**FORM      10-K-SB**

**[X]      ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)**

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**Diatom      Corporation.**

***Page          - 1***

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**INTRODUCTION**

**PART      I**

**ITEM      1. Description of Business.**

**(a)      Historical Information. **

**(b)      The Business of Registrant and Its Subsidiaries. **
*Planktos,      Inc.*

*Diatom      Corporation*
*Planktos,      Inc.*

***Page          - 2***

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**(c)      Financing Plans. **

**(d)      Planned Acquisitions**

**(e)      Employees.**

**ITEM      2. Description of Property.**

**ITEM      3. Legal Proceedings.**

**ITEM      4. Submission of Matters to a Vote of Security Holders.**

**PART      II**

**ITEM      5. Market for Common Equity and Stockholder Matters.**

**(a)      Market Information. **

| period                  | high                bid | low                bid | volume    |
|-------------------------|-------------------------|------------------------|-----------|
| 4th                2000 | 0.56                    | 0.25                   | 85,000    |
| 1st                2001 | 0.25                    | 0.25                   | 5,000     |
| 2nd                2001 | 0.25                    | 0.24                   | 365,00    |
| 3rd                2001 | 0.30                    | 0.25                   | 1,190,000 |
| 4th                2001 | 2.38                    | 0.20                   | 800,000   |
| 1st                2002 | 1.90                    | 1.10                   | 91,270    |
| 2nd                2002 | 2.10                    | 0.05                   | 450,000   |
| 3rd                2002 | 0.10                    | 0.02                   | 200,000   |
| 4th                2002 | 1.00                    | 0.02                   | 1,000,000 |
| 1st                2003 | 1.01                    | 0.15                   | 309,520   |
| 2nd                2003 | 0.20                    | 0.04                   | 59,200    |
| 3rd                2003 | 0.10                    | 0.05                   | 36,840    |
| 4th                2003 | 0.11                    | 0.04                   | 870,360   |
| 1st                2004 | 0.15                    | 0.05                   | 160,660   |
| 2nd                2004 | 0.08                    | 0.05                   | 157,420   |
| 3rd                2004 | 0.06                    | 0.04                   | 166,820   |
| 4th                2004 | 0.13                    | 0.03                   | 3,605,760 |
| 1st                2005 | 0.05                    | 0.02                   | 620,000   |
| 2nd                2005 | 0.35                    | 0.02                   | 2,000,000 |
| 3rd                2005 | 0.90                    | 0.17                   | 3,250,000 |
| 4th                2005 | 0.80                    | 0.17                   | 2,100,000 |

***Page          - 3***

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**(b)      Holders. **

**(c)      Dividends. **

**(d)      Sales of Unregistered Common Stock 2004.**

**ITEM      6. Management's Discussion and Analysis or Plan of      Operation.**

**(a)      Plan of Operation. **

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**Cash      Requirements and of Need for additional funds: twelve      months**

**Cautionary      Statement:**

**Marketing      Rights and Commitments**

**(c)      Discussion and Analysis of Financial Condition and Results of Operations.**

**Cautionary      Statement Repeated:**

***Page          - 5***

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**ITEM      7. Financial Statements.**

**(a)      Audit Committee. **

**(b)      Financial Statements. **

**ITEM      8. Changes In and Disagreements With Accountants on **

**Accounting      and Financial Disclosure.**

**PART      III**

**ITEM      9. Directors and Executive Officers, Promoters and Control      Persons.**

**ITEM      10. Executive Compensation.**

***Page          - 6***

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**ITEM      11. Security Ownership of Certain Beneficial Owners and      Management.**

|                                                                                                                       | shares           | %           |
|----------------------------------------------------------------------------------------------------------------------------|------------------|-------------|
| Dan                Sifford Director668                North Coast Highway #261Laguna                Beach CA 92651         |  2,050,000  |  3.97  |
| All                Officers and Directors as a group                                                                       | 2,050,000        | 3.97        |
| Gabriela                SameniegoAve                Ricardo J. Alfaro, Sun Tower Mall 59Panama                City, Panama |  23,000,000 |  44.55 |
| Other                Affiliates                                                                                            | 23,000,000       | 44.55       |
| All                Affiliates                                                                                              | 25,050,000       | 48.52       |
| Total                Issued and Outstanding                                                                                | 51,625,892       | 100.00      |
| (Less                all affiliates)                                                                                       | (25,050,000)     | (48.52)     |
| Indicated                Non-Affiliate Total                                                                               | 26,575,892       | 51.48       |

**Change      of Control. **

**ITEM      12. Controls and Procedures.**

**Evaluation      of Disclosure Controls and Procedures.**

**Changes      in Internal Accounting.**

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**ITEM      13. Attachments, Financial Statements, Exhibits, and Reports on Form      8-K.**

**Signatures**

*Pursuant      to the requirements*

**Diatom      Inc.**

| /s/Russ                George                |   | /s/Toby                Thatcher                |   | /s/J.                Dan Sifford  |
|----------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------|
| Russ                GeorgePresident/Director |   | Toby                ThatcherSecretary/Director |   | J.                Dan SiffordDirector  |

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**Exhibit      31**

**Section      302 Certifications**

***Page          - 9***

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**CERTIFICATIONS      PURSUANT TO SECTION 302**

|   | I,                Russ                George,                president/director, certify that: |
|--------|------------------------------------------------------------------------------------------------|

|  1.                    | Based                  on my knowledge, this annual report does not contain any untrue                  statement                  of a material fact or omit to state a material fact necessary to                  make the                  statements made, in light of the circumstances under which such                  statements                  were made, not misleading with respect to the period covered by                  this                  annual report; |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  2.                    | Based                  on my knowledge, the financial statements, and other financial                  information                  included in this annual report, fairly present in all material                  respects                  the financial condition, results of operations and cash flows of                  the                  Registrant as of, and for, the periods presented in this annual                  report; |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  5.                    | The                  registrant’s other certifying officer and I have indicated in this annual                  report whether or not there were significant changes in internal                  controls                  or in other factors that could significantly affect internal controls                  subsequent to the date of our most recent evaluation, including                  any                  corrective actions with regard to significant deficiencies and                  material                  weaknesses. |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Dated:                April 20, 2006 |
|--------|--------------------------------------|

| /s/Russ                George           |
|----------------------------------------------|
| Russ                GeorgePresident/Director |

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**CERTIFICATIONS      PURSUANT TO SECTION 302**

|   |   | I,                Toby                Thatcher,                secretary/director, certify that: |
|--------|--------|--------------------------------------------------------------------------------------------------|

|  1.                    | Based                  on my knowledge, this annual report does not contain any untrue                  statement                  of a material fact or omit to state a material fact necessary to                  make the                  statements made, in light of the circumstances under which such                  statements                  were made, not misleading with respect to the period covered by                  this                  annual report; |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  2.                    | Based                  on my knowledge, the financial statements, and other financial                  information                  included in this annual report, fairly present in all material                  respects                  the financial condition, results of operations and cash flows of                  the                  Registrant as of, and for, the periods presented in this annual                  report; |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  5.                    | The                  registrant’s other certifying officer and I have indicated in this annual                  report whether or not there were significant changes in internal                  controls                  or in other factors that could significantly affect internal controls                  subsequent to the date of our most recent evaluation, including                  any                  corrective actions with regard to significant deficiencies and                  material                  weaknesses. |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Dated:                April 20, 2006 |
|--------|--------------------------------------|

| /s/Toby                Thatcher           |
|------------------------------------------------|
| Toby                ThatcherSecretary/Director |

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**CERTIFICATIONS      PURSUANT TO SECTION 302**

|   |   | I,                J.                Dan Sifford,                director, certify that: |
|--------|--------|-----------------------------------------------------------------------------------------|

|  1.                    | Based                  on my knowledge, this annual report does not contain any untrue                  statement                  of a material fact or omit to state a material fact necessary to                  make the                  statements made, in light of the circumstances under which such                  statements                  were made, not misleading with respect to the period covered by                  this                  annual report; |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  2.                    | Based                  on my knowledge, the financial statements, and other financial                  information                  included in this annual report, fairly present in all material                  respects                  the financial condition, results of operations and cash flows of                  the                  Registrant as of, and for, the periods presented in this annual                  report; |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  5.                    |  The                  registrant’s other certifying officer and I have indicated in this annual                  report whether or not there were significant changes in internal                  controls                  or in other factors that could significantly affect internal controls                  subsequent to the date of our most recent evaluation, including                  any                  corrective actions with regard to significant deficiencies and                  material                  weaknesses.  |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Dated:                April 20, 2006 |
|--------|--------------------------------------|

| /s/J.                Dan Sifford      |
|---------------------------------------|
| J.                Dan SiffordDirector |

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**Exhibit      32**

**CERTIFICATION      PURSUANT TO 18 USC SECTION 1350**

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**CERTIFICATION      PURSUANT TO 18 U.S.C. SECTION 1350,**

**AS      ADOPTED PURSUANT TO SECTION 906 OF THE **

**SARBANES-OXLEY      ACT OF 2002**

*Diatom      Corporation*

| /s/Russ                George                |   | /s/Toby                Thatcher           |   | /s/J.                Dan Sifford  |
|----------------------------------------------|--------|------------------------------------------------|--------|----------------------------------------|
| Russ                GeorgePresident/Director |   | Toby                ThatcherSecretary/Director |   | J.                Dan SiffordDirector  |

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**Attachment      AC-99.1**

**Audit      Committe Report**

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| /s/Russ                  George                |   | /s/Toby                  Thatcher           |   | /s/J.                  Dan Sifford  |
|------------------------------------------------|--------|--------------------------------------------------|--------|------------------------------------------|
| Russ                  GeorgePresident/Director |   | Toby                  ThatcherSecretary/Director |   | J.                  Dan SiffordDirector  |

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**Attachment      AFK-05**

**Audited      Financial Statements**

**of**

**Diatom      Corporation**

**for      the years ended**

**December      31, 2005, 2004**

**and      from inception**

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**C        O N T E N T S**

Independent        Auditors’        Report

Consolidated        Balance Sheet

Consolidated        Statements of Operations

Consolidated        Statements of Stockholders’        Equity

Consolidated        Statements of Cash Flows

Notes        to        the Consolidated Financial Statements

***Page            - 18***

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REPORT        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING        FIRM

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**DIATOM        CORPORATION**

Balance        Sheets

| ASSETS                                                                        |   |   |                                |   |   |                          |   |
|-------------------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|-------------------------------|--------|
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   | December                  31,  |   |   | December                  31, |   |
|                                                                          |   |   | 2005                                |   |   | 2004                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| CURRENT                  ASSETS                                               |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| Cash                  and cash equivalents                               |   | $      | 34,768                              |   | $      | -                             |   |
|                                                                          |   |   |                                |   |   |                          |   |
|  Total                  Current Assets                                   |   |   | 34,768                              |   |   | -                             |   |
|                                                                          |   |   |                                |   |   |                          |   |
| OTHER                  ASSETS                                                 |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| Marketing                  rights                                        |   |   | 250,000                             |   |   | -                             |   |
|                                                                          |   |   |                                |   |   |                          |   |
|  Total                  Other Assets                                     |   |   | 250,000                             |   |   | -                             |   |
|                                                                          |   |   |                                |   |   |                          |   |
|  TOTAL                  ASSETS                                           |   | $      | 284,768                             |   | $      | -                             |   |
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| LIABILITIES                  AND STOCKHOLDERS' EQUITY                         |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| CURRENT                  LIABILITIES                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| Accounts                  payable                                        |   | $      | 245                                 |   | $      | 395                           |   |
| Accounts                  payable - related parties (Note 4)             |   |   | 99,541                              |   |   | 125,345                       |   |
| Notes                  payable - related parties (Note 4)                |   |   | -                                   |   |   | 160,154                       |   |
|                                                                          |   |   |                                |   |   |                          |   |
|  Total                  Current Liabilities                              |   |   | 99,786                              |   |   | 285,894                       |   |
|                                                                          |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| STOCKHOLDERS'                  EQUITY                                         |   |   |                                |   |   |                          |   |
|                                                                          |   |   |                                |   |   |                          |   |
| Common                  stock, authorized 1,000,000,000 shares           |   |   |                                |   |   |                          |   |
| of                  $.001 par value, issued and outstanding 51,625,892   |   |   |                                |   |   |                          |   |
| and                  44,751,685 shares respectively                      |   |   | 51,626                              |   |   | 44,752                        |   |
| Additional                  paid-in capital                              |   |   | 3,418,961                           |   |   | 1,598,378                     |   |
| Deficit                  accumulated during the development stage        |   |   | (3,285,605                          | )      |   | (1,929,024                    | )      |
|                                                                          |   |   |                                |   |   |                          |   |
|  Total                  Stockholders' Equity                             |   |   | 184,982                             |   |   | (285,894                      | )      |
|                                                                          |   |   |                                |   |   |                          |   |
|  TOTAL                  LIABILITIES AND STOCKHOLDERS'                    |   |   |                                |   |   |                          |   |
|  EQUITY                                                                  |   | $      | 284,768                             |   | $      | -                             |   |
|                                                                          |   |   |                                |   |   |                          |   |

***Page          - 20***

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**DIATOM      CORPORATION**

Statements        of Operations

|                                                |   |   | For                  the Years Ended   |   |   | Cumulative                  Deficit |   |
|-----------------------------------------------------|--------|--------|--------------------------------------------------|--------|--------|-------------------------------------|--------|
|                                                |   |   | December                  31,          |   |   | During                  Devel-      |   |
|                                                |   |   | 2005                                             |   |   | 2004                                |   |   | opment                  State |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| REVENUES                                            |   | $      | -                                                |   | $      | -                                   |   | $ | - |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| OPERATING                  EXPENSES                 |   |   |                                             |   |   |                                |   |   |   |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| General                  and administrative    |   |   | 1,356,581                                        |   |   | 54,079                              |   |   | 3,282,746 |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
|  Total                  Operating Expenses     |   |   | 1,356,581                                        |   |   | 54,079                              |   |   | 3,282,746 |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| LOSS                  FROM OPERATIONS               |   |   | (1,356,581                                       | )      |   | (54,079                             | )      |   | (3,282,746 | ) |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| OTHER                  INCOME (EXPENSE)             |   |   |                                             |   |   |                                |   |   |   |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| Loss                  on sale of securities    |   |   | -                                                |   |   | -                                   |   |   | (12,108 | ) |
| Gain                  on settlement of debt    |   |   | -                                                |   |   | -                                   |   |   | 9,249 |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
|  Total                  Other Income (Expense) |   |   | -                                                |   |   | -                                   |   |   | (2,859 | ) |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| NET                  LOSS BEFORE INCOME TAX         |   | $      | (1,356,581                                       | )      | $      | (54,079                             | )      | $ | (3,285,605 | ) |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| INCOME                  TAX EXPENSE                 |   | $      | -                                                |   | $      | -                                   |   | $ | - |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| NET                  LOSS                           |   | $      | (1,356,581                                       | )      | $      | (54,079                             | )      | $ | (3,285,605 | ) |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| NET                  LOSS PER SHARE                 |   | $      | (0.03                                            | )      | $      | (0.00                               | )      | $ | (0.16 | ) |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |
| WEIGHTED                  AVERAGE NUMBER OF         |   |   |                                             |   |   |                                |   |   |   |   |
| COMMON                  SHARES OUTSTANDING          |   |   | 48,598,066                                       |   |   | 44,751,686                          |   |   | 20,690,453 |   |
|                                                |   |   |                                             |   |   |                                |   |   |   |   |

***Page          - 21***

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**DIATOM        CORPORATION**

Statement        of Stockholders' Equity 

|                                                     |   |   |                                      |   |   |       |   |        |          | Deficit                     |   |
|----------------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|------------|--------|-------------|---------------|-----------------------------|--------|
|                                                     |   |   |                                      |   |   |       |   |        |          | Accumulated                 |   |
|                                                     |   |   |                                      |   |   | Additional |   | Accumulated |          | During                  the |   |
|                                                     |   |   | Common                  Stock   |   |   | Paid-in    |   |        | Comprehensive |                        |   | Development |   |
|                                                     |   |   | Shares                          |   |   | Amount     |   |        | Capital       |                        |   | Income/(Loss) |   |   | Stage |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock, issued at inception       |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| for                  cash at $100 per share              |   |   | 200                                       |   | $      | -          |   | $           | 20,000        |                        | $      | - |   | $ | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Net                  loss for the period ended           |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| December                  31, 1998                       |   |   | -                                         |   |   | -          |   |        | -             |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Balance,                  December 31, 1998              |   |   | 200                                       |   |   | -          |   |        | 20,000        |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock, issued for cash           |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| at                  $251 per share                       |   |   | 67                                        |   |   | -          |   |        | 16,800        |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock, issued for cash           |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| at                  $2,000 per share                     |   |   | 1                                         |   |   | -          |   |        | 2,000         |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Net                  loss for the year ended             |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| December                  31, 1999                       |   |   | -                                         |   |   | -          |   |        | -             |                        |   | - |   |   | (36,360 | ) |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Balance,                  December 31, 1999              |   |   | 268                                       |   |   | -          |   |        | 38,800        |                        |   | - |   |   | (36,360 | ) |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Net                  change in unrealized gains/(losses) |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| on                  available for sale securities        |   |   | -                                         |   |   | -          |   |        | -             |                        |   | (12,185 | ) |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Net                  loss for the year ended             |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| December                  31, 2000                       |   |   | -                                         |   |   | -          |   |        | -             |                        |   | - |   |   | (37,792 | ) |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Balance,                  December 31, 2000              |   |   | 268                                       |   | $      | -          |   | $           | 38,800        |                        | $      | (12,185 | ) | $ | (74,152 | ) |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock issues for services        |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| at                  $25 per share                        |   |   | 3,000                                     |   |   | 3          |   |        | 74,997        |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock issues for services to     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| a                  related party at $10 per share        |   |   | 50,000                                    |   |   | 50         |   |        | 49,950        |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock issues for services to     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| at                  $20 per share                        |   |   | 7,000                                     |   |   | 7          |   |        | 174,993       |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock issues for services to     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| at                  $20 per share                        |   |   | 10,000                                    |   |   | 10         |   |        | 199,990       |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Share                  issued in round-up                |   |   | 3                                         |   |   | -          |   |        | -             |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Common                  stock issues for services to     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| a                  related party at $0.01 per share      |   |   | 2,000,000                                 |   |   | 2,000      |   |        | 18,000        |                        |   |   |   |   |   |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Rounding                  of shares                      |   |   | 99                                        |   |   | -          |   |        | -             |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Forgiveness                  of debt                     |   |   | -                                         |   |   | -          |   |        | 43,085        |                        |   | - |   |   | - |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Net                  change in unrealized gains/(losses) |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| on                  available for sale securities        |   |   | -                                         |   |   | -          |   |        | -             |                        |   | 12,185 |   |   |   |   |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Net                  loss for the year ended             |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| December                  31, 2001                       |   |   | -                                         |   |   | -          |   |        | -             |                        |   | - |   |   | (588,198 | ) |
|                                                     |   |   |                                      |   |   |       |   |        |          |                        |   |   |   |   |   |   |
| Balance,                  December 31, 2001              |   |   | 2,070,370                                 |   |   | 2,070      |   |        | 599,815       |                        |   | - |   |   | (662,350 | ) |

***Page            - 22***

----

**DIATOM          CORPORATION**

|                                                   |   |   |                                |   |   |    |   |   |                   | Deficit     |   |
|--------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|---------|--------|--------|------------------------|-------------|--------|
|                                                   |   |   |                                |   |   |    |   |   |                   | Accumulated |   |
|                                                   |   |   |                                |   |   |    |   |   | Additional   |        |   | Accumulated |   |   | During                  the |   |
|                                                   |   |   | Common                  Stock  |   |   | Paid-in |   |   | Comprehensive          |        |   | Development |   |
|                                                   |   |   | Shares                    |   |   | Amount  |   |   | Capital                |        |   | Income/(Loss | ) |   | Stage |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Balance,                  December 31, 2001            |   |   | 2,070,370                           |   |   | 2,070   |   |   | 599,815                |        |   | - |   |   | (662,350 | ) |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Shares                  returned to treasury           |   |   | (5,000                              | )      |   | (5      | )      |   | 5                      |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Issuance                  of common stock for services |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| at                  $0.25 per share                    |   |   | 500,000                             |   |   | 500     |   |   | 124,500                |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Issuance                  of common stock for debt     |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| at                  $0.20 per share                    |   |   | 400,000                             |   |   | 400     |   |   | 79,600                 |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Issuance                  of stock in round-up         |   |   | 15,166                              |   |   | 15      |   |   | (15                    | )           |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Issuance                  of common stock for services |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| at                  $0.02 per share                    |   |   | 20,000,000                          |   |   | 20,000  |   |   | 380,000                |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Issuance                  of common stock for services |   |   | 1,800,000                           |   |   | 1,800   |   |   | 34,200                 |        |   | - |   |   | - |   |
| at                  $0.02 per share                    |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Net                  loss for the period ended         |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| December                  31, 2002                     |   |   | -                                   |   |   | -       |   |   | -                      |        |   | - |   |   | (749,558 | ) |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Balance,                  December 31, 2002            |   |   | 24,780,536                          |   |   | 24,780  |   |   | 1,218,105              |        |   | - |   |   | (1,411,908 | ) |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Issuance                  of common stock for services |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| at                  $0.02 per share                    |   |   | 20,000,000                          |   |   | 20,000  |   |   | 380,000                |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Rounding                  due to stock split           |   |   | 149                                 |   |   | -       |   |   | -                      |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Cancellation                  of common shares         |   |   | (29,000                             | )      |   | (29     | )      |   | 29                     |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Net                  loss for the period ended         |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| December                  31, 2003                     |   |   | -                                   |   |   | -       |   |   | -                      |        |   | - |   |   | (463,037 | ) |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Balance,                  December 31, 2003            |   |   | 44,751,685                          |   |   | 44,751  |   |   | 1,598,134              |        |   | - |   |   | (1,874,945 | ) |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Rounding                  due to Madison adjustment    |   |   | -                                   |   |   | 1       |   |   | 243                    |        |   | - |   |   | - |   |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Net                  loss for the period ended         |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| December                  31, 2004                     |   |   | -                                   |   |   | -       |   |   | -                      |        |   | - |   |   | (54,079 | ) |
|                                                   |   |   |                                |   |   |    |   |   |                   |        |   |   |   |   |   |   |
| Balance,                  December 31, 2004            |   |   | 44,751,685                          |   |   | 44,752  |   |   | 1,598,377              |        |   | - |   |   | (1,929,024 | ) |

***Page            - 23***

----

**DIATOM          CORPORATION**

|                                                            |   |    |                                      |    |   |    |   |    |                   | Deficit    |   |
|-----------------------------------------------------------------|--------|--------------|-------------------------------------------|--------------|--------|--------------|--------|--------------|------------------------|---------------------------|--------|
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   | Accumulated   |   |
|                                                            |   |         |                                      |         |   |         |   |         | Additional   |                      |   | Accumulated |   |   | During                  the |   |
|                                                            |   |         | Common                  Stock   |         |   | Paid-in      |   |         | Comprehensive          |                      |   | Development |   |
|                                                            |   |         | Shares                               |         |   | Amount       |   |         | Capital                |                      |   | Income/(Loss) |   |   | Stage |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Balance,                  December 31, 2004                     |   |         | 44,751,685                                |         |   | 44,752       |   |         | 1,598,377              |                      |   | - |   |   | (1,929,024 | ) |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 4,750,000                                 |         |   | 4,750        |   |         | 85,500                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 4,750,000                                 |         |   | 4,750        |   |         | 85,500                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 3,814,382                                 |         |   | 3,814        |   |         | 68,659                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 750,000                                   |         |   | 750          |   |         | 13,500                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 4,750,000                                 |         |   | 4,750        |   |         | 85,500                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 1,465,207                                 |         |   | 1,465        |   |         | 26,374                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 2,194,618                                 |         |   | 2,195        |   |         | 39,503                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of common stock for debt              |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $.01 per share                              |   |         | 30,000,000                                |         |   | 30,000       |   |         | 540,000                |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Common                  stock issued for cash at $0.2 per share |   |         | 400,000                                   |         |   | 400          |   |         | 79,600                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Common                  stock, issued for cash                  |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| at                  $0.25 per share                             |   |         | 1,000,000                                 |         |   | 1,000        |   |         | 249,000                |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Cancellation                  of common shares                  |   |         | (47,000,000                               | )            |   | (47,000      | )      |         | 47,000                 |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Issuance                  of warrants                           |   |         | -                                         |         |   | -            |   |         | 500,347                |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Captital                  contribution by shareholders          |   |         | -                                         |         |   | -            |   |         | 100                    |                      |   | - |   |   | - |   |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Net                  loss for the period ended                  |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| December                  31, 2005                              |   |         | -                                         |         |   | -            |   |         | -                      |                      |   | - |   |   | (1,356,581 | ) |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |
| Balance,                  December 31, 2005                     |   |         | 51,625,892                                |         |   | 51,626       |   |         | 3,418,960              |                      |   | - |   |   | (3,285,605 | ) |
|                                                            |   |         |                                      |         |   |         |   |         |                   |                      |   |   |   |   |   |   |

***Page          - 24***

----

**DIATOM        CORPORATION**

Statements        of Cash Flows

|                                                                         |   |   | For                  the Years Ended  |   |   | Cumulative                     |    |
|------------------------------------------------------------------------------|--------|--------|--------------------------------------------|--------|--------|--------------------------------|---------|
|                                                                         |   |   | December                  31,         |   |   | During                  Devel- |    |
|                                                                         |   |   | 2005                                       |   |   |                           | 2004    |   |   | opment                  State |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                       |   |   |                                       |   |   |                           |    |   |   |   |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| Net                  loss                                                    |   | $      | (1,356,581                                 | )      |   | $                              | (54,079 | ) | $ | (3,285,605 | ) |
| Adjustments                  to reconcile net loss to net cash               |   |   |                                       |   |   |                           |    |   |   |   |   |
| (used)                  in operating activities:                             |   |   |                                       |   |   |                           |    |   |   |   |   |
| Stock                  issued for services                              |   |   | -                                          |   |   |                           | -       |   |   | 1,481,000 |   |
| Warrant                  expense                                        |   |   | 500,347                                    |   |   |                           | -       |   |   | 500,347 |   |
| Loss                  on sale of securities                             |   |   | -                                          |   |   |                           | -       |   |   | 12,108 |   |
| Gain                  on settlement of notes receivable                 |   |   | -                                          |   |   |                           | -       |   |   | (9,249 | ) |
| Increase                  (decrease) in accounts payable                |   |   | (150                                       | )      |   |                           | -       |   |   | 95 |   |
| Increase                  (decrease) in accounts payable related party  |   |   | (25,804                                    | )      |   |                           | 54,079  |   |   | 179,936 |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
|  Net                  Cash (Used in) Operating Activities               |   |   | (882,188                                   | )      |   |                           | -       |   |   | (1,121,368 | ) |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  FLOWS FROM INVESTING ACTIVITIES:                       |   |   |                                       |   |   |                           |    |   |   |   |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| Proceeds                  from sale of securities                       |   |   | -                                          |   |   |                           | -       |   |   | 492 |   |
| Purchase                  of marketing rights                           |   |   | (250,000                                   | )      |   |                           | -       |   |   | (250,000 | ) |
| Payment                  on notes receivable                            |   |   | -                                          |   |   |                           | -       |   |   | (3,351 | ) |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
|  Net                  Cash (Used in) Investing Activities               |   |   | (250,000                                   | )      |   |                           | -       |   |   | (252,859 | ) |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  FLOWS FROM FINANCING ACTIVITIES:                       |   |   |                                       |   |   |                           |    |   |   |   |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| Capital                  contributions                                  |   |   | 100                                        |   |   |                           | -       |   |   | 1,500 |   |
| Issued                  common stock for cash                           |   |   | 330,000                                    |   |   |                           | -       |   |   | 367,800 |   |
| Proceeds                  from officer                                  |   |   | -                                          |   |   |                           | -       |   |   | 201,839 |   |
| Proceeds                  from notes payable - related party            |   |   | 836,856                                    |   |   |                           |    |   |   | 836,856 |   |
| Proceeds                  from subscription receivable                  |   |   | -                                          |   |   |                           | -       |   |   | 1,000 |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
|  Net                  Cash Provided by Financing Activities             |   |   | 1,166,956                                  |   |   |                           | -       |   |   | 1,408,995 |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| NET                  INCREASE (DECREASE) IN CASH AND                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  EQUIVALENTS                                            |   |   | 34,768                                     |   |   |                           | -       |   |   | 34,768 |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS AT BEG OF YEAR                    |   |   | -                                          |   |   |                           | -       |   |   | - |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  AND CASH EQUIVALENTS AT END OF YEAR                    |   | $      | 34,768                                     |   |   | $                              | -       |   | $ | 34,768 |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| SUPPLIMENTAL                  CASH FLOW INFORMATION                          |   |   |                                       |   |   |                           |    |   |   |   |   |
|                                                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
| CASH                  PAID FOR:                                         |   |   |                                       |   |   |                           |    |   |   |   |   |
|  Interest                                                               |   | $      | -                                          |   |   | $                              | -       |   | $ | - |   |
|  Income                  taxes                                          |   | $      | -                                          |   |   | $                              | -       |   | $ | - |   |

***Page            - 25***

----

**DIATOM CORPORATION**

**Statements              of Cash Flows**

**NON-CASH                  FINANCING AND INVESTING TRANSACTIONS:**

***Page          - 26***

----

**DIATOM        CORPORATION**

**Notes        to the Financial Statements**

----

|                                                  |   |                                         |       |                                  |   |  From                            |   |
|-------------------------------------------------------|--------|----------------------------------------------|------------|---------------------------------------|--------|---------------------------------------|--------|
|                                                  |   |                                         |       |                                  |   |  Inception                    on |   |
|                                                  |   |                                         |       |                                  |   |  December                    10, |   |
|                                                  |   |  For                    the Years Ended |       |  1998                    Through |   |
|                                                  |   |  December                    31,        |       |  December                    31, |   |
|                                                  |   |  2005                                   |       |  2004                            |   |  2005                            |   |
|                                                  |   |                                         |       |                                  |   |                                  |   |
|  Numerator                  - loss               |   | $                                            | (1,356,186 | )                                     | $      | (54,079                               | )      | $ | (3,285,604 | ) |
|                                                  |   |                                         |       |                                  |   |                                  |   |   |   |   |
|  Denominator                  - weighted average |   |                                         |       |                                  |   |                                  |   |   |   |   |
|  of                  shares outstanding          |   |                                         | 48,598,066 |                                  |   | 44,751,686                            |   |   | 20,690,453 |   |
|                                                  |   |                                         |       |                                  |   |                                  |   |   |   |   |
|  Loss                  per share                 |   | $                                            | (0.03      | )                                     | $      | (0.00                                 | )      | $ | (0.16 | ) |
|                                                  |   |                                         |       |                                  |   |                                  |   |   |   |   |

***Page            - 27***

----

**DIATOM          CORPORATION**

----

|                                     |   |   | December                  31,  |   |
|------------------------------------------|--------|--------|-------------------------------------|--------|
|                                     |   |   | 2005                                |   |   | 2004 |   |
|                                     |   |   |                                |   |   |   |   |
|  Deferred                tax asset: |   |   |                                |   |   |   |   |
|  NOL                carryforward    |   | $      | 1,117,105                           |   | $ | 655,868 |   |
|                                     |   |   |                                |   |   |   |   |
|  Valuation                allowance |   |   | (1,117,105                          | )      |   | (655,868 | ) |
|                                     |   |   |                                |   |   |   |   |
|  Total                              |   | $      | -                                   |   | $ | - |   |
|                                     |   |   |                                |   |   |   |   |

----

***Page            - 28***

----

**DIATOM          CORPORATION**

----

----

| NOTE                  5 - | Equity |
|---------------------------|--------|

----

***Page            - 29***

----

**DIATOM          CORPORATION**

| NOTE                  5 - | Equity                  (Continued) |
|---------------------------|-------------------------------------|

----

| NOTE                  6 - | Marketing                  Rights & Commitments |
|---------------------------|-----------------------------------------------------|

----

***Page            - 30***

----

**DIATOM          CORPORATION**

| NOTE                    6 - | Marketing                    Rights & Commitments                    (Continued) |
|-----------------------------|--------------------------------------------------------------------------------------|

----

***Page            - 31***

----