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, 2004

                                       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

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


   P.O. Box 224, Landing, New Jersey                      07850
 -------------------------------------                   --------
(Address of principal executive offices)                (Zip Code)


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


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


Securities registered pursuant to Section 12(g) of the Act:         NONE



<PAGE>




Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes     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 Registrant'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 ].

The Registrant did not have any revenues during its fiscal year ended July 31,
2004.

As of October 26, 2004, the aggregate market value of the registrant's Common
Stock held by nonaffiliates of the registrant as computed by reference to the
closing price of such stock on such date was approximately $310,873.

80,153,434 shares of the registrant's Common Stock were outstanding as of
October 26, 2004.

Transitional Small Business Disclosure Format:

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


Documents incorporated by Reference:  NONE







<PAGE>






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



Part I
       -  Item 1.   Description of Business
       -  Item 2.   Description of Property
       -  Item 3.   Legal Proceedings
       -  Item 4.   Submission of Matters to a Vote of Security Holders


Part II
       -  Item 5.   Market for Common Equity and Related Stockholder Matters
       -  Item 6.   Management's Discussion and Analysis or Plan of Operation
       -  Item 7.   Financial Statements
       -  Item 8.   Changes in and Disagreements With Accountants on
                      Accounting and Financial Disclosure
       -  Item 8A.  Controls and Procedures

Part III
       -  Item 9.   Directors, Executive Officers, Promoters and Control
                      Persons; Compliance with Section 16(a) of the Exchange Act
       -  Item 10.  Executive Compensation
       -  Item 11.  Security Ownership of Certain Beneficial Owners and
                      Management
       -  Item 12.  Certain Relationships and Related Transactions


Part IV
       -  Item 13.  Exhibits, Lists and Reports on Form 8-K

       -  Item 14  Principal Accountant Fees and Services

                         Signature
                         Exhibit 31(a)
                         Exhibit 31(b)
                         Exhibit 32(a)
                         Exhibit 32(b)






                                       2
<PAGE>



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS
         ------------------------

A. RISK FACTORS

         Safe Harbor Statement

         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. In
particular, our statements regarding the anticipated markets for our
technologies, the continued advancement of our research, the approval of our
patent applications, the successful implementation of our commercialization
strategy, and the timing of our projects are examples of such forward-looking
statements. The forward-looking statements include risks and uncertainties,
including, but not limited to variability in size, scope and duration of
research projects, research study results which may lead to cancellations of
research projects, and other factors, including general economic conditions and
regulatory developments, not within our control. The factors discussed herein
and expressed from time to time in our filings with the Securities and Exchange
Commission may cause results and developments to be materially different from
those expressed in or implied by such statements. The forward-looking statements
are made only as of the date of this filing, and we undertake no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.

DEVELOPMENT STAGE COMPANY; LIMITED OPERATING HISTORY.

We are a developmental stage company with a limited operating history and
limited assets and capital. We have incurred losses each year since inception
and have an accumulated deficit of $4,561,118 at July 31, 2004. We have never
generated any operating revenues, and our technologies may not be ready for
widespread commercialization for several years. We expect to continue to incur
losses over the next two to three years because we anticipate that our
expenditures on research and development, commercialization and administrative
activities will significantly exceed any revenues during that period. We cannot
predict when, if ever, we will become profitable.

WE DEPEND ON THREE PRINCIPAL TECHNOLOGIES AND, IF OUR TECHNOLOGIES ARE NOT
COMMERCIALLY SUCCESSFUL, WE WILL HAVE NO ALTERNATIVE SOURCE OF REVENUE.





                                       3
<PAGE>


     Our primary business is the development and commercial exploitation of
technologies (1) to produce hydrogen using a photogalvanic process, (2) to
remove contaminants from coal burning flue gases and building air, and (3) to
develop an internal combustion engine that would run on alternative fuels. Our
future revenue and profitability critically depend on our ability to develop
these technologies and later to market and license such technologies at a
profit. We have conducted testing in connection with each of these technologies.
Such testing has provided us with data upon which we have designed additional
research. However, we cannot give any assurance that any of our technologies
will be commercially successful or economically viable. Our failure to obtain
market acceptance of our technologies or to successfully commercialize such
technologies would have a material adverse effect on our future prospects and
business.

WE OUTSOURCE ALL OF OUR RESEARCH AND DEVELOPMENT ACTIVITIES AND, IF WE ARE
UNSUCCESSFUL IN MAINTAINING OUR ALLIANCES WITH THESE THIRD PARTIES, OUR RESEARCH
AND DEVELOPMENT EFFORTS MAY BE DELAYED OR CURTAILED.

         We rely on third parties to perform all of our research and development
activities. At this time, we do not have the internal capabilities to perform
our research and development activities. Accordingly, the failure of third-party
research partners to perform under agreements entered into with us, or our
failure to renew important research agreements with these third parties, may
delay or curtail our research and development efforts.

WE HAVE SIGNIFICANT FUTURE CAPITAL NEEDS AND MAY BE UNABLE TO RAISE CAPITAL WHEN
NEEDED, WHICH COULD FORCE US TO DELAY OR REDUCE OUR RESEARCH AND DEVELOPMENT
EFFORTS.

     As of July 31, 2004, we had cash and liquid investments valued at only
$1,033 and a working capital deficit of $19,709. To date, we have generated
minimal revenues, and we anticipate that our operating costs will exceed any
revenues generated over the next several years. Therefore, we may be required to
raise additional capital in the future in order to operate according to our
current business plan, and this funding may not be available on favorable terms,
if at all. If adequate funds are not available, we may be required to curtail
our research efforts significantly or to obtain funds through arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our technologies, products or potential markets. Failure to obtain
financing on acceptable terms would have a material adverse effect on our
liquidity.

         Our future capital requirements depend on numerous factors, including:

          o    the scope of our research and development;

          o    our ability to attract business partners willing to share in our
               development costs;

          o    our ability to successfully commercialize our technologies;

          o    competing technological and market developments;

          o    our ability to enter into collaborative arrangements for the
               development and commercialization of our technologies; and

          o    the cost of filing, prosecuting, defending and enforcing patent
               claims and other intellectual property rights.


OUR BUSINESS WILL DEPEND UPON OUR ABILITY TO OBTAIN PATENTS AND UPON OUR OTHER
PROPRIETARY RIGHTS AND THE ENFORCEMENT OF THESE RIGHTS. OUR FAILURE TO OBTAIN
AND MAINTAIN PATENT PROTECTION MAY INCREASE COMPETITION AND REDUCE DEMAND FOR
OUR TECHNOLOGIES.




                                       4
<PAGE>


      As a result of the substantial length of time and expense associated with
developing products and bringing them to the marketplace obtaining and
maintaining patent and trade secret protection for technologies, products and
processes is of vital importance. Our success will depend in part on several
factors, including, without limitation:

     o    our ability to obtain patent protection for our technologies and
          processes;

     o    our ability to preserve our trade secrets; and

     o    our ability to operate without infringing the proprietary rights of
          other parties.

      We have three (3) patents that have been issued by the U.S. Patent and
Trademark Office, (PTO) in connection with the Rotorcam Engine. We have also
filed patent applications for our hydrogen production and smoke stack and
building air decontamination technologies in the United States. Our success
depends in part upon the grant of patents from our pending patent applications.
Although we believe that each of our technologies is unique and will not violate
or infringe upon the proprietary rights of any third party, we cannot assure you
that such claims will not be made, or if made, could be successfully defended
against.

     Since patent applications in the United States are maintained in secrecy
until patents are issued, and since publication of discoveries in scientific and
patent literature tend to lag behind actual discoveries by several months, we
cannot be certain that we were the first creator of the technologies covered by
our pending patent applications or that we were the first to file patent
applications for these technologies.

In addition, among other things, we cannot assure you that:

     o    our patent applications will result in the issuance of patents;

     o    any patents issued or licensed to us will be free from challenge and,
          if challenged, would be held to be valid;

     o    any patents issued or licensed to us will provide commercially
          significant protection for our technologies, products and processes.

     o    other companies will not independently develop substantially
          equivalent technologies that are not covered by our patent rights.

     o    other companies will not obtain access to our know-how;

     o    other companies will not be granted patents that may prevent the
          commercialization of our technologies; or

     o    we will not require licensing and the payment of significant fees or
          royalties to third parties for the use of their intellectual property
          in order to enable us to conduct our business.

OUR SECURITY MEASURES MAY NOT ADEQUATELY PROTECT OUR UNPATENTED TECHNOLOGY AND,
IF WE ARE UNABLE TO PROTECT THE CONFIDENTIALITY OF OUR PROPRIETARY INFORMATION
AND KNOW-HOW, THE VALUE OF OUR TECHNOLOGIES MAY BE ADVERSELY AFFECTED.

         Our success also depends upon know-how, unpatentable trade secrets, and
the skills, knowledge and experience of our scientific and technical
consultants. We cannot assure you that adequate protection for our trade
secrets, know-how or other proprietary information against unauthorized use of
disclosure will be available. We occasionally provide information to research
collaborators in academic institutions and request them to conduct certain
tests. We cannot assure you that such academic institutions will not assert
intellectual property rights in the results of the tests they conduct or that
such academic institutions will grant licenses under such intellectual property
rights to us on acceptable terms, if at all. If the assertion of intellectual
property rights by an academic institution is substantiated, and such academic
institution does not grant intellectual property rights to us, these events
could limit our ability to commercialize our technologies.



                                       5
<PAGE>


AS WE EVOLVE FROM A COMPANY PRIMARILY INVOLVED IN THE RESEARCH AND DEVELOPMENT
OF OUR TECHNOLOGIES INTO ONE THAT IS ALSO INVOLVED IN THEIR COMMERCIALIZATION,
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH AND EXPANDING OUR OPERATIONS.

         Should our business grow, we may need to add employees and enhance our
management, systems and procedures. We will need to successfully integrate our
operations with the operations of marketing partners, manufacturers,
distributors and suppliers to produce and market commercially viable products.
We may also need to manage additional relationships with various collaborative
partners, suppliers and other organizations. Expanding our business will place a
significant burden on our management and operations. Our failure to effectively
respond to changes may make it difficult for us to manage our growth and expand
our operations.

WE HAVE NO MARKETING OR SALES HISTORY AND WILL DEPEND ON THIRD-PARTY MARKETING
PARTNERS. ANY FAILURE OF THESE PARTIES TO PERFORM WOULD DELAY OR LIMIT OUR
COMMERCIALIZATION EFFORTS.

         We intend to rely on third parties to market, distribute and sell
commercially viable products. Our business plan also envisions creating
strategic alliances to access needed commercialization and marketing expertise.
We may not be able to attract qualified distributors or marketing partners, and
even if qualified, these marketing partners may not be able to successfully
market products developed with our technologies. If we fail to successfully
establish distribution channels, or if our marketing partners fail to provide
adequate levels of sales, our commercialization efforts will be delayed or
limited and we will not be able to generate revenue.

WE DEPEND ON OUR KEY PERSONNEL AND, IF WE ARE NOT ABLE TO ATTRACT AND RETAIN
QUALIFIED SCIENTIFIC AND BUSINESS PERSONNEL, WE MAY NOT BE ABLE TO GROW OUR
BUSINESS OR DEVELOP AND COMMERCIALIZE OUR TECHNOLOGIES.

         We are highly dependent on our scientific advisors, consultants and
third-party research partners. The loss of such advisors, consultants and
partners would severely hinder our technological development. Our future success
will also depend in part on our ability to identify, hire and retain qualified
personnel in an intensely competitive market. The failure to attract and retain
key personnel could limit our growth and hinder our research and development
efforts.

CERTAIN PROVISIONS OF DELAWARE LAW COULD MAKE A TAKEOVER DIFFICULT.

         We are subject to the Business Combination Act of the Delaware General
Corporation Law which, subject to certain exceptions, restricts certain
transactions and business combinations between a corporation an a stockholder
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date such stockholder becomes a 15% owner. These provisions
may have the effect of delaying or preventing a change of control of us without
action by our stockholders and, therefore, could adversely affect the value of
our common stock.



                                       6
<PAGE>


INCREASING POLITICAL AND SOCIAL TURMOIL, SUCH AS TERRORIST AND MILITARY ACTIONS,
INCREASE THE DIFFICULTY FOR US AND OUR STRATEGIC PARTNERS TO FORECAST ACCURATELY
AND PLAN FUTURE BUSINESS ACTIVITIES.

         Recent political and social turmoil, including the terrorist attacks of
September 11, 2001, the conflict in Iraq and the current crisis in the Middle
East, can be expected to put further pressure on economic conditions in the
United States and worldwide. These political, social and economic conditions may
make it difficult for us to plan future business activities.

OUR MANAGEMENT HAS SIGNIFICANT CONTROL OF OUR COMMON STOCK AND COULD
SIGNIFICANTLY INFLUENCE OUR ACTIONS IN A MANNER THAT CONFLICTS WITH OUR
INTERESTS AND THE INTERESTS OF OTHER STOCKHOLDERS.

         As of July 31, 2004, our executive officers, directors and affiliated
entities together beneficially owned approximately 64.3 % of the outstanding
shares of our common stock, assuming the exercise of options and warrants which
are currently exercisable, held by these stockholders. As a result, these
stockholders, acting together, are able to exercise significant influence over
matters requiring approval by our stockholders.

OUR COMMON STOCK HAS A LIMITED TRADING MARKET, WHICH COULD LIMIT YOUR ABILITY TO
RESELL YOUR SHARES OF COMMON STOCK AT OR ABOVE YOUR PURCHASE PRICE.

         Our common stock is quoted on the over-the-counter bulletin board and
currently has a limited trading market. We cannot assure you that an active
trading market will develop or, if developed, will be maintained. As a result,
our stockholders may find it difficult to dispose of shares of our common stock
and, as a result, may suffer a loss of all or a substantial portion of their
investments.

BECAUSE WE DO NOT INTEND TO PAY, AND HAVE NOT PAID, ANY CASH DIVIDENDS ON OUR
SHARES OF COMMON STOCK, OUR STOCKHOLDERS WILL NOT BE ABLE TO RECEIVE A RETURN ON
THEIR SHARES UNLESS THE VALUE OF OUR COMMON STOCK APPRECIATES AND THEY SELL
THEIR SHARES.

         We have never paid or declared any cash dividends on our common stock,
and we intend to retain future earnings, if any, to finance the development of
our business. We do not anticipate paying any cash dividends on our common stock
in the foreseeable future. Therefore, our stockholders will not be able to
receive a return on their investment unless the value of our common stock
appreciates and they sell their shares.


OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" REGULATIONS WHICH MAY AFFECT
THE ABILITY OF OUR STOCKHOLDERS TO SELL THEIR SHARES.



                                       7
<PAGE>


         In general regulations of the SEC define a "penny stock" to be an
equity security that is not listed on a national securities exchange or the
NASDAQ Stock Market and that has a market price of less than $5.00 per share or
an exercise price of less than $5.00 per share, subject to certain exceptions.
The regulations relating to penny stock impose additional sales practice
requirements on broker-dealers that sell such securities to persons other than
certain qualified investors. For transactions involving a penny stock, unless
exempt, a broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written consent to the transaction prior
to the sale. In addition, the rules on penny stocks require delivery, prior to
and after any penny stock transaction, of disclosures required by the SEC.
Accordingly, the ability of holders of our common stock to sell their shares in
the secondary market may also be adversely affected.


B. BACKGROUND

         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.

         In October 1987 we acquired from our predecessor, Rotorcam Technology
Corp., an assignment of license under which we obtained the exclusive right and
license to exploit all existing technology relating to the Rotorcam Engine,
which had previously been licensed to Rotorcam Technology Corp. by one of our
former officers. 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 $877,000 on such research
and development. However, due principally to the lack of any operating revenue
or other sources of funding, we did not incur any expenses for research and
development for the Rotorcam Engine during our last three fiscal years.

         During such period, we attempted to locate a funding source for the
$350,000 to $375,000 required in order to complete a second prototype of the
Rotorcam Engine, which is a necessary step in attempting to commercialize it.
Possible sources of such funding included borrowing from private sources and/or
exercise of our 15,398,000 outstanding Class B Warrants. 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 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 Warrants 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.



                                       8
<PAGE>


         Principally because of our inability to raise the funds necessary to
further develop the Rotorcam Engine, we have begun to research and develop other
technologies that may permit us to diversify into additional product areas.
These technologies consist of an environmentally safe cleaning solution and a
method of producing hydrogen from sunlight. Our investments in these
technologies have been guided by the Company's mission to commercialize
technologies that improve the environment. This has been our philosophy with the
Rotorcam Engine and continues with our efforts to produce hydrogen as a
substitute for fossil fuels and a cleaning solution that has the capability of
eliminating or reducing certain contaminants from the environment.


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 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 will manufacture the cleaning
solution and supply it to our customers. Foster-Campo will then invoice us for
their cost of doing so without any profit to Foster-Campo. Foster-Campo will
receive a royalty payment of 50% of our net profit on sales of the proprietary
solution to our customers. Calculation of our net profit will include, but not
be limited to, amounts Foster-Campo invoices us for supplying our customers with
the cleaning solution.

         In June 2000 Penn State Energy Institute, which is a facility of Penn
State University, agreed to conduct laboratory tests of the application of the
Klenz-Safe solution to the reduction of sulfur from coal burning flue gas. When
coal burning flue gas was introduced through Klenz-Safe using the Company's
proprietary methodology, the capture rate of sulfur exceeded 99.2% and
maintained a minimum 98% rate throughout the testing.

         Due to the success of the initial testing, Penn State Energy Institute
applied to the U.S. Department of Energy for a grant to conduct a pilot test of
Klenz-Safe's ability to capture sulfur in coal burning flue gas. Such grant
request was not funded during the Department of Energy's 2003 funding period.
During our most recent fiscal year, Penn State informed us that the cost of
further testing, which would be conducted in a working smoke stack to simulate
actual conditions, would be approximately $100,000. We are currently attempting
to form a business relationship with one of more third parties that may assist
us in funding the cost of such testing; however, we are not able to provide any
assurances that we will be able to enter into such a business relationship. In
addition, even if we are able to enter into any such business relationship, it
is probable that we will be required to assign a partial interest in our
Klenz-Safe Technology, or the proceeds of such technology, to such third party
in consideration of such third party's agreement to assist in funding the
additional research.

         If funding for the pilot study is obtained, the pilot tests would be
conducted in a working smoke stack to simulate actual conditions. If such tests
are conducted and are successful, we intend to seek distribution partners to
assist us in marketing and selling the Klenz-Safe product to the coal burning
utility market. We cannot provide any assurances that such testing will occur
or, even if it does occur, that it will be successful.




                                       9
<PAGE>


         In 2001, we engaged a certified indoor air quality laboratory to
perform a series of laboratory tests on Klenz-Safe to determine Klenz-Safe's
ability to remove pollutants and contaminants from building air and to examine
other potential industrial uses. The tests simulated wet scrubber equipment,
which is commonly used device for removing pollutants from building air. Based
on generally known industry practices, management believes that the range of
pollutants captured by Klenz-Safe and the rate of such capture have not been
previously achieved in a single operation. The following were the material
findings of the laboratory tests:

     -    Klenz-Safe captured 90% of carbon monoxide in tested air streams;

     -    Klenz-Safe captured 70% of both nitrogen dioxide and of nitrous oxide
          in tested streams;

     -    Klenz-Safe added no detectable volatile organic compounds to the air
          stream at elevated temperatures, indicating that Klenz-Safe could be
          applied to indoor air cleaning systems without the need of additional
          filtering.

         Based on our tests of Klenz-Safe, management believes that Klenz-Safe
possesses the following environmentally beneficial attributes:

o    Klenz-Safe is a non-toxic, non-hazardous composition that requires no
     special equipment to protect the personnel using it;

o    Klenz-Safe achieves a higher starting alkalinity and has a longer operating
     life than can be obtained with commercial caustic materials or lime
     slurries;

o    Klenz-Safe protects rather than corrodes metal compounds and surfaces

         Management presently believes that Klenz-Safe may be useful in the
following applications:

o    Air pollution control in we scrubber equipment, which are commonly used to
     remove pollutants from building air;

o    Containment and neutralization of liquids and compounds;

o    Decontamination of equipment in pharmaceutical production;

o    Air filtration in indoor air quality control;

o    Flue and combustion gas scrubbing.

         We are currently attempting to form a business relationship with one of
more third parties that may assist us in funding the cost of further testing of
Klenz-Safe's ability to remove contaminants from building air on a cost
effective basis; however, we are not able to provide any assurances that we will
be able to enter into such a business relationship. In addition, even if we are
able to enter into any such business relationship, it is probable that we will
be required to assign a partial interest in our Klenz-Safe Technology, or the
proceeds of such technology, to such third party in consideration of such third
party's agreement to assist in funding such additional testing.



                                       10
<PAGE>


         We are also presently continuing to demonstrate Klenz-Safe to potential
end-user customers. At such customers' request, we are performing further tests
on Klenz-Safe to determine its ability to meet the particular intended
applications of such customers.

         To date, the cost of the research at Penn State was approximately
$9,000, and the cost of the research by the certified air quality laboratory was
approximately $5,000. In addition, during fiscal 2003 and 2004 we incurred
approximately $10,000 and $4,700, respectively for research relating to Klenz
Safe's ability to remove sulfur from flue burning smoke stacks. Funding for all
such research was provided by loans to the Company from our Chairman, Mr.
Anthony Campo.

         We have been granted trademark protection for the name "Klenz-Safe"
from the US Patent and Trademark Office (PTO). The method of application of the
Klenz-Safe formula for removal of sulfur from coal burning flue gas was
developed by a consultant to the Company, who assigned to us his rights to such
know-how and his rights under a provisional patent application filed with the
PTO covering such know-how. In October 2002 we filed an application for a
provisional patent, which extends the Klenz-Safe technology into additional
indoor air quality applications. In February 2003, we filed an amendment to the
October 2002 provisional patent application that revised certain data contained
in the October 2002 provisional patent with the PTO application. In February
2004 we filed a non-provisional patent application relating to Klenz-Safe.
However, we cannot provide any assurances that the PTO will grant a patent on
our Klenz-Safe technology.

HYDROGEN PRODUCTION TECHNOLOGY

         In light of the energy plan of current administration encouraging the
use of hydrogen fuel cells in place of fossil fuels such as oils and gas,
management has begun 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 June 2002, we entered into an oral agreement with George Johnson and
William L. Johnson (the "Inventors") to develop a method and apparatus for
production of photo galvanic hydrogen (the "PGH Technology") and to prepare and
file a provisional patent application (the "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. The Company subsequently formalized the oral agreement with
the Inventors by a written agreement dated as of June 1, 2002.



                                       11
<PAGE>


         In July 2003, the Inventors filed the Provisional Patent Application
with the PTO. By Agreement dated October 2, 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,
both domestic and foreign, that may be granted for the PGH Technology. In
consideration for such assignment, we granted to the Inventors a right of first
refusal to perform all consulting services derived from contracts and/or grants
entered into between the Company and third parties relating to the development
of the PGH Technology. We further agreed to reimburse the Inventors up to $5,000
for their out-of pocket expenses incurred for materials and supplies to build
apparatus relating to the PGH Technology and for collecting, and testing for,
the production of hydrogen.

         Pursuant to the Technology Assignment Agreement, the Inventors executed
an Assignment of Invention & Patent Rights, dated October 2, 2003 (the
"Assignment"), under which the Inventors assigned to the Company their rights in
the PGH Technology, all applications for Letters Patent that may be filed for
the PGH Technology, and all Letters Patent for the PGH Technology in any
country. The Company intends to file such Assignment with the PTO as soon as
reasonably practicable.

         In October 2003, but effective as of July 18, 2003, we entered into
Consulting Agreements with each of the Inventors (the "Consulting Agreements")
pursuant to which the Inventors agreed to assist the Company in obtaining grants
from and/or contracts with third parties for research and development relating
to the PGH Technology and in obtaining a patent on the technology described in
the Provisional Patent Application. All services under such Consulting
Agreements have been suspended by the Inventors for personal reasons.

         In October 2004, we transferred the apparatus for our PGH Technology to
the University of Kansas for purposes of conducting further testing of the
ability of our PGH Technology to produce hydrogen. Initial results of such
testing were positive, and we are currently in negotiations to attempt to reach
an agreement with a professor at the University of Kansas to perform further
testing on our PGH Technology. We are unable to provide any assurances that such
agreement will be reached.

         During fiscal 2004, we spent approximately $4,500 on research relating
to the PGH Technology Funding for such research was provided by loans from our
Chairman.

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.

         Markets that may be available for the Rotorcam Engine include off-road
terrain equipment, such as earth-moving farm equipment, tanks, pony engines,
marine engines, generators, and co-generation systems that are used to cool, as
well as to provide an electrical power source for, home and industry.



                                       12
<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. Because the Company is still engaged in assessing
the viability of the Klenz-Safe product, we are unable to assess the competitive
environment for Klenz-Safe. We will be better able to determine the competitive
market after completion and analysis of further testing.

         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.

         If we are able to obtain sufficient funds to commercially exploit the
Rotorcam Engine, we expect to compete primarily on the basis of technological
advantage, which will permit favorable product cost and performance
differentials. Since engine technology is subject to rapid and dramatic changes,
however, competitors may develop better approaches to such technology, that
would seriously and adversely affect our ability to compete with them.

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 and William L. Johnson have
suspended their services to the Company for personal reasons.

         In October 2003, we engaged John Bryne 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. Bryne one million shares of our Common Stock. Such shares
will be issued prior to November 30, 2004. We also agreed to issue an additional
one million shares of such Common Stock within 30 days after the Company derives
at least $250,000 of revenue resulting from business relationships between
Company and one or more of third parties introduced to us by Mr. Byrne.



                                       13
<PAGE>


         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.

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.

         If successfully developed, the Rotorcam Engine will be subject to a
series of governmental regulations with respect to safety, fuel efficiency and
pollution. We cannot provide you with any assurance that the Rotorcam Engine
will be able to meet these standards of pollution and safety. In addition, the
assembly and manufacture of products containing the Rotorcam Engine will be
subject to Federal and State regulations.

         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 with the Murrays, we
obtained title to seven U.S. patents and four international patents as well as
rights to various patents pending. 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 US Patent and Trademark Office (PTO). In February 2004, we filed a non
provisional 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. In July 2004 we filed a non provisional
patent application covering a method and apparatus for production of photo
galvanic hydrogen ("PGH"). We are actively pursuing the grant of such
applications but cannot provide any assurances that we will be able to obtain a
patent on either the Klenz-Safe or PGH technologies.

STATUS OF ANY PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE

         We have presently suspended further testing of Klenz-Safe's ability to
remove sulfur and other contaminating from coal-burning flue gas and to remove
contaminants from building air. We are continuing to demonstrate Klenz-Safe to
potential end user customers to demonstrate its ability to meet intended
applications of such customers.




                                       14
<PAGE>


         We have transferred the apparatus for our PGH Technology to the
University of Kansas for the purpose of conducting further testing on its
ability to produce hydrogen. Initial results were encouraging, and we are
presently negotiating with a professor at the University of Kansas to conduct
further testing.

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.



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.



                                       15
<PAGE>


         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.



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.

         If we are successful in our attempts to produce an engine that is
commercially viable, we intend to attempt to enter into licensing or contract
manufacturing arrangements with other companies for production and sale of the
Rotorcam Engine.



                                       16
<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.




                                       17
<PAGE>






                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         -----------------------------------------------------------------
         MATTERS
         -------

         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:

                                       Year Ended July 31,

                              2004                              2003
                              ----                              ----

                     High              Low             High             Low
1st Quarter         $0.033           $0.017           $0.04            $0.02
2nd Quarter         $0.019           $0.011           $0.04            $0.02
3rd Quarter         $0.021           $0.012           $0.04            $0.02
4th Quarter         $0.012           $0.006           $0.062           $0.016

         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 20, 2004 there were approximately
826 holders of record of our Common Stock.

         Effective as of January 4, 2001, we issued 2,000,000 shares of our
common stock, $.0001 par value, to Mr. Frank Pecorella, who is a director of the
Company. These shares were issued in consideration of Mr. Pecorella's past
services to the Company. Mr. Pecorella has been serving as a director of the
Company since December 1998 without compensation. On January 4, 2001, the
closing price of our Common Stock as quoted on the Over the Counter Bulletin
Board was $0.0525 per share. Based solely on such market price, the value of the
grant to Mr. Pecorella was therefore approximately $105,000.

         On April 17, 2001, we issued 1,000,000 shares of our common stock to
Mr. Robert Van Dine and 250,000 shares of such common stock to Mr. Newell Dimen.
Such shares were issued as compensation for their services to the Company,
principally in connection with our efforts to diversify by engaging in the
testing of a proprietary cleaning solution for use in coal and oil burning smoke
stacks. On April 17, 2001, the closing price of our Common Stock as quoted on
the Over the Counter Bulletin Board was $0.034 per share. Based solely on such
market price, the value of the grant to Mr. Van Dine was therefore approximately
$34,000, and the value of the grant to Mr. Dimen was approximately $8,500.

         Effective May 2, 2001, we issued 1,000,000 shares of our Common Stock
to James P. O'Day in satisfaction of $45,000 owed to Mr. O'Day for accounting
services previously performed by him and $5,000 of additional accounting
services to be performed after May 2, 2001. On May 2, 2001, the closing price of
our Common Stock was $0.05 per share. Based solely on such market price, the
value of the grant to Mr. O'Day was therefore approximately $50,000.





                                       18
<PAGE>


         Effective on May 2, 2001, we issued 1,000,000 shares of our Common
Stock to Jubran Jubran in satisfaction of $40,000 owed to Mr. Jubran for tax and
financial consulting services previously performed by him for the Company and
$10,000 of additional financial consulting services to be performed after May 2,
2001. On May 2, 2001, the closing price of our Common Stock was $.005 per share.
Based solely on such market price, the value of the grant to Mr. Jubran was
therefore approximately $50,000.

         The shares issued to Messrs. Pecorella, Dimen, Van Dine, O'Day and
Jubran were issued in reliance upon the exemption from the registration
requirements of the Securities Act of 1933 permitted by Section 4(2) of such
Act. Since all of such shares have been held by such individuals for more than
two years, they may be resold or otherwise transferred in accordance with Rule
144 of the Securities Act of 1933.

         On April 9, 2002, Mr. Anthony Campo, the Chairman of the Board and
Executive Vice President of the Company, exercised a right to convert $37,500
indebtedness owed by the Company to Mr. Campo into 5,000,000 shares of our
Common Stock. The number of shares for which Mr. Campo exercised his conversion
right was computed at a rate of $.0075 for each such share of Common Stock. Mr.
Campo's conversion right contained in a Promissory Noted dated August 1, 2001 in
the principal amount of $1,337,552 issued by the Company to Mr. Campo. Under the
terms of the Promissory Note, Mr. Campo was given the right to convert all or
any portion of the unpaid principal and/or interest of the Note of a rate of one
share of Common Stock for each 3/4 of one cost of such principal and interest
converted, up to a maximum of 100,000,000 shares. The terms of such Promissory
Note are further described in our Form 10-KSB for the fiscal year ended July 31,
2003. Mr. Campo had previously exercised his conversion right under the August
1, 2001 Promissory Note on March 5, 2002. Under the March 5, 2002 exercise, Mr.
Campo converted $37,500 of indebtedness into 5 million shares of the Company's
Common Stock. All of the shares acquired by Mr. Campo upon conversion of amounts
due under his promissory note are eligible for sale or other transfer by Mr.
Campo in accordance with Rule 144 of the Securities Act of 1933.

         On April 11, 2002, the Board of Directors approved the issuance of 1
million shares of the Company's Common Stock to Robert Van Dine in consideration
for certain consulting services that Mr. Van Dine had agreed to perform for the
Company. Such services included (a) research and development of methods of using
the Klenz-Safe cleaning product for reducing or eliminating pollutants from
building air; (b) research and development of other uses of the Klenz-Safe
cleaning product; (c) marketing all technologies using the Klenz-Safe cleaning
product; and (d) upon request by the Board of the Company, serving as an
executive officer of the Company for a minimum of one year. On April 30, 2002
the Board requested Mr. Van Dine to serve as its President. Mr. Van Dine assumed
such position as of such date and continues to serve as President of the Company
to date.

         On April 11, 2002, the Board of Directors approved the issuance of
250,000 shares of the Company's Common Stock to Newell Dimen in consideration
for certain consulting services that Mr. Dimen had agreed to perform on behalf
of the Company. Such services included (a) research and development of methods
of using the Klenz-Safe cleaning product for reducing or eliminating pollutants
from building air; (b) research and development of other uses of the Klenz-Safe
cleaning product; and (c) marketing all technologies using the Klenz-Safe
cleaning product.

         The shares issued to Mr. Van Dine and Mr. Dimen 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 day the shares were issued to Mr. Van Dine and Mr. Dimen was $.041
per share. Based solely on such market price, the values of the shares issued to
Mr. Van Dine and Mr. Dimen were $41,000 and $10,250, respectively. Since Mr. Van
Dine and Mr. Dimen have held such shares for more than one year, such shares may
be resold or otherwise transferred in accordance with Rule 144 of the Securities
Act of 1933.



                                       19
<PAGE>


         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. Mr. Foster had been serving as the Company's President and Chief
Executive Officer since December 1998 and as a Director since March 2000, in
each case without any compensation.

         The Option is 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. From and after April
11, 2005 the Option may be exercised as to all optioned shares for which it had
not been previously exercised.

         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 of such Option or the underlying shares 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.

         On December 30, 2003, we issued 100,000 Shares of Common Stock to each
of Mr. George Johnson and Mr. William L. Johnson (the "Inventors") in
consideration of their services in developing the PGH Technology and preparing a
provisional patent application relating thereto. Pursuant to the Company's
agreement with them, the shares issued to Mr. George Johnson and Mr. William L.
Johnson were registered with the SEC on Form S-8 and are therefore freely
tradable. The closing price of the Company's Common Stock on the date the shares
were issued to the Inventors was $.015. Therefore, the market value of the
shares that were issued to each of the Inventors was $1,500 as of the date of
issuance.

         In October 2004, we approved the issuance of one million shares of our
Common Stock to Mr. John Bryne as consideration for consulting services rendered
by Mr. Bryne since October 2003 and to be rendered through September 2005. Such
shares will be issued to Mr. Bryne prior to November 30, 2004 and will be issued
without registration pursuant to Section 4(2) of the Securities Act of 1933.
They will therefore be "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.

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.

         Statements in this Form 10-KSB that are not statements of historical or
current fact constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other unknown
factors that could cause our actual results to be materially different from the
historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements that explicitly describe
such risks and uncertainties, readers are urged to consider statements labeled
with the terms "believes," "belief," "intends," "anticipates" or "plans" to be
uncertain and forward-looking. The forward-looking statements contained herein
are also subject generally to other risks and uncertainties that are described
from time to time in our reports filed with the Securities and Exchange
Commission.



                                       20
<PAGE>



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, 2004 of $4,561,118. Our revenues from our inception on
October 13, 1987 through July 31, 2004 aggregating $66,465 were derived from
interest earned. Interest income was zero in the periods ended July 31, 2004 and
July 31, 2003 as a result of the unavailability of funds for investment.

         The cumulative loss from inception includes research and development
costs of $876,771. Research and development costs in the periods ended July 31,
2004 and July 31, 2003. 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 $2,896,420. General and administrative expenses increased to
$117,407 in the period ended July 31, 2004 from $105,597 in the period ended
July 31, 2003, or an 11.2% increase. Increased general and administrative
expenses can be attributed to increased 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, 2004, and,
cumulatively, $57,260 since inception.

         The cumulative loss from inception also includes interest expense of
$797,132 on promissory notes payable to our principal stockholder and chairman.
Interest expense increased to $127,399 in the period ending July 31, 2004 from
$110,197 in the twelve (12) month period ended July 31, 2003, primarily as a
result of increased loans to us by our chairman and principal stockholder.

         Our net loss of $252,861 in the period ended July 31, 2004 increased by
$37,067, or 17.2%, over the net loss of $215,794 in July 31, 2003. Increases in
legal fees, research costs and interest expense caused the overall increase.

LIQUIDITY AND CAPITAL RESOURCES

         At July 31, 2004, we had cash and short-term investments totaling
$1,033 (compared to liquid assets of $8,252 at July 31, 2003), a working capital
decrease of $7,219 (compared with a working capital increase of $14,496 at July
31, 2003), and a total stockholders' deficiency of $2,005,671 (compared to a
deficiency of $1,758,810 at July 31, 2003). The stockholders' deficiency
increased due to the net loss of $252,861 incurred in the twelve months ended
July 31, 2004.



                                       21
<PAGE>


         At July 31, 2004, we had current liabilities in excess of current
assets of $19,709. 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, 2004 as
well as July 31, 2003 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, 2004.
Cash flows used by operating activities were $107,219 and $203,700 in the
periods ended July 31, 2004 and July 31, 2003, respectively. The limited amount
of liquid resources available at July 31, 2004, and our inability to generate
operating revenues and cash flows, raise substantial doubts about our ability to
continue as a going concern.


                                PLAN OF OPERATION


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 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 will manufacture the cleaning
solution and supply it to our customers. Foster-Campo will then invoice us for
their cost of doing so without any profit to Foster-Campo. Foster-Campo will
receive a royalty payment of 50% of our net profit on sales of the proprietary
solution to our customers. Calculation of our net profit will include, but not
be limited to, amounts Foster-Campo invoices us for supplying our customers with
the cleaning solution.

         In June 2000 Penn State Energy Institute, which is a facility of Penn
State University, agreed to conduct laboratory tests of the application of the
Klenz-Safe solution to the reduction of sulfur from coal burning flue gas. When
coal burning flue gas was introduced through Klenz-Safe using the Company's
proprietary methodology, the capture rate of sulfur exceeded 99.2% and
maintained a minimum 98% rate throughout the testing.

         Due to the success of the initial testing, Penn State Energy Institute
applied to the U.S. Department of Energy for a grant to conduct a pilot test of
Klenz-Safe's ability to capture sulfur in coal burning flue gas. Such grant
request was not funded during the Department of Energy's 2003 funding period.
During our most recent fiscal year, Penn State informed us that the cost of
further testing, which would be conducted in a working smoke stack to simulate
actual conditions, would be approximately $100,000. We are currently attempting
to form a business relationship with one of more third parties that may assist
us in funding the cost of such testing; however, we are not able to provide any
assurances that we will be able to enter into such a business relationship. In
addition, even if we are able to enter into any such business relationship, it
is probable that we will be required to assign a partial interest in our
Klenz-Safe Technology, or the proceeds of such technology, to such third party
in consideration of such third party's agreement to assist in funding the
additional research.



                                       22
<PAGE>


         If funding for the pilot study is obtained, the pilot tests would be
conducted in a working smoke stack to simulate actual conditions. If such tests
are conducted and are successful, we intend to seek distribution partners to
assist us in marketing and selling the Klenz-Safe product to the coal burning
utility market. We cannot provide any assurances that such testing will occur
or, even if it does occur, that it will be successful.

         In 2001, we engaged a certified indoor air quality laboratory to
perform a series of laboratory tests on Klenz-Safe to determine Klenz-Safe's
ability to remove pollutants and contaminants from building air and to examine
other potential industrial uses. The tests simulated wet scrubber equipment,
which is commonly used device for removing pollutants from building air. Based
on generally known industry practices, management believes that the range of
pollutants captured by Klenz-Safe and the rate of such capture have not been
previously achieved in a single operation. The following were the material
findings of the laboratory tests:

     -    Klenz-Safe captured 90% of carbon monoxide in tested air streams;

     -    Klenz-Safe captured 70% of both nitrogen dioxide and of nitrous oxide
          in tested streams;

     -    Klenz-Safe added no detectable volatile organic compounds to the air
          stream at elevated temperatures, indicating that Klenz-Safe could be
          applied to indoor air cleaning systems without the need of additional
          filtering.

         Based on our tests of Klenz-Safe, management believes that Klenz-Safe
possesses the following environmentally beneficial attributes:

o    Klenz-Safe is a non-toxic, non-hazardous composition that requires no
     special equipment to protect the personnel using it;

o    Klenz-Safe achieves a higher starting alkalinity and has a longer operating
     life than can be obtained with commercial caustic materials or lime
     slurries;

o    Klenz-Safe protects rather than corrodes metal compounds and surfaces

         Management presently believes that Klenz-Safe may be useful in the
following applications:

o    Air pollution control in we scrubber equipment, which are commonly used to
     remove pollutants from building air;

o    Containment and neutralization of liquids and compounds;

o    Decontamination of equipment in pharmaceutical production;

o    Air filtration in indoor air quality control;

o    Flue and combustion gas scrubbing.



                                       23
<PAGE>


         We are currently attempting to form a business relationship with one of
more third parties that may assist us in funding the cost of further testing of
Klenz-Safe's ability to remove contaminants from building air on a cost
effective basis; however, we are not able to provide any assurances that we will
be able to enter into such a business relationship. In addition, even if we are
able to enter into any such business relationship, it is probable that we will
be required to assign a partial interest in our Klenz-Safe Technology, or the
proceeds of such technology, to such third party in consideration of such third
party's agreement to assist in funding such additional testing.

         We are also presently continuing to demonstrate Klenz-Safe to potential
end-user customers. At such customers' request, we are performing further tests
on Klenz-Safe to determine its ability to meet the particular intended
applications of such customers.

         To date, the cost of the research at Penn State was approximately
$9,000, and the cost of the research by the certified air quality laboratory was
approximately $5,000. In addition, during fiscal 2003 and 2004 we incurred
approximately $10,000 and $4,700, respectively for research relating to Klenz
Safe's ability to remove sulfur from flue burning smoke stacks. Funding for all
such research was provided by loans to the Company from our Chairman, Mr.
Anthony Campo.

         We have been granted trademark protection for the name "Klenz-Safe"
from the US Patent and Trademark Office (PTO). The method of application of the
Klenz-Safe formula for removal of sulfur from coal burning flue gas was
developed by a consultant to the Company, who assigned to us his rights to such
know-how and his rights under a provisional patent application filed with the
PTO covering such know-how. In October 2002 we filed an application for a
provisional patent, which extends the Klenz-Safe technology into additional
indoor air quality applications. In February 2003, we filed an amendment to the
October 2002 provisional patent application that revised certain data contained
in the October 2002 provisional patent with the PTO application. In February
2004 we filed a non-provisional patent application relating to Klenz-Safe.
However, we cannot provide any assurances that the PTO will grant a patent on
our Klenz-Safe technology.

HYDROGEN PRODUCTION TECHNOLOGY

         In light of the energy plan of current administration encouraging the
use of hydrogen fuel cells in place of fossil fuels such as oils and gas,
management has begun 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 June 2002, we entered into an oral agreement with George Johnson and
William L. Johnson (the "Inventors") to develop a method and apparatus for
production of photo galvanic hydrogen (the "PGH Technology") and to prepare and
file a provisional patent application (the "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. The Company subsequently formalized the oral agreement with
the Inventors by a written agreement dated as of June 1, 2002.



                                       24
<PAGE>


         In July 2003, the Inventors filed the Provisional Patent Application
with the PTO. By Agreement dated October 2, 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,
both domestic and foreign, that may be granted for the PGH Technology. In
consideration for such assignment, we granted to the Inventors a right of first
refusal to perform all consulting services derived from contracts and/or grants
entered into between the Company and third parties relating to the development
of the PGH Technology. We further agreed to reimburse the Inventors up to $5,000
for their out-of pocket expenses incurred for materials and supplies to build
apparatus relating to the PGH Technology and for collecting, and testing for,
the production of hydrogen.

         Pursuant to the Technology Assignment Agreement, the Inventors executed
an Assignment of Invention & Patent Rights, dated October 2, 2003 (the
"Assignment"), under which the Inventors assigned to the Company their rights in
the PGH Technology, all applications for Letters Patent that may be filed for
the PGH Technology, and all Letters Patent for the PGH Technology in any
country. The Company intends to file such Assignment with the PTO as soon as
reasonably practicable.

         In October 2003, but effective as of July 18, 2003, we entered into
Consulting Agreements with each of the Inventors (the "Consulting Agreements")
pursuant to which the Inventors agreed to assist the Company in obtaining grants
from and/or contracts with third parties for research and development relating
to the PGH Technology and in obtaining a patent on the technology described in
the Provisional Patent Application. All services under such Consulting
Agreements have been suspended by the Inventors for personal reasons.

         In October 2004, we transferred the apparatus for our PGH Technology to
the University of Kansas for purposes of conducting further testing of the
ability of our PGH Technology to produce hydrogen. Initial results of such
testing were positive, and we are currently in negotiations to attempt to reach
an agreement with a professor at the University of Kansas to perform further
testing on our PGH Technology. We are unable to provide any assurances that such
agreement will be reached.

         During fiscal 2004, we spent approximately $4,500 on research relating
to the PGH Technology Funding for such research was provided by loans from our
Chairman.

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.



                                       25
<PAGE>


         Markets that may be available for the Rotorcam Engine include off-road
terrain equipment, such as earth-moving farm equipment, tanks, pony engines,
marine engines, generators, and co-generation systems that are used to cool, as
well as to provide an electrical power source for, home and industry.


ROTORCAM ENGINE

         We do not expect to further develop the Rotorcam Engine during the next
12-month period. We have been advised by Southwest Research Institute that it
would take up to 4 years and $3 million in order to develop the Rotorcam Engine
for commercial sale. We therefore first intend to use any funds that may become
available to further develop our Klenz-Safe and PGH technologies, which we
believe have the potential to generate operating revenues much earlier than the
Rotorcam Engine. We will, however, continue to evaluate possible
commercialization of the Rotorcam Engine in light of future facts and
circumstances.

SEASONALITY

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






                                       26
<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.

         On October 20, 2004 we filed a report on Form 8-K disclosing that the
firm of Albrecht, Viggiano, Zureck & Company, P.C., which is in the process of
ceasing to provide audit services to public companies, had resigned as our
auditors effective October 15, 2004 and that we had engaged the firm of
Blanchfield, Kober & Company, P.C. as independent public accountants for the
Company's fiscal year ended July 31, 2004. There were no disagreements with
Albrecht, Viggiano, Zureck & Company, P.C. during any period in which such firm
had acted as the Company's independent public accountants.

ITEM 8A.  CONTROLS AND PROCEDURES
          -----------------------

         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.

         There have been no significant changes in our internal controls or in
other factors during the most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our controls
over financial reporting.




                                       27
<PAGE>




                                            PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
          -------------------------------------------------------------------
          REGISTRANT; COMPLIANCE WITH SECTION 16(a) OF THEEXCHANGE 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. Our present executive officers and directors,
their ages and present positions are as follows:

                                                            First Year
Name                 Age         Position                   Elected/Appointed
----                ----         --------                   ------------------

Anthony Campo        64          Chairman of the            1993
                                 Board, Executive
                                 Vice President,
                                 Secretary and Treasurer

Dwight Foster        55          Director and               2000
                                 Chief Executive Officer

Frank Pecorella      52          Director                   1998


Robert Van Dine      53          President                  2002


         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
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.



                                       28
<PAGE>


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.


FRANK PECORELLA

         Mr. Frank Pecorella was appointed as a member of the Board of Directors
in December 1998. Since approximately October 2004, Mr. Pecorella has been
employed by Essex Financial Services as an investment consultant. From September
2001 until October 2004, Mr. Pecorella was employed by Fleet Bank/Quick & Reilly
as an investment consultant. From March 2000 to August 2001, Mr. Pecorella was
employed by Citicorp Investment Services as an investment consultant. From
February 1999 to February 2000, Mr. Pecorella was employed by Chase Investment
Services as an investment consultant, and from January 1996 to February 1999,
Mr. Pecorella was employed by Citicorp Investment Services as an investment
consultant.


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 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.

         There are no family relationships among our directors and officers.



                                       29
<PAGE>


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.


Item 10.  EXECUTIVE COMPENSATION

         Effective as of January 4, 2001, we issued 2,000,00 shares of our
Common Stock, $.0001 par value, to Mr. Frank Pecorella, who is a director of the
company. These shares were issued in consideration of Mr. Pecorella's past
services to the Company. Mr. Pecorella has been serving as a Director of the
Company since December 1998 without any compensation other than the shares of
our Common Stock issued to him in 2001. The closing price of our shares on
January 4, 2001 was $.0525. Therefore, the value of the grant to Mr. Pecorella,
without considering any discount due to the restricted character of such shares,
was $105,000.

         On April 17, 2001, we issued 1,000,000 shares of our common stock to
Mr. Robert Van Dine. Such shares were issued as compensation for his services to
the Company, principally in connection with our efforts to diversify by engaging
in the testing of a proprietary cleaning solution for use in coal and oil
burning smoke stacks. On April 17, 2001, the closing price of our Common Stock
as quoted on the Over the Counter Bulletin Board was $0.034 per share. Based
solely on such market price, the value of the grant to Mr. Van Dine was
therefore approximately $34,000.

         On April 11, 2002, the Board of Directors approved the issuance of 1
million shares of the Company's Common Stock to Robert Van Dine in consideration
for certain consulting services that Mr. Van Dine had agreed to perform for the
Company. Such services included (a) research and development of methods of using
the Klenz-Safe cleaning product for reducing or eliminating pollutants from
building air; (b) research and development of other uses of the Klenz-Safe
cleaning product; (c) marketing all technologies using the Klenz-Safe cleaning
product; and (d) upon request by the Board of the Company, serving as an
executive officer of the Company for a minimum of one year. On April 30, 2002
the Board requested Mr. Van Dine to serve as its President, and Mr. Van Dine
assumed such position as of such date.

         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. In issuing such Option, the Board noted that Mr. Foster had been
serving as the Company's President and Chief Executive Officer since December
1998 and as a Director since March 2000, in each case without any compensation.

         The Option granted to Mr. Foster is 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.
From and after April 11, 2005 the Option may be exercised as to all optioned
shares for which it had not been previously exercised.





                                       30
<PAGE>



         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
latest fiscal year to any executive or other 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
31,2004.

<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             4,000,000             2,000,000               $0.00                 $0.00

</TABLE>

         (1) Based on the OTC Bulletin Board last sales price for our common
stock on July 31, 2004 in the amount of $0.007 per common share.

         During the past three fiscal years, we have not paid any cash or other
compensation to any director or executive officer of the Company except for the
grants to Mr. Pecorella, Mr. Van Dine and Mr. Foster described above.

         Mr. Anthony Campo, our Chairman of the Board, Executive Vice President,
Secretary and Treasurer, received no compensation for his services to us during
our fiscal years ended July 31, 2004, 2003 or 2002. No other person served as an
executive officer of the Company during the fiscal year ended July 31, 2004, and
none of our directors received any compensation for serving in such capacity
during our fiscal years ended July 31, 2004 or 2003.

         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.



                                       31
<PAGE>


Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

         We have provided below information as of October 22, 2004 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.





                                       32
<PAGE>



Name and                               Amount and
Address of                             Nature of                 Percent
Beneficial Owner (1)(2             Beneficial Ownership        of Class (%)
----------------------             --------------------        ------------

Anthony S. Campo (3)                   103,503,500                 60.1

Dwight Foster (4)                        5,096,500                  6.0

Frank Pecorella                          3,390,000                  4.2

Robert Van Dine                          2,000,000                  2.5

All Directors and
Executive Officers
as a Group (4 persons)                 113,990,000                 64.3


(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) Except as indicated below, all of such persons have sole investment and
voting power over the shares listed as being owned by them. Unless otherwise
indicated, we believe that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by them. A person is deemed to be the beneficial owner of securities, which may
be acquired by such person within 60 days from the date of this Report upon the
exercise of options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options, warrants 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 5,570,000 shares owned individually by Mr. Campo, includes
(i) 2,150,000 shares held by Mr. Campo's wife, (ii) 3,772,400 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, (iv) 911,100 shares that may be acquired by
the children of Mr. Campo upon exercise of Class B Warrants, and (v) 90,000,000
shares that may be acquired by Mr. Campo upon the conversion of his Promissory
Note from the Company dated August 1, 2004 (see "Certain Transactions".)

(4) In addition to 75,000 shares owned individually by Mr. Foster, includes
21,500 shares held by Mr. Foster's wife and 5,000,000 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. Does not include 1,000,000 shares with respect
to which such option is not exercisable within sixty (60) days of the date
hereof.




                                       33
<PAGE>



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.

         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
$568,000 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 July 3l, 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. As of the maturity date of the August 1, 1998 Note, we had defaulted on
the payment of all obligations to pay principal of and interest on such Note.

         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 thereon 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 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 thereon 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 August 1, 1998 and August 1, 2000 Notes. 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 the Note.





                                       34
<PAGE>



         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 thereon 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 of the number of shares that Mr. Campo may
acquire upon exercise of his conversion right to 90 million shares resulting
from his exercise of the conversion right for 10 million shares in March and
April 2002, the terms of such Note are the same as the August 1, 1998, August 1,
2000 and August 1, 2001 Notes.

         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 thereon through July 31,
2003 in the amount of $110,197. Other than the principal amount and maturity
dates, the terms of the August 1, 2003 Note are materially the same as 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 thereon through July 31,
2004 in the amount of $123,908. Other than the principal amount and maturity
dates, the terms of the August 1, 2004 Note are materially the same as the
August 1, 2003 Note.

         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 August 1, 2004 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.


                                     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 F-1 to F-18 of
         this Report.

         (i)   Report of Independent Accountants

         (ii)  Balance Sheets as of July 31, 2004 and July 31, 2003

         (iii) Statements of Income for the fiscal years ended July 31, 2004,
               2003 and 2002

         (iv)  Statement of Cash Flows for the fiscal years ended July 31, 2004,
               2003, and 2002

         (v)   Statements of Changes in Stockholders' Equity for the fiscal
               years ended July 31, 2004, 2003 and 2002

         (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.


                                       35
<PAGE>


Exhibit No.       Exhibit
----------        ---------

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

     (10) Material contracts

          (a) Promissory Note dated August 1, 1998 from the Company to
          to Mr. Anthony S. Campo.                                           (3)

          (b) Amendment dated March 15, 2000 to Company's                    (2)
          Promissory Note dated August 1, 1998.

          (c) Promissory Note dated August 1, 2000 from the Company )        (3)
          to Mr. Anthony Campo.

          (d) Promissory Note dated August 1, 2001 from the Company of       (4)
          Mr. Anthony Campo.

          (e) Option Agreement between the Company and (5) Dwight            (5)
          Foster covering grant of option on April 11, 2002.

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

          (g) Consulting Agreement dated as of April 11, 2002 )              (5)
          between the Company and Newell Dimen.

          (h) Assignment dated March 13, 2002 from Robert Van Dine to        (5)
          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,.

          (i) Technology Development Consulting Agreement dated as of        (6)
          June 1, 2002 between the Company and George H. Johnson and
          William L. Johnson.

          (j) Technology Development Consulting Agreement dated as of        (6)
          June 1, 2002 between the Company and George H. Johnson and
          William L. Johnson.

          (k) Assignment of Invention & Patent Rights dated October 2,       (6)
          2003 from George H. Johnson and William L. Johnson to the
          Company




                                       36
<PAGE>


          (l) Consulting Agreement dated as of October 2, 2003               (6)
          between the Company and William L. Johnson,

          (m) Consulting Agreement dated as of October 2, 2003               (6)
          between the Company and George H. Johnson

          (n) Promissory Note dated August 1, 2003 from the                  (7)
          Company to Mr. Anthony Campo.

          (o) Promissory Note dated August 1, 2004 from the Company to
          Mr. Anthony Campo.

          (p) Consulting Agreement dated October 26, 2004 between the
          Company and John Byrne.

     (23) (a) Consent of Albrecht, Viggiano, Zureck & Company, P.C.

          (b) Consent of Blanckfield, Kober & Company, P.C.

     (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.

          (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 Annual Report on Form 10-KSB for the
          year ended July 31, 1998 and incorporated herein by reference.



                                       37
<PAGE>


          (4) Filed with the registrant's Annual Report on Form 10-KSB for the
          year ended July 31, 2000 and incorporated herein by reference.

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

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

          (7) Filed with the registrant's Annual Report on Form 10-KSB for the
          fiscal year ended July 31, 2003 and incorporated herein by reference.

      (B) Reports on Form 8K.

          We filed no reports on Form 8-K for the quarter ended July 31, 2004.

          On October 20, 2004 we filed a report on Form 8-K disclosing that the
firm of Albrecht, Viggiano, Zureck & Company, P.C., which is in the process of
ceasing to provide audit services to public companies, had resigned as our
auditors effective October 15, 2004 and that we had engaged the firm of
Blanchfield, Kober & Company, P.C. as independent public accountants for the
Company's fiscal year ended July 31, 2004. There were no disagreements with
Albrecht, Viggiano, Zureck & Company, P.C. during any period in which such firm
had acted as the Company's independent public accountants.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
          --------------------------------------

AUDIT FEES

         The aggregate 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 2003 were $10,000 and for such auditors'
review of the financial statements included in the Company's Forms 10-QSB for
fiscal 2004 and 2003 were $6,000 and $6,000, respectively. To date, no fees have
been billed by our current auditor for professional services rendered in
connection with their audit of the Company's annual financial statements for
fiscal 2004. However, we have agreed with our current auditor to pay such firm
$10,000 for their services in connection with such audit.


AUDIT-RELATED FEES

         For fiscal 2004 and 2003, 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 2004 and 2003, 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 2004 and 2003 were $0 and $0,
respectively.





                                       38
<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 25, 2004


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

                                    Dated: October 25, 2004


         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/ FRANK PECORELLA
                                    --------------------------
                                    Frank Pecorella, Director

                                    Dated:  October 25, 2004


<PAGE>
                      MURRAY UNITED DEVELOPMENT CORPORATION

                              FINANCIAL STATEMENTS

                       YEARS ENDED JULY 31, 2004 AND 2003




<PAGE>


                                TABLE OF CONTENTS



                                                                         Page
                                                                      ----------
INDEPENDENT AUDITORS' REPORT ..................................       F-1

FINANCIAL STATEMENTS

    Balance Sheets ............................................       F-2

    Statements of Operations ..................................       F-3

    Statements of Stockholders' Equity (Deficiency) ...........       F-4 - F-10

    Statements of Cash Flows ..................................       F-11

    Notes to Financial Statements .............................       F-12 -F-18

<PAGE>

BK

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

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

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


                                       F-1

             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 sheet of Murray United Development
Corporation as of July 31, 2004 and the related statements of operations,
stockholders' equity, and cash flows for the year ended July 31, 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

The financial statements of Murray United Development Corporation as of July 31,
2003 and prior years were audited by other auditors whose report dated October
16, 2003 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,
2004, and the results of its operations and its cash flows for the year ended
July 31, 2004 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, 2004, 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.



Blanchfield, Kober and Company Cpas P.C.
Hauppauge, New York
November 3, 2004

    1200 VETERANS MEMORIAL HIGHWAY * SUITE 350 * HAUPPAUGE, NEW YORK 11788 *
                    TEL: (631) 234-4200 * FAX: (631) 234-4272
              WEB SITE: WWW.BKKCPAS.COM * E-MAIL: INFO@BKKCPAS.COM

<PAGE>


                                       F-2

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                                 BALANCE SHEETS
                             JULY 31, 2004 AND 2003


                                     ASSETS

<TABLE>
<CAPTION>
                                                                                   2004           2003
                                                                                -----------    -----------
<S>                                                                             <C>            <C>
CURRENT ASSETS
     Cash and cash equivalents                                                  $     1,033    $     8,252
     Loan receivable                                                                  2,000          2,000
                                                                                -----------    -----------

         TOTAL CURRENT ASSETS                                                         3,033         10,252

FURNITURE AND EQUIPMENT, NET                                                         41,671         50,004
                                                                                -----------    -----------
         TOTAL ASSETS                                                           $    44,704    $    60,256
                                                                                ===========    ===========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
     Accounts payable                                                           $    22,742    $    18,832
                                                                                -----------    -----------

         TOTAL CURRENT LIABILITIES                                                   22,742         18,832
                                                                                -----------    -----------

LONG -TERM LIABILITIES
     Accrued compensation                                                           148,128        148,128
     Accrued interest payable                                                       127,399        110,197
     Notes payable - stockholder                                                  1,752,106      1,541,909
                                                                                -----------    -----------

         TOTAL LONG - TERM LIABILITIES                                            2,027,633      1,800,234
                                                                                -----------    -----------

         TOTAL LIABILITIES                                                        2,050,375      1,819,066

STOCKHOLDERS' EQUITY (DEFICIENCY)
     Capital stock - par value $.001; authorized
     200,000,000 shares; issued and outstanding
     80,153,434 and 79,953,434 shares                                                 8,016          7,996
     Additional paid-in capital                                                   2,547,431      2,541,451
     Deficit accumulated in the development stage                                (4,561,118)    (4,308,257)
                                                                                -----------    -----------

         TOTAL STOCKHOLDERS' EQUITY
                (DEFICIENCY)                                                     (2,005,671)    (1,758,810)
                                                                                -----------    -----------

         TOTAL LIABILITY AND STOCKHOLDERS'
              DEFICIENCY                                                        $    44,704    $    60,256
                                                                                ===========    ===========

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.



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

<PAGE>

                                       F-3


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENTS OF OPERATIONS
                    YEARS ENDED JULY 31, 2004, 2003 AND 2002
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)


<TABLE>
<CAPTION>
                                                                                          CUMULATIVE
                                                                                         AMOUNTS FROM
                                                 2004            2003         2002        INCEPTION
                                             ------------    ------------  -----------   ------------
INCOME

<S>                                          <C>            <C>           <C>             <C>
Interest income                              $        -0-   $         -0-  $         -0- $     66,465

EXPENSES

Research and development costs                      8,055             -0-        14,063       876,771
Licensing fees stockholder and affiliate              -0-             -0-           -0-        57,260
General and administrative expenses               117,407         105,597       134,107     2,896,420
Interest expense stockholder and affiliate        127,399         110,197        99,827       797,132
                                             ------------   -------------  ------------  ------------

                           Total Expenses         252,861         215,794       247,997     4,627,583
                                             ------------   -------------  ------------  ------------

                           Net Loss          $   (252,861)  $    (215,794) $   (247,997) $ (4,561,118)
                                             ============   =============  ============  ============

Net loss per common share                    $     (0.003)  $      (0.003) $     (0.003) $     (0.057)

Weighted average number of common
Shares outstanding                             80,076,174      79,953,434    74,328,434    80,153,434
                                             ------------   -------------  ------------  ------------


</TABLE>










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


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

<PAGE>

                                       F-4

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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.


                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>


                                       F-5


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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.


                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                       F-6


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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.

                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
                                       F-7

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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.

                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                       F-8


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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:

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.



                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                       F-9

                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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                         (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.

                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>


                                      F-10


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                       YEARS ENDED JULY 31, 2004 AND 2003
                  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.


                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                      F-11


                      MURRAY UNITED DEVELOPMENT CORPORATION
                      (A COMPANY IN THE DEVELOPMENT STAGE)
                            STATEMENTS OF CASH FLOWS
                    YEARS ENDED JULY 31, 2004, 2003 AND 2002
                  AND CUMULATIVE AMOUNTS FROM OCTOBER 13, 1987
                               (DATE OF INCEPTION)

<TABLE>
<CAPTION>
                                                                                                                   CUMULATIVE
                                                                                                                  AMOUNTS FROM
                                                          2004               2003                2002               INCEPTION
                                                     -------------      --------------      -------------        ---------------
<S>                                                  <C>                <C>                 <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                          $   (252,861)      $     (215,794)     $    (247,997)       $    (4,561,118)
   Adjustment to reconcile net loss to net cash
     used by operating activities:
   Depreciation and amortization                            8,333                8,332              8,333                218,825
   Expenses paid through issuance of
     common stock by:
      Company                                                                      -0-             51,250                523,785
      Principal stockholder                                                        -0-                -0-                220,900
   Changes in operating assets and liabilities:
     Loans receivable                                                              -0-                -0-                 (2,000)
     Accounts payable and accrued expenses                137,309                3,762             27,806                414,469
                                                     ------------       --------------      -------------        ---------------

               NET CASH USED BY OPERATING
                   ACTIVITIES                            (107,219)           (203,700)           (160,608)            (3,185,139)
                                                     ------------       --------------      -------------        ---------------

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

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

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable - stockholder              100,000              211,588            158,702              1,768,576
   Payments to notes payable - stockholder                    -0-                  -0-            (75,000)              (126,667)
   Proceeds from issuance of common stock                     -0-                  -0-             75,000              1,804,760
                                                     ------------       --------------      -------------        ---------------

         NET CASH PROVIDED BY FINANCING
                  ACTIVITIES                              100,000              211,588            158,702              3,446,669
                                                     ------------       --------------      -------------        ---------------

NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                      (7,219)               7,888             (1,906)                 1,033

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR              8,252                  364              2,270                    -0-
                                                     ------------       --------------      -------------        ---------------

         CASH AND CASH EQUIVALENTS AT
                   END OF YEAR                       $      1,033       $        8,252      $         364        $         1,033
                                                     ============       ==============      =============        ===============

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

</TABLE>



SEE INDEPENDENT AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.



                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                      F-12

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2004 AND 2003


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 intends to continue research and development on the Klenz-Safe
product and the production of hydrogen during the ensuing 12-month period.
Funding will be provided through loans from the Chairman of the Company, at his
sole discretion. The Company does not intend to continue its research and
development efforts with respect to its rotary engine during the next 12-month
period, unless it is able to raise the funds necessary to conduct such research,
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, 2004, the
Company had not been able to commercially utilize its engine technology,
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 $2,005,671 as of July 31, 2004 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, 2004. The limited amount of liquid
resources available at July 31, 2004, and the inability to generate operating
revenues and cash flows raise substantial doubts about the Company's ability to
continue as a going concern.

The Company plans to continue research and development activities on at least a
limited basis through the twelve-month period subsequent to July 31, 2004.
However, management believes that the net liquid assets available at July 31,
2004 will not be sufficient to enable the Company to meet its obligations and to
continue as a going concern during the ensuring twelve-month period even on this
limited basis without limiting research and development and other operating
activities more severely unless it obtains additional debt or equity financing
and/or government sponsored research grants.

Management believes that continuation of the Company as a going concern during
the twelve-month period subsequent to July 31, 2004 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
technology and the general and administrative expenses to be incurred during the
remaining development period. Potential


                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                      F-13

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2004 AND 2003


NOTE 1 - ORGANIZATION AND BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

sources of such working capital include: the private or public sale of common
stock (the Company has historically depended primarily on the sale of equity
securities to finance its operations); the exercise of a substantial portion of
the 15,398,000 outstanding Class B warrants prior to their proposed expiration
on March 11, 2005, 14,898,000 of which are exercisable at $0.15 per share and
500,000 of which are exercisable at $.115 per share; and borrowing additional
amounts from related parties or other sources. However, there can be no
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.

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.






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

<PAGE>

                                      F-14

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2004 AND 2003


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:


<TABLE>
<CAPTION>
                                                      July 31
                                     -------------------------------------------       Estimated
                                          2004                         2003           Useful Lives
                                     --------------                -------------     --------------

<S>                                   <C>                          <C>                  <C>
     Furniture                        $       2,098                $       2,098        7 years
     Equipment                              129,451                      129,451        5 years
     Leasehold improvements                      -0-                       3,947        3 years
     Patent                                 125,000                      125,000       15 years
                                       ------------                 ------------
                                            256,549                      260,496
     Less accumulated
           depreciation                     214,878                      210,492
                                       ------------                 ------------

                                       $     41,671                 $     58,004
                                       ============                 ============
</TABLE>

Depreciation expense totaled $8,333 and $8,332 for the years ended July 31, 2004
and 2003, respectively.

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

                                                     JULY 31
                                     -------------------------------------
                                          2004                   2003
                                     --------------          -------------

      Professional fees              $       22,742          $      18,832
      Other                                       0                      0
                                     --------------          -------------
                                     $       22,742          $      18,832
                                     ==============          =============


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

<PAGE>

                                      F-15

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENT
                             JULY 31, 2004 AND 2003


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


                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                      F-16

                      MURRAY UNITED DEVEL0PMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2004 AND 2003


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.

During the fiscal year ended July 31, 2004 Mr. Campo has advanced $100,000 at
various times during the year. These notes also bear interest at 7.5% per annum.
(See note 8)

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.

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.




                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                      F-17

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2004 AND 2003


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

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, 2004, the Company had net operating loss carry forwards of
approximately $4,000,000 available to reduce future federal taxable income, and
tax credits of approximately $59,991 available to offset future federal income
tax, that expire from 2004 through 2008.

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 - SUBSEQUENT EVENT

Subsequent to July 31, 2004 the Company has consolidated the amount due to Tony
Campo including accrued interest totaling $1,876,014. The new note shall pay
interest at 7.5% per annum payable quarterly on November 1, February1, May 1,
and August 1, with a balloon payment due August 1, 2005.






                       BLANCHFIELD, KOBER & COMPANY, P.C.
                          CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>

                                      F-18

                      MURRAY UNITED DEVELOPMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             JULY 31, 2004 AND 2003


NOTE 9 - RECLASSIFICATIONS

Certain accounts in the prior year financial statements have been reclassified
for comparative purposes to conform to the presentation in the current year
financial statements.










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