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

                                   FORM 10-KSB

                                   (Mark One)

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

                    For the fiscal year ended March 31, 2006

     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

          For the transition period from _____________ to ____________

             COMMISSION FILE NUMBER _______________________________

                              KYTO BIOPHARMA, INC.
           (Name of small business issuer as specified in its charter)

              FLORIDA                                           65-1086538
   (State or other jurisdiction of                            (IRS Employer
    Incorporation or organization)                         Identification No.)

   B1-114 BELMONT, TORONTO, ONTARIO, CANADA                      M5R 1P8
   (Address of principal executive offices)                     (Zip Code)

                    Issuer's telephone number: (416) 955-0349

           Securities registered under Section 12(b) of the Act: NONE

              Securities registered under Section 12(g) of the Act:
                 COMMON STOCK, $.0001 PAR VALUE ("COMMON STOCK")

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

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

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

State issuer's revenues for its most recent fiscal year: $0.00

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. NONE AS OF MARCH 31ST, 2006

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 12,080,203 COMMON SHARES - $0.0001
PAR VALUE - AS OF MARCH 31, 2006.

    TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE) YES [X] NO [ ]

<PAGE>

                              KYTO BIOPHARMA, INC.
                                   FORM 10-KSB
                      FOR FISCAL YEAR ENDED MARCH 31, 2006

                                TABLE OF CONTENTS

PART I ....................................................................    3
     ITEM 1.  DESCRIPTION OF BUSINESS .....................................    3
     ITEM 2.  DESCRIPTION OF PROPERTY .....................................    8
     ITEM 3.  LEGAL PROCEEDINGS ...........................................    8
     ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .........    8

PART II ...................................................................    9
     ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ...    9
     ITEM 7.  FINANCIAL STATEMENTS ........................................   13
     ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE .........................   13
     ITEM 8A. CONTROLS AND PROCEDURES .....................................   13

PART III ..................................................................   14
     ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
              PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT ..   14
     ITEM 10. EXECUTIVE COMPENSATION ......................................   15
     ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT ..................................................   17
     ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..............   18
     ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K ............................   18
     ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ......................   19

   SIGNATURES .............................................................   20

   CONSOLIDATED FINANCIAL STATEMENTS ......................................  F-1

                                       2
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

(A) BUSINESS DEVELOPMENT

Kyto Biopharma, Inc. was originally formed under the name of B. Twelve, Inc., a
Florida corporation, filed with the Department of State on March 5, 1999. Also,
on March 5, 1999, the Company acquired B Twelve Limited as a wholly-owned
subsidiary Canadian corporation.

On April 27, 1999, the Company filed an amendment to its Articles of
Incorporation, increasing its authorized capital stock from 1,000 shares of
common stock with a Par Value of $1.00 per share, to 25,000,000 shares of common
stock with a Par Value of $1.00 per share and 1,000,000 shares of preferred
stock, also with a Par Value of $1.00 per share.

In August, 2001, the Company filed an amendment to its Articles of
Incorporation, changing the Par Value of its common stock from $1.00 per share
to $0.0001 Par Value per share.

On August 14, 2002, the Company filed an amendment to its Articles of
Incorporation, changing the name to KYTO BIOPHARMA, INC.

The Company filed a Uniform Business Report (UBR) with the Department of State,
State of Florida, for the year 2006 and paid all required fees. Its status is
active.

(B) BUSINESS OF ISSUER

(1) Principal Products and Markets

Kyto Biopharma, Inc. (Kyto) was formed to acquire a patent portfolio and the
rights to early-stage compounds which have potential use as therapeutic agents
for the treatment of cancer and diseases of the immune system. The Company has
subsequently built itself into a development stage biopharmaceutical company
that develops receptor-mediated technologies to control the uptake of vitamin
B12 by non-controlled proliferative cells. Vitamin B12 regulates one of two
major cellular pathways for the production of folates, the cell's primary source
of carbon and the progenitor for the synthesis of DNA.

Kyto is currently engaged in the development of a portfolio of potential
targeted biologic treatments based on:

i) the delivery of cytotoxic drugs to cancer cells using the vitamin B12 as a
Trojan Horse,

ii) the therapeutic effect of vitamin B12 depletion by receptor modulators, and

iii) the use of monoclonal antibodies to block the vitamin B12 uptake by cancer
cells.

Kyto's portfolio consists of molecules at the research and development stage
which may ultimately prove useful in the treatment of certain types of cancer
and inflammatory diseases. Kyto believes that there are several human
therapeutics applications for its drug candidates. Specifically, a number of
properties of the Company's drug delivery and vitamin B12 depletion technologies
suggest a potential role for its drug candidates in the therapy of solid tumors
such as colorectal and breast cancer in addition to treatment of leukemias. The
following table summarizes the Company's research and product development
programs:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
TECHNOLOGIES            DRUG CANDIDATES       TARGET INDICATION   STATUS
----------------------------------------------------------------------------------
<S>                     <C>                   <C>                 <C>
   Bioconjugates        Paclitaxel            Oncology            Development
   (Drug Delivery)      Doxorubicin           Oncology            Proof of concept
                        Carboplatinum         Oncology
----------------------------------------------------------------------------------
Monoclonal Antibodies   Transport protein     Oncology            Development
                        Receptor              Oncology            Development
----------------------------------------------------------------------------------
   Growth Blockers      Receptor modulators   Oncology            Proof of concept
----------------------------------------------------------------------------------
</TABLE>

                                        3

<PAGE>

Kyto is currently using vitamin B12 as a vehicle to deliver cytotoxic drugs
selectively to tumors. The process can be achieved by taking advantage of a
proprietary technology and expertise based on known biological transport
mechanisms. The technology, known as bioconjugation, creates a molecular complex
or "bioconjugate" through the non-covalent binding of a transportable state of
the drug with the vitamin B12. The technology is designed to protect drugs from
degradation whilst allowing absorption through specific binding to a receptor. A
number of different types of bioconjugates were produced, including those with
marketed chemotherapeutic agents such as: paclitaxel (Taxol(R)), doxorubicin,
and carboplatinum.

Kyto has developed a core drug delivery technology that permits to generate:

1) Vitamin B12 bioconjugates that are used as a vehicle to deliver cytotoxic
drugs selectively to tumors via a receptor-mediated pathway.

2) Growth blockers that are used to deplete the same tumors of the vitamin B12,
an essential co-factor for the biosynthesis of methionine and nucleic acids.

Kyto's bioconjugate and growth blocker technologies are applicable to a very
broad range of therapeutic areas. Each specific technology has the potential to
target a large number of therapeutic targets for creation of drug candidates.
New drug candidates can be synthesis from:

(a)   Existing drugs;

(b)   Generic drugs;

(c)   Molecules in development, and;

(d)   Molecules with attractive biological activity and potency that were never
      developed because of too short half-life of activity for commercial
      utility or inadequate safety profile.

The Company believes that its core drug delivery technology exhibits a number of
properties that would make it attractive to potential partners and be
commercially viable:

(a)   Core component (vitamin B12) and linker are safe and non toxic;

(b)   Core technology is protected by issued patents;

(c)   Versatility of the technology;

(d)   Diverse drug payloads;

(e)   Permit rapid drug creation;

(f)   New bioconjugate constructs are patentable;

(g)   Availability and low cost of raw material, and;

(h)   Easy to scale-up and technology transfer.

As mentioned above, Kyto has created a class of agents known as receptor
modulators, with the selectivity of the natural ligand (vitamin B12) for its
receptor, that cause a reduction in the number of receptors through alterations
in receptor movement on the surface of and within the cell. Treatment with such
drugs eventually results in cells devoid of receptors triggering the death of
the cancer cells, biological response known as apoptosis.

The second aspect of Kyto's business is the development of human antibodies. The
Company is developing monoclonal antibodies as vitamin B12 receptor control
agents for certain pharmaceutical applications including treatment of cancer and
autoimmune diseases. Many of the product development issues for antibodies have
been addressed over the last ten years including immunogenicity and scale-up
manufacturing for therapeutic applications resulting in the approval or pending
approval of a number of products in the United States (U.S.) and Europe.

                                        4

<PAGE>

(2) Competitive Business Conditions and Adverse Factors

The Company has identified the following companies as competitors and/or
comparables to the activities of Kyto:

Endocyte, Inc. is a private U.S. based biotechnology company focused on vitamin
based drug targeting and delivery systems. Similarly to Kyto, Endocyte's mission
is to use vitamins as "trojan horses" to target and deliver diagnostic and
therapeutic agents into cells for treatment of diseases. Endocyte's lead project
is the use of the vitamin folate to target and deliver anticancer agents.

Protarga, Inc. is a private U.S. based pharmaceutical company that has developed
a technology involving the chemical attachment of natural fatty acids to
therapeutic agents that are accumulated by the cells. The Company's first
product candidate, Taxoprexin(R) Injection for cancer chemotherapy, is currently
being evaluated in eight Phase II clinical studies in the U.S. and Europe.

Manticore Pharmaceuticals Inc. is a private U.S. based biotechnology company
that has developed a method to target the delivery of cytotoxic anticancer drugs
to tumor cells by using vitamin B12 as delivery vehicle similarly to Kyto's
approach, except that their bioconjugates are synthesized by attaching cytotoxic
drugs to the cobalt atom of cobalamin. The bioconjugates need to be activated by
ultrasound to cleave the C-Co bond, thereby allowing release of the drug. They
also developed fluorescent cobalamin conjugates ("CobalaFluors") that may be
useful as diagnostic imaging agents in breast cancer surgery and other
diagnostic procedures where it is desirable to visualize cancer cells.

Access Pharmaceuticals, Inc. is a public U.S. based pharmaceutical company that
has proprietary patents or rights to seven drug delivery technology platforms:

synthetic polymer targeted delivery, vitamin mediated targeted delivery
(including oral), bioerodible hydrogel technology, nanoparticles, Residerm
topical delivery, carbohydrate targeting technology and agents for the
prevention and treatment of viral diseases, including HIV.

Other companies that are involved in the development and/or production, improved
method of delivery or analogs of paclitaxel include but are not limited to
Bristol-Myers Squibb Company, Cell Therapeutics Inc., Ivax Corporation, Bioxell
Pharma Inc., Supratek Pharma Inc., Enzon Inc., Napro Biotherapeutics Inc., F.H.
Faulding & Co. Limited, Phytogen Inc., Aphios Corporation, Taxolog Inc.,
Cytoclonal Pharmaceutics Inc., Protarga Inc., and Mylan Laboratories Inc.

(3) Research and Development Programs

Kyto believes that there are several applications for its drug candidates. A
number of properties of our drug delivery and vitamin B12 depletion technologies
suggest a potential role for its drug candidates in the therapy of solid tumors
such as colorectal and breast cancer in addition to treatment of leukemias.
Specifically, Kyto's research and product development programs include the
following projects:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Technologies /            Clinical
Drug Candidates           Market     Status             Collaborators
----------------------------------------------------------------------------------------
<S>                       <C>        <C>                <C>
Drug Delivery
Bioconjugates
----------------------------------------------------------------------------------------
   Paclitaxel             Oncology   Development        New York University
   Doxorubicin            Oncology   Proof of concept
   Carboplatinum          Oncology   Proof of concept
----------------------------------------------------------------------------------------
Vitamin B12 Depletion
Monoclonal Antibodies
----------------------------------------------------------------------------------------
   Transport protein      Oncology   Development        Medarex Inc.
                                                        The Research Foundation of State
   Receptor               Oncology   Development        University of New York

----------------------------------------------------------------------------------------
Receptor Modulators
----------------------------------------------------------------------------------------
   Growth blockers        Oncology   Proof of concept   --
----------------------------------------------------------------------------------------
</TABLE>

In December 2004, the Company signed an Extension Modification of Research
Collaboration Agreement with the Research Foundation of State University of New
York (RFSUNY) regarding the research and development of the use of monoclonal
antibodies to block the vitamin B12 uptake by cancer cells for funding
consideration of $35,000 to be appropriated for the initial 6 months of the
conduct of the research plan from January 1, 2005 through June 30, 2005. The
Company shall amend patent No. 5,688,504 to legally establish joint ownership
with RFSUNY. The $35,000 was paid in January 2005.

(4) Distribution of Products

Because of capital constraints, the Company has decided to focus its financial
resources for i) the development of its monoclonal antibodies and ii) the
pre-clinical development of its first lead drug candidate based on paclitaxel
conjugated to vitamin B12 for out-licensing.

As the first drug candidate paclitaxel conjugated to vitamin B12 enters the
formal preclinical program the Company plans to outsource specific study
components to a Chemical Contract Manufacturer (CCM) and an integrated Contract
Research Organizations (CRO) to permit the conduct of concurrent studies in
order to meet time-limiting project milestones.

During the preclinical development of a new drug candidate, a diverse number of
studies relating chemistry, formulation, animal pharmacology, toxicology,
manufacturing and clinical supplies are required to meet the regulatory
requirements of an Investigational New Drug (IND) submission. Kyto is also
reviewing the possibility to have a CRO as a strategic partner as opposed to a
service provider. Due to the limited internal project management staff, Kyto may
prefer to outsource the entire pre-clinical program to a vertically integrated
CRO capable of handling studies from discovery screening to IND filing.

The Company has no specific marketing plans beyond those mentioned above. Future
marketing will depend upon the amount of capital realized by the Company.

(5) Patents

Kyto's patent strategy has been to develop an "umbrella" of patents protecting
its core technology and their therapeutic uses and the underlying technologies
used to create them. The Company has filed a number of patent applications in
the United States, the PCT Member Countries, Japan, and in most other
jurisdictions to protect its proprietary rights in the development of its
technologies and products. To date, 16 patents have been issued. Kyto is
co-assignee on the issued and pending patents along with different universities.


                                        5

<PAGE>
The following is a list of the issued patents:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
 PATENT NO.                                  TITLE                                        ISSUED
--------------------------------------------------------------------------------------------------
<S>           <C>                                                                       <C>
 NZ252,559    Anti-receptor agents to the vitamin B12/transcobalamin II receptor         14/02/97
--------------------------------------------------------------------------------------------------
US5,688,504   Anti-receptor and growth blocking agents to the vitamin                    18/11/97
              B12/transcobalamin II receptor and binding sites
--------------------------------------------------------------------------------------------------
US5,739,287   Biotinylated cobalamins                                                    14/04/98
--------------------------------------------------------------------------------------------------
US5,840,712   Water soluble vitamin B12 receptor modulating agents and methods           24/11/98
              relating thereto
--------------------------------------------------------------------------------------------------
US5,840,880   Vitamin B12 receptor modulating agents                                     24/11/98
--------------------------------------------------------------------------------------------------
US5,869,465   Methods for receptor modulation and uses thereto                           09/02/99
--------------------------------------------------------------------------------------------------
US6,083,926   Water soluble vitamin B12 receptor modulating agents and methods           04/07/00
              relating thereto
--------------------------------------------------------------------------------------------------
CA2,135,277   Anti-receptor and growth blocking agents to the vitamin                    24/04/01
              B12/transcobalamin II receptor and use in preventing cellular uptake of
              vitamin B12
--------------------------------------------------------------------------------------------------
 NZ323,127    Vitamin B12 receptor modulating agents and methods related and methods     12/07/01
              related thereto
--------------------------------------------------------------------------------------------------
 KR297,310    Anti-receptor and growth blocking agents to the vitamin                    21/05/01
              B12/transcobalamin II receptor and use in preventing cellular uptake of
              vitamin B12
--------------------------------------------------------------------------------------------------
 CH0754189    Receptor modulating agents and methods relating thereto                   09/10/2002
--------------------------------------------------------------------------------------------------
 DE0754189    Receptor modulating agents and methods relating thereto                   09/10/2002
--------------------------------------------------------------------------------------------------
 EP0754189    Receptor modulating agents and methods relating thereto                   09/10/2002
--------------------------------------------------------------------------------------------------
 FR0754189    Receptor modulating agents and methods relating thereto                   09/10/2002
--------------------------------------------------------------------------------------------------
 GB0754189    Receptor modulating agents and methods relating thereto                   09/10/2002
--------------------------------------------------------------------------------------------------
 KR361,075    Receptor modulating agents and methods relating thereto                   01/11/2002
--------------------------------------------------------------------------------------------------
</TABLE>

(6) Regulatory Environment

Kyto's pre-clinical and clinical trials, as well as the manufacturing and
marketing of its potential products, are subject to extensive regulation for
safety and efficacy by various governmental authorities around the world. The
United States Food and Drug Administration ("FDA") plays a key role since it
regulates drug approval for the world's largest market.

The process of studying drugs intended for use in humans usually begins with
pre-clinical studies involving only animals. These pre-clinical studies are
followed by studies that involve humans on a scale to assess safety and which
are then expanded to a larger group to assess safety and efficacy. These various
studies are usually broken into four phases with multiple studies generally
conducted within each phase. Throughout these pre-clinical and clinical studies
drug concentrations are measured in biological fluid samples as part of the
assessment of drug safety and efficacy.

PRECLINICAL STUDIES

Preclinical drug studies involve the evaluation of drug testing in animals in a
preliminary effort to determine toxicity, correct doses, side effects and
efficacy in animals to provide evidence of the safety of the drug prior to its
administration to humans. Bioanalytical research involves the use of instruments
that can detect and measure trace quantities of drugs, metabolites, genetic
material and other products in biological samples.

CLINICAL STUDIES

Upon successful completion of pre-clinical studies the drug undergoes a series
of evaluations in humans including healthy volunteers. The pharmaceutical
Company sponsoring the new drug must file an Investigational New Drug
application (IND), which includes results from the pre-clinical evaluations and

                                        6

<PAGE>

provides comprehensive descriptions of the proposed human clinical studies.
There are four generally accepted Phases in clinical studies, but the Phases may
overlap:

            Phase I   These studies usually take one year to complete and are
                      conducted on a small number of healthy human subjects to
                      evaluate the drug's pharmacological actions, toxicity,
                      metabolism and pharmacokinetics.

            Phase II  These studies take an average of two years to complete and
                      are carried out on a relatively small number of patients
                      suffering from the targeted condition or disease, to
                      determine the drug's effectiveness and dose response
                      relationship. This phase provides additional safety data
                      and the first substantiative evidence of the drug's
                      efficacy in humans.

            Phase III These studies take an average of two years to three years
                      to complete and involve tests on a much larger population
                      of patients suffering from the targeted condition or
                      disease, typically several hundred to several thousand
                      patients. Such studies measure the drug's efficacy and its
                      side effects on a large scale and typically involve
                      numerous hospitals and clinics.

            Phase IV  This final phase involves monitoring the long-term
                      benefits and risks of a drug after it has entered the
                      market. These studies also involve examining the efficacy
                      and safety of different dosage forms or focusing on
                      specific sub-populations of patients for evaluation of the
                      drug's efficacy and safety. Such studies can be carried
                      out on thousands to tens of thousands of patients.

Upon completion of Phase III clinical studies, the pharmaceutical company
sponsoring the new drug assembles all the preclinical and clinical data in the
form of a New Drug Application (NDA), for submission to the FDA, or a New Drug
Submission (NDS) for the TPP. The review process generally takes 12 to 18 years
before the drug receives approval for marketing.

In Canada, these activities are regulated by the Food and Drug Act. The approval
procedure is substantially similar to that of the FDA, but the rules and
regulations promulgated thereunder are enforced by the Therapeutic Products and
Programs ("TPP") of Health Canada. Outside the United States and Canada, and
whether or not the FDA or TPP approval has been obtained, approval of a product
by local regulatory authorities must be obtained prior to the commencement of
commercial sales of the product in a given country. The requirements governing
the conduct of clinical trials and product approvals vary widely from country to
country, and the time required for approval may be longer or shorter than that
required for FDA or TPP approval. Although there are some procedures for unified
regulatory filings for certain European countries, in general, each country at
this time has its own procedures and requirements.

Drug manufacturing is also regulated, thus companies are required to ensure
compliance with GMPs quality standards that require the control of production
activities, raw-material procurement, complaint management, product recalls,
labeling and promotional material. In addition to these standards, which are
common to all drugs, manufacturers of biopharmaceutical products must
demonstrate that their products are homogeneous from one lot to the next,
failing which the applicable regulatory authority may prohibit the sale of a lot
and possibly require that a product be recalled.

(7) Research and Development Costs

Others conduct research and development on behalf of the Company under
contractual agreements and such costs are charged to expense as incurred.
Research and development expense was $41,590, $44,614, and $1,103,518 for the
years ended March 31, 2006, 2005, and for the period from March 5, 1999
(inception) to March 31, 2006, respectively.

(8) Employees

The Company has no employees, full-time or part-time. The President of Kyto
Biopharma, Inc. is acting as consultant to the Company and does not receive
compensation.

                                        7

<PAGE>

(C) REPORTS TO SECURITY HOLDERS

The Bylaws of Kyto Biopharma, Inc. are silent regarding an annual report to
shareholders. Kyto Biopharma, Inc. is a reporting company and files reports with
the U.S. Securities and Exchange Commission (SEC). The Company is required to
file quarterly reports (Form 10-QSB) and an annual report (Form 10-KSB) with the
SEC. The annual report includes an audited financial statement.

Any materials that the Company filed with the Securities and Exchange Commission
may be read and copied at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Further, you may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SECD-0330. The Company is an electronic filer and the SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission. That
site is HTTP://WWW.SEC.GOV.

ITEM 2. DESCRIPTION OF PROPERTY

The Company occupies office space on a month-to-month basis and therefore has no
leasehold interest. The Company pays a fee to Credifinance Capital Corp., a
related party, at the rate of $3,333.33 (US) monthly, which includes rent of
$1,666.6 and certain administrative services, such as bookkeeping, copying and
printing, courier services, and telephone.

The Company owns no investments.

ITEM 3. LEGAL PROCEEDINGS

There is no litigation of any type whatsoever pending or threatened by or
against the Company, its officers and directors.

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

There were no shareholders meetings during the period covered by this report.

                                        8

<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following discussions should be read in conjunction with the financial
statements and related notes which are included in this Form 10-KSB for the year
ending March 31, 2006. Statements made below which are not historical facts are
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties including, but not limited to, general economic conditions and
our ability to develop our products. For further information regarding our
business, competition and risk factors, refer to this Company's Form 10-KSB
filed with the U.S. Securities Exchange Commission.

(A) MARKET INFORMATION

Our common stock has traded on the OTC Bulletin Board(R), or OTCBB, since August
04, 2005. The Company's common stock is quoted on the Electronic Bulletin Board
of the OTC market, under the trading symbol KBPH. The following table sets
forth, for the calendar quarters indicated, the high and low closing prices for
our common stock as reported by OTCBB for fiscal years ended March 31, 2006 and
2005. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not represent actual transactions. The market
for the common stock has been sporadic and there have been long periods during
which there were few, if any, transactions in the common stock and no reported
quotations. Accordingly, reliance should not be placed on the quotes listed
below, as the trades and depth of the market may be limited, and therefore, such
quotes may not be a true indication of the current market value of the Company's
common stock.

                                                    Common Stock
                                              -------------------------
                                                   High             Low
                                                   ----             ---
        Fiscal Year Ended March 31, 2006
        ---------------------------------------------------------------
        First quarter                         $    1.10       $    0.35
        Second quarter                             0.51            0.35
        Third quarter                              0.75            0.25
        Fourth quarter                             0.75            0.75

        Fiscal Year Ended March 31, 2005
        ---------------------------------------------------------------
        First quarter                         $      --       $      --
        Second quarter                             2.00            1.50
        Third quarter                              1.50            1.55
        Fourth quarter                             1.60            1.10

There were 12,080,203 shares of common stock outstanding and 275,000 options to
purchase common stock outstanding as of the end of the fiscal year ended March
31, 2006.

(B) HOLDERS

According to information provided to us by the transfer agent for our shares of
Common Stock, as of March 31, 2006, there were 16 holders of record of the
shares of Common Stock, including depositories. Based upon information we have
received from some of these record owners, we believe there are more than 200
beneficial holders of our shares of Common Stock.

(C) DIVIDENDS

The Company has not paid any dividends to date and has no plans to do so in the
foreseeable future.

(D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS.

None



                                        9

<PAGE>

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

(A) PLAN OF OPERATION

The Company has not been profitable and has had no revenues from operations
since its inception in March 1999. As reflected in the accompanying audited
consolidated financial statements, in 2006 the company had, a net loss of
$3,534,787, cash used in operations of $43,235, a working capital deficiency of
$231,455, a stockholders' deficiency of $231,227, and a deficit accumulated
during development stage of $11,329,010 at March 31, 2006. These factors raise
substantial doubt about its ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company's
ability to further implement its business plan, raise capital, and generate
revenues. The consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.

Research and development expense was $41,590, $44,614, and $1,103,518 for the
years ended March 31, 2006, 2005, and for the period from March 5, 1999
(inception) to March 31, 2005, respectively.

In December 2004, the Company signed an Extension Modification of Research
Collaboration Agreement with the Research Foundation of State University of New
York (RFSUNY) regarding the research and development of the use of monoclonal
antibodies to block the vitamin B12 uptake by cancer cells for funding
consideration of $35,000 to be appropriated for the initial 6 months of the
conduct of the research plan from January 1, 2005 through June 30, 2005. The
Company shall amend patent No. 5,688,504 to legally establish joint ownership
with RFSUNY.

(B) LIQUIDITY AND CAPITAL RESOURCES

The Company is currently a development stage company and its continued existence
is dependent upon the Company's ability to resolve its liquidity problems,
principally by obtaining additional debt financing and/or equity capital. The
Company has yet to generate an internal cash flow, and until the sales of its
product begins, the Company is very dependent upon debt and equity funding. The
Company must successfully complete its research and development resulting in a
saleable product. However, there is no assurance that once the development of
the product is completed and finally gains Federal Drug and Administration
clearance, that the Company will achieve a profitable level of operations.

The Company has, as of the end of its fiscal year (March 31, 2006), $272,561 in
liabilities. The Company estimates that it will require up to $50,000 to meet
operating costs for this fiscal year, excluding research and development costs.
In addition, with the help of its scientific partners, the Company is reviewing
its technology and assessing the best way of pursuing its development.

The report of our Independent Registered Public Accounting Firm on our
consolidated March 31, 2006 financial statements includes an explanatory
paragraph indicating that there is substantial doubt about our ability to
continue as a going concern due to substantial recurring losses from operations,
cash used in operations, stockholders' deficit and significant accumulated
deficit and working capital deficit. Our ability to continue as a going concern
will be determined by our ability to obtain additional funding and maintain
operations. We do not currently have sufficient financial resources to fund our
operations. Therefore, we need additional funds to continue these operations.
Should the financing we require to sustain our working capital needs be
unavailable or prohibitively expensive when we require it, we would be forced to
curtail our business operations.

To meet the projected cash requirements as stated above, the Company intends to
obtain cash loans from one or more of its stockholders. As the date of filing of
this Form 10-KSB with the U.S. Securities and Exchange Commission, the Company
did not receive any commitments of any of its stockholders to provide operating
loan funds for the Company. We are also looking at merger opportunities or to
acquire companies and products to raise capital. We expect to form strategic
alliances for product development and to out-license the commercial rights to
development partners. By forming strategic alliances with third parties, we
believe that our technologies and related products can be more rapidly developed
and successfully introduced into the marketplace.

The Company's plan of operation for the next twelve months is to continue to
focus its efforts on finding new sources of capital and on research activities
and the development of its drug candidates which maximize the utility and
application of its platform technologies. Management expects the Company to
incur additional operating losses over the next several years as research and
development efforts, preclinical and clinical testing activities and
manufacturing scale-up efforts expand. To date, we have not had any material
product sales and do not anticipate receiving any revenue from the sale of
products in the upcoming year. Our sources of working capital have been equity
financings and interest earned on investments.

                                       10

<PAGE>

The Company operates in a rapidly changing environment that involves a number of
factors, some of which are beyond management's control, such as financial market
trends and investors' appetite for new financings. It should also be emphasized
that, should the Company not be successful in completing its own financing
(either by debt or by the issuance of securities from treasury), the Company may
be unable to continue to operate as a going concern.

(C) OFF-BALANCE SHEET ARRANGEMENT

Not applicable.

In addition to the competition, as noted above, the Company faces certain
adverse conditions/and/or risks factors as outlined below:

o        KYTO'S BUSINESS STRATEGY REQUIRES THAT IT ESTABLISH AND MAINTAIN GOOD
         STRATEGIC ALLIANCES. Currently, Kyto is seeking strategic alliances. We
         have limited experience in establishing and maintaining such strategic
         alliances and cannot give any assurance that we will be successful in
         establishing one or more relationships. Our strategy for the research,
         development and commercialization of our potential biopharmaceutical
         products may require us to enter into various arrangements with
         corporate and academic collaborators, licensors, licensees and others,
         in addition to our existing relationships with other parties.
         Specifically, we may seek to joint venture, sublicense or enter other
         marketing arrangements with parties that have an established marketing
         capability or we may choose to pursue the commercialization of such
         products on our own. We may, however, be unable to establish such
         additional collaborative arrangements, license agreements, or marketing
         agreements as we may deem necessary to develop, commercialize and
         market our potential pharmaceutical products on acceptable terms.
         Furthermore, if we maintain and establish arrangements or relationships
         with third parties, our business may depend upon the successful
         performance by these third parties of their responsibilities under
         those arrangements and relationships.

o        KYTO HAS NO EXPERIENCE IN MANUFACTURING, PROCURING PRODUCTS IN
         COMMERCIAL QUANTITIES OR MARKETING, CONDUCTING CLINICAL TRIALS,
         REGULATORY APPROVAL PROCESS AND ONLY LIMITED EXPERIENCE IN NEGOTIATING,
         SETTING-UP OR MAINTAINING RESEARCH COLLABORATION AND THERE IS NO
         ASSURANCE THAT IT WILL SUCCESSFULLY ENGAGE OR CONTINUE TO ENGAGE IN ANY
         OF THESE ACTIVITIES. If we are unable to obtain or retain third party
         manufacturing on commercially acceptable terms, we may not be able to
         commercialize our products as planned. Our potential dependence upon
         third parties for the manufacture of

                                       11

<PAGE>

         our products may adversely affect our ability to generate profits or
         acceptable profit margins and our ability to develop and deliver such
         products on a timely and competitive basis. Kyto may be unable to
         obtain the raw materials used in the production of some of its
         bioconjugates in sufficient quantity to meet demand when and if such
         product is approved. By example, paclitaxel is derived from certain
         varieties of yew trees and is also used in one of the Company's drug
         candidates. To date, Kyto has not entered into an agreement with a
         supplier to provide sufficient quantity or quality of any drugs used in
         the construction of its bioconjugates. Kyto does not have internal
         facilities for the manufacture of any of its products for clinical or
         commercial production.

o        MANY OF KYTO'S DRUG CANDIDATES ARE STILL IN RESEARCH AND PRECLINICAL
         DEVELOPMENT, WHICH MEANS THAT THEY HAVE NOT YET BEEN TESTED ON HUMANS.
         The Company will need to commit significant time and resources to
         develop these and additional product candidates. Kyto is dependent on
         the successful completion of clinical trials and obtaining regulatory
         approval in order to generate revenues. Specifically, its drug
         candidates that appear to be promising at early stages of development
         may not reach the market for a number of reasons. Potential products
         may: i) be found ineffective or cause harmful side effects during
         preclinical testing or clinical trials, ii) fail to receive necessary
         regulatory approvals, iii) be difficult to manufacture on a large
         scale, iv) be uneconomical to produce, v) fail to achieve market
         acceptance, vi) be precluded from commercialization by proprietary
         rights of third parties, or vii) third parties may market superior or
         equivalent drugs.

o        KYTO HAS BASED MANY OF ITS DRUG CANDIDATES ON UNPROVEN NOVEL
         TECHNOLOGIES, AND IT MAY NEVER DEVELOP THEM INTO COMMERCIAL PRODUCTS.
         Our primary focus is on our research and development activities of drug
         candidates covered by proprietary biopharmaceutical patents and patent
         applications. Research and development activities, by their nature,
         preclude definitive statements as to the time required and costs
         involved in reaching certain objectives. Actual research and
         development costs, therefore, could exceed budgeted amounts and
         estimated time frames may require extension. Cost overruns,
         unanticipated regulatory delays or demands, unexpected adverse side
         effects or insufficient therapeutic efficacy will prevent or
         substantially slow our research and development effort and our business
         could ultimately suffer. We anticipate that we will remain principally
         engaged in research and development activities for an indeterminate,
         but substantial, period of time. Furthermore, preclinical results in
         animal studies may not predict outcome in human clinical trials.

o        KYTO MAY NOT BE SUCCESSFUL IN PROTECTING ITS INTELLECTUAL PROPERTY AND
         PROPRIETARY RIGHTS. Our success depends, in part, on our ability to
         obtain U.S. and foreign patent protection for our drug candidates and
         processes, preserve our trade secrets and operate our business without
         infringing the proprietary rights of third parties. Legal standards
         relating to the validity of patents covering pharmaceutical and
         biotechnological inventions and the scope of claims made under such
         patents are still developing and there is no consistent policy
         regarding the breadth of claims allowed in biotechnology patents. The
         patent position of a biotechnology firm is highly uncertain and
         involves complex legal and factual questions. The Company cannot assure
         you that any existing or future patents issued to, or licensed by, us
         will not subsequently be challenged, infringed upon, invalidated or
         circumvented by others. Kyto cannot assure investors that any
         additional patents will issue from any of the patent applications owned
         by, or licensed to, us. Furthermore, any rights that we may have under
         issued patents may not provide us with significant protection against
         competitive products or otherwise be commercially viable.

         In addition, patents may have been granted to third parties or may be
         granted covering products or processes that are necessary or useful to
         the development of our drug candidates. If our drug candidates or
         processes are found to infringe upon the patents or otherwise
         impermissibly utilize the intellectual property of others, our
         development, manufacture and sale of such drug candidates could be
         severely restricted or prohibited. In such event, we may be required to
         obtain licenses from third parties to utilize the patents or
         proprietary rights of others. Kyto cannot assure investors that it will
         be able to obtain such licenses on acceptable terms, if at all. If we
         become involved in litigation regarding our intellectual property
         rights or the intellectual property rights of others, the potential
         cost of such litigation, regardless of the strength of our legal
         position, and the potential damages that we could be required to pay
         could be substantial.

                                       12

<PAGE>

o        OWNERSHIP OF OUR SHARES IS CONCENTRATED, TO SOME EXTENT, IN THE HANDS
         OF A FEW INVESTORS, WHICH COULD LIMIT THE ABILITY OF OUR OTHER
         STOCKHOLDERS TO INFLUENCE THE DIRECTION OF THE COMPANY: Credifinance
         Capital Corp. owned approximately 73.6% of our common stock as of March
         31, 2006. Accordingly, they collectively may have the ability to
         significantly influence or determine the election of all of our
         directors or the outcome of most corporate actions requiring
         stockholder approval. They may exercise this ability in a manner that
         advances their best interests and not necessarily those of our other
         stockholders.

o        OUR SECURITIES ARE QUOTED ON THE OVER-THE-COUNTER BULLETIN BOARD. The
         Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter
         market that provides significantly less liquidity than the NASDAQ Stock
         Market or national or regional exchanges. Securities traded on the
         Over-the-Counter Bulletin Board are usually thinly traded, highly
         volatile, have fewer market makers and are not followed by analysts.
         The Securities and Exchange Commission's order handling rules, which
         apply to NASDAQ-listed securities, do not apply to securities quoted on
         the Over-the-Counter Bulletin Board. Quotes for stocks included on the
         Over-the-Counter Bulletin Board are not listed in newspapers.
         Therefore, prices for securities traded solely on the Over-the-Counter
         Bulletin Board may be difficult to obtain and holders of our securities
         may be unable to resell their securities at or near their original
         acquisition price, or at any price.

o        WE WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND
         WITHOUT IT WE WILL NOT BE ABLE TO CONTINUE OPERATIONS. We do not
         currently have sufficient financial resources to fund our operations.
         Therefore, we need additional funds to continue these operations. The
         ability of the Company to secure sources of funding will depend on a
         number of factors including, the prevailing market price of our common
         stock the results of our research and development programs, the timing
         and results of preclinical and clinical trials, our ability to maintain
         existing and establish new collaborative agreements with other
         companies to provide funding to us, technological advances, and
         activities of competitors and other factors and the extent to which we
         are able to secure working capital from other sources, such as through
         the sale of debt or sale of stock. If sufficient financing is not
         available or if we are unable to license and sell our technologies and
         related products, we will need to secure another source of funding in
         order to satisfy our working capital needs.

         If we do raise additional funds by issuing equity securities, further
         dilution to existing stockholders would result and future investors may
         be granted rights superior to those of our existing stockholders. If
         adequate funds are not are not available to us through additional
         equity offerings, we may be required to delay, reduce the scope of or
         eliminate one or more of our research and development programs or to
         obtain funds by entering into arrangements with collaborative partners
         or others that require us to issue additional equity securities or to
         relinquish rights to certain technologies or drug candidates that we
         would not otherwise issue or relinquish in order to in order to
         continue independent operations. Should the financing we require to
         sustain our working capital needs be unavailable or prohibitively
         expensive when we require it, we would be forced to curtail our
         business operations.

o        THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING
         CONCERN DUE TO SIGNIFICANT RECURRING LOSSES FROM OPERATIONS, CASH USED
         IN OPERATIONS, STOCKHOLDERS' DEFICIT, ACCUMULATED DEFICIT AND WORKING
         CAPITAL DEFICIT ALL OF WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE
         OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING. The report of our
         Independent Registered Public Accounting Firm on our March 31, 2006
         financial statements includes an explanatory paragraph indicating that
         there is substantial doubt about our ability to continue as a going
         concern due to substantial recurring losses from operations, cash used
         in operations, stockholders' deficit and significant accumulated
         deficit and working capital deficit. Our ability to continue as a going
         concern will be determined by our ability to obtain additional funding
         and maintain successful operations. Our financial statements do not
         include any adjustments that might result from the outcome of this
         uncertainty.

ITEM 7. FINANCIAL STATEMENTS

Attached audited consolidated financial statements for KYTO BIOPHARMA, INC. AND
SUBSIDIARY for the fiscal years ended March 31, 2006, 2005, and Cumulative from
March 5, 1999 (Inception) to March 31, 2006 can be found beginning on page F-1.

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

The Company changed accountants during the current period. The accountants were
changed due to the policy of our previous accountant to only work with a client
for Five years under the partner rotation rules and there were no disagreements
with the findings of said accountants.

ITEM 8A. CONTROLS AND PROCEDURES

An evaluation of the Company's disclosure controls and procedures (as defined in
Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the "Act")) was
carried out under the supervision and with the participation of our President
and Chief Executive Officer within the 90-day period preceding the filing date
of this report. Our President and Chief Executive Officer concluded that the
Company's disclosure controls and procedures as currently in effect are
effective in ensuring that the information required to be disclosed by the
Company in the reports it files or submits under the Act is (i) accumulated and
communicated to the Company's management in a timely manner, and (ii) recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms.

There were no significant changes made to our internal control over financial
reporting (as defined in Rule 13 a-15(f) under the Exchange Act) during the
period covered by this report that materially affected or are reasonably likely
to materially affect our internal control over financial reporting.

                                       13

<PAGE>

                                    PART III

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

(A) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS

--------------------------------------------------------------------------------
NAME                        AGE    POSITION
--------------------------------------------------------------------------------
Georges Benarroch           59     President & Chief Executive Officer, Director

Don MacAdam                 59     Director

Jean-Luc Berger, Ph.D.      43     Director

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

The business experience of the persons listed above during the past five years
are as follows:

MR. GEORGES BENARROCH, DIRECTOR.
--------------------------------

Director of the Company since May 5, 2000. Mr Benarroch was elected as President
and Chief Executive Officer effective February 27, 2006. Mr. Benarroch is the
President and Chief Executive Officer of Credifinance Capital Corp. and
Credifinance Securities Limited. Mr. Benarroch is a Director of BMB Munai Inc, a
public company. Mr. Benarroch is a director of Rebank Corp., a public Company.
Mr. Benarroch is also president of Osprey Gold Corp., a public company.

MR. DONALD MACADAM, DIRECTOR.
-----------------------------

Director of the Company since November 17, 1999. Since January 2000, Mr. MacAdam
is a consultant to technology companies. He is currently President and Chief
Executive Officet of MBVax Bioscience, a private Canadian biotechnology company.
From 1997 to 1999, he was President and Chief Executive Officer of Tm Bioscience
Corporation. Prior to Tm Bioscience Corporation, Mr. MacAdam was President of
CRS Robotics Corporation from 1993 to 1996. Both Tm Bioscience Corporation and
CRS Robotics Corporation are public companies.

DR. JEAN-LUC BERGER, PH.D., PRESIDENT & CHIEF EXECUTIVE OFFICER; DIRECTOR.
--------------------------------------------------------------------------

Director of the Company since inception on March 5, 1999, Dr. Berger was
President and Chief Executive Officer of the Company from May 15, 2001 to
February 27, 2006. Co-founder of Kyto, he joined the Company as Chief Operating
Officer in September 2000. Dr Berger resigned as President and Chief Executive
Officer effective February 27, 2006. Prior to joining the Company, Dr. Berger
was a Pharmaceutical/Biotechnology analyst with Credifinance Securities Limited,
a Toronto-based, institutional investment and research firm, since 1996. Dr.
Berger obtained his M. Sc. from Universite de Montreal, his Ph.D. from
Universite LAVAL and completed his post-doctoral studies at McGill University
and has over thirty publications and scientific communications to his credit.

(B) IDENTIFY SIGNIFICANT EMPLOYEES

The Company does not expect to receive a significant contribution from employees
that are not executive officers.

(C) FAMILY RELATIONSHIPS

There are no directors, executive officers or persons nominated or persons
chosen by the Company to become a director or executive officer of the Company
who are directly related to an individual who currently holds the position of
director or executive officer or is nominated to one of the said positions.

                                       14

<PAGE>

(D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

There are no material events that have occurred in the last five years that
would affect the evaluation of the ability or integrity of any director, person
nominated to become a director, executive officer, promoter or control person of
the Company.

(E) AUDIT COMMITTEE

The Company has currently no audit committee. The Board of Directors approved
the financial statements for the previous year.

ITEM 10. EXECUTIVE COMPENSATION

(A) SUMMARY COMPENSATION TABLE

The following table sets forth all annual and long term compensation for
services in all capacities rendered to Kyto by its executive officers and
directors for each of the last four most recently completed fiscal years.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                      Annual Compensation               Long-Term Compensation
                             ----------------------------------   -----------------------------------
                                                                       Awards             Payouts
                                                                  -----------------------------------
                                                                  Securities
                                                                    Under      Restricted
                                                      Other        Options/    Shares or
                                                      Annual         SARs      Restricted    LTIP       All Other
Name and                      Salary       Bonus   Compensation    Granted     Share Units   Payouts   Compensation
Principal Position    Year      ($)         ($)       ($)            (#)          ($)         ($)           ($)
-------------------------------------------------------------------------------------------------------------------
<S>                   <C>    <C>           <C>     <C>            <C>          <C>           <C>       <C>
Jean-Luc Berger,      2006   $55,000 (1)                                         None
Director
                      2005   $52,250 (1)                                         None

                      2004   $40,000 (1)                                         None

                      2003   $40,000 (1)                                       $149,985
-------------------------------------------------------------------------------------------------------------------

Georges Benarroch,    2006   None                                                None
Director

President and Chief
Executive Officer     2005   None                                                None

                      2004   None                                                None

                      2003   None                                                None
-------------------------------------------------------------------------------------------------------------------

Donald MacAdam,       2006   None                                                None
Director

                      2005   None                                                None

                      2004   None                                                None

                      2003   None                                                None
-------------------------------------------------------------------------------------------------------------------
</TABLE>

----------
(1) This was paid by B Twelve Limited, a subsidiary of Kyto Biopharma, Inc.

                                       15

<PAGE>

(B) OPTION/SAR GRANTS TABLE

The following table (presented in accordance with the Regulation) sets forth
stock options granted under the Share Incentive Plan during fiscal year 2002 to
the name key employees. There were no grants to key employees in fiscal years
2006, 2005, 2004 and 2003.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                  Number of      % of Total
                  Securities     Options/SARs Granted
                  Underlying     P[topms/SARs Granted   Exercise or
                  Options/SARs   to Employees in        Base
Name              Granted (#)    Fiscal Year            Price ($Sh)   Expiration Date
-------------------------------------------------------------------------------------
<S>               <C>            <C>                    <C>           <C>
Jean-Luc Berger   262,500        31                     $0.0001       Exercised in
                                                                      November 2001
-------------------------------------------------------------------------------------
Uri Sagman        587,500        69                     $0.0001       Exercised in
                                                                      February 2002
-------------------------------------------------------------------------------------
</TABLE>

(C) AGGREGATED OPTION/SAR EXERCISE IN LATEST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUE TABLE

The following table (presented in accordance with the Regulation) sets forth
details of all exercises of stock options/SARs during the fiscal year end March
31, 2002 (none in fiscal years 2005, 2004 and 2003) by the named executive
officer and employees and the fiscal year-end value of unexercised options/SARs
on an aggregated basis:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                    Shares
                  Acquired on   Value      Number of Securities Underlying      Value of Unexercised In-the-Money
                   Exercise     Realized   Options/SARs Granted at FY-End (#)   Options/SARs at FY-End ($)
Name                 (#)        ($)        Exercisable/Unexercisable            Exercisable/Unexercisable
-----------------------------------------------------------------------------------------------------------------
<S>               <C>           <C>        <C>                                  <C>
Jean-Luc Berger   262,500       262,474    --                                   --          --
-----------------------------------------------------------------------------------------------------------------
Uri Sagman        587,500       587,441    --                                   --          --
-----------------------------------------------------------------------------------------------------------------
</TABLE>

(E) LONG-TERM INCENTIVE ("LTIP") AWARDS TABLE

None

(D) COMPENSATION OF DIRECTORS

All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election and compensation of directors. The Board
of Directors appoints officers annually and each executive officer serves at the
discretion of the Board of Directors. The Company does not have any standing
committees at this time.

The Company does not currently maintain insurance for the benefit of the
directors and officers of Kyto against liabilities incurred by them in their
capacity as directors or officers of Kyto. Kyto does not maintain a pension plan
for its employees, officers or directors.

Four directors received 14,525 and 3,000 common shares each for services during
fiscal years 2001 and 2002, respectively. No director shares were granted in
fiscal years 2006 and 2005.

None of the directors or senior officers of Kyto and no associate of any of the
directors or senior officers of Kyto was indebted to the Company during the
financial period ended March 31, 2006 of Kyto other than for routine
indebtedness.

                                       16

<PAGE>

(F) EMPLOYMENT CONTRACTS

None

(G) REPORT ON REPRICING OF OPTIONS/SARS

None

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following persons (including any group as defined in Regulation S-B, Section
228.403) are known to the Company, as the issuer, to be beneficial owner of more
than five percent (5%) of any class of the said issuer's voting securities.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
                 Name and Address of
Title of Class   Beneficial Owner                 Common Shares   Percentage of Class
-------------------------------------------------------------------------------------,
<S>              <C>                                <C>                  <C>
Common           Credifinance Capital Corp. (1)     8,953,145            73.6%

                 Delaware, United States
Common           Medarex Inc.                       1,300,000            10.8%

                 New Jersey, United States
Common           Dr. Uri Sagman                       902,025             7.5%
                 Toronto, Ontario, Canada
-------------------------------------------------------------------------------------
</TABLE>

(1) Credifinance Capital Corp. is a privately held Delaware corporation. A
director and officer of Kyto, Georges Benarroch is the President & Chief
Financial Officer of Credifinance Capital Corp.

(B) SECURITY OWNERSHIP OF MANAGEMENT

----------------------------------------------------------------------------
                 Name and Address of
Title of Class   Beneficial Owner        Common Shares   Percentage of Class
----------------------------------------------------------------------------
Common           Georges Benarroch (1)   44,079               0.3%
Common           Dr. Jean-Luc Berger     527,025              4.4%
Common           Don MacAdam (2)         30,025               0.3%
----------------------------------------------------------------------------

----------
(1) Georges Benarroch is the President and Chief Executive Officer of
Credifinance Capital Corp which owns 8,953,145 common shares representing 73.6%
of issued shares.

(2) Don MacAdam owns 27,025 common shares directly and 3,000 common shares
through A360 Inc., a private holding company.

(C) CHANGES IN CONTROL

There is no such arrangement which may result in a change in control of the
Company.

                                       17

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(A) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Detail of related party transactions are described in note 5 of the consolidated
Financial Statements.

(B) TRANSACTIONS WITH PROMOTORS

Georges Benarroch would be considered as a promoter of the Company. Georges
Benarroch, is the President & CEO of Credifinance Capital Corp which owns
8,953,145 common shares representing 73.6% of issued shares.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(A) LISTING OF EXHIBITS

EXHIBIT NUMBER   DESCRIPTION
--------------   ------------
   3(i)(a)       Articles of Incorporation of Kyto Biopharma, Inc.*

   3(i)(b)       Articles of Amendment changing name to Kyto Biopharma, Inc.*

   3(ii)         Bylaws of Kyto Biopharma, Inc.*

   31.1          Section 302 Certification**

   32.1          Certification pursuant to 18 U.S.C. Section 1350 as
                 adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                 of 2002 **

*Filed as Exhibit to Company's Form 10-SB on September 12th, 2003, with the
Securities and Exchange Commission

**Filed as Exhibit with this Form 10-KSB.

(B) Code of Ethics

Kyto Biopharma Inc. will conduct its business honestly and ethically wherever we
operate in the world. We will constantly improve the quality of our services,
products and operations and will create a reputation for honesty, fairness,
respect, responsibility, and integrity, trust and sound business judgment. No
illegal or unethical conduct on the part of officers, directors, employees or
affiliates is in the company's best interest. Kyto Biopharma Inc. will not
compromise its principles for short-term advantage. The ethical performance of
this company is the sum of the ethics of the men and women who work here. Thus,
we are all expected to adhere to high standards of personal integrity.

Officers, directors, and employees of the company must never permit their
personal interests to conflict, or appear to conflict, with the interests of the
company, its clients or affiliates. Officers, directors and employees must be
particularly careful to avoid representing Kyto Biopharma Inc. in any
transaction with others with whom there is any outside business affiliation or
relationship. Officers, directors, and employees shall avoid using their company
contacts to advance their private business or personal interests at the expense
of the company, its clients or affiliates.

No bribes, kickbacks or other similar remuneration or consideration shall be
given to any person or organization in order to attract or influence business
activity. Officers, directors and employees shall avoid gifts, gratuities,
fees, bonuses or excessive entertainment, in order to attract or influence
business activity.

Officers, directors and employees of Kyto Biopharma Inc. will often come into
contact with, or have possession of, proprietary, confidential or
business-sensitive information and must take appropriate steps to assure that
such information is strictly safeguarded. This information - whether it is on
behalf of our company or any of our clients or affiliates - could include
strategic business plans, operating results, marketing strategies, customer
lists, personnel records, upcoming acquisitions and divestitures, new
investments, and manufacturing costs, processes and methods. Proprietary,
confidential and sensitive business information about this company, other
companies, individuals and entities should be treated with sensitivity and
discretion and only be disseminated on a need-to-know basis.

Misuse of material inside information in connection with trading in the
company's securities can expose an individual to civil liability and penalties.
Directors, officers, and employees in possession of material information not
available to the public are "insiders". Spouses, friends, suppliers, brokers,
and others outside the company who may have acquired the information directly or
indirectly from a director, officer or employee are also "insiders." The Act
prohibits insiders from trading in, or recommending the sale or purchase of, the
company's securities, while such inside information is regarded as "material",
or if it is important enough to influence you or any other person in the
purchase or sale of securities of any company with which we do business, which
could be affected by the inside information.

                                       18

<PAGE>

The following guidelines should be followed in dealing with inside information:

Until the company has publicly released the material information, an employee
must not disclose it to anyone except those within the company whose positions
require use of the information.

Employees must not buy or sell the company's securities when they have knowledge
of material information concerning the company until it has been disclosed to
the public and the public has had sufficient time to absorb the information.

Employees shall not buy or sell securities of another corporation, the value of
which is likely to be affected by an action by the company of which the employee
is aware and which has not been publicly disclosed.

Officers, directors and employees will seek to report all information accurately
and honestly, and as otherwise required by applicable reporting requirements.

Officers, directors and employees will refrain from gathering competitor
intelligence by illegitimate means and refrain from acting on knowledge, which
has been gathered in such a manner. The officers, directors and employees of
Kyto Biopharma Inc. will seek to avoid exaggerating or disparaging comparisons
of the services and competence of their competitors.

Officers, directors and employees will obey all Equal Employment Opportunitylaws
and act with respect and responsibility towards others in all of their dealings.
Officers, directors and employees will remain personally balanced so that their
personal life will not interfere with their ability to deliver quality products
or services to the company and its clients.

Officers, directors and employees agree to disclose unethical, dishonest,
fraudulent and illegal behavior, or the violation of company policies and
procedures, directly to management.

Violation of this Code of Ethics can result in discipline, including possible
termination. The degree of discipline relates in part to whether there was a
voluntary disclosure of any ethical violation and whether or not the violator
cooperated in any subsequent investigation.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Board of Directors appointed Jewett Schwartz and Associates. ("Jewett") as
our independent auditors for the fiscal years ending March 31, 2006.

(1) Audit Fees

Salberg & Company P.A our previous independent Registered Public Accounting Firm
billed us an aggregate of $16,800 for the following professional services: audit
of our annual consolidated financial statements for the fiscal year ended March
31, 2005 included in our annual report on Form 10-KSB and review of our interim
financial statements included in our quarterly reports on Form 10-QSB.

Jewett our independent Registered Public Accounting Firm billed us an aggregate
of $21,550 for the following professional services; audit of our annual
consolidated financial statements for the fiscal year ended March 31, 2006
included in our annual report on Form 10-KSB and review of our interim financial
statements included in our quarterly reports on Form 10-QSB


(2) Audit Related Fees

Salberg & Company P.A billed us an aggregate of $0 for audit related services
rendered during the fiscal year ended March 31, 2005.

Jewett billed us an aggregate of $0 for audit related services rendered during
the fiscal year ended March 31, 2006.


(3) Tax Fees

No professional services were rendered by Jewett for tax compliance, tax advice,
and tax planning the fiscal years ended March 31, 2006.

(4) All Other Fees

Not applicable.

                                       19

<PAGE>

                                   SIGNATURES

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

            DATE: June 27, 2006          KYTO BIOPHARMA, INC.

                                         By: /s/ Georges Benarroch
                                             ----------------------------
                                             Georges Benarroch
                                             President & C.E.O.

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: June 27, 2006          KYTO BIOPHARMA, INC.

                                         By: /s/ Georges Benarroch
                                             ----------------------------
                                             Georges Benarrcoh
                                             President & C.E.O.,
                                             Acting C.F.O., Director

            DATE: June 27, 2006          KYTO BIOPHARMA, INC.

                                         By: /s/ Jean-Luc Berger
                                             ----------------------------
                                             Jean-Luc Berger
                                             Director

                                       20

<PAGE>

                       KYTO Biopharma, Inc. and Subsidiary
                          (A Development Stage Company)

                                    Contents

                                                                       Page(s)

                                                                       -------

Report of Independent Registered Public Accounting Firm                   F-2

Report of Independent Registered Public Accounting Firm                   F-3

Consolidated Balance Sheet                                                F-4

Consolidated Statements of Operations                                     F-5

Consolidated Statement of Changes in Stockholders' Deficiency             F-6

Consolidated Statements of Cash Flows                                     F-7

Notes to Consolidated Financial Statements                              F-8-F-25

                                        F-1

<PAGE>

             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------

To the Board of Directors of:
   Kyto Biopharma, Inc. and Subsidiary
   (A Development Stage Company)

We have audited the accompanying consolidated balance sheet of Kyto Biopharma,
Inc. and Subsidiary (a development stage company) as of March 31, 2006 and the
related statements of operations, stockholders' equity, and cash flows for the
year in the period ended March 31, 2006. These consolidated 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the consolidated financial position of Kyto
Biopharma, Inc. and Subsidiary (a development stage company) as of March 31,
2006 and the results of its operations and its cash flows for the period ended
March 31, 2006, in conformity with U.S. generally accepted accounting
principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 11 to
the consolidated financial statements, the company has no revenues, a net loss
of $3,534,787 and net cash used in operations of $43,235 in 2006, a working
capital deficiency of $231,455, a stockholders' deficiency of $231,227 and a
deficit accumulated during development stage of $11,329,010 at March 31, 2006.
These factors raise substantial doubt about its ability to continue as a going
concern. Management's plan in regards to these matters is also described in Note
11. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Jewett, Schwartz & Associates
Hollywood, Florida
June 23, 2006

                                      F-2
<PAGE>
             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------

To the Board of Directors of:
     Kyto Biopharma, Inc. and Subsidiary
     (A Development Stage Company)

We have audited the accompanying consolidated statements of operations, changes
in stockholders' deficiency and cash flows of Kyto Biopharma, Inc. and
Subsidiary (a development stage company) for the year ended March 31, 2005 and
for the period from March 5, 1999 (inception) to March 31, 2005. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with auditing 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the consolidated results of operations, changes
in stockholders' deficiency and cash flows of Kyto Biopharma, Inc. and
Subsidiary (a development stage company) for the year ended March 31, 2005 and
for the period from March 5, 1999 (inception) to March 31 2005, in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 11 to
the consolidated financial statements, the Company has no revenues, a net loss
of $1,963,666 and cash used in operations of $162,786 in 2005, a working capital
deficiency of $102,326, a stockholders' deficiency of $274,554 and a deficit
accumulated during development stage of $7,794,223 at March 31, 2005. These
factors raise substantial doubt about its ability to continue as a going
concern. Management's plan in regards to these matters is also described in Note
11. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

SALBERG & COMPANY, P.A.
Boca Raton, Florida
June 2, 2005


                                      F-3
<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                           CONSOLIDATED BALANCE SHEET
                                 MARCH 31, 2006

ASSETS

CURRENT ASSETS

   Cash                                                           $     40,415
   Other receivables                                                       691
                                                                  ------------
TOTAL CURRENT ASSETS                                                    41,106
                                                                  ------------

EQUIPMENT, NET                                                             228
                                                                  ------------

TOTAL ASSETS                                                      $     41,334
                                                                  ============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES

   Note Payable - related party                                   $    100,000
   Accrued interest payable - related party                             22,271
   Accounts payable                                                     53,690
   Accounts payable - related party                                     86,600
   Accrued liabilities - related party                                  10,000
                                                                  ------------
TOTAL CURRENT LIABILITIES                                              272,561
                                                                  ------------

TOTAL LIABILITIES                                                      272,561
                                                                  ------------

STOCKHOLDERS' DEFICIENCY

   Preferred stock, $1.00 par value, 1,000,000 shares
      authorized, none issued and outstanding                               --
   Common stock, $0.0001 par value, 25,000,000 shares
      authorized, 12,080,203 issued and outstanding                      1,208
   Additional paid-in capital                                       15,323,307
   Deficit accumulated during development stage                    (11,329,010)
   Accumulated other comprehensive loss                               (257,919)
                                                                  ------------
                                                                     3,737,586
   Less: Subscription Receivable                                           (13)
   Less: Deferred consulting fees                                   (3,968,800)
                                                                  ------------
TOTAL STOCKHOLDERS' DEFICIENCY                                        (231,227)
                                                                  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                    $     41,334
                                                                  ============

See accompanying notes to consolidated financial statements.

                                        F-4

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                             FOR THE PERIOD FROM
                                                          YEAR ENDED MARCH                      MARCH 5, 1999
                                                                 31                             (INCEPTION) TO
                                                                2006              2005          MARCH 31, 2006
                                                          ----------------    -----------    -------------------
<S>                                                       <C>                 <C>            <C>
OPERATING EXPENSES
   Compensation                                           $         54,935    $    52,253    $         1,740,386
   Depreciation and amortization                                       602            805                813,955
   Consulting                                                    3,374,950      1,406,250              5,724,599
   Bad Debt                                                              -              -                 12,819
   Director fees                                                         -              -                 64,100
   Financing fees                                                        -              -                 28,781
   Professional fees                                                18,550         16,551                 92,408
   General and administrative                                       50,676         52,396                412,717
   Research and development                                         41,590         44,614              1,103,517
   Loss on debt Conversion                                          23,513        479,986                519,795
   Impairment loss                                                       -              -              1,191,846
                                                          ----------------    -----------    -------------------
TOTAL OPERATING EXPENSES                                         3,564,816      2,052,855             11,704,910
                                                          ----------------    -----------    -------------------

LOSS FROM OPERATIONS                                            (3,564,816)    (2,052,855)           (11,704,910)
                                                          ----------------    -----------    -------------------

OTHER INCOME (EXPENSES)
   Interest income                                                       -            124                  4,922
   Interest expense                                                 (9,805)        (6,924)               (26,078)
   Gain on debt forgivemess                                              2          9,124                 68,780
   Loss on disposal of equipment                                         -              -                   (567)
   Foreign currency transaction gain (loss)                         39,832         86,865                328,855
                                                          ----------------    -----------    -------------------
TOTAL OTHER INCOME (EXPENSE), NET                                   30,029         89,189                375,914
                                                          ----------------    -----------    -------------------

NET INCOME (LOSS)                                         $     (3,534,787)   $(1,963,666)   $       (11,329,010)
                                                          ================    ===========    ===================
COMPREHENSIVE INCOME (LOSS)
   Foreign currency translation gain (loss)                        (40,435)       (87,495)              (257,919)
                                                          ----------------    -----------    -------------------

TOTAL COMPREHENSIVE LOSS                                  $     (3,575,222)   $(2,051,161)   $       (11,586,929)
                                                          ================    ===========    ===================

Net Loss Per Share - Basic and Diluted                    $          (0.30)   $     (0.23)   $             (1.99)
                                                          ================    ===========    ===================

Weighted average number of shares outstanding
   during the year - basic and diluted                          11,827,069      8,389,402              5,688,023
                                                          ================    ===========    ===================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

          CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
          YEARS ENDED MARCH 31, 2006 AND 2005, AND FOR THE PERIOD FROM
                   MARCH 5, 1999 (INCEPTION) TO MARCH 31, 2006

<TABLE>
<CAPTION>
                                                               PREFERRED STOCK              COMMON STOCK          ADDITIONAL
                                                          ------------------------   -------------------------    PAID - IN
                                                            SHARES       AMOUNT        SHARES        AMOUNT         CAPITAL
                                                          ---------   ------------   ----------   ------------   ------------
<S>                                                       <C>         <C>            <C>          <C>            <C>
Common stock issued for services to officer                      --   $         --      300,000   $         30   $    299,970
Common stock issued for services to consultant                   --             --      255,000             25        254,975
Warrants issued to consultant                                    --             --           --             --        345,000
Net loss, 1999                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 1999                                          --             --      555,000             55        899,945
Preferred stock issued for cash                             250,000        250,000           --             --             --
Offering cost                                                    --             --           --             --        (17,005)
Common stock issued for intangible assets                        --             --    2,000,000            200      1,999,800
Common stock issued for cash upon exercise
   of warrants                                                   --             --      100,000             10         99,990
Foreign currency translation loss                                --             --           --             --             --
Net loss, 2000                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 2000                                     250,000        250,000    2,655,000            265      2,982,730
Common stock issued as director fees                             --             --       58,100              6         58,094
Common stock issued for cash upon exercise
   of warrants                                                   --             --      150,000             15        149,985
Common stock issued for cash upon exercise
   of warrants                                                   --             --      345,000             35             --
Common stock issued to officer as
   compensation                                                  --             --      100,000             10         99,990
Common stock issued for cash                                     --             --      100,000             10         99,990
Common stock issued for future services                          --             --      400,000             40      1,199,960
Foreign currency translation gain                                --             --           --             --             --
Net loss, 2001                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 2001                                     250,000        250,000    3,808,100            381      4,590,749
Preferred stock converted to common stock                  (250,000)      (250,000)     250,000             25        249,975
Common stock warrants issued for consulting
   services                                                      --             --           --             --        254,346
Common stock issued for cash upon exercise
   of warrants                                                   --             --      125,000             13        124,987
Common stock warrants issued for services                        --             --           --             --        849,915
Common stock issued for cash upon exercise
   of warrants                                                   --             --      850,000             85             --
Common stock issued to directors as
   compensation                                                  --             --        6,000             --          6,000
Common stock issued to employees as
   compensation                                                  --             --        3,000             --          3,000
Common stock issued as loan fee                                  --             --       25,000              3         24,997
Foreign currency translation gain                                --             --           --             --             --
Net loss, 2002                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 2002                                          --             --    5,067,100            507      6,103,969
Stock issued for cash and services                               --             --      225,000             22        224,978
Stock issued in settlement of accounts payable,
   net of redeemable shares                                      --             --      100,000             10         99,990
Stock issued to settle loans payable, related party              --             --      102,658             10        102,648
Stock issued as consideration for future
   services                                                      --             --      800,000             80        799,920
Stock issued for past and future rent and
   administrative services                                       --             --       65,000              7         64,993
Common stock warrants issued as financing fee                    --             --           --             --          3,783
Foreign currency translation loss                                --             --           --             --             --
Net loss, 2003                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 2003                                          --             --    6,359,758            636      7,400,281
Foreign currency translation loss                                --             --           --             --             --
Amortization of deferred expenses                                --             --           --             --             --
Net Loss, 2004                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March  31, 2004                                         --             --    6,359,758            636      7,400,281
Stock issued for cash and services                               --             --      500,000             50        249,950
Common stock issued for services to consultant                   --             --    4,500,000            450      6,749,550
Stock issued to settle loans payable, related party              --             --      320,000             32        479,968
Stock issued for past and future rent and
   administrative services                                       --             --      133,333             13        199,986
Foreign currency translation loss                                --             --           --             --             --
Net Loss, 2005                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 2005                                          --   $         --   11,813,091   $      1,181   $ 15,079,735
Stock issued for cash and services                               --             --      173,058             18        173,040
Common stock issued for services to consultant                   --             --           --             --             --
Stock issued to settle loans payable, related party              --             --       14,054              1         10,540
Stock issued for past and future rent and
   administrative services                                       --             --       80,000              8         59,992
Foreign currency translation loss                                --             --           --             --             --
Net Loss, 2006                                                   --             --           --             --             --
                                                          ---------   ------------   ----------   ------------   ------------
Balance, March 31, 2006                                          --   $         --   12,080,203   $      1,208   $ 15,323,307
                                                          =========   ============   ==========   ============   ============
</TABLE>
[Restubbed Table]
<TABLE>
<CAPTION>
                                                            DEFICIT
                                                          ACCUMULATED      ACCUMULATED
                                                            DURING            OTHER
                                                          DEVELOPMENT     COMPREHENSIVE      DEFERRED
                                                            STAGE             LOSS          CONSULTING
                                                         -------------    -------------    ------------
<S>                                                      <C>              <C>              <C>
Common stock issued for services to officer              $          --    $          --    $         --
Common stock issued for services to consultant                      --               --              --
Warrants issued to consultant                                       --               --              --
Net loss, 1999                                                (900,000)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 1999                                       (900,000)              --              --
Preferred stock issued for cash                                     --               --              --
Offering cost                                                       --               --              --
Common stock issued for intangible assets                           --               --              --
Common stock issued for cash upon exercise
  of warrants                                                       --               --              --
Foreign currency translation loss                                   --           (5,745)             --
Net loss, 2000                                                (650,366)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 2000                                     (1,550,366)          (5,745)             --
Common stock issued as director fees                                --               --              --
Common stock issued for cash upon exercise
   of warrants                                                      --               --              --
Common stock issued for cash upon exercise
   of warrants                                                      --               --              --
Common stock issued to officer as
   compensation                                                     --               --              --
Common stock issued for cash                                        --               --              --
Common stock issued for future services                             --               --      (1,200,000)
Foreign currency translation gain                                   --           60,054              --
Net loss, 2001                                                (966,789)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 2001                                     (2,517,155)          54,309      (1,200,000)
Preferred stock converted to common stock                           --               --              --
Common stock warrants issued for consulting
   services                                                         --               --              --
Common stock issued for cash upon exercise
   of warrants                                                      --               --              --
Common stock warrants issued for services                           --               --              --
Common stock issued for cash upon exercise
of warrants                                                         --               --              --
Common stock issued to directors as
   compensation                                                     --               --              --
Common stock issued to employees as
   compensation                                                     --               --              --
Common stock issued as loan fee                                     --               --              --
Foreign currency translation gain                                   --           13,397              --
Net loss, 2002                                              (2,959,415)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 2002                                     (5,476,570)          67,706      (1,200,000)
Stock issued for cash and services                                  --               --              --
Stock issued in settlement of accounts payable,
   net of redeemable shares                                         --               --              --
Stock issued to settle loans payable, related party                 --               --              --
Stock issued as consideration for future
   services                                                         --               --        (800,000)
Stock issued for past and future rent and
   administrative services                                          --               --              --
Common stock warrants issued as financing fee                       --               --              --
Foreign currency translation loss                                   --          (80,354)             --
Net loss, 2003                                                (319,141)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 2003                                     (5,795,711)         (12,648)     (2,000,000)
Foreign currency translation loss                                   --         (117,341)             --
Amortization of deferred expenses                                   --               --              --
Net Loss, 2004                                                 (34,846)              --              --
                                                         -------------    -------------    ------------
Balance, March  31, 2004                                    (5,830,557)        (129,989)     (2,000,000)
Stock issued for cash and services                                  --               --              --
Common stock issued for services to consultant                      --               --      (5,343,750)
Stock issued to settle loans payable, related party                 --               --              --
Stock issued for past and future rent and
   administrative services                                          --               --              --
Foreign currency translation loss                                   --          (87,495)             --
Net Loss, 2005                                              (1,963,666)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 2005                                    $(7,794,223)     $  (217,484)   $ (7,343,750)
Stock issued for cash and services                                  --               --              --
Common stock issued for services to consultant                      --               --       3,374,950
Stock issued to settle loans payable, related party                 --               --              --
Stock issued for past and future rent and
   administrative services                                          --               --              --
Foreign currency translation loss                                   --          (40,435)             --
Net Loss, 2006                                              (3,534,787)              --              --
                                                         -------------    -------------    ------------
Balance, March 31, 2006                                  $ (11,329,010)   $    (257,919)   $ (3,968,800)
                                                         =============    =============    ============
</TABLE>
[Restubbed table]
<TABLE>
<CAPTION>
                                                                            DEFERRED
                                                          SUBSCRIPTION        LOAN         DEFERRED
                                                           RECEIVABLE         FEE          EXPENSES        TOTAL
                                                          ------------    -----------    -----------    -----------
<S>                                                       <C>             <C>            <C>            <C>
Common stock issued for services to officer               $         --    $        --    $        --    $   300,000
Common stock issued for services to consultant                      --             --             --        255,000
Warrants issued to consultant                                       --             --             --        345,000
Net loss, 1999                                                      --             --             --       (900,000)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 1999                                             --             --             --             --
Preferred stock issued for cash                                     --             --             --        250,000
Offering cost                                                       --             --             --        (17,005)
Common stock issued for intangible assets                           --             --             --      2,000,000
Common stock issued for cash upon exercise
  of warrants                                                       --             --             --        100,000
Foreign currency translation loss                                   --             --             --         (5,745)
Net loss, 2000                                                      --             --             --       (650,366)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 2000                                             --             --             --      1,676,884
Common stock issued as director fees                                --             --             --         58,100
Common stock issued for cash upon exercise
   of warrants                                                      --             --             --        150,000
Common stock issued for cash upon exercise
   of warrants                                                      --             --             --             35
Common stock issued to officer as
   compensation                                                     --             --             --        100,000
Common stock issued for cash                                        --             --             --        100,000
Common stock issued for future services                             --             --             --             --
Foreign currency translation gain                                   --             --             --         60,054
Net loss, 2001                                                      --             --             --       (966,789)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 2001                                             --             --             --      1,178,284
Preferred stock converted to common stock                           --             --             --             --
Common stock warrants issued for consulting
   services                                                         --             --             --        254,346
Common stock issued for cash upon exercise
   of warrants                                                      --             --             --        125,000
Common stock warrants issued for services                           --             --             --        849,915
Common stock issued for cash upon exercise
   of warrants                                                      --             --             --             85
Common stock issued to directors as
   compensation                                                     --             --             --          6,000
Common stock issued to employees as
   compensation                                                     --             --             --          3,000
Common stock issued as loan fee                                     --        (24,997)            --              3
Foreign currency translation gain                                   --             --             --         13,397
Net loss, 2002                                                      --             --             --     (2,959,415)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 2002                                             --        (24,997)            --       (529,385)
Stock issued for cash and services                                  --             --             --        225,000
Stock issued in settlement of accounts payable,
   net of redeemable shares                                         --             --             --        100,000
Stock issued to settle loans payable, related party                 --         24,997             --        127,655
Stock issued as consideration for future
   services                                                         --             --             --             --
Stock issued for past and future rent and
   administrative services                                          --             --        (30,000)        35,000
Common stock warrants issued as financing fee                       --             --             --          3,783
Foreign currency translation loss                                   --             --             --        (80,354)
Net loss, 2003                                                      --             --             --       (319,141)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 2003                                             --             --        (30,000)      (437,442)
Foreign currency translation loss                                   --             --             --       (117,341)
Amortization of deferred expenses                                   --             --         30,000         30,000
Net Loss, 2004                                                      --             --             --        (34,846)
                                                          ------------    -----------    -----------    -----------
Balance, March  31, 2004                                            --             --             --       (559,629)
Stock issued for cash and services                                   0             --             --        250,000
Common stock issued for services to consultant                      --             --                     1,406,250
Stock issued to settle loans payable, related party                 --             --             --        480,000
Stock issued for past and future rent and
   administrative services                                         (13)            --             --        199,986
Foreign currency translation loss                                   --             --             --        (87,495)
Net Loss, 2005                                                      --             --             --     (1,963,666)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 2005                                   $        (13)   $        --    $        --    $  (274,554)
Stock issued for cash and services                                   0             --             --        173,058
Common stock issued for services to consultant                      --             --                     3,374,950
Stock issued to settle loans payable, related party                 --             --             --         10,541
Stock issued for past and future rent and
   administrative services                                          (0)            --             --         60,000
Foreign currency translation loss                                   --             --             --        (40,435)
Net Loss, 2006                                                      --             --             --     (3,534,787)
                                                          ------------    -----------    -----------    -----------
Balance, March 31, 2006                                   $        (13)   $        --    $        --    $  (231,227)
                                                          ============    ===========    ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                        F-6

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             FOR THE PERIOD FROM
                                                                                                MARCH 5, 1999
                                                                  YEAR ENDED MARCH 31          (INCEPTION) TO
                                                                 2006            2005         DECEMBER 31, 2006
                                                             -----------    --------------   -------------------
<S>                                                          <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Income (loss)                                        $(3,534,787)   $   (1,963,666)  $       (11,329,010)
    Adjustment to reconcile net income (loss)
      to net cash used in operating activities:
      Depreciation and amortization                                  602               805               813,955
      Stock based compensation                                 3,374,950         1,406,250             6,259,093
      Stock based consulting expense                                  --                --               854,345
      Stock based director fees                                       --                --                64,100
      Stock based rent and administrative fees                    47,028                --                87,028
      Common stock warrants issued as financing fee                   --                --                 3,783
      Loss on disposal of equipment                                   --                --                   567
      Impairment loss                                                 --                --             1,191,846
      Gain on settlement of accounts payable                          --                --               (59,654)
      Loss on debt conversion                                     23,513           479,986               519,795
      Amortization of stock based financing fee                       --                --                24,997
    Changes in operating assets and liabilities:
      (Increase) decrease in:
         Other receivables                                         3,475             1,491                  (690)
         Prepaids and other assets                                17,500           (16,177)                   --
      Increase (decrease) in:
         Accounts payable and accrued expenses                    22,083           (81,793)              516,797
         Accounts payable-Related Parties                          2,401            10,318                20,879
                                                             -----------    --------------   -------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES              (43,235)         (162,786)           (1,032,169)
                                                             -----------    --------------   -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                --                --                (4,463)
                                                             -----------    --------------   -------------------
NET CASH USED IN INVESTING ACTIVITIES                                 --                --                (4,463)
                                                             -----------    --------------   -------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from common stock issuance, net of
      offering cost                                                                250,000               958,222
    Loan proceeds from related parties, net                       86,600            35,358               405,666
    Repayment of loan to related parties                              --                --               (26,792)
                                                             -----------    --------------   -------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                         86,600           285,358             1,337,096
                                                             -----------    --------------   -------------------

Effect of Exchange Rate on Cash                                  (40,435)          (87,495)             (260,049)

Net Increase in Cash and Cash Equivalents                          2,930            35,077                40,415

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                  37,485             2,408                    --
                                                             -----------    --------------   -------------------

Cash and Cash Equivalents at End of Period                   $    40,415    $       37,485   $            40,415
                                                             ===========    ==============   ===================

    Supplemental Disclosure of Cash Flow Information:
      Cash paid for:
         Interest                                            $        --    $           --   $                --
                                                             ===========    ==============   ===================
         Taxes                                               $        --    $           --   $                --
                                                             ===========    ==============   ===================

    Supplemental Disclosure of Non-Cash Investing and
      Financing Activities:
         Conversion of debt to equity                        $              $      200,000   $           640,716
                                                             ===========    ==============   ===================
         Stock issued for deferred consulting services       $              $    6,750,000   $         6,750,000
                                                             ===========    ==============   ===================
         Conversion of liabilities to note payable           $        --    $           --   $           102,023
                                                             ===========    ==============   ===================
         Stock issued for debt restructuring
           anti-dilution provision                           $        --    $           --   $           800,000
                                                             ===========    ==============   ===================
         Conversion of preferred shares to common shares     $        --    $           --   $           250,000
                                                             ===========    ==============   ===================
         Stock issued for future services                    $        --    $           --   $         1,200,000
                                                             ===========    ==============   ===================
         Issued common shares for intangible assets          $        --    $           --   $         2,000,000
                                                             ===========    ==============   ===================
</TABLE>

See accompanying notes to consolidated financial statements.

                                        F-7

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) NATURE OF BUSINESS

Kyto Biopharma, Inc. was formed as a Florida corporation on March 5, 1999. B
Twelve, Limited, Kyto Biopharma, Inc.'s wholly-owned Canadian subsidiary
(collectively referred to as the "Company"), was also formed on March 5, 1999.
On August 14, 2002, the parent Company changed its name from B Twelve, Inc. to
Kyto Biopharma, Inc.

The Company is a biopharmaceutical company, formed to acquire and develop
innovative minimally toxic and non-immunosuppressive proprietary drugs for the
treatment of cancer, arthritis, and other proliferate and autoimmune diseases.
The Company has subsequently built itself into a development stage
biopharmaceutical company that develops receptor-mediated technologies to
control the uptake of vitamin B12 by non-controlled proliferative cells.

Activities during the development stage include acquisition of financing and
intellectual properties and research and development activities conducted by
others under contracts.

(B) PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiary. All material intercompany balances and transactions
have been eliminated in consolidation.

(C) USE OF ESTIMATES

In preparing consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and revenues and expenses during the period
presented. Actual results may differ from these estimates.

Significant estimates during 2006 and 2005 and for the period for March 5, 1999
(inception) to March 31, 2006 include depreciable lives on equipment, valuation
of intangible assets, the valuation allowance of deferred tax assets, and the
valuation of non-cash stock based transactions.

(D) CASH AND CASH EQUIVALENTS

For the purpose of the consolidated cash flow statements, the Company considers
all highly liquid investments with original maturities of three months or less
at the time of purchase to be cash equivalents.

                                        F-8

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

(E) BASIS OF PRESENTATION AND FOREIGN CURRENCY

The accompanying consolidated financial statements are presented under
accounting principles generally accepted in the United States of America and in
United States dollars.

The Company's Canadian subsidiary transacts business in the Canadian dollar. The
accounts of the Canadian subsidiary are translated to United States dollars
using the current rate method. Under the current rate method, all assets and
liabilities are translated using exchange rates at the balance sheet date.
Revenue and expense items are translated using the average rate of exchange
prevailing during the period. Capital transactions are translated at their
historical rates. Exchange gains and losses resulting from translation of
foreign currencies are recorded in stockholders' deficiency as a cumulative
translation adjustment and reflected as a component of other accumulated
comprehensive income or loss.

Gains and losses resulting from foreign currency transactions are recognized in
operations of the period incurred.

(F) CONCENTRATIONS

The Company maintains its cash in bank deposit accounts, which, at times, exceed
federally insured limits. As of March 31, 2006, the Company did not have any
deposits in excess of federally insured limits. The Company has not experienced
any losses in such accounts through March 31, 2006.

The Company has obtained and continues to obtain a large amount of its funding
from loans and equity funding from a principal stockholder related to a director
of the Company.

(G) EQUIPMENT

Equipment is stated at cost, less accumulated depreciation. Expenditures for
maintenance and repairs are charged to expense as incurred. Depreciation is
provided using the straight-line method over the estimated useful lives of the
assets of five years.

(H) LONG-LIVED ASSETS

The Company reviews long-lived assets and certain identifiable assets related to
those assets for impairment whenever circumstances and situations change such
that there is an indication that the carrying amounts may not be recoverable. If
the undiscounted future cash flows of the long-lived assets are less that the
carrying amount, their carrying amount is reduced to fair value and an
impairment loss is recognized.

(I) STOCK-BASED COMPENSATION

The Company accounts for stock options issued to employees in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation cost is measured on the date of grant as the excess of the
current market price of the underlying stock over the exercise price. Such
compensation amounts are amortized over

                                        F-9

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

their respective vesting periods of the option grant. The Company adopted the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," and SFAS No. 148, "Accounting for Stock Based
Compensation-Transaction and Disclosure," which permits entities to provide pro
forma net income (loss) and pro forma earnings (loss) per share disclosures for
employee stock option grants as if the fair-valued based method defined in SFAS
No. 123 had been applied.

The Company accounts for stock options or warrants issued to non-employees for
goods or services in accordance with SFAS No. 123. Under this method, the
Company records an expense equal to the fair value of the options or warrants
issued. The fair value is computed using an options pricing model.

(J) RESEARCH AND DEVELOPMENT COSTS

Others conduct research and development on behalf of the Company under
contractual agreements and such costs are charged to expense as incurred.
Research and development expense was $41,590, $44,614, and $1,103,517 for the
years ended March 31, 2006, 2005, and for the period from March 5, 1999
(inception) to March 31, 2006, respectively.

(K) INCOME TAXES

The Company accounts for income taxes under the Financial Accounting Sta0ndards
No. 109 "Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the consolidated financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period, which includes the enactment
date.

(L) COMPREHENSIVE INCOME

The Company accounts for Comprehensive Income under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("Statement No. 130"). Statement No. 130 establishes
standards for reporting and display of comprehensive income and its components.
Comprehensive income is the total of net income (loss) and other comprehensive
income (loss).

The foreign currency translation gains and losses resulting from the translation
of the financial statements of B Twelve, Ltd. expressed in Canadian dollars to
United States dollars are reported as Accumulated Other Comprehensive Income or
Loss in the Consolidated Statement of Operations.

(M) NET LOSS PER COMMON SHARE

In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share", basic earnings per share is computed by dividing

                                        F-10

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

the net income less preferred dividends for the period by the weighted average
number of common shares outstanding. Diluted earnings per share is computed by
dividing net income less preferred dividends by the weighted average number of
common shares outstanding including the effect of common stock equivalents.
Common stock equivalents, consisting of stock options and warrants, have not
been included in the calculation, as their effect is antidilutive for the
periods presented. At March 31, 2006, there were common stock warrants to issue
275,000 common shares, which could potentially dilute future earnings per share.

Additionally, there were 173,058 shares of redeemable common stock issued in
connection with a written put option (see Note 4(C)) that expired during the
period ending March 31, 2006.

(N) FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosures of information about the
fair value of certain financial instruments for which it is practicable to
estimate that value. For purposes of this disclosure, the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced sale or
liquidation.

The carrying amounts of the Company's short-term financial instruments,
including other receivable, accounts payable, and loans payable-related parties,
approximate fair value due to the relatively short period to maturity for these
instruments.

                                       F-11

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

(O) NEW ACCOUNTING PRONOUNCEMENTS

In September 2004, the Emerging Issues Task Force (EITF) reached a consensus on
Issue No. 04-08, "The Effect of Contingently Convertible Instruments on Diluted
Earnings Per Share" (EITF 04-08), which is effective for reporting periods
ending after December 15, 2004. EITF 04-08 requires companies to include shares
issuable under convertible instruments in diluted earnings per share
computations (if dilutive) regardless of whether the market price trigger (or
other contingent feature) has been met. In addition, prior period earnings per
share amounts presented for comparative purposes must be restated. EITF 04-08
did not impact earnings per share in 2005.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs." The new
statement amends Accounting Research Bulletin (APB) No. 43, Chapter 4,
"Inventory Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material. This statement
requires that those items be recognized as current-period charges and requires
that allocation of fixed production overheads to the cost of conversion be based
on the normal capacity of the production facilities. This statement is effective
for fiscal years beginning after June 15, 2005. The Company does not expect
adoption of this statement to have a material impact on its financial condition
or results of operations.

In December 2004, the FASB issued SFAS No. 123(R) that will require compensation
costs related to share-based payment transactions to be recognized in the
financial statements. With limited exceptions, the amount of compensation cost
will be measured based on the grant-date fair value of the equity or liability
instruments issued. In addition, liability awards will be re-measured each
reporting period. Compensation cost will be recognized over the period that an
employee provides service in exchange for the award. Statement 123(R) replaces
FASB Statement No. 123 and supersedes APB Opinion No. 25, and is effective as of
the beginning of the first annual reporting period that begins after June 15,
2005. SFAS 123(R) was adopted by the company on April 1, 2006. The company does
not anticipate any impact of SFAS 123(R).

In March 2005, the U.S. Securities and Exchange Commission, or SEC, released SAB
107, "Share-Based Payments." The interpretations in SAB 107 express views of the
SEC staff, or staff, regarding the interaction between SFAS 123R and certain SEC
rules and regulations, and provide the staff's views regarding the valuation of
share-based payment arrangements for public companies. In particular, SAB 107
provides guidance related to share-based payment transactions with
non-employees, the transition from nonpublic to public entity status, valuation
methods (including assumptions such as expected volatility and expected term),
the accounting for certain redeemable financial instruments issued under
share-based payment arrangements, the classification of compensation expense,
non-GAAP financial measures, first-time adoption of SFAS 123R in an interim
period, capitalization of compensation cost related to share-based payment
arrangements, the accounting for income tax effects of share-based payment
arrangements upon adoption of SFAS 123R, the modification of employee share
options prior to adoption of SFAS 123R and disclosures in Management's
Discussion and Analysis subsequent to adoption of SFAS 123R. SAB 107 requires
stock-based compensation to be classified in the same expense lines as cash
compensation is reported for the same employees. The Company and management is
reviewing SAB 107 in conjunction with its review of SFAS 123R.

In March 2005, the FASB issued FASB Interpretation (FIN) No. 47 - "Accounting
for Conditional Asset Retirement Obligations - an Interpretation of SFAS 143
(FIN No. 47). FIN No. 47 clarifies the timing of liability recognition for legal
obligations associated with the retirement of a tangible long-lived asset when
the timing and/or method of settlement are conditional on a future event. FIN
No. 47 is effective no later than December 31, 2005. FIN No. 47 did not impact
the Company for the year ended December 31, 2005.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections, a Replacement of APB No. 20 and FASB 3 (SFAS No.154). SFAS No. 154
requires retrospective application to prior periods' financial statements of a
voluntary change in accounting principle unless it is impracticable. APB Opinion
No. 20 "Accounting Changes," previously required that most voluntary changes in
accounting principle be recognized by including in net income of the period of
the change the cumulative effect of changing to the new accounting principle.

                                       F-12

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

(P) RECLASSIFICATIONS

Certain amounts in the March 31, 2005 consolidated financial statements may have
been reclassified to conform to the March 31, 2006 presentation.

NOTE 2 EQUIPMENT

Equipment consists of the following at March 31:

                                                        2006
                                                      -------
                   Computers and equipment            $ 4,589
                   Less: Accumulated depreciation      (4,361)
                                                      -------
                                                      $   228
                                                      =======

Depreciation was $602 and $805 for the years ended March 31, 2006 and 2005,
respectively, and $813,955 for the period from March 5, 1999 (inception) to
March 31, 2006.

During 2002, furniture and fixtures were disposed of. The loss on the disposal
for the year ended March 31, 2002 was $567.

NOTE 3 INTANGIBLE ASSETS IMPAIRMENT

On June 2, 1999, the Company purchased a portfolio of patents, patents pending,
and related intellectual property (collectively the "Intellectual Property")
from a third party in exchange for 2,000,000 shares of the Company's common
stock. The shares were valued at $1.00 per share based on contemporaneous cash
purchases of convertible preferred stock and common stock warrants resulting in
a value of $2,000,000. The Company also capitalized certain legal costs.

The purchased Intellectual Property has been amortized over its estimated useful
life of seven years from the acquisition date and through March 31, 2002.

Amortization expense was $285,708 for the year ended March 31, 2002 and $809,511
for the period from March 5, 1999 (inception) to March 31, 2004 (See below).
There was no amortization expense for the years ended March 31, 2006 and 2005,
respectively.

As of March 31, 2002, management performed an impairment analysis of the
Intellectual Property. Due to the then current status of the Company as a
development stage company and the inherent difficulties in projecting future
revenues, management decided to take a conservative approach and recognize an
impairment loss for the full book value of the asset totaling $1,191,846 in
2002.

                                       F-13

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

NOTE 4 COMMITMENTS AND CONTINGENCIES

(A) EMPLOYMENT AGREEMENTS

The Company entered into an employment agreement with an officer in June 1999,
which expired on May 31, 2001. The agreement stipulated a salary based on
funding criteria and issuance of 1,200,000 common stock options, which vested
based on the Company meeting stipulated milestones. The options were exercisable
upon vesting at $0.0001 per share. The options were valued on the grant date
using the intrinsic value method pursuant to APB No. 25 and the contemporaneous
cash common stock sale price of $1.00 resulting in an approximate $1.00 option
value. Due to the uncertainty of meeting milestones, a compensation expense
based on the estimated $1.00 value of the options was to be recognized upon
vesting. Through March 31, 2001, none of the options vested. In May 2001,
587,500 of the options vested, and a compensation expense of $587,441 was
recognized. (See Notes 6(B) and 6(C))

The Company entered into an employment agreement with an officer in June 2000,
which expired on May 31, 2001. The agreement stipulated a salary based on
funding criteria and issuance of 400,000 common stock options, which vested
based on the Company meeting stipulated milestones. The options were exercisable
upon vesting at $0.0001 per share. The options were valued on the grant date
using the intrinsic value method of APB No. 25 and the contemporaneous cash
common stock sale price of $1.00 resulting in an approximate $1.00 option value.
Due to the uncertainty of meeting milestones, a compensation expense based on
the estimated $1.00 value of the options was to be recognized upon vesting.
Through March 31, 2001, none of the options vested. In May 2001, 262,500 of the
options vested and a compensation expense of $262,474 was recognized. (See Notes
6(B) and 6(C))

In June 2001, the above employment agreements were renewed and the remaining
612,500 and 137,500 options under each agreement, respectively, remained
outstanding. However, in November 2001, those employment agreements were
terminated by the Company and the related option agreements for 612,500 and
137,500 options were also cancelled. One of those agreements was replaced with
an oral consulting agreement with one individual to act as President and Chief
Executive Officer.

(B) LEASES

The Company leases office space on a month-to-month basis. The premise is leased
from a principal stockholder (See Note 6(B) and 7). Rent expense in 2006, 2005,
and for the period from March 5, 1999 (inception) to March 31, 2006 was $20,000,
$20,000, and $128,377, respectively and is included in general and
administrative expense in the accompanying consolidated statements of
operations. (See Note 5(B))

                                       F-14

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

(C) REDEEMABLE COMMON STOCK PURSUANT TO PUT OPTION

In November 2002 and February 2003, the Company issued an aggregate 273,058
shares of its common stock having a fair value of $273,058 to settle certain
accounts payable under a debt settlement agreement ("agreement") with three
unrelated parties (See Note 6(B)). Of the total stock issued in connection with
the agreement, two of these parties received an aggregate 173,058 shares of
common stock. In addition, these two creditors received a written put option for
the aggregate 173,058 shares of common stock previously issued. Specifically,
three years from the date of the initial settlement, the put option holders have
a thirty-day period in which to notify the Company of their intent to put the
options back to the Company at a redemption price of $1.00 per share. The
Company had 90 days from the notification date to make the required payment.
These shares expired without redemption during the year ended March 31, 2006.
(See Note 1(M))

(D) REGULATION

The business of the Company is subject to various governmental regulations in
the United States of America, Canada, and other countries, which must approve
any Company products before commencement of commercial sales and which regulate
the manufacturing of pharmaceuticals. (See Note 11)

NOTE 5 LOANS AND NOTES PAYABLE AND ACCRUED LIABILITIES, RELATED PARTIES

(A) LOANS PAYABLE, RELATED PARTIES

In November 2002, the Company received working capital funds from a principal
stockholder totaling $50,000 as part of a $100,000 agreement to provide debt
financing.

During the year ended March 31, 2004, the Company received the remaining $50,000
portion of the debt financing transaction plus an additional $25,000. All
activity with this principal stockholder represents a 100% concentration of all
debt financing for the year ended March 31, 2004. All loans are non-interest
bearing, unsecured and due on demand. In the first quarter of fiscal 2004, an
additional $35,000 loan was received from the same principal stockholder. In
October 2004, the $160,000 was exchanged for 320,000 common shares. The Company
recognized a loss of $320,000 on this transaction. (see Note 6 (B))

                                       F-15

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

At March 31, 2005, the Company owed $4,616 to a related party director of the
Company. The loan was non-interest bearing, unsecured and due on demand and
included in the loans payable, relayed party balance. The amount was paid in
February 2006, through issuance of stock. (See Note 7)

(B) ACCRUED LIABILITIES, RELATED PARTY

The Company leases office space and administrative services from a principal
stockholder related party. Rent and administrative expense in 2006, 2005, and
for the period from March 5, 1999 (inception) to March 31, 2006 was $40,000,
$40,000, and $256,754, respectively and is included in general and
administrative expense in the accompanying consolidated statements of
operations. The Company allocates 50% of these amounts to rent expense. (See
Note 4(B)). Accrued liabilities for the above services at March 31, 2006 were
$10,000. (See Note 4(B))

At March 31, 2005, accounts payable-related party of $2,225 was payable to a
director for expense reimbursement due, the amount was paid in February 2006,
through issuance of stock.

(C) NOTE PAYABLE, RELATED PARTY

During the year ended March 31, 2001, the Company entered into an agreement with
a vendor, who is also a principal stockholder, related party for services
totaling $200,000. On November 11, 2002, the Company and vendor mutually agreed
that in lieu of the $200,000 payment, the vendor would accept 100,000 shares of
the Company's common stock valued at $1.00 totaling $100,000. In addition, the
Company also executed a $100,000 unsecured promissory note with the vendor.
Under the terms of the promissory note, the obligation bears interest at prime
plus 1% (7.50% at March 31, 2006). Interest is accrued and payable quarterly. At
March 31, 2006, accrued interest totaled $22,271. In connection with the
promissory note, all principal and accrued interest is payable in full upon the
earliest of the following:

(i) The date on which the Company raises at least $1,000,000 in funding within a
twelve-month period;

(ii) The date on which the agreement between the Company, vendor and other
unrelated party terminates; or

(iii) Three years from the date of the promissory note.

Since the note was due in November 2005, the note payable was re-classified to
current liabilities at March 31, 2005. The note is in default, however, demand
for payment has not been made.




NOTE 6 STOCKHOLDERS' DEFICIENCY

(A) PREFERRED STOCK

In June 1999, an investor purchased 250,000 units at $1.00 per unit or $250,000
consisting of 250,000 shares of convertible preferred stock and receives
warrants to purchase up to 750,000 common shares as

                                       F-16

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

follows: 250,000 common stock warrants exercisable at $1.00 per share issued
with the preferred stock and another potential 500,000 as discussed below. The
preferred stock was convertible to common stock on a one-for-one basis upon the
earlier of:

(i) An initial public offering by the Company

(ii) The completion of a reverse take-over transaction,

(iii) A minimum $3,000,000 private equity financing based on a $10,000,000
valuation or,

(iv) The merger of the Company with another corporation or the sale of
substantively all the assets of the Corporation.

There was no beneficial conversion feature upon the sale as the value of the
common shares into which the preferred shares are convertible are also $1.00
based on contemporaneous transactions.

Upon exercise of the first 250,000 warrants, the investor received another
warrant for 250,000 common shares at $1.00 exercise price per share. Upon
conversion of the preferred stock, each share of common stock issued shall be
coupled with an additional common stock purchase warrant at an exercise price of
$1.00 per share with a three-month term. In December 1999 and May 2000, 100,000
and 150,000, respectively, of the first warrant were exercised and therefore in
May 2000 the additional 250,000 warrants were granted with an exercise price of
$1.00 expiring June 2003. In June 2001, pursuant to a letter of intent, which
was ratified by the shareholders, the preferred shares were converted and the
additional 250,000 warrants were granted at an exercise price of $1.00 with an
amended term not to exceed five years. There was no beneficial conversion
feature to the warrants as the value of the common stock was still considered to
be $1.00 based on contemporaneous transactions at that time. There was no effect
of the warrant issuances on operations as all warrants are considered to be
purchased as part of the preferred stock unit. The second and third warrants
totaling 500,000 common shares remained outstanding at March 31, 2003. In June
2003, 250,000 of those expired leaving 250,000 outstanding at March 31, 2005. As
of March 31, 2006, no preferred shares were outstanding.

(B) COMMON STOCK AND OPTIONS

In March 1999, the Company issued 300,000 common shares to an officer for
services, which were valued at a planned contemporaneous cash offering price for
one-for-one convertible preferred stock and common stock warrants issued with an
exercise price of $1.00 per share. A compensation expense of $300,000 was
recorded in 1999.

In March 1999, the Company issued 255,000 common shares and 345,000 common stock
warrants exercisable at $0.0001 per share as a fee for assistance in the
acquisition of intangible assets. The common shares were valued based on a
contemporaneous cash-offering price of $1.00 per share. The warrants were valued
pursuant to SFAS 123, at $1.00 per warrant. The aggregate consulting expense
charged to operations in 1999 for the shares and warrants was $600,000.

In June 1999, the Company issued 2,000,000 common shares for a portfolio of
patents, patents pending, and related intellectual

                                       F-17

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

property. The portfolio was valued at $2,000,000 based on a $1.00 per share
contemporaneous cash offering price for one-for-one convertible preferred stock
and common stock warrants issued with an exercise price of $1.00.

In December 1999, 100,000 common stock warrants were exercised for $100,000.

In May 2000, directors were granted an aggregate 58,100 common shares for
services rendered. The shares were valued at the contemporaneous cash offering
price of $1.00 per share resulting in a compensation expense of $58,100 on the
grant date.

In May 2000, 150,000 common stock warrants were exercised for $150,000.

In October 2000, 345,000 common stock warrants were exercised at $0.0001 per
share or a total of $35.

In October 2000, 100,000 common shares were issued to an officer as compensation
for services rendered. A compensation expense of $100,000 was recognized on the
grant date based on the contemporaneous cash offering price of $1.00 per common
share.

In December 2000, 50,000 common shares were sold to an unrelated party for
$50,000 and another 50,000 common shares were sold to a stockholder for $50,000.

During January 2001, the Company issued 400,000 fully vested shares to a third
party research and development subcontractor (the "Vendor") to be used as credit
against $1,200,000 in future invoiced license and royalty fees. Based on the
contract, the shares had a fair value of $3.00 per share and stated
anti-dilution provisions provided to the Vendor, the Company valued the 400,000
shares at $1,200,000, which reflected the best available evidence as to the
valuation of these shares (See note 7). The value, considered a prepaid expense,
was recorded as deferred consulting fees deducted from stockholders' deficiency,
to be amortized against future invoices. During 2003, in accordance with the
anti-dilution provision, the Company issued an additional 800,000 shares for
common stock having a fair value of $1.00 per share based on recent transactions
upon which certain accounts payable and loans payable with related and unrelated
parties were settled. For financial accounting purposes, the additional shares
are valued at $800,000 based on contemporaneous transactions at $1.00 per share
and were recorded as an addition to the $1,200,000 deferred consulting fees for
a total of $2,000,000. However, the vendor only receives credit of $1,200,000
towards its invoices. In addition, the vendor's common stock holdings may not
exceed 20%. Should the vendor's stock be reduced to comply with the 20%
provision the Company's credit will be reduced pro-rata. As of March 31, 2004,
no services had yet been performed under the terms of the agreement. As a result
of the 800,000 shares issued, this third party subcontractor became a principal
stockholder of approximately 19.9% and thus, a related party.

In May 2001, two officers vested in 850,000 common stock options previously
granted pursuant to their employment agreements upon the achievement of certain
milestones. A compensation expense of $849,915 was recognized under APB 25 based
on the intrinsic value of the options at the grant date. In November 2001 and
March 2002, the 262,500 and 587,500 options, respectively, were exercised.
Accordingly, 850,000 common shares were issued at $0.0001 per share for an
aggregate $85. (See Notes 4(A) and 6(C))

                                       F-18

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

In May 2001, a principal stockholder was granted 125,000 common stock options
and a consulting expense of $254,345 was recognized pursuant to SFAS 123 based
on the $3.00 fair market value of the common shares. The shareholder immediately
exercised 125,000 options for 125,000 common shares at an exercise price of
$125,000. (See Note 7)

In May 2001, the 250,000 preferred shares were converted into 250,000 common
shares. Pursuant to the warrant agreement attached to the preferred shares, an
additional 250,000 warrants were issued upon conversion with an exercise term of
five years at an exercise price of $1.00 per share.

In December 2001, 3,000 common shares were issued to an employee at $0.0001 per
share for services rendered. A compensation expense was recognized at the actual
cost of $1.00 per share or $3,000 based on a contemporaneous cash offering
price.

In December 2001, 3,000 common shares were issued to two directors each at
$0.0001 per share for services rendered. A director's fee was recognized at the
actual cost of $1.00 per share or $6,000 based on a contemporaneous cash
offering price.

In March 2002, 25,000 common shares were issued to a related party for $0.0001
per share as a loan fee relating to a convertible debenture issued subsequently
to March 31, 2002 (see Note 9). A deferred loan fee was recorded at $24,997
based on the contemporaneous cash offering price less the cash paid of $3.00
(see Note 10). During 2003, the convertible debt associated with this loan fee
was converted into 102,658 shares of common stock and the entire fee of $24,997
was charged to operations for 2003.

In November 2002, the Company issued 225,000 shares of common stock at $0.001
par value for $23.00 to certain employees, members of management, and the board
of directors (see Note 7). The shares issued had a fair value of $1.00 per share
based on recent contemporaneous transactions. Accordingly, an additional
$224,977 was charged to operations and reflected as compensation.

In November and December 2002, the Company issued 167,658 shares of common stock
having a fair value of $1.00 per share based on the recent stock issuances for
cash to settle outstanding accounts and loans payable with a related party
totaling $167,658. Of the total shares issued, 102,658 shares valued at $102,658
were issued in connection with a convertible debenture (See Note 9).
Accordingly, no gain or loss was recognized in these transactions. (See Note 7)

In November 2002 and February 2003, the Company issued an aggregate 273,058
shares of common stock to settle certain accounts payable totaling $256,762 with
unrelated entities (See Note 4(C)). The shares issued has a fair value of $1.00
per share representing the mutually agreed upon value of the Company's stock. As
a result, the Company recognized a loss on settlement totaling $16,296.

In December 2002, the Company issued 40,000 shares of its common stock to a
principal stockholder (See Notes 4(B) and 7) having a fair value

                                       F-19

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

of $40,000 based on recent contemporaneous transactions. In exchange for the
stock issued, the Company received various corporate services including rental
of the office facility, general accounting services, and overhead. The 40,000
shares were issued for calendar year 2003. Accordingly, $10,000 was charged to
operations and included in general and administrative expenses and the remaining
$30,000 was deferred and included as a separate component of stockholders'
deficiency to be amortized over the remaining of fiscal year.

In October 2004, the Company entered into a non-brokered private placement of
500,000 shares at a price of $0.50 per share for proceeds of $250,000 with a
finance company controlled by a director of the Company.

In October 2004, the Company converted a related party loans payable of $160,000
into 320,000 shares of common stock at $1.50 per share. The debt was due to a
finance company controlled by a director of the Company. The Company recognized
a loss of $320,000 on this transaction (see Note 5 (A)).

In November 2004, the Company entered into a services agreement for two years to
generate and increase customer interest in the Company's products and
technologies and explore merger/acquisition possibilities. The Company issued
4,500,000 shares of common stock. The stock was valued at the quoted trading
price of $1.50 on the grant date resulting in a total value of $6,750,000 to be
recognized over the service period of November 1, 2004 through October 31, 2006.
A consulting expense of $1,406,250 was recorded as of March 31, 2005.

In December 2004, the Company issued 133,333 shares valued at $1.50 per share
based on the quoted trade price in payment of various expenses totaling $40,000
owed to a finance company controlled by a director of the Company. The Company
recorded a loss on debt conversion of $159,986. A subscription receivable of
$13.00 was recorded as of December 31, 2004.

In January 2005, the Company received the remaining $100,000 from a private
placement announced in October 2005.

In January 2006, the Company issued 94,054 shares valued at $0.75 per share
based on the quoted trade price in payment of various expenses totaling $47,027
to a finance company controlled by a director of the company and to a director.
The Company recorded a loss on debt conversion of $23,513.

(C) STOCK OPTIONS AND WARRANTS

The Company issues stock options and warrants to employees, service providers,
and investors in the course of business.

In accordance with SFAS 123, for options issued to employees, the Company
applies APB Opinion No. 25 and related interpretations. During 2003, the Company
did not grant common stock options to officers. Due to the uncertain vesting
period of certain grants due to vesting contingencies, compensation expense is
recognized only upon vesting. Accordingly, compensation cost of $849,915 was
recognized for 850,000 options vested in May 2001. The remaining 750,000
potential options under the employment agreements were terminated by the Board
of Directors when the employment agreements were terminated in November 2001.
(See Notes 4(A) and 6(B))

                                       F-20

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

Had compensation cost for the Company's stock-based compensation plan been
determined on the fair value at the grant dates for awards under that plan,
consistent with Statement No. 123, the Company's net loss for the years ended
March 31, 2006 and 2005 and the period from March 5, 1999 (inception) to March
31, 2006 would not have changed.

For stock options and warrants issued to non-employees, the Company applies SFAS
123. Accordingly, consulting expense of $3,783 and $254,345 was recognized in
2003 and 2002, respectively, upon granting of 25,000 and 125,000 common stock
options, respectively. $345,000 was charged to operations in 1999 as reflected
in the accompanying consolidated statements of operations from March 5, 1999
(inception) to March 31, 2006.

For consolidated financial statement disclosure purposes and for purposes of
valuing stock options and warrants issued, the fair market value of each stock
granted was estimated on the grant date using the Black-Scholes Option-Pricing
Model in accordance with SFAS 123. The following weighted-average assumptions
were used for the year ended March 31:

<TABLE>
<CAPTION>
                          2006   2005   2004     2003       2002    2001   2000    1999
                          ----   ----   ----   --------   -------   ----   ----  --------
<S>                       <C>    <C>    <C>    <C>        <C>       <C>    <C>   <C>
Expected Dividend Yield   $ --   $ --   $ --   $   0.00%  $  0.00%  $ --   $ --  $   0.00%
Risk Free Interest Rate     --     --     --      4.145%     3.57%    --     --      4.53%
Expected Volatility         --     --     --       0.00%     0.00%    --     --      0.00%
Expected Term               --     --     --    4 Years    1 Year     --     --   2 Years
</TABLE>

A summary of the options outstanding, which were granted for cash or services
are presented below:

                             NUMBER OF
                            OPTIONS AND   WEIGHTED AVERAGE
                              WARRANTS     EXERCISE PRICE
                            -----------   ----------------
Stock Options
Balance at March 31, 2002       500,000   $           1.00
Granted                          25,000               1.00
Exercised                            --                 --
Forfeited                            --                 --
Terminated                           --                 --
                            -----------   ----------------
Balance at March 31, 2003       525,000   $           1.00
Granted                              --                 --
Exercised                            --                 --
Forfeited                      (250,000)              1.00
Terminated                           --                 --
                            -----------   ----------------
Balance at March 31, 2004       275,000   $           1.00
Granted                              --                 --
Exercised                            --                 --
Forfeited                            --                 --
Terminated                           --                 --
                            -----------   ----------------
Balance at March 31, 2005       275,000   $           1.00
Granted                              --                 --
Exercised                            --                 --
Forfeited                            --                 --
Terminated                           --                 --
                            -----------   ----------------
Balance at March 31, 2006       275,000   $           1.00
                                          ================
Weighted average fair value
  of options granted for
  services during 2006                    $             --
                                          ================

                                       F-21

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

The following table summarizes information about options and warrants
outstanding at March 31, 2006:

<TABLE>
<CAPTION>
         OPTIONS AND WARRANTS OUTSTANDING            OPTIONS AND WARRANTS EXERCISABLE
--------------------------------------------------   --------------------------------
                             WEIGHTED
                              AVERAGE     WEIGHTED                           WEIGHTED
RANGE OF       NUMBER        REMAINING     AVERAGE       NUMBER               AVERAGE
EXERCISE   OUTSTANDING AT   CONTRACTUAL   EXERCISE   EXERCISABLE AT          EXERCISE
  PRICE    MARCH 31, 2006      LIFE         PRICE    MARCH 31, 2006            PRICE
--------   --------------   -----------   --------   --------------          --------
<S>        <C>              <C>           <C>        <C>                     <C>
$   1.00          250,000    0.08 Years       1.00          250,000              0.91
$   1.00           25,000    1.08 Years       1.00           25,000              0.09
           --------------                 --------   --------------          --------
                  275,000                 $   1.00          275,000          $   1.00
           ==============                 ========   ==============          ========
</TABLE>

(D) PAR VALUE

In August 2001, the par value of common stock was changed to $0.0001 from $1.00.
The change is reflected retroactively for all periods presented in the
accompanying consolidated financial statements.

NOTE 7 RELATED PARTIES

Certain liabilities with a related party were settled with common stock. (See
Note 6(B).)

In November 2004 the Company issued 4,500,000 shares to a consultant which
represents approximately 37% of the outstanding shares as of March 31, 2005.
Therefore, this consultant became a principle stockholder related party in
November 2004.

The Company leases its facility from a principal stockholder who also provides
certain administrative services to the Company. (See Notes 4(B) and 6(B)).

During the year ended March 31, 2004, the Company received working capital funds
from a principal stockholder totaling $75,463. The receipt of these funds
represents a 100% concentration of debt financing for the Company during 2004.
(See Note 5 (A).)

At March 31, 2005, the Company owed $4,616 to a related party of a principal
stockholder. (See Note 5(A)).

During the year ended March 31, 2006, the Company received working capital funds
from a principal stockholder totaling $86,600. The receipt of these funds
represents a 100% concentration of debt financing for the Company during 2006.
(See Note 5 (A).)

                                       F-22

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

In November and December, 2003, the Company issued 167,758 shares of common
stock to settle certain accounts and loans payable (See Note 6(B).)

In November 2002, the Company issued 225,000 shares of common stock to certain
employees, members of management, and directors. (See Note 6(B).

On May 1, 2002, the Company issued a $100,000, 5% Senior Secured Convertible
Debenture-Series A to a principal stockholder (see notes 6(B) and 9).

In May 2001, a principal stockholder was granted 125,000 common stock options
(See Note 6(B)).

In October 2000, 400,000 stock options were reserved in trust for future
issuance in accordance with an anti-dilution provision in an amended stockholder
agreement (See Note 6(B)). During May 2001, 125,000 of these options were
granted to a principal stockholder and then exercised at a price of $1.00 per
share. The Company recognized a consulting expense of $254,345 in 2002 based on
the $3.00 current fair market value of the warrants computed pursuant to the
fair market value method of SFAS 123. (See Note 6(B))

NOTE 8 SETTLEMENT OF ACCOUNTS PAYABLE

During the year ended March 31, 2003, the Company had outstanding accounts
payable with a vendor totaling $59,654. The vendor formally released the Company
of any further obligations under the terms of the agreement. Accordingly, the
Company recognized the entire $59,654 as a gain on settlement and this amount is
reflected in the consolidated statement of operations as other income during the
period from March 5, 1999 (inception) to March 31, 2006.

Related to 2005 the Company recorded a gain on debt forgiveness of $9,124
related to a vendor invoice.

NOTE 9 CONVERTIBLE DEBENTURE

On May 1, 2002, the Company issued a $100,000, 5% Senior Secured Convertible
Debenture-Series A (the "Debenture") to a related party principal stockholder
(the "Investor") and received the first $50,000 of funding under the debenture
(see Note 7). Unless converted, redeemed or retracted before maturity, interest
payments are due May 1, 2003 and April 30, 2004. The Debenture was to be paid in
full on the earlier of April 30, 2004 or the closing date of the next round of
financing for a minimum of $1,000,000. The Debenture was collateralized under a
Security Agreement by all of the Company's assets, including its patent
applications. At any time, at the option of the holder, the outstanding
principal amount of the debenture was convertible into common shares of the
Company at a conversion price of $1.00 per share and accrued interest wass
payable in cash at that time. The Debenture contained various covenants, some of
which restricted the ability of the Company to issue further debt or equity
securities. The Debenture contained anti-dilution provisions requiring the
Company to issue additional shares to the Investor, based upon a stipulated
formula, if the Company sold any additional shares at less than $3.00 per share.
(See Note 6(B)).

Upon the issuance of the convertible debenture, and in accordance with EITF 98-5
"Accounting for Convertible Securities with Beneficial Conversion Features or

                                       F-23

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

Contingently Adjustable Conversion Ratio," there was no beneficial conversion as
the market price of the Company's common stock, which was $1.00 on the
commitment date, was equivalent to the exercise price of $1.00.

In November 2002, the $100,000 debenture plus accrued interest was converted
into 102,568 shares of common stock having a fair value of $102,568. The
principal of $100,000 and accrued interest of $2,568 was valued at $1.00 per
share based upon recent transaction for the settlement of certain accounts
payable and loans payable with the same related party (principal stockholder)
and unrelated parties (See Note 6(B)).

NOTE 10 INCOME TAXES

The Company files separate tax returns for the parent and its Canadian
subsidiary. There was no income tax expense for the years ended March 31, 2006
and 2005, due to the Company's net losses or utilization of net operating loss
carryforwards.

The blended Canadian Federal and Provincial Corporate tax rate of 41.5% applies
to loss before taxes of the Canadian subsidiary. The Company's tax expense
differs from the "expected" tax expense for Federal income tax purposes for the
years ended March 31, 2006 and 2005, (computed by applying the United States
Federal Corporate tax rate of 34% to consolidated loss before taxes), as
follows:

                                             YEARS ENDED MARCH 31,
                                       --------------------------------

                                           2006               2005
                                       --------------    --------------
Computed "expected" tax benefit        $   (1,201,827)   $     (667,646)
Foreign income tax rate differences             1,200             2,196
Change in deferred tax asset
  valuation allowance                       1,200,627           665,450
                                       --------------    --------------
                                       $           --    $           --
                                       ==============    ==============

The effects of temporary differences that gave rise to significant portions of
deferred tax assets and liabilities at March 31, 2006 are as follows:

Deferred tax assets:
United States net operating loss carryforward            $    2,873,984
Canadian net operating loss carryforward                      1,119,470
                                                         --------------
Total gross deferred tax assets                               3,993,454
Less valuation allowance                                     (3,993,454)
                                                         --------------
Net deferred tax assets                                  $           --
                                                         ==============

The valuation allowance at March 31, 2006 was $2,792,827. The net change in
valuation allowance during the year ended March 31, 2006 was an increase of
approximately $1,200,627. The Company's subsidiary has net operating losses of
approximately $2,675,000 at March 31, 2006 available to offset the subsidiaries'
net income through 2010 under Canadian Federal and Provincial tax laws and the
parent United States entity has a net operating loss carryforward of
approximately $8,504,000 available to offset the parent's net income through
2024.

For the purpose of these estimates, certain stock based expenses aggregating
approximately $1,008,000 since inception were considered non-deductible. Actual
amounts ultimately deductible may differ from these estimates.

                                       F-24

<PAGE>

                       KYTO BIOPHARMA, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2006

The utilization of the net operating loss carryforwards is dependent upon the
ability to generate sufficient taxable income during the carryforward period. In
addition, utilization of these carryforwards may be limited due to ownership
changes as defined in the Internal Revenue Code.

NOTE 11 GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company
has no revenues, a net loss of $3,564,787 and net cash used in operations of
$43,235 in 2006 and a working capital deficiency of $231,455, a stockholders'
deficiency of $231,227 and a deficit accumulated during the development stage of
$11,329,010 at March 31, 2006. The ability of the Company to continue as a going
concern is dependent on the Company's ability to further implement its business
plan, raise capital, and generate revenues (see Note 4(D)). The consolidated
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.

The Company is currently a development stage company and its continued existence
is dependent upon the Company's ability to resolve its liquidity problems,
principally by obtaining additional debt financing and/or equity capital. During
the year ended March 31, 2006, the Company received $86,600 in related party
debt financing. During the three months ended June 30, 2004, the Company
received $35,000 in related party debt financing. In October 2004, the Company
closed on a non-brokered private placement of 500,000 shares at a price of $0.50
per share for proceeds of $250,000 of which $100,000 was paid in January 2005
and has also converted a debt of $160,000 into 320,000 shares of common stock.
(See Note 5(A) and Note 6(B)) The Company recognized a loss of $320,000 on this
transaction.

The Company has yet to generate an internal cash flow, and until the sales of
its product begins, the Company is very dependent upon debt and equity funding.
The Company must successfully complete its research and development resulting in
a saleable product. However, there is no assurance that once the development of
the product is completed and finally gains Federal Drug and Administration
clearance, that the Company will achieve a profitable level of operations.

                                       F-25