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 July 31, 2006

                                       or

/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
For the transition period from N/A to N/A

                        Commission File Number 3319048NY

                         MURRAY UNITED DEVELOPMENT CORP.
                         -------------------------------
                         (Name of Small Business Issuer)

             Delaware                                    222856171
----------------------------------------    -----------------------------------
(State of incorporation or organization)    (I.R.S. employer identification no.)


P.O. Box 669, Huntington, New York                         11743
---------------------------------------                  ---------
(Address of principal executive offices)                 (Zip Code)

Issuer's telephone number, including area code: (908) 979-3025


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


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




                                        i


<PAGE>

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

Check whether the Issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer 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 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 the Issuer's knowledge, in definitive information or proxy statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [ X ].

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

The Issuer did not have any revenues during its fiscal year ended July 31, 2006.

As of October 18, 2006, the aggregate market value of the registrant's Common
Stock held by non affiliates of the Issuer as computed by reference to the
closing price of such stock on such date was approximately $742,880.

As of October 18, 2006, 173,253,434 shares of the Issuer's Common Stock were
outstanding. If holders of all securities convertible into the Issuer's Common
Stock exercised their respective conversion rights, there would be 194,851,434
shares of Common Stock outstanding.

Transitional Small Business Disclosure Format:

Yes      No  X
   ----     -----

Documents incorporated by Reference:  NONE




                                       ii

<PAGE>
<TABLE>
<CAPTION>


                                    INDEX TO FORM 10-KSB -- Parts I - IV

                                                                                                               Page No.
<S>                                <C>                                                                        <C>
Part I   - Item 1.                  Description of Business                                                       1
         - Item 2.                  Properties                                                                    9
         - Item 3.                  Legal Proceedings                                                             9
         - Item 4.                  Submission of Matters to a Vote of Security Holders                           9

Part II
         -  Item 5.                 Market for Common Equity, Related Stockholder Matters and Small
                                    Business Issuer Purchases of Equity Securities                                9
         -  Item 6.                 Management's Discussion and Analysis or Plan of Operation                    11
         -  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
         -  Item 8B.                Other Information                                                            13
Part III
         -  Item 9.                 Directors, Executive Officers, Promoters and Control Persons;                14
                                    Compliance with Section 16(a) of the Exchange Act
         -  Item 10.                Executive Compensation                                                       16
         -  Item 11.                Security Ownership of Certain Beneficial Owners and                          17
                                            Management and Related Stockholder Matters
         -  Item 12.                Certain Relationships and Related Transactions                               18
         -  Item 13.                Exhibits                                                                     21
         -  Item 14                 Principal Accountant Fees and Services                                       23

            Signatures                                                                                           24

            Index to Financial Statements

            Exhibit 23 Consent of Blanchfield, Meyer, Kober & Rizzo LLP

            Exhibit 31(a) (Certification required under the Section 302 of the
            Sarbanes-Oxley Act of 2002)

            Exhibit 31(b) (Certification required under the Section 302 of the
            Sarbanes-Oxley Act of 2002)

            Exhibit 32(a) (Certification required under the Section 906 of the
            Sarbanes-Oxley Act of 2002)

            Exhibit 32(b) (Certification required under the Section 906 of the
            Sarbanes-Oxley Act of 2002)
</TABLE>

                                       iii





<PAGE>

                                     PART I


DISCLOSURE OF FORWARD-LOOKING STATEMENTS


         The statements contained in this Annual Report on Form 10-KSB that are
not historical facts are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements may be
identified by, among other things, the use of forward-looking terminology such
as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable terminology. All
statements other than statements of historical fact included in this report,
including without limitation, the statements regarding the Company's financial
position and liquidity, the Company's plan of operation, its ability to identify
and form a business combination with a suitable business entity, and other
matters, may be deemed forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from the Company's expectations are disclosed in this report. Should
the Company's underlying assumptions prove incorrect, actual results may vary
materially from those described in this report as intended, anticipated,
believed, estimated or expected with respect to other forward-looking
statements. The Company does not undertake to update these forward-looking
statements.

ITEM 1.  DESCRIPTION OF BUSINESS

Rotorcam Engine

         Murray United Development Corporation (sometimes referred to in this
Report as the "Company") is a development stage company that was formed under
Delaware law on October 13, 1987 to exploit commercially an internal combustion
engine (referred to in this Report as the "Rotorcam Engine") that would run on
fuels other than gasoline, that would have significantly fewer parts, and that
would be lighter and operate more efficiently than conventional internal
combustion engines.

         From our inception in 1988 through fiscal 2000, we were engaged in
research, design and development relating solely to the Rotorcam Engine
technology. During such period, we spent approximately $840,000 on such research
and development.

         From approximately 2000 to 2005, we attempted to locate a funding
source for the $350,000 to $375,000 that was required in order to commercialize
the Rotorcam Engine. Possible sources of such funding included borrowing from
private sources and/or exercise of the 15,398,000 outstanding Class B Warrants
issued during our initial public offering. In order to encourage Warrant holders
to exercise their Class B Warrants, we filed a Registration Statement with the
United States Securities and Exchange Commission ("SEC"), which became effective
on May 3, 2000. The Registration Statement, together with the qualification or
exemptions from qualification obtained in several states where holders of our
Class B Warrants reside, permit such


                                       1
<PAGE>



holders to exercise their Class B Warrants under the laws of the United States
and those states where we have either qualified or obtained an exemption from
qualifying the shares of our Common Stock for which the are exercisable. To
date, however, none of such Class B Warrant holders have exercised their Class B
Warrants due principally to the fact that, with limited exceptions, the market
price of our Common Stock has been lower than the exercise price of the Class B
Warrants since the effective date of the Registration Statement.

         Due principally to the lack of any operating revenue or other
internally or externally generated sources of funding, we did not incur any
expenses for research and development for the Rotorcam Engine during our 2001
through 2006 fiscal years. Management has decided to discontinue further efforts
to develop and commercialize this technology unless it receives expressions of
interest from third parties to fund such development and commercialization, of
which there can be no assurances.

Klenz-Safe Cleaning Solution

         In February 2002, we reached an agreement in principle with Mr. Anthony
Campo, the Chairman of the Company, and with Mr. Dwight Foster, Chief Executive
Officer of the Company, pursuant to which we would obtain a license to use and
sell a proprietary cleaning solution for removing sulfur from coal burning smoke
flues and pollutants and contaminants from building air. This proprietary
solution is owned by Foster-Campo Corp. ("Foster-Campo"), a corporation owned by
Mr. Foster and Mr. Campo. Under the terms of the proposed license, Foster-Campo
would manufacture the cleaning solution and supply it to our customers and then
invoice us for their cost of doing so without any profit to Foster-Campo.
Foster-Campo would receive a royalty payment of 50% of our net profit on sales
of the proprietary solution to our customers.

         Between 2000 and 2004 we tested and conducted research relating to
Klenz-Safe's ability to remove sulfur from coal burning smoke flues and
pollutants and contaminants from building air at an aggregate cost of
approximately $28,700. Funding for all such testing was provided by loans to the
Company from our Chairman, Mr. Anthony Campo. The results of this research and
testing were successful, and from fiscal 2000 through fiscal 2006 we sought
third-party companies with which to form business relationships to assist us in
funding the cost of further testing and commercialization of Klenz-Safe. To
date, however, we have not been successful in our attempts to form any such
business relationships.

         The Company did not conduct any research and development activities on
its Klenz-Safe technology during fiscal 2005 or 2006 and does not intend to
conduct such research and development during the ensuing 12 months unless it is
able to obtain funds to conduct such activities from third parties. Management
is not able to provide any assurances that such third party funding will be
available at any time during such 12-month period.



                                       2
<PAGE>

Hydrogen Production Technology

         In 2002, we began to investigate a technology that would produce
hydrogen from sunlight through the use of a proprietary device and solution. The
hydrogen gas produced would be used to supply on demand, low cost hydrogen fuel
to hydrogen-oxygen fuel cells in order to meet stationary and mobile electric
power requirements. Stationary uses would include residential and commercial
heating systems, and mobile uses would include electric and hybrid fuel cell
powered vehicles.

         In an attempt to develop this technology, we entered into agreements
with George Johnson and William L. Johnson (the "Inventors") in which the
Inventors agreed to develop a method and apparatus for production of photo
galvanic hydrogen (the "PGH Technology") and to prepare and file a provisional
patent application relating thereto in the PTO. The Inventors further agreed
that, upon filing of the provisional patent application, they would negotiate
with the Company for an assignment of all of their interest in the PGH
Technology and the provisional patent application to the Company. In
consideration for the Inventors' services, the Company agreed to issue to each
of the Inventors 100,000 shares of the Company's Common Stock and to register
such shares with the Securities and Exchange Commission.

         In July 2003, the Inventors filed the provisional patent application
with the PTO, and in October 2003, the Company entered into a Technology
Assignment Agreement with the Inventors pursuant to which the Inventors agreed
to assign to the Company all of their rights in the PGH Technology, in the
provisional patent application, and in all letters patent, that may be granted
for the PGH Technology.

         We conducted research on the PGH Technology on a limited basis in
fiscal 2004. However, we did not conduct any research and development activities
on the PGH Technology during fiscal 2005 or 2006 and do not intend to conduct
such research and development during the ensuing 12 months unless we are able to
obtain funds to conduct such activities from third parties. Management is not
able to provide any assurances that such third party funding will be available
at any time during such 12-month period.


POTENTIAL MARKETS FOR COMPANY'S PRODUCTS

         We believe that potential markets for Klenz-Safe include the chemical
production, manufacturing, food processing, pharmaceutical production and indoor
air quality control industries. Potential markets for the Company's hydrogen
technology include residential and commercial heating systems and electric and
hybrid fuel cell powered vehicles.

DISTRIBUTION METHODS OF PRODUCTS OR SERVICES

         If we successfully commercialize our Klenz-Safe technology, we plan to
distribute our Klenz-Safe products through third-party distribution channels
either on a commission or buy and resell basis.

         If we successfully produce hydrogen using the photo galvanic process,
we intend to develop a prototype apparatus to produce commercial quantities of
hydrogen and will seek distribution partners in order to market and distribute
our photo galvanic hydrogen product.


                                       3
<PAGE>

COMPETITION

         If we are able to commercialize Klenz-Safe, we expect to compete by
means of higher value in use through combining the advantages of differing
technologies in one product. We are not presently aware of any entities that may
directly compete with us in the production of photo galvanic hydrogen. Other
companies are engaged in the production and sale of hydrogen using electrolytic
or other electro-chemical processes. If we are able to develop and market our
hydrogen technology, we intend to compete on the basis that our technology is
more economical than electrolytic or other electro-chemical processes.

NEED FOR GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES

         Sales of our Klenz-Safe technology to power generating utilities, if
any, will require verification testing for pollutant capture. We expect that the
cost of compliance with such testing requirements will be minimal. We do not
believe that governmental approval will be required for other applications of
our Klenz-Safe product.

         We are not aware of any requirement for governmental approval of our
proposed hydrogen technology.

         We intend to comply with all regulations that may be applicable to our
business. However, the compliance with such regulations may cause delays and
additional expense that could adversely affect the commercial viability of our
potential products.


PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR
LABOR CONTRACTS, INCLUDING DURATION

         Under legal settlements signed in 1993 and 1996, we obtained title to
seven U.S. patents and four international patents relating to the Rotorcam
Engine. Of these seven U.S. patents, three remain in effect and four have
expired due to lack of funds necessary to maintain such patents. Each of the
foreign patents and the rights to patents pending have also expired due to a
lack of funds necessary to acquire or maintain such patents.

         We have been granted trademark protection for the name "Klenz-Safe"
from the PTO. In February 2004, we filed a patent application with the PTO for
the use of Klenz-Safe to remove contaminants from coal burning flue gas and to
remove carbon monoxide and other contaminants from indoor building air, and in
July 2004 we filed a patent application covering a method and apparatus for
production of photo galvanic hydrogen ("PGH"). To date, neither of such patents
has issued.

   SEASONALITY

         As the company is a development stage company, its business is not
affected by seasonality.


                                       4
<PAGE>

EMPLOYEES AND CONSULTANTS

         We currently have one employee, Mr. Dwight Foster, whom the Board
appointed as our President and Chief Executive Officer in December 1998. Mr.
Foster resigned his position as President in January 2000 upon the simultaneous
appointment of Mr. Robert Van Dine as President but remained as Chief Executive
Officer of the Company. Mr. Anthony Campo, who is our Chairman of the Board,
Executive Vice-President, Secretary and Treasurer, also provides us with general
administrative services. Mr. Robert Van Dine, our current President, has
rendered consulting services to us from January 2000 to the present.

         In October 2003, we engaged George Johnson and William L. Johnson as
consultants to the Company to engage in research and development of the
Company's hydrogen technology. George Johnson's services have been terminated
due to his death, and William L. Johnson's services have been suspended
indefinitely for personal reasons.

         In October 2003, we engaged John Byrne to assist us in identifying, and
coordinating and negotiating with, third parties that may form business
affiliations with the Company for purposes of developing and/or marketing the
Company's Klenz-Safe and PGH Technologies. In consideration of his services, we
agreed to issue to Mr. Byrne one million shares of our Common Stock. Such shares
were issued on November 30, 2004. Mr. Byrne's services were terminated effective
May 2, 2006.

         We have previously also retained the services of a consultant on an as
needed basis, who provides us with engineering services with payment being made
based on such consultants' hourly rate.


RECENT LETTER OF INTENT RELATING TO POSSIBLE BUSINESS COMBINATION WITH AN
OPERATING COMPANY

         In August 2006, management was approached by representatives of a
company with operations located in the People's Republic of China (the "PRC
Operating Company") to determine whether management might be interested in
having the Company engage in a merger with the PRC Operating Company. The PRC
Operating Company is engaged in the business of manufacturing and sales of
precision investment casting and metal fabrication products and of electronic
circuit boards for home appliances and motion controllers in China.

         In September 2006, we entered into a non-binding letter of intent
("Letter of Intent") pursuant to which we would merge (the "Merger") with the
PRC Operating Company. Under the terms of the Letter of Intent, upon completion
of the Merger, shareholders and consultants of the PRC Operating Company would
own 85.56% of the common stock of the Company on a fully diluted basis, and
existing Murray shareholders would own 12.22% of the shares of common stock of
the Company on a fully diluted basis. In addition, Mr. Campo would receive 0.71%
of such common stock on a fully diluted basis as partial consideration for his
agreement to cancel approximately $900,000 of indebtedness from the Company to
him; and shareholders holding 15,398,000 Class "B" warrants and Mr. Dwight




                                       5
<PAGE>

Foster, who currently holds an option to purchase 6,000,000 shares of the
Company, would receive similar rights to purchase an aggregate of 1.52% of the
common stock of the Company on a fully diluted basis. The PRC Operating Company
further agreed to pay up to $35,000 of the Company's legal, accounting and other
expenses incurred from the date of the Letter of Intent, subject to completion
of the transaction and certain other conditions.

         Management of the Company and of the PRC Operating Company are
presently negotiating the terms of a definitive agreement (the "Definitive
Agreement"). Under the Definitive Agreement, the parties would engage in a share
exchange transaction pursuant to which the Company would acquire all of the
outstanding capital stock of the PRC Operating Company in return for issuance to
the shareholders and consultants of such PRC Operating Company of that number of
shares of our Common Stock that would result in such shareholders' owning
approximately 85.56% of the total outstanding shares of Common Stock of the
Company.

         Although the form of the transaction contemplated by the Definitive
Agreement would be a share exchange rather than a merger, the respective
percentages set forth in the Letter of Intent (as described above) would remain
approximately the same. Even if the Definitive Agreement is concluded and
executed, closing of the share exchange would be subject to certain terms and
conditions including, but not limited to, mutually satisfactory due diligence
investigations by each of the companies involved.

         We are unable to predict whether the Company will enter into the
proposed share exchange with the PRC Operating Company or any other business
combination. However, if any such business combination is concluded, it is
unlikely that present management and shareholders of the Company will have
control of a majority of the voting shares of the Company following any business
combination. It is also probable that the Company's directors and officers would
resign and new directors and officers would be appointed without a vote of the
shareholders.

         Should the Definitive Agreement be concluded and executed, the Company
intends to promptly file a Form 8-K that will provide its shareholders with
detailed disclosure of the material terms and conditions of the Definitive
Agreement as well as a detailed description of the business of the PRC Operating
Company.

         If the transaction with the PRC Operating Company is not completed,
management intends simultaneously to seek a company with which to engage in a
possible business combination and to continue to look for companies to assist
the Company in attempting to develop and commercialize its Klenz-Safe and PGH
technologies. Depending on the timing, terms and nature of the opportunities
presented as a result of any such efforts, management will determine whether to
engage in a business combination with an operating company or pursue the
development and commercialization of one or both of the Company's Klenz-Safe and
PGH technologies.

         In seeking possible business combination opportunities, the Company
does not intend to restrict its search to any particular industry or
geographical location. Analysis of such companies will be undertaken by or under
the supervision of the Company's management, none of whom is a professional
business analyst. In view of the Company's lack of capital, management will
attempt to require any such candidate to assume the obligation to pay for the
professional and other fees and expenses relating to any such proposed business
combination.


                                       6
<PAGE>

         In connection with any proposed business combination, management will
perform a due diligence investigation of such proposed business combination
candidate, as they may deem appropriate in their business discretion. Such
investigation may include meeting personally with key personnel of the business
combination candidate, inspecting its facilities, checking references of
management, and other reasonable measures to the extent of the Company's limited
capital resources and management expertise.

         The Company anticipates that its participation in a business
combination would be accomplished through the issuance of its common stock.
While the terms of any such transaction cannot be predicted it should be noted
that in some circumstances the criterion for determining whether or not the
combination is a "tax free" reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended, may depend on the issuance to the shareholders
of the company with which the Company intends to combine of at least 80% of the
common stock of the Company. Existing shareholders of the Company may, in such
circumstances, retain up to 20% of the total outstanding capital stock of the
Company. Shareholders of the Company should exercise caution in relying on any
tax benefits in light of any new or proposed tax laws, and it is possible that
no tax benefits will exist at all. Shareholders should also consult with their
own tax, financial or other business advisors.


EFFECTS OF EXISTING OR PROBABLE GOVERNMENTAL REGULATIONS

Sarbanes-Oxley Act

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002
(the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety of new
regulatory requirements on publicly held companies and their insiders. Many of
these requirements will affect us. For example:

     -    Our Chief Executive Officer and Chief Financial Officer must now
          certify the accuracy of all of our periodic reports that contain
          financial statements;

     -    Our periodic reports must disclose our conclusions about the
          effectiveness of our disclosure controls and procedures; and

     -    We may not make any loan to any director or executive officer and we
          may not materially modify any existing loans.

The Sarbanes-Oxley Act has required us to review our current procedures and
policies to determine whether they comply with the Sarbanes-Oxley Act and the
new regulations promulgated thereunder. We will continue to monitor our
compliance with all future regulations that are adopted under the Sarbanes-Oxley
Act and will take whatever actions are necessary to ensure that we are in
compliance.


                                       7
<PAGE>

PENNY STOCK

     Our common stock is "penny stock" as defined in Rule 3a51-1 of the
Securities and Exchange Commission. Penny stocks are stocks:

     -    with a price of less than five dollars per share;

     -    that are not traded on a "recognized" national exchange; whose prices
          are not quoted on the NASDAQ automated quotation system;

     -    whose issuer has net tangible assets in excess of $2,000,000 if the
          issuer has been in continuous operation for at least three years, or
          $5,000,000 if such issuer has been in continuous operation for less
          than three years, or has received average revenues of less than
          $6,000,000 for the last three years.

         Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and
Exchange Commission require broker/dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny stocks and to
obtain a manually signed and dated written receipt of the document before making
any transaction in a penny stock for the investor's account. You are urged to
obtain and read this disclosure carefully before purchasing any of our shares.

         Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in these stocks before selling any penny stock to that investor.
This procedure requires the broker/dealer to:

     -    get information about the investor's financial situation, investment
          experience and investment goals;

     -    reasonably determine, based on that information, that transactions in
          penny stocks are suitable for the investor and that the investor can
          evaluate the risks of penny stock transactions;

     -    provide the investor with a written statement setting forth the basis
          on which the broker/dealer made his or her determination; and

     -    receive a signed and dated copy of the statement from the investor,
          confirming that it accurately reflects the investors' financial
          situation, investment experience and investment goals.

         Compliance with these requirements may make it harder for our
stockholders to resell their shares.


                                       8
<PAGE>

REPORTS TO SECURITY HOLDERS

         We have not in the past provided an annual report to our shareholders
and do not intend to do so until we are able to generate sufficient revenues to
fund the expense of such reports. We are subject to the disclosure rules of
Regulation S-B for a small business issuer under the Securities Act of 1933 and
the Securities Exchange Act of 1934 and are therefore required to file a Form
10-KSB annually and Forms 10-QSB quarterly. In addition, we are required to file
Forms 8-K and other information statements from time to time as required.

         The public may read and copy any materials we file with the Securities
and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an internet site (http://www.sec.gov). That contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with SEC.


ITEM 2.  PROPERTIES

We do not presently own or lease any properties.


ITEM 3.  LEGAL PROCEEDINGS

We are not presently a party to any pending legal proceedings.

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

Not applicable.

                                     PART II


     ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
     STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF SECURITIES

         Our Common Stock has been traded in on the over-the-counter market
since March 24, 1988 and is quoted on the OTC Bulletin Board under the symbol
MRAY. The range of high and low bid quotations as reported by the National
Quotation Bureau, Inc., without adjustment for retail markup, markdown or
commission, for the periods indicated below are:


                                       9
<PAGE>

                               Year Ended July 31,

                             2006                               2005
                             ----                               ----
                       High         Low                 High             Low
                       ----         ---                 ----             ---
1st Quarter            0.025       0.0055             $ 0.009          $ 0.003
2nd Quarter            0.056       0.005              $ 0.035          $ 0.015
3rd Quarter            0.036       0.012              $ 0.025          $ 0.01
4th Quarter            0.025       0.0055             $ 0.015          $ 0.008

         Reporting by the National Quotation Bureau, Inc. of quotations for our
Common Stock does not evidence an established public trading market for such
stock, and holders of our Common Stock may not be able to liquidate their
investment at acceptable prices. Moreover, such quotations reflect inter-dealer
prices without retail mark-up, mark-down or commission and may not be indicative
of actual trading transactions.

         As of October 18, 2006 there were approximately 831 holders of record
of our Common Stock. We have not paid any dividends on our Common Stock during
either of the past two fiscal years and have no intention of paying dividends
during the forthcoming fiscal year.

         On November 5, 2004, we issued 2,000,000 shares of our Common Stock to
Mr. Dwight Foster. Such shares were issued as compensation for his services as
Chief Executive Officer and a Director of the Company. Such shares were issued
without registration pursuant to Section 4(2) of the Securities Act of 1933 and
are therefore "restricted" securities, which may not be resold or otherwise
transferred without registration under the securities laws or pursuant to an
exemption from such registration requirements. There were no transactions in the
Company's Common Stock on November 5, 2004. However, the average of the closing
bid and asked prices of such Common Stock on November 5, 2004 was $ 0.0050.
Based solely on such average price, the value of the grant to Mr. Foster was
therefore approximately $10,000.

         On November 30, 2004, we issued one million shares of our Common Stock
to Mr. John Byrne as consideration for consulting services rendered by Mr. Byrne
between October 2003 and September 2005. Such shares were issued without
registration pursuant to Section 4(2) of the Securities Act of 1933 and are
therefore "restricted" securities, which may not be resold or otherwise
transferred without registration under the securities laws or pursuant to an
exemption from such registration requirements. On November 30, 2004, the closing
price of our Common Stock as quoted on the Over the Counter Bulletin Board was $
0.0065 per share. Based solely on such price, the value of the issuance to Mr.
Byrne was therefore $6,500.

         On December 17, 2004, Mr. Anthony Campo, the Chairman of the Board and
Executive Vice President of the Company, exercised a right to convert $7,500 of
indebtedness owed by the Company to Mr. Campo under a Promissory Note dated
August 1, 2004 (the "2004 Note") into 1,000,000 shares of our Common Stock.
Under the terms of the 2004 Note, Mr. Campo was given the right to convert all
or any portion of the unpaid principal of and/or interest on the 2004 Note at a
rate of one share of Common Stock for each 3/4 of one cent of such principal and
interest converted, up to a maximum of 90,000,000 shares. The shares issued to
Mr. Campo upon such conversion were issued without registration pursuant to
Section 4(2) of the Securities Act of 1933 and are therefore "restricted"
securities, which may not be resold or otherwise transferred without
registration under the securities laws or pursuant to an exemption from such
registration requirements.


                                       10
<PAGE>

         On September 20, 2005 we issued 100,000 shares of our Common Stock to
Mr. Carmine Vano as consideration for his agreement to serve as a Director of
the Company. The shares issued to Mr. Vano were issued without registration
pursuant to Section 4(2) of the Securities act of 1933 and are therefore
"restricted" securities. The closing price of the Company's Common Stock on the
date the shares were issued to Mr. Vano was $.019 per share. Based solely on
such market price, the value of the shares issued to Mr. Vano was $1,900.

         On December 27, 2005, Mr. Anthony Campo, the Chairman of the Board of
Directors and the Executive Vice President, Secretary and Treasurer of the
Company, acquired 89 million shares of the Company's Common Stock pursuant to
the exercise of a conversion right granted to him under the Company's promissory
note dated August 1, 2005 (the "2005 Note") in the original principal amount of
$2,087,278. The 2005 Note had been issued to Mr. Campo to evidence loans,
including accrued interest thereon, made by him to the Company since at least
1994 and provided that Mr. Campo could convert each $.0075 in principal amount
of such Note into one share of Common Stock up to a maximum of 89 million
shares. Pursuant to this conversion right, Mr. Campo converted $667,500 of
indebtedness under the 2005 Note into 89 million shares of the Company's Common
Stock. To the extent the issuance of such shares is deemed to be a sale, the
Company relied on the exemption from registration provided by Section 4(2) of
the Securities Act of 1933.

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

         The following discussion and analysis provides information which we
believe is relevant to an assessment and understanding of our results of
operations and financial condition. This discussion should be read in
conjunction with the financial statements and notes thereto appearing elsewhere
herein.

RESULTS OF OPERATIONS

         We have not derived any revenues from the license or sale of our
technology and have incurred cumulative losses from our inception on October 13,
1987 through July 31, 2006 of $4,390,267. Our revenues from our inception on
October 13, 1987 through July 31, 2006 aggregating $66,469 were derived from
interest earned. Interest income was zero in the periods ended July 31, 2006 and
July 31, 2005 as a result of the unavailability of funds for investment.

         The cumulative loss from inception includes research and development
costs of $876,771. We had no research and development costs in the periods ended
July 31, 2006 or July 31, 2005, as we have had to reduce substantially our
research and development activities due to liquidity problems.

         Our cumulative loss from inception includes general and administrative
expenses of $3,114,361. General and administrative expenses decreased to $94,081
in the period ended July 31, 2006 from $123,858 in the period ended July 31,
2005, or a 24% decrease. Decreased general and administrative expenses can be
attributed to decreased legal and other professional expenses.

         Our cumulative loss from inception also includes past licensing fees,
of which there were none during the period ended July 31, 2006, and,
cumulatively, $57,260 since inception.


                                       11
<PAGE>

         The cumulative loss from inception also includes interest expense of
$1,040,840 on promissory notes payable to our principal stockholder and
chairman. Interest expense decreased to $100,684 in the period ending July 31,
2006 from $143,024 in the twelve (12) month period ended July 31, 2005,
primarily as a result of the conversion by our chairman of $667,500 of
indebtedness into 89 million shares of our Common Stock in December 2005 and his
forgiveness of an additional $632,500 of indebtedness under such note, also in
December 2005.

         Our net loss from operations of $194,769 in the period ended July 31,
2006 decreased by $72,177, or 27%, over the net loss from operations of $266,882
in July 31, 2005. Decreases in professional fees, research costs, and interest
expenses caused the overall increase.

         Net income of $437,735 for the period ended July 31, 2006 resulting
from forgiveness of debt income of $667,500 during the year. This compares to an
overall loss of $266,882 for the period ended July 31, 2005, an increase of
$704,617.

LIQUIDITY AND CAPITAL RESOURCES

         At July 31, 2006, we had cash and short-term investments totaling
$3,707 (compared to liquid assets of $2,170 at July 31, 2005), a working capital
decrease of $11,081 (compared with a working capital increase of $8,061 at July
31, 2005), and a total stockholders' deficiency of $1,140,418 (compared to a
deficiency of $2,247,553 at July 31, 2005). The stockholders' deficiency
increased due to the net income of $437,735 incurred in the twelve months ended
July 31, 2006 and the conversion of debt to equity.

         At July 31, 2006, we had current liabilities in excess of current
assets of $ 22,728. We have not been able to commercially utilize our Rotorcam
Engine, Klenz-Safe or hydrogen technologies to generate any revenue through that
date, and as a result, we have suffered recurring losses from operations from
inception that have generated the net capital deficiencies at July 31, 2006 as
well as July 31, 2005 and significant working capital deficiencies from time to
time. We do not expect to generate any significant revenues or positive
operating cash flows during the twelve-month period subsequent to July 31, 2006.
Cash flows used by operating activities were $80,063 and $73,612 in the periods
ended July 31, 2006 and July 31, 2005, respectively. We continue to depend upon
loans and advances from shareholders to satisfy our cash needs. There can be no
assurances that this source of funding will continue. The limited amount of
liquid resources available at July 31, 2006, and our inability to generate
operating revenues and cash flows, raise substantial doubts about our ability to
continue as a going concern.

OFF-BALANCE SHEET ARRANGEMENTS AND LONG-TERM CONTRACTUAL OBLIGATIONS

         We do not have any off-balance sheet arrangements or long-term
contractual obligations.

                                PLAN OF OPERATION

         If the transaction with the PRC Operating Company is not completed,
management intends simultaneously to seek a company with which to engage in a
possible business combination and to continue to look for companies to assist
the Company in attempting to develop and commercialize its Klenz-Safe and PGH
technologies. Depending on the timing, terms and nature of the opportunities
presented as a result of any such efforts, management will determine whether to
engage in a business combination with an operating company or pursue the
development and commercialization of one or both of the Company's Klenz-Safe and
PGH technologies.

                                       12
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

         The financial statements are set forth where indicated in Item 13 (A) 1
of this Form 10-KSB.

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

         We did not have any disagreements on accounting and financial
disclosure with our accounting firm during the reporting period.

ITEM 8A. CONTROLS AND PROCEDURES

         The Company is a development state company and currently has no
revenues, significant assets or independent operations. Its current Chief
Executive Officer, Dwight Foster, and its current Chief Financial Officer,
Anthony Campo, are the only individuals who accumulate financial information
required to be disclosed in the Company's financial reports. Since Messrs.
Foster and Campo are the only individuals who accumulate such information, they
have concluded that the information they accumulate is obtained by them in such
a manner as to permit them to make timely decisions regarding disclosure. They
have also concluded that the Company's controls and procedures are effective to
ensure that information required to be disclosed in the reports that the Company
files under the Exchange Act is recorded, processed, summarized and reported
within the periods required by the Exchange Act.

             No significant changes in the Company's financial controls over
financial reporting have come to management's attention during the Company's
previous fiscal quarters that have materially affected or are likely to
materially affect the Company's internal control over financial reporting.

         As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and the with the participation of the
Company's management, including the Company's Chief Executive Officer and its
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's controls and procedures, as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e). Based upon that evaluation, the Company's Chief Executive Officer
and its Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective in enabling the Company to record, process,
summarize and report information required to be included in the Company's
periodic SEC filings within the required time period.

ITEM 8B. OTHER INFORMATION

          None


                                       13
<PAGE>

                                    PART III

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

         In December 1998, Mr. Anthony Campo resigned as President and Chief
Executive Officer of the Company but remained as Chairman of the Board. Upon Mr.
Campo's resignation, the Board appointed Mr. Dwight Foster as President and CEO
and Mr. Campo as Executive Vice President, Secretary and Treasurer. In December
1998, the Board also appointed Mr. Frank Pecorella as a Director of the Company.
In April 2000, the Board appointed Mr. Dwight Foster as a Director of the
Company to replace Mr. Thomas Caltabiano, who resigned as a Director in April
2000. In April 2002, the Board appointed Robert Van Dine as President to replace
Mr. Foster who simultaneously resigned such office but who remains the Chief
Executive Officer of the Company. In May 2005, Mr. Frank Pecorella resigned as a
Director of the Company for personal reasons. In September 2005, the Board
appointed Mr. Carmine Vano to replace Mr. Pecorella. Our present executive
officers and directors, their ages and present positions are as follows:

                                                             First Year
                                                             ----------
Name             Age         Position                        Elected/Appointed
----             ---         --------                        -----------------
Anthony Campo     66         Chairman of the                 1993
                             Board, Executive
                             Vice President,
                             Secretary and Treasurer

Dwight Foster     57         Director and                    2000
                             Chief Executive Officer

Robert Van Dine   55         President                       2002

Carmine Vano      60         Director                        2005


         All of our directors will hold office until the next meeting of
shareholders and until their successors have been duly elected and qualified.
All of our executive officers will hold office until the next annual meeting of
the directors and until their successors have been duly appointed and qualified.

ANTHONY S. CAMPO

         Mr. Anthony S. Campo has been a Director of the Company since January
1993. He was elected Chairman of the Board on July 28 1995 and was appointed
Secretary of the Company in December 1995 and President and Chief Executive
Officer in December 1997. In December 1998, Mr. Campo resigned as President and


                                       14
<PAGE>

Chief Executive Officer and was appointed as Executive Vice President, Secretary
and Treasurer of the Company. Mr. Campo was President of Chester Hill Manors,
Inc. from June 1996 through October, 2002 and of The Campo Organization, Inc.
from December 1998 through October, 2002. Each of such companies developed and
constructed residential housing. From October 2002 to the present, Mr. Campo has
managed various income-producing properties owned by him and his family.

DWIGHT FOSTER

         Mr. Dwight Foster was elected President and Chief Executive Officer of
the Company in December 1998 and was appointed to the Board of Directors in
March 2000. From 1983 to 2002 Mr. Foster was the owner/operator of the National
Automobile Dealers Exchange Services, which represented automobile dealers at
premier automobile auctions. In addition, from 1972 to the present, Mr. Foster
has been employed as a consultant to start-up and emerging companies, advising
such companies on product development, marketing, public relations and
financing. From February 1999 to the present, Mr. Foster has also acted as
President of Ultra One Corp. (formerly known as Sierra Cleansafe USA, Inc.),
which markets and sells environmentally safe cleaning products.

ROBERT VAN DINE

         Mr. Robert Van Dine was appointed President of the Company in April
2002. From approximately June 1998 to the present Mr. Van Dine has been a
consultant providing engineering and administrative services to two start-up
biotechnology companies. From January 2000 to the present Mr. Van Dine has also
been a consultant to the Company. providing engineering and administrative
services to us as well. From 1994 to 1998 Mr. Van Dine was employed as President
by IMC, Inc., a manufacturing technology consulting firm. Mr. Van Dine is a
graduate of the U.S. Naval Academy where he earned a Bachelor of Science degree
in engineering in 1973. Mr. Van Dine has served tours both in Vietnam and the
Middle East.

CARMINE VANO

         Mr. Carmine Vano was appointed as a Director of the Company in
September 2005. From 1963 to the present, Mr. Vano has owned and operated Roman
Concrete Corp., a concrete contracting company located on Long Island, New York.
He is also a principal and manager of AMC Realty Properties Company, LLC and CNV
Realty Company, LLC, which own two shopping centers and an industrial building
on Long Island, New York.

         There are no family relationships among our directors and officers, and
there have been no legal proceedings within the last five years in regard to
these officers and directors.

CODE OF ETHICS

         The Company has not yet adopted a code of ethics for its principal
executive officer, principal financial officer, principal accounting officer or
controller due to the small number of executive officers involved with the
Company and due to the fact that the Company operates principally through
consultants with only one employee. The Board of Directors will continue to
evaluate, from time to time, whether a code of ethics should be developed and
adopted.


                                       15
<PAGE>

Item 10.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows for the last three fiscal years compensation
information for our Chief Executive Officer. No compensation was awarded during
any of such fiscal years to any executive or other officer of the Company or any
other individual serving in a similar capacity.

NAME AND PRINCIPAL POSITION         YEAR       RESTRICTED STOCK AWARD
---------------------------         ----       ----------------------
Dwight Foster, Chief Executive      2006       $ - 0 -
Officer                             2005       $ 10,000
                                    2004       $ - 0 -

         On April 11, 2002, the Board of Directors approved the issuance of a
non-qualified stock option (the "Option") for 6 million shares of the Company's
Common Stock to Dwight Foster, the Chief Executive Officer and a Director of the
Company.

         The Option granted to Mr. Foster was exercisable, cumulatively, at an
exercise price of $0.02 per share in accordance with the following schedule of
vesting: 1 million shares on October 11, 2002; 1 million shares on April 11,
2003; 1 million shares on October 11, 2003; 1 million shares on April 11, 2004;
1 million shares on October 11, 2004; and 1 million shares on April 11, 2005.
Since April 11, 2005 the Option has been exercisable for all optioned shares.

         The Option expires 10 years after the date of grant. If Mr. Foster's
employment with the Company is terminated for any reason other than death, Mr.
Foster may exercise only that portion of the Option that was exercisable on the
date such employment terminated. The Option issued to Mr. Foster was issued
without registration pursuant to Section 4(2) of the Securities Act of 1933. The
closing price of the Company's Common Stock on the date the Option was granted
to Mr. Foster was $.041 per share.

         No options or stock appreciation rights have been granted during the
last three fiscal years to any other executive or non executive officer or to
any Director of the Company.

         The following table indicates the total number and value of exercisable
and unexercisable stock options held by all Executive Officers as of July 31,
2006.


                                       16
<PAGE>

<TABLE>
<CAPTION>

                                          Number of Securities                        Value of Unexercised
                                         Underlying Unexercised                       In-the-Money Options
                                      Options at Fiscal Year-End(#)                  At Fiscal Year-End (1)
                                     ------------------------------             -------------------------------
Name                                Exercisable          Unexercisable          Exercisable          Unexercisable
------------------------------- --------------------- -------------------- ---------------------- --------------------
<S>                                  <C>                       <C>                 <C>                   <C>
Dwight Foster                        6,000,000               - 0 -                 $0.00                 $0.00
</TABLE>


         (1) Based on the OTC Bulletin Board last sales price for our common
stock on July 27, 2006 in the amount of $ 0.0065 per common share. No sales of
the Company's stock occurred between such date and July 31, 2006.

         None of our directors received any compensation for serving in such
capacity during our last fiscal year.

         On September 20, 2005 we issued 100,000 shares of our Common Stock to
Mr. Carmine Vano in consideration for his agreement to serve as a Director of
the Company. The shares issued to Mr. Vano were issued without registration
pursuant to Section 4(2) of the Securities act of 1933 and all therefore
"restricted" securities. The closing price of the Company's Common Stock on the
day the shares were issued to Mr. Vano was $.018 per share. Based solely on such
market price, the value of the shares issued to Mr. Vano was $1,800.

         We do not have any employment agreement with any of our executive
officers, nor are there any compensatory plans or arrangements that would
provide compensation to any executive officer upon his resignation, retirement
or other termination of employment, or as a result of a change in control of the
Company or a change in such executive officer's responsibilities following a
change in control of the Company.

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

         We have provided below information as of October 19, 2006 concerning
the beneficial ownership of our Common Stock by (i) all persons whom we know to
own beneficially 5% or more of our Common Stock, (ii) each of our directors and
executive officers individually, and (iii) all of our directors and executive
officers as a group.


                                       17
<PAGE>

Name and                            Amount and
Address of                          Nature of                   Percent
Beneficial Owner (1)(2          Beneficial Ownership          of Class (%)
----------------------          --------------------          ------------
Anthony S. Campo (3)                 102,731,100                  58.88

Dwight Foster (4)                      8,096,500                   4.52

Robert Van Dine                        2,000,000                   1.15

Carmine Vano                             130,000                    .08

All Directors and
Executive Officers
as a Group (4 persons)               112,957,600                  62.59


(1) Unless otherwise indicated, the address of each beneficial owner is in care
of the Company, P.O. Box 224, Landing, New Jersey 07850.

(2) A person is deemed to be the beneficial owner of securities over which such
person has or shares voting or investment power or which which may be acquired
by such person within 60 days from the date of this Report upon the exercise of
options, or convertible securities. Each beneficial owner's percentage ownership
is determined by assuming that options, or convertible securities that are held
by such person (but not those held by any other person) and which are
exercisable or convertible within 60 days of this Report have been exercised or
converted.

(3) In addition to 78,570,000 shares owned individually by Mr. Campo, includes
(i) 2,150,000 shares held by Mr. Campo's wife, (ii) 20,772,400 shares held by
Mr. Campo's children, (iii) 1,100,000 shares that may be acquired by Mr. Campo
upon the exercise of Class B Warrants, and (iv) 138,700 shares that may be
acquired by the children of Mr. Campo upon exercise of Class B Warrants (see
"Certain Transactions").

(4) In addition to 2,075,000 shares owned individually by Mr. Foster, includes
21,500 shares held by Mr. Foster's wife and 6,000,000 shares that may be
acquired by Mr. Foster within sixty(60) days upon exercise of the stock option
granted to him on April 11, 2002.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         On April 20, 1994, in consideration of prior loans made to us by Mr.
Anthony Campo, we issued to Mr. Campo a promissory note in the amount of
$100,000. On November 15, 1994 we issued another promissory note to Mr. Campo
for $79,300 in return for additional loans that he had made to us. On March 9,
1995 we again issued a new note in the amount of $328,000 to Mr. Campo that
consolidated the amounts that we owed to him under the previous two notes and an
additional $149,200 that he had advanced to us between November 15, 1994 and
March 9, 1995.


                                       18
<PAGE>

         On October 20, 1995 we renegotiated the March 9, 1995 promissory note
and issued a new note in the amount of $568,000, which included the former
principal amount of $328,500, accrued interest thereon, additional cash advances
that Mr. Campo had made to us during fiscal 1995, and our purchase of an
engineering workstation and software from Mr. Campo. The new note bore interest
at 7.5 % per annum and matured on July 1, 1998. The note was convertible, in
whole or in part, into Common Stock of the Company at the conversion rate one
share of our Common Stock for each of $.0075 in principal of the note converted.
The conversion feature was subject to anti-dilution. We did not make any
payments to Mr. Campo under the October 20, 1995 promissory note.

         We subsequently issued a new promissory note to Mr. Campo, dated August
1, 1998, in the amount of $807,280, which consolidated amounts owed under the
October 20, 1995 Note; accrued interest on such note to July 31, 1998 in the
amount of $122,070; cash advances made by Mr. Campo to us or on our behalf
between October 20, 1995 and July 31, 1998 in the amount of $60,090; cash
advances in the amount of $42,000 made by Mr. Campo between May 6, 1993 and July
14, 1993 for which he had not previously been credited; and interest on such
1993 advances through July 31, 1993 in the amount of $15,120. The August 1, 1998
note bore interest at 7.5% per annum and matured on August l, 2000. The note was
convertible into our Common Stock at a conversion rate of one share of our
Common Stock for each $.0075 in principal amount of the note converted up to a
maximum of 100 million shares.

         In September 2000, the Board approved the issuance of a new Note to Mr.
Campo dated August 1, 2000 in the principal amount of $1,193,294 to replace the
August 1, 1998 Note that matured on August 1, 2000. The principal amount of the
August 1, 2000 Note consolidated all amounts the Company owed Mr. Campo as of
August 1, 2000, including accrued interest on the August 1, 1998 Note through
July 31, 2000. Except for the increased principal amount of the August 1. 2000
Note, the terms of such Note were the same as the terms of the August 1, 1998
Note.

         In September 2001, the Board approved the issuance of a new Note to Mr.
Campo dated August 1, 2001 in the principal amount of $1,337,552 to replace the
August 1, 2000 Note that matured on August 1, 2001. The principal amount of the
August 1, 2001 Note consolidated all amounts the Company owed Mr. Campo as of
August 1, 2001, including accrued interest on the August 1, 2000 Note through
July 31, 2001. Except for the increased principal amount of the August 1, 2001
Note, the terms of such Note were the same as the terms of the August 1, 2000
Note. In March 2002 and April 2002, Mr. Campo exercised his conversion right
under the August 2001 Note to acquire a total of 10,000,000 shares of our Common
Stock in exchange for retirement of $75,000 of debt under such Note.

         In October 2002, the Board approved the issuance of a new Note to Mr.
Campo dated as of August 1, 2002 in the principal amount of $1,430,148 to
replace the August 1, 2001 Note that matured on August 1, 2002. The principal
amount of the August 1, 2002 Note consolidated all amounts the Company owed Mr.
Campo as of August 1, 2002, including accrued interest on the August 1, 2001
Note through July 31, 2002 in the amount of $99,827. Except for the increased
principal amount of the August 1, 2002 Note and the reduction in the number of
shares that Mr. Campo may acquire upon exercise of his conversion right to 90
million shares, which resulted from his exercise of such conversion right for 10
million shares in March and April 2002, the terms of such Note were the same as
the terms of the August 1, 2001 Note.

                                       19
<PAGE>

         In October 2003, the Board approved the issuance of a new Note to Mr.
Campo dated as of August 1, 2003 in the principal amount of $1,652,106 to
replace the August 1, 2002 Note that matured on August 1, 2003. The principal
amount of the August 1, 2003 Note consolidated all amounts the Company owed Mr.
Campo as of August 1, 2003, including accrued interest on the August 1, 2002
Note through July 31, 2003 in the amount of $110,197. Except for the principal
amount, the terms of the August 1, 2003 Note were the same as the terms of the
August 1, 2002 Note.

         In October 2004, the Board approved the issuance of a new Note to Mr.
Campo dated as of August 1, 2004 in the principal amount of $1,876,104 to
replace the August 1, 2003 Note that matured on August 1, 2004. The principal
amount of the August 1, 2004 Note consolidated all amounts the Company owed Mr.
Campo as of August 1, 2004, including accrued interest on the August 1, 2003
Note through July 31, 2004 in the amount of $123,908. Except for the principal
amount, the terms of the August 1, 2004 Note were the same as the terms of the
August 1, 2003 Note.

         In September 2005, the Board approved the issuance of a new Note to Mr.
Campo dated as of August 1, 2005 in the principal amount of $2,087,278 to
replace the August 1, 2004 Note that matured on August 1, 2005. The principal
amount of the August 1, 2005 Note consolidated all amounts the Company owed Mr.
Campo as of August 1, 2005, including accrued interest on the August 1, 2004
Note through July 31, 2005 in the amount of $140,132, additional advances made
by Mr. Campo between August 1, 2004 Note and July 31, 2005 in the amount of
$76,240, and interest on such additional advances in the amount of $2,892.
Except for the increased principal amount of the August 1, 2004 Note and the
reduction in the number of shares that Mr. Campo may acquire upon exercise of
his conversion right from 90 million shares to 89 million shares, which resulted
from his exercise of his conversion right for 1 million shares in December 2004,
the terms of the August 1, 2005 Note were the same as the terms of the August 1,
2004 Note.

         In September 2006, the Board approved the issuance of a new note to Mr.
Campo dated as of August 1, 2006 in the principal amount of $969,562 (the "2006
Note"). The 2006 Note reflected the conversion by Mr. Campo of $667,500 of
indebtedness under the 2005 Note into 89 million shares of the Company's Common
Stock in December 2005; the forgiveness by Mr. Campo of $632,500 of additional
indebtedness under the 2005 Note in December 2005; additional loans in the
amount of $81,600 made by Mr. Campo to the Company between August 1, 2005 and
July 31, 2006; and accrued interest on principal amounts outstanding under the
2005 Note between August 1, 2005 and July 31, 2006 in the amount of $100,684.
Except for a decrease in the principal amount of the 2006 Note and the
elimination of the conversion right resulting from Mr. Campo's full exercise of
such right in December 2005, the terms of such note are the same as the terms of
the 2005 Note.


                                       20
<PAGE>

         Since we do not have any revenues, it is very doubtful that we will be
able to pay any interest or principal amounts due under the 2006 Note until such
time as we have operating revenues or until we raise funds from an independent
source, both of which events may not occur at any time. However, should the
Merger be concluded, Mr. Campo has agreed to cancel all existing indebtedness
under the 2006 Note as partial consideration for his receipt of shares in the
Merger equaling 0.71% of the outstanding capital stock of the Company on a fully
diluted basis.

                                     PART IV

ITEM 13.  EXHIBITS, LISTS  AND REPORTS ON FORM 8-K

(A) Exhibits and Financial Statements:

         1.  Financial Statements

         The following financial statements are included on pages 1 to 19 of the
Financial Statements in this Report.

         (i)      Report of Independent Accountants
         (ii)     Balance Sheets as of July 31, 2006 and July 31, 2005
         (iii)    Statements of Income for the fiscal years ended July 31, 2006
                  and 2005
         (iv)     Statements of Cash Flows for the fiscal years ended July 31,
                  2006 and 2005
         (v)      Statements of Changes in Stockholders' Equity for the fiscal
                  years ended July 31, 2006 and 2005
         (vi)     Notes to Financial Statements

(B) The following exhibits, which are required by Item 601 of Regulation S-B,
are incorporated by reference to previously filed documents.


Exhibit No.       Exhibit

(3)      (a)      Articles of Incorporation and Bylaws.                      (1)
         (b)      Amended and Restated Bylaws                                (2)

(10)     Material contracts
         (a) Option Agreement between the Company and (3) Dwight Foster
         covering grant of option on April 11, 2002.

         (b Consulting Agreement dated as of April 11, 2002                  (3)
         between the Company and Robert Van Dine.

         (c) Consulting Agreement dated as of April 11, 2002                 (3)
         between the Company and Newell Dimen.

         (d) Assignment dated March 13, 2002 from Robert                     (3)
         Van Dine to the Company covering Robert Van Dine's
         rights under provisional patent application no. 60/3113, 087
         relating to process of employing proprietary cleaning solution
         to the treatment of flue gases.


                                       21
<PAGE>

         (e) Technology Development Consulting Agreement                     (4)
         dated as of June 1, 2002 between the Company and
         George H. Johnson and William L. Johnson.

         (f) Technology Development Consulting Agreement                     (4)
         dated as of June 1, 2002 between the Company and
         George H. Johnson and William L. Johnson.

         (g) Assignment of Invention & Patent Rights dated                   (4)
         October 2, 2003 from George H. Johnson and
         William L. Johnson to the Company.

         (h) Consulting Agreement dated as of October 2, 2003                (4)
         between the Company and William L. Johnson.

         (i) Consulting Agreement dated as of October 2, 2003                (4)
         between the Company and George H. Johnson.

         (j) Promissory Note dated August 1, 2006 from the Company           (5)
         to Mr. Anthony Campo.

(23) Consent of Blanchfield, Meyer, Kober & Rizzo LLP

(31)     (a) Certification of Chief Executive Officer in accordance with 18
         U.S.C. Section 1350, as adopted by Section 302 of the Sarbanes-Oxley
         Act of 2002.

         (b) Certification of Principal Financial Officer in Accordance with 18
         U.S.C. Section 1350, as adopted by Section 302 of the Sarbanes-Oxley
         Act of 2002.

(32)     (a) Certification of Chief Executive Officer in accordance with 18
         U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley
         Act of 2002.

         (b) Certification of Principal Financial Officer in accordance with 18
         U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley
         Act of 2002.

         Footnotes

         (1) Filed with the registrant's Registration Statement on Form S-18
         dated December 9, 1987 (registration No., 33-19048-NY) and Amendment
         Nos. 2 and 3 thereto dated February 17, 1988 and February 22, 1988,
         respectively, and incorporated herein by
`        reference.


                                       22
<PAGE>

         (2) Filed with the registrant's Registration Statement on Form SB-2
         dated April 20, 2000 (amending its Form S-18 Registration Statement)
         and incorporated herein by reference.

         (3) Filed with the registrant's Quarterly Report on Form 10-QSB for the
         quarter ended April 30, 2002 and incorporated herein by reference.

         (4) Filed with the registrant's Report on Form 8-K dated October 2,
         2003 and incorporated herein by reference.

         (5) Filed with the registrant's Report on Form 8-K dated September 21,
         2006 and incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

         The fees previously billed by the Company's auditors for professional
services rendered in connection with their audit of the Company's annual
financial statements for fiscal 2006 and 2005 were $10,000 for each of such
fiscal years and for such auditors' review of the financial statements included
in the Company's Forms 10-QSB for fiscal 2006 and 2005 were $7,500 and $6,000,
respectively.

AUDIT-RELATED FEES

         For fiscal 2006 and 2005, the Company's auditors did not bill any
additional fees for services that are reasonably related to the performance of
the audit or review of the Company's financial statements and are not reported
under "Audit Fees" above.

TAX FEES

         The aggregate fees billed by the Company's auditors for professional
services for tax compliance, tax advice, and tax planning were $0 and $0 for
fiscal 2006 and 2005, respectively.

ALL OTHER FEES

         The aggregate fees billed by the Company's auditors for all other
non-audit services rendered to the Company, such as attending meetings and other
miscellaneous financial consulting in fiscal 2006 and 2005 were $0 and $0,
respectively.

PRE-APPROVAL POLICIES AND PROCEDURES

         Our financial statements for the fiscal year ended July 31, 2006 have
been audited by our independent accountants, Blanchfield, Meyer, Kober & Rizzo
LLP. Each year our Chairman of the Board pre-approves all audit and tax related
services prior to the performance of such services. The percentage of hours
expended on the audit by persons other than full-time, permanent employees of
Blanchfield, Meyer, Kober & Rizzo LLP was zero.


                                       23
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                    MURRAY UNITED DEVELOPMENT CORPORATION
                                    (Registrant)


                                    By:  /s/ DWIGHT FOSTER
                                       --------------------
                                    Dwight Foster
                                    Chief Executive Officer

                                    Dated: October 24, 2006


                                    By:  /s/ ANTHONY S. CAMPO
                                       --------------------
                                    Anthony S. Campo
                                    Executive Vice President, Secretary
                                    and Treasurer
                                    (Chief Financial Officer)

                                    Dated: October 24, 2006

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

                                    /s/ ANTHONY CAMPO
                                    -----------------------
                                    Anthony S. Campo,
                                    Chairman of the Board

                                    /s/ DWIGHT FOSTER
                                    -----------------------
                                    Dwight Foster, Director

                                    /s/ CARMINE VANO
                                    -----------------------
                                    Carmine Vano, Director

                                    Dated:  October 24, 2006



                                       24

<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION

                              FINANCIAL STATEMENTS

                       YEARS ENDED JULY 31, 2006 AND 2005




<PAGE>

                                TABLE OF CONTENTS



                                                                      Page

INDEPENDENT AUDITORS' REPORT.......................................        1


FINANCIAL STATEMENTS

    Balance Sheets.................................................        2
    Statements of Operations.......................................        3

    Statements of Stockholders' Equity (Deficiency)................    4 -11

    Statements of Cash Flows.......................................       12

    Notes to Financial Statements..................................   13 -19



<PAGE>

                       BLANCHFIELD, KOBER & COMPANY, P.C.
                           CERTIFED PUBLIC ACCOUNTANTS

                                   MEMBERS OF
               AMERICAN INISTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                    PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

Charles W. Blanchfield, CPA                                 Thomas G. Kober, CPA
Joseph Mortimer, CPA                                          Steven W. Lyon,CPA

             Report of Independent Registered Public Accounting Firm

To the Board of Directors
Murray United Development Corporation
Landing, N.J.

We have audited the accompanying balance sheets of Murray United Development
Corporation as of July 31, 2006 and 2005 and the related statements of
operations, stockholders' equity, and cash flows for the years ended July 31,
2006 and 2005. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

The cumulative amounts from inception included in the statement of operations,
stockholders' equity, and cash flows for the periods prior to August 1, 2003
were audited by other auditors. The prior auditor's report dated October 16,
2004 included an explanatory paragraph describing conditions that raised
substantial doubt about the Company's ability to continue as a going concern.

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 financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of July 31, 2006
and 2005, and the results of its operations and its cash flows for the years
ended July 31, 2006 and 2005 in conformity with U.S generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, as of July 31, 2006, the Company had not generated any
operating revenues and had suffered recurring losses from operations from
inception and had a net capital deficiency. These matters raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


Hauppauge, New York
October 18, 2006

         1200 VETERANS MEMORIAL HIGHWAY SUITE 350 HAUPPAUGE, NY 11788 TEL:
                         631-234-4200 FAX 631-234-4272



<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                                 BALANCE SHEETS
                             JULY 31, 2006 AND 2005

<TABLE>
<CAPTION>

                                     ASSETS

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

<S>                                                                       <C>                  <C>
CURRENT ASSETS
     Cash and cash equivalents                                            $          1,707     $           170
     Loan receivable                                                                 2,000               2,000
                                                                          ----------------     ---------------

         TOTAL CURRENT ASSETS                                                        3,707               2,170


FURNITURE AND EQUIPMENT, NET                                                             0                  0
                                                                          ----------------     ---------------

         TOTAL ASSETS                                                     $          3,707     $         2,170
                                                                          ================     ===============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                                     $         26,435     $        13,817
                                                                          ----------------     ---------------

         TOTAL CURRENT LIABILITIES                                                  26,435              13,817
                                                                          ----------------     ---------------
LONG -TERM LIABILITIES
     Accrued compensation                                                          148,128             148,128

     Accrued interest payable                                                      100,684             146,515

     Notes payable - stockholder                                                   868,878           1,941,263
                                                                          ----------------     ---------------

         TOTAL LONG - TERM LIABILITIES                                           1,117,690           2,235,906
                                                                          ----------------     ---------------

         TOTAL LIABILITIES                                                       1,144,125           2,249,723
                                                                          ----------------     ---------------


STOCKHOLDERS' EQUITY (DEFICIENCY)
     Capital stock - par value $.001; authorized
     200,000,000 shares; issued and outstanding
     173,253,434 and 84,153,434 shares                                              17,326               8,416
     Additional paid-in capital                                                  3,232,521           2,572,031
     Deficit accumulated in the development stage                               (4,390,265)         (4,828,000)
                                                                          ----------------     ---------------
         TOTAL STOCKHOLDERS' EQUITY
                (DEFICIENCY)                                                    (1,140,418)         (2,247,553)
                                                                          ----------------     ---------------


         TOTAL LIABILITY AND STOCKHOLDERS'
              (DEFICIENCY)                                                 $         3,707     $         2,170
                                                                          ================     ===============
</TABLE>


SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 2

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENTS OF OPERATIONS
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>
                                                                                      CUMULATIVE
                                                                                     AMOUNTS FROM
                                                    2006               2005           INCEPTION
                                                  -------            -------         ------------
<S>                                            <C>                <C>              <C>
INCOME

Interest income                                 $          -0-       $       -0-    $       66,465

EXPENSES

Research and development costs                             -0-               -0-           876,771
Licensing fees stockholder and affiliate                   -0-               -0-            57,260
General and administrative expenses                     94,081           123,858         3,114,361
Interest expense stockholder and affiliate             100,684           143,024         1,040,838
                                                --------------       -----------    --------------

             Total Expenses                            194,765           266,882         5,089,230
                                                --------------       -----------    --------------
             Net Loss from operations                 (194,765)      $  (266,882)   $   (5,022,765)
                                                --------------       -----------    --------------
Other income
                 Debt forgiveness                      632,500                -0-          632,500
                                                --------------       -----------    --------------
                 Net income (loss)              $      437,735       $  (266,882)   $   (4,390,265)
                                                ==============       ===========    ==============

BASIC AND DILUTED
Net income (loss) per common share              $        0.003       $    (0.003)   $        0.025

Weighted average number of common
shares outstanding                                 136,422,055        83,084,941       173,253,434
                                                --------------       -----------    --------------

Weighted average number of common
shares fully diluted                               157,820,055        83,084,941       194,651,434
                                                --------------       -----------    --------------

</TABLE>


SEE INDEPENDENT AUDITOR'S REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 3

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>

                                                                                  Deficit
                                   Common                                       Accumulated
                                    Stock                      Additional         in the             Stock
                                  Number of                     Paid in        Developmental      Subscriptions
                                   Shares        Amounts        Capital           Stage             Receivable       Total
                                 ----------      -------       ----------      -------------      -------------      ------
<S>                               <C>           <C>             <C>            <C>                   <C>            <C>
Issuance in October 1987 to
Principal Stockholder             49,000,000    $    4,900                                           $  (4,900)

Issuance in October 1987
  for  cash                        3,000,000           300      $   49,800                                (100)      $ 50,000

Issuance through initial public
offering of 15,000,000 units in
February 1988 for cash at $.05
per unit, net of issuance cost of
$220,900                          15,000,000         1,500         527,600                                            529,100

Net Loss - 1988                                                                $   (156,821)                         (156,821)

Exercise of Class A Warrants:

at $.45 per share                    312,588            31          14,035                                             14,066

at $.10 per share                     21,000             2           2,098                                              2,100

Costs relating to continuing
 registration of warrants                                         (29, 532)                                           (29,532)

Reclassification of common
  Stock                             (333,588)          (33)        (16,133)                                           (16,166)

Net Loss - 1989
                                                                                   (362,922)                         (362,922)
                                  ----------    ----------      ----------     ------------          ---------      ---------
Balance, July 31, 1989            67,000,000    $    6,700      $  547,868     $   (519,743)         $  (5,000)     $  29,825
                                  ==========    ==========      ==========     ============          =========      =========


</TABLE>




SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 4

<PAGE>


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>

                                                                                     Deficit
                                     Common                                        Accumulated
                                     Stock                       Additional          in the            Stock
                                    Number of                      Paid in        Developmental     Subscriptions
                                     Shares      Amounts           Capital            Stage          Receivable          Total
                                   ----------   ----------      -------------    --------------    --------------     ------------
<S>                              <C>           <C>              <C>              <C>                  <C>          <C>
Exercise of Class A Warrants:
  at $.045 per share               5,201,205    $      520       $   233,534                                         $    234,054
  at $.10 per share                  409,000            41            40,859                                               40,900

Exercise of Class B Warrants:
  at $.15 per share                   25,000             3             3,747                                                3,750

Costs relating to continuing
 registration and solicitation
 of warrants                                                         (24,588)                                             (24,588)

Cash received for stock subscription                                                                       5,000            5,000

Reclassification of common
 stock                            (5,635,205)         (564)         (278,140)                                            (278,704)

Charge for stock bonus                                                40,000                                               40,000

Net Loss - 1990                                                                                         (422,314)        (422,314)
                                  ----------    ----------       -----------      -------------        ---------     ------------

Balance, July 31, 1990            67,000,000    $    6,700       $   563,280      $    (942,057)       $     -0-     $   (372,077)
                                  ==========    ==========       ===========      =============        =========     ============



</TABLE>



SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 5


<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>


                                                                                     Deficit
                                     Common                                        Accumulated
                                     Stock                       Additional          in the            Stock
                                    Number of                      Paid in        Developmental    Subscriptions
                                     Shares      Amounts           Capital            Stage         Receivable           Total
                                   ----------   ----------      -------------    --------------    --------------     ------------
<S>                              <C>           <C>              <C>              <C>                  <C>          <C>

Sale of 3,297,000 shares
  through private placement
  at $.08 per share                3,297,000    $      329       $   244,871                                         $    245,200

Exercise of Class A Warrants:
      at $.10 per share            3,152,472           315           314,933                                              315,248

Exercise of Class B Warrants:
  at $.15 per share                   60,000             6             8,994                                                9,000

Costs relating to continuing
registration of warrants                                             (80,607)                                             (80,607)

Reclassification of common
 stock                            (3,212,472)         (321)         (323,927)                                            (324,248)

Net Loss - 1991                                                                        (354,727)                         (354,727)
                                  ----------    ----------       ------------     -------------      -----------     ------------

Balance, July 31, 1991            70,297,000    $    7,029       $    727,544     $  (1,296,784)     $       -0-     $   (562,211)
                                  ==========    ==========       ============     =============      ===========     ============


</TABLE>



SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 6

<PAGE>




                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>
                                                                                     Deficit
                                     Common                                        Accumulated
                                     Stock                       Additional          in the
                                    Number of                      Paid in        Developmental
                                     Shares      Amounts           Capital            Stage              Total
                                   ----------   ----------      -------------    --------------       ------------
<S>                              <C>           <C>              <C>              <C>               <C>
Exercise of Class A Warrants:
  at $.10 per share                3,779,425    $      378       $   377,565                         $    377,943

Exercise of Class B Warrants:
  at $.15 per share                    4,000             1               599                                  600

Exercise of underwriters
warrants                              63,000             6             4,719                                4,725

Costs relating to:

Exercise of warrants                                                 (33,191)                             (33,191)

Registration of privately placed
shares                                                               (55,496)                             (55,496)

Issuance for:  Compensation at
 $.065 per share                      50,000             5             3,245                                3,250

Agency fee at $.10 per share          25,000             2             2,498                                2,500

Claim settlement at
$.085 per share                        1,000             1                84                                   85

Reclassification of common
stock                              9,181,265           918           618,200                              619,118

Charge for compensation                                              180,900                              180,900

Net Loss - 1992                                                                        (606,508)         (606,508)
                                  ----------    ----------       -----------       ------------      ------------
Balance, July 31, 1992            83,400,690    $    8,340       $ 1,826,667       $ (1,903,292)     $    (68,285)
                                  ==========    ==========       ===========       ============      ============


</TABLE>


SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 7


<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)



<TABLE>
<CAPTION>

                                     Common                                        Accumulated
                                     Stock                       Additional          in the
                                    Number of                      Paid in        Developmental
                                     Shares      Amounts           Capital            Stage              Total
                                   ----------   ----------      -------------    --------------       ----------
<S>                              <C>           <C>              <C>              <C>               <C>
             ISSUANCE FOR:

Compensation at $.065
 per share                           100,000    $       10       $     6,490                         $     6,500

Exercise of Underwriters
 warrants at $.075 per share         500,000            50            37,450                              37,500

Exercise of Class B Warrants
 at $.15 per share                    13,000             1             1,949                               1,950

Retirement of 8,970,300
 shares  of stock                 (8,970,300)         (897)                                                 (897)

Net loss for 1993                                                                      (470,621)        (470,621)
                                  ----------    ----------       ----------       -------------     ------------

Balance, July 31, 1993            75,043,390    $    7,504       $1,872,556       $  (2,373,913)    $   (493,853)
                                  ==========    ==========       ==========       =============     ============


</TABLE>

SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 8


<PAGE>


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>

                                                                                     Deficit
                                     Common                                        Accumulated
                                     Stock                       Additional          in the
                                    Number of                      Paid in        Developmental
                                     Shares      Amounts           Capital            Stage              Total
                                   ----------   ----------      -------------    --------------       ----------
<S>                              <C>           <C>              <C>              <C>               <C>
                ISSUANCE FOR:
                -------------
Prior period adjustment                                                            $    369,329      $   369,329

Net loss for 1994                                                                      (342,783)        (342,783)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 1994            75,043,390    $    7,504       $ 1,872,556      $  (2,347,367)     $  (467,307)
                                  ==========    ==========       ===========      =============      ===========

Issuance for: Compensation at
  $.015 per share                  2,000,000           200            29,800                              30,000

Net loss for 1995                                                                      (354,155)        (354,155)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 1995            77,043,390    $    7,704       $ 1,902,356      $  (2,701,522)     $  (791,462)
                                  ==========    ==========       ===========      =============      ===========

Issuance for services              2,000,000           200           262,814                             263,014

Issuance for services                340,000            34             6,766                               6,800

Private placement                  8,182,833           818                                                   818

Retired shares                    (2,055,556)         (205)          (92,294)                            (92,499)

Net loss for 1996                                                                      (275,551)        (275,551)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 1996            85,510,667    $    8,551       $ 2,079,642      $  (2,977,073)     $  (888,880)
                                  ==========    ==========       ===========      =============      ===========

Video fee                            200,000    $       20       $     1,980      $         -0-      $     2,000

Legal fees                         2,548,867           254            37,979                              38,233

Retirement                         2,548,867)         (254)                                                 (254)

Net loss for 1997                                                                      (170,924)        (170,924)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 1997            85,710,667    $    8,571       $ 2,119,601      $  (3,147,997)     $(1,019,825)
                                  ==========    ==========       ===========      =============      ===========

Retired  shares                  (24,757,233)       (2,475)                                               (2,475)

Net loss for 1998                                                                       (96,900)         (96,900)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 1998            60,953,434    $    6,096       $ 2,119,601      $  (3,244,897)     $(1,119,200)
                                  ==========    ==========       ===========      =============      ===========

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.       PAGE 9

<PAGE>



                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>


                                                                                     Deficit
                                     Common                                        Accumulated
                                     Stock                       Additional          in the
                                    Number of                      Paid in        Developmental
                                     Shares      Amounts           Capital            Stage              Total
                                   ----------   ----------      -------------    --------------       ----------
<S>                              <C>           <C>              <C>              <C>               <C>
              ISSUANCE FOR:
              ------------
Issuance for services              2,500,000    $      250       $    49,750      $         -0-      $    50,000

Net loss for 1999                                                                      (210,594)        (210,594)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 1999            63,453,434    $    6,346       $ 2,169,351      $  (3,455,491)     $(1,279,794)
                                  ==========    ==========       ===========      =============      ===========

Net loss for 2000                                                                        (5,053)          (5,053)

Balance, July 31, 2000            63,453,434    $    6,346       $ 2,169,351      $  (3,460,544)     $(1,284,847)
                                  ==========    ==========       ===========      =============      ===========

Issuance for services              3,250,000           325           147,175                             147,500

Issuance for services              2,000,000           200            99,800                             100,000

Net loss for 2001                                                                      (383,922)        (383,922)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 2001            68,703,434    $    6,871       $ 2,416,326      $  (3,844,466)     $(1,421,269)
                                  ==========    ==========       ===========      =============      ===========

Issuance for debt                 10,000,000         1,000            74,000                              75,000

Issuance for services              1,250,000           125            51,125                              51,250

Net loss for 2002                                                                      (247,997)        (247,997)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 2002            79,953,434    $    7,996       $ 2,541,451      $  (4,092,463)     $(1,543,016)
                                  ==========    ==========       ===========      =============      ===========

Net loss for 2003                                                                      (215,794)        (215,794)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 2003            79,953,434    $    7,996       $ 2,541,451      $  (4,308,257)     $(1,758,810)
                                  ==========    ==========       ===========      =============      ===========

Issuance for services                200,000            20             5,980                               6,000

Net loss for 2004                                                                      (252,861)        (252,861)
                                  ----------    ----------       -----------      -------------      -----------

                                  80,153,434    $    8,016       $ 2,547,431      $  (4,561,118)     $(2,005,671)
                                  ==========    ==========       ===========      =============      ===========

</TABLE>


SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.      PAGE 10


<PAGE>



                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>


                                                                                     Deficit
                                     Common                                        Accumulated
                                     Stock                       Additional          in the
                                    Number of                      Paid in        Developmental
                                     Shares      Amounts           Capital            Stage              Total
                                   ----------   ----------      -------------    --------------       ----------
<S>                              <C>           <C>              <C>              <C>               <C>
              ISSUANCE FOR:
              ------------

Issuance for services              1,000,000    $      100       $     6,400      $         -0-      $     6,500

Officer compensation               2,000,000           200            10,800                -0-           11,000

Converted from note payable        1,000,000           100             7,400                -0-            7,500

Net loss for 2005                        -0-           -0-               -0-           (266,882)        (266,882)
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 2005            84,153,434    $    8,416       $ 2,572,031      $  (4,828,000)     $(2,247,553)
                                  ----------    ----------       -----------      -------------      -----------


Issuance for services                100,000            10             1,890                 -0-           1,900

Converted from note payable -
    stockholder                   89,000,000         8,900           658,600                 -0-         667,500

Net income for 2006                      -0-           -0-               -0-            437,735          437,735
                                  ----------    ----------       -----------      -------------      -----------

Balance, July 31, 2006           173,253,434    $   17,326       $ 3,232,521      $  (4,390,265)     $(1,140,418)
                                  ==========    ==========       ===========      =============      ===========
</TABLE>



SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.      PAGE 11

<PAGE>



                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENTS OF CASH FLOWS
                       YEARS ENDED JULY 31, 2006 AND 2005
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)



<TABLE>
<CAPTION>
                                                                                          CUMULATIVE
                                                                                         AMOUNTS FROM
                                                            2006            2005           INCEPTION
                                                         ---------       ---------        -----------
<S>                                                    <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income (loss)                                     $ 437,735        (266,882)       $(4,390,265)
   Adjustment to reconcile net loss to net cash
     used by operating activities:
   Depreciation and amortization                               -0-          41,670            260,495
   Forgiveness of debt income                             (632,500)            -0-           (632,500)
   Expenses paid through issuance of
     common stock by:
      Company                                                1,900          17,500            543,185
       Principal stockholder                                   -0-             -0-            220,900
   Changes in operating assets and liabilities:
     Loans receivable                                                                          (2,000)

     Accounts payable and accrued expenses                 112,802         134,100            661,371
                                                         ---------       ---------        -----------

               NET CASH USED BY OPERATING
                   ACTIVITIES                              (80,063)        (73,612)        (3,338,814)
                                                         ---------       ---------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Acquisition of fixed assets                                 -0-             -0-           (260,497)
                                                         ---------       ---------        -----------

               NET CASH USED BY INVESTING
            ACTIVITIES                                         -0-             -0-           (260,497)
                                                         ---------       ---------        -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable - stockholder                81,600          72,749          1,922,925
   Payments to notes payable - stockholder                     -0-                           (126,667)
   Proceeds from issuance of common stock                      -0-                          1,804,760
                                                         ---------       ---------        -----------

         NET CASH PROVIDED BY FINANCING
                  ACTIVITIES                                81,600          72,749          3,601,018
                                                         ---------       ---------        -----------

NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                        1,537            (863)             1,707

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                 170           1,033                  0
                                                         ---------       ---------        -----------

         CASH AND CASH EQUIVALENTS AT
                   END OF YEAR                           $   1,707       $     170        $     1,707
                                                         =========       =========        ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the year for interest                      -0-             -0-             32,420

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
    Conversion of note payable - stockholder to stock    $ 667,500             -0-        $   667,500
                                                         =========       =========        ===========


</TABLE>

SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.      PAGE 12

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2006 AND 2005


NOTE 1 - ORGANIZATION AND BUSINESS AND BASIS OF PRESENTATION

The Company was incorporated on October 12, 1987 under the laws of the State of
Delaware. It was organized to further develop and exploit commercially certain
technology for a rotary internal combustion engine that would utilize
alternative fuels. The patent and related rights to the use of the technology
have been assigned to the Company.

The Company has been in the development stage since inception. Activities of the
Company have been limited to the acquisition of funds from the sale of its
common stock; the acquisition of the licensing rights for and, subsequently,
title to, the engine technology; research and development related to the
development of an initial fuel-driven prototype of the engine that was
successfully tested on a preliminary basis in January, 1990; additional testing
and development of the engine prototype to obtain performance data for the
demonstration of the engine to potential licensees; research relating to the
ability of a proprietary cleaning solution, which will be licensed to the
Company, to remove air pollutants from coal burning fuel gas and certain air
pollutants and contaminants from building air, as well as other industrial uses;
and research relating to the production of hydrogen using a proprietary
technology. The proprietary cleaning solution, for which we have been granted
trademark protection under the name of Klenz-Safe, is owned by a corporation
whose sole shareholders are Mr. Anthony Campo and Mr. Dwight Foster, the
Chairman of the Board and Chief Executive Officer of the Company, respectively.

The Company did not conduct any research and development activities on its
Klenz-Safe or hydrogen technologies during fiscal 2005 or fiscal 2006 and does
not intend to conduct such research and development during the ensuing twelve
months unless it is able to obtain funds from third parties to do so, of which
there can be no assurances. The Company has also not conducted research and
development on the Rotorcam engine during its 2001 through 2006 fiscal years.
Presently, management has decided to discontinue efforts to conduct further
research on its engine technology unless the Company receives expressions of
interest to fund such research and development from third parties, of which
there can be no assurances.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, as of July 31, 2006, the
Company had not been able to commercially utilize its engine, cleaning solution
or hydrogen technology to generate revenues or cash flows from operating
activities. As a result, it has suffered recurring losses from operations from
inception that have generated the net stockholders' deficiency of $1,140,418 as
of July 31, 2006 and have also generated significant working capital
deficiencies from time to time.

Management does not expect the Company to generate any significant revenues or
positive operating cash flows during the twelve-month period subsequent to July
31, 2006. The limited amount of liquid resources available at July 31, 2006, and
the Company's inability to generate operating revenues and cash flows raise
substantial doubts about the Company's ability to continue as a going concern.

Management believes that the net liquid assets available at July 31, 2006 will
not be sufficient to enable the Company to meet its obligations and to continue
as a going concern during the ensuing twelve-month period and that the Company's
ability to continue as a going concern during such period and thereafter will
depend upon the Company's ability to obtain sufficient additional working
capital to fund research and development activities on its Klenz-Safe and
hydrogen technologies and the general and administrative expenses to be incurred
during the remaining development period.

Potential sources of such working capital include government grants, the private
or public sale of common stock (the Company has historically depended primarily
on the sale of equity securities to finance its operations) and borrowing
additional amounts from related parties or other sources. However, there can be
no

                                                                         PAGE 13

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2006 AND 2005

assurances that such financing will be available. The accompanying financial
statements do not include any adjustments that might result from the
uncertainties related to the ability of the Company to continue as a going
concern.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers highly liquid
temporary cash investments with an original maturity of three months or less to
be cash equivalents.

DEPRECIATION

Depreciation of furniture and equipment is provided over the estimated useful
lives of the related assets using declining balance methods. As of July 31,
2006, all of the Company's furniture and equipment is fully depreciated.

ESTIMATES

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

RESEARCH AND DEVELOPMENT

Costs and expenses related to research and development are expensed as incurred.

NET LOSS PER COMMON SHARE

Net loss per common share was computed on the basis of the weighted average
number of shares of common stock outstanding during each period. The effect of
assuming the exercise of outstanding warrants was antidilutive and, accordingly,
not included in the computation of net loss per share.


                                                                         PAGE 14


<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2006 AND 2005


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consists of taxes currently due plus deferred taxes
related primarily to differences between the bases of assets and liabilities for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled.

Deferred taxes also are recognized for operating losses that are available to
offset future federal income taxes. The Company accounts for investment tax
credits using the flow-through method, thus reduces income tax expense in the
year the related assets are placed in service.

NOTE 3 - FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

                                            JULY 31
                                  --------------------------     Estimated
                                    2006             2005        Useful Lives
                                 ----------       ----------     ------------
     Furniture                   $    2,098       $    2,098       7 years
     Equipment                      129,451          129,451       5 years
     Patent                         125,000          125,000      15 years
                                 ----------       ----------
                                    256,549          256,549
     Less accumulated
           depreciation             256,549          256,549
                                 ----------       ----------

                                 $        0       $        0
                                 ==========       ==========

Depreciation expense totaled $0 and $41,670 for the years ended July 31, 2006
and 2005, respectively.

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

                                           JULY 31
                               -----------------------------
                                   2006               2005
                               -----------------------------
      Professional fees        $  26,435           $  13,817
      Other                            0                   0
                               ---------           ---------
                               $  26,435           $  13,817
                               =========           =========


                                                                         PAGE 15

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENT
                             JULY 31, 2006 AND 2005


NOTE 5 - NOTES PAYABLE - STOCKHOLDER

Effective April 15, 1994, the Company issued a promissory note (the "First
Note"), to Mr. Anthony Campo, the Chairman of the Board, Executive Vice
President, Secretary and Treasurer of the Corporation, to evidence cash advances
of $79,300. The First Note provided for an interest rate of 6% on the unpaid
balance and was due in equal installments for one-half of the principal amounts
on April 15, 1996 and the remaining one-half on April 20, 1997. The First Note
had warrants attached to purchase 1,666,667 shares of common stock at an excise
price of $0.06 per common share and expired on April 30, 1997. On November 15,
1994, the Company issued a second promissory note (The "Second Note"), to Mr.
Anthony Campo to evidence cash advances to the Company amounting to $100,000.
The Second Note provided for an interest rate of 6% on the unpaid balance and
was due in equal installments for one-half of the principal amount on April 15,
1997 and the remaining one-half on April 15, 1999. The Second Note had warrants
attached to purchase 7,930,000 shares of common stock at an excise price of
$0.01 per common share, which expired on April 30, 1999.

Effective March 24, 1995, the Company restructured the obligations under the
First Note and the Second Note by issuing a new note payable to Mr. Campo in the
amount of $328,500. This restructured note (the "Third Note") provided for
interest at a rate of 6% per year on the outstanding principal balance in equal
quarterly installments of principal beginning March 24, 1995 through April 30,
1999. This Third Note was issued with warrants attached to acquire 32,850,000
shares of common stock at the excise price of $0.01 per share, which expired on
April 30, 1999.

Effective October 20, 1995, the Company renegotiated the outstanding debt and
interest owed to Mr. Campo under the Third Note. The new note (the" Fourth
Note") bore interest at 7.5% per year and matured on July 1, 1999. The principal
amount of $568,000 plus interest was convertible into common shares of the
Company at $0.0075 per share. It was also agreed that any additional monies
loaned to the Company would bear interest at 7.5% per year.

Effective August 1, 1998, the Company consolidated the outstanding principal and
interest owed to Mr. Campo under the Fourth Note with additional cash advances
of $102,090 made by Mr. Campo, with accrued interest thereon at 7.5% per annum.
The new note in the amount of $807,280 bore interest at 7.5% per annum matured
on August 31, 2000 and carried a conversion feature of one share for each
$0.0075 of debt converted. In March, 2000, Mr. Campo agreed to limit the number
of shares for which he may convert the August 1, 1998 Note to 100,000,000
shares.

Effective August 1, 2000, the Company consolidated the outstanding principal and
interest owed Mr. Campo under the August 1, 1998 Note. The new note in the
amount of $1,193,294 bore interest at 7.5% per annum, matured on August 31, 2001
and carried a conversion feature of one share for each $0.0075 of debt
converted. As of July 31, 2001, the note balance increased to $1,246,619 as
additional funds were loaned to the Company by Mr. Campo.

Effective August 1, 2001, the Company consolidated the outstanding principal and
interest owed to Mr. Campo under the August 1, 2000 Note. The new note in the
amount of $1,337,552 bore interest at 7.5% per annum, matured on August 31, 2002
and carried a conversion feature of one share of each $0.0075 of debt


                                                                         PAGE 16
<PAGE>

                      MURRAY UNITED DEVEL0PMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2006 AND 2005


NOTE 5 - NOTES PAYABLE - STOCKHOLDER (CONTINUED)

converted. As of July 31, 2002, the note balance decreased to $1,330,321,
additional funds were loaned by Mr. Campo in the amount of $67,769 but he
converted $75,000 of debt into equity.

Effective August 1, 2002, the Company consolidated the outstanding principal and
interest owed to Mr. Campo under the August 1, 2001 Note. The new note in the
amount of $1,430,148 bore interest at 7.5% per annum, matured on August 31, 2003
and carried a conversion feature of one share for each $0.0075 of debt
converted. As of July 31, 2003, the note balance increased to $1,541,909 as
additional funds were loaned to the Company by Mr. Campo.

The Company had defaulted on its principal payment due August 1, 2003 and its
quarterly interest payments due November 1, 2000, February 1, 2001, May 1, 2001,
August 1, 2002, November 1, 2002, February 1, 2003, and May 1, 2003. As of July
31, 2003, a total of $110,197 in unpaid interest was owed to Mr. Campo under the
August 1, 2002 note.

Accordingly, the balances of the restructured obligations were classified as
long-term debt at July 31, 2004 and 2003.

August 1, 2003, the Company consolidated the outstanding principal and interest
owed to Mr. Campo under the August 1, 2002 Note. The new note in the amount of
$1,652,106 bears interest at 7.5% per annum and matures on August 1, 2004. This
note also carries the conversion feature of one share for each $0.0075 of debt
converted, limited to 90,000,000 shares.

On August 1, 2004, the Company consolidated the outstanding principal and
interest owed to Mr. Campo under the prior note. The new note in the amount $
1,876,014 bears interest at 7.5% per annum and matures on August 1, 2005 ( See
note 8). The note is convertible at one share of common stock for each $0.0075
of debt converted. In December 2004, $7,500 of debt was converted into 1,000,000
shares of common stock. At July 31, 2005, the note is convertible into
89,000,000 shares of common stock.

On December 27, 2005, Mr. Campo exercised the conversion feature of the note and
received 89,000,000 shares of common stock for $667,500 of principal.

Mr. Campo forgave $632,500 of the note on December 30, 2005, which resulted in
forgiveness of debt income.

Mr. Campo has advanced $81,600 and $72,749 during the years ended July 31, 2006
and 2005, respectively. These notes also bear interest at 7.5% per annum.

NOTE 6 - STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING

In October 1987, the Company issued 49,000,000 shares of common stock to Jerome
Murray and 5,989 shares of common stock to another officer in consideration of
$4,900 and $100, respectively. Payments for the shares were received in November
1989.

                                                                         PAGE 17

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2006 AND 2005

NOTE 6 - STOCKHOLDERS' EQUITY AND INITIAL PUBLIC OFFERING (CONTINUED)

In an initial public offering of the company's common stock on February 26,1988,
the Company sold 15,000,000 units at a price of $0.05 per unit. Each unit
consisted on one share of common stock, one Class A redeemable common stock
purchase warrant and one class B redeemable common stock purchase warrant.
Proceeds, net of $220,900 of underwriting discounts and other registration
costs, amounted to $529,100. Concurrent with the public offering, the Company
issued warrants (the underwriter's warrants") to the underwriter for nominal
consideration to purchase 1,500,000 units consisting of 1,500,000 shares of
common stock and certain other warrants to purchase additional shares (the other
warrants were not exercised and expired prior to July 31, 1991). The
underwriter's warrants were exercisable through February 1993 at an exercise
price of $0.0075 per unit. In February 1993, the Company received $37,500 from
the exercise of 500,000 underwriter warrants pursuant to which the Company
issued 500,000 shares of common stock and 500,000 Class B stock purchase
warrants, whose exercise price is 150% of the Class B warrants, or $0.225 per
share, and expire on the same date as the Class B warrants.

The Class A warrants were exercisable through October 25, 1992 (as last extended
on June 25, 1991) at an exercise price of $0.10 per share. Effective for the
sixty-day period from June 16, 1989, the Company reduced the exercise price of
the Class A warrants to $0.45 per share. The Class B warrants were exercisable
through March 11, 2001 at an exercise price of $0.15 per share. There were
3,779,425, 3,152,472, 409,000 and 21,000 Class A warrants exercised in fiscal
years ending 1992, 1991, 1990 and 1989, respectively, at $.10 per share and
5,201,205 and 312,588 Class A warrants exercised in 1990 and 1989, respectively
at $.045 per share. The remaining 2,124,310 Class A warrants expired in 1991.
There were 13,000, 64,000 and 25,000 Class B warrants exercised in 1993, 1991
and 1990, respectively, at $0.15 per share and 500,000 underwriter's warrants
exercised in 1993 at $0.075 per share. Proceeds, net of solicitation costs, from
exercises of Class A, Class B and underwriter's warrants were credited to
stockholders' equity.

As a result of the exercises and expiration of warrants, the Company has no
Class A warrants, 14,898,000 Class B warrants, and 500,000 underwriter's B
warrants outstanding as of July 31, 2000. The Class B warrants are redeemable at
any time at the option of the Company at a price of $0.0001 per warrant. Holders
of the Class B warrants have certain rights with respect to the registration of
those warrants under the Securities Act of 1933.

During 1991, the Company offered for purchase to qualified investors a minimum
total of 1,000,000 and a maximum total of 5,000,000 shares of common stock at
$0.08 per share and received $245,200 from the sale of 3,065,000 shares prior to
the closing of the offering on March 31, 1991. The Company issued an additional
232,000 shares as commissions in connection with certain of the sales for a
total of 3,297,000 shares issued.


NOTE 7 - INCOME TAXES

At July 31, 2006, the Company had net operating loss carry forwards of
approximately $2,890,000 available to reduce future federal taxable income, and
tax credits of approximately $59,991 available to offset future federal income
tax, that expire from 2007 through 2024.

                                                                         PAGE 18

<PAGE>

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2006 AND 2005


NOTE 7 - INCOME TAXES (CONTINUED)


Deferred income taxes are recognized for differences between the basis of assets
and liabilities for financial statement and income tax purposes. The utilization
of these tax attributes is contingent upon the Company's ability to generate
future taxable income and tax before the tax attributes expire as well as
Internal Revenue Code limitations. As a result, a valuation allowance equal to
the full extent of the deferred tax asset has been established. The change in
the deferred tax asset (as well as the valuation account) was approximately
$5,000 for the fiscal year ended July 31, 2003.

NOTE 8 - STOCK OPTIONS

In April 2002 the Company issued options to purchase six million shares of
common stock at .02 per share. The options were issued to an employee under non
qualified option plan. As of July 31, 2006 all options were fully vested. No
options were issued during the years ended July 31, 2006 and 2005. Options
outstanding as of July 31, 2006 is as follows:

Options outstanding and exercisable                   6,000,000
Weighted average exercise price                           $0.02
Weighted average remaining life                            5.75 years

NOTE 9 - SUBSEQUENT EVENT

Subsequent to July 31, 2006 the Company has consolidated the amount due to Tony
Campo including accrued interest totaling $969,562. The new note shall pay
interest at 7.5% per annum payable quarterly on November 1, February 1, May 1,
and August 1, with a balloon payment due August 1, 2007.



PAGE 19