**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-QSB**


**(Mark
      One)**




**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934.**




**For
      the quarterly period ended September 30, 2006.**


**or**




**o**
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934.**




**For
      the transition period from ______to______.**




**Commission
      File number 333-110324**




**BTX
      HOLDINGS, INC.**


(Name
      of
      small business issuer in its charter)




**FLORIDA**
            **16-1682307**(State
                or other jurisdiction of
              incorporation
                or organization)
            (IRS
                Employer Identification No.)**1400
                Cypress Creek Road, Fort Lauderdale, Florida**
            **33309**(Address
                of principal executive offices)
            (Zip
                Code)




**(954)776-6600**


(Registrant’s
      telephone number, including area code)




(Former
      name, former address and former fiscal year, if changed since last
      report)




Check
      whether the issuer (1) has filed all reports required to be filed by Section
      13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the issuer was required to file such reports), and (2) has been
      subject to such filing requirements for the past 90 days. Yes x No o




Indicate
      by check mark whether the registrant is a shell company as defined in Rule
      12b-2
      of the Exchange Act.




Yes
            x
            Noo





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of November 14, 2006: 34,043,020,000shares of common stock.













**BTX
      HOLDINGS, INC.**


**(Formerly
      known as King Capital Holdings, Inc.)**


**FINANCIAL
      STATEMENTS**




**INDEX**




**PART
        I-- FINANCIAL INFORMATION**
  Item
                  1.
              Financial
                  StatementsItem
                  2.
              Management’s
                  Discussion and Analysis of Financial ConditionItem
                  3.
              Control
                  and Procedures
  **PART
        II-- OTHER INFORMATION**
  Item
                  1.
              Legal
                  ProceedingsItem
                  2.
              Changes
                  in SecuritiesItem
                  3.
              Defaults
                  Upon Senior SecuritiesItem
                  4.
              Submission
                  of Matters to a Vote of Security HoldersItem
                  5.
              Other
                  InformationItem
                  6.
              Exhibits
                  and Reports on Form 8-K
  **SIGNATURE**




**Item
      1. Financial Information**




BASIS
      OF
      PRESENTATION




The
      accompanying reviewed financial statements are presented in accordance with
      generally accepted accounting principles for interim financial information
      and
      the instructions to Form 10-QSB and item 310 under subpart A of Regulation
      S-B.
      Accordingly, they do not include all of the information and footnotes required
      by generally accepted accounting principles for complete financial statements.
      In the opinion of management, all adjustments (consisting only of normal
      occurring accruals) considered necessary in order to make the financial
      statements not misleading, have been included. Operating results for the nine
      months ended September 30, 2006 are not necessarily indicative of results that
      may be expected for the year ending December 31, 2006. The financial statements
      are presented on the accrual basis.









**BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **AS
        OF SEPTEMBER 30, 2006**
 **(UNAUDITED)**


**ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              4,439Prepaid
                  expenses
              
              
              500**TOTAL
                  CURRENT ASSETS**
              
              
              4,939Property
                  and Equipment, net
              
              
              8,341**TOTAL
                  ASSETS**
              
              $
              13,280**LIABILITIES
                  AND STOCKHOLDERS’ DEFICIENCY****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              98,909Accrued
                  payroll
              
              
              143,067Accrued
                  interest
              
              
              23,615Notes
                  payable- related party, net of discount of $17,899
              
              
              261,851**TOTAL
                  CURRENT LIABILITIES**
              
              
              527,442**COMMITMENTS
                  AND CONTINGENCIES**
              
              
              -**STOCKHOLDERS’
                  DEFICIENCY**Preferred
                  stock, $.001 par value, 10,000,000shares authorized, none issued
                  and
                  outstanding
              
              
              -Common
                  stock, $0.001 par value, 100,000,000 shares authorized, 34,043,020
                  shares
                  issued and outstanding
              
              
              34,043Additional
                  paid in capital
              
              
              1,501,851Deferred
                  compensation
              
              
              (101,861
              )Accumulated
                  deficit during development stage
              
              
              (1,948,195
              )Total
                  Stockholders’ Deficiency
              
              
              (514,162
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**
              
              $
              13,280




See
        accompanying notes to financial statements.






F-1




**BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**




Three
                  Month's Ended September 30,
              
              Nine
                  Month's Ended September 30,
              
              For
                  The Period From January 8, 2003 (Inception) to September 30, 20062006
              
              2005
              
              2006
              
              2005(Restated)
              
              
              
              (Restated)**OPERATING
                  EXPENSES**Consulting
                  fees
              
              $
              41,605
              
              $
              -
              
              $
              68,383
              
              $
              -
              
              $
              297,043Management
                  fees - related party
              
              
              -
              
              
              -
              
              
              -
              
              
              84,000
              
              
              84,000Professional
                  fees
              
              
              57,319
              
              
              37,878
              
              
              99,700
              
              
              64,799
              
              
              228,939Research
                  and development
              
              
              11,193
              
              
              -
              
              
              41,193
              
              
              20,000
              
              
              138,118Impairment
                  of technology
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              500,000General
                  and administrative
              
              
              75,729
              
              
              127,573
              
              
              260,320
              
              
              285,917
              
              
              481,595Total
                  Operating Expenses
              
              
              185,846
              
              
              165,451
              
              
              469,596
              
              
              454,716
              
              
              1,729,695**LOSS
                  FROM OPERATIONS**
              
              
              (185,846
              )
              
              (165,451
              )
              
              (469,596
              )
              
              (454,716
              )
              
              (1,729,695
              )**OTHER
                  EXPENSES:**Interest
                  Expense
              
              
              83,677
              
              
              1,714
              
              
              125,137
              
              
              5,049
              
              
              133,500Financing
                  fees
              
              
              -
              
              
              21,425
              
              
              -
              
              
              63,110
              
              
              85,000Total
                  Other Expenses
              
              
              83,677
              
              
              23,139
              
              
              125,137
              
              
              68,159
              
              
              218,500**LOSS
                  BEFORE PROVISION FOR INCOME TAXES**
              
              
              (269,523
              )
              
              (188,590
              )
              
              (594,733
              )
              
              (522,875
              )
              
              (1,948,195
              )Provision
                  for Income Taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**NET
                  LOSS**
              
              $
              (269,523
              )
              $
              (188,590
              )
              $
              (594,733
              )
              $
              (522,875
              )
              $
              (1,948,195
              )Net
                  loss per share - basic and diluted
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.02
              )
              $
              (0.03
              )
              $
              (0.09
              )Weighted
                  average number of shares outstanding during the period - basic
                  and
                  diluted
              
              
              34,470,289
              
              
              24,186,000
              
              
              33,039,486
              
              
              19,582,612
              
              
              20,561,194
 See
          accompanying notes to financial statements.








F-2







**BTX
      HOLDINGS, INC. AND SUBSIDIARY**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’ **EQUITY/****(DEFICIENCY)****


**FOR
      THE PERIOD FROM JANUARY 8, 2003 (INCEPTION) TO SEPTEMBER 30,
      2006**


**(UNAUDITED)**


Preferred
                  Stock
              
              Common
                  Stock
              
              Additional
                  Paid-In
              
              Deferred
              
              Accumulated
                  Deficit During DevelopmentShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Compensation
              
              Stage
              
              Total**BALANCE,
                  JANUARY 8, 2003 (Inception)**
              
              
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Issuance
                  of founders stock
              
              
              -
              
              
              -
              
              
              15,746,000
              
              
              15,746
              
              
              (13,746
              )
              
              -
              
              
              -
              
              
              2,000Net
                  loss, 2003
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -**BALANCE,
                  DECEMBER 31, 2004**
              
              
              -
              
              
              -
              
              
              15,746,000
              
              
              15,746
              
              
              (13,746
              )
              
              -
              
              
              -
              
              
              2,000Beneficial
                  conversion on convertible debt
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              85,000
              
              
              -
              
              
              -
              
              
              85,000Net
                  loss, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (102,668
              )
              
              (102,668
              )**BALANCE,
                  December 31, 2004**
              
              
              -
              
              
              -
              
              
              15,746,000
              
              
              15,746
              
              
              71,254
              
              
              -
              
              
              (102,668
              )
              
              (15,668
              )Sale
                  of common stock
              
              
              -
              
              
              -
              
              
              3,115,000
              
              
              3,115
              
              
              619,885
              
              
              -
              
              
              -
              
              
              623,000Stock
                  issued to acquire technology
              
              
              -
              
              
              -
              
              
              2,500,000
              
              
              2,500
              
              
              497,500
              
              
              -
              
              
              -
              
              
              500,000Common
                  stock issued for reverse merger
              
              
              -
              
              
              -
              
              
              2,825,000
              
              
              2,825
              
              
              (2,825
              )
              
              -
              
              
              -
              
              
              -Common
                  stock issued for reverse merger
              
              
              -
              
              
              -
              
              
              165,507,000
              
              
              165,507
              
              
              (165,507
              )
              
              -
              
              
              -
              
              
              -Repurchase
                  and cancellation of common stock
              
              
              -
              
              
              -
              
              
              (157,375,000
              )
              
              (157,375
              )
              
              107,375
              
              
              -
              
              
              -
              
              
              (50,000
              )Common
                  stock issued for financing fees on note payable
              
              
              -
              
              
              -
              
              
              50,000
              
              
              50
              
              
              9,950
              
              
              -
              
              
              -
              
              
              10,000In-kind
                  contribution of management services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              880
              
              
              -
              
              
              -
              
              
              880Common
                  stock issued for legal services
              
              
              -
              
              
              -
              
              
              150,000
              
              
              150
              
              
              29,850
              
              
              -
              
              
              -
              
              
              30,000Net
                  loss, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,250,794
              )
              
              (1,250,794
              )**BALANCE,
                  December 31, 2005**
              
              
              -
              
              
              -
              
              
              32,518,000
              
              
              32,518
              
              
              1,168,362
              
              
              -
              
              
              (1,353,462
              )
              
              (152,582
              )Sale
                  of common stock
              
              
              
              
              
              
              
              
              40,000
              
              
              40
              
              
              9,960
              
              
              -
              
              
              0
              
              
              10,000Common
                  stock issued for services
              
              
              -
              
              
              -
              
              
              500,000
              
              
              500
              
              
              167,500
              
              
              (153,000
              )
              
              -
              
              
              15,000Common
                  stock issued for financing fees on note payable
              
              
              -
              
              
              -
              
              
              180,000
              
              
              180
              
              
              78,320
              
              
              -
              
              
              -
              
              
              78,500Conversion
                  on notes payable and accrued interest
              
              
              -
              
              
              -
              
              
              855,020
              
              
              855
              
              
              77,659
              
              
              -
              
              
              -
              
              
              78,514In-kind
                  contribution of common stock
              
              
              -
              
              
              -
              
              
              (50,000
              )
              
              (50
              )
              
              50
              
              
              -
              
              
              -
              
              
              -Amortization
                  of deferred compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              51,139
              
              
              -
              
              
              51,139Net
                  Loss for the nine months ended September 30, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (594,733
              )
              
              (594,733
              )**Balance
                  September 30, 2006**
              
              
              -
              
              $
              -
              
              
              34,043,020
              
              $
              34,043
              
              $
              1,501,851
              
              $
              (101,861
              )
              $
              (1,948,195
              )
              $
              (514,162
              )


See
        accompanying notes to financial statements.






F-3







**BTX
      HOLDINGS, INC. AND SUBSIDIARY**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**






Nine
                  Month's Ended September 30,
              
              Nine
                    Month’s Ended September 30,
              
              For
                  The Period From January 8, 2003
                (Inception)
                  to2006
              
              2005
                  (Restated)
              
              September
                  30, 2006**CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (594,733
              )
              $
              (522,875
              )
              $
              (1,948,195
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Common
                  stock issued for services
              
              
              15,000
              
              
              -
              
              
              45,000Common
                  stock issued for financing fees
              
              
              3,500
              
              
              -
              
              
              3,500Beneficial
                  conversion expenses
              
              
              35,763
              
              
              -
              
              
              35,763Depreciation
                  expense
              
              
              3,521
              
              
              1,682
              
              
              7,010Amortization
              
              
              117,907
              
              
              68,159
              
              
              203,240Impairment
                  of technology
              
              
              -
              
              
              -
              
              
              500,000In-kind
                  contribution of services
              
              
              -
              
              
              -
              
              
              880Changes
                  in operating assets and liabilities:(Increase)
                  / Decrease in prepaid expenses
              
              
              6,541
              
              
              5,000
              
              
              (500
              )Accounts
                  payable and accrued expenses
              
              
              229,246
              
              
              (12,237
              )
              
              268,342Net
                  Cash Used In Operating Activities
              
              
              (183,255
              )
              
              (460,271
              )
              
              (884,960
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchase
                  of property and equipment
              
              
              -
              
              
              (13,670
              )
              
              (15,351
              )Net
                  Cash Used In Investing Activities
              
              
              -
              
              
              (13,670
              )
              
              (15,351
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from notes payable
              
              
              35,000
              
              
              -
              
              
              70,000Repayments
                  of notes payable
              
              
              (20,000
              )
              
              -
              
              
              (35,000
              )Proceeds
                  from notes payable related party
              
              
              142,750
              
              
              (10,000
              )
              
              284,750Repurchase
                  and retirement or treasury stock
              
              
              -
              
              
              -
              
              
              (50,000
              )Proceeds
                  from issuance of common stock
              
              
              10,000
              
              
              623,000
              
              
              635,000Net
                  Cash Provided By Financing Activities
              
              
              167,750
              
              
              613,000
              
              
              904,750NET
                  INCREASE (DECREASE) IN CASH
              
              
              (15,505
              )
              
              139,059
              
              
              4,439CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              19,944
              
              
              9,674
              
              
              -CASH
                  AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              4,439
              
              $
              148,733
              
              $
              4,439**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                  paid for income taxes
              
              $
              -
              
              $
              -
              
              $
              -Cash
                  paid for interest expense
              
              $
              500
              
              $
              -
              
              $
              500**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH INVESTING AND FINANCING
                  ACTIVITIES:**During
                  2006, the President converted $40,000 of notes payable and $2,751
                  of
                  accrued interest into 853,020 shares of common stock.




See
        accompanying notes to financial statements.
   F-4




**BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
  **NOTE
          1  **ORGANIZATION
          AND SUMMARY OF SIGNIFICANT ACCOUNTING
          POLICIES****
  ***(A)
        Basis of Presentation***
  The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with accounting principles generally accepted in The
        United States of America and the rules and regulations of the Securities
        and
        Exchange Commission for interim financial information. Accordingly, they
        do not
        include all the information necessary for a comprehensive presentation of
        financial position and results of operations.
  It
        is
        management’s opinion, however that all material adjustments (consisting of
        normal recurring adjustments) have been made which are necessary for a fair
        financial statements presentation. The results for the interim period are
        not
        necessarily indicative of the results to be expected for the year.
  ***(B)
        Organization***
  BTX
        Holdings, Inc. f/k/a King Capital Holdings, Inc. was incorporated under the
        laws
        of the State of Florida on April 24, 2003.
  BioTex
        Corporation (f/k/a YB Holdings, Inc.) (a development stage company) was
        established in 2003 to develop and employ technologies from around the world
        to
        process biomass (plant derived) waste, extract the usable fractions, and
        then
        utilize or sell those extractions for varied applications or in further
        processes.
  Activities
        during the development stage include developing the business plan, acquiring
        technology and raising capital.
  Pursuant
        to a share purchase agreement, dated December 30, 2005, BioTex Corporation,
        consummated an agreement with BTX Holdings, Inc., pursuant to which BioTex
        Corporation, exchanged all of its 64,186,000 then issued and outstanding
        shares
        of common stock for 64,186,000 shares or approximately 89% of the common
        stock
        of BTX Holdings, Inc.. This transaction has been accounted for as a reverse
        acquisition. Accounting principles applicable to reverse acquisitions have
        been
        applied to record the acquisition. Under this basis of accounting, BioTex
        Corporation, is the acquirer and, accordingly, the consolidated entity is
        considered to be a continuation of BioTex Corporation, with the net assets
        of
        BTX Holdings, Inc. deemed to have been acquired and recorded at its historical
        cost. The statements of operations include the results of BioTex Corporation
        for
        the three and nine months ended September 30, 2006 and 2005 and for the period
        from January 3, 2003 (inception) to September 30, 2006.
  BTX
        Holdings, Inc. and BioTex Corporation are hereafter referred to as (the
“Company”).
  ***(C)
        Use of Estimates***
  In
        preparing financial statements in conformity with generally accepted accounting
        principles, management is required to make estimates and assumptions that
        affect
        the reported amounts of assets and liabilities and the disclosure of contingent
        assets and liabilities at the date of the financial statements and revenues
        and
        expenses during the reported period. Actual results could differ from those
        estimates.
   
  F-5
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
    ***(D)
        Consolidation***
  The
        accompanying September 30, 2006 condensed consolidated financial statements
        include the accounts of BTX Holdings, Inc (from December 30, 2005) and its
        100%
        owned subsidiary BioTex Corporation. The accompanying September 30, 2005
        condensed financial statements include the accounts of BioTex Corporation.
        All
        inter-company accounts have been eliminated in the consolidation.
  ***(E)
        Cash and Cash Equivalents***
  For
        purposes of the cash flow statements, the Company considers all highly liquid
        investments with original maturities of three months or less at the time
        of
        purchase to be cash equivalents. The Company at times has cash in excess
        of FDIC
        insurance limits and places its temporary cash investments with high credit
        quality financial institutions. At September 30, 2006, the Company did not
        have
        any balances that exceeded FDIC insurance limits.
  ***(F)
        Property and Equipment***
  Property
        and equipment are stated at cost, less accumulated depreciation. Expenditures
        for maintenance and repairs are charged to expense as incurred. Depreciation
        is
        provided using the straight-line method over the estimated useful life of
        five
        years.
  ***(G)
        Income Taxes***
  The
        Company accounts for income taxes under the Statement of Financial Accounting
        Standards No. 109, “Accounting for Income Taxes” (“Statement 109”). Under
        Statement 109, deferred tax assets and liabilities are recognized for the
        future
        tax consequences attributable to differences between the financial statement
        carrying amounts of existing assets and liabilities and their respective
        tax
        bases. Deferred tax assets and liabilities are measured using enacted tax
        rates
        expected to apply to taxable income in the years in which those temporary
        differences are expected to be recovered or settled. Under Statement 109,
        the
        effect on deferred tax assets and liabilities of a change in tax rates is
        recognized in income in the period that includes the enactment
        date.
    
 
  F-6
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   ***(H)
        Stock-Based Compensation***
  In
        December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment,” which
        replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
        companies are required to measure the compensation costs of share-based
        compensation arrangements based on the grant-date fair value and recognize
        the
        costs in the financial statements over the period during which employees
        are
        required to provide services. Share-based compensation arrangements include
        stock options, restricted share plans, performance-based awards, share
        appreciation rights and employee share purchase plans. In March 2005 the
        SEC
        issued Staff Accounting Bulletin No. 107, or “SAB 107”. SAB 107 expresses views
        of the staff regarding the interaction between SFAS No. 123(R) and certain
        SEC
        rules and regulations and provides the staff’s views regarding the valuation of
        share-based payment arrangements for public companies. SFAS No. 123(R) permits
        public companies to adopt its requirements using one of two methods. On April
        14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS
        123R. Companies may elect to apply this statement either prospectively, or
        on a
        modified version of retrospective application under which financial statements
        for prior periods are adjusted on a basis consistent with the pro forma
        disclosures required for those periods under SFAS 123. Effective January
        1,
        2006, the Company has fully adopted the provisions of SFAS No. 123R and related
        interpretations as provided by SAB 107. As such, compensation cost is measured
        on the date of grant at their fair value. Such compensation amounts, if any,
        are
        amortized over the respective vesting periods of the option grant. The Company
        applies this statement prospectively.
  A
        summary
        of the status of the Company’s stock options as of September 30, 2006 and the
        changes during the year ended is presented below:
  Fixed
                  Options
              
              Shares
              
              Weighted
                  Average
                Exercise
                  PriceOutstanding
                  at beginning of year
              
              
              5,000,000
              
              $
              1.15Granted
              
              
              -
              
              
              -Outstanding
                  at September 30, 2006
              
              
              5,000,000
              
              $
              1.15Options
                  exercisable at September 30, 2006
              
              
              5,000,000Weighted
                  average exercise price of options granted to employeesduring
                  period ended September 30, 2006
              
              $
              -
  
 
 
  F-7
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   ***(I)
        Loss Per Share***
  Basic
        and
        diluted net loss per common share is computed based upon the weighted average
        common shares outstanding as defined by Financial Accounting Standards No.
        128,
“Earnings Per Share.” As of September 30, 2006 and 2005, common share
        equivalents of 5,000,000 and 5,000,000 stock options, respectively were
        anti-dilutive and not used in the calculation of diluted net loss per
        share.
  ***(J)
        Business Segments***
  The
        Company operates in one segment and therefore segment information is not
        presented.
  ***(K)
        Long-Lived Assets***
  The
        Company accounts for long-lived assets under the Statements of Financial
        Accounting Standards Nos. 142 and 144 “Accounting for Goodwill and Other
        Intangible Assets” and “Accounting for Impairment or Disposal of Long-Lived
        Assets” (“SFAS No. 142 and 144”). In accordance with SFAS No. 142 and 144,
        long-lived assets, goodwill and certain identifiable intangible assets held
        and
        used by the Company are reviewed for impairment whenever events or changes
        in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. For purposes of evaluating the recoverability of long-lived
        assets,
        goodwill and intangible assets, the recoverability test is performed using
        undiscounted net cash flows related to the long-lived assets.
  ***(L)
        Fair Value of Financial Instruments***
 
 The
        carrying amounts of the Company’s accounts payable, accrued expenses, notes
        payable-related party, and deferred compensation approximate fair value due
        to
        the relatively short period to maturity for these instruments.
  ***(M)
        Recent Accounting Pronouncements***
  SFAS
        155,
“Accounting for Certain Hybrid Financial Instruments” and SFAS 156, “Accounting
        for Servicing of Financial Assets” were recently issued. SFAS 155 and 156 have
        no current applicability to the Company and have no effect on the financial
        statements.
  NOTE 2 **RESTATEMENT**
  The
        Company has restated its September 30, 2005 financial statements to give
        effect
        to the beneficial conversion feature on its convertible debt and interest
        expense. Accordingly financing fees have been restated to give effect to
        the
        amortization of the debt discount of $63,110 and interest expense of $5,049,
        net
        loss and earning per share have been restated to give effect to the recording
        of
        the beneficial conversion feature.
  The
        following table summarizes the effects of the restatement on the Company’s
        condensed financial statements as of September 30, 2005:
  
 
  F-8
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   As
                  Reported
              
              As
                  RestatedIncome
                  Statement:Interest
                  Expense
              
              $
              --
              
              $
              5,049Financing
                  costs
              
              
              --
              
              
              63,110Net
                  loss
              
              $
              (454,716
              )
              $
              (522,875
              )
  **NOTE
          3        
**PROPERTY
          AND EQUIPMENT****
  Property
        and equipment at September 30, 2006 were as follows:
  Computer
              
              $
              15,351Less
                  accumulated depreciation
              
              
              (7,010
              )$
              8,341
  During
        the three and nine months ended September 30, 2006 and 2005 and the period
        January 8, 2003 (Inception) to September 30, 2006 the Company recorded
        depreciation expense of $1,173, $3,521, $935, $1,682 and $7,010,
        respectively.
  **NOTE
          4 **PURCHASE
          OF INTELLECTUAL PROPERTY****
  During
        January 2005, the Company entered into an agreement with BioReduction
        Technology, LLC, pending the Company's acceptance of a working prototype.
        Whereby the Company has the right to acquire an exclusive license to make
        and
        have made and to use, offer to sell, sell, license, rent, and distribute
        products embodying the bio reduction technology and any improvements to such
        technology throughout the entire world. In exchange for the aforementioned
        license, the Company has agreed to issue up to 1,500,000 shares of common
        stock
        valued at $1,500,000 the fair market value on the agreement date and an option
        to purchase 300,000 additional shares of common stock, which will be exercisable
        at a price of $5.00 per share. As of September 30, 2006 the Company has not
        received a working prototype and has not closed on the agreement.
  During
        May 2005, the Company entered into an agreement with an individual who is
        the
        sole inventor of and holds all the rights, title, and interest in a pending
        patent for citrus separation technology, whereby the Company has been assigned
        the pending patent and the right to make and have made and to use, offer
        to
        sell, sell, license, rent, and distribute products embodying the citrus
        separation technology and improvements to such technology throughout the
        entire
        world. In exchange for the aforementioned pending patent, the Company issued
        2,500,000 shares of common stock valued at $500,000, the fair market value
        on
        the agreement date and an option for the purchase of 1,500,000 additional
        shares
        of YB common stock, exercisable at a price of $1.00 per share. The options
        were
        valued based on the Black-Scholes model with the following assumptions as
        required under SFAS 123 with the following weighted average assumptions:
        expected dividend yield 0%, volatility 0%, risk-free interest rate of 4.25%,
        and
        expected warrant life of one year. The Company also agreed to share a certain
        percentage of profits derived from sales. As the Company has yet to determine
        the commercial feasibility of this technology, it has elected to fully impair
        the value of it.
   
  F-9
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   On
        December 29, 2005, the Company entered into an agreement with Dexion
        International, Ltd to acquire all rights and interest in its patent application
        number 5425221.8 for Hypercritical Separation Technology that was filed with
        the
        European Patent Office on April 15, 2005. Upon successful testing, the rights,
        title and interest to the technology are being acquired by us at a cost of
        $2.5
        million and 5,800,000 shares of common stock. Additionally, pending successful
        testing of the technology, the Company has agreed to acquire Dexion's HST
        machine for $500,000 and to establish a research and development facility
        for
        the technology. As of September 30, 2006 the Company has not completed
        testing.
   **NOTE
          5 **NOTES
          PAYABLE - RELATED PARTIES****
   Notes
                  payable
              
              $
              279,750Discount
              
              
              (17,899
              )Balance
              
              $
              261,851
 
 In
        March,
        2006 the Company borrowed $5,000 from a stockholder. The note is unsecured,
        is
        due June 1, 2006, and bears interest at a rate of 15%. In August, the note
        was
        extended to September 30, 2006 and the Company agreed to issue 5,000 shares
        of
        common stock in consideration for the extension. The note is currently in
        default.
  In
        April,
        2006 The Company borrowed $25,000 from a stockholder. The note is unsecured,
        is
        due four months from the date of issuance and bears interest at a rate of
        10%.
        The Company issued the note holder 50,000 shares of common stock. The fair
        market value on the date of issuance based on recent cash offering price
        was
        $25,000. The value is being amortized over the term of the note. At September
        30, 2006 the Company recorded a discount on the notes of $0 and amortization
        of
        $35,000. The note is currently in default.
  In
        May,
        2005 the Company borrowed $5,000 from a stockholder. The note is unsecured,
        is
        due June 1, 2006, and bears interest at a rate of 7%. In June, 2006 the note
        was
        extended to October 15, 2006. The note is currently in default.
 
 During
        2004, the Company issued a one-year 8% Convertible Debenture (“Debenture”) in
        the principal amount of $87,000, to an officer, director and shareholder
        in
        settlement of the note payable to such related party, which was issued for
        the
        sole purpose of funding ongoing operations. The note was extended until December
        31, 2006. The principal and accrued interest of the Debenture is convertible
        upon issuance into shares of common stock, par value $0.001 per share, at
        a
        conversion price of $0.25 per share. During the three and nine months ended
        September 30, 2006 and 2005 and the period January 8, 2003 (Inception) to
        September 30, 2006 the Company recorded financing fees for the beneficial
        conversion of $0, $0, $21,424 $63,289 and $85,000, respectively. On September
        1
        , 2006 the officer, director and shareholder converted $40,000 of principal
        and
        $2,751 of accrued interest into 855,020 shares of common stock. The Company
        recorded interest expense of $35,763 associated with the beneficial conversion
        of the accrued interest.
  
  F-10
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   On
        December 27, 2005, the Company borrowed $15,000 from a related party. The
        note
        is unsecured and is due twelve months from the date of issuance and bears
        interest at a rate of 10%.
  On
        December 28, 2005, the officer, director and shareholder loaned the Company
        $40,000 at a rate of 10% per annum. The principle and interest are due on
        December 31, 2006. The note is unsecured. In September 2006 the officer,
        director and shareholder converted $40,000 of principal and $2,751 of accrued
        interest into 855,020 shares of common stock. The Company recorded interest
        expense of $35,763 associated with the beneficial conversion of the accrued
        interest.
 
 In
        March
        2006 a related party repaid an existing unsecured note of the Company in
        the
        amount of $20,000 and $500 of accrued interest. The related party entered
        into a
        new unsecured note agreement in the amount of $20,500 bearing interest at
        a rate
        of 15% per annum and is due December 31, 2006.
  In
        April
        2006 The Company borrowed $50,000 from a related party. The note is unsecured
        and is due December 31, 2006 and bears interest at a rate of 15%. The Company
        issued the note holder 125,000 shares of common stock. The fair market value
        on
        the date of issuance based on recent cash offering price was $50,000. The
        value
        is being amortized over the term of the note. At September 30, 2006 the Company
        recorded a discount on the notes of $17,899 and amortization of $32,101 as
        of
        September 30, 2006.
  During
        the nine months ended September 30, 2006, officer, director and shareholder
        loaned the Company an additional $37,250. The balance accrued interest at
        a rate
        of 10% per annum, is unsecured, and is due on December 31, 2006.
 
 On
        August 4, 2006, the Company borrowed $35,000 from a related party. The note
        is
        unsecured and is due six months from the date of issuance and bears interest
        at
        a rate of 15%.
  **NOTE
          6 **JOINT
          VENTURE****
  On
        August
        15, 2005, the Company agreed to enter into an agreement with the Citrus
        Products of Belize Limited (“CPBL”). Pursuant to the Agreement, the Company and
        CPBL formed a joint venture named BTX Citrus Belize, Ltd. (“BTXC”) for the
        purpose of building a plant in Belize for waste peel processing. Pursuant
        to the
        terms of the Agreement, the Company will own 65% and CPBL will own 35% of
        the
        joint venture company. As of September 30, 2006 the joint venture has not
        been
        formed.
  The
        parties have agreed that the Net Profits generated by BTXC, minus a working
        capital reserve to be determined by the BTXC board of directors, shall be
        distributed on a quarterly basis on the same percentage basis as each party’s
        equity ownership. For the purpose of this Agreement, Net Profits has been
        defined as Gross Revenues from the sale of finished products less all associated
        costs of operation, including, but not limited to, salaries and wages,
        utilities, commissions, SG&A, royalties and debt service. An additional 20%
        of the Net Profits will be retained to establish a sinking fund in order
        to
        retire the debt incurred in building the plant until such time that the debt
        is
        retired.
  **NOTE
          7 **STOCKHOLDERS’
          EQUITY****
  ***(A)
        Common Stock Issued to Founders***
  During
        January 2003 the Company issued 15,746,000 shares of common stock to founders
        for a capital contribution of $2,000.
 
 In
        August
        2006 one of the founders returned 50,000 shares of common stock with a par
        value
        of $50. The Company retired the share of common stock in August
        2006.
  ***(B)
        Common Stock Issued for Cash***
  In
        2005,
        the Company sold a total of 3,115,000 shares of common stock to 22 individuals
        for cash of $623,000 ($.20 per share).
    F-11
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
    In
        2006,
        the Company sold a total of 40,000 shares of common stock to an individual
        for
        cash of $10,000 ($.25 per share).
  ***(C)
        Common Stock Issued for Services***
  In
        December 2005 the Company issued 150,000 shares of common stock with a fair
        market value of $30,000 for legal services.
  In
        March
        2006 the Company issued 450,000 shares of common stock valued at $153,000
        for
        investor relations. The term of the agreement is from June 1, 2006 to June
        1,
        2007. As of March 31, 2006 the Company has recorded the value of these shares
        as
        deferred compensation and will amortize them over the term of the
        agreement.
  In
        June
        2006 the Company issued 50,000 shares of common stock with a fair market
        value
        of $15,000 for consulting services.
  ***(D)
        Common Stock Issued for Financing Fees***
  In
        December 2005 the Company issued 50,000 shares of common stock with a fair
        market value of $10,000 for financing fees in relation to a note payable(See
        Note 4).
  In
        April
        2006 the Company issued 50,000 shares of common stock with a fair market
        value
        of $25,000 for financing fees in relation to a note payable(See Note
        5).
  In
        April
        2006, the Company issued a related party 125,000 shares of common stock with
        a
        fair market value of $50,000 for financing fees in relation to a note
        payable(See Note 6).
  ***(E)
        Common Stock Issued for Notes Payable***
 
 In
        September 2006 the officer, director and shareholder converted $40,000 of
        principal and $2,751 of accrued interest into 855,020 shares of common stock.
        The Company recorded interest expense of $35,763 associated with the beneficial
        conversion of the accrued interest.
 
 ***(F)
        Common Stock Issued for Technology***
  The
        Company issued 2,500,000 shares of common stock with a fair value of $500,000
        and 1,500,000 warrants during 2005, at an exercise price of $5.00 per share
        for
        the purchase of intellectual technology. The fair market value of the warrants
        was estimated on the grant date using the Black-Scholes option pricing model
        as
        required under SFAS 123 with the following weighted average assumptions:
        expected dividend yield 0%, volatility 1%, risk-free interest rate of 4.25%,
        and
        expected warrant life of one year. The value was immaterial at the grant
        date.
  ***(G)
        Capital Contribution***
  In
        December, 2005 the Company’s CEO elected to forgo $880 of amounts owed to him
        for management fees. This amount has been recorded as in-kind contribution
        of
        services at December 31, 2005
  ***(H)
        Reverse Mergers***
  On
        June
        9, 2005, pursuant to the Stock Purchase Agreement and Share Exchange, the
        Company issued a total of 2,825,000 shares of the Company’s common stock to the
        shareholders of Capital Ventures I.
   
  F-12
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
    On
        December 30, 2005 pursuant to the Stock Purchase Agreement and Share Exchange,
        the Company issued a total of 165,507,000 shares of the Company’s common stock
        to the shareholders of BTX Holdings, Inc. simultaneous with the Stock Purchase
        Agreement and Share Exchange, the Company purchased and retired a total of
        157,375,000 shares of its common stock for $50,000 from a former shareholder
        of
        King Capital.
  ***(I)
        Shares in Escrow***
  During
        2005, 5,800,000 shares of common stock were issued into escrow pending the
        acceptance of the Agreement between the Company and Dexion International
        Ltd. to
        acquire the right to Hypercritical Separation Technology. As at August 8,
        2006
        the Company has not completed the transaction with Dexion and the shares
        remain
        in escrow.
  During
        2005, 1,500,000 shares of common stock and 500,000 warrants with an exercise
        price of $5.00 were issued into escrow pending the acceptance of the Agreement
        between the Company and Bio Reduction Technology, LLC to acquire the license
        to
        their Bio Reduction Technology. As of August 14, 2006 the Company has not
        completed the transaction with Bio Reduction Technology, LLC and the shares
        in
        escrow were cancelled pending delivery of a working prototype.
  During
        2005 the Company issued 500,000 shares of common for the a finder’s fee which
        were put into escrow pending the acceptance of the Agreement between the
        Company
        and Dexion International Ltd. to acquire the license to their HyperCritical
        Separation Technology. As at August 8, 2006 the Company has not completed
        the
        transaction with Dexion International Ltd. and the shares remain in
        escrow.
 
 During
        July 2006, the Company cancelled 1,500,000 shares held in escrow pending
        the
        acceptance of the agreement between the Company and Bio Reduction Technology,
        LLC as the agreement does not require shares to be held in escrow. Upon
        acceptance of the technology by the Company, we will issue up to 1,500,000
        shares of common stock and 300,000 warrants. As of November 1, 2006, the
        transaction has not closed.
  ***(J)
        Stock Split***
  On
        July
        14, 2006, the Company’s stockholders approved a 5 for 1 stock split for its
        common stock. As a result, stockholders of record at the close of business
        on
        July 28, 2006, received five shares of common stock for every one shares
        held.
        Common stock, additional paid-in capital and share and per share data for
        prior
        periods have been restated to reflect the stock split as if it had occurred
        at
        the beginning of the earliest period presented.
  **NOTE
          8 **RELATED
          PARTY TRANSACTIONS****
  During
        2004, the Company issued a one-year 10% Convertible Debenture (“Debenture”) in
        the principal amount of $87,000, to an officer, director and shareholder
        in
        settlement of the note payable to such related party, which was issued for
        the
        sole purpose of funding ongoing operations. The principal and accrued interest
        of the Debenture is convertible upon issuance into shares of common stock,
        par
        value $0.001 per share, at a conversion price of $0.05 per share. The Company
        recorded financing fees for the beneficial conversion feature for the year
        ended
        December 31, 2005, 2004 and the period January 8, 2003 (Inception) to December
        31, 2005 of $70,795, $14,205 and $85,000 respectively. Principle and accrued
        interest is due December 31, 2006.
  On
        December 28, 2005, the officer, director and shareholder loaned the Company
        $40,000 at a rate of 10% per annum. The principle and interest are due on
        December 31, 2006. In September 2006 the officer, director and shareholder
        converted $40,000 of principal and $2,751 of accrued interest into 855,020
        shares of common stock. The Company recorded interest expense of $35,763
        associated with the beneficial conversion of the accrued interest.
  In
        March,
        2006 the Company borrowed $5,000 from a stockholder. The note is unsecured,
        is
        due June 1, 2006, and bears interest at a rate of 15%. In August, the note
        was
        extended to September 30, 2006 and the Company agreed to issue 5,000 shares
        of
        common stock in consideration for the extension. The note is currently in
        default.
  In
        April,
        2006 The Company borrowed $25,000 from a stockholder. The note is unsecured,
        is
        due four months from the date of issuance and bears interest at a rate of
        10%.
        The Company issued the note holder 50,000 shares of common stock. The fair
        market value on the date of issuance based on recent cash offering price
        was
        $25,000. The value is being amortized over the term of the note. At September
        30, 2006 the Company recorded a discount on the notes of $0 and amortization
        of
        $35,000. The note is currently in default.
  In
        May,
        2005 the Company borrowed $5,000 from a stockholder. The note is unsecured,
        is
        due June 1, 2006, and bears interest at a rate of 7%. In June, 2006 the note
        was
        extended to October 15, 2006. The note is currently in default.
 
 
   F-13
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   On
        December 27, 2005, the Company borrowed $15,000 from a related party. The
        note
        is due twelve months from the date of issuance and bears interest at a rate
        of
        10%.
  In
        March,
        2006 a related party repaid an existing note of the Company in the amount
        of
        $20,000 and $500 of accrued interest. The related party entered into a new
        note
        agreement in the amount of $20,500 bearing interest at a rate of 15% per
        annum
        and is due December 31, 2006.
  In
        April
        2006, a related party loaned the Company $50,000 at a rate of 15% per annum
        and
        due December 31, 2006. Upon execution of the promissory note, the Company
        issued
        25,000 shares of common stock.
  During
        the nine months ended September 30, 2006, the officer, director and shareholder
        loaned the Company an additional $37,250. The balance accrued interest at
        a rate
        of 10% per annum and is due on December 31, 2006.
 
 **NOTE
          9 **COMMITMENTS
          AND CONTINGENCIES****
 ***(A)
        Employment Agreement***
  During
        December 2005, the Company entered into an employment agreement with the
        President and Chief Executive Officer of the Company for a term of five years
        at
        an annual minimum salary of $150,000.
  In
        the
        event that the net profits of the Company is less than $2,500,000 per annum
        than
        the Executive shall receive a salary of $150,000; If net profits of the Company
        are more than $2,500,000 per annum and less than $5,000,000 than the Executive
        shall receive a salary of $250,000; if net profits of the Company are more
        than
        $5,000,000 per annum but less than $7,500,000 than the Executive shall receive
        a
        salary of $375,000; if the net profits of the Company are greater than
        $7,500,000 per annum than the Executive shall receive a salary of $500,000
        and
        4% of the Annual Net Profits of the Companies, from all sources, before
        Depreciation, Amortization and Taxes, in excess of $10,000,000. In addition
        the
        Company has agreed to a monthly car allowance of up $1,500 per month. Net
        Profits is based upon the net corporate profits, from all sources, before
        Depreciation, Amortization and Taxes as collectively defined by the United
        States Generally Accepted Accounting Principles (“GAAP”).
  The
        Company has agreed to issue the following common stock options:
  Options
        to purchase 1,000,000 shares of the Company’s common stock at an exercise price
        of $.50 expiring in 2015.
  Options
        to purchase 1,000,000 shares of the Company’s common stock at an exercise price
        of $.75 expiring in 2015.
  Options
        to purchase 1,000,000 shares of the Company’s common stock at an exercise price
        of $1.00 expiring in 2015.
  Options
        to purchase 1,000,000 shares of the Company’s common stock at an exercise price
        of $1.50 expiring in 2015.
  Options
        to purchase 1,000,000 shares of the Company’s common stock at an exercise price
        of $2.00 expiring in 2015.
  
  F-14
  
   **BTX
        HOLDINGS, INC. AND SUBSIDIARY**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006**
 **(UNAUDITED)**
   ***(B)
        Joint Venture***
  During
        August 2005, the Company agreed to form a majority-owned venture, BTX Citrus
        Belize, Ltd. (hereinafter known as “BTXC”), with Citrus Products Of Belize Ltd.
        (“CPBL”), comprised of the Company’s capital funding and citrus peel processing
        equipment. CPBL is providing the land, free citrus peels for 10 years and
        is
        placing $700,000 in an escrow account for a period of no longer than four
        months. As a result of this transaction, BioTex Corp. (“BIOTEX”) will have a 65%
        ownership interest. The remaining 35% shall be owned by Citrus Products Of
        Belize Ltd. (“CPBL”).  (See Note 6)
   **NOTE
          10 **GOING
          CONCERN****
  As
        reflected in the accompanying financial statements, the Company is in the
        development stage with no operations, a stockholders’ deficiency of $514,162, a
        working capital deficiency of $522,503 and used cash in operations from
        inception of $884,960. This raises substantial doubt about its ability to
        continue as a going concern. The ability of the Company to continue as a
        going
        concern is dependent on the Company’s ability to raise additional capital and
        implement its business plan. The financial statements do not include any
        adjustments that might be necessary if the Company is unable to continue
        as a
        going concern.
   **NOTE
          11 **SUBSEQUENT
          EVENTS****
 
 On
        October 12, 2006, the Company borrowed $17,700 from a related party. The
        note is
        unsecured, is due 115 days from the date of issuance and bears interest at
        a
        rate of 15%.
 
  
  F-15




**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation**




GENERAL




The
      information contained in Item 2 contains forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. Actual results may
      materially differ from those projected in the forward-looking statements as
      a
      result of certain risks and uncertainties set forth in this report. Although
      management believes that the assumptions made and expectations reflected in
      the
      forward-looking statements are reasonable, there is no assurance that the
      underlying assumptions will, in fact, prove to be correct or that actual results
      will not be different from expectations expressed in this report.




**Plan
      of Operations**




Our
      plan
      of operations for the next fifteen months is focused on the following primary
      objectives.




1.
            Complete
                testing and close on contracts for technologies currently under
                agreements2.
            Raising
                capital through private debt or equity offerings;3.
            Find
                additional customers to purchase or lease machinery from us or enter
                into
                joint venture or strategic partner arrangements4.
            Assemble
                new facilities to operate and demonstrate our technologies5.
            Implement
                Sales & Marketing of value added products derived from our
                technology6.
            Further
                develop and enhance our technology; and continue research and development
                for new applications of existing technologies and seek out new
                technologies




Subject
      to the requisite financing, we believe that we can complete the following
      objectives within the time period specified:




New
      Facilities




We
      intend
      to finance the development of several new facilities and have such facilities
      in
      operation during 2007. These will be on-site locations owned, leased and/or
      operated by BioTex, where we will joint venture with existing operations to
      process wet citrus peel into specific products. We intend to build a
      demonstration facility in Florida, and additionally we intend to build
      facilities in Belize and California. Although we do not have any agreements
      in
      place for facilities in Florida or California, we are in negotiations with
      several juicing operations, and it is our intention to open our demonstration
      facility in Florida in the first quarter of 2007. This will be a pilot operation
      and we estimate the cost of equipment to be $150,000 which will be financed
      internally. Assuming we receive financing on a timely basis, we believe this
      can
      be accomplished in this time period since the facility would only take a month
      to build.





We
        estimate that the additional planned facilities will cost $18.5 million to
        become fully operational. We intend to secure the funding necessary and to
        begin
        construction of the Belize facility during the 1st Quarter of 2007. Pending
        successful negotiation with juicing plants in Florida and California to build
        CST facilities, we intend to secure funding and begin construction under
        the
        following cost and time projections; 1 st Quarter
        of 2007, build the Belize operation, $11 million; 3rd Quarter 2007, build
        the
        Florida operation, $2.5 million; 4th Quarter 2007, build the California
        operation, $5 Million.We presently do not have the funds available to finance
        these activities, however management believes that actions presently being
        taken
        to obtain additional funding will be successful and will allow us to construct
        the aforementioned facilities in a timely manner. We intend to raise the
        funds
        through equity sales and debt, though no definitive agreements have been
        signed
        yet.













Sales
      Marketing




All
      sales
      will initially be generated through direct sales with three internal employees:
      We are in preliminary talks with several customers, although no contracts have
      been consummated for the leasing of our machines. Sales and marketing
      expenditures are budgeted at $75,000 for the next twelve months. Our sales
      success depends on the following fundamental points:




1.
            Demonstrating
                proof of our technology and its applications for producing value
                added
                products2.
            Providing
                increased cost savings and profit3.
            Introducing
                and educating customers on our technology and our
                processes





We
      will
      initially focus our marketing efforts on establishing joint ventures that will
      utilize our Citrus Separation Technology (CST) and of the Hypercritical
      Separation Technology (HST) for the processing of biomass waste streams, pending
      completion of our due diligence and acquisition, as well as leasing individual
      BioReduction Technology (BRT) machines:




1. **Joint
      ventures utilizing our CST and HST technologies.** In
      August, 2005, we entered into an agreement with Citrus Products of Belize,
      Ltd.
      to form a joint venture company which will use our CST technology for the
      processing of citrus peel waste in Belize. We will continue to market our
      technologies through this model to citrus juice producers, pineapple, rice,
      grain, corn and sugar cane grower cooperatives, as well as continue to develop
      new markets that may use our technologies. Through these joint ventures,
      value-added products will be generated, and as a result, we will also focus
      our
      marketing efforts on the sale of these products. We have identified several
      markets for these products, such as the chemical and perfume industries, paper
      producers, animal and human consumable manufacturers, nutraceutical and
      pharmaceutical companies and ethanol producers. We will focus our efforts on
      marketing our value-added products to these industries.




On
      August
      16, 2005, we entered into an agreement to form a Joint Venture Company, BTX
      Citrus Belize, Ltd., along with Citrus Products of Belize, Ltd (CPBL). BTX
      Citrus Belize will be formed with the purpose of constructing a citrus peel
      processing facility utilizing BioTex's CST technology. CPBL will contribute
      land, building and citrus peel to BTX Citrus, and BioTex will arrange for
      funding, provide the technology, oversee construction of the plant, operate
      the
      plant, and sell the products the plant generates. CPBL will own 35% of the
      joint
      venture and BioTex will own 65%. The plant is expected to cost approximately
      $11
      million.




On
      December 29, 2005, we terminated our agreement with Mastercraft Ltd. dated
      May
      31, 2005. The agreement contemplated the acquisition of the rights, title and
      interest to its MST technology at a cost of $3 million and 6,500,000 shares
      of
      common stock of BioTex. The agreement was terminated when Mastercraft defaulted
      on the terms of the agreement and both Mastercraft and BioTex signed mutual
      releases of liability. Upon termination, the 6,500,000 shares being held in
      escrow were returned to the treasury.




On
      December 29, 2005, we entered into an agreement with Dexion International,
      Ltd
      to acquire all rights and interest in its patent application number 5425221.8
      for Hypercritical Separation Technology that was filed with the European Patent
      Office on April 15, 2005. Upon successful testing, the rights, title and
      interest to the technology are being acquired by us at a cost of $2.5 million
      and 5,800,000 shares of common stock. Additionally, pending successful testing
      of the technology, we have agreed to acquire Dexion’s HST machine for $500,000
      and to establish a research and development facility for the technology. The
      technology has not yet been demonstrated to our satisfaction and we have not
      closed on the transaction. We intend to continue testing and intend to close
      on
      this transaction in the 4th Quarter of 2006.




We
      are
      also currently in negotiations with a juicing facilities located in Southern
      California and Florida to construct CST processing plants at their respective
      facilities. BioTex will form joint venture companies which will own and operate
      the plants. The joint venture partners will contribute citrus peel and possibly
      land and/or buildings to the joint ventures, and we will arrange for the
      funding, will provide the technology, oversee construction of the plants,
      operate the plants and sell the value added products that are produced. It
      is
      anticipated that the plants will cost approximately $5 million and $2.5 million
      respectively.













We
      presently do not have the funds available to finance these activities, however
      management believes that actions presently being taken to obtain additional
      funding will be successful and will allow us to construct the aforementioned
      facilities. We intend to raise the funds through equity sales and debt, though
      no definitive agreements have been signed yet.





We
      account for long-lived assets under the Statements of Financial Accounting
      Standards Nos. 142 and 144 "Accounting for Goodwill and Other Intangible Assets"
      and "Accounting for Impairment or Disposal of Long-Lived Assets" ("SFAS No.
      142
      and 144"). In accordance with SFAS No. 142 and 144, long-lived assets, goodwill
      and certain identifiable intangible assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances indicate
      that the carrying amount of an asset may not be recoverable. For purposes of
      evaluating the recoverability of long-lived assets, goodwill and intangible
      assets, the recoverability test is performed using undiscounted net cash flows
      related to the long-lived assets. A 100% or $500,000 impairment charge was
      recorded for the Citrus Separation Technology acquired during the year ended
      December 31, 2005 as it was determined by management that the future value
      was
      impaired.




2 **BRT
      machines in the large urban areas of the United States.** Upon
      BioTex Corporation’s acceptance of the technology, we will market the BRT
      machines to supermarkets, produce distributors, waste transfer stations and
      commercial bakeries in urban areas which have waste disposal problems. Future
      business will be derived by marketing to farms and other large-scale commercial
      generators of organic waste. The BRT machine will initially be built in three
      sizes. It is our intention to build these machines and then lease them to our
      customers. We intend to focus only on a niche market of the waste industry,
      not
      unlike the current recycling industry. It is our intent to become the premier
      supplier of equipment for the collection and disposal of biomass (plant-derived
      material) streams from commercial and industrial sources. To that end, we will
      market our three sizes of machines to commercial industries as appropriate.
      Initially, we will focus on companies that generate medium sized biomass
      streams. Examples include waste transfer stations and institutional re-packagers
      of vegetable products, such as suppliers to the airline and hospitality
      industries, large produce markets, terminal markets and produce distributors.




We
      intend
      to implement a sales & marketing plan for value added products derived from
      our technology. In addition to direct sales, we have currently secured a domain
      name, BioTexcorp.com, and during the first quarter of 2006, launched a web-site
      for Sales and Marketing purposes and explaining our processes and the various
      aspects of our business. The value added products we intend to derive for sale
      from our technology for sale are represented below:




a.
            Cellulose
                can either be sold to the paper industry, or can be used to create
                ethanol, a renewable energy sourceb.
            Hemicellulose
                can be converted into xylose, which is the basis for a new sweetener,
                and
                can also be used in the manufacture of paperc.
            Lignin
                is an industrial fuel, usually used to provide energy to industrial
                plantsd.
            Starch
                can also be used in ethanol production and well as in food
                productione.
            Fiber
                is used in the nutraceutical industry, as well as in the food industryf.
            Pectin
                is used in the food, pharmaceutical and nutraceutical
                industriesg.
            Protein
                is used in the food, nutraceutical and pharmaceutical
                industries




Research
      & Development




We
      intend
      to devote time and financial resources to research and development activities
      to
      develop additional products and services. Research and development expenditures
      are budgeted at $120,000 for the next twelve months. There is no assurance
      that
      we will successfully develop these products or services, or that competitors
      will not develop products or services sooner or products or services that are
      superior to our product or service offerings.





As
        part
        of our agreement with Dexion International, Ltd., pending successful testing,
        we
        will purchase the existing HST machine at a cost of $500,000 and establish
        a
        research and development center during the first half of 2007, where the
        machine
        will be used for testing the marketing applications specific to the HST
        machine’s processing of organic and inorganic waste streams. Additional uses for
        the machine will also be developed through the continual testing of newly
        contemplated feed stocks. Our research and development will be focused on
        the
        following initiatives:













1.
            Seeking
                out new technologies2.
            Develop
                new applications for existing technologies3.
            Develop
                other uses for output from our machines4.
            Develop
                new ways to market our products




Administrative
      Costs




We
      do
      expect to hire several employees for sales, engineering, administrative and
      finance support staff as necessary. We anticipate employee recruiting and
      training to cost $24,000 over the next twelve months. (Salaries are included
      below as part of the office salaries)




Completion
      of our plan of operations is subject to attaining adequate revenue. We cannot
      assure investors that adequate revenues will be generated. In the absence of
      our
      projected revenues, we may be unable to proceed with our plan of operations.
      Even without significant revenues within the next twelve months, we still
      anticipate being able to continue with our present activities, but we may
      require financing to potentially achieve our goal of profit, revenue and growth.




We
      anticipate that our operational as well as general and administrative expenses
      for the next 12 months will total $24,189,000. The breakdown is as
      follows:




Operating
                  and Capital ExpendituresResearch
                  and Development
              
              $
              120,000Contractual
                  Obligations
              
              
              2,500,000Equipment
                  Purchase (HST Machine)
              
              
              500,000New
                  Facilities
              
              
              18,650,000Total
                  Operating Expenses
              
              
              
              
              
              21,770,000General
                  and AdministrativeAutomotive
              
              $
              24,000Depreciation
                  and Amortization
              
              
              1,335,000Employee
                  Recruiting and Training
              
              
              24,000Insurance
              
              
              90,000Legal
                  and Professional
              
              
              150,000Office
                  Salaries
              
              
              320,000Outside
                  Services
              
              
              45,000Payroll
                  expenses
              
              
              81,000Postage
                  and Shipping
              
              
              1,000Rent
              
              
              72,000Repairs
                  and Maintenance
              
              
              12,000Sales
                  and Marketing
              
              
              75,000Subscriptions
                  and Memberships
              
              
              6,000Supplies
                  (office and operating)
              
              
              8,500Taxes
                  and Licenses
              
              
              5,000Telephone
              
              
              25,000Travel
                  and Ent.
              
              
              142,500Utilities
              
              
              3,000Total
                  General Administration
              
              
              
              
              $
              2,419,000Total
                  Expenses
              
              
              
              
              $
              24,189,000









The
      foregoing represents our best estimate of our cash needs based on current
      planning and business conditions. The exact allocation, purposes and timing
      of
      any monies raised in subsequent private financings may vary significantly
      depending upon the exact amount of funds raised and status of our business
      plan.
      In the event we are not successful in reaching our initial revenue targets,
      additional funds will be required and we may then not be able to proceed with
      our business plan for the development and marketing of our core products and
      services. Should this occur, we would likely seek additional financing to
      support the continued operation of our business. Additionally, should we not
      successfully close on the acquisitions of technologies that we are currently
      under agreements to acquire, we may not be able to meet our revenue targets.
      We
      presently do not have the funds available to finance these activities, however
      management believes that actions presently being taken to obtain additional
      funding will be successful and will allow us to undertake our plan of
      operations. We intend to raise the funds through equity sales and debt, though
      no definitive agreements have been signed yet.




We
      anticipate that depending on market conditions and our plan of operations,
      we
      will incur operating losses in the foreseeable future.




**Going
      Concern Consideration**





As
          reflected in the accompanying financial statements, we are in the development
          stage with no operations, a stockholders' deficiency of $514,162, and a
          working
          capital deficiency of $522,503 and used cash in operations from inception
          of
          $884,960. This raises substantial doubt about our ability to continue as
          a going
          concern. Our ability to continue as a going concern is dependent on our
          ability
          to raise additional capital and implement our business plan. The financial
          statements do not include any adjustments that might be necessary if the
          Company
          is unable to continue as a going concern.




Current
        cash on hand is insufficient to support our operations for the next twelve
        months , however, we believe that actions presently being taken to obtain
        additional funding and implement our strategic plans provide the opportunity
        for
        us to continue as a going concern.


**Liquidity
      and Capital Resources**




As
        of
        September 30, 2006, we have assets of $13,280 consisting of cash of $4,439,
        prepaid expenses of $500 and property and equipment of $8,341 and total
        liabilities of $527,442 consisting of accounts payable of $98,090; and accrued
        payroll of $143,067; and accrued interest of $23,615 and notes payable of
        $261,851.


Cash
      and
      cash equivalents from inception to date have been sufficient to cover expenses
      involved in starting our business. Current cash on hand is insufficient to
      support our operations for the next twelve months. Therefore, we will require
      additional funds to continue to implement and expand our business plan during
      the next twelve months.




**Critical
      Accounting Policies**




Our
      financial statements and related public financial information are based on
      the
      application of accounting principles generally accepted in the United States
      (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
      subjective interpretations of accounting principles that have an impact on
      the
      assets, liabilities, revenue and expense amounts reported. These estimates
      can
      also affect supplemental information contained in our external disclosures
      including information regarding contingencies, risk and financial condition.
      We
      believe our use if estimates and underlying accounting assumptions adhere to
      GAAP and are consistently and conservatively applied. We base our estimates
      on
      historical experience and on various other assumptions that we believe to be
      reasonable under the circumstances. Actual results may differ materially from
      these estimates under different assumptions or conditions. We continue to
      monitor significant estimates made during the preparation of our financial
      statements.




Our
      significant accounting policies are summarized in Note 1 of our financial
      statements. While all these significant accounting policies impact our financial
      condition and results of operations, we view certain of these policies as
      critical. Policies determined to be critical are those policies that have the
      most significant impact on our financial statements and require management
      to
      use a greater degree of judgment and estimates.





Actual
      results may differ from those estimates. Our management believes that given
      current facts and circumstances, it is unlikely that applying any other
      reasonable judgments or estimate methodologies would cause effect on our
      consolidated results of operations, financial position or liquidity for the
      periods presented in this report.




**Item
      3. Controls and Procedures**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of our disclosure controls and procedures, as such term is defined
      under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
      Exchange Act of 1934, as amended (Exchange Act), as of September 30, 2006.
      Based
      on this evaluation, our principal executive officer and principal financial
      officer have concluded that our disclosure controls and procedures are effective
      to ensure that information required to be disclosed by us in the reports we
      file
      or submit under the Exchange Act is recorded, processed, summarized, and
      reported within the time periods specified in the Securities and Exchange
      Commission’s rules and forms and that our disclosure and controls 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 accumulated and communicated to our
      management, including our principal executive officer and principal financial
      officer, or persons performing similar functions, as appropriate to allow timely
      decisions regarding required disclosure.




There
      were no changes (including corrective actions with regard to significant
      deficiencies or material weaknesses) in our internal controls over financial
      reporting that occurred during the third quarter of fiscal 2006 that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.




**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




The
      Company is currently not a party to any pending legal proceedings and no such
      action by, or to the best of its knowledge, against the Company has been
      threatened.




**Item
      2. Changes in Securities.**




On
        December 28, 2005, the officer, director and shareholder loaned the Company
        $40,000 at a rate of 10% per annum. The principle and interest are due on
        December 31, 2006. In September 2006 the officer, director and shareholder
        converted $40,000 of principal and $2,751 of accrued interest into 855,020
        shares of common stock. The Company recorded interest expense of $35,763
        associated with the beneficial conversion of the accrued
 
 In
        August
        2006 one of the founders returned 50,000 shares of common stock with a par
        value
        of $50. The Company retired the share of common stock in August
        2006.


**Item
      3. Defaults Upon Senior Securities.**




None




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




No
      matter
      was submitted during the quarter ending September 30, 2006, covered by this
      report to a vote of the Company’s shareholders, through the solicitation of
      proxies or otherwise.




**Item
      5. Other Information.**




None







**Item
      6. Exhibits and Reports of Form 8-K.**





(a)  Exhibits





31.1
      Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002





32.1
      Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002




(b)  Reports
      of Form 8-K





None




**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, there unto duly
      authorized.




**BTX
                  HOLDINGS, INC.**RegistrantDate:
                  November 14, 2006
              By:*/s/
                  Scott J. Silverman*Scott
                  J. SilvermanPresident,
                  Chief Executive Officer,Chairman
                  of Board of Directors