**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **WASHINGTON** **,
        D.C. 20549**
 
 **FORM
        10-KSB**
 
 **ANNUAL
        REPORT PURSUANT TO SECTION 13 OR** **15 (** **d)** ****
 **OF
        THE SECURITIES EXCHANGE ACT OF 1934**
 
 **For
        the Fiscal Year Ended November 30, 2007**
 
 **Commission
        File No. 000-25277**
 
 **HERBORIUM
        GROUP** **,
        INC** **.**
 (Name
        of
        small business issuer in its charter)
 
 **NEVADA**
              
              **88-0353141**(State
                  or other jurisdiction of
              
              (I.R.S.
                  employerincorporation
                  or organization)
              
              identification
                  number)
 
 **Park
        80W Plaza II, Suite 200, Saddle Brook, NJ 07663**
 (Address
        of principal executive office)
 
 **(201)
        291-2602**
 (Registrant’s
        telephone number)
 
 Securities
        registered under Section 12(b) of the Act:
 
 None
 
 Securities
        registered under Section 12(g) of the Act:
 
 Common
        Stock, $.001Par Value, 500,000,000 shares authorized
 
 Check
        whether the issuer is not required to file reports pursuant to Section 13
        or
        15(d) of the Exchange Act. o
  Check
        whether the issuer (1) has filed all reports required to be filed by Section
        13
        or 15(d) of the Securities Exchange Act of 1934 during the past 12 months
        (or
        for such shorter period that the registrant was required to file such reports),
        and (2) has been subject to such filing requirements for the past 90 days.
        Yes
x No
o
  Check
        if
        there is no disclosure of delinquent filers pursuant 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. o
  Indicate
        by check mark whether the registrant is a shell company (as defined in rule
        12b-2 of the Exchange Act). Yes o No
x
  The
        issuer's revenue for fiscal year ended November 30, 2007 was
        $761,844.
  The
        aggregate market value as of February 22, 2008 of the voting common equity
        held
        by non-affiliates is $1,528,000.
  **ISSUERS
        INVOLVED IN BANKRUPTCY**
 PROCEEDING
          DURING THE PAST FIVE YEARS
 Check
        whether the issuer has filed all documents and reports required to be filed
        by
        Section 12, 13 or 15(d) of the Securities Exchange Act after the distribution
        of
        securities under a plan confirmed by a court. Yes o No
o
 
 **APPLICABLE
        ONLY TO CORPORATE REGISTRANTS**
 
 As
        of
        February 22, 2008, there were 119,067,080 shares of the Company’s $.001 par
        value common stock issued and outstanding.
  **DOCUMENTS
        INCORPORATED BY REFERENCE**
  None
  Transitional
        Small Business Disclosure Format (check one): Yes o No
x
  
  
  **HERBORIUM
        GROUP, INC.**
 **FORM** **10-KSB**
 
 **TABLE
        OF CONTENTS**
 
 **P****AGE****P****ART****I**ITEM1.
              
              Description
                  of Business
              
              1-8ITEM2.
              
              Description
                  of Property
              
              8ITEM3.
              
              Legal
                  Proceedings
              
              8ITEM4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              8**P****ART****II**ITEM5.
              
              Market
                  for Common Equity, Related Stockholder Matters and SmallBusiness
                  Issuer Purchases of Equity Securities
              
              9ITEM6.
              
              Management's
                  Discussion and Analysis or Plan of Operation
              
              10-21ITEM7.
              
              Financial
                  Statements
              
              21ITEM8.
              
              Changes
                  In and Disagreements with Accountants on Accounting andFinancial
                  Disclosure
              
              21-22ITEM8A.
              
              Controls
                  and Procedures
              
              22ITEM8B.
              
              Other
                  Information
              
              22**P****ART****III**ITEM9.
              
              Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance with Section 16(a) of the Exchange Act
              
              23-25ITEM10.
              
              Executive
                  Compensation
              
              25-27ITEM11.
              
              Security
                  Ownership of Certain Beneficial Owners and Managementand
                  Related Stockholder Matters
              
              27-28ITEM12.
              
              Certain
                  Relationships and Related Transactions, and Director
                  Independence
              
              29ITEM13.
              
              Exhibits
              
              29-30ITEM14.
              
              Principal
                  Accountant Fees and Services
              
              30-32HERBORIUM
                  GROUP, INC. CONSOLIDATED FINANCIAL STATEMENTS AS OF NOVEMBER 30,
                  2007AND2006
              
              F-1-F-14
 
 
  As
        used
        herein, the terms the “Company,” “Herborium,” “we,” “us,” or “our” refer to
        Herborium Group, Inc., a Nevada corporation.
  **Forward-Looking
        Statements**
  *Certain
        statements in the "Description of Business" (Item 1), "Management’s Discussion
        and Analysis or Plan of Operation" (Item 6) and elsewhere in this Annual
        Report
        on Form 10-KSB constitute "forward-looking statements" (within the meaning
        of
        the Private Securities Litigation Reform Act of 1995 (the "Act")) relating
        to us
        and our business, which represent our current expectations or beliefs including,
        but not limited to, statements concerning our operations, performance, financial
        condition and growth. The Act may, in certain circumstances, limit our liability
        in any lawsuit based on forward-looking statements we have made. All statements,
        other than statements of historical facts, included in this Annual Report
        on
        Form 10-KSB that address activities, events or developments that we expect
        or
        anticipate will or may occur in the future, including such matters as our
        projections, future capital expenditures, business strategy, competitive
        strengths, goals, expansion, market and industry developments and the growth
        of
        our businesses and operations are forward looking statements. Without limiting
        the generality of the foregoing, words such as "may,” "anticipation,” "intend,”
"could,” "estimate,” or "continue" or the negative or other comparable
        terminologies are intended to identify forward-looking statements. These
        statements by their nature involve substantial risks and uncertainties, such
        as
        credit losses, dependence on management and key personnel, variability of
        quarterly results, our ability to continue our growth strategy and competition,
        certain of which are beyond our control. Any or all of our forward-looking
        statements may turn out to be wrong. They may be affected by inaccurate
        assumptions that we might make or by known or unknown risks or uncertainties.
        Should one or more of these risks or uncertainties materialize or should
        the
        underlying assumptions prove incorrect, actual outcomes and results could
        differ
        materially from those indicated in the forward-looking
        statements.*
  *Additional
        factors that could affect future results are set forth throughout the
        "Description of Business" (Item 1) section, including the subsection entitled
        "Risks Related to Our Business," and elsewhere in this Annual Report on Form
        10-KSB. Because of the risks and uncertainties associated with forward-looking
        statements, you should not place undue reliance on them. Further, any
        forward-looking statement speaks only as of the date on which it is made,
        and we
        undertake no obligation to update any forward-looking statement to reflect
        events or circumstances after the date on which the statement is made or
        to
        reflect the occurrence of unanticipated events.*
  
 **PART
        I**
  **ITEM
        1. DESCRIPTION OF BUSINESS**
  Herborium,
        Inc. was incorporated in the State of Delaware in November 2000 and has one
        wholly owned, but dormant subsidiary, Herborium.com Inc., a Delaware
        corporation. In June 2002, Herborium, Inc. merged with G.O. International,
        Inc.,
        a consulting firm specializing in business strategies for pharmaceutical
        industry and global technology transfer that was founded by Drs. Olszewski
        and
        Gilligan. Drs. Olszewski and Gilligan also own a dormant UK entity, Herborium
        UK, LLC. Herborium has engaged in research, development and marketing of
        botanical supplements since its inception, and prior to the merger, funded
        its
        operations by equity investments and direct and indirect loans from its
        founders, Drs. Olszewski and Gilligan, of approximately $401,000, funding
        from
        friends and family of approximately $274,500, lines of credit, credit card
        borrowings and cash generated by gross profit from sales.
 
 Herborium
        was historically a privately held company, owned primarily by Drs. Olszewski
        and
        Gilligan. In September 2006, Herborium completed a reverse merger with the
        publicly-owned Nevada corporation formerly named Pacific Magtron International
        Corp., now named Herborium Group, Inc. See “Company History” below for further
        details.
 
 ***General***
 
 We
        provide unique, natural and complementary healthcare related products to
        consumers and healthcare professionals seeking alternative answers to the
        management of healthcare issues not currently met by standard Western medicine.
        Our products are botanical supplements comprised of unique herbal
        formulations referred
        to as botanical therapeutics, that have a record of clinical efficacy and
        safety
        established in China; however, these products have not been evaluated according
        to standards of clinical efficacy and safety applicable to pharmaceutical
        products sold in the United States and other countries, and because these
        products are herbal-based, they are not recognized as pharmaceuticals by
        the
        Food and Drug Administration (the "FDA").
 
 Our
        business model is based on:
 
 ·
              owning
                  and/or marketing unique products with established clinical history
                  in
                  their country of origin, and
 
 ·
              a
                  proactive approach to meeting the regulatory changes and challenges
                  of the
                  new healthcare marketplace.
 
 ***Product
        Strategy***
 
 Our
        products address healthcare issues that many consumers do not believe are
        treated satisfactorily by conventional pharmaceuticals and, thus, satisfy
        niche
        market demands resulting from the gap between consumer’s healthcare issues and
        currently available treatment options. Our products are presently classified
        by
        the FDA as dietary supplements and are regulated by the Dietary Supplement
        Health and Education Act of 1994 ("DSHEA”).
 
 We
        seek
        to distinguish our Company from the marketers of traditional herbal supplements
        and vitamins, as well as those focused on traditional pharmaceuticals and
        "over-the-counter" drugs, by offering “bridge products,” which we define as
        Botanical Therapeutics® with a record of clinical efficacy and safety
        established in the country of origin. To date our initial products have been
        tested in China. Our business model takes advantage of the newly emerging
        opportunities afforded by changing FDA perspectives with respect to botanical
        supplements. The present regulatory environment now encourages the performance
        of clinical studies of botanical supplements. Through clinical testing, we
        expect to confirm the positive outcomes initially demonstrated in China that
        will enable us to make claims about the efficacy of our products. Successful
        completion of clinical studies would allow advertising claims of “clinically
        proven” greatly enhancing our advertising campaigns and facilitating marketing
        efforts. To pursue clinical studies with respect to our products, we have
        developed preliminary collaborative relationships with proactive medical
        institutions, such as Johns Hopkins University, New York University and Columbia
        Presbyterian Hospital in the U.S. and the Traditional Chinese Medicine Institute
        in Hong Kong. We will not be able to pursue any such clinical studies without
        adequate financing. While we have only recently received bridge financing
        aggregating $225,000, we presently do not have commitments or understandings
        to
        receive sufficient financing to accomplish our business plan, including clinical
        trials. We believe that if we are able to obtain sufficient financing to
        conduct
        such clinical studies in the U.S. we will have the opportunity to establish
        and
        maintain a differential advantage over our competitors through clinical
        validation and a proactive regulatory strategy.
  1
 
 We
        also
        believe that if we are able to obtain sufficient financing we can further
        enhance our differential advantage over our competitors by planning
        pharmaceutical grade quality control and quality assurance standards for
        our
        products.
  We
        believe that if we obtain sufficient financing to pursue our objectives,
        our
        company should be poised to take advantage of the accelerating domestic and
        global interest in botanical and alternative therapies. The U.S. Department
        of
        Health and Human Services, National Center for Health Statistics, estimates
        that
        the U.S. public spends between $36-$47 billion on “complementary and
        alternative” therapies (Complementary and Alternative Medicine Use Among Adults:
        United States, 2002 by Patricia M. Bames and Eve Powel-Griner; Advance Data
        No.
        343, May 27, 2004). A survey conducted by the National Center for Complementary
        and Alternative Medicine as a part of National Health Institute Surveys studies
        in 2002 reported that 49.8% of U.S. adults use various forms of alternative
        and
        complementary therapies, with 19% of adults using natural products including
        herbal medicines. In a recent national survey, 64% of doctors reported that
        they
        have recommended complementary therapies to their patients (New York, NY,
        September 7, 2005). Finally, during the closing weeks of the 105th Congress,
        Senator Tom Harkin, the ranking member of the U.S. Senate Appropriations
        Subcommittee, shared with his colleagues a report developed by the Institute
        for
        Alternative Futures. The document noted that at the present, complementary
        and
        alternative approaches to health and medicine are among the fastest growing
        aspects of health care, and that while in 1990, one-third of the U.S. population
        used some form of alternative approach to health care, by the year 2010 it
        is
        expected that at least two-thirds of the population will use some form of
        alternative health care approach.
 
 ***Products
        on the Market***
  Following
        is a description of our products. Applicable regulatory requirements are
        described below under the caption *Regulation* .
 
 *AcnEase®* ,
        which
        we license under an exclusive world-wide license, ** is
        currently the only product that we have on the market. *AcnEase®* is a
        traditional Chinese herbal remedy composed of a proprietary blend of all
        natural
        substances. We market *AcnEase®* for
        improving conditions typically associated with acne and rosacea. Based on
        Chinese herbal therapy, *AcnEase®* seeks to
        address the cause of skin-related problems. According to traditional Chinese
        medicine, the ingredients in *AcnEase®* decrease
        “heat” in the body which, practitioners of traditional Chinese medicine believe,
        affect bodily functions, resulting in, among other things, gastrointestinal
        discomfort and skin blemishes. In Western terms, the ingredients comprising
        AcnEase® appear to decrease sebaceous gland secretions. *AcnEase®* does not
        simply address the external symptoms, as do topical solutions and antibiotics. *AcnEase®* is taken
        in tablet form.
 
 *AcnEase®* is
        typically used by consumers suffering from acne and rosacea. Acne is a disease
        of the sebaceous hair follicles. The rapid growth of bacteria in combination
        with the accumulated sebum cause the follicle to enlarge and can result in
        a
        mild form of non-inflammatory acne, known as comedones. Acne may progress
        to
        inflammatory lesions that are red in color called papules, pustules and nodules.
        Nodules or cysts are the most advanced and severe form of acne. An estimated
        50
        million people (13 million adults) in the U.S. suffer from acne. Currently,
        the
        only FDA-approved drug to treat the causes of acne is accutane (isotretinoin).
        Accutane has many serious side effects, and physicians currently require
        that
        patients sign a consent form before prescribing this drug. People of all
        races
        and ages get acne. It is most common in adolescents and young adults. An
        estimated 80 percent of all people between the ages of 11 and 30 have acne
        outbreaks at some point. For most people, acne tends to go away by the time
        they
        reach their thirties; however, some people in their forties and fifties continue
        to have this skin problem (source: National Institute of Arthritis and
        Musculoskeletal and Skin Diseases http://www.niams.nih.gov/hi/topics/
        acne/acne.htm#acne_d). Many of the over-the-counter acne products are topical,
        including benzoyl peroxide, and only address the overt clinical manifestation
        of
        acne. Side effects of topical agents may include dry and flaky skin, irritation,
        and redness. Prescription pharmaceutical products include broad-spectrum
        antibiotics, which non-specifically kill bacteria associated with acne. Systemic
        antibiotics, such as tetracycline and minocycline, are the mainstays of acne
        therapy. The use of systemic antibiotics for the treatment of acne is in
        disfavor with many physicians due to the development of resistant strains
        of
        bacteria. For severe, persistent cases of acne, Retin-A cream (tretinoin)
        and
        Accutane are often recommended. Both products are retinoid derivatives, are
        costly and have a multitude of side effects. Accutane is a known potent
        teratogen and strictly contraindicated in women not practicing a proven method
        of birth control. Recent information has also indicated that Accutane may
        induce
        depression. As a result, the FDA recommends that special caution be used
        when
        prescribing this medication to teenagers and may even consider more severe
        restrictions.
  2
  Rosacea
        is characterized by facial flushing due to dilatation of blood vessels that
        occurs in middle-aged men and women. According to the National Rosacea Society,
        approximately 14 million adults in the United States suffer from rosacea
        (http://www.rosacea.org/). The cause of rosacea is unknown. It affects adults
        who are typically in their 30s and 40s, especially those with fair-skin,
        blue
        eyes and of Celtic origin
        (http://www.niams.nih.gov/hi/topics/rosacea/rosacea.htm#ros_b). The standard
        therapy for rosacea involves the use of a systemic oral antibiotic, such
        as
        tetracycline, minocycline and erythromycin, in combination with a topical
        antibiotic gel. Isotretinoins, also known under the brand names Accutane
        or
        Roaccutane, are sometimes considered alternatives to oral antibiotics,
        especially in cases of papopustular rosacea. In 1989, Metronidazole was the
        first topical treatment approved for the treatment of rosacea and is used
        to
        reduce rosacea flare-ups once the disease is brought under control. If rosacea
        progresses to a severe stage, dilated blood vessels that become distended
        under
        the surface of the skin, known as telangiectasis, appear. Treatment options
        for
        telangiectasis are limited to corrective surgery or mixed light pulse therapy,
        known as Photoderm, which directs a series of light pulse to the dermal layer
        of
        the skin stimulating collagen synthesis and resulting in a thickening of
        the
        skin and decreasing the visible signs of rosacea.
  Our
        product, *AcnEase®* ,
        is a
        unique herbal supplement which has been shown in studies conducted in China
        to
        improve skin conditions associated with juvenile acne and adult acne and
        rosacea. *AcnEase®* has no
        known side effects unlike antibiotics or retinoid derived products.
 
 Clinical
        trials of the efficacy of *AcnEase®* in
        patients with acne have been performed in China. In these trials, approximately
        95% of the patients aged 15 to 30 responded to *AcnEase®* .
        In
        patients aged 31 to 45, the level of effectiveness was approximately 80%.
        Based
        on anecdotal experience in the U.S. market, AcnEase has proven to be especially
        effective in addressing skin conditions associated with cystic acne or androgen
        induced acne in women. In addition, *AcnEase®* has
        demonstrated a high satisfaction rate among our present and past customers
        in
        the U.S. and U.K. who number approximately 25,000. Over the last five years
        of
        operations, fewer than 5% of our customers have returned *AcnEase®* ,
        which
        we back with a 100% guarantee. In clinical studies performed in China and
        according to customer surveys, users typically respond within 2-3 weeks of
        their
        first use of *AcnEase®* and
        become blemish-free within four to six weeks.
 
 Customers
        with symptoms of rosacea have been using AcnEase *®* since
        2001. Responses from our customers show that 85% of our customers suffering
        from
        rosacea have experienced improvements in facial flushing, itchy gritty eyes,
        acne and gastric reflux.
 
 In
        December 2004, *AcnEase®* was
        featured in *New
        Generalist* ,
        a
        publication of the Royal College of Medicine of London. In July 2005, it
        was
        presented in *Dermatology* ,
        an
        English language European journal of Dermatology as the only all natural
        acne
        therapeutic product.
 
 We
        selected *AcnEase* *®*  as
        our
        business model prototype to demonstrate our ability to identify herbal-based
        products and bring them to the mainstream marketplace in the U.S. and U.K. We
        launched *AcnEase®* in 2001.
        For the last five fiscal years, *AcnEase®* contributed approximately 98% of our revenues. *AcnEase®* has
        demonstrated high brand recognition, consistently ranking in the top three
        acne
        products searched on Google and Yahoo.
 
 Since
        2001, we have been the exclusive worldwide distributor of *AcnEase®* under an
        existing license agreement. As these agreements do not explicitly set forth
        the
        extent of our exclusive rights with *AcnEase®* ,
        our
        exclusivity rights may be subject to limitation or termination in the
        future.
 
 Currently,
        we purchase *AcnEase®* manufactured on our behalf by our licensor, AH USA. Since 2004, *AcnEase®* tablets
        have been manufactured in the U.S.
 
 Our
        business plan contemplates our future acquisition of the intellectual property
        rights related to AcnEase®, including the formulation thereof, from AH USA;
        accordingly, on January 10, 2008, we entered into a Purchase Agreement with
        AH
        USA to effect this acquisition. In the event that we obtain sufficient financing
        and close on the purchase the formulation and other intellectual property
        rights
        relating to *AcnEase®* , *AcnEase®* would be
        manufactured in the U.S. on our behalf. In that event, all herbs for
        AcnEase *®* would be
        sourced from China using our contacts in Beijing. Such herbs would come from
        suppliers that practice cGAP (current Good Agricultural Practice) and the
        quality and identity confirmed by a herbalist/pharmacognocist. Routine quality
        control (QC) and identity tests would be performed on the raw materials.
        All
        extractions would initially be performed at inspected facilities in China
        (PRC)
        or Hong Kong. The extracts would then be shipped to the U.S. where QC analysis
        and all final product manufacturing testing and release would be performed
        in
        contract labs. Packaging and labeling would also be performed using contract
        manufacturers.
  3
 
 ***Pipeline
        Products***
 
 We
        have a
        number of other products in varying stages of development for which we will
        need
        additional time and financing before introduction to the market. These products
        include:
 
 *AcnEase®
        Skin Management System:* This
        series of products will include a cleanser, toner, moisturizer, mask and
        topical
        acne treatment product.
 
 *Sexual
        Health:* Our
        sexual health series line includes all natural products that address selected
        sexual disorders resulting from cardiovascular disease, use of anti-depressants,
        surgical procedures and other problems.
 
 *Energy
        Restoration:* This
        product will address overall depletion of energy due to competitive sports,
        high-level stress, extensive sexual activities, as well as other conditions
        that
        are physically demanding on a long-term or temporary basis.
 
 *Additional
        Products:* We have
        also researched expanding our line to include additional products in the
        areas
        of liver disease (including liver damage due to Hepatitis and Cirrhosis),
        prostate health for benign prostate hyperplasia (BPH), women’s sexual health,
        rheumatoid arthritis, antibiotic resistant chronic pulmonary infections and
        diabetes. We do not expect to be able to develop these products and bring
        them
        to market until we have raised substantial financing.
 
 To
        date
        virtually all of our sales have been made through our website.
 
 ***Marketing
        and Distribution***
 
 We
        pursue
        a multi-channel marketing and distribution strategy using a strong
        brand-building approach and information-driven strategy. We maintain a visible
        Internet presence and foster partnerships with selected traditional and
        non-traditional health care providers, nutraceutical and supplement sales
        channels, as well as high quality consumer products and service providers
        in the
        U.S. and abroad.
 
 We
        sell
        products in the U.S., the United Kingdom and Continental Europe. Our long
        term
        plans include expanding into the Indian, Chinese and Australian markets after
        sufficient financing is received by our Company. In the U.K., we subcontract
        with a firm, Meads LLC of Nottingham, which handles order fulfillment, marketing
        and customer services for our customers in the U.K. and European Union. We
        also
        maintain relationships with advisors in Beijing and Shanghai, PRC.
 
 ***Manufacturing***
 
 We
        plan
        to become a fully-integrated company by establishing our own manufacturing
        and
        development capabilities at such time as we receive sufficient financing.
        If we
        obtain the rights to begin manufacturing our products, we intend to manufacture
        our products using contract manufacturing companies that are GMP compliant.
        Quality Control analysis will be contracted during the initial stages of
        development, though at an appropriate point in time QC may be taken in house.
        Currently, AcnEase *®* is
        manufactured for us by the licensor of the formula, and we outsource packaging
        functions for our products.
 
 The
        state
        of the art for the processing and sourcing of many herbs still resides in
        Asia.
        Through our network, we have contacts that can oversee the manufacturing
        of
        select products in China. Samples and initial batches of one of our sexual
        health products have been made for us in China because the product is
        manufactured using proprietary process and enrichment steps, as well as raw
        materials that are sourced in China. Initial batches of certain of our sexual
        health and energy restoration products are currently manufactured in the
        United
        States through several contract manufacturers and we expect will continue
        to be
        made in the U.S. after we begin marketing the products. *AcnEase®* is also
        manufactured in the United States. Sourcing of the raw materials can be from
        several suppliers in either the United States or Asia.
  4
 
 ***Raw
        Materials***
 
 Raw
        materials for *AcnEase®* and one
        of our sexual health products are obtained from China. Raw materials can
        be
        obtained from several suppliers. We have an arrangement with Botanic Century
        in
        Beijing and David Pharma, Shijiazhuang to work as agents for the procurement
        of
        herbs and in some instances processing and testing of the raw materials.
        In
        addition, we retain CMM consultants (Oxford UK) to perform similar services.
        In
        the case of the sexual health product, it is not only the raw materials that
        are
        important but also the extraction and enrichment process that is proprietary.
        Final product manufacturing and release testing (QC) can eventually be performed
        in the United States following sourcing of the active ingredients in China.
        Raw
        materials for another of our sexual health products in the pipeline ** can
        be
        obtained from suppliers in the United States. All extractions are performed
        in
        the United States as is final production manufacturing packaging and labeling.
 
 ***Intellectual
        Property***
 
 All
        of
        our existing and pipeline products are presently protected as trade secrets.
        Some of our products may qualify for patent protection that will involve
        the
        ingredients, ratios of ingredients, and specific fractions for extracts of
        ingredients and/or an extraction process.
 
 The
        key
        method of protection for our products at the current time is through trade
        secrets relating to:
 
 ·
              ingredients
                  (content and amount),
  ·
              part
                  of plant used,
  ·
              ratio
                  of ingredients,
  ·
              preparation
                  and enrichment of ingredients, and
  ·
              proprietary
                  extraction procedures.
 
 Most
        of
        these trade secrets are owned by our licensor and licensed to us. Therefore,
        we
        rely on our licensor to continue to adequately protect these trade secrets.
        We
        intend to source ingredients from different companies to make certain no
        single
        entity has a list of all ingredients. All subsequent processing is performed
        at
        separate factories. We believe trade secrets are the best method at this
        time to
        protect herbal based products.
 
 ***Working
        Capital Items***
 
 We
        carry
        varying amounts of inventory. We do not extend payment terms to customers
        or
        provide wholesale customers any rights to return merchandise. Retail customers
        in the U.S. are provided with a 100% money-back guarantee; however, the rate
        of
        returns is less than 5%.
 
 ***Major
        Customers***
 
 Due
        to
        the fragmented market, we do not have any one customer that accounts for
        10% or
        more of consolidated revenues.
 
 ***Competition***
 
 Our
        direct corporate competitors are primarily nutraceutical companies, including
        specialty retailers, supermarkets, large chain discount retailers, drug store
        chains and independent drug stores, health food stores, on-line merchants,
        and
        mail order companies. Indirect competition also includes healthcare-focused
        online marketers. Some of our more prominent competitors include General
        Nutrition Centers, Inc., NBTY, Inc., Invite Health, Vitamin World and Vitamin
        Shoppe. The vast majority of products distributed by nutraceutical and herbal
        supplement companies are targeted towards dieting and weight management,
        body
        building supplementation, dietary or vitamin supplements and personal care
        products. These products represent the commodity approach to satisfying the
        markets needs and a selected few qualify as proprietary and unique formulations
        with intellectual property value. To our knowledge, no other botanical
        supplement targeting a specific health issue currently entertains national
        brand
        recognition. In addition, the herbaceutical sector is highly fragmented.
        We
        believe that the rudimentary stage of development for this sector, in
        conjunction with our superior products and pipeline, provides us an opportunity
        for growth, including acquisitions, and the ability to assume a leadership
        position in the sector in a relatively short period of time.
  5
 
 ***Regulation***
  We
        have
        determined that all of our existing and proposed products are dietary
        supplements as defined under federal statutes and regulations of the FDA.
        Neither nutritional supplements nor dietary supplements require FDA or other
        governmental approval prior to their marketing in the United States. No
        governmental agency or other third party makes a determination as to whether
        our
        products qualify as nutritional supplements, dietary supplements, or neither.
        We
        make this determination based on the ingredients contained in the products
        and
        the claims made for the products. The processing, formulation, packaging,
        labeling and advertising of such products, however, are subject to regulation
        by
        one or more federal agencies including the FDA, the Federal Trade Commission,
        the Consumer Products Safety Commission, the Department of Agriculture and
        the
        Environmental Protection Agency. Our activities also are subject to regulation
        by various agencies of the states and localities in which its products are
        sold.
        We markets products that are covered under FDA regulations for Dietary
        Supplements.
  *Federal
        Food, Drug, and Cosmetic Act*
  The
        FDA,
        pursuant to the Federal Food, Drug, and Cosmetic Act (“FFDCA”), regulates the
        formulation, manufacturing, packaging, labeling, distribution and sale of
        dietary supplements. The FDA has broad authority to enforce the provisions
        of
        the FFDCA applicable to foods and dietary supplements, which by definition
        is a
        sub-category of foods. The FDA’s powers include (i) issuing a public “Warning
        Letter” notifying a company that a product is not in compliance with FDA
        regulations, (ii) publicizing information about an illegal product, (iii)
        requesting a voluntary recall of an illegal product from the market, (iv)
        requesting the Department of Justice to initiate civil seizure and/or injunction
        actions, (v) seeking and receiving consumer redress, and (vi) initiating
        criminal proceedings in the U.S. federal courts.
  Under
        the
        FFDCA, all labels and labeling claims must be truthful and non-misleading.
        As a
        general rule, advertising for dietary supplements is regulated by the FTC.
        Labeling for these products is regulated by the FDA. Nevertheless, the FDA
        takes
        the position that, in addition to the FTC, the FDA also has jurisdiction
        to
        review Internet websites and mail order catalogs as it considers these forms
        of
        media to be labeling. Moreover, the FDA has been known to review advertising
        for
        dietary supplements to help it determine the intended use of the product
        being
        advertised. Non-compliance with the FDA regulation could lead to, among other
        things, injunctions, product withdrawals, recalls, and product
        seizures.
 
 *Dietary
        Supplement Health and Education Act of 1994*
 
 Dietary
        Supplements is a classification of products resulting from the enactment
        of the
        Dietary Supplement Health and Education Act of 1994 ("DSHEA") in October
        1994.
        Our dietary supplement products are subject to DSHEA. DSHEA amended and modified
        the application of certain provisions of the FFDCA as they relate to dietary
        supplements, and required the FDA to promulgate regulations consistent with
        DSHEA. The provisions of DSHEA are generally favorable to the dietary supplement
        industry and define dietary supplements and dietary ingredients; establish
        a new
        framework for assuring safety; outline guidelines for literature displayed
        where
        dietary supplements are sold; provide for the use of claims and nutritional
        support statements; require ingredient and nutrition labeling; and grant
        the FDA
        the authority to establish regulations concerning good manufacturing practices
        (“GMPs”).
 
 DSHEA
        defines a dietary supplement to include any product (other than
        tobacco):
 
 (i)
              intended
                  to supplement the diet that bears or contains one or more of a
                  vitamin,
                  mineral, herb or other botanical, amino acid, substance to supplement
                  the
                  diet by increasing the total dietary intake, or any concentrate,
                  metabolite, constituent, extract, or combination of any such ingredient,
                  provided that such product is either intended for ingestion in
                  tablet,
                  capsule, powder, soft gel, gelcap, or liquid droplet form, or
 
 (ii)
              if
                  not intended to be ingested in such form, is not represented for
                  use as a
                  conventional food or as a sole item of a meal or the diet,
                  and
 
 (iii)
              is
                  labeled as a dietary supplement.
  6
  A
        dietary
        supplement, which contains an ingredient not on the market before October
        15,
        1994 (a “new dietary ingredient”) adulterates the product under the FFDCA unless
        there is evidence of a history of use or other evidence of safety establishing
        that it will reasonably be expected to be safe. The practical effect of such
        an
        expansive definition is to ensure that the new protections and requirements
        of
        DSHEA will apply to a wide class of products.
 
 Under
        DSHEA, companies that manufacture and distribute dietary supplements are
        allowed
        to make any of the following four types of statements with regard to nutritional
        support on labeling without FDA approval:
 
 (i)  a
        statement that claims a benefit related to a classical nutrient deficiency
        disease if it discloses the prevalence of such disease in the United States;
 
 (ii)  a
        statement that describes the role of a nutrient or dietary ingredient intended
        to affect the structure or function of the body;
 
 (iii)  a
        statement that characterizes the documented mechanism by which a nutrient
        or
        dietary ingredient acts to maintain the structure or function; or
 
 (iv)  a
        statement that "describes general well-being" from consumption of a nutrient
        or
        dietary ingredient.
 
 In
        addition to making sure that a statement meets one of these four criteria,
        a
        manufacturer of the dietary supplement must have substantiation that such
        statement is truthful and not misleading, must not claim to diagnose, mitigate,
        treat, cure, or prevent a specific disease or class of diseases, and for
        structure/function claims, must contain the following disclaimer, prominently
        displayed in boldface type: "This statement has not been evaluated by the
        Food
        and Drug Administration. This product is not intended to diagnose, treat,
        cure,
        or prevent any disease."
 
 Under
        its
        authority granted by DSHEA, the FDA has proposed GMPs specifically for dietary
        supplements. These new GMPs, when finalized, will be more detailed than the
        GMPs
        that currently apply to dietary supplements and may, among other things,
        require
        dietary supplements to be prepared, packaged and held in compliance with
        certain
        rules (including quality control provisions) similar to the GMPs applicable
        to
        drugs. There can be no assurance that, if the FDA adopts GMPs for dietary
        supplements, we and/or our suppliers will be able to comply with the new
        rules
        without incurring substantial expenses that might have a material adverse
        effect
        on our consolidated financial position or results of operations.
 
 As
        a
        formulator, distributor and marketer of dietary supplements, we are subject
        to
        the risk that one or more of the ingredients in our product may become subject
        to regulatory action in the future.
 
 *The
        Federal Trade Commission*
  The
        FTC
        exercises jurisdiction over the advertising of dietary supplements and foods
        and
        has the authority over both “deceptive” and “unfair” advertising and other
        marketing practices. In addition to its broad investigative powers, the FTC
        has
        the power to initiate administrative and judicial proceedings against a company
        and may also seek a temporary restraining order or preliminary injunction
        against a company pending the final determination of an action. The FTC’s
        remedies also include consumer redress, civil and criminal penalties.
 
 Our
        advertising and sale of our dietary supplements is subject to regulation
        by the
        FTC under the Federal Trade Commission Act (the “FTCA”). The FTCA prohibits
        unfair methods of competition and unfair or deceptive acts or practices in
        or
        affecting commerce. The FTCA provides dissemination or causing to be
        disseminated any false advertisement pertaining to drugs or foods (which
        would
        include dietary supplements) is an unfair or deceptive act or practice. Under
        the FTC’s “substantiation doctrine”, an advertiser is required to have a
“reasonable basis” for all objective product claims before the claims are made.
        Failure to substantiate claims adequately may be considered a deceptive or
        unfair practice. Pursuant to this FTC requirement, we are required to have
        adequate substantiation for all advertising claims made for our products
        at the
        time such claims are made.
 
 ***Research
        and Development***
  We
        limit
        the amount of expenditures relating to the development of new products through
        the use of co-licensing and co-development. We incur minimal research
        and development expenditures.
  7
 
 ***Environmental
        Compliance***
 
 We
        are
        not aware of any administrative or other costs incurred which are directly
        related to compliance with environmental laws, and we have not experienced
        any
        other significant effect from the impact of environmental laws.
 
 ***Company
        History***
 
 The
        Company was incorporated in the State of Delaware on June 4, 2002, and was
        the
        surviving entity following a merger of G.O. International, Inc. (“G.O.”), a New
        Jersey corporation, with and into the Company effective June 6, 2002.
 
 On
        September 18, 2006, Herborium was acquired by Pacific Magtron International
        Corporation, Inc. (“PMIC”), a publicly traded Nevada Corporation, pursuant to a
        Merger Agreement and PMIC’s plan of reorganization in bankruptcy. The
        transaction was accomplished by the merger of a PMIC subsidiary into Herborium,
        with Herborium as the surviving corporation (the “Merger). Under the provisions
        of the Merger Agreement and the plan of reorganization, the stockholders
        of
        Herborium exchanged 100% of their common stock of the Company for 85% of
        the
        post-Merger PMIC common stock. The previously outstanding common shares of
        PMIC
        were cancelled under the plan of reorganization, and one new share of the
        Company was issued in exchange for each cancelled shares held by all PMIC
        shareholders, other than its majority shareholder, Advanced Communications
        Technologies, Inc (“ACT”). A total of 11,454,300 shares were issued to the
        shareholders of ACT in exchange for the cancellation of the PMIC shares and
        ACT’s contribution of $50,000 to the bankruptcy. Shares of our common stock have
        been distributed to PMIC shareholders. Following this distribution, as well
        as
        certain other distributions that are included in the plan of reorganization,
        an
        aggregate of 108,567,080 shares of common stock of Herborium Group was issued
        and outstanding as of November 30, 2006. This number of shares was used in
        the
        calculation of net loss per share for the year then ended on a retroactive
        basis.
  The
        Company’s merger with PMIC is treated as a recapitalization with no purchase
        price allocation. In connection with the merger, PMIC changed its name to
        Herborium Group, Inc. and adopted the fiscal year of Herborium Group, Inc.
        which
        is November 30.
  ***Employees***
  We
        presently have one full-time employee whose principal responsibility is product
        order fulfillment. Dr. Olszewski, our President, Chief Executive Officer
        and
        Acting Chief Financial Officer does not currently devote her full time to
        us and
        will not do so until such time as we raise at least $1,250,000 in financing.
        Dr.
        Gilligan will assume full-time employment with us as our Co-President and
        Chief
        Operating Officer within six months after the date that we raise at least
        $2,500,000 in financing. Prior to such time, he will serve as a consultant
        to
        us.
  **ITEM
        2. DESCRIPTION OF PROPERTY**
  Currently,
        we maintain our office at Park 80W Plaza II, Suite 200, Saddle Brook, NJ
        07663.
        Fulfillment and customer service are performed from space at 985 Carteret
        Ave.
        in Union, New Jersey, the home of Dr. Gilligan. We also rent warehouse space
        to
        house inventory in New Jersey.
  **ITEM
        3. LEGAL PROCEEDINGS**
  None.
  **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  None.
  8
  **PART
        II**
  **ITEM
        5.**  **MARKET
        FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS** **AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES**
  ***Price
        Range Of Common Stock***
  Our
        common stock is presently traded on the Over-the-Counter Bulletin Board under
        the symbol HBRM; PMIC was formerly traded on the Over-the-Counter Bulletin
        Board
        under the symbol PMICQ.OB. The following table shows the high and low sale
        prices for 2005, 2006 and 2007 in dollars per share as reported by the OTC
        Bulletin Board. These may not be the prices that you would sell or would
        pay to
        purchase a share of our common stock during the periods shown.
 
 **High**
              
              **Low**Fiscal
                  Year Ended November 30, 2007Quarter
                  Ended February 28, 2007
              
              $
              0.10
              
              $
              0.04Quarter
                  Ended May 31, 2007
              
              
              0.06
              
              
              0.02Quarter
                  Ended August 31, 2007
              
              
              0.03
              
              
              0.01Quarter
                  Ended November 30, 2007
              
              
              0.01
              
              
              0.01Fiscal
                  Year Ended November 30, 2006*Quarter
                  Ended March 31, 2006
              
              $
              0.03
              
              $
              0.02Quarter
                  Ended June 30, 2006
              
              
              0.05
              
              
              0.02Quarter
                  Ended August 31, 2006
              
              
              0.04
              
              
              0.02Quarter
                  Ended November 30, 2006
              
              
              0.06
              
              
              0.02
 
 *
        The
        initial Form 10-QSB for Herborium Group was filed for the quarter ended August
        31, 2006. For purposes of reporting high and low sales prices in this item,
        we
        have changed from calendar quarters to our fiscal quarters.
 
 The
        number of holders of record for our common stock immediately after giving
        effect
        to the merger was approximately 600 .
  ***Dividend
        Policy***
  We
        have
        not paid and have no plan to pay dividends on our common stock .
  ***Recent
        Sales Of Unregistered Securities***
  We
        had no
        sales of unregistered securities during the fiscal year ended November 30,
        2007.
 
 ***Issuer
        Purchases of Equity Securities***
  We
        did
        not make any purchases of equity securities during the fiscal year ended
        November 30, 2007.
  9
  **ITEM
        6. MANAGEMENT’S DISCUSSION AND ANALYSIS** **OR
        PLAN OF OPERATION**
  The
        following discussion should be read in conjunction with our financial statements
        and the related notes and the other financial information appearing elsewhere
        in
        this report. In addition to historical information, the following discussion
        and
        other parts of this Annual Report contain forward-looking information that
        involves risks and uncertainties including the use of words
        such as "estimates," "expects," "anticipates," "believes," "intends," "will,"
        "seek" and other similar expressions, are intended to identify forward-looking
        information that involves risks and uncertainties. In addition, any statements
        that refer to expectations or other characterizations of future events or
        circumstances are forward-looking statements. Actual results and outcomes
        could
        differ materially as a result of important factors including, among other
        things, general economic conditions, the Company's ability to renew or replace
        key supply and credit agreements, fluctuations in operating results, committed
        backlog, public market and trading issues, risks associated with dependence
        on
        key personnel, competitive market conditions in the Company's existing lines
        of
        business and technological obsolescence, as well as other risks and
        uncertainties.
  **GENERAL**
  We
        provide unique, natural and complementary healthcare related products to
        consumers and healthcare professionals seeking alternative answers to the
        management of healthcare issues not currently met by standard Western medicine.
        Our products are botanical supplements comprised of unique herbal formulations.
        We select products that have a record of clinical efficacy and safety
        established in China; however, these products have not been evaluated according
        to standards of clinical efficacy and safety applicable to pharmaceutical
        products sold in the United States and other countries, and because these
        products are herbal-based, they are not recognized as pharmaceuticals by
        the
        Food and Drug Administration (the "FDA").
 
 Our
        business model is based on:
 
 ·
              owning
                  and/or marketing unique products with established clinical history
                  in
                  their country of origin, and
 
 ·
              a
                  proactive approach to meeting the regulatory changes and challenges
                  of the
                  new healthcare marketplace.
  **SIGNIFICANT
        ACCOUNTING POLICIES**
  **a.**
              **Principles
                  of consolidation**
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiaries, Herborium, Inc. and Herborium.com, Inc. All
        significant intercompany accounts and transactions are eliminated in
        consolidation.
 
 **b.**
              **Inventory**
 
 Inventory,
        consisting of finished botanical therapeutic products, is stated at the lower
        of
        cost or market and is valued on the first-in, first-out method. When net
        realizable value has fallen below cost, inventory is written down.
 
 **c.**
              **Shipping
                  and handling costs**
 
 Shipping
        and handling costs associated with outbound freight amounted to approximated
        $50,000 and $46,000 for the years ended November 30, 2007 and 2006,
        respectively, and were charged to cost of sales.
 
 **d.**
              **Property
                  and equipment**
 
 Depreciation
        and amortization are computed using the straight-line method over the estimated
        useful lives of the assets ranging from five to seven years.
  10
 
 Maintenance
        and repairs are charged to expense when incurred. When property and equipment
        are retired or otherwise disposed of, the applicable cost and accumulated
        depreciation are removed from the accounts and any gain or loss is credited
        or
        charged directly to income.
 
 **e.**
              **Advertising**
 
 It
        is the
        Company’s policy to expense advertising costs as they are incurred. Advertising
        expenses for the years ended November 30, 2007 and 2006 were approximately
        $192,000 and $199,000, respectively.
 
 **f.**
              **Estimates**
 
 The
        preparation of consolidated financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities and
        disclosure of contingent assets and liabilities at the date of the consolidated
        financial statements and the reported amounts of revenues and expenses during
        the reporting period. Actual results could differ from those
        estimates.
 
 **g.**
              **Revenues**
  The
        Company recognizes revenue when inventory is shipped to its
        customers.
 
 **h.**
              **Recent
                  accounting pronouncements**
 
 In
        September 2006, the Financial Accounting Standards Board (“FASB”) issued
        Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”
(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring
        fair value in generally accepted accounting principles (“GAAP”), and expands
        disclosures about fair value measurements This Statement is effective for
        financial statements issued for fiscal years beginning after November 15,
        2008,
        and interim periods within those fiscal years. The Company is currently
        evaluating the impact, if any, that SFAS 157 will have on its financial
        position, results of operations and cash flows.
 
 In
        June
        2006, the FASB issued Financial Accounting Standards Board Interpretation
        (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes—an
        interpretation of SFAS 109. FIN No. 48 provides a comprehensive model
        for the recognition, measurement and disclosure in the financial statements
        of
        uncertain tax positions taken or expected to be taken on a tax return. The
        Company adopted FIN No. 48 effective beginning on December 1, 2007.
        The adoption of this interpretation did not have an impact on the Company’s
        financial statements.
 
 In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
        for Financial Assets and Financial Liabilities—Including an Amendment of FASB
        Statement No. 115.” This Standard allows entities to voluntarily choose, at
        specified election dates, to measure many financial assets and financial
        liabilities (as well as certain non-financial instruments that are similar
        to
        financial instruments) at fair value. The election is made on an
        instrument-by-instrument basis and is irrevocable. If the fair value option
        is
        elected for an instrument, the Statement specifies that all subsequent changes
        in fair value for that instrument shall be reported in earnings. SFAS No.
        159 is
        effective beginning on December 1, 2008. We are currently evaluating the
        impact this new Standard could have on our financial position and results
        of
        operations.
 
 The
        FASB
        has issued Statement No. 141 (R), “Business Combinations”. This statement
        retains the fundamental requirements in Statement No. 141 that the acquisition
        method of accounting (which Statement No. 141 called the “purchase method”) be
        used, and applies to the all business entities, including mutual entities
        that
        previously used the pooling of interest method of accounting for some business
        combinations. The statement is effective for transactions within the annual
        reporting period beginning on or after December 15, 2008. Management does
        not
        expect this pronouncement to have a significant impact on the financial
        statements of the Company.
 
 The
        FASB
        has issued Statement No. 160, “Non-controlling Interests in Consolidated
        Financial Statements”. This statement changes the way the consolidated income
        statement is presented when non-controlling interests are present. It requires
        consolidated net income to be reported at amounts that include the amounts
        attributable to both the parent and the non-controlling interest, and is
        effective for periods beginning on or after December 15, 2008. Management
        does
        not expect this pronouncement to have a significant impact on the financial
        statements of the Company.
  11
  **FINANCIAL
        CONDITION**
 
 We
        had
        net losses of $643,000 and $340,000 during the years ended November 30, 2007
        and
        2006, respectively. As of November 30, 2007, we had cash and total current
        assets of $2,000 and $45,000, respectively, and current liabilities of
        $1,223,000, with obligations aggregating $640,000 for trade creditors and
        accrued expenses, $129,000 for credit card obligations, $166,000 payable
        for
        line of credit obligations, $51,000 for amounts due to others, $35,000 for
        amounts due to related parties and $201,000 for amounts due to stockholders.
        We
        have been operating at a loss since inception and have been funding these
        losses
        in a number of ways, including lines of credit, credit card debt, advances
        from
        stockholders and others and entering into subscription agreements with “friends
        and family” for investment funds. While we have recently received bridge
        financing aggregating $225,000, we are actively seeking a substantial amount
        of
        equity or debt financing to accomplish our business plan, we do not have
        commitments for such financing. Our working capital at November 30, 2007,
        is not
        sufficient to meet our working capital needs for the next twelve-month period
        and we will need to obtain additional financing from one or more of the sources
        described above, or an entirely new source.
 
 To
        date
        we have not obtained adequate equity or debt financing to enable us to implement
        our business plan. As a result of the lack of financial resources, a condition
        unfavorably impacting us since inception, revenue and profitability have
        not
        increased as we believe would have otherwise been the case. Without sufficient
        financing, we have not been able to (i) acquire ownership of several products,
        particularly the intellectual property rights to, and formulation of, our
        principal product, AcnEase®, (ii) market and promote our products, (iii) conduct
        certain clinical trials that would further such marketing and promotional
        activities and (iv) hire additional employees.
 
 **RELATED
        PARTY TRANSACTIONS**
 
 During
        the fiscal years ended November 30, 2007 and 2006, the Company's due to
        stockholders obligation increased by $47,000 and $25,000 to $201,000 and
        $154,000, respectively. During the fiscal years ended November 30, 2007 and
        2006, the Company's due to related parties obligation increased by $22,000
        and
        $13,000 to $35,000 and $13,000, respectively.
 
 **COMPARISON
        OF THE FISCAL YEAR ENDED NOVEMBER 30, 2007 TO THE FISCAL YEAR ENDED NOVEMBER
        30,
        2006**
 
 **Overall
        Results of Operations**
 
 For
        the
        fiscal year ended November 30, 2007, we incurred a net loss of $643,000,
        an
        increase of $303,000 from the net loss of $340,000 for the comparable prior
        year
        period. The increase in net loss in the fiscal 2007 compared to fiscal 2006
        period is principally attributable to an increase in general and administrative
        expenses.
 
 **Sales**
 
 Net
        sales
        for the fiscal year ended November 30, 2007 **** were
        $762,000 compared to $828,000 for the fiscal year ended November 30, 2006.
        The
        decrease of $66,000, or 8%, can be attributed to both the adverse effect
        of a
        temporary closing of the United Kingdom office for reorganization of fulfillment
        services and a change in its management, and a temporary strike by the primary
        delivery service utilized in that country, partially offset by a modest increase
        in sales in other European countries and the increase in sales experienced
        in
        the United States due to increased awareness of AcnEase, the Company’s principal
        product, resulting from web-based promotion activities and growth in distributor
        orders.
  **Gross
        Profit**
 
 Gross
        profit decreased to $380,000 for the fiscal year ended November 30,
        2007 **** compared
        to $485,000 for the fiscal year ended November 30, 2006, a decrease of $105,000,
        or 21.7%, with gross margin decreasing to 49.9% from 58.6% for the prior
        period.
        The decrease in gross profit is attributable to both the decrease in net
        sales
        as well as the decreased gross margin. The decrease in gross margin was caused
        by the temporary operational issues in the United Kingdom, which partially
        offset an improvement earlier in the year in the average selling price received
        for AcnEase due to a change in the mix of distribution channels.
  12
 
 **Operating
        Expenses**
 
 Total
        operating expenses increased by $196,000, or 25.2%, to $976,000 for the fiscal
        year ended November 30, 2007, from $779,000 for the fiscal year ended November
        30, 2006, principally attributable to an increase in selling and administrative
        expenses for non-cash stock-based consulting fees and officer salary expense
        accrued but not paid, partially offset by a decrease in legal fees and website
        development expenditures.
 
 **Other
        Expense**
 
 Interest
        expense increased slightly to $46,000 from $45,000 for the fiscal year ended
        November 30, 2007 **** as
        compared with the fiscal year ended November 30, 2006, as interest bearing
        debt
        and related interest rates remained constant.
 
 **Seasonality**
 
 There
        are
        no seasonality factors that affect the Company.
 
 **Off-Balance
        Sheet Arrangements**
 
 The
        Company has no off-balance sheet arrangements that have or are reasonably
        likely
        to have a current or future effect on the Company’s financial condition, changes
        in financial condition, revenue or expenses, results of operations, liquidity,
        capital expenditures or capital resources that is material to investors,
        and the
        Company does not have any non-consolidated special purpose
        entities.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 As
        of
        November 30, 2007, we had a cash balance of $2,077 and a negative cash flow
        from
        operations of $86,000 for the year then ended. We have been operating at
        a loss
        since inception and have been funding these losses in a number of ways,
        including lines of credit, credit card debt, advances from stockholders and
        others and entering into subscription agreements with “friends and family” for
        investment funds. While we have recently received bridge financing aggregating
        $225,000, we are actively seeking a substantial amount of equity or debt
        financing to accomplish our business plan, we do not have commitments for
        such
        financing. Our working capital at November 30, 2007, is not sufficient to
        meet
        our working capital needs for the next twelve-month period and will need
        to
        obtain additional financing from one or more of the sources described above,
        or
        an entirely new source.
 
 The
        Company has contractual obligations of $582,400 as of November 30, 2007.
        These
        contractual obligations, along with the dates on which such payments are
        due,
        are described below:
 
 **Contractual
                  Obligations**
                **(as
                  of November 30, 2007)****Total**
              
              **1
                  Year or Less**
              
              **More
                  Than 1 Year**Credit
                  cards payable
              
              $
              129,077
              
              $
              129,077
              
              $
              —Lines
                  of credit payable
              
              
              166,372
              
              
              166,372
              
              
              —Due
                  to others
              
              
              50,895
              
              
              50,895
              
              
              —Due
                  to related parties
              
              
              35,000
              
              
              35,000
              
              
              —Due
                  to stockholders
              
              
              201,056
              
              
              201,056
              
              
              —**Total
                  Contractual Obligations**
              
              **$**
              **582,400**
              
              **$**
              **582,400**
              
              **$**
              —
  
 Below
        is
        a discussion of our sources and uses of funds for the years ended November
        30,
        2007 and 2006.
  13
 
 **Net
        Cash Used In Operating Activities**
 
 Net
        cash
        used in operating activities was $86,000 and $24,000 in the fiscal years
        ended
        November 30, 2007 and 2006, respectively. The use of cash in operating
        activities for the fiscal year ended November 30, 2007 was principally the
        result of a net loss of $643,000, partially offset by an increase of $293,000
        in
        accounts payable and accrued expenses and non-cash expenses of $220,000.
        The use
        of cash in operating activities for the fiscal year ended November 30, 2006
        was
        principally the result of a net loss of $340,000, partially offset by an
        increase of $308,000 in accounts payable and accrued expenses.
 
 **Net
        Cash Used In Investing Activities**
 
 During
        the fiscal years ended November 30, 2007 **** and
        2006,
        net cash used in investing activities was $4,000 and $10,000, respectively,
        which principally consisted of $4,000 and $9,000, respectively, for the
        acquisition of other assets, principally trademark costs.
 
 **Net
        Cash Provided By Financing Activities**
 
 Net
        cash
        provided by financing activities for the fiscal year ended November 30,
        2007 **** amounted
        to $87,000, principally attributable to an increase of $47,000 in amounts
        due to
        stockholders, an increase of $29,000 in amounts due to others and an increase
        of
        $22,000 in amounts due to related parties. Net cash provided by financing
        activities for the fiscal year ended November 30, 2006 amounted to $39,000,
        principally attributable to an increase of $25,000 in amount due to
        stockholders, an increase of $13,000 in amount due to related parties, an
        increase in credit card debt payable of $13,000, partially offset by payments
        on
        lines of credit payable of $7,000 and long-term debt of $5,000.
 
 **RISK
        FACTORS**
  *Our
        business and results of operations are subject to numerous risks, uncertainties
        and other factors that you should be aware of, some of which are described
        below
        and in the section entitled “Cautionary Statement Concerning Forward-Looking
        Statements.” The risks, uncertainties and other factors described below are not
        the only ones facing our company. Additional risks, uncertainties and other
        factors not presently known to us or that we currently deem immaterial may
        also
        impair our business operations. Any of the risks, uncertainties and other
        factors could have a materially adverse effect on our business, financial
        condition or results of operations and could cause the trading price of our
        common stock to decline substantially.*
  **Risks
        Relating to Our Company**
 
 ***We
        have a history of losses, and will incur additional
        losses.***
 
 We
        are a
        company with a limited history of operations, and do not expect to significantly
        increase ongoing revenues from operations in the immediately foreseeable
        future.
        To date, we have not been profitable. We had a net loss of $643,000  during
        the fiscal year ended November 30, 2007. Our losses have resulted principally
        from costs incurred in product development, including product testing and
        selection, and from general and administrative costs associated with our
        operations. While we seek to attain profitability, we cannot be sure that
        we
        will ever achieve product and other revenue sufficient for us to attain this
        objective.
 
 With
        the
        exception of *AcnEase®* ,
        our
        product candidates are in research or various stages of development. For
        some of
        these products we will want to conduct additional research, development and
        clinical trials in order to improve our ability to advertise and differentiate
        these products from others in the market place. We cannot be sure that we
        will
        successfully research, develop, commercialize, manufacture and market any
        other
        product candidates. We expect that these activities, together with future
        general and administrative activities, will result in significant expenses
        for
        the foreseeable future.
  14
 
 ***We
        need additional capital, which may not be available to us.***
  We
        require funds in excess of our existing cash resources to fund operating
        deficits, develop new products, purchase additional rights to existing products,
        establish and expand our manufacturing capabilities, and finance general
        and
        administrative and research activities. In particular, we will need additional
        capital to:
 ·     
acquire
                      intellectual property rights relating to *AcnEase**®*and other products;
 ·conduct
                    clinical trials and fund marketing and new product
                    launches;
 
 ·establish
                    U.S. manufacturing capabilities;
                    and
 
 ·fund
                    general working capital requirements if we continue to experience
                    deficits.
  Due
        to
        market conditions at the time we may need additional funding, or due to our
        own
        financial condition at that time, it is possible that we will be unable to
        obtain additional funding as and when we need it. Even if we are able to
        obtain
        capital, it may be on unfavorable terms or terms that excessively dilute
        existing shareholders or otherwise negatively affect the interests of existing
        shareholders. If we are unable to obtain additional funding as and when needed,
        we could be forced to delay our development, marketing and expansion efforts
        and, if we continue to experience losses, potentially cease operations.
 
 ***We
        may not be able to obtain or sustain market acceptance for our services and
        products.***
 
 Failure
        to establish a brand and presence in the marketplace on a timely basis could
        adversely affect our financial condition and operating results. Moreover,
        we
        cannot be sure that we will successfully complete the development and
        introduction of new products or product enhancements or that any new products
        developed will achieve acceptance in the marketplace. We may also fail to
        develop and deploy new products and product enhancements on a timely basis. *AcnEase* *®* is
        currently our only product providing revenues.
 
 ***Government
        regulation of the processing, formulation, packaging, labeling and advertising
        of our products can impact our ability to market products.***
 
 Under
        the
        Dietary Supplement Health and Education Act of 1994, companies that manufacture
        and distribute dietary supplements are limited in the statements that they
        are
        permitted to make about nutritional support on the product label without
        FDA
        approval. In addition, a manufacturer of a dietary supplement must have
        substantiation for any such statement made and must not claim to diagnose,
        mitigate, treat, cure or prevent a specific disease or class of disease.
        The
        product label must also contain a prominent disclaimer. These restrictions
        may
        restrict our flexibility in marketing our product.
 
 The
        FDA
        has proposed GMPs (Good Manufacturing Practices) specifically for dietary
        supplements. These new GMPs, when finalized, will be more detailed than the
        GMPs
        that currently apply to dietary supplements and may, among other things,
        require
        dietary supplements to be prepared, packaged and held in compliance with
        certain
        rules (including quality control provisions) similar to the GMPs applicable
        to
        drugs. There can be no assurance that, if the FDA adopts GMPs for dietary
        supplements, we and/or our suppliers will be able to comply with the new
        rules
        without incurring substantial expenses that might have a material adverse
        effect
        on our consolidated financial position or results of operations. As a
        formulator, distributor and marketer of dietary supplements, we are subject
        to
        the risk that one or more of the ingredients in our product may become subject
        to regulatory action in the future.
 
 The
        processing, formulizing, packaging, labeling and advertising of such products,
        however, are subject to regulation by one or more federal agencies including
        the
        FDA, the Federal Trade Commission, the Consumer Products Safety Commission,
        the
        Department of Agriculture and the Environmental Protection Agency. Our
        activities also are subject to regulation by various agencies of the states
        and
        localities in which our products are sold. Among other things, such regulation
        puts a burden on our ability to bring products to market. Any changes in
        the
        current regulatory environment could impose requirements that would make
        bringing new products to market more expensive or restrict the ways we can
        market our products. In addition, the adoption of new regulations or changes
        in
        the interpretation of existing regulation may result in significant compliance
        costs or discontinuation of product sales and may adversely affect our revenue.
        The FDA may implement additional regulations with which we would have to
        comply,
        which would increase expenses.
 
 No
        governmental agency or other third party makes a determination as to whether
        our
        products qualify as dietary supplements or not. We make this determination
        based
        on the ingredients contained in the products and the claims we make for the
        products and if our determination is denied by any regulatory authority we
        could
        face significant penalties that may require us to shut down our operations.
  15
 
 ***We
        face substantial competition.***
  The
        dietary supplement industry is growing rapidly and is highly competitive.
        Competition for the sale of nutritional products comes from many sources,
        including specialty retailers, supermarkets, large chain discount retailers,
        drug store chains and independent drug stores, health food stores, on-line
        merchants, mail order companies and a variety of other participants in the
        market for nutritional products. Some of our more prominent competitors include
        General Nutrition Centers, Inc., NBTY, Inc., Invite Health, Vitamin World
        and
        Vitamin Shoppe. We compete regularly with companies selling nationally
        advertised brand name products and with companies that may have more expanded
        product lines with much larger volume of sales. This competition could have
        a
        material adverse effect on our business, results of operations and financial
        condition since these companies have greater financial and other resources
        available to them and may possess manufacturing, distribution and marketing
        capabilities far greater than our own.
  Certain
        existing products may become more mainstream and thereby increase competition
        for those products as more participants enter the market. We may not be able
        to
        compete effectively and our attempt to do so may require us to reduce our
        prices, which may result in lower margins. Failure to compete effectively
        could
        adversely affect our market share, revenues and growth prospects.
  Our
        competitive position will be affected by the continued acceptance of our
        products, our ability to attract and retain qualified personnel, future
        governmental regulations affecting nutritional products, and publication
        of
        product safety studies by the media, government and authoritative health
        and
        medical authorities.
 
 ***We
        currently have no manufacturing capabilities and we are dependent upon other
        companies to manufacture our products.***
 
 We
        currently have no manufacturing facilities. We are dependent upon relationships
        with independent manufacturers to fulfill our product needs. We use several
        manufacturers for various parts of the manufacturing processes for our products.
        We believe these are small privately held firms.
 
 Because
        the manufacturing processes, which our contract manufacturers perform, are
        fairly standard in the industry, we believe that there are a large number
        of
        manufacturers who could provide us with these services if our current contract
        manufacturers are unavailable for any reason or seek to impose unfavorable
        terms. Our ability to market and sell our products requires that such products
        be manufactured in commercial quantities and in compliance with applicable
        federal and state regulatory requirements. In addition, we must be able to
        manufacture our products at a cost that permits us to charge a price acceptable
        to the customer while also accommodating distribution costs and third-party
        sales compensation. Competitors who do own their own manufacturing may have
        an
        advantage over us with respect to pricing, availability of product and in
        other
        areas through their control of the manufacturing process.
 
 ***We
        are dependent on key management and the loss of their services could have
        a
        material adverse impact on us.***
 
 We
        have
        relied extensively on the services of Drs. Agnes P. Olszewski and James P.
        Gilligan, our co-founders. Drs. Olszewski and Gilligan play key roles in
        our management and the loss of their services would materially and adversely
        affect us and our prospects. Until we raise substantial financing, neither
        of
        these key individuals will spend full-time working for us. Under her employment
        agreement, Dr. Olszewski is not required to do so until we have raised
        $1,250,000, and under his consulting/employment agreement, Dr. Gilligan is
        not
        required to do so until six months after we have raised $2,500,000 in financing.
        There is no assurance that we will be able to raise such amounts and without
        such financing and the full-time employment of these key executives we will
        in
        all likelihood not be able to further develop our business and will likely
        continue to experience losses. The loss of services of any of these persons
        could delay or reduce our product development and commercialization efforts
        and
        harm our ability to compete effectively.
 
 ***We
        may be subject to product liability claims and may not have adequate insurance
        to cover such claims.***
 
 Like
        other retailers, distributors and manufacturers of products that are designed
        to
        be ingested, we face an inherent risk of exposure to product liability claims
        in
        the event that the use of our products results in injury. We intend to obtain
        general liability coverage of $3 to $5 million that will include product
        liability coverage; however, presently we have no such coverage. Because
        our
        policies will be purchased on a year-to-year basis, industry conditions or
        our
        own claims experience could make it difficult for us to secure the necessary
        insurance at a reasonable cost. In addition, we may not be able to secure
        insurance that will be adequate to cover liabilities. We generally do not
        obtain
        contractual indemnification from parties supplying raw materials or marketing
        our products. In any event, any such indemnification is limited by its terms
        and, as a practical matter, by the creditworthiness of the other party. In
        the
        event that we do not have adequate insurance or contractual indemnification,
        liabilities relating to defective products could require us to pay the injured
        parties’ damages which may be significant compared to our net worth or revenues.
  16
 
 ***We
        may be adversely affected by unfavorable publicity relating to our product
        or
        similar products manufactured by our competitors.***
 
 We
        believe that the dietary supplement market is affected by national media
        attention regarding the consumption of these products. Future scientific
        research or publicity may be unfavorable to the dietary and nutritional
        supplement market generally or to any particular product and may be inconsistent
        with earlier favorable research or publicity. Adverse publicity associated
        with
        illness or other adverse effects resulting from the consumption of products
        distributed by other companies that are similar to our products could reduce
        consumer demand for our products and consequently our revenues. This may
        occur
        even if the publicity does not relate to our products. Adverse publicity
        directly concerning our products could be expected to have an immediate negative
        effect on the market for that product.
 
 ***We
        depend on trade secrets to protect our proprietary technology, which may
        be
        inadequate to protect our position.***
 
 Our
        long-term success will substantially depend upon protecting our technology
        from
        infringement, misappropriation, discovery and duplication. We expect that
        we
        will apply for patent protection with respect to some of our products. Since
        we
        do not currently have patents on our products, a competitor could replicate
        our
        products. Any patents that we might obtain may not provide meaningful protection
        or significant competitive advantages over competing products, due to the
        complexity of the legal and scientific issues involved in patent defense
        and
        litigation. For these reasons we have elected to protect our current products
        through trade secrets.
 
 Because
        of the complexity of the legal and scientific issues involved in patent
        prosecutions, we cannot be sure that any future patent applications for new
        products will be granted. Nor can we be sure that any patent rights that
        we do
        obtain will provide meaningful protection against others duplicating our
        products because of the complexity of the legal and scientific issues that
        could
        arise in litigation over these issues. Furthermore, patent applications are
        maintained in secrecy in the United States until the patents are approved,
        and
        in most foreign countries for a period of time following the date from which
        priority is claimed. A third party’s pending patent applications may cover any
        technology that we currently are developing. Additionally, if we must resort
        to
        legal proceedings to enforce our intellectual property rights, the proceedings
        could be burdensome and expensive and could involve a high degree of risk
        to our
        proprietary rights if we are unsuccessful in, or cannot afford to pursue,
        such
        proceedings.
 
 We
        rely
        at present completely on trade secrets and contract law to protect our
        proprietary technology. There can be no assurance that any such contract
        will
        not be breached, or that if breached, it will have adequate remedies. Currently,
        all of our products are protected by trade secrets owned by our licensor
        and
        other third parties . We rely on such third parties to adequately protect
        such
        trade secrets. There can be no assurance that these third parties will protect
        and continue to hold the trade secrets relating to our products. Furthermore,
        there can be no assurance that any of these trade secrets will not become
        known
        or independently discovered by third parties.
 
 There
        can
        be no assurance that others will not independently develop substantially
        equivalent proprietary information and techniques or otherwise gain access
        to
        our trade secrets and know-how. In addition, we may be required to obtain
        licenses to patents or other proprietary rights from third parties. There
        can be
        no assurance that any licenses required under any patents or proprietary
        rights
        would be made available on acceptable terms, if at all. If we do not obtain
        required licenses, we may encounter delays in product development or find
        that
        the development, manufacture or sale of products requiring such licenses
        could
        be foreclosed.
 
 ***We
        have limited the liability of our directors and officers for breaches of
        the
        duty of care.***
 
 Our
        articles of incorporation limit the liability of our directors for monetary
        damages for breaches of directors’ fiduciary duty of care. This provision may
        reduce the likelihood of derivative litigation against directors and may
        discourage or deter shareholders or management from suing directors for breaches
        of their duty of care, even though such an action, if successful, might
        otherwise benefit our shareholders and us. In addition, our articles of
        incorporation provide for the indemnification of directors and officers in
        connection with civil, criminal, administrative or investigative proceedings
        when acting in their capacities as agents for us.
  17
 
 ***Our
        results of operations may be affected by changing market prices and requirements
        for dietary supplements.***
 
 Our
        results of operations may be affected by changing resale prices or market
        requirements for dietary supplements, some of which are priced on a commodity
        basis. The sale price, and market demand for, these materials can be volatile
        due to numerous factors beyond our control, which may cause significant
        variability in its period-to-period results of operations.
 
 ***Our
        results of operations will fluctuate.***
 
 Our
        revenues and results of operations will vary from quarter to quarter in the
        future. A number of factors, many of which are outside of our control, may
        cause
        variations in our results of operations, including:
 
 ·
              demand
                  and price for our products;·
              the
                  timing and recognition of product sales;·
              unexpected
                  delays in developing and introducing products;·
              unexpected
                  delays in manufacturing our products;·
              increased
                  expenses, whether related to marketing, product development or
                  administration or otherwise;·
              insufficient
                  demand in the marketplace could cause our distributors to return
                  product;·
              the
                  mix of revenues derived from products;·
              the
                  hiring, retention and utilization of personnel; and·
              general
                  economic factors.
 
 ***We
        may not succeed in our acquisition of additional
        products.***
 
 As
        part
        of our growth strategy, we intend to acquire and develop additional product
        candidates or approved products. The success of this strategy depends upon
        our
        ability to identify, select and acquire bioherbaceutical products that meet
        the
        criteria we have established. Any product candidate we acquire or license
        may
        require additional research and development efforts prior to commercial sale,
        including extensive pre-clinical and/or clinical testing. All product candidates
        are prone to the risks of failure inherent in product development, including
        the
        possibility that the product candidate will not be safe, non-toxic and
        effective. In addition, we cannot assure that any approved products that
        we
        develop, acquire or license will be manufactured or produced economically;
        successfully commercialized; widely accepted in the marketplace or that we
        will
        be able to recover our significant expenditures in connection with the
        development, acquisition or license of such products. In addition, proposing,
        negotiating and implementing an economically viable acquisition or license
        is a
        lengthy and complex process. Other companies, including those with substantially
        greater financial, marketing and sales resources, may compete with us for
        the
        acquisition or license of product candidates and approved products. We may
        not
        be able to acquire the rights to additional product candidates and approved
        products on terms that we find acceptable, or at all. In addition, if we
        acquire
        or license product candidates from third parties, we will be dependent on
        third
        parties to supply such products to us for sale. We could be materially adversely
        affected by the failure or inability of such suppliers to meet performance,
        reliability and quality standards.
 
 ***Other
        companies may claim that we infringed upon their proprietary
        rights.***
 
 We
        do not
        believe that our products or processes violate third-party intellectual property
        rights. Nevertheless, there is no guarantee that such rights are not being,
        and
        will not be, violated. If any of the products or processes are found to violate
        third-party intellectual property rights, we may be required to re-engineer
        or
        cause to be re-engineered one or more of those products or processes or seek
        to
        obtain licenses from third parties to continue offering its products or
        processes without substantial re-engineering, and such efforts may not be
        successful.
  18
 
 ***Our
        non-US sales present special risks.***
 
 A
        subcontractor in London handles fulfillment and coordinates market development
        for our products in the U.K. and continental Europe. We anticipate that sales
        outside the U.S. will continue to account for a significant percentage of
        our
        product sales and we intend to continue to expand our presence in international
        markets. Non-US sales are subject to a number of special risks. For example:
 
 ·sales
                  agreements may be difficult to enforce;·receivables
                  may be difficult to collect through a foreign country’s legal
                  system;·foreign
                  countries may impose additional withholding taxes or otherwise
                  tax foreign
                  income, impose tariffs or adopt other restrictions on foreign
                  trade;·intellectual
                  property rights may be more difficult to enforce in foreign
                  countries;·terrorist
                  activity or the outbreak of a pandemic disease may interrupt distribution
                  channels or adversely impact customers or employees;
                  and·regulations
                  may change relating to dietary supplements that may negatively
                  impact the
                  ability to market products in those geographical
                  regions.
 
 Any
        of
        these events could harm our operations or operating results.
 
 ***Compliance
        with changing regulation of corporate governance and public disclosure will
        result in additional expenses.***
 
 Changing
        laws, regulations and standards relating to corporate governance and public
        disclosure, including the Sarbanes-Oxley Act of 2002 (“SOX”) and new Securities
        and Exchange Commission regulations, are creating uncertainty for public
        companies. Our management team will be required to invest significant management
        time and financial resources to comply with both existing and evolving standards
        for public companies, which may lead to increased general and administrative
        expenses and a diversion of management time and attention from revenue
        generating activities to compliance activities. Compliance with Rule 404
        of SOX
        will be required for the fiscal year ending November 30, 2008, for which
        we will
        incur additional expenses in fiscal 2008.
 
 ***It
        is possible that there are claims of which we are unaware that may come to
        light
        in the future and cost us considerable time, effort and expense to
        resolve.***
 
 It
        is
        possible that a claim, whether valid or not, may be asserted against us in
        the
        future with respect to matters arising prior to the merger. There can be
        no
        assurance given that some person will not devise a claim and attempt to assert
        it against us in the hopes of obtaining some monetary benefit. To resolve
        such a
        claim, including payment, may cost us considerable time, effort and expense.
        Any
        of these may impair management’s implementation of the business plan with the
        consequence of a loss of opportunity.
 
 **Risks
        Related to Our Common Stock**
 
 ***Because
        our common stock is traded on the OTC Bulletin Board, your ability to sell
        your
        shares in the secondary trading market may be limited.***
 
 Our
        common stock currently is traded on the over-the-counter market on the OTC
        Bulletin Board. Consequently, the liquidity of our common stock is limited,
        not
        only in the number of shares that are bought and sold, but also through delays
        in the timing of transactions, and coverage by security analysts and the
        news
        media, if any, of us. As a result, prices for shares of our common stock
        may be
        lower than might otherwise prevail if our common stock was traded on a national
        securities exchange, such as The New York Stock Exchange or The Nasdaq Stock
        Market, LLC.
  ***Our
        common stock may be removed from the OTC Bulletin Board, which would likely
        cause the trading price of our common stock to decline and affect our ability
        to
        raise capital in the future.***
 
 Under
        applicable NASD Rules, if we are delinquent in our reporting obligations
        three
        times in a 24-month period and/or are actually removed from the OTC Bulletin
        Board for failure to file two times in a 24-month period, in each case, we
        would
        be ineligible for quotation on the OTC Bulletin Board for a period of one
        year.
        On April 5, 2006, we received notice from the OTC Bulletin Board that unless
        we
        cured our delinquency in filing the Annual Report on Form 10-K for the year
        ended December 31, 2005 prior to the expiration of the grace period (May
        5,
        2006), our common stock would be removed from the OTC Bulletin Board effective
        May 9, 2006. We cured this delinquency with the filing of our Annual Report
        on
        Form 10-K filed on May 1, 2006. On March 2, 2007, we received notice from
        the
        OTC Bulletin Board that unless we cured our delinquency in filing the Annual
        Report on Form 10-K for the year ended November 30, 2006 prior to the expiration
        of the grace period (April 2, 2007), our common stock would be removed from
        the
        OTC Bulletin Board effective April 3, 2007. We cured this delinquency with
        the
        filing of our Annual Report on Form 10-K filed on March 29, 2007. To date,
        we
        have been delinquent two times in the past 24-month period. Should quotation
        of
        our common stock on the OTC Bulletin Board or a similar facility cease for
        any
        reason, the liquidity of our common stock and our ability to raise equity
        capital would likely decrease.
  19
 
 ***Because
        our shares are “penny stocks,” you may have difficulty selling them in the
        secondary trading market.***
 
 Federal
        regulations under the Exchange Act regulate the trading of so-called “penny
        stocks,” which are generally defined as any security not listed on a national
        securities exchange, priced at less than $5.00 per share and offered by an
        issuer with limited net tangible assets and revenues. Since our common stock
        currently trades on the OTC Bulletin Board at less than $5.00 per share,
        our
        common stock is a “penny stock” and may not be traded unless a disclosure
        schedule explaining the penny stock market and the risks associated therewith
        is
        delivered to a potential purchaser prior to any trade.
 
 In
        addition, because our common stock is not listed on any national securities
        exchange and currently trades at less than $5.00 per share, trading in our
        common stock is subject to Rule 15g-9 under the Exchange Act. Under this
        rule,
        broker-dealers must take certain steps prior to selling a “penny stock,” which
        steps include:
 
 ·
              obtaining
                  financial and investment information from the investor;·
              obtaining
                  a written suitability questionnaire and purchase agreement signed
                  by the
                  investor; and·
              providing
                  the investor a written identification of the shares being offered
                  and the
                  quantity of the shares.
 
 If
        these
        penny stock rules are not followed by the broker-dealer, the investor has
        no
        obligation to purchase the shares. The application of these comprehensive
        rules
        will make it more difficult for broker-dealers to sell our common stock and
        our
        shareholders, therefore, may have difficulty in selling their shares in the
        secondary trading market.
 
 ***Our
        stock price has been and may continue to be volatile and an investment in
        our
        common stock could suffer a decline in value.***
 
 Trading
        of our common stock has been sporadic, and the trading volume has generally
        been
        low. Even a small trading volume on a particular day or over a few days may
        affect the market price of our common stock. The market price of our common
        stock may fluctuate significantly in response to a number of factors, some
        of
        which are beyond our control. These factors include:
 
 ·
              announcements
                  of research activities and technology innovations or new products
                  by us or
                  our competitors;·
              changes
                  in market valuation of companies in our industry
                  generally;·
              variations
                  in operating results;·
              changes
                  in governmental regulations;·
              results
                  of research studies of our products or our competitors’
                  products;·
              regulatory
                  action or inaction on our products or our competitors’
                  products;·
              changes
                  in our financial estimates by securities analysts;·
              general
                  market conditions for companies in our industry;
  20
  ·
              broad
                  market fluctuations; and·
              economic
                  conditions in the United States or abroad.
 
 ***Our
        directors and executive officers own a significant number of shares of our
        common stock to control our company, which could discourage or prevent a
        takeover, even if an acquisition would be beneficial to our stockholders.***
 
 Certain
        of our directors and our current executive officer own or control approximately
        80% of our outstanding voting power. Accordingly, these stockholders,
        individually and as a group, will be able to influence the outcome of
        stockholder votes, involving votes concerning the election of directors,
        the
        adoption or amendment of provisions in our certificate of incorporation and
        bylaws and the approval of certain mergers or other similar transactions,
        such
        as a sale of substantially all of our assets. Such control by existing
        stockholders could have the effect of delaying, deferring or preventing a
        change
        in control of us.
 
 ***We
        do not pay cash dividends, so any return on an investment must come from
        appreciation.***
 
 We
        do not
        intend to pay any cash dividends in the foreseeable future and, therefore,
        any
        return on an investment in our common stock must come from increases in the
        fair
        market value and trading price of our common stock.
 
 ***We
        may issue additional equity securities that will dilute our stockholders.***
 
 We
        may
        issue additional equity securities to raise capital and through the exercise
        of
        options, warrants and convertible debt that is outstanding or may be
        outstanding. These additional issuances will have a dilutive effect on our
        existing stockholders.
  **ITEM
        7. FINANCIAL STATEMENTS**
  The
        financial statements required by item 7 are included in this Annual Report
        on
        Form 10-KSB beginning on page F-1.
  **ITEM
        8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL** **DISCLOSURE**
  On
        May 3,
        2007, the Company received notice that BerensonLLP
        (“Berenson”), the Company’s independent registered public accountants, had
        combined with J.H. Cohn LLP (“J.H. Cohn”), with J.H. Cohn as the
        surviving entity.
        OnMay
        31,
        2007, the Company’s Board of Directors approved the engagement of J.H. Cohn as
        Berenson’s successor to continue as the Company’s independent registered public
        accountants for the fiscal year ending November 30, 2007.
  The
        report of Berensonon the
        financial statements of the Company as of and for the fiscal year ended November
        30, 2006 did not contain an adverse opinion or a disclaimer of opinion and
        was
        not qualified or modified as to uncertainty, audit scope, or accounting
        principles, except that Berenson’s report on the Company’s financial statements
        for fiscal year ended November 30, 2006 did contain an explanatory paragraph
        regarding their substantial doubt as to the Company’s ability to continue as a
        going concern, and the lack of any adjustments to the financial statements
        that
        might result from that circumstance.
  During the Company’s fiscal year ended November 30, 2006 and subsequent interim
        periods preceding the engagement of J.H. Cohn, there were no disagreements
        between the Company and Berensonon any
        matter of accounting principles or practices, financial statement disclosure,
        or
        auditing scope or procedure, which disagreements, if not resolved to the
        satisfaction of Berenson,
        would
        have caused Berensonto make
        reference to the subject matter of the disagreements in connection with its
        audit reports on the Company’s financial statements. During the Company’s past
        fiscal year and the interim period through the engagement of J.H. Cohn, Berenson
        did not advise the Company of any of the matters specified in Item
        304(a)(1)(iv)(B) of Regulation S-B.
  21
  On
        February 28, 2006, we dismissed Weinberg & Co., P.A. ("Weinberg") as the
        auditor for Pacific Magtron International Corp. Effective February 28, 2006,
        we
        engaged Berenson, subject to the U.S. Bankruptcy Court's approval, to serve
        as
        the independent public accountants to audit our consolidated financial
        statements for the calendar year ending December 31, 2005. Weinberg's report
        on
        our consolidated financial statements for the calendar year ended December
        31,
        2004 did not contain an adverse opinion or a disclaimer of opinion, and was
        not
        qualified or modified as to uncertainty, audit scope or accounting principles,
        except that Weinberg's report on our consolidated financial statements for
        the
        calendar year ended December 31, 2004 did contain a modification paragraph
        that
        expressed substantial doubt about the Company's ability to continue as a
        going
        concern. During our past calendar years and the interim period through February
        28, 2006, we had no disagreements with Weinberg on any matter of accounting
        principles or practices, financial statement disclosure, or auditing scope
        or
        procedure, which disagreements, if not resolved to Weinberg's satisfaction,
        would have caused Weinberg to make reference to the subject matter of the
        disagreement in connection with its report. During our past calendar year
        and
        the interim period through February 28, 2006, Weinberg did not advise us
        of any
        of the matters specified in Item 304(a)(1)(B) of Regulation S-B. During our
        calendar year ended December 31, 2004, and the interim period through February
        28, 2006, we have had no consultations with Berenson concerning: (a) the
        application of accounting principles to a specific transaction or the type
        of
        opinion that might be rendered on our financial statements as to which we
        received oral advice that was an important factor in reaching a decision
        on any
        accounting, auditing or financial reporting issue; or (b) any disagreements,
        as
        defined in Item 304(a)(1) of Regulation S-K. The appointment of Berenson
        as
        independent public accountants was recommended and unanimously approved by
        our
        Board of Directors.
  **ITEM
        8A. CONTROLS AND PROCEDURES**
  **(a)**
              **Evaluation
                  of Disclosure Controls and
                  Procedures**
 
 Based
        on
        her evaluation of our disclosure controls and procedures (as defined in Rules
        13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of
        1934,
        as amended (the “Exchange Act”)) as of November 30, 2007, our Chief Executive
        Officer and Chief Financial Officer has concluded that our disclosure controls
        and procedures are designed to ensure that information required to be disclosed
        by us in the reports that we file or submit under the Exchange Act is recorded,
        processed, summarized, and reported within the time periods specified in
        the
        SEC’s rules and forms and is accumulated and communicated to the company’s
        management, as appropriate, to allow timely decisions regarding required
        disclosure, and are operating in an effective manner.  It
        should
        be noted that the design of any system of controls is based in part upon
        certain
        assumptions about the likelihood of future events, and there can be no assurance
        that any design will succeed in achieving its stated goals under all potential
        future conditions, regardless of how remote.
  **(b)**
              **Changes
                  in Internal Controls****Over
                  Financial Reporting**
 
 During
        the fiscal quarter ended November 30, 2007, there were no changes in our
        internal control over financial reporting that have materially affected,
        or are
        reasonably likely to materially affect, our internal control over financial
        reporting.
  **ITEM
        8B. O** **THER** **I** **NFORMATION**
  Not
        applicable.
  22
  **PART
        III**
  **ITEM
        9. DIRECTORS** **,
        EXECUTIVE OFFICERS** **,
        PROMOTERS, CONTROL PERSONS** **AND CORPORATE GOVERNANCE** **;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT**
  The
        following table sets forth the names of our directors and executive officers,
        their ages and the positions they currently hold. Each such person became
        an
        officer and/or director of the company immediately after the closing of the
        merger. The positions that Drs. Olszewski and Gilligan held with Herborium
        prior
        to the merger are described in the biographical information set forth below.
  **Name**
              
              **Age**
              
              **Position**Dr.
                  Agnes P. Olszewski
              
              51
              
              Chief
                  Executive Officer, Chief Financial Officer and DirectorDr.
                  James P. Gilligan
              
              56
              
              Consultant
                  and DirectorMax
                  G. Ansbacher
              
              71
              
              DirectorWayne
                  I. Danson
              
              54
              
              Director
  ***Dr.
        Agnes Olszewski.*** Dr.
        Olszewski is a ****** co-founder
        of Herborium, Inc. and served as co-Chief Executive Officer and President
        Business Development and director of Herborium, Inc. since its inception
        in 2000
        until the merger. She was appointed as our Chief Executive Officer, Acting
        Chief
        Financial Officer and director concurrently with the closing of the merger.
        In
        addition, concurrently with the closing of the merger, she was appointed
        director of our subsidiary Herborium. Until such time as we receive a minimum
        of
        $1,250,000 of financing, Dr. Olszewski will not devote her full time to our
        company, and will continue to engage in her activities as a professor. Dr.
        Olszewski has over 20 years experience in business strategy, strategic marketing
        management and international business. She holds M.A. in Consumer Psychology
        and
        Ph.D. degrees from Warsaw University, Poland, and an M.B.A. degree from Fordham
        University, New York City. Dr. Olszewski has been a consultant and a team
        leader
        on strategic management and competitive marketing strategies for leading
        American corporations, as well as foreign companies and institutions. In
        her
        capacity as an international consultant, she had lead multicultural negotiations
        and managed diverse teams of professionals. She has also been responsible
        for
        developing and implementing business and marketing strategies in the United
        States and foreign markets. After the collapse of communism in Central Europe,
        Dr. Olszewski formed A&T Global Marketing Inc., one of the first consulting
        firms in the U.S. focusing on the transfer of western management and financial
        know-how into transitional economies. A&T Global Marketing was also involved
        in advising American corporations on entry strategies into the emerging markets
        of Europe and Asia. Dr. Olszewski has successfully led the efforts to form
        Joint
        Ventures in Poland, China and France. She was President and Chief Executive
        Officer of G.O. International, Inc., which she co-founded with Dr. James
        P.
        Gilligan, a consulting firm specializing in business strategies for
        pharmaceutical industry and global technology transfer. G.O. International
        merged with Herborium, Inc. in June 2002.
  ***Dr.
        James P. Gilligan.*** Dr.
        Gilligan is a co-founder of Herborium, Inc. and served co-Chief Executive
        Officer and President Product Development and director of Herborium, Inc.
        since
        its inception in 2000 until the merger. He was appointed as our director
        and as
        a director of our subsidiary Herborium concurrently with the closing of the
        merger. He is currently providing consulting services to us and has agreed
        to
        serve on a full-time basis as our President and Chief Operating Officer within
        six months after we receive a minimum of $2,500,000 of financing. He has
        over 25
        years experience in the pharmaceutical and biotechnology industry. He received
        his Ph.D. in Pharmacology and Toxicology from the University of Connecticut,
        during which time he completed a special research fellowship at the Cleveland
        Clinic Atherosclerosis Research Unit. He performed his post-doctoral training
        at
        the Roche Institute of Molecular Biology. Dr. Gilligan is author or co-author
        of
        15 U.S. patents, as well as multiple PCT patents and the author of numerous
        scientific publications. He also received a M.S. in International Business
        from
        Seton Hall University. Dr. Gilligan is Vice President of Product Development
        at
        Unigene Laboratories Inc. Fairfield, NJ, a biopharmaceutical company. He
        was a
        founding member of Unigene in 1981 and participated in the design of its
        R&D
        facility in 1983 and the cGMP biotechnology manufacturing facility in 1993.
        His
        responsibilities have included coordination of all U.S. and international
        pre-clinical research, toxicology, and regulatory filings as well as design
        and
        management of clinical studies.
  23
  ***Max
        G. Ansbacher*** **.** Mr.
        Ansbacher was appointed as our director and as a director of our subsidiary
        Herborium concurrently with the closing of the merger. He is the principal
        of
        Ansbacher Investment Management, a management firm concentrating in
        sophisticated options strategies. The firm currently manages over $158 million.
        Prior to founding his firm, Mr. Ansbacher managed options accounts for the
        investment banking firm Bear Stearns. He is the author of three books on
        investing and his book *The
        New Options Market* is one
        of the all-time best selling books on exchange traded options. Mr. Ansbacher
        is
        a graduate of Phillips Exeter Academy, the University of Vermont and Yale
        law
        school. He also holds an advanced degree in tax law from New York University,
        and is a member of the bar in New York, Vermont and the District of Columbia.
  ***Wayne
        I. Danson*** **.** Mr. Danson was appointed as our director and as a director of our subsidiary
        Herborium.com concurrently with the closing of the merger. Prior to the merger,
        Mr. Danson served as Chief Executive Officer and as a director of LW. Mr.
        Danson
        was appointed a director on January 3, 2000, President on April 30, 2002
        and
        Chief Executive Officer on June 7, 2005. Mr. Danson is the Managing Director
        and
        Founder of Danson Partners, LLC, a financial advisory firm specializing in
        middle market companies in the real estate and technology industries. Prior
        to
        forming Danson Partners, LLC in May 1999, Mr. Danson was Managing Director
        of
        PricewaterhouseCoopers LLP's Real Estate Capital Markets Group. Prior to
        rejoining PricewaterhouseCoopers in 1996, Mr. Danson was a Managing Tax Partner
        with Kenneth Leventhal & Company in New York and Washington D.C., where he
        was also Kenneth Leventhal's National Director of its International and Debt
        Restructure Tax Practices. Prior to his involvement with Kenneth Leventhal
        in
        1988, Mr. Danson was a Managing Director with Wolper Ross & Co., Ltd. in New
        York, a closely-held financial services company specializing in financial
        tax,
        pension consulting, designing financial instruments and providing venture
        capital and investment banking services. Mr. Danson graduated with honors
        from
        Bernard M. Baruch College with a B.B.A. in Accounting and an M.B.A. in Taxation.
        He is a certified public accountant and a member of the AICPA and the New
        York
        State Society of CPAs.
  We
        intend
        to obtain an additional board member who is “independent” as determined in
        accordance with the applicable requirements of The NASDAQ Stock Market LLC
        and
        other applicable rules and regulations of the Securities and Exchange
        Commission. While we have had discussions with potential candidates, we had
        no
        active candidates at the time of filing of this report. All directors will
        hold
        office until the next annual meeting of stockholders and until their successors
        have been elected and qualified. Officers serve at the discretion of the
        Board
        of Directors.
  **Family
        Relationships**
  There
        are
        no family relationships among our directors, executive officers or persons
        nominated or chosen to become our directors or executive officers.
  **Involvement
        in Certain Legal Proceedings**
  No
        director, person nominated to become a director, executive officer, promoter
        or
        control person has been involved in any legal proceeding during the past
        five
        years that is required to be disclosed pursuant to Item 401(f) of Regulation
        S-K.
 
 **Board
        Committees**
 
 We
        do not
        have an Audit Committee, and therefore have not determined whether we have
        an
“audit committee financial expert,” as such term is defined in Item 401(h) of
        Regulation S-K. We also do not have a nominating or compensation committee.
        The
        functions of such committees are performed by the entire board. The Company
        believes that due to the small size of the Board, no separate nominating
        committee is necessary
  ***Other
        Significant Employees***
  None.
  ***Corporate
        Governance***
  In
        March
        2007, we established a Code of Business Conduct and Ethics (the "Code"),
        applicable to all of our employees, including our principal executive,
        accounting and financial officers, which states that we are committed to
        the
        highest standards of legal and ethical conduct. This Code sets forth our
        policies with respect to the way we conduct ourselves individually and operate
        our business. The provisions of this Code are designed to deter wrongdoing
        and
        to promote honest and ethical conduct among our employees, officers and
        directors. The Code is attached as an exhibit to this report. We will satisfy
        our disclosure requirement under Item 5.05 of Form 8-K regarding certain
        amendments to, or waivers of, any provision of our Code by posting such
        information on our corporate website. We will provide a copy of the Code,
        without charge, upon request. You may request a copy of the Code by writing
        to
        the Company’s corporate office located at Park 80W Plaza II, Suite 200, Saddle
        Brook, NJ 07663.
  24
  ***Section
        16(a) Beneficial Ownership Reporting Compliance***
  Section
        16(a) of the Exchange requires that our directors and executive officers
        and any
        persons who own more than ten percent of our common stock file with the SEC
        initial reports of ownership and reports of changes in ownership of our common
        stock and other equity securities. Such persons are required by SEC regulations
        to furnish us with copies of all such reports that they file. As of the fiscal
        year ending November 30, 2007, Form 3 reports were not timely filed by James
        P.
        Gilligan and Max G. Ansbacher, directors of the Company.
  **ITEM
        10. EXECUTIVE COMPENSATION**
  ***Summary
        Compensation Table***
  The
        following table sets forth the compensation Herborium paid to Drs. Agnes
        P.
        during our last fiscal year ended November 30, 2007. Dr. Olszewski became
        our
        Chief Executive Officer and Acting Chief Financial Officer on September 18,
        2006. During the fiscal year ended November 30, 2007, we had no other acting
        executive officer.
 
 **Name
                  and Principal Position**
              
              **Year**
              
              **Salary
                  ($)**
              
              **All
                  Other Compensation**
                **($)**
              
              **Total**
                **($)**Dr.
                  Agnes P. Olszewski
              
              
              2007
              
              $
              150,000
              (1)
              
              
              (2)
              $
              150,000*Chief
                  Executive Officer and Acting Chief Financial Officer*
 
 (1)
        Dr.
        Olszewski’s compensation for fiscal year 2007 has been accrued but not
        paid.
  (2)
        Dr.
        Olszweski did not receive aggregate personal benefits or perquisites in excess
        of $10,000 during fiscal year 2007.
 
 ***Outstanding
        Equity Awards at Fiscal Year-End***
 
 As
        of the
        end of our fiscal year 2007, there were no outstanding equity awards for
        our
        Chief Executive Officer and Acting Chief Financial Officer.
  ***Long-Term
        Incentive Plans***
  On
        January 19, 2007, the Board of Directors approved the 2007 Stock Plan to
        provide
        (i) designated employees of the Company and its subsidiaries, (ii) certain
        consultants and advisors who perform services for the Company or its
        subsidiaries and (iii) non-employee members of the Board of Directors of
        the
        Company with the opportunity to receive grants of incentive stock options,
        nonqualified stock options and restricted stock..
 
 ***Employment
        and Consulting Agreement; Post-Termination or Change-In-Control
        Payments***
  *Agreement
        with Dr. Agnes P. Olszewski*
 
 On
        September 18, 2006, we entered into an employment agreement with Dr. Olszewski
        who will serve as President, Chief Executive Officer and Acting Chief Financial
        Officer until such time as we hire a controller or Chief Financial Officer.
        Dr.
        Olszewski has the position of Chairman of the Board of Directors. The employment
        agreement provides for an initial four-year term of employment, with an addition
        twelve-month extension at Dr. Olszewski’s option. Under the agreement, Dr.
        Olszewski is not required to work full-time until such time as we have received
        debt or equity financing in an aggregate of amount of $1,250,000 or more.
        Until
        we obtain such amount of financing, Dr. Olszewski will receive 75% of her
        base
        salary. Her annual base salary is $200,000 with a bonus equal to (i) for
        the
        first three years, 5% of EBITDA (as defined in the agreement) and (ii)
        thereafter 5% of Net Income before bonus (as defined in the agreement). She
        will
        be eligible for an additional bonus ranging from $75,000 to $200,000 in the
        event that our Pre-Tax Income for a fiscal year exceeds that of the prior
        fiscal
        year by 150% or more. Under the employment agreement,. Dr. Olszewski will
        be an
        eligible participant under one or more stock option plans adopted by us.
        Dr.
        Olszewski will be subject to non-competition provisions during the term of
        the
        agreement or until September 30, 2012 in the event that she extends the
        agreement for the additional twelve month period.
  25
 
 Dr.
        Olszewski’s employment may be terminated in the event of extended disability or
        incapacity or a “For Cause Event” as defined in the agreement. Dr. Olszewski may
        terminate her employment voluntarily with 180 days prior written notice,
        upon
        our material breach of the agreement with 10 days prior written notice and
        upon
        a “Change of Control” as defined in the agreement upon 90 days prior written
        notice. In the event of her termination, Dr. Olszewski or her beneficiary,
        as
        the case may be, will have the right to receive all accrued but unpaid base
        salary. In the event of her death, her termination based on a material breach
        by
        us or our termination of her for any reason other than a For Cause Event,
        she
        will be entitled to receive $600,000. In the event of her termination for
        or
        after a Change of Control, she will be entitled to receive an amount equal
        to
        the product of her base salary multiplied by 2.99. After (i) the expiration
        of
        the term (including an extension of one year by Dr. Olszewski) or (ii) her
        voluntary termination of the employment agreement, Dr. Olszewski may, at
        her or
        our option in the case of clause (i) or at our option in the case of clause
        (ii), act as a consultant to us for one year and receive compensation equal
        to
        50% of her base salary.
 
 *Agreement
        with Dr. James P. Gilligan*
  On
        September 18, 2006 we entered into a consulting and employment agreement
        with
        Dr. Gilligan who will serve as co-President and Chief Operating Officer.
        The
        agreement provides for an initial term of employment expiring on September
        20,
        2011, with an addition twelve-month extension at Dr. Gilligan’s option. Under
        the agreement, Dr. Gilligan’s employment will not commence until six months
        after we have received debt or equity financing in the aggregate amount of
        $2,500,000, and until such date, Dr. Gilligan will serve as a consultant
        to us
        at an hourly rate of $120 per hour and will be permitted to continue his
        full-time employment elsewhere. Upon his full-time employment, his annual
        base
        salary will be $200,000 with a bonus equal to (i) for the first three years,
        5%
        of EBITDA (as defined in the agreement) and (ii) thereafter 5% of Net Income
        before bonus (as defined in the agreement. He will be eligible for an additional
        bonus ranging from $75,000 to $200,000 in the event that our Pre-Tax Income
        for
        a fiscal year exceeds that of the prior fiscal year by 150% or more. Under
        the
        employment agreement, Dr. Gilligan will be an eligible participant under
        one or
        more stock option plans adopted by us. Dr. Gilligan will be subject to
        non-competition provisions during the term of the agreement or until September
        30, 2012 in the event that he extends the agreement for the additional
        twelve-month period.
 
 Dr.
        Gilligan’s employment may be terminated in the event of extended disability or
        incapacity or a “For Cause Event” as defined in the agreement. Dr. Gilligan may
        terminate his employment voluntarily with 180 days prior written notice,
        upon
        our material breach of the agreement with 10 days prior written notice and
        upon
        a “Change of Control” as defined in the agreement upon 90 days prior written
        notice. In the event of his termination, Dr. Gilligan or his beneficiary,
        as the
        case may be, will have the right to receive all accrued but unpaid base salary.
        In the event of his death, his termination based on a material breach by
        us or
        our termination of him for any reason other than a For Cause Event, he will
        be
        entitled to receive $600,000. In the event that his employment is terminated
        for
        or after a Change of Control, he will be entitled to receive an amount equal
        to
        the product of his base salary multiplied by 2.99. After (i) the expiration
        of
        the term (including an extension of one year by Dr. Gilligan) or (ii) his
        voluntary termination of the employment agreement, Dr. Gilligan may, at his
        or
        our option in the case of clause (i) or at our option in the case of clause
        (ii), act as a consultant to us for one year and receive compensation equal
        to
        50% of his base salary.
 
 ** ***Compensation
        Committee Interlocks and Insider Participation***
  W e
        do not
        currently have a separately designated compensation committee. Instead the
        entire Board of Directors makes executive officer compensation decisions.
        Prior
        to the merger, Herborium, Inc. had no compensation committee. See *“Item
        12.*  *Certain
        Relationships and Related Transactions, and Director Independence”* below
        for
        more information about related party transactions involving Drs. Olszewski
        and
        Gilligan.
  26
  ***Directors
        Compensation***
  Our
        directors did not receive any cash or stock compensation for their services
        as a
        director in fiscal 2007, but were reimbursed for all of their out-of-pocket
        expenses incurred in connection with the rendering of services as a director.
        Dr. James P. Gilligan earned compensation pursuant to his consulting agreement
        with us during fiscal year 2007 as set forth below. Dr. Agnes P. Olszweski,
        our
        Chief Executive Officer and Acting Chief Financial Officer and a director,
        earned compensation pursuant to her employment agreement with us as set forth
        in
        the Summary Compensation Table on page 26.
 
 **Name**
              
              **Fees
                  Earned or Paid in Cash ($)**
              
              **All
                  Other Compensation ($)(1)**
              
              **Total
                  ($)**Dr.
                  James P. Gilligan
              
              $
              0
              
              $
              66,667
              (2)
              $
              66,667Max
                  G. Ansbacher
              
              $
              0
              
              
              -
              
              $
              0Wayne
                  I. Danson
              
              $
              0
              
              
              -
              
              $
              0
 
 (1)
        No
        director receive aggregate personal benefits or perquisites in excess of
        $10,000
        during fiscal year 2007.
  (2)
        Dr.
        Gilligan earned compensation for fiscal year 2007 pursuant to his consulting
        agreement with us as described above under the heading “Employment and
        Consulting Agreements.” Such compensation has been accrued but not paid.
  **ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
        MANAGEMENT** **AND RELATED STOCKHOLDER MATTERS** **.**
  The
        following table contains information about the beneficial ownership of our
        common stock as of February 22, 2008 for:
  ·
              any
                  person who owned more than five percent (5%) of our common
                  stock;
  ·
              each
                  of our directors;
  ·
              our
                  executive officers named in theSummary
                  Compensation Table in*Part
                  III - Item 10. Executive Compensation*of
                  this Annual Report on Form 10-KSB;
                  and
  ·
              all
                  directors and executive officers as a
                  group.
 
 Beneficial
        ownership is determined in accordance with the rules of the SEC and generally
        includes voting or investment power with respect to securities. Except as
        indicated by footnote, and subject to community property laws where applicable,
        the persons named in the table below have sole voting and investment power
        with
        respect to all shares of common stock shown as beneficially owned by them.
        The
        percentage of beneficial ownership is based on 117,567,080 shares of common
        stock outstanding as of February 22, 2008.
  27
    **Common
                  Stock (1)****Name
                  and Address of Stockholder**
              
              **Amount
                  and Nature**
                **of
                  Beneficial Ownership(2)**
              
              **Percent
                  of Class (2)***Directors
                  and Officers*Dr.
                  Agnes P. Olszewski
              
              
              44,811,063
              (3)
              
              38.1
              %Herborium
                  Group, Inc.
                3
                  Oak Street
                Teaneck,
                  New Jersey 07666Dr.
                  James P. Gilligan
              
              
              42,992,563
              (4)
              
              36.6
              %985
                  Carteret Ave
                Union,
                  New Jersey 07083Max
                  G. Ansbacher
              
              
              434,268
              
              
              *
              %515
                  Madison Avenue, 29th Floor
                New
                  York, NY 10022Wayne
                  I. Danson
              
              
              347,373
              (5)
              
              *
              %420
                  Lexington Avenue, Suite 2739
                New
                  York, NY 10170*All
                  Directors and Officers as a Group(4)*
              
              
              88,585,267
              
              
              75.3
              %
 
 *
        Less
        than 1 percent
  (1)
              The
                  holders of common stock are entitled to one vote per share.(2)
              The
                  number of shares of common stock and the percent of the class in
                  the table
                  and these notes to the table have been calculated in accordance
                  with Rule
                  13d-3 under the Exchange Act, and assume, on a stockholder by stockholder
                  basis, that each stockholder has converted all securities owned
                  by such
                  stockholder that are convertible into common stock at the option
                  of the
                  holder currently or within 60 days of February 22,
                  2008.(3)
              Includes
                  515,693 shares of common stock held by Dr. Olszewksi’s son who resides in
                  the same household.(4)
              Includes
                  434,268 shares of common stock held by Dr. Gilligan’s son who resides in
                  the same household.(5)
              Mr.
                  Danson’s shares were received as a distribution as a shareholder of
                  Advanced Communications Technologies, Inc - See “Description of Business -
                  Company History.”
 
 ***Equity
        Compensation Plan Information***
 
 The
        following table sets forth information as of November 30, 2007 regarding
        our
        existing compensation plans and individual compensation arrangements pursuant
        to
        which our equity securities are authorized for issuance to employees or
        non-employees (such as directors, consultants and advisors) in exchange for
        consideration in the form of services:
 
 **Plan
                  Category**
              
              **Number
                  of securities to be issued upon exercise of outstanding options,
                  warrants
                  and rights**
              
              **Weighted-average
                  exercise price of outstanding options, warrants and
                  rights**
              
              **Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in column
                  (a))****(a)**
              
              **(b)**
              
              **(c)**Equity
                  compensation plans approved by security holders
              
              
              None
              
              $
              N/A
              
              
              NoneEquity
                  compensation plans not approved by security holders (1)
              
              
              None
              
              $
              N/A
              
              
              14,500,000Total
              
              
              None
              
              $
              N/A
              
              
              14,500,000
  (1)
              Securities
                  are issuable pursuant to the Company’s 2007 Stock Plan. See Note 10 (b) to
                  the accompanying consolidated financial
                  statements.
  28
  **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION** **S**
  Financing
        of Herborium’s operations has been provided by equity investments amounting
        $200,000 and loans amounting to $201,000 as of November 30, 2007 from our
        founders, Drs. Olszewski and Gilligan, and aggregate funding from friends
        and
        family of approximately $274,500 as of November 30, 2007. The loans from
        founders are unsecured demand loans that do not bear interest. Funding from
        friends and family aggregating $188,500 was received pursuant to subscription
        agreements entered into in fiscal 2001 through 2005 in connection with a
        contemplated private placement of equity securities. Under the terms of the
        subscription agreements, the type of equity security to be issued to the
        investors will be determined through negotiation with the principal investors
        in
        the private placement, and the price to be paid by the investors will be
        the
        same as the principal investors in the financing. The number of shares to
        be
        received by each investor will be a function of the amount of capital raised
        from, and the price per share paid by, the principal investors. The subscription
        agreements do not have an expiration date, provisions for interest payments,
        nor
        the form of warrants in the event the private placement is to be in the form
        of
        debt. An additional $10,000 of funding from friends and family was received
        pursuant to two secured loan agreements. The loans are repayable at on or
        before
        January 14, 2008 with a 20% premium. In the event repayment is not made by
        that
        date, the obligations are to be satisfied with shares of common stock owned
        by
        the Company’s co-founders. Through February 22, 2008, no payments of principal
        or premium have been made, nor have any shares of common stock been transferred
        in satisfaction thereof.
  **DIRECTOR
        INDEPENDENCE**
 
 The
        Board
        of Directors currently consists of four members, two of whom are “independent”
as defined under applicable rules of the SEC and The NASDAQ Stock Market
        LLC.
        The two independent members of the Board of Directors are Max G. Ansbacher
        and
        Wayne I. Danson. For a director to be considered independent, the Board must
        determine that the director has no relationship which, in the opinion of
        the
        Board, would interfere with the exercise of independent judgment in carrying
        out
        the responsibilities of a director.
 
 Herborium
        does not have a separately designated audit, nominating or compensation
        committee or committee performing similar functions, and the full board performs
        the functions of these committees. Under the SEC’s independence requirements for
        audit committee members, neither Dr. Agnes P. Olszewski or Dr. James P. Gilligan
        is independent.
  **ITEM
        13. EXHIBITS**
 Exhibit
                    No.
                
                Description2.1
                
                Fourth
                    Amended Plans of Reorganization for Pacific Magtron International
                    Corp.
                    and LiveWarehouse, Inc. (incorporated by reference to Exhibit
                    2.1 to
                    Pacific Magtron International Corp.’s Current Report on Form 8-K filed on
                    August 16, 2006).2.2
                
                Order
                    Approving Fourth Amended Plans of Reorganization for Pacific
                    Magtron
                    International Corp. and LiveWarehouse, Inc. entered August 11,
                    2006
                    (incorporated by reference to Exhibit 2.2 to Pacific Magtron
                    International
                    Corp.’s Current Report on Form 8-K filed on August 16,
                    2006).
  29
  2.3
                
                Agreement
                    and Plan of Merger, dated as of September 18, 2006, by and among
                    Pacific
                    Magtron International Corp., LiveWarehouse, Inc. and Herborium,
                    Inc.
                    (incorporated by reference to Exhibit 2.3 to the Company’s Current Report
                    on Form 8-K filed on September 22, 2006)3(i)
                
                Second
                    Amended and Restated Articles of Incorporation of Pacific Magtron
                    International Corp. (incorporated by reference to Exhibit 3(i)
                    to the
                    Company’s Current Report on Form 8-K filed on September 22,
                    2006)3(ii)
                
                Amended
                    and Restated Bylaws of Pacific Magtron International Corp. (incorporated
                    by reference to Exhibit 3(ii) to the Company’s Current Report on Form 8-K
                    filed on September 22, 2006)10.1
                
                Order
                    Approving Settlement Agreement and Mutual Settlement Agreement
                    and Release
                    (incorporated by reference to Exhibit 10.1 to Pacific Magtron
                    International Corp.’s Current Report on Form 8-K filed on August 16,
                    2006).10.2
                
                Employment
                    Agreement dated as of September 18, 2006 between Pacific Magtron
                    International Corp. and Dr. Agnes P. Olszewski (incorporated
                    by reference
                    to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
                    September 22, 2006)10.3
                
                Employment
                    Agreement dated as of September 18, 2006 between Pacific Magtron
                    International Corp. and Dr. James P. Gilligan (incorporated by
                    reference
                    to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
                    September 22, 2006)14
                
                Code
                    of Ethics21
                
                Subsidiaries
                    of the Registrant23.1
                
                Consent
                    of Independent Registered Public Accounting Firm - J.H. Cohn
                    LLP23.2
                
                Consent
                    of Independent Registered Public Accounting Firm - Berenson
                    LLP31.1
                
                Certification
                    of Chief Executive Officer andChief
                    Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of
                    200232.1
                
                Certification
                    of Chief Executive Officer and Chief Financial Officer pursuant
                    to Section
                    906 of the Sarbanes-Oxley Act of 2002
 **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
  ***Audit
        Fees***
  Our
        independent registered public accounting firm, J.H. Cohn, has billed us (a)
        $45,000 in the fiscal year ended November 30, 2007 for the audit of the
        Company’s annual consolidated financial statements and for the review of the
        Company’s Form 10-KSB and (b) a total of $12,000 in the fiscal year ended
        November 30, 2007 for the review of our consolidated financial statements
        included in the Company’s Forms 10-QSB for the quarters ended May 31, 2007
        and August 31, 2007.
  Our
        predecessor independent registered public accounting firm, Berenson, has
        billed
        us (a) $6,250 in the fiscal year ended November 30, 2007 for the review of
        our
        consolidated financial statements included in the Company’s Forms 10-QSB
        for the quarter ended February 28, 2007, (b) $44,789 in the fiscal year ended
        November 30, 2006 for the audit of the Company’s annual consolidated financial
        statements and for the review of the Company’s Form 10-KSB and (c) $10,069
        in the fiscal year ended November 30, 2006 for the review of our consolidated
        financial statements included in the Company’s Forms 10-QSB for the quarter
        ended August 31, 2006 and of our consolidated financial statements for the
        six
        months ended May 31, 2006 included in the Company’s Form 8-K.
  ***Audit-Related
        Fees***
  No
        fees
        were billed in the fiscal year ended November 30, 2007 for audit-related
        services rendered by our independent registered public accounting firm, J.H.
        Cohn, for tax compliance, tax advice and tax planning services.
  30
  Our
        predecessor independent registered public accounting firm, Berenson, has
        billed
        us $5,984 in the fiscal year ended November 30, 2006 for audit-related
        services.
  ***Tax
        Fees***
  No
        fees
        were billed in the fiscal year ended November 30, 2007 for professional services
        rendered by our independent registered public accounting firm, J.H. Cohn,
        for
        tax compliance, tax advice and tax planning services.
  No
        fees
        were billed in the fiscal year ended November 30, 2006 for professional services
        rendered by our predecessor independent registered public accounting firm,
        Berenson, for tax compliance, tax advice and tax planning services.
  ***All
        Other Fees***
  Other
        than the services described above, no other fees were billed by our independent
        registered public accounting firm, J.H. Cohn, for the fiscal year ended November
        30, 2007.
  Other
        than the services described above, no other fees were billed by our predecessor
        independent registered public accounting firm, Berenson, for the fiscal year
        ended November 30, 2007.
  ***Policy
        For Pre-Approval Of Audit And Non-Audit Services***
 
 Our
        Company has not adopted an Audit Committee; therefore, there is no Audit
        Committee policy in this regard. However, our Company does require approval
        in
        advance of the performance of professional services to be provided to our
        Company by its principal accountant. Additionally, all services rendered
        by our
        principal accountant are performed pursuant to a written engagement letter
        between us and the principal accountant.
  31
  **SIGNATURES**
  In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 **HERBORIUM
                  GROUP, INC.**By:
              /s/
                Agnes P. OlszewskiName:
                  Agnes P. OlszewskiTitle:
                  Chief Executive OfficerDate:
                  February 28, 2008
  In
        accordance with the Exchange Act, this amended report has been signed below
        by
        the following persons on behalf of the registrant and in the capacities and
        on
        the dates indicated.
  **SIGNATURE**
              
              **TITLE**
              
              **DATE**/s/
                  Agnes P. Olszewski
              
              Chief
                Executive Officer (Principal Executive
                Officer)Agnes P. Olszewski
              
              and
                  Principal Financial and Accounting Officer) and Director
              
              February
                  28, 2008/s/
                  James P. Gilligan
              
              Consultant
                  and Director
              
              February
                  28, 2008James P. Gilligan*/s/
                  Max G. Ansbacher*Max
                  G. Ansbacher
              
              Director
              
              February
                  28, 2008*Wayne
                  I. Danson*Wayne
                  I. Danson
              
              Director
              
              February
                  28, 2008
  32
  **EXHIBIT
        INDEX**
 Exhibit
                    No.
                
                Description2.1
                
                Fourth
                    Amended Plans of Reorganization for Pacific Magtron International
                    Corp.
                    and LiveWarehouse, Inc. (incorporated by reference to Exhibit
                    2.1 to
                    Pacific Magtron International Corp.’s Current Report on Form 8-K filed on
                    August 16, 2006).2.2
                
                Order
                    Approving Fourth Amended Plans of Reorganization for Pacific
                    Magtron
                    International Corp. and LiveWarehouse, Inc. entered August 11,
                    2006
                    (incorporated by reference to Exhibit 2.2 to Pacific Magtron
                    International
                    Corp.’s Current Report on Form 8-K filed on August 16,
                    2006).2.3
                
                Agreement
                    and Plan of Merger, dated as of September 18, 2006, by and among
                    Pacific
                    Magtron International Corp., LiveWarehouse, Inc. and Herborium,
                    Inc.
                    (incorporated by reference to Exhibit 2.3 to the Company’s Current Report
                    on Form 8-K filed on September 22, 2006)3(i)
                
                Second
                    Amended and Restated Articles of Incorporation of Pacific Magtron
                    International Corp. (incorporated by reference to Exhibit 3(i)
                    to the
                    Company’s Current Report on Form 8-K filed on September 22,
                    2006)3(ii)
                
                Amended
                    and Restated Bylaws of Pacific Magtron International Corp. (incorporated
                    by reference to Exhibit 3(ii) to the Company’s Current Report on Form 8-K
                    filed on September 22, 2006)10.1
                
                Order
                    Approving Settlement Agreement and Mutual Settlement Agreement
                    and Release
                    (incorporated by reference to Exhibit 10.1 to Pacific Magtron
                    International Corp.’s Current Report on Form 8-K filed on August 16,
                    2006).10.2
                
                Employment
                    Agreement dated as of September 18, 2006 between Pacific Magtron
                    International Corp. and Dr. Agnes P. Olszewski (incorporated
                    by reference
                    to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
                    September 22, 2006)10.3
                
                Employment
                    Agreement dated as of September 18, 2006 between Pacific Magtron
                    International Corp. and Dr. James P. Gilligan (incorporated by
                    reference
                    to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
                    September 22, 2006)14
                
                Code
                    of Ethics21
                
                Subsidiaries
                    of the Registrant23.1
                
                Consent
                    of Independent Registered Public Accounting Firm - J.H. Cohn
                    LLP23.2
                
                Consent
                    of Independent Registered Public Accounting Firm - Berenson
                    LLP31.1
                
                Certification
                    of Chief Executive Officer and Chief Financial Officer pursuant
                    to Section
                    302 of the Sarbanes-Oxley Act of 200232.1
                
                Certification
                    of Chief Executive Officer and Chief Financial Officer pursuant
                    to Section
                    906 of the Sarbanes-Oxley Act of 2002




**HERBORIUM
        GROUP, INC.**
 **CONSOLIDATED
        FINANCIAL STATEMENTS**









**HERBORIUM
      GROUP, INC.**




**CONTENTS**


PAGE
            
            F-1
            
            REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPAGE
            
            F-1a
            
            REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPAGE
            
            F-2
            
            CONSOLIDATED
                BALANCE SHEETS AS OFNOVEMBER30, 2007 AND 2006PAGE
            
            F-3
            
            CONSOLIDATED
                STATEMENTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 2007 AND
                2006PAGE
            
            F-4
            
            CONSOLIDATED
                STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY FOR THE YEARS ENDED
                NOVEMBER 30, 2007 AND 2006PAGE
            
            F-5
            
            CONSOLIDATED
                STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED NOVEMBER 30, 2007 AND
                2006PAGES
            
            F6
                - F-14
            
            NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS









REPORT
      OF
      INDEPENDENT REGISTERED


PUBLIC
      ACCOUNTING FIRM





To
      the
      Board of Directors and Stockholders


of
      Herborium Group, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Herborium Group, Inc.
      (the “Company”) as of November 30, 2007, and the related consolidated statements
      of operations, changes in stockholders’ deficiency and cash flows for the year
      then ended. These consolidated financial statements are the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Herborium Group, Inc. as
      of
      November 30, 2007, and the results of its operations and cash flows for the
      year
      then ended in conformity with accounting principles generally accepted in the
      United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company incurred net losses of $643,000
      for the year ended November 30, 2007 and had a working capital deficiency of
      $1,177,000 and a stockholders’ deficiency of $1,144,000 as of November 30, 2007.
      These matters raise substantial doubt about its ability to continue as a going
      concern. Management's plans in regards to these matters are also described
      in
      Note 2. The accompanying consolidated financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.







/s/
      J.H.
      Cohn LLP





New
      York,
      NY


February
      28, 2008




F-1




REPORT
      OF
      INDEPENDENT REGISTERED


PUBLIC
      ACCOUNTING FIRM





To
      the
      Board of Directors and Stockholders


of
      Herborium Group, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Herborium Group, Inc.
      (the “Company”) as of November 30, 2006, and the related consolidated statements
      of operations, changes in stockholders’ deficiency and cash flows for the year
      then ended. These consolidated financial statements are the responsibility
      of
      the Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Herborium Group, Inc. as
      of
      November 30, 2006, and the results of its operations and its cash flows for
      the
      year then ended in conformity with accounting principles generally accepted
      in
      the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 2 to the
      consolidated financial statements, the Company incurred net losses of $340,000
      for the year ended November 30, 2006 and had a working capital deficiency of
      $757,000 as of November 30, 2006. These matters raise substantial doubt about
      its ability to continue as a going concern. Management's plans in regards to
      these matters are also described in Note 2. The accompanying consolidated
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.








/s/
      Berenson LLP





New
      York,
      NY


January
      30, 2007


F-1a





**HERBORIUM
      GROUP, INC.**


**CONSOLIDATED
      BALANCE SHEETS**




**November
                30,****2007**
            
            **2006****ASSETS**Current
                assets:Cash
            
            $
            2,077
            
            $
            4,649Accounts
                receivable
            
            
            4,772
            
            
            5,416Inventory
            
            
            31,181
            
            
            73,890Prepaid
                expenses and other current assets
            
            
            7,292
            
            
            442Total
                Current Assets
            
            
            45,322
            
            
            84,397Property
                and equipment, net of accumulated depreciation
            
            
            4,231
            
            
            6,170Other
                assets, net of accumulated amortization
            
            
            28,997
            
            
            27,728Total
                Other Assets
            
            
            33,228
            
            
            33,898**TOTAL
                ASSETS**
            
            $
            78,550
            
            $
            118,295**LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCY**Current
                liabilities:Accounts
                payable and accrued expenses
            
            $
            640,403
            
            $
            344,655Credit
                card debt payable
            
            
            129,077
            
            
            134,126Lines
                of credit debt payable
            
            
            166,372
            
            
            172,913Due
                to others
            
            
            50,895
            
            
            21,513Due
                to related parties
            
            
            35,000
            
            
            13,000Current
                portion of long-term debt
            
            
            —
            
            
            1,353Due
                to stockholders
            
            
            201,056
            
            
            153,682Total
                Current Liabilities
            
            
            1,222,803
            
            
            841,242**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS’
                DEFICIENCY**Preferred
                stock, $0.001 par value, 10,000 sharesauthorized,
                no shares issued and outstanding
            
            
            -
            
            
            -Common
                stock, $0.001 par value; 500,000,000 sharesauthorized,
                115,567,080 and 108,567,080 shares issued and outstanding at November
                30,
                2007 and 2006, respectively
            
            
            27,000
            
            
            20,000Common
                stock subscribed; no shares issuedand
                outstanding
            
            
            188,500
            
            
            188,500Additional
                paid-in capital
            
            
            500,500
            
            
            180,000Deferred
                consulting fees
            
            
            (106,250
            )
            
            —Accumulated
                deficit
            
            
            (1,754,003
            )
            
            (1,111,447
            )Total
                Stockholders’ Deficiency
            
            
            (1,144,253
            )
            
            (722,947
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**
            
            $
            78,550
            
            $
            118,295




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


F-2





**HERBORIUM
      GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**




**Years
                ended November 30,****2007**
            
            **2006****NET
                SALES**
            
            $
            761,884
            
            $
            827,755**COST
                OF SALES**
            
            
            381,653
            
            
            342,349**GROSS
                PROFIT**
            
            
            380,231
            
            
            485,406**OPERATING
                EXPENSES**Marketing
                and selling
            
            
            237,246
            
            
            286,399General
                and administrative
            
            
            738,321
            
            
            493,016**TOTAL
                OPERATING EXPENSES**
            
            
            975,567
            
            
            779,415Loss
                from operations
            
            
            (595,336
            )
            
            (294,009
            )**OTHER
                EXPENSE**Interest
                expense
            
            
            (45,659
            )
            
            (44,748
            )**TOTAL
                OTHER EXPENSE**
            
            
            (45,659
            )
            
            (44,748
            )**LOSS
                BEFORE PROVISION FOR INCOME TAXES**
            
            
            (640,995
            )
            
            (338,757
            )Provision
                for income taxes
            
            
            1,560
            
            
            1,000**NET
                LOSS**
            
            $
            (642,555
            )
            $
            (339,757
            )Basic
                and diluted loss per share
            
            $
            (.01
            )
            $
            -Weighted
                average number of shares outstanding during the year - basic and
                dilutive
            
            
            113,193,107
            
            
            108,567,080




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


F-3


**HERBORIUM
      GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN**


**STOCKHOLDERS’
      DEFICIENCY**




**Common
                    Stock**
                
                **Common
                    Stock Subscribed**
                
                **Additional
                    Paid-in**
                
                **Deferred
                    Consulting**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **Fees**
                
                **Deficit**
                
                **Total****BALANCE,
                    DECEMBER 1, 2005**
                
                
                108,567,080
                
                $
                20,000
                
                
                -
                
                $
                188,500
                
                $
                180,000
                
                $
                -
                
                $
                (771,690
                )
                $
                (383,190
                )Net
                    loss for the period
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (339,757
                )
                
                (339,757
                )**BALANCE,
                    NOVEMBER 30, 2006**
                
                
                108,567,080
                
                
                20,000
                
                
                -
                
                
                188,500
                
                
                180,000
                
                
                -
                
                
                (1,111,447
                )
                
                (722,947
                )Common
                    stock issued to consultant for services
                
                
                7,000,000
                
                
                7,000
                
                
                
                
                
                
                
                
                320,500
                
                
                (320,208
                )
                
                
                
                
                7,292Amortization
                    of deferred consulting fees
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                213,958
                
                
                
                
                
                213,958Net
                    loss for the period
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (642,555
                )
                
                (642,555
                )**BALANCE,
                    NOVEMBER 30, 2007**
                
                
                115,567,080
                
                $
                27,000
                
                
                -
                
                $
                188,500
                
                $
                500,500
                
                $
                (106,250
                )
                $
                (1,754,003
                )
                $
                (1,144,253
                )




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




F-4


**HERBORIUM
      GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**




**Years
                ended November 30,****2007**
            
            **2006****CASH
                FLOWS USED IN OPERATING ACTIVITIES**:Net
                loss
            
            $
            (642,555
            )
            $
            (339,757
            )Adjustments
                to reconcile net loss tonet
                cash used by operating activities:Depreciation
                and amortization
            
            
            4,389
            
            
            5,075Stock-based
                consulting fees
            
            
            215,574
            
            
            -Changes
                in assets (increase) decrease:Accounts
                receivable
            
            
            644
            
            
            17,850Inventory
            
            
            42,709
            
            
            (17,150
            )Prepaid
                expenses and other assets
            
            
            —
            
            
            2,086Changes
                in liabilities increase:Accounts
                payable and accrued expenses
            
            
            293,220
            
            
            307,803Net
                cash used in operating activities
            
            
            (86,019
            )
            
            (24,093
            )**CASH
                FLOWS USED IN INVESTING ACTIVITIES**:Purchase
                of equipment
            
            
            —
            
            
            (687
            )Purchase
                of amortizable assets
            
            
            (3,720
            )
            
            (9,274
            )Net
                cash used in investing activities
            
            
            (3,720
            )
            
            (9,961
            )**CASH
                FLOWS PROVIDED BY FINANCING ACTIVITIES:**Repayments
                of lines of credit debt
            
            
            (6,541
            )
            
            (6,550
            )Repayments
                of long-term debt
            
            
            —
            
            
            (4,515
            )Increase
                (decrease) in due to others
            
            
            29,382
            
            
            (1,137
            )Increase
                in due to related parties
            
            
            22,000
            
            
            13,000Increase
                in due to stockholders
            
            
            47,374
            
            
            24,927Increase
                (decrease) in credit card debt payable
            
            
            (5,048
            )
            
            12,796Net
                cash provided by financing activities
            
            
            87,167
            
            
            38,521**NET
                INCREASE (DECREASE) IN CASH**
            
            
            (2,572
            )
            
            4,467**CASH,
                BEGINNING OF YEAR**
            
            
            4,649
            
            
            182**CASH,
                END OF YEAR**
            
            $
            2,077
            
            $
            4,649Supplemental
                disclosures of cash flow information:Cash
                paid during the year for:Income
                taxes
            
            $
            —
            
            $
            1,637Interest
            
            
            45,217
            
            
            43,824Supplemental
                disclosure on noncash financing activities:





The
      Company issued 7,000,000 shares of common stock valued at $320,000 in the year
      ended November
      30, 2007 for consulting services.




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




F-5




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


**1.**  **ORGANIZATION
      AND NATURE OF BUSINESS**





Herborium,
      Inc., (the “Company”) was incorporated in the State of Delaware on June 4, 2002,
      and is the surviving entity following a merger of G.O. International, Inc.,
      a
      New Jersey corporation, with and into the Company effective June 6, 2002. The
      Company provides unique, natural and complementary healthcare related products
      to consumers and healthcare professionals seeking alternative answers to the
      management of healthcare issues not currently met by standard Western medicine.
      Its products are botanical supplements comprised of unique herbal formulations,
      referred to as botanical therapeutics, that have a record of clinical efficacy
      and safety established in China; however, these products have not been evaluated
      according to standards of clinical efficacy and safety applicable to
      pharmaceutical products sold in the United States and other countries, and
      because these products are herbal-based, they are not recognized as
      pharmaceuticals by the Food and Drug Administration (the "FDA"). The Company’s
      business model is based on (i) owning and/or marketing unique products with
      established clinical history in their country of origin, and (ii) a proactive
      approach to meeting the regulatory changes and challenges of the new healthcare
      marketplace. Historically, substantially all of the Company’s revenue has been
      derived from the sale of AcnEase through its corporate website.





On
      September 18, 2006, Herborium was acquired by Pacific Magtron International
      Corporation, Inc. (“PMIC”), a publicly traded Nevada Corporation, pursuant to a
      Merger Agreement and PMIC’s plan of reorganization in bankruptcy. The
      transaction was accomplished by the merger of a PMIC subsidiary into Herborium,
      with Herborium as the surviving corporation (the “Merger). Under the provisions
      of the Merger Agreement and the plan of reorganization, the stockholders of
      Herborium exchanged 100% of their common stock of the Company for 85% of the
      post-Merger PMIC common stock. The previously outstanding common shares of
      PMIC
      were cancelled under the plan of reorganization, and one new share of the
      Company was issued in exchange for each cancelled shares held by all PMIC
      shareholders, other than its majority shareholder, Advanced Communications
      Technologies, Inc (“ACT”). A total of 11,454,300 shares were issued to the
      shareholders of ACT in exchange for the cancellation of the PMIC shares and
      ACT’s contribution of $50,000 to the bankruptcy. Shares of our common stock have
      been distributed to PMIC shareholders. Following this distribution, as well
      as
      certain other distributions that are included in the plan of reorganization,
      an
      aggregate of 108,567,080 shares of common stock of Herborium Group was issued
      and outstanding as of November 30, 2006. This weighted average number of shares
      was used in calculations of net loss per share, presented on a retroactive
      basis, for the year ended November 30, 2006.





The
      Company’s merger with PMIC is treated as a recapitalization with no purchase
      price allocation. In connection with the merger, PMIC changed its name to
      Herborium Group, Inc. and adopted the fiscal year of Herborium Group, Inc.
      which
      is November 30.




**2.**  **BASIS
      OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES**





**a.**  **Basis
      of Accounting**





The
      Company's consolidated financial statements have been prepared on a going
      concern basis, which contemplates the realization of assets and the settlement
      of liabilities in the normal course of business. The Company incurred net losses
      of $643,000 and $340,000 for the years ended November 30, 2007 and 2006,
      respectively. The Company had a working capital deficiency of $1,177,481 and
      $757,000 as of November 30, 2007 and 2006, respectively. Management is pursuing
      additional equity capital and debt financing in connection with the proposed
      acquisition of the AcnEase formula (See Note 13). However, there is no assurance
      that these efforts will be successful.  Our ability to generate sufficient
      profits and obtain additional funding and pay off our obligations will determine
      our ability to continue as a going concern. Our financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





**b.**  **Principles
      of consolidation**





The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiaries, Herborium, Inc. and Herborium.com, Inc. All
      significant intercompany accounts and transactions are eliminated in
      consolidation.




F-6




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




**c.**  **Cash
      and cash equivalents**





The
      Company maintains its cash accounts in two commercial banks. The balance is
      insured by the Federal Deposit Insurance Corporation up to $100,000 at each
      bank.





**d.**  **Inventory**





Inventory,
      consisting of finished botanical therapeutic products, is stated the lower
      of
      cost or market and is valued on the first-in, first-out method. When net
      realizable value has fallen below cost, inventory is written down.





**e.**  **Shipping
      and handling costs**





Shipping
      and handling costs associated with outbound freight amounted to approximated
      $50,000 and $46,000 for the years ended November 30, 2007 and 2006,
      respectively, and were charged to cost of sales.





**f.**  **Property
      and equipment**





Depreciation
      and amortization are computed using the straight-line method over the estimated
      useful lives of the assets ranging from five to seven years.





Maintenance
      and repairs are charged to expense when incurred. When property and equipment
      are retired or otherwise disposed of, the applicable cost and accumulated
      depreciation are removed from the accounts and any gain or loss is credited
      or
      charged directly to income.





**g.**  **Advertising**





It
      is the
      Company’s policy to expense advertising costs as they are incurred. Advertising
      expenses for the years ended November 30, 2007 and 2006 were approximately
      $192,000 and $199,000, respectively.





**h.**  **Estimates**





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





**i.**  **Income
      taxes**





Income
      tax expense includes current and deferred federal and state taxes arising from
      temporary differences between income for financial reporting and income tax
      purposes, as well as from the expected realization of net operating loss
      carryforwards. A valuation allowance is established when necessary to reduce
      deferred tax assets to the amounts expected to be realized.





**j.** **Revenues**




The
      Company recognizes revenue when inventory is shipped to its
      customers.





**k.**  **Loss
      per share**





Basic
      loss per share is computed by dividing net loss by the weighted average number
      of common shares outstanding for the period. Diluted earnings per share reflect
      the potential dilution of securities, using the treasury stock method, that
      could share in the earnings of an entity. During the fiscal years ended November
      30, 2007 and 2006, the Company had no securities convertible into common stock
      that would, in any event, have been excluded from the calculation of diluted
      loss per share as their effect, because of the net loss, would have been
      anti-dilutive. During the fiscal years ended November 30, 2007 and 2006, the
      Company had an obligation to issue common stock pursuant to subscription
      agreements, as well as an obligation to grant warrants to purchase shares of
      common stock. Such shares, had the number thereof been determinable, would
      have
      been excluded from the calculation of diluted loss per share as their effect
      would have been anti-dilutive.




F-7




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**







**l.
      Allowance for doubtful accounts**





The
      Company makes judgments as to its ability to collect outstanding trade
      receivables and provides allowances, if deemed necessary, for the portion of
      receivables when collection becomes doubtful. Provisions are made based upon
      a
      specific review of all significant outstanding invoices.




**m.**  **Recent
      accounting pronouncements**





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”
(“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring
      fair value in generally accepted accounting principles (“GAAP”), and expands
      disclosures about fair value measurements. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2008.
      Management does not believe that the adoption of this pronouncement will have
      a
      material impact on the Company’s financial position or results of
      operations.





In
      June
      2006, the FASB issued Financial Accounting Standards Board Interpretation
      (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes—an
      interpretation of SFAS 109. FIN No. 48 provides a comprehensive model
      for the recognition, measurement and disclosure in the financial statements
      of
      uncertain tax positions taken or expected to be taken on a tax return. The
      Company adopted FIN No. 48 effective beginning on December 1, 2007. The
      adoption of this interpretation did not have an impact on the Company’s
      financial statements.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities—Including an Amendment of FASB
      Statement No. 115.” This Standard allows entities to voluntarily choose, at
      specified election dates, to measure many financial assets and financial
      liabilities (as well as certain non-financial instruments that are similar
      to
      financial instruments) at fair value. The election is made on an
      instrument-by-instrument basis and is irrevocable. If the fair value option
      is
      elected for an instrument, the Statement specifies that all subsequent changes
      in fair value for that instrument shall be reported in earnings. SFAS No. 159
      is
      effective beginning on December 1, 2008. We are currently evaluating the
      impact this new Standard could have on our financial position and results of
      operations.





The
      FASB
      has issued Statement No. 141 (R), “Business Combinations”. This statement
      retains the fundamental requirements in Statement No. 141 that the acquisition
      method of accounting (which Statement No. 141 called the “purchase method”) be
      used, and applies to the all business entities, including mutual entities that
      previously used the pooling of interest method of accounting for some business
      combinations. The statement is effective for transactions within the annual
      reporting period beginning on or after December 15, 2008. Management does not
      expect this pronouncement to have a significant impact on the financial
      statements of the Company.





The
      FASB
      has issued Statement No. 160, “Non-controlling Interests in Consolidated
      Financial Statements”. This statement changes the way the consolidated income
      statement is presented when non-controlling interests are present. It requires
      consolidated net income to be reported at amounts that include the amounts
      attributable to both the parent and the non-controlling interest, and is
      effective for periods beginning on or after December 15, 2008. Management does
      not expect this pronouncement to have a significant impact on the financial
      statements of the Company.




F-8




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




**3.**  **PROPERTY
      AND EQUIPMENT**





Property
      and equipment consist of the following:





2007
            
            2006Machinery
                and equipment
            
            $
            25,185
            
            $
            25,185Less:
                accumulated depreciation
            
            
            (20,954
            )
            
            (19,015
            )$
            4,231
            
            $
            6,170





Depreciation
      expense amounted to $1,939 and $2,976 for the years ended November 30, 2007
      and
      2006, respectively.





**4.**  **OTHER
      ASSETS**





Other
      assets consist of:





2007
            
            2006Security
                deposit
            
            $
            450
            
            $
            —Trademarks
            
            
            37,761
            
            
            34,491Less:
                accumulated amortization
            
            
            (9,213
            )
            
            (6,763
            )$
            28,998
            
            $
            27,728





Amortization
      expense amounted to $2,450 and $2,099 for the years ended November 30, 2007
      and
      2006, respectively. The company expects to amortize approximately $2,500 for
      each of the next five years.





**5.**  **DUE
      TO STOCKHOLDERS AND RELATED PARTIES**





Amounts
      due to stockholders consist of unsecured demand loans to the Company with no
      specified terms, including the payment of interest, and, accordingly, this
      liability is included in current liabilities and no interest expense has been
      accrued. Repayment is not expected until such time as the Company has adequate
      funds available.





Amounts
      due to related parties consist of three unsecured demand loans to the Company,
      one in the amount of $25,000 with no specified terms, including the payment
      of
      interest, and, accordingly, this liability is included in current liabilities
      and no interest expense has been accrued, and two loans to the Company in the
      amount of $5,000 each payable in 90 days by January 14, 2008, bearing an
      interest premium of 20% or $1,000, secured by common stock of the cofounders.
      Through February 24, 2008, no payments of principal or premium have been made,
      nor have any shares of common stock been transferred in satisfaction thereof.





**6.**  **MAJOR
      SUPPLIER**





For
      the
      years ended November 30, 2007 and 2006, the Company purchased all of its
      inventory from AH USA, a China-based business entity owned by the individual
      who
      is the inventor and sole owner of AcnEase, an acne product. The Company is
      party
      to a licensing agreement with AH USA under which the Company, as licensee,
      is
      the exclusive worldwide distributor of AcnEase. See Note 13.




F-9




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




**7.**  **LINES
      OF CREDIT AND CREDIT CARD DEBT PAYABLE**





The
      Company has entered into four revolving line of credit agreements with
      commercial banks. The credit agreements provide for aggregate borrowings of
      up
      to $187,500 and are payable on demand with no maturity dates set forth in the
      loan agreements. Borrowings under these facilities bear interest at rates
      ranging from prime plus 1.25% (8.75% at November 30, 2007) to 14%.





The
      Company also has entered into a number of standard credit card agreements that
      it uses for business expenses. Borrowings under these agreements, which have
      no
      set maturity dates, bear interest at rates ranging from 11.2% to
      39.7%.





**8.**  **STOCKHOLDERS’
      DEFICIENCY**





**a.**  **Proceeds
      from subscription agreements**





As
      of
      November 30, 2007 and 2006, the Company received $188,500 from investors
      pursuant to subscription agreements entered into in fiscal 2001 through 2005
      in
      connection with a contemplated private placement of equity securities. Under
      the
      terms of the subscription agreements, the type of equity security to be issued
      to the investors will be determined through negotiation with the principal
      investors in the private placement, and the price to be paid by the investors
      will be the same as the principal investors in the financing. The number of
      shares to be received by each investor will be a function of the amount of
      capital raised from, and the price per share paid by, the principal
      investors.





The
      subscription agreements do not have an expiration date; no provisions for
      repayment; nor the manner of the form of the warrants in the event the private
      placement is to be in the form of debt.





Additionally,
      given that a private placement did not occur prior to certain deadlines, each
      investor is entitled to be granted a warrant to purchase additional shares
      in
      the equity security issued in the private placement, generally in an amount
      equal to the number of shares purchased under the subscription agreement at
      an
      exercise price equal to the closing price per share of the private placement.
      The number of warrants to be issued and the value thereof is not determinable.
      As of November 30, 2007, no warrants have been issued to such investors in
      connection with the subscription agreements.





**b.**  **Stock
      incentive awards**





Commencing
      in fiscal 2002, the Company awarded to certain employees, consultants and
      advisors restricted common stock awards as incentive compensation. The Company
      has no formal plan with respect thereto. Under the terms of the individual
      stock
      award agreements, the number of shares to be received by each individual will
      be
      determined based on the terms of the aforementioned contemplated private
      placement. The awarded shares will vest immediately upon issuance within 90
      days
      following the closing of financing for a minimum of $1 million, and will have
      piggyback registration rights. For the years ended November 30, 2007 and 2006,
      no expense was recorded for such awards.





**9.**  **INCOME
      TAXES**





The
      Company has tax net operating loss carryforwards at November 30, 2007 of
      approximately $1.8 million expiring through 2025. Due to the merger (Note 1),
      the amount of carryforwards available to offset future taxable income is subject
      to limitation. The recorded deferred tax asset, representing the expected
      benefit from the future realization of net operating losses, net of a 100%
      valuation allowance, was $-0-.





Income
      tax expense consists of the following:





2007
            
            2006Federal
                tax expense
            
            $
            -
            
            $
            -State
                tax expense
            
            
            1,560
            
            
            1,000$
            1,560
            
            $
            1,000




F-10




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




**10.**  **COMMITMENTS
      AND CONTINGENCIES**





**a.**  **Employment
      agreements**




On
      September 18, 2006 the Company entered into an employment agreement with Dr.
      Olszewski who will serve as President, Chief Executive Officer and Acting Chief
      Financial Officer until such time as the Company hires a controller or Chief
      Financial Officer. Dr. Olszewski will have the position of Chairman of the
      Board
      of Directors. The employment agreement provides for an initial four-year term
      of
      employment, with an addition twelve-month extension at Dr. Olszewski’s option.
      Under the agreement, Dr. Olszewski is not required to work full-time until
      such
      time as the Company receives debt or equity financing in an aggregate of amount
      of $1,250,000 or more. Until the Company obtains such amount of financing,
      Dr.
      Olszewski will receive 75% of her base salary. Her annual base salary is
      $200,000 with a bonus equal to (i) for the first three years, 5% of EBITDA
      (as
      defined in the agreement) and (ii) thereafter 5% of Net Income before bonus
      (as
      defined in the agreement). She will be eligible for an additional bonus ranging
      from $75,000 to $200,000 in the event that the Company’s Pre-Tax Income for a
      fiscal year exceeds that of the prior fiscal year by 150% or more.





On
      September 18, 2006 the Company entered into a consulting and employment
      agreement with Dr. Gilligan who will serve as co-President and Chief Operating
      Officer. The agreement provides for an initial term of employment expiring
      on
      September 20, 2011, with an addition twelve-month extension at Dr. Gilligan’s
      option. Under the agreement, Dr. Gilligan’s employment will not commence until
      six months after the Company receives debt or equity financing in the aggregate
      amount of $2,500,000, and until such date, Dr. Gilligan will serve as a
      consultant to the Company at an hourly rate of $120 per hour and will be
      permitted to continue his full-time employment elsewhere. Upon his full-time
      employment, his annual base salary will be $200,000 with a bonus equal to (i)
      for the first three years, 5% of EBITDA (as defined in the agreement) and (ii)
      thereafter 5% of Net Income before bonus (as defined in the agreement). He
      will
      be eligible for an additional bonus ranging from $75,000 to $200,000 in the
      event that the Company’s Pre-Tax Income for a fiscal year exceeds that of the
      prior fiscal year by 150% or more.





Under
      the
      employment agreements, Dr. Olszewski and Dr. Gilligan each will be an eligible
      participant under one or more stock option plans adopted by the Company. Dr.
      Olszewski and Dr. Gilligan will be subject to non-competition provisions during
      the term of the agreements or until September 30, 2012 in the event that either
      extends their agreement for the additional twelve-month period. Dr. Olszewski’s
      and Dr. Gilligan’s employment may be terminated in the event of extended
      disability or incapacity or a “For Cause Event” as defined in the agreement. Dr.
      Olszewski and Dr. Gilligan may terminate their employment voluntarily with
      180
      days prior written notice, upon a material breach of the agreement by the
      Company with 10 days prior written notice and upon a “Change of Control” as
      defined in the agreement upon 90 days prior written notice. In the event of
      termination, Dr. Olszewski and Dr. Gilligan or their beneficiaries, as the
      case
      may be, will have the right to receive all accrued but unpaid base salary.
      In
      the event of death, termination based on a material breach by us or our
      termination of either party for any reason other than a For Cause Event, that
      party will be entitled to receive $600,000. In the event that employment is
      terminated for or after a Change of Control, that party will be entitled to
      receive an amount equal to the product of his or her base salary multiplied
      by
      2.99. After (i) the expiration of the term (including an extension of one year
      by either party) or (ii) voluntary termination of the employment agreement,
      each
      individual may, at their or the Company’s option in the case of clause (i) or at
      our option in the case of clause (ii), act as a consultant to the Company for
      one year and receive compensation equal to 50% of his or her base
      salary.





As
      of
      November 30, 2007 and 2006, an aggregate of $362,000 and $145,000, respectively,
      of accrued and unpaid compensation for Dr. Olszewski and Dr. Gilligan under
      these agreements was included in accounts payable and accrued
      expenses.




F-11




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


**b.**  **2007
      Stock Plan**





On
      January 19, 2007, the Board of Directors of the Company approved the Herborium
      Group, Inc. 2007 Stock Plan (“Plan”) which provides for a maximum aggregate of
      20 million shares of common stock to be issued upon grants of restricted stock
      or upon exercise of options granted under the Plan, as compensation and
      incentive to eligible employees, directors, consultants and advisors. On January
      26, 2007, the Company filed a Registration Statement on Form S-8 with the
      Securities and Exchange Commission to in connection with the Plan. See 10 (c)
      grants made under this plan.




**c.**  **Consulting
      agreements**





On
      January 1, 2007, the Company entered into a two-year consulting agreement with
      an individual and, in consideration of the services to be provided pursuant
      to
      that agreement, the Company agreed to initially issue up to 9 million shares
      of
      the Company’s common stock pursuant and subject to the Plan, and when so issued,
      such shares shall be validly issued, fully paid and non-assessable, of which
      7.5
      million shares vested immediately, with 5.5 million shares being issued
      immediately. The remaining shares will vest over the term of the agreement,
      and,
      in the event certain transactions are consummated, up to an additional 3 million
      shares could be issued per the terms of the agreement. The shares issued and
      yet
      to be issued have been valued at $.05 per share based on the market value on
      the
      date granted for an aggregate cost of $450,000, which cost is being expensed
      over the period of the agreement. Accordingly, consulting expense in the amount
      of $169,000 was recorded in general and administrative expense during the year
      ended November 30, 2007.





On
      February 14, 2007, the Company entered into a two-year consulting agreement
      with
      a consulting firm and, in consideration of the services to be provided pursuant
      to that agreement, the Company agreed to issue up to 3 million shares of the
      Company’s common stock pursuant and subject to the Plan, and when so issued,
      such shares shall be validly issued, fully paid and non-assessable, of which
      500,000 shares vested and were issuable immediately. Of the remaining shares,
      500,000 will vest upon the occurrence of one or more transactions, as defined,
      and the remaining 2,000,000 will vest ratably on the sixth, ninth, twelfth
      and
      eighteenth month anniversaries of this agreement. The shares, 1,500,000 of
      which
      have been issued as of November 30, 2007, have been valued at $.035 per share
      based on the market value on the date granted for an aggregate cost of $105,000,
      which cost is being expensed over the period of the agreement. Accordingly,
      consulting expense in the amount of $45,000 was recorded in general and
      administrative expense during the year ended November 30, 2007.




d.  **Contingency**




Due
      to
      the fact that the Company’s products are designed to be ingested, there is an
      inherent risk of exposure to product liability claims in the event that the
      use
      of our products results in injury. The Company may be subject to contingencies
      that may arise from such matters such as product
      liability claims, legal proceedings, shareholder suits, as such, the Company
      is
      unable to estimate the potential exposure, if any. The Company accrues for
      such
      contingencies in accordance with SFAS No. 5, Accounting for Contingencies.
      The Company has not recognized any liability as of November 30,
      2007.




**11.**  **KEY
      EMPLOYEES**





The
      Company relies extensively on the services of Drs. Agnes P. Olszewski and James
      P. Gilligan, its co-founders, who play key roles in all aspects of operations
      and management and the loss of their services would materially and adversely
      affect the Company’s prospects. Until the Company raises substantial financing,
      neither of these key individuals will be able to receive cash compensation.





**12.**  **SEGMENT
      INFORMATION**





The
      Company applies Statement of Financial Accounting Standards No. 131 “Disclosures
      about Segments of an Enterprise and Related Information”. For the fiscal years
      ended November 30, 2007 and 2006, the Company primarily operated in one segment
      - botanical therapeutics, with sales of AcnEase representing substantially
      all
      of the Company’s revenue.




F-12




**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




**13.**  **SUBSEQUENT
      EVENTS**




**a.**  **Purchase
      agreement - intellectual property**





On
      January 10, 2008, the Company and the individual owning the intellectual
      property rights related to AcnEase (the “Seller”) entered into a Purchase
      Agreement (“Agreement”) for the acquisition of all rights related to AcnEase,
      including the formulation thereof, all sourcing information, extraction
      procedures, manufacturing and packaging information as well as all related
      clinical and testing information and trade secrets. Consideration will consist
      of aggregate cash payments of $500,000 and common stock issuances of 5,428,354
      shares. In accordance with the Agreement, 3,500,000 shares of the Company’s
      common stock were issued to Seller following the Agreement’s signing. Upon
      obtaining sufficient financing, the Company will make an initial payment of
      $450,000 to the Seller in return for all the aforementioned information
      regarding the acne product. The remaining portions of the purchase price,
      $50,000 cash and 1,928,354 shares of common stock, will be held in escrow and
      released when certain conditions are met, principally the successful
      manufacturing of the acne product on a commercial scale. The Agreement also
      requires the Company to purchase on an as-needed basis at a negotiated price
      any
      inventory of the acne product in the possession of the Seller at the time that
      the Company has the ability to manufacture the product.





**b.**  **Bridge
      financing transaction**





Pursuant
      to a private offering, on February 19, 2008 and February 21, 2008, the “Company
      sold Units of its securities consisting of an aggregate $225,000 in principal
      amount of its Convertible Notes (the “Notes”), 225,000 shares of its common
      stock and warrants (the “Warrants”) exercisable for 450,000 shares of the common
      stock.





The
      Warrants are exercisable for a period of five years from issuance. Half of
      the
      Warrants are exercisable at $.025 per share and half are exercisable at $.50
      per
      share, subject to certain adjustments, including, but not limited to,
      adjustments for stock splits, stock dividends, mergers and
      consolidations.





The
      Notes
      are convertible, beginning six months after issuance or, if earlier, the closing
      of a qualified financing or an acquisition of the Company, into shares of common
      stock in whole or in part from time to time at the option of the investors
      at a
      Conversion Price equal to $.025 or 80% of the issuance price in a qualified
      financing or in connection with an acquisition of the Company. The Notes define
      a qualified financing as the date upon which the Company completes the sale
      of
      common stock (or like security) for aggregate gross proceeds of at least $1.5
      million. The Conversion Price is subject to certain customary adjustments,
      including, but not limited to, adjustments for stock splits, stock dividends,
      mergers and consolidation.





The
      Notes
      bear interest at the rate of 10% per annum, payable semi-annually in shares
      of
      the Company’s common stock valued, for this purpose, at $.025 per share.





Unless
      converted to Common Stock, the principal balance of the each Note is payable
      upon demand made any time after the first anniversary of the issuance of the
      Note, or upon a qualified financing or acquisition of the Company. In addition,
      the Company is required to set aside 5% of its gross revenues for redemption
      of
      the principal amount of the Notes. The set-aside revenues will be distributed
      to
      the Note holders semi-annually, pro rata in accordance with the outstanding
      principal balance of each Note.





Pursuant
      to a Registration Rights Agreement, the Company has agreed to include the shares
      of common stock issuable upon conversion of the Notes and exercise of the
      Warrants, as well as the shares of common stock issued to the investors, in
      any
      registration statement filed by the Company under the Securities Act of 1933
      with respect to the Company’s equity securities to be sold by the Company or any
      other stockholder.





The
      Company’s Board of Directors has authorized the sale of up to an additional
      $275,000 principal amount of the Notes, in Units together with 275,000 shares
      of
      common stock and Warrants exercisable for 550,000 shares of common
      stock




F-13


**HERBORIUM
        GROUP, INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




Southridge
      Investment Group LLC is serving as the Company’s placement agent in connection
      with the offer and sale of the Notes, common stock and Warrants. In its capacity
      as placement agent, Southridge will be paid a cash fee equal to 10% of the
      gross
      proceeds received by the Company, as well as an expense allowance equal to
      2% of
      the gross proceeds. In addition, Southridge will be issued Warrants exercisable
      for a number of shares of common stock equal to 10% of the aggregate shares
      issued by the Company in the private placement, assuming conversion and exercise
      of all of the Notes and Warrants. The placement agent warrants will be
      exercisable for 5 years at a price of $.03 per share. In its capacity as the
      Company’s financial advisor, Southridge is entitled to a retainer fee of 750,000
      shares of the Company’s common stock, and one share for each $1 received by the
      Company in the private placement





None
      of
      the aforementioned shares of common stock have been issued as of February 25,
      2008.




F-14