**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)




x QUARTERLY
        REPORT
        UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934


**For
      the quarterly period ended December 31, 2005**




o TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





For
      the
      transition period from ________________ to _______________





**000-49620**


(Commission
      file number)





**COBALIS
      CORP.**


(Exact
      name of small business issuer as specified in its charter)





**Nevada**
            **91-1868007**(State
                or other jurisdiction
            (IRS
                Employerof
                incorporation or organization)
            Identification
                No.)





**2445
      McCabe Way, Suite 150, Irvine, California 92614**


(Address
      of principal executive offices)





**(949)
      757-0001**


(Issuer's
      telephone number)





**N/A**


(Former
      name, former address and former fiscal year, if changed since last
      report)





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





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: As of January
      27, 2006 - 26,995,670 shares
      of
      common stock





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





Transitional
      Small Business Disclosure Format (check one): Yes [ ] No [X]


1




**COBALIS
      CORP.**


**Index**





PageNumberPART
                I.
            FINANCIAL
                INFORMATION
            3Item
                1.
            Financial
                Statements
            3Consolidated
                Balance Sheet as of December 31, 2005 (unaudited)
            3Consolidated
                Statements of Operations for the
            4three
                and nine months ended December 31, 2005 and 2004
                (unaudited)Consolidated
                Statements of Stockholders’ Deficit for thenine
                months ended December 31, 2005 (unaudited)
            5Consolidated
                Statements of Cash Flows for thenine
                months ended December 31, 2005 and 2004 (unaudited)
            6Notes
                to Consolidated Financial Statements (unaudited)
            7Item
                2.
            Management's
                Discussion and Analysis or Plan of Operations
            15Item
                3.
            Controls
                and Procedures
            21PART
                II.
            OTHER
                INFORMATION
            21Item
                1.
            Legal
                Proceedings
            21Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            22Item
                3.
            Defaults
                Upon Senior Securities
            22Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            22Item
                5.
            Other
                Information
            22Item
                6.
            Exhibits
            23SIGNATURES
            
            24





2




**PART
      I.**  **FINANCIAL
      INFORMATION**





**Item
      1.**  **Financial
      Statements**





**Cobalis
                  Corp. and Subsidiary****(formerly
                  Biogentech Corp.)****(A
                  Development Stage Company)****Consolidated
                  Balance Sheet****December
                  31,****2005**(unaudited)**ASSETS**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              14,383TOTAL
                  CURRENT ASSETS
              
              
              14,383PROPERTY
                  AND EQUIPMENT, net of accumulated depreciation of $97,192
              
              
              17,970WEBSITE
                  DEVELOPMENT COSTS, net of accumulated amortization of
                  $32,839
              
              
              1,768PATENTS,
                  net of accumulated amortization of $265,250
              
              
              640,065DEPOSIT
              
              
              40,000TOTAL
                  ASSETS
              
              $
              714,186**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              155,085Accrued
                  expenses
              
              
              1,473,528Due
                  to related parties
              
              
              4,177,089Warrant
                  liability
              
              
              56,647Promissary
                  notes
              
              
              225,113Convertible
                  notes payable
              
              
              700,000TOTAL
                  CURRENT LIABILITIES
              
              
              6,787,462SENIOR
                  DEBENTURE, net of discount of $119,488
              
              
              130,512TOTAL
                  LIABILITIES
              
              
              6,917,974CONVERTIBLE
                  PREFERRED STOCK (dividends on arrears of $168,750)
              
              
              885,000COMMITMENTS
                  AND CONTINGENCIES
              
              
              -STOCKHOLDERS'
                  DEFICITCommon
                  stock; $0.001 par value; 50,000,000 sharesauthorized;
                  26,745,670 shares issued and outstanding
              
              
              26,746Additional
                  paid-in capital
              
              
              14,483,770Prepaid
                  expenses
              
              
              (88,195
              )Deficit
                  accumulated during the development stage
              
              
              (21,511,109
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (7,088,788
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              714,186





The
            accompanying notes are an integral part of these consolidated financial
            statements.
 3




**Cobalis
                  Corp. and Subsidiary****(formerly
                  Biogentech Corp.)****(A
                  Development Stage Company)****Consolidated
                  Statements of Operations****Cumulative
                  from****Three
                  Months Ended**
              
              **Nine
                  Months Ended**
              
              **November
                  21,****December31,**
              
              **December31,**
              
              **December31,**
              
              **December31,**
              
              **2000
                  (inception) to****2005**
              
              **2004**
              
              **2005**
              
              **2004**
              
              **December
                  31, 2005**(unaudited)
              
              (unaudited)
              
              (unaudited)
              
              (unaudited)
              
              (unaudited)NET
                  SALES
              $
              -
              
              $
              -
              
              $
              -
              
              $
              479
              
              $
              5,589COST
                  OF SALES
              
              -
              
              
              -
              
              
              -
              
              
              2,930
              
              
              31,342GROSS
                  PROFIT (LOSS)
              
              -
              
              
              -
              
              
              -
              
              
              (2,451
              )
              
              (25,753
              )OPERATING
                  EXPENSES:Professional
                  fees
              
              1,003,441
              
              
              1,662,139
              
              
              1,961,801
              
              
              2,605,599
              
              
              7,546,587Salary
                  and wages
              
              317,025
              
              
              55,136
              
              
              495,245
              
              
              178,031
              
              
              2,471,023Rent
                  expense
              
              34,486
              
              
              32,729
              
              
              103,409
              
              
              100,373
              
              
              519,772Marketing
                  and research
              
              (406,315
              )
              
              974,128
              
              
              (350,999
              )
              
              985,921
              
              
              1,894,373Depreciation
                  and amortization
              
              23,262
              
              
              21,018
              
              
              69,545
              
              
              62,965
              
              
              503,910Impairment
                  expense
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,331,522Other
                  operating expenses
              
              167,373
              
              
              119,741
              
              
              455,985
              
              
              256,364
              
              
              1,577,297TOTAL
                  OPERATING EXPENSES
              
              1,139,272
              
              
              2,864,891
              
              
              2,734,986
              
              
              4,189,253
              
              
              16,844,484LOSS
                  FROM OPERATIONS
              
              (1,139,272
              )
              
              (2,864,891
              )
              
              (2,734,986
              )
              
              (4,191,704
              )
              
              (16,870,237
              )OTHER
                  INCOME (EXPENSE)Interest
                  expense and financing costs
              
              (137,502
              )
              
              (208,725
              )
              
              (545,869
              )
              
              (1,236,313
              )
              
              (4,050,704
              )Change
                  in fair value of warrant liability
              
              (51,270
              )
              
              141,786
              
              
              (24,928
              )
              
              86,867
              
              
              294,832TOTAL
                  OTHER INCOME (EXPENSE)
              
              (188,772
              )
              
              (66,939
              )
              
              (570,797
              )
              
              (1,149,446
              )
              
              (3,755,872
              )LOSS
                  BEFORE PROVISION FOR INCOME TAXES
              
              (1,328,044
              )
              
              (2,931,830
              )
              
              (3,305,783
              )
              
              (5,341,150
              )
              
              (20,626,109
              )PROVISION
                  FOR INCOME TAXES
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              (1,328,044
              )
              
              (2,931,830
              )
              
              (3,305,783
              )
              
              (5,341,150
              )
              
              (20,626,109
              )PREFERRED
                  STOCK DIVIDENDS
              
              18,750
              
              
              18,750
              
              
              56,250
              
              
              56,250
              
              
              1,053,750NET
                  LOSS ATTRIBUTED TO COMMON STOCKHOLDERS
              $
              (1,346,794
              )
              $
              (2,950,580
              )
              $
              (3,362,033
              )
              $
              (5,397,400
              )
              $
              (21,679,859
              )NET
                  LOSS PER SHARE:BASIC
                  AND DILUTED
              $
              (0.05
              )
              $
              (0.13
              )
              $
              (0.13
              )
              $
              (0.25
              )
              $
              (1.08
              )WEIGHTED
                  AVERAGE SHARES OUTSTANDING:BASIC
                  AND DILUTED
              
              26,154,906
              
              
              23,012,243
              
              
              25,410,249
              
              
              22,025,432
              
              
              20,071,930


The
            accompanying notes are an integral part of these consolidated financial
            statements.
 4




**Cobalis
                  Corp. and Subsidiary****(formerly
                  Biogentech Corp.)****(A
                  Development Stage Company)****Consolidated
                  Statements of Stockholders' Deficit****For
                  the Period From November 21, 2000 (inception) to March 31,
                  2005****(unaudited)**Deficitaccumulated
              
              TotalAdditional
              
              
              
              during
                  the
              
              stockholders'Common
                  stock
              
              paid-in
              
              Prepaid
              
              development
              
              equityShares
              
              Amount
              
              capital
              
              Expenses
              
              stage
              
              (deficit)Balance
                  at inception (November 21, 2000)
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Issuance
                  of founder’s shares in exchangefor
                  property and equipment
              
              
              16,300,000
              
              
              16,300
              
              
              -
              
              
              -
              
              
              -
              
              
              16,300Issuance
                  of common stock for cash - November 2000 @ $1.00
              
              
              30,000
              
              
              30
              
              
              29,970
              
              
              -
              
              
              -
              
              
              30,000Issuance
                  of common stock for cash - December 2000 @ $1.00
              
              
              15,000
              
              
              15
              
              
              14,985
              
              
              -
              
              
              -
              
              
              15,000Issuance
                  of common stock for cash - February 2001 @ $1.00
              
              
              12,000
              
              
              12
              
              
              11,988
              
              
              -
              
              
              -
              
              
              12,000Issuance
                  of common stock for cash - March 2001 @ $1.00
              
              
              125,000
              
              
              125
              
              
              124,875
              
              
              -
              
              
              -
              
              
              125,000Issuance
                  of common stock for services - March 2001 @ $1.00
              
              
              10,000
              
              
              10
              
              
              9,990
              
              
              -
              
              
              -
              
              
              10,000Contributed
                  capital
              
              
              -
              
              
              -
              
              
              62,681
              
              
              -
              
              
              -
              
              
              62,681Net
                  loss for the period from inception
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -(November
                  21, 2000) to March 31, 2001
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (223,416
              )
              
              (223,416
              )Balance
                  at March 31, 2001, as restated
              
              
              16,492,000
              
              
              16,492
              
              
              254,489
              
              
              -
              
              
              (223,416
              )
              
              47,565Issuance
                  of common stock for cash - April 2001 @ $1.00
              
              
              10,000
              
              
              10
              
              
              9,990
              
              
              -
              
              
              -
              
              
              10,000Issuance
                  of common stock for telephone equipment-April
                      2001 @ $1.00
              
              
              6,750
              
              
              7
              
              
              6,743
              
              
              -
              
              
              -
              
              
              6,750Issuance
                  of common stock for cash - May 2001 @ $1.00
              
              
              11,000
              
              
              11
              
              
              10,989
              
              
              -
              
              
              -
              
              
              11,000Issuance
                  of common stock for website development -May
                  2001 @ $1.00
              
              
              17,000
              
              
              17
              
              
              16,983
              
              
              -
              
              
              -
              
              
              17,000Issuance
                  of common stock for legal services -May
                  2001 @ $1.00
              
              
              1,000
              
              
              1
              
              
              999
              
              
              -
              
              
              -
              
              
              1,000Issuance
                  of common stock for cash - June 2001 @ $1.00
              
              
              23,500
              
              
              24
              
              
              23,476
              
              
              -
              
              
              -
              
              
              23,500Issuance
                  of common stock for cash - July 2001 @ $1.00
              
              
              20,000
              
              
              20
              
              
              19,980
              
              
              -
              
              
              -
              
              
              20,000Issuance
                  of common stock for cash - August 2001 @ $1.00
              
              
              25,000
              
              
              25
              
              
              24,975
              
              
              -
              
              
              -
              
              
              25,000Issuance
                  of common stock for services, related party -September
                  2001 @ $1.00
              
              
              65,858
              
              
              66
              
              
              65,792
              
              
              -
              
              
              -
              
              
              65,858Issuance
                  of common stock for cash - September 2001 @ $1.00
              
              
              15,000
              
              
              15
              
              
              14,985
              
              
              -
              
              
              -
              
              
              15,000Issuance
                  of common stock for services - September 2001 @ $1.00
              
              
              11,000
              
              
              11
              
              
              10,989
              
              
              -
              
              
              -
              
              
              11,000Issuance
                  of stock options for services - September 2001
              
              
              -
              
              
              -
              
              
              32,000
              
              
              -
              
              
              -
              
              
              32,000Issuance
                  of common stock for cash - October 2001 @ $1.00
              
              
              5,000
              
              
              5
              
              
              4,995
              
              
              -
              
              
              -
              
              
              5,000Issuance
                  of common stock for cash - December 2001 @ $1.00
              
              
              30,000
              
              
              30
              
              
              29,970
              
              
              -
              
              
              -
              
              
              30,000Issuance
                  of common stock for services -December
                  31, 2001 @ $1.00
              
              
              33,000
              
              
              33
              
              
              32,967
              
              
              -
              
              
              -
              
              
              33,000Issuance
                  of common stock for services, related party -December
                  2001 @ $1.00
              
              
              117,500
              
              
              118
              
              
              117,382
              
              
              -
              
              
              -
              
              
              117,500Issuance
                  of common stock for prepaid advertising -December
                  2001 @ $1.00
              
              
              15,600
              
              
              15
              
              
              15,585
              
              
              -
              
              
              -
              
              
              15,600Issuance
                  of common stock for property and equipment -January
                  2002 @ $3.00
              
              
              1,000
              
              
              1
              
              
              2,999
              
              
              -
              
              
              -
              
              
              3,000Issuance
                  of common stock for services, related party -January
                  2002 @ $1.00
              
              
              33,000
              
              
              33
              
              
              32,967
              
              
              -
              
              
              -
              
              
              33,000Issuance
                  of common stock for cash - February 2002 @ $2.00
              
              
              20,000
              
              
              20
              
              
              39,980
              
              
              -
              
              
              -
              
              
              40,000Issuance
                  of common stock for cash - March 2002 @ $2.00
              
              
              12,500
              
              
              12
              
              
              24,988
              
              
              -
              
              
              -
              
              
              25,000Contributed
                  capital
              
              
              -
              
              
              -
              
              
              211,269
              
              
              -
              
              
              -
              
              
              211,269Deferred
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              (60,108
              )
              
              -
              
              
              (60,108
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,144,249
              )
              
              (1,144,249
              )Balance
                  at March 31, 2002, as restated
              
              
              16,965,708
              
              
              16,966
              
              
              1,005,492
              
              
              (60,108
              )
              
              (1,367,665
              )
              
              (405,315
              )Issuance
                  of common stock for services - April 2002 @ $2.00
              
              
              3,000
              
              
              3
              
              
              5,997
              
              
              -
              
              
              -
              
              
              6,000Issuance
                  of common stock for cash - April 2002 @ $1.00
              
              
              10,000
              
              
              10
              
              
              9,990
              
              
              -
              
              
              -
              
              
              10,000Issuance
                  of common stock for cash - April 2002 @ $2.00
              
              
              17,500
              
              
              17
              
              
              34,983
              
              
              -
              
              
              -
              
              
              35,000Issuance
                  of common stock for cash - May 2002 @ $1.00
              
              
              10,000
              
              
              10
              
              
              9,990
              
              
              -
              
              
              -
              
              
              10,000Issuance
                  of common stock for cash - May 2002 @ $2.00
              
              
              16,000
              
              
              16
              
              
              31,984
              
              
              -
              
              
              -
              
              
              32,000Issuance
                  of stock options for services - May 2002
              
              
              -
              
              
              -
              
              
              350,000
              
              
              -
              
              
              -
              
              
              350,000Contributed
                  capital - bonus expense
              
              
              -
              
              
              -
              
              
              50,000
              
              
              -
              
              
              -
              
              
              50,000Issuance
                  of common stock for cash - June 2002 @ $1.00
              
              
              5,000
              
              
              5
              
              
              4,995
              
              
              -
              
              
              -
              
              
              5,000Issuance
                  of common stock for cash - June 2002 @ $2.00
              
              
              5,000
              
              
              5
              
              
              9,995
              
              
              -
              
              
              -
              
              
              10,000Issuance
                  of common stock for cash - July 2002 @ $1.00
              
              
              5,000
              
              
              5
              
              
              4,995
              
              
              -
              
              
              -
              
              
              5,000Issuance
                  of common stock for cash - August 2002 @ $2.00
              
              
              10,000
              
              
              10
              
              
              19,990
              
              
              -
              
              
              -
              
              
              20,000Issuance
                  of common stock for cash - September 2002 @ $2.00
              
              
              10,000
              
              
              10
              
              
              19,990
              
              
              -
              
              
              -
              
              
              20,000Issuance
                  of stock options below fair market value - November 2002
              
              
              -
              
              
              -
              
              
              250,000
              
              
              (250,000
              )
              
              -
              
              
              -Issuance
                  of common stock for conversion of note - December 2002 @
                  2.00
              
              
              50,000
              
              
              50
              
              
              99,950
              
              
              -
              
              
              -
              
              
              100,000Issuance
                  of common stock for cash - December 2002 @ $2.00
              
              
              20,000
              
              
              20
              
              
              39,980
              
              
              -
              
              
              -
              
              
              40,000Issuance
                  of common stock for services - December 2002 @ $2.00
              
              
              15,000
              
              
              15
              
              
              29,985
              
              
              -
              
              
              -
              
              
              30,000Issuance
                  of common stock for patents - December 2002 @ $2.00
              
              
              2,000,000
              
              
              2,000
              
              
              1,285,917
              
              
              -
              
              
              -
              
              
              1,287,917Contributed
                  capital
              
              
              
              
              
              
              
              
              292,718
              
              
              -
              
              
              -
              
              
              292,718Issuance
                  of common stock for exercise of options - December 2002
              
              
              574,000
              
              
              574
              
              
              574,028
              
              
              -
              
              
              -
              
              
              574,602Deferred
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              60,108
              
              
              
              
              
              60,108Contributed
                  capital
              
              
              
              
              
              
              
              
              5,000
              
              
              -
              
              
              -
              
              
              5,000Issuance
                  of common stock for services - January 2003
              
              
              
              
              
              
              
              
              25,000
              
              
              -
              
              
              -
              
              
              25,000Issuance
                  of common stock for cash February 2003 @ $2.00
              
              
              11,500
              
              
              12
              
              
              22,988
              
              
              -
              
              
              -
              
              
              23,000Issuance
                  of common stock for cash March 2003 @ $2.00
              
              
              5,000
              
              
              5
              
              
              9,995
              
              
              -
              
              
              -
              
              
              10,000Deferred
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              54,000
              
              
              -
              
              
              54,000Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              (2,148,008
              )
              
              (2,148,008
              )Balance
                  at March 31, 2003, as restated
              
              
              19,732,708
              
              
              19,733
              
              
              4,193,962
              
              
              (196,000
              )
              
              (3,515,673
              )
              
              502,022Issuance
                  of common stock for cash April 2003 @ $2.00
              
              
              70,000
              
              
              70
              
              
              139,930
              
              
              -
              
              
              -
              
              
              140,000Issuance
                  of common stock for cash May 2003 @ $2.00
              
              
              30,000
              
              
              30
              
              
              59,970
              
              
              -
              
              
              -
              
              
              60,000Acquisition
                  by Biogentech Corp of ("Togs for Tykes")
              
              
              1,032,000
              
              
              1,032
              
              
              (101,032
              )
              
              -
              
              
              -
              
              
              (100,000
              )Issuance
                  of common stock for penalties January 2004 @ $2.80
              
              
              135,000
              
              
              135
              
              
              377,865
              
              
              -
              
              
              -
              
              
              378,000Issuance
                  of common stock for services February 2004 @ $2.20
              
              
              100,000
              
              
              100
              
              
              219,900
              
              
              -
              
              
              -
              
              
              220,000Issuance
                  of common stock for services February 2004 @ $1.85
              
              
              20,000
              
              
              20
              
              
              36,980
              
              
              -
              
              
              -
              
              
              37,000Value
                  of beneficial converstion feature of convertibledebenture
                  issued in September 2003
              
              
              
              
              
              
              
              
              346,870
              
              
              -
              
              
              -
              
              
              346,870Fair
                  value allocated to warrant liability for detachablewarrants
                  issued with preferred stock
              
              
              
              
              
              
              
              
              (181,849
              )
              
              -
              
              
              -
              
              
              (181,849
              )Dividend
                  on preferred stock
              
              
              
              
              
              
              
              
              885,000
              
              
              -
              
              
              (885,000
              )
              
              -Deferred
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              196,000
              
              
              -
              
              
              196,000Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              (5,703,639
              )
              
              (5,703,639
              )Balance
                  at March 31, 2004
              
              
              21,119,708
              
              
              21,120
              
              
              5,977,596
              
              
              -
              
              
              (10,104,312
              )
              
              (4,105,596
              )Issuance
                  of common stock for penalties May 2004 @ $1.85
              
              
              170,000
              
              
              170
              
              
              314,330
              
              
              -
              
              
              -
              
              
              314,500Issuance
                  of common stock for services June 2004 @ $1.75
              
              
              10,000
              
              
              10
              
              
              17,490
              
              
              -
              
              
              -
              
              
              17,500Issuance
                  of common stock for conversion of debt June 2004 @ $1.60
              
              
              371,317
              
              
              371
              
              
              593,736
              
              
              -
              
              
              -
              
              
              594,107Issuance
                  of common stock for services July 2004 @ $1.35
              
              
              7,489
              
              
              8
              
              
              10,101
              
              
              
              
              
              
              
              
              10,109Issuance
                  of common stock for services July 2004 @ $1.10
              
              
              75,000
              
              
              75
              
              
              82,425
              
              
              
              
              
              
              
              
              82,500Issuance
                  of common stock for services August 2004 @ $0.75
              
              
              100,000
              
              
              100
              
              
              74,900
              
              
              
              
              
              
              
              
              75,000Conversion
                  of debt to common stock September 2004 @ 2.22
              
              
              857,143
              
              
              857
              
              
              1,902,000
              
              
              
              
              
              
              
              
              1,902,857Issuance
                  of common stock for services October 2004 @ $2.20
              
              
              4,758
              
              
              5
              
              
              10,463
              
              
              
              
              
              
              
              
              10,468Issuance
                  of common stock for services October 2004 @ $2.55
              
              
              375,000
              
              
              375
              
              
              955,875
              
              
              
              
              
              
              
              
              956,250Issuance
                  of common stock for services December 2004 @ $1.45
              
              
              5,000
              
              
              5
              
              
              7,245
              
              
              
              
              
              
              
              
              7,250Issuance
                  of common stock for services December 2004 @ $1.30
              
              
              63,676
              
              
              63
              
              
              82,715
              
              
              
              
              
              
              
              
              82,778Issuance
                  of common stock for services January 2005 @ $1.05
              
              
              1,250
              
              
              1
              
              
              1,312
              
              
              
              
              
              
              
              
              1,313Issuance
                  of common stock for services January 2005 @ $1.18
              
              
              75,000
              
              
              75
              
              
              88,425
              
              
              
              
              
              
              
              
              88,500Issuance
                  of common stock for services February 2005 @ $1.10
              
              
              155,000
              
              
              155
              
              
              170,345
              
              
              
              
              
              
              
              
              170,500Issuance
                  of common stock for services February 2005 @ $1.06
              
              
              100,000
              
              
              100
              
              
              105,900
              
              
              
              
              
              
              
              
              106,000Issuance
                  of common stock for services February 2005 @ $0.95
              
              
              30,000
              
              
              30
              
              
              28,470
              
              
              
              
              
              
              
              
              28,500Issuance
                  of common stock for services February 2005 @ $1.05
              
              
              80,628
              
              
              81
              
              
              84,578
              
              
              
              
              
              
              
              
              84,659Issuance
                  of common stock for services February 2005 @ $1.00
              
              
              467,159
              
              
              467
              
              
              466,692
              
              
              
              
              
              
              
              
              467,159Issuance
                  of common stock for services February 2005 @ $0.96
              
              
              350,000
              
              
              350
              
              
              335,650
              
              
              
              
              
              
              
              
              336,000Issuance
                  of common stock for financing costs March 2005 @ $0.81
              
              
              50,000
              
              
              50
              
              
              40,450
              
              
              
              
              
              
              
              
              40,500Issuance
                  of common stock for services March 2005 @ $0.80
              
              
              5,000
              
              
              5
              
              
              3,995
              
              
              
              
              
              
              
              
              4,000Issuance
                  of common stock for services March 2005 @ $0.75
              
              
              120,000
              
              
              120
              
              
              89,880
              
              
              
              
              
              
              
              
              90,000Issuance
                  of common stock for services March 2005 @ $0.68
              
              
              37,500
              
              
              38
              
              
              25,462
              
              
              
              
              
              
              
              
              25,500Fair
                  value of warrants issued to consultants
              
              
              
              
              
              
              
              
              553,715
              
              
              
              
              
              
              
              
              553,715-Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (8,101,014
              )
              
              (8,101,014
              )Balance
                  at March 31, 2005
              
              
              24,630,628
              
              
              24,631
              
              
              12,023,750
              
              
              -
              
              
              (18,205,326
              )
              
              (6,156,945
              )Cancelation
                  of common stock previously issued
              
              
              (105,000
              )
              
              (105
              )
              
              (113,895
              )
              
              
              
              
              
              
              
              (114,000
              )Issuance
                  of common stock for services April 2005 @ $0.59
              
              
              100,000
              
              
              100
              
              
              58,900
              
              
              
              
              
              
              
              
              59,000Issuance
                  of common stock for services April 2005 @ $0.62
              
              
              162,500
              
              
              162
              
              
              100,587
              
              
              
              
              
              
              
              
              100,749Issuance
                  of common stock for services May 2005 @ $0.60
              
              
              39,836
              
              
              40
              
              
              23,862
              
              
              
              
              
              
              
              
              23,902Issuance
                  of common stock for services June 2005 @ $0.65
              
              
              110,000
              
              
              110
              
              
              71,390
              
              
              
              
              
              
              
              
              71,500Issuance
                  of common stock for services June 2005 @ $0.45
              
              
              200,000
              
              
              200
              
              
              89,800
              
              
              
              
              
              
              
              
              90,000Issuance
                  of common stock for services July 2005 @ $0.60
              
              
              10,000
              
              
              10
              
              
              5,990
              
              
              
              
              
              
              
              
              6,000Issuance
                  of common stock for services July 2005 @ $0.61
              
              
              125,000
              
              
              125
              
              
              76,125
              
              
              
              
              
              
              
              
              76,250Issuance
                  of common stock for interest July 2005 @ $0.61
              
              
              50,000
              
              
              50
              
              
              30,450
              
              
              
              
              
              
              
              
              30,500Cancelation
                  of common stock previously issued
              
              
              (150,000
              )
              
              (150
              )
              
              (143,850
              )
              
              
              
              
              
              
              
              (144,000
              )Issuance
                  of common stock for services August 2005 @ $0.48
              
              
              100,000
              
              
              100
              
              
              47,900
              
              
              
              
              
              
              
              
              48,000Issuance
                  of common stock for services September 2005 @ $0.50
              
              
              30,000
              
              
              30
              
              
              14,970
              
              
              
              
              
              
              
              
              15,000Issuance
                  of common stock for services September 2005 @ $0.42
              
              
              50,000
              
              
              50
              
              
              20,950
              
              
              
              
              
              
              
              
              21,000Issuance
                  of common stock for services September 2005 @ $0.50
              
              
              75,000
              
              
              75
              
              
              37,425
              
              
              
              
              
              
              
              
              37,500Issuance
                  of common stock for services October 2005 @ $0.53
              
              
              220,000
              
              
              220
              
              
              115,280
              
              
              
              
              
              
              
              
              115,500Issuance
                  of common stock for prepaid interest October 2005 @ $0.58
              
              
              125,000
              
              
              125
              
              
              72,375
              
              
              (72,500
              )
              
              
              
              
              -Issuance
                  of common stock for conversion of debt October 2005 @
                  $1.75
              
              
              150,000
              
              
              150
              
              
              262,350
              
              
              
              
              
              
              
              
              262,500Issuance
                  of common stock for services November 2005 @ $0.78
              
              
              822,706
              
              
              823
              
              
              644,847
              
              
              (26,700
              )
              
              
              
              
              618,970Amortization
                  of prepaid expenses
              
              
              
              
              
              
              
              
              
              
              
              11,005
              
              
              
              
              
              11,005Value
                  of warrants issued with debt
              
              
              
              
              
              
              
              
              131,365
              
              
              
              
              
              
              
              
              131,365Amortization
                  of fair value of warrants issued to consultants
              
              
              
              
              
              
              
              
              913,199
              
              
              
              
              
              
              
              
              913,199-Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,305,783
              )
              
              (3,305,783
              )Balance
                  at December 31, 2005
              
              
              26,745,670
              
              $
              26,746
              
              $
              14,483,770
              
              $
              (88,195
              )
              $
              (21,511,109
              )
              $
              (7,088,788
              )


The
            accompanying notes are an integral part of these consolidated financial
            statements.
 5




**Cobalis
                  Corp. and Subsidiary****(formerly
                  Biogentech Corp.)****(A
                  Development Stage Company)****Consolidated
                  Statements of Cash Flows****Cumulative
                  from****Nine
                  Months Ended**
              
              **November
                  21,****December
                  31,**
              
              **December
                  31,**
              
              **2000
                  (inception) to****2005**
              
              **2004**
              
              **December
                  31, 2005**(unaudited)
              
              (unaudited)
              
              (unaudited)CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              $
              (3,305,783
              )
              $
              (5,341,150
              )
              $
              (20,626,109
              )Adjustment
                  to reconcile net loss to net cashprovided
                  by (used in) operating activities:Depreciation
                  and amortization expense
              
              69,545
              
              
              62,964
              
              
              503,910Common
                  stock issued for services
              
              1,025,371
              
              
              1,241,855
              
              
              4,233,715Common
                  stock issued for penalty
              
              -
              
              
              314,500
              
              
              692,500Common
                  stock issued for financing costs
              
              30,500
              
              
              -
              
              
              71,000Change
                  in value of warrant liability
              
              24,928
              
              
              (86,867
              )
              
              (294,832
              )Amortization
                  of debt issue costs
              
              11,877
              
              
              67,882
              
              
              95,377Exercise
                  of stock options for services
              
              -
              
              
              -
              
              
              26,960Amortization
                  of discounts on notes
              
              -
              
              
              492,137
              
              
              790,128Issuance
                  of stock options/warrants for services
              
              913,199
              
              
              351,725
              
              
              1,873,914Capital
                  contribution - bonus (related party)
              
              -
              
              
              -
              
              
              50,000Amortization
                  of prepaid expenses
              
              11,005
              
              
              -
              
              
              26,605Amortization
                  of deferred compensation
              
              -
              
              
              -
              
              
              250,000Discount
                  on common stock issued for settlement of debt
              
              -
              
              
              -
              
              
              50,000Impairment
                  expense
              
              -
              
              
              -
              
              
              2,331,522Changes
                  in assets and liabilities:
              
              
              
              
              
              
              
              -Prepaid
                  expenses and other assets
              
              -
              
              
              11,619
              
              
              -Inventory
              
              -
              
              
              5,903
              
              
              6,250Accounts
                  payable
              
              (171,734
              )
              
              465,542
              
              
              563,475Accrued
                  expenses
              
              (506,943
              )
              
              1,250,776
              
              
              2,388,998Amounts
                  due to related parties
              
              228,561
              
              
              372,226
              
              
              1,666,401Net
                  cash used in operating activities
              
              (1,669,474
              )
              
              (790,888
              )
              
              (5,300,186
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              (1,542
              )
              
              (1,561
              )
              
              (89,111
              )Increase
                  in patent costs
              
              -
              
              
              -
              
              
              (24,711
              )Change
                  in restricted cash
              
              -
              
              
              -
              
              
              -Merger
                  fees and costs
              
              -
              
              
              -
              
              
              -Increase
                  in acquisition deposits
              
              -
              
              
              -
              
              
              (2,220,000
              )Increase
                  in other deposits
              
              -
              
              
              -
              
              
              (40,000
              )Increase
                  in capitalized website
              
              -
              
              
              (3,532
              )
              
              (18,097
              )Net
                  cash used in investing activities
              
              (1,542
              )
              
              (5,093
              )
              
              (2,391,919
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Change
                  in cash overdraft
              
              (11,941
              )
              
              -
              
              
              -Payment
                  on contract
              
              -
              
              
              -
              
              
              (161,000
              )Proceeds
                  from advances - related party
              
              1,217,500
              
              
              752,832
              
              
              3,542,449Proceeds
                  from advances from stockholders
              
              310,000
              
              
              -
              
              
              310,000Proceeds
                  from issuance of notes payable
              
              250,000
              
              
              -
              
              
              1,465,000Proceeds
                  from sale of common stock
              
              -
              
              
              -
              
              
              806,500Proceeds
                  from sale of preferred stock
              
              -
              
              
              -
              
              
              885,000Proceeds
                  from convertible debenture
              
              100,000
              
              
              -
              
              
              700,000Capital
                  contribution
              
              -
              
              
              -
              
              
              571,668Payment
                  of debt issue costs
              
              -
              
              
              -
              
              
              (83,500
              )Payments
                  on advances from stockholders
              
              
              
              
              
              
              
              (50,000
              )Payments
                  on advances - related party
              
              (131,329
              )
              
              (15,500
              )
              
              (279,629
              )Net
                  cash provided by financing activities
              
              1,684,230
              
              
              737,332
              
              
              7,706,488NET
                  INCREASE (DECREASE) IN CASH ANDCASH
                  EQUIVALENTS
              
              13,214
              
              
              (58,649
              )
              
              14,383CASH
                  AND CASH EQUIVALENTS, Beginning of period
              
              1,169
              
              
              76,181
              
              
              -CASH
                  AND CASH EQUIVALENTS, End of period
              $
              14,383
              
              $
              17,532
              
              $
              14,383SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATION:Interest
                  paid
              $
              -
              
              $
              -
              
              $
              -Income
                  taxes paid
              $
              -
              
              $
              -
              
              $
              -





The
              accompanying notes are an integral part of these consolidated financial
              statements.
 6
 
 **COBALIS
          CORP. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**
  **NOTE
        1 - BASIS OF PRESENTATION**
 
 The
        unaudited consolidated financial statements have been prepared by Cobalis
        Corp.
        (the “Company”), pursuant to the rules and regulations of the Securities and
        Exchange Commission. The information furnished herein reflects all adjustments
        (consisting of normal recurring accruals and adjustments) which are, in the
        opinion of management, necessary to fairly present the operating results
        for the
        respective periods. Certain information and footnote disclosures normally
        present in annual consolidated financial statements prepared in accordance
        with
        accounting principles generally accepted in the United States of America
        have
        been omitted pursuant to such rules and regulations. These consolidated
        financial statements should be read in conjunction with the audited consolidated
        financial statements and footnotes for the year ended March 31, 2005 included
        in
        the Company’s Annual Report on Form 10-KSB. The results of the nine months ended
        December 31, 2005 are not necessarily indicative of the results to be expected
        for the full year ending March 31, 2006.
 
 Going
        Concern
 
 The
        accompanying consolidated financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States of America,
        which contemplate continuation of the Company as a going concern. The Company
        has incurred a net loss of $3,305,783 for the nine months ended December
        31,
        2005 and as of December 31, 2005 the Company had a working capital deficit
        of
        $6,773,079 and a stockholder deficit of $7,088,788. In addition, as of December
        31, 2005, the Company has not developed a substantial source of revenue.
        These
        conditions raise substantial doubt as to the Company's ability to continue
        as a
        going concern. These consolidated financial statements do not include any
        adjustments that might result from the outcome of this uncertainty. These
        consolidated financial statements do not include any adjustments relating
        to the
        recoverability and classification of recorded asset amounts, or amounts and
        classification of liabilities that might be necessary should the Company
        be
        unable to continue as a going concern.
 
 The
        Company is currently attempting to raise additional debt and equity financing
        for operating purposes and expects to begin selling its product in Australia,
        New Zealand, Indonesia, certain European countries and other territories
        in
        2006. The Company is also attempting to partner with a large pharmaceutical
        company for research and development, marketing and distribution of its
        product.
 
 The
        Company requires substantial capital to pursue its operating strategy, which
        includes commercialization of its products, and currently has limited cash
        for
        operations. Until the Company can obtain revenues or obtain funding through
        debt
        and equity financing sufficient to fund working capital needs and additional
        research and development costs necessary to obtain the regulatory approvals
        for
        commercialization, the Company will be dependent upon external sources of
        financing.
 
 There
        can
        be no assurances that sufficient financing will be available on terms acceptable
        to the Company, or at all. If the Company is unable to obtain such financing,
        the Company will be forced to scale back operations, which could have an
        adverse
        effect on the Company's financial condition and results of operations. These
        factors raise substantial doubt about the Company's ability to continue as
        a
        going concern.
 
 Management
        believes that actions presently being taken to revise the Company's operating
        and financial requirements provide the opportunity for the Company to continue
        as a going concern.
  7
 **COBALIS
            CORP. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
            THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**




Stock
        Options
 
 SFAS
        No.
        123, "Accounting for Stock-Based Compensation," establishes and encourages
        the
        use of the fair value based method of accounting for stock-based compensation
        arrangements under which compensation cost is determined using the fair value
        of
        stock-based compensation determined as of the date of grant and is recognized
        over the periods in which the related services are rendered. The statement
        also
        permits companies to elect to continue using the current intrinsic value
        accounting method specified in Accounting Principles Board ("APB") Opinion
        No.
        25, "Accounting for Stock Issued to Employees," to account for stock-based
        compensation. The Company has elected to use the intrinsic value based method
        and has disclosed the pro forma effect of using the fair value based method
        to
        account for its stock-based compensation issued to employees. For options
        granted to employees where the exercise price is less than the fair value
        of the
        stock at the date of grant, the Company recognizes an expense in accordance
        with
        APB 25. For non-employee stock based compensation the Company recognizes
        an
        expense in accordance with SFAS No. 123 and values the equity securities
        based
        on the fair value of the security on the date of grant. For stock-based awards
        the value is based on the market value for the stock on the date of grant
        and if
        the stock has restrictions as to transferability a discount is provided for
        lack
        of tradability. Stock option awards are valued using the Black-Scholes
        option-pricing model.
  If
        the
        Company had elected to recognize compensation expense based upon the fair
        value
        at the grant date for awards under the Stock Option Plan consistent with
        the
        methodology prescribed by SFAS No. 123, the Company’s net loss and loss per
        share would be increased to the pro forma amounts indicated below for the
        nine
        months ended December 31, 2005 and 2004:
  **2005**
                  
                  **2004**Net
                      loss attributed to common stockholders:As
                      reported
                  
                  $
                  (3,362,033
                  )
                  $
                  (5,397,400
                  )Compensation
                      recognized under APB 25
                  
                  
                  —
                  
                  
                  —Compensation
                      recognized under SFAS 123
                  
                  
                  (579,035
                  )
                  
                  —Pro
                      forma
                  
                  $
                  (3,941,068
                  )
                  $
                  (5,397,400
                  )Basic
                      and diluted loss per common share:As
                      reported
                  
                  $
                  (0.13
                  )
                  $
                  (0.25
                  )Pro
                      forma
                  
                  $
                  (0.16
                  )
                  $
                  (0.25
                  )
 The
          fair
          value for these options was estimated at the date of grant using a Black-Scholes
          option pricing model with the following weighted-average assumptions
          for 2005: risk-free interest rate of 4.25%; dividend yields of 0%;
          volatility factors of the expected market price of the Company’s common shares
          of 202%; and a weighted average expected life of the option of 5 years.
  Patent
        Costs
 
 Patent
        costs are carried at cost less accumulated amortization, which is calculated
        on
        a straight-line basis, over the estimated economic life of the patent. In
        accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," the
        Company evaluates intangible assets and other long-lived assets (including
        patent costs) for impairment, at least on an annual basis and whenever events
        or
        changes in circumstances indicate that the carrying value may not be recoverable
        from its estimated future cash flows. Recoverability of intangible assets
        and
        other long-lived assets is measured by comparing their net book value to
        the
        related projected undiscounted cash flows from these assets, considering
        a
        number of factors including past operating results, budgets, economic
        projections, market trends and product development cycles. If the net book
        value
        of the asset exceeds the related undiscounted cash flows, the asset is
        considered impaired, and a second test is performed to measure the amount
        of
        impairment loss. During the year ended March 31, 2004, the Company recognized
        an
        impairment expense of $111,522 related to one of its patents as it determined
        that this patent had no future value based on its assessment of expected
        future
        cash flows to be generated by this patent and the results of an independent
        appraisal done in April 2004. Amortization expense related to these patents
        for
        the nine months ended December 31, 2005 and 2004 was $40,399 and $40,399,
        respectively. Projected amortization expense approximates $54,000, $49,000,
        $49,000, $49,000 and $49,000, respectively, for each of the five years ended
        March 31, 2010. Weighted average life of the remaining patent approximated
        16.2
        years.


**NOTE
        2 - LOSS PER SHARE**
 
 The
        Company reports loss per share in accordance with SFAS No. 128, "Earnings
        per
        Share." Basic loss per share is computed by dividing loss available to common
        shareholders by the weighted average number of common shares available. Diluted
        loss per share is computed similar to basic loss per share except that the
        denominator is increased to include the number of additional common shares
        that
        would


8
 **COBALIS
          CORP. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**




have
        been
        outstanding if the potential common shares had been issued and if the additional
        common shares were dilutive. Diluted loss per share has not been presented
        since
        the effect of the assumed exercise of options and warrants to purchase common
        shares would have an anti-dilutive effect. There
        were 8,194,167 and 5,594,167 c ommon
        equivalent shares outstanding related to the options and warrants at December
        31, 2005 and 2004, respectively. In addition, as of December 31, 2005, 716,667
        shares of common stock are issuable upon the conversion of the convertible
        note
        payable and convertible preferred stock.
  **NOTE
        3 - PROPERTY AND EQUIPMENT**
 
 The
        cost
        of property and equipment at December 31, 2005 consisted of the
        following:





Furniture
                and fixtures
            
            $
            73,042Office
                equipment
            
            
            42,120115,162Less
                accumulated depreciation and amortization
            
            
            (97,192
            )$
            17,970




**NOTE
      4 - ACCRUED EXPENSES**





Accrued
      expenses at December 31, 2005 consisted of the following:





Accrued
                clinical trials payable
            
            $
            2,467Accrued
                penalties payable
            
            
            902,000Accrued
                interest payable
            
            
            266,700Accrued
                legal settlement
            
            
            200,000Accrued
                legal fees
            
            
            25,000Other
            
            
            77,361$
            1,473,528




The
      Company converted a total of $225,113 of amounts due for clinical trials to
      promissory notes that accrued interest at a rate of 10% per annum and were
      due
      on December 27, 2005. The notes currently have not been paid. In addition,
      the
      Company had estimated the amounts due related to the clinical trials and reduced
      this estimate by $415,418 during the three months ended December 31, 2005 as
      the
      Company began settling its obligation with the doctors and other services
      providers who conducted the clinical trials.




**NOTE
      5 - DUE TO RELATED PARTIES**




Due
      to
      related parties at December 31, 2005 consists of the following:





R&R
                Holdings, Inc. and affiliate a)
            
            $
            4,026,464Chaslav
                Radovich b)
            
            
            20,833Other
                officers/executives c)
            
            
            129,792$
            4,177,089


9
 **COBALIS
            CORP. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
            THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**


a)
        On
        January 1, 2001, the Company entered into a consulting contract with R&R
        Holdings, Inc. and its affiliate, Silver Mountain Promotions, Inc. ("R&R")
        whereby they would provide managerial consulting services to the Company
        at the
        rate of $125,000 per year and the rate was increased to $135,000 per year.
        R&R is also a shareholder of the Company and the controlling shareholder of
        R&R is Mr. Radul “Rudy” Radovich, the Company’s Chairman. As of December 31,
        2005, the Company had accrued $444,892 of consulting fees relating to this
        agreement.
 
 R&R
        advances the Company cash from time to time. As of December 31, 2005, the
        Company owed R&R $2,534,721 related to these advances. The St. Petka Trust,
        which is controlled by Mr. Radul Radovich, also advances the Company cash
        from
        time to time. As of December 31, 2005, the Company owed St. Petka Trust $664,500
        related to these advances. The Company has accrued interest on these advances
        at
        a rate of 10% per annum. Accrued interest at December 31, 2005 related to
        these
        advances totaled $382,351.
 
 b)
        The
        Company currently owes its Chief Executive Officer $20,833 in past due
        compensation. During the three months ended December 31, 2005, the Company
        paid
        its CEO a total of $104,167 in shares of its common stock. The Company is
        accruing salary to its CEO at an annual rate of $125,000.
 
 c)
        The
        Company currently owes other current and former executives $16,667 and $113,125,
        respectively, in past due compensation.
  **NOTE
        6 - ADVANCES FROM STOCKHOLDERS**
 
 During
        the nine months ended December 31, 2005, one stockholder advanced the Company
        $260,000. These advances are non-interest bearing, unsecured and payable
        upon
        demand. During the three months ended December 31, 2005, these advances plus
        $2,500 of accrued interest were converted into 150,000 shares of the Company’s
        common stock.
  **NOTE
        7 - PROMISSORY NOTES**
 
 The
        Company converted a total of $225,113 of amounts due for clinical trials
        into
        nine promissory notes that accrued interest at a rate of 10% per annum and
        were
        due on December 27, 2005. The notes currently have not been paid.
  **NOTE
        8 - CONVERTIBLE NOTES PAYABLE**
 
 Gryphon
        Master Fund, LP
 
 In
        September 2003, the Company sold a $600,000, three-year, 8% convertible note
        payable to Gryphon Master Fund, LP, which is convertible into shares of the
        Company's common stock at the initial conversion price of $2.00 per share.
        This
        price is subject to adjustment should the Company issue shares of its common
        stock at a price less than $1.75 per share. The convertible note payable
        was
        sold with detachable three-year warrants to purchase 90,000 shares of the
        Company's common stock at $2.88 per share. The warrant exercise price is
        also
        subject to adjustment based on sales of the Company's common stock below
        the
        current fair market value on the contract date.


10
 **COBALIS
          CORP. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**


The
        fair
        value of these warrants totaling $169,630 was computed using the Black-Scholes
        model under the following assumptions: (1) expected life of 3 years; (2)
        volatility of 104%, (3) risk free interest of 4.39% and (4) dividend rate
        of
        $0%. In addition, since this debt is convertible into equity at the option
        of
        the note holder at beneficial conversion rates, an embedded beneficial
        conversion feature was recorded as a debt discount and amortized using the
        effective interest method over the life of the debt in accordance with Emerging
        Issues Task Force No. 00-27, "Application of Issue No. 98-5 to Certain
        Convertible Instruments." Since the intrinsic value of the beneficial conversion
        feature and relative fair value of the warrants exceeds the proceeds of the
        convertible debt, the amount of the discount assigned to the beneficial
        conversion feature and warrants is limited to the amount of the net proceeds
        of
        the convertible debt. Therefore, the Company recorded a discount of $516,500
        (consisting of relative fair value of the warrants of $169,630 and beneficial
        conversion features of $346,870), the net proceeds received by the Company
        after
        the debt discount of $83,500. During the year ended March 31, 2005, the Company
        fully amortized the debt discount associated with the $600,000 convertible
        note
        payable due to the lawsuit filed by the holder of the convertible note
        payable.
 
 The
        Company also entered into a registration rights agreement whereby the Company
        agreed to file a valid registration statement with the Securities and Exchange
        Commission to register the shares of common stock underlying the Convertible
        Debentures and Debenture Warrants. Pursuant to EITF 00-19, "Accounting for
        Derivative Financial Instruments Indexed to, and Potentially Settled in,
        a
        Company's Own Stock", the relative fair value of the warrants has been recorded
        as a short-term liability until the Company has obtained an effective
        registration statement for these shares. If the Company does not file such
        an
        effective registration statement within 30 days of the closing date, or October
        8, 2003, the Company is subject to penalties as follows: 1% of the principal
        amount of the funding for the first 30 day period in which the Company fails
        to
        file such registration statement, and 2% for each 30 day period thereafter.
        At
        December 31, 2005, the Company had not filed such a registration statement
        and
        accordingly is currently subject to a penalty of approximately $282,000.
 
 In
        addition, the Company is required to report a value of the warrant as a fair
        value and record the fluctuation to the fair value of the warrant liability
        to
        current operations. During nine months ended December 31, 2005, the increase
        of
        the relative fair value of the warrants approximated $10,832. The relative
        fair
        value of the warrants approximated $24,528 as of December 31, 2005.
 
 Per
        the
        terms of the note agreement, in the event of default, the Company is subject
        to
        accrue interest at a default rate of 18% from the date of the default. As
        of
        December 31, 2005, Company had accrued interest of $250,027 related to this
        convertible note payable. In addition, the Company is obligated to remit
        125% of
        the outstanding note balance or $150,000 upon the acceleration of repayment
        by
        the holder.
 
 This
        convertible debenture is presented in the accompanying balance sheet as a
        current liability as the Company has not made required interest payment on
        this
        convertible debenture which is an event of default that give the holder the
        right to call the convertible debenture.





Tejeda
      and Tejeda, Inc.





On
      June
      13, 2005, the Company entered into a loan agreement with Tejeda and Tejeda,
      Inc.
      in the amount of $100,000. The loan is due on or before the 12-month anniversary
      and accrues interest at the rate of 10% per annum. The note is personally
      guaranteed by Mr. Radul Radovich, the Company’s Chairman, and Mr. Chaslav
      Radovich the Company’s CEO. On the 12-month anniversary, the holder of the note


11
 **COBALIS
          CORP. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**


may
      elect
      to convert the loan into shares of the Company’s common stock at $1.75 per
      shares or at a price equal to a 25% discount to the closing bid price on the
      day
      of conversion at maturity. If such conversion is elected, the loan shall be
      considered paid in full. The loan is convertible at the maturity, which is
      the
      date at which the conversion feature will become beneficial; therefore the
      intrinsic value of the beneficial conversion feature of approximately $25,000 has
      been calculated at the commitment date using the stock price as of that date. The
      amount will be recorded as interest expense at the date of conversion, if the
      loan is converted to shares of common stock.




**NOTE
      9 - SENIOR DEBENTURE**





On
      October 26, 2005, the Company issued a senior debenture to the Brad Chisick
      Trust in the amount of $250,000 that accrues interest at 10% per annum and
      is
      due on October 26, 2007. In addition, the Company also issued to the Brad
      Chisick Trust a warrant to purchase 500,000 shares of the Company’s common stock
      for $1.75 per shares.





The
      fair
      value of these warrants totaling $276,827 was computed using the Black-Scholes
      model under the following assumptions: (1) expected life of 5 years; (2)
      volatility of 194%, (3) risk free interest of 4.50% and (4) dividend rate of
      $0%. The face amount of the senior debenture of $250,000 was proportionately
      allocated to the senior debenture and the warrants in the amount of $118,635
      and
      $131,365, respectively. The amount allocated to the warrants of $131,365 was
      recorded as a discount on the senior debenture and is being amortized over
      the
      term of the debenture. During the three months ended December 31, 2005, the
      Company amortized $11,877 of the discount to interest expense. The balance
      of
      the debenture is shown net of unamortized discount of $ 119,488 in the balance
      sheet. In addition, on October 26, 2005, the Company issued to the Brad Chisick
      Trust 125,000 shares of its common stock valued at $72,500 as pre-payment of
      the
      accrued interest on this senior debenture. The prepaid interest will be
      amortized to interest expense over the two year term of the senior
      debenture.




**NOTE
      10 - CONVERTIBLE PREFERRED STOCK**





In
      September 2003, the Company sold 1,000 shares of its 7.5% convertible preferred
      stock to Gryphon Master Fund, LP for $1,000,000, less direct issuance costs
      of
      $115,000, which were netted against the proceeds of the offering. The
      Convertible Preferred Stock carries voting rights equivalent to the number
      of
      shares of common stock into which it can be converted, and has liquidation
      preference of $1,000 per share. The Convertible Preferred Stock is convertible
      into shares of the Company's common stock at the initial conversion price of
      $2.40 per share. This price is subject to change should the Company issue shares
      of its common stock at a price less than $1.75 per share. Included with the
      Convertible Preferred Stock were detachable three-year warrants to purchase
      104,167 shares of the Company's common stock at the price of $2.90 per share.
      The warrant exercise price is also subject to adjustment based on sales of
      the
      Company's common stock below the current fair market value on the contract
      date.





Since
      the
      intrinsic value of the beneficial conversion feature and relative fair value
      of
      the warrants exceeds the proceeds of the convertible preferred stock, the amount
      of the discount assigned to the beneficial conversion feature and warrants
      is
      limited to the amount of the proceeds of the convertible preferred stock. The
      discount was recorded as a preferred stock dividend at the date of issuance.
      The
      Company recognized $885,000 of preferred dividends related to the discount.




Pursuant
      to EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to,
      and
      Potentially Settled in, a Company's Own Stock", the relative fair value of
      the
      warrants, has been recorded as a short-term liability until the Company has
      obtained an effective registration statement for these shares.


12
 **COBALIS
          CORP. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**


If
      the
      Company does not file such an effective registration statement within 30 days
      of
      the closing date, or October 25, 2003, the Company is subject to penalties
      as
      follows: 1% of the value of the shares and the warrants paid by the purchaser
      for the first 30 day period in which the Company fails to file such registration
      statement, and 2% for each 30 day period thereafter. At December 31, 2005,
      the
      Company has not filed such a registration statement and accordingly is currently
      subject to a penalty of $470,000.





In
      addition, the Company is required to report a value of the warrant as a fair
      value and record the fluctuation to the fair value of the warrant liability
      to
      current operations. During the nine months ended December 31, 2005, the increase
      of the relative fair value of the warrants was $14,096. The relative fair value
      of the warrants was $32,119 as of December 31, 2005.





As
      of
      December 31, 2005, there was $168,750 of dividends in arrears related to the
      1,000 share of convertible preferred stock.




**NOTE
      11 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS**





In
      December 2004, the FASB issued SFAS No. 123 (Revised), entitled *Share-Based
      Payment* .
      This
      revised Statement eliminates the alternative to use APB Opinion No. 25’s
      intrinsic value method of accounting that was provided in SFAS No. 123 as
      originally issued. Under Opinion 25, issuing stock options to employees
      generally resulted in recognition of no compensation cost. This Statement
      requires entities to recognize the cost of employee services received in
      exchange for awards of equity instruments based on the grant-date fair value
      of
      those awards. For public companies that file as a small business issuer, this
      Statement is effective as of the beginning of the first interim or annual
      reporting period that begins after December 15, 2005. The adoption of SFAS
      123
      (Revised) will not impact the consolidated financial statements as the Company
      has not granted any equity instruments to employees.





In
      May
      2005, the FASB issued SFAS No. 154, entitled *Accounting
      Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB
      Statement No. 3* .
      This
      Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement
      No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes
      the requirements for the accounting for and reporting of a change in accounting
      principle. This Statement applies to all voluntary changes in accounting
      principle. It also applies to changes required by an accounting pronouncement
      in
      the unusual instance that the pronouncement does not include specific transition
      provisions. Opinion 20 previously required that most voluntary changes in
      accounting principle be recognized by including in net income of the period
      of
      the change the cumulative effect of changing to the new accounting principle.
      This Statement requires retrospective application to prior periods’ financial
      statements of changes in accounting principle, unless it is impracticable to
      determine either the period-specific effects or the cumulative effect of the
      change. This Statement defines *retrospective
      application* as the
      application of a different accounting principle to prior accounting periods
      as
      if that principle had always been used or as the adjustment of previously issued
      financial statements to reflect a change in the reporting entity. This Statement
      also redefines *restatement* as the
      revising of previously issued financial statements to reflect the correction
      of
      an error. **** The
      adoption of SFAS 154 did not impact the consolidated financial statements.





In
      June
      2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization
      Period for Leasehold Improvements (“EITF 05-6”) EITF 05-6 provides guidance on
      determining the amortization period for leasehold improvements acquired in
      a
      business combination or acquired subsequent to lease inception.
      The guidance in EITF 05-6 will be applied prospectively and is effective for
      periods beginning after June 29, 2005. EITF 05-6 is not expected to have a
      material effect on its consolidated financial position or results of
      operations.


13
 **COBALIS
          CORP. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004**
 **(UNAUDITED)**


**NOTE
        1** **2
        - LITIGATION**
 
 *Gryphon
        Master Fund, LP v. Cobalis Corp.:* On
        November 8, 2004, the Gryphon Master Fund, LP filed a lawsuit against the
        Company in United States District Court, Northern District of Texas, Dallas
        Division. The lawsuit seeks repayment of the $600,000 convertible note payable,
        accrued interest on the convertible note payable, penalties for failing to
        register the shares underlying the conversion of the convertible note payable,
        attorney fees and court costs.
 
 *Lease
        Dispute:* In
        March
        2003, the Company vacated its office space. The landlord then filed suit
        against
        the Company in the County of Orange, Superior Court of California, for unpaid
        rent. The Company believes that the landlord breached the agreement and,
        as
        such, the Company does not believe it owes any unpaid rent. In
        January 2006, this matter was settled and the Company is to pay a total of
        $200,000 over the next year, of which the Company paid the first $75,000
        on
        January 31, 2006. This leaves a total of $125,000 owing, of which $75,000
        is due
        on July 31, 2006, and $50,000 is due on December 31, 2006.
  In
        the
        ordinary course of business, the Company is generally subject to claims,
        complaints, and legal actions. At December 31, 2005, management believes
        that
        the Company is not a party to any action which would have a material impact
        on
        its financial condition, operations, or cash flows.
 14


**Item
        2.**  **Management's
        Discussion and Analysis or Plan of Operations**
  THIS
        FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT
        OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE
        HAPPENING OF FUTURE EVENTS ARE NOT BASED ON HISTORICAL FACT. FORWARD-LOOKING
        STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH
        AS
        "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE", "ANTICIPATE", "PREDICT",
        "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR SIMILAR TERMS, VARIATIONS
        OF
        THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS
        SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR MANAGEMENT
        ON
        THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT
        TO BE
        REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT
        AND
        NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE
        FORWARD-LOOKING STATEMENTS.
 
 THE
        ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED
        IN THE
        FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT
        TO
        UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND
        OTHER
        CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA
        AND
        OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM
        AND
        AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT
        THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY
        FROM
        ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED
        ON
        THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE
        GIVEN
        THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED
        IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO
        UPDATE
        ANY SUCH FORWARD-LOOKING STATEMENTS.
 
 **OVERVIEW**
 
 BioGentec
        Incorporated ("BG"), a private Nevada corporation, was incorporated on November
        21, 2000 according to the laws of Nevada, under the name St Petka, Inc. On
        May
        4, 2001, St Petka, Inc. formally changed its name to BioGentec Incorporated.
        On
        July 2, 2003, BG was merged into Togs for Tykes Acquisition Corp. ("TTAC"),
        a
        wholly owned subsidiary formed for the purpose of acquiring BG. On July 6,
        2004,
        BioGentech Corp. changed its name to Cobalis Corp. As allowed under SFAS
        141,
“Business Combinations” (“SFAS 141”), we designated a date of convenience of the
        closing for accounting purposes as June 30, 2003. Under the terms of the
        merger
        agreement, all of BG's outstanding common stock (19,732,705 shares of $0.001
        par
        value stock) was exchanged for 19,732,705 shares newly issued shares of $0.001
        par value stock of Cobalis Corp. common stock. This transaction was consummated
        with the filing of the Articles of Merger with the State of Nevada on July
        2,
        2003. BG shareholders then effectively controlled approximately 95% of the
        issued and outstanding common stock of Cobalis. Since the shareholders of
        BG
        obtained control of Cobalis, according to SFAS 141, this acquisition was
        treated
        as a recapitalization for accounting purposes, in a manner similar to reverse
        acquisition accounting.


15


**GOING
      CONCERN**





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America,
      which contemplate continuation as a going concern. We incurred a net loss of
      $3,305,783 for the nine months ended December 31, 2005 and as of December 31,
      2005, we had a working capital deficit of $6,773,079 and a stockholder deficit
      of $7,088,788. In addition, as of December 31, 2005, we have not developed
      a
      substantial source of revenue. These conditions raise substantial doubt as
      to
      our ability to continue as a going concern. The consolidated financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty. The consolidated financial statements do not include any
      adjustments relating to the recoverability and classification of recorded asset
      amounts, or amounts and classification of liabilities that might be necessary
      should we be unable to continue as a going concern.





We
      are
      currently attempting to raise additional debt and equity financing for operating
      purposes and expect to begin selling our product in Australia , New Zealand,
      Indonesia, certain European countries and other territories in 2006. We are
      also
      attempting to partner with a large pharmaceutical company for research and
      development, marketing and distribution of our product.





We
      require substantial capital to pursue our operating strategy, which includes
      commercialization of our products, and we currently have limited cash for
      operations. Until we can obtain revenues sufficient to fund working capital
      needs and additional research and development costs necessary to obtain the
      regulatory approvals for commercialization, we will be dependent upon external
      sources of financing.





We
      believe that actions presently being taken to revise our operating and financial
      requirements provide the opportunity for us to continue as a going concern.
      There can be no assurances that sufficient financing will be available on terms
      acceptable to us, or at all. If we are unable to obtain such financing, we
      will
      be forced to scale back operations, which could have an adverse effect on our
      financial condition and results of operations.




**CRITICAL
      ACCOUNTING POLICY AND ESTIMATES**





Our
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations section discusses our consolidated financial statements, which have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States of America. The preparation of the consolidated financial
      statements requires management to make estimates and assumptions that affect
      the
      reported amounts of assets and liabilities at the date of the consolidated
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. On an on-going basis, management evaluates its estimates
      and judgments, including those related to revenue recognition, accrued expenses,
      financing operations, and contingencies and litigation. Management bases its
      estimates and judgments on historical experience and on various other factors
      that are believed to be reasonable under the circumstances, the results of
      which
      form the basis for making judgments about the carrying value of assets and
      liabilities that are not readily apparent from other sources. Actual results
      may
      differ from these estimates under different assumptions or conditions. The
      most
      significant accounting estimates inherent in the preparation of our consolidated
      financial statements include estimates as to the appropriate carrying value
      of
      certain assets and liabilities which are not readily apparent from other
      sources, primarily valuation of patent costs and stock-based compensation.
      The
      methods, estimates and judgments we use in applying these most critical
      accounting policies have a significant impact on the results we report in our
      consolidated financial statements.


16


Patent
        Cost Valuation. The determination of the fair value of certain acquired assets
        and liabilities is subjective in nature and often involves the use of
        significant estimates and assumptions. Determining the fair values and useful
        lives of intangible assets especially requires the exercise of judgment.
        While
        there are a number
        of
        different generally accepted valuation methods to estimate the value of
        intangible assets acquired, we primarily use the weighted-average probability
        method outlined in SFAS 144, “Accounting for the Impairment or Disposal of
        Long-Lived Assets.” This method requires significant management judgment to
        forecast the future operating results used in the analysis. In addition,
        other
        significant estimates are required such as residual growth rates and discount
        factors. The estimates we have used are consistent with the plans and estimates
        that we use to manage our business, based on available historical information
        and industry averages. The judgments made in determining the estimated useful
        lives assigned to each class of assets acquired can also significantly affect
        our net operating results.
 
 Stock-based
        Compensation. We record stock-based compensation to outside consultants at
        fair
        market value in general and administrative expense. We do not record expense
        relating to stock options granted to employees with an exercise price greater
        than or equal to market price at the time of grant. We report pro-forma net
        loss
        and loss per share in accordance with the requirements of SFAS 123 and 148.
        This
        disclosure shows net loss and loss per share as if we had accounted for our
        employee stock options under the fair value method of those statements.
        Pro-forma information is calculated using the Black-Scholes pricing method
        at
        the date of grant. This option valuation model requires input of highly
        subjective assumptions. Because our employee stock options have characteristics
        significantly different from those of traded options, and because changes
        in the
        subjective input assumptions can materially affect the fair value estimate,
        in
        management's opinion, the existing model does not necessarily provide a reliable
        single measure of fair value of our employee stock options.
 
 Estimate
        of Litigation-based Liability. We are a defendant in certain claims and
        litigation in the ordinary course of business. We accrue liabilities relating
        to
        these lawsuits on a case-by-case basis. We generally accrue attorney fees
        and
        interest in addition to the liability being sought. Liabilities are adjusted
        on
        a regular basis as new information becomes available. We consult with our
        attorneys to determine the viability of an expected outcome. The actual amount
        paid to settle a case could differ materially from the amount accrued.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 We
        had a
        cash and cash equivalents of $14,383 at December 31, 2005. Our total current
        assets at December 31, 2005 were equal to $14,383. We also had the following
        long term assets: $17,970 in property and equipment, net, $1,768 in net website
        development costs, and $640,065 represented by net value of our patents,
        and
        $40,000 in deposits. Our total assets as of December 31, 2005 were $714,186.
 
 Our
        total
        current liabilities were $6,787,462 at December 31, 2005, which was represented
        by accounts payable of $155,085, accrued expenses of $1,473,528, due to related
        parties of $4,177,089, warrant liability of $56,647, promissory notes of
        $225,113 and convertible notes payable of $700,000. Our long-term liabilities
        consist of a secured debenture of $130,512 (net of a discount of $119,488)
        making total liabilities of $6,917,974 at December 31, 2005. Our liabilities
        exceeded our assets by $6,203,788 as of December 31, 2005.
 
 We
        have
        financed our operations primarily through cash generated from related party
        debt
        financing, from advances from stockholders and from the private placement
        sales
        of equity securities, as well as issuing convertible notes. During the nine
        months ended December 31, 2005, we received an additional $1,086,171, net
        from a
        related party, $260,000, net from advances from two stockholders, $100,000
        from
        the issuance of a convertible note and $250,000 from the issuance of a senior
        debenture.
  Our
        net
        cash provided by financing activities was $1,684,230 for the nine months
        ended
        December 31, 2005 compared to $737,332 for the same period in 2004. The increase
        of $946,898 is primarily due to the proceeds received from related party
        advances, advances from stockholder and the issuance of a convertible note
        and
        senior debenture.


17


**RESULTS
        OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2005 AS COMPARED TO
        THE
        THREE MONTHS ENDED DECEMBER 31, 2004**
 
 **Revenues
        and Cost of Sales**
 
 We
        had no
        significant revenues for the three months ended December 31, 2005 and December
        31, 2004 as we are undertaking a Phase III clinical trial in order to obtain
        FDA
        approval of PreHistin (TM) as an over the counter allergy prevention drug.
        Our
        net revenues were $0 less $0 for cost of sales for a gross loss of $0 for
        the
        three months ended December 31, 2005 as compared net sales of $0 less $0
        for
        cost of sales for a gross loss of $0 for the three months ended December
        31,
        2004.
 
 **Operating
        Expenses**
 
 Our
        operating expenses for the three months ended December 31, 2005 were $1,139,272
        compared to $2,864,891 for the three months ended December 31, 2004. For
        both
        periods, we incurred expenses for two major purposes: i) ongoing development
        of
        our PreHistin (TM) product and related product management and ii) general
        management and fund raising efforts. For the three months ended December
        31,
        2005, this amount was represented by $23,262 in depreciation and amortization,
        $1,003,441 in professional fees, $317,025 in salary and wages, $34,486 in
        rent
        expense, ($406,315) in marketing and research, and $167,373 in other operating
        expenses, as compared to the three months ended December 31, 2004, where
        we had
        $21,018 in depreciation and amortization, $1,662,139 in professional fees,
        $55,136 in salary and wages, $32,729 in rent expense, $974,128 in marketing
        and
        research, and $119,741 in other operating expenses. Our operating expenses
        decreased during the three months ended December 31, 2005 as compared to
        the
        three months ended December 31, 2004 principally as a result of a decrease
        in
        professional fees and marketing and research offset by an increase in salary
        and
        wages. The decrease in professional fees is a result lower investor relation
        fees paid in 2005 as compared to 2004. A majority of these professional fees
        were paid with shares of our common stock. The value of these services was
        based
        on the market value of our stock at the agreement date.
 We
        incurred a large portion of our clinical trials costs during the three months
        ended December 31, 2004. We had estimated the amounts due related to the
        clinical trials and reduced this estimate by $415,418 during the three months
        ended December 31, 2005 as the Company began settling its obligation with
        the
        doctors and other services providers who conducted the clinical trials. The
        increase in salary and wages was due to bonuses paid to employees during
        the
        three months ended December 31, 2005. The bonuses were paid with shares of
        our
        common stock.
 
 Interest
        expense and financing costs for the three months ended December 31, 2005
        were
        $137,502 compared to $208,725 for the three months ended December 31, 2004.
        The
        decrease is due to us not accruing any additional non-registration penalties
        during the three months ended December 31, 2005. The non-registration penalties
        were accrued for a two year period which ended on September 30, 2005.
 
 The
        change in the fair value in the warrant liability relates to the increase
        in the
        value of the detachable warrants issued in connection with the convertible
        note
        payable and convertible preferred stock. Due to the increase of our stock
        price,
        the fair value of these warrants has increased resulting in the increase
        of the
        warrant liability.
  **RESULTS
        OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 2005 AS COMPARED TO
        THE
        NINE MONTHS ENDED DECEMBER 31, 2004**
 
 **Revenues
        and Cost of Sales**


18




We
        had no
        significant revenues for the nine months ended December 31, 2005 and December
        31, 2004 as we are undertaking a Phase III clinical trial in order to obtain
        FDA
        approval of PreHistin (TM) as an over the counter drug. Our net revenues
        were $0
        less $0 for cost of sales for a gross loss of $0 for the nine months ended
        December 31, 2005 as compared net sales of $479 less $2,930 for cost of sales
        for a gross loss of $2,451 for the nine months ended December 31, 2004.
 
 **Operating
        Expenses**
 
 Our
        operating expenses for the nine months ended December 31, 2005 were $2,734,986
        compared to $4,189,253 for the nine months ended December 31, 2004. For both
        periods, we incurred expenses for two major purposes: i) ongoing development
        of
        our PreHistin (TM) product and related product management and ii) general
        management and fund raising efforts. For the nine months ended December 31,
        2005, this amount was represented by $69,545 in depreciation and amortization,
        $1,961,801 in professional fees, $495,245 in salary and wages, $103,409 in
        rent
        expense, $(350,999) in marketing and research, and $455,985 in other operating
        expenses, as compared to the nine months ended December 31, 2004, where we
        had
        $62,965 in depreciation and amortization, $2,605,599 in professional fees,
        $178,031 in salary and wages, $100,373 in rent expense, $985,921 in marketing
        and research, and $256,364 in other operating expenses. Our operating expenses
        decreased during the nine months ended December 31, 2005 as compared to the
        nine
        months ended December 31, 2004 principally as a result of a decrease in
        professional fees and marketing and research offset by an increase in salary
        and
        wages. The decrease in professional fees is a result lower investor relation
        fees paid in 2005 as compared to 2004. A majority of these professional fees
        were paid with shares of our common stock. The value of these services was
        based
        on the market value of our stock at the agreement date.
  We
        incurred a large portion of our clinical trials costs during the three months
        ended December 31, 2004. We had estimated the amounts due related to the
        clinical trials and reduced this estimate by $415,418 during the three months
        ended December 31, 2005 as the Company began settling its obligation with
        the
        doctors and other services providers who conducted the clinical trials. The
        increase in salary and wages was due to bonuses paid to employees during
        the
        three months ended December 31, 2005. The bonuses were paid with shares of
        our
        common stock.
 
 Interest
        expense and financing costs for the nine months ended December 31, 2005 were
        $545,869 compared to $1,236,313 for the nine months ended December 31, 2004.
        The
        decrease is due to the write off of the discounts on convertible debentures
        during the quarter ended December 31, 2004 and discontinuing the accrual
        for
        non-registration penalties effective September 30, 2005.
 
 The
        change in the fair value in the warrant liability relates to the increase
        in the
        value of the detachable warrants issued in connection with the convertible
        note
        payable and convertible preferred stock. Due to the increase of our stock
        price,
        the fair value of these warrants has increased resulting in the increase
        of the
        warrant liability.
 
 **OUR
        PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.**
 
 Over
        the
        next 12 months, we plan to continue moving forward with the completion of
        the
        Phase III clinical trials of our allergy prevention product, PreHistin (TM),
        followed immediately by submission of an application to the FDA for marketing
        approval of PreHistin (TM) as an over the counter ("OTC") allergy medication.
        We
        hope to receive approval from the FDA in early 2007, enabling our marketing
        launch in the United States of the product for the 2007 allergy season, but
        there is no assurance we will receive approval from the FDA. We estimate
        the
        cost to complete the Phase III clinical trials and the submission of the
        application to the FDA for marketing approval will be approximately $3,500,000.


19


While
        continuing with the US FDA approval process, we are working to finalize the
        international launch strategy in the primary global markets. Discussions
        are
        progressing with potential joint venture partners for marketing, manufacturing,
        regulatory approval and distribution throughout the world, the most advanced
        of
        which are with companies in Australia and Japan. There is no assurance we
        will
        complete any transaction with these companies. In addition to seeking approval
        from the FDA for the primary indication of seasonal allergic rhinitis (hay
        fever) for PreHistin (TM), we plan to conduct additional studies to validate
        the
        viability of approval for supplemental indications and alternative delivery
        mechanisms. The tests will be a combination of clinical trials and laboratory
        analyses.
 
 In
        addition to seeking approval from the FDA for the primary indication of seasonal
        allergic rhinitis (hay fever) for PreHistin (TM), we plan to conduct additional
        studies to validate the viability of approval for supplemental indications
        and
        alternative delivery mechanisms. The tests will be a combination of clinical
        trials and laboratory analyses.
 
 We
        are
        also actively pursuing the acquisition and development of products that we
        hope
        will enable us to leverage our resources. Areas of focus are OTC pharmaceutical
        products and nutritional supplements.
 
 As
        of
        December 31, 2005, we had a cash of $14,383. To fully execute our business
        plan
        for the next 12 months, we will need to raise additional funds in order to
        complete the Phase III clinical trials, submit the PreHistin (TM) application
        to
        the United States FDA and execute a marketing launch of the PreHistin (TM)
        product. We will also need to raise funds to execute studies for the further
        development of the PreHistin (TM) product line and to complete the acquisition
        of additional products. Along with our investment bankers, we plan to raise
        these funds through private and institution or other equity offerings. We
        may
        attempt to secure other loans from lending institutions or other sources.
        There
        is no guarantee that we will be able to raise additional funds through offerings
        or other sources. If we are unable to raise funds, our ability to continue
        with
        product development will be hindered.
 
 Other
        than the research and development related to our PreHistin (TM) product,
        we do
        not plan to engage in any other research and development unless we are able
        to
        raise additional funds.
 
 **Off-balance
        sheet arrangements**
 
 There
        are
        no off balance sheet arrangements that have or are reasonably likely to have
        a
        current or future effect on our financial condition, changes in financial
        condition, revenues or expenses, results of operations, liquidity, capital
        expenditures or capital resources that are material to investors.


20




**Item
        3.**  **Controls
        and Procedures**
 
 As
        required by SEC rules, we have evaluated the effectiveness of the design
        and
        operation of our disclosure controls and procedures at the end of the period
        covered by this report. This evaluation was carried out under the supervision
        and with the participation of our management, including our principal executive
        officer and principal financial officer. Based on this evaluation, these
        officers have concluded that the design and operation of our disclosure controls
        and procedures are effective. There were no changes in our internal control
        over
        financial reporting or in other factors that have materially affected, or
        are
        reasonably likely to materially affect, our internal control over financial
        reporting.
 
 Disclosure
        controls and procedures are our controls and other procedures that are designed
        to ensure that information required to be disclosed by us in the reports
        that we
        file or submit under the Exchange Act is recorded, processed, summarized
        and
        reported, within the time periods specified in the SEC’s rules and forms.
        Disclosure controls and procedures include, without limitation, controls
        and
        procedures designed to ensure that information required to be disclosed by
        us in
        the reports that we file under the Exchange Act is accumulated and communicated
        to our management, including principal executive officer and principal financial
        officer, as appropriate, to allow timely decisions regarding required
        disclosure.
  **Part
        II.**  **OTHER
        INFORMATION**
 
 **Item
        1.**  **Legal
        Proceedings**
 
 On
        November 8, 2004, the Gryphon Master Fund, LP filed a lawsuit against us
        in
        United States District Court, Northern District of Texas, Dallas Division.
        The
        lawsuit seeks repayment of the $600,000 convertible note payable, accrued
        interest on the convertible note payable, penalties for failing to register
        the
        shares underlying the conversion of the convertible note payable, attorney
        fees
        and court costs.
 
 *Lease
        Dispute:* In
        March
        2003, the Company vacated its office space. The landlord then filed suit
        against
        the Company in the County of Orange, Superior Court of California, for unpaid
        rent. The Company believes that the landlord breached the agreement and,
        as
        such, the Company does not believe it owes any unpaid rent. In
        January 2006, this matter was settled and the Company is to pay a total of
        $200,000 over the next year, of which the Company paid the first $75,000
        on
        January 31, 2006. This leaves a total of $125,000 owing, of which $75,000
        is due
        on July 31, 2006, and $50,000 is due on December 31,
        2006.  21
 **Item
          2.**  **Unregistered
          Sales of Equity Securities and Use of Proceeds**
 
 During
          the three months ended December 31, 2005, we issued the following shares
          of our
          unregistered common stock:
  ·
                50,000
                    shares to William Lareese for services valued at
                    $23,500;
 
 ·
                100,000
                    shares to Kevin Prendiville for services valued at
                    $53,000;
 
 ·
                20,000
                    shares to Andre Baillargeon for services valued at
                    $10,000;
 
 ·
                125,000
                    shares to the Brad Chisick Trust for pre-paid interest valued
                    at
                    $72,500;
 
 ·
                50,000
                    shares to Steve Barnes for services valued at $29,000;
 
 ·
                150,000
                    shares to James Hammer for the conversion of $262,500 of
                    debt;
 
 ·
                50,000
                    shares to Deron Colby for services valued at $35,000;
 
 ·
                50,000
                    shares to Mark Stewart for services valued at
                    $26,000;
 
 ·
                30,000
                    shares to Brian Strickel for services valued at
                    $26,700;
 
 ·
                55,000
                    shares to Lyndon Mansfield for services valued at $48,950;
                    and
 
 ·
                125,000
                    shares to Marlin Financial Group for services valued at
                    $58,750.
 
 **Item
          3.**  **Defaults
          Upon Senior Securities**
 
 We
          are
          currently in default on terms of our $600,000 convertible note payable
          to
          Gryphon Master Fund LP, dated September 8, 2003, for failing to register
          the
          shares underlying the conversion.
 
 **Item
          4.**  **Submission
          of Matters to a Vote of Security Holders**
 
 Not
          applicable
 
 **Item
          5.**  **Other
          Information**
 
 Not
          applicable


22




**Item
      6.**  **Exhibits**




**Regulation**
              **S-B
                Number**
            **Exhibit**3.1
            Articles
                of Incorporation (1)3.1.1
            Certificate
                of Amendment to Articles of Incorporation (1)3.1.2
            Certificate
                of Amendment to Articles of Incorporation (2)3.1.3
            Certificate
                of Amendment to Articles of Incorporation (3)3.2
            Bylaws
                (1)4.1
            Convertible
                Note with Gryphon Master Fund LP (4)10.1
            Asset
                Purchase Agreement between BioGentec Inc., (fka St. Petka, Inc.)
                and Gene
                Pharmaceuticals, LLC, (fka Allergy Limited, LLC,) as amended
                (4)10.2
            Employment
                Agreement with Thomas Stankovich (5)31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the
                Company (5)31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the
                Company (5)32.1
            Section
                906 Certification by Chief Executive Officer (5)32.2
            Section
                906 Certification by Chief Financial Officer
                (5)




(1)  Incorporated
      by reference to the exhibits to the registrant’s registration statement on Form
      10-SB filed on February 8, 2002.


(2)  Incorporated
      by reference to the exhibits to the registrant’s information statement on
      schedule 14C filed on June 10, 2003.


(3)  Incorporated
      by reference to the exhibits to the registrant’s current report on Form 8-K,
      filed July 8, 2004.


(4)  Incorporated
      by reference to the exhibits to the registrant’s annual report on Form 10-KSB
      for the fiscal year ended March 31, 2004.


(5)  Included
      herein.


23




**SIGNATURES**





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







**COBALIS
      CORP.**







February
14,
                2006
              
              By:
              /s/ Chaslav
                RadovichChaslav Radovich
                Principal Executive Officer, President,
                Secretary,
                  Director


February
14,
                  2006
                
                By:
                /s/ Thomas
                  StankovichThomas Stankovich
                  Executive Vice-President, Treasurer
                  and
                    Chief Financial
                    Officer
  24