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

                                  FORM 10-QSB*


                                   (Mark One)


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


                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006


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


                         Commission file number: 0-27848

                                 BIOFIELD CORP.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           Delaware                                         13-3703450
-------------------------------                         ------------------
(State or other jurisdiction of                           (IRS Employer
 incorporation or organization)                         Identification No.)

                          1615 Walnut Street, 3rd Floor
                        Philadelphia, Pennsylvania 19103
                    (Address of principal executive offices)

                                 (215) 972-1717
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during the  preceding  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 [ ] No
[X]

*Registrant has been delinquent in its Form 10-Qs for 2006.  Events discussed in
this filing are reported and are accurate at the time of  preparation.  However,
there was a management  change  effective as of March 30,  2006.  Moreover,  the
former Chairman, Dr. David Long, died April 8, 2006.  Consequently,  executions,
affidavits and required  Certifications  alluded to were necessarily  changed to
reflect new management.

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

43,142,936 shares of common stock as of June 30, 2006.
------------------------------------------------------

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORM YES [ ] NO [X]


<PAGE>

<TABLE>

<CAPTION>

                                 BIOFIELD CORP.
                                   FORM 10-QSB
                                      INDEX

                                                                                         Page Number
                                                                                         -----------
<S>                                                                                      <C>

PPART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

Consolidated  Balance Sheets as of June 30, 2006  (unaudited)  and December 31,
2005                                                                                           3

Consolidated  Statements of Operations for the three  months ended June 30, 2006
and 2005 and for the period  October 16, 1987 (date of inception)  through  June
30, 2006 (unaudited)                                                                           4

Consolidated Statements of Stockholders' Equity (Deficit) for the period October
16, 1987 (date of inception) through June 30, 2006 (unaudited)                                 5

Consolidated  Statements of Cash Flows for the  three months ended June 30, 2006
and 2005 and for the period  October 16, 1987 (date of inception)  through  June
30, 2006 (unaudited)                                                                           15

Notes to Unaudited Consolidated Financial Statements                                           16

  Item 2.     Management's Discussion and Analysis or Plan of Operation                        29

  Item 3.     Controls and Procedures                                                          38


  PART II. OTHER INFORMATION


  Item 1.     Legal Proceedings                                                                39

  Item 1A.    Risk Factors                                                                     39

  Item 2.     Changes in Securities and Small Business Issuer Purchases of
              Equity Securities                                                                39

  Item 3.     Default upon Senior Securities                                                   39

  Item 4.     Submission of Matters to a Vote of Security Holders                              39

  Item 5.     Other information                                                                39

  Item 6.     Exhibits and Reports on Form 8-K                                                 39


  SIGNATURES

</TABLE>


                                       2
<PAGE>

<TABLE>

<CAPTION>

PART I.  FINANCIAL INFORMATION
ITEM 1.           FINANCIAL STATEMENTS
         BIOFIELD CORP.
         (A Development Stage Company)
                           CONSOLIDATED BALANCE SHEETS
         -------------------------------------------------------------------------------------

                                                                    June 30,      December 31,
                                                                      2006            2005
                                                                  ------------    ------------
         ASSETS                                                   (Unaudited)      (Audited)
<S>                                                               <C>              <C>


         CURRENT ASSETS:
           Cash and cash equivalents                              $      3,875    $      2,794
           Prepaid expenses                                                 --              --

                                                                  ------------    ------------
               Total current assets                                      3,875           2,794

         PROPERTY AND EQUIPMENT - Net                                      953           1,967
                                                                  ------------    ------------
               TOTAL                                              $      4,828           4,761
                                                                  ============    ============


         LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

         CURRENT LIABILITIES:
           Accounts payable                                       $  1,295,948    $  1,321,635
           Accrued expenses                                            801,223         690,677
           Due to affiliate                                            329,687
           Short-term notes payable                                  1,439,000       1,379,000
           Long-term debt from stockholder - short term position       622,534         607,350
           Advances from stockholders                                3,561,747       3,488,816
                                                                  ------------    ------------
               Total current liabilities                             8,050,139       7,817,165

         STOCKHOLDERS' EQUITY (DEFICIT):
           Preferred Stock, $.001 par value;  authorized
             12,300,000 undesignated shares;
             no shares issued or outstanding
           Common Stock, $.001 par value; authorized - 60,000,000
             Shares at 2006
             and 2005; issued 43,142,936 and -
             at 2006 and 2005, respectively                             43,143         43,143
           Treasury stock - 2,306,131 shares                            (3,100)        (3,100)
         Additional paid-in capital                                 64,559,756      64,602,001
           Accumulated deficit during development stage            (72,645,110)   (72,314,448)
                                                                  ------------    ------------
             Total stockholders' equity (deficit)                   (8,045,311)    (7,812,404)
                                                                  ------------    ------------
           TOTAL                                                  $      4,828    $     4,761
                                                                  ============    ============

</TABLE>

See notes to unaudited consolidated financial statements.

                                       3
<PAGE>

<TABLE>

<CAPTION>

BIOFIELD CORP.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                           October 16, 1987
                                                                                                           (inception) to
                                        Three Months Ended June 30,      Six Months Ended June 30,         June 30, 2006

                                        ----------------------------     --------------------------        ------------
                                            2006            2005            2006            2005
                                        ------------    ------------     ------------    -----------       ------------
<S>                                                                      <C>             <C>               <C>

REVENUE                                 $         --    $         --     $         --    $        --       $    135,132
COST OF SALES
  Cost of goods sold                              --              --               --             --                 --
 75,447
  Loss on write down of inventory                 --              --               --             --            693,500
                                        ------------    ------------     ------------    -----------       ------------
GROSS PROFIT (LOSS)                               --          10,500               --             --           (633,815)


OPERATING EXPENSES:
  Research and development                        --              --               --             --         40,481,889
  Share based compensation                        --              --           47,512             --             47,512
  Selling, general, and administrative        33,538         600,376          105,410      1,194,366         29,123,606
  Impairment of intangible asset                  --              --               --             --            194,268
  Gain on disposition of fixed assets             --              --               --             --             (8,084)
                                        ------------    ------------      -----------    -----------       ------------
      Total operating expenses                33,538         600,376          152,922      1,194,366         69,839,191


OTHER INCOME (EXPENSE):
  Interest income                                 --              --               --             --          2,476,723
  Interest expense                                --        (140,544)        (117,740)      (263,934)        (2,107,503)
  Amortization of shares issued to
  lenders and other finance costs                 --              --               --             --         (2,736,419)
  Royalty income and other                        --          15,000               --         15,000            214,845
                                        ------------    ------------      -----------    -----------       ------------
      Net (expense) other income                  --        (125,544)        (117,740)      (248,934)        (2,152,354)
                                        ------------    ------------      -----------    -----------       ------------

------------
LOSS BEFORE INCOME TAXES                     (33,538)       (725,920)        (330,662)    (1,443,301)       (72,625,360)

PROVISION FOR INCOME TAXES                        --              --               --             --            (19,749)
                                        ------------    ------------      -----------    -----------       ------------
NET LOSS                                $    (33,538)   $   (725,920)     $  (330,662)   $(1,443,301)       (72,645,109)
                                        ============    ============      ===========    ===========       ============

BASIC AND DILUTED
NET (LOSS) PER SHARE
                                        $      (0.01)   $      (0.02)     $     (0.01)   $     (0.04)
                                        ============    ============      ===========    ===========

BASIC AND DILUTED WEIGHTED-AVERAGE
COMMON SHARES OUTS                        40,836,805      37,431,979       40,836,805     36,628,472
                                        ============    ============      ===========    ===========

</TABLE>

See notes to unaudited consolidated financial statements.

                                       4
<PAGE>

<TABLE>

<CAPTION>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                Series A          Series B          Series C
                                                            Preferred Stock   Preferred Stock   Preferred Stock     Common Stock
                                                            ----------------  ----------------  ---------------  ------------------
                                                             Shares  Amount   Shares   Amount    Shares  Amount   Shares    Amount
<S>                                                                           <C>      <C>       <C>     <C>      <C>       <C>

Sale of Common Stock, October 16, 1987
  (date of inception) ($.16 per share, net)                                                                        549,020  $    55
Issuance of Common Stock in connection with patent
  acquisition ($.001 per share)                                                                                    235,294       24
Net loss, October 16, 1987 to March 31, 1988
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1988                                         -        -        -        -        -       -    784,314       79
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1989                                         -        -        -        -        -       -    784,314       79
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1990                                         -        -        -        -        -       -    784,314       79
Acquisition of 235,294 shares of Common Stock
  ($.001 per share)
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1991                                         -        -        -        -        -       -    784,314       79
Retirement of Common Stock held in treasury                                                                       (235,294)     (24)
Issuance of Common Stock in exchange for notes
  and debt (with accrued interest) ($2.90 per share, net)                                                          431,372       43
Sale of Common Stock ($.82 per share, net)                                                                          24,510        2
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1992                                         -        -        -        -        -       -  1,004,902      100
Sale of Common Stock  ($7.67 per share, net)                                                                       557,475       55
Exercise of Common Stock options                                                                                     2,451        1
Amortization of deferred compensation
Change in par value of common stock
  from $.0001 to $.001                                                                                                        1,408
Net loss
Total comprehensive income (loss)
                                                          ---------  -------  -------  -------  -------  ------  ---------  -------
BALANCE AT MARCH 31, 1993                                         -        -        -        -        -       -  1,564,828  $ 1,564
                                                          =========  =======  =======  =======  =======  ======  =========  =======


See notes to unaudited consolidated financial statements.

                                       5
<PAGE>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                   Deficit
                                                                                 Accumulated    Foreign
                                                           Additional               During      Currency                 Total
                                                            Paid-In    Treasury  Development  Translation            Comprehensive
                                                            Capital     Stock       Stage      Adjustment    Total       Loss
                                                          -----------  -------- ------------- ----------- ----------- -------------
Sale of Common Stock, October 16, 1987
  (date of inception) ($.16 per share, net)               $    91,898                                     $   91,953
Issuance of Common Stock in connection with patent
  acquisition ($.001 per share)                                   276                                            300
Net loss, October 16, 1987 to March 31, 1988                                   $   (159,359)                (159,359)
Total comprehensive income (loss)                                                                                      $  (159,359)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1988                                      92,174       -      (159,359)          -      (67,106)
Net loss                                                                           (495,520)                (495,520)
Total comprehensive income (loss)                                                                                      $  (495,520)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1989                                      92,174       -      (654,879)          -     (562,626)
Net loss                                                                           (233,347)                (233,347)
Total comprehensive income (loss)                                                                                      $  (233,347)
                                                          ----------   ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1990                                      92,174       -      (888,226)          -     (795,973)
Acquisition of 235,294 shares of Common Stock
  ($.001 per share)                                                    $ (300)                                  (300)
Net loss                                                                           (285,179)                (285,179)
Total comprehensive income (loss)                                                                                      $  (285,179)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1991                                      92,174    (300)   (1,173,405)          -   (1,081,452)
Retirement of Common Stock held in treasury                      (276)    300
Issuance of Common Stock in exchange for notes
  and debt (with accrued interest) ($2.90 per share, net)   1,248,638                                      1,248,681
Sale of Common Stock ($.82 per share, net)                     19,998                                         20,000
Amortization of deferred compensation                         136,880                                        136,880
Net loss                                                                           (461,061)                (461,061)
Total comprehensive income (loss)                                                                                      $  (461,061)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1992                                   1,497,414       -    (1,634,466)          -     (136,952)
Sale of Common Stock  ($7.67 per share, net)                4,275,223                                      4,275,278
Exercise of Common Stock options                                  624                                            625
Amortization of deferred compensation                         477,453                                        477,453
Change in par value of common stock
  from $.0001 to $.001                                         (1,408)
Net loss                                                                         (3,099,637)              (3,099,637)
Total comprehensive income (loss)                                                                                      $(3,099,637)
                                                          -----------  ------   -----------    --------   ----------   ===========
BALANCE AT MARCH 31, 1993                                 $ 6,249,306       -    (4,734,103)          -    1,516,767
                                                          ===========  ======   ===========    ========   ==========


                                       6
<PAGE>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                           Series A            Series B          Series C
                                                       Preferred Stock     Preferred Stock    Preferred Stock     Common Stock
                                                       ------------------  ----------------   ---------------  ------------------
                                                        Shares  Amount      Shares   Amount    Shares  Amount   Shares    Amount

BALANCE AT MARCH 31, 1993                                      -        -        -        -         -       -  1,564,828  $ 1,564
  (brought forward)
Exercise of Common Stock options                                                                                     735        1
Sale of Series A Preferred Stock
  ($3.97 per share, net)                               2,119,896  $ 2,120
Issuance of Series A Preferred Stock in
  exchange for notes ($4.50 per share)                   222,222      222
Issuance of Common Stock warrants
Amortization of deferred compensation Net loss
Total comprehensive income (loss)
                                                       ---------  -------  -------  -------   -------  ------  ---------  -------

BALANCE AT MARCH 31, 1994                              2,342,118    2,342        -        -         -       -  1,565,563    1,565
Sale of Series B Preferred Stock
  ($4.04 per share, net)                                                   481,644  $   482
Issuance of Common Stock warrants
Amortization of deferred compensation Net loss
Total comprehensive income (loss)
                                                       ---------  -------  -------  -------   -------  ------  ---------  -------
BALANCE AT DECEMBER 31, 1994                           2,342,118    2,342  481,644      482         -       -  1,565,563    1,565
Sale of Series C Preferred Stock
  ($4.11 per share, net)                                                                     2,914,771 $2,915
Issuance of Common Stock warrants
Amortization of deferred compensation Net loss
Total comprehensive income (loss)
                                                       ---------  -------  -------  -------   -------  ------  ---------  -------
BALANCE AT DECEMBER 31, 1995                           2,342,118    2,342  481,644      482  2,914,771  2,915  1,565,563    1,565
Sale of Common Stock ($9.91 per share, net)                                                                    1,819,000    1,819
Conversion of Series A, Series B, and Series C
  Preferred Stock to Common Stock                     (2,342,118)  (2,342)(481,644)    (482)(2,914,771)(2,915) 3,046,474    3,047
Exercise of Common Stock warrants                                                                                  2,058        2
Amortization of deferred compensation
Net loss
Total comprehensive income (loss)
                                                       ---------  -------  -------  -------   -------  ------  ---------  -------
BALANCE AT DECEMBER 31, 1996                                   -        -        -        -         -       -  6,433,095    6,433
                                                       =========  =======  =======  =======   =======  ======  =========  =======




                                       7
<PAGE>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                 Deficit
                                                                               Accumulated    Foreign
                                                         Additional               During      Currency                 Total
                                                          Paid-In    Treasury  Development  Translation            Comprehensive
                                                          Capital     Stock       Stage      Adjustment    Total       Loss
                                                        -----------  --------  ------------   --------  ----------- -------------
BALANCE AT MARCH 31, 1993                               $ 6,249,306         -    (4,734,103)         -     1,516,767
  (brought forward)
Exercise of Common Stock options                                187                                              188
Sale of Series A Preferred Stock
  ($3.97 per share, net)                                  8,411,370                                        8,413,490
Issuance of Series A Preferred Stock in
  exchange for notes ($4.50 per share)                      999,778                                        1,000,000
Issuance of Common Stock warrants                             2,119                                            2,119
Amortization of deferred compensation                     1,580,320                                        1,580,320
Net loss                                                                         (6,899,515)              (6,899,515)
Total comprehensive income (loss)                                                                                      $(6,899,515)
                                                        -----------   -------  ------------   --------    ----------   ===========
BALANCE AT MARCH 31, 1994                                17,243,080         -   (11,633,618)         -    5,613,369
Sale of Series B Preferred Stock
  ($4.04 per share, net)                                  1,947,149                                       1,947,631
Issuance of Common Stock warrants                                 6                                               6
Amortization of deferred compensation                        14,859                                          14,859
Net loss                                                                         (4,959,312)             (4,959,312)
Total comprehensive income (loss)                                                                                    $ (4,959,312)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1994                             19,205,094         -   (16,592,930)         -    2,616,553
Sale of Series C Preferred Stock
  ($4.11 per share, net)                                 11,977,856                                      11,980,771
Issuance of Common Stock warrants                               161                                             161
Amortization of deferred compensation                       195,874                                         195,874
Net loss                                                                         (8,739,858)             (8,739,858)
Total comprehensive income (loss)                                                                                    $ (8,739,858)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1995                             31,378,985         -   (25,332,788)         -    6,053,501
Sale of Common Stock  ($9.91 per share, net)             18,026,419                                      18,028,238
Conversion of Series A, Series B, and Series C
  Preferred Stock to Common Stock                             2,692
Exercise of Common Stock warrants                            20,145                                          20,147
Amortization of deferred compensation                        26,093                                          26,093
Net loss                                                                        (10,036,090)            (10,036,090)
Total comprehensive income (loss)                                                                                    $(10,036,090)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1996                             49,454,334         -   (35,368,878)         -   14,091,889
                                                       ============   =======  ============   ========  ===========


See notes to unaudited consolidated financial statements.


                                       8
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                             Series A          Series B          Series C
                                                         Preferred Stock   Preferred Stock   Preferred Stock       Common Stock
                                                       ------------------  ---------------- ------------------  ------------------
                                                          Shares  Amount   Shares   Amount    Shares  Amount     Shares    Amount
BALANCE AT DECEMBER 31, 1996                                    -       -         -      -           -       -   6,433,095   6,433
  (brought forward)
Sale of Common Stock ($2.92 per share, net)                                                                      2,867,670   2,868
Warrants exchanged for Common Stock                                                                                643,639     644
Exercise of Common Stock options                                                                                    50,674      50
Exercise of Common Stock warrants                                                                                    9,531      10
Issuance of Common Stock for consulting                                                                             25,000      25
  services ($4.00 per share, net)
Amortization of deferred compensation Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1997                                    -       -         -      -           -       -  10,029,609  10,030
Repurchase of Common Stock for
  treasury (2,246,131 shares)
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1998                                    -       -         -      -           -       -  10,029,609  10,030
Sale of Common Stock ($.05 per share, net)                                                                      14,000,000  14,000
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 1999                                    -       -         -      -           -       -  24,029,609  24,030
Issuance of right to purchase Common Stock
  in lieu of compensation ($0.45 per share)
Sale of common stock ($0.05 per share)                                                                             500,000     500
Sale of common stock ($0.50 per share)                                                                           3,000,000   3,000
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Repurchase of common stock for
  treasury (60,000 shares)
Net loss
Foreign currency translation adjustment
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- -------
BALANCE AT DECEMBER 31, 2000                                    -       -         -      -           -       -  27,529,609 $27,530
                                                       ==========  ======  ========  =====  ==========  ======  ========== =======


See notes to unaudited consolidated financial statements.

                                       9
<PAGE>

BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- -------------
BALANCE AT DECEMBER 31, 1996                             49,454,334         -   (35,368,878)         -   14,091,889
  (brought forward)
Sale of Common Stock ($2.92 per share, net)               8,377,583                                       8,380,451
Warrants exchanged for Common Stock                            (644)
Exercise of Common Stock options                            168,541                                         168,591
Exercise of Common Stock warrants                            93,299                                          93,309
Issuance of Common Stock for consulting                      99,975                                         100,000
  services ($4.00 per share, net)                            62,579                                          62,579
Amortization of deferred compensation
Net loss                                                                        (10,151,041)            (10,151,041)
Foreign currency translation adjustment                                                       $  1,333        1,333
Total comprehensive income (loss)                                                                                    $(10,149,708)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1997                             58,255,667         -   (45,519,919)     1,333   12,747,111
Repurchase of Common Stock for
   treasury (2,246,131 shares)                                        $  (100)                                 (100)
Net loss                                                                        (10,654,597)            (10,654,597)
Foreign currency translation adjustment                                                         55,891       55,891
Total comprehensive income (loss)                                                                                    $(10,598,706)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1998                             58,255,667      (100)  (56,174,516)    57,224    2,148,305
Sale of Common Stock ($.05 per share, net)                  686,000                                         700,000
Net loss                                                                         (1,253,696)             (1,253,696)
Foreign currency translation adjustment                                                        (43,020)     (43,020)
Total comprehensive income (loss)                                                                                    $ (1,296,716)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 1999                             58,941,667      (100)  (57,428,212)    14,204    1,551,589
Issuance of right to purchase Common Stock
  in lieu of compensation ($0.45 per share)                 198,000                                         198,000
Sale of common stock ($0.05 per share)                       24,500                                          25,000
Sale of common stock ($0.50 per share)                    1,497,000                                       1,500,000
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Repurchase of common stock                                             (3,000)                               (3,000)
Net loss                                                                         (1,522,233)             (1,522,233)
Foreign currency translation adjustment                                                        (14,204)     (14,204)
Total comprehensive income (loss)                                                                                    $ (1,536,437)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2000                           $ 60,761,167   $(3,100) $(58,950,445)  $     --  $ 1,835,152
                                                       ============   =======  ============   ========  ===========
                                                                                                                     (Continued)


          See notes to unaudited consolidated financial statements.

                                       10
<PAGE>


BIOFIELD CORP.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------

                                                            Series A           Series B          Series C
                                                        Preferred Stock    Preferred Stock    Preferred Stock      Common Stock
                                                       ------------------- ----------------- ----------------- --------------------
                                                        Shares     Amount    Shares  Amount    Shares   Amount   Shares    Amount
BALANCE AT DECEMBER 31, 2000                                    -       -         -      -           -       -  27,529,609 $ 27,530
  (brought forward)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2001                                    -       -         -      -           -       -  27,529,609 $ 27,530
Exercise of Common Stock options                                                                                    62,745       63
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss (unaudited)
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2002                                    -       -         -      -           -       -  27,592,354 $ 27,593
Issuance of Common Stock for consulting
  services ($0.30 per share, net)                               -       -         -      -           -       -      50,000       50
Issuance of Common Stock for consulting
  services ($0.32 per share, net)                                                                                  468,749      468
Issuance of Common Stock for consulting
  services ($0.11 per share, net)                                                                                  275,000      275
Issuance of Common Stock as incentive for
  funding by issue of notes ($0.25 per share net)                                                                3,187,500    3,188
Common Stock (410,358 shares) to be issued
  for interest accrued on stockholder's advances
Memorandum entry to record as expense for
  honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2003                                    -       -         -      -           -       -  31,573,603 $ 31,574
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)                                                                 1,812,500    1,813
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.31 per share net)                                                                 1,895,000    1,895
Sale of Common Stock ($0.10 per share)                                                                           1,224,000    1,224
Common Stock (286,421 shares) to be issued
  for interest accrued on stockholder's advances
Accrual of 2,500,000 shares of Common Stock
  due on payment default on notes payable
Memorandum entry to record as expense for
   honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)
                                                       ----------  ------  --------  -----  ----------  ------  ---------- --------
BALANCE AT DECEMBER 31, 2004                                    -       -         -      -           -       -  36,505,103 $ 36,506
Sale of Common Stock ($0.05 to $0.10 per share)                                                                  3,240,333    3,240
-----------------------------------------------------------------------------------------------------------------------------------



See notes to unaudited consolidated financial statements.

                                       11
<PAGE>


CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Deficit)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- -------------
BALANCE AT DECEMBER 31, 2000                             60,761,167    (3,100) $(58,950,445)         -    1,835,152
  (brought forward)
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,238,687)             (2,238,687)
Total comprehensive income (loss)                                                                                    $ (2,238,687)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2001                             60,861,167    (3,100)  (61,189,132)         -     (303,535)
Exercise of Common Stock options                             15,623                                          15,686
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,888,789)             (2,888,789)
Total comprehensive income (loss)                                                                                    $ (2,888,789)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2002                           $ 60,976,790   $(3,100) $(64,077,921)  $      -  $(3,076,638)

Issuance of Common Stock for consulting
  services ($0.30 per share, net)                            14,950                                          15,000
Issuance of Common Stock for consulting
  services ($0.32 per share, net)                           149,532                                         150,000
Issuance of Common Stock for consulting
  services ($0.11 per share, net)                            29,975                                          30,250
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)            793,687                                         796,875
Common Stock (410,358 shares) to be issued
  for interest accrued on stockholder's advances            102,386                                         102,386
Memorandum entry to record as expense for
  honorary services rendered by a shareholder               100,000                                         100,000
Net loss                                                                         (2,164,698)             (2,164,698)
Total comprehensive income (loss)                                                                                    $ (2,164,698)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2003                           $ 62,167,320  $ (3,100) $(66,242,619)  $      -  $(4,046,825)
                                                       ============   =======  ============   ========  ===========
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.25 per share net)            451,312                                         453,125
Issuance of Common Stock as incentive for
 funding by issue of notes ($0.31 per share net)            585,555                                         587,450
Sale of Common Stock ($0.10 per share)                      160,601                                         161,825
Common Stock (286,421 shares) to be issued
  for interest accrued on stockholder's advances             64,743                                          64,743
Accrual of 2,500,000 shares of Common Stock
  due on payment default on notes payable                   350,000                                         350,000
Memorandum entry to record as expense for
   honorary services rendered by a shareholder              100,000                                         100,000
Net loss                                                                         (3,846,517)             (3,846,517)
Total comprehensive income (loss)                                                                                    $ (3,846,517)
                                                       ------------   -------  ------------   --------  -----------  ============
BALANCE AT DECEMBER 31, 2004                           $ 63,879,531  $ (3,100) $(70,089,136)  $      -  $(6,176,200)


See notes to unaudited consolidated financial statements.

                                       12
<PAGE>



                                                            Series A           Series B          Series C
                                                        Preferred Stock    Preferred Stock    Preferred Stock      Common Stock
                                                       ------------------- ----------------- ----------------- --------------------
                                                        Shares    Amount    Shares  Amount    Shares   Amount    Shares  Amount
Common Stock (2,310,300 shares) to be issued
  for interest accrued on stockholder's advances
Issue of shares of common stock due on payment
  default on notes payable                                                                                     897,500  $     897
Issue of shares of common stock due on payment
  Default on notes payable previously credited                                                               2,500,000  $
2,500
Memorandum entry to record as expense for
   honorary services rendered by a shareholder
Net loss
Total comprehensive income (loss)

BALANCE AT DECEMBER 31, 2005
                                                               -        -        -       -                    43,142,936  $ 43,143
COMMON STOCK (841,438)to be issued
  for interest accrued on stockholder's advances (1050)        -        -        -       -        -           -                  -

Share based compensation                                       -        -        -       -        -           -                  -
Memorandum entry to record as expense for
  honorary services rendered by a shareholder                  -        -        -       -        -           -                  -
Net loss
Total comprehensive income (loss)                              -        -        -       -        -           -                  -

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

BALANCE AT JUNE 30, 2006                                      -        -        -       -  -     -           43,142,936     43,143
                                                      ==========   ======  ========  =====  ========== =======  ========== ========







See notes to unaudited consolidated financial statements.

                                       13
<PAGE>


-----------------------------------------------------------------------------------------------------------------------------------
                                                                                  Deficit
                                                                                Accumulated   Foreign
                                                        Additional                 During     Currency                  Total
                                                         Paid-In     Treasury   Development  Translation            Comprehensive
                                                         Capital       Stock       Stage      Adjustment    Total        Loss
                                                       ------------ ---------- ------------- ----------- ---------- --------------

BALANCE AT DECEMBER 31, 2004                           $ 63,879,532  $ (3,100) $(70,089,136)            $(6,176,198)





Sale of Common Stock ($0.05 to $0.10 per share)        $    382,177                                     $   385,417
Common Stock (2,310,300 shares) to be issued
  for interest accrued on stockholder's advances       $     85,740                                     $    85,740
Issue of shares of common stock due on payment
  default on notes payable                             $     17,052                                     $
17,950
Issue of shares of common stock due on payment
  default on notes payable previously credited         $     (2,500)
Memorandum entry to record as expense for
   honorary services rendered by a shareholder         $    100,000                                     $   100,000
Net loss                                                                       $ (2,225,312)            $(2,225,312)
Total comprehensive income (loss)                                                                                    $ (2,225,312)



BALANCE AT DECEMBER 31, 2005                           $ 64,462,001  $ (3,100) $(72,314,448)            $(7,812,403)

COMMON STOCK (841,438)to be issued
  for interest accrued on stockholder's advances       $     25,243                                     $    25,243
  (1050)
Share based compensation                               $     47,512                                     $    47,512
Memorandum entry to record as expense for
  honorary services rendered by a shareholder          $     25,000                                     $    25,000
Net loss                                               $                       $   (330,662)            $  (330,662) $ (8,045,310)
Total comprehensive income (loss)
                                                       ------------ ---------- ------------- ----------- ---------- --------------

BALANCE AT JUNE 30, 2006                              $ 64,559,756  $ (3,100) $(72,645,110)            $(8,045,310)
                                                       ============  ========  ============   ========  ===========

</TABLE>






See notes to unaudited consolidated financial statements. (Concluded)


                                       14



<PAGE>

<TABLE>

<CAPTION>

                                  BIOFIELD CORP
                          (A Development Stage Entity)
                       Condensed Statements of Cash Flows
                                   (Uaudited)

                                                                                                    OCTOBER 16, 1987
                                                                      SIX MONTHS ENDED JUNE 30,       (INCEPTION) TO
                                                                           2006            2005       JUNE 30, 2006
                                                                      ------------    ------------    ------------
<S>                                                                   <C>             <C>             <C>

Cash flows from operating activities:                                 $   (330,662)   $   (717,381)   $(72,645,092)
     Net Loss
     Adjustments to reconcile net loss to net cash
     used in operating activities
           Depreciation and amortization                                     1,014          10,970       2,760,722
           Share based compensation                                         47,512            --            47,512
           Amortization of premiums on short term investments                 --              --           156,692
           Amortization of deferred financing costs                           --           172,044       2,609,231
           Loss on disposal of property and equipment                         --              --           194,102
           Loss on license and settlement agreements                          --              --            49,026
           Loss on abandonment of patent applications                         --              --           303,234
           Loss on inventory writedown                                        --              --           693,500
           Commission and discount on sales of Common Stock                   --            90,167            --
           Impairment of intangible assets                                    --              --           194,268
           Vendor settlements                                                 --              --            77,257
           Non-cash compensation                                            25,000          25,000       3,533,451
           Gain on disposition of fixed assets                                --              --          (159,473)
           Interest paid on common stock                                    25,243          18,771         575,260
           Consultancy fees paid in common stock                              --              --           195,250
Changes in assets and liabilities:
           Inventories                                                        --              --          (693,500)
           Prepaids                                                           --              --          (132,582)
           Due to affiliate                                                   --            10,957         329,687
           Accounts payable and accrued expenses                            84,859         (96,811)      2,178,614
                                                                      ------------    ------------    ------------

               Net cash used in operating activities                      (147,034)       (486,283)   (59, 911,733)
                                                                      ------------    ------------    ------------

Cash flows from investing activities
         Acquisition of property and equipment                                --              --        (2,610,691)
         Cost incurred for patents and applications                           --              --          (782,527)
         Proceeds from sale of property and equipment                         --              --           294,748
         Purchase of short-term investments                                   --              --       (26,476,638)
         Proceeds from sale and maturity of short-term investments            --                               --_
                                                                      ------------    ------------    ------------
                                                                                                        26,406,378

               Net cash used in investing activities                          --              --        (3,168,730)
                                                                      ------------    ------------    ------------

Cash flows from financing activities
         Repayment of capitalized lease obligations                           --              --           (82,234)
         Proceeds from issuance of Preferred Stock, net                       --              --        22,341,892
         Proceeds from issuance of Common Stock and
         Common Stock Warrants - net                                          --           285,249      33,383,362
         Proceeds from exercise of Common Stock options and
         Common Stock warrants - net                                          --              --           298,546
         Proceeds from the issuance of notes payable                          --              --         1,379,000
         Notes financing costs                                                --              --          (216,744)
         Advances from stockholders and related parties                    148,115         179,593       3,693,580
         Repayment of advances from stockholder and related parties           --              --          (145,000)
         Repurchases of Common Stock held in treasury                         --              --            (3,100)
         Proceeds from notes payable issue from stockholder
         and related party                                                    --              --         2,546,533
                                                                      ------------    ------------    ------------



               Net cash provided by financing activities                   148,115         464,842      63,195,835
                                                                      ------------    ------------    ------------


            Net increase (decrease) in cash and cash equivalents            (1,081)        (21,441)        115,372
            Effect of exchange rate changes on cash and
            cash equivalents
Cash and cash equivalents at beginning of period                             2,794          33,142        (111,497)

Cash and cash equivalents at end of period                            $      3,875    $     11,071    $      3,875
                                                                      ------------    ------------    ------------

</TABLE>


           See accompanying notes and accountants' compilation report

                                       15
<PAGE>


BIOFIELD CORP.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.       GOING CONCERN BASIS OF ACCOUNTING

As  shown  in  the  accompanying  financial  statements,   Biofield  Corp.  (the
"Company")  continues to incur  significant  losses.  As of June 30, 2006,  the
Company  had total  assets  worth  less than  $5,000  and its total  liabilities
exceeded its assets by $8 million.  These factors raise  substantial doubt about
the Company's ability to continue as a going concern.

During 2002, the Company financed its operations almost entirely with $1,750,000
of borrowings  obtained from, or with the assistance of, Dr. David M. Long, Jr.,
M.D.,  Ph.D., its Chairman,  Chief Executive  Officer and principal  stockholder
("Dr. Long"), and certain of his affiliates.

In the first quarter of 2003, the Company  instituted a cost  reduction  program
that included  lowering  salaries of its six then current  employees and some of
its  consultants,  minimizing  use of outside  consultants,  arranging  with its
employees  and a consultant to accept  options to acquire the  Company's  Common
Stock for a portion of their services, and limiting its marketing activities. In
January 2003, Dr. Long advanced  $475,000 to enable the Company to meet its then
projected  minimum financial  requirements.  As of June 30, 2006, the aggregate
amount due to Dr. Long and his  affiliates,  including  advances  made by him in
2003,  2004 and 2005,  liability for a three-year  promissory  note amounting to
$450,000 and interest accrued on all the debts due to him, is $4,513,968, and is
also  entitled to receive  3,007,078  shares of the  Company's  Common Stock for
interest due up to December 31, 2004 on an advance of $1,050,000  made by him in
2003.

During the seven months  commencing  April 16,  2003,  the Company was unable to
meet its payroll commitments.  Five of its six employees agreed to the deferment
of the payment of the salary due to them,  payable with 100%  interest  thereon,
until the receipt of the  proceeds  from new  funding.  The Company also granted
options to  acquire  514,227  shares of Common  Stock to these  employees  at an
exercise price of $0.33 per share,  the closing market price of the Common Stock
on the date of the grant,  in  consideration  for the reduction in  remuneration
accepted by them during the first four months of 2003.

In June 2003,  the  Company's  bank line of credit was  increased by $200,000 to
$1.2 million upon the furnishing of additional  collateral  provided to the bank
by Dr. Long and certain of his affiliates.  The line expired in May 2005 and was
repaid by Dr. Long and his affiliates. The loan is included in the advances from
stockholder  in the  accompanying  Balance  Sheet.

In October 2003, the Company  entered into an agreement  with a placement  agent
for  assistance  in obtaining  short-term  bridge  financing  agreement of up to


                                       16
<PAGE>

$700,000 (subsequently increased to $1 million) in a private placement on a best
effort basis. In December 2003, the Company  received gross proceeds of $637,500
against  issuance of $637,500  principal  amount of notes  payable and 3,187,500
shares of Common Stock, at a cost of $796,875 which was amortized over 365 days.
Additionally,  the Company made cash  payments of $129,807 for  financing  costs
that was also amortized over the same period.

During January and February 2004, the Company received further gross proceeds of
$362,500 and issued an additional $362,500 of notes payable and 1,812,500 shares
of Common Stock,  at a cost of $453,125  which was amortized  over the remaining
365 days since the initial sale in December 2004. Additionally, the Company made
cash payments of $46,038 for financing  costs that was also  amortized  over the
same period.

On May 3, 2004, the Company  signed a similar  agreement with the same placement
agent to secure further short-term bridging finance of up to $800,000. Under the
new agreement, the Company sold $329,000 of its securities, and the offering was
closed on August 30,  2004.  The Company  received  gross  proceeds of $100,000,
$154,000 and $75,000 against aggregate  issuance of $329,000 principal amount of
notes  payable and 1,645,000  shares of Common  Stock,  at a cost of $509,950 on
June 1, 2004,  July, 2004 and August,  2004,  respectively.  The value of Common
Stock was amortized  over the period of the notes all of which expire on May 31,
2005.  Additionally,  the Company  made cash  payments of $35,900 for  financing
costs that was also  amortized  over the same period.

On  September  8, 2004,  the Company  signed an  agreement  for $50,000 with the
placement agent on the same terms and conditions as the agreement  signed on May
3, 2004, and received gross  proceeds of $15,644 and $34,356  against  aggregate
issuance of $50,000  principal  amount of notes  payable  and 250,000  shares of
Common  Stock,  at a cost of $77,500 on September 8, 2004 and November 12, 2004,
respectively.

On October 13, 2004, the Company engaged an investment  broker and consultant to
obtain  financing its operations  while waiting for FDA approval by offering the
Company  shares of Common  Stock to  non-U.S.  citizens  overseas  investors  in
accordance  with  the  provisions  of Rule 903 or Rule  904 of  Regulation  S or
pursuant to registration of the securities under the Securities Act of 1933 at a
cost of 50% of the amount of gross capital raised as fees.  Under the agreement,
the broker  bears all the  associated  marketing  and  operating  costs,  and is
required to offer the shares at a price per share of not less than $0.10.  Under
this  arrangement,  the Company  received  aggregate  gross proceeds of $123,400
against aggregate  issuance of 1,224,000 shares of Common Stock, at an aggregate
discount  of $38,425  over the market  price on the date of the sale  during the
period from October 29, 2004 to December 31, 2004.  Additionally,  in 2005,  the
Company received aggregate gross proceeds of $295,250 against aggregate issuance
of approximately  3.2 million shares of Common Stock at an average rate of $0.09
per share and agent's fees of $118,906.

The Company used the proceeds from the two  placements  and from the sale of its
shares under the  exemption  provided by  Regulation S to finance the expense to
complete  its  FDA  application  to  obtain  approval  to  market  the  Biofield
Diagnostic  System in the United  States,  marketing of the Company's  device in
certain European  countries and to keep the Company  operational.  On January 5,
2005, in accordance  with  recommended  FDA procedure,  the Company  submitted a
Request for Evaluation of Automatic  Class III  Designation  for the Biofield(R)
Breast  Proliferation  Rate Detection System under  ss.513(f)(2) of the Cosmetic


                                       17
<PAGE>

Act.  Simultaneously,  the Company is attempting to raise  long-term  capital of
approximately $5 million to $7 million to enable it to commercialize  its device
(assuming FDA approval is obtained) and maintain its operations. The infusion of
long-term capital is essential for the Company to continue its operations. There
is no assurance the Company will be successful in securing the long-term capital
or any the short-term funding.

The notified body,  KEMA  Registered  Quality,  Inc.,  submitted a formal 510(k)
application  to the FDA on  November  16,  2004.  FDA  informed  the  Company on
December  3,  2004  that  a  manufacturer  whose  device  is  found  to  be  not
substantially  equivalent  to a  predicate  device can request the FDA to make a
risk-based  classification for its device.  However,  the letter also included a
statement  that the FDA  believes  that  "based on the  review  of your  device,
general controls would be inadequate and special controls  difficult to develop,
to provide  reasonable  assurance of the device's safety and  effectiveness." On
January 5, 2005, in  accordance  with  recommended  FDA  procedure,  the Company
submitted a Request for Evaluation of Automatic  Class III  Designation  for the
Biofield(R) Breast Proliferation Rate Detection System under ss.513(f)(2) of the
Cosmetic Act. On July 25, 2005,  the FDA sent the Company a response to a recent
meeting at FDA's  offices at which the  Company  had  reviewed  with the FDA the
Biofield data contained in the Company's  previously submitted 510K application.
The FDA  informed the Company  that the data  contained in the 510K  application
would be insufficient  for several  reasons and requested more clinical  testing
for the  Company's  pre-market  approval  application.  The Company is unable to
proceed  with the  clinical  testing as it has not been  successful  in sourcing
additional capital.

On August 1, 2005,  the company signed a partnership  agreement with  Bridgetech
Holdings International, Inc. ("Bridgetech"), a company focused on maximizing the
potential  of emerging  healthcare  products  and services in the U.S. and Asian
markets.  Bridgetech paid $50,000 upfront for  distributorship and five Biofield
devices.  Bridgetech also paid $20,000 to be used for clinical testing to obtain
regulatory  approvals  to  market  and  distribute  the  Biofield  Device in the
People's  Republic of China (the "PRC"),  the Hong Kong  Special  Administrative
Region of the PRC, the Republic of China ("Taiwan"),  Vietnam and Singapore. The
agreement,  which was subject to minimum purchase and other  requirements  which
have not been met, has since been terminated.

On March 30, 2006, Dr. David Long and his affiliates  (the "Long Group") entered
into three  agreements  with The MacKay  Group,  Inc.  ("MKG").  The  agreements
provide, among other things, that:

o    MKG will  acquire all the shares of Common  Stock of the Company  presently
     issued to the Long Group and his  affiliates  (comprising  an  aggregate of
     8,747,528 shares).

o    Certain  members of the Long Group will assign $2 million of the total debt
     owed them by the Company.

o    For a three year term,  MKG will give the Long Group a royalty  equal to 1%
     of net sales of the Company's products MKG generates worldwide;




                                       18
<PAGE>


o    Pursuant to the terms of the Consulting Agreement,  Dr. Long or his nominee
     will  remain as a  consultant  to the Company for a term of three years and
     receive  an  annual  payment  of  $60,000  upon  each  anniversary  of  the
     Consulting Agreement; and

o    MKG shall  exercise  voting  rights of any and all shares of the  Company's
     stock in favor of Dr.  Long or his  nominee  remaining  on the Board of the
     Company  and all stock  options  and other  benefits  to which  other Board
     members are entitled.

Specifically,  at the June 30, 2006 closing,  the Long Group transferred all of
its  shares  of  common   stock   presently   issued  to  them  in  the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  20.6% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long intended to remain on the Board so long as his health permitted but he died
on April 8, 2006 and his  assignee has not been  nominated.  The other two Board
members (Dr.  Raymond Long and John  Stephens) have  resigned,  their  vacancies
being  filled  by  James  MacKay  (the  Chairman  of the  Board  of MKG) and his
designee,  Michael Yom,  thereby  giving MKG control of the  Company's  Board of
Directors.  Further,  as of June 30,  2006,  certain  members of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the "Assigned  Debt").

Pursuant to the  agreements,  MKG has undertaken to make reasonable best efforts
to cause the Company to convert all of the  Assigned  Debt into shares of Common
Stock of the Company at $0.05 per share (the "Converted  Shares").  In the event
of the conversion of all of the Assigned Debt into shares of Common Stock of the
Company,  MKG will retain 51% of the Converted Shares plus an additional portion
of the Converted Shares so that,  together with the shares MKG acquired on March
30,  2006  from the Long  Group,  MKG would  then hold 51% of all the  shares of
Common Stock issued and outstanding  (on a  fully-diluted  basis) of the Company
existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the debt to the Long Group.  In  addition,  pursuant to the  agreements,  to the
extent  that any other debt owed to the Long Group by the  Company is  converted
into  shares of Common  Stock,  the Long Group  agreed to  transfer  51% of such
shares to MKG.  In return  for the  foregoing  restructuring,  MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring Company's products to Asia and other markets as quickly as feasible.

MKG is  making  these  purchases  and is  being  assigned  the  debt (as well as
possibly  converting the latter into Company's Common Stock) potentially to gain
control of the Company. MKG is not a member of a group relating to the Company.


The Company has  depleted all its cash  resources  and the Company had to let go
all its  employees,  except  the Chief  Operating  Officer  and Chief  Executive


                                       19
<PAGE>

Officer,  who does not  receive any  remuneration  for his  services.  Since the
employees' departure in November 2004, the Company has relied on past employees'
services on a consultancy  basis when funds are available as it is unable to pay
their  salaries on a regular  basis.  As at June 30,  2006,  the  Company  owes
$232,245 in back pay and accrued  interest to the past employees.

The  Company's  existence  is  dependent  upon  management's  ability  to secure
immediately  cash  to  resolve  its  current  liquidity  problems.  However,  no
assurance  can be given that  management's  actions  will  result in  profitable
operations  or  the  resolution  of  the  Company's  liquidity   problems.   The
accompanying consolidated financial statements do not include any adjustments to
the amounts  and  classification  of assets and  liabilities  that might  result
should the Company be unable to continue as a going concern.

2.       THE COMPANY

Biofield  Corp.  is a  development  stage company that has developed a system to
assist in detecting breast cancer using a non-invasive procedure.  The Company's
breast  cancer  diagnostic  device,  the  Biofield  Diagnostic  System,  employs
single-use sensors to measure and analyze changes in cellular  electrical charge
distributions  associated  with the development of epithelial  cancers,  such as
breast  cancer.  Principal  activities  to  date  include  product  development,
conducting   clinical  trials,   seeking   permission  from  various  regulatory
authorities to market the device and raising  capital.  The Company  operates in
one market segment, the biomedical device segment.

In March 1996, the Company  completed its initial  public  offering of 1,819,000
shares  of Common  Stock,  at a  purchase  price of $11.00  per  share,  for net
proceeds  of  approximately  $18  million.  During the first  half of 1997,  the
Company  formed a wholly owned  Delaware  corporation,  Biofield  International,
Inc.,  which  established a branch in  Switzerland.  The  Subsidiary  closed the
branch in March 1999.

In December  1997,  the Company  received  net  proceeds of  approximately  $8.4
million  from  the  sale of  2,867,670  shares  of  Common  Stock  in a  private
placement.  Simultaneously, the Company issued 643,639 shares of Common Stock in
exchange for previously  issued warrants to purchase  1,574,930 shares of Common
Stock.

In November 1998,  the Company  decided to eliminate  certain  operations due to
lack of adequate  financial  resources.  In December  1998, the Common Stock was
delisted  from trading on The NASDAQ Stock Market due primarily to the Company's
inability to meet certain  financial  criteria and, in March 1999, the Company's
reporting obligations under the Securities Exchange Act of 1934 were terminated.
At such time,  the  Company  announced  that its  efforts  would be  directed to
selling its existing  technology if it was  unsuccessful  in raising  additional
capital.

In  December  1999,  the  Company  sold 14  million  shares of Common  Stock for
$700,000 to Dr.  Long and a related  investor  and  certain of their  affiliated
entities. Simultaneously, the Company's Board of Directors was reconstituted and
Dr.  Long was  appointed  as the  Chairman  and Chief  Executive  Officer of the
Company.


                                       20
<PAGE>

In 2000,  the  Company's  then  existing  device and  sensors  received  CE mark
certification and were granted ISO-9001 quality system status,  which allows the
Company to market such device and sensors within the European community.

In 2001 and 2002,  the  Company's  major  efforts had been focused  primarily on
activities  to seek FDA  approval to market the  Company's  device in the United
States,  marketing  the device in certain  overseas  markets and  attempting  to
obtain funds for the operating and capital needs of the Company.

Since 2003,  the Company has had to severely  curtail its activities as its cash
resources depleted and Dr. Long and his affiliates  extended limited funding for
operations  beyond  June 30, 2003.  In 2004,  the Company  received  short-term
funding of $741,500,  from the two private placements and a $50,000 note payable
and $253,698 from Dr. Long and his affiliates,  and $161825 in permanent capital
from the sale of shares of Common Stock under  Regulation  S. See Notes 1 and 9.
This  funding has enabled the Company to complete and submit an  application  to
the FDA for its device and to continue operations in 2004.

In 2005,  the Company  continued to curtail its activities due to lack of funds.
Dr. Long and his affiliates advanced money to pay off the $1.2 million bank line
of credit and advanced  additional  $536,361 for other essential  expenses.  The
Company also received $295,250 from the sale of shares under Regulation S.

As  detailed  in Note 1, MKG bought  over all the shares held by the Long Group.
MKG intends to  aggressively  market the Company's  device  internationally  and
plans  on  securing  the  necessary  capital  to  achieve  this  objective.

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned subsidiary, Biofield International, Inc.

3.       SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

The  Company  considers  cash  on  hand,   deposits  in  banks,  and  short-term
investments  purchased with an original maturity date of three months or less to
be cash and cash  equivalents.  The  carrying  amounts  reflected in the balance
sheets for cash and cash  equivalents  approximate  the fair values due to short
maturities of these instruments.

ACCOUNTS RECEIVABLE

The Company  provides an allowance for doubtful  accounts equal to the estimated
uncollectible  amounts.  At June 30, 2006 and  December 31, 2005, a provision of
$71,000 was made for bad and  doubtful  accounts,  representing  an allowance of
100% for the outstanding accounts receivable.

INVENTORY AND INVENTORY VALUATION RESERVE

Inventories  are  stated  at the  lower  of cost or  market,  determined  by the
first-in,  first-out  (FIFO)  method,  including  provisions  for  obsolescence.

                                       21
<PAGE>

Obsolescence  is  based  upon  assumptions   concerning  future  demand,  market
conditions and anticipated timing of the release of next generation products. If
actual  market  conditions  or  future  demand  are less  favorable  than  those
projected by management,  or if next  generation  products are released  earlier
than anticipated, additional inventory write-downs may be required.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost,  less  accumulated  depreciation  and
amortization.  Depreciation and  amortization  are computed using  straight-line
methods over the estimated useful lives of the assets, principally three to five
years, or the term of the lease, if shorter, for leasehold improvements.

PATENTS AND OTHER INTANGIBLE ASSETS

The costs of patents are amortized on a straight-line basis over their estimated
economic  life,  but not  exceeding  17 years.  In  December  2005,  during  the
Company's  annual review of the carrying values of patents and  trademarks,  the
management  determined that, due to increased  uncertainty about obtaining FDA's
approval to sell the Company's device in the United States,  the  recoverability
of the carrying values of Patents and Trade Marks is in doubt. The management is
unable to determine and project future  undiscounted cash flows for these assets
with reasonable accuracy due to these uncertainties.  Consequently,  the Company
recorded a charge of  $194,268  to provide  in full for these  assets,  and this
amount is recorded as a component of operating  expenses in the Income Statement
as a separate line item.  Revenue  recognition and deferred  revenue.

The Company recognizes revenue in accordance with SEC Staff Accounting  Bulletin
("SAB") No. 104,  "Revenue  Recognition".  SAB No. 104 requires  that four basic
criteria must be met before revenue can be recognized:  (1) persuasive  evidence
of an arrangement  exists;  (2) delivery has occurred;  (3) the selling price is
fixed  and  determinable;   and  (4)   collectibility  is  reasonably   assured.
Determination  of  criteria  (3) and (4) are  based  on  management's  judgments
regarding the fixed nature of the selling  prices of the products  delivered and
the  collectibility  of those  amounts.  Provisions for discounts and rebates to
customers,  estimated returns and allowances, and other adjustments are provided
for in the same period that the related sales are recorded. Royalty revenues are
recognized  in the period  they are earned.  The Company  defers any revenue for
which the product has not been delivered or is subject to refund until such time
that the Company and the customer  jointly  determine  that the product has been
delivered or no refund will be required.


INCOME TAXES

Income taxes are provided based on the liability method for financial  reporting
purposes in accordance with the provisions of Statements of Financial Accounting
Standards  ("SFAS") No. 109,  "Accounting for Income Taxes".  Under this method,
deferred  tax  assets  and   liabilities  are  recognized  for  the  future  tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing  assets and liabilities are measured using enacted
tax rates  expected  to apply to  taxable  income  in the  years in which  those
temporary  differences  are  expected  to be removed or  settled.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
the statement of  operations  in the period that  includes the  enactment  date.



                                       22
<PAGE>

IMPAIRMENT  OF  LONG-LIVED  ASSETS

The Company has adopted SFAS No. 144, which requires that long-lived  assets and
certain  identifiable  intangibles  held and used by the Company be reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount  of an  asset  may  not  be  recoverable.  Events  relating  to
recoverability  may  include   significant   unfavorable   changes  in  business
conditions,  recurring losses, or a forecasted  inability to achieve  break-even
operating   results  over  an  extended  period.   The  Company   evaluates  the
recoverability  of long-lived  assets based upon  forecasted  undiscounted  cash
flows. Should impairment in value be indicated, the carrying value of intangible
assets will be  adjusted,  based on estimates  of future  discounted  cash flows
resulting from the use and ultimate  disposition of the asset. SFAS No. 144 also
requires  that assets to be disposed of be reported at the lower of the carrying
amount or the fair value less costs to sell.

STOCK-BASED COMPENSATION

The Company applies the intrinsic value-based method of accounting prescribed by
Accounting  Principles  Board  Opinion  25,  "Accounting  for  Stock  Issued  to
Employees",  and related  interpretations,  in  accounting  for its stock option
plans. As such, compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the exercise price.
SFAS No. 123, "Accounting for Stock-Based Compensation",  established accounting
and disclosure  requirements  using a fair value-based  method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, the Company
has elected to continue to apply the intrinsic  value-based method of accounting
described  above,  and has adopted the disclosure  requirements  of SFAS No. 123
which  are  included  in Note 17.  The  Company  has  also  adopted  the  annual
disclosure provisions of SFAS No. 148, "Accounting for Stock-Based  Compensation
- Transition and Disclosure - an Amendment of SFAS 123" in its financial reports
for the year ended December 31, 2003 and for the subsequent periods.

In accordance  with Financial  Accounting  Standards  Board Emerging Issues Task
Force ("EITF") 96-18,  the  measurement  date to determine fair value for shares
issued to consultants  was the date at which a commitment for performance by the
consultant to earn the equity  instrument  was reached.  The Company  valued the
shares  issued for  consulting  services at the rate which the Company  believes
represents  the fair  value  of the  services  received,  which  did not  differ
materially  from the value of the Common Stock issued.

RESEARCH AND DEVELOPMENT

The Company  accounts for research and development  costs in accordance with the
SFAS No. 2, "Accounting for Research and Development  Costs".  Under SFAS No. 2,
all  research  and  development  costs must be  charged to expense as  incurred.
Accordingly,  internal  research and development costs are expensed as incurred.
Third-party  research and  developments  costs are expensed when the  contracted
work  has  been   performed  or  as  milestone   results  have  been   achieved.
Company-sponsored  research and  development  costs  related to both present and
future  products  are expensed in the period  incurred.  Total  expenditures  on
research  and product  development  incurred for and the period from October 16,
1987 (date of inception) to June 30, 2006 were $40,481,889.


                                       23
<PAGE>


BASIC AND DILUTED LOSS PER SHARE

The basic loss per share is computed by dividing loss to common  stockholders by
the  weighted  average  number of shares of  Common  Stock  outstanding  for the
period.  Diluted loss per share reflects the potential dilution that could occur
if the  Company's  dilutive  outstanding  stock options were  exercised.  Common
equivalent  shares totaling 6,349,025 as at June 30, 2006 (2,217,931 as  at June
30,  2005) are not  included in the per share  calculations  of diluted loss per
share, since the effect of their inclusion would be antidilutive.

USE OF ESTIMATES

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

RECLASSIFICATION

Certain prior period  figures have been  reclassified  to conform to the current
year's  presentation.  Significantly,  as  recommended  by the SEC,  a charge of
$2,140,897  relating  amortization of shares issued to lenders and other finance
costs  for  2004  have  been  reclassified  in  the  Consolidated  Statement  of
Operations  as a separate  line item under  `Interest  expense and other finance
costs' with a corresponding reduction in the selling, general and administrative
expenses to conform with the current year's  presentation.

COMPREHENSIVE INCOME

SFAS No.  130,  "Reporting  Comprehensive  Income",  establishes  standards  for
reporting and displaying of comprehensive income, its components and accumulated
balances.  Comprehensive  income is defined to  include  all  changes in equity,
except those resulting from  investments by owners and  distributions to owners.
Among other disclosures,  SFAS No. 130 requires that all items that are required
to  be  recognized   under  current   accounting   standards  as  components  of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company does not have any
items of comprehensive income in any of the periods presented.

NEW ACCOUNTING PRONOUNCEMENTS

In December  2004,  the FASB issued SFAS No. 123  (revised)  ("SFAS No.  123R"),
"Share-Based Payment." SFAS No. 123R eliminates the intrinsic value method under
APB 25,  "Accounting for Stock Issued to Employees" as an alternative  method of
accounting  for  stock-based  awards.  SFAS  No.  123R  also  revises  the  fair
value-based   method  of  accounting  for   share-based   payment   liabilities,
forfeitures and modifications of stock-based awards and clarifies SFAS No. 123's
guidance in several areas, including measuring fair value,  classifying an award
as equity or as a  liability  and  attributing  compensation  cost to  reporting
periods.  In  addition,  SFAS No. 123R amends  SFAS No. 95,  "Statement  of Cash
Flows," to require  that excess tax  benefits  be  reported as a financing  cash
inflow  rather than as a  reduction  of taxes  paid,  which is  included  within
operating  cash flows.  Public  companies are required to apply SFAS No. 123R in


                                       24
<PAGE>

the first annual period  beginning  after June 15, 2005.  The Company  currently
accounts  for its  stock-based  awards  under the  intrinsic  value  approach in
accordance  with APB  Opinion  No. 25 and  discloses  the effect of  stock-based
awards as required by SFAS No. 148, "Accounting for Stock-Based  Compensation --
Transition and Disclosure" (see Note 1 and Note 2 to the consolidated  financial
statements).  The  adoption  of the new  standard  would  require the Company to
recognize  compensation  expense  for  equity-based  awards.  This will have the
effect of reducing the  Company's net income by the fair value of the options in
future years, beginning in 2006. We are not in a position to know the effects of
adoption of the new standard at this time.


4.       INVENTORIES

Inventories at June 30, 2006 and 2005 consisted of the following:
                                              2006           2005
                                         ------------   ------------

Components and supplies                     $ 37,749       $ 37,749
Finished goods                               564,559        564,559
                                            --------       --------
                                             602,308        602,308
Less: Reserve for potential losses           602,308        602,308
                                            --------       --------
                                            $      -       $      -
                                            ========       ========

Due to a 2001 Company decision to introduce an enhanced model of its device with
updated  technology  and design  modifications  by 2003,  the Company  created a
reserve for the inventory of the old device.  By December 31, 2002,  the Company
had set aside $532,070 to fully provide for the old units and all of the sensors
for these units. In 2004, the Company fully provided for the remaining inventory
amounting to $81,480.  In 2003, the Company replaced inventory worth $1,958 held
by a distributor  at no charge.  This amount is disclosed as a part of "Selling,
general and  administrative"  in the  accompanying  Consolidated  Statements  of
Operations.

5.       DEFERRED FINANCING COST
Deferred financing costs at June 30, 2006 and 2005 consisted of the following:

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

Deferred financing costs                          -         311,073
Private placement expenses                        -          19,002
                                         ----------       ---------
                                         $        -       $ 330,075
                                         ==========       =========

The Company did not incur any deferred finance cost in 2005.  Financing expenses
(deferred  financing  costs and private  placement  expenses)  pertaining to the
bridge financing incurred in 2004, as discussed in Note 9, were $1,127,513.  The
financing  expenses for 2004 included private  placement costs and legal fees of
$86,938  and the fair  market  values of  $1,040,575  for the  3,707,500  shares


                                       25
<PAGE>

issued.  Costs relating to the bridge  financing are  capitalized  and amortized
over  the  term  of  the  debt,  using  the  straight-line  method.  Accumulated
amortization   at  March  31,  2006  and  2005  was  $2,054,195  and  $1,724,120
respectively,  and deferred  financing  costs  charged to operations in 2006 and
2005 were zero and $1,693,977 respectively. Unamortized portions of the deferred
finance cost are reflected in Other  Current  Assets in the Balance  Sheet.  All
finance expenses had been fully amortized as at December 31, 2005. See Note 9.


6.       PROPERTY AND  EQUIPMENT,  PATENT AND PATENT  APPLICATION  COSTS

Property and equipment at June 30, 2006 and 2005 consisted of the following:

                                         2006           2005
                                       ------------------------
Furniture and office equipment         $  54,738     $   54,738
Plant and production equipment           144,308        144,308
                                       ---------     ----------
                                         199,046        199,046
Less accumulated depreciation            198,097        195,962
                                       ---------     ----------
                                       $     953     $    3,079
                                       =========     ==========

Depreciation expense in 2006 and 2005 were $1014 and $1,532 respectively.

The Company  entered  into a 15-year  agreement  dated  December 22, 1992 with a
consultant  and  inventor  for the  assignment  of certain  rights  relating  to
performance under a laboratory service agreement.  The Company paid $100,000 for
such  assignment  and agreed to pay  royalties  of 5% of the Net Sales  Price of
Covered Inventions (as defined),  if any, subject to a limit of $2.5 million. No
royalties have been paid or accrued as of December 31, 2005.

The  Company has a patent  royalty  agreement  with Dr. Long and his  affiliated
corporation which assigns all rights to the Company for patented inventions,  if
any,  resulting from performance under a laboratory  service agreement (see Note
16). The Company has been issued a United  States  patent in which Dr. Long is a
named co-inventor.  No royalties have been paid or accrued as of March 31, 2006.

In December  2005,  during the Company's  annual  review the carrying  values of
patents  and  trademarks,  the  management  determined  that,  due to  increased
uncertainty  about obtaining FDA's approval to sell the Company's  device in the
United States,  the  recoverability  of the carrying values of Patents and Trade
Marks is in doubt.  The  management  is unable to determine  and project  future
undiscounted  cash flows for these assets with reasonable  accuracy due to these
uncertainties.  Consequently,  the  Company  recorded  a charge of  $194,268  to
provide  in full for these  assets,  and which is  recorded  as a  component  of
operating expenses in the Income Statement as a separate line item.

Accumulated amortization for patents was $466,106 and $254,998 at March 31, 2006
and 2005,  respectively.  Besides  the  impairment  charge of  $194,268 in 2005,
patent  amortization  expense for 2006,  2005, and for the period from inception
through June 30, 2006, were zero, zero and $369,302, respectively.


                                       26
<PAGE>


7.       ACCRUED EXPENSES

Accrued expenses at June 30, 2006 and 2005 consisted of the following:

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

Professional fees                              $    308,352   $    283,369
Due to ex-employees                                 232,245        184,100
Interest accrued on short-term notes payable        200,830        200,830
Other                                                59,798          9,088
                                               ------------   ------------
                                               $    801,223   $    690,677
                                               ============   ============

Due to severe cash flow  constraints  experienced  by the  Company in 2003,  its
employees  were not paid salaries from April 16, 2003 to October 31, 2003.  Five
of its six  employees  then agreed to the deferment of the payment of the salary
due to them,  payable  with 100%  interest  thereon,  until the  receipt  of the
proceeds from new funding.  The Company also granted  options to acquire 514,227
shares of Common  Stock to these  employees  at an  exercise  price of $0.33 per
share,  the closing market price of the Company's  shares of Common Stock on the
date of the grant in consideration for the reduction in remuneration accepted by
them  during the first four  months of 2003.  As at March 31,  2006,  the unpaid
salary and interest  thereon,  together with unpaid  remuneration for subsequent
periods,  amounting  to  $232,245  is  recorded  as  accrued  expenses  in these
financial statements.

8.      ADVANCES FROM STOCKHOLDERS

Advances from stockholders  included payments  amounting to $1,050,000  received
from Dr. Long and his  affiliates  during 2002 to finance the Company's  working
capital needs. The debt is unsecured and became payable on demand after December
31, 2002. The debt bears interest of 2% above the prime rate (7.25% at March 31,
2006).  The interest is  calculated  quarterly,  and is payable in  unregistered
shares of Common Stock, unless Dr. Long requests payment in cash at the start of
the  applicable  quarter.  The  number of shares to be issued  for the  interest
accrued  during any quarter is determined  using the closing price of the Common
Stock on the last  business day of the quarter.  In 2005 and 2004,  the interest
amounted to $85,740 and $64,743, respectively. At March 31, 2006 and 2005, since
no cash payment was requested for any quarter,  an aggregate of 3,007,078 shares
and 696,778  shares of Common Stock were reserved for issuance in payment of the
interest.  As at March 31, 2006 and 2005, total accrued interest of $317,613 and
$167,129, respectively, have been credited to Additional Paid-In Capital.

Advances from stockholders also included payments received from Dr. Long and his
affiliates  in  2005,  2004 and  2003  amounting  to  $1,605,381,  $162,897  and
$670,539,  respectively. In June 2005, Dr. Long and his affiliates paid off $1.2
million  due on the bank line of credit.  This  amount was  credited to the 2005
advance  account.  The advances bear interest of 10% per annum. The interest for
2005 and 2004  amounted  to $155,886  and  $56,472,  respectively,  and has been
accrued and added to the debt.




                                       27
<PAGE>

9.       LONG-TERM DEBT - RELATED PARTY

On  November  8,  2002,  the  Company  issued  its  10%  three-year   promissory
convertible   note  in  the  principal   amount  of  $450,000  to  Dr.  Long  in
consideration  for his  loan to the  Company  in such  amount.  The  note  (with
accrued,  unpaid  interest  thereon)  is  convertible  at the end of three years
(November 8, 2005),  at the option of the holder,  into  unregistered  shares of
Common  Stock at the rate of $0.40 per share,  the  closing  price of the Common
Stock on November 5, 2002.  Interest  for 2005 and 2004  amounted to $55,214 and
$50,194, respectively, and has been added to the note amount and is disclosed as
short-term portion of the long-term debt in these financial statements.

10.      INCOME TAXES

Due to the Company's  operating  losses,  there was no provision for U.S. income
taxes in 2006 and 2005.

At June 30, 2006,  the Company had Federal net operating  loss carry forwards of
approximately  $64 million,  which expire in years 2006 through  2025.  However,
substantially  all of the net operating loss carry forwards are not  utilizable,
as a result of the  limitations  imposed by Section 382 of the Internal  Revenue
Code, due to ownership  changes in 1992, 1995, 1997 and 1999. To the extent that
these losses are  utilizable,  they may be offset  against  future U.S.  taxable
income, if any, during the carry forward period.

11.      DEVELOPMENT STAGE COMPANY

The Company is in the development  stage,  and its operations are subject to the
risks inherent in the  establishment of a new business with previously  untested
technology.  The Company has  generated  nominal  revenues  and has  accumulated
losses of more than $72.6 million for the period from inception through June 30,
2006. Since inception,  the Company has financed its operations primarily by the
issuance of equity securities,  interest income on the then unutilized  proceeds
from these  issuances  and  short-term  borrowings.  During  2005,  the  Company
financed its  operations  with (a)  $1,736,361 of advances from Dr. Long and his
affiliates,  and (b) $295,250 from issuance of shares of Common Stock. See Notes
8, 9 and 10.

The Company requires the immediate  infusion of long-term capital to continue it
operations. See Note 1.

12. STOCK-BASED EMPLOYEE COMPENSATION

At June 30, 2006, the Company had three stock-based employee compensation plans.
The  Company  accounts  for these plans under the  recognition  and  measurement
principles of Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock Issued to  Employees",  and related  interpretations.  No  stock-based
employee  compensation  cost is reflected in net income,  as all options granted
under  these  plans  had an  exercise  price  equal to the  market  value of the
underlying  common  stock  on  the  date  of  the  grant.  The  following  table
illustrates  the effect on net income and  earnings per share if the Company had


                                       28
<PAGE>

<TABLE>

applied the fair value  recognition  provision of SFAS No. 123,  "Accounting for
Stock-Based Compensation", to stock-based employee compensation:

                                      Three months  ended                Six months ended
                                 June 30,  2005 June 30,  2006    June 30, 2006   June 30, 2005
                                 -----------------------------    -----------------------------
<S>                              <C>               <C>            <C>             <C>

Net loss, as reported            $  (33,506)       $(725,920)     $ (330,662)     $ (1,443,301)
Add: Total stock-based
 employee compensation
 expense determined under
 fair value based method for
 all awards, net of related tax
 effects                               -               -           $   47,512             -
                                 -------------   -------------    -------------   -------------
Pro forma net loss               $ (33,506)       $ (725,920)      $ (283,150)    $ (1,443,301)

Earnings per share:
Basic and diluted loss per share
  As reported                    $   (0.01)       $    (0.02)      $    (0.01)    $      (0.04)
  Pro forma                      $   (0.01)       $    (0.02)      $    (0.01)    $      (0.04)

</TABLE>


Under the SFAS No.  123,  the fair  value of  stock-based  awards is  calculated
through the use of option-pricing models, even though such models were developed
to  estimate  the fair  value of freely  tradable,  fully  transferable  options
without  vesting  restrictions,  which differ  significantly  from the Company's
stock option grants. These models also require subjective assumptions, including
future stock price volatility and expected lives of each option grant.

13.      SUBSEQUENT EVENTS The Company is dormant at this time.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

The following  discussion and analysis  should be read in  conjunction  with our
Financial  Statements  and Notes thereto  appearing  elsewhere in this document.

OVERVIEW

As a development  stage  company,  we have  incurred net losses since  inception
through June 30, 2006 of approximately  $72.6 million.  Our current  liabilities
exceeded  our  current  assets  by  approximately  $8  million,  and  our  total
liabilities  exceeded our total assets also by approximately  $8 million.  These
factors  raise  substantial  doubt about our ability to continue our  operations
without obtaining immediate funding.

From  January  1, 2005 to April  30,  2005,  we have  received  aggregate  gross
proceeds of $295,250 against  aggregate  issuance of  approximately  3.2 million
shares of Common  Stock at an average  price of $0.09 per share and 50%  agent's
fees of $147,625.

On August 1, 2005, we signed a partnership  agreement with  Bridgetech  Holdings
International,  Inc., a company  focused on maximizing the potential of emerging
healthcare  products and services in the U.S. and Asian  markets.  The agreement
requires Bridgetech to begin clinical testing to obtain regulatory  approvals to
market and distribute our device in the People's  Republic of China (the "PRC"),
the Hong Kong  Special  Administrative  Region of the PRC, the Republic of China


                                       29
<PAGE>

("Taiwan"),  Vietnam and Singapore. The agreement,  which was subject to minimum
purchase  and  other  requirements  which  have not been  met,  has  since  been
terminated.

On March 30, 2006, the Long Group entered into
three agreements with MKG. The agreements provide, among other things, that:

O    MKG will  acquire all the shares of Common  Stock of the Company  presently
     issued to the Long Group (comprising an aggregate of 8,747,528 shares).

O    Certain  members of the Long Group will assign $2 million of the total debt
     owed them by the Company.

O    For a three year term,  MKG will give the Long Group a royalty  equal to 1%
     of net sales of the Company's products MKG generates worldwide;

O    Pursuant to the terms of the Consulting Agreement,  Dr. Long or his nominee
     will  remain as a  consultant  to the Company for a term of three years and
     receive  an  annual  payment  of  $60,000  upon  each  anniversary  of  the
     Consulting Agreement; and

O    MKG shall  exercise  voting  rights of any and all shares of the  Company's
     stock in favor of Dr. Long or his nominee  remaining on the Company's Board
     and all stock  options and other  benefits to which other Board members are
     entitled.


Specifically,  at the March 31, 2006 closing,  the Long Group transferred all of
its  shares  of  common   stock   presently   issued  to  them  in  the  Company
(approximately  17.49% of all shares of Common  Stock of the  Company on a fully
diluted basis or approximately  20.6% of all outstanding  shares of Common Stock
of the Company  issued as of December 31, 2005).  Effective  March 30, 2006, Dr.
Long  intended to remain on the Board so long as his health  permits but he died
on April 8, 2006 and his  assignee has not been  nominated;  the other two Board
members (Dr.  Raymond Long and John  Stephens) have  resigned,  their  vacancies
being  filled  by  James  MacKay  (the  Chairman  of the  Board  of MKG) and his
designee,  Michael Yom,  thereby  giving MKG control of the  Company's  Board of
Directors.  Further,  as of June 30,  2006,  certain  members  of the Long Group
assigned $2 million  (comprising  principal  and accrued  interest) of the total
debt owed to  members  of the Long  Group by the  Company  as well as all rights
associated  with  such  debt  under any  note,  instrument,  agreement  or other
authorization  and under  applicable  law, under which the debt may be converted
into equity of the Company (the  "Assigned  Debt").  As of June 30, 2006 no debt
has been converted into equity of the Company.

Pursuant to the  agreements,  MKG has undertaken to make reasonable best efforts
to cause the Company to convert all of the  Assigned  Debt into shares of Common
Stock of the Company at $0.05 per share (the "Converted  Shares").  In the event
of the conversion of all of the Assigned Debt into shares of Common Stock of the
Company,  MKG will retain 51% of the Converted Shares plus an additional portion
of the Converted Shares so that,  together with the shares MKG acquired on March
30,  2006  from the Long  Group,  MKG would  then hold 51% of all the  shares of
Common Stock issued and outstanding  (on a  fully-diluted  basis) of the Company


                                       30
<PAGE>

existing  immediately  prior to the time of conversion.  All shares remaining of
the Converted  Shares not retained by MKG will be  transferred to members of the
Long Group,  provided that the Long Group agrees to deliver a proxy with respect
to all voting rights  associated  with those remaining  shares.  If MKG fails to
convert the  Assigned  Debt on or before June 27,  2006 or within  another  time
period  mutually  agreed by MKG and the Long Group,  it is required to re-assign
the Assigned Debt to the Long Group. In addition, pursuant to the agreements, to
the  extent  that any  other  debt  owed to the Long  Group  by the  Company  is
converted into shares of Common Stock,  the Long Group agreed to transfer 51% of
such shares to MKG. In return for the foregoing restructuring, MKG has agreed to
bring in  necessary  funding  and  management,  move  the  Company's  office  to
Philadelphia and immediately  utilize the contact base of MKG and its principals
to bring  the  Company's  products  to Asia and  other  markets  as  quickly  as
feasible.

MKG is  making  these  purchases  and is  being  assigned  the  debt (as well as
possibly  converting the latter into Company's Common Stock) potentially to gain
control of the Company.  MKG is not a member of a group relating to the Company.


The  restructuring  of the Company as described above and possible  injection of
badly needed capital by MKG may allow us the opportunity to address our over due
liabilities  and provide  essential  capital for creating an  infrastructure  to
internationally  market the  Company's  device.  If the planned  restructure  is
successful and required capital is injected, then the threats to the survival of
the Company may be significantly reduced.

Under the new management following the change in the controlling interest in the
Company, it is our hope to bring our technology to foreign markets, particularly
markets in Asia, Europe,  Latin America,  the Middle East and Africa. We believe
that some of these markets are among the most  appropriate for our technology as
breast cancer is of particularly  great significance for women in these regions.
These markets  currently  show a high need for early  awareness and detection as
current  access to mammograms is more limited,  access to  radiologists  is more
limited,  access to medical centers is more limited.  Early detection  awareness
programs  are  still  in  developmental   stages  in  these  markets.   Portable
technologies,  which  can bring  the  technology  to the  patient,  rather  than
requiring the patient to go to the medical center,  may be better suited to help
meet the  needs of  these  markets.  The CE mark  Certification  awarded  to the
technology  may further  enable us to introduce  the  technology  in the regions
where the CE mark Certification is recognized.

Under the new management,  we have developed strategic alliances and contacts in
these countries that include government, industry, manufacturing, technology and
finance.  We hope to leverage  these  strategic  alliances and contacts in those
foreign  markets to introduce our  technology,  sell our products and coordinate
breast cancer/early detection awareness initiatives.

One of our goals is to  develop  an  information  database  for  these  markets,
particularly China, the Philippines,  Mexico and Latin America,  which are among
the most populous regions in these markets.

We endeavor to  continue to pursue our efforts  overseas in these areas  through
our  strategic  alliances and  contacts,  to  incorporate  our  technology  into
national  health  systems,  insurance  systems  and breast  cancer  initiatives.
Through  these  efforts,  we hope to  generate  sales,  establish  manufacturing
facilities   overseas,   secure  additional  funding  and  further  develop  the
technology.



                                       31
<PAGE>

 LIQUIDITY  AND CAPITAL  RESOURCES

We have financed our operations  since inception almost entirely by the issuance
of our securities,  interest  income on the then unutilized  proceeds from these
issuances and with loans made directly, or guaranteed and collateralized, by Dr.
David Long and certain of his affiliates.

At June 30, 2006, we had a working capital deficiency of $8,045,311, an increase
of $232,907 from December 31, 2005. Our cash and cash equivalents were $3,875 at
June 30, 2006,  as compared to $2,794 at December 31, 2005. At December 31, 2005
and December 31, 2004, we had no value on the balance sheet for the inventory as
we decided to make full provision for all the items in our inventory.


During 2005,  our  operating  activities  utilized  $861,959 of net cash and our
financing  activities  provided  $831,611  of net  cash,  representing  advances
aggregating  $1,736,361 from Dr. David Long and certain of his  affiliates,  and
$295,250 from sale of shares of our common stock, and repayment of the liability
of $1.2 million  liability  under the line of credit from the advances  received
from Dr. Long and his affiliates. During 2004, our operating activities utilized
$1,304,073 of net cash, our investing  activities  used $5,284 and our financing
activities  provided $973,167 of net cash, $654,563 (net of $86,937 of expenses)
of which  represented net cash proceeds from the $1 million and $329,000 private
placements, advances aggregating $253,698 from Dr. David Long and certain of his
affiliates, and $64,906 (net of commission and discount of $96,919) representing
the net cash proceeds received from sale of shares of our common stock.


In June 2000,  we obtained a $500,000  line of credit from a bank,  repayment of
which has been guaranteed and  collateralized by an affiliate of Dr. David Long.
The line of credit was increased in November  2001 to $750,000,  in January 2002
to $1 million, and in December 2003 to $1.2 million. The line of credit has been
fully  drawn-down and was repaid by advances made by Dr. Long and his affiliates
in May 2005.


Since 2001, we have been seeking  additional  third-party  funding.  During such
time, we have retained a number of different  investment banking firms to assist
us in locating  available funding;  however,  we have not yet been successful in
obtaining any of the  long-term  funding  needed to make us into a  commercially
viable entity.  During such period, Dr. David Long and certain of his affiliates
have  made  funding  available  to us to permit us to  sustain  certain  minimum
operations;  however, in 2003 Dr. Long advised us that we should not expect that
he or his  affiliates  will make any further  funds  available to us. During the
period from  December 2003 to February  2004, we were able to obtain  short-term
financing of $1 million from a private placement (which resulted in net proceeds
to us of  $811,778,  prior  to any  allocation  for  the  cost  of our  required
registration of the shares of common stock issued in the  placement).  On May 3,
2004, we signed an agreement with our placement agent to secure bridge financing
up to $800,000,  and we secured  $329,000 under this placement.  On September 8,
2004,  we signed a note in favor of our private  placement for $50,000 under the
same  terms  and  conditions  as the  $329,000  private  placement.  Most of the
proceeds  from this note are set aside to pay for  interest  due on notes issued
under the $1 million and $329,000 private placements.

As  detailed  above in the  Overview  Section,  the  change  in the  controlling
interest in the Company and possible  injection  of badly needed  capital by MKG


                                       32
<PAGE>

may allow us the  opportunity  to address our over due  liabilities  and provide
essential capital for creating an infrastructure to  internationally  market the
Company's device. If the planned  restructure is successful and required capital
is  injected,   then  the  threats  to  the  survival  of  the  Company  may  be
significantly reduced.

Comparison  of the  Unaudited  Three  Months  Ended  June 30,  2006  (the  "2006
Quarter")  with the  Unaudited  Three  Months  Ended  June 30,  2005 (the  "2005
Quarter")

We did not sell any of our products in the 2006 or 2005 Quarter.

We did not incur  any  research  and  development  expenses  in the 2006 or 2005
Quarter.

Selling,  general and administrative  expenses decreased by $566,838, or 94%, to
$33,538 in the 2006 Quarter from $600,376 in the 2005 Quarter.

We had no  interest  expenses in the 2006  Quarter,  compared to $140,544 in the
2005 Quarter.

As a result of the  foregoing,  we  incurred  a net loss of  $33,538 in the 2006
Quarter,  compared to a net loss of $725,920 in the 2005 Quarter,  a decrease of
$692,382, or 95%.

Comparison of the Unaudited Six Months Ended June 30, 2006 (the "2006
Period") with the Unaudited Six Months Ended June 30, 2005 (the "2005 Period")

We did not sell any of our products in the 2006 or 2005 Period.

In the 2006 or 2005  Period,  we did not  incur  any cost of sales as we did not
sell any products.

We did not incur any research and  development  expenditure  in the 2006 or 2005
Period.

Selling, general and administrative expenses decreased by $1,088,956, or 91%, to
$105,410 in the 2006 Period from $1,194,366 in the 2005 Period.

We had no interest expense in the 2006 Period,  compared to $263,934 in the 2005
Period.

As a result of the  foregoing,  we  incurred a net loss of  $330,662 in the 2006
Period,  compared to a net loss of $1,443,301 in the 2005 Period, a reduction in
loss of $1,112,639, or 77%.

Comparison of the Year Ended  December 31, 2005 with the Year Ended December 31,
2004

In 2005, as we did not sell any products, we did not incur any cost of sales; in
2004, we sold one device and sensors to a distributor  overseas for $10,550.


                                       33
<PAGE>

<TABLE>


In 2005,  we did not have any cost of sales as full  provision  was made for the
items  sold.  In 2004,  we wrote down in full our then  remaining  inventory  by
making an additional provision of $81,480.

We did not incur any research and development expenses in 2005 and 2004.

Selling,  general and administrative  expenses decreased by $325,683, or 26%, to
$943,634 in 2005 from $1,269,317 in 2004. The decrease was largely  attributable
to costs related to personnel  (employees and consultants),  which were lower by
approximately  $169,000,  professional  fees pertaining to regulatory audits and
patent  legal  fees were  reduced by  $93,000.

We had net interest  expense of $576,887 in 2005,  compared to $365,373 in 2004,
an increase of $211,514,  or 58%, due to increase in advances  from Dr. Long and
his affiliates in 2005.

Amortization  of finance costs were reduced by $1,545,373 in 2005 mainly because
the  amortization  for the $ 1 million  placement  was fully  amortized  in 2004
(maturity date December 31, 2004);  and, in 2005, only the remaining cost of the
$329,000  placement  and the $50,000 note with maturity date of May 31, 2005 was
amortized,  as detailed in the table below along with the cost of shares  issued
under  Regulation S and the expensing of the fair value of shares issued for the
default  of  repayment  of the  notes  due under  the $1  million  and  $329,000
placements during the two years:

                                                                    2005          2004          VARIANCE
                                                                    ----          ----          --------

<S>                                                                            <C>              <C>
Amortization of value of shares issued as incentive for notes      $311,073    $1,502,907        $1,191,834
Amortization of Finance Expenses relating to private placements      19,002       191,070           172,068
Commission and discount on sale of shares under S Registration      247,498        96,919          (150,579)
Fair value shares due as penalty for payment default on notes        17,950       350,000           332,050
                                                                -------------------------------------------
Total cost relating to issuance of financial instruments           $595,523    $2,140,896        $1,545,373
                                                                ===========================================
</TABLE>

In 2005, we received a settlement of $15,000 for a breach of a royalty agreement
and  $70,000  from a new  distributor  to train and  prepare  clinical  data for
regulator bodies in certain southeast Asian countries; we had no other income in
2004.

As a result of the  foregoing,  we  incurred a net loss of  $2,225,312  in 2005,
compared to a net loss of $3,846,517 in 2004, a decrease of $1,621,205, or 42%.

Comparison of the Year Ended  December 31, 2004 with the Year Ended December 31,
2003

We did one device and sensors to a distributor  overseas for $10,550; we did not
sell any of our products in 2003. In 2003,  as we did not sell any products,  we
did not incur any cost of sales.

In 2004,  we did not have any cost of sales as full  provision  was made for the
items sold. Also, in 2004, we wrote down in full our then remaining inventory by
making an additional  provision of $81,480;  no similar  write-down  occurred in
2003.

Research   and   development   expenses   include  the  costs  of   engineering,
manufacturing  and related  activities  conducted in connection  with  obtaining
required governmental and regulatory approvals for our device,  expenses related


                                       34
<PAGE>

<TABLE>


to the adoption of new  technology  and costs  incurred in  connection  with the
redesign of our device.  We did not incur any research and development  expenses
in 2004; in 2003, we spent  $41,425 for research and  development.  Our redesign
project  was  completed  and no new  research  was started due to lack of funds.

Selling,  general and administrative  expenses decreased by $452,751, or 26%, to
$1,269,317 in 2004 from  $1,722,068 in 2003.  The major savings were made in the
costs  related to  personnel  (employees  and  consultants)  which were lower by
approximately $146,000, professional fees were reduced by $169,000, and payments
to investment advisors was down by $112,000 in 2004 compared to 2003.

We had net interest expense of $365,373 in 2004, compared to $455,822 in 2003, a
decrease of $90,449,  or 20%, due to accrual of interest  ($192,243)  payable to
employees on deferred  remuneration  due in 2003,  partly off set by  additional
interest on increased borrowings in 2004.


The increased amortization of shares issued and other finance costs were largely
attributable to the following cost related to issuance of financial  instruments
to secure new funding:

                                                                    2004          2003          Variance
                                                                    ----          ----          --------
<S>                                                                             <C>           <C>

Amortization of value of shares issued as incentive for notes    $1,502,907      $23,470      $ (1,479,437)
Amortization of Finance Expenses relating to private placements     191,070            -          (191,070)
Commission and discount on sale of shares under S Registration       96,919            -           (96,919)
Fair value of shares due as penalty for payment default on notes    350,000            -          (350,000)
                                                                 -----------------------------------------

Total cost relating to issuance of financial instruments         $2,140,896      $23,470       ($2,117,426)
                                                                 =========================================
</TABLE>

We did not earn any royalty income in 2004 as the royalty  agreement  expired in
2004; in 2003,  royalty  income was $54,617.

As a result of the  foregoing,  we  incurred a net loss of  $3,846,517  in 2004,
compared to a net loss of $2,164,698 in 2003, an increase of $1,681,819, or 78%.

While we have raised capital to meet our working  capital and financing needs in
the past,  additional  financing  is  required  in order to meet our current and
projected  cash flow deficits from  operations and  development.  We are seeking
financing  in the form of  equity  in order to  provide  the  necessary  working
capital.  We currently have no commitments for financing.  There is no guarantee
that we will be successful in raising the funds required.

By adjusting its operations and  development  to the level of  capitalization  ,
management  believes it has sufficient  capital resources to meet projected cash
flow deficits  through the next twelve months . However,  if thereafter,  we are
not successful in generating  sufficient liquidity from operations or in raising
sufficient  capital  resources,  on terms  acceptable  to us,  this could have a
material  adverse effect on our business,  results of operations,  liquidity and
financial  condition.

The independent  auditors  report on our December 31, 2005 financial  statements
states that our recurring losses raise  substantial  doubts about our ability to
continue as a going concern.

PRODUCT RESEARCH AND DEVELOPMENT

We do not anticipate  incurring  material research and development  expenditures
during the next 12 months.


                                       35
<PAGE>


ACQUISITION OR DISPOSITION OF PLANT AND EQUIPMENT

We do not anticipate the sale of any  significant  property,  plant or equipment
during the 12 months.  We do not anticipate the  acquisition of any  significant
property, plant or equipment during the next 12 months.

NUMBER OF EMPLOYEES

From our inception through the period ended December 31, 2005, we have relied on
the services of outside consultants for services and currently have one (1) full
time  employee.  In order for us to attract  and retain  quality  personnel,  we
anticipate we will have to offer competitive salaries to future employees. We do
not anticipate our employment base will significantly  change during the next 12
months.  As we continue to expand,  we will incur additional cost for personnel.
This projected  increase in personnel is dependent upon our generating  revenues
and  obtaining  sources  of  financing.  There is no  guarantee  that we will be
successful in raising the funds  required or generating  revenues  sufficient to
fund the projected increase in the number of employees.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not maintain  off-balance  sheet  arrangements nor
does it  participate  in  non-exchange  traded  contracts  requiring  fair value
accounting treatment.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Impairment of long-lived assets

At December 31, 2005, we had impaired in full the  unamortized  value of patents
and  disclosed  separately  in the Income  Statement as impairment of intangible
assets.  In December  2005,  during the Company's  annual review of the carrying
values of  patents  and  trademarks,  the  management  determined  that,  due to
increased  uncertainty  about  obtaining  FDA's  approval to sell the  Company's
device in the  United  States,  the  recoverability  of the  carrying  values of
Patents and Trade Marks is in doubt.  The  management is unable to determine and
project future undiscounted cash flows for these assets with reasonable accuracy
due to these  uncertainties.  Consequently,  the  Company  recorded  a charge of
$194,268 to provide in full for these  assets,  and this amount is recorded as a
component of operating expenses in the Income Statement as a separate line item.


Valuation of deferred tax assets

In  assessing  the  realizability  of deferred  tax assets,  we have  considered
whether it is more likely than not that some  portion,  or all, of deferred  tax
assets will be  realized.  The  ultimate  realization  of deferred tax assets is
dependent  upon the  generation of future  taxable  income during the periods in
which those temporary  differences become  deductible.  At December 31, 2005 and
2004,  we made full  provision  for our deferred tax assets due to our continued
operating losses and inability to assess the likelihood of generating sufficient
future  taxable income to realize such  benefits.  Substantially  all of our net
operating  loss   carryforwards   are  subject  to  limitation  and  may  expire
unutilized.


                                       36
<PAGE>


INVENTORY VALUATION RESERVES

We provide for inventory  obsolescence based upon assumptions  concerning future
demand,  market  conditions  and  anticipated  timing  of the  release  of  next
generation  products.  If actual  market  conditions  or future  demand are less
favorable than those projected by management, or if next generation products are
released  earlier than  anticipated,  additional  inventory  write-downs  may be
required.  Due to our decision to introduce a new device with updated technology
and major design modifications in 2003 (which is now projected to occur in 2005,
subject to receipt of adequate  financing to enable us to complete the project),
we created a reserve for our  inventory of old devices  amounting to $179,916 in
2001 and increased this reserve by $352,154 in 2002 to fully provide for the old
units and all the sensors for these units.  In 2004, we increased the reserve by
$81,480 to fully provide for all the inventory items. Additionally, we wrote off
obsolete and scrapped inventory totaling $41,364 in 2002.

STOCK-BASED COMPENSATION

We apply the intrinsic value-based method of accounting prescribed by Accounting
Principles  Board Opinion 25,  "Accounting  for Stock Issued to Employees",  and
related  interpretations,  in accounting  for our stock option  plans.  As such,
compensation  expense  is  recorded  on the date of grant of an  employee  stock
option only if the then current market price of the underlying stock exceeds the
exercise  price.  Statement of Financial  Accounting  Standards  (SFAS) No. 123,
"Accounting for Stock-Based Compensation", established accounting and disclosure
requirements  using a fair  value-based  method of  accounting  for  stock-based
employee  compensation  plans.  As allowed by SFAS  No.123,  we have  elected to
continue  to apply the  intrinsic  value-based  method of  accounting  described
above,  and have adopted the  disclosure  requirements  of SFAS No. 123. We also
have adopted the annual disclosure  provisions of SFAS No. 148,  "Accounting for
Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS 123"
in our  financial  reports  for the year  ended  December  31,  2003 and for the
subsequent periods.

AUDIT COMMITTEE AND FINANCIAL EXPERT

Our Board of Directors has not had an Audit  Committee  since the resignation of
our  two  independent  directors  in  December  2002,  and we  have  not had the
available  financial  resources to obtain any  replacement.  None of our current
directors  would be considered to have the  experience to be considered to be an
audit committee financial expert.

NON-GAAP FINANCIAL MEASURES

The financial  statements  appearing in this annual report on Form 10-KSB do not
contain  any  financial  measures  which are not in  accordance  with  generally
accepted accounting procedures.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004,
the FASB issued SFAS No. 123 (revised) ("SFAS No. 123R"), "Share-Based Payment."
SFAS No. 123R  eliminates the intrinsic  value method under APB 25,  "Accounting
for Stock  Issued to  Employees"  as an  alternative  method of  accounting  for
stock-based  awards.  SFAS No. 123R also revises the fair value-based  method of
accounting for share-based payment liabilities, forfeitures and modifications of
stock-based  awards and  clarifies  SFAS No.  123's  guidance in several  areas,


                                       37
<PAGE>

including measuring fair value, classifying an award as equity or as a liability
and attributing  compensation cost to reporting periods.  In addition,  SFAS No.
123R amends SFAS No. 95,  "Statement  of Cash Flows," to require that excess tax
benefits be reported as a financing  cash inflow  rather than as a reduction  of
taxes paid,  which is included  within  operating cash flows. We are required to
adopt  SFAS No.  123R for the  interim  period  beginning  July 1, 2005  using a
modified  version of  prospective  application  or may elect to apply a modified
version of  retrospective  application.  We  currently  account for  stock-based
awards under the intrinsic  value approach in accordance with APB Opinion No. 25
and  disclose  the effect of  stock-based  awards as  required  by SFAS No. 148,
"Accounting for  Stock-Based  Compensation  -- Transition and  Disclosure".  The
adoption of the new standard would require our Company to recognize compensation
expense for equity-based  awards.  This will have the effect of reducing our net
income by the fair value of the options in future  years,  beginning in 2006. We
are not in a position to know the  effects of  adoption  of the new  standard at
this time.

ITEM 3.  CONTROLS AND PROCEDURES

Michael Yom, our president and chief executive  officer,  and Joseph Repko,  our
chief  financial  officer,  have evaluated the  effectiveness  of our disclosure
controls and procedures (as defined in Rules  13a-14(c) and 15d-14(c)  under the
Securities  Exchange Act of 1934) as they existed at June 30, 2006. Based on our
evaluation,  our Chief Executive  Officer and Chief Financial  Officer concluded
that our  disclosure  controls  and  procedures  need  improvement  and were not
adequately  effective as of June 30, 2006 to ensure  timely  reporting  with the
Securities  and  Exchange  Commission.  Our  management  is in  the  process  of
identifying  deficiencies with respect to our disclosure controls and procedures
and implementing  corrective  measures,  which includes the establishment of new
internal policies related to financial reporting.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

As  required by Rule  13a-15(d),  the  Company's  Chairman  and Chief  Financial
Officer,  also  conducted an  evaluation of  Biofield's  internal  controls over
financial  reporting to determine whether any changes occurred during the fourth
fiscal  quarter  that have  materially  affected,  or are  reasonably  likely to
materially  affect,  the Company's  internal  control over financial  reporting.
During the preparation of the Company's  financial  statements as of and for the
quarter ended June 30, 2006,  the Company has concluded  that the current system
of disclosure  controls and procedures was not effective because of the internal
control weaknesses identified below. As a result of this conclusion, the Company
has  initiated the changes in internal  control,  to the extent  possible  given
limitations in financial and manpower resources, also described below. It should
be noted that any system of controls,  however well designed and  operated,  can
provide only reasonable, and not absolute,  assurance that the objectives of the
system will be met. In  addition,  the design of any control  system is based in
part upon certain  assumptions  about the likelihood of future  events.

LACK OF ADEQUATE ACCOUNTING STAFF

Due to limitations in financial and management  resources,  the Company does not
have adequate  accounting staff. As a result,  the Company took steps to address
its understaffed  Finance and Accounting team to correct this material weakness.
The  Company  engaged  an  independent   contractor  with  extensive   CFO-level


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<PAGE>

management and SEC reporting  experience in public companies.  The Company feels
this  addition to the  Company's  Finance and  Accounting  team will improve the
quality of future period financial reporting.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

We are  not a  party  to any  pending  legal  proceeding  which  is not  routine
litigation  incidental  to our  business  or which  involves a claim for damages
exceeding  10%  of our  current  assets,  nor  are we  aware  of any  proceeding
concerning us that a governmental authority may be contemplating.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2.  UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

No matter was submitted to a vote of our  securities  holders  during the fiscal
quarter ended June 30, 2006.

ITEM 5.  OTHER INFORMATION Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits

Exhibit (31) Rule 13a-14(a)/15d-14(a) Certification by Michael Yom and Joseph
             Repko

Exhibit (32) Section 1350 Certification by Michael Yom and Joseph Repko

B. Reports on Form 8-K

None.

SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be signed on its  behalf  by the  undersigned,  there  unto duly
authorized.

                                 BIOFIELD CORP.

Date: March 5, 2007               By: /s/ JOSEPH REPKO
                                          ----------------------------------
                                          Joseph Repko
                                          (Chief Financial Officer)

Date: March 5, 2007               By: /s/ MICHAEL YOM
                                         ----------------------------------
                                         Michael Yom
                                        (President & Chief Executive Officer)