**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**





x **Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934**


For
      the
      Fiscal Year Ended: June 30, 2006





 ̈ **Transition
      Report Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of
      1934** ****


Commission
      File No. 000-28371





**Endovasc,
      Inc.**


(Exact
      name of registrant as specified in its charter)





Nevada
            
            76-0512500(State
                or Other Jurisdiction of Incorporation or Organization)
            
            (I.R.S.
                Employer Identification Number)





**550
      Club Drive Suite 440, Montgomery, Texas 77316**


(Address
      of principal executive offices)


**(936)
      582-5920**





(Registrant’s
      telephone number, including area code)





Securities
      registered pursuant to Section 12(b) of the Exchange Act: None





Securities
      registered pursuant to Section 12(g) of the Exchange Act: Common Stock, Par
      Value $. 001
      per
      share.




Indicate
      by check mark if the Registrant is a well-know seasoned issuer, as denied in
      Rule 405 of the securities Act. Yes  ̈ No x





Indicate
      by check mark if the Registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes  ̈ No x





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No  ̈





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K contained herein, and will not 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-K or any amendment to
      this
      Form 10-K. x





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined by Rule 12b-2 of
      the
      Act). Large accelerated filer  ̈ Accelerated filer  ̈ Non-Accelerated filer x





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




The
      aggregate market value of the voting and non-voting common equity by
      non-affiliates of the Company was $6,414,475 as of September 15, 2006, based
      on
      the price of $0.04 per share.





As
      of
      September 15, 2006, we had outstanding: 156,981,519 shares of Common Stock,
      $.001 par value; and 14,158,593 shares of Series NDC Common Stock, $.001 par
      value.













**Table
      of Contents**


**Part
                  I**
              
              **Page**Item
                  1
              Business
              1Item
                  1A
              Risk
                  Factors
              5Item
                  1B
              Unresolved
                  Staff Comments
              8Item
                  2
              Properties
              8Item
                  3
              Legal
                  Proceedings
              8Item
                  4
              Submissions
                  of Matters to a Vote of Security
                  Holders
              9**Part
                  II**Item
                  5
              Market
                  for Registrant’s Common Equity, Related Stockholder
                  Matters and Issuer Purchases of Equity Securities
              10Item
                  6
              Selected
                  Financial Data
              11Item
                  7
              Management’s
                  Discussion and Analysis of Financial Condition and
                  Results of Operation
              12Item
                  7A
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk
              14Item
                  8
              Financial
                  Statements and Supplementary Data
              15Item
                  9
              Changes
                  in and Disagreements With Accountants on Accounting and
                  Financial Disclosure
              15Item
                  9A
              Controls
                  and Procedures
              15Item
                  9B
              Other
                  Information
              15**Part
                  III**Item
                  10
              Directors
                  and Executive Officers of the
                  Registrant
              16Item
                  11
              Executive
                  Compensation
              17Item
                  12
              Security
                  Ownership of Certain Beneficial Owners and Management
                  and Related Stockholder Matters
              18Item
                  13
              Certain
                  Relationships and Related
                  Transactions
              19Item
                  14
              Principal
                  Accounting Fees and Services
              20**Part
                  IV**Item
                  15
              Exhibits,
                  Financial Statement Schedules
              22




*Table
            of Contents*





**PART
      I**




**Item
                1**
            **BUSINESS**





**General**





As
      a
      business development company, we provide long-term debt and equity investment
      capital to our portfolio companies.





Our
      investment portfolio consists primarily of loans with equity features and equity
      investments in companies which constitutes a controlling equity interest, and
      debt obligations. At June 30, 2006, our investment portfolio totaled $1,605,000
      at fair value. Our investment objective is to achieve current income and capital
      gains.





A
      business development company provides stockholders the ability to retain the
      liquidity of a publicly traded stock while sharing in the possible benefits
      of
      investing in privately owned small companies.





**Corporate
      History**





We
      were
      incorporated as a biopharmaceutical company under the laws of the State of
      Nevada on June 10, 1996, under the name Endovasc, Inc. We were authorized to
      issue an aggregate of 25,000 shares of capital stock with a par value of $0.001
      per share. On September 5, 1996, we amended our articles of incorporation to
      increase our authorized shares to 100,000,000 shares of common stock, par value
      $0.001 per share. On May 28, 1997, we amended our articles of incorporation
      to
      change our name to Endovasc Ltd., Inc. On June 2, 1997, we amended our articles
      of incorporation to authorize a total of 120,000,000 shares of capital stock,
      par value $0.001 per share, of which 100,000,000 shares are common shares and
      20,000,000 shares are preferred shares. In January of 2006 our shareholders
      voted to increase our authorized capital stock to 500,000,000.





On
      April
      30, 2002, our Board of Directors authorized our Chairman to pursue a plan of
      reorganization that would allow us to meet our obligations to our creditors
      and
      the Series A Convertible Preferred Stockholders. This plan involved the issuance
      of up to 3,000,000 shares of Series B Convertible Stock and a reverse domicile
      merger from Nevada to Delaware. On or about May 6, 2002 an information statement
      was filed with the SEC and simultaneously sent to our stockholders. On July
      5,
      2002 a meeting of stockholders representing 52.6% of the total outstanding
      voting authority approved the resolution to adopt the plan of reorganization.
      It
      was made effective July 9, 2002.





Effective
      April 1, 2003, our Board of Directors and holders of shares representing a
      majority of the voting rights of the outstanding shares of our common stock
      and
      preferred stock approved a reincorporation from the State of Delaware to the
      State of Nevada. This reincorporation was accomplished by a merger into a new
      Nevada corporation under the name Endovasc, Inc.





In
      September 2003, our Board of Directors authorized the creation of a new class
      of
      common stock, called Series NDC common stock, $0.001 par value per share, whose
      rights and distributions would be based on the performance of Nutraceutical
      Development Corporation (NDC). During the twelve months ended June 30, 2004,
      we
      issued a dividend of one share of the Series NDC common stock for each four
      shares of our common stock. As of June 30, 2006, 14,158,593 shares of Endovasc
      Series NDC common stock were issued and outstanding.





In
      October 2004, we filed our election with the SEC (Form N-54A) to adopt Business
      Development Company (“BDC”) status under the Investment Company Act of 1940
      (“1940 Act”). A BDC is a specialized type of investment company under the 1940
      Act. A BDC may primarily be engaged in the business of furnishing capital and
      managerial expertise to companies that do not have ready access to capital
      through conventional financial channels; such companies are termed “eligible
      portfolio companies”. Endovasc, as a BDC, may invest in other securities;
      however, such investments may not exceed 30% of our total asset value at the
      time of such investment. In accordance with Article 6 of Regulation S-X under
      the Securities Act of 1933 and Securities Exchange Act of 1934, we do not
      consolidate portfolio company investments in which we have a controlling
      interest.





1
 *Table
            of Contents*





In
      May of
      2005, we announced our intention to cease funding research to our portfolio
      company, Angiogenix Limited, Inc. (“Angiogenix”) and that Angiogenix has
      terminated its licensing agreement with Leland J. Stanford University dated
      February 1, 2000 relating to the use of a nicotine receptor agonist (NRA).
      There
      were two primary reasons for this decision: firstly, ceasing research efforts
      for Angiogenix will allow us to concentrate our resources on funding future
      clinical studies for Liprostin, and secondly, the current licensing agreement
      contained unrealistic deadlines for the commercialization of NRA.





We
      have
      not been subject to bankruptcy, receivership or any similar
      proceeding.





**Eligible
      Portfolio Investments**





Investments
      are reported at fair value. The most significant estimate inherent in the
      preparation of our financial statements is the valuation of our investments
      and
      the related unrealized appreciation or depreciation.





Upon
      our
      conversion to a BDC, we employed an independent business valuation expert to
      value our portfolio companies. The Board of Directors determined all portfolio
      companies and investments at fair value under a good faith standard.





We
      currently have investments in five portfolio companies as follows:





***Liprostin,
      Inc.***





We
      have
      an investment in a wholly-owned portfolio company Liprostin, Inc. which is
      engaged in the FDA approval of LiprostinTM for the treatment of intermittent
      claudication. The active component Prostaglandin E-1(PGE-1) is encapsulated
      in a
      unique lipid membrane to protect PGE-1 from degradation in the blood
      stream.





Liprostin,
      Inc. conducted a successful Phase I clinical trial to test product safety and
      tolerance levels using a small group of healthy subjects in January 2001. Based
      on the results of this trial, and the previously established safety profile
      of
      PGE-1, the FDA recommended that we proceed to a Phase III trial to determine
      the
      safety and efficacy of the administration of LiprostinTM in combination with
      angioplasty for the treatment of intermittent claudication or critical limb
      ischemia. In 2003, Liprostin, Inc., submitted a protocol for the phase II
      clinical study entitled “A Phase II, Open label, Multi-center study of Liposomal
      prostaglandin E-1 (LiprostinTM) in Patients with Critical Limb Ischemia and
      Intermittent Claudication”.





The
      Phase
      II clinical trial consisting of 73 patients was initiated in December 2003
      and
      concluded in August 2004. The successful results of this trial for peripheral
      arterial occlusive disease were presented to the FDA in the fall of
      2004.





Liprostin,
      Inc., will conduct a Phase IIIa trial to establish efficacy and safety profile
      in order to seek or enter into a partnership with a suitable company to
      co-develop and market our lead product LiprostinTM for treatment of peripheral
      vascular disease. Opportunities to out-license or sell the technology are also
      being considered. We expect to enter into a phase IIIa clinical trial in
      2006.





2
 *Table
            of Contents*





*Distribution
      Methods*





Upon
      receipt of necessary governmental regulatory consent, Liprostin intends to
      distribute its products utilizing LiprostinTM technologies
      worldwide.





*Governmental
      Regulation*





The
      clinical trials performed in support of the IND 61,026 have been carried out
      in
      compliance with the regulations stipulated by the Food and Drug Administration.





*Competition*





Major
      contributors of Peripheral Vascular Disease (“PVD”) include smoking, diabetes,
      high fat or cholesterol levels in the blood, high blood pressure, obesity,
      and
      lack of exercise. Thus, treatment of these symptoms may help to slow the
      progression of the disease. Surgical procedures such as angioplasty, (and stent
      placement, if needed) and by-pass surgery are used as to increase blood flow
      to
      the extremities in the more severe cases.





There
      is
      no “standard of care” medication for the treatment of PVD. Medications such as
      aspirin or Plavix® (clopidogrel) are usually advised, although these do not help
      with symptoms of PVD, but help to prevent blood clots (thrombosis) forming
      in
      arteries. Cilostazol® has recently been shown to improve walking distance in
      people with PVD and blood flow in the lower leg.





***Nutraceutical
      Development Corporation***





We
      have
      an investment in a wholly-owned portfolio company, Nutraceutical Development
      Corporation (“NDC”) which developed a technology for use in dietary supplements
      to enhance muscle mass muscle strength when used in combination with a strenuous
      exercise program.





In
      2002,
      NDC began experimentation in mice to demonstrate accelerated muscle mass was
      achieved when fed very low doses of the compound in drinking water combined
      with
      extensive exercise during a three week regimen. The mice that were given low
      amounts developed a significant muscle increase compared to the controlled
      mice.
      A scientifically controlled double blind, double placebo study in healthy weight
      lifters confirmed our earlier animal results and in August of 2003 we filed
      a
      Patent Application, No.10/633,325 relating to this discovery.





An
      agreement to exclusively sublicense the patent was formed between NDC and Basic
      Research, L.L.C. of Salt Lake City Utah in July of 2003. NDC will receive a
      10%
      royalty on all revenues generated. Due to delays in product manufacturing,
      the
      minimum royalty payment date is being renegotiated with the licensee. This
      contract to retain exclusivity includes a clause allowing termination of the
      contract by Basic Research, L.L.C. for cause including their decision to
      discontinue selling the licensed product.





Based
      on
      the information embodied in the patent, the product Endothil - CR was developed
      and launched at the Arnold Classic Convention in March of 2005 and is now being
      sold at GNC stores nationwide.





3
 *Table
            of Contents*





*Distribution
      Methods*





NDC
      intends to seek additional applications of its technology and to conceptualize
      products for related indications. Basic Research, L.L.C will receive first
      right
      of refusal for the development of other products.





***Endovasc-TissueGen
      Research Sponsors, L.L.C.***





We
      have a
      49.9% investment in a joint venture named Endovasc-TissueGen Research Sponsors,
      L.L.C. (the “Partnership”). The purpose of the Partnership is to develop a
      bioresorbable drug-eluting cardiovascular stent (DES) for the advanced treatment
      of coronary artery disease.





*Competition*





There
      is
      considerable competition from medical device manufacturers with respect to
      the
      development of stent-coating technologies for metal stents. These competitors
      include Guidant, Inc., Cook, Inc., Cordis, Medtronics, Inc and Boston
      Scientific, Inc. To our knowledge, current competition in this technology is
      limited to the use of drugs, such as paclitaxol and other taxol derivatives
      and
      sirrolimus (Cordis).





***Endovasc-TissueGen-Blumberg
      Research Sponsors, L.L.C.***





We
      have a
      39.9% investment in a joint venture named Endovasc-TissueGen-Blumberg Research
      Sponsors, L.L.C. (the “Joint Venture”). The purpose of the Joint Venture is to
      develop biodegradable stents for ureteral and prostate applications.




*Competition*





Boston
      Scientific, Inc., developed a biodegradable urinary stent but has chosen not
      to
      commercialize this product.





***Angiogenix
      Ltd., Inc***





We
      have
      an investment in the wholly-owned, unconsolidated subsidiary, Angiogenix
      Limited, Inc. (“Angiogenix”). Angiogenix had an exclusive licensing agreement
      (the "Stanford License Agreement") with the Board of Trustees of the Leland
      Stanford University relating to US Patent Application 60/146,233 (issued as
      US
      Patent No. 6,417,205 B1 on July 9, 2002) relating to the administration of
      Nicotine or Nicotine Receptor Agonist (NRA) to induce the growth of new blood
      vessels angiogenesis. During the year ended June 30, 2005, we elected to cancel
      our license agreement with Leland J. Stanford University.




**Patents
      and Proprietary Rights**





We
      believe that adequate protection of the proprietary technology of our portfolio
      companies is a vital aspect of business operations. Our portfolio companies
      actively protect their patents and proprietary technology in the United States
      and in foreign countries, as deemed necessary to protect development of their
      operations.





Our
      portfolio companies have patent protection for several products and are pursuing
      patent and trademark applications for additional products.  United States
      Patent No. 4,820,732 was granted on April 11, 1989 and Canadian Patent No.
      was
      granted on August 6, 1991, for a "Method and Composition for Reducing
      Dysfunction in Angioplasty Procedures”.  United States Patent No. 4,955,878
      was granted on September 11, 1990, for a "Kit for Treating Arterial Dysfunction
      Resulting from Angioplasty Procedures”.  United States Patent No.
      5,980,551, was granted on November 9, 1999, for a “Composition and Method for
      Making a Biodegradable Drug Delivery Stent,” United States Patent No.
      6,395,023B1, was granted on May 28, 2002 for a “Prosthesis with Biodegradable
      Surface Coating and Method for Making Same,” and United States Patent No.
      7,074,812B2 was granted on July 11, 2006 for “Development of Muscle Mass in a
      Mammal.”





4
 *Table
            of Contents*





Liprostin,
      Inc. filed a U.S. Trademark Application Serial No. 78/629,456 for LiprostinTM
with the U.S. Patent and Trademark Office.  We also own rights to several
      trademarks and service marks employed in our business, including our logo,
      the
      registered domain name of www.endovasc.com, and other trademarks and service
      marks identifying our products and services.





Liprostin,
      Inc. has filed U.S. Patent Application Serial No.11/359,784 with the U.S. Patent
      & Trademark Office to further protect its technology.





It
      is
      important to note that other public and private institutions may have obtained
      or filed, applications for patents that we may need for development of our
      products. We cannot know the scope or validity of such patents, the extent
      that
      we may desire to acquire licenses for such patents, or the availability of
      such
      licenses upon terms that are acceptable to us.





**Research
      and Development**





Since
      our
      election to become a BDC, research and development is performed by our portfolio
      companies and the details about such are described in this document under
“Portfolio Companies”. Research and development costs prior to our conversion to
      a BDC, was $86,000 and $1,647,000 for the three months ended September 30,
      2004
      and year ended June 30, 2004, respectively.





**Employees**





As
      of
      June 30, 2006, we employ 4 full time employees and one contract consultant.
      None
      of our employees are subject to a collective bargaining agreement and we believe
      that our relations with our employees are good. Most of our developmental
      activities are outsourced in order to reduce overhead.





**Item
                1A**
            **RISK
                FACTORS**





*An
      investment in our securities involves a number of significant risks and other
      factors relating to our structure and investment objectives. As a result, we
      cannot assure you that we will achieve our investment objectives. You should
      consider carefully the following information before making an investment in
      our
      securities.*




**We
      have a history of operating losses, and we may not achieve or maintain
      profitability in the future.**





We
      have
      experienced a net loss of $225,000 **** for
      the
      year ending June 30, 2006. We expect these losses to continue and it is
      uncertain when, if ever, we will become profitable.





5
 *Table
            of Contents*





**Our
      competitive position depends on protection of our intellectual
      property.**




Our
      success will depend on our ability to obtain and protect patents on our
      technology and to protect our trade secrets. The patents we currently license,
      and any future patents we may obtain or license, may not afford meaningful
      protection for our technology and products. In addition, our current and future
      patent applications may not result in the issuance of patents in the United
      States or foreign countries. Competitors may develop products similar to ours
      that conflict with our patent applications and any patents we ultimately
      receive. In order to protect or enforce our patent rights, we may initiate
      legal
      proceedings against third parties. These lawsuits could be expensive, take
      significant time and divert management’s attention from other business concerns.
      Biotechnology patent positions are highly uncertain and involve complex legal
      and factual issues.





**Our
      products could infringe on the intellectual property rights of
      others.**




Third
      parties may challenge the patents that have been issued or licensed to us.
      We
      may have to pay substantial damages for past infringement if it is ultimately
      determined that our products infringed upon a third party’s patents. Even if
      infringement claims against us are without merit, defending a lawsuit takes
      significant time, is expensive and may divert management attention from other
      business concerns.





**Our
      lack of operating experience may cause us difficulty in managing our
      growth.**





We
      have
      no experience in manufacturing or procuring products in commercial quantities,
      conducting other later-stage phases of the regulatory approval process or
      selling our products. We have very little experience with respect to the launch
      of a commercial product. Our ability to manage our growth, if any, will require
      us to improve and expand our management and our operational and financial
      systems and controls. In addition, if rapid growth occurs, it may strain our
      operational, managerial and financial resources.





**Our
      business is subject to technological obsolescence.**




Biotechnology
      and related pharmaceutical technology have undergone and are subject to rapid
      and significant change. We expect that the technologies associated with
      biotechnology research and development will continue to develop rapidly. Our
      future will depend in large part on our ability to maintain a competitive
      position with respect to these technologies. Any processes, discovery platforms
      or products that we develop may become obsolete before we recover any expenses
      incurred in connection with developing these products.





**We
      face intense competition in the biotechnology, pharmaceutical and nutraceutical
      industries.**




Our
      competitors may succeed in developing or licensing technologies and products
      that are more effective or less costly than any we are developing. Our
      competitors may succeed in obtaining FDA or other regulatory approvals for
      product candidates before we do.  Products resulting from our research and
      development efforts, if approved for sale, may not compete successfully with
      our
      competitors’ existing products or products under development.





6
 *Table
            of Contents*





**We
      will need significant additional capital in the future and, if additional
      capital is not available, we may have to curtail or cease
      operations.**





We
      have
      an immediate need for capital to continue our operations, and we will need
      to
      raise significant additional funds to implement our business plan.  The
      actual amount of funds that we will need will be determined by many factors,
      some of which are beyond our control, and we may need funds sooner than
      currently anticipated. These factors include:




·
            the
                extent to which we enter into licensing arrangements, collaborations
                or
                joint ventures;


·
            our
                progress with research and product
                development;


·
            the
                costs and timing of obtaining new patent
                rights;


·
            the
                extent to which we acquire or license other technologies;
                and


·
            regulatory
                changes and competition and technological developments in the
                market.




Our
      continued operations will therefore depend upon our ability to raise additional
      funds through additional equity or debt financing.  We may seek additional
      funding through private sales of our securities, public sales of our securities,
      strategic alliances or by licensing all or a portion of our technology. 
Any such funding may significantly dilute existing shareholders or may limit
      our
      rights to our technology.  Moreover, the increase in the number of shares
      available in the public marketplace may reduce the market price for our common
      stock and, consequently, the price investors may receive at the time of
      sale.  When we require additional funds, general market conditions or the
      then-current market price of our common stock may not support capital raising
      transactions such as additional public or private offerings of our common
      stock.  If we are unable to obtain additional funds on a timely basis or on
      terms favorable to us, we may be required to scale back our development of
      new
      products, sell, or license some or all of our technology or assets, or curtail
      or cease operations.





**Stock
      prices for biomedical and biotechnology companies are
      volatile.**




The
      market price for securities of biomedical and biotechnology companies
      historically have been highly volatile, and the market from time to time has
      experienced significant price and volume fluctuations that are unrelated to
      the
      operating performance of such companies. Fluctuations in the trading price
      or
      liquidity of our common stock may adversely affect our ability to raise capital
      through future equity financings.





**Because
      our stock currently trades below $5.00 per share** **,
      our stock is considered by the SEC a “penny stock,” which can adversely affect
      its liquidity.**




If
      the
      trading price of our common stock remains less than $5.00 per share, our common
      stock is considered a “penny stock,” and trading in our common stock is subject
      to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934.
      Under this rule, brokers or dealers who recommend low-priced securities to
      persons other than established customers and accredited investors must satisfy
      special sales practice requirements. The broker or dealer must make an
      individualized written suitability determination for the purchaser and receive
      the purchaser’s written consent prior to the transaction.




SEC
      regulations also require additional disclosure in connection with any trades
      involving a penny stock, including the delivery, prior to any penny stock
      transaction, of a disclosure schedule explaining the penny stock market and
      its
      associated risks. These requirements could severely limit the liquidity of
      such
      securities in the secondary market because few brokers or dealers are likely
      to
      undertake these compliance activities. In addition to the applicability of
      the
      penny stock rules, another risk associated with trading in penny stocks may
      be
      high price fluctuations. Purchasers of stock may be subject to substantial
      dilution.





7
 *Table
            of Contents*





**We
      do not anticipate paying dividends on our common stock.**




We
      do not
      plan to pay dividends on our common stock for the foreseeable future. We
      currently intend to retain future earnings, if any, to finance operations,
      capital expenditures and the expansion of our business.





**Item
                1B**
            **UNRESOLVED
                STAFF COMMENTS**





None





**Item
                2**
            **PROPERTIES**





We
      do not
      own any real estate or other physical properties materially important to our
      operation. Our administrative and principal executive offices are located at
      550
      Club Dr., Suite 345, Montgomery, Texas 77316. We believe that our office
      facilities are suitable for our current levels of operations.





**Item
                3**
            **LEGAL
                PROCEEDINGS**





On
      August
      28, 2003, Cause No. 03-08-0681-CV, "The Dow Chemical Company vs. Endovasc LTD.,
      Inc.," was filed against us in the District Court of Montgomery County, Texas,
      359th Judicial District. Dow Chemical Company ("Dow") filed a complaint against
      us for breach of contract and damages. The amount of damages sought is
      approximately $230,000. This case is being vigorously defended against the
      allegations made by Dow. We have filed a counter-claim against Dow for breach
      of
      contract and damages. A prediction cannot be made as to the final outcome of
      the
      complaint and damages allegedly owed to Dow or to us. This case has been tried
      and a judgment entered by the District Court against us. This case is on appeal
      and is being vigorously defended against the allegations made by Dow and the
      counter-claim is being vigorously pursued as well. A prediction cannot be made
      as to the final outcome of the complaint and damages allegedly owed to Dow.
      No
      amounts have been accrued for this contingency.





On
      November 7, 2003, Cause No. 03-11-08112-CV, "Greg Creekmore vs. Endovasc, Inc.
      and Endovasc, LTD., Inc.," was filed against us in the District Court of
      Montgomery County, Texas, 284th Judicial District. Greg Creekmore ("Creekmore")
      filed a complaint against us for breach of a consulting contract between the
      parties. Creekmore seeks payment of $114,000 plus interest, one million shares
      of our common stock and reimbursement of court costs including reasonable
      attorneys' fees allowed by law. This case is being vigorously defended against
      the allegations made by Creekmore. A prediction cannot be made as to the final
      outcome of the complaint and damages allegedly owed to Creekmore. However,
      management believes it will prevail and accordingly, no amounts have been
      accrued for this contingency.





On
      January 13, 2004, Case No. H-03-5226, "Lorenz M. Hofmann, Ph.D. and LMH
      Associates, Inc. vs. Endovasc, LTD., Inc., Endovasc, Inc., David P. Summers,
      Ph.D. and M. Dwight Cantrell" was filed against us in the United States District
      Court for the Southern District of Texas Houston Division. Lorenz M. Hofmann,
      Ph.D. and LMH Associates, Inc. ("LMH") filed a complaint against us for breach
      of contract and damages. LMH seeks payment of $96,000. We filed a counter-claim
      against LMH for breach of contract and damages. This case has been tried and
      a
      judgment was rendered in favor of the plaintiff. The plaintiff's award,
      including attorney’ fees, total $128,000, an increase of $32,000 previously
      reported, and are reflected as a payable in the accompanying financial
      statements.





In
      November 2004, we filed a lawsuit against our former President and CEO in the
      284th District Court of Montgomery County, Texas. The suit filed on our behalf
      alleges a civil conspiracy, breach of fiduciary duty and breach of contract
      and
      rescission by our former CEO and seeks restitution and damages in excess of
      $3.5
      million.





8
 *Table
            of Contents*





We
      are
      subject to certain other legal proceedings and claims which arose in the
      ordinary course of our business. In the opinion of management, the amount of
      ultimate liability with respect to these actions will not materially affect
      our
      financial position, results of operations or cash flows.





**Item
                4**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**





No
      matters were submitted to a vote of security holders the fourth quarter of
      the
      fiscal year ended June 30, 2006.





9
 *Table
            of Contents*





**PART
      II**





**Item
                5**
            **MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY
                SECURITIES**





Our
      common stock trades on the NASDAQ Over the Counter Bulletin Board (OTCBB) under
      the symbol "EVSC." The following table reflects, by quarter, the high and low
      closing prices per share of our common stock.





**Common
      Stock**





**Fiscal
                Quarter Ending**
            
            **Common
                Stock Price (rounded to the nearest penny)****High**
            
            **Low**June
                30, 2006
            
            
            .05
            
            
            .03March
                31, 2006
            
            
            .08
            
            
            .02December
                31, 2005
            
            
            .03
            
            
            .02September
                30, 2005
            
            
            .06
            
            
            .03June
                30, 2005
            
            
            .10
            
            
            .03March
                31, 2005
            
            
            .10
            
            
            .05December
                31, 2004
            
            
            .10
            
            
            .04September
                30, 2004
            
            
            .17
            
            
            .10





Our
      common stock NDC series trades on the NASDAQ Over the Counter Bulletin Board
      (OTCBB) under the symbol "EVSD." The following table reflects, by quarter,
      the
      high and low closing prices per share of our common stock NDC
      series.





**Common
      Stock NDC Series**





**Fiscal
                Quarter Ending**
            
            **Common
                Stock Price (rounded to the nearest penny)****High**
            
            **Low**June
                30, 2006
            
            
            .07
            
            
            .03March
                31, 2006
            
            
            .07
            
            
            .03December
                31, 2005
            
            
            .09
            
            
            .03September
                30, 2005
            
            
            .09
            
            
            .06June
                30, 2005
            
            
            .08
            
            
            .02March
                31, 2005
            
            
            .07
            
            
            .02December
                31, 2004
            
            
            .07
            
            
            .01September
                30, 2004
            
            
            .10
            
            
            .00




As
      of
      June 30, 2006, we have 646 record stockholders of Endovasc common stock, and
      652
      shareholders of record of NDC common stock.





Our
      common stock, EVSC.OB is trading at $.034 on October 9, 2006.


Our
      serried NDC tracking stock is trading at $.045 on October 9, 2006.





10
 *Table
            of Contents*





**Dividend
      Policy**





We
      have
      never paid cash dividends on our common stock and intend to retain earnings,
      if
      any, for use in the operation and expansion of our business. The amount of
      future dividends, if any, will be determined by our Board of Directors based
      upon our earnings, financial condition, capital requirements and other
      conditions.





On
      April
      1, 2003 in conjunction with our re-domicile to the State of Nevada, a stock
      dividend representing 20% to the holders of record on that date was declared
      by
      the Board of Directors.




**Recent
      Sales of Unregistered Securities**





We
      effected the following transactions in reliance upon Regulation S, Rules
      Governing Offers and Sales made Outside the United States without Registration,
      under the Securities Act of 1933 as amended (the "Act"). Each certificate issued
      for unregistered securities contained a legend stating that the securities
      have
      not been registered under the Act and setting forth the restrictions on the
      transferability and the sale of the securities. We believe that each person
      had
      knowledge and experience in financial and business matters, which allowed them
      to evaluate the merits and risk of the receipt of our securities. We believe
      that each person was knowledgeable about our operations and financial
      condition.





During
      the year ended June 30, 2004 we received $1,223,256 for the sale of 7,615,737
      restricted shares of common stock from one investor pursuant to Regulation
      S of
      the Act. A net of 8% commission was paid on this transaction.





In
      January 2005 we issued 2,241,060 shares of common stock under Regulation D
      of
      the Act to three executive officers in exchange for debt that had been issued
      in
      lieu of cash compensation totaling $65,735.





**Item
                6**
            **SELECTED
                FINANCIAL DATA**





**(In
                thousand except share data)**
            
            
            
            
            
            **Prior
                to becoming a Business Development Company****Year
                Ended June 30, 2006**
            
            **Nine
                Months Ended June 30, 2005**
            
            **Three
                Months Ended September 30, 2004**
            
            **Year
                Ended June 30, 2004**
            
            **Year
                Ended June 30, 2003**
            
            **Year
                Ended June 30, 2002**Income
            
            $
            449
            
            $
            90
            
            $
            -
            
            $
            72
            
            $
            321
            
            $
            671Operating
                loss
            
            $
            (225
            )
            $
            (205
            )
            $
            (594
            )
            $
            (4,679
            )
            $
            (9,644
            )
            $
            (2,398
            )Operating
                loss per common share
            
            
            0.00
            
            
            0.00
            
            
            (0.01
            )
            
            (0.06
            )
            
            (0.26
            )
            
            (0.34
            )Total
                assets
            
            $
            1,714
            
            $
            772
            
            $
            537
            
            $
            729
            
            $
            870
            
            $
            579Total
                liabilities
            
            $
            470
            
            $
            416
            
            $
            854
            
            $
            1,020
            
            $
            1,212
            
            $
            1,256Stockholders'
                equity (deficit)
            
            $
            1,244
            
            $
            356
            
            $
            (317
            )
            $
            (291
            )
            $
            (342
            )
            $
            (677
            )




11
 *Table
            of Contents*





**Item
                7**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATIONS**





The
      following analysis of our financial condition and results of operations should
      be read in conjunction with our financial statements and the notes thereto
      contained elsewhere in the Form 10-K.





**Critical
      Accounting Policies**





We
      believe that of the significant accounting policies used in the preparation
      of
      our financial statements (See Note 1 to the financial statements), the following
      are critical accounting policies, which may involve a higher degree of judgment,
      complexity and estimates.





**Significant
      Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the dates
      of
      the financial statements and the reported amounts of revenues and expenses
      during the periods. The most significant estimate inherent in the preparation
      of
      our financial statements is the valuation of our investments, which are reported
      at estimated fair value, and the related unrealized appreciation or
      depreciation. Actual results could differ from estimates making it reasonably
      possible that a change in the estimates could occur in the near
      term.





**Research
      and Development**





Prior
      to
      our conversion to a BDC, research and development costs were expensed as
      incurred. These costs consisted of direct and indirect costs associated with
      specific projects. Since our election to become a BDC, research and development
      is performed by our portfolio companies and the details about such are described
      in this document under “Eligible Portfolio Investments” in Item 1.





**Results
      of Operations**





Until
      October of 2004, when we became a BDC, we were in the development stage and
      have
      had limited operating revenues since our inception on June 10, 1996. From June
      10, 1996 through September 30, 2004, we had an accumulated deficit of $
      26,187,000. We continued to incur a net loss during the year ended June 30,
      2006.





During
      the year ended June 30, 2006, our income was $449,000 were $197,000 with
      $90,000 in the nine months ended June 30, 2005, $-0- in the three months ended
      September, 30, 2004 and $72,000 for the fiscal year ended June 30, 2004. The
      increase in revenue is due to an increase in management fees from our portfolio
      companies.





During
      the year ended June 30, 2006, and the nine months ended June 30, 2005, operating
      expenses were $1,174,000, $741,000, respectively. This decrease in operating
      expenses is primarily due to a shorter reporting period of June 30, 2005 and
      due
      to our conversion to a BDC.





During
      the period ended September 30, 2004, and the year ended June 30, 2004, operating
      expenses were $594,000 and $4,779,000, respectively. This decrease is due in
      part to a shorter reporting period of three months ended September 30, 2004
      and
      due to the fact that prior to our conversion to a BDC, we were involved in
      a
      trial of our LiprostinTM .





12
 *Table
            of Contents*





Interest
      expense for the periods ended June 30, 2006, June 30, 2005, September 30, 2004,
      and the year ended June 30, 2004, were $6,000, $4,000, $7,000 and $17,000,
      respectively. This decrease was primarily due to a decrease in the average
      balance outstanding of capital leases and notes payable to financial
      institutions.





There
      were no research and development expenses for the year ended June 30, 2006
      and
      period ended June 30, 2005 as all research and development activities after
      the
      conversion is carried out by the portfolio companies. Research and development
      expenses were $86,000, and $1,647,000 during the three month ended September
      30,
      2004 and year ended June 30, 2004, respectively. The decrease is due in large
      part to the change in accounting procedures related to our conversion to a
      BDC.





Cash
      flows used in operating activities for the periods ended June 30, 2006, June
      30,
      2005, September 30, 2004, and the year ended June 30, 2004 were $618,000,
      $375,000, $133,000 and $1,987,000, respectively. The decrease is due in part
      to
      the change in accounting procedures related to our conversion to a
      BDC.





**Liquidity
      and Capital Resources**





On
      June
      30, 2006, our cash and cash equivalents is $20,000.





We
      had a
      working capital deficit of $384,000 and $285,000 at June 30, 2006 and June
      30,
      2005, respectively.





In
      October 2004, we began operating as a BDC, and are no longer a development
      stage
      company. Nevertheless, we are subject to many of the risks associated with
      development and early stage companies that lack working capital, operating
      resources and contracts, cash and ready access to the credit and equity markets.
       We hope to obtain additional debt and equity financing from various
      sources in order to finance our operations and to continue to grow through
      investment opportunities.   In the event we are unable to obtain additional
      debt or equity financing, we will not be able to continue our current level
      of
      operations.  If we are unable to continue our operations, our assets will
      experience a significant decline in value.





Our
      continuation as a going concern is dependent upon our ability to generate
      sufficient cash flow to meet our obligations on a timely basis, to comply with
      the terms of our financing agreements, to obtain additional financing or
      refinancing as may be required, and ultimately to attain positive cash flows
      from operations and profits. We have increased our investment in several of
      our
      portfolio investment companies which are now reflected on the accompanying
      balance sheets at the board of directors’ best estimate of fair value through
      capital contributions in the form of transfers of net assets and cash
      contributions. Because the investments are illiquid, we are limited in our
      ability to sell the investments in our portfolio companies. The value of these
      investments may decline substantially, resulting in little or no cash value
      for
      our services and investments in these portfolio companies.





These
      events raise substantial doubt as to our ability to continue as a going concern.
      The report of our registered public accounting firm, which accompanied our
      financial statements for the year ended June 30, 2006, was qualified with
      respect to that risk. In order to continue as a going concern, we must raise
      additional funds as noted above and ultimately achieve profit from our
      operations.





During
      the year ended June 30, 2006, our portfolio company, NDC, began receiving
      royalties for its licensed technology, and we began to receive management fees
      from our portfolio companies.





13
 *Table
            of Contents*





We
      continue to actively pursue additional financing, collaborations with firms,
      and
      other arrangements aimed at increasing our capital resources. Failure to acquire
      such funds may adversely impact our ability to perform our phase IIIa trial
      of
      LiprostinTM and possibly adversely affect our operations.





**Off
      Balance Sheet Arrangements**





We
      do not
      have material off-balance sheet arrangements or related party transactions.
      We
      are not aware of factors that are reasonably likely to adversely affect
      liquidity trends, other than the risks discussed in this filing and presented
      in
      other company filings. However, the following additional information is provided
      to assist financial statement users.




*Operating
      Leases* —
      These leases generally are entered into for office space and
      equipment.





**Disclosure
      on Contractual Obligations**





Our
      future commitments at June 30, 2006 for operating lease obligations are as
      follows:


**Year
                  ending June 30,**
              
              **Operating
                  Lease**
              
              **Capital
                  Lease**2007
              
              $
              48,000
              
              $
              10,0002008
              
              
              16,000
              
              
              4,0002009
              
              
              -
              
              
              2,00064,000
              
              
              16,000




**Item
                7A**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**





Our
      functional currency is the U.S. dollar.





Our
      investment activities contain elements of risk. The portion of our investment
      portfolio consisting of equity or equity-linked debt securities in private
      companies is subject to valuation risk. Because there is typically no public
      market for the equity and equity-linked debt securities in which it invests,
      the
      valuation of the equity interest in the portfolio is stated at “fair value” and
      determined in good faith under the direction of our Board of Directors
      on a quarterly basis in accordance with our investment valuation
      policy.





In
      the
      absence of a readily ascertainable market value, the estimated value of our
      portfolio may differ significantly from the value that would be placed on the
      portfolio if a ready market for the investments existed. Any changes in
      valuation are recorded in our Statement of Operations as “Net unrealized
      appreciation (depreciation) on investments”.





As
      of
      June 30, 2006, we have no off-balance sheet investments or hedging
      investments.





*Impact
      of Inflation*





We
      do not
      believe that our business is materially affected by inflation, other than the
      impact inflation may have on the securities markets, the valuations of business
      enterprises and the relationship of such valuation to underlying earnings,
      all
      of which will influence the value of our investments.





14
 *Table
            of Contents*





**Item
                8**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY
                DATA**




Financial
      statements begin on page 25


Reports
      of Independent Registered Public Accounting Firms


Statements
      of Net Assets


Statements
      of Operations


Statements
      of Changes in Net Assets


Statements
      of Cash Flows


Schedules
      of Investments


Notes
      to
      Financial Statements





**Item
                9**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None.





**Item
                9A**
            **CONTROLS
                AND PROCEDURES**





(a)
      Evaluation of Disclosure Controls and Procedures.





An
      evaluation made at the end of the period covered by this report was performed
      under the supervision and with the participation of our president, chief
      executive officer ("CEO") and the chief financial officer ("CFO") of the
      effectiveness of the design and operation of our disclosure controls and
      procedures to insure that we record, processes, summarize and report in a timely
      and effective manner the information required to be disclosed in reports filed
      with or submitted to the Securities and Exchange Commission. Based on that
      evaluation, our management, including the CEO and CFO, concluded that our
      disclosure controls and procedures were effective in timely bringing to their
      attention material information related to us required to be included in our
      periodic Securities and Exchange Commission filings. Since the date of this
      evaluation, there have been no significant changes in our internal controls
      or
      in other factors that could significantly affect those controls.





However,
      due to the limited number of employees engaged in the authorization, recording,
      processing and reporting of transactions, there is inherently a lack of
      segregation of duties. We periodically assesses the cost versus benefit of
      adding the resources that would remedy or mitigate this situation, and currently
      do not consider the benefits to outweigh the costs of adding additional staff
      in
      light of the limited number of transactions related to our
      operations.





(b)
      Changes in Internal Controls Over Financial Reporting.





There
      have been no significant changes in internal control over financial reporting
      that occurred during the fiscal period covered by this report that have
      materially affected or are reasonably likely to materially affect our internal
      control over financial reporting.




**Item
                9B**
            **OTHER
                INFORMATION**





In
      August
      of 2006, the Company’s Chief Operations Officer and member of the board, M.
      Dwight Cantrell, passed away. In August of 2006 Barbara J. Richardson resigned
      her position on the Board of Directors, effective immediately. In October of
      2006, Clarice Motter, Chief Financial Officer, resigned her position, effective
      October 9, 2006.





15
 *Table
            of Contents*





**PART
      III**




**Item
                10**
            **DIRECTORS
                AND EXECUTIVE OFFICERS OF THE REGISTRANT**




**Name**
            
            **Age**
            
            **Position**
            
            **Period
                Officer/Director/Key Employee**Diane
                Dottavio, Ph.D.
            
            59
            
            President/Chief
                Executive Officer/ Chief Financial Officer/ Chairman of the
                Board
            
            March
                2000 - presentRobert
                Johnson
            
            35
            
            Vice
                President of Business Development
            
            February
                2003 - presentDonald
                Leonard
            
            49
            
            Director
            
            September
                2004-present





Set
      forth
      below is a brief background of the executive officers, directors and key
      employees of Endovasc, Inc. based on information supplied by them.





Diane
      Dottavio, Ph.D. serves as our President, Chief Executive Officer and Chairman
      of
      the Board of Directors. Dr. Dottavio served as our Vice President of Research
      and Development from March 2000 to December 2003. Prior to joining us in March
      of 2000, Dr. Dottavio served as Senior Scientist with Leukosyte, Inc., from
      1994
      to 1996, and as Director of Laboratory Instruction and Research at the
      University of Houston, from 1996 to 2001. Dr. Dottavio holds a B.S. in Biology
      and a M.S. in Organic Chemistry from the University of New Mexico, as well
      as a
      Ph.D. in Biochemistry from the University of Texas.





Robert
      Johnson has served as our Vice President of Business Development since February
      2003. He has over 11 years of progressive experience in a corporate and
      franchise business environment. From 1992 to 2003, Mr. Johnson held several
      management positions with the Alderwoods Group, Inc.





Donald
      Leonard has over 27 years experience in the real estate industry and currently
      conducts classes for the Champions School of Real Estate. Mr. Leonard is a
      realtor and an investment broker who operates one of the largest individual
      real
      estate firms in the greater Houston area. He has been involved in all areas
      of
      the investment and management of commercial and residential properties. Since
      1997, Mr. Leonard as been the owner of Re/Max N.W. Territories which currently
      hosts 40 agents and has been honored twice as the fastest growing privately
      owned residential real estate company in the eight-county Houston
      area.





Our
      Directors are elected for a three year term with certain members coming up
      for
      re-election annually. Executive officers are elected by our Board of Directors
      annually and serve at the discretion of the Board. We have no standing
      committees.




Directors
      receive no salary for their services and receive no fee from us for their
      participation in meetings, although all Directors are reimbursed for reasonable
      travel and other out-of-pocket expenses incurred in attending meetings of the
      Board.





**Code
      of Ethics**





During
      the year ended June 30, 2004, we adopted a Code of Ethics for our Principal
      Executive and Senior Financial Officers.





16
 *Table
            of Contents*





**Item
                11**
            **EXECUTIVE
                COMPENSATION**





The
      following table sets forth certain summary information with respect to the
      compensation paid to the executive officers for services rendered to us, in
      all
      capacities, for the fiscal years ended June 30, 2006, 2005 and 2004. Other
      than
      as listed below, we had no executive officers whose total annual salary and
      bonus exceeded $100,000 for those fiscal years:





Summary
      Compensation Table ****





**Name
                and Principal Position**
            
            **Fiscal
                Year**
            
            **Salary**
            
            **Other
                Annual Compensation (Restricted stock)**
            
            **Long
                Term Compensation Awards Options/SAR(#of Shares)****Diane
                Dottavio, Chairman and CEO**2006
            
            $
            85,569
            
            
            -
            
            
            1,662,0332005
            
            $
            82,400
            
            $
            81,154
            
            
            -2004
            
            $
            72.399
            
            
            -
            
            
            -





**Stock
      Option Plans**





On
      October 21, 2005, our Board of Directors adopted the 2005 Executive Compensation
      Plan (the "Plan"). Amendment No. 1 to the Plan was adopted by the Board of
      Directors on November 14, 2005. On December 16, 2005, the stockholders approved
      the 2005 Plan and the grant of stock options. The maximum number of shares
      currently reserved for issuance is equal to 15% of the number of shares of
      Common Stock issued and outstanding at any time.





We
      are
      not presently able to compensate our officers and employees with cash because
      of
      the lack of available funds from operations. The Plan was adopted to provide
      a
      means by which we can attract and retain officers and employees and give such
      officers and employees an interest in our success. Under the Plan, our
      Board of Directors (or a committee designated by the Board of Directors) may
      grant options to purchase shares to officers and employees.




Directors
      are not eligible to receive options under the Plan.





During
      the fiscal year ended June 30, 2006, we recognized $93,000 in compensation
      expense for employee stock options grants. Restricted stock is expensed based
      on
      the fair market value on the grant date. There was no impact on cash flows
      from
      financing activities.





The
      fair
      value of each option grant was estimated on the grant date using the
      Black-Scholes Option-Pricing Model with the following assumptions:





(1)
      The
      option life was determined using the simplified method for estimating expected
      option life, which qualify as "plain-vanilla" option.





(2)
      The
      stock volatility for each grant is determined based on the review of the
      experience of the weighted average of historical monthly price changes of the
      Company's common stock over the most recent ten years, which is the contractual
      term of the option awards.





17
 *Table
            of Contents*





(3)
      The
      risk-free interest rate for periods equal to the expected term of the stock
      option is based on the U.S. Treasury yield curve in effect at the time of the
      grant.





Fiscal
                year endedJune
                30, 2006Expected
                option term (1)
            10
                yearsExpected
                volatility factor (2)
            100.0%Risk-free
                interest rate (3)
            5.0%Expected
                annual dividend yield
            0.0%





**Option
      Grants in Fiscal 2006**


**Individual
      Grants**


Grant
                Date
            #
                of Securities Underlying Options Granted
            %
                of Total Options Granted to Employees in Fiscal Year 2006
            Price
                Per Share
            Expiration
                DateDottavio,
                D
            10/21/2005
            1,662,033
            49.17
            .03
            10/21/2016Cantrell,
                M
            10/21/2005
            1,010,000
            29.28
            .03
            10/21/2016Johnson,
                R
            10/21/2005
            583,333
            17.26
            .03
            10/21/2016





**Item
                12**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS.**





**Equity
                Compensation Plan Information****Plan
                category**
            
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights (a)**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
              **(b)**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column (a)
                (c)**Equity
                compensation plans approved by security holders
            
            
            3,380,366
            
            $
            0.03
            
            
            19,344,362Equity
                compensation plans not approved by security holders
            
            
            -0-
            
            
            -0-
            
            
            -0-**Total**
            
            
            3,380,366
            
            $
            0.03
            
            
            19,344,362




As
      of the
      end of the period covered by this report, certain employees returned, and the
      company cancelled, 2,672,033 shares of stock issued in error during the quarter
      ended March, 31 2006, and reflected as outstanding as of the quarter ended
      March
      31, 2006.  As a result of the return and cancellation, the company reversed
      the expense of $93,000 during the three months ended June 30, 2006 from the
      reversal of previously recognized compensation expenses and options to purchase
      683,333 shares were reinstated as of October 9, 2006.





The
      following table sets forth certain information as of June 30, 2006 with respect
      to the number of shares of Common Stock beneficially owned by (i) each person
      known by us to own beneficially 10% or more of the Common Stock; (ii) each
      director; (iii) the Chief Executive Officer, and (iv) all directors and
      executive officers as a group. Unless otherwise noted, each person listed below
      has sole voting and investment power with respect to his shares. The address
      for
      each individual set forth below is 550 Club Drive, Suite 345, Montgomery, Texas
      77316.





18
 *Table
            of Contents*




**Name
                  of**
                **Individual
                  or Group (1)**
              
              **Series
                  Endovasc Common Stock**
              
              **Percent
                  of Class(2)**
              
              **Series
                  NDC Common Stock**
              
              **Percent
                  of Class(3)**
              
              **Total
                  Voting Interests**
              
              **Percent
                  of Class(4)****INDIVIDUAL
                  DIRECTORS, OFFICERS AND NOMINEES**Diane
                  Dottavio, Ph.D.
              
              
              2,079,643
              
              
              1.33
              %
              
              234,786
              
              
              1.66
              %
              
              2,314,429
              
              
              1.36
              %Chief
                  Executive Officer, DirectorRobert
                  G. Johnson
              
              
              846,819
              
              
              0.54
              %
              
              18,458
              
              
              0.13
              %
              
              865,277
              
              
              0.51
              %Vice
                  President, Business DevelopmentDonald
                  Leonard
              
              
              10,000
              
              
              0.01
              %
              
              -
              
              
              -
              
              
              10,000
              
              
              0.01
              %Director**ALL
                  OFFICERS AND DIRECTORS AS A GROUP**
              
              
              2,936,462
              
              
              1.87
              %
              
              253,244
              
              
              1.79
              %
              
              3,189,706
              
              
              1.87
              %




(1)
      The
      securities "beneficially owned" by a person are determined in accordance with
      the definition of "beneficial ownership" set forth in the rules and regulations
      promulgated under the Securities Exchange Act of 1934, as amended, and
      accordingly, may include securities owned by and for, among others, the spouse
      and/or minor children of an individual and any other relative who has the same
      home as such individual, as well as other securities as to which the individual
      has or shares voting or investment power or which such person has the right
      to
      acquire within 60 days after the Record Date pursuant to the conversion of
      convertible equity, exercise of options, or otherwise. Beneficial ownership
      may
      be disclaimed as to certain of the securities.





2)
      Based
      upon 156, 151,519 shares of Common stock-Endovasc Series outstanding as of
      September 15, 2006, assuming no other changes in the beneficial ownership of
      our
      securities.





(3)
      Based
      upon 14,158,593 shares of Common stock-NDC Series outstanding as of September
      15, 2006, assuming no other changes in the beneficial ownership of our
      securities.





(4)
      Based
      upon the total shares of common stock outstanding as of September 15, 2006
      of
      170,310,112 assuming no other changes in the beneficial ownership of our
      securities.




Based
      solely upon a review of Forms 3 and 4 submitted to us during the fiscal year
      ending June 30, 2005, we believe that all reporting persons have complied with
      the reporting requirements of Section 16(a) of the Exchange Act.





**Item
                13**
            **CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS.**




As
      of
      June 30, 2006, we have not entered into a transaction during the past two years
      with a value in excess of $60,000 with a Director, officer, or beneficial owner
      of 5% or more of our capital stock, or members of their immediate families
      that
      had, or is to have, a direct or indirect material interest in us, except as
      follows:





19
 *Table
            of Contents*





During
      the year ended June 30, 2004, our former Chief Executive Officer advanced to
      us
      an additional $205,000 under the existing note payable which had a balance
      of
      $680,000 as of June 30, 2003. During the year ended June 30, 2004, we repaid
      $885,000 of the note through a $49,000 cash payment to the shareholder, payments
      totaling $149,000 on behalf of the shareholder to third parties, and through
      issuance of common stock with a value of $687,000. The balance due on this
      note
      is $-0- as of June 30, 2004.





During
      the year ended June 30, 2004, certain stockholders made a series of advances
      to
      us totaling $84,000. As of June 30, 2006, $29,000 has been paid. The balance
      of
      the note payable to stockholders is $105,000 as of June 30, 2006, is due on
      demand, non-interest bearing and is not collateralized.





**Item
                14**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**





**Audit
      Fees**





Our
      auditors, McConnell and Jones, L.L.P. and our prior auditors, Ham, Langston
      & Brezina billed us in the aggregate amount of $38,000 and $48,000 for
      professional services rendered for their audit of our annual financial
      statements and their reviews of the quarterly financial statements included
      in
      our annual and quarterly filings for the years ended June 30, 2006 and June
      30,
      2005, respectively.





**Audit
      Related Fees**





Our
      auditors, McConnell & Jones, LLP and our prior auditors, Ham, Langston &
Brezina did not bill us, nor perform professional services rendered for
      assurance and related services that were reasonably related to the performance
      of audit or review of our financial statements for the years ended June 30,
      2006, June 30, 2005 and June 30, 2004 but were not reportable as audit fees.




**Financial
      Information Systems Design and Implementation Fees**





For
      the
      fiscal years ended June 30, 2006 and June 30, 2005, our auditors, McConnell
      & Jones, LLP and our prior auditors, Ham, Langston & Brezina did not
      bill us for, nor perform, any financial information systems design or
      implementation. For the fiscal years ended June 30, 2006 and June 30, 2005,
      we
      were not billed for professional services from any other accounting firm for
      information systems design or implementation.





**Tax
      Fees**





Our
      auditors, McConnell & Jones, L.L.P., and our prior auditors, Ham, Langston
& Brezina did not bill us for professional accounting services rendered for
      tax related services for the years ended June 30, 2006 and June 30,
      2005.





**All
      Other Fees**





We
      were
      not billed for any other professional accounting services for the fiscal years
      ended June 30, 2006 and 2005.





20
 *Table
            of Contents*





**Auditor
      Independence**





Our
      Board
      of Directors considers that the work done for us in the year ended June 30,
      2006
      by McConnell & Jones, LLP is compatible with maintaining McConnell and
      Jones, LLPs independence.





21
 *Table
            of Contents*





**PART
      IV**





**Item
                15**
            **Exhibits,
                Financial Statement
                Schedules**





(a)
            INDEX
                TO EXHIBITS


1)
            Financial
                Statements





(b)
            Exhibits


14.1
            Code
                of Ethics Incorporated by reference to form 10QSB filed October 13,
                2004


31.1
            Certifications
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002


31.2
            Certifications
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002


32.1
            Certifications
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002


32.2
            Certifications
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002







**SIGNATURES**





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





**ENDOVASC,
                INC.**Date:
                October 12, 2006
            By:/s/
                Diane DottavioDiane
                Dottavio, Ph.D.Chief
                Executive OfficerChairman
                of the Board








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




Date:
                October 12, 2006
            /s/
                Diane DottavioDiane
                Dottavio, Ph.D.Chief
                Executive OfficerChairman
                of the BoardDate:
                October 12, 2006
            /s/
                Diane DottavioDiane
                Dottavio, Ph.D.Chief
                Financial OfficerChairman
                of the BoardDate:
                October 12, 2006
            /s/
                Donald LeonardDonald
                LeonardDirector




22
 *Table
            of Contents*





**ENDOVASC,
      INC.**


**__________**








**FINANCIAL
      STATEMENTS**


**WITH
      REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS**


**as
      of June 30, 2006 and June 30, 2005,**


**and
      for the Year ended June 30, 2006 and Periods ended June 30, 2005 and September
      30, 2004,**


**and
      for the Year ended June 30, 2004**





*Table
            of Contents*





**ENDOVASC,
      INC.**


**TABLE
      OF CONTENTS**


**__________**





**Page(s)**Reports
                of Independent Registered Public Accounting Firms
            25Financial
                Statements:Statements
                of Net Assets as of June 30, 2006 and June 30, 2005
            27Statements
                of Operations for the year ended June 30, 2006, periods ended June
                30,
                2005 and September 30, 2004, and the year ended June 30, 2004
            28Statements
                of Cash Flows for the year ended June 30, 2006, periods ended June
                30,
                2005 and September 30, 2004, and the year ended June 30, 2004
            29Statements
                of Changes in Net Assets for the year ended June 30, 2006, periods
                ended
                June 30, 2005 and September 30, 2004, and the year ended June 30,
                2004
            30Schedule
                of Investments as of June 30, 2006
            31Notes
                to Financial Statements
            32




*Table
          of Contents*




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and


Stockholders
      of Endovasc, Inc.




We
      have
      audited the accompanying statements of net assets of Endovasc, Inc. (the
“Company”) as of June 30, 2006 and 2005 including schedule of investments as of
      June 30, 2006, and the related statements of operations, cash flows, and changes
      in net assets for the year ended June 30, 2006 and the periods of nine months
      ended June 30, 2005 and three months ended September 30, 2004. 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 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. The Company is not required to
      have, nor were we engaged to perform, an audit of its 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 also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, 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 the Company as of June 30, 2006,
      and 2005, and the results of its operations and its cash flows for the year
      ended June 30, 2006 and the periods of nine months ended June 30, 2005 and
      three
      months ended September 30, 2004 in conformity with accounting principles
      generally accepted in the United States of America.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company’s significant operating losses raise substantial doubt
      about its ability to continue as a going concern. Management’s plans regarding
      those matters also are described in Note 2. The financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty




/s/
      McConnell & Jones, LLP


Houston,
      Texas


September
      29, 2006





25
 *Table
            of Contents*




REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Stockholders of




Endovasc,
      Inc.






We
      have
      audited the accompanying statements of operations, cash flows, and changes
      in
      net assets of Endovasc, Inc. for the year ended June 30, 2004. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.




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




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the results of operations and cash flows of Endovasc, Inc.
      for the year ended June 30, 2004, in conformity with accounting principles
      generally accepted in the United States of America.




The
      accompanying financial statements have been prepared assuming that the Endovasc,
      Inc. will continue as a going concern. As shown in the financial statements
      and
      discussed in Note 2, the Company has incurred significant recurring losses
      from
      operations, is in a negative working capital and net deficit position at June
      30, 2004, and is dependent on outside sources of financing for the continuation
      of its operations. These factors raise substantial doubt about the Company’s
      ability to continue as a going concern. Management’s plans with regard to this
      matter are also discussed in Note 2. These financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty








/s/
      Ham,
      Langston & Brezina, L.L.P.


Houston,
      Texas


September
      30, 2004




26
 *Table
          of Contents*




**Endovasc,
        Inc.**
 **Statements
        of Net Assets**
 
 **(In
        thousands, except share data)**
 **June
                        30,**
                      **2006**
                    
                    **June
                        30,**
                      **2005****Assets**Investments:Investment
                        in controlled companies, at fair value
                    
                    $
                    1,605
                    
                    $
                    605(cost
                        of $1,168 at June 30, 2006 and $668 at June 30, 2005)Cash
                        and cash equivalents
                    
                    
                    20
                    
                    
                    116Subscriptions
                        receivable
                    
                    
                    25
                    
                    
                    -Prepaid
                        expenses
                    
                    
                    35
                    
                    
                    14Property
                        and equipment, net
                    
                    
                    29
                    
                    
                    37Total
                        assets
                    
                    $
                    1,714
                    
                    $
                    772**Liabilities**Notes
                        payable
                    
                    $
                    46
                    
                    $
                    42Notes
                        payable- stockholders
                    
                    
                    105
                    
                    
                    115Capital
                        leases
                    
                    
                    15
                    
                    
                    28Accounts
                        payable and accrued liabilities
                    
                    
                    303
                    
                    
                    230Convertible
                        debentures
                    
                    
                    1
                    
                    
                    1Total
                        liabilities
                    
                    
                    470
                    
                    
                    416**Net
                        assets**
                    
                    $
                    1,244
                    
                    $
                    356Commitments
                        and contingencies
                    
                    
                    -
                    
                    
                    -**Composition
                        of net assets:**Common
                        stock, $.001 par value, 500,000,000 shares authorized Common
                        stock-Endovasc Series, 146,694,319 and 104,432,179 shares
                        outstanding at
                        June 30, 2006 and June 30, 2005 respectively
                    
                    $
                    147
                    
                    $
                    104Common
                        stock - NDC Series, 14,158,593 shares issued and
                        outstanding
                    
                    
                    14
                    
                    
                    14Preferred
                        stock, $.001par value, 20,000,000 shares authorized 208 shares
                        of Series A
                        8% cumulative convertible preferred stock issued and
                        outstanding
                    
                    
                    -
                    
                    
                    -Additional
                        paid-in capital
                    
                    
                    27,700
                    
                    
                    26,630Accumulated
                        deficit:Accumulated
                        net opearting loss
                    
                    
                    (27,054
                    )
                    
                    (26,329
                    )Unrealized
                        appreciation (depreciation) on investments
                    
                    
                    437
                    
                    
                    (63
                    )**Net
                        assets**
                    
                    $
                    1,244
                    
                    $
                    356**Net
                        assets value per share**
                    
                    $
                    0.0085
                    
                    $
                    0.0034
 
 The
        accompanying notes are an integral
 part
        of
        these financial statements
  27
  **Endovasc,
                    Inc.****Statements
                    of Operations****(In
                    thousands, except share data)****Prior
                    to becoming a BDC****Year
                    Ended June 30, 2006**
                
                **Nine
                    Months Ended June 30, 2005**
                
                **Three
                    Months Ended September 30, 2004**
                
                **Year
                    Ended June 30, 2004**Income:Management
                    fee
                
                $
                197
                
                $
                81
                
                $
                -
                
                $
                71Other
                    Income
                
                
                252
                
                
                9
                
                
                -
                
                
                1Total
                    income
                
                
                449
                
                
                90
                
                
                -
                
                
                72Operating
                    expensesGeneral
                    and administrative
                
                
                1,168
                
                
                737
                
                
                501
                
                
                3,115Research
                    and development
                
                
                -
                
                
                -
                
                
                86
                
                
                1,647Interest
                    expense
                
                
                6
                
                
                4
                
                
                7
                
                
                17Total
                    operating expenses
                
                
                1,174
                
                
                741
                
                
                594
                
                
                4,779Operating
                    loss before investment
                
                
                (725
                )
                
                (651
                )
                
                (594
                )
                
                (4,707
                )Unrealized
                    appreciation/(depreciation) of portfolio investments
                
                
                500
                
                
                (228
                )
                
                -
                
                
                -(225
                )
                
                (879
                )
                
                (594
                )
                
                (4,707
                )Loss
                    attributed to minority interest
                
                
                -
                
                
                -
                
                
                -
                
                
                28Loss
                    before cumulative effect of accounting change
                
                
                (225
                )
                
                (879
                )
                
                (594
                )
                
                (4,679
                )Cumulative
                    effect of conversion to business development company, net of
                    income tax
                    effect
                
                
                -
                
                
                674
                
                
                -
                
                
                -Net
                    loss
                
                $
                (225
                )
                $
                (205
                )
                $
                (594
                )
                $
                (4,679
                )Net
                    loss available to common stockholders
                
                $
                (225
                )
                $
                (205
                )
                $
                (594
                )
                $
                (4,679
                )Weighted
                    average shares outstanding
                
                
                120,767,861
                
                
                99,893,211
                
                
                71,697,112
                
                
                76,721,885Basic
                    and diluted loss per common share before cumulative effect of
                    accounting
                    change
                
                $
                0.00
                
                $
                (0.01
                )
                $
                (0.01
                )
                $
                (0.06
                )Cumulative
                    effect of conversion to business development company
                
                
                0.00
                
                
                0.01
                
                
                -
                
                
                -Basic
                    and diluted net loss per common share
                
                $
                0.00
                
                $
                (0.00
                )
                $
                (0.01
                )
                $
                (0.06
                )
 
 The
        accompanying notes are an integral
 part
        of
        these financial statements
  28
 
 **Endovasc,
        Inc.**
 **Statement
        of Cash Flows**
 
 **(In
        thousands)**
 
 Prior
                  to becoming a Business Development CompanyCash
                  flows from operating activities:
              
              Year
                  ended
                June
                  30, 2006
              
              Nine
                  months ended
                June
                  30, 2005
              
              Three
                  months ended
                September
                  30, 2004
              
              Year
                  ended
                June
                  30, 2004Net
                  loss
              
              $
              (225
              )
              $
              (205
              )
              $
              (594
              )
              $
              (4,679
              )Adjustments
                  to reconcile net loss to net cash used in operating activities:Common
                  stock, preferred stock and warrants issued as compensation for
                  services,
                  financing and settlements
              
              
              93
              
              
              105
              
              
              313
              
              
              2,098Depreciation
                  and amortization
              
              
              17
              
              
              14
              
              
              16
              
              
              77Other
                  income
              
              
              (30
              )
              
              -
              
              
              -
              
              
              -Unrealized
                  appreciation/(depreciation) on investments
              
              
              (500
              )
              
              228
              
              
              -
              
              
              -Cumulative
                  effect of accounting change
              
              
              -
              
              
              (674
              )
              
              -
              
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              76Subscription
                  receivable
              
              
              (25
              )
              
              -
              
              
              -
              
              
              -Other
                  assets/ prepaid expenses
              
              
              (21
              )
              
              -
              
              
              62
              
              
              15Accounts
                  payable and accrued liabilities
              
              
              73
              
              
              206
              
              
              74
              
              
              373Deferred
                  liabilities
              
              
              -
              
              
              (49
              )
              
              (4
              )
              
              53Net
                  cash used in operating activities
              
              
              (618
              )
              
              (375
              )
              
              (133
              )
              
              (1,987
              )Cash
                  flows from investing activities:Capital
                  expenditures
              
              
              (9
              )
              
              -
              
              
              -
              
              
              (1
              )Investment
                   in subsidiaries
              
              
              (470
              )
              
              (276
              )
              
              -Net
                  cash used in investing activities
              
              
              (479
              )
              
              (276
              )
              
              -
              
              
              (1
              )Cash
                  flows from financing activities:Proceeds
                  from sale of common stock
              
              
              1,020
              
              
              999
              
              
              -
              
              
              1,223Proceeds
                  from sale of stock warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              529Issuance
                  of long-term debt and notes payable
              
              
              39
              
              
              7
              
              
              5
              
              
              398Repayment
                  of long-term debt and notes payable
              
              
              (35
              )
              
              (17
              )
              
              (5
              )
              
              (416
              )Payments
                  of obligations under capital leases
              
              
              (13
              )
              
              (25
              )
              
              (5
              )
              
              (47
              )Proceeds
                  from advances from stockholders
              
              
              -
              
              
              20
              
              
              77
              
              
              495Repayments
                  of notes to stockholders
              
              
              (10
              )
              
              (217
              )
              
              (55
              )
              
              (198
              )Net
                  cash provided by financing activities
              
              
              1,001
              
              
              767
              
              
              17
              
              
              1,984Net
                  (decrease)/increase in cash and cash equivalents
              
              
              (96
              )
              
              116
              
              
              (116
              )
              
              (4
              )Cash
                  and cash equivalents, beginning of year
              
              
              116
              
              
              -
              
              
              116
              
              
              120Cash
                  and cash equivalents, end of year
              
              $
              20
              
              $
              116
              
              $
              -
              
              $
              116
 
 The
        accompanying notes are an integral
 part
        of
        these financial statements
  29
 
 **Endovasc,
        Inc.**
 **Statements
        of Changes in Net Assets**
 **(in
        thousands)**
 
 Prior
                  to becoming a BDCYear
                  Ended
                June
                  30, 2006
              
              Nine
                  months ended
                June
                  30, 2005
              
              Three
                  months ended September 30, 2004
              
              Year
                  Ended
                June
                  30, 2004Changes
                  in net assets from operations:Net
                  (loss)/earning from operations
              
              $
              (725
              )
              $
              23
              
              $
              (594
              )
              $
              (4,679
              )Changes
                  in unrealized appreciation/(depreciation) on investment
              
              
              500
              
              
              (228
              )
              
              -Net
                  increase/(decrease) in net assets from operations
              
              
              (225
              )
              
              (205
              )
              
              (594
              )
              
              (4,679
              )Capital
                  stock transaction:Issuance
                  of common stock for cash
              
              
              1,020
              
              
              999
              
              
              -
              
              
              1,223Issuance
                  of common stock for services
              
              
              -
              
              
              137
              
              
              234
              
              
              1,620Issuance
                  of common stock for lawsuit settlement
              
              
              -
              
              
              -
              
              
              33
              
              
              125Conversion
                  of liabilities to common stock
              
              
              -
              
              
              -
              
              
              43
              
              
              163Conversion
                  of note payable to common stock
              
              
              -
              
              
              -
              
              
              -
              
              
              687Issuance
                  of common stock for exercise of warrants and options
              
              
              -
              
              
              -
              
              
              -
              
              
              559Grant
                  of stock option
              
              
              93
              
              
              -
              
              
              
              
              
              353Net
                  increase/in net assets from common stock transactions
              
              
              1,113
              
              
              1,136
              
              
              310
              
              
              4,730Net
                  increase/(decrease) in net assets
              
              
              888
              
              
              931
              
              
              (284
              )
              
              51Net
                  assets, beginning of period
              
              
              356
              
              
              (575
              )
              
              (291
              )
              
              (342
              )Net
                  assets, end of period
              
              $
              1,244
              
              $
              356
              
              $
              (575
              )
              $
              (291
              )
 
 The
        accompanying notes are an integral
 part
        of
        these financial statements
  30
 
 **Endovasc,
        Inc.**
 **Schedule
        of Investments**
 **(In
        thousands)**
 
 **Portfolio
                  Companies**
              
              **Industry**
              
              **Title
                  of Security Held by Company**
              
              **Percentage
                  of Class Held**
              
              **Cost**
              
              **June
                  30, 2006 Fair Value****Investments
                  in equity securities:**Liprostin,
                  Inc
              
              
              Biopharmaceutical
              
              
              Common
                  Stock
              
              
              100
              %
              $
              773
              
              $
              600Angiogenix,
                  Ltd Inc
              
              
              Biopharmaceutical
              
              
              Common
                  Stock
              
              
              100
              %
              
              34
              
              
              -Nutraceutical
                  Development Corp
              
              
              Biopharmaceutical
              
              
              Common
                  Stock
              
              
              100
              %
              
              89
              
              
              1,000**Investments
                  in joint ventures:**Endovasc-TissueGen
                  Research Sponsors, L.L.C
              
              
              Biopharmaceutical
              
              
              Equity/Debt
              
              
              49.90
              %
              
              55
              
              
              3Endovasc-TissueGen-Blumberg
                  Research Sponsors, L.L.C
              
              
              Biopharmaceutical
              
              
              Equity/Debt
              
              
              39.90
              %
              
              217
              
              
              2$
              1,168
              
              $
              1,605
 
 The
        accompanying notes are an integral
 part
        of
        these financial statements
  31
 **Endovasc,
          Inc.**
 **Notes
          the Financial Statements**
 **(Amounts
          are in thousands, except per share data)**
 **1.**
              **Organization
                  and Summary of Significant Accounting
                  Policies**
 
 Endovasc,
        Inc. (the “Company”) is incorporated under the laws of the State of Nevada. In
        October 2004 the Company filed its election with the Securities and Exchange
        Commission (SEC) (Form N-54A) to adopt Business Development Company (“BDC”)
        status under the Investment Company Act of 1940 (“1940 Act”). A BDC is a
        specialized type of investment company under the 1940 Act. A BDC may primarily
        be engaged in the business of furnishing capital and managerial expertise
        to
        companies that do not have ready access to capital through conventional
        financial channels; such companies are termed “eligible portfolio companies”.
        The Company, as a BDC, may invest in other securities; however, such investments
        may not exceed 30% of the Company’s total asset value at the time of such
        investment. The accompanying financial statements reflect the accounts of
        Endovasc, Inc., and the related results of its operations. In accordance
        with
        Article 6 of the Regulation S-X under the Securities Act of 1933 and Securities
        Exchange Act of 1934, the Company does not consolidate portfolio company
        investments in which the Company has a controlling interest.
 
 The
        consolidated financial statements for the periods prior to the Company’s filing
        of its BDC election in October 2004 include the accounts of the Company,
        its
        subsidiaries and its joint venture investments in which it exercises control.
        All inter-company accounts and transactions during this period were eliminated
        in consolidation. Subsequent to the conversion to a BDC, the Company is no
        longer in the development stage.
 
 Accounting
        principles used in the preparation of the financial statements beginning
        October
        2004 are different than those of prior periods and, therefore, the financial
        position and results of operations of these periods are not directly comparable.
        The primary differences in accounting principles relate to the carrying value
        of
        investments.
 
 The
        cumulative effect adjustment for the period ended June 30, 2005 reflects
        the
        effects of conversion to a BDC as follows:
 
 **Cumulative
                  Effect of (BDC) Conversion**Effect
                  of recording investments at fair value
              
              $
              426Adjustment
                  for previously consolidated net liabilities
              
              
              248$
              674
 
 ***Portfolio
        Investments***
 
 The
        Company currently has investments in five portfolio companies as
        follows:
 
 Liprostin,
        Inc.
 
 The
        Company has invested in the wholly-owned portfolio company Liprostin, Inc.
        which
        is engaged in the FDA process of obtaining FDA approval of LiprostinTM for the
        treatment of intermittent claudication. The active component Prostaglandin
        E-1(PGE-1) is encapsulated in a unique lipid membrane to protect PGE-1 from
        degradation in the blood stream.
  32
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  Angiogenix
        Limited, Inc.
 
 The
        Company has invested in the wholly-owned unconsolidated subsidiary Angiogenix
        Limited, Inc (“Angiogenix”). Angiogenix had an exclusive licensing agreement
        (the "Stanford License Agreement") with the Board of Trustees of the Leland
        Stanford University (the “University”) relating to US Patent Application
        60,146,233 (issued as US Patent No. 6,417,205 B1 on July 9, 2002) relating
        to
        the administration of Nicotine or Nicotine Receptor Agonist (NRA) to induce
        the
        growth of new blood vessels ("angiogenesis"). During the year ended June
        30,
        2005, the Company cancelled the Stanford License Agreement with the
        University.
 
 Nutraceutical
        Development Corporation.
 
 The
        Company has invested in the wholly-owned portfolio company Nutraceutical
        Development Corporation (NDC). NDC was formed to develop certain technologies
        for use in dietary products designed to enhance health and provide beneficial
        biological effects (“nutraceuticals”). NDC is currently receiving royalties for
        the license of its proprietary muscle mass technology.
 
 Endovasc-TissueGen
        Research Sponsors, L.C.C.
 
 The
        Company has a 49.9% investment in a joint venture named Endovasc-TissueGen
        Research Sponsors, L.L.C. (the “Partnership”). The purpose of the Partnership is
        to develop a bioresorbable drug-eluting cardiovascular stent for the advanced
        treatment of coronary artery disease.
 
 Endovasc-TissueGen-Blumberg
        Research Sponsors, L.C.C
 
 The
        Company has a 39.9% investment in a joint venture named
        Endovasc-TissueGen-Blumberg Research Sponsors, L.L.C. (the “Joint Venture”). The
        purpose of the Joint Venture is to develop biodegradable stents for ureteral
        and
        prostate applications.
 
 ***Significant
        Estimates***
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosures of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        While
        it is believed that such estimates are reasonable, actual results could differ
        from those estimates.
 
 As
        a BDC,
        the Company’s investments are in private companies with no publicly available
        market price. BDCs are required to carry investments at fair value. Generally,
        the fair value of a private security will initially be based primarily on
        its
        original cost to the Company. Management and the Company’s board of directors
        must evaluate the actual and expected future operations of the portfolio
        companies, monitor market conditions and evaluate any new financings or other
        significant events that the portfolio companies may sustain in order to estimate
        a fair value for the investments in these companies at least quarterly. If
        the
        Company’s estimates of the future differ from actual events in the future, for
        any reason, the Company may fail to record an unrecognized gain or loss or
        may
        record it later or earlier than it would with a perfect forecast of the future.
        Because these investments are restricted and illiquid, even if the Company
        correctly estimates a fair value for an investment today, that investment
        could
        lose some or all of its value in the near future without the Company realizing
        any benefit from its investments or recognizing any cash proceeds from the
        sale
        of these investments.
  33
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  If,
        in
        the future, the Company determines that a loss has occurred in any of its
        investments, that loss will be reflected as a reduction in the value of its
        investments on the Company’s balance sheet and the reduced values will
        negatively impact earnings and be reflected as a loss on the statements of
        operations.
 
 ***Investments***
 
 The
        Company’s investments potentially subject the Company to various levels of risk
        associated with economic changes, interest rate fluctuations, political events,
        war and terrorism, and operating conditions beyond the control of the Company.
        Consequently, management’s judgment as to the level of losses that currently
        exist or may develop in the future, if any, involves the consideration of
        current and anticipated conditions and their potential effects on the Company’s
        investments. Due to the level of risk associated with investment securities
        and
        the level of uncertainty related to changes in the value of investment
        securities, it is at least reasonably possible that changes in risks in the
        near
        term could materially impact the value of the amounts reflected in the
        accompanying financial statements. Investments are carried at fair value
        as
        determined in good faith by or under the direction of the board of directors
        (the “Board”) of the Company based on information, including an independent
        valuation, and using valuation methodologies considered appropriate and reliable
        by the Board. Generally, the fair value of a private security will initially
        be
        based primarily on its original cost to the Company. Cost will be the primary
        factor used to determine fair value on an ongoing basis until significant
        developments or other factors affecting the investment (such as results of
        the
        portfolio company’s operations, changes in general market conditions, subsequent
        financings, independent valuations or the availability of market quotations)
        provide a basis for value other than cost. For investments in which the Company
        earns an interest for services rendered, the Board estimates the fair value
        of
        the services as the initial basis for estimating fair value of the securities
        received. The Board believes that the  methods
        used to value the investments reflected in the accompanying financial statements
        have been valued appropriately and that the values reflected herein have
        been
        calculated in accordance with generally accepted valuation methods which
        result
        in valuations in the Company’s financial statements being recorded in accordance
        with generally accepted accounting principles in the United States. However,
        losses may occur, which may be material to the financial condition of the
        Company and proceeds, if any, from the disposition of securities could differ
        significantly from the values reflected herein. In particular, early stage
        and
        seed round investments in private companies, which is the focus of the Company,
        are typically in illiquid restricted securities with no current market and
        therefore no market prices or comparables are available upon which to base
        estimates. These factors, among others, make determination of fair value
        more
        difficult and subject to significant errors in judgment by the Company’s
        Board.
 
 ***Stock-Based
        Compensation***
 
 Until
        June 30, 2005, the Company accounted for employee stock options using the
        intrinsic value method in accordance with Accounting Principles Board Opinion
        ("APB") No. 25, Accounting for Stock Issued to Employees, and had adopted
        the
        disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based
        Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
        Compensation-Transition and Disclosure which requires pro-forma disclosure
        of
        compensation expense associated with stock options under the fair value method.
        Under the intrinsic value method, the Company only recorded stock-based
        compensation resulting from options granted at below fair market value.
        Effective July 1, 2005, the Company adopted SFAS No. 123R, "Share Based
        Payment", which requires that they measure the cost of employee services
        received in exchange for an award of equity instruments based on the grant-date
        fair value of the award, and recognize that cost over the vesting
        period.
  34
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  ***Loss
        per Share***
 
 Basic
        and
        diluted loss per share is computed on the basis of the weighted average number
        of shares of common stock outstanding during each period. Common equivalent
        shares from common stock options and warrants and Series A preferred stock
        are
        excluded from the computation (See Note 9) as their effect would dilute the
        loss
        per share for all periods presented.
 
 ***Concentrations
        Of Credit Risk***
 
 Financial
        instruments which potentially subject the Company to concentrations of credit
        risk consist principally of investments and cash. The Company places its
        cash
        with high credit quality financial institutions. At times in the future,
        such
        amounts may exceed FDIC limits.
 
 ***Revenue
        Recognition***
 
 As
        a BDC,
        the Company’s revenue will be recognized primarily based on security
        transactions and related income. Security transactions are accounted for
        on a
        trade date basis. Net realized gains or losses on sales of securities are
        determined on the specific identification method. Interest income and expenses
        are recognized on an accrual basis. Dividend income is recorded on cumulative
        preferred equity securities on an accrual basis to the extent that such amounts
        are expected to be collected and, on common equity securities, on the record
        date for private companies or on the ex-dividend date for publicly traded
        companies. The Company assesses the collectibility of dividends and interest
        income receivables in connection with its determination of the fair value
        of the
        related security. To the extent that there are adverse future developments,
        previously recognized dividend and interest income may not be realized. When
        fees are paid to the Company by portfolio companies in their stock, in
        accordance with generally accepted accounting principles in United States
        of
        America, the Company generally recognizes fee income to the extent of par
        value
        in the case of a new company or fair value in the case of an existing company,
        as determined by the Company’s board of directors. Management fees paid to the
        Company by its portfolio companies are recognized as income when received.
        Fees
        paid in shares of the stock of portfolio companies are both restricted and
        illiquid thus the Company may be unable to convert these shares of stock
        to cash
        in the future. Increases or decreases in the fair value of investments above
        or
        below accounting cost basis are not included in investment income but are
        included in the Statement of Operations as unrealized gains or losses until
        such
        time as the investment is liquidated or sold.
 
 Other
        income in 2006 includes $225 of reimbursement of certain research and
        development costs incurred by the Company on behalf of NDC prior to conversion
        to BDC.
 
 ***Cash
        and Cash Equivalents***
 
 The
        Company considers all highly liquid short-term investments with an original
        maturity of three months or less when purchased to be cash
        equivalents.
 
 The
        Company maintains cash deposits in banks which may occasionally exceed the
        amount of federal deposit insurance available. Management periodically assesses
        the financial condition of the institutions and believes that any possible
        deposit loss is minimal.
  35
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  ***Property
        and Equipment***
 
 Property
        and equipment are recorded at cost. Depreciation is provided on the
        straight-line method over the estimated useful lives of the assets, which
        range
        from five to seven years. Expenditures for major renewals and betterments
        that
        extend the original estimated economic useful lives of the applicable assets
        are
        capitalized. Expenditures for normal repairs and maintenance are charged
        to
        expense as incurred. The cost and related accumulated depreciation of assets
        sold or otherwise disposed of are removed from the accounts, and any gain
        or
        loss is included in operations.
 
 ***Debt
        Issuance Costs***
 
 Debt
        issuance costs are deferred and recognized, using the interest method, over
        the
        term of the related debt.
 
 ***Income
        Taxes***
 
 The
        Company uses the liability method of accounting for income taxes. Under this
        method, deferred income taxes are recorded to reflect the tax consequences
        on
        future years of temporary differences between the tax basis of assets and
        liabilities and their financial amounts at year-end. The Company provides
        a
        valuation allowance to reduce deferred tax assets to their net realizable
        value.
        The Company files consolidated income tax returns with its
        subsidiaries.
 
 ***Research
        and Development***
 
 Since
        the
        Company’s election to become a BDC, research and development is performed by its
        portfolio companies.
 
 ***New
        Accounting Pronouncements***
 
 In
        March
        2005, the SEC issued Staff Accounting Bulletin ("SAB") 107 "Share-Based
        Payment." SAB 107 expressing views of the SEC staff regarding the interaction
        between SFAS 123R and certain SEC rules and regulations and provides the
        staff's
        views regarding the valuation of share-based payment arrangements. The Company
        adopted SFAS 123R effective July 1, 2005. See Note 10 for further
        information.
  Through June
        2006, the FASB has issued several new pronouncements including FASB issued
        FIN
        48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB
        Statement 109," which clarifies the accounting for uncertainty in income
        taxes
        recognized in an enterprise's financial statements in accordance with FAS
        109,
        "Accounting for Income Taxes." Adoption of these pronouncements is not expected
        to have any significant impact on the financial condition or results of
        operations.
  36
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **2.**
              **Going
                  Concern Considerations**
 
 Since
        its
        inception as a development stage enterprise, and subsequent to its conversion
        to
        a BDC, the Company has not generated significant revenue and has been dependent
        on debt and equity raised from individual investors to sustain its operations.
        The Company has conserved cash by issuing its common stock and preferred
        stock
        to satisfy obligations, to compensate individuals and vendors and to settle
        disputes that have arisen. However, during the periods ended June 30, 2006,
        June
        30, 2005 and September 30, 2004 and for the year ended June 30, 2004, the
        Company incurred net losses (in thousands) of $(225), $(205), $(594) and
        $(4,679), respectively, and negative cash flows from operations of $(618),
        $(374), $(133) and $(1,987), respectively. These factors, along with a $(384)
        negative working capital position at June 30, 2006, raise substantial doubt
        about the Company’s ability to continue as a going concern.
 
 Management
        plans to take specific steps to address its difficult financial situation
        as
        follows:
 
 ·
              In
                  the near term the Company plans additional private sales of debt
                  and
                  common stock to sophisticated investors to fund its current
                  operations.
 
 ·
              In
                  the long-term, the Company believes that cash flows from commercialization
                  of its products will provide the resources for continued
                  operations.
 
 There
        can
        be no assurance that the Company’s planned private sales of debt and equity
        securities or its planned public registration of common stock will be successful
        or that the Company will have the ability to commercialize its products and
        ultimately attain profitability. The Company’s long-term viability as a going
        concern is dependent upon four key factors, as follows:
 
 ·
              The
                  Company’s ability to obtain adequate sources of debt or equity funding
                  to
                  meet current commitments and fund the commercialization of its
                  products.
 
 ·
              The
                  ability of the Company to obtain positive test results of its products
                  in
                  clinical trials.
 
 ·
              The
                  ability of the Company to ultimately achieve adequate profitability
                  and
                  cash flows to sustain its operations.
 
 ·
              The
                  Company’s cash requirement for 2007 is expected to be approximately
                  $1,500,000, or $375,000 per quarter. The Company does not presently
                  believe that the Company will have positive cash flow from operations
                  in
                  2007.
 
 The
        accompanying financial statements do not include any adjustments that might
        result from the outcome of this uncertainty .
  37
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **3.**
              **Property
                  and Equipment**
 
 Property
        and equipment at June 30, 2006 and 2006 consists of the following:
 
 **2006**
              
              **2005**Office
                  furniture, fixtures and equipment
              
              $
              138
              
              
              129Less:
                  accumulated depreciation
              
              
              (109
              )
              
              (92
              )$
              29
              
              $
              37
 
 Included
        in property and equipment at June 30, 2006 and 2005 is equipment under capital
        leases at gross amount of $9 and $59, and accumulated depreciation of $1
        and
        $26, respectively.
 
 **4.**
              **Notes
                  Payable**
 
 Notes
        payable at June 30, 2006 and 2005 consist of the following (in
        thousands):
 
 **2006**
              
              **2005**Note
                  payable to a financial institution, bearing interest at prime (8%
                  and 6%
                  at June 30, 2006 and 2005, repectively) with interest due monthly
                  and
                  principal due on demand. Note is uncollateralized but is guaranteed
                  by a
                  stockholder of the Company.
              
              $
              18
              
              $
              35Note
                  payable to a financial institution, bearing interest at rates ranging
                  from
                  16% to 18%, due in 9 monthly installments of $4 and
                  uncollateralized.
              
              
              28
              
              
              746
              
              
              42Notes
                  payable to a stockholder, non-interest bearing, due on demand and
                  uncollateralized.
              
              
              105
              
              
              115Total
                  notes payable
              
              
              151
              
              
              157Less
                  current maturities
              
              
              (151
              )
              
              (157
              )$
              -
              
              $
              -
  38
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **5.**
              **Accrued
                  Liabilities**
 
 Accrued
        liabilities at June 30, 2006 and 2005 consist of the following:
 
 **2006**
              
              **2005**Accrued
                  payroll and related taxes
              
              $
              4
              
              $
              16Interest
                  payable
              
              
              -
              
              
              9$
              4
              
              $
              25
 
 **6.**
              **Convertible
                  Debentures**
 
 During
        the year ended June 30, 2002, the Company issued $400 in convertible debentures.
        The debentures bear interest at 8% per year payable quarterly in arrears.
        The
        debentures mature in September 2004 and are convertible, at the option of
        the
        holder, to shares of the Company’s common stock at a conversion price per share
        equal to the lower of (i) 85% of the average of the three lowest closing
        prices
        for the common stock for the thirty days prior to the closing date of the
        debentures; or (ii) 70% of the average of the three lowest closing prices
        for
        the common stock for the thirty days prior to the conversion date. Accordingly,
        the actual weighted average interest rate on these debentures, including
        the
        effect of the cost of the beneficial conversion feature is approximately
        23%. $1
        of the convertible debenture is outstanding as of June 30, 2006 and
        2005.
 
 **7.**
              **Income
                  Taxes******
 
 The
        provision for income taxes includes these components:
  **2006**
                
                **2005**Taxes
                    currently payable
                
                $
                -
                
                $
                -Deferred
                    income taxes
                
                
                -
                
                
                -Income
                    tax expense (benefit)
                
                $
                -
                
                $
                -
 
 A
        reconciliation of income tax expense (benefit) at the statutory rate to the
        Company's actual income tax expense is shown below:
 **2006**
                
                **2005**
                
                **2004**Computed
                    at the statutory rate (34%)
                
                $
                (77
                )
                $
                (70
                )
                $
                (1,591
                )Increase
                    (decrease) resulting fromNondeductible
                    expenses
                
                
                32
                
                
                152Changes
                    in the deferred tax asset valuation allowance
                
                
                312
                
                
                143
                
                
                713Adjustment
                    due to conversion to business development company
                
                
                (267
                )
                
                (225
                )
                
                878Actual
                    tax expense (benefit)
                
                $
                -
                
                $
                -
                
                $
                -
  39
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  The
        tax
        effects of temporary differences related to deferred taxes shown on the balance
        sheets were:
 
 **2006**
              
              **2005**Deferred
                  tax assetsNet
                  operating loss carryforwards
              
              $
              5,407
              
              $
              5,013Deferred
                  tax liabilitiesUnrealized
                  gains on portfolio company investments
              
              
              (149
              )
              
              (67
              )Net
                  deferred tax asset before valuation allowance
              
              
              5,258
              
              
              4,946Valuation
                  allowanceBeginning
                  balance
              
              
              (4,946
              )
              
              (4,803
              )Increase
                  during the period
              
              
              (312
              )
              
              (143
              )Ending
                  balance
              
              
              (5,258
              )
              
              (4,946
              )Net
                  deferred tax asset (liability)
              
              $
              -
              
              $
              -
 
 The
        non-deductible expenses relate primarily to the issuance of common stock
        for
        services using different valuation methods for financial and tax reporting
        purposes. The Company also has unused operating loss carryforwards of
        approximately $16,500 expiring in various years through 2025. The Company
        files
        a consolidated income tax return with its controlled companies.
 
 **8.**
              **Capital
                  Structure Disclosure**
 
 ***Common
        Stock***
 
 During
        the year ended June 30, 2005, the board of directors approved the purchase
        by
        the Company of up to 50% of the outstanding shares of its common stock. No
        purchase of common stock of the Company was made by the Company during the
        year
        ended June 30, 2006. Endovasc Series NDC common stocks’ rights and distributions
        would be based on the performance of Nutraceutical Development
        Corporation.
 
 ***Preferred
        Stock***
 
 The
        Company’s articles of incorporation authorize the issuance of up to 20,000,000
        shares of preferred stock with characteristics determined by the Company’s board
        of directors. The Series A convertible preferred stock can be converted to
        common stock at any time at the option of the holder. The conversion rate
        is the
        stated value per share plus any accrued and unpaid dividends divided by 85%
        of
        the average of the three lowest closing bid prices of the Company’s common stock
        for the thirty trading days immediately preceding May 9, 2000, or 70% of
        the
        average of the three lowest closing bid prices for the thirty days immediately
        preceding the conversion date of the respective preferred stock. During the
        years ended June 30, 2006 and 2005, no preferred shares of preferred stock
        were
        converted to common stock. During the year ended June 30, 2004, 1,227,594
        of
        preferred stock were converted to 55,518 shares of common stock.
  40
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **9.**
              **Loss
                  Per Common Share**
 
 The
        following table sets forth the computation of basic and diluted net loss
        per
        common share:
  Prior
                    tobecominga
                    BDCJune
                    30
                  2006
                
                June
                    30
                  2005
                
                Sep
                    30
                  2004
                
                June
                    30
                  2004Basic
                    and diluted loss per common share:Net
                    loss before extraordinary iten
                
                $
                (225
                )
                $
                (205
                )
                $
                (594
                )
                $
                (4,679
                )Preferred
                    stock dividends
                
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    loss available for common stockholders
                
                $
                (225
                )
                $
                (205
                )
                $
                (594
                )
                $
                (4,679
                )
 If
        the
        Company had reported net income for the periods ended June 30, 2006 or June
        30,
        2005, or for the period ended September 30, 2004 or for year ended June 30,
        2004, diluted net income per share would not have included any additional
        common
        equivalent shares.
 
 **10.**
              **Stock
                  Options and Warrants**
 
 The
        Company periodically issues incentive stock options and warrants to key
        employees, officers, directors and outside consultants to provide additional
        incentives to promote the success of the Company’s business and to enhance the
        ability to attract and retain the services of qualified persons.
 
 In
        May
        2002, the Company adopted the 2002 Directors, Officers and Consultants Stock
        Option, Stock Warrant and Stock Award Plan (the “2002 Plan”). The purpose of the
        Plan was to maintain the ability of the Company to attract and retain highly
        qualified and experienced directors, employees and consultants and to give
        such
        directors, employees and consultants a continued proprietary interest in
        the
        success of the Company. This Plan was terminated on October 5,
        2006.
 
 In
        May
        2003, the Company adopted the 2003 Stock Compensation Plan (the “2003 Plan”) in
        order to attract and retain highly qualified and experienced directors,
        employees and consultants and to give such directors, employees and consultants
        a continued proprietary interest in the success of the Company. Under the
        Plan,
        the Company may award up to 10,000,000 shares of its common stock or options
        to
        purchase its common stock to the directors, employees and consultants of
        the
        Company. All terms of the common stock, stock options or warrants granted
        under
        the Plan were at the discretion of the board of directors but will expire
        not
        more than ten years from the date of grant. This Plan was terminated on October
        5, 2006.
 
 On
        October 21, 2005, the Company's board of directors adopted the 2005 Executive
        Compensation Plan (the "2005 Plan"). Amendment No. 1 to the Plan was adopted
        by
        the board of directors on November 14, 2005. On December 16, 2005, the
        stockholders approved the 2005 Plan and the grant of stock options. The maximum
        number of shares currently reserved for issuance is equal to 15% of the number
        of shares of Common Stock issued and outstanding at any time. The Company
        is not
        presently able to compensate its officers and employees with cash because
        of the
        lack of available funds from operations. The Plan was adopted to provide
        a means
        by which the Company can attract and retain officers and employees and give
        such
        officers and employees an interest in the success of the Company. Under the
        Plan, the board of directors (or a committee designated by the board of
        directors) may grant options to purchase shares of the Company’s common stock to
        officers and employees. Directors are not eligible to receive options under
        the
        2005 Plan.
  41
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  Total
        stock compensation expense recognized by the Company during the year ended
        June
        30, 2006 was $93. The fair value of each option grant was estimated on the
        grant
        date using the Black-Scholes option-Pricing Model with the following
        assumptions:
 
 (1)
        The
        option life was determined using the simplified method for estimating expected
        option life, which qualify as "plain-vanilla" options.
 
 (2)
        The
        stock volatility for each grant is determined based on the review of the
        experience of the weighted average of historical monthly price changes of
        the
        Company's common stock over the most recent ten years, which is the contractual
        term of the option awards.
 
 (3)
        The
        risk-free interest rate for periods equal to the expected term of the stock
        option is based on the U.S. Treasury yield curve in effect at the time of
        the
        grant.
 
 **Fiscal
                  year ended****June
                  30, 2006**Expected
                  option term (1)
              10
                  yearsExpected
                  volatility factor (2)
              100.0%Risk-free
                  interest rate (3)
              5.0%Expected
                  annual dividend yield
              0.0%
 
 The
        Company has issued stock options to employees and non-employee consultants
        as
        follows:
  **Number
                    of Shares****Employee**
                
                **Non-****Employee**
                
                **Total**
                
                **Exercise****able**
                
                **Exercise****Price**
                
                **Weighted
                    Average Exercise****Price**Options
                    outstanding at June 30, 2003
                
                
                10,516
                
                
                29,250
                
                
                39,766
                
                
                39,766
                
                
                $13.33-$33.33
                
                $
                14.00Options
                    expired
                
                
                (10,516
                )
                
                (29,250
                )
                
                (39,766
                )
                
                (39,766
                )
                
                $13.33-$33.00
                
                $
                14.00Options
                    issued
                
                
                -
                
                
                1,850,758
                
                
                1,850,758
                
                
                1,850,758
                
                
                $0.17-$0.29
                
                $
                0.22Options
                    exercised at
                
                
                -
                
                
                (1,850,758
                )
                
                (1,850,758
                )
                
                (1,850,758
                )
                
                $0.17-$0.29
                
                $
                0.22June
                    30, 2004
                
                
                -
                
                
                -
                
                
                -
                
                
                -Options
                    expired
                
                
                (
                )
                
                (
                )
                
                (
                )
                
                (
                )Options
                    issued
                
                
                -
                
                
                -
                
                
                -
                
                
                -Options
                    exercised
                
                
                -
                
                
                (
                )
                
                (
                )
                
                (
                )Options
                    outstanding at June 30, 2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -Options
                    expired
                
                
                (
                )
                
                (
                )
                
                (
                )
                
                (
                )Options
                    issued
                
                
                3,380,366
                
                
                -
                
                
                3,380,366
                
                
                3,380,366
                
                
                $0.03
                
                $
                0.03Options
                    exercised
                
                
                -
                
                
                (
                )
                
                (
                )
                
                (
                )Options
                    outstanding at June 30, 2006
                
                
                3,380,366
                
                
                -
                
                
                3,380,366
                
                
                3,380,366
                
                
                $0.03
                
                $
                0.03
  42
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  Prior
        to
        fiscal 2006, no compensation expense was recognized for stock options. Had
        compensation cost for stock option plans been determined consistent with
        SFAS
        No. 123(R), net income and earnings per share for the fiscal 2005 and 2004
        would
        have been reduced to the following pro forma amounts:
 
 **2005**
              
              **2004**Net
                  loss available to common stockholders as reported
              
              $
              (799
              )
              $
              (4,679
              )Proforma
                  net loss available to common stockholders
              
              $
              (799
              )
              $
              (4,679
              )Proforma
                  basic and dilutive loss per share
              
              $
              (0.00
              )
              $
              (0.06
              )
 
 The
        fair
        value for these options was estimated at the date of grant using a Black-Scholes
        option pricing model with the following weighted-average assumptions for
        2005
        and 2004.
 
 **2005**
              
              **2004**Risk-free
                  interest rate
              4.25%
              
              3.75%Dividend
                  yield
              -
              
              -Volatility
              190%
              
              190%Weighted
                  average and expected life
              2
                  months
              
              2
                  months
 
 Company
        issued stock warrants to certain companies in payment of stock offering costs
        and for consulting services, some of which were subsequently exercised, as
        follows:
 
 **Weighted****Average****Number
                  of**
              
              
              
              **Exercise**
              
              **Exercise****Shares**
              
              **Exercisable**
              
              **Price**
              
              **Price**Warrants
                  outstanding atJune
                  30, 2003
              
              
              390,288
              
              
              390,288
              
              $
              1.25-$3.33
              
              $
              1.30Warrants
                  issued
              
              
              1,000,000
              
              
              1,000,000
              
              $
              0.15-$0.20
              
              $
              0.17Warrants
                  exercised
              
              
              (1,000,000
              )
              
              (1,000,000
              )
              $
              0.15-$0.20
              
              $
              0.17Warrants
                  expired
              
              
              (51,036
              )
              
              (51,036
              )
              $
              1.25
              
              $
              1.25June
                  30, 2004
              
              
              339,252
              
              
              339,252
              
              $
              1.25-$3.33
              
              $
              1.30Warrants
                  issued
              
              
              -
              
              
              -Warrants
                  exercised
              
              
              -
              
              
              -Warrants
                  expired
              
              
              (7,500
              )
              
              (7,500
              )
              $
              1.25
              
              $
              1.25Warrants
                  outstanding atJune
                  30, 2005
              
              
              331,752
              
              
              331,752
              
              $
              1.25-$3.33
              
              $
              1.30Warrants
                  issued
              
              
              -
              
              
              -Warrants
                  exercised
              
              
              -
              
              
              -Warrants
                  expired
              
              
              (328,752
              )
              
              (328,752
              )
              $
              1.25
              
              $
              1.25Warrants
                  outstanding atJune
                  30, 2006
              
              
              3,000
              
              
              3,000
              
              $
              1.25-$3.33
              
              $
              2.00
 
 All
        warrants outstanding at June 30, 2006 expire in August 2006.
  43
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **11.**
              **Commitments
                  and Contingencies**
 
 ***Legal
        Proceedings***
 
 On
        August
        28, 2003, Cause No. 03-08-0681-CV, "The Dow Chemical Company vs. Endovasc
        LTD.,
        Inc.," was filed against the Company in the District Court of Montgomery
        County,
        Texas, 359th Judicial District. Dow Chemical Company ("Dow") filed a complaint
        against the Company for breach of contract and damages. The amount of damages
        sought is approximately $230. This case is being vigorously defended against
        the
        allegations made by Dow. The Company has filed a counter-claim against Dow
        for
        breach of contract and damages. This case has been tried and a judgment entered
        by the district court against the Company. This case in appeal and a prediction
        cannot be made as to the final outcome of the complaint and damages allegedly
        owed to Dow or the company. This case is being adjudicated and the verdict
        is
        pending. No amounts have been accrued for this contingency.
 
 On
        November 7, 2003, Cause No. 03-11-08112-CV, "Greg Creekmore vs. Endovasc,
        Inc.
        and Endovasc, LTD., Inc.," was filed against the Company in the District
        Court
        of Montgomery County, Texas, 284th Judicial District. Greg Creekmore
        ("Creekmore") filed a complaint against the Company for breach of a consulting
        contract between the parties. Creekmore seeks payment of $114,000 plus interest,
        one million shares of the Company common stock and reimbursement of court
        costs
        including reasonable attorneys' fees allowed by law. This case is being
        vigorously defended against the allegations made by Creekmore. A prediction
        cannot be made as to the final outcome of the complaint and damages allegedly
        owed to Creekmore. However, management believes it will prevail and accordingly,
        no amounts have been accrued for this contingency.
 
 On
        January 13, 2004, Case No. H-03-5226, "Lorenz M. Hofmann, Ph.D. and LMH
        Associates, Inc. vs. Endovasc, LTD., Inc., Endovasc, Inc., David P. Summers,
        Ph.D. and M. Dwight Cantrell" was filed against the Company in the United
        States
        District Court for the Southern District of Texas Houston Division. Lorenz
        M.
        Hofmann, Ph.D. and LMH Associates, Inc. ("LMH") filed a complaint against
        the
        Company for breach of contract and damages. The Company filed a counter-claim
        against LMH for breach of contract and damages. During the year ended June
        30.
        2006, The Company was rendered an adverse decision in the case. The plaintiff's
        award, including attorney’ fees, total $128, an increase of $32 previously
        reported, and are reflected as a payable in the accompanying financial
        statements.
 
 In
        November 2004, the Company filed a lawsuit against the former President and
        CEO,
        David P. Summers in the 284th District Court of Montgomery County, Texas.
        The
        suit filed on Company’s behalf alleges a civil conspiracy, breach of fiduciary
        duty and breach of contract and rescission by David P. Summers and seeks
        restitution and damages in excess of $3,500.
 
 The
        Company is subject to certain other legal proceedings and claims which arose
        in
        the ordinary course of our business. In the opinion of management, the amount
        of
        ultimate liability with respect to these actions will not materially affect
        our
        financial position, results of operations or cash flows.
  44
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  ***Leases***
 
 The
        Company has entered into a five year lease agreement for office space which
        is
        accounted for as an operating lease. Lease payments of $4 are due monthly
        until
        May 2008. Rent expense for the periods ended June 30, 2006, June 30, 2005,
        September 30, 2004 and the year ended June 30, 2004 were approximately $48,
        $36,
        $12 and $144, respectively. In addition, the Company leases equipment under
        capital leases which expire at various dates through 2008. Future minimum
        lease
        payments having initial or noncancellable lease terms in excess of one year
        are
        as follows:
 
 **Operating
                  Lease**
              
              **Capital
                  Leases**2007
              
              $
              48
              
              $
              102008
              
              
              16
              
              
              42009
              
              
              
              
              
              2Total
                  payments
              
              $
              64
              
              $
              16Less
                  amount representing interest
              
              
              
              
              
              (1
              )Present
                  value of minimum lease payments
              
              
              
              
              $
              15
 
 **12.**
              **Disclosures
                  About Fair Value of Financial
                  Instruments**
 
 Statement
        of Financial Accounting Standards No. 107, *Disclosures about Fair Value of Financial Instruments,* requires
        disclosure of fair value information about financial instruments, whether
        or not
        recognized in the statement of financial condition. In cases where quoted
        market
        prices are not available, fair values are based on estimates using present
        value
        or other valuation techniques. Those techniques are significantly affected
        by
        the assumptions used, including the discount rate and estimates of future
        cash
        flows. In that regard, the derived fair value estimates cannot be substantiated
        by comparison to independent markets and, in many cases, could not be realized
        in immediate settlement of the instruments. Statement No. 107 excludes certain
        financial instruments and all nonfinancial instruments from its disclosure
        requirements. The following methods were used to estimate the fair value
        of
        financial instruments.
 
 Fair
        value is the estimated amount at which financial assets or liabilities could
        be
        exchanged in a current transaction between willing parties, other than in
        a
        forced or liquidation sale. Because no market exists for certain of these
        financial instruments and because management does not intend to sell these
        financial instruments, the Company does not know whether the fair values
        represent values at which the respective financial instruments could be sold
        individually or in the aggregate.
  45
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
 
 ***Investment
        in Portfolio Companies***
 
 No
        quoted
        market prices are available for these investments. The fair value is estimated
        by the management based on alternative valuation methods including discounting
        future cash flows.
 
 **Notes
        Payables**
 
 It
        was
        not practical to estimate the fair value of long-term notes payables to related
        parties. The terms of the amounts reflected in the balance sheets at June
        30,
        2006 and 2005 are more fully discussed in Note 4.
  Fair
        value is estimated based on the borrowing rates currently available to the
        Company for bank loans with similar terms and maturities. Estimated fair
        values
        of notes payable at June 30, 2006and 2005 are not materially different from
        cost
        or book-value.
 
 **13.**
              **Non-Cash
                  Investing and Financing
                  Activities**
 
 During
        the years ended June 30, 2006, 2005, and 2004 the Company engaged in certain
        non-cash investing and financing activities as follows (in
        thousands):
  **2006**
                
                **2005**
                
                **2004**Common
                    stock issued in settlement of lawsuit and related liabilities
                    ($33 for the
                    period ended September 30, 2004)
                
                $
                -
                
                $
                33
                
                $
                -Common
                    stock issued for payment of accounts payable and accrued liabilities
                    ($277
                    for the period ended September 30, 2004 and $137 for the period
                    ended June
                    30, 2005)
                
                $
                -
                
                $
                414
                
                $
                163Conversion
                    of note payable to shareholder to common stock
                
                $
                -
                
                $
                -
                
                $
                687Issuance
                    of common stock for receivable
                
                $
                -
                
                $
                -
                
                $
                30
  46
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **14.**
              **Related
                  Party Transactions**
 
 During
        the year ended June 30, 2004, the current Chief Executive Officer and the
        Chief
        Operations Officer of the Company advanced the Company $55 and $50,
        respectively. During the year ended June 30, 2005, the $55 advance from the
        current Chief Executive Officer was repaid. During the year ended June 30,
        2005,
        the Chief Operations Officer of the Company advanced the Company and additional
        $84, and was repaid $19. During the year ended June 30, 2006, the Company
        repaid
        $10. The remaining balance of the note of $105 as of June 30, 2006 is due
        on
        demand, non-interest bearing and are not collateralized.
 
 **15.**
              **Subsequent
                  Events**
 
 In
        August
        of 2006, the Company’s Chief Operations Officer and member of the board, M.
        Dwight Cantrell, passed away. In August of 2006 Barbara J. Richardson resigned
        her position on the Board of Directors, effective immediately. In October
        of
        2006, Clarice Motter, Chief Financial Officer, resigned her position, effective
        October 9, 2006.
  47
  **Endovasc,
        Inc.**
 **Notes
        the Financial Statements**
 **(Amounts
        are in thousands, except per share data)**
  **16.**
              **Unaudited
                  Quarterly Financial
                  Information**
 
 **Quarters****First**
              
              **Second**
              
              
              
              **Third**
              
              **Fourth****2006**Income
              
              $
              38
              
              $
              127
              
              
              
              
              $
              250
              
              $
              34Operating
                  loss
              
              
              (191
              )
              
              (199
              )
              
              *
              
              
              (234
              )
              
              (101
              )Unrealized
                  appreciation (depreciation) of portfolio investments
              
              
              31
              
              
              (39
              )
              
              
              
              
              559
              
              
              (51
              )Net
                  income (loss)
              
              
              (160
              )
              
              (238
              )
              
              *
              
              
              325
              
              
              (152
              )Net
                  loss per common share:Basic
              
              
              0.00
              
              
              0.00
              
              
              
              
              
              0.00
              
              
              0.00Diluted
              
              
              0.00
              
              
              0.00
              
              
              
              
              
              0.00
              
              
              0.00**2005**Income
              
              $
              -
              
              $
              39
              
              
              
              
              $
              21
              
              $
              30Operating
                  income (loss)
              
              
              (594
              )
              
              (457
              )
              
              
              
              
              (276
              )
              
              82Unrealized
                  appreciation (depreciation) of portfolio investments
              
              
              -
              
              
              -
              
              
              
              
              
              100
              
              
              (328
              )Loss
                  before cumulative effect of accounting change
              
              
              (594
              )
              
              (457
              )
              
              
              
              
              (276
              )
              
              (246
              )Cumulative
                  effect of conversion to business development company
              
              
              -
              
              
              674
              
              
              
              
              
              -
              
              
              -Net
                  Income
              
              
              (594
              )
              
              217
              
              
              
              
              
              (176
              )
              
              (246
              )Net
                  loss per common share:Basic
              
              
              0.01
              
              
              0.00
              
              
              
              
              
              0.00
              
              
              0.00Diluted
              
              
              0.00
              
              
              0.00
              
              
              
              
              
              0.00
              
              
              0.00
 
 _______________
 
 *
        In
        third quarter Form 10-Q, the operating loss and net income previously reported
        as $(133) and 426, respectively. The difference of $101 is due to certain
        investor relations expenses were reported as deduction in additional paid
        in
        capital and now reported as operating expenses. The effect on basic and diluted
        earnings per share is negligible.
   48