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

                                   FORM 10-KSB

(MARK ONE)

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

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2006

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                        COMMISSION FILE NUMBER 000-26067

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

               NEVADA                                    87-0571300
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

1428 BRANDYWINE CIRCLE, FORT MYERS, FLORIDA                     33919
  (Address of principal executive offices)                    Zip Code)


ISSUER'S TELEPHONE NO.:                                   (239) 437-5255
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)                NONE
OF THE EXCHANGE ACT:
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)               COMMON
OF THE EXCHANGE ACT:

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

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

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes_X_ No___

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

State the  aggregate  market  value of the voting  stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and ask prices of such stock as of a specified date within 60 days. $999,175

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

          CLASS                              OUTSTANDING AS OF NOVEMBER 30, 2006
Common Stock, $.001 par value                              11,101,946

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE

Transitional Small Business Disclosure Format. Yes |_| No |X|



<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                             PART I
<S>          <C>                                                                                                     <C>
ITEM 1.      DESCRIPTION OF BUSINESS....................................................................................1

ITEM 2.      DESCRIPTION OF PROPERTY...................................................................................16

ITEM 3.      LEGAL PROCEEDINGS.........................................................................................16

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................................16

<CAPTION>
                                                            PART II
<S>          <C>                                                                                                     <C>
ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................................17

ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.................................................18

ITEM 7.      FINANCIAL STATEMENTS......................................................................................20

ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................21

ITEM 8A.     CONTROLS AND PROCEDURES...................................................................................21

<CAPTION>
                                                         PART III
<S>          <C>                                                                                                     <C>
ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
             COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.........................................................21

ITEM 10.     EXECUTIVE COMPENSATION....................................................................................24

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................25

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................25

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K..........................................................................26

ITEM 14.     PRINCIPAL ACCOUNTANTS FEES AND SERVICES...................................................................27

SIGNATURES   ..........................................................................................................28
</TABLE>



<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

         This  report  contains  certain   forward-looking   statements.   These
statements  relate to future events or our future  performance and involve known
and unknown risks and  uncertainties.  Actual  results may differ  substantially
from  such  forward-looking  statements,  including,  but not  limited  to,  the
following:

              o our ability to search for an  appropriate  business  opportunity
                and to subsequently acquire or merge with such entity;

              o to meet our cash and working capital needs;

              o our  ability to maintain  our  corporate  existence  as a viable
                entity; and

              o other risks  detailed in our  periodic  report  filings with the
                SEC.

         In  some  cases,  you  can  identify   forward-looking   statements  by
terminology  such as "may,"  "will"  "should,"  "expects,"  "intends,"  "plans,"
"anticipates,"  "believes," "estimates," "predicts," "potential," "continue," or
the negative of these terms or other comparable terminology.

         These  statements  are only  predictions.  Although we believe that the
expectations  reflected in the  forward-looking  statements are  reasonable,  we
cannot   guarantee   future   results,   levels  of  activity,   performance  or
achievements.

RECENT DEVELOPMENTS

         CESSATION OF OPERATIONS

         As disclosed  prior to the date of the filing of this Annual  Report on
Form 10-KSB, we have experienced a chronic working capital deficiency, which has
severely  handicapped our ability to meet our business  objectives.  At the date
hereof,  we have  current  assets of $2,803  and  liabilities  of  approximately
$1,523,905.  We recorded no revenues  during the fiscal year ended September 30,
2006.  Further,  we are in default with respect to loans in the principal amount
of $1,790,000 from our principal creditor.

         We have  expended  efforts to secure  additional  capital from both our
principal  creditor  and  other  third  parties,  but  such  efforts  have  been
unsuccessful. Currently, we have a severe working capital deficiency.

         We are party to an Amended and Restated Research and License Agreement,
dated  September 12, 2003,  (the "License  Agreement")  with New York University
("NYU") that was further amended on November 11, 2003. The License  Agreement is
our sole material asset. Under the terms of the License  Agreement,  NYU granted
to us a license to certain  pre-existing  inventions  and  certain  intellectual
property to be generated by a designated research project being conducted at NYU
relating  to DNA  nanotechnology.  Pursuant  to the  License  Agreement,  we are
required to pay to NYU an annual  licensing  fee. At the date hereof,  we are in
default of our payment  obligations under the License Agreement in the amount of
$347,500 and have  received  notice from NYU that NYU intends to  terminate  the
License Agreement.  Further, we are required to reimburse NYU additional amounts
for patent fees and other expenses estimated to be approximately  $80,000 at the
date hereof.

<PAGE>

         Accordingly, we have determined on December 1, 2006 to cease operations
immediately and, at the request of such creditor appointed a director designated
by  such  creditor  to  our  Board  of  Directors.  Immediately  following  such
appointment,   our  existing  directors   resigned  effective   immediately  and
terminated their association with us.  Accordingly,  such creditor may be deemed
to control us at the date of the filing of this Report.

         SHELL COMPANY STATUS

         As a result of our cessation of operations  and the  termination of the
License  Agreement,  we became a "blank  check" or "shell  company"  whose  sole
purpose at this time is to locate and consummate a merger or acquisition  with a
private  entity.  Many  states  have  enacted  statutes,  rules and  regulations
limiting the sale of securities of "blank check"  companies in their  respective
jurisdictions.  Management  does not  believe it will  undertake  any efforts to
cause  a  market  to  develop  in our  securities  until  such  time  as we have
successfully  implemented  our business plan described  herein.  However,  if we
intend to facilitate  the eventual  creation of a public  trading  market in our
outstanding securities, we must consider that our securities, when available for
trading,  will be subject to a  Securities  and  Exchange  Commission  rule that
imposes special sales practice  requirements upon  broker-dealers  who sell such
securities to persons other than established  customers or accredited investors.
For purposes of the rule, the phrase  "accredited  investors"  means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of  $1,000,000  or  having  an annual  income  that  exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000).  For
transactions  covered  by the  rule,  the  broker-dealer  must  make  a  special
suitability  determination for the purchaser and receive the purchaser's written
agreement  to the  transaction  prior to the  sale.  Consequently,  the rule may
affect the ability of broker- dealers to sell our securities and also may affect
the ability of holders of our securities to sell their  securities in any market
that might develop therefor.

         In  addition,  the  Securities  and Exchange  Commission  has adopted a
number of rules to regulate  "penny  stocks."  Because our securities are "penny
stocks" within the meaning of the rules,  the rules would apply to us and to our
securities.  See "Risk Factors - Our Common Stock is penny stock." The rules may
further  affect the ability of owners of the Common Stock to sell our securities
in any market that might develop for them.

         Our business plan is to seek, investigate,  and, if warranted,  acquire
one or more  properties or  businesses,  and to pursue other related  activities
intended to enhance shareholder value. The acquisition of a business opportunity
may be made by  purchase,  merger,  exchange  of stock,  or  otherwise,  and may
encompass assets or a business entity, such as a corporation,  joint venture, or
partnership.  We have very limited  capital,  and it is unlikely that we will be
able to take  advantage  of more  than one  such  business  opportunity.  At the
present time, we have not identified any business  opportunity  that it plans to
pursue,  nor have we reached any agreement or definitive  understanding with any
person concerning an acquisition.

         It  is  anticipated   that  our  officers  and  directors  may  contact
broker-dealers  and other persons with whom they are acquainted who are involved
in corporate  finance  matters to advise them of our existence and status and to
determine if any  companies or  businesses  they  represent  have an interest in
considering a merger or acquisition with us. We can provide no assurance that we
will be  successful  in finding or acquiring a desirable  business  opportunity,
given  the  limited   funds  that  are  expected  to  be  available  to  us  for
acquisitions,  or that any  acquisition  that  occurs  will be on terms that are
favorable to us or our stockholders.

         We anticipate that the business opportunities  presented to us will (i)
be  recently  organized  with no  operating  history,  or a  history  of  losses
attributable  to  under-capitalization  or other factors;  (ii) be  experiencing
financial or operating difficulties;  (iii) be in need of funds to develop a new
product or  service  or to expand

                                       2
<PAGE>

into a new  market;  (iv) be  relying  upon an  untested  product  or  marketing
concept;  or (v) have a  combination  of the  characteristics  mentioned  in (i)
through (iv). We intend to concentrate our acquisition  efforts on properties or
businesses that we believe to be undervalued. Given the above factors, investors
should expect that any acquisition candidate may have a history of losses or low
profitability.

         We do not propose to restrict our search for  investment  opportunities
to any particular  geographical area or industry, and may, therefore,  engage in
essentially any business, to the extent of our limited resources.  This includes
industries such as service,  finance,  natural  resources,  manufacturing,  high
technology, product development,  medical,  communications,  construction,  real
estate development, and others.

         As a consequence  of the  registration  of its  securities,  any entity
which has an interest in being  acquired  by, or merging into us, is expected to
be an entity  that  desires to become a public  company  and  establish a public
trading  market  for  its  securities.  In  connection  with  such a  merger  or
acquisition, it is highly likely that an amount of stock constituting control of
us would be issued by us or purchased from our current principal shareholders by
the acquiring entity or its affiliates.

         In our  judgment,  none of our officers  and  directors  would  thereby
become  an  "underwriter"  within  the  meaning  of  the  Section  2(11)  of the
Securities  Act of 1933,  as  amended.  The sale of a  controlling  interest  by
certain  of our  principal  shareholders  could  occur at a time  when our other
shareholders remain subject to restrictions on the transfer of their shares.

         Depending upon the nature of the transaction,  our current officers and
directors may resign their  management  positions with us in connection with our
acquisition of a business opportunity.  In the event of such a resignation,  our
current  management  would not have any control over the conduct of our business
following our combination with a business opportunity.

         It  is  anticipated  that  business  opportunities  will  come  to  our
attention from various sources,  including our officers and directors, our other
stockholders,   professional   advisors  such  as  attorneys  and   accountants,
securities  broker-dealers,   venture  capitalists,  members  of  the  financial
community,  and others who may present unsolicited proposals.  We have no plans,
understandings,  agreements,  or commitments with any individual for such person
to act as a finder of opportunities for us.

         While we will  evaluate  other  business  opportunities  with which our
officers and directors are currently affiliated, we do not foresee that we would
enter into a merger or acquisition  transaction with any business with which our
officers or  directors  are  currently  affiliated.  Should we  determine in the
future,  contrary to the  foregoing  expectations,  that a  transaction  with an
affiliate would be in the best interests of us and its  stockholders,  we are in
general permitted by Nevada law to enter into such a transaction if:

              1. The material  facts as to the  relationship  or interest of the
affiliate  and as to the contract or  transaction  are disclosed or are known to
the Board of Directors,  and the Board in good faith  authorizes the contract or
transaction  by  the  affirmative  vote  of  a  majority  of  the  disinterested
directors,  even  though  the  disinterested  directors  constitute  less than a
quorum; or

              2. The material  facts as to the  relationship  or interest of the
affiliate  and as to the contract or  transaction  are disclosed or are known to
our  stockholders  entitled to vote thereon,  and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or

              3. The contract or  transaction is fair as to us as of the time it
is  authorized,  approved  or  ratified,  by  the  Board  of  Directors  or  the
stockholders.

                                       3
<PAGE>

INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES

         To a large extent,  a decision to  participate  in a specific  business
opportunity may be made upon  management's  analysis of the quality of the other
company's  management  and  personnel,  the  anticipated  acceptability  of  new
products  or  marketing  concepts,  the  merit  of  technological  changes,  the
perceived  benefit the company will derive from becoming a publicly held entity,
and numerous other factors which are difficult,  if not  impossible,  to analyze
through the  application of any objective  criteria.  In many  instances,  it is
anticipated that the historical  operations of a specific  business  opportunity
may not necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis,  change or substantially  augment  management,  or make
other  changes.  We  anticipate  that we will be dependent  upon the owners of a
business  opportunity  to  identify  any such  problems  which  may exist and to
implement,  or be primarily  responsible  for the  implementation  of,  required
changes.

         Because  we may  participate  in a  business  opportunity  with a newly
organized  firm or with a firm  which is  entering  a new  phase of  growth,  we
emphasize that we will incur further risks, because management in many instances
will not have proved its  abilities or  effectiveness,  the eventual  market for
such  company's  products or services will likely not be  established,  and such
company may not be profitable when acquired.

         We  anticipate  that  we  will  not be  able  to  diversify,  but  will
essentially  be limited to one such  venture  because of our limited  financing.
This lack of diversification  will not permit us to offset potential losses from
one business  opportunity against profits from another, and should be considered
an adverse factor affecting any decision to purchase our securities.

         We  emphasize  that our  management  may effect  transactions  having a
potentially  adverse impact upon our shareholders  pursuant to the authority and
discretion of our  management to complete  acquisitions  without  submitting any
proposal to the stockholders for their consideration.  Holders of our securities
should not anticipate  that we necessarily  will furnish such holders,  prior to
any  merger  or   acquisition,   with   financial   statements,   or  any  other
documentation,  concerning a target company or its business.  In some instances,
however,  the proposed  participation in a business opportunity may be submitted
to  the  stockholders  for  their  consideration,  either  voluntarily  by  such
directors to seek the  stockholders'  advice and consent or because state law so
requires.

         Since  our   management  has  no  current  plans  to  use  any  outside
consultants or advisors to assist in the investigation and selection of business
opportunities,  no policies have been adopted  regarding use of such consultants
or advisors,  the criteria to be used in selecting such consultants or advisors,
the services to be provided,  the term of service, or regarding the total amount
of fees that may be paid.  We  anticipate  that we will  consider,  among  other
things, the following factors:

              1.  Potential  for  growth  and  profitability,  indicated  by new
technology, anticipated market expansion, or new products;

              2. Our perception of how any particular business  opportunity will
be received by the investment community and by our stockholders;

              3.  Whether,  following  the business  combination,  the financial
condition  of the  business  opportunity  would be, or would have a  significant
prospect  in the  foreseeable  future  of  becoming  sufficient  to  enable  our
securities  to qualify for  listing on an  exchange  or on a national  automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15c2-6.

                                       4
<PAGE>

              4. Capital  requirements and anticipated  availability of required
funds, to be provided by us or from  operations,  through the sale of additional
securities,  through  joint  ventures  or  similar  arrangements,  or from other
sources;

              5. The extent to which the business opportunity can be advanced;

              6. Competitive  position as compared to other companies of similar
size and experience  within the industry  segment as well as within the industry
as a whole;

              7.  Strength and diversity of existing  management,  or management
prospects that are scheduled for recruitment;

              8. The cost of  participation  by us as compared to the  perceived
tangible and intangible values and potential; and

              9. The accessibility of required management expertise,  personnel,
raw materials, services, professional assistance, and other required items.

No one of the factors  described above will be determinative in the selection of
a business  opportunity,  and  management  will  attempt to analyze  all factors
appropriate to each  opportunity and make a determination  based upon reasonable
investigative  measures  and  available  data.  Potentially  available  business
opportunities  may occur in many  different  industries and at various stages of
development,  all of which will make the task of comparative  investigation  and
analysis  of  such  business  opportunities  extremely  difficult  and  complex.
Potential  investors  must  recognize  that,  because  of  our  limited  capital
available for  investigation  and  management's  limited  experience in business
analysis,  we may not discover or  adequately  evaluate  adverse facts about the
opportunity to be acquired.

         As part of our investigation,  our executive officers and directors may
meet  personally  with  management  and key  personnel,  may visit  and  inspect
material  facilities,  obtain  independent  analysis or  verification of certain
information provided, check references of management and key personnel, and take
other reasonable  investigative measures, to the extent of our limited financial
resources and management  expertise.

         Our  management  believes  that various  types of  potential  merger or
acquisition  candidates  might  find  a  business  combination  with  us  to  be
attractive.  These include  acquisition  candidates  desiring to create a public
market for their shares in order to enhance liquidity for current  shareholders,
acquisition  candidates  which have long-term  plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public  market  for  their  securities  would  be  beneficial,  and  acquisition
candidates  which  plan  to  acquire   additional  assets  through  issuance  of
securities rather than for cash, and believe that the possibility of development
of a public market for their  securities  will be of assistance in that process.
Acquisition  candidates which have a need for an immediate cash infusion are not
likely to find a  potential  business  combination  with us to be an  attractive
alternative.

FORM OF ACQUISITION

         We cannot currently predict the manner in which we may participate in a
business opportunity.  Specific business  opportunities will be reviewed as well
as the respective  needs and desires of us and the

                                       5
<PAGE>

promoters of the opportunity and, upon the basis of that review and the relative
negotiating  strength of us and such  promoters,  the legal  structure or method
deemed by  management  to be  suitable  will be  selected.  Such  structure  may
include, but is not limited to leases,  purchase and sale agreements,  licenses,
joint  ventures  and other  contractual  arrangements.  We may act  directly  or
indirectly  through an interest in a  partnership,  corporation or other form of
organization.  Implementing such structure may require our merger, consolidation
or reorganization with other corporations or forms of business organization, and
although  it is likely,  there is no  assurance  that we would be the  surviving
entity.  In addition,  our present  management and stockholders most likely will
not have control of a majority of our voting shares  following a  reorganization
transaction.  As part of such a transaction,  our existing  directors may resign
and new directors may be appointed without any vote by stockholders.

         Management may actively  negotiate or otherwise consent to the purchase
of any portion of their common shares as a condition to or in connection  with a
proposed merger or acquisition transaction. We emphasize that our management may
effect  transactions  having a potentially  adverse impact upon our shareholders
pursuant  to  the  authority  and  discretion  of  our  management  to  complete
acquisitions  without  submitting  any  proposal to the  stockholders  for their
consideration.   Holders  of  our  securities  should  not  anticipate  that  we
necessarily will furnish our holders,  prior to any merger or acquisition,  with
financial statements, or any other documentation, concerning a target company or
its  business.  In some  instances,  however,  the proposed  participation  in a
business   opportunity   may  be  submitted  to  the   stockholders   for  their
consideration,  either  voluntarily by such directors to seek the  stockholders'
advice and consent or because state law so requires.

         We believe that it is likely that we will acquire our  participation in
a business  opportunity  through the  issuance of our common  stock or our other
securities.  Although  we  cannot  currently  predict  the  terms  of  any  such
transaction,  we note that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986,  depends upon the issuance to the stockholders of
the acquired company of a controlling  interest (i.e. 80% or more) of the common
stock of the combined entities  immediately  following the reorganization.  If a
transaction  were structured to take advantage of these  provisions  rather than
other "tax free"  provisions  provided  under the  Internal  Revenue  Code,  our
current  stockholders  would  retain in the  aggregate  20% or less of the total
issued and  outstanding  shares.  This could  result in  substantial  additional
dilution  in the  equity  of  those  who  were  our  stockholders  prior to such
reorganization.  Any such  issuance  of  additional  shares  might  also be done
simultaneously  with a sale or transfer  of shares  representing  a  controlling
interest in us by the current officers, directors and principal shareholders.

         We  anticipate   that  any  new   securities   that  we  issue  in  any
reorganization  would  be  issued  in  reliance  upon  exemptions,  if  any  are
available, from registration under applicable federal and state securities laws.
In some circumstances,  however, as a negotiated element of the transaction,  we
may agree to register  such  securities  either at the time the  transaction  is
consummated,  or under certain conditions or at specified times thereafter.  The
issuance of substantial  additional securities and their potential sale into any
trading market that might develop in our securities may have a depressive effect
upon such market.

         We  will   participate  in  a  business   opportunity  only  after  the
negotiation  and  execution of a written  agreement.  Although the terms of such
agreement  cannot  be  predicted,  generally  such an  agreement  would  require
specific  representations and warranties by all of the parties thereto,  specify
certain events of default,  detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing,  outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.

                                       6
<PAGE>

         As a general  matter,  we  anticipate  that we, and/or our officers and
principal  shareholders  will enter into a letter of intent with the management,
principals or owners of a prospective  business  opportunity  prior to signing a
binding  agreement.  Such a letter  of  intent  will set  forth the terms of the
proposed  acquisition  but will not bind any of the  parties to  consummate  the
transaction.  Execution  of a letter of intent  will by no means  indicate  that
consummation  of an  acquisition  is  probable.  Neither we nor any of the other
parties  to the letter of intent  will be bound to  consummate  the  acquisition
unless and until a definitive  agreement concerning the acquisition as described
in the  preceding  paragraph is executed.  Even after a definitive  agreement is
executed,  it is possible that the acquisition  would not be consummated  should
any party elect to exercise any right  provided in the agreement to terminate it
on specified grounds.

         We anticipate that the investigation of specific business opportunities
and the negotiation,  drafting and execution of relevant agreements,  disclosure
documents and other  instruments  will require  substantial  management time and
attention and  substantial  costs for  accountants,  attorneys and others.  If a
decision is made not to  participate  in a specific  business  opportunity,  the
costs  theretofore   incurred  in  the  related   investigation   would  not  be
recoverable.  Moreover,  because many  providers  of goods and services  require
compensation at the time or soon after the goods and services are provided,  our
inability to pay until an  indeterminate  future time may make it  impossible to
procure goods and services.

INVESTMENT COMPANY ACT AND OTHER REGULATION

         We may participate in a business opportunity by purchasing,  trading or
selling the securities of such business.  We do not,  however,  intend to engage
primarily in such activities.  Specifically, we intend to conduct our activities
so as to avoid being classified as an "investment  company" under the Investment
Company Act of 1940 (the "Investment  Act"), and therefore to avoid  application
of  the  costly  and  restrictive  registration  and  other  provisions  of  the
Investment Act, and the regulations promulgated thereunder.

         Section  3(a) of the  Investment  Act  contains  the  definition  of an
"investment  company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing,  owning, holding or trading "investment
securities"  (defined as "all  securities  other than  government  securities or
securities of  majority-owned  subsidiaries")  the value of which exceeds 40% of
the value of its total assets  (excluding  government  securities,  cash or cash
items).  We intend to implement  our business plan in a manner which will result
in the  availability  of this  exception  from  the  definition  of  "investment
company."  Consequently,  our participation in a business or opportunity through
the purchase and sale of investment securities will be limited.

         Our plan of  business  may involve  changes in our  capital  structure,
management,  control and business,  especially if we consummate a reorganization
as discussed  above.  Each of these areas is regulated by the Investment Act, in
order to protect purchasers of investment company securities.  Since we will not
register as an  investment  company,  stockholders  will not be  afforded  these
protections.

         Any securities  which we might acquire in exchange for our common stock
will be  "restricted  securities"  within the meaning of the  Securities  Act of
1933, as amended (the "Act").  If we elect to resell such securities,  such sale
cannot proceed unless a  registration  statement has been declared  effective by
the Securities  and Exchange  Commission or an exemption  from  registration  is
available.  Section  4(1) of the Act,  which  exempts  sales of  securities  not
involving a  distribution,  would in all  likelihood  be  available  to permit a
private  sale.  Although the plan of operation  does not  contemplate  resale of
securities acquired,  if such a sale were to be necessary,  we would be required
to comply with the provisions of the Act to effect such resale.

                                       7
<PAGE>

         An  acquisition  made by us may be in an industry which is regulated or
licensed  by  federal,   state  or  local  authorities.   Compliance  with  such
regulations can be expected to be a time-consuming and expensive process.

COMPETITION

         We expect to encounter substantial competition in our efforts to locate
attractive opportunities, primarily from business development companies, venture
capital  partnerships  and  corporations,  venture  capital  affiliates of large
industrial and financial  companies,  small  investment  companies,  and wealthy
individuals.  Many of these entities will have significantly greater experience,
resources and  managerial  capabilities  than we have and will therefore be in a
better   position  than  we  are  to  obtain   access  to  attractive   business
opportunities.  We also will  experience  competition  from other public  "blind
pool" companies, many of which may have more funds available than we do.

EMPLOYEES

         We currently have 2 employees,  our Chief Executive  Officer,  James H.
Schneider  and  our  Interim  Chief  Financial  Officer,  Fred J.  Griffin.  Our
management  expects to use consultants,  attorneys and accountants as necessary,
and does not anticipate a need to engage any other  full-time  employees so long
as it is seeking and  evaluating  business  opportunities.  The need for further
employees  and their  availability  will be  addressed  in  connection  with the
decision  whether  or  not  to  acquire  or  participate  in  specific  business
opportunities.

RISK FACTORS

         AN INVESTMENT IN OUR  SECURITIES IS HIGHLY  SPECULATIVE  AND SUBJECT TO
NUMEROUS AND  SUBSTANTIAL  RISKS.  THESE RISKS INCLUDE THOSE SET FORTH BELOW AND
ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-KSB. READERS ARE ENCOURAGED TO REVIEW
THESE RISKS CAREFULLY BEFORE MAKING ANY INVESTMENT DECISION.

         OUR FINANCIAL  STATEMENT INCLUDE  SUBSTANTIAL  NON-OPERATING  GAINS OR
         LOSSES RESULTING FROM REQUIRED QUARTERLY REVALUATION UNDER GAAP OF OUR
         OUTSTANDING DERIVATIVE INSTRUMENTS.

         GAAP  requires   that  we  report  the  value  of  certain   derivative
instruments  we have  issued as current  liabilities  on our  balance  sheet and
report  changes  in the value of these  derivatives  as  non-operating  gains or
losses on our statement of operations.  The value of the derivatives is required
to be recalculated (and resulting non-operating gains or losses reflected in our
statement of operations and resulting  adjustments  to the associated  liability
amounts  reflected on our balance sheet) on a quarterly  basis,  and is based on
the  market  value  of our  common  stock.  Due to the  nature  of the  required
calculations  and the larger  number of shares of our common  stock  involved in
such  calculations,  changes in our common stock price may result in significant
changes in the value of the  derivatives  and resulting  gains and losses on our
statement of operations.

         WE MAY NOT CONTINUE AS A GOING CONCERN.

         Our financial  statements  were prepared on the assumption that we will
continue as a going  concern,  and the  independent  accountants  have expressed
doubt as to that assumption.  If sufficient  capital is not available,  we would
likely be required to discontinue our  operations.  We have recurring net losses
of $1,880,029  and $1,430,183 in 2006 and 2005  respectively  and an accumulated
deficit  of  $4,328,908  as of  September  30,  2006.  We are  trying  to  raise
additional  capital  through sales of our common stock as well as financing from
third parties. However if we are unable to raise additional capital or financing
we may not continue as a going concern.

                                       8
<PAGE>

         THERE MAY BE  CONFLICTS  OF  INTEREST  BETWEEN OUR  MANAGEMENT  AND OUR
         NON-MANAGEMENT STOCKHOLDERS.

         Conflicts  of  interest  create  the risk that  management  may have an
incentive to act  adversely to the interests of other  investors.  A conflict of
interest may arise between our management's  personal pecuniary interest and its
fiduciary duty to our  stockholders.  Further,  our  management's  own pecuniary
interest may at some point compromise its fiduciary duty to our stockholders. In
addition,  our officers and directors  are  currently  involved with other blank
check companies and conflicts in the pursuit of business  combinations with such
other blank check  companies with which they and other members of our management
are, and may in the future be,  affiliated  with may arise.  If we and the other
blank check companies that our officers and directors are affiliated with desire
to take  advantage of the same  opportunity,  then those  officers and directors
that are  affiliated  with both  companies  would  abstain  from voting upon the
opportunity.  In the event of identical officers and directors, the officers and
directors  will  arbitrarily  determine  the  company  that will be  entitled to
proceed with the proposed transaction.

         THERE IS COMPETITION FOR THOSE PRIVATE COMPANIES  SUITABLE FOR A MERGER
         TRANSACTION OF THE TYPE CONTEMPLATED BY MANAGEMENT.

         We are in a highly  competitive  market for a small  number of business
opportunities  which could reduce the  likelihood of  consummating  a successful
business  combination.   We  are  and  will  continue  to  be  an  insignificant
participant  in the business of seeking  mergers with,  joint  ventures with and
acquisitions of small private and public entities. A large number of established
and well-financed entities, including small public companies and venture capital
firms, are active in mergers and acquisitions of companies that may be desirable
target candidates for us. Nearly all these entities have  significantly  greater
financial resources, technical expertise and managerial capabilities than we do;
consequently,  we will be at a competitive  disadvantage in identifying possible
business opportunities and successfully completing a business combination. These
competitive   factors  may  reduce  the  likelihood  of  our   identifying   and
consummating a successful business combination.

         FUTURE  SUCCESS IS HIGHLY  DEPENDENT  ON THE ABILITY OF  MANAGEMENT  TO
         LOCATE AND ATTRACT A SUITABLE ACQUISITION.

         The  nature  of our  operations  is highly  speculative  and there is a
consequent risk of loss of your investment. The success of our plan of operation
will  depend  to a great  extent  on the  operations,  financial  condition  and
management of the identified business  opportunity.  While management intends to
seek  business   combination(s)  with  entities  having  established   operating
histories,  we  cannot  assure  you  that  we  will be  successful  in  locating
candidates  meeting  that  criterion.  In  the  event  we  complete  a  business
combination,  the success of our operations may be dependent upon  management of
the successor firm or venture partner firm and numerous other factors beyond our
control.

         WE HAVE NO  EXISTING  AGREEMENT  FOR A  BUSINESS  COMBINATION  OR OTHER
         TRANSACTION.

         We have no  arrangement,  agreement  or  understanding  with respect to
engaging in a merger with,  joint venture with or  acquisition  of, a private or
public entity. No assurances can be given that we will successfully identify and
evaluate  suitable  business  opportunities  or that we will conclude a business
combination.  Management has not identified any particular  industry or specific
business within an industry for evaluation.  We cannot guarantee that we will be
able to  negotiate  a business  combination  on  favorable  terms,  and there is
consequently a risk that funds  allocated to the purchase of our shares will not
be invested in a company with active business operations.

                                       9
<PAGE>

         THE TIME AND COST OF  PREPARING  A PRIVATE  COMPANY TO BECOME A PUBLIC
         REPORTING  COMPANY  MAY  PRECLUDE  US FROM  ENTERING  INTO A MERGER OR
         ACQUISITION WITH THE MOST ATTRACTIVE PRIVATE COMPANIES.

         Target  companies  that fail to comply with SEC reporting  requirements
may delay or preclude  acquisition.  Sections 13 and 15(d) of the  Exchange  Act
require  reporting  companies to provide certain  information  about significant
acquisitions, including certified financial statements for the company acquired,
covering  one,  two,  or three  years,  depending  on the  relative  size of the
acquisition.  The time and additional  costs that may be incurred by some target
entities to prepare these  statements  may  significantly  delay or  essentially
preclude   consummation  of  an  acquisition.   Otherwise  suitable  acquisition
prospects  that  do not  have or are  unable  to  obtain  the  required  audited
statements  may be  inappropriate  for  acquisition  so  long  as the  reporting
requirements of the Exchange Act are applicable.

         WE MAY  BE  SUBJECT  TO  FURTHER  GOVERNMENT  REGULATION  WHICH  WOULD
         ADVERSELY AFFECT OUR OPERATIONS.

         Although  we will be subject to the  reporting  requirements  under the
Exchange Act, management believes we will not be subject to regulation under the
Investment  Act,  since we will not be engaged in the  business of  investing or
trading in securities. If we engage in business combinations which result in our
holding  passive  investment  interests  in a number  of  entities,  we could be
subject to regulation  under the Investment  Act. If so, we would be required to
register as an  investment  company  and could be expected to incur  significant
registration and compliance costs. We have obtained no formal determination from
the SEC as to our status under the Investment Act and,  consequently,  violation
of the Investment Act could subject us to material adverse consequences.

         ANY POTENTIAL  ACQUISITION OR MERGER WITH A FOREIGN COMPANY MAY SUBJECT
         US TO ADDITIONAL RISKS.

         If we enter into a business combination with a foreign concern, we will
be  subject  to risks  inherent  in  business  operations  outside of the United
States.  These risks include,  for example,  currency  fluctuations,  regulatory
problems,  punitive tariffs, unstable local tax policies, trade embargoes, risks
related to shipment of raw materials and finished goods across national  borders
and cultural and language differences. Foreign economies may differ favorably or
unfavorably from the United States economy in growth of gross national  product,
rate of inflation, market development,  rate of savings, and capital investment,
resource  self-sufficiency  and  balance  of  payments  positions,  and in other
respects.

         OUR  BUSINESS  WILL HAVE NO REVENUE  UNLESS AND UNTIL WE MERGE WITH OR
         ACQUIRE AN OPERATING BUSINESS.

         We are a  development  stage  company  and  have  had no  revenue  from
operations.  We may not  realize any  revenue  unless and until we  successfully
merge with or acquire an operating business.

         WE INTEND TO ISSUE MORE SHARES IN A MERGER OR ACQUISITION,  WHICH WILL
         RESULT IN SUBSTANTIAL DILUTION.

         As of September 30, 2006, our Certificate of  Incorporation  authorized
the issuance of a maximum of 100,000,000  shares of common stock.  Any merger or
acquisition  effected by us may result in substantial dilution in the percentage
of our common stock held by our then existing stockholders. Moreover, the common
stock issued in any such merger or acquisition  transaction  may be valued on an
arbitrary  or  non-arm's-length  basis  by  our  management,   resulting  in  an
additional reduction in the percentage of common stock held by our

                                       10
<PAGE>

then existing stockholders. To the extent that additional shares of common stock
or  preferred  stock are issued in  connection  with a business  combination  or
otherwise,  dilution to the  interests  of our  stockholders  will occur and the
rights of the holders of common stock might be materially adversely affected.

         WE MAY NOT BE ABLE TO IDENTIFY A BUSINESS TO MERGE WITH OR ACQUIRE.

         There  is  assurance   that  market  demand  exists  for  a  merger  or
acquisition  as  contemplated  by us.  Our  management  has not  identified  any
specific business combination or other transactions for formal evaluation by us,
such that it may be expected that any such target  business or transaction  will
present such a level of risk that  conventional  private or public  offerings of
securities or  conventional  bank financing  will not be available.  There is no
assurance  that we will be able to  acquire  a  business  opportunity  on  terms
favorable to us.  Decisions as to which  business  opportunity to participate in
will be unilaterally made by our management,  which may act without the consent,
vote or approval of our stockholders.

         BECAUSE  WE MAY SEEK TO  COMPLETE  A  BUSINESS  COMBINATION  THROUGH A
         "REVERSE  MERGER",  FOLLOWING SUCH A TRANSACTION WE MAY NOT BE ABLE TO
         ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS.

         Additional  risks  may  exist  since we will  assist a  privately  held
business to become public  through a "reverse  merger."  Securities  analysts of
major brokerage firms may not provide coverage of us since there is no incentive
to brokerage  firms to recommend the purchase of our common stock.  No assurance
can be given that brokerage  firms will want to conduct any secondary  offerings
on behalf of our post-merger company in the future.

         OUR COMMON STOCK IS CONSIDERED TO BE "PENNY STOCK".

         Our common stock is deemed to be "penny  stock" as that term is defined
in Rule 3a51-1,  promulgated  under the  Securities and Exchange Act of 1934, as
amended (the "Exchange Act"). Penny stocks are stocks:

         o with a price of less than $5.00 per share;

         o that are not traded on a "recognized" national exchange;

         o whose prices are not quoted on the NASDAQ automated quotation system;
           or

         o of issuers  with net  tangible  assets less than  $2,000,000  (if the
           issuer has been in continuous  operation for at least three years) or
           $5,000,000 (if in continuous operation for less than three years), or
           with  average  revenue  of less than  $6,000,000  for the last  three
           years.

         Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder
require  broker-dealers  dealing in penny stocks to provide potential  investors
with a document  disclosing  the risks of penny  stocks and to obtain a manually
signed  and  dated  written  receipt  of  the  document  before   effecting  any
transaction  in a "penny stock" for the  investor's  account.  We urge potential
investors to obtain and read this  disclosure  carefully  before  purchasing any
shares that are deemed to be "penny stock."

         Rule 15g-9 promulgated  under the Exchange Act requires  broker-dealers
in penny stocks to approve the account of any investor for  transactions in such
stocks  before  selling  any  "penny  stock" to that  investor.  This  procedure
requires the broker-dealer to:

                                       11
<PAGE>

         o obtain  from the  investor  information  about  his or her  financial
           situation, investment experience and investment objectives;

         o reasonably determine, based on that information, that transactions in
           penny  stocks are suitable for the investor and that the investor has
           enough  knowledge and  experience to be able to evaluate the risks of
           "penny stock" transactions;

         o provide the investor with a written statement setting forth the basis
           on which the broker-dealer made his or her determination; and

         o receive a signed and dated copy of the  statement  from the investor,
           confirming  that it  accurately  reflects  the  investor's  financial
           situation, investment experience and investment objectives.

         Compliance with these  requirements may make it harder for investors in
our common  stock to resell  their  shares to third  parties.  Accordingly,  our
common stock should only be purchased by  investors,  who  understand  that such
investment  is a  long-term  and  illiquid  investment,  and are  capable of and
prepared to bear the risk of holding the common stock for an  indefinite  period
of time.

         A LIMITED PUBLIC  TRADING  MARKET MAY CAUSE  VOLATILITY IN THE PRICE OF
         OUR COMMON STOCK.

         Our common stock is currently  quoted on the OTC  Bulletin  Board.  The
quotation of our common  stock on the OTC Bulletin  Board does not assure that a
meaningful, consistent and liquid trading market currently exists, and in recent
years such market has experience extreme price and volume fluctuations that have
particularly  affected the market prices of many smaller  companies like us. Our
common stock is thus subject to this volatility. Sales of substantial amounts of
common stock,  or the perception  that such sales might occur,  could  adversely
affect  prevailing  market  prices of our common  stock and our stock  price may
decline  substantially in a short time and our shareholders  could suffer losses
or be unable to liquidate their holdings.

         WE MAY  NOT BE ABLE TO  ACHIEVE  SECONDARY  TRADING  OF OUR  STOCK  IN
         CERTAIN STATES BECAUSE OUR COMMON STOCK IS NOT NATIONALLY TRADED.

         Because  our common  stock is not  approved  for  trading on the Nasdaq
National  Market or listed for trading on a national  securities  exchange,  our
common  stock is  subject  to the  securities  laws of the  various  states  and
jurisdictions  of the United States in addition to federal  securities law. This
regulation  covers any  primary  offering  we might  attempt  and all  secondary
trading  by our  stockholders.  While we  intend  to take  appropriate  steps to
register our common stock or qualify for exemptions for our common stock, in all
of the states and  jurisdictions  of the United States,  if we fail to do so the
investors in those  jurisdictions  where we have not taken such steps may not be
allowed to purchase our stock or those who  presently  hold our stock may not be
able to resell  their  shares  without  substantial  effort and  expense.  These
restrictions   and  potential   costs  could  be  significant   burdens  on  our
stockholders.

         IT IS UNCERTAIN  WHETHER WE WILL EVER PAY DIVIDENDS OR EVER PROVIDE AN
         OPPORTUNITY FOR ANY RETURN ON INVESTMENT. OUR SECURITIES SHOULD NOT BE
         PURCHASED  BY  PERSONS  WHO  CANNOT  AFFORD  THE LOSS OF THEIR  ENTIRE
         INVESTMENT.

         It is uncertain whether we will ever pay dividends on our common stock.
Our securities should not be purchased by persons who can not afford the loss of
their entire investment.

                                       12
<PAGE>

HISTORY

         Nanoscience  Technologies,  Inc.  ("NTI") was  incorporated in Idaho on
September  14, 1987. In July 2001,  we formed a new Nevada  corporation  for the
purpose of changing our corporate  domicile from Idaho to Nevada. On November 8,
2001,  we  implemented  the change of domicile  to Nevada by filing  Articles of
Merger  between the Idaho and Nevada  corporations.  Also in November  2001,  we
changed our authorized capitalization to 100,000,000 shares of Common Stock, par
value $.001 per share.  On November 16, 2001, we affected a forward split of our
outstanding  shares of common stock on a 12.5 shares for 1 share  basis.  In May
2002,  we  changed  our  corporate  name from  Eagles  Nest  Mining  Company  to
Nanoscience Technologies, Inc.

BUSINESS PRIOR TO CESSATION OF OPERATIONS

         We have a limited  operating history and no representation is made, nor
is any intended, that we will be able to carry on our future business activities
successfully.  As a result of the License Agreement with NYU, we were engaged in
the  development  and  commercialization  of  the  inventions  and  intellectual
property to be generated by the research project being conducted at NYU relating
to DNA  Nanotechnology.  Structural  DNA  Nanotechnology  seeks to  exploit  the
architectural  properties of DNA with the ultimate goal of organizing  matter in
three dimensions. Pharmaceutical development,  nano-electronics and the creation
of new materials are among the potential applications of this research.

         BACKGROUND OF TECHNOLOGY

         We were originally formed to commercialize  significant  nanotechnology
research and intellectual  property  developed at New York University (NYU). The
technology and its related intellectual  property are the result of twenty-three
years of research at NYU by Dr. Nadrian C. Seeman, Ph.D. and his research group.
Dr.  Seeman  is  an  internationally  recognized  scientist  and  a  pioneer  in
developments  pertaining to DNA nanotechnology.  In September 2003, NTI executed
an exclusive  worldwide  Research and License  Agreement with NYU for all of Dr.
Seeman's past, current and future developments pertaining to nanotechnology.

         Nanotechnology  is the "cutting  edge" of science and technology on our
planet.  It is technology at the molecular  level. The nano scale is measured in
billionths of a meter, one nanometer being  one-billionth of a meter. To provide
a reference for the size of a nanometer, the average human hair measures between
50,000 to 75,000 nanometers in diameter, and there are approximately  24,500,000
nanometers in an inch.

         Nanotechnology  will allow the ability to construct  precise  molecular
formations by combining individual molecules with other molecules to make larger
and  more  defined  constructs.  Applications  for  nanotechnology  are vast and
include huge areas of opportunity in chemicals,  physics,  engineered materials,
life  sciences  and a  long  list  of  other  applications.  It  is an  enabling
technology  expected  to create in excess  of one  million  jobs and  contribute
billions of dollars to the U.S. Economy over the next decade.

         The U.S.  National  Science  Foundation  estimates  the  global  market
opportunity for nanotechnology  products and service-related  industries will be
$25 billion annually by 2006 and $1 trillion annually by 2015.

         We believed that the commercial  applications that will result from the
research and development programs at NYU are scientifically significant,  highly
extensive and novel. In addition, the technology is well patented.

         We had identified a two-phase  research and  development  plan which is
based on the research conducted/accomplished to date and planned future research
and the need to meet long-term  business  objectives  that will result in viable
commercial product opportunities

                                       13
<PAGE>

         Prior to our cessation of operations,  our  commercialization  strategy
was as follows:

         o Enter into research collaboration relationships early in the research
           and  development  process with market leaders in each industry sector
           that NTI plans to pursue;

         o Establish  relationships  with targeted companies that will result in
           exclusive,  or in certain  instances,  non-exclusive  licenses  for a
           DEFINED field of use; and

         o Focus on  collaboration  partners/licensees  that have a  substantial
           manufacturing  and  marketing  capability  which may result in a more
           defined   product   development   effort   and  a  shorter   time  to
           commercialization.

         The intellectual  property portfolio  contained five issued patents and
five patent applications.

         POTENTIAL COMMERCIAL APPLICATIONS

         Nanotechnology is in its commercial infancy;  however, there is already
a  substantial  market  in  place  for  nanotechnology  products.  The  earliest
application of nanoscale  materials  occurred in systems where nanoscale powders
and  particles  could be used in  their  free  form,  without  consolidation  or
blending. For example, nanoscale titanium dioxide and zinc oxide powders are now
commonly  used by cosmetics  manufacturers  for facial base creams and sunscreen
lotions.  Nanoscale  iron oxide powder is now being used as a base  material for
rouge  and  lipstick.   Paints  with   reflective   properties  are  also  being
manufactured using nanoscale titanium dioxide particles.

         Nanotechnology  is also being used in various  technology  and  defense
applications.  Nano-structured  cemented  carbide coatings are used on some U.S.
Navy ships for their increased durability. Nano-structured materials are in wide
use in information technology, integrated into complex products such as the hard
disk drives that store information and the silicon integrated circuit chips that
process information in every Internet server and personal computer.  In 2003 IBM
announced  the  introduction  of  an  atomically  thin  layer  of  ruthenium  to
substantially increase the information storage density of its products.  Greater
storage density translates directly to less expensive storage cost.

         In biomedical areas,  structures called liposomes have been synthesized
for improved delivery of therapeutic  agents.  Liposomes are lipid spheres about
100 nanometers in diameter. They have been used to encapsulate anti-cancer drugs
for the treatment of Kaposi's  Sarcoma.  Several  companies are presently  using
magnetic nanoparticles in the analyses of blood, urine, and other body fluids to
speed up separation  and improve  selectivity.  Other  companies  have developed
derivatized  fluorescent  nanospheres and nanoparticles  that form the basis for
new detection technologies.  These reagent nanoparticles are used in new devices
and systems for infectious and genetic disease analysis and for drug discovery.

         Many uses of nanoscale  particles  have appeared in specialty  markets,
such  as  defense  applications,   and  markets  for  scientific  and  technical
equipment.  Producers of optical  materials and  electronics  substrates such as
silicon and gallium  arsenide  have  embraced the use of nanosize  particles for
chemomechanical  polishing of these  substrates.  Nanosize  particles of silicon
carbide, diamond and boron carbide are used as "lapping compounds" to reduce the
waviness of finished surfaces from corner to corner and produce surface finishes
to one and  two  nanometer  smoothness.  The  ability  to  produce  high-quality
components is significant as electric devices shrink and optical  communications
systems become a larger part of the nation's communications network.

                                       14
<PAGE>

         OTHER APPLICATIONS

         As nanoscale  science and  technology  continue to grow,  it is certain
that  many  new  materials,  properties  and  applications  will be  discovered.
Research  in areas  related  to  nanofabrication  is needed to  develop  new and
advanced  manufacturing  techniques.   These  new  techniques  would  allow  the
fabrication  of  highly  integrated  two-  and  three-dimensional   devices  and
structures to form diverse molecular and nanoscale components.  They would allow
many of the new and promising nanostructures,  such as carbon nanotubes, organic
molecular electronic components,  and quantum dots, to be rapidly assembled into
more complex circuitry to form useful logic and memory devices. Such new devices
would have computational performance characteristics and data storage capacities
many orders of  magnitude  higher than present  devices,  and would come in even
smaller packages.

         Nanomaterials  and their  performance  properties will also continue to
improve.  Thus,  even  better  and  cheaper  nanopowders,   nanoparticles,   and
nanocomposites  will be  available  for more  widespread  applications.  Another
important  application  for future  nanomaterials  will be highly  selective and
efficient catalysts for chemical and energy conversion  processes.  This will be
important economically not only for energy and chemical production, but also for
conservation and environmental applications.  Thus, nanomaterial-based catalysis
may play an  important  role in  photoconversion  devices,  fuel  cell  devices,
bioconversion  (energy) and bioprocessing  (food and agriculture)  systems,  and
waste and pollution control systems.

         Nanoscale  science and  technology  could have a  continuing  impact on
biomedical areas such as therapeutics,  diagnostic  devices,  and  biocompatible
materials for implants and prostheses.  There will continue to be  opportunities
for the use of nanomaterials in drug delivery systems. Combining new nanosensors
with  nanoelectronic  components  could lead to a further  reduction in size and
improved performance for many diagnostic devices and systems. Ultimately, it may
be possible to make  implantable in vivo diagnostic and monitoring  devices that
approach the size of cells. New biocompatible  nanomaterials and  nanomechanical
components  could lead to the  creation  of new  materials  and  components  for
implants, artificial organs, and greatly improved mechanical,  visual, auditory,
and other prosthetic devices.

         Exciting predictions aside, these advances will not be realized without
considerable  research  and  development.  For  example,  the  present  state of
nanodevices and  nanotechnology  resembles that of semiconductor and electronics
technology  in 1947,  when the first  point  contact  transistor  was  realized,
ushering in the INFORMATION AGE, which blossomed in the 1990s. The full power of
the  transistor  was not fully  evident  until the  invention of the  integrated
circuit  with  reliable  processing  techniques  that produce  numerous  uniform
devices  and  connect  them  across a large  wafer,  wafer-scale  packaging  and
interconnection  techniques for large-scale integrated circuits.  Similarly,  it
will  require an era of advances in the  development  of  processes to integrate
nanoscale components into devices, both with other nanoscale components and with
microscale and larger  components,  accompanied by the ability to do so reliably
and cost-effectively.

         Since  nanoscale  technology  spans a much broader  range of scientific
disciplines and potential  applications than does solid state  electronics,  its
societal impact may be many times greater than that of the  Microelectronics and
Computing  Revolution.  Nanotechnology is definitely a "disruptive  technology",
that is, a  technology  that will  have a  widespread  effect  and  change  many
societal norms. It will eventually  precipitate massive shifts in industries and
their importance to the world economy.

         At the date hereof, we are in default of our payment  obligations under
the License  Agreement in the amount of $347,500 and have  received  notice from
NYU that NYU  intends  to  terminate  the  License  Agreement.  Further,  we are
required to reimburse NYU additional  amounts for patent fees and other expenses
estimated to be approximately $80,000 at the date hereof.  Presently, we have no
marketable  products or licensable  technology.  Our collaboration  with NYU has
terminated.We have been dependent upon NYU's

                                       15
<PAGE>

successful  research  and  development  of a  marketable  product or  licensable
technology.  At this time,  we have lost our license  with NYU and have no other
technology, products or services from which we can expect to generate revenues.

GOVERNMENT REGULATION

         Presently,  we are not presently  subject to government  regulations or
consents because we do not have any marketable or licensable technology.  We can
provide no assurances that in the  foreseeable  future we will not be subject to
government  regulation or will not have to obtain government consents to conduct
our business and there is no guarantee  that we will be in compliance  with such
regulations at the time they become  applicable.  The relevant  regulations  and
necessary consents cannot be discerned until the type of technology developed is
determined.

RESEARCH AND DEVELOPMENT

         We have  incurred  $447,288 and  $230,750 in research  and  development
expenses in 2006 and 2005 respectively.

EMPLOYEES

         As of the date hereof, we have 2 full-time  employees and have no plans
for retaining further  employees.  We may find it necessary to periodically hire
part-time  clerical help on an as-needed  basis.  We also fulfill several of our
management functions through the use of independent contractors. These functions
include legal, accounting and investor relations.

FACILITIES

         We  currently  use as our  principal  place of  business  the  business
offices of our  President  and Chief  Executive  Officer  located in Fort Myers,
Florida.  It is contemplated that at such future time as business  warrants,  we
will secure commercial office space. However, we have no current plans to secure
such commercial office space.

INDUSTRY SEGMENTS

ITEM 2. DESCRIPTION OF PROPERTY

         We do not own any material property.

ITEM 3. LEGAL PROCEEDINGS

         We are not a party to any material  pending legal  proceedings  and, to
best of our knowledge, no such action by or against us, has been threatened.

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

         There  were no  matters  submitted  to a vote of our  security  holders
during the year ended September 30, 2006.

                                       16
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common  stock has been  accepted  for  trading on the OTC  Bulletin
Board under the trading  symbol  "NANS."  Inclusion  on the OTC  Bulletin  Board
permits price  quotations for our shares to be published by such service.  There
has not been an active  trading  market for our common  stock nor has there been
significant  trading  in the  public  market  in recent  years.  We have made no
proposals,  arrangements  or  understandings  with  any  person  concerning  the
development of a trading market in any of our securities.  Because there has not
been a regular,  active  trading  market in our  shares,  no trading  history is
presented herein.

         On November 16, 2001,  we affected a forward  split of our  outstanding
common stock on a 12.5 shares for 1 share basis.  The forward  split was treated
as a stock dividend.

         The ability of an  individual  shareholder  to trade their  shares in a
particular  state may be subject to various rules and regulations of that state.
A number of states  require that an issuer's  securities  be registered in their
state or  appropriately  exempted from  registration  before the  securities are
permitted  to trade in that state.  Presently,  we have no plans to register our
securities  in any  particular  state.  Further,  our shares will most likely be
subject  to the  provisions  of Section  15(g) and Rule 15g-9 of the  Securities
Exchange Act of 1934,  commonly  referred to as the "penny stock" rule.  Section
15(g) sets forth certain  requirements for transactions in penny stocks and Rule
15g-9(d)(1)  incorporates  the  definition  of penny  stock as that used in Rule
3a51-1 of the Exchange Act.

         The SEC generally  defines  penny stock to be any equity  security that
has a market  price less than $5.00 per  share,  subject to certain  exceptions.
Rule 3a51-1  provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting  specified  criteria set by the Commission;  authorized for quotation on
The Nasdaq Stock Market;  issued by a registered  investment  company;  excluded
from the  definition  on the basis of price (at  least  $5.00 per  share) or the
issuer's net tangible assets; or exempted from the definition by the SEC. If our
shares are deemed to be a penny stock,  trading in the shares will be subject to
additional sales practice  requirements on broker-dealers  who sell penny stocks
to persons other than established customers and accredited investors,  generally
persons with assets in excess of $1,000,000 or annual income exceeding  $200,000
or $300,000 together with their spouse.

         For  transactions  covered by these rules,  broker-dealers  must make a
special  suitability  determination for the purchase of such securities and must
have received the purchaser's  written  consent to the transaction  prior to the
purchase.  Additionally,  for any  transaction  involving a penny stock,  unless
exempt,  the rules require the delivery,  prior to the first  transaction,  of a
risk  disclosure  document  relating to the penny stock market.  A broker-dealer
also must disclose the  commissions  payable to both the  broker-dealer  and the
registered representative,  and current quotations for the securities.  Finally,
monthly  statements  must be sent  disclosing  recent price  information for the
penny stocks held in the account and  information on the limited market in penny
stocks. Consequently,  these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in our common stock and may affect the ability of
shareholders to sell their shares.

         As of November 30, 2006 there were  approximately 149 holders of record
of our common stock,  which figure does not take into account those shareholders
whose certificates are held in the name of broker-dealers or other nominees.

         As of November 30, 2006 we had 11,101,946 shares of common stock issued
and  outstanding.  Of the  total  outstanding  shares,  4,271,119  may be  sold,
transferred or otherwise traded in the public market without restriction, unless
held by an affiliate or controlling  shareholder.  Of these 4,271,119 shares, we
have not

                                       17
<PAGE>

identified any shares as being held by affiliates.  A total of 6,830,827  shares
are considered restricted securities.

         Under Rule 144 as  currently  in effect,  a person  (or  persons  whose
shares are aggregated) who has beneficially owned restricted shares for at least
one year, including any person who may be deemed to be an "affiliate" as defined
under the Act, is entitled to sell, within any three-month  period, an amount of
shares that does not exceed the greater of (i) the average weekly trading volume
in the  security  as  reported  through  the  automated  quotation  system  of a
registered securities association, during the four calendar weeks preceding such
sale or (ii) 1% of the shares then outstanding. A person who is not deemed to be
an  "affiliate"  and has not been an affiliate for the most recent three months,
and who has held  restricted  shares for at least two years would be entitled to
sell such shares without regard to the resale limitations of Rule 144.

RECENT ISSUANCE OF SECURITIES

         In connection with the License Agreement and Stock Purchase  Agreement,
we issued in October 2003 a total of 4,812,377 shares of our common stock to NYU
in further consideration for entering into the License Agreement.  This issuance
was made in an isolated,  private transaction to a single accredited investor in
reliance upon the  exemptions  from  registration  provided by Sections 4(2) and
4(6) of the Securities Act of 1933.

         On October 17, 2003,  we sold an  aggregate of 1,222,192  shares of our
authorized but previously  unissued common stock in a private  placement to four
accredited  investors  (305,548 shares each) for the aggregate purchase price of
$400,000.  We used the funds to make the initial  $300,000  payment to NYU under
the License  Agreement,  the  payment of various  expenses  and fees  related to
finalization and execution of the License Agreement,  professional fees, and for
working  capital.  The  sale of  securities  was  made in an  isolated,  private
transaction to four accredited investors only and in reliance upon the exemption
from registration provided by Section 4(6) of the Securities Act.

         On December 15, 2004, we issued  125,000  shares of our common stock to
one person as a loan commitment fee valued at $218,750,  or $1.75 per share. The
issuance was made pursuant to a private,  isolated  transaction in reliance upon
the exemption from the  registration  provided by Section 4(2) of the Securities
Act of 1933.

         On January 17, 2005,  we issued  130,000  shares of our common stock to
one person for cash  consideration  of $130,000,  or $1.00 per share.  The funds
realized were used for general corporate  operating  expenses.  The issuance was
made pursuant to a private,  isolated transaction in reliance upon the exemption
from the registration provided by Section 4(2) of the Securities Act of 1933.

DIVIDEND POLICY

         We have not declared or paid cash  dividends or made  distributions  in
the  past,  and we do not  anticipate  that we will pay cash  dividends  or make
distributions  in the  foreseeable  future.  We  currently  intend to retain and
invest any future earnings to finance our operations.

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

         The  following  information  should  be read in  conjunction  with  the
consolidated  financial statements and notes thereto appearing elsewhere in this
Form  10-KSB.  We have  determined  on  December  1,  2006 to  cease  operations
immediately and, at the request of our principal  creditor  appointed a director
designated  by such creditor to our Board of  Directors.  Immediately  following
such appointment,  our existing  directors

                                       18
<PAGE>

resigned  effective  immediately  and  terminated  their  association  with  us.
Accordingly, such creditor may be deemed to control us at the date of the filing
of this Report.  As a result of our cessation of operations and the  termination
of the License  Agreement,  we became a "blank check" or "shell  company"  whose
sole purpose at this time is to locate and  consummate  a merger or  acquisition
with a private entity.

RESULTS OF OPERATIONS

         We incurred a loss from  operations  of  $1,880,029  for the year ended
September 30, 2006 compared to a loss of $1,430,183 for the year ended September
30, 2005.  The  increase was due to our expanded  efforts to license and develop
Nanotechnology.  Included  in the  loss for  2006  and  2005  was  $447,288  and
$230,750,  respectively,  to NYU for research and development of Nanotechnology.
In 2006 NTI  employed  full time  officers  to manage its  operations,  to raise
operational  capital  and to  interface  with  NYU.  We paid  $254,000  to these
employees  in 2006  compared to $152,333 in 2005.  In  connection  with our fund
raising activities and securities reporting requirements we incurred $231,566 in
2006 on legal and accounting fees compared to $152,227 in 2005. We also expended
$24,250 in consulting  costs in our fund raising efforts compared to $442,459 in
2005.  Our  interest  expense was  approximately  $619,610  in 2006  because our
funding came  primarily from  convertible  debentures as compared to $206,674 in
2005 when our funding was primarily equity.

LIQUIDITY AND CAPITAL RESOURCES

         We used cash of  $702,372  during the year  ended  September  30,  2006
compared to $937,512 in 2005.  We had cash on hand of $2,803 as of September 30,
2006  compared to $44,582 as of September  30, 2005.  Our source of cash in 2006
was the issuance of  convertible  debentures  for  $650,593 of cash.  In 2005 we
received proceeds from convertible debentures of $1,000,000. We received $25,200
in  shareholder  loans in 2006  compared  to $0 in 2005.  We repaid  $15,200 and
$5,000 of those  loans in 2006 and  2005,  respectively.  In 2005,  we also paid
$19,565 in legal fees to obtain patents on our technology.

         Our cash  was  short of  covering  our  accounts  payable  and  accrued
liabilities  by $942,454 at  September  30,  2006.  This  includes an accrual of
$347,288 for which we are in default on our  obligation  to pay to NYU on May 1,
2006.  The related  party loans of $325,060 are due upon  demand,  unless we are
able to persuade our creditors to convert the debts to equity.

         We  expect  that we will  need  approximately  $1,000,000  to fund  our
operations  in 2007.  We intend to raise the  needed  funds from the sale of our
shares  of our  common  stock.  There is no  assurance  that the  funds  will be
available or that even if they are  available  that the terms will be acceptable
to us.

PLAN OF OPERATION

         In September 2003, we entered into a License Agreement with NYU whereby
NYU  granted to us a license  to certain  pre-existing  inventions  and  certain
intellectual  property to be generated by a designated  research  project  being
conducted at NYU relating to DNA  Nanotechnology.  The License Agreement further
provides  that NYU  grants to us an  exclusive  worldwide  license  to  develop,
manufacture,  use, lease or sell any licensed  products and/or processes related
to the  research  project,  together  with the right to grant  sublicenses.  The
Company is required to pay NYU a royalty fee relating to sales  generated  using
technology  developed by NYU. The term of the License  Agreement is equal to the
life of the longest  patent  licensed to the Company.  There is no provision for
renewal in the License Agreement.

         We intended to  re-license  the  technology we acquired from NYU and to
license any newly  developed  technology  to companies  which have the financial
resources to economically  market the related products to the

                                       19
<PAGE>

public. We did not intend to market the products ourselves. We expected that the
licensees  would pay us royalties as a percentage of their sales of any products
which use our technology.

         However,  in November  2006,  we forfeited  our  technology  rights and
licenses due to our failure to pay the research and license fees under the terms
the License  Agreement.  Presently we are seeking a merger or  acquisition of an
existing operating company by which we can continue to operate.

NET OPERATING LOSS

         We have  accumulated  approximately  $2,664,000 of net  operating  loss
carry-forwards  as of September 30, 2006,  which may be offset  against  taxable
income  and  income  taxes in future  years.  The use of these  losses to reduce
future income taxes will depend on the  generation of sufficient  taxable income
prior  to  the  expiration  of  the  net  operating  loss  carry-forwards.   The
carry-forwards  expire in the year  2026.  In the event of  certain  changes  in
control,  there will be an annual limitation on the amount of net operating loss
carry-forwards  which  can be used.  No tax  benefit  has been  reported  in the
financial  statements  for the year ended  September 30, 2006 because there is a
50% or greater chance that the carry-forward will not be used. Accordingly,  the
potential  tax  benefit  of the loss  carry-forward  is  offset  by a  valuation
allowance of the same amount.

NEW ACCOUNTING PRONOUNCEMENTS

         SFAS NO.  123(R) -- In  December  2004,  the FASB  issued  SFAS No. 123
(Revised 2004) (SFAS 123 (R)) "Share-based  payment".  SFAS 123 (R) will require
compensation costs related to share-based payment  transactions to be recognized
in the financial statements. With limited exceptions, the amount of compensation
cost  will be  measured  based on the  grant-date  fair  value of the  equity or
liability instruments issued. In addition,  liability awards will be re-measured
each reporting period. Compensation cost will be recognized over the period that
an employee  provides  service in exchange for the award.  FASB 123 (R) replaces
FASB 123, Accounting for Stock-Based  Compensation and supersedes APB option No.
25,  Accounting for Stock Issued to Employees.  This guidance is effective as of
the first interim or annual  reporting  period after December 15, 2005 for Small
Business filers.

         EITF 00-19.2--In December 2006, the FASB issued Staff Position No. EITF
00-19-2.  This FSP addresses an issuer's  accounting  for  registration  payment
arrangements  and  specifies  that  the  contingent  obligation  to make  future
payments  or  otherwise  transfer  consideration  under a  registration  payment
arrangement should be separately recognized and measured in accordance with FASB
No. 5. The  guidance  in this FSP amends  FASB  Statements  133 and 150 and FASB
Interpretation  No. 45 to include scope  exceptions  for  registration  payments
arrangements.  This FSP further clarifies that a financial instrument subject to
a registration payment arrangement should be accounted for without regard to the
contingent  obligation to transfer  consideration  pursuant to the  registration
payment arrangement.  This guidance is effective for financial statements issued
for fiscal years  beginning  after  December 15, 2006.  The Company is currently
assessing the impact this pronouncement will have on its financial statements if
any.

ITEM 7. FINANCIAL STATEMENTS

         Our financial statements, as of and for the fiscal year ended September
30, 2006, have been examined to the extent  indicated in its report by Moore and
Associates Chartered,  independent certified accountants, and have been prepared
in accordance  with  generally  accepted  accounted  principles  and pursuant to
Regulation S-B promulgated by the SEC. Our financial  statements,  as of and for
the fiscal  year ended  September  30,  2005,  have been  examined to the extent
indicated in its report by Goldstein  Golub Kessler LLP,  independent  certified
accountants,  and have been  prepared  in  accordance  with  generally  accepted
accounted  principles and pursuant to Regulation S-B promulgated by the SEC. The
aforementioned financial statements are included herein in response to Item 7 of
this Form 10-KSB.

                                       20
<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                              FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2006

                                 C O N T E N T S

Reports of Independent Registered Public Accounting Firms          F-1

Balance Sheet                                                      F-3

Statements of Operations                                           F-4

Statements of Stockholders' Equity                                 F-5

Statements of Cash Flows                                           F-9

Notes to the Financial Statements                                  F-11

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors
Nanoscience Technologies, Inc.

         We  have  audited  the   accompanying   balance  sheet  of  Nanoscience
Technologies,  Inc. (a development stage company), as of September 30, 2006, and
the related  statements of operations,  stockholders'  (deficiency)  equity, and
cash flows for the year then ended and the amounts  included  in the  cumulative
column in the statements of operations,  stockholders'  (deficiency)  equity and
cash flows for the period from October 1, 2004 through September 30, 2006. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in  all  material  respects,  the  financial  position  of  Nanoscience
Technologies,  Inc. (a  development  stage company) as of September 30, 2006 and
the results of their operations and their cash flows for the year then ended and
the amounts  included in the cumulative  column in the statements of operations,
stockholders'  (deficiency) equity and cash flows for the period from October 1,
2004 through  September  30, 2006 in  conformity  with United  States  generally
accepted accounting principles.

         The accompanying  financial statements have been prepared assuming that
the Company  will  continue as a going  concern.  As  discussed in Note 2 to the
financial  statements,  the  Company  is a  development  stage  company  with no
significant  operating  results  to date,  a working  capital  deficiency  and a
stockholders'  deficiency  which raises  substantial  doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  2.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

Moore and Associates, Chartered
Las Vegas, Nevada
December 13, 2006

                                       F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Nanoscience Technologies, Inc.
(A Development Stage Company)
New York, New York

         We  have   audited   the   accompanying   statements   of   operations,
stockholders'  equity,  and cash  flows of  Nanoscience  Technologies,  Inc.  (a
development stage company) for the year ended September 30, 2005 and the amounts
included in the cumulative column in the statements of operations, stockholders'
(deficiency)  equity and cash flows for the period from  October 1, 2004 through
September 30, 2005.  These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

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

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all material  respects,  the results of operations and cash flows of
Nanoscience Technologies,  Inc. (a development stage company) for the year ended
September  30, 2005 and the amounts  included  in the  cumulative  column in the
statements of operations,  stockholders'  (deficiency) equity and cash flows for
the period from October 1, 2004 through  September 30, 2005 in  conformity  with
United States generally accepted accounting principles.

         The accompanying  financial statements have been prepared assuming that
the Company  will  continue as a going  concern.  As  discussed in Note 2 to the
financial  statements,  the  Company  is a  development  stage  company  with no
significant  operating results to date, which raises substantial doubt about its
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 2. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.

Goldstein Golub Kessler LLP
New York, New York
December 13, 2006

                                       F-2

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                                  Balance Sheet

                                     ASSETS

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30, 2006
<S>                                                                      <C>
CURRENT ASSETS
         Cash                                                            $       2,803
                                                                         -------------

         Total Current Assets                                            $       2,803
                                                                         -------------

OTHER ASSETS
         Lease deposit                                                             550
                                                                         -------------

         Total Other Assets                                                        550
                                                                         -------------

TOTAL ASSETS                                                             $       3,353
                                                                         =============

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES

         Accounts payable and accrued expenses                           $     511,390
         Accrued interest                                                      108,807
         Notes payable-related parties                                         325,060
                                                                         -------------

                  Total Current Liabilities                                    945,257
                                                                         -------------

         Warrant liability                                                      10,709
         Convertible debentures, net                                           567,939
                                                                         -------------

                  Total Liabilities                                          1,523,905
                                                                         -------------

COMMITMENTS

STOCKHOLDERS' EQUITY (DEFICIENCY)

         Common stock: $0.001; authorized 100,000,000 shares;
         11,101,946 shares issued and outstanding                               11,102
         Additional paid-in capital                                          2,797,254
         Deficit accumulated during the development stage                   (4,328,908)
                                                                         -------------

                  Total Stockholders' Equity (Deficiency)                   (1,520,552)
                                                                         -------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)         $       3,353
                                                                         =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-3

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                            Statements of Operations

<TABLE>
<CAPTION>
                                                                                                  From Inception of the
                                                                      For the Years Ended         Development Stage on
                                                                          September 30,             September 14, 1987
                                                                  ----------------------------    Through September 30,
                                                                      2006            2005                 2006
                                                                  ------------    ------------    ---------------------
<S>                                                               <C>             <C>             <C>
REVENUES                                                          $         --    $         --    $                 --

OPERATING EXPENSES

         General and administrative                                    846,879       1,021,130               2,166,410
         Research and development                                      447,288         230,750               1,293,038
         Licensing fees                                                     --              --                  96,248
                                                                  ------------    ------------    --------------------

              TOTAL OPERATING EXPENSES                               1,294,167       1,251,880               3,555,696
                                                                  ------------    ------------    --------------------

LOSS FROM OPERATIONS                                                 1,294,167       1,251,880               3,555,696

OTHER INCOME (EXPENSES)

         Other income                                                   33,748          28,371                  62,119
         Interest expense                                             (619,610)       (206,674)               (835,331)
                                                                  ------------    ------------    --------------------

              TOTAL OTHER INCOME (EXPENSES)                           (585,862)       (178,303)               (773,212)
                                                                  ------------    ------------    --------------------

NET LOSS                                                          $ (1,880,029)   $ (1,430,183)   $         (4,328,908)
                                                                  ============    ============    ====================

BASIC AND DILUTED LOSS
 PER COMMON SHARE                                                 $      (0.17)   $      (0.13)
                                                                  ============    ============

BASIC AND DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES OUTSTANDING
                                                                    11,011,823      11,011,823
                                                                  ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                        Deficit Accumulated
                                                                       Additional           During the
                                             Common Stock            Paid-in Capital    Development Stage
                                 ---------------------------------   ---------------    -----------------
                                      Shares            Amount
                                 ---------------   ---------------
<S>                              <C>               <C>               <C>                <C>
Balance from inception of
  the development  stage at
  September 14, 1987                          --   $            --   $            --                 --

Common stock issued to
  directors for services on
  September 17, 1987 at
  $0.008 per share                     3,750,000             3,750            26,250                 --

Common stock issued for
  cash on September 17,
  1987 at $0.008 per share                27,500                28               192                 --

Common stock issued for
  cash on January 12, 1988
  at $0.008 per share                      6,250                 6                44                 --

Common stock issued to a
  director for cash on
  October 10, 1997 at
  $0.0004 per share                   12,500,000            12,500            (7,500)                --

Common stock issued to
  directors for services on
  November 12, 1997 at
  $0.0004 per share                    1,125,000             1,125              (675)                --

Net loss for the period
  from inception on
  September 14, 1987
  through September 30,
  1999                                        --                --                --            (37,470)
                                 ---------------   ---------------   ---------------    ---------------

Balance, September 30, 1999           17,408,750            17,409            18,311            (37,470)

Net loss for the year
  ended September 30, 2000                    --                --                --             (3,200)
                                 ---------------   ---------------   ---------------    ---------------

Balance, September 30, 2000           17,408,750            17,409            18,311            (40,670)

Net loss for the year
  ended September 30, 2001                    --                --                --             (7,097)
                                 ---------------   ---------------   ---------------    ---------------

Balance, September 30, 2001           17,408,750   $        17,409   $        18,311    $       (47,767)
                                 ---------------   ---------------   ---------------    ---------------
</TABLE>

(Continued)

   The accompanying notes are an integral part of these financial statements.

                                       F-5

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                 Stock          Deficit Accumulated
                                                                          Additional         Subscriptions          During the
                                          Common Stock                  Paid-in Capital       Receivable        Development Stage
                             --------------------------------------    -----------------   -----------------    -----------------
                                   Shares              Amount
                             -----------------    -----------------
<S>                          <C>                  <C>                  <C>                 <C>                  <C>
Balance, September 30, 2001         17,408,750    $          17,409    $          18,311   $              --    $         (47,767)

Common stock issued for
  cash on October 2, 2001
  at $0.01 per share                   250,000                  250                   --                  --                   --

Net loss for the year ended
  September 30, 2002                        --                   --                   --                  --               (9,140)
                             -----------------    -----------------    -----------------   -----------------    -----------------

Balance, September 30, 2002         17,658,750               17,659               18,311                  --              (56,907)

Common stock issued for
  cash at $0.33 per share
  on September 18, 2003              1,222,192                1,222              398,778                  --                   --

Common shares issued for
  licensing fees at $0.02
  per share on September
  18, 2003                           4,812,377                4,812               91,436                  --                   --

Forgiveness of debt by a
  related party                             --                   --               30,367                  --                   --

Contributed services                        --                   --                  290                  --                   --

Net loss for the year ended
  September 30, 2003                        --                   --                   --                  --             (429,380)
                             -----------------    -----------------    -----------------   -----------------    -----------------

Balance, September 30, 2003         23,693,319               23,693              539,182                  --             (486,287)

Common stock cancelled on
  October 10, 2003                 (12,846,373)             (12,846)              12,846                  --                   --
</TABLE>

(Continued)

   The accompanying notes are an integral part of these financial statements.

                                       F-6

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                 Stock          Deficit Accumulated
                                                                          Additional         Subscriptions          During the
                                          Common Stock                  Paid-in Capital       Receivable        Development Stage
                             --------------------------------------    -----------------   -----------------    -----------------
                                   Shares              Amount
                             -----------------    -----------------
<S>                          <C>                  <C>                  <C>                 <C>                  <C>
Common stock warrants
  Granted for services                      --                   --                6,875                  --                   --

Net loss for the year ended
  September 30, 2004                        --                   --                   --                  --             (532,409)

Balance, September 30, 2004        10,846,9465    $          10,847    $         558,903                  --    $      (1,018,696)
                             -----------------    -----------------    -----------------   -----------------    -----------------

Common stock issued for
  stock subscriptions at
  $1.00 per share                      130,000                  130              129,870                  --                   --

Common stock issued as a
  loan commitment fee at
  $1.75 per share                      125,000                  125              218,625                  --                   --

Preproduction costs
  contributed by
  shareholders                              --                   --              110,000            (110,000)                  --

Completed preproduction work                --                   --                   --              44,000                   --

Accrued interest
  contributed by
  shareholders                              --                   --               38,530                  --                   --

Termination of derivative
  feature of debentures                     --                   --              113,481                  --                   --

Common stock warrants
  issued for services                       --                   --               68,555                  --                   --

Net loss for the year ended
  September 30, 2005                        --                   --                   --                  --           (1,430,183)
                             -----------------    -----------------    -----------------   -----------------    -----------------
</TABLE>

(Continued)

   The accompanying notes are an integral part of these financial statements.

                                       F-7

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                  Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                 Stock          Deficit Accumulated
                                                                          Additional         Subscriptions          During the
                                          Common Stock                  Paid-in Capital       Receivable        Development Stage
                             --------------------------------------    -----------------   -----------------    -----------------
                                   Shares              Amount
                             -----------------    -----------------
<S>                          <C>                  <C>                  <C>                 <C>                  <C>
Balance, September 30, 2005         11,101,946               11,102            1,237,964             (66,000)          (2,448,879)

Completed preproduction work                --                   --                   --              66,000                   --

Fair value of beneficial
  conversion feature of the
  convertible debt                          --                   --            1,527,284                  --                   --

Accrued interest
  contributed by
  shareholders                              --                   --               32,006                  --                   --

Net loss for the year ended
  September 30, 2006                        --                   --                   --                  --           (1,880,029)

Balance, September 30, 2006         11,101,946    $          11,102    $       2,797,254                  --    $      (4,328,908)
                             =================    =================    =================   =================    =================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-8

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                        From Inception of
                                                                                                        the Development
                                                                                                           Stage on
                                                                                                         September 14,
                                                                       For the Years Ended               1987 Through
                                                                            September 30,                September 30,
                                                                  ----------------------------------    ---------------
                                                                       2006                2005              2006
                                                                  ---------------    ---------------    ---------------
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                               <C>                <C>                <C>
Net loss                                                          $    (1,880,029)   $    (1,430,183)   $    (4,328,908)
Adjustments to reconcile net loss to net cash used by
     operating activities:
     Change in fair value of warrant liability                            (33,748)                --            (33,748)
     Accrued interest contributed by shareholders                          32,006             38,530             70,536
     Common stock issued for services and fees                                 --            218,750            345,448
     Common stock warrants granted for services                                --             68,555             75,430
     Depreciation and amortization expense                                 38,762              2,980             43,658
     Amortization of marketing expense                                     66,000             44,000            110,000
     Contributed services                                                      --                 --                290
     Amortization of discount on debt                                     447,939            113,481            561,420
Changes in operating assets and liabilities:
     (Increase ) Decrease in prepaid expenses                              30,438            (27,438)                --
     Increase (Decrease) in accounts payable and
          accrued expenses                                                596,260             33,813            661,345
                                                                  ---------------    ---------------    ---------------

                  Net Cash Used in Operating Activities                  (702,372)          (937,512)        (2,494,529)
                                                                  ---------------    ---------------    ---------------

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment                                            --             (4,931)            (4,931)
Lease deposits                                                                 --                 --               (550)
Patent costs                                                                   --            (19,565)           (38,727)
                                                                  ---------------    ---------------    ---------------

                  Net Cash Used in Investing Activities                        --            (24,496)           (44,208)
                                                                  ---------------    ---------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from of notes payable-related parties                             25,200                 --            375,627
Proceeds from convertible debentures payable                              650,593          1,000,000          1,650,593
Proceeds from stock subscriptions payable                                      --                 --            130,000
Repayment of notes payable-related parties                                (15,200)            (5,000)           (20,200)
Common stock issued for cash                                                   --                 --            405,520
                                                                  ---------------    ---------------    ---------------

                  Net Cash Provided by Financing Activities               660,593            995,000          2,541,540
                                                                  ---------------    ---------------    ---------------

NET INCREASE (DECREASE) IN CASH                                           (41,779)            32,992              2,803

CASH AT BEGINNING OF PERIOD                                                44,582             11,590                 --
                                                                  ---------------    ---------------    ---------------

CASH AT END OF PERIOD                                             $         2,803    $        44,582    $         2,803
                                                                  ===============    ===============    ===============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-9

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                       From Inception of
                                                                                                        the Development
                                                                                                           Stage on
                                                                                                         September 14,
                                                                       For the Years Ended               1987 Through
                                                                            September 30,                September 30,
                                                                  ----------------------------------    ---------------
                                                                       2006                2005              2006
                                                                  ---------------    ---------------    ---------------
<S>                                                               <C>                <C>                <C>


SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:

Cash paid during the year for:
     Interest                                                     $           487   $            --   $           487
     Income taxes                                                 $            --   $            --   $            --

NON-CASH FINANCING AND INVESTING ACTIVITIES:

     Forgiveness of debt by related party                         $            --   $            --   $        30,367
     Common stock warrants granted for services                   $            --   $        68,555   $        75,430
     Common stock issued for services and fees                    $            --   $       218,750   $       345,448
     Accrued interest converted to debt                           $        31,801   $         9,347   $        41,148
     Production costs contributed by shareholders                 $            --   $       110,000   $       110,000
     Issuance of common stock for stock subscription
         payable                                                  $            --   $       130,000   $       130,000
     Termination of derivative feature of debentures              $            --   $       113,418   $       113,418

     Allocation of convertible debt proceeds to beneficial
          conversion feature

                                                                  $     1,527,284   $            --   $     1,527,284
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-10

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 1 -          ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                  a.    Business and Organization

                  Nanoscience  Technologies,  Inc. (the "Company") was organized
                  on September  14, 1987,  under the laws of the State of Idaho,
                  under the name  Eagle's Nest Mining  Company.  As set forth in
                  its  Articles  of  Incorporation,  the  Company was created to
                  engage in the  business of  acquiring  and  developing  mining
                  claims and prospecting,  developing,  processing and marketing
                  all types of mineral resources.  However, from the time of its
                  inception the Company has not engaged in any material business
                  operations.  Pursuant to  Statement  of  Financial  Accounting
                  Standards  No. 7,  "Accounting  and  Reporting by  Development
                  Stage Enterprises," the Company is classified as a development
                  stage company.

                  On July 31, 2001,  the Company  formed a corporation in Nevada
                  with the intent to move its domicile to Nevada. On November 8,
                  2001,  the  Company  implemented  its change of  domicile  and
                  became  a  Nevada   Corporation.   As  a  result,   the  Idaho
                  corporation was dissolved.

                  On  October  12,  2001,  the  Company  elected  to change  the
                  authorized  capitalization  from 10,000 shares of no par value
                  common stock to 100,000,000  shares of $0.001 par value common
                  stock.  All share and per share values within these  financial
                  statements have been adjusted to reflect this change.

                  On November 5, 2001, the Company approved a 12.5 for 1 forward
                  stock  split.  All  share and per share  values  within  these
                  financial  statements  have  been  adjusted  to  reflect  this
                  change.

                  On May 23, 2002 the Company  changed its name from Eagles Nest
                  Mining Company to Nanoscience  Technologies,  Inc. As a result
                  of the License  Agreement  with NYU, we have become engaged in
                  the  development and  commercialization  of the inventions and
                  intellectual  property to be generated by the research project
                  being  conducted  at  NYU  relating  to  DNA   Nanotechnology.
                  Structural   DNA   Nanotechnology   seeks   to   exploit   the
                  architectural  properties  of DNA  with the  ultimate  goal of
                  organizing   matter   in  three   dimensions.   Pharmaceutical
                  development,   nano-electronics   and  the   creation  of  new
                  materials  are  among  the  potential   applications  of  this
                  research.

                  b.    Accounting Method

                  The  Company's  financial  statements  are prepared  using the
                  accrual  method  of  accounting.  The  Company  has  elected a
                  September 30 year-end.

                  c.    Cash and Cash Equivalents

                  For purposes of financial statement presentation,  the Company
                  considers  all highly  liquid  investments  with a maturity of
                  three months or less,  from the date of  purchase,  to be cash
                  equivalents.

   The accompanying notes are an integral part of these financial statements.

                                      F-11

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 1 -          ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)

                  d.    Use of Estimates

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

                  e.    Revenue Recognition

                  The  Company  currently  has no  source of  revenues.  Revenue
                  recognition   policies  will  be  determined   when  principal
                  operations begin.

                  f.    Basic and Diluted Loss Per Common Share

                  The  Computation  of basic  loss per share of common  stock is
                  based on the  weighted  average  number of shares  outstanding
                  during the period.  Common  stock  equivalents  if any are not
                  included in the weighted  average shares  outstanding  because
                  they would be anti-dilutive.

                  g.    Research and Development

                  The Company  follows the policy of expensing  its research and
                  development costs in the period in which they are incurred.

                  h.    Income Taxes

                  Deferred  taxes are  provided  on a liability  method  whereby
                  deferred tax assets are recognized  for  deductible  temporary
                  differences  and operating  loss and tax credit  carryforwards
                  and  deferred  tax  liabilities  are  recognized  for  taxable
                  temporary   differences.   Temporary   differences   are   the
                  differences   between  the  reported  amounts  of  assets  and
                  liabilities  and their tax  bases.  Deferred  tax  assets  are
                  reduced  by a  valuation  allowance  when,  in the  opinion of
                  management,  it is more likely  than not that some  portion or
                  all of the  deferred  tax  assets  will  fail to be  realized.
                  Deferred  tax  assets and  liabilities  are  adjusted  for the
                  effects  of  changes  in tax  laws  and  rates  on the date of
                  enactment.

   The accompanying notes are an integral part of these financial statements.

                                      F-12

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 1 -          ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)

                  h.    Income Taxes (continued)

                  Net deferred tax assets consist of the following components as
                  of September 30, 2006 and 2005:

<TABLE>
<CAPTION>
                                                             2006           2005
                                                          -----------    -----------
<S>                                                       <C>            <C>
                    Deferred tax assets:
                    NOL Carryover                         $ 1,101,274    $   545,387
                    Accrued Expenses                          152,899        140,417
                    Deferred tax liabilities:                      --             --

                    Valuation allowance                    (1,254,173)      (685,804)
                                                          -----------    -----------

                    Net deferred tax asset                $        --    $        --
                                                          ===========    ===========
</TABLE>

                  The income tax provision differs from the amount of income tax
                  determined  by applying the U.S.  federal and state income tax
                  rates of 39% to pretax income from  continuing  operations for
                  the  years  ended  September  30,  2006  and  2005  due to the
                  following:

<TABLE>
<CAPTION>
                                                             2005           2004
                                                          -----------    -----------
<S>                                                       <C>            <C>
                    Book Income                           $  (733,212)   $  (557,771)
                    Stock, Discount and Warrants Expense      164,843        204,463
                    Other                                      12,482         24,721
                    Valuation allowance                       555,887        328,587
                                                          -----------    -----------

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

                  At September  30,  2006,  the Company had net  operating  loss
                  carryforwards of  approximately  $2,664,000 that may be offset
                  against future taxable income from the year 2003 through 2026.
                  No tax benefit has been  reported  in the  September  30, 2005
                  financial statements since the potential tax benefit is offset
                  by a valuation allowance of the same amount.

                  Due to the change in  ownership  provisions  of the Tax Reform
                  Act of 1986,  net  operating  loss carry  forwards for Federal
                  income  tax   reporting   purposes   are   subject  to  annual
                  limitations. Should a change in ownership occur, net operating
                  loss carryforwards may be limited as to use in future years.

                  i.       Advertising

                  The Company expenses  advertising costs in the period in which
                  they are incurred. Advertising expense was $66,000 and $44,000
                  for the 2006 and 2005, respectively.


   The accompanying notes are an integral part of these financial statements.

                                      F-13

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 1 -          ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (Continued)

                  j.    Patents

                  Qualifying patent costs totaling $38,728 have been capitalized
                  at September 30, 2005. The patents which have been granted are
                  being  amortized over a period of 10 years.  Costs  associated
                  with  patent  applications  which  are  pending  or are  being
                  developed are not being  amortized.  Amortization  expense for
                  the years  ended  September  30, 2006 and 2005 was $34,406 and
                  $2,405, respectively.

                  The Company  evaluates the  recoverability  of intangibles and
                  reviews the amortization period on a continual basis utilizing
                  the guidance of SFAS No. 142,  "Goodwill and Other  Intangible
                  Assets."  Several  factors are used to  evaluate  intangibles,
                  including,  but not limited to,  management's plans for future
                  operations,    recent   operating   results   and   projected,
                  undiscounted  cash flows.  In 2006, the Company  amortized the
                  balance  of  its   capitalized   patent  costs  due  to  their
                  forfeiture  for non  payment  of the  fees due NYU  under  the
                  technology licensing agreement.

                  k.    Fixed Assets

                  The Company's fixed assets are comprised of computer equipment
                  with a cost of $4,931.  The equipment is depreciated  over its
                  estimated  useful  life of 5  years  under  the  straight-line
                  method. Depreciation expense for the years ended September 30,
                  2006 and 2005 was $4,356 and $575, respectively.  In 2006, the
                  Company  depreciated  the balance of the cost of its  computer
                  equipment as it was  determined  that the  equipment's  useful
                  life was reduced to zero.

                  l.    Recent Accounting Pronouncements

                  During the year ended  September 30, 2006, the Company adopted
                  the following accounting pronouncements:

                  Adopted:

                  SFAS NO. 123(R) -- In December  2004, the FASB issued SFAS No.
                  123 (Revised 2004) (SFAS 123 (R)) "Share-based payment".  SFAS
                  123 (R) will require compensation costs related to share-based
                  payment   transactions  to  be  recognized  in  the  financial
                  statements.   With   limited   exceptions,   the   amount   of
                  compensation  cost will be  measured  based on the  grant-date
                  fair value of the equity or liability  instruments  issued. In
                  addition,  liability awards will be re-measured each reporting
                  period.  Compensation  cost will be recognized over the period
                  that an employee  provides  service in exchange for the award.
                  FASB 123 (R) replaces  FASB 123,  Accounting  for  Stock-Based
                  Compensation and supersedes APB option No. 25,  Accounting for
                  Stock Issued to  Employees.  This  guidance is effective as of
                  the first interim or annual  reporting  period after  December
                  15, 2005 for Small Business filers.

                  Under review:

                  EITF 00-19.2--In December 2006, the FASB issued Staff Position
                  No. EITF 00-19-2.  This FSP  addresses an issuer's  accounting
                  for registration  payment  arrangements and specifies that the
                  contingent  obligation  to make future  payments or  otherwise
                  transfer    consideration   under   a   registration   payment
                  arrangement  should be separately  recognized  and measured in
                  accordance  with FASB No. 5. The  guidance  in this FSP amends
                  FASB Statements 133 and 150 and FASB  Interpretation No. 45 to
                  include   scope   exceptions   for    registration    payments
                  arrangements.  This FSP  further  clarifies  that a  financial
                  instrument  subject  to  a  registration  payment  arrangement
                  should be  accounted  for  without  regard  to the  contingent
                  obligation   to   transfer   consideration   pursuant  to  the
                  registration payment  arrangement.  This guidance is effective
                  for  financial  statements  issued for fiscal years  beginning
                  after  December 15, 2006.  The Company is currently  assessing
                  the  impact  this  pronouncement  will  have on its  financial
                  statements if any.

   The accompanying notes are an integral part of these financial statements.

                                      F-14

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 2 -          GOING CONCERN

                  The  Company's   financial   statements   are  prepared  using
                  accounting  principles generally accepted in the United States
                  of America  applicable to a going concern,  which contemplates
                  the  realization  of assets and  liquidation of liabilities in
                  the  normal  course  of  business.  The  Company  has  not yet
                  established an ongoing source of revenues  sufficient to cover
                  its  operating  costs  and  allow  it to  continue  as a going
                  concern.  Historically,  the Company has incurred  significant
                  annual loses, which have resulted in an accumulated deficit of
                  $4,328,908, has a working capital deficiency of $942,454 and a
                  shareholders'  deficiency of $1,520,552 at September 30, 2006,
                  which raises  substantial doubt about the Company's ability to
                  continue  as a going  concern.  The  ability of the Company to
                  continue  as a  going  concern  is  dependent  on the  Company
                  obtaining  adequate  capital to fund operating losses until it
                  becomes  profitable.  If  the  Company  is  unable  to  obtain
                  adequate capital,  it could be forced to cease operation.  The
                  accompanying   financial   statements   do  not   include  any
                  adjustments  relating to the recoverability and classification
                  of asset carrying amounts or the amount and  classification of
                  liabilities  that  might  result  from  the  outcome  of  this
                  uncertainty.

                  Management's  plans to obtain such  resources  for the Company
                  include   obtaining   capital   in  the  form  of  loans  from
                  significant   shareholders  sufficient  to  meet  its  minimal
                  operating  expenses  and from the sale of shares of its common
                  stock. However,  management cannot provide any assurances that
                  the Company will be  successful  in  accomplishing  any of its
                  plans.

NOTE 3-           COMMON STOCK

                  On September 17, 1987, the Company issued  3,750,000 shares of
                  $0.001 per value common stock to directors of the Company, for
                  services, at $0.008 per share.

                  On September  17, 1987,  the Company  issued  27,500 shares of
                  $0.001 par value common stock, for cash, at $0.008 per share.

                  On January 12, 1988, the Company issued 6,250 shares of $0.001
                  par value common stock, for cash, at $0.008 per share.

                  On October 10, 1997, the Company issued  12,500,000  shares of
                  $0.001 par value common stock to directors of the Company, for
                  services, at $0.0004 per share.

                  On November 12, 1997, the Company issued  1,125,000  shares of
                  $0.0001 par value  common  stock to  directors of the Company,
                  for services, at $0.0004 per share.

                  On October 2,  2001,  the  Company  issued  250,000  shares of
                  $0.001 par value common stock for cash at $0.001.

                  On  October  12,  2001,  the  Company  elected  to change  the
                  authorized  capitalization  from  10,000,000  shares of no par
                  value common stock to  100,000,000  shares of $0.001 par value
                  common  stock.  All share and per share  values  within  these
                  financial  statements  have  been  adjusted  to  reflect  this
                  change.

                  On November 5, 2001, the Company approved a 12.5 for 1 forward
                  stock  split.  All  share and per share  values  within  these
                  financial  statements  have  been  adjusted  to  reflect  this
                  change.

   The accompanying notes are an integral part of these financial statements.

                                      F-15

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 3-           COMMON STOCK (Continued)

                  On September  18,  2003,  the Company  sold  1,222,192  common
                  shares  for  cash at  $0.33  per  share,  or an  aggregate  of
                  $400,000.

                  Additionally,  on September 18, 2003, the Company entered into
                  a Stock Purchase Agreement with New York University (NYU) (see
                  Note 5) whereby it issued  4,812,377 shares of common stock to
                  NYU as partial  consideration  for  certain  licensing  rights
                  related to NYU-developed technologies.

                  On October 10,  2003,  the Company  cancelled  an aggregate of
                  12,846,373  shares  of its  previously  issued  common  stock,
                  pursuant  to the terms of the Stock  Purchase  Agreement  with
                  NYU.

                  In June 2004, the Company received  $130,000 from an unrelated
                  individual  as  payment  for  86,667  shares of the  Company's
                  common stock (at $1.50 per share).  However, before the shares
                  could be properly issued, the Company began drafting a Private
                  Placement  Memorandum  ("the  PPM"),  under  which the Company
                  would issue  shares of common  stock to various  investors  at
                  $1.00  per  share.   Therefore,   management  deemed  it  most
                  appropriate  to issue shares to this investor  under the terms
                  of the PPM, at $1.00 per share,  rather than  according to the
                  terms of the  original  subscription  agreement,  which was at
                  $1.50 per share.  In January 2005,  the Company issued 130,000
                  shares of its common stock in satisfaction of the subscription
                  payable.

                  The  Company  issued   130,000  stock  purchase   warrants  in
                  connection  with  the  funding  which  allows  the  holder  to
                  purchase an additional 130,000 shares of common stock at $1.50
                  per share.

                  In April 2004, the Company entered into an Investment  Banking
                  Agreement  "the   Agreement")   with  Divine  Capital  Markets
                  ("Divine")   whereby  Divine  contracted  to  perform  certain
                  "financial  advisory  services"  for a term  of one  year.  In
                  exchange for these services,  the Company  contracted to grant
                  to Divine a total of 250,000 common stock warrants exercisable
                  for five  years  with a  strike  price  of  $6.88  per  share.
                  Pursuant to the  Agreement,  the first  125,000  warrants were
                  considered  fully vested upon  consummation  of the Agreement.
                  The remaining  125,000  warrants were to have been  considered
                  fully  vested  upon  the  closing  of   $1,000,000  in  future
                  financing within the scope of the Agreement. Subsequent to the
                  consummation  of the Agreement as a commitment fee, Divine was
                  unable  to  secure  financing  for the  Company,  and the non-
                  vested  125,000  common stock  warrants  were  cancelled.  The
                  Company  recognized  an  expense  of  $6,875  relating  to the
                  125,000 common stock warrants granted to Divine.

                  On December 13, 2004, the Company issued 125,000 shares of its
                  common  stock as a one time  loan  commitment  fee  under  the
                  financing agreement described in Note 6.

NOTE 4 -          RELATED PARTY TRANSACTIONS

                  During  the  year  ended  September  30,  2005,   shareholders
                  contributed  shares  of  their  own  common  stock  to pay for
                  preproduction  advertising  costs.  The shares  were valued at
                  $110,000 when they were  transferred  to pay the costs.  As of
                  September 30, 2006 the $110,000 of the advertising  costs were
                  completed and expensed.

   The accompanying notes are an integral part of these financial statements.

                                      F-16

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 4 -          RELATED PARTY TRANSACTIONS (Continued)

                  During the year ended September 30, 2006, related parties lent
                  the Company $25,200.  The loans are non interest bearing,  due
                  upon demand and unsecured. The Company has imputed interest on
                  the loans at 10% per annum.  This  interest  was  recorded  as
                  contribution  to capital by the  shareholders.  $15,200 of the
                  related party notes were repaid in 2006.

                  During the year ended  September  30,  2006,  related  parties
                  forgave the interest accrued on certain Company debts totaling
                  $32,006.  This amount has been recorded as additional  paid-in
                  capital in the Company's financial statements.

NOTE 5 -          LICENSING AGREEMENT

                  In  September  2003,  the Company  entered into a Research and
                  License  Agreement  (as  subsequently  amended,  the  "License
                  Agreement")  with  New  York  University   (hereafter  "NYU"),
                  whereby  NYU  granted  to  the  Company  certain  pre-existing
                  inventions  and  intellectual  property to be  generated  by a
                  designated research project being conducted by NYU relating to
                  DNA  technology.  As  consideration  for these  inventions and
                  technology,  the  Company is required to pay NYU a royalty fee
                  relating to sales generated using technology developed by NYU.
                  The term of the License  Agreement is equal to the life of the
                  longest patent licensed to the Company.  There is no provision
                  for renewal in the License  Agreement.  As part of the License
                  Agreement, to reduce the dilution to NYU, certain shareholders
                  returned  to the Company for  cancellation  12,846,873  of its
                  common  stock.  Additionally,  the  Company  agreed to provide
                  funding for NYU totaling $1,657,690 in installments commencing
                  on September 15, 2003 through May 1, 2007 as follows:

                    September 15, 2003       $     300,000
                    May 1, 2004                    315,000
                    May 1, 2005                    330,750
                    May 1, 2006                    347,288
                    May 1, 2007                    364,652
                                             -------------
                    Total                    $   1,657,690
                                             =============

                  In connection with the Licensing  Agreement,  the Company also
                  entered into a Stock  Purchase  Agreement,  whereby in further
                  consideration  of  entering  into the License  Agreement,  the
                  Company issued 4,812,377 shares of the Company's stock to NYU.
                  These shares were valued at $0.02 per share, and were expensed
                  as licensing fees expense.

                  As an additional stipulation of the Agreement, the Company was
                  required to pay $19,162 in cash to NYU, being 50% of all costs
                  and  fees  incurred  by  NYU in  relation  to  patents  on its
                  technology   covered  in  the   Agreement.   This  amount  was
                  capitalized  by the  Company,  and is being  amortized  over a
                  ten-year period.

                  The Company  paid  $230,750 to NYU in 2005 for the May 1, 2005
                  research  and  development  fee. NYU has extended the due date
                  for the  payment  of  $100,000  of the May 1,  2005 fee  until
                  November 1, 2005.

   The accompanying notes are an integral part of these financial statements.

                                      F-17

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 5 -          LICENSING AGREEMENT (Continued)

                  During  November 2006 the Company  determined that it would be
                  unable to fulfill its payment  obligations  under the terms of
                  the  Licensing  Agreement  and  forfeited  its  rights  to the
                  licensed  technology.  The  Company  has  accrued in  accounts
                  payable  and  accrued  expenses  $433,615  owed  to  NYU as of
                  September 30, 2006.

NOTE 6 -          CONVERTIBLE DEBENTURES

                  On December  13, 2004,  the Company  entered into a Securities
                  Purchase  Agreement  with Highgate  House,  LP and  Montgomery
                  Equity  Partners,  LP,  each a Delaware  limited  partnership.
                  Pursuant  to the  Agreement,  the Company  issued  $500,000 in
                  convertible debentures dated December 13, 2004. The debentures
                  were  convertible into shares of the Company's common stock at
                  the  holder's  option any time up to maturity at a  conversion
                  price  equal to the lower of (i) 120% of the closing bid price
                  of the common stock on the date of the  debentures or (ii) 80%
                  of the lowest  closing  bid price of the common  stock for the
                  five trading days  immediately  preceding the conversion date.
                  The debentures were secured by the assets of the Company.  The
                  debentures  had a three-year  term and accrued  interest at 5%
                  per year. At maturity,  the outstanding  principal and accrued
                  and unpaid interest under the debentures are, at the Company's
                  option,  to be  either  repaid  by  the  Company  in  cash  or
                  converted  into  shares  of common  stock.  In  addition,  the
                  related Securities  Purchase Agreement requires the Company to
                  register  the  underlying  shares of common  stock with the US
                  Securities and Exchange Commission.

                  On April 28, 2005,  this  $500,000 of  convertible  debentures
                  along  with  $9,247 of accrued  interest  were  exchanged  for
                  amended convertible debentures having a fixed conversion price
                  of $1.20  at a time  when the  market  value of the  Company's
                  common stock was $1.15 per share of common stock. Accordingly,
                  there was no  beneficial  conversion  amount  related to these
                  amended convertible debentures. All other terms and conditions
                  of the amended convertible  debentures remained  substantially
                  the  same as the  original  convertible  debentures  with  the
                  three-year term recommencing on April 28, 2005.

                  Also on April 28, 2005,  and in  accordance  with terms of the
                  Securities   Purchase   Agreement,   the  Company   issued  an
                  additional  $500,000 of  convertible  debentures  based on the
                  terms of the amended convertible debentures.

                  The Company  recorded a liability of $141,852 for the value of
                  the embedded  derivative  related to the conversion  option of
                  the convertible debenture. The Company recomputed the value of
                  the embedded derivative quarterly and recorded the decrease in
                  the value as other income of $28,371.  Upon the refinancing of
                  the  $500,000  convertible  debenture,  the  Company  recorded
                  contributed  capital of $113,481 for the remaining  balance of
                  the embedded derivative  liability for the conversion feature.
                  The newly issued  debenture  included the interest  accrued on
                  the prior debenture.  A total liability of $1,009,347 has been
                  recorded as of April 28, 2005.

                  On December 14, 2005, the $1,009,347 of convertible debentures
                  along with $31,801 of accrued  interest  were  exchanged for a
                  new  Securities  Purchase  Agreement  with the same  investors
                  ("Note  Holders")  including  new net proceeds of $530,593 for
                  the  sale  of  $1,690,359   Secured   Convertible  Notes  (the
                  "Convertible  Notes")  and  warrants to purchase up to 100,000
                  shares  of  its  common  stock.  The  Convertible  Notes  bear
                  interest  at 8% and have a maturity  date of three  years from
                  the date of issuance.  The Company is not required to make any
                  principal payments during the term of the

   The accompanying notes are an integral part of these financial statements.

                                      F-18

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 6 -          CONVERTIBLE DEBENTURES (Continued)

                  Convertible  Notes. The Convertible Notes are convertible into
                  7,171,000  shares of the  Company's  common  stock at the Note
                  Holders'  option  as  described  in the  agreement.  The  full
                  principal amount of the Notes is due upon the occurrence of an
                  event of default. The warrants are exercisable for a period of
                  three  years from the date of  issuance  and have an  exercise
                  price of $0.01 per share. In addition, the Company has granted
                  the Note Holders  registration  rights and a security interest
                  in substantially all of the Company's assets.

                  In  accordance   with   Emerging   Issues  Task  Force  00-27,
                  Application   of  Issue  No.   98-5  to  Certain   Convertible
                  Instruments,  the Company allocated the proceeds from the sale
                  of  $1,690,359  of  Convertible  Notes on December  14,  2005,
                  between the relative fair values of the warrants and the debt.
                  The fair  value  of the  warrants  was  calculated  using  the
                  Black-Scholes  valuation model with the following assumptions:
                  market  price of  common  stock on the date of grant of $0.45,
                  exercise  price of warrants of $0.01,  risk free interest rate
                  of 3.5%,  expected  volatility  of 124% and  expected  life of
                  three  years.  The  resulting  fair value of the  warrants  of
                  $44,457 was  recorded  as a debt  discount.  The Company  also
                  recorded  $118,618  of  fees  withheld  by  the  lender  as an
                  additional debt discount.  The Company calculated a beneficial
                  conversion feature related to the remaining proceeds allocated
                  to the debt portion of the Convertible Notes. This calculation
                  resulted in a beneficial  conversion feature which was greater
                  than the  amount  of the  allocated  proceeds  of  $1,527,284.
                  Accordingly,  the Company recorded an additional debt discount
                  of $1,527,284.  The total debt discount of $1,690,359 is being
                  amortized to interest  expense over the three year term of the
                  Convertible Notes.

                  Similarly, the Company allocated the proceeds from the sale of
                  $120,000 of  Convertible  Notes on July 28, 2006,  between the
                  relative  fair values of the warrants  and the debt.  The fair
                  value of the warrants was calculated  using the  Black-Scholes
                  valuation model with the following  assumptions:  market price
                  of common stock on the date of grant of $0.17,  exercise price
                  of  warrants  of  $0.20,  risk  free  interest  rate of  3.5%,
                  expected  volatility  of 106% and expected  life of two years.
                  The  resulting  fair  value of the  warrants  of  $44,457  was
                  recorded as a debt discount. The Company also recorded $20,000
                  of fees withheld by the lender as an additional debt discount.
                  The Company calculated a beneficial conversion feature related
                  to the remaining proceeds allocated to the debt portion of the
                  Convertible  Notes. This calculation  resulted in a beneficial
                  conversion  feature  which was greater  than the amount of the
                  allocated  proceeds  of  $100,000.  Accordingly,  the  Company
                  recorded an additional  debt  discount of $100,000.  The total
                  debt  discount  of  $120,000  is being  amortized  to interest
                  expense over the two year term of the Convertible  Notes.  The
                  Convertible Notes bear interest at 8% and have a maturity date
                  of two years  from the date of  issuance.  The  Company is not
                  required to make any principal payments during the term of the
                  Convertible  Notes. The Convertible Notes are convertible into
                  1,200,000 shares  of the  Company's  common  stock at the Note
                  Holders'  option  as  described  in the  agreement.  The  full
                  principal amount of the Notes is due upon the occurrence of an
                  event of default. The warrants are exercisable for a period of
                  three  years from the date of  issuance  and have an  exercise
                  price of $0.01 per share. In addition, the Company has granted
                  the  Note Holders registration  rights and a security interest
                  in substantially all of the Company's assets.

                    A summary of the Secured Convertible Notes at
                    September 30, 2006:

                    Convertible secured notes: 8% per annum
                      due December 14, 2008                     $   1,690,359
                    Convertible secured notes: 8% per annum
                      due July 28, 2008                               120,000
                    Discount on debt, net of accumulated
                      amortization of $447,939                     (1,242,420)
                                                                -------------

                    Net convertible secured debentures          $     567,939
                                                                =============

   The accompanying notes are an integral part of these financial statements.

                                      F-19

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 6 -          CONVERTIBLE DEBENTURES (Continued)

                  Pursuant  to the  terms  of a  registration  rights  agreement
                  entered into with the Note  Holders,  the Company is obligated
                  to register  for resale,  within a defined  time  period,  the
                  shares  underlying  the warrants  that were issued to the Note
                  Holders  under the  Securities  Act of 1933,  as amended.  The
                  terms of the registration rights agreement provide that in the
                  event  that  the   registration   statement  does  not  become
                  effective  within 90 days after the date filed, the Company is
                  required to pay to the Note Holders as liquidated  damages, an
                  amount  equal  to 2% per  month of the  outstanding  principal
                  amount of the Convertible Notes.

                  In  accordance  with EITF 00-19,  "Accounting  for  Derivative
                  Financial  Instruments Indexed To, and Potentially Settled In,
                  a Company's Own Common  Stock," the fair value of the warrants
                  amounting  to  $45,457  was  recorded  as a  liability  on the
                  closing  date of  December  14,  2005.  The fair  value of the
                  warrants  was  calculated  using the  Black-Scholes  valuation
                  model with the following  assumptions:  market price of common
                  stock  on the  date of  grant  of  $0.45,  exercise  price  of
                  warrants of $0.01,  risk free interest rate of 3.5%,  expected
                  volatility  of 124%  and  expected  life of three  years.  The
                  Company  is  required  to  re-measure  the  fair  value of the
                  warrants  at each  reporting  period  until  the  registration
                  statement  is  declared  effective.  Accordingly,  the Company
                  measured  the fair value of the  warrants at December 31, 2005
                  using the  Black-Scholes  valuation  model with the  following
                  assumptions: market price of common stock on the date of grant
                  of $0.45,  exercise  price of  warrants  of  $0.01,  risk free
                  interest  rate  of  3.5%,  expected  volatility  of  185%  and
                  expected  life of 2.96 years.  The decrease in the fair market
                  value of the  warrants  from  $44,457 to $10,709  resulted  in
                  non-cash other income of $33,748. Upon the Company meeting its
                  obligations to register the securities,  the fair value of the
                  warrants on that date will be reclassified to equity.

NOTE 7 -          STOCK OPTION PLANS

                  2005 STOCK OPTION PLAN

                  The Company  has made  available  an  aggregate  of  1,100,000
                  shares of its common stock for  issuance  upon the exercise of
                  options granted under the 2005 Stock Option Plan. The purchase
                  price per Share  deliverable  upon the exercise of each option
                  shall be 100% of the Fair  Market  Value per Share on the date
                  the option is granted.  For purposes of this Plan, Fair Market
                  Value  shall be the  closing  sales  price as  reported on the
                  Nasdaq  National  Market  or such  other  national  securities
                  exchange, inter-dealer quotation system or electronic bulletin
                  board or over the counter market as the Company's Common Stock
                  shall  then be  traded  on the date in  question,  or,  if the
                  Shares shall not have traded on such date,  the closing  sales
                  price on the first date prior thereto on which the Shares were
                  so traded.

                  Options may be  exercised  only upon  payment of the  purchase
                  price thereof in full.  Such payment shall be made in cash or,
                  unless  otherwise  determined by the Board,  in Shares,  which
                  shall have a Fair Market Value  (determined in accordance with
                  the  rules of  paragraph  (i)  above)  at  least  equal to the
                  aggregate  exercise price of the Shares being purchased,  or a
                  combination of cash and Shares.

   The accompanying notes are an integral part of these financial statements.

                                      F-20

<PAGE>

                         NANOSCIENCE TECHNOLOGIES, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

NOTE 7 -          STOCK OPTION PLANS (Continued)

                  2005  STOCK  OPTION  PLAN  FOR  INDEPENDENT  AND  NON-EMPLOYEE
                  DIRECTORS

                  The Company has made  available an aggregate of 500,000 shares
                  of its common stock for issuance  upon the exercise of options
                  granted under the 2005 Stock Option Plan for  Independent  and
                  Non-Employee   Directors.   The   purchase   price  per  Share
                  deliverable  upon the exercise of each option shall be 100% of
                  the Fair  Market  Value  per  Share on the date the  option is
                  granted. For purposes of this Plan, Fair Market Value shall be
                  the closing  sales  price as  reported on the Nasdaq  National
                  Market   or   such   other   national   securities   exchange,
                  inter-dealer  quotation system or electronic bulletin board or
                  over the counter  market as the  Company's  Common Stock shall
                  then be traded  on the date in  question,  or,  if the  Shares
                  shall not have traded on such date, the closing sales price on
                  the first  date  prior  thereto  on which the  Shares  were so
                  traded.

                  Options may be  exercised  only upon  payment of the  purchase
                  price thereof in full.  Such payment shall be made in cash or,
                  unless  otherwise  determined by the Board,  in Shares,  which
                  shall have a Fair Market Value  (determined in accordance with
                  the  rules of  paragraph  (i)  above)  at  least  equal to the
                  aggregate  exercise price of the Shares being purchased,  or a
                  combination of cash and Shares.

                  The  creation  of the 2005  Stock  Option  Plans is subject to
                  shareholder approval accordingly,  no options have been issued
                  under the plan .

NOTE 8 -          SUBSEQUENT EVENTS

                  CONVERTIBLE DEBENTURES

                  In November 2006 the Company  received an  additional  $20,000
                  from the placement of its Convertible  Debentures  under terms
                  similar to the preceding Convertible Debentures.

                  In November 2006 the Company  announced that it was in default
                  under the terms of its  licensing  agreement  with NYU and had
                  forfeited its rights to the technology there under.

                  In December 2006 the Company  received an  additional  $60,000
                  from the Amendment of its Convertible Debenture dated July 28,
                  2006 with Cornell Capital Partners, LP.

   The accompanying notes are an integral part of these financial statements.

                                      F-21

<PAGE>

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

         On November  30, 2006,  the Board of Directors of the Company  approved
and ratified the termination of Goldstein Golub Kessler LLP as its auditors and,
simultaneously,  approved and ratified the  engagement of Moore and  Associates,
Chartered as its auditors.

         The audit report submitted by  Goldstein Golub Kessler LLP for the year
ended September 30, 2005 included a modification as to the Company's  ability to
continue as a going  concern.  Such  modification  was based upon the  Company's
status as a development stage company with no significant operating history. The
submitted audit reports  contained no adverse opinion,  disclaimer of opinion or
other  modifications  or  qualifications.  Goldstein  Golub Kessler LLP did not,
during the applicable periods, advise the Company of any of the enumerated items
described in Item 304(a)(1) of Regulation  S-K.  During the relevant  periods in
which Goldstein Golub Kessler LLP served as the Company's  auditors,  there were
no  disagreements  between  Goldstein  Golub  Kessler LLP and the Company on any
matter of accounting principles or practices, financial statement disclosure, or
auditing  scope  or  procedure,  which  disagreements,  if not  resolved  to the
satisfaction of Goldstein  Golub Kessler LLP, would have caused  Goldstein Golub
Kessler LLP to make reference  thereto in, or in connection with, its reports on
financial statements for the years or such interim period.

ITEM 8A. CONTROLS AND PROCEDURES

         As of the end of the period  covered by this report,  we carried out an
evaluation,  under the  supervision  and with the  participation  of management,
including  our chief  executive  officer  and chief  financial  officer,  of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  as  defined  in Rules  13a-15(e)  and  15d-15(e)  of the  Securities
Exchange Act of 1934.  Based upon that evaluation,  our chief executive  officer
and  chief  financial  officer  concluded  that  our  disclosure   controls  and
procedures  are  effective  to cause the  material  information  required  to be
disclosed  by us in the reports that we file or submit under the Exchange Act to
be  recorded,  processed,  summarized  and  reported  within  the  time  periods
specified in the SEC's rules and forms.  There have been no significant  changes
in our internal  controls or in other factors which could  significantly  affect
internal controls subsequent to the date we carried out our evaluation.

                                    PART III

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

         Our sole  executive  officer  and  director  at the date  hereof  is as
follows:

        NAME          AGE                      POSITION
        ----          ---                      --------
James H. Schneider    45          President, Chief Executive Officer, and
                                  Director

Fred J. Griffin       55          Interim Chief Financial Officer

         All directors hold office until the next annual meeting of stockholders
and until their  successors  have been duly elected and qualified.  There are no
agreements  with respect to the election of directors.  We have not  compensated
our directors for service on the Board or any committee  thereof,  but directors
are entitled to be reimbursed  for expenses  incurred for attendance at meetings
of the Board and any committee of the Board.  However, due to our lack of funds,
the directors will defer their expenses and any compensation  until such time as
we have sufficient liquidity. As of the date hereof, no director has accrued any
expenses  or  compensation.  Officers  are  appointed  annually  by the Board of
Directors and each executive  officer serves at the discretion of the Board.  We
do not have any standing committees.

                                       21

<PAGE>

         No director,  officer, affiliate has, within the past five years, filed
any  bankruptcy  petition,  been convicted in or been the subject of any pending
criminal proceedings,  or is any such person the subject or any order, judgment,
or decree involving the violation of any state or federal securities laws.

         Currently, there is no arrangement,  agreement or understanding between
management   and   non-management   shareholders   under  which   non-management
shareholders  may  directly  or  indirectly  participate  in  or  influence  the
management of our affairs. Present management openly accepts and appreciates any
input or  suggestions  from  shareholders.  However,  the Board of  Directors is
elected by the shareholders  and the  shareholders  have the ultimate say in who
represents them on the Board.  There are no agreements or understandings for any
officer or director  to resign at the request of another  person and none of our
current  officers  or  directors  are  acting on  behalf  of, or will act at the
direction of, any other person.

         The  business  experience  of the persons  listed above during the past
five years is set forth below:

         JAMES  H.  SCHNEIDER.  Mr.  Schneider  was  appointed  to the  board of
directors  on December 5, 2006 and assumed the roles of acting  Chief  Executive
Officer and Chief  Financial  Officer upon the  resignation  of our officers and
directors on December 6, 2006. He is the Vice President of Cray Construction and
Development,    Inc.,   a    multi-million    dollar   land    development   and
commercial/residential   construction  corporation  in  Southwest  Florida.  Mr.
Schneider currently oversees both Land Development and Residential  Construction
for the companies  many  projects,  including  Sandy Key Lane, LLC a residential
subdivision  and Calypso Cove, LLC a multi-family  project in the Ft. Myers area
of Southwest Florida. As Projects Manager for Cray Construction, he has overseen
the   building/construction   of   simple    residential/commercial    remodels,
multi-million  dollar custom homes,  churches and municipal projects including a
parking garage.  Mr. Schneider joined Cray  Construction & Development,  Inc. in
2000.  While  with Cray  Construction  &  Development,  Inc.,  he and his Senior
Partner  Scott  Cray  have  been  involved  in a  number  of land  and  business
acquisitions such as Quality Materials, LLC a 400 acre mining operation,  Haul-n
Mining an active mining  operation and Old Burnt Store 50, LLC, a 50 acre mining
operation and single-family  residential  development,  all located in Charlotte
County,  Florida.  Prior to joining Cray  Construction & Development,  Inc., Mr.
Schneider was the President and CEO of Captiva Food Purveyors, Inc. a restaurant
holding  company.  Mr.  Schneider  holds a B.S.  degree in  Accounting  from the
University of South Florida, and his General Contractor's License.

         FRED J.  GRIFFIN.  We have  determined  on  December  1,  2006 to cease
operations immediately and, at the request of our principal creditor appointed a
director  designated  by such  creditor to our Board of  Directors.  Immediately
following  such  appointment,   our  existing  directors  and  officer  resigned
effective  immediately and terminated their association with us. Set forth below
is biographical information relating to such resigned directors.

                  Prior  to  December  1,  2006,  our  executive   officers  and
directors were as follows:

    NAME          AGE                             POSITION
    ----          ---                             --------
David Keenan      50     President, Chief Executive Officer and Director Nominee

David Rector      59     Chief Operating Officer, Acting Chief Financial Officer
                         and Director

Steven Katz       57     Chairman of the Board of Directors

Albert Passner    67     Director

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

                                       22

<PAGE>

         The business  experience of each of the persons listed above during the
past five years is set forth below:

         DAVID  KEENAN.  Mr. Keenan was elected  President  and Chief  Executive
Officer of the Company on September  27, 2005 and was  nominated to the Board of
Directors  of the Company on October  21,  2005;  he will serve as a  non-voting
observer to the Board until his  nomination is approved by the  stockholders  of
the Company. Mr.Keenan is an accomplished technologist with extensive experience
in new product development, new technology commercialization, operations, sales,
marketing and business  strategy.  Mr.  Keenan  serves as technology  advisor to
equity investors in a variety of new ventures.  He analyzes emerging  technology
trends and  presents  regularly at the  Minnesota  Futurists  and the  Minnesota
Nanotechnology Study Group. Mr. Keenan is also a contributing journalist for the
Nano For People newsletter,  a publication of The NanoTechnology Group. Prior to
founding Small  Technology  Consulting in 2003, Mr. Keenan served in progressive
management  roles with Goodrich Sensor  Systems,  Sheldahl and 3M over a 25 year
period.  Mr.  Keenan has been  deeply  involved  in  commercializing  technology
products  including  microsensors and actuators,  aerospace  thermal  management
materials,  specialty thin film  materials,  and optical data storage media.  He
graduated  from  University  of  Wisconsin  with a Bachelors  degree in Chemical
Engineering  and completed the Masters  program in Management of Technology from
the  University  of  Minnesota's  Center for the  Development  of  Technological
Leadership.

         DAVID  RECTOR.  Since 1985,  Mr.  Rector has been the  principal of the
David Stephen Group, which provides  enterprise  consulting services to emerging
and developing companies in a variety of industries. Mr. Rector currently serves
as a member of the Board of Directors of Senseco Technologies, Inc., an American
Stock  Exchange  biotech  agricultural  and  life  sciences  company  developing
technology  in  the  area  of  cell  death  genomics   addressing   agricultural
applications  and  human  chronic  diseases  including  cancer,  heart  disease,
glaucoma and  arthritis,  among others.  Mr. Rector also serves as a Director of
Amalgamated  Technologies,  Inc. and Superior  Galleries,  Inc.,  both  publicly
traded  companies  From 1983 until 1985,  Mr.  Rector  served as  President  and
General  Manager  of  Sunset  Designs,   Inc.,  a  domestic  and   international
manufacturer  and  marketer  of consumer  product  craft  kits,  a  wholly-owned
subsidiary of Reckitt & Coleman,  N.A.  From 1980 until 1983,  Mr. Rector served
Director of Marketing of Sunset Designs. From 1971 until 1980, Mr. Rector served
in progressive roles with Crown Zellerbach  Corporation,  a multi-billion dollar
pulp and paper Industry  corporation.  Mr. Rector received a Bachelor of Science
degree in business/ finance from Murray State University in 1969.

         STEVEN KATZ is  President of Steven Katz &  Associates,  Inc., a health
care and technology-based  management  consulting firm specializing in strategic
planning, corporate development, new product planning, technology licensing, and
structuring and securing various forms of financing. Mr. Katz has been President
of Steven Katz &  Associates,  Inc.  since 1982 and is presently a member of the
Boards  of  Directors  of a number of  publicly-held  corporations  and  several
private  companies.  From  January  2000 to  October  2001,  Mr.  Katz  was also
President and Chief Operating Officer of Senesco Technologies, Inc., an American
Stock  Exchange  company  engaged  in  the  identification  and  development  of
proprietary gene technology with application to human, animal and plant systems.
From 1983 to 1984 he was a co-founder  and  Executive  Vice  President of S.K.Y.
Polymers,  Inc.,  a  biomaterials  company.  Prior  to this,  Mr.  Katz was Vice
President and General Manager of a non-banking  division of Citicorp.  From 1976
to  1981  he  held  various  senior  management  positions  at  National  Patent
Development  Corporation,  including  President  of  three  subsidiaries.  Prior
positions  were with  Revlon,  Inc.  (1975) and Price  Waterhouse & Co. (1969 to
1974).  Mr. Katz  received a  Bachelors  of  Business  Administration  degree in
Accounting from the City College of New York in 1969.

         ALBERT PASSNER is a consultant in the fields of physics and engineering
following a career at Lucent/AT&T  Bell Labs. Among his many  achievements  with
the Lucent team were: the  development  of

                                       23
<PAGE>

ultra-low noise amplifiers used to measure  transistor  noise; the design of the
world's most powerful pulsed  electromagnet;  production of a positron plasma in
the   laboratory;   production   of  the  first   optical   bi-stability   in  a
semi-conductor;  production of the first  transverse  lasing in a semi-conductor
thin film and demonstration  that stellar images could be corrected in real time
using an electronically  deformed mirror. In addition,  Mr. Passner has authored
and co-authored more than fifty publications.  Prior to his thirty plus years at
Lucent /AT&T Bell Labs, Mr. Passner served as an engineer at RCA (1961-1963) and
a Member of Staff at Princeton-Penn  Accelerator in Princeton, NJ (1963 - 1969).
He received a BS in Physics  from CCNY in 1960 and an MS in Physics  from NYU in
1966.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires our directors and executive  officers and persons who own more than ten
percent of a registered class of our equity securities (collectively, "Reporting
Persons")  to file with the SEC  initial  reports of  ownership  and  reports of
changes in ownership of our Common  Stock and other  equity  securities  of NTI.
Reporting  Persons are required by SEC  regulation to furnish NTI with copies of
all Section  16(a) forms that they file.  To our  knowledge,  based  solely on a
review of the copies of such  reports  furnished  to us, we believe  that during
fiscal year ended  September  30, 2005 all Reporting  Persons  complied with all
applicable filing requirements.

CODE OF CONDUCT

         On September 20, 2005 the Board of Directors adopted a Code of Business
Conduct and Ethics for its directors,  officers and employees  which it believes
complies  with the  requirements  for a  company  code of ethics  for  financial
officers that were promulgated by the SEC pursuant to the  Sarbanes-Oxley Act of
2002  (the  "Sarbanes-Oxley  Act") as well as for the  members  of our  Board of
Directors.  The directors will be surveyed  annually  regarding their compliance
with the policies as set forth in the Code of Conduct for  Directors.  We intend
to disclose any  amendment to, or waiver of, a provision of the Code of Business
Conduct and Ethics for Directors in a report filed under the Securities Exchange
Act of 1934 within five business days of the amendment or waiver.

ITEM 10. EXECUTIVE COMPENSATION

         We do not have a bonus, profit sharing,  or deferred  compensation plan
for the benefit of our  employees,  officers or  directors.  We paid salaries or
other  compensation  to our  officers,  directors  or  employees of $254,000 and
$152,333  for the years ended  September  30, 2006 and 2005,  respectively.  For
2006,  David Rector received  $132,000 and David Keenan received  $122,000.  For
2005,  David Rector received  $144,000 and David Keenan received  $8,333.  As of
June 30, 2006 all employment  agreements were terminated.  Additional agreements
are  anticipated  in the next twelve  months.  We expect that our directors will
defer any  compensation  until such time as business  and  financial  conditions
warrant. As of the date hereof, no person has accrued any compensation.

         In November 2003, by unanimous  consent of the board of directors,  the
company  adopted a resolution to authorize an employee stock option plan.  Under
the plan, 1,000,000 shares of authorized,  but previously unissued common stock,
will be held in reserve in order that they may be issued  pursuant  to the terms
and conditions set forth in the plan. Precise terms and conditions for issuances
under  the plan have not yet been  finalized.  In  October  2005,  by  unanimous
consent of the board of directors, the company adopted a resolution to authorize
the 2005 Stock  Option Plan  ("Option  Plan") and the 2005 Stock Option Plan for
Independent and Non-Employee Directors  ("Independent Director Plan"). Under the
Option Plan,  1,100,000 shares, and under the Independent Director Plan, 500,000
shares,  of authorized,  but previously  unissued common stock,  will be held in
reserve in order that they may be issued  pursuant  to the terms and  conditions
set  forth in each of the

                                       24
<PAGE>

Plans, respectively.  Both the Option Plan and the Independent Director Plan are
subject to the approval of the stockholders at the next annual meeting.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table provides information,  to the best of our knowledge
as of December 6, 2006, regarding beneficial ownership of our common stock by:

         o        each person  known to us to own  beneficially  more than 5% of
                  our common stock;
         o        each of the named executive officers;
         o        each or our directors; and
         o        all executive officers and directors as a group.

<TABLE>
<CAPTION>
         NAME AND ADDRESS                                AMOUNT AND NATURE OF      PERCENT
       OF BENEFICIAL OWNER                               BENEFICIAL OWNERSHIP     OF CLASS(1)
       -------------------                               --------------------     -----------
<S>                                                         <C>                   <C>
James H. Schneider                                                  0                  0
P.O. Box 148
Sanibel, Florida

Fred J. Griffin *                                                   0                  0
110 Savannah Estates Dr.
Atlanta, Georgia

David Rector *                                                 80,000                0.7%
1640 Terrace Way
Walnut, California

New York University                                         4,812,377               43.3%
Office of Industrial Liaison
650 First Avenue, 6th Floor
New York, NY 10016

All directors and executive officers                           80,000               0.7%
  as a group (4 persons)
</TABLE>

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

          *         Former director and/or executive officer

          Note:     Unless  otherwise  indicated in the footnotes below, we have
                    been  advised  that each person  above has sole voting power
                    over the shares indicated above.

          (1)       Based upon 11,101,946  shares of common stock outstanding on
                    November 30, 2006.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During the past two fiscal years,  except as set forth below there have
been no transactions between us and any officer,  director, nominee for election
as director,  or any  shareholder  owning  greater than five percent (5%) of our
outstanding  shares,  nor  any  member  of  the  above  referenced  individuals'
immediate family.

         In October 2003, our former President, Edward F. Cowle, was one of four
investors that  participated in the private  placement of our common stock.  Mr.
Cowle purchased  305,548 shares for the purchase price of

                                       25
<PAGE>

$100,000  each.  We used the  proceeds  from the private  placement  to make the
initial payment to NYU under the License Agreement and related expenses.

         In July and August 2004,  we received  loans of $320,060  were received
from major  shareholders  and directors of our company.  We repaid $5,000 of the
loans in  September  2005.  The loans are  unsecured,  due upon  demand  and non
interest  bearing.  We are  seeking to convert the loans to equity or repay them
from proceeds of an equity financing.  As of September 30, 2005, $150,060 is due
to Deworth  Williams,  $5,000 to Edward F. Cowle,  $125,000 to Adrien  Ellul and
$35,000 to Viking Investment Group.

         During the year ended  September  30,  2005,  shareholders  contributed
shares of their own common stock to pay for preproduction advertising costs. The
shares were valued at $110,000 when they were  transferred to pay the costs.  As
of September 30, 2005 the $44,000 of the  advertising  costs were  completed and
expensed.

         During the year ended  September 30, 2006, we received loans of $15,200
from our former CFO, David Rector which were repaid in full during the year.

         Our  officers  and  directors  are subject to the doctrine of corporate
opportunities  only insofar as it applies to business  opportunities in which we
have indicated an interest,  either through our proposed business plan or by way
of an express statement of interest contained in our minutes. If any director is
presented with a business opportunity that may conflict with a business interest
identified by us, such  opportunity  must be promptly  disclosed to the Board of
Directors  and  made  available  to us.  In  the  event  the  Board  rejects  an
opportunity  so  presented,  and  only in that  event,  any of our  officers  or
directors may avail themselves of such an opportunity. Every effort will be made
to resolve any conflicts that may arise in favor of the company. There can be no
assurance, however, that these efforts will be successful.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         2(1)        Articles of Merger
         3.1(2)      Articles of Incorporation filed as Exhibit to Form 10-SB
         3.2(2)      By-Laws filed as Exhibit to Form 10-SB
         3.3(3)      Nevada Articles of Incorporation
         3(ii)(1)    Amendment to Articles of Incorporation (Nevada)
         3(iii)(1)   Amendment to Articles of Incorporation (Idaho)
         3(iv)(1)    Articles of Dissolution
         3(v)(1)     Nevada By-Laws
         4(2)        Specimen  Stock  Certificate  filed as  Exhibit  to Form
                     10-SB
         10.1(3)     Agreement and Plan of Merger
         10.2(4)     Amended and Restated Research and License Agreement
         10.3(4)     Amended and Restated Stock Purchase Agreement
         14          Code of Ethics
         31.1        Certification  of C.E.O.  Pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002
         31.2        Certification of Principal  Accounting  Officer Pursuant
                     to Section 302 of the Sarbanes-Oxley Act of 2002
         32.1        Certification  of C.E.O.  Pursuant to 18 U.S.C.  Section
                     1350,  as  Adopted   Pursuant  to  Section  906  of  the
                     Sarbanes-Oxley Act of 2002
         32.2        Certification of Principal  Accounting  Officer Pursuant
                     to 18  U.S.C.  Section  1350,  as  Adopted  Pursuant  to
                     Section 906 of the Sarbanes-Oxley Act of 2002

                                       26
<PAGE>

                        (1)         Incorporated  by  reference  to  our  annual
                                    report on Form  10-KSB  filed  February  13,
                                    2002
                        (2)         Incorporated    by    reference    to    our
                                    registration  statement on Form 10-SB, filed
                                    May 14, 1999.
                        (3)         Incorporate  by reference to the  attachment
                                    to our  Definitive  Proxy  Statement,  filed
                                    December 31, 2001.
                        (4)         Incorporated  by  reference  to  the  report
                                    filed on Form 8-K Current Notice on November
                                    13, 2003

            (b)         Reports  on Form 8-K.  Since  September  30,  2005,  the
                        Company has filed the following  current reports on Form
                        8-K with the Securities and Exchange Commission:

                        Form 8-K dated  December 1, 2006  relating to Items 1.02
                        and 8.01

                        Form 8-K dated  December 5, 2006  relating to Items 4.01
                        and 9.01

                        Form 8-K filed  December 8, 2006 relating to Items 5.01,
                        5.02, and 9.01

ITEM 14.  PRINCIPAL ACCOUNTANTS FEES AND SERVICES

         We do not have an audit  committee  and as a result our entire board of
directors performs the duties of an audit committee. Our board of directors will
approve in advance the scope and cost of the engagement of an auditor before the
auditor  renders audit and non-audit  services.  As a result,  we do not rely on
pre-approval policies and procedures.

         AUDIT FEES

         Our independent  auditors,  Moore and Associates,  Chartered,  were not
engaged  until  after  the  end  of our  fiscal  year  on  September  30,  2006.
Accordingly no fees have been paid or accrued to them during the year.

         Through September 30, 2005,  Goldstein Golub Kessler LLP (the Firm) had
a continuing  relationship  with American Express Tax and Business Services Inc.
(TBS),  from  which it  leased  auditing  staff who were  full  time,  permanent
employees of TBS and through  which its  partners  provide  non-audit  services.
Subsequent  to  September  30,  2005,  this  relationship  ceased  and the  firm
established a similar relationship with RSM  McGladrey, Inc. (RSM). The Firm has
no full time employees and therefore,  none of the audit services performed were
provided by  permanent  full-time  employees  of the Firm.  The Firm manages and
supervises  the audit and audit staff,  and is exclusively  responsible  for the
opinion rendered in connection with its examination.

         The aggregate fees billed by our independent auditors,  Goldstein Golub
Kessler  LLP,  for  professional  services  rendered for the audit of our annual
financial statements included in our Annual Report on Form 10-KSB for the fiscal
years  ended  September  30,  2005,  and for the review of  quarterly  financial
statements  included in our  Quarterly  Reports on Form 10-QSB for the  quarters
ending December 31, 2005, June 30, 2006 and March 31, 2006 were $38,750.

         TAX FEES

         For the fiscal years ended  September 30, 2006 and 2005,  the aggregate
fees  billed by RSM  McGladrey,  Inc.  for tax  compliance,  tax  advice and tax
planning totaled $-0-.

         We do not use TBS or RSM for  financial  information  system design and
implementation. These services, which include designing or implementing a system
that  aggregates  source data  underlying the financial  statements or generates
information  that is  significant  to our  financial  statements,  are  provided
internally  or by other  service  providers.  We do not engage  Goldstein  Golub
Kessler LLP to provide compliance outsourcing services.

                                       27

<PAGE>


                                   SIGNATURES

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

                                       NANOSCIENCE TECHNOLOGIES, INC.


Dated: January 13, 2007                By: /s/ James H. Schneider
                                           ------------------------------------
                                           JAMES H. SCHNEIDER
                                           President and Chief Executive Officer
                                           (Chief Executive Officer)

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

<TABLE>
<CAPTION>
           SIGNATURE                                     TITLE                                 DATE
           ---------                                     -----                                 ----
<S>                                    <C>                                                <C>
By:  /s/ James H. Schneider            President and Chief Executive Officer               January 13, 2007
     -------------------------         (Chief Executive Officer)
          JAMES H. SCHNEIDER

By:  /s/ Fred J. Griffin               Interim Chief Financial Officer                     January 13, 2007
     -------------------------         (Interim Chief Financial Officer)
          FRED J. GRIFFIN
</TABLE>



                                       28