old Ridgebury Road-Suite 14,Danbury, CT 06817 at an annual base rent of $173,660, subject to modest annualincreases thereafter.  On May 1, 2005,the Company relocated to this address.

As part of the2005 Acquisition, the Company assumed a five-year lease for manufacturing,warehousing and office space in Conroe, Texas at an annual base rent of$114,000.

Futureaggregate minimum annual rental payments under these leases for the next fiveyears is shown in the schedule below. The schedule below also includes leaseexpenses for several leased vehicles. The annual lease expense for these vehicles is approximately $66,000,$63,000, $13,000 and $2,000 for the years ended December 31, 2006, 2007, 2008and 2009, respectively.

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| Future Minimum  Lease Payments | ** ** |
|------------------------------------------|------------|
| 2006                                     |       | $ | 387,114 |   |
| 2007                                     |       | 384,953 |   |
| 2008                                     |       | 328,134 |   |
| 2009                                     |       | 274,540 |   |
| 2010                                     |       | 62,228 |   |
| Total                                    |       | $ | 1,436,969 |   |

Rent expense for theyears ended December 31, 2005, 2004 and 2003 was $340,034, $56,927 and $30,000,respectively.

# **17.          RELATED PARTY TRANSACTIONS**

During theyear ended December 31, 2005, the Company incurred approximately $353,000 inexpenses to certain members of the Company’s Board of Directors excluding feespayable for Board service.  One Boardmember received approximately $151,000 for the production of inventory for theCompany, $125,000 in consulting and $35,000 as rent for a laboratory facility(also see Note 14 for further discussion on related parties).  The Company also incurred consulting expensesof approximately $42,000 from another Board member.

The followingtable summarizes related party transactions during the years ended December 31,2005 and 2003 and the period of inception, May 13, 1996, to December 31, 2005.There were no payments to related parties in 2004:
| ** **                                   | ** ** | **2005** | ** ** | **2003** | ** ** | **Since Inception** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|--------------------------|------------|
| Remuneration  paid and payable to a director |       | $        | 318,000    |     | $          | 39,040                   |       | $ | 380,550 |   |
| Management fees  paid to directors           |       | —   |       | —   |       | $                        | 123,892    |   |
| Rent reimbursed to a  director               |       | $        | 35,000     |     | $          | 30,000                   |       | $ | 80,343 |   |

# **18.          SEVERANCEPAYMENTS**

During thefourth quarter of fiscal year 2005 the Company recorded and paid approximately$29,000 of severance to one executive and five staff members. Seven more staffmembers were terminated but no severance was paid to them during this timeperiod. No liability remained at the end of fiscal year 2005 related to thisreduction action. The Company expects to experience cost reductions ofapproximately $200,000 per quarter starting in the first quarter of 2006related to this action.

# **19.          SEGMENTS - ENTERPRISE WIDE DISCLOSURES**

The Companyowns several utility patents that allow it to produce, market and distributecertain product applications related to these utility patents. In 2005, theCompany began selling two product applications, Unifresh® Footbath and CloseCallTM. The Chief Operating Decision Maker (CODM) of the Company is thePresident and CEO. The operating results of each product application, otherthan for revenue, are not separately tracked or reported. Operating results byproduct application are not reviewed by the CODM because discrete financialinformation is not available. Consequently, as permitted by the provisions ofSFAS No. 131, “Disclosure About Segments of an Enterprise and RelatedInformation,” the Company has one reportable segment for financial statementpurposes.

**Revenue by Product**

The Company’srevenue by product is as follows for each of the periods ended:

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|                          | ** ** | **December 31,**   | ** ** |
|--------------------------|------------|-------------------------|------------|
| ** **               | ** ** | **2005**                | ** ** | **2004** | ** ** |
| ** **               | ** ** | **(in thousands)** | ** ** |
| Unifresh  Footbath® |       | $                       | 202        |   | $ | — |   |
| Close CallTM         |       | 503                     |       | — |   |
|                     |       | $                       | 705        |   | $ | — |   |

**Dependence on Certain Customers**

For the yearended December 31, 2005, there was no single customer that accounted for 10% ormore of the Company’s consolidated revenue.

# **20.          QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)**

The followingis a summary of the unaudited quarterly results of operations: 
| ** **                                                            | ** ** | **Quarter Ended**   | ** ** |
|-----------------------------------------------------------------------|------------|--------------------------|------------|
| **(in thousands, except per share amounts)** | ** ** | **March 31,  2005** | ** ** | **June 30,  2005** | ** ** | **September 30,  2005 (1)** | ** ** | **December 31,  2005** | ** ** |
| Revenues                                                              |       | $                        | 61         |   | $ | 244 |   | $ | 1,128 |   | $ | (728 | ) |
| Gross profit                                                          |       | 36                       |       | 160 |   | 800 |   | (1,598 | ) |
| Net (loss)                                                            |       | (3,284                   | )          | (3,713 | ) | (4,208 | ) | (1,598 | ) |
| Net (loss) per share -  basic and dilutive                            |       | $                        | (0.06      | ) | $ | (0.06 | ) | $ | (0.05 | ) | $ | (0.08 | ) |

 
| ** **                                 | ** ** | **Quarter Ended**   | ** ** |
|--------------------------------------------|------------|--------------------------|------------|
| ** **                                 | ** ** | **March 31,  2004** | ** ** | **June 30,  2004 (2)** | ** ** | **September 30,  2004 (2)** | ** ** | **December 31,  2004** | ** ** |
| Revenues                                   | ** ** | **$**                    | **—** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** |
| Gross profit                               | ** ** | **—**               | ** ** | **—** | ** ** | **—** | ** ** | **—** | ** ** |
| Net (loss)                                 |       | (258                     | )          | (1,763 | ) | (2,553 | ) | (1,497 | ) |
| Net (loss) per share -  basic and dilutive |       | $                        | (0.02      | ) | $ | (0.11 | ) | $ | (0.11 | ) | $ | (0.06 | ) |

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(1)                                  Asreported on Form 8-K/A on January 20, 2006, the Company announced onDecember 7, 2005 that it had initiated an internal investigation of itsaccounts receivable and revenues for the quarter ended September 30, 2005. TheCompany originally reported revenues for the three month and nine month periodsended September 30, 2005 of $1,446,285 and $1,751,553, respectively in itsquarterly report on Form 10-QSB for the quarter ended September 30, 2005,filed with the SEC on November 14, 2005 (the “Form 10-QSB”). The Companyalso reported accounts receivable, net as of September 30, 2005, of $1,469,723.As a result of the investigation, the Company discovered that certain salesrecognized as revenues and booked as accounts receivable were mischaracterized.The accounting issues relate solely to sales of the Company’s Unifresh®Footbath product, a product the Company acquired in the 2005 Acquisition. TheCompany’s investigation found no accounting issues associated with the revenuesreported with respect to sales of its Close CallTM product.

During its investigation,the Company discovered that revenues for the three and nine months endedSeptember 30, 2005, and the period from inception to September 30, 2005, shouldhave been $1,128,125, $1,433,393 and $1,433,393, respectively, a reduction of$318,160 for each such period as compared to the numbers as reported in theForm 10-QSB.

Net loss for the threeand nine months ended September 30, 2005 should have been $4,208,198 and$11,205,184, respectively, an increase of $258,341, respectively to the numbersas reported in the Form 10**-**QSB. Net**l**oss for the period from inception toSeptember 30, 2005 should have been $19,002,453, also an increase of $258,341to the numbers as reported in the Form 10**-**QSB.

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Net loss per Common Sharefor the three and nine months ended September 30, 2005 remained the same as thenumbers reported in the Form 10**-**QSB at$0.05 and $0.16, respectively. Net loss per Common Share for the period sinceinception to September 30, 2005 should have been $1.13, an increase of $0.02.

Accounts receivable, net,total current assets and total assets at September 30, 2005 should have been$1,126,563, $10,983,997 and $76,139,252, respectively, a reduction of $343,160,$258,341 and $258,341, respectively to the numbers as reported in the Form 10**-**QSB. The amounts included in the table above reflectthe amounts that should have been reported in the Form 10**-**QSB.

(2)                                  TheQuarterly Reports on Form 10-QSB for the periods ended June 30 andSeptember 30, 2004 were restated to reflect the following adjustments toincome: (1) a stock -basedcompensation charge for “in the money” options issued to employees, (2) therecognition of value allocated to warrants and an embedded conversion featureassociated with convertible debentures issued in April and July 2004 (anincrease of the debt discount) and the immediate amortization of such discountas a result of the Company’s violation of certain covenants of the April andJuly 2004 convertible debentures and (3) a compensation charge to reflect themarket value of common stock issued to consultants for services rendered. Theaggregate effect of this restatement had no impact on the December 31, 2004Audited Consolidated Financial Statements of the Company as reported in its Form10-KSB filed April 16, 2005.  The amountsincluded in the table above reflect the restated amounts.

# **21.          SUBSEQUENT EVENTS**

## ***(a)           Employmentagreements:***

On January 26,2006, effective on the closing of the January 2006 private placement, the Boardof Directors of the Company appointed Richard D. Falcone as President and ChiefExecutive Officer of the Company. On February 9, 2006, the Company entered intoan employment agreement with Mr. Falcone. The principal terms of the employmentagreement are as follows: (i) Mr. Falcone’s base salary is $275,000 per year;(ii) any bonus payments made to Mr. Falcone will be at the discretion of theBoard; (iii) Mr. Falcone is eligible to participate in the Company’s existingbenefit plans; and (iv) Mr. Falcone has use of a Company car. In addition, theCompany has agreed to provide Mr. Falcone with disability benefits and toreimburse him for health insurance coverage if the Company terminates its grouphealth insurance plan. The employment agreement has a term of three years, withprovision for automatic renewal for successive three year terms. If Mr. Falconeis terminated by the Company for any reason other than cause, as defined in hisemployment agreement, if he should resign for a good reason, as defined in hisemployment agreement and, that includes a change in control of the Company, orif the Company should not renew his employment agreement after the expirationof the term, Mr. Falcone is entitled to severance. The severance payable to Mr.Falcone is dependant on how long he has been employed at the Company, beginningwith twenty-four months of base salary (and any bonus to which he would havebeen entitled during such period) payable upon termination immediately afterexecution of his employment agreement, decreasing by one month for each monthhe remains employed at the Company, but subject to a minimum severance oftwelve months of base salary. The obligation to pay severance is conditionedupon Mr. Falcone’s execution of a mutually agreeable release of claims againstthe Company.  The Board also granted Mr.Falcone 2,200,000 stock options with an exercise price of $1.00 per share. Theoptions have a ten year term, less one day. Twenty-five percent (25%) of theoptions vested immediately, and the remainder vest in equal monthlyinstallments over the two-year period from the date of grant. If Mr. Falcone isterminated by the Company other than for cause, if Mr. Falcone resigns for goodreason, or if termination is caused by Mr. Falcone’s death, the options willcontinue to vest; otherwise, vesting of the options ceases upon Mr. Falcone’stermination. In addition, if the Company undergoes a change in control, asdefined in his employment agreement, the stock options granted above will fullyvest upon the change in control.

On January 26,2006, the Company approved a new consulting arrangement with Mr. Gordon Davis,the Company’s Chairman of the Board of Directors. On February 9, 2006, theCompany entered into a consulting agreement with Mr. Davis with an effectivedate of February 2, 2006. The principal terms of the consulting agreement areas follows: (i) Mr. Davis’s consulting fee is $120,000 per year and (ii) Mr.Davis has use of a company car for **C**ompanybusiness. The consulting agreement has a term of three years, with**a** provision for automatic renewal for successive one yearterms. If Mr. Davis is terminated for any reason other than by the Company forcause, as defined in his consulting agreement, including if the consultingagreement is not renewed by the Company, he will be entitled to terminationpayments. If Mr. Davis’s termination is caused by his death or disability, thenthe

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termination fee is equal to $120,000. If the Company terminates Mr.Davis for any reason other than for cause, if Mr. Davis terminates theagreement for good reason, or if the Company does not renew the consultingagreement, then Mr. Davis’s termination fee is dependant on when thetermination takes place. If the termination occurs prior to the one yearanniversary of the effective date, then Mr. Davis is entitled to the $120,000annual consulting fee for the remainder of the term of the consultingagreement. If the termination occurs after the one year anniversary of theeffective date, Mr. Davis is entitled to the consulting fee then in effect fora period of one year following termination. The obligation to pay thetermination fee is conditioned upon Mr. Davis’s execution of a release ofclaims against the Company. Mr. Davis will continue to receive remuneration forservice on the Board of Directors.  TheBoard also granted Mr. Davis 1,750,000 stock options with an exercise price of$1.00 per share. The options have a ten year term, less one day. Twenty-fivepercent (25%) of the options vested immediately, and the remainder vest inequal monthly installments over the two-year period from the date of grant. IfMr. Davis is terminated by the Company other than for cause, if Mr. Davisterminates for good reason, or if termination is caused by Mr. Davis’s death ordisability, or non-renewal of the agreement by the Company, the options willcontinue to vest**. **Otherwise,vesting of the options ceases upon Mr. Davis’s termination as a consultant. Inaddition, if the Company undergoes a change in control, as defined in theconsulting agreement, the stock options granted above will fully vest upon thechange in control.

On February 8, 2006, the Company appointed Stathis Kouninis as ChiefFinancial Officer. On February 13, 2006 the Company entered into an employmentagreement with Mr. Kouninis. The principal terms of the employment agreementare as follows: (i) Mr. Kouninis will be paid a base salary of $165,000 peryear; (ii) any bonus payment made to Mr. Kouninis will be at the discretion ofthe Board and (iii) Mr. Kouninis will be eligible to participate in the Company’sexisting benefit plans. In addition, the employment agreement will have a termof three years with a provision for automatic renewal for successive one yearterms. If Mr. Kouninis is terminated by the Company for any reason other thancause, as defined in his employment agreement, or if he should resign for goodreason, as defined in his employment agreement, Mr. Kouninis will be entitledto receive, for a period of six months following termination, his base salaryat the rate in effect on the date of termination. The obligation to payseverance is conditioned upon Mr. Kouninis’ execution of a mutually agreeablerelease of claims against the Company. The Company also granted Mr. Kouninis stock options to purchase 450,000shares of the Company’s common stock at an exercise price of $1.00 per share.The options have a ten year term, less one day. Twenty five percent (25%) ofthe options vested on the date of grant, and the remainder will vest in equalmonthly installments over the two-year period from the date of grant, providedthat Mr. Kouninis remains employed by the Company. If the Company undergoes achange in control, as defined in his employment agreement, the stock optionsgranted above will fully vest upon such change.

On February 8,2006, the Company entered into an employment agreement with Michael Bradley toserve as its Controller. The principal terms of the employment agreement are asfollows: (i) Mr. Bradley will be paid a base salary of $140,000 per year; (ii)any bonus payment made to Mr. Bradley will be at the discretion of the CEO;(iii) an automobile allowance in the amount of $7,800 per annum and (iv) Mr.Bradley will be eligible to participate in the Company’s existing benefitplans. In addition, the employment agreement will have a term of three yearswith provision for automatic renewal for successive one year terms. If Mr.Bradley is terminated by the Company for any reason other than cause, asdefined in his employment agreement, or if he should resign for good reason, asdefined in his employment agreement, Mr. Bradley will be entitled to receive,for a period of six months following termination, his base salary at the ratein effect on the date of termination. The obligation to pay severance isconditioned upon Mr. Bradley’s execution of a mutually agreeable release ofclaims against the Company.  The Companyalso granted Mr. Bradley stock options to purchase 350,000 shares of theCompany’s common stock at an exercise price of $1.00 per share. The optionshave a ten year term, less one day. Twenty five percent (25%) of the optionsvested on the date of grant, and the remainder will vest in equal monthlyinstallments over the two-year period from the date of grant, provided that Mr.Bradley remains employed by the Company. If the Company undergoes a change incontrol, as defined in his employment agreement, the stock options grantedabove will fully vest upon the change in control.

## ***(b)           Equityfinancing:***

On January 26,2006, the Company, entered into a Securities Purchase Agreement (the “PurchaseAgreement”) with accredited investors pursuant to which the Company sold13,335,925 units consisting of one share of common stock and a warrant topurchase one share of common stock at an exercise price of $1.00 per share for$0.70 per unit.

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EmergingGrowth Equities, Ltd., a Pennsylvania limited partnership, served as placementagent for the transaction. The gross proceeds to the Company at the closing ofthis private placement, exclusive of the exercise price of the warrants, were$9,335,151.

The warrantsalso include a cashless exercise provision pursuant to which the warrants maybe exercised without payment in cash to the Company of the exercise price inthe event that, at any time after one year from the date of the issuance of thewarrant, there is no effective registration statement registering the resale ofthe shares of common stock underlying the warrants.

Pursuant tothe Purchase Agreement, the Company agreed to several covenants, including thefollowing: (i) the Company has agreed to take all actions necessary, includingthe preparation of proxy materials and solicitation of the Company’sshareholders, to seek shareholder approval to increase the size of the existingBoard of Directors of the Company from five to seven members; (ii) the Companyhas agreed to update, if necessary, and as soon as reasonably practicable,certain prospectuses filed with the Securities and Exchange Commission; (iii)the Company has agreed to take all action necessary to appoint an individual selectedby the purchasers holding a majority of the units purchased in this privateplacement, and reasonably agreeable to the Company’s existing Board ofDirectors, to fill the current vacancy on the Company’s Board of Directors, toappoint such person to serve on the Compensation Committee and, if qualified,the Audit Committee, and to take all actions necessary to ensure that suchperson will be included on the Company’s slate of Board nominees submitted fora shareholder vote at the Company’s next scheduled annual meeting ofshareholders and (iv) the Company has agreed to permit the purchasers in thisprivate placement to designate a person to attend and observe (in person ortelephonically) presentations to and matters before the Company’s Board, providedthat such observer will remove himself or herself prior to any Board vote ortaking of formal Board action, if such removal is requested by the Board.

On January 26,2006, the Company also entered into an Escrow Agreement (the “Escrow Agreement”),pursuant to which the subscription amounts from each purchaser were placed intoescrow pending release upon the happening of certain specified conditions. Allof these conditions were either met or waived at the closing that occurred onJanuary 26, 2006. The escrow conditions included not only the agreements by theCompany set forth above, but also several additional covenants including thefollowing: (i) the Company has agreed to use no more that $500,000 of theproceeds raised in the January 2006 private placement as payment for theCompany’s past due payables existing as of December 31, 2005; (ii) the Companyhad to obtain a waiver of claims for liquidated damages relating to the Company’sSeptember 2005 private placement of securities from shareholders representingat least a majority of all outstanding securities issued in connection with theSeptember 2005 private placement, and the Company had to reprice the warrantsissued to shareholders providing the waiver such that the exercise price of thewarrants issued in connection with the September 2005 private placement wasreduced from $3.00 to $1.00 and (iii) all of the current members of the Company’sBoard, with the exception of the Board member selected by the purchasers, hadto subscribe for, in the aggregate, at least $150,000 worth of common stock andwarrants being sold in the private placement.

In addition tothe Purchase Agreement and the Escrow Agreement, the Company also entered intoa Registration Rights Agreement (the “Registration Rights Agreement”). Pursuantto the Registration Rights Agreement, the Company is required to file aregistration statement covering the resale of the shares of common stockpurchased pursuant to the Purchase Agreement and the shares of common stockreceivable upon exercise of the warrants within 90 days after the closing ofthe private placement, and to have that registration statement declaredeffective within six months after the filing of the registration statement. TheCompany is also obligated to use its best efforts to respond to any comments ofthe SEC within fifteen calendar days of the receipt of comments. The Company isrequired to pay liquidated damages if the registration statement has not beenfiled or declared effective on or prior to the applicable deadline specifiedabove, or if the Company fails to use best efforts to respond to SEC commentswithin fifteen calendar days. The Registration Rights Agreement requires theCompany to pay the liquidated damages in additional common stock and warrants.

The Companyhas covenanted to use the net proceeds from the January 2006 private placementfor working capital purposes, including poultry processing, seafood processing,Unifresh® Footbath concentrate, Unifresh® Pen Spray concentrate and otherproducts and/or businesses the Company deems necessary, and not for thesatisfaction of any portion of the Company’s past due payables outstanding asof December 31, 2005 (other than payment of past due

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payables outstanding asof December 31, 2005 in an amount not to exceed $500,000), to redeem anyCompany equity or equity-equivalent securities or to settle any outstandinglitigation.

Ascompensation for acting as placement agent, Emerging Growth Equities, Ltd.received a cash payment equal to 6% of the gross proceeds from the privateplacement, and also received a warrant exercisable for shares of the Company’scommon stock in an amount equal to 6% of the gross proceeds from the sale ofthe shares and warrants divided by $0.70. The warrant to Emerging GrowthEquities has an exercise price equal to $1.00 and is exercisable immediatelyfor a term of five years.

**Waiversof Liquidated Damages:**

In connectionwith the private placement described above, the Company also obtained waiversof all claims for liquidated damages relating to the inability of the Companyto have the registration statement registering resale of securities purchasedin the September 2005 private placement declared effective by the deadlinespecified in the Registration Rights Agreement. The Company received thesewaivers from shareholders representing more than a majority of all outstandingsecurities issued in connection with the September 2005 private placement. Inconsideration for obtaining the waiver, the Company repriced the warrantsissued to shareholders providing the waiver such that the exercise price of thewarrants issued in connection with the September 2005 private placement wasreduced from $3.00 to $1.00. The Company also agreed to have the registration statementcovering resale of the securities purchased in the September 2005 privateplacement declared effective by May 23, 2006.

## ***(c)           Commonstock issuances:***

Through March9, 2006, the Company issued an additional 15.6 million common shares inconnection with the following:

| January 2006 private  placement |   | 13,335,925 |   |
|---------------------------------|--------|------------|--------|
| Debenture  conversions          |   | 2,095,000  |   |
| Option exercises                |   | 175,000    |   |
|                            |   | 15,605,925 |   |

 

F-39

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**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.
|                        | TASKER CAPITAL CORP. |
|------------------------|----------------------|
|                   |                 |   |
|                   | By:                  | /s/ Stathis Kouninis |   |
|                   |                 | Stathis Kouninis |
|                   |                 | Chief Financial Officer |
|                   |                 |   |
| Date: October 26, 2006 |                 |   |

----

**EXHIBIT INDEX**
| EXHIBIT  NUMBER | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                                                                                                 |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1             |       | Asset Purchase Agreement by and among Tasker Capital  Corp. and Tasker Products IP Holdings Corp. (as “Buyers”) and Indian River  Labs, L.L.C., pHarlo Citrus Technologies, Inc., pHarlo Citrus Properties  Partnership, LLLP and Coast to Coast Laboratories, LLC (as “Sellers”) dated  July 15, 2005 (incorporated by reference to Exhibit 2.1 to the Registrant’s  Form 8-K filed on July 21, 2005) |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.1             |       | Articles of Incorporation of Tasker Capital Corp, as  amended (incorporated by reference to Exhibit 3.1 to the Registrant’s  Registration Statement on Form SB-2 filed August 30, 2005)                                                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.2             |       | By-Laws of Tasker Capital Corp. (incorporated by  reference to Exhibit 2.2 to the Registration Statement of the Registrant on  Form 10-SB filed with the SEC on November 27, 2000)                                                                                                                                                                                                                                              |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.1             |       | Cummins Lock-Up Agreement dated July 15, 2005  (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed  on July 21, 2005)                                                                                                                                                                                                                                                                             |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.2             |       | Creasey Lock-Up Agreement dated July 15, 2005  (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed  on July 21, 2005)                                                                                                                                                                                                                                                                             |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.3             |       | Dickinson Lock-Up Agreement dated July 15, 2005 (incorporated  by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed on July 21,  2005)                                                                                                                                                                                                                                                                           |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.4             |       | Smith Lock-Up Agreement dated July 15, 2005  (incorporated by reference to Exhibit 4.4 to the Registrant’s Form 8-K filed  on July 21, 2005)                                                                                                                                                                                                                                                                               |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.5             |       | Form of Warrant from the September 2005 Private  Placement (incorporated by reference to Exhibit 4.01 to the Registrant’s  Form 8-K filed on September 26, 2005)                                                                                                                                                                                                                                                      |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 5.1             |       | Opinion of Hale Lane (incorporated by reference to  Exhibit 23.3 to the Registrant’s Registration Statement on Amendment 1 on  Form SB-2 filed October 27, 2005)                                                                                                                                                                                                                                                           |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.1            |       | April 5, 2004 Non-qualified Stock Option Grant  Agreement with Robert Appleby (incorporated by reference to Exhibit 10.1 to  the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                         |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.2            |       | April 5, 2004 Non-qualified Stock Option Grant  Agreement with James Burns (incorporated by reference to Exhibit 10.2 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                            |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.3            |       | May 11, 2004 Non-qualified Stock Option Grant  Agreement with Robert Appleby (incorporated by reference to Exhibit 10.3 to  the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                          |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.4            |       | May 11, 2004 Non-qualified Stock Option Grant  Agreement with James Burns (incorporated by reference to Exhibit 10.4 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                             |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.5            |       | May 31, 2004 Employee Non-Statutory Stock Option  Agreement with Barbara Longchamp (incorporated by reference to Exhibit 10.5  to the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.6            |       | May 31, 2004 Employee Non-Statutory Stock Option  Agreement with Gordon Davis (incorporated by reference to Exhibit 10.6 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                         |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.7            |       | August 25, 2004 Employee Non-Statutory Stock Option  Agreement with Robert Appleby (incorporated by reference to Exhibit 10.7 to  the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                    |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.8            |       | August 25, 2004 Employee Non-Statutory Stock Option  Agreement with James Burns (incorporated by reference to Exhibit 10.8 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                       |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.9            |       | January 1, 2005 Executive Employment Agreement with  Robert P. Appleby (incorporated by reference to Exhibit 10.9 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                                |
| 10.10           |       | January 1, 2005 Executive Employment Agreement with  James Burns (incorporated by reference to Exhibit 10.10 to the Registrant’s  Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                                                     |
|            |       |                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.11           |       | November 1, 2004 Executive Employment Agreement with  Dennis Smithyman (incorporated by reference to                                                                                                                                                                                                                                                                                                                            |

----

 
|        |   | Exhibit 10.11 to the Registrant’s Form 10-KSB filed  on April 15, 2005)                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.12  |   | November 15, 2004 Executive Employment Agreement  with James Collins (incorporated by reference to Exhibit 10.12 to the Registrant’s  Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.13  |   | November 15, 2004 Executive Employment Agreement  with Robert D. Jenkins (incorporated by reference to Exhibit 10.13 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.14  |   | Securities Purchase Agreement dated as of April 30,  2004, Registration Rights Agreement dated as of April 30, 2004, Form of  Common Stock Purchase Warrant and Form of 7% Convertible Debenture for the  April 2004 private placement (incorporated by reference to Exhibits 4.1, 4.2,  4.3 and 4.4 to the Registrant’s Form 8-K filed on May 5, 2004)                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.15  |   | Securities Purchase Agreement dated as of July 21,  2004, Registration Rights Agreement dated as of July 21, 2004, Form of Common  Stock Purchase Warrant and Form of Convertible Debenture for the July 2004  private placement (incorporated by reference to Exhibits 4.1, 4.2, 4.3 and  4.4 to the Registrant’s Form 8-K filed on July 22, 2004)                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.16  |   | Securities Purchase Agreement dated as of December  23, 2004, Registration Rights Agreement dated as of December 23, 2004, and  Warrant issued to Emerging Growth Equities, LTD. for the December 2004  private placement (Equity financing that closed on 12/29/04) (incorporated by  reference to Exhibits 4.1, 4.2 and 4.3 to the Registrant’s Form 8-K filed on  January 5, 2005) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.17  |   | Exclusive Field of Use License Agreement with pHarlo  Citrus Technologies, Inc. dated September 20, 2004 (incorporated by reference  to Exhibit 10.17 to the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.18  |   | Exclusive Field of Use License Agreement with pHarlo  Citrus Technologies, Inc. dated September 16, 2004 (incorporated by reference  to Exhibit 10.18 to the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.19  |   | Exclusive Field of Use License Agreement &  Product Sale Agreement between Wynn Starr Special Products LLC and Tasker  Capital Corp. dated September 16, 2004 (incorporated by reference to Exhibit  10.19 to the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.20  |   | Promissory note with pHarlo Citrus Technologies  dated November 28, 2004 (incorporated by reference to Exhibit 10.20 to the  Registrant’s Form 10-KSB filed on April 15, 2005).                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.21  |   | Promissory note with pHarlo Citrus Technologies  dated November 12, 2004 (incorporated by reference to Exhibit 10.21 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.22  |   | Promissory note with pHarlo Citrus Properties  Partnership LLLP dated December 15, 2004 (incorporated by reference to  Exhibit 10.22 to the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.23  |   | Promissory note with pHarlo Citrus Properties  Partnership LLLP dated December 30, 2004 (incorporated by reference to  Exhibit 10.23 to the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.24  |   | January 10, 2004 Consulting Agreement with Thomas  Brazil (incorporated by reference to Exhibit 10.24 to the Registrant’s Form  10-KSB filed on April 15, 2005)                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.25  |   | January 20, 2004 Consulting Agreement with Stuart  McPherson (incorporated by reference to Exhibit 10.25 to the Registrant’s  Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.26  |   | May, 2004 Consulting Agreement with Arthur Bergeron  (incorporated by reference to Exhibit 10.26 to the Registrants Form 10-KSB  filed on April 15, 2005)                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.27  |   | August, 2004 Consulting Agreement with Wall Street  Investor Relations (incorporated by reference to Exhibit 10.27 to the  Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.28  |   | December 7, 2004 Settlement Agreement with Richard  J. Kirby (incorporated by reference to Exhibit 10.28 to the Registrant’s Form  10-KSB filed on April 15, 2005)                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.29  |   | December 27, 2004 Consulting Agreement with Avanti  HR Placement & Consulting (incorporated by reference to Exhibit 10.29 to  the Registrant’s Form 10-KSB filed on April 15, 2005)                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.30  |   | Promissory note by Barry Cummins to Tasker Capital  Corp., dated January 10, 2005 (incorporated by reference to Exhibit 10.30 to  the Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.31  |   | Promissory note by David Creasey to Tasker Capital Corp.,  dated January 3, 2005 (incorporated by reference to Exhibit 10.31 to the  Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                                                                                                                  |

 

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| 10.32  |   | Promissory note by David Creasey to Tasker Capital  Corp., dated March 1, 2005 (incorporated by reference to Exhibit 10.32 to the  Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                               |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.33  |   | Promissory note by David Dickinson to Tasker Capital  Corp., dated January 10, 2005 (incorporated by reference to Exhibit 10.33 to  the Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.34  |   | Promissory note by David Dickinson to Tasker Capital  Corp., dated March 4, 2005 (incorporated by reference to Exhibit 10.34 to the  Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.35  |   | Loan Agreement by and between pHarlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated January 20, 2005  (incorporated by reference to Exhibit 10.35 to the Registrant’s Form 10-QSB  filed on May 16, 2005)                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.36  |   | Loan Agreement by and between pHarlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated February 15,  2005 (incorporated by reference to Exhibit 10.36 to the Registrant’s Form  10-QSB filed on May 16, 2005)                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.37  |   | Loan Agreement by and between pHarlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated March 7, 2005  (incorporated by reference to Exhibit 10.37 to the Registrant’s Form 10-QSB  filed on May 16, 2005)                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.38  |   | Loan Agreement by and between pHarlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated March 31, 2005  (incorporated by reference to Exhibit 10.38 to the Registrant’s Form 10-QSB  filed on May 16, 2005)                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.39  |   | Loan Agreement by and between Coast to Coast and  Tasker Capital Corp., dated March 3, 2005 (incorporated by reference to Exhibit  10.39 to the Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.40  |   | Promissory Note by David Creasey to Tasker Capital  Corp., dated March 28, 2005 (incorporated by reference to Exhibit 10.40 to  the Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.41  |   | February 3, 2005 sale of promissory note by Philip  Georgas to Tasker Capital Corp. in the sum of $49,950 plus interest and  services for 32,272 restricted common shares at US $1.65 share (incorporated  by reference to Exhibit 10.41 to the Registrant’s Form 10-QSB filed on May  16, 2005) |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.42  |   | Employment agreement between Tasker Capital Corp.  and Mr. Richard Weiner dated April 12, 2005 (incorporated by reference to  Exhibit 10.42 to the Registrant’s Form 10-QSB filed on May 16, 2005)                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.43  |   | Amendment No. 1 to Executive Employment Agreement,  dated May 16, 2005, between Tasker Capital Corp. and Robert P. Appleby  (incorporated by reference to Exhibit 10.43 to the Registrant’s Form 10-QSB  filed on May 16, 2005)                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.44  |   | Amendment No. 1 to Executive Employment Agreement,  dated May 16, 2005, between Tasker Capital Corp. and James Burns  (incorporated by reference to Exhibit 10.44 to the Registrant’s Form 10-QSB  filed on May 16, 2005)                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.45  |   | Amendment No. 1 to Executive Employment Agreement, dated  May 16, 2005, between Tasker Capital Corp. and Robert D. Jenkins  (incorporated by reference to Exhibit 10.45 to the Registrant’s Form 10-QSB  filed on May 16, 2005)                                                                  |
| 10.46  |   | Loan Agreement by and between Pharlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated April 20, 2005  (incorporated by reference to Exhibit 10.46 to the Registrant’s Form 10-QSB  filed on August 15, 2005)                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.47  |   | Loan Agreement by and between Pharlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated May 19, 2005  (incorporated by reference to Exhibit 10.47 to the Registrant’s  Form 10-QSB filed on August 15, 2005)                                                              |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.48  |   | Loan Agreement by and between Pharlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated June 14, 2005  (incorporated by reference to Exhibit 10.48 to the Registrant’s  Form 10-QSB filed on August 15, 2005)                                                             |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.49  |   | Loan Agreement by and between Pharlo Citrus  Properties Partnership, LLLP and Tasker Capital Corp., dated July 6, 2005  (incorporated by reference to Exhibit 10.49 to the Registrant’s  Form 10-QSB filed on August 15, 2005)                                                              |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.50  |   | Loan Agreement by and between Coast to Coast  Laboratories LLC and Tasker Capital Corp., dated May 25, 2005 (incorporated  by reference to Exhibit 10.50 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.51  |   | Loan Agreement by and between Coast to Coast  Laboratories LLC and Tasker Capital Corp., dated June 29, 2005 (incorporated  by reference to Exhibit 10.51 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                  |
| 10.52  |   | Loan Agreement by and between Pharlo Citrus  Technologies and Tasker Capital Corp., dated May 11, 2005 (incorporated by  reference to Exhibit 10.52 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                                   |

 

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| 10.53  |   | Loan Agreement by and between Pharlo Citrus  Technologies and Tasker Capital Corp., dated May 27, 2005 (incorporated by  reference to Exhibit 10.53 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                                                                                                                |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.54  |   | Loan Agreement by and between Pharlo Citrus  Technologies and Tasker Capital Corp., dated June 2, 2005 (incorporated by  reference to Exhibit 10.54 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.55  |   | Loan Agreement by and between Pharlo Citrus  Technologies and Tasker Capital Corp., dated June 14, 2005 (incorporated by  reference to Exhibit 10.55 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.56  |   | Loan Agreement by and between Pharlo Citrus  Technologies and Tasker Capital Corp., dated June 27, 2005 (incorporated by reference  to Exhibit 10.56 to the Registrant’s Form 10-QSB filed on August 15, 2005)                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.57  |   | Loan Agreement by and between Pharlo Citrus  Technologies and Tasker Capital Corp., dated July 12, 2005 (incorporated by  reference to Exhibit 10.57 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.58  |   | Loan Agreement by and between Indian River Labs and  Tasker Capital Corp., dated June 29, 2005 (incorporated by reference to  Exhibit 10.58 to the Registrant’s Form 10-QSB filed on August 15, 2005)                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.59  |   | Stock Purchase Agreement between Electric Aquagenics  Unlimited, Inc. and Tasker Capital Corp., dated April 22, 2005 (incorporated  by reference to Exhibit 10.59 to the Registrant’s Form 10-QSB filed on August  15, 2005)                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.60  |   | Amendment No. 2 to Executive Employment Agreement,  dated August 10, 2005, between Tasker Capital Corp. and Robert P. Appleby  (incorporated by reference to Exhibit 10.60 to the Registrant’s Form 10-QSB  filed on August 15, 2005)                                                                                                                                         |
| 10.61  |   | Amendment No. 2 to Executive Employment Agreement,  dated August 10, 2005, between Tasker Capital Corp. and James Burns  (incorporated by reference to Exhibit 10.61 to the Registrant’s Form 10-QSB  filed on August 15, 2005)                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.62  |   | Patent Technology Sublicense Agreement made as of  July 15, 2005 by and among pHarlo IP, LLC, Tasker Capital Corp. and Tasker  Products IP Holdings Corp. (incorporated by reference to Exhibit 10.2 to the  Registrant’s Form 8-K filed on July 21, 2005)                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.63  |   | Promissory Note executed by Tasker Capital Corp. to  Indian River Labs, L.L.C. dated July 15, 2005 (incorporated by reference to  Exhibit 10.1 to the Registrant’s Form 8-K filed on July 21, 2005)                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.64  |   | Securities Purchase Agreement, dated as of September  21, 2005, by and among Tasker Capital Corp. and the Purchaser parties thereto  (incorporated by reference to Exhibit 10.01 to the Registrant’s Form 8-K  filed on September 26, 2005)                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.65  |   | Registration Rights Agreement, dated as of September  21, 2005, by and among Tasker Capital Corp. and the Purchaser parties thereto  (incorporated by reference to Exhibit 10.02 to the Registrant’s Form 8-K  filed on September 26, 2005)                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.66  |   | Amendment to Exclusive Field of Use License  Agreement and Product Sale Agreement by and between Tasker Capital Corp.,  Wynn Starr Special Products, LLC, Pharlo Citrus Technologies, Inc., and  Indian River Labs, LLC, retroactively effective to March 18, 2005  (incorporated by reference to Exhibit 10.66 to the Registrant’s Form 10-QSB  filed on November 14, 2005). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 10.67* |   | Settlement Agreement and General Lease, dated  December 23, 2005, between Tasker Capital Corp. and Robert P. Appleby                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 21.1   |   | Subsidiaries of the Registrant (incorporated by  reference to Exhibit 21.1 to the Registrant’s Registration Statement on Form  SB-2 filed on August 30, 2005)                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 23.1   |   | Consent of Rothstein, Kass & Company, P.C.                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 23.2   |   | Consent of Morgan and Company                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1   |   | Rule 13a-14(a)/15d-14(a) Certification of Principal  Executive Officer                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 31.2   |   | Rule 13a-14(a)/15d-14(a) Certification of Principal  Financial Officer                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |
| 32     |   | Section 1350 Certification of Principal Executive  Officer and Principal Financial Officer                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                               |

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|  |   | *              previously  filed. |
|--|--------|----------------------------------------------------------------------------------------------------|

 

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