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

                                  FORM 10-KSB/A


(Mark One)

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

For the fiscal year ended: February 28, 2006

                                       OR

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

For the transition period from ______ to ______


Commission File Number 0-26329


                                 POSEIDIS, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)


            FLORIDA                                         65-0867538
-----------------------------------                 ------------------------
(State or Other Jurisdiction of                          (I.R.S. Employer
Incorporation or Organization)                          Identification No.)

                          222 LAKEVIEW AVE., SUITE 160
                            WEST PALM BEACH, FL 33401
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               (Address of Principal Executive Offices) (Zip Code)

                                 (305) 428-3757
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                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value, $0.0001

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. [_]

Note:    Checking the box above will not relieve any registrant required to file
         reports pursuant to section 13 or 15(d) of the Exchange Act from their
         obligations under those Sections.


<PAGE>


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]

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

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

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

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. Approximately $2,293,628 as of August 7,
2006. The aggregate market value was based upon the average between the closing
bid and asked price for the common stock on August 7, 2006 as quoted by various
market makers on the Pink Sheets Electronic Quotation Service published by the
National Quotation Bureau under the symbol "PSED", which average was $0.0550.

    (ISSURERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check wither the issuer has filed all documents and reports required to be filed
by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [_] No [_]

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 7, 2006, 70,156,300
shares of common stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly, describe them
and identify the part of the Form 10-KSB (e.g., Part 1, Part II, etc.) into
which the document is incorporated: (1) any annual report to security-holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990). None.

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

                                EXPLANATORY NOTE

The purpose of this Annual Report on Form 10-KSB/A is to amend the Form 10-KSB
for the Fiscal Year Ended February 28, 2006 that was filed with the SEC on
September 13, 2006 in response to the comment letter from the SEC staff dated
October 20, 2006.

The Company's management has reviewed and approved, and takes full
responsibility for, the revisions made to the Form 10-KSB for the Fiscal Year
Ended February 28, 2006 as set forth in this 10-KSB/A.


                                      -2-
<PAGE>


TABLE OF CONTENTS

                                     PART I

ITEM 1.         DESCRIPTION OF BUSINESS                                        5

ITEM 2.         DESCRIPTION OF PROPERTY                                       15

ITEM 3.         LEGAL PROCEEDINGS                                             15

ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           15

                                     PART II

ITEM 5.         MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS      16

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

ITEM 7.         FINANCIAL STATEMENTS                                          42

ITEM 8.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
                DISCLOSURE                                                    42

ITEM 8A.        CONTROLS AND PROCEDURES                                       42

ITEM 8B.        OTHER INFORMATION                                             42

                                    PART III

ITEM 9.         DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT    42

ITEM 10.        EXECUTIVE COMPENSATION                                        45

ITEM 11.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                47

ITEM 12.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                48

ITEM 13.        EXHIBITS                                                      48

ITEM 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES                        51

FINANCIAL STATEMENTS                                                         F-1

                                      -3-
<PAGE>


                           CURRENCY AND EXCHANGE RATES

         All monetary amounts contained in this report are, unless otherwise
indicated, expressed in U.S. Dollars. On August 7, 2006, the noon buying rate
for euros as reported by the Federal Reserve Bank of New York was $1.2867 per
one euro.

                           FORWARD-LOOKING STATEMENTS

         This report contains certain forward-looking statements and information
that are based on the beliefs of management as well as assumptions made by and
information currently available to management. The statements contained in this
report relating to matters that are not historical facts are forward-looking
statements that involve risks and uncertainties, including, but not limited to,
the successful commercialization of our products and services, future demand for
our products, general economic conditions, government and environmental
regulation, competition and customer strategies, technological innovations,
changes in our business strategy or development plans, capital deployment,
business disruptions, our ability to consummate future financings, the
reinclusion of our common stock for quotation on the NASD OTC Bulletin Board
("OTC-BB"), and other risks and uncertainties, certain of which are beyond our
control. Additional factors that could affect the Company's forward-looking
statements include, among other things: the restatement of the quarterly
financial statement for the second and third quarters in the fiscal year ended
February 28, 2006; negative reactions from the Company's stockholders,
creditors, or employees to the results of the review and restatement or delay in
providing financial information caused by restatement; the impact and result of
any litigation (including private litigation), or of any investigation by the
Securities and Exchange Commission or any investigation by any other
governmental agency related to the Company; the Company's ability to manage its
operations during and after the financial statement restatement process; and the
Company's ability to successfully implement internal controls and procedures
that remediate any material weakness in controls and ensure timely, effective
and accurate financial reporting. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may differ materially from those described herein as anticipated,
believed, estimated or expected.

         Forward-looking statements are based on management's current views and
assumptions and involve unknown risks that could cause actual results,
performance or events to differ materially from those expressed or implied in
those statements. These risks include, but are not limited to, the risks set
forth under the caption "Risk Factors."

                                     PART I

         Information included or incorporated by reference in this report may
contain forward-looking statements. This information may involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements. Forward-looking statements, which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "will," "should," expect," "anticipate," "estimate,"
"believe," "intend" or "project" or the negative of these words or other
variations on these words or comparable terminology.

         This report contains forward-looking statements, including statements
regarding, among other things, (a) our growth strategies, (b) anticipated trends
in our industry, (c) our future financing plans and (d) our anticipated needs
for working capital. These statements may be found under "Management's
Discussion and Analysis or Plan of Operation" and "Description of Business," as
well as in this report generally. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including, without limitation, the risks outlined under "Risk Factors"
and matters described in this report generally. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this report will in fact occur.

                                      -4-
<PAGE>


ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

         Poseidis, Inc. ("Poseidis" or the "Company"), together with its
subsidiary Montespan SAS ("Montespan"), is engaged in the development of a
sparkling mineral water spring in central France known as the La Troliere
Spring. We refer to this spring as the "Source". Our objectives are to develop
and market a new brand of sparkling natural mineral water under the brand name
"l' Eau de Montespan" as well as other beverage products, potentially a line of
cosmetics products utilizing the mineral water drawn from the Source, and other
related products and merchandise.

         REAL ESTATE PURCHASE AGREEMENT

         In October 2005 Montespan entered into a real estate purchase agreement
with Christian Berthier, as amended in March 2006 (the "Berthier Agreement"), to
acquire the land where the Source is located for 2,150,000 euros (approximately
U.S. $2,580,000 using, for purposes of illustration only in this report, a
currency exchange rate of U.S. $1.20 per one euro) of which we have paid 430,000
euros (approximately U.S. $516,000) as of July 31, 2006. The Berthier Agreement
expires on February 28, 2008. In addition, Montespan owns approximately 13 acres
near the Berthier property. Pursuant to the March 2006 amendment of the Berthier
Agreement, we have agreed to make a monthly payment of at least 10,000 euros
(approximately $12,000) to Mr. Berthier commencing in March 2006. These monthly
payments shall be applied against the 2,150,000 euro aggregate purchase price
for the Berthier property. Prior to the October 2005 real estate purchase
agreement, Montespan and Mr. Berthier were parties to a lease agreement that was
entered into in April 2003, pursuant to which Montespan leased from Mr. Berthier
the property at and about the Source. Pursuant to the October 2005 Berthier
Agreement, the 230,000 euros in lease payments that were made by Montespan to
Mr. Berthier from April 2003 through October 2005 have been applied as credits
against the purchase price for the Berthier property.

         We will need to raise additional capital in order to make the monthly
payments to Mr. Berthier and to pay the remaining 1,720,000 euros (approximately
$2,064,000) balance due as of July 31, 2006 under the Berthier Agreement by
February 28, 2008. If we are unable to raise such capital and if we default on
the monthly payments or fail to pay the entire purchase price by February 28,
2008, we will be unable to acquire exclusive title to the Berthier property. In
that event, the Berthier Agreement provides that Mr. Berthier and Montespan
shall be co-owners of the property in proportion to the 2,150,000 euro purchase
price, such that Montespan's co-ownership percentage shall be the fraction whose
numerator is the total sum paid by Montespan to Mr. Berthier and whose
denominator is 2,150,000 euros, and Mr. Berthier's co-ownership percentage shall
be 100% minus Montespan's co-ownership percentage. In the event of co-ownership
of the Berthier property between Mr. Berthier and Montespan, the Berthier
Agreement provides that each party will hold a right of preemption to acquire
the interest of the other party when the other party wishes to sell its interest
to a third party. Such right of preemption is exercisable on the same terms and
conditions that are proposed between the other party and the third party.

                                      -5-
<PAGE>


         CONVERTIBLE DEBENTURE FINANCING

         Poseidis has obtained convertible debenture financing from Cornell
Capital Partners, LP ("Cornell Capital" or "Cornell") in the aggregate principal
amount of $644,000, all of which has been fully funded, and Poseidis has also
entered into a standby equity distribution agreement ("SEDA") with Cornell
Capital to sell a variable amount of shares for gross proceeds of up to
$8,000,000.

         BUSINESS STRATEGY

         Our primary business strategy is focused first on developing the
Montespan brand of sparkling natural mineral water and commencing sales of that
product in North America (U.S. and Canada), the Middle East and subsequently in
other geographic markets in Europe and North America.

         Our management team is experienced in the beverage and consumer
products industries and in the development and launch of new products. The team
is led by our Chairman, Chief Executive Officer, and President, Louis Pardo.
Among other business ventures, Mr. Pardo was employed at Symbolic Corp. of
France from 1993 until 1996. At Symbolic Corp., Mr. Pardo launched the market
leading energy soft drink in France: "x-energy drink".

         FINANCIAL OVERVIEW

         We generated a net loss of $3,294,210 during the year ended February
28, 2005, and a net loss of $1,569,140 during the year ended February 28, 2006.
Our accumulated deficit as of February 28, 2006 was $8,312,661. As of July 31,
2006, our available cash position was approximately $21,500. We are continuing
to seek additional financing to meet our working capital needs and to continue
on-going equipment installation at the Source, development of our pilot plant,
development of our commercial production and bottling facility, and other
elements of our business plan. We expect that operating and development expenses
will increase significantly as we continue to implement our plan. No assurance
can be given that we will be successful in completing these or any other
financings at the minimum level necessary to fund our working capital
requirements or to complete our development plan or at all. If we are
unsuccessful in completing these financings, or in acquiring the funds available
pursuant to the SEDA, we will not be able to fund our working capital
requirements or execute our business plan, we will run out of cash and have to
substantially reduce or curtail the development of our projects.

         On July 19, 2006, the OTC-BB temporarily ceased quoting our shares
because our annual report on Form 10-KSB for the year ended February 28, 2006
had not been filed with the U.S. Securities and Exchange Commission ("SEC"). The
filing of this report eliminates that eligibility deficiency. In addition, our
quarterly report on Form 10-QSB for the three months ended May 31, 2006, has not
been filed with the SEC but we expect it will be filed on or about September 28,
2006. The Company's common stock is currently quoted through various market
makers on the Pink Sheets Electronic Quotation Service (the "Pink Sheets")
published by the National Quotation Bureau under the symbol "PSED". The Pink
Sheets is a centralized quotation service that collects and publishes market
maker quotations of securities. Quoted stocks on the Pink Sheets are available
on www.pinksheets.com and www.OTCquote.com. Upon filing of our 10-KSB for the
year ended February 28, 2006 and our 10-QSB for the quarter ended May 31, 2006,
the Company's stock will again be eligible for quotation on the OTC-BB.

         The principal address of Poseidis is 222 Lakeview Ave., Suite 160, West
Palm Beach, Florida 33401; telephone number (305) 428-3757.

MARKET OPPORTUNITY

         The global market for bottled water can be broken down into three
categories (listed in ascending order of quality):

                                      -6-
<PAGE>


o        Purified Waters.

         Mostly sold in the U.S., purified waters are derived from common
         network waters and are subjected to a series of treatments, such as
         reverse osmosis, to purify, neutralize and standardize their
         organoleptic and bacteriological specifications. Those waters offer no
         mineral value nor valued components and have little taste quality.
         Targeting mass-market distribution, and bottled in plastic bottles,
         those products have raised the U.S. consumers' awareness of bottled
         waters to new levels, but have failed to deliver quality,
         environmentally-conscious products.

o        Spring and Glacier Waters.

         Extracted at the surface, spring and glacier waters take advantage of a
         non-restrictive and light regulation on their capping and bottling
         processes. Therefore, their exploitation offers no guaranty of purity
         nor sustainability over time, but allows the production of large
         volumes at low cost.

o        Still and Sparkling Mineral Waters

         Very strict and constraining regulations and production criteria result
         in a constant and rigorous quality control, and give to mineral waters
         a unique value and an international quality definition. More than 200
         daily analyses are required onsite, in order to comply with the
         specifications imposed by AFSSA (the French governmental agency for
         food safety roughly equivalent to the U.S. Food and Drug
         Administration) and the French health ministry. Still mineral water
         refers to non-carbonated mineral water whereas sparkling mineral water
         refers to carbonated mineral water. Carbonation refers to the carbon
         dioxide bubbles in the mineral water.

         THE MINTEL REPORT

         According to an October 2005 bottled water market research report by
Mintel International Group, Ltd. (the "Mintel Report"), the consumption of
bottled water has been rapidly increasing worldwide. The Mintel Report states
that in the U.S., the consumption of bottled water increased from 11.9 billion
liters in 1995 to 27.2 billion liters in 2005; consumption more than doubled
within ten years. The Mintel Report also noted that the Beverage Marketing
Corporation (an industry consultancy), bottled water consumption in the U.S. has
surpassed that of milk, coffee, and beer. U.S. consumption of sparkling water
has also accelerated, with the market beating 9.3% volume growth in 2004.
Imported water achieved its third consecutive year of double-digit volume growth
in 2004, growing by 18.3% when compared to 2003.

         THE TGI GLOBAL REPORT

         According to a February 2004 report titled "Soft Drinks: A fluid
picture" by TGI Global (the "TGI Global Report"), sparkling mineral waters have
an average higher selling price and as a result higher profit margins. The TGI
Global Report states that the European market is characterized by its diversity:
95% of the mineral waters sold in Germany and more than 65% in Italy are
sparkling. In some countries drinking habits reflect the local culture. For
example, in France, Germany and Poland over 80% of the population drink bottled
mineral water. In Germany, where penetration of bottled mineral water is 88%,
compared with just 61% for carbonates, almost half of all consumers also agree
with the statement "I consider my diet to be very healthy". The TGI Global
Report suggests that the global demand for sparkling mineral waters is
increasing rapidly. World consumption of bottled mineral water is growing at a
rate of 9 percent per year, almost twice the increase registered by consumption
of other non-alcoholic beverages. The regions with the most growth were Asia
which registered the largest increase last year, with 16 percent growth followed
by North America, with an 11 percent increase according to the TGI Global
Report. This has prompted existing water companies to try and increase their
market shares outside Europe as demonstrated by recent acquisitions by Nestle
and the Group Danone.

                                      -7-
<PAGE>


PRODUCTS/BRAND

         Poseidis will exploit the potential for high-end brand positioning and
plans to initially offer two products:

         Bottled Mineral Water: L' Eau de Montespan will be a luxury traditional
mineral water. L' Eau de Montespan will possess all the qualities of premium
sparkling mineral water and will be comparable to Chateldon Water, which is
considered by many to be the best mineral water in France. Production and sale
of Chateldon Water is limited to one million liters per year, which restricts
its distribution primarily to the French market. Management believes that its
mineral water will be comparable to Chateldon Water for several reasons.
Firstly, it will have limited production and limited availability and will
generally be available only in high-end restaurants and hotel establishments.
Secondly, the source of the Montespan Water is from a similar source as the
Chateldon Water with respect to water quality and processing Management believes
its water quality will be similar to Chateldon based on carbonation level,
purity of water, i.e., absence of Phosphates and Nitrates, quantity of dry
matter per liter, and salt concentration levels. Thirdly, Montespan will be
priced similarly to Chateldon Water at or above the price that Chateldon Water
is available at retail. Generally, this product will not be a mass market
product as is the case with Chateldon Water.


         Functional drink: Athenais Night Water is envisioned to be the epitome
of the functional food development. In a base of l' Eau de Montespan water,
specific concentrations of active ingredients, such as millepertuis, chamomile
or pass flora in homeopathic forms and concentrations will be added as well as
natural flavoring. Athenais Night Water is a luxury water, positioned like a
cosmetic product, sold exclusively to and found on the bed tables of high-end
resorts and "5-Star" hotels. Its exclusive formula will make it the only water
to drink at night for its detoxifying, restructuring and reconstituting
benefits.

         Follow-on cosmetics by-products under the Athenais and/or Night Water
brand may include:

         o        Athenais Spray 0.5 liter
         o        Athenais Light Moisturizing Fluid for the body
         o        Athenais Lift Serum
         o        Athenais Moisturizing Cream for the face
         o        Athenais Night Repair / Eye Cream

OPERATIONS/PRODUCTION

         The Company's foundational asset is its contractual right to acquire
the real estate where the Source is located in Theneuille, France. The Source
has been well known for its intrinsic qualities and health benefits dating back
to the 3rd Century. In October 2005 Montespan entered into the Berthier
Agreement (as defined above) with the owner of the Source (Christian Berthier)
pursuant to which Montespan may acquire the land where the spring is located and
the immediately surrounding area including certain government-granted and
government-regulated rights to draw and use the Source's water as natural
mineral water. The Berthier Agreement provides for a purchase price of 2,150,000
euros of which 430,000 euros has been paid as of July 31, 2006 and expires on
February 28, 2008.

         Poseidis will develop a production and processing facility at the
Source divided into the following main steps:

                                      -8-
<PAGE>


o        Initial capture at the Source - La Troliere is an artesian source and
         the water is pumped at a depth of approximately 182 meters then
         transferred to the storage location by a system of pipes.

o        From the point of capture, stainless steel pipes take the water to the
         conditioning plant where the water is first degasified. Deferritization
         is a filtering process to reduce the iron content of the water using a
         fine-grade silica sand. No chemical or artificial treatment is used for
         deferritization.

o        After deferritization, the mineral water will be packaged in bulk for
         container shipment to our to-be-acquired bottling operation in North
         America for final processing and bottling. In conjunction with a
         supplier, we have developed innovative, single-use bulk shipping
         containers that will be used to transport the water from the Source to
         the North American bottling plant. The containers will be constructed
         with recyclable materials.

o        Poseidis will maintain a laboratory to maintain a constant control on
         the quality of the water. In order to maintain its certification by the
         French authorities as well as to guarantee a superior quality product,
         the laboratory has to process daily chemical and bacteriological
         analyses on the entire production chain.

MANAGEMENT

Our management team is comprised of the following senior executives:

LOUIS PARDO, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER, AND PRESIDENT OF
POSEIDIS

         Mr. Pardo is responsible for the strategic direction, product and brand
development, marketing and business development activities of Poseidis. Mr.
Pardo was appointed the Company's President in September 2002. Prior to that,
Mr. Pardo was the Company's Marketing Manager and Product Developer. Before
joining Poseidis in 2000, Mr. Pardo spent four years with Faz Productions of
France. While at Faz Productions, he received many awards for various music and
video productions. Prior to Faz Productions, Mr. Pardo spent four years with
Symbolic Corp. of France where he was a Product Manager. At Symbolic Corp. Mr.
Pardo launched the market leading energy soft drink in France: "x-energy drink."

BERNARD BOUVEROT, DIRECTEUR GENERAL OF MONTESPAN

         Mr. Bouverot has been the Directeur General (roughly equivalent to the
chief operating officer in the United States) of Montespan, our French
subsidiary, since 2004. Prior to joining Montespan, from 2001 to 2004 Mr.
Bouverot was the Technical Manager for Blue Industry, a company that specializes
in the potabilization and treatment of used waters. In addition, Mr. Bouverot
has served as Chief Technology Officer and as a member of the Board of Smart
Tech Inc. (satellite tracking devices), as president of several subsidiaries of
Gemplus Group (a leading manufacturer of microchip cards) in France, Holland,
Italy, and Spain, and as president of Haviland USA, Inc. (fine porcelain table
products). While Mr. Bouverot was a principal of Smart IT Technology in Lyon,
France that company went through a bankruptcy proceeding. Mr. Bouverot's
educational background includes a French DESS degree in marketing and business
administration (MBA equivalent), a French DESS degree in business law, and a
medical doctor degree in applied biology and engineering.

                                      -9-
<PAGE>


JOHN J. (JACK) MCGOVERN, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER OF POSEIDIS

         Mr. McGovern has over twenty-five years of financial and executive
management experience. He is the Chairman and a Managing Director of Bridgehead
Partners, LLC which he founded in January of 2002. Recently, Mr. McGovern was
the Chief Financial Officer of Lithium Technology Corporation from May 2004
until June 2005. From November 1999 until December 2001, Mr. McGovern was the
Senior Vice President and CFO of Multex.com, Inc., a $100 million NASDAQ listed
company that was considered the leading internet-based investment information
and technology provider to the financial services industry. Multex was acquired
by Reuters in March, 2003. Mr. McGovern received a B.S. degree in Accounting
from Monmouth University and an MBA from Columbia University where he attended
the Masters Degree Program for Executives. He is a Certified Public Accountant
in the State of New Jersey (inactive).

FINANCE/RECENT HISTORY

         From February 2001 until the end of July 2005 our operations have been
financed primarily through the use of proceeds from equity financings and
borrowings under short term debt agreements. Over that period of time, we have
raised $1,138,153 from the sale of our common stock and $170,804 from borrowings
in the form of short term debt, of which $33,890 has been repaid and $108,000
has been converted to common stock. The Board members, senior management, and
key stockholders of Poseidis have provided the Company with aggregate equity
financing of approximately $1 million during the period from February 2001
through December 31, 2005, excluding the Cornell Capital financing as described
in this report.

         Between August 2005 and February 2006, we received an aggregate of
$644,000 in principal amount of convertible debt in two financing transactions
with Cornell Capital pursuant to the terms of two Securities Purchase Agreements
(the "SPA's"). In exchange for financing under the SPA's, we have issued to
Cornell Capital $644,000 of our 12% secured, convertible debentures (the
"Convertible Debentures"). The SPA's conversion provisions entitle Cornell
Capital at any time, and from time to time, to convert all or any part of the
principal plus accrued interest into Poseidis' common stock (the "Conversion
Shares"), at a per share price equal to $0.0497 per share with respect to
$300,000 in principal amount and interest accrued thereon and at a per share
price equal to $0.04 per share with respect to $344,000 in principal amount and
interest accrued thereon, which may be adjusted under certain circumstances. The
maturity date of each of the three Convertible Debentures is September 1, 2007;
monthly payments of principal and accrued interest commence on September 1, 2006
as to each of the Convertible Debentures. We have the right to redeem the
Convertible Debentures without a premium if the market price for our common
stock is greater than the conversion price then in effect. Otherwise, a
redemption premium of 20% applies to all three Convertible Debentures.

         In August and September of 2006, the Company entered into letter
agreements with Cornell Capital pursuant to which, among other things, Cornell
Capital provided a waiver of certain defaults that had arisen under applicable
loan documents and Cornell Capital and the Company also amended certain
covenants and other terms under the loan documents including: termination of the
Company's obligation to further fund with cash or stock or otherwise an escrow
account held for the benefit of Cornell Capital in connection with the $344,000
debenture that we had issued to Cornell Capital in February 2006; Cornell
Capital's consent to the release of approximately $60,000 from such escrow
account for the purpose of our payment of certain vendors' invoices relating to
our development project at the Source in France; changing the due date for the
first scheduled payment of principal and interest due under the Convertible
Debentures from September 1, 2006 to October 1, 2006; and revising the due dates
for our filing with the SEC of certain reports and our registration statement.

                                      -10-
<PAGE>


         In addition, in August 2005, we entered into a SEDA with Cornell
Capital whereby we may (after certain conditions are satisfied including the
effectiveness of an SEC registration statement covering the Conversion Shares
and the shares issued upon our SEDA draws), at our discretion, periodically sell
to Cornell Capital shares of our common stock for a gross purchase price of $8.0
million. For each share of common stock purchased under the SEDA, Cornell
Capital will pay Poseidis 96% of the market price for our common stock (as
defined in the SEDA). Further, Cornell Capital will retain a fee of 5% of each
advance under the SEDA. The documents pertaining to the SEDA, the Convertible
Debentures, and the related documents and agreements between the Company and
Cornell Capital are included among the exhibits that are attached to our reports
filed with the SEC.

         In March 2006, Poseidis completed a private placement to accredited
investors (the "2006 Private Placement") and received gross proceeds of U.S.
$917,800 from the issuance and sale of units consisting of convertible
debentures and warrants.

         In March 2006, we received a bridge loan from Portfolio Lenders II, LLC
("Portfolio Lenders") in the principal amount of $100,000 (the "March 2006
Portfolio Lenders Note"). We also issued to Portfolio Lenders a warrant to
purchase up to 100,000 shares of our common stock with an exercise price of
$0.05 per share. The March 2006 Portfolio Lenders Note accrued interest at the
rate of 15% per annum, of which 30 days worth of interest ($1,250) was paid in
advance on the closing date. The Company repaid all amounts due and owing under
the March 2006 Portfolio Lenders Note on April 11, 2006.

         In May 2006, we obtained a loan of $250,000 from Portfolio Lenders (the
"May 2006 Portfolio Lenders Note"). We used the loan proceeds for working
capital purposes. We issued to Portfolio Lenders a warrant to purchase 1,000,000
shares of our common stock with an exercise price of $0.05 per share. The May
2006 Portfolio Lenders Note accrues interest at the rate of 15% per annum, of
which 90 days worth of interest ($9,375) was paid in advance on the closing
date. The principal and accrued but unpaid interest shall be paid in full on or
before the earlier of (i) 60 days after the effective date of the Registration
Statement on Form SB-2 as filed by Poseidis on April 14, 2006 or (ii) October
31, 2006.

         In July 2006, we obtained a loan of $30,000 from Louis Pardo which we
used for working capital purposes. Mr. Pardo is our President, Chief Executive
Officer, and Chairman of our Board of Directors and a substantial stockholder of
the Company. This note accrues interest at the rate of 9.25% per annum. The
principal and accrued interest shall be paid in full on demand, not later than
the fifth business day after written demand therefore is received by the
Company.

         We generated a net loss of $3,294,210 during the year ended February
28, 2005, and a net loss of $1,569,140 during the year ended February 28, 2006.
Our accumulated deficit as of February 28, 2006 was $8,312,661. As of July 31,
2006, our available cash position was approximately $21,500. We are continuing
to seek additional financing to meet our working capital needs and to continue
on-going equipment installation at the Source, development of our pilot plant,
development of our commercial production and bottling facility, and other
elements of our business plan. We expect that operating and development expenses
will increase significantly as we continue to implement our plan. No assurance
can be given that we will be successful in completing these or any other
financings at the minimum level necessary to fund our working capital
requirements or to complete our development plan or at all. If we are
unsuccessful in completing these financings, or in acquiring the funds available
pursuant to the SEDA, we will not be able to fund our working capital
requirements or execute our business plan, we will run out of cash and have to
substantially reduce or curtail the development of our projects.

                                      -11-
<PAGE>


TARGETED LAUNCH

         We are currently ramping up towards a targeted commercial launch of our
natural mineral spring water product in the fourth quarter of 2007. Prior to our
product launch, our strategy is to provide our sales team with high-quality
samples with an approximate accuracy of 98% of the ultimate quality and
composition of the commercial product which we believe will give the Company the
ability to negotiate pre-launch agreements with major distribution networks in
Europe and in the US, starting as early as first quarter 2007. The date of
product launch will be dependent upon a number of factors, including the
availability of financing for construction of our small-scale production
facility, commercial-scale production facility, and related infrastructure;
receipt of regulatory approvals, licenses and permits in France and other
applicable jurisdictions at national and local levels; hiring qualified senior
management and technical/operations personnel; obtaining key contracts,
alliances, and vendor relationships; as well as our ability to raise additional
capital.

COMPETITION

         The bottled water market is highly competitive. Our competitors in
these markets include bottlers and distributors of nationally advertised and
marketed products, bottlers and distributors of regionally advertised and
marketed products, as well as bottlers of private label water products sold in
chain stores. Actions by our major competitors and others in the beverage
industry, as well as the general economic environment, could have an impact on
our ability to gain any future market share.

         We intend to compete primarily on the basis of new products and
packaging innovations, directed advertising and marketing programs to create
brand awareness, retail space and distribution channel management, customer
service, and multi-tiered distribution methods. We believe that brand
recognition, market place pricing, consumer value, customer service,
availability and consumer and customer goodwill will be the primary factors
affecting our competitive position.

         The following are the brands of French mineral water available on the
market which are potential direct competitors to l' Eau de Montespan:

BADOIT

         Badoit water is one of the few naturally fizzy waters. Filtered through
a layer of granite rock in the Saint Galmier region of France, it emerges at the
source with a light, natural sparkle, unlike most sparkling waters, which have
their gaseous bubbles added during the bottling process. Light and refreshing,
this delicate mineral water is a favorite amongst the best hotels and
restaurants in the world.

CHATELDON

         Chateldon water is known as the water of Louis XIV, probably France's
most famous ruler. It was transported on two mules from the Auvergne to Louis'
table in the Palace of Versailles. It is this Royal seal of approval that
creates Chateldon's distinctive trademark. Naturally sparkling, Chateldon water
is rich in minerals, especially calcium and carbon. The production is limited to
one million liters per year.

FERRARELLE

         Ferrarelle is among the very few naturally carbonated waters in the
world. At 43 milligrams per liter of potassium, and 81 milligrams per liter of
silica, Ferrarelle is in a class by itself in terms of composition; most high
mineral waters, by comparison, are loaded with sodium and/or bicarbonates.
Harvested in Val d'Assano, inland from Naples, Ferrarelle dates back to
pre-Roman times.

                                      -12-
<PAGE>


HILDON

         Hildon Natural Mineral Water was discovered in 1989 at the Hildon
Estate in Broughton, Hampshire, Southern England. A small production outlet was
established and the water has been flowing ever since. The water is wholesome,
naturally filtered and crystal-clear. It is free from pollution and has a stable
composition, being naturally low in sodium and naturally high in calcium. The
water is bottled at the source and sold in both still or gently carbonated
forms.

PERRIER

         The legend of Perrier water dates as far back as Hannibal, who
allegedly discovered it in 218 B.C., while crossing Spain in his attempt to
conquer Rome. The Romans were the first to build a stone basin on the site of
the source around two hundred years after it was discovered by Hannibal. The
first commercial ventures began in 1863 after the Granier family purchased the
Bouillens estate, which held the source. In 1898 Louis Perrier took over the
estate and the first instance of the Perrier name being associated with the
source. In 1992 Perrier water, one of the few naturally carbonated waters, in
its distinctive green glass, screw top bottles, had become such a market player
that Nestle waters bought out the brand.

SAN PELLEGRINO

         The town of San Pellegrino in the mountains north of Milan was first
made famous by quenching the thirst of Leonardo da Vinci. Today the Fonte
Termale, an opulent marbled drinking hall, is a monument to the tradition of
"taking the waters." S. Pellegrino's sources are three deep springs which emerge
at 69.8 degrees F. The waters come from an aquifer 1,300 feet below the surface,
where limestone and volcanic rocks impart unique minerals and trace elements.

SPA

         Spa Natural Spring Water is from the town of Spa Belgium located in the
Ardennes Mountains, one of Europe's most renowned conservation areas. The land
around the spring has been protected from pollution for centuries. Spa Natural
Spring Water is sodium free and is lower in total mineral salts than all leading
European bottled waters. Spa Natural Spring Water is owned by the Spadel Group.

TY NANT

         Beginning at London's top hotels in 1989, Ty Nant rapidly gained
recognition as a premium product and today it can be ordered in many of the
world's leading hotels, clubs and fine restaurants. Ty Nant is bottled at its
source in the countryside of mid Wales and exports 60% of its production.

VOSS

         Voss Artesian Water comes from an aquifer in Southern Norway which
produces a naturally unfiltered artesian water which is bottled at the site. The
product comes in still and sparkling versions.

WATTWILLER

         Wattwiller has one of the longest pedigrees of any water. It was
discovered by the Romans during their reign over the area now known as Alsace,
France. It was controlled by the monks of the Abbey of Murbach beginning in 735
AD. The village was called Wasserweiler - the village of water. Guarded by
protected forest land, the water rises from beneath a ten meter screen of clay.
The Lithinee spring produces only still mineral water, and the Jouvence spring
produces a mineral water to which is added natural carbonation.

         The Company is not aware of any direct competitors to Athenais Night
Water at the current time.

                                      -13-
<PAGE>

CERTAIN AGREEMENTS

         In order to implement our strategies, construct our plant and ramp-up
our business, we have entered into agreements in the U.S. with Cornell Capital
(equity financing and debt financing), Bridgehead Partners, LLC (financial
consulting and related services), Phoenix Ventures, LLP (government/public
relations and related services), and North Coast Securities Corporation
(placement agent for a completed offering and a financial consulting and
advisory agreement). Each of these agreements has been filed with the SEC and is
referred to in the Item 13 exhibit index.

INTELLECTUAL PROPERTY

         We have no registered trademarks in the United States. In July 2006, we
filed three trademark applications in the U.S. for "Poseidis", "Montespan", and
"Night Water". We have two registered trademarks in France. They are "St.
Troliere" (stylized letters) and "Montespan" (stylized letters and fleur de lis
design). Both are registered in appropriate International Classes consistent
with our business development strategies. The French registration for "St.
Troliere" is valid until October 17, 2012 and the French registration for
"Montespan" is valid until August 26, 2012. Both can be renewed for additional
ten year terms within six months of the deadline for the registrations. We do
have the opportunity to seek registration of these marks and others in the
United States and in other jurisdictions, but can give no assurance whether
registration will be granted. In the meantime, existing laws afford only limited
protection for intellectual property based upon use of the trademarks without
registration.

GOVERNMENT REGULATION

         In order to enter the bottled water industry, Poseidis will be subject
to regulation by each country in which it conducts business, and under national,
regional and (in some cases) local laws and regulations. Our product launch
cannot begin until all regulatory approvals are obtained. There can be no
assurance that the Company will obtain the requisite licenses and approvals of
the various regulatory agencies in a timely fashion, if at all. The securing of
the requisite national, regional and local licenses and permits is a
prerequisite for conducting, operating or performing any regulated activity.

         Poseidis is also subject to certain national, regional and local
environmental protection, health and safety laws, regulations and ordinances
that apply to non-bottled water businesses generally, as well as laws and
regulations which apply to businesses specifically engaging in the bottled water
industry.

EMPLOYEES

         As of February 28, 2006, Poseidis did not have any employees. We did
have three consultants, none of whom were full-time. As we progress with our
development strategy we intend to hire full-time and part-time employees on a
phased basis and to enter into employment agreements with our senior management.

CORPORATE INFORMATION

Poseidis is a Florida corporation that was incorporated on June 10, 1998. Our
corporate name was originally EZ Talk, Inc., which was changed in May 2000 to
BillyWeb Corp. and changed in August 2002 to Poseidis, Inc. The principal
address of Poseidis is 222 Lakeview Ave., Suite 160, West Palm Beach, Florida
33401; telephone number: (305) 428-3757.

                                      -14-
<PAGE>


         In May 2000, the Company entered into an agreement to acquire 77.3% of
the issued and outstanding common shares of a predecessor company which was then
named BillyWeb Corp. (the "Predecessor")in a reverse merger; upon the completion
of this transaction the management of the Predecessor became the management of
the Company. The consideration for this transaction was 23,100,000 shares of the
Company's common stock. In July 2000, the Company acquired the remaining 22.7%
of the Predecessor that it did not previously own in exchange for 5,000,000
shares of restricted common stock. In October 2000, the Company formed a
subsidiary under the laws of France, SARL BillyWeb.

         In December 2002, the Company placed SARL BillyWeb in bankruptcy under
French law. The Company recorded a gain of $12,700 as a result of this. In April
2003, the Company created a new wholly owned subsidiary, Poseidis, SAS, under
French law and later changed that subsidiary's name to Montespan SAS.

ITEM 2. DESCRIPTION OF PROPERTY

         Montespan owns approximately 13 acres in Theneuille, France near the
Source (as defined above) and has entered into a real estate purchase agreement
pursuant to which Montespan may purchase approximately 5.2 acres where the
Source is located and the immediate surrounding area. The purchase price for
these 5.2 acres is 2,150,000 euros (approximately $2,580,000) of which we have
paid 430,000 euros (approximately $516,000) as of July 31, 2006. This real
estate purchase agreement expires on February 28, 2008.

ITEM 3. LEGAL PROCEEDINGS

         As of the date of this report, we are not a party to any material legal
proceedings.

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

         No matters were submitted to a vote of our security holders during the
fourth quarter of the fiscal year ended February 28, 2006.


                                      -15-
<PAGE>


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                               MARKET INFORMATION

         As of February 28, 2006, our common stock was traded in the
over-the-counter market, and "bid" and "asked" prices were quoted on the OTC-BB
under the symbol "PSED". The following table sets forth certain information with
respect to the high and low bid prices for our common stock on the OTC-BB for
each quarter within the fiscal years ended February 28, 2006 and February 28,
2005. Such quotations reflect inter-dealer prices, without retail mark-ups,
mark-downs or commissions, and may not represent actual transactions. On July
19, 2006, the OTC-BB ceased quoting our shares on the OTC-BB because our annual
report on Form 10-KSB for the year ended February 28, 2006 had not been filed
with the SEC. The Company's common stock is quoted through various market makers
on the Pink Sheets published by the National Quotation Bureau.

<TABLE>
<CAPTION>

                                                             Bid Prices for Common Stock
                                                     ---------------------------------------------
                                                            High                       Low
                                                     -------------------        ------------------
<S>                                                   <C>                          <C>
Fiscal Year Ended February 28, 2006

     Fourth Quarter ended February 28, 2006               $0.0900                    $0.0200
     Third Quarter ended November 30, 2005                $0.0800                    $0.0400
     Second Quarter ended August 31, 2005                 $0.2800                    $0.0510
     First Quarter ended May 31, 2005                     $0.1900                    $0.1100

Fiscal Year Ended February 28, 2005

     Fourth Quarter ended February 28, 2005               $0.2000                    $0.1350
     Third Quarter ended November 30, 2004                $0.3500                    $0.1650
     Second Quarter ended August 31, 2004                 $1.1700                    $0.1500
     First Quarter ended May 31, 2004                     $2.4500                   $0.4062*

-------------
* This low bid price is adjusted to reflect the 8:1 forward stock split on March
31, 2004.
</TABLE>

         On August 7, 2006, the closing sale price quoted in the Pink Sheets was
$0.06. As of August 7, 2006, there were approximately 752 holders of record of
our common stock.

                                    DIVIDENDS

         We have not paid cash dividends on our common stock and do not
presently anticipate paying cash dividends in the foreseeable future. It is
anticipated that earnings, if any, will be retained for use in our business for
an indefinite period. Payments of dividends in the future, if any, will depend
on, among other things, our ability to generate earnings, our need for capital,
and our financial condition. Our ability to pay dividends is limited by
applicable state law. Declaration of dividends in the future will remain within
the discretion of our Board of Directors, which will review the dividend policy
from time to time.

                                      -16-
<PAGE>


                    SECURITIES AUTHORIZED FOR ISSUANCE UNDER
                            EQUITY COMPENSATION PLANS

         The following table sets forth information as to securities issuable
upon exercise of outstanding options and warrants and available for issuance
under equity compensations plans as of February 28, 2006.

<TABLE>
<CAPTION>
                                                                    WEIGHTED-AVERAGE      NUMBER OF SECURITIES
                                                                    EXERCISE PRICE        REMAINING AVAILABLE
                                        NUMBER OF SECURITIES        OF OUTSTANDING     FOR FUTURE ISSUANCE UNDER
                                         TO BE ISSUED UPON            OPTIONS,        EQUITY COMPENSATION PLANS
                                      EXERCISE OF OUTSTANDING          WARRANTS          (EXCLUDING SECURITIES
                                         OPTIONS, WARRANTS          AND RIGHTS (B)      REFLECTED IN COLUMN (A))
PLAN CATEGORY                              AND RIGHTS (A)                                        (C)

<S>                             <C>                 <C>                  <C>                  <C>
Equity compensation plans
approved by security holders:                                N/A                N/A               N/A

Equity compensation plans not
approved by security holders:
                                    Options:
                                          2000
                                          Plan(1)              0                N/A                0
                                          2002
                                          Plan(1)              0                N/A                0

                                        Warrants
                                                       1,500,000            $0.0375                0
                                                       1,250,000              $0.12                0
                                                         500,000              $0.12                0
                                                       3,750,000              $0.08                0
                                                       1,250,000              $0.12                0
                                                       1,200,000              $0.25                0
                                                       9,000,000              $0.04                0
                                                       1,000,000              $0.05                0
TOTAL                                                 19,450,000(2)          $0.073                0

<FN>
------------
(1)      No outstanding grants have been made under the Company's 2000
         Employee/Consultant Stock Compensation Plan (the "2000 Plan") or the
         Company's 2002 Employee/Consultant Stock Compensation Plan (the "2002
         Plan"). The 2000 Plan and the 2002 Plan were terminated by Poseidis'
         Board of Directors in July 2006.

(2)      This table excludes warrants that were issued in March-April 2006
         (after the completion of the Company's fiscal year ended February 28,
         2006) in connection with the Company's 2006 Private Placement.
</FN>
</TABLE>


EMPLOYEE/CONSULTANT STOCK COMPENSATION PLANS

         Poseidis' Board of Directors adopted the 2000 Employee/Consultant Stock
Compensation Plan in 2000 and the 2002 Employee/Consultant Stock Compensation
Plan in 2002. No outstanding grants have been made by Poseidis under the 2000
Plan and the 2002 Plan. The 2000 Plan and the 2002 Plan were terminated by
Poseidis' Board of Directors in July 2006.

                                      -17-
<PAGE>


WARRANTS

         Warrants issued under equity compensation plans, which were outstanding
as of February 28, 2006, include the following:

         The Company issued to a consultant warrants to purchase 1,500,000
shares of common stock with an exercise price of $0.0375. The warrants expire on
January 12, 2011.

         In connection with the 2006 Offering, the Company issued the placement
agent, North Coast Securities Corporation ("North Coast") 2,499,444 warrants for
North Coast's role as the placement agent and 1,000,000 warrants for North
Coast's role as financial advisor. These warrants have an exercise price of
$0.05 and expire on February 1, 2011. The warrants were issued pursuant to the
exemption provided under Section 4(2) of the Securities Act of 1933, as amended
to accredited investors pursuant to a limited offering of the Company's
securities.

         The Company issued to Cornell Capital in connection with debenture
financing and SEDA financing, and related fees, an aggregate of 16,950,000
warrants to purchase shares of common stock with the following exercise prices
and expiration dates:

Number of           Exercise             Expiration
Warrants            Price                Date
----------------    -----------------    ---------------------------
      1,250,000     $0.12                August 26, 2010
        500,000     $0.12                August 26, 2010
      3,750,000     $0.08                February 1, 2011
      1,250,000     $0.12                February 1, 2001
      1,200,000     $0.25                February 1, 2011
      9,000,000     $0.04                February 1, 2011

SECURITIES ISSUED DURING QUARTER ENDED FEBRUARY 28, 2006; securities issued
during the year ended February 28, 2006 and not previously included in a
quarterly report on Form 10QSB or in a current report on Form 8-K

         In December 2005, the Company issued 280,000 shares of the Company's
common stock at a purchase price of $0.14 per share to five investors residing
in France in private transactions in exchange for $40,351 in cash and 160,000
shares valued at $3,200 in exchange for services to the Company. Issuance of the
securities in each of these transactions was exempt from registration pursuant
to Section 4(2) of the Securities Act. The securities were issued in private
transactions without the use of any form of general solicitation or advertising.
The securities are "restricted securities" subject to applicable limitations on
resale.

         In February 2006, the Company issued warrants to the designees of North
Coast to purchase a total of 1,000,000 shares of common stock as described
above. These warrants have an exercise price of $0.05 and expire on February 1,
2011.

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

         The following discussion and analysis should be read together with the
financial statements and the accompanying notes thereto included elsewhere in
this report.

                                      -18-
<PAGE>


                                     GENERAL

         Our business is the commercial exploitation of a natural mineral water
spring called La Troliere Spring located in the village of Theneuille, Allier
Department, Canton Cerilly, in the region of one of the largest natural forests
in France.

         We have had no revenues from our current operations, our operations
since inception in 1998 have not generated a profit, and we have relied on, and
will continue to rely on, significant external financing to fund our operations.
During the fiscal year ended February 28, 2006, our financing came primarily
from the sale of $644,000 of convertible debentures and approximately $86,000 in
private placement proceeds. Subsequent to year-end we closed on $917,800 in
gross proceeds from the private sale of our securities in the 2006 Private
Placement. We also have a commitment for gross proceeds of up to $8.0 million
that is available to us under the SEDA upon the satisfaction of certain
conditions including the effectiveness of an SEC registration statement
covering, among other securities, the common stock issuable in exchange for the
SEDA funds, and the listing of our of shares for quotation on the OTC-BB. As
noted above, the OTC-BB has ceased quoting our shares.

         We cannot assure you that financing, whether from external sources or
related parties, will be available on favorable terms or at all. Our inability
to obtain adequate financing will result in the need to reduce or curtail
planned business operations. Any of these events would be materially harmful to
our business and may result in a lower stock price. We will need to raise
additional capital to fund our anticipated future development. No financing
commitments for future capital needs have been obtained as of the date of this
report other than the $8.0 million SEDA funds. There can be no assurance that
the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of current liabilities.

                             FINANCING TRANSACTIONS

         The following is a general description of our most recent financing
transactions. See also the Notes to the financial statements included with this
report.

         From February 2001 until the end of July 2005 our operations have been
financed primarily through the use of proceeds from equity financings and
borrowings under short term debt agreements. Over that period of time, we have
raised $1,138,153 from the sale of our common stock and $170,804 from borrowings
in the form of short term debt, of which $33,890 has been repaid and $108,000
has been converted to common stock. The Board members, senior management, and
key stockholders of Poseidis have provided the Company with aggregate equity
financing of approximately $1 million during the period from February 2001
through December 31, 2005; excluding the Cornell Capital financing as described
in this report.

         Between August 2005 and February 2006, we received an aggregate of
$644,000 in principal amount of convertible debt in two financing transactions
with Cornell Capital pursuant to the terms of the two SPA's. In exchange for
financing under the SPA's, we have issued to Cornell Capital $644,000 of our 12%
secured, Convertible Debentures. The SPA's conversion provisions entitle Cornell
Capital at any time, and from time to time, to convert all or any part of the
principal plus accrued interest into Poseidis' common stock , at a per share
price equal to $0.0497 per share with respect to $300,000 in principal amount
and interest accrued thereon and at a per share price equal to $0.04 per share
with respect to $344,000 in principal amount and interest accrued thereon, which
may be adjusted under certain circumstances. The maturity date of each of the
three Convertible Debentures is September 1, 2007; monthly payments of principal
and accrued interest commence on September 1, 2006 as to each of the Convertible
Debentures. We have the right to redeem the Convertible Debentures without a
premium if the market price for our common stock is greater than the conversion
price then in effect. Otherwise, a redemption premium of 20% applies to all
three Convertible Debentures.

                                      -19-
<PAGE>


         In addition, in August 2005 we entered into the SEDA with Cornell
Capital whereby we may (after certain conditions are satisfied including the
effectiveness of an SEC registration statement covering the Conversion Shares
and the shares issued upon our SEDA draws), at our discretion, periodically sell
to Cornell Capital shares of our common stock for a gross purchase price of $8.0
million. For each share of common stock purchased under the SEDA, Cornell
Capital will pay Poseidis 96% of the market price for our common stock (as
defined in the SEDA). Further, Cornell Capital will retain a fee of 5% of each
advance under the SEDA. The documents pertaining to the SEDA, the Convertible
Debentures, and the related documents and agreements between the Company and
Cornell Capital are included among the exhibits that are attached to our reports
filed with the SEC.

         In March 2006, Poseidis completed the 2006 Private Placement and
received gross proceeds of U.S. $917,800 from the sale of units consisting of
convertible debentures and warrants.

         In March 2006, we received the bridge loan from Portfolio Lenders in
the principal amount of $100,000 . We also issued to Portfolio Lenders a warrant
to purchase up to 100,000 shares of our common stock with an exercise price of
$0.05 per share. The March 2006 Portfolio Lenders Note accrued interest at the
rate of 15% per annum, of which 30 days worth of interest ($1,250) was paid in
advance on the closing date. The Company repaid all amounts due and owing under
the March 2006 Portfolio Lenders Note on April 11, 2006.

         In May 2006, we obtained the loan of $250,000 from Portfolio Lenders.
We used the loan proceeds for working capital purposes. We issued to Portfolio
Lenders a warrant to purchase 1,000,000 shares of our common stock with an
exercise price of $0.05 per share. The May 2006 Portfolio Lenders Note accrues
interest at the rate of 15% per annum, of which 90 days worth of interest
($9,375) was paid in advance on the closing date. The principal and accrued but
unpaid interest shall be paid in full on or before the earlier of (i) 60 days
after the effective date of the Registration Statement on Form SB-2 as filed by
Poseidis on April 14, 2006 or (ii) October 31, 2006.

         In July 2006, we obtained a loan of $30,000 from Louis Pardo which we
used for working capital purposes. Mr. Pardo is our President, Chief Executive
Officer, and Chairman of our Board of Directors and a substantial stockholder of
the Company. This note accrues interest at the rate of 9.25% per annum. The
principal and accrued interest shall be paid in full on demand, not later than
the fifth business day after written demand therefore is received by the
Company.

         We generated a net loss of $3,294,210 during the year ended February
28, 2005, and a net loss of $1,569,140 during the year ended February 28, 2006.
Our accumulated deficit as of February 28, 2006 was $8,312,661. As of July 31,
2006, our available cash position was approximately $21,500. We are continuing
to seek additional financing to meet our working capital needs and to continue
on-going equipment installation at the Source and other elements of our business
plan. We expect that operating and development expenses will increase
significantly as we continue to implement our plan. No assurance can be given
that we will be successful in completing these or any other financings at the
minimum level necessary to fund our working capital requirements or to complete
our development plan or at all. If we are unsuccessful in completing these
financings, or in acquiring the funds available pursuant to the SEDA, we will
not be able to fund our working capital requirements or execute our business
plan, we will run out of cash and have to substantially reduce or curtail the
development of our project.

                                      -20-
<PAGE>


         Our operating plan seeks to minimize our capital requirements, but
construction of our production facility, purchase of equipment, expansion of our
staff, and other expenses will require additional capital. We expect that
operating and production expenses will increase significantly as we continue to
ramp up.

         We are continuing to seek financing sources. We need to raise
additional capital to meet our working capital needs, for the repayment of debt
and for capital expenditures. Such capital is expected to come from the sale of
equity (including the sale of common stock under the SEDA) or debt financing.

         No assurance can be given that we will be successful in completing any
financings at the minimum level necessary to fund our capital equipment, debt
repayment or working capital requirements, or at all. If we are unsuccessful in
completing these financings, we will not be able to meet our working capital,
debt repayment or capital equipment needs or execute our business plan. In such
case we will assess all available alternatives including a sale of our assets or
merger, the suspension of operations and possibly liquidation, auction,
bankruptcy, or other measures.

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

         On August 26, 2005, the Company entered into the SEDA with Cornell
Capital, pursuant to which the Company may, at its discretion, periodically sell
to Cornell Capital shares of Common Stock for a total gross price of up to
$8,000,000. The Company and Cornell Capital entered into an Amended and Restated
SEDA and related letter agreement as of October 24, 2005 which removed the
escrow agent and takes into effect the termination of the Escrow Agreement by
and among the Company, Cornell Capital and David Gonzalez, Esq. In addition, the
Company agreed to not redeem or repay convertible debentures issued by Cornell
Capital with proceeds from the Amended and Restated SEDA. On February 1, 2006,
the Company and Cornell Capital entered into a Second Amended and Restated SEDA
which amended the payment terms pertaining to the $320,000 commitment fee due
Cornell Capital as provided for in the original SEDA. Under these amended terms,
on February 1, 2006, the Company issued to Cornell Capital (i) 3,000,000 shares
of common stock, (ii) a warrant to purchase 9,000,000 shares of common stock at
an exercise price of $0.04 per share and (iii) a promissory note in the
principal amount of $200,000.

         For each share of Common Stock purchased under the SEDA, Cornell
Capital will pay the Company 96% of the lowest volume weighted average price of
Common Stock as quoted by on the OTC-BB or other principal market on which
Common Stock is traded for the five days immediately following the date the
Company delivers a notice requiring Cornell Capital to purchase shares under the
SEDA.

         Cornell Capital's obligation to purchase shares of common stock under
the SEDA is subject to certain conditions, including the Company obtaining an
effective registration statement for shares of common stock sold under the SEDA,
reinclusion of the Company's common stock for quotation on the OTC-BB, and the
limitation of advances under the SEDA to $300,000 per week. In addition, on each
date that the Company requests an advance pursuant to the SEDA, the Company is
required to pay to Cornell Capital a fee totaling 5% of each advance request
which is payable directly from the gross proceeds. If such payment is not made
by the Company on the date that such advance is made, the payment may be
deducted from the amount of the advance requested by the Company with no
reduction in the amount of shares to be delivered to Cornell Capital in
connection therewith.

                                      -21-
<PAGE>


                             CONVERTIBLE DEBENTURES

         On August 26, 2005, the Company also entered into the first SPA with
Cornell Capital (the "August 2005 SPA"), pursuant to which the Company issued to
Cornell Capital $300,000 in principal of 12% convertible debentures (the "2005
Debentures") under (i) a $150,000 debenture originally issued August 26, 2005
and amended and restated in October 2005 and in February 2006 and (ii) a
$150,000 debenture originally issued October 24, 2005 and amended and restated
in February 2006. On February 1, 2006, the Company entered into a second SPA
with Cornell Capital (the "February 2006 SPA"), pursuant to which the Company
issued to Cornell Capital $344,000 in principal of 12% convertible debentures
(the "February 2006 Debenture"). The 2005 Debentures and the February 2006
Debenture are convertible into shares of common stock at a conversion price of
$0.0497 per share and $0.04, respectively, which may be adjusted under certain
circumstances. Interest on the 12% debentures is payable in cash but may be
payable in shares of common stock at the option of the holder under certain
conditions. All Convertible Debentures issued to Cornell Capital have a
September 1, 2007 maturity date and accrue interest at 12% per year.

         Beginning October 1, 2006, we are required to make monthly payments
until all amounts under the Convertible Debentures are repaid. The principal
amount of each monthly payment is determined by dividing the outstanding
principal amount of the Debentures as of the date the monthly payment is due by
the number of monthly payments remaining until the maturity date of the
Convertible Debentures.

         The Convertible Debentures are secured by security agreements covering
substantially all of our business assets dated August 26, 2005 (as to the 2005
Debentures) and February 1, 2006 (as to the February 2006 Debenture),
respectively, and by a pledge and escrow agreement dated February 1, 2006
whereby we have pledged 20,000,000 shares of our common stock to secure
repayment of the Convertible Debentures. Principal plus accrued interest may be
converted at Cornell Capital's option, into shares of our common stock at a
price per share of $0.0497 (as to the 2005 Debentures) and $0.04 (as to the
February 2006 Debenture). If the holder elects to convert, we may redeem the
portion of the debenture that was subject to the conversion notice by paying
120% of the amount being redeemed. We are restricted from issuing such number of
shares upon conversion of the Convertible Debentures if such conversion would
result in Cornell Capital owning in excess of 4.9% of our outstanding common
stock, which may only be waived by Cornell Capital either in its sole discretion
with 60 days' notice or without notice upon an event of default. This
restriction may significantly limit and delay our ability to access funds under
the SEDA.

         We are required to register all shares issuable pursuant to the
Convertible Debentures pursuant to the terms of an Amended and Restated Investor
Registration Rights Agreement between Cornell Capital and us. In addition, while
the Convertible Debentures are outstanding and unconverted, we are restricted,
without prior consent of Cornell Capital, from issuing or selling any of our
common or preferred stock or other security for less than fair market value or
less than Cornell's purchase price, or from granting any security interest other
than for equipment, or from filing any registration statement on Form S-8 except
for securities covered by a bona fide stock incentive plan. We have agreed to
pay Cornell Capital 5% of the proceeds that we receive from each advance under
the SEDA.

                              GOING CONCERN MATTERS

         Our accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the continuation of operations,
realization of assets and liquidation of liabilities in the ordinary course of
business. Since inception, we have incurred substantial operating losses and
expect to incur additional operating losses over the next several years. As
February 28, 2006, we had an accumulated deficit of approximately $8,313,000. We
are continuing to seek financing sources. We will need to raise additional
capital to meet our working capital needs and to complete our product
commercialization process. No assurances can be given that such financing will
be available in sufficient amounts or at all. Continuation of our operations
through fiscal year 2007 is dependent upon obtaining such further financing.
These conditions raise substantial doubt about our ability to continue as a
going concern. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                      -22-
<PAGE>


                        LIQUIDITY AND FINANCIAL CONDITION

         At February 28, 2006, cash and cash equivalents were $73,314. Total
liabilities at February 28, 2006 were $1,697,947 consisting of current
liabilities in the aggregate amount of $940,517 and long-term liabilities in the
amount of $757,430. At February 28, 2006, assets included $0 in inventories,
property and equipment, net, of $443,572, net intangibles of $1,159,978, and
prepaid expenses and other assets of $7,000. As of February 28, 2006 our working
capital deficit was $846,787 as compared to $1,090,832 at February 28, 2005. We
expect to incur substantial operating losses as we continue our
commercialization efforts. We are continuing to seek financing sources. We need
to raise additional capital to meet our working capital needs, for the repayment
of debt and for capital expenditures. Such capital is expected to come from the
sale of equity (including the sale of common stock under the SEDA) or debt
financing. We believe that if we raise approximately $9.2 million in debt and
equity financings we would have sufficient funds to meet our needs for working
capital and repayment of debt (approximately $2.5 million) and for capital
expenditures (approximately $6.7 million) over the next twelve months ending
August 2007.

                              RESULTS OF OPERATIONS
      YEAR ENDED FEBRUARY 28, 2006 COMPARED TO YEAR ENDED FEBRUARY 28, 2005

REVENUES

The Company has generated no revenues during the prior two years.

General and Administrative Expenses

         General and administrative expenses during the year ended February 28,
2006, decreased by $170,696 or approximately 50% to $174,412 from $345,108 in
the year ended February 28, 2005. This decrease was primarily due to reduced
office, rent, travel and entertainment expenses

CONSULTING FEES

         Consulting fees were $528,693 during the year ended February 28, 2006
as compared to $2,711,604 in the year ended February 28, 2005 for a decrease of
$2,182,911 or approximately 81%. This decrease was due primarily to reductions
in stock issuances for consulting services during the year ended February 28,
2006 as compared to the year ended February 28, 2005.

PROFESSIONAL FEES

         Professional fee expenses during the year ended February 28, 2006
increased by $383,973 to $435,045 in the year ended February 28, 2006 from
$51,072 in the year ended February 28, 2005. The increase was due to increased
expenditures for legal and accounting fees, financial advisory services, graphic
design and website development.

OTHER INCOME (EXPENSE)

         Interest expense for the year ended February 28, 2006 increased by
$126,211 to $126,216 from $5 in the year ended February 28, 2005. Interest
expense represents the amortization of the debt discount on the Debentures of
$107,654 and the related interest expense.

                                      -23-
<PAGE>


NON-OPERATING INCOME - REAL ESTATE

         Non-operating income - real estate was $249,830 for the year ended
February 28, 2006 versus $0 for the year ended February 28, 2005. The increase
was due to a one time benefit derived under the 2006 purchase agreement for the
land where the Source is located.

LOSS ON DERIVATIVE LIABILITY

         Loss on derivative liability, which was related to the embedded
derivatives of the Cornell Capital Debentures, was $507,154 for the year ended
February 18, 2006, with no corresponding amounts in prior years.

NET LOSS TO COMMON SHAREHOLDERS

         Net loss to common shareholders was approximately $1,481,000 or $0.02
per share for the year ended February 28, 2006 as compared to a net loss of
$3,295,000 or $ 0.07 for the year ended February 28, 2005. The decrease in net
loss for the year was principally due to a decrease in consulting expenses and
general and administrative expenses and a one time gain realized due to the
right to offset prior years' operating lease payments under a purchase agreement
to acquire real estate executed in 2006 which was partially offset by the
following factors:1) interest expense associated with outstanding borrowings and
increased professional fees in 2006.

ACCUMULATED DEFICIT

         Since inception, we have incurred substantial operating losses and
expect to incur substantial additional operating losses over the next several
years. As of February 28, 2006, our accumulated deficit was $8,312,661.

                                PLAN OF OPERATION

         We are engaged in the development of a sparkling mineral water spring
in central France known as the La Troliere Spring. We refer to this spring as
the "Source". Our objectives are to develop and market a new brand of sparkling
natural mineral water under the brand name "l' Eau de Montespan" as well as
other beverage products, potentially a line of cosmetics products utilizing the
mineral water drawn from the Source, and other related products and merchandise.

         Our primary business strategy is focused on initially developing the
Montespan brand of sparkling natural mineral water and commencing sales of that
product in North America (U.S. and Canada) and the Middle East and subsequently
in other geographic markets in Europe and Asia.

         Our operations since inception in 1998 have not generated a profit. We
have a commitment for $8.0 million in gross proceeds that will be available to
us under the SEDA upon the satisfaction of certain conditions including the
effectiveness of an SEC registration statement covering, among other securities,
the common stock issuable in exchange for the SEDA funds, and reinclusion of our
common stock for quotation on the OTC-BB. If we determine not to utilize any of
the $8.0 million SEDA funds, we will need to raise at least approximately $9.2
million in additional capital to finance operations through year-end 2007. To
the extent we do draw on the SEDA funds to finance operations as described
above, the aforesaid $9.2 million figure will decrease by the amount of such
draws. If we are unsuccessful in accessing the funds available pursuant to the
SEDA or in obtaining necessary capital from other sources, we will run out of
cash and have to substantially reduce or curtail the development of our project.

                                      -24-
<PAGE>


Product Development; Market Entry Strategy. Poseidis will exploit the potential
for high-end brand positioning initially with two product offerings:

         Bottled Mineral Water: L' Eau de Montespan will be a luxury traditional
mineral water. L' Eau de Montespan will possess all the qualities of premium
sparkling mineral water and will be comparable to Chateldon Water, which is
considered by many to be the best mineral water in France. Production and sale
of Chateldon Water is limited to one million liters per year, which restricts
its distribution primarily to the French market. Management believes that its
mineral water will be comparable to Chateldon Water for several reasons.
Firstly, it will have limited production and limited availability and will
generally be available only in high-end restaurants and hotel establishments.
Secondly, the source of the Montespan Water is from a similar source as the
Chateldon Water with respect to water quality and processing Management believes
its water quality will be similar to Chateldon based on carbonation level,
purity of water, i.e., absence of Phosphates and Nitrates, quantity of dry
matter per liter, and salt concentration levels. Thirdly, Montespan will be
priced similarly to Chateldon Water at or above the price that Chateldon Water
is available at retail. Generally, this product will not be a mass market
product as is the case with Chateldon Water.


         Functional drink: Athenais Night Water is envisioned to be the epitome
of the functional food development. In a base of l' Eau de Montespan water,
specific concentrations of active ingredients, such as millepertuis, chamomile
or pass flora in homeopathic forms and concentrations will be added as well as
natural flavoring. Athenais Night Water is a luxury water, positioned like a
cosmetic product, sold exclusively to and found on the bed tables of high-end
resorts and "5-Star" hotels. Its exclusive formula will make it the only water
to drink at night for its detoxifying, restructuring and reconstituting
benefits.

         Follow-on cosmetics by-products under the Athenais and/or Night Water
brand may include:

         o        Athenais Spray 0.5 liter
         o        Athenais Light Moisturizing Fluid for the body
         o        Athenais Lift Serum
         o        Athenais Moisturizing Cream for the face
         o        Athenais Night Repair / Eye Cream

OPERATIONS/PRODUCTION

         The Company's foundational asset is its contractual right to acquire
the real estate where the Source is located in Theneuille, France. The Source
has been well known for its intrinsic qualities and health benefits dating back
to the 3rd Century. In October 2005 Montespan entered into the Berthier
Agreement (as defined above) with the owner of the Source (Christian Berthier)
pursuant to which Montespan may acquire the land where the spring is located and
the immediately surrounding area including certain government-granted and
government-regulated rights to draw and use the Source's water as natural
mineral water. The Berthier Agreement provides for a purchase price of 2,150,000
euros of which 430,000 euros has been paid as of July 31, 2006 and expires on
February 28, 2008.

         Poseidis will develop a production and processing facility at the
Source divided into the following main steps:

o        Initial capture at the Source - La Troliere is an artesian source and
         the water is pumped at a depth of approximately 182 meters then
         transferred to the storage location by a system of pipes.

                                      -25-
<PAGE>


o        From the point of capture, stainless steel pipes take the water to the
         conditioning plant where the water is first degasified. Deferritization
         is a filtering process to reduce the iron content of the water using a
         fine-grade silica sand. No chemical or artificial treatment is used for
         deferritization.

o        After deferritization, the mineral water will be packaged in bulk for
         container shipment to our to-be-acquired bottling operation in North
         America for final processing and bottling. In conjunction with a
         supplier, we have developed innovative, single-use bulk shipping
         containers that will be used to transport the water from the Source to
         the North American bottling plant. The containers will be constructed
         with recyclable materials.


o        Poseidis will maintain a laboratory to maintain a constant control on
         the quality of the water. In order to maintain its certification by the
         French authorities as well as to guarantee a superior quality product,
         the laboratory has to process daily chemical and bacteriological
         analyses on the entire production chain.


NUMBER OF EMPLOYEES.

         By June 2007 we do not expect our number of employees to increase
significantly.

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 2004, the Financial Accounting Standards Board ("FASB)
issued SFAS No. 153, "Exchanges of Nonmonetary Assets," ("SFAS No. 153"). SFAS
No. 153 amends Accounting Principles Board ("APB") Opinion No. 29, "Accounting
for Nonmonetary Transactions," to require exchanges of nonmonetary assets be
accounted for at fair value, rather than carryover basis. Nonmonetary exchanges
that lack commercial substance are exempt from this requirement. SFAS 153 is
effective for nonmonetary exchanges entered into in fiscal years beginning after
June 15, 2005. We do not routinely enter into exchanges that could be considered
nonmonetary, accordingly we do not expect the adoption of SFAS 153 to have a
material impact on our financial statements.

         In March 2005, the FASB issued Interpretation No. 47 (FIN 47),
"Accounting for Conditional Asset Retirement Obligations--an interpretation of
FASB Statement No. 143." FIN 47 clarifies that an entity is required to
recognize a liability for the fair value of a conditional asset retirement
obligation when incurred if the liability's fair value can be reasonably
estimated. FIN 47 also clarifies when an entity would have sufficient
information to reasonably estimate the fair value of an asset retirement
obligation. FIN 47 was adopted in the fourth quarter of 2005 and has had no
significant impact on our financial position, results of operations or cash
flows.

         In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3"
("SFAS No. 154"). SFAS No. 154 requires retrospective application as the
required method for reporting a change in accounting principle, unless
impracticable or a pronouncement includes specific transition provisions. SFAS
No. 154 also requires that a change in depreciation, amortization or depletion
method for long-lived, non-financial assets be accounted for as a change in
accounting estimate effected by a change in accounting principle. This statement
carries forward the guidance in APB Opinion No. 20, "Accounting Changes," for
the reporting of the correction of an error and a change in accounting estimate.
SFAS No. 154 is effective beginning January 1, 2006. SFAS No. 154 is not
expected to have a significant impact on our financial position, results of
operations or cash flows.

                                      -26-
<PAGE>


         In June 2005, the Emerging Issues Task Force ("EITF") reached a
consensus on EITF Issue No. 05-6, "Determining the Amortization Period for
Leasehold Improvements Purchased after Lease Inception or Acquired in a Business
Combination" ("EITF 05-6"). EITF 05-6 requires that leasehold improvements that
are placed in service significantly after and not contemplated at or near the
beginning of the lease term be amortized over the shorter of the useful life of
the assets or a term that includes required lease periods and renewals that are
deemed to be reasonably assured at the date the leasehold improvements are
purchased. EITF 05-6 was adopted in the fourth quarter of 2005. EITF 05-6 did
not have a significant impact on our financial position, results of operations
or cash flows.

         In February 2006, FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments an amendment of FASB 133, Accounting for Derivative
Instruments and Hedging Activities, and FASB 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No.
155"). SFAS No. 155, provides the framework for fair value remeasurement of any
hybrid financial instrument that contains an embedded derivative that otherwise
would require bifurcation as well as establishes a requirement to evaluate
interests in securitized financial assets to identify interests. SFAS No. 155
further amends FASB 140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial
instrument. The guidance SFAS No. 155 also clarifies which interest-only strips
and principal-only strips are not subject to the requirements of SFAS No. 133
and concentrations of credit risk in the form of subordination are not embedded
derivatives. This Statement is effective for all financial instruments acquired
or issued after the beginning of an entity's first fiscal year that begins
September 15, 2006. SFAS No. 155 is not expected to have a material impact on
the Company's consolidated financial statements.

         In March 2006, FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets--an amendment of FASB Statement No. 140" ("SFAS No. 156"). SFAS
No. 156 requires the recognition of a servicing asset or servicing liability
under certain circumstances when an obligation to service a financial asset by
entering into a servicing contract. SFAS No. 156 also requires all separately
recognized servicing assets and servicing liabilities to be initially measured
at fair value utilizing the amortization method or fair market value method.
SFAS No. 156 is effective at the beginning of the first fiscal year that begins
after September 15, 2006. SFAS No. 156 is not expected to have a material impact
on the Company's consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

         Our consolidated financial statements and related public financial
information are based on the application of accounting principles generally
accepted in the United States ("GAAP"). GAAP requires the use of estimates,
assumptions, judgments and subjective interpretations of accounting principles
that have an impact on the assets, liabilities, revenue and expense amounts
reported. These estimates can also affect supplemental information contained in
our external disclosures including information regarding contingencies, risk and
financial condition. We believe our use of estimates and underlying accounting
assumptions adhere to GAAP and are consistently and conservatively applied. We
base our estimates on various assumptions that we believe to be reasonable under
the circumstances. Actual results may differ materially from these estimates
under different assumptions or conditions. We continue to monitor significant
estimates made during the preparation of our financial statements.

         Our significant accounting policies are summarized in the Notes of our
consolidated financial statements. While all these significant accounting
policies impact its financial condition and results of operations, we view
certain of these policies as critical. Policies determined to be critical are
those policies that have the most significant impact on our consolidated
financial statements (or are anticipated to have such impact when operations

                                      -27-
<PAGE>

commence) and require management to use a greater degree of judgment and
estimates. Actual results may differ from those estimates. Our management
believes that given current facts and circumstances, it is unlikely that
applying any other reasonable judgments or estimate methodologies would cause a
material effect on our consolidated results of operations, financial position or
liquidity for the periods presented in this report. Our critical accounting
policies are useful lives of assets, impairment testing of asset recognition,
accounting for derivative instruments and deferred offering costs.

USEFUL LIVES OF TANGIBLE AND INTANGIBLE ASSETS.

         Depreciation and amortization of tangible and intangible assets are
based on estimates of the useful lives of the assets. We regularly review the
useful life estimates established to determine their propriety. Changes in
estimated useful lives could result in increased depreciation or amortization
expense in the period of the change in estimate and in future periods that could
materially impact our financial condition and results of operations.

IMPAIRMENT OF LONG-LIVED ASSETS.

         We adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS No. 144") SFAS No. 144 requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. An
impairment charge could materially impact our financial condition and results of
operations.

DEFERRED OFFERING COSTS AND DEFERRED FINANCING COSTS.

         We incurred certain costs related to financing activities during the
twelve-month period ended February 28, 2006. These costs consisted primarily of
placement agent fees, commissions and legal fees which are related to the
placement of debt securities (deferred financing costs) and equity securities
(deferred offering costs).

ADDITIONAL INFORMATION. With respect to our cash requirements and sources during
the next 12 months, see Management's Discussion and Analysis--Liquidity and
Financial Condition.

OFF-BALANCE SHEET ARRANGEMENTS. The Company has no off-balance sheet
arrangements.

                                  RISK FACTORS

WE ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. IF ANY OF THESE RISKS OR UNCERTAINTIES
ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COLD BE
MATERIALLY HARMED. IN THAT CASE THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND CLOSE LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

WE NEED TO RAISE ADDITIONAL CAPITAL IN ORDER TO COMPLETE OUR PURCHASE OF THE
REAL ESTATE WHERE THE SOURCE IS LOCATED. WE COULD DEFAULT ON OUR PAYMENT
OBLIGATIONS UNDER THE BERTHIER AGREEMENT.

                                      -28-
<PAGE>


         We will need to raise additional capital in order to make the monthly
payments to Mr. Berthier and to pay the remaining 1,720,000 euros (approximately
$2,064,000) balance due as of July 31, 2006 under the Berthier Agreement by
February 28, 2008. If we are unable to raise such capital and if we default on
the monthly payments or fail to pay the entire purchase price by February 28,
2008, we will be unable to acquire exclusive title to the Berthier property. In
that event, the Berthier Agreement provides that Mr. Berthier and Montespan
shall be co-owners of the property in proportion to the 2,150,000 euro purchase
price, such that Montespan's co-ownership percentage shall be the fraction whose
numerator is the total sum paid by Montespan to Mr. Berthier and whose
denominator is 2,150,000 euros, and Mr. Berthier's co-ownership percentage shall
be 100% minus Montespan's co-ownership percentage. In the event of co-ownership
of the Berthier property between Mr. Berthier and Montespan, the Berthier
Agreement provides that each party will hold a right of preemption to acquire
the interest of the other party when the other party wishes to sell its interest
to a third party. Such right of preemption is exercisable on the same terms and
conditions that are proposed between the other party and the third party.

WE HAVE NO REVENUE FROM OPERATIONS AND MUST RAISE ADDITIONAL CAPITAL TO FINANCE
OPERATIONS. OUR OPERATIONS SINCE INCEPTION HAVE NOT GENERATED A PROFIT.

         We have no revenues from our current operations as of the date of this
report and we have relied on, and will continue to rely on, significant external
financing to fund our operations. During the fiscal year ended February 28,
2006, our financing came primarily from the sale of $644,000 of convertible
debentures and approximately $86,000 in private placement proceeds. In addition,
we have recently closed on $917,800 in gross proceeds from the private sale of
our securities and obtained loans of $100,000, $250,000 and $30,000
respectively. We have a commitment for gross proceeds of up to $8.0 million that
will be available to us under the SEDA upon the satisfaction of certain
conditions including the effectiveness of an SEC registration statement
covering, among other securities, the common stock issuable in exchange for the
SEDA funds. If we determine not to utilize any of the $8.0 million SEDA funds,
we will need to raise at least approximately $9.2 million in additional capital
to finance operations through year-end 2007. To the extent we do draw on the
SEDA funds to finance operations as described above, the aforesaid $9.2 million
figure will decrease by the amount of such draws.

         Our operations since inception in 1998 have not generated a profit. We
generated a net loss of $793,520 during the year ended February 28, 2004, a net
loss of $3,294,210 during the year ended February 28, 2005, and a net loss of
$1,569,140 during the year ended February 28, 2006.

         We cannot assure you that financing, whether from external sources or
related parties, will be available on favorable terms. Our inability to obtain
adequate financing will result in the need to reduce or curtail business
operations. Any of these events would be materially harmful to our business and
may result in a lower stock price. We will need to raise additional capital to
fund our anticipated future development. No financing commitments for future
capital needs have been obtained as of the date of this report other than the
$8.0 million SEDA funds.

WE NEED TO CONSTRUCT A SMALL-SCALE PRODUCTION PLANT, AND INFRASTRUCTURE
IMPROVEMENTS; OBTAIN AND INSTALL EQUIPMENT; AND OBTAIN FINANCING FOR THESE
PURPOSES, AND FOR WORKING CAPITAL IN A COMPRESSED TIMEFRAME WITH LIMITED
MANPOWER AND LIMITED RESOURCES. WE COULD FAIL.

         We plan to install pumping equipment at the Source and to construct,
first, a small-scale production facility capable of manufacturing limited
quantities of samples of our envisioned final product (the carbonation in these
samples will vary slightly compared to the carbonation in the final commercial
product). However, there can be no assurance that one or more financing
transactions will be completed at all, or on terms favorable to us.

                                      -29-
<PAGE>


WE NEED TO OBTAIN NUMEROUS REGULATORY PERMITS, CERTIFICATES, LICENSES, ETC. FROM
GOVERNMENTAL AUTHORITIES WHICH WE COULD FAIL TO OBTAIN OR WHICH COULD TAKE
LONGER OR BE MORE COSTLY TO OBTAIN THAN WE HAVE PLANNED.

         We are subject to a wide range of governmental regulation by French
national, regional and local governmental agencies and by governmental agencies
in the other jurisdictions in which our products will be marketed. We are also
regulated in the U.S. by federal and state securities regulators and other
governmental agencies. Our business will require permits, licenses, approvals,
certifications, and various other authorizations including the following:

o        Building permit.

o        Water transportation permit (pipeline from the Source to the plant).

o        Tag approval (health-related claims on our bottle labeling).

o        Gas pressure treatment approval.

o        Food and health permits from the applicable French and other
         governmental regulatory authorities.

         We do not have all the final permits, licenses, approvals,
certifications, and other authorizations in place that we need to commence the
operation of our business. There can be no assurance we will be able to obtain,
or renew or extend as applicable, these items on a timely basis or at all. There
can also be no guarantee we will be able to obtain these items at the cost we
anticipate.

WE NEED TO OBTAIN CONTRACTS FOR OPERATING AND PRODUCTION FACILITIES AND FOR
OTHER KEY COMPONENTS OF OUR BUSINESS.

         In order to conduct our business, we must enter into several agreements
including without limitation agreements with one or more distributors, general
contractors, computer hardware and software providers, quality control
specialists, flavors and fragrances suppliers, and other vendors. There can be
no assurance that we will be able to obtain such agreements. If we are
unsuccessful in obtaining such agreements, we may not be able to implement our
business plan and, consequently, our ability to generate revenue and our
business in general will be adversely affected.

OUR BUSINESS IS DEPENDENT ON THE AVAILABILITY OF THE NATURAL MINERAL WATER DRAWN
FROM THE SOURCE. SIGNIFICANT DISRUPTIONS IN THE SUPPLY OF WATER FROM THE SOURCE
COULD MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS.

         Our operating results will be significantly impacted by any negative
changes in the availability of the natural mineral spring water from the Source.
Changes in government policy concerning the Source or the bottled water industry
in general, environmental concerns, political or civil unrest, and other
unpredictable events could adversely affect our business in the future.

                                      -30-
<PAGE>


OUR FAILURE TO SUCCESSFULLY IMPLEMENT OUR GROWTH STRATEGY COULD HARM OUR
BUSINESS.

         Our growth strategy involves initially developing the Montespan brand
of sparkling natural mineral water and commencing sales of that product in North
America (U.S. and Canada) and the Middle East and subsequently in other
geographic markets in Europe and Asia. Achieving our growth strategy is critical
in order for our business to achieve economies of scale and to achieve
profitability. Increasing the number of products we offer and the number of
markets we serve depends on a number of factors including market acceptance of
our products, our ability to raise necessary capital, hiring necessary
management and operations personnel, successful construction of our small-scale
production plant and full-scale production plant, our obtaining of distribution
agreements in our desired markets on terms favorable to us, and other ramp-up
milestones. Any condition that would deny, limit or delay our ability to achieve
these and other milestones in the future will constrain our ability to grow.
There can be no assurance that we will be able to successfully implement our
growth strategy.

         An inability to obtain financing, hire and retain personnel, secure the
required equipment and facilities in a timely and cost-effective manner,
efficiently operate our facilities, or obtain the necessary regulatory approvals
may adversely affect our ability to achieve our growth strategy. We cannot
assure you that we will be able to successfully establish new markets and our
failure to do so could harm our business.

         Expansion of our product lines and markets may also strain our existing
management resources and operational, financial and management information
systems to the point that they may be inadequate to support our operations,
requiring us to make significant expenditures in these areas. We expect that we
will need to develop further financial, operational and management controls,
reporting systems and procedures to accommodate future growth. We cannot assure
you that we will be able to develop these controls, systems or procedures on a
timely basis, and the failure to do so could harm our business.

WE HAVE AN ABSENCE OF OPERATING HISTORY.

         Poseidis and Montespan do not have an operating history. Our business
plan is focused on entry into the sparkling natural mineral water industry. This
industry is highly competitive. Our efforts in this regard are recent and in
varying stages of development. There can be no assurance that successful entry
into this industry will occur or that we will be able to develop our business
plan as a new line of business. Moreover, our lack of an operating history in
our industry makes it impossible to predict whether or not we will operate
profitably if we are able to enter such industry. While our management
collectively possesses substantial experience in our industry, and certain
experience in taking start-up companies from early stage to an operational stage
as described in the "Management" section of this report, there can be no
assurances that we will be able to locate, hire and retain the necessary
personnel to initiate, manage and operate the business, develop and implement
necessary systems, obtain contracts and obtain financing, and achieve the other
key components as contemplated in our business plan.

FOREIGN CURRENCY RISKS.

         Poseidis will have operations throughout the world including production
facilities in France and offices in France and the U.S. We will export products
to various countries. Poseidis purchases services and materials and will sell
its products in foreign currencies, therefore currency fluctuations may have an
effect on Poseidis' results of operations, balance sheet and cash flow, which
could over time impact its results. Since Poseidis will export many products
from France and may generate a substantial portion of its revenues in currencies
other than euros, Poseidis' results of operations would be adversely affected by
an appreciation of the euros against other currencies, in particular the U.S.
dollar. Further, the majority of the Company's financing to date has been raised
in U.S. dollars while its major expenditures and asset purchases are in euros,
leaving it exposed to significant changes in currency conversion rates.

                                      -31-
<PAGE>


CHANGES IN OUR GOVERNMENTAL AUTHORIZATIONS, PERMITS OR CERTIFICATES COULD
ADVERSELY IMPACT OUR BUSINESS.

         A modification, suspension, non-renewal, or revocation of any of our
authorizations, permits or certificates to be issued by the regulatory
authorities having jurisdiction over us or institution of proceedings for
non-compliance with the regulations of such authorities could adversely impact
our business, once we have obtained the necessary approvals for our operations.
Several aspects of our operations are subject to regulation by authorities that
may require changes to operating procedures that could impact our future ongoing
economic performance or operating performance.

THE BOTTLED WATER INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION, AND
CHANGES IN EXISTING REGULATIONS AND/OR NEW REGULATIONS MAY INCREASE OUR
OPERATING COSTS.

         Bottled water producers are subject to extensive regulatory and legal
compliance requirements that result in significant costs. The maintenance and
operation of our water purification system and bottling plant will necessitate
significant expenditures. We expect to continue incurring expenses to comply
with all applicable regulations. In addition, in the geographical markets and
jurisdictions that we intend to enter after introduction of our products in the
U.S., Canada, and the Middle East, we will also need to comply with the
applicable laws and regulations of the governmental agencies in those markets
and jurisdictions which could require significant expenditures. We have not yet
received approvals from these governmental agencies; however, we will be
obligated to comply with the regulations established by these agencies if and
when we do receive such authorizations.

         New or additional laws, regulations, taxes and the like could
significantly increase the cost of, or reduce the demand for, our products. If
adopted these measures could have the effect of raising prices charged to our
customers, reducing revenue and increasing costs. We may not be able to increase
our prices to pass these costs on to our customers. We cannot assure you that
these and other laws or regulations enacted in the future will not harm our
business.

RISK OF COMPETITION COULD IMPACT OUR GROWTH POTENTIAL WITHIN A MARKET OR IN
EXPANSION MARKETS.

         If our products are successful in our initial market, our success may
prompt others to imitate our products and compete in our markets or in other
markets. Such a development could impact our operations or expansion timetable.

THE MARKET WE ANTICIPATE FOR OUR SPARKLING NATURAL MINERAL WATER AND OTHER
PRODUCTS MIGHT NOT DEVELOP OR TAKE LONGER TO DEVELOP OR BE MORE COSTLY TO
DEVELOP THAN WE ANTICIPATE OR THE MARKET MAY BE UNRECEPTIVE TO OUR PRODUCTS.

         The market that we have targeted for the initial launch of our products
is very competitive with a very large number of sparkling natural mineral water
products. The success of our new products in this market cannot be guaranteed or
accurately predicted. The number of potential customers cannot be predicted with
any degree of certainty and there can be no assurance that we will operate in a
profitable manner.

INTERRUPTIONS OR DISRUPTIONS IN OUR ABILITY TO PRODUCE AND DELIVER OUR PRODUCTS
COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR OPERATIONS.

         Our business will be dependent on our operations at our planned
production facility in Theneuille, France. A significant interruption or
disruption at the Source could have a serious impact on our business, financial
condition and operating results.

                                      -32-
<PAGE>


WE ARE AT RISK OF LOSSES AND ADVERSE PUBLICITY STEMMING FROM ANY PRODUCT
LIABILITY CLAIMS INVOLVING OUR PRODUCTS.

         If our products were to cause health-related claims among our
customers, we could be exposed to significant tort liability. The insurance we
plan to carry to cover damages arising from any products liability claims may be
inadequate. In the event that our insurance is not adequate, we may be forced to
bear substantial losses from a claim or claims. In addition, any product
liability claims involving our products or involving our industry in general
could create a public perception that our products are not safe or reliable,
which could harm our reputation, result in customers being reluctant to purchase
and use our product, and harm our business.

         Customers consider safety and reliability as primary concerns in
selecting consumer products and especially beverage and food products. If we
fail to maintain a record of safety and reliability that is satisfactory to our
customers, our ability to retain customers and attract new customers may be
adversely affected.

SEASONALITY AND OTHER FACTORS IMPACT DEMAND FOR OUR PRODUCTS.

         Demand for bottled water is affected by factors such as seasonality,
economic conditions, pricing levels and other factors. Due to these and other
factors, operating results for an interim period are not necessarily indicative
of operating results for an entire year.

WE WILL HAVE A SIGNIFICANT AMOUNT OF DEBT AND FIXED OBLIGATIONS WHICH COULD HARM
OUR ABILITY TO MEET OUR GROWTH STRATEGY AND IMPAIR OUR ABILITY TO SERVICE OUR
FIXED OBLIGATIONS.

         We will have a significant amount of fixed obligations under our
financing arrangements. Our debt and fixed obligations could:

o         impact our ability to obtain additional financing to support expansion
          plans and for working capital and other purposes on acceptable terms
          or at all;

o         divert substantial cash flow from our operations and expansion plans
          in order to service our fixed obligations;

o         require us to incur significantly more interest expense than we
          currently do; and

o         place us at a possible competitive disadvantage compared to less
          leveraged competitors and competitors that have better access to
          capital resources.

         Our ability to make scheduled payments on our debt and fixed
obligations will depend on our future operating performance and cash flow, which
in turn will depend on prevailing economic conditions and financial,
competitive, regulatory, business and other factors, many of which are beyond
our control. We cannot assure you that we will be able to generate sufficient
cash flow from our operations to pay our debt and fixed obligations as they
become due, and our failure to do so could harm our business. If we are unable
to make payments on our debt and fixed obligations, we could be forced to seek
to renegotiate those obligations or obtain additional equity or debt financing.
To the extent we finance our activities with additional debt, we may become
subject to financial and other covenants that may restrict our ability to pursue
our growth strategy. We cannot assure you that our efforts would be successful
or timely or that we could refinance our obligations on acceptable terms, if at
all.

                                      -33-
<PAGE>


OUR MAINTENANCE COSTS WILL INCREASE AT OUR PRODUCTION FACILITY.

         While our small-scale production plant and full-scale production plant
are scheduled for construction in 2007 and 2008, history has shown that
maintenance costs will increase over time. We will incur lower maintenance
expenses during the first few years of operations. As equipment ages, the cost
to maintain it naturally increases. In addition, the costs of maintenance
increase each year due to increases in parts prices from manufacturers and
increases in labor rates. Ongoing manufacturer and regulatory directives also
increase maintenance costs. Our maintenance costs will increase both on an
absolute basis and as a percentage of our operating expenses, as our production
facility ages.

IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL AT REASONABLE COSTS
OR FAIL TO MAINTAIN OUR COMPANY CULTURE, OUR BUSINESS COULD BE HARMED.

         Our business plan requires specialized expertise in several fields and
is labor intensive, with personnel costs representing a significant percentage
of our anticipated operating expenses. We expect salaries, wages and benefits to
increase on a gross basis and these costs could increase as a percentage of our
overall costs. Since we will compete against the major bottled water suppliers
for management-level personnel and others and many of our competitors offer wage
and benefit packages that will exceed ours, we may be required to increase wages
and/or benefits in order to attract and retain qualified personnel or risk
considerable employee turnover. If we are unable to hire, train and retain
qualified employees at a reasonable cost, our business could be harmed and we
may be unable to complete our expansion plans.

OUR BUSINESS IS HIGHLY DEPENDENT ON THE MARKET IN THE U.S., CANADA AND THE
MIDDLE EAST AND INCREASES IN COMPETITION OR A REDUCTION IN DEMAND FOR OUR
PRODUCT IN THIS MARKET WOULD HARM OUR BUSINESS.

         Our plan for market entry contemplates phased-in growth focused on
North America (U.S. and Canada) followed by expansion of our territories and
expansion of our product lines. Our business would be harmed by any
circumstances causing a reduction in demand for our products in the French
market such as adverse changes in local economic conditions, negative public
perception of our product or our industry, and the like.

WE MAY BE SUBJECT TO UNIONIZATION, WORK STOPPAGES, SLOWDOWNS OR INCREASED LABOR
COSTS.

         We have a non-union workforce. If our employees unionize, it could
result in demands that may increase our operating expenses and adversely affect
our profitability. Each of our different employee groups could unionize at any
time and require separate collective bargaining agreements. If any group of our
employees were to unionize and we were unable to reach agreement on the terms of
their collective bargaining agreement or we were to experience wide spread
employee dissatisfaction, we could be subject to work slowdowns or stoppages. In
addition, we may be subject to disruptions by organized labor groups protesting
our non-union status. Any of these events would be disruptive to our operations
and could harm our business.

OUR RESULTS OF OPERATIONS WILL FLUCTUATE.

         We expect our quarterly operating results to fluctuate due to
additional costs associated with new market entries and new product development
and introductions. As we enter new markets, we could also be subject to
additional seasonal variations along with any potential competitive responses to
our entry. As a result of these factors, quarter-to-quarter comparisons of our
operating results may not be a good indicator of our future performance. In
addition, it is possible that in any future quarter our operating results could
be below the expectations of investors and any published reports or analyses
regarding us. In that event, the price of our common stock could decline,
perhaps substantially.

                                      -34-
<PAGE>


OUR BUSINESS COULD BE HARMED IF WE LOSE THE SERVICE OF OUR KEY PERSONNEL; WE DO
NOT HAVE EMPLOYMENT AGREEMENTS WITH CERTAIN SENIOR EXECUTIVES; WE HAVE NOT HIRED
EMPLOYEES FOR CERTAIN KEY POSITIONS.

         Our business will depend upon the efforts of Louis Pardo (President and
CEO of Poseidis), Bernard Bouverot (Directeur General of Montespan), John J.
McGovern (Executive Vice President and Chief Financial Officer of Poseidis), and
a number of management and operating personnel. The Company has not entered into
employment agreements with its executive officers and key personnel except for a
consulting agreement between the Company and Bridgehead Partners, LLC (John J.
McGovern, the Company's Chief Financial Officer, is the Chairman and Managing
Director of Bridgehead Partners, LLC). We do not maintain key-man life insurance
on Messrs. Pardo, Bouverot, and McGovern. The loss of the services of any of
these executives could materially harm our business because of the cost and time
necessary to replace and train a replacement. Such a loss would also divert
management attention away from operational issues. We may have difficulty
replacing management or other key personnel who are lost or who leave and,
therefore, the loss of the services of any of these individuals could materially
harm our business.

         In addition, we have not hired personnel as of the date of this report
who will fill significant operations positions such as production facility
manager and sales managers. We may have to pay a higher salary than we
anticipate to retain the services of qualified individuals for these positions.
There can be no assurances that we will be able to hire such persons on terms
acceptable to us. In addition, the failure to fill such positions may affect our
ability to implement our business plan.

OTHER COMPANIES MAY HAVE DIFFICULTY ACQUIRING US, EVEN IF DOING SO WOULD BENEFIT
OUR STOCKHOLDERS, DUE TO PROVISIONS UNDER OUR CORPORATE CHARTER AND BYLAWS, AS
WELL AS FLORIDA LAW.

         Provisions in our amended certificate of incorporation, our bylaws, and
under Florida law could make it more difficult for other companies to acquire
us, even if doing so would benefit our stockholders. Our certificate of
incorporation and bylaws contain the following provisions, among others, which
may inhibit an acquisition of our company by a third party:

o         advance notification procedures for matters to be brought before
          stockholder meetings;

o         a limitation on who may call stockholder meetings; and

o         the ability of our board of directors to issue u p to 10,000,000
          shares of preferred stock without a stockholder vote.

         We are also subject to provisions of Florida law that prohibit us from
engaging in any business combination with any "interested shareholder", meaning
generally that a shareholder who beneficially owns more than 10% of our stock
cannot acquire us unless various conditions are met, such as approval of the
transaction by two-thirds of the voting shares other than the shares
beneficially owned by the interested shareholder. Any of these restrictions
could have the effect of delaying or preventing a change in control.

WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY.

         Our success and ability to compete depends in part upon our proprietary
rights and intellectual property. We have no registered trademarks in the United
States, but have two registered trademarks in France. They are "St. Troliere"
(stylized letters) and "Montespan" (stylized letters and fleur de lis design).

                                      -35-
<PAGE>

Both are registered in appropriate International Classes consistent with our
business development strategies. We do have the opportunity to seek registration
of these marks and others in the United States and in other jurisdictions, but
can give no assurance whether registration will be granted. In the meantime,
existing laws afford only limited protection for intellectual property based
upon use of the trademarks without registration. If we are unable to adequately
protect our intellectual property or become subject to intellectual property
infringement claims, we could incur costly and time-consuming litigation.

IF WE WERE TO DETERMINE THAT OUR EQUIPMENT, PARTS OR INVENTORY WERE IMPAIRED, IT
WOULD HAVE A SIGNIFICANT ADVERSE EFFECT ON OUR OPERATING RESULTS.

         In accordance with GAAP, we plan to periodically perform impairment
reviews in order to determine whether we need to reduce the carrying value of
our equipment and related assets with a related charge to earnings. In addition
to the fact that the value of our equipment will decline as it ages, other
factors beyond our control may further contribute to the decline of the fair
market value of our equipment and related assets and inventory. If such an
impairment does occur, Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", would require
us to write down these assets to their estimated fair market value through a
charge to earnings. A significant charge to earnings would adversely affect our
financial condition and operating results.

WE WILL BE DEPENDENT ON THIRD PARTY SUPPLIERS FOR PARTS AND COMPONENTS.

         Frequent maintenance will be required for our plant, and maintenance
costs will likely comprise a significant portion of our operating costs. Failure
or significant delay by potential vendors in providing necessary parts could, in
the absence of alternative sources of supply, have a material adverse effect on
our operations. If we are dependent on a small number of suppliers for parts and
other materials for our business, we may also be subject to adverse impacts from
unusually high price increases which are greater than overall inflationary
trends.

OUR FINANCIAL STATEMENTS FOR THE YEAR ENDED FEBRUARY 28, 2006 WERE SUBJECT TO A
GOING CONCERN OPINION FROM OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. WE
MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.

         Our independent registered public accounting firm included an
explanatory paragraph to their audit opinion issued in connection with the year
ended February 28, 2006 financial statements, which states that Poseidis'
ability to continue as a going concern depends upon its ability to secure
financing and attain profitable operations. Our ability to obtain additional
funding will determine our ability to continue as a going concern. Additionally,
our financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

WE FACE RISKS RELATED TO OUR ACCOUNTING RESTATEMENTS.

         On July 25, 2006 we publicly announced that we had discovered
accounting errors in previously reported financial statements. Following
consultation with our independent accountants, we have decided to restate our
financial statements for the quarters ended August 31, 2005 and November 30,
2005. The restatements relate to (1) the accounting for certain debt financings
conducted by the Company in August and October 2005 as well as certain
compensatory warrants issued by the Company and (2) the accounting for the
issuance of the Company's common stock in payment of certain accrued expenses.
Further information about these restatements is contained in our Current Report
on Form 8-K filed July 25, 2006, as amended September 12, 2006, our Amended
Quarterly Report on Form 10-QSB/A for the three months ended August 31, 2005,
and our Amended Quarterly Report on Form 10-QSB/A for the three months ended
November 30, 2005.

                                      -36-
<PAGE>


         The restatement of these financial statements may lead to litigation
claims and/or regulatory proceedings against us. The defense of any such claims
or proceedings may cause the diversion of management's attention and resources,
and we may be required to pay damages if any such claims or proceedings are not
resolved in our favor. Any litigation or regulatory proceeding, even if resolved
in our favor, could cause us to incur significant legal and other expenses. We
also may have difficulty raising equity capital or obtaining other financing. We
may not be able to effectuate our current business strategy. Moreover, we may be
the subject of negative publicity focusing on the financial statement errors and
resulting restatement and negative reactions from our stockholders, creditors or
others with whom we do business. The occurrence of any of the foregoing could
harm our business and reputation and cause the price of our securities to
decline.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL AND DISCLOSURE CONTROLS,
WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD.
AS A RESULT, CURRENT AND POTENTIAL STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR
FINANCIAL REPORTING WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE OF OUR
SECURITIES.

         Effective internal and disclosure controls are necessary for us to
provide reliable financial reports and effectively prevent fraud and to operate
successfully as a public company. If we cannot provide reliable financial
reports or prevent fraud, our reputation and operating results would be harmed.
We have in the past discovered, and may in the future discover, areas of our
disclosure and internal controls that need improvement. As a result after a
review of our August 31, 2005 and November 30, 2005 operating results, we
identified certain deficiencies in some of our disclosure controls and
procedures which we have addressed as stated above.

         We have undertaken improvements to our internal controls in an effort
to remediate these deficiencies through the following efforts: 1) engaging a
qualified, experienced Chief Financial Officer as of January 12, 2006; 2)
implementing a review of all convertible securities to identify any securities
that are not conventional convertible securities; and 3) periodic
reconciliations of our common stock transactions with our stock transfer agent
to assure accurate and timely recording of common stock issuances. We cannot be
certain that our efforts to improve our internal and disclosure controls will be
successful or that we will be able to maintain adequate controls over our
financial processes and reporting in the future. Any failure to develop or
maintain effective controls or difficulties encountered in their implementation
or other effective improvement of our internal and disclosure controls could
harm our operating results or cause us to fail to meet our reporting
obligations. If we are unable to adequately establish or improve our internal
controls over financial reporting, our external auditors may not be able to
issue an unqualified opinion on the effectiveness or our controls. Ineffective
internal and disclosure controls could also cause investors to lose confidence
in our reported financial information, which would likely have a negative effect
on the trading price of our securities.

THERE MAY BE NO REMAINING PROCEEDS FOR STOCKHOLDERS IN THE EVENT OF OUR
DISSOLUTION.

         In the event of our dissolution, the proceeds from the liquidation of
our assets, if any, will be first used to satisfy the claims of creditors. Only
after all outstanding debts are satisfied will the remaining proceeds, if any,
be distributed to our stockholders. Accordingly, the ability of any investor to
recover all or any portion of an investment in our securities under such
circumstances will depend on the amount of funds so realized and claims to be
satisfied therefrom.

                                      -37-
<PAGE>


OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY.

         Our common stock may experience in the future significant price and
volume fluctuations that could adversely affect the market price of our common
stock and/or our stockholders' ability to sell our common stock without regard
to our operating performance. In addition, we believe that factors such as
quarterly fluctuations in our financial results and changes in the overall
economy or the condition of the financial markets could cause the price of our
common stock to fluctuate substantially.

THE OTC BULLETIN BOARD HAS CEASED QUOTING OUR COMMON STOCK. AFTER WE COMPLETE
AND FILE CERTAIN REPORTS WITH THE SEC SO THAT OUR STOCK WILL AGAIN BE ELIGIBLE
FOR QUOTATION ON THE OTC-BB, IT IS UNCERTAIN AS TO WHEN THE REINCLUSION OF OUR
SHARE QUOTATION ON THE OTC-BB WILL BE ACHIEVED.

         On July 19, 2006, the OTC-BB ceased quoting our shares because our
annual report on Form 10-KSB for the year ended February 28, 2006 had not been
filed with the SEC. We will pursue reinclusion of our share quotation on the
OTC-BB. It is uncertain as to when the reinclusion of our share quotation on the
OTC-BB will be achieved.

OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE
DIFFICULT FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.

Our common stock is deemed to be "penny stock" as that term is defined in Rule
3a51-1 promulgated under the Securities Exchange Act of 1934. These requirements
may reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to sell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline. Penny stocks are stock:

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

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

o         Whose prices are not quoted on the NASDAQ automated quotation system
          (NASDAQ listed stock must still have a price of not less than $5.00
          per share); or

o         In issuers with net tangible assets less than $2.0 million (if the
          issuer has been in continuous operation for at least three years) or
          $5.0 million (if in continuous operation for less than three years),
          or with average revenues of less than $6.0 million for the last three
          years.

         Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers are required to determine whether an investment in a
penny stock is a suitable investment for a prospective investor.

RISKS RELATED TO CORNELL CAPITAL FINANCING

THE SEDA AND CONVERTIBLE DEBENTURES CONTAIN CERTAIN COVENANTS PROHIBITING US,
AMONG OTHER THINGS, FROM RAISING CAPITAL AT LESS THAN THE MARKET PRICE OR LESS
THAN CORNELL CAPITAL'S PURCHASE PRICE OR PLEDGING ASSETS TO OTHER LENDERS.

         The SEDA and Convertible Debentures contain covenants that restrict the
following activities:

o         Raising capital from the sale of stock or other securities convertible
          into stock at a price less than the market price of Poseidis' common
          stock on the date of issuance or less than Cornell Capital's purchase
          price; or

                                      -38-
<PAGE>


o         Granting a security interest in Poseidis' assets, which security
          interest may be needed in order to obtain borrowings or capital from a
          lender, except that the secured party is obligated to subordinate the
          priority of its security interest under certain circumstances.

o         Other matters as stated in our agreements with Cornell as filed with
          our SEC reports which are available at the SEC website.

         The existence of these covenants may severely limit Poseidis' ability
to borrow money or raise capital from the sale of stock or convertible
securities because any potential lender will likely require collateral in the
form of a security interest on Poseidis' assets to secure a loan and purchasers
of our stock or convertible securities may want to pay a discount to the market
price of our stock.

CORNELL CAPITAL COULD ACQUIRE A SIGNIFICANT AMOUNT OF OUR COMMON STOCK AND, IF
IT DOES SO, COULD EXERCISE SIGNIFICANT INFLUENCE OVER US.

         Cornell Capital currently owns 3,000,000 shares of common stock and,
based upon the conversion rights under the Convertible Debentures as described
in this report, could acquire up to 29.48% of our common stock, subject to the
terms and conditions of the applicable agreements. If Cornell Capital acquired
such 29.48% of our common stock, it could exercise significant influence over
the election of directors, determination of policies, appointing the persons
constituting management, and determining the outcome of corporate actions
requiring stockholder approval, including mergers, consolidations, and the sale
of all or substantially all or our assets. The interests of Cornell Capital may
differ from the interest of other stockholders.

POSSIBLE AMENDMENT OF STANDBY EQUITY DISTRIBUTION AGREEMENT (SEDA)

         As a result of the number of shares that could be acquired by Cornell
Capital upon full utilization of the SEDA, Cornell Capital could become an
affiliate of the Company and own a majority of the Company's outstanding common
shares. Accordingly, in light of recent informal positions taken by the
Securities and Exchange Commission, the Company may be required to amend the
SEDA to substantially reduce the dollar amount available under the SEDA. To the
extent that the Company must substantially reduce the amount of financing
available under the SEDA, the Company's financing plans may be materially
adversely affected. Additionally, further delays could occur with respect to the
review and approval of the registration statement covering the SEDA shares.

OUR ABILITY TO IMPLEMENT OUR BUSINESS PLAN IS DEPENDENT UPON CORNELL CAPITAL.

         Cornell Capital has provided $644,000 in funding pursuant to the
Convertible Debentures. However, in the future, we will be reliant upon the
ability of Cornell Capital to provide a significant amount of funding pursuant
to the SEDA, which it has agreed to do in accordance with the terms of the SEDA.
In the event that Cornell Capital is unable to fulfill its commitment under the
SEDA for whatever reason, our ability to implement our business plan will
suffer.

OUR ABILITY TO GENERATE THE CASH NEEDED TO MAKE PAYMENT ON THE CONVERTIBLE
DEBENTURES AND OUR OTHER OBLIGATIONS AND TO OPERATE OUR BUSINESS DEPENDS ON MANY
FACTORS BEYOND OUR CONTROL.

         Our ability to make payments on the Convertible Debentures and our
other obligations and to fund working capital needs will depend on our ability
to generate cash and secure financing in the future. This ability, to an extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors beyond our control. If our business does not generate
sufficient cash flow from operations, and sufficient future funds are not
available to us from other sources of financing, we may not be able to repay the

                                      -39-
<PAGE>

Convertible Debentures, operate our business or fund our other liquidity needs.
We cannot assure you that we will be able to obtain additional financing. If we
cannot meet or finance our obligations when they are due, we may have to sell
assets, reduce capital expenditures or take other actions which could have a
material adverse effect on us.

OUR INDEBTEDNESS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL HEALTH,
OUR ABILITY TO OBTAIN FINANCING IN THE FUTURE AND TO REACT TO CHANGES IN OUR
BUSINESS.

         We have a significant amount of debt. Our significant amount of debt
could have important consequences to stockholders. For example, it could:

o         Make it more difficult for us to satisfy our creditors;

o         Increase our vulnerability to adverse economic and general industry
          conditions;

o         Require us to dedicate a substantial portion of our cash flow from
          operations to payments on our debt, which would reduce the
          availability of our cash flow from operations to fund working capital,
          capital expenditures or other general corporate purposes;

o         Limit our flexibility in planning for, or reacting to, changes in our
          business and industry; and

o         Limit our ability to borrow additional funds in the future.

IF WE DEFAULT UNDER THE CONVERTIBLE DEBENTURES, ALL OF OUR ASSETS ARE AT RISK,
AND WE MAY BE FORCED TO CURTAIL OR CEASE OUR OPERATIONS. WE HAVE PLEDGED SHARES
OF OUR COMMON STOCK WHICH MAY BE SOLD IF WE DEFAULT UNDER THE CONVERTIBLE
DEBENTURES.

         We have pledged all of our assets as a security interest to Cornell
Capital in connection with the Convertible Debentures. In the event of a default
to Cornell Capital, we could lose some or all of our assets which would force us
to curtail or cease operations. If we default on any of these agreements,
Cornell Capital would be entitled to, among other things, accelerate our
obligations to repay outstanding amounts under the Convertible Debenture, or to
seize control of our assets and sell them to third parties or to sell shares of
our common stock that we have pledged to Cornell Capital.

RESTRICTIONS UNDER THE CONVERTIBLE DEBENTURES AND THE SEDA COULD SIGNIFICANTLY
LIMIT OUR ABILITY TO ACCESS FUNDS UNDER THE SEDA.

         We are prohibited from issuing shares to Cornell Capital upon
conversion of the Convertible Debentures or pursuant to the SEDA which would
result in Cornell Capital holding in excess of 4.9% and 9.9%, respectively, of
our issued and outstanding common stock. Pursuant to the terms of the
Convertible Debentures, this restriction may only be waived by Cornell Capital
either in its sole discretion with 65 days' notice or without notice upon an
event of default. This restriction may significantly limit and delay our ability
to access funds under the SEDA and, accordingly, may affect our ability to
implement our business plan.

CONVERSION OF THE CONVERTIBLE DEBENTURES BY CORNELL CAPITAL WILL HAVE A DILUTIVE
EFFECT ON OUR SHAREHOLDERS.

         We have sold $644,000 of our secured convertible debentures to Cornell
Capital. In the event Cornell Capital elects to convert the Convertible
Debentures, the resulting share issuance to Cornell Capital will have a dilutive
effect upon our shareholders. The Company's financing agreements with Cornell

                                      -40-
<PAGE>

include anti-dilution provisions which, if activated, could result in the
issuance of a substantial number of shares to Cornell and dilute the percentage
ownership of the investors who acquire shares of our common stock. These
anti-dilution provisions are contained in the documents that we have filed with
our periodic SEC reports and are available at the SEC's website to which
prospective investors are referred.

EXISTING SHAREHOLDERS WILL EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF
SHARES UNDER THE SEDA.

         The sale of shares pursuant to the SEDA will have a dilutive impact on
our stockholders. As a result, our net income per share could decrease in future
periods, and the market price of our common stock could decline. In addition,
the lower our stock price is, the more shares of common stock we will have to
issue under the SEDA to draw down the full amount. If our stock price is lower,
then our existing stockholders would experience greater dilution.

CORNELL CAPITAL WILL PAY LESS THAN THE THEN-PREVAILING MARKET PRICE OF OUR
COMMON STOCK FOR SHARES PURCHASED UNDER THE SEDA.

         The common stock to be issued under the SEDA will be issued at 96% of
the lowest volume weighted average price of our common stock as quoted on the
OTC-BB or other principal market on which our common stock is traded for the
five days immediately following the notice date of an advance. These discounted
sales could cause the price of our common stock to decline.

THE SALE OF OUR STOCK UNDER OUR SEDA COULD ENCOURAGE SHORT SALES BY THIRD
PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE OF OUR STOCK PRICE.

         The significant downward pressure on the price of our common stock
caused by the sale of material amounts of common stock under the SEDA could
encourage short sales by third parties. In a short sale, a prospective seller
borrows stock from a shareholder or broker and sells the borrowed stock. The
prospective seller hopes that the stock price will decline, at which time the
seller can purchase shares at a lower price to repay the lender. The seller
profits when the stock price declines because it is purchasing shares at a price
lower than the sale price of the borrowed stock. Such sales could place further
downward pressure on the price of our common stock by increasing the number of
shares being sold.

WE MAY NOT BE ABLE TO ACCESS SUFFICIENT FUNDS UNDER THE SEDA WHEN NEEDED.

         We are dependent on external financing to fund our operations. Our
financing needs are expected to be provided from the SEDA, in large part. No
assurances can be given that such financing will be available in sufficient
amounts or at all when needed, in part, because the amount of financing
available will fluctuate with the price and volume of our common stock. As the
price and volume decline, then the amount of financing available under the SEDA
will decline.

         There are additional restrictions on our ability to request advances
under the SEDA. For example, our ability to request an advance is conditioned
upon us registering the shares of common stock with the SEC. Further, we may not
request advances if the shares to be issued in connection with such advances
would result in Cornell Capital owning more than 9.9% of our outstanding common
stock. Even if we request advances the amount of each advance is limited to a
maximum draw down of $300,000 every five (5) trading days.

                                      -41-
<PAGE>


ITEM 7. FINANCIAL STATEMENTS

         Our Financial Statements beginning on Page F-1 are filed as part of
this Annual Report on Form 10-KSB/A and are incorporated herein by reference.

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

         Not applicable.

ITEM 8A. CONTROLS AND PROCEDURES

         The Company's Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's disclosure controls and procedures
as of February 28, 2006. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in reports that the Company files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms. The Company's officers have
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed in the reports that the Company
files or submits under the Exchange Act is accumulated and communicated to the
Company's management, including the principal executive and principal financial
officers, to allow timely decisions regarding required disclosure in accordance
with Exchange Act Rule 13a-15(e). No changes in the Company's internal control
over financial reporting that have materially affected, or are reasonably likely
to materially affect, its internal control over financial reporting, including
any corrective actions with regard to significant deficiencies and material
weaknesses, occurred during the fourth quarter of the year ended February 28,
2006 or subsequent to the date of the evaluation by its management thereof.


ITEM 8B. OTHER INFORMATION

         Not applicable.


                                    PART III

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

         The following sets for information concerning Poseidis' and Montespan's
directors and executive officers as of August 7, 2006:

NAME                  AGE                             POSITION
----                  ---                             --------

Louis Pardo            38       Chairman, Chief Executive Officer, and President
                                of Poseidis

Diane Boisvert         48       Director and Secretary of Poseidis

Bernard Bouverot       41       Directeur General of Montespan

John J. McGovern       50       Executive Vice President, Chief Financial
                                Officer, and Treasurer of Poseidis

                                      -42-
<PAGE>


LOUIS PARDO, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER, AND PRESIDENT OF
POSEIDIS

         Mr. Pardo has served as the Company's President since September 2002
and as the Company's Chief Executive Officer since January 2006. Mr. Pardo has
served as a Director of Poseidis since 2002. Mr. Pardo is responsible for the
Company's strategic direction, product and brand development, marketing and
business development activities. Prior to his appointment as President, Mr.
Pardo was the Company's Marketing Manager and Product Developer. Before joining
Poseidis, Mr. Pardo served as Marketing Manager and Product Developer for
Billyweb Corp. and Music Life Entertainment Inc. from 1999 to 2001. During this
time, he was responsible for the development of leading television programs for
children in France. From 1996 to 1999, Mr. Pardo served as President of Faz
Productions of France. While at Faz Productions, he received many awards for
various music and video productions. Prior to Faz Productions, Mr. Pardo spent
four years with Symbolic Corp of France where he was President and Senior
Product Manager. At Symbolic Corp. Mr. Pardo launched "x-energy drink," the
market leading energy soft drink in France. Since 2000, Mr. Pardo has also been
a partner of Deston Songs and Deston Entertainment, where he co-produced
successful platinum-selling albums of Ricky Martin, Sakis Rouvas and 2Be3.

BERNARD BOUVEROT, DIRECTEUR GENERAL OF MONTESPAN

         Mr. Bouverot has been the Directeur General of Montespan, our French
subsidiary, since 2004. Prior to joining Montespan, from 2001 to 2004 Mr.
Bouverot was the Technical Manager for Blue Industry, a company that specializes
in the potabilization and treatment of used waters. In addition, Mr. Bouverot
has served as Chief Technology Officer and as a member of the Board of Smart
Tech Inc. (satellite tracking devices), as president of several subsidiaries of
Gemplus Group (a leading manufacturer of microchip cards) in France, Holland,
Italy, and Spain, and as president of Haviland USA, Inc. (fine porcelain table
products). While Mr. Bouverot was a principal of Smart IT Technology in Lyon,
France that company went through a bankruptcy proceeding. Mr. Bouverot's
educational background includes a French DESS degree in marketing and business
administration (MBA equivalent), a French DESS degree in business law, and a
medical doctor degree in applied biology and engineering.

JOHN J. (JACK) MCGOVERN, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
TREASURER OF POSEIDIS

         Mr. McGovern has over twenty-five years of financial and executive
management experience. He is the Chairman and a Managing Director of Bridgehead
Partners, LLC which he founded in January of 2002. Recently, Mr. McGovern was
the Chief Financial Officer of Lithium Technology Corporation from May 2004
until June 2005. From November 1999 until December 2001, Mr. McGovern was the
Senior Vice President and CFO of Multex.com, Inc., a $100 million NASDAQ listed
company that was considered the leading internet-based investment information
and technology provider to the financial services industry. Multex was acquired
by Reuters in March, 2003. Mr. McGovern received a B.S. degree in Accounting
from Monmouth University and an MBA from Columbia University where he attended
the Masters Degree Program for Executives. He is a Certified Public Accountant
in the State of New Jersey (inactive).

DIANE BOISVERT, DIRECTOR AND SECRETARY OF POSEIDIS

         Ms. Boisvert has served as a Director and Secretary since January 2006.
Ms. Boisvert has held senior positions with Canada National Bank including Vice
President and Senior Executive (1992-2003) in the bank's Mortgage & Loan
Department. She is the founder of, and is the self-employed operator of,
Hypotheca, Ltd., a mortgage brokerage firm (2003 to the present).

                                      -43-
<PAGE>


EMPLOYEES

         As of February 28, 2006, Poseidis did not have any employees. We did
have three consultants, none of whom were full-time. As we progress with our
development strategy we intend to hire full-time and part-time employees on a
phased basis and to enter into employment agreements with our senior management.

CORPORATE INFORMATION

         Our directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified.

AUDIT COMMITTEE

         We do not currently have a separate audit committee. Currently, our
entire Board of Directors performs all the functions that may be delegated to an
audit committee. We intend to establish an audit committee during the fiscal
year ending February 28, 2008 and are currently assessing which potential
members of our Board are best qualified, based on their accounting or related
financial management expertise, independence, time availability, corporate
experience and other relevant factors, to serve on our audit committee. Based on
our small size, early development state and limited financial and human
resources, we did not believe that creating an audit committee separate and
distinct from our full Board of Directors would have been cost-effective prior
to fiscal year ending February 28, 2008. The Board does not contain at least one
financial expert serving on the Board. The Company has been searching for such
an expert but has not been able to locate one. The Company believes that it will
have such a person once it completes the next round of financing and obtains
directors and officers liability insurance.

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires our
officers and directors, and persons who beneficially own, directly or
indirectly, more than ten percent (10%) of the registered class of our equity
securities to file reports of ownership and changes in ownership on Form 3, 4
and 5 with the SEC. Officers, directors, and greater than ten percent (10%)
beneficial owners are required by SEC regulation to furnish us with copies of
all Forms 3,4 and 5 they file. To our knowledge, based solely on a review of the
copies of such reports furnished to the Company and on representations that no
other reports were required, the following persons required to file such a
report filed a report late or failed to so file during the year ended February
28, 2006: Louis Pardo and Christophe Giovannetti did not file Forms 4 nor Form 5
with respect to the year ended February 28, 2006.

FAMILY RELATIONSHIPS

         No family relationships exist among the Company's directors or
officers.

CODE OF ETHICS

         We have not formally adopted a written Code of Ethics. Management of
the Company is reviewing a draft Code of Ethics designed to deter wrongdoing and
promote honest and ethical conduct, full, fair and accurate disclosure,
compliance with laws, prompt internal reporting, and accountability to adherence
to the Code of Ethics. We have not adopted a written Code of Ethics prior to
filing this report because based on our small size, early development stage and
limited financial and human resources, we did not believe that formally adopting
a written Code of Ethics would have been necessary or cost-effective prior to
the fiscal year ending February 28, 2007.

                                      -44-
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table shows all the cash compensation paid by Poseidis,
as well as any other compensation paid or accrued, during the fiscal years ended
February 28, 2006, February 28, 2005, and February 29, 2004 to Poseidis' Chief
Executive Officer and the two highest paid executive officers other than
Poseidis' Chief Executive Officer during the fiscal year ended February 28,
2006. Poseidis did not have any salaried employees during the fiscal years ended
February 28, 2006, February 28, 2005, and February 29, 2004. No restricted stock
awards, long-term incentive plan payouts or other types of compensation, other
than the compensation identified in the chart below, were paid or accrued to
these executive officers during these fiscal years. Except as indicated below,
no executive officer earned a total annual salary, bonus, or other compensation
for any of these years in excess of $100,000.

<TABLE>
<CAPTION>


                                              Annual Compensation                          Long Term Compensation
                             ------------------------------------------------------  -----------------------------------
Name and                                                           Other Annual        Options/          All Other
Principal Position           Year*    Salary ($)    Bonus ($)    Compensation ($)      SARs (#)       Compensation ($)
---------------------------  -------  ------------ ------------ -------------------  --------------  -------------------
<S>                           <C>          <C>          <C>             <C>                <C>          <C>
Louis Pardo                   2006        -0-          -0-             -0-                -0-           $665,300(1)
Chairman, Chief
Executive Officer and
President
                              2005        -0-          -0-             -0-                -0-               -0-
                              2004        -0-          -0-             -0-                -0-               -0-


Bernard Bouverot              2006        -0-          -0-             -0-                -0-               -0-
Directeur General of
Montespan
                              2005        -0-          -0-             -0-                -0-               -0-
                              2004        -0-          -0-             -0-                -0-               -0-

John J. McGovern              2006    $60,000(2)       -0-             -0-           1,500,000 (2)          -0-
Executive Vice President,
Chief Financial Officer,
and Treasurer
                              2005         0           -0-             -0-                -0-               -0-
                              2004         0           -0-             -0-                -0-               -0-

<FN>
-------------------
* Fiscal year end is February 28.


(1)      Mr. Pardo provided services to the Company on a consultant basis during
         the period from January 2001 through December 2005. On July 11, 2005,
         the Company issued 6,653,000 shares of common stock to Mr. Pardo as
         payment for these services. The Company and Mr. Pardo entered into an
         amended and restated consulting agreement in July 2006. The shares were
         at the time of issuance, and are as of the date of this report, subject
         to restrictions on transferability. The closing market price of our
         common stock on the OTC-BB on the date of issuance of these shares was
         $0.10 per share. The issuance price of these shares was $0.816, based
         on a discount of 20% to the five-day trailing average price for the
         Company's common stock on the OTC-BB as of July 11, 2005.

                                      -45-
<PAGE>


(2)      The Company has entered into an engagement agreement with Bridgehead
         Partners, LLC ("Bridgehead") whereby Mr. McGovern serves as Executive
         Vice President and Chief Financial Officer of the Company effective as
         of January 12, 2006. Mr. McGovern is the Chairman and Managing Director
         of Bridgehead. The engagement agreement with Bridgehead provides, among
         other things, for a monthly fee of $15,000. The Company has issued
         Bridgehead a warrant for 1,500,000 shares exercisable at $0.0375 per
         share which vests in 3 tranches: one half on January 12, 2006, one
         quarter on June 1, 2006, and one quarter on October 31, 2006.
</FN>
</TABLE>


EMPLOYMENT AGREEMENTS; MANAGEMENT - RELATED AGREEMENTS

         The Company has not entered into employment agreements with its
executive officers except for a consulting agreement between the Company and
Bridgehead (John J. McGovern, the Company's Chief Financial Officer, is the
Chairman and Managing Director of Bridgehead) and consulting agreements between
the Company and Mr. Pardo. These agreements with related parties were comparable
to the terms the Company could have obtained from unaffiliated third parties.

         Mr. Pardo provided services to the Company on a consultant basis during
the period from January 2001 through December 2005. On July 11, 2005, the
Company issued 6,653,000 shares of common stock to Mr. Pardo as payment for
these services. The Company and Mr. Pardo entered into an amended and restated
consulting agreement in July 2006. The shares were at the time of issuance, and
are as of the date of this report, subject to restrictions on transferability.
The closing market price of our common stock on the OTC-BB on the date of
issuance of these shares was $0.10 per share. The issuance price of these shares
was $0.816, based on a discount of 20% to the five-day trailing average price
for the Company's common stock on the OTC-BB as of July 11, 2005.

         The Company has entered into a renewable engagement agreement with
Bridgehead Partners, LLC ("Bridgehead") whereby Mr. McGovern serves as Executive
Vice President and Chief Financial Officer of the Company effective as of
January 12, 2006. Mr. McGovern is the Chairman and Managing Director of
Bridgehead. The engagement agreement with Bridgehead provides, among other
things, for a monthly fee of $15,000. The Company has issued Bridgehead a
warrant for 1,500,000 shares exercisable at $0.0375 per share which vests in 3
tranches: one half on January 12, 2006, one quarter on June 1, 2006, and one
quarter on October 31, 2006.

         Poseidis and Montespan intend to negotiate and enter into employment
agreements with their executive officers in 2007.

2000 AND 2002 EMPLOYEE/CONSULTANT STOCK COMPENSATION PLANS

         The Company adopted a 2000 Employee/Consultant Stock Compensation Plan
and a 2002 Employee/Consultant Stock Compensation Plan. The Company has no
outstanding options or other rights under those plans. Both plans were
terminated by Poseidis' Board of Directors in July 2006. The Company intends to
adopt a new stock incentive plan in 2006 and to make grants under that plan as
determined by the Board of Directors or applicable committee.

                            COMPENSATION OF DIRECTORS

         Directors receive no cash compensation or other compensation for
serving on our Board of Directors. Directors are reimbursed for reasonable
travel expenses incurred in connection with their service on our Board.

                                      -46-
<PAGE>

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
              RELATED STOCKHOLDER MATTER

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of August 7, 2006, the number and
percentage of outstanding shares of our common stock beneficially owned by our
executive officers, directors and stockholders owning more than 5% of our common
stock and our executive officers and directors as a group:

                                        Shares
Name of Owner (1)                 Beneficially Owned    Percentage of Class (2)
---------------------------    ----------------------   ------------------------

Louis  Pardo                        14,063,572               20.05%

Christophe Giovannetti              14,390,389(3)            20.51%

Diane Boisvert                          35,055                    *

John J. McGovern                     1,125,000(4)             1.58%

Bernard Bouverot                             0                    *

All Executive Officers &            15,223,627               21.36%
Directors as a Group

* Less than 1%

(1)      Address: c/o Poseidis, Inc., 222 Lakeview Ave., Suite 160, West Palm
         Beach, FL 33401.

(2)      The percentage of class calculation for each person or entity is based
         on 70,156,300 shares of our common stock outstanding as of August 7,
         2006, exclusive of the number of shares of our common stock issuable to
         the person or entity upon conversion of convertible securities held by
         such person or entity and also exclusive of 20,000,000 shares of our
         common stock pledged by us to Cornell Capital as security. Beneficial
         ownership is determined in accordance with the rules of the Securities
         and Exchange Commission and generally includes voting or investment
         power with respect to securities. Shares of common stock subject to
         options that are currently exercisable or exercisable within 60 days of
         August 7, 2006, are deemed to be beneficially owned by the person
         holding such options for the purpose of computing the percentage of
         ownership of such person, but are not treated as outstanding for the
         purpose of computing the percentage ownership of any other person. The
         common stock is the only outstanding class of our equity securities.

(3)      Includes a total of 5,774,576 shares of common stock held by DMI
         Joaillerie Paris, of which Mr. Giovannetti is the Managing Director and
         owns 49% of its common stock. Also includes a total of 168,000 shares
         of common stock held by Matthews Morris, Inc., of which Mr. Giovannetti
         is the President and sole owner.

(4)      This figure represents shares that may be purchased pursuant to a
         warrant issued to Bridgehead Partners, LLC, which is controlled by Mr.
         McGovern, within 60 days of July 7, 2006. Pursuant to this warrant, Mr.
         McGovern may also acquire an additional 375,000 shares, which vests on
         October 31, 2006.

                                      -47-
<PAGE>


                       SECURITIES AUTHORIZED FOR ISSUANCE
                         UNDER EQUITY COMPENSATION PLANS

         See Item 5 "Market for Common Equity, Related Stockholders Matters and
Small Business Issuer Purchases of Equity Securities".

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Louis Pardo, the Chairman, Chief Executive Officer, and President of
the Company, provided services to the Company on a consultant basis during the
period from January 2001 through December 2005. On July 11, 2005, the Company
issued 6,653,000 shares of common stock to Mr. Pardo as payment for these
services. The Company and Mr. Pardo entered into an amended and restated
consulting agreement in July 2006. The shares were at the time of issuance, and
are as of the date of this report, subject to restrictions on transferability.
The closing market price of our common stock on the OTC-BB on the date of
issuance of these shares was $0.10 per share. The issuance price of these shares
was $0.816, based on a discount of 20% to the five-day trailing average price
for the Company's common stock on the OTC-BB as of July 11, 2005.

         Christophe Giovannetti, a direct or indirect beneficial owner of
approximately 20.51% of the Company's outstanding common stock, provided
services to the Company on a consultant basis during the period from January
2001 through December 2005. On July 11, 2005, the Company issued 6,653,000
shares of common stock to Mr. Giovannetti as payment for these services. The
Company and Mr. Giovannetti entered into an amended and restated consulting
agreement in July 2006. The shares were at the time of issuance, and are as of
the date of this report, subject to restrictions on transferability. The closing
market price of our common stock on the OTC-BB on the date of issuance of these
shares was $0.10 per share. The issuance price of these shares was $0.816, based
on a discount of 20% to the five-day trailing average price for the Company's
common stock on the OTC-BB as of July 11, 2005.

         The Company and Bridgehead are parties to an engagement agreement
whereby Mr. McGovern serves as Executive Vice President and Chief Financial
Officer of the Company. The engagement agreement with Bridgehead provides, among
other things, for a monthly fee of $15,000. The Company has issued to Bridgehead
a warrant for 1,500,000 shares of the Company's common stock with an exercise
price of $.0375 per share which vests in three tranches: one half on January 12,
2006, one quarter on June 1, 2006, and one quarter on October 31, 2006.

ITEM 13. EXHIBITS

         (a) Exhibits. The following exhibits are filed as part of this Report
or incorporated herein by reference:

<TABLE>
<CAPTION>

Exhibit No.  Document Description                                                                 Location

<C>          <S>                                                                              <C>
3.1          Articles of Incorporation                                                            (2)
3.2          By-laws                                                                              (3)
3.3          Articles of Amendment to Articles of Incorporation                                   (4)
4.1          Specimen of Common Stock Certificate                                                 (4)
4.2          Form of Common Stock Purchase Warrant                                                (5)
4.3          Form of Unsecured Convertible Debenture                                              (5)
10.1         Second Amended & Restated Standby Equity Distribution Agreement dated February
             1, 2006 between Poseidis, Inc. and Cornell Capital Partners, LP                      (6)

                                      -48-
<PAGE>

10.2         Registration Rights Agreement between Poseidis, Inc. and Cornell Capital
             Partners, LP                                                                         (7)
10.3         Securities Purchase Agreement between Poseidis, Inc. and Cornell Capital
             Partners, LP (exhibits omitted)                                                      (7)
10.4         Security Agreement dated as of August 26, 2005 between Poseidis, Inc. and
             Cornell Capital Partners, LP                                                         (7)
10.5         Investor Registration Rights Agreement dated as of August 26, 2005 between the
             Company and Cornell Capital Partners, LP                                             (7)
10.6         Letter Agreement dated as of October 24, 2005 between the Company Filed
             herewith and Cornell Capital Partners, LP (with respect to Standby Equity
             Distribution Agreement and Escrow Agreement)                                         (8)
10.7         Letter Agreement dated as of October 24, 2005 between the Company Filed
             herewith and Cornell Capital Partners, LP (with respect to Second Debenture and
             Investor Registration Agreement)                                                     (8)
10.8         Lock-Up Agreement between Poseidis, Inc. and Louis Pardau dit Pardo                  (4)
10.9         Securities Purchase Agreement dated as of February 1, 2006 between the Company
             and Cornell Capital Partners, LP (exhibits omitted)                                  (6)
10.10        Engagement Agreement dated October 31, 2005 between Poseidis, Inc. and
             Bridgehead Partners, LLC                                                             (9)
10.11        Engagement Agreement dated November 10, 2005 between Poseidis, Inc. and Phoenix
             Ventures, LLP                                                                        (10)
10.12        Amended and Restated Consulting Agreement dated July 27, 2006 between Poseidis,
             Inc. and Louis Pardo                                                                 (11)
10.13        Amended and Restated Consulting Agreement dated July 27, 2006 between Poseidis,
             Inc. and Christophe Giovannetti                                                      (11)
10.14        Amended and Restated Real Estate Purchase Agreement dated as of March 15, 2006
             between Christian Berthier and Montespan SAS                                         (12)
21.1         List of Subsidiaries                                                                 (4)
31.1         Certification of Chief Executive Officer pursuant to Section 302 of
             Sarbanes-Oxley Act of 2002                                                           (1)
31.2         Certification of Chief Financial Officer pursuant to Section 302 of the
             Sarbanes-Oxley Act of 2002                                                           (1)
32.1         Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
             adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                    (1)
32.2         Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
             adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                    (1)
99.1         Warrant dated as of August 26, 2005 issued to Cornell Capital Partners, LP
             (500,000 shares)                                                                     (7)
99.2         Warrant dated as of August 26, 2005 issued to Cornell Capital Partners, LP
             (1,250,000 shares)                                                                   (7)
99.3         Secured Convertible Debenture dated as of February 1, 2006 issued to Cornell
             Capital Partners, LP                                                                 (6)
99.4         Second Amended and Restated Secured Convertible Debenture dated as of February
             1, 2006 issued to Cornell Capital Partners in the principal amount of $150,000
             (No. CCP-1aa)                                                                        (6)

                                      -49-
<PAGE>

99.5         Amended and Restated Secured Convertible Debenture dated as of February 1, 2006
             issued to Cornell Capital Partners in the principal amount of $150,000 (No.
             CCP-2a)                                                                              (6)
99.6         Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, LP in
             the principal amount of $344,000 (3,750,000)                                         (6)
99.7         Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, LP
             (1,250,000 shares)                                                                   (6)
99.8         Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, LP
             (1,200,000 shares)                                                                   (6)
99.9         Warrant dated as of February 1, 2006 issued to Cornell Capital Partners, LP
             (9,000,000 shares)                                                                   (6)
99.10        Warrant issued pursuant to Engagement Agreement dated October 31, 2005 between
             Poseidis, Inc. and Bridgehead Partners, LLC (1,500,000 shares)                       (13)

<FN>
--------------------
(1)      Filed herewith.

(2)      Originally filed on May 16, 2000 with the Company's Current Report on Form 8-K and incorporated herein
         by reference.

(3)      Originally filed on June 10, 1999 with the Company's Registration
         Statement on Form 10-SB and incorporated herein by reference.

(4)      Filed as an exhibit to our Registration Statement on Form SB-2 dated April 14, 2006 and incorporated
         herein by reference.

(5)      Filed as an exhibit to our Current Report on Form 8-K filed with the
         Securities and Exchange Commission on April 6, 2006 and incorporated
         herein by reference.

(6)      Filed as an exhibit to our Current Report on Form 8-K filed with the
         Securities and Exchange Commission on February 7, 2006 and incorporated
         herein by reference.

(7)      Filed as an exhibit to our Current Report on Form 8-K filed with the
         Securities and Exchange Commission on September 1, 2005 and
         incorporated herein by reference.

(8)      Filed as an exhibit to our Current Report on Form 8-K filed with the
         Securities and Exchange Commission on October 28, 2005 and incorporated
         herein by reference.

(9)      Filed as an exhibit to our Current Report on Form 8-K filed with the
         Securities and Exchange Commission on January 18, 2006 and incorporated
         herein by reference.

(10)     Filed as an exhibit to our Quarterly Report on Form 10-QSB for the
         three months ended November 30, 2005 filed with the Securities and
         Exchange Commission on January 24, 2006 and incorporated herein by
         reference.

(11)     Filed as an exhibit to our Amended Quarterly Report on Form 10-QSB for
         the three months ended August 31, 2005 with the Securities and Exchange
         Commission on September 12, 2006 and incorporated herein by reference.

                                      -50-
<PAGE>


(12)     Filed as an exhibit to our Current Report on Form 8-K filed with the
         Securities and Exchange Commission on March 21, 2006 and incorporated
         herein by reference.

(13)     Filed as an exhibit to our Annual Report on Form 10-KSB for the year ended February 28, 2006 filed with
         the Securities and Exchange Commission on September 13, 2006.
</FN>
</TABLE>


         (b) Reports on Form 8-K. During the quarter ended February 28, 2006,
the Company filed the following Reports on Form 8-K:

         We filed a Form 8-K dated January 18, 2006 reporting on the appointment
         of Diane Boisvert to the Board of Directors and as Secretary of the
         Company, the appointment of John J. McGovern as Executive Vice
         President and Chief Financial Officer of the Company, and the Company's
         entry into an engagement agreement with Bridgehead Partners, LLC.

         We filed a Form 8-K dated February 7, 2006 reporting on the Company's
         entry into a Securities Purchase Agreement with Cornell Capital
         Partners, LP ("Cornell Capital"), amendment of certain terms,
         agreements and instruments with Cornell Capital relating to the
         $300,000 principal amount of convertible secured debentures and our
         Standby Equity Distribution Agreement with Cornell Capital. In
         addition, we also reported on the Company's subsidiary in France,
         Montespan SAS, entering into an agreement with Christian Berthier
         regarding our real estate purchase agreement with Mr. Berthier.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

         The aggregate fees billed for the fiscal years ended February 28, 2006
and February 28, 2005 for professional services rendered by Stephen H. Durland,
CPA as our principal accountant for the audit of our annual financial statements
for the fiscal year ended February 28, 2005 and for review of financial
statements included in our Form 10-QSB and services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements for each of the fiscal years ended February 28, 2006 and February
28, 2005 were $36,500 and $31,250, respectively.

The aggregate fees billed for the fiscal year ended February 28, 2006 for
professional services rendered by Moore Stephens, PC as our principal accountant
for the audit of our annual financial statements and services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for the fiscal year ended February 28, 2006 were $$56,019.

         The aggregate fees billed in each of the fiscal years ended February
28, 2006 and February 28, 2005 for assurance and related services by our
principal accountant that are reasonably related to the performance of the audit
or review of our financial statements (and are not reported under Item 9(e)(1)
of Schedule 14(A)) were $6,797 and $0, respectively.

TAX FEES

         The aggregate fees billed in each of the fiscal years ended February
28, 2006 and February 28, 2005 for professional services rendered by our
principal accountant for tax compliance, tax advice and tax planning were $0 and
$0, respectively.

                                      -51-
<PAGE>


ALL OTHER FEES

         The aggregate fees billed in each of the fiscal years ended February
28, 2006 and February 28, 2005 for products and services provided by our
principal accountant (other than the services reported in Item 9(e)(1) through
9(e)(3) of Schedule 14(A)) were $0 and $0, respectively.

PRE-APPROVAL POLICIES AND PROCEDURES

         The decision to retain Moore Stephens, PC as our principal accountant
for the audit of our financial statements for the year ended February 28, 2006
was approved by our Board of Directors. We did not have a separate audit
committee at such time. At that time, our entire Board of Directors performed
all the functions that may be delegated to an audit committee.

         We currently do not have a separate audit committee. Currently our
entire Board of Directors perform all the functions that may be delegated to an
audit committee. We intend to establish an audit committee during the fiscal
year ending February 28, 2008 and are currently assessing which current and
potential members of our Board are best qualified, based on their accounting or
related financial management expertise, independence, time availability,
corporate experience and other relevant factors, to serve on our audit
committee. Based on our small size, early development stage and limited
financial and human resources, we did not believe that creating an audit
committee separate and distinct from our full Board of Directors would have been
cost-effective price to the fiscal year ending February 28, 2008.

                                      -52-
<PAGE>
                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                 POSEIDIS, INC.
<TABLE>
<CAPTION>

<S>                         <C>                        <C>
                                                     By:    /s/ Louis Pardo
                                                            --------------------------------------------------------
Date: September 27, 2007                                    Louis Pardo, Chief Executive Officer and President
                                                            (Principal Executive Officer)

                                                     By:    /s/ John J. McGovern
                                                            --------------------------------------------------------
Date: September 27, 2007                                    John J. McGovern, Chief Financial Officer,
                                                            Executive Vice President and Treasurer
                                                            (Principal Financial Officer
                                                            and Principal Accounting Officer)

         In accordance with the Securities and Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Signature                     Title                                     Date

/s/ Louis Pardo               Chairman of the Board, Chief Executive    September 27,2007
------------------------------Officer, and President
Louis Pardo                   (Principal Executive Officer)



/S/ JOHN J. MCGOVERN          Chief Financial Officer, Executive Vice   September 27, 2007
------------------------------President, Treasurer, and Director
John J. McGovern              (Principal Financial Officer
                              and Principal Accounting Officer)



/s/ Diane Boisvert
------------------------------
Diane Boisvert                            Director                      September 27, 2007

/S/ COL. CLINTON L. PAGANO, SR. (RET.)
--------------------------------------
Col. Clinton L. Pagano, Sr. (Ret.)        Director                      September 27, 2007


------------------------------
John G. Murphy                            Director                      September __, 2007


/S/ ROBERT D. PRUNETTI
------------------------------
Robert D. Prunetti                        Director                      September 27, 2007


/S/ KENNETH E. WALSH
------------------------------
Kenneth E. Walsh                          Director                      September 27, 2007


------------------------------
Shyam Iyer                                Director                      September __, 2007
</TABLE>

                                      -53-
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm                     F-2

Report of Independent Registered Public Accounting Firm                     F-3

Consolidated Balance Sheets                                                 F-4

Consolidated Statements of Operations and Comprehensive Income (Loss)       F-5

Consolidated Statements of Stockholders' Equity (Deficiency)                F-6

Consolidated Statements of Cash Flows                                       F-8

Notes to Consolidated Financial Statements                                  F-9


                                      F-1
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Poseidis, Inc. and
Subsidiaries

We have audited the accompanying consolidated balance sheet of Poseidis, Inc.
and Subsidiaries as of February 28 2006, and the related consolidated statements
of operations and comprehensive income, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. We did
not audit the consolidated financial statements of Poseidis, Inc. as of February
28, 2005 and for the year then ended. Those statements were audited by other
auditors whose reports have been made available to us and our opinion is based
solely upon the reports of the other auditors.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Poseidis, Inc. and
Subsidiaries as of February 28, 2006, and the consolidated results of their
operations and their cash flows for the year then ended and in conformity with
accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully described in
Note 5 to the consolidated financial statements, the Company has sustained a
significant operating loss in 2006 and has a working capital deficiency of
approximately $847,000 and an accumulated deficit of approximately $8,313,000 as
of February 28, 2006. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
these matters are also described in Note 5. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ MOORE STEPHENS, P. C.
-------------------------
MOORE STEPHENS, P. C.
Certified Public Accountants.

New York, New York

September 24, 2007

                                      F-2
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Poseidis, Inc.
West Palm Beach, Florida

We have audited the accompanying consolidated balance sheets of Poseidis, Inc.
(the "Company"), as of February 28, 2005 and the related consolidated statements
of operations and comprehensive income (loss), stockholders' equity (deficit)
and cash flows for each of the two years in the period ended February 28, 2005.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Poseidis, Inc. as of February
28, 2005 and the results of its operations and its cash flows for each of the
two years in the period ended February 28, 2005, in conformity with U.S.
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, the Company has experienced a loss since inception. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 5. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ Durland and Company, CPAs, P.A.
-----------------------------------
Durland and Company, CPAs, P.A.

Palm Beach, Florida
June 13, 2005

                                      F-3
<PAGE>
<TABLE>
<CAPTION>


                         POSEIDIS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                               AS OF FEBRUARY 28,

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

                                    ASSETS
CURRENT ASSETS
<S>                                                               <C>            <C>
     Cash                                                         $    73,314    $     1,051
     VAT taxes receivable                                              20,416         39,750
                                                                  -----------    -----------
              Total Current Assets                                     93,730         40,801
                                                                  -----------    -----------
PROPERTY AND EQUIPMENT
     Land                                                             316,973         40,863
     Land improvements                                                131,761        151,530
     Furniture and fixtures                                            22,705         22,705
     Equipment                                                         31,467         30,806
                                                                  -----------    -----------
         Subtotal Property and Equipment                              502,906        245,904
                                                                  -----------    -----------
         Less: Accumulated depreciation                               (59,334)       (37,144)
                                                                  -----------    -----------
              Net Property and Equipment                              443,572        208,760
                                                                  -----------    -----------
OTHER ASSETS
     Deferred financing costs                                         134,231           --
     Deferred offering costs                                          995,935           --
     Deferred consulting expense                                       29,812           --
     Deposits                                                           7,000         35,889
                                                                  -----------    -----------
              Total Other Assets                                    1,166,978         35,889
                                                                  -----------    -----------
Total Assets                                                      $ 1,704,280    $   285,450
                                                                  ===========    ===========

              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
     Accounts payable                                             $   137,014    $   188,667
     Accrued expenses                                                 394,154        887,238
     Accrued salaries/payroll taxes                                    11,185         26,719
Current portion of long term debt, less debt
     discount of $223,478                                              44,855           --
     Derivative liability                                             353,309           --
     Short-term loan                                                     --           29,009
                                                                  -----------    -----------
              Total Current Liabilities                               940,517      1,131,633
                                                                  -----------    -----------
LONG TERM LIABILITIES
Secured convertible debentures, less debt
     discount of $312,869                                              62,798           --
Promissory note                                                       200,000           --
Derivative liability                                                  494,632
                                                                  -----------    -----------
              Total Long Term Liabilities                             757,430           --
                                                                  -----------    -----------
Total Liabilities                                                   1,697,947      1,131,633
                                                                  -----------    -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
     Preferred stock, $0.0001 par value, authorized
         10,000,000 shares; none issued                                  --             --
     Common stock, $0.0001 par value, authorized
         500,000,000 shares;  69,685,800 and 51,761,881
         issued and outstanding at February 28, 2006
         and 2005, respectively                                         6,969          5,176
     Additional paid-in capital                                     8,241,023      5,908,932
     Accumulated comprehensive income (loss)                           71,002        (16,770)
     Accumulated deficit                                           (8,312,661)    (6,743,521)
                                                                  -----------    -----------
              Total Stockholders' Equity (Deficiency)                   6,333       (846,183)
                                                                  -----------    -----------
Total Liabilities and Stockholders' Equity (Deficiency)           $ 1,704,280    $   285,450
                                                                  ===========    ===========


                   The accompanying notes are an integral part
                    of the consolidated financial statements
</TABLE>

                                      F-4
<PAGE>
<TABLE>
<CAPTION>


                         POSEIDIS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                                                      YEARS ENDED FEBRUARY 28,
                                                   ----------------------------
                                                       2006             2005
                                                   ------------    ------------
<S>                                                <C>             <C>
REVENUES                                           $       --      $       --
                                                   ------------    ------------
OPERATING EXPENSES
     General and administrative                         174,412         345,108
     Salaries                                              --            70,050
     Consulting fees                                    528,693       2,711,604
     Depreciation                                        26,324          23,910
     Professional fees                                  435,045          51,072
     Bad debt expense                                      --            93,806
     Loss on fixed asset abandonment                       --            23,064
     Costs on trading activity                           31,428            --
                                                   ------------    ------------
             Total operating expenses                 1,195,902       3,318,614
                                                   ------------    ------------
Operating (loss)                                     (1,195,902)     (3,318,614)
                                                   ------------    ------------
OTHER INCOME (EXPENSE)
     Interest expense                                  (126,216)             (5)
     Loss on derivative liability                      (507,154)           --
     Amortization of deferred financing costs           (18,707)           --
     Foreign currency transaction gain                     --            24,409
     Gain on debt forgiveness                            29,009            --
     Non-operating income - real estate                 249,830            --
                                                   ------------    ------------
              Total other income (expense)             (373,238)         24,404

Net (loss)                                           (1,569,140)     (3,294,210)
OTHER COMPREHENSIVE INCOME (LOSS)
     Foreign currency translation gain (loss)            87,772            (869)
                                                   ------------    ------------

Comprehensive (loss)                               $ (1,481,368)   $ (3,295,079)
                                                   ============    ============
Net (loss) per common share - basic and diluted    $      (0.02)   $      (0.07)
                                                   ============    ============
Weighted average number of shares                    61,150,081      49,922,315
                                                   ============    ============

                   The accompanying notes are an integral part
                    of the consolidated financial statements
</TABLE>

                                      F-5
<PAGE>
<TABLE>
<CAPTION>


                         POSEIDIS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)


                                                                                           ADDITIONAL
                                                                  NUMBER       COMMON       PAID-IN
                                                                OF SHARES       STOCK        CAPITAL
                                                               -----------   -----------   -----------
<S>                                                             <C>                 <C>     <C>
BEGINNING BALANCE, March 1, 2004                                 5,584,136           558     3,167,638

     1st Quarter - Forward split - 8 for 1                      39,295,606         3,930        (3,930)
     1st Quarter - Shares issued for services                    1,614,861           162     2,244,084
     1st Quarter - Shares issued for cash                           93,225             9       116,522
     2nd Quarter - Shares issued for services                      117,704            12       147,118
     2nd Quarter - Shares issued for cash                           83,069             8       103,828
     3rd Quarter - Forward split - 11 for 10                     4,679,008           468          (468)
     3rd Quarter - Shares issued for services                      113,043            11        15,673
     3rd Quarter - Shares issued for cash                           12,944             1        23,145
     4th Quarter - Shares issued for services                      168,285            17        95,322
     Other comprehensive (loss)                                       --            --            --
Net (loss)                                                            --            --            --
                                                               -----------   -----------   -----------
ENDING BALANCE, February 28, 2005                               51,761,881         5,176     5,908,932

     1st Quarter - Shares issued for cash                          154,399            16        23,144
     2nd Quarter - Shares issued for services                      585,123            58        51,536
     2nd Quarter - Shares issued for cash                          188,397            19        16,401
     2nd Quarter - Shares issued to pay accrued expenses        13,306,000         1,331     1,084,439
     2nd Quarter - Fair value of warrants issued
         with convertible debentures                                  --            --          62,810
     2nd Quarter - Fair value of warrants issued
         with SEDA                                                    --            --          32,317
     4th  Quarter -Fair value of warrants issued in
         conjunction with convertible debentures                      --            --         240,403
     4th Quarter - Fair value of warrants and common shares
          issued in conjunction with SEDA for offering costs     3,250,000           325       717,911
     4th Quarter - Fair value of warrants issued
         with consulting agreement                                    --            --          59,623
     4th Quarter - Shares issued for services                      160,000            16         3,184
     4th Quarter - Shares issued for cash                          280,000            28        40,323
     Other comprehensive income                                       --            --            --
Net (loss)                                                            --            --            --
                                                               -----------   -----------   -----------
ENDING BALANCE, February 28, 2006                               69,685,800   $     6,969   $ 8,241,023
                                                               ===========   ===========   ===========

                   The accompanying notes are an integral part
                    of the consolidated financial statements
</TABLE>

                                      F-6
<PAGE>
<TABLE>
<CAPTION>



                         POSEIDIS, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                   (Continued)

    STOCK           CUMULATIVE                            TOTAL
 SUBSCRIPTION       TRANSLATION     ACCUMULATED       STOCKHOLDERS
  RECEIVABLE        ADJUSTMENT        DEFICIT            EQUITY
---------------   --------------   -------------      ------------
<S>               <C>               <C>               <C>
        --        $   (15,901)      $(3,449,311)      $  (297,016)


------------      -----------       -----------       -----------
        --               --                --           2,244,246
        --               --                --             116,531
        --               --                --             147,130
        --               --                --             103,836
------------      -----------       -----------       -----------
        --               --                --              15,684
        --               --                --              23,146
        --               --                --              95,339
        --               (869)             --                (869)
        --               --          (3,294,210)       (3,294,210)
------------      -----------       -----------       -----------
        --            (16,770)       (6,743,521)         (846,183)
        --               --                --              23,160
        --               --                --              51,594
        --               --                --              16,420
        --               --                --           1,085,770

        --               --                --              62,810

        --               --                --              32,317

        --               --                --             240,403

        --               --                --             718,236

        --               --                --              59,623

        --               --                --               3,200

        --               --                --              40,351
        --             87,772              --              87,772
        --               --          (1,569,140)       (1,569,140
------------      -----------       -----------       -----------
$       --        $    71,002       $(8,312,661)      $     6,333
============      ===========       ===========       ===========

                   The accompanying notes are an integral part
                    of the consolidated financial statements
</TABLE>

                                      F-7
<PAGE>
<TABLE>
<CAPTION>


                         POSEIDIS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                YEARS ENDED FEBRUARY 28,
                                                               --------------------------
                                                                  2006           2005
                                                               -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                            <C>            <C>
Net loss                                                       $(1,569,140)   $(3,294,210)
Adjustments to reconcile net loss to net cash used
for operating activities
Stock issued for services                                          375,439      2,277,202
Depreciation and Amortization                                       45,031         23,910
Other non-cash charges                                              61,240           --
Debt forgiveness                                                   (29,009)          --
Non-cash interest expense                                          107,654           --
Loss on derivative liability                                       507,154           --
Non-operating income - real estate                                (249,830)          --
Bad debt expense                                                      --           93,806
Loss on fixed asset abandonment                                       --           23,064
Change in assets and liabilities
(Increase) decrease in deferred costs                             (160,442)          --
(Increase) decrease in other assets                                 25,814         10,069
Increase (decrease) in accounts payable                            (51,653)       142,726
Increase (decrease) in accrued expenses                            289,561        362,850
Increase (decrease) in accrued salaries/payroll taxes              (15,534)        17,047
Increase (decrease) in VAT payable/receivable                       19,334        (24,260)
                                                               -----------    -----------
Net cash used by operating activities                             (644,381)      (367,796)
                                                               -----------    -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of land and land improvements                             (6,511)          --
Purchase of property and equipment                                    (661)      (176,737)
                                                               -----------    -----------
Net cash used by investing activities                               (7,172)      (176,737)
                                                               -----------    -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from short-term loans                                        --           29,009
Stock sold for cash                                                 79,931        491,870
Proceeds from secured convertible debentures                       644,000           --
                                                               -----------    -----------

Net cash provided by financing activities                          723,931        520,879
                                                               -----------    -----------

Effect of exchange rates on cash                                      (115)        (6,083)
                                                               -----------    -----------

Net increase (decrease) in cash                                     72,263        (29,737)

CASH, beginning of period                                            1,051         30,788
                                                               -----------    -----------

CASH, end of period                                            $    73,314    $     1,051
                                                               ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the periods for:
Interest                                                       $      --      $      --
                                                               ===========    ===========
Income taxes                                                   $      --      $      --
                                                               ===========    ===========
Non-Cash Financing Activities:
Common stock issued to pay accrued expenses                    $   765,125    $      --
                                                               ===========    ===========
Common stock, note and warrants issued for deferred
  offering costs                                               $   950,553    $      --
                                                               ===========    ===========

                   The accompanying notes are an integral part
                    of the consolidated financial statements
</TABLE>

                                      F-8
<PAGE>


                         POSEIDIS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) ORGANIZATION AND BUSINESS

Poseidis, Inc. ("Poseidis "or the "Company") was incorporated on June 10, 1998
in the state of Florida. Our corporate name was originally EZ Talk, Inc., which
was changed in May 2000 to BillyWeb Corp. and changed in August 2002 to
Poseidis, Inc.

In May 2000, we entered into an agreement to acquire 77.3% of the issued and
outstanding common shares of a predecessor company which was then named BillyWeb
Corp. (the "Predecessor") in a reverse merger; the consideration for this
transaction was 23,100,000 shares of the Company's common stock. In July 2000,
we acquired the remaining 22.7% of the Predecessor that were not previously
owned in exchange for 5,000,000 shares of restricted common stock. In October
2000, we formed a subsidiary under the laws of France, SARL BillyWeb. In
December 2002, we placed SARL BillyWeb in bankruptcy under French law. In April
2003, we created a new subsidiary, Poseidis, SAS, under French law and later
changed that subsidiary's name to Montespan SAS ("Montespan"). We own 99% of
Montespan and a French citizen holds the remaining 1%, pursuant to French law.

Together with our subsidiary Montespan (as well as certain inactive
subsidiaries), we are engaged in the development of a sparkling mineral water
spring in central France known as the La Troliere Spring (the "Source"). Our
objectives are to develop and market a new brand of sparkling natural mineral
water under the brand name "l' Eau de Montespan" as well as other beverage
products, potentially a line of cosmetics products utilizing the mineral water
drawn from the Source, and other related products and merchandise.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of Poseidis and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or classification of liabilities that might be necessary should we
be unable to operate in the normal course of business.

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

FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair value estimates, assumptions and
methods used to estimate fair value of our financial instruments are made in
accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments." The Company has used available information to derive
its estimates. However, because these estimates are made as of a specific point
in time, they are not necessarily indicative of amounts the Company could
realize currently. The use of different assumptions or estimating methods may
have a material effect on the estimated fair value amounts. We estimate that
there are no material variations between fair value and book value of our
financial assets or liabilities as of February 28, 2006 and 2005. The carrying
amounts of cash, accounts payable, accrued expenses and short-term notes payable
approximate fair value due to the short-term nature of the instruments.
Long-term liabilities are comprised of the convertible notes which approximate
fair value based on borrowing rates available to the Company.

COMPREHENSIVE INCOME (LOSS) - We report our operating results in accordance with
SFAS No. 130, "Reporting Comprehensive Income" which requires that recognized
revenue, expense, gains and losses be included in net income. Although certain
changes in assets and liabilities, such as gains or losses on translation of
foreign currencies, are reported as a separate component of the equity section
of the balance sheet, such items, along with net income, are components of
comprehensive income (loss).

                                      F-9
<PAGE>

PROPERTY AND EQUIPMENT - All property and equipment are recorded at cost and
depreciated over their estimated useful lives, generally three, five or seven
years, using the straight-line method. Upon sale or retirement, the costs and
related accumulated depreciation are eliminated from their respective accounts,
and the resulting gain or loss is included in the results of operations. Repairs
and maintenance charges which do not increase the useful lives of the assets are
charged to operations as incurred. Depreciation expense was $26,324 and $23,910
for the years ended February 28, 2006 and 2005, respectively.

LONG LIVED ASSETS - In accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", we record impairment losses on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts. SFAS No. 144 also addresses the
accounting for long-lived assets that are expected to be disposed of.

REVENUE RECOGNITION - Revenue is recognized as services are rendered or products
are delivered, the price to the buyer is fixed and determinable, and
collectibility is reasonably assured.

ADVERTISING - We expense all advertising costs as incurred.

FOREIGN CURRENCY TRANSACTION AND TRANSLATION GAINS (LOSSES) - On a consolidated
basis our reporting currency is the US Dollar. The functional currency for
foreign operations is the local currency (the euro). For these foreign entities,
we translate assets and liabilities at end-of-period exchange rates. For
revenues, expenses, gains and losses, the weighted average exchange rate for the
period is used to translate those elements. For equity items the historic
conversion rate is used. We record these translation adjustments in other
comprehensive income (loss), a separate component of equity in the consolidated
balance sheet.

INCOME TAXES - We account for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the years in which the differences are expected to affect taxable
income. Valuation allowances will be established when necessary to reduce
deferred tax assets to the amounts expected to be realized.

CASH EQUIVALENTS - We consider all highly liquid investments with original
maturities of three months or less to be cash equivalents.

NET LOSS PER COMMON SHARE - We have presented net loss per common share pursuant
to SFAS No. 128, "Earnings Per Share". Net loss per common share is based upon
the weighted average number of outstanding common shares. Due to net losses in
the years ended February 28, 2006 and 2005, the effect of the potential common
shares resulting from convertible notes payable, stock options and warrants in
those years were excluded, as the effect would have been anti-dilutive, though
they may be dilutive in future periods.

RECENT ACCOUNTING PRONOUNCEMENTS - In December 2004, the Financial Accounting
Standards Board ("FASB"), issued SFAS No. 153, "Exchanges of Nonmonetary
Assets," ("SFAS No. 153"). SFAS No. 153 amends Accounting Principles Board
Opinion No. 29, "Accounting for Nonmonetary Transactions," to require exchanges
of nonmonetary assets be accounted for at fair value, rather than carryover
basis. Nonmonetary exchanges that lack commercial substance are exempt from this
requirement. SFAS No. 153 is effective for nonmonetary exchanges entered into in
fiscal years beginning after June 15, 2005. We do not routinely enter into
exchanges that could be considered nonmonetary, accordingly we do not expect the
adoption of SFAS No. 153 to have a material impact on our consolidated financial
statements.

In March 2005, the FASB issued Interpretation No. 47 ("FIN No. 47"), "Accounting
for Conditional Asset Retirement Obligations--an interpretation of FASB
Statement No. 143." FIN No. 47 clarifies that an entity is required to recognize
a liability for the fair value of a conditional asset retirement obligation when
incurred if the liability's fair value can be reasonably estimated. FIN No. 47
also clarifies when an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. FIN No. 47 was
adopted in the fourth quarter of 2005 and has had no significant impact on our
consolidated financial position, results of operations or cash flows.

                                      F-10
<PAGE>


In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections--a replacement of APB Opinion No. 20 and FASB Statement No. 3"
("SFAS No. 154"). SFAS No. 154 requires retrospective application as the
required method for reporting a change in accounting principle, unless
impracticable or a pronouncement includes specific transition provisions. SFAS
No. 154 also requires that a change in depreciation, amortization or depletion
method for long-lived, nonfinancial assets be accounted for as a change in
accounting estimate effected by a change in accounting principle. This statement
carries forward the guidance in APB Opinion No. 20, "Accounting Changes," for
the reporting of the correction of an error and a change in accounting estimate.
SFAS No. 154 is effective beginning January 1, 2006. SFAS No. 154 is not
expected to have a significant impact on our financial position, results of
operations or cash flows.

In June 2005, the Emerging Issues Task Force ("EITF") reached a consensus on
EITF Issue No. 05-6, "Determining the Amortization Period for Leasehold
Improvements Purchased after Lease Inception or Acquired in a Business
Combination" ("EITF 05-6"). EITF 05-6 requires that leasehold improvements that
are placed in service significantly after and not contemplated at or near the
beginning of the lease term be amortized over the shorter of the useful life of
the assets or a term that includes required lease periods and renewals that are
deemed to be reasonably assured at the date the leasehold improvements are
purchased. EITF 05-6 was adopted in the fourth quarter of 2005. EITF 05-6 did
not have a significant impact on our financial position, results of operations
or cash flows.

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments - an amendment of FASB Statements No. 133 and 140" ("SFAS
No. 155") which provides the framework for fair value remeasurement of any
hybrid financial instrument that contains an embedded derivative that otherwise
would require bifurcation as well as establishes a requirement to evaluate
interests in securitized financial assets to identify interests. SFAS No.155
further amends SFAS No.140 to eliminate the prohibition on a qualifying
special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial
instrument. The guidance SFAS No.155 also clarifies which interest-only strips
and principal-only strips are not subject to the requirements of SFAS No.133 and
concentrations of credit risk in the form of subordination are not embedded
derivatives. This Statement is effective for all financial instruments acquired
or issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006. SFAS No.155 is not expected to have a material impact on our
consolidated financial statements.

In March 2006, FASB issued SFAS No. 156, "Accounting for Servicing of Financial
Assets - an amendment of FASB Statement No. 140" ("SFAS No. 156") which requires
the recognition of a servicing asset or servicing liability under certain
circumstances when an obligation to service a financial asset by entering into a
servicing contract. FASB No. 156 also requires all separately recognized
servicing assets and servicing liabilities to be initially measured at fair
value utilizing the amortization method or fair market value method. SFAS No.
156 is effective at the beginning of the first fiscal year that begins after
September 15, 2006. SFAS No. 156 is not expected to have a material impact on
the Company's consolidated financial statements.

(3) STOCKHOLDERS' EQUITY.

We have authorized 500,000,000 shares of $0.0001 par value common stock and
10,000,000 shares of $0.0001 par value preferred stock. Rights and privileges of
the preferred stock are to be determined by our Board of Directors prior to
issuance.

(4) INCOME TAXES.

Deferred income taxes (benefits) are provided for certain items of income and
expense that are recognized in different periods for tax and financial reporting
purposes. We have net operating loss carry-forwards for federal income tax
purposes, but the future use of such carry-forwards may be severely limited due
to changes in ownership. The amounts recorded as deferred tax assets as of
February 28, 2006 and 2005, which represent the amounts of tax benefit related
to the loss carry-forwards, have been fully offset by equal valuation allowances
as we have not determined that the realization of the assets is "more likely
than not".

                                      F-11
<PAGE>


(5) GOING CONCERN AND MANAGEMENT'S PLANS TO OVERCOME OPERATING AND LIQUIDITY
DIFFICULTIES.

The accompanying consolidated financial statements have been prepared assuming
that we will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. The
financial statements do not include any adjustments that might be necessary if
we are unable to continue as a going concern. Since our inception, we have
incurred losses, had an accumulated deficit, and have experienced negative cash
flows from operations. The expansion and development of our business will
require additional capital. These conditions raise substantial doubt about our
ability to continue as a going concern. If we fail to obtain additional
financing when required, we may have to modify, delay or abandon some or all of
our business and expansion plans.

Our development and marketing of a new brand of sparkling natural mineral water
is at an early stage and the time and money required to develop the commercial
value and marketability of our proposed products will require significant cash
expenditures for an indefinite period in the future. In order to meet these cash
needs, we have entered into the financing agreements detailed in Notes 7, 8 and
12. In addition, we continue to actively seek additional financing to support
our development activities.

(6) DEFERRED OFFERING COSTS AND DEFERRED FINANCING COSTS.

We have incurred certain costs related to financing activities since inception.
These costs consisted primarily of placement agent fees, commissions and legal
fees which are related to the placement of debt securities (deferred financing
costs) and equity securities (deferred offering costs).

At February 28, 2006, we had net deferred financing costs of $134,231. These
costs were related to the placement of 12% convertible notes [Note 7] and are
being amortized on a straight-line basis over the life of the debenture which
approximates the effective interest method. We recorded amortization expense
related to deferred financing totaling $18,707,and $0 for the years ended
February 28, 2006 and 2005, respectively.

At February 28, 2006 and February 28, 2005, we had net deferred offering costs
of $995,935 and $0, respectively. These costs were primarily related to a
Standby Equity Distribution Agreement ["SEDA"] [Note 8] and will be offset
against the proceeds of the offering, when consummated.

(7) DEBT FINANCINGS

Short-Term Notes Payable- In fiscal 2005 we received a short-term loan from a
third-party in the amount of approximately $29,000. This loan was payable on
demand and carried no stated interest rate. This debt was forgiven in fiscal
2006 and the note payable was written off.

Promissory Note - In February 2006 we issued a promissory note to Cornell
Capital Partners, L.P. ("Cornell Capital") in the face amount of $200,000 with
an interest rate of 8% and a due date of September 1, 2007 as partial
compensation for the Standby Equity Distribution Agreement [Note 8].

Convertible Debentures - In each of August 2005 and October 2005, we issued
Secured Convertible Debentures in exchange for $150,000 in cash. The terms of
these debentures were amended and restated in February, 2006. In February 2006,
the Company issued additional Secured Convertible Debentures (collectively the
"Debentures") in exchange for $344,000 in cash. In connection with the
Debentures, we issued to Cornell Capital warrants to purchase 1,250,000,
3,750,000, 1,250,000 and 1,200,000 shares of our common stock at exercise prices
of $0.12, $0.08, $0.12 and $0.25 per share, respectively.

The Debentures are due September, 1, 2007, and carry an interest rate of 12%.
The Debentures were issued to Cornell Capital. The Debentures are convertible
into shares of our common stock at a conversion prices of $0.04 for the
February, 2006 issuance and $0.0497 for the August and October, 2005 issuances
at the option of Cornell Capital. The conversion is subject to certain
limitations including that Cornell Capital may not convert the Debentures for a
number of shares in excess of that number of shares which, upon giving effect to
such conversion, would cause the aggregate number of shares of our common stock
beneficially held by Cornell Capital to exceed 4.9% of our then outstanding
common stock. Upon an uncured event of default, the conversion price for the
Debentures would be reduced to $0.0124 per share. We are required to set aside
into an escrow fund for the benefit of Cornell Capital an amount equal to one
third of all net proceeds from the future offering of up to $1,500,000 of
debentures and warrants up to a maximum of $350,000. We are permitted to redeem
all or a portion of the Debentures. In the event the closing bid price for our

                                      F-12
<PAGE>

stock on a redemption date is greater than the Debenture's conversion price, we
must pay a redemption premium of 20% of the amount redeemed in addition to such
redemption costs. Commencing October 1, 2006, we are required to make monthly
payments of the remaining principal balance at the rate of approximately $54,000
plus accrued interest.

The above issued Debentures and related warrants required us to value several
discrete elements of the Debentures. For the Debentures, these discrete elements
consist of certain conversion features, a contingent call feature and a
re-pricing of the conversion for the debenture in the case of default. We
accounted for each of the discrete elements of the Debentures at fair value.
Also required was a fair market valuation of the warrants.

We accounted for the embedded contingent call feature and the re-pricing of the
conversion for the Debenture in the case of default in accordance with SFAS No.
133 "Accounting For Derivative Instruments And Hedging Activities" and EITF
Issue No. 00-19 "Accounting For Derivative Financial Instruments Indexed To And
Potentially Settled In A Company's Own Stock" which requires us to bifurcate and
separately account for the embedded contingent call feature and the re- pricing
of the conversion for the Debentures in the case of default as embedded
derivatives contained in the Debentures. Pursuant to SFAS No. 133, we bifurcated
the fair value of the conversion feature from the convertible notes, since the
conversion features were determined to not be clearly and closely related to the
debt host. The derivative liability related to the embedded contingent call and
default re-pricing factors has been valued at $321,044 using the Black Scholes
model.

The convertible Debentures are not considered to be conventional debt under EITF
Issue No. 00-19 or SFAS No. 133. We therefore bifurcated the fair value of the
embedded conversion features from the debt host and accounted for them as a
derivative liability. The effect of this valuation was the creation of fair
value of this conversion feature of $526,897.

The warrants issued in conjunction with the Debentures were valued and recorded
as equity by us in accordance with EITF 00-19 and guidance described under SFAS
No. 150 as we made the determination that the warrants were conventional. We
have valued the warrants by using the Black-Scholes valuation model and
accounted for the fair value of the warrants in relation to the debt host. This
resulted in a fair value of the warrants of $303,213 which was allocated to
Additional Paid In Capital and recorded as a discount to the Debentures. This
discount is being amortized on a straight-line basis over the life of the
Debentures which approximates the effective interest method.

We recorded the fair value of the embedded derivatives as either short-term or
long-term liabilities (based on the underlying term of the Debentures) and as a
discount to the Debentures to the extent there was a net carrying value for the
Debentures, which resulted in a discount to the Debentures of $340,787. This
discount is being amortized on a straight-line basis over the life of the
Debentures which approximates the effective interest method. The amount in
excess of the net carrying value, $507,154, was charged to loss on embedded
derivative in the statement of operations

LONG TERM DEBT

At February 28, 2006 long-term debt consisted of the following:

                                                           FEBRUARY 28, 2006
       Convertible Debentures due September 1, 2007
       with monthly payments $53,666.67 plus
       accrued interest
       commencing October 1, 2006                             $   644,000

       Promissory Note due September 1, 2007                      200,000
                                                              ------------
                                                                  844,000
       Less current maturities                                    268,333
                                                              ------------
                                                              $   575,667
                                                              ============

                                      F-13
<PAGE>


Scheduled maturities of long-term debt are as follows:

Years Ending February 28,
                     2007                  $  268,333
                     2008                  $  575,667
                     2009                        --
                     2010                        --
                     2011                        --
                  Thereafter                     --
                                           -----------
                                           $  844,000
                                           ===========

The debt disclosed in the accompanying balance sheet is shown net of unamortized
debt discounts of $536,347 as of February 28, 2006.

(8) STANDBY EQUITY DISTRIBUTION AGREEMENT.

On August 26, 2005, we entered into a SEDA with Cornell Capital. The SEDA was
subsequently amended and restated on October 24, 2005 and on February 1, 2006.
Pursuant to the SEDA, we may, at our discretion, periodically sell to Cornell
Capital shares of our common stock for a gross purchase price of up to
$8,000,000.For each share of common stock purchased under the SEDA, Cornell
Capital will pay us 96% of the lowest closing bid price of our common stock as
quoted on the Over-the-Counter Bulletin Board ("OTC-BB") or other principal
market on which our common stock is traded for the five days immediately
following the date we deliver a notice requiring Cornell Capital to purchase our
shares under the SEDA.

Cornell Capital's obligation to purchase shares of our common stock under the
SEDA is subject to certain conditions, including, but not limited to, our
obtaining an effective registration statement for shares of common stock sold
under the SEDA (the "Registration Statement") and our shares being listed for
quotation on the Over-the-Counter Bulletin Board, and is limited to $300,000 per
weekly advance.

The commitment period under the SEDA commences on the earlier to occur of (i)
the date that the Registration Statement is declared effective by the Securities
and Exchange Commission (the "Effective Date"), or (ii) such earlier date as we
and Cornell Capital may mutually agree in writing. The commitment period under
the SEDA expires on the earliest to occur of (i) the date on which Cornell
Capital has purchased an aggregate amount of $8,000,000 shares of our common
stock under the SEDA, (ii) the date occurring twenty-four months after the
Effective Date, or (iii) the date the SEDA is earlier terminated (in the event
that (x) there occurs any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of fifty trading days, other than due to
the acts of Cornell Capital, during the commitment period, and (y) we fail
materially to comply with any of the covenants contained in the SEDA and such
failure is not cured within thirty days after receipt of written notice from
Cornell Capital, provided, however, that this termination provision does not
apply to any period commencing upon the filing of a post-effective amendment to
the Registration Statement and ending upon the date on which such post effective
amendment is declared effective by the Securities and Exchange Commission
("SEC").

We have agreed to pay Cornell Capital 5% of the gross proceeds that we receive
from each advance under the SEDA. In addition, we issued 3,000,000 shares of our
common stock to Cornell Capital and 250,000 shares of our common stock to the
placement agent in connection with the SEDA, which we recorded at fair value and
a promissory note in the face amount of $200,000 with an interest rate of 8%
[Note 7] and a due date of September 1, 2007. In addition, we have issued to
Cornell Capital warrants to purchase 500,000 and 9,000,000 shares of our common
stock at exercise prices of $0.12 and $0.04 per share, respectively. The
Warrants issued in conjunction with the SEDA were valued and recorded as equity
by us in accordance with EITF 00-19. In valuing these Warrants, we elected to
use the Black Scholes model. The effect of this valuation was the creation of
fair value of $750,228 for the 3,000,000 shares of common stock and the Warrants
which was allocated to APIC. The charges for the Common Stock, promissory notes
and Warrants have been recorded as deferred offering costs and will be offset
against the proceeds of the offering, when consummated [Note 6].

                                      F-14
<PAGE>


We also paid Yorkville Advisors Management, LLC a fee of $15,000 for structuring
in connection with this transaction and $10,000 for due diligence expenses which
have been recorded as deferred offering costs and will be offset against the
proceeds of the offering, when consummated [Note 6].

(9) COMMITMENTS AND CONTINGENCIES.

In October 2005 we entered into a real estate purchase agreement with Christian
Berthier, as amended in March 2006 (the "Berthier Agreement") to acquire the
land where the Source is located for 2,150,000 euros. The Berthier Agreement
expires on February 28, 2008. In conjunction with the Berthier Agreement, we
negotiated the use of all previous payments made under our prior lease agreement
be used to offset a portion of the purchase price for the Source. As a result of
the new agreement, we recorded non-operating income of $249,830 in 2006 for the
reversal of the prior years' lease payments. Pursuant to the March 2006
amendment of the Berthier Agreement, we made a payment of 150,000 euros and
agreed to make a monthly payment of at least 10,000 euros to Mr. Berthier
commencing in March 2006. These monthly payments shall be applied against the
2,150,000 euros aggregate purchase price for the Berthier property.

Annual minimum commitments under the Berthier Agreement at 10,000 euros per
month are as follows (using, for purposes of illustration only in this report, a
currency exchange rate of U.S. $1.20 per one euro):

Years Ending February 28,
                     2007                  $    144,000
                     2008                  $  2,160,000
                     2009                         --
                     2010                         --
                     2011                         --
                    Beyond                        --
                                           -------------
                                           $  2,304,000
                                           =============

(10) RELATED PARTY TRANSACTIONS.

In July 2006 we entered into an amended and restated consulting agreement with
our CEO, Mr. Louis Pardo in connection with the services he provided to us
during the period from January 2001 through December 2005. The Company issued
6,653,000 shares of common stock to Mr. Pardo on July 11, 2005 as payment for
these services. The shares were at the time of issuance, and are as of the
balance sheet date, subject to restrictions on transferability. The closing
market price of our common stock on the OTC-BB on the date of issuance of these
shares was $0.10 per share. The issuance price of these shares was $0.816, based
on a discount of 20% to the five-day trailing average price for the Company's
common stock on the OTC-BB as of July 11, 2005.

In July 2006, we entered into an amended and restated consulting agreement in
connection with the services rendered by a significant shareholder, Mr.
Christophe Giovannetti. Mr. Giovannetti provided these services to us during the
period from January 2001 through December 2005. The Company issued 6,653,000
shares of common stock to Mr. Giovannetti on July 11, 2005 as payment for these
services. The shares were at the time of issuance, and are as of the balance
sheet date, subject to restrictions on transferability. The issuance price of
these shares was $0.816, based on a discount of 20% to the five-day trailing
average price for our common stock on the OTC-BB as of July 11, 2005.

On January 12, 2006, we entered into an agreement with Bridgehead Partners, LLC
("Bridgehead") whereby Bridgehead provides the services of Mr. John J. McGovern
to serve as our Executive Vice President and Chief Financial Officer. The
agreement with Bridgehead provides, among other things, for a monthly fee of
$15,000. We have issued Bridgehead a warrant for 1,500,000 shares exercisable at
$0.0375 per share which vests in 3 tranches: one half on January 12, 2006, one
quarter on June 1, 2006, and one quarter on October 31, 2006. The warrants
expire on January 12, 2011. The Warrants issued in conjunction with the
Bridgehead agreement were valued and recorded as equity by the Company in
accordance with EITF 00-19. In valuing these Warrants, we elected to use the
Black Scholes model. The effect of this valuation was the creation of fair value
of the Warrants of $59,623 which was allocated to APIC; the value of the
warrants is expensed to consulting expense as they vest.

                                      F-15
<PAGE>


(11) CONCENTRATION OF CREDIT RISK.

Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash and cash equivalent accounts in financial
institutions, which from time to time exceed Federal depository insurance
coverage limits. At February 28, 2006, cash and cash equivalents did not exceed
federally insured limits.

(12) SUBSEQUENT EVENTS

In March 2006 we entered into a bridge loan agreement with Portfolio Lenders II,
LLC with gross proceeds of $100,000 for which we issued 100,000 warrants to the
lender exercisable at $0.05 per share. The bridge loan was repaid in full in
April, 2006.

During March and April 2006 we undertook a private placement to accredited
investors of convertible debentures and warrants ("Units") for which we held
four closings aggregating gross proceeds of $917,800. Poseidis issued (a) a
total of $917,800 in principal amount of convertible debentures, (b) 2,753,400
warrants exercisable at 125% of the FMV on the four respective closing dates
(540,000 warrants at $ 0.086, 701,400 warrants at $0.078, 381,000 warrants at
$0.076, and 1,131,000 warrants at $0.082), and (c) 2,753,400 warrants
exercisable at 145% of the FMV on the four respective closing dates (540,000
warrants at $0.099, 701,400 warrants at $0.090, 381,000 warrants at $0.088, and
1,131,000 warrants at $0.095).

In March 2006 our subsidiary Montespan , entered into an amendment and
restatement of its October 2005 real estate purchase agreement with Christian
Berthier pertaining to approximately 5 acres in Theneuille, France where the
natural mineral water spring is located. The purchase price for this property is
2,150,000 euros of which Montespan has paid 430,000 euros as of July 26, 2006.
In the agreement, Montespan agreed to pay Mr. Berthier at least 10,000 euros per
month.

In May 2006 Poseidis issued a Promissory Note to Portfolio Lenders II, LLC
pursuant to which the Company obtained a loan in the principal amount of
$250,000 and issued warrants to purchase 1,000,000 shares of the Company's
common stock exercisable at $0.05 per share.

In June 2006 Poseidis formed an advisory board to advise the Board of Directors
and senior management on strategic planning issues, business development
matters, and other corporate matters. Three members have been appointed to the
advisory board as of July 26, 2006. Poseidis has agreed to issue stock options
to purchase 100,000 of our common stock to each member of the advisory board
exercisable at the then current market value of Poseidis' common stock on the
date of approval of such options by the Poseidis Board of Directors. Such
options are to be issued under, and governed by, an equity incentive plan to be
adopted by Poseidis.

In July 2006 Poseidis issued a Promissory Note to Mr. Pardo pursuant to which
the Company obtained a loan in the principal amount of $30,000. The Note bears
interest at the rate of 9.25% per annum. The principal and accrued interest
shall be paid in full on demand, not later than the fifth business day after
written demand for repayment is received by the Company.

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<PAGE>


On July 19, 2006, the OTC-BB temporarily ceased quoting the Company's shares
pending the completion of the audit of the Poseidis financial statements and the
filing of the Company's Annual Report on Form 10-KSB for the year ended February
28, 2006. The Company's common stock has continued to be quoted through various
market makers on the Pink Sheets Electronic Quotation Service published by the
National Quotation Bureau under the symbol "PSED".

In July 2006 Poseidis entered into amended and restated consulting agreements
with Mr. Pardo, and Mr. Giovannetti in order to address errors identified by the
Company in the historical accounting treatment of consulting fees and the
issuance of shares of Poseidis common stock to Mr. Pardo and Mr. Giovannetti
under previously executed consulting agreements [Note 10].

In August and September of 2006, the Company entered into letter agreements with
Cornell pursuant to which, among other things, Cornell provided a waiver of
certain defaults that had arisen under applicable loan documents and Cornell and
the Company also amended certain covenants and other terms under the loan
documents including: termination of the Company's obligation to further fund
with cash or stock or otherwise an escrow account held for the benefit of
Cornell in connection with the $344,000 debenture that we had issued to Cornell
in February 2006; Cornell's consent to the release of approximately $60,000 from
such escrow account for the purpose of our payment of certain vendors' invoices
relating to our development project at the Source in France; changing the due
date for the first scheduled payment of principal and interest due under the
Debentures from September 1, 2006 to October 1, 2006; and revising the due dates
for our filing with the SEC of certain reports and our registration statement.

In September 2006, the Company filed with the SEC amended quarterly reports on
Form 10-QSB/A for the three and six-month periods ended August 31, 2005 and for
the three and nine-month periods ended November 30, 2005, and the Company also
filed with the SEC the Company's annual report on Form 10-KSB for the fiscal
year ended February 28, 2006.

In October 2006, the Company filed with the SEC an amended quarterly report on
Form 10-QSB/A for the three-month period ended May 31, 2006 and the Company also
filed with the SEC a registration statement on Form SB-2. The SEC staff issued a
comment letter dated October 20, 2006 with respect to the Form 10-KSB for the
fiscal year ended February 28, 2006 and the Form 10-QSB/A for the three-month
period ended May 31, 2006.

On September 4, 2007, the Company filed a reply to the SEC comment letter via
EDGAR and on September 12, 2007, the Company filed with the SEC a current report
on Form 8-K reporting on the Company's recent developments. This Report should
be read in conjunction with the Company's Form 8-K filed on September 12, 2007.


                                      F-17