**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





**FORM
      10-KSB/A**


**(Amendment
      No. 2)**





o
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the fiscal year ended June 30, 2005**





x
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**.














(Name
      of
      small business issuer in its charter)




Commission
      File Number: 001-33073


**Delaware**
              **33-0954381**(State
                  or Other Jurisdiction of
              (IRS
                  EmployerIncorporation
                  or Organization)
              Identification
                  No.)
   **590
                  Madison Avenue, 13****th****Floor****New
                  York, New York**
              **10022**(Address
                  of Principal Executive Offices)
              (Zip
                  Code)





**(212)
        398-1780**
 (Issuer’s
        Telephone Number, Including Area Code)





Securities
      Registered Pursuant to Section 12(b) of the Act: None.





Securities
      Registered Pursuant to Section 12(g) of the Act: Common stock, $0.001 par value
      per share





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





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.


x Yes   ̈ No





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








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





Issuer's
      revenues for the year ended June 30, 2005 were approximately
      $239,000.





The
      aggregate market value of the voting stock held by non-affiliates of the
      registrant, based on the average bid and asked prices on the OTC Bulletin Board
      on August 22, 2005 was approximately $20.4 million.





The
      number of shares outstanding of the issuer's common stock, $0.001 par value,
      as
      of the latest practicable date: 13,701,720 shares as of August 22,
      2005.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





None.








Transitional
      Small Business Disclosure Format (Check one):


 ̈ Yes  x No








**EXPLANATORY
      NOTE**








MRU
      Holdings, Inc. (“MRU” or the “Company”) timely filed its Transition Report on
      Form 10-KSB for the fiscal year ended June 30, 2005 (the “Annual Report”) with
      the Securities and Exchange Commission on September 28, 2005.




On
        September 26, 2007, after consultation with, and review of the conclusions
        of,
        the Company’s management as discussed below, the Audit Committee concluded that
        the value of certain warrants issued to Nomura Capital & Credit, Inc.
        (“Nomura”) in 2005 should be revised and restated.
  On
        February 4, 2005, MRU Lending, Inc. (“MRUL”), a wholly-owned subsidiary of the
        Company, entered into a credit agreement with Nomura pursuant to which Nomura
        agreed to provide MRUL with a $165 million secured revolving credit facility
        for
        the origination and warehousing of private student loans. Related to this
        transaction, Nomura was granted a warrant, subject to certain terms and
        conditions, to purchase common stock of the Company equal to, at that point
        in
        time, an approximately 27.5% ownership interest in the Company on a diluted
        basis.
 
 Financial
        Accounting Standards No. 123R - Share Based Payments, requires that when
        payments are made in equity instruments to individuals and entities other
        than
        employees, that the value ascribed to such equity instruments in the company’s
        financial statements be based upon either (i) the fair value of the
        consideration received or (ii) the fair value of the equity instruments issued,
        whichever is more reliably measurable. At the time of the Nomura transaction,
        the Company made the determination that the warrants had deminimus
        value.
 
 As
        a
        result of a review by management of the data considered in deriving the value
        of
        the warrants issued to Nomura, management has determined that the assumptions
        used in determining that the Nomura warrants had deminimus value should be
        revised. As such, a restatement is required to attribute appropriate value
        to
        the Nomura warrants.
 
 The
        impact of this restatement on the consolidated balance sheet as at June 30,
        2005
        is an increase of $5,235,195 in deferred financing fees, net of amortization;
        an
        increase of $6,079,581 in additional paid-in capital - warrants; and an increase
        of $844,386 in the accumulated deficit of the Company. With respect to the
        consolidated statement of operations for the fiscal year ended June 30,
        2005, the restatement has the effect of increasing depreciation and amortization
        by $844,386, from $70,595 to $914,981. The Company’s net loss applicable to
        common shares for the fiscal year ended June 30, 2005 has increased $844,386
        from $(10,367,249) to $(11,211,635). Net loss per basic and diluted shares
        for
        the fiscal year ended June 30, 2005 has increased $0.07 from ($0.75) to
        ($0.82).
  As
        a result of the decision to restate the Company’s financial statements for the fiscal years ended June 30, 2005 and 2006, management of the Company concluded on
        September 26, 2007 that the previously filed financial statements as of and
        for
        the fiscal years ended June 30, 2005 and 2006, and any related reports of
        the
        Company’s independent registered public accounting firm for such periods, should
        no longer be relied upon. The Company has also made a decision to file a
        Form
        10-KSB/A for each of the fiscal  years
        ended June 30, 2005 and 2006 to change the valuation of the
        warrants in the consolidated balance sheets and statements of income fiscal
        years ended June 30, 2005 and 2006. The restatements do not affect the total net
        change in cash and cash equivalents for the fiscal years ended June 30, 2005
        and
        2006.
  The
        Audit
        Committee and Management have discussed the matters disclosed in this
        explanatory note with the Company’s independent
        registered public accounting firm, Bagell, Josephs, Levine & Company,
        LLC.


This
      Amendment No. 2 to the Transition Report on Form 10-KSB (“Amendment No. 2”)
      is being filed for the purpose of amending Items 6, 7 and 8A of Part II of
      the
      Annual Report. Additionally, pursuant to the rules of the SEC, Item 13 of Part
      III of the Annual Report has been amended to contain currently dated
      certifications of the Company’s chief executive officer and chief financial
      officer. As required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002,
      the certifications of our chief executive officer and chief financial officer
      are attached to this Amendment No. 2 as Exhibits 31.1, 31.2, 32.1 and 32.2.





Except
      as
      described above, no other amendments are being made to the Annual Report. All
      other Items of the original filing on Form 10-KSB and Form 10-KSB/A for the
      period ended June 30, 2005 and each of which were filed on
      September 28, 2005 and February 9, 2007, respectively, are unaffected by
      this Amendment No. 2 and such Items have not been included in this
      Amendment No. 2. This Amendment No. 2 does not reflect events occurring
      after the June 30, 2005 date of the Annual Report or modify or update the
      disclosure contained in the Annual Report in any way other than as required
      to
      reflect the amendments discussed above and reflected below. This Amendment
      No. 2 should be read in conjunction with the Company’s filings made with
      the SEC subsequent to the original filing of the Annual Report, as information
      in such filings may update or supersede certain information contained in this
      Amendment No. 2.







**PART
      I**





**Item
      6. Management's Discussion and Analysis** .





**Forward
      Looking Statements**





This
      Form
      10-KSB contains forward-looking statements within the meaning of Section 27A
      of
      the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
      1934. This Report on Form 10-KSB includes statements regarding our plans, goals,
      strategies, intent, beliefs or current expectations. These statements are
      expressed in good faith and based upon a reasonable basis when made, but there
      can be no assurance that these expectations will be achieved or accomplished.
      Sentences in this document containing verbs such as "believe," "plan," "intend,"
      "anticipate," "target," "estimate," "expect," and the like, and/or future-tense
      or conditional constructions ("will," "may," "could," "should," etc.) constitute
      forward-looking statements that involve risks and uncertainties. Items
      contemplating or making assumptions about, actual or potential future sales,
      market size, collaborations, and trends or operating results also constitute
      such forward-looking statements.





Although
      forward-looking statements in this Report on Form 10-KSB reflect the good faith
      judgment of management, such statements can only be based on facts and factors
      currently known by management. Consequently, forward-looking statements are
      inherently subject to risks and uncertainties, and actual results and outcomes
      may differ materially from the results and outcomes discussed in, or anticipated
      by, the forward-looking statements. Factors that could cause or contribute
      to
      such differences in results and outcomes, include without limitation, those
      discussed in our Registration Statement on Form SB-2 field with the Securities
      and Exchange Commission on August 23, 2004 and in our definitive Information
      Statement on Schedule 14C, dated June 15, 2004, as filed with the Securities
      and
      Exchange Commission on June 15, 2004. Readers are urged not to place undue
      reliance on these forward-looking statements, which speak only as of the date
      of
      this Quarterly Report. We undertake no obligation to revise or update any
      forward-looking statements in order to reflect any event or circumstance that
      may arise after the date of this Quarterly Report, other than as may be required
      by applicable law or regulation. Readers are urged to carefully review and
      consider the various disclosures made by us in the above-referenced Registration
      Statement and Information Statement, which attempt to advise interested parties
      of the risks and factors that may affect our business, financial condition,
      results of operation and cash flows.





**Results
      of Operations**





The
      Company executed the following elements of its business plan during the fiscal
      year ending June 30, 2005:




-
            Completed
                3,250,000 million share offering of
                the Company's Series "A" Preferred Stockresulting
                in gross proceeds of $11.375
                million.




-
            Completed
                $165 million credit facility
                with Nomura Credit and Capital, Inc.
                ("NCCI").




-
            Successfully
                launched the Company's private
                student loan product offering to the public in May,2005,
                with the first funded loan occurring during June, 2005. The Company
                closed
                the fiscal yearwith
                approximately $158,000 in funded student
                loans.




-
            Of
                the Company's $4,962,200 operating expenses
                for the fiscal year ended June 30, 2005,$1,646,143
                were non-recurring and related to financing and legal fees for the
                establishment of theNCCI
                credit facility, technology/operations consulting for the development
                of
                the Company'sproprietary
                loan application, and funds distribution platform. The Company is
                confident that themajority
                of the costs to establish the foundation of its business plan are
                complete.




-
            The
                Company established originating bank
                relationships with Webbank, a Utah state charteredbank.




**FOR
      THE FISCAL YEAR ENDED JUNE 30, 2005 (RESTATED) COMPARED TO THE SIX MONTHS ENDED
      JUNE** **30,
      2004.**





1


**GROSS
      REVENUES** .
      For the
      fiscal year ended June 30, 2005, the Company generated $239,353 in operating
      revenues, $238,175 in referral income from referring consolidation student
      loan
      requests to other lenders. At this time the Company does not have the ability
      to
      complete consolidation loans. The Company receives referral income from other
      lenders after the referred borrower has completed the consolidation loan
      process. This is compared to $932 in referral income for the six months ended
      June 30, 2004.





**COSTS
      OF REVENUES.** For the
      fiscal year ended June 30, 2005, the Company incurred $189,725 in referral
      marketing generation fees related to consolidation student loan referral income,
      $10,185 in originating bank fees, and $25,070 for third-party servicing of
      our
      private student loan portfolio. The Company had no costs of revenues for the
      six
      months ended June 30, 2004.





**OPERATING
      EXPENSES AND NET LOSS.** For the
      fiscal year ended June 30, 2005, our total operating expenses were $4,962,200,
      compared to $201,666 for the six months ended June 30, 2004.





Of
      the
      Company’s $4,962,200 operating expenses for the fiscal year ended June 30, 2005,
      $1,646,143 were non-recurring and related to financing and legal fees for the
      establishment of the NCCI credit facility ($791,011), technology/operations
      consulting for the development of the Company’s proprietary loan application and
      funds distribution platform ($855,132). The Company believes that the majority
      of the costs to establish its business are complete.





Of
      the
      remaining $3,316,057 in operating expenses for the fiscal year ended June 30,
      2005, the majority of the expenses were incurred in corporate general and
      administrative expenses ($1,104,701), sales and marketing expenses ($791,261),
      customer service/originations process operations expenses ($257,307), and
      depreciation and amortization expense ($914,981).





The
      Company also had $67,905 in interest expense and $83,398 in interest income
      making our net loss before provision for income taxes $4,915,549. This is
      compared with the six months ended June 30, 2004 where the Company had total
      operating expenses of $201,666, consisting primarily of $73,936 for founders'
      salaries and benefits and $61,260 for operational and development consulting.
      Therefore, for the six months ended June 30, 2004, the Company experienced
      a net
      loss from operations of $200,734.





**LIQUIDITY
      AND CAPITAL RESOURCES** .
      The
      Company had cash of $6,894,522, accounts receivable of $20,246, and total
      current assets of $7,456,787 as of June 30, 2005. The Company also had $273,073
      in net property and equipment and $5,413,015 in deferred financing fees net
      of
      amortization, making our total assets equal to $13,535,838. Our total current
      liabilities were $973,897 as of June 30, 2005. The Company had $577,478 in
      accounts payable, $170,775 in accrued expenses and $225,644 in accrued
      payroll.





For
      June
      30, 2004, the Company had cash of $475,421, accounts receivable of $0, and
      total
      current assets of $567,950. The Company also had $25,357 in net property and
      equipment, making our total assets $595,807. The Company had no long-term
      commitments, debt, or contingencies.





**OUR
      PLAN OF OPERATIONS FOR THE NEXT TWELVE MONTHS** .
      In the
      near term, we intend to use our cash on hand to support the ongoing operating
      and financing requirements of implementing our business plan. We believe that
      our current liquidity should be sufficient to meet our cash needs for working
      capital through the next twelve months. However, if cash generated from
      operations and cash on hand are not sufficient to satisfy liquidity
      requirements, we will seek to obtain additional debt or equity financing.
      Additional funding may not be available when needed or not available at terms
      acceptable to the Company. If the Company is required to raise additional
      financing and if adequate funds are not available or not available on acceptable
      terms, the ability to fund expansion, develop and enhance products and services,
      or otherwise respond to competitive pressures may be severely limited. Such
      a
      limitation could have a material adverse effect on our business, financial
      conditions, results of operations, and cash flow.





Our
      long-term liquidity will depend on the Company's ability to execute on our
      business plan and to commercialize our financial products and
      services.





2


The
      Company is focused on generating private student loan volume from its three
      primary volume channels: direct to consumer, third-party referral marketing
      partners, school as lender channels. In the direct to consumer channel, the Company
      is also actively focusing on refining its marketing message and the mediums
      in
      which it communicates its message. In the third-party referral marketing partner
      channel, the Company is working with referral marketing partners to train
      partner staffs and implement processes and systems to enable referral marketing
      partners' customers to easily connect to the Company's products. In the school
      as lender channel, the Company is continuing efforts to establish relationships
      with large volume universities that originate loans to their
      students.





Operationally,
      the Company is refining its internal processes and systems to shorten the time
      frame from when a customer initiates a credit request to when the Company funds
      the credit request. The Company continues to hone its customer service
      experience so that prospective and current borrowers can readily understand
      the
      terms and conditions of the Company's products and more easily comply with
      the
      Company's information requests required to underwrite their credit
      requested.





**OFF-BALANCE
      SHEET ARRANGEMENTS**





We
      do not
      have any off-balance sheet arrangements.





**CRITICAL
      ACCOUNTING POLICY AND ESTIMATES**





The
      Company's Management Discussion and Analysis of Financial Condition and Results
      of Operations section discusses our consolidated financial statements, which
      have been prepared in accordance with accounting principles generally accepted
      in the United States of America. The preparation of these financial statements
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      On an
      on-going basis, management evaluates its estimates and judgments, including
      those related to revenue recognition, accrued expenses, financing operations,
      and contingencies and litigation. Management bases its estimates and judgments
      on historical experience and on various other factors that are believed to
      be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying value of assets and liabilities that are
      not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions. The most significant
      accounting estimates inherent in the preparation of our financial statements
      include estimates as to the appropriate carrying value of certain assets and
      liabilities which are not readily apparent from other sources. These accounting
      policies are described at relevant sections in this discussion and analysis
      and
      in the notes to the consolidated financial statements included in this annual
      report.





**PART
      II**





**Item
      7. Financial Statements.**





The
      financial statements and related financial statement schedule are included
      herein and filed as a part of this report. See Index on page F-1.





**Item
      8A. Controls and Procedures.**





Our
      Chief
      Executive Officer and our Chief Financial Officer had previously evaluated
      the
      effectiveness of our disclosure controls and procedures as of June 30, 2005.
      Based on this evaluation, they had previously concluded that our disclosure
      controls and procedures were effective, as of that date, in providing a
      reasonable level of assurance that information we are required to disclose
      in
      reports we file or furnish under the Securities Exchange Act of 1934, as
      amended, is disclosed on a timely basis.





In
      connection with this filing on Form 10-KSB/A, our Chief Executive Officer and
      Chief Financial Officer reevaluated our disclosure controls and procedures
      and
      concluded that they were effective as of June 30, 2005 as described above.
      In
      reaching this conclusion, they considered the impact of the restatement of
      our
      financial results set forth herein.




3




**PART
      III**





**Item
      13. Exhibits.**





(a)
            The
                following exhibits are to be filed as part of this report:





**Exhibit
                No.**
            **Description**
            **Incorporated
                by Reference to**
              **Filings
                Indicated**3.1
            Certificate
                of Incorporation.
            Exhibit
                3.1 to Company's Registration Statement, filed with the SEC on August
                10,
                2001, File No. 333-67222.3.2
            Certificate
                of Amendment to the Certificate of Incorporation.
            Exhibit
                3.4 to Company's Form 8-K, filed with the SEC on March 7, 2003, File
                000-33487.3.3
            Certificate
                of Designation.
            Exhibit
                4.1 to Company's Current Report on Form 8-K filed on February 10,
                2005
                File No. 001-33487.3.4
            By-laws.
            Exhibit
                3.2 to Company’s Registration Statement on Form SB-2, filed with the SEC
                on August 10, 2001, File No. 333.-67222.4
            2004
                Ominibus Incentive Plan.
            Exhibit
                4(c) to Company's Registration Statement
              on
                Form SB-2 filed with the SEC on August 24, 2004, File No.
                333-118518.10.1
            Credit
                Agreement between MRU Lending, Inc. and Nomura Credit & Capital, Inc.,
                dated February 4, 2005
            Exhibit
                10.1 to Company’s Registration Statement on Form SB-2 filed with the SEC
                on March 22, 2005, File No. 333-123503.10.2
            Employment
                Agreement dated November 17, 2004 between the Company and Edwin J.
                McGuinn, Jr.
            Exhibit
                10 to Company’s Pre-Effective Amendment No. 1 to Form SB-2 filed with the
                SEC on November 18, 2004, File No. 333-118518.10.3
            Loan
                Program Agreement dated July 25, 2005 between MRU Lending, Inc. and
                Doral
                Bank NY FSB
            Exhibit
                10.1 to Company’s Current Report on Form 8-K filed on July 29, 2005, File
                No. 000-33487.10.4
            Loan
                Sale Agreement dated July 25, 2005 between MRU Lending, Inc. and
                Doral
                Bank NY.
            Exhibit
                10.2 on Company’s Current Report on Form 8-K filed on July 29, 2005, File
                No. 000-33487.10.5
            Sublease
                between ISID Finance of America, Inc. and MRU Holdings, Inc. dated
                April
                26, 2005.
            Exhibit
                10.1 to Company’s Current Report on From 8-K filed on May 18, 2005, File
                No. 000-33487.10.6
            Guaranty
                of Edwin McGuinn in favor of ISID Finance of America, Inc. dated
                April 26,
                2005.
            Exhibit
                10.2 to Company’s Current Report on Form 8-K filed on May 18, 2005, File
                No. 000-33487.10.7
            Securities
                Purchase Agreement by and among MRU Holdings, Inc. and the purchasers
                of
                Series B Convertible Preferred Stock.
            Exhibit
                10.1 to the Company’s Current Report on Form 8-K filed with the SEC on
                January 6, 2006, File No. 000-33487.10.8
            Consent
                to Sublease of 1114 Trizechahn-Swig, L.L.C.
            Exhibit
                10.3 to Company’s Current Report on Form 8-K filed on May 18, 2005, File
                No. 000-33487.10.9
            Amended
                and Restated 2004 Ominibus Incentive Plan.
            Appendix
                C to the Definitive Proxy Statement on Form 14A, filed with the SEC
                on
                September 7, 2005, File No. 000-33487.10.10
            2005
                Consultant Incentive Plan.
            Appendix
                B to the Definitive Proxy Statement on Form 14A, filed with the SEC
                on
                September 7, 2005, File No. 000-33487.14.1
            Code
                of Ethics.
            Exhibit
                14 to Company’s Annual Report on Form 10-KSB filed on March 22, 2005 File
                No. 000-33487.21.1
            Subsidiaries
                of the Company.
            Exhibit
                21 to Company’s Annual Report on Form 10-KSB filed on March 22, 2005 File
                No. 000-33487.23.1
            Consent
                of Bagell, Josephs, Levine & Company, LLC. *31.1
            Certification
                of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a),
                as adopted pursuant to Section 302 of the Sarbanes Oxley Act of
                2002.*31.2
            Certification
                of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a),
                as adopted pursuant to Section 302 of the Sarbanes Oxley Act of
                2002.*32.1
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes Oxley Act of
                2002.*32.2
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes Oxley Act of
                2002.*





________________


*
      filed
      herewith





4





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, as amended, the Company has duly caused this report to be signed on its
      behalf by the undersigned, thereby duly authorized on September 28, 2007.




MRU
              HOLDINGS,
              INC./s/ Edwin J. McGuinn, Jr.By: Edwin
              J. McGuinn, Jr.Its:
              Chief Executive Officer




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





Date:
              September 28, 2007
            
            /s/
              Edwin J. McGuinn, Jr.By: Edwin
              J. McGuinn, Jr.Its:
              Chief Executive Officer and Director


Date:
              September 28, 2007
            
            /s/ Vishal GargBy: Vishal
              GargIts:
              Chief Financial Officer and Director




Date:
              September 28, 2007
            
            /s/ Raza KhanBy: Raza
              KhanIts:
              President and Director




5




**EXHIBIT
      INDEX**





31.1
            Certification
                of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a),
                as adopted pursuant to Section 302 of the Sarbanes Oxley Act of
                2002.31.2
            Certification
                of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a),
                as adopted pursuant to Section 302 of the Sarbanes Oxley Act of
                2002.32.1
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes Oxley Act of
                2002.32.2
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes Oxley Act of
                2002.





6




**MRU
      HOLDINGS, INC. AND SUBSIDIARIES**


**JUNE
      30, 2005 AND 2004; AND DECEMBER 31, 2004 AND 2003**


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004**


**AND
      THE YEARS ENDED DECEMBER 31, 2004 AND 2003**








Report
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheet as of June 30, 2005
            F-3Consolidated
                Statements of Operations for the Six Months Ended June 30, 2005 (Audited)
                and 2004 (Unaudited) and the Years Ended December 31, 2004 and 2003
                (Audited)
            F-4Consolidated
                Statements of Cash Flow for the Six Months Ended June 30, 2005 (Audited)
                and 2004 (Unaudited) and the Years Ended December 31, 2004 and 2003
                (Audited)
            F-5Consolidated
                Statements of Changes in Stockholders’ Equity (Deficit) (Restated) for the
                Six Months Ended June 30, 2005 (Audited) and the Years Ended December
                31,
                2004 and 2003 (Audited)
            F-6Notes
                to Consolidated Financial Statements
            F-7




F-1


**BAGELL,
        JOSEPHS & COMPANY, L.L.C.**
  **Certified
        Public Accountants**
  High
        Ridge Commons
 Suites
        400-403
 200
        Haddonfield Berlin Road
 Gibbsboro,
        New Jersey 08026
 (856)
        346-2828 Fax (856) 346-2882
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 Board
        of
        Directors
 MRU
        Holdings, Inc.
 New
        York,
        New York
 
 We
        have
        audited the accompanying consolidated balance sheet of MRU Holdings, Inc.
        and
        Subsidiaries (the "Company) as of June 30, 2005 and the related consolidated
        statements of operations, consolidated changes in stockholders' equity
        (deficit), and consolidated cash flows for the six months ended June 30,
        2005
        and the years ended December 31, 2004 and 2003. We have also included for
        comparative purposes, the unaudited related consolidated statement of
        operations, and the consolidated cash flows for the six months ended June
        30,
        2004. These consolidated financial statements are the responsibility of the
        Company's management. Our responsibility is to express an opinion on these
        consolidated financial statements based on our audits.
  We
        have
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the consolidated financial statements. An audit also includes assessing the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall consolidated financial statement presentation.
        We
        believe that our audits provide a reasonable basis for our opinion.
   In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the consolidated financial position of MRU Holdings,
        Inc. and Subsidiaries as of June 30, 2005 and the results of its operations,
        changes in stockholders' equity (deficit) and cash flow for the six months
        June
        30, 2005 and the years ended December 31, 2004 and 2003 in conformity with
        accounting principles generally accepted in the United States of
        America.
   As
        discussed in note 13 to the financial statements, the accompanying June 30,
        2005
        consolidated financial statements have been restated.
  **/s/BAGELL,
        JOSEPHS & COMPANY, L.L.C.** ****
 **BAGELL,
        JOSEPHS & COMPANY, L.L.C.**
 Certified
        Public Accountants
 Gibbsboro,
        New Jersey
 September
        21, 2005, except for footnote 13
 as
        to
        which the date is September 28, 2007


F-2


**MRU
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET**


**(RESTATED)**


**JUNE
      30, 2005**


**ASSETS****2005****(Restated)****CURRENT
                  ASSETS:**Cash
                  and cash equivalents
              
              $
              6,894,522Accounts
                  receivable
              
              
              20,246Private
                  student loans receivable, held for sale, lower of cost or
                  market
              
              
              158,479Collateral
                  deposit - student loans
              
              
              250,000Prepaid
                  expenses and other current assets
              
              
              133,540**Total
                  Current Assets**
              
              
              **7,456,787**Fixed
                  assets, net of depreciation
              
              
              273,073**OTHER
                  ASSETS:**Security
                  deposits
              
              
              392,963Deferred
                  financing fees, net
              
              
              5,413,015**Total
                  Other Assets**
              
              
              **5,805,978****TOTAL
                  ASSETS**
              
              $
              **13,535,838****LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                  LIABILITIES:**Accounts
                  payable
              
              $
              577,478Accrued
                  expenses
              
              
              170,775Accrued
                  payroll
              
              
              225,644**Total
                  Current Liabilities**
              
              
              **973,897****LONG-TERM
                  LIABILITIES:**Deferred
                  origination fee revenue
              
              
              7,388**Total
                  Long-term Liabilities**
              
              
              **7,388****Total
                  Liabilities**
              
              
              **981,285****STOCKHOLDERS'
                  EQUITY (DEFICIT)**Series
                  A Preferred Stock, $.001 par value; 5,000,000 shares authorized
                  and
                  3,250,006shares
                  issued and outstanding
              
              
              3,250Common
                  Stock, $.001 par value; 50,000,000 shares authorized,
                13,664,502
                  issued and outstanding
              
              
              13,664Additional
                  paid-in capital
              
              
              19,887,715Additional
                  paid-in capital - Series A beneficial conversion feature
              
              
              6,175,000Accumulated
                  deficit
              
              
              (13,525,076
              )**Total
                  Stockholders' Equity (Deficit)**
              
              
              **12,554,553****TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)**
              
              $
              **13,535,838**




**The
      accompanying notes are an integral part of these consolidated financial
      statements** .




F-3





**MRU
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(RESTATED)**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004 AND**


**THE
      YEARS ENDED DECEMBER 31, 2004 AND 2003**




**Six
                    Months Ended**
                
                **Years
                    Ended****June
                    30,**
                
                **June
                    30,**
                
                **December
                    31,**
                
                **December
                    31,****2005**
                
                **2004**
                
                **2004**
                
                **2003****(Audited)**
                
                **(Unaudited)**
                
                **(Audited)**
                
                **(Audited)****(Restated)****OPERATING
                    REVENUE:**Referral
                    income - consolidation loans
                
                $
                238,175
                
                $
                -
                
                $
                -
                
                $
                -Referral
                    income - private student loans
                
                
                881
                
                
                932
                
                
                8,177
                
                
                2,406Private
                    student loan portfolio interest income
                
                
                297
                
                
                -
                
                
                -
                
                
                -**Total
                    Operating Revenue**
                
                
                **239,353**
                
                
                **932**
                
                
                **8,177**
                
                
                **2,406****COST
                    OF REVENUES**Referral
                    marketing costs - consolidations
                
                
                189,725
                
                
                -
                
                
                -
                
                
                -Facility
                    interest and origination bank costs
                
                
                10,185
                
                
                -
                
                
                -
                
                
                -Servicing
                    and custodial costs
                
                
                25,070
                
                
                -
                
                
                -
                
                
                -**Total
                    Cost of Revenues**
                
                
                224,980
                
                
                -
                
                
                -
                
                
                -**GROSS
                    PROFIT/(LOSS)**
                
                
                **14,373**
                
                
                **932**
                
                
                **8,177**
                
                
                **2,406****OPERATING
                    EXPENSES**Corporate
                    general and administrative expenses
                
                
                1,104,701
                
                
                200,574
                
                
                774,122
                
                
                48,633Sales
                    and marketing expenses
                
                
                791,261
                
                
                -
                
                
                312,301
                
                
                -Operations
                    expenses
                
                
                257,307
                
                
                -
                
                
                35,687
                
                
                -Technology
                    development
                
                
                855,132
                
                
                -
                
                
                158,646
                
                
                -Legal
                    expenses
                
                
                791,011
                
                
                -
                
                
                475,984
                
                
                -Other
                    operating expenses
                
                
                247,807
                
                
                -
                
                
                98,894
                
                
                -Depreciation
                    and amortization
                
                
                914,981
                
                
                1,092
                
                
                13,782
                
                
                1,547**Total
                    Operating Expenses**
                
                
                **4,962,200**
                
                
                **201,666**
                
                
                **1,869,416**
                
                
                **50,180****NET
                    (LOSS) BEFORE OTHER INCOME/(LOSS)**
                
                
                **(4,947,827**
                **)**
                
                **(200,734**
                **)**
                
                **(1,861,239**
                **)**
                
                **(47,774**
                **)****OTHER
                    INCOME (LOSS)**Interest
                    income
                
                
                83,398
                
                
                1,345
                
                
                13,931
                
                
                -Interest
                    expense
                
                
                (67,905
                )
                
                -
                
                
                (22,133
                )
                
                -


Other
                  expenses
              
              
              (2,000
              )
              
              -
              
              
              (1,992
              )
              
              -Unrealized
                  (loss) on investment
              
              
              -
              
              
              (1,500
              )
              
              -
              
              
              (1,500
              )Other
                  gain
              
              
              18,785
              
              
              -
              
              
              -
              
              
              -**Total
                  Other Income (Loss)**
              
              
              **32,278**
              
              
              **(155**
              **)**
              
              **(10,194**
              **)**
              
              **(1,500**
              **)****NET
                  (LOSS) BEFORE PROVISION FOR INCOME TAXES**
              
              
              (4,915,549
              )
              
              (200,889
              )
              
              (1,871,433
              )
              
              (49,274
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -**NET
                  (LOSS)**
              
              
              **(4,915,549**
              **)**
              
              **(200,889**
              **)**
              
              **(1,871,433**
              **)**
              
              **(49,274**
              **)**LESS
                  PREFERRED STOCK DIVIDEND
              
              
              (6,296,086
              )
              
              -
              
              
              -
              
              
              -**LOSS
                  APPLICABLE TO COMMON SHARES**
              
              $
              **(11,211,635**
              **)**
              **$**
              **(200,889**
              **)**
              **$**
              **(1,871,433**
              **)**
              **$**
              **(49,274**
              **)****NET
                  LOSS PER BASIC AND DILUTED SHARES**
              
              $
              **(0.82**
              **)**
              **$**
              **(0.01**
              **)**
              **$**
              **(0.14**
              **)**
              **$**
              **(0.01**
              **)**WEIGHTED
                    AVERAGE NUMBER OF COMMONSHARES
                  OUTSTANDING
              
              
              13,608,511
              
              
              10,300,000
              
              
              13,209,331
              
              
              10,300,000




The
      accompanying notes are an integral part of
      these consolidated financial statements.




F-4




**MRU
      HOLDINGS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED**


**JUNE
      30, 2005 (AUDITED) AND 2004 (UNAUDITED) AND THE YEARS**


**ENDED
      DECEMBER 31, 2004 AND 2003 (AUDITED)**


Six
                  Months Ended
              
              Years
                  EndedJune
                  30,
              
              June
                  30,
              
              December
                  31,
              
              December
                  31,2005
              
              2004
              
              2004
              
              2003(Restated)
              
              (Unaudited)
              
              (Audited)
              
              (Audited)**CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net
                  loss
              
              $
              (4,915,549
              )
              $
              (200,889
              )
              $
              (1,871,433
              )
              $
              (49,274
              )**Adjustments
                  to reconcile net loss to net cash****used
                  in operating activities:**Depreciation
                  and amortization
              
              
              914,981
              
              
              1,092
              
              
              13,782
              
              
              1,547Unrealized
                  gain (loss) on investment
              
              
              -
              
              
              1,500
              
              
              -
              
              
              1,500**Changes
                  in assets and liabilities**(Increase)
                  in accounts receivable
              
              
              (20,246
              )
              
              -
              
              
              -
              
              
              -(Increase)
                  in student loans receivable
              
              
              (158,479
              )
              
              -
              
              
              -
              
              
              -(Increase)
                  decrease in prepaid expenses and other current assets
              
              
              41,016
              
              
              (1,451
              )
              
              (180,032
              )
              
              4,476(Increase)
                  in security deposits
              
              
              (386,938
              )
              
              (95,000
              )
              
              -
              
              
              -(Increase)
                  in collateral deposit - student loans
              
              
              (250,000
              )
              
              -
              
              
              -
              
              
              -Increase
                  in accrued payroll
              
              
              225,644
              
              
              -
              
              
              -
              
              
              -Increase
                  in deferred loan origination fee revenue
              
              
              7,388
              
              
              -
              
              
              -
              
              
              -Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              165,584
              
              
              (849
              )
              
              458,482
              
              
              1,100Total
                  adjustments
              
              
              538,950
              
              
              (94,708
              )
              
              292,232
              
              
              8,623**Net
                  cash used in operating activities**
              
              
              (4,376,599
              )
              
              (295,597
              )
              
              (1,579,201
              )
              
              (40,651
              )****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ******CASH
                  FLOWS FROM INVESTING ACTIVITIES**Acquisition
                  of fixed assets
              
              
              (247,867
              )
              
              (9,081
              )
              
              (70,409
              )
              
              (6,928
              )Increase
                  (decrease) in investment
              
              
              -
              
              
              (1,500
              )
              
              -
              
              
              (1,500
              )**Net
                  cash used in investing activities**
              
              
              (247,867
              )
              
              (10,581
              )
              
              (70,409
              )
              
              (8,428
              )**CASH
                  FLOWS FROM FINANCING ACTIVITES**Proceeds
                  from conversion of warrants
              
              
              107,760
              
              
              31,550
              
              
              -
              
              
              -Proceeds
                  from bridge loan
              
              
              -
              
              
              750,000
              
              
              750,000
              
              
              -Proceeds
                  from sale of stock and equity - net of expenses
              
              
              -
              
              
              -
              
              
              2,548,438
              
              
              -(Increase)
                  in deferred financing fees
              
              
              (206,500
              )
              
              -
              
              
              -
              
              
              -Proceeds
                  from issuance of preferred stock shares - net
              
              
              9,968,851
              
              
              -
              
              
              -
              
              
              -**Net
                  cash provided by financing activities**
              
              
              9,870,111
              
              
              781,550
              
              
              3,298,438
              
              
              -**NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              5,245,645
              
              
              475,372
              
              
              1,648,828
              
              
              (49,079
              )**CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
              
              
              1,648,877
              
              
              49
              
              
              49
              
              
              49,128**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              6,894,522
              
              $
              475,421
              
              $
              1,648,877
              
              $
              49**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:****CASH
                  PAID DURING THE PERIOD FOR:**Interest
                  expense
              
              $
              78,090
              
              $
              -
              
              $
              -
              
              $
              -**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH ACTIVITIES:**Issuance
                  of common stock for conversion of bridge loan
              
              $
              0
              
              $
              -
              
              $
              750,000
              
              $
              0Issuanceof
                  preferred stock in conversion of dividends payable
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              0Accrued
                  Series A and B stock dividends
              
              $
              121,086
              
              $
              -
              
              $
              -
              
              $
              0Issuance
                  of warrants
              
              $
              13,461,649
              
              $
              0
              
              $
              -
              
              $
              0Preferred
                  stock converted to common shares
              
              $
              0
              
              $
              0
              
              $
              -
              
              $
              0
  **The
      accompanying notes are an integral part of these consolidated financial
      statements.**





F-5





**MRU
                HOLDINGS, INC. AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                (DEFICIT)****(RESTATED)****FOR
                THE SIX MONTHS ENDED JUNE 30, 2005 (AUDITED)****AND
                THE YEARS ENDED DECEMBER 31, 2004 AND 2003
                (AUDITED)**




**Additional****Additional**
              
              **Additional**
              
              **Paid-In****Series
                  A**
              
              
              
              
              
              **Additional**
              
              **Paid-In**
              
              **Paid-In**
              
              **Capital****Preferred
                  Stock**
              
              **Common
                  Stock**
              
              **Paid-In**
              
              **Capital**
              
              **Capital**
              
              **-
                  Series A**
              
              **Accumulated****Shares**
              
              **Amount**
              
              **Shares**
              
              **Amount**
              
              **Capital**
              
              **-
                  Options**
              
              **-
                  Warrants**
              
              **Ben
                  Conv**
              
              **(Deficit)**
              
              **Total****(Restated)**
              
              **(Restated)**
              
              **(Restated)****Balance,
                  December 31, 2003**
              
              
              900,000
              
              $
              900
              
              
              10,300,000
              
              $
              10,300
              
              $
              438,800
              
              $
              0
              
              $
              0
              
              
              
              
              $
              (442,008
              )
              $
              7,992Additional
                  capital contribution
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,450
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,450Net
                  (loss) for the six months ended June 30, 2004 before effects of
                  reverse
                  merger
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (200,889
              )
              
              (200,889
              )Subtotal-June
                  30, 2004
              
              
              900,000
              
              $
              900
              
              
              10,300,000
              
              $
              10,300
              
              $
              469,250
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              (642,897
              )
              
              ($162,447
              )Effects
                  of Reverse MergerElimination
                  of Iempower equity
              
              
              (900,000
              )
              
              (900
              )
              
              (10,300,000
              )
              
              (10,300
              )
              
              (469,250
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (480,450
              )Distribution
                  of Pacific Technology equity to Iempower holders
              
              
              
              
              
              
              
              
              6,863,433
              
              
              6,863
              
              
              439,790
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              446,653Assumption
                  of Pacific Technology liabilities by Iempower holders
              
              
              
              
              
              
              
              
              466,519
              
              
              466
              
              
              29,894
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              30,360Remaining
                  equity in Pacific Technology (now MRU Holdings, Inc.)
              
              
              
              
              
              
              
              
              3,600,000
              
              
              3,600
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,600Issuance
                  of shares in conversion of bridge loan and accrued
                  interest
              
              
              
              
              
              
              
              
              468,750
              
              
              469
              
              
              749,531
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              750,000Common
                  stock issued for cash, July 2004 - net of expenses
              
              
              
              
              
              
              
              
              2,150,000
              
              
              2,150
              
              
              2,455,674
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,457,824Common
                  stock issued for cash, October 2004
              
              
              
              
              
              
              
              
              37,500
              
              
              38
              
              
              59,962
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              60,000Net
                  (loss) for the period July 1, 2004 to December 31, 2004
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,670,544
              )
              
              (1,670,544.00
              )**Balance,
                  December 31, 2004**
              
              
              0
              
              $
              0
              
              
              13,586,202
              
              $
              13,586
              
              $
              3,734,851
              
              $
              0
              
              $
              0
              
              $
              0
              
              $
              (2,313,441
              )
              $
              1,434,996Issuance
                  of Series A preferred stock, February 2005
              
              
              3,250,006
              
              $
              3,250
              
              
              
              
              
              
              
              
              2,583,533
              
              
              
              
              
              7,382,068
              
              
              6,175,000
              
              $
              (6,296,086
              )
              
              9,968,851Exercise
                  of warrants at $2.00 per share
              
              
              
              
              
              
              
              
              40,000
              
              
              40
              
              
              79,960
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              80,000Exercise
                  of warrants at $1.60 per share
              
              
              
              
              
              
              
              
              7,100
              
              
              7
              
              
              12,153
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,160Exercise
                  of warrants at $0.50 per share
              
              
              
              
              
              
              
              
              31,200
              
              
              31
              
              
              15,569
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              15,600Accrue
                warrants issued to Nomura
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,079,581
              
              
              
              
              
              
              
              
              6,079,581Net
                  (loss) for the six months ended June 30, 2005
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,915,549
              )
              
              (4,915,549
              )**Balance,
                  June 30, 2005 (Restated)**
              
              
              3,250,006
              
              $
              3,250
              
              
              13,664,502
              
              $
              13,664
              
              $
              6,426,066
              
              $
              0
              
              $
              13,461,649
              
              $
              6,175,000
              
              $
              (13,525,076
              )
              $
              12,554,553


**The
      accompanying notes are an integral part of these consolidated financial
      statements.**




F-6


**MRU
      HOLDINGS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004**


**AND
      THE YEARS ENDED DECEMBER 31, 2004 AND 2003**





**NOTE
      1 -**  **ORGANIZATION
      AND BASIS OF PRESENTATION**





On
      July
      8, 2004, the Company acquired 100% of the outstanding capital stock of Iempower,
      Inc., a privately-held Delaware corporation doing business as MyRichUncle
      ("Iempower"), pursuant to a Share Exchange Agreement, dated as of April 13,
      2004, with Iempower and it stockholders in exchange for 6,863,433 shares of
      common stock, $0.001 par value per share (the "Common Stock"), which the Company
      issued to the stockholders of Iempower, together with 2,136,567 Common Stock
      purchase warrants to the warrant holders of Iempower (each warrant is
      exercisable to purchase one share of Common Stock, and the warrants have a
      weighted average exercise price of $0.45 per share) (the "Share Exchange").
      Concurrently, and in connection with the Share Exchange, the Company also sold
      100% of the outstanding capital stock of its Nevada subsidiary, Pacific
      Technology, Inc., to four of the Company's principal stockholders prior to
      the
      Share Exchange in consideration for 9,325,000 shares of Common Stock which
      has
      been retired. The Share Exchange has been accounted for as a reverse merger
      under the purchase method of accounting. Accordingly, Iempower will be treated
      as the continuing entity for accounting purposes and the historical financial
      statements presented will be those of Iempower.





Although
      the Company acquired Iempower as a result of the Share Exchange, the
      stockholders of Iempower hold a majority of the voting interest in the Company.
      Additionally, the Share Exchange resulted in Iempower's management and Board
      of
      Directors assuming operational control of the Company.





The
      Company has permanently discontinued the business of selling and distributing
      optical storage devices and has adopted the Iempower business plan directed
      primarily at providing students with funds for higher education using a
      proprietary approach of analyzing future repayment potential to profile and
      provide customized financial products to students. The Company receives
      financing requests from students, which the Company refers to lenders. The
      Company also proposes to originate federal loans, which are student loans
      guaranteed by the federal government, and private student loans.





The
      Company was incorporated in Delaware on March 2, 2000 as Dr. Protein.Com, Inc.
      and on March 7, 2003 changed its name to Pacific Technology, Inc. On July 6,
      2004 the Company changed its name to MRU Holdings, Inc. On May 20, 2005, the
      Board of Directors of the Company approved a change in the Company's year-end
      from December 31st to June 30th.





**NOTE
      2 -**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of the Company and all
      its wholly owned subsidiaries. All significant intercompany accounts and
      transactions have been eliminated in consolidation.





**Use
      of Estimates**





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





F-7


**Revenue
      Recognition**





The
      Company records its revenue on the accrual basis, whereby revenue is recognized
      when earned and expenses recognized when incurred.





The
      Company recognizes referral income from referring consolidation student loan
      and
      private student loan requests to other lenders when payments are received from
      referral partners, since referral partners only remit payments for those
      borrowers after the referred borrowers have completed the loan
      process.





Interest
      income on student loans receivable is recognized in accordance with SFAS 91, *Accounting
      for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
      and Initial Direct Costs of Leases* .





The
      Company follows SFAS 91 for the revenue recognition of origination fee revenue,
      whereby loan origination fees are deferred and recognized over the life of
      the
      loan as an adjustment of yield (interest income).





**Cash
      and Cash Equivalents**





The
      Company considers all highly liquid debt instruments and other short-term
      investments with an initial maturity of three months or less to be cash
      equivalents.





The
      Company maintains cash and cash equivalent balances at a financial institution
      that is insured by the Federal Deposit Insurance Corporation up to $100,000.
      At
      June 30, 2005, the Company's uninsured cash balance was $6,805,965.





**Fixed
      Assets**





Fixed
      assets are stated at cost. Depreciation is computed primarily using the
      straight-line method over the estimated useful life of the assets.




Computer
                network equipment
            3-5
                YearsLeasehold
                improvements
            3
                YearsFurniture
                and fixtures
            5
                Years




**Income
      Taxes**





The
      income tax benefit is computed on the pretax income (loss) based on the current
      tax law. Deferred income taxes are recognized for the tax consequences in future
      years of differences between the tax basis of assets and liabilities and their
      financial reporting amounts at each year-end based on enacted tax laws and
      statutory tax rates.





**Advertising**





The
      Company expenses the costs associated with advertising and marketing as
      incurred. Advertising and marketing expenses, included in the statements of
      operations for the six months ended June 30, 2005 and 2004 were $124,504 and
      $42,432, respectively, and for the years ended December 31, 2004 and 2003 were
      $17,577 and $0, respectively.





**Costs
      of Revenues**





The
      Company includes as costs of revenues all direct costs related to the production
      of the various revenue streams of the Company’s business.





F-8


For
      the
      fiscal year ended June 30, 2005, the Company incurred $189,725 in referral
      marketing fees related to consolidation student loan referral income, $25,070
      in
      third party student loan servicing and custodial costs, and $10,185 in
      originating bank costs.





**Valuation
      Reserve - Student Loan Receivables**


The
        Company’s private student loans receivable portfolios are held for sale, valued
        at the lower of cost or market. The valuation reserve represents management’s
        estimate of expected losses based on the Company’s analysis of its student loans
        receivable portfolio. This evaluation process is subject to numerous estimates
        and judgments.
 
 In
        determining the adequacy of the valuation reserve for the private student
        loans
        receivable portfolio, the Company considers several factors including: 2003
        United States Department of Education’s cohort default rates for Title IV
        post-secondary educational institutions (adjusted for particular characteristics
        of individual borrowers including the university attended, program of study,
        academic progress in the current or prior program of study, and current or
        prior
        employment history), portfolio loan performance of those loans in repayment
        versus those in nonpayment status, and portfolio delinquency and default
        performance. Should any of these factors change, the estimates made by
        management would also change, which in turn would impact the level of the
        Company’s future valuation reserve process.
 
 The
        valuation reserve is maintained at a level management believes is adequate
        to
        provide for estimated possible credit losses inherent in the student loans
        receivable portfolio. This evaluation is inherently subjective because it
        requires estimates that may be susceptible to significant changes.
 
 There
        was
        no valuation reserve established for the fiscal year ended June 30, 2005,
        as the
        Company had no expectation of a valuation reserve using our valuation reserve
        process at that time.
 
 The
        Company places a private student loan receivable on nonaccrual status and
        charges off the loan when the collection of principal and/or interest is
        180
        days past due or if the Company learns of an event or circumstance, which
        in the
        Company’s judgment causes the loan to have a high probability of nonpayment,
        even before the collection of principal and/or interest is 180 days past
        due.
        The Company’s third party servicer works with borrowers who have temporarily
        ceased making full payments due to hardship of other factors, according to
        a
        schedule approved by the third party servicer that is consistent with
        established loan program servicing procedures and policies. Loan granted
        deferment or forbearance will move off principal and/or interest repayment,
        although these loans will continue to accrue interest. The Company is motivated
        to work with the servicer in identifying borrowers who may be delinquent
        on
        their loans due to misinformation (students frequently change addresses)
        or
        availing the student borrower deferment or forbearance. The Company wishes
        to
        actively manage its servicing and collection process for two principal reasons:
        to assist student borrowers maintain their credit ratings and to keep the
        Company’s valuation reserve as low as possible.





**Collateral
      Deposit - Student Loans**





On
      May 5,
      2005, the Company entered into a loan purchase and sale agreement with Webbank,
      a Utah state chartered financial institution, which required the Company to
      post
      $250,000 as a collateral deposit in an interest-bearing account with Webbank.
      The Company does not control this account, which is why this asset is not shown
      as cash or a cash equivalent. The deposit would be returned to the Company
      upon
      termination of the loan purchase and sale agreement with Webbank.





**Security
      Deposits**





As
      of
      June 30, 2005, the Company has $392,963 in security deposits held and controlled
      by other parties to secure lease agreements the Company has for office space
      and
      facilities in New York, NY.





F-9
 
  (Loss)
        Per Share of Common Stock


Historical
      net (loss) per common share is computed using the weighted average number of
      common stock outstanding. Diluted earnings per share (EPS) include additional
      dilution from common stock equivalents, such as stock issuable pursuant to
      the
      exercise of stock options and warrants.





The
      following is a reconciliation of the computation for basic and diluted
      EPS:




June
                  30,
              
              June
                  30,
              
              December
                  31,
              
              December
                  31,2005
              
              2004
              
              2004
              
              2004(Restated)(Audited)
              
              (Unaudited)
              
              (Audited)
              
              (Audited)Net
                  (loss)
              
              $
              (11,211,635
              )
              $
              (200,889
              )
              $
              (1,871,433
              )
              $
              (49,274
              )Weighted-average
                  common stockOutstanding
                  (Basic)
              
              
              13,608,511
              
              
              10,300,000
              
              
              13,209,331
              
              
              10,300,000Weighted-average
                  common stockequivalents:Stock
                  options
              
              
              -
              
              
              -
              
              
              -
              
              
              -Warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -Weighted-average
                  common stockoutstanding
                  (Diluted)
              
              
              13,608,511
              
              
              10,300,000
              
              
              13,209,331
              
              
              10,300,000





For
      June
      30, 2005 and 2004 and December 31, 2004 and 2003, warrants (11,357,856 and
      0,
      respectively; 3,214,727 and 0, respectively) and options (1,500,000 and 0,
      respectively; and 1,430,000 and 0, respectively) were not included in the
      computation of diluted EPS because their inclusion would have been
      antidilutive.





**Fair
      Value of Financial Instruments**


Statement
        of Financial Accounting Standard 107, *Disclosures
        about Fair Value of Financial Statements* ,
        (FAS
        107), requires entities to disclose the fair value of all (recognized and
        unrecognized) financial instruments that is practicable to estimate, including
        liabilities. The estimates of fair value of financial instruments are summarized
        as follows:
 
 Carrying
        amounts approximate fair value
 June
                    30, 2005Cash
                
                $6,894,522Accounts
                    Receivable
                
                20,246Collateral
                    deposit - student loans
                
                250,000Accounts
                    Payable
                
                577,478
  Fair
        values approximate carrying values because of the short time until
        realization.
 
 Assets
        with fair values exceeding carrying amounts
 June
                    30, 2005Carrying
                    Value
                
                Fair
                    ValuePrivate
                  student loans receivable, held for
                  sale
                
                $
                158,479
                
                $
                176,014





F-10
 
  The
          Company determined the fair value of its student loans receivable through
          a net
          present value analysis. The Company collates data from a variety of public
          and
          private sources, including the United States Department of Education, individual
          colleges and universities, academic research studies, the Company’s internal
          research and survey efforts as well as the data from credit bureaus and
          other
          credit grantors. This Company’s net present value analysis considered the
          following: the 2003 United States Department of Education’s cohort default rates
          for Title IV post-secondary educational institutions (adjusted for particular
          characteristics of individual borrowers including the university attended,
          program of study, academic progress in the current or prior program of
          study,
          and current or prior employment history), and individual loan basis of
          valuation, and estimated prepayment assumptions. As of June 30, 2005, the
          approximate 11% increase in fair value over the carrying value, which is
          the
          Company’s cost, results from this net present value modeling of future cash
          flows from the borrowers servicing these loans tempered by all of the above
          factors.





**Stock
      Based Compensation**





The
      Company has elected to follow Accounting Principles Board Opinion No. 25
      "Accounting for Stock Issued to Employees" (APB No. 25), and related
      interpretations, in accounting for their employee stock options rather than
      the
      alternative fair value accounting allowed by SFAS No. 123, "Accounting for
      Stock- Based Compensation", and has adopted the enhanced disclosure provisions
      of SFAS No. 148, "Accounting for Stock Base Compensation - Transition and
      Disclosures", an amendment of SFAS No. 123. APB No. 25 provides that the
      compensation expense relative to the Company's employee stock options is
      measured based on the intrinsic value of the stock option. SFAS No. 123 requires
      companies that continue to follow APB No. 25 to provide a pro forma disclosure
      of the impact of applying the fair value method of SFAS No. 123 and, as amended,
      SFAS 148.





**Recent
      Accounting Pronouncements**





In
      December 2004, the FASB issued Financial Accounting Standards No. 123 (revised
      2004) (FAS 123R), "Share-Based Payment," FAS 123R replaces FAS No. 123,
      "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25,
      "Accounting for Stock Issued to Employees." FAS 123R requires compensation
      expense, measured as the fair value at the grant date, related to share-based
      payment transactions to be recognized in the financial statements over the
      period that an employee provides service in exchange for the award.





The
      Company intends to adopt FAS 123R using the "modified prospective" transition
      method as defined in FAS 123R. Under the modified prospective method, companies
      are required to record compensation cost prospectively for the unvested portion,
      as of the date of adoption, of previously issued and outstanding awards over
      the
      remaining vesting period of such awards. FAS 123R is effective January 1, 2006.
      The Company is evaluating the impact of FAS 123R on its' results and financial
      position.





In
      May
      2003, the FASB issued SFAS No. 150, "Accounting for certain Financial
      Instruments with Characteristics of both Liabilities and Equity" ("SFAS No.
      150"). SFAS 150 requires that certain financial instruments issued in the form
      of shares that are mandatorily redeemable as well as certain other financial
      instruments be classified as liabilities in the financial statements. SFAS
      No.
      150 is effective for financial instruments entered into or modified after May
      31, 2003. The adoption of SFAS No. 150 did not have a material affect on the
      Company's reported financial results.





**NOTE
      3-**  **FIXED
      ASSETS**





Fixed
      assets consisted of the following at June 30, 2005:





F-11
 
  2005Computer
                    equipment
                
                $
                302,803Leasehold
                    improvements
                
                
                21,994Furniture
                    and fixtures
                
                
                5,884330,681Less
                    accumulated Depreciation
                
                
                (57,608
                )Total
                    Fixed Assets
                
                $
                273,073
 Depreciation
        expense for the six months ended June 30, 2005 and 2004 was $41,915 and $1,092,
        respectively. Depreciation expense for the years ended December 31, 2004
        and
        2003 was $13,782 and $1,547, respectively.





**NOTE
      3A-**  **STUDENT
      LOAN RECEIVABLES, HELD FOR SALE**


Student
        loan receivables are private student loans made to post-secondary and/or
        graduate students pursuing degree programs from selective colleges and
        universities in the United States of America and abroad. Private student
        loans
        are not guaranteed by any governmental entity and are unsecured consumer
        debt.
        Interest accrues on these loans from date of advance, with the interest rate
        dependent on the student borrower’s choice of repayment option (deferred,
        interest payment only, and principal and interest payment). Once these loans
        begin to service, borrower payments are applied to interest and principal
        consistent with the effective interest rate method per SFAS 91, *Accounting
        for Nonrefundable Fees and Costs Associated with Originating or Acquiring
        Loans
        and Initial Direct Costs of Leases* .
        Origination fee revenue is recognized, if applicable, over the principal
        servicing life of the loan, also per SFAS 91.
  The
        Company values its student loan receivables at the lower of cost or market.
        The
        Company determines the fair market value of its student loans receivable
        through
        a net present value analysis of its student loan portfolios on an individual
        loan basis. This process is described in Note 2, Financial Instruments
        Disclosures of Fair Value for private student loans receivable. The Company
        intends to sell or securitize student loans receivable at a time indefinite,
        such action is largely dependent on the Company’s ability to originate and/or
        hold similar student loans receivable to bundle for sale or
        securitization.
 
 Through
        June 30, 2005, MRU Lending, Inc. had a loan purchase agreement with Webbank,
        a
        Utah state chartered financial institution and a wholly owned subsidiary
        of
        WebFinancial Corporation.
 
 Through
        June 30, 2005, the Company purchased the following private student loan volumes
        through its various subsidiary loan programs. All loans purchased through
        these
        loans programs are purchased at par, i.e. no discount, and without recourse
        or
        redemption features available to the originating bank.
 
 · The
        Webbank-MRU Lending loan program purchased approximately $158 thousand in
        private student loans.
 
 The
        Company has retained servicing rights on the loans purchased under its various
        subsidiary loan programs and has outsourced the servicing function to a third
        party, who remits funds collected to us along with monthly activity
        reports.
  **NOTE
      4-**  **PROVISION
      FOR INCOME TAXES**





Income
      taxes are provided for the tax effects of transactions reported in the financial
      statements and consist of taxes currently due. Deferred taxes related to
      differences between the basis of assets and liabilities for financial and income
      tax reporting will either be taxable or deductible when the assets or
      liabilities are recovered or settled. The difference between the basis of assets
      and liabilities for financial and income tax reporting are not material;
      therefore, the provision for income taxes from operations consists of income
      taxes currently payable.





F-12


The
      nature of the timing difference generating the deferred tax asset is the
      accumulated net operating loss carryforwards that can be applied towards
      mitigating future tax liabilities of the Company. The Company has established
      a
      valuation account at the full value of the tax deferred asset.





There
      was
      no provision for income taxes for the fiscal year ended June 30,
      2005.





Deferred
      income taxes are determined using the liability method for the temporary
      differences between the financial reporting basis and income tax basis of the
      Company’s assets and liabilities. Deferred income taxes will be measured based
      on the tax rates expected to be in effect when the temporary differences are
      included in the Company’s consolidated tax return. Deferred tax assets and
      liabilities are recognized based on anticipated future tax consequences
      attributable to differences between the financial statements carrying amounts
      of
      assets and liabilities and their respective tax bases.





The
      Company’s deferred tax asset, for which the Company has set aside a valuation
      allowance at an equal amount, is due to the expected tax benefit of the
      Company’s net operating losses. To date the Company’s operations have not
      generated any federal, state, or local taxes beyond the minimum filing
      requirements, which cannot and have not been mitigated by operating loss
      carryforwards. The Company does not have an effective tax rate due to the
      Company’s lack of taxable profits to date.




2005Deferred
                  tax assets
              
              $
              2,205,023Less:
                  valuation allowance
              
              
              (2,205,023
              )Total
              
              $
              -




At
      June
      30, 2005, the Company had accumulated a net operating loss deficit of
      approximating $7.4 million, available to offset future taxable income through
      2023. The Company established valuation allowances equal to the full amount
      of
      the deferred tax assets due to the uncertainty of the operating losses in future
      periods. The Company’s beneficial conversion feature for the Series A
      Convertible Preferred Stock increases the Company’s accumulated deficit but does
      not contribute to net operating losses that can be used to offset future taxable
      income.





**NOTE
      5-**  **STOCKHOLDERS’
      EQUITY**





**Common
      Stock**





There
      were 50,000,000 and 22,100,000 shares of common stock authorized, with
      13,664,502 and 10,300,000 shares issued and outstanding at June 30, 2005 and
      2004, respectively. The par value for the common stock is $.001 per
      share.





The
      following details the stock transactions for the six months ended June 30,
      2005.





The
      Company issued 40,000 shares of common stock upon the exercise of warrants
      at a
      value of $2.00 per share.





The
      Company issued 7,600 shares of common stock upon the exercise of warrants at
      a
      value of $1.60 per share.





The
      Company issued 31,200 shares of common stock upon the exercise of warrants
      at a
      value of $0.50 per share.





F-13


**Series
      A Preferred Stock**





There
      were 5,000,000 shares of preferred stock authorized, with 3,250,006 issued
      and
      outstanding as of June 30, 2005. The par value for the preferred shares is
      $0.001 per share.





On
      January 27, 2005, the Company filed a Designation of Powers, Preferences and
      Rights of Series A Convertible Preferred Stock, par value $0.001 per share
      (the
      Certificate of Designation) with the Secretary of State of the State of
      Delaware. Pursuant thereto, the Company authorized 4,500,000 shares of its
      preferred stock to be designated as Series A Convertible Preferred Stock and
      issued or offered at a purchase price equal to $3.50 per share. A total of
      3,250,006 shares of the Series A Preferred Stock has been sold by the Company
      in
      the private placement transaction





The
      Series A Preferred Stock is convertible at any time into common stock of the
      Company at a price of $3.50 per share subject to adjustment for future stock
      issuances, splits, dividends, and recapitalizations. Cumulative dividends on
      the
      Series A Preferred at a rate equal to 1) 7% of the Series A Original Issue
      Price
      annually through the first anniversary of the Original Issue Date and 2) 4%
      of
      the Series A Original Issue Price annually thereafter, are payable quarterly
      in
      arrears in cash or, at the option of the Company, in additional shares of the
      Series A Preferred. The Series A Preferred Stock has no voting rights except
      on
      certain defaults in the Company’s payment of dividends and as otherwise required
      by law.





The
      Company has the right to redeem the Series A Preferred Stock at any time if
      the
      common stock into which the shares of Series A Preferred Stock are to be
      converted has been registered and listed for trading on the market where the
      common stock of the Company is then traded and the closing price of the common
      stock exceeds a 15% premium of the conversion price per share for 20 out of
      30
      consecutive trading days.





In
      the
      event of a change in control of the Company, the holders of the shares of Series
      A Preferred Stock will have the right to request and receive, within the
      specified periods, redemption of their shares of Preferred Stock at $3.50 per
      share plus any accrued and unpaid dividends.





On
      February 4, 2005, contemporaneously with and as a condition to the transaction
      described, the Company sold 3,250,006 shares of its Series A Preferred Stock
      (Series A Preferred Stock) at a price of $3.50 per share to certain accredited
      investors in a private placement transaction. The Company received gross
      aggregate proceeds of $11,375,000 from the sale of these
      securities.





For
      the
      year ended June 30, 2005, the additional paid-in capital account for the
      beneficial conversion feature for the Series A Preferred Stock was
      $6,175,000.





**Stock
      Options**





On
      August
      24, 2004, the Company adopted an Omnibus Incentive Plan (OIP) authorizing the
      grant of incentive and non-incentive options for an aggregate of 1,500,000
      shares of the Company’s common stock to directors, officers, employees, and
      consultants. Incentive options are to be granted at fair market value as
      determined by the Company’s stock price on the date of grant. Options are to be
      exercisable as per the vesting requirements determined by the Company’s board of
      directors.





F-14




If
      compensation expense for the Company’s stock-based compensation plans had been
      determined consistent with SFAS 123, *Accounting
      for Stock-Based Compensation* ,
      the
      Company’s net income and net income per share including pro forma results would
      have been the amount indicated below:


Period
                  EndedJune
                  30, 2005(Restated)Net
                  (Loss) Applicable to Common SharesAs
                  Reported
              
              $
              (11,211,635
              )Total
                  stock-based compensation expensedetermined
                  under FV method
              
              
              (2,945,404
              )Pro
                  forma Net (Loss)
              
              $
              (14,157,039
              )Net
                  (Loss) per ShareAs
                  ReportedPrimary
              
              $
              (0.82
              )Diluted
              
              $
              (0.82
              )Pro
                  FormaPrimary
              
              $
              (1.04
              )Diluted
              
              $
              (1.04
              )




The
      pro
      forma effect on net income may not be representative of the pro forma effect
      on
      net income of future years due to, among other factors: (1) the vesting period
      of the stock options and (2) fair value of additional stock options in future
      years.





The
      following table summarizes the stock option activity for the OIP for the fiscal
      year ended June 30, 2005:




Options
                  outstanding at beginning of period
              1,430,000Options
                  granted
              70,000Options
                  exercised
              0Options
                  forfeited, expired, or cancelled
              0Options
                  outstanding at period end
              1,500,000Exercisable
                  options at period end
              711,249


The
      following summarizes the range of exercise prices, weighted average exercise
      price and weighted average contractual life at June 30, 2005:




Exercise
                
                
                Weighted
                WeightedPrice
                Number
                Remaining
                Avg.
                    Number
                AverageRange
                Outstanding
                Life
                Exercisable
                Exer.
                    Price$0.01-$1.00
                600,000
                9.03
                300,000
                $1.00$1.01-$2.00
                645,000
                9.26
                383,749
                $1.63$2.01-$3.00
                182,000
                9.40
                8,167
                $3.00$3.01-$4.00
                73,000
                9.81
                19,333
                $3.50$4.01-$7.00
                0
                0.00
                0
                $0.00TOTAL
                1,500,000
                
                711,249
                $1.37


**Warrants**





At
      June
      30, 2005 there were 11,357,856 warrants outstanding.





For
      the
      year ending June 30, 2005, there were 40,000 warrants exercised at $2.00, 7,600
      warrants exercised at $1.60, and 31,200 warrants exercised at
      $0.50.




F-15
 
  The
          Company has the following warrants outstanding for the purchase of its
          common
          stock:


Exercise
                Expiration
                June
                    30Price
                Date
                2005$0.02
                April
                    2009
                89,950$0.50
                September
                    2006
                37,021$0.99
                September
                    2006
                75,800$0.99
                December
                    2006
                818,646$0.99
                December
                    2007
                530,603$0.99
                December
                    2008
                530,607$0.99
                April
                    2009
                22,740$1.60
                July
                    2007
                101,000$1.60
                July
                    2009
                405,350$2.00
                July
                    2007
                512,115$2.00
                October
                    2007
                7,075$3.50
                February
                    2015
                7,999,449$3.50
                February
                    2010
                227,500TOTAL
                
                11,357,856Exercisable
                    warrants
                9,903,411Weighted
                    average exercise price
                $2.80




**NOTE
      6 -**  **LONG
      TERM DEBT**





On
      April
      1, 2004, the Company received a bridge loan in the amount of $750,000, bearing
      interest at 5% per year based on a 360-day year. The note was to mature the
      earliest of 1.) September 30, 2004 or 2.) Consummation of the Share Exchange.
      If
      the Share Exchange was consummated prior to the maturity date, the Lender shall
      cause Pacific Technology and Brean Murray & Company to exchange the note for
      the number of units equal to the quotient obtained by dividing (a) the sum
      of
      the outstanding principal and all other amounts due hereunder on the date of
      the
      Share Exchange by (b) $1.60 (the per unit price of a unit sold to an investor
      in
      the offering. As of July 8, 2004, the entire principal and accrued interest
      on
      the bridge loan was converted in connection with the Share Exchange into 475,000
      shares of the Company's common stock at $1.60 per share and warrants to acquire
      88,433 shares of the common stock at an exercise price of $2.00 per
      share.





**NOTE
      7 -**  **CREDIT
      LINE WITH UNIVERSAL FINANZ HOLDING AG** .





On,
      October 25, 2004 the Company entered into a commitment letter with Universal
      Finanz Holding AG ("Universal") under which Universal offered to provide up
      to
      $50 million of credit support to be used as collateral security for the
      obligations of MRU Universal Guarantee Agency, Inc. (the "Guarantor"), a wholly
      owned subsidiary of the Company, as a guarantor of student loans and lines
      of
      credit arranged by the Company or banks and other financial institutions.
      Universal's commitment is conditioned on the satisfaction of certain conditions
      including the execution of an agreement providing Universal the right to
      purchase up to 65% ownership interest in the Guarantor and pay the purchase
      price for such ownership interest by releasing the Guarantor from its obligation
      to repay an equal amount of its outstanding obligations to
      Universal.





As
      of
      June 30, 2005, there were no amounts outstanding on the credit line with
      Universal Finanz Holdings AG by any Company subsidiary or
      affiliate.





**NOTE
      8-**  **CREDIT
      LINE WITH NOMURA CREDIT & CAPITAL, INC.**


On
          February 4, 2005, MRUL, a wholly-owned subsidiary of the Company entered
          into a
          credit agreement (the “Credit Agreement”), by and among Nomura, as Agent, a
          subsidiary of Nomura Holdings, Inc., and the institutions from time to
          time
          party thereto as lenders, pursuant to which the lenders have agreed to
          provide
          MRUL with a $165 million secured revolving credit facility for the origination
          and warehousing of private student loans. The loans under the Credit Agreement
          are secured by, among other things, a lien on all of the student loans
          financed
          under the Credit Agreement and any other student loans owned by MRUL and
          not
          otherwise released, together with a pledge of 100% of the capital stock
          of MRUL.
          The Credit Agreement contains terms and provisions (including representations,
          covenants and conditions) customary for transactions of this type. The
          Company
          paid $206,500 in deferred financing fees in association with the Credit
          Agreement.
  The
          Credit Agreement also provides for customary events of default, including
          failure to pay principal, interest or fees when due, failure to comply
          with
          covenants, breaches of certain representations and warranties, the bankruptcy
          of
          MRUL or MRU Lending Holdco, LLC (MRU Lending’s direct parent and wholly-owned
          subsidiary of the Company), failure to maintain certain net worth ratios,
          a
          material adverse change in MRUL’s ability to originate student loans, and
          failure of the Company to indirectly own 100% of the outstanding capital
          stock
          of MRUL. The facility has a three year term. Related to this transaction,
          Nomura
          was granted a warrant, subject to certain terms and conditions, to purchase
          common stock of the Company equal to 27.5% ownership interest in the Company
          on
          a diluted basis. The Company valued the warrants granted at $6,079,582
          and
          recorded it as a deferred financing fee (see Note 13 -
          Restatement).
  Amortization
          expense on the above deferred financing fees was $871,066 for the six months
          ended June 30, 2005.


F-16




**NOTE
      8A-**  **LOAN
      PROGRAM AGREEMENT**





On
      May 5,
      2005, MRU Lending, Inc. ("MRUL"), a wholly-owned subsidiary of the Company
      entered into a definitive agreement with Webbank, a Utah state chartered
      financial institution. The agreement provides for the Bank's origination of
      private student loans to qualified applicants participating in MRU Lending's
      private student loan program, the marketing of such program and solicitation
      and
      qualification of such applicants by MRUL and the sale by the Bank and purchase
      by MRUL of such student loans at par, i.e. no discount, and without recourse.
      The agreement between MRUL and the Bank is evidenced by a Loan Program Agreement
      and a Loan Sale Agreement both dated May 5, 2005. Pursuant to the Loan Program
      Agreement, the Bank has agreed to not originate or sell private student loans
      for or to any party other than MRUL. The Agreements have a 36 month term and
      are
      automatically renewable for up to two successive terms of 12
      months.





The
      Company has no balance due to the Bank for origination of loans as of June
      30,
      2005.





**NOTE
      9-**  **PATENTS**





The
      Company has a patent pending for a business method. This business method enables
      the company to provide customized financial products to consumers.





**NOTE
      10-**  **COMMITMENTS
      AND CONTINGENCIES**





**Employment
      Agreements**





The
      Company has four employment agreements with key management personnel. The terms
      of these agreements range between one and five years.


NAME
              
              TITLE
              
              EXPIRATION
                  DATEEdwin
                  J. McGuinn, Jr.
              
              Chief
                  Executive Officer
              
              November
                  11, 2007Raza
                  Khan
              
              President
              
              April
                  1, 2009Vishal
                  Garg
              
              Chief
                  Financial Officer
              
              April
                  1, 2009Keith
                  Landis
              
              MD-Operations
                  & Sales
              
              November
                  22, 2005





F-17




Operating
      Leases




The
      Company leases office and other corporate space under leases with terms between
      one and four years. Monthly payments under the current leases range between
      $1,525 and $29,459. The Company is required to pay its pro-rata share of costs
      relating to certain of the leased facilities.





The
      following is a schedule by years of future minimum rental payments required
      under the operating leases which have an initial or remaining non-cancelable
      lease term in excess of one year as of June 30, 2005:




For
                    the Years Ending June 302006
                
                $
                561,0722007
                
                
                502,2262008
                
                
                390,6892009
                
                
                324,050$
                1,778,037




**NOTE
      11-**  **SUBSEQUENT
      EVENTS**





On
      July
      25, 2005, MRU Lending, Inc. ("MRUL"), a wholly-owned subsidiary of the Company
      entered into a definitive agreement with Doral Bank NY, FSB, ("the Bank").
      The
      agreement provides for the Bank's origination of private student loans to
      qualified applicants participating in MRUL's private student loan program,
      the
      marketing of such program and solicitation and qualification of such applicants
      by MRUL and the sale by the Bank and purchase by MRUL of such student loans
      at
      par, i.e. no discount, and without recourse. The business purpose of the Loan
      Program and Loan Sale Agreements between MRUL and the Bank allow MRUL to
      purchase student loans originated by a Federal Savings Bank. There are legal
      an
      regulatory advantages to MRUL for purchasing loans originated by a Federal
      Savings Bank that are not otherwise available to MRUL. The agreement between
      MRUL and the Bank is evidenced by a Loan Program Agreement and a Loan Sale
      Agreement both dated July 25, 2005. Pursuant to the Loan Program Agreement,
      the
      Bank has agreed to not originate or sell private student loans for or to any
      party other than MRUL. The Agreements have a 36 month term and are automatically
      renewable for up to two successive terms of 12 months.





On
      September 20, 2005, the 2005 Annual Meeting of Stockholders was held at the
      principal offices of the Company. At the Annual Meeting the Company's
      stockholders voted on, and approved by requisite stockholder vote, the following
      matters: 1) the election of six directors to the Company's Board of Directors,
      2) Adoption of the 2005 Consultant Incentive Plan, 3) Adoption of an Amendment
      and Restatement to the 2004 Omnibus Incentive Plan, and 4) Approval of an
      Amendment to the Company's Certificate of Incorporation to increase the number
      of authorized shares of common stock from 50,000,000 shares to 200,000,000
      shares and the number of authorized shares of preferred stock from 5,000,000
      shares to 25,000,000.





**NOTE
      12-**  **RELATED
      PARTY TRANSACTIONS**





The
      obligations of the Company under the ISID Finance of America, Inc. sub-lease
      are
      guaranteed by Edwin J. McGuinn, the Company’s Chief Executive Officer, in
      accordance with a Guaranty dated April 26, 2005 executed by Mr. McGuinn in
      favor
      of the Sub-landlord.





**NOTE
      13-**  **RESTATEMENT**


The
          Company is restating the consolidated balance sheet as of June 30, 2005,
          and the
          consolidated statements of operations, cash flows, and changes in stockholders
          equity for the six months ended June 30, 2005.
  As
          identified in Note 8, on February 4, 2005, MRUL, a wholly-owned subsidiary
          of
          the Company, entered into a Credit Agreement with Nomura under which Nomura
          agreed to provide MRUL with a $165 million secured revolving credit facility
          for
          the origination and warehousing of private student loans. Related to this
          transaction, Nomura was granted a warrant, subject to certain terms and
          conditions, to purchase common stock of the Company equal to, at that point
          in
          time, 27.5% ownership interest in the Company on a diluted basis.
  Financial
          Accounting Standards no. 123R - *Share
          Based Payments* ,
          requires, with respect to share based transactions with other than employees,
          that the consideration received for the issuance of equity instruments
          shall be
          accounted for based on the fair value of the consideration received or
          the fair
          value of the equity instruments issued, whichever is more reliably
          measurable.
  As
          a
          result of a review by management of the data considered in deriving the
          value of
          the warrants issued to Nomura, management has determined that a restatement
          is
          required to appropriately reflect the value of the
          warrants.
  The
          impact on the consolidated balance sheet as of June 30, 2005 is as
          follows:
 
 ·
                Deferred
                    financing fees, net of amortization has been increased $5,235,195
                    from
                    $177,820 to $5,413,015.
 ·
                Additional
                    paid-in capital warrants has been increased $6,079,581, from
                    $7,382,068 to
                    $13,461,649.
 ·
                Accumulated
                    deficit has been increased $844,386 from $(12,680,690) to
                    $(13,525,076).
 
 The
          impact on the consolidated statement of operations for the six months ended
          June
          30, 2005 is as follows:
 
 ·
                Depreciation
                    and amortization has been increased by $844,386, from $70,595
                    to
                    $914,981.
 ·
                Loss
                    applicable to common shares has increased $844,386, from $(10,367,249)
                    to
                    $(11,211,635).
 ·
                Net
                    Loss per basic and diluted shares has increased $0.07 from $(0.75)
                    to
                    $(0.82).
 
 Net
          loss,
          and depreciation and amortization as reported in the consolidated statement
          of
          cash flows for the six month ended June 30, 2005 have been restated as
          described
          above. In the supplemental disclosure of non-cash activities, issuance
          of
          warrants for the six months ended June 30, 2005 has increased $6,079,581
          from
          $7,382,068 to $13,461,649.
  Additional
          paid-in capital - warrants and accumulated deficit as reported in the
          consolidated statement of changes in stockholders equity for the six months
          ended June 30, 2005 have been restated as described
          above.


F-18